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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) January 31, 1994
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MERISEL, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE
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(State or other jurisdiction of incorporation)
0-17156 95-4172359
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(Commission File Number) (IRS Employer Identification No.)
200 Continental Boulevard, El Segundo, California 90245-0984
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (310) 615-3080
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n/a
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(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On January 31, 1994, Merisel, Inc. (the "Company"), through a wholly-
owned subsidiary, Merisel FAB, Inc. ("Merisel FAB"), completed its acquisition
of certain assets (the "Assets") of the United States Franchise and Distribution
Division (the "Division") of ComputerLand Corporation ("ComputerLand") pursuant
to an Asset Purchase Agreement (the "Purchase Agreement") dated January 31, 1994
among ComputerLand, Merisel FAB and the Company (a copy of which is attached
hereto as Exhibit 10.1).
The Division (and now Merisel FAB) is a distributor of microcomputer
products to a network of two specific customer groups: "ComputerLand"
franchisees, with whom Merisel FAB acts as a franchisor by licensing the
"ComputerLand" name and providing both product supply and various support
services and "Datago" affiliates, which are independent dealers and value added
resellers that purchase products from Merisel FAB on a cost-plus basis, but do
not license the "ComputerLand" name.
Merisel FAB paid approximately $80 million in cash for the Assets. In
addition, the Purchase Agreement provides for a payment in 1996 of up to $30
million based upon the growth in the Company's and Merisel FAB's sales of
designated vendor products to former Division customers over the two year period
ending January 31, 1996. The Assets' purchase price was established by arms
length negotiations between the Company and ComputerLand.
The principal Assets purchased by Merisel FAB consist of the
Division's franchise and third party reseller agreements and substantially all
of the rights in the United States to ComputerLand's trademarks, trade names,
service marks, copyrights, patents and logos.
The purchase of the Assets was financed by (i) a borrowing of $65
million under a credit agreement dated as of December 23, 1993 between the
Company and NationsBank of Texas, N.A. ("NationsBank") and guaranteed by Merisel
FAB (a copy of which is attached hereto as Exhibit 10.4) and (ii) a borrowing of
$16 million under a credit agreement dated as of January 31, 1994 among Merisel
FAB, the Company, as guarantor, and NationsBank (a copy of which is attached
hereto as Exhibit 10.6). The $65 million facility matures on January 29, 1995,
but is subject to mandatory prepayment upon any debt or equity issuance by the
Company. Borrowings under such facility may bear interest at either a LIBOR
based rate or a prime/federal funds-based rate, at the option of the Company.
This facility provides that the interest rate increases 0.5% per annum at the
end of each three month period subsequent to January 31, 1994 and requires a fee
of $162,500 if not prepaid by the end of July 1994. The $16 million facility
matures on February 15, 1994 and bears interest at a prime/federal funds-based
rate.
In connection with the acquisition of the Assets, Merisel FAB and
ComputerLand entered into a Distribution and Services Agreement (the "Services
Agreement") pursuant to which ComputerLand will provide significant distribution
and other support services to Merisel FAB for up to two years. Under the
Services Agreement, Merisel FAB will receive up to $20 million in extended
credit terms on its product purchases from ComputerLand. ComputerLand has
agreed to use this amount to purchase shares of
2.
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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.
The Company has guaranteed the obligations of Merisel FAB under the
Purchase Agreement and the Services Agreement pursuant to a Guaranty Agreement
dated January 31, 1994 (a copy of which is attached hereto as Exhibit 10.2).
The foregoing summary of the Company's acquisition of the Assets is
qualified in its entirety by reference to the exhibits attached hereto.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired
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Statements of Revenues and Operating Expenses of the Division for the
fiscal years ended September 30, 1993 and September 30, 1992, together with
notes thereto and report of independent auditors thereon, a copy of which is
attached hereto as Exhibit 99.
(b) Pro forma financial information
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It is impracticable at this time for the Company to file the required
pro forma financial information. The Company anticipates filing such
information within the next 45 days.
(c) Exhibits
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Exhibit 4: Stock Purchase Agreement dated January 31, 1994 between
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the Company and ComputerLand.
Exhibit 10.1: Asset Purchase Agreement dated January 31, 1994 between
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ComputerLand, Merisel FAB, and, for purposes of Section 2.2 thereof, the
Company. Portions of this agreement have been omitted from this filing pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended, but a complete
copy of this agreement has been separately filed with the Securities and
Exchange Commission.
Exhibit 10.2: Guaranty Agreement dated January 31, 1994 between
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ComputerLand and the Company.
Exhibit 10.3: Distribution and Services Agreement dated January 31,
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1994 between ComputerLand and Merisel FAB. A copy of this agreement has been
omitted from this filing pursuant to Rule 24b-2 of the Securities Exchange Act
of 1934, as amended,
3.
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but has been separately filed with the Securities and Exchange Commission.
Exhibit 10.4: Credit Agreement dated December 23, 1993 between the
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Company and NationsBank of Texas, N.A.
Exhibit 10.5: Amendment No. 1 to Credit Agreement dated December 23,
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1993.
Exhibit 10.6: Credit Agreement dated January 31, 1994 between Merisel
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FAB and NationsBank of Texas, N.A.
Exhibit 23: Consent of Ernst & Young.
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Exhibit 99: Statements of Revenues and Operating Expenses of the
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Division for the fiscal years ended September 30, 1993 and September 30, 1992,
together with notes thereto and report of independent auditors thereon.
4.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
MERISEL, INC.
By: /s/ James L. Brill
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James L. Brill
Senior Vice President, Finance
and Chief Financial Officer
Date: February 14, 1994
5.
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Index of Exhibits
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Exhibit
No. Description
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4 Stock Purchase Agreement dated January 31, 1994 between the
Company and ComputerLand
10.1 Asset Purchase Agreement dated January 31, 1994 between
ComputerLand, Merisel FAB, and, for purposes of Section 2.2
thereof, the Company. Portions of this Agreement have been
omitted from this filing pursuant to Rule 24b-2 of the
Securities Exchange Act of 1934, as amended, but a complete
copy of this Agreement has been separately filed with the
Securities and Exchange Commission.
10.2 Guaranty Agreement dated January 31, 1994 between
ComputerLand and the Company
10.3 Distribution and Services Agreement dated January 31, 1994
between ComputerLand and Merisel FAB. A copy of this
agreement has been omitted from this filing pursuant to Rule
24b-2 of the Securities Exchange Act of 1934, as amended,
but has been separately filed with the Securities and
Exchange Commission.
10.4 Credit Agreement dated December 23, 1993 between the Company
and NationsBank of Texas, N.A.
10.5 Amendment No. 1 to Credit Agreement dated December 23, 1993.
10.6 Credit Agreement dated January 31, 1994 among Merisel FAB,
the Company, as guarantor and NationsBank of Texas, N.A.
23 Consent of Ernst & Young.
99 Statement of Revenues and Operating Expenses of the Division
for the fiscal years ended September 30, 1993 and September
30, 1992.
6.
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") is made as of the 31st day
of January 1994 by and between Merisel, Inc., a Delaware corporation (the
"Company"), and ComputerLand Corporation, a Delaware corporation (the
"Purchaser").
R E C I T A L S:
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WHEREAS, in connection with the transactions contemplated by that
certain Asset Purchase Agreement dated as of the date hereof among the Company,
the Purchaser and Merisel FAB, Inc., the Company wishes to sell to the
Purchaser, on the terms and conditions set forth in this Agreement, a number of
shares of the Company's common stock, $.01 par value (the "Common Stock") as
contemplated by Section 1.2; and
WHEREAS, the Purchaser wishes to acquire such shares of Common Stock
on the terms and conditions set forth in this Agreement.
A G R E E M E N T
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NOW, THEREFORE, in consideration of the foregoing premises, the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
SECTION 1
Authorization and Issuance of the Shares
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1.1 Authorization of the Shares. The Company has authorized the
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issuance and sale of that number of shares of Common Stock contemplated by
Section 1.2 hereof.
1.2 Sale of the Shares. At the Closing (as defined in Section 7.1),
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subject to the terms and conditions hereof, the Company shall issue and sell to
the Purchaser, and the Purchaser shall purchase that number of shares of Common
Stock (the "Shares"), rounded to the nearest whole share, determined by dividing
the Additional Receivable Amount (as defined in the Distribution and Services
Agreement dated the date hereof between the Purchaser and Merisel FAB, Inc., a
wholly-owned subsidiary of the Company ("Merisel FAB")) as it shall exist at the
Closing (but not in excess of $20,000,000) by $18.13 (subject to adjustment for
stock splits, stock dividends and similar events). The aggregate purchase price
to be paid by the Purchaser for the Shares shall be equal to the Additional
Receivable Amount and shall be paid by cancellation by the Purchaser of the
Additional Receivable Amount (not to exceed $20,000,000).
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SECTION 2
Representations and Warranties of the Company
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The Company hereby represents and warrants to the Purchaser that:
2.1 Due Authorization and Execution. The Company has all necessary
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corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The Board of Directors of the Company has
duly authorized and approved the execution and delivery of this Agreement and
the performance by the Company of its obligations under this Agreement. No
other corporate proceeding or action on the part of the Company or its
stockholders is necessary to authorize and approve the execution and delivery of
this Agreement or the performance by the Company of its obligations under this
Agreement. This Agreement has been duly and validly executed and delivered by
the Company and, assuming due execution and delivery by the Purchaser,
constitutes the valid and binding obligation of the Company enforceable against
it in accordance with its terms, except as such enforcement may be limited by
(a) bankruptcy, insolvency, reorganization, moratorium or similar laws relating
to creditors' rights generally, (b) equitable principles (whether considered in
an action at law or in equity) or (c) laws or principles of law limiting the
enforceability of indemnification of or contribution for violations of
securities laws.
2.2 Organization of the Company. The Company is a corporation duly
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organized, validly existing and in good standing under the laws of State of
Delaware and has all requisite corporate power and authority to own, operate and
lease its properties and to carry on its business as now conducted. The Company
has made available or provided to the Purchaser complete and correct copies of
its charter and bylaws, each as amended to the date hereof. Each subsidiary of
the Company (a "Subsidiary") is a corporation duly organized, validly existing
and in good standing under the laws of its respective state of incorporation,
and each has all requisite corporate power and authority to own, operate and
lease its properties and to carry on its business as now conducted. The Company
and each Subsidiary are duly qualified or licensed to do business as a foreign
corporation and is in good standing in all other jurisdictions that require such
qualification or licensing except where the failure to so qualify would not have
a material adverse effect on the business, properties, assets, liabilities,
prospects, results of operation, or financial condition of the Company and the
Subsidiaries, taken as a whole (a "Company Material Adverse Effect").
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2.3 Capitalization.
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(a) The Company's authorized capital stock consists of 1,000,000
shares of preferred stock, none of which shares were issued and outstanding as
of the date hereof, and 50,000,000 shares of Common Stock, of which 29,604,229
shares were issued and outstanding as of December 31, 1993. All of the
outstanding shares of Common Stock have been duly authorized and validly issued,
are fully paid and non-assessable and are free of preemptive rights with respect
thereto. Except with respect to plans and agreements filed as exhibits to the
SEC Filings (as defined in Section 2.4), there are no outstanding preemptive,
conversion or other rights, options, warrants or agreements granted or issued by
or binding upon the Company for the purchase or acquisition of any shares of its
capital stock. Except with respect to shares of capital stock issued pursuant
to the foregoing plans and agreements, no shares of capital stock have been
newly issued by the Company since December 31, 1993.
(b) All Shares to be issued pursuant to the terms of this
Agreement will be duly authorized and validly issued, fully paid and
nonassessable.
2.4 Financial Statements and SEC Reports. The Company heretofore has
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delivered to the Purchaser true and complete copies of its Annual Report on Form
10-K for the fiscal year ended December 31, 1992 (the "1992 10-K"), the Proxy
Statement for the Company's 1993 Annual Meeting of Stockholders as filed with
the Securities and Exchange Commission (the "SEC") and any filings made with the
SEC since December 31, 1992 (the "SEC Reports") including any financial
statements or schedules included or incorporated by reference therein (the
"Company Financial Statements" and collectively with the SEC Reports, the "SEC
Filings"). As of their respective dates, the SEC Filings complied in all
material respects with all applicable requirements of the Securities Act of
1933, as amended (along with the rules and regulations thereunder, the
"Securities Act") and the Securities Exchange Act of 1934, as amended (along
with the rules and regulations thereunder, the "Exchange Act"). As of their
respective dates, the SEC Filings did not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The Company Financial Statements included
in the SEC Filings were prepared in accordance with generally accepted
accounting principles (as in effect from time to time) applied on a consistent
basis (except as may be indicated therein or in the notes thereto and except
that the quarterly financial statements do not contain all of the footnote
disclosures required by generally accepted accounting principles) and present
fairly, in all material respects, the consolidated financial position, results
of operations and cash flows of the
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Company and its subsidiaries as of the dates and for the periods indicated
(subject, in case of unaudited quarterly financial statements, to normal year-
end adjustments).
2.5 No Violation. Neither the execution and delivery of, nor the
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consummation of the transactions contemplated by, this Agreement will result in
any of the following: (a) a default or an event that, with notice or lapse of
time, or both, would constitute a default, breach or violation of the charter,
bylaws or other governing instruments of the Company or any of its Subsidiaries,
or any contract, agreement, license or instrument to which the Company or any of
its Subsidiaries is a party or by which any of them or their properties are
bound; (b) an event that would permit any Person, as such term is defined in the
Exchange Act, to terminate any contract, agreement, license or instrument to
which the Company or any of its Subsidiaries is a party or by which any of them
or their properties are bound, or to accelerate the maturity of any indebtedness
or other obligation of the Company or any of its Subsidiaries; (c) the creation
or imposition of any lien, mortgage, pledge, charge or encumbrance of any kind
upon any asset of the Company or any of its Subsidiaries; (d) a violation or
breach of any statute, ordinance, rule or regulation applicable to the Company
or any of its Subsidiaries, or any writ, injunction or decree of any court or
governmental instrumentality to which the Company or any of its Subsidiaries is
a party or by which any of them or their properties are bound; or (e) the
necessity to obtain the consent or approval of, or give notice to or register
with any nongovernment third party, in each of the cases set forth in (a)
through (e) above subject to exceptions which will not, individually or in the
aggregate, have a Company Material Adverse Effect.
2.6 Governmental Consents. Other than in connection with the Hart-
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Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the Securities
Act (as contemplated by Section 4), no notice to or filing with, and no
authorization, consent or approval of, any domestic or foreign court or any
public or governmental body or authority is necessary for the consummation by
the Company of the transactions contemplated by this Agreement, except for
notices or filings the failure to give or make, and authorizations, consents and
approvals the failure to obtain, would not, individually or in the aggregate,
have a Company Material Adverse Effect, or materially and adversely affect the
ability of the Company to consummate the transactions contemplated hereby.
2.7 Compliance with Law. Neither the Company nor any of its
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Subsidiaries has been, or is now, in violation of any federal, state or local
laws, regulations or orders relating to the operation, conduct or ownership of
the property or business of the Company or any of its Subsidiaries, which
violations have
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or will have a Company Material Adverse Effect. Each of the Company and its
Subsidiaries has all licenses, permits and certificates from governmental
agencies necessary for the conduct of its business as now conducted, the failure
of which would have a Company Material Adverse Effect.
2.8 Litigation. There is no action, suit, proceeding or
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investigation pending or, to the knowledge of the Company, threatened against
the Company or any of its Subsidiaries at law or in equity, or before or by any
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, which, if adversely
determined, would have a Company Material Adverse Effect. Neither the Company
nor any of its Subsidiaries is subject to any judgment, award, decree,
injunction, rule or order of any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, which has or could have a Company Material Adverse Effect.
2.9 No Material Adverse Change. Since September 30, 1993 the Company
--------------------------
has not suffered any Company Material Adverse Effect.
2.10 Registration Statement. On the effective date of the
----------------------
Registration Statement (as defined in Section 4), the Registration Statement
(including documents incorporated therein by reference, financial statements and
schedules) other than the Written Information (as defined in Exhibit A) and the
prospectus relating thereto will contain all material information required to be
included therein by the Securities Act and will conform in all material respects
to the requirements of the Securities Act and will not include any untrue
statement of a material fact or will omit to state a material fact required to
be stated therein or necessary to make the Statements therein, in light of the
circumstances under which they were made, not misleading.
SECTION 3
Representations, Warranties and Covenants of the Purchaser
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The Purchaser represents, warrants and covenants to the Company that:
3.1 Investment Intent. The Purchaser is acquiring the Shares for
-----------------
investment for the Purchaser's own account and not with the view to, or for
resale in connection with, any distribution thereof in violation of any
applicable securities laws. The Purchaser understands that the issuance of the
Shares has not been registered under the Securities Act by reason of specified
exemptions therefrom which depend upon, among other
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things, the bona fide nature of the Purchaser's investment intent as expressed
herein and as explicitly acknowledged hereby.
3.2 Investigation and Experience. The Purchaser has had an
----------------------------
opportunity to discuss the Company's business, management and financial affairs
with the Company's management. The officers of the Company have made available
to the Purchaser any and all written information which it has requested and have
answered, to the Purchaser's satisfaction, all inquiries made thereby. The
Purchaser acknowledges that the investment in the Shares contemplated by this
Agreement involves risk. The Purchaser has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of an investment in the Company and has the capacity to protect its own
interests in connection with this Agreement and the transactions contemplated
hereby.
3.3 Compliance with Laws. The Purchaser understands and agrees that
--------------------
the issuance of the Shares it is acquiring hereunder have not been registered
under the Securities Act and are characterized as "Restricted Securities" under
the federal securities laws and that under such laws and applicable regulations
such securities may be resold without registration under the Securities Act only
in reliance on exemptions available under the Securities Act. In this
connection the Purchaser represents that it is aware of and understands Rule 144
under the Securities Act, as presently in effect. Purchaser agrees that any
resale of the Shares by the Purchaser will be in compliance with all applicable
securities laws.
3.4 Accredited Investor. The Purchaser is an "accredited investor"
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within the meaning of Rule 501 under the Securities Act.
SECTION 4
Registration of Shares
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The Company agrees it will use its best efforts to cause a
registration statement on Form S-3 covering the resale of the Shares (the
"Registration Statement") to be filed with, and to be declared effective by, the
SEC as promptly as practicable. Additional agreements relating to such
registration of the Shares are attached hereto as Exhibit A.
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SECTION 5
Conditions of the Purchaser's Obligations
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The obligation of the Purchaser to purchase the Shares at the Closing
is subject to the fulfillment on or prior to the Closing Date (as defined in
Section 7 below) of each of the following conditions, any of which may be waived
in whole or in part by the Purchaser:
5.1 Representations and Warranties. The representations and
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warranties made by the Company in Section 2 hereof shall be true and correct in
all material respects as of the date made and on the Closing Date (unless made
as of a specific date).
5.2 Performance. All covenants, agreements and conditions contained
-----------
in this Agreement to be performed or complied with by the Company on or prior to
the Closing Date shall have been performed or complied with in all material
respects.
5.3 Officer's Certificate. The Purchaser shall have received a
---------------------
certificate executed by an officer of the Company and dated as of the Closing
Date to the effect that the conditions set forth in Sections 5.1, 5.2 and 5.4
have been satisfied at and as of the Closing Date.
5.4 Waiting Periods; Prohibitions. Any applicable waiting periods
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under the HSR Act shall have expired or been terminated and there shall have
been no statute, rule, injunction or other order promulgated, enacted, entered
or enforced by any state, federal or foreign government or governmental
authority or by any court, domestic or foreign, of competent jurisdiction which
restrains, prohibits or delays the performance of this Agreement.
5.5 Registration Statement. The Registration Statement shall have
----------------------
been declared effective by the SEC on or before June 30, 1994.
SECTION 6
Conditions of the Company's Obligations
---------------------------------------
The Company's obligation to sell the Shares at the Closing is subject
to the fulfillment on or prior to the Closing Date of each of the following
conditions, any of which may be waived in whole or in part by the Company.
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6.1 Representations and Warranties. The representations and warranties
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made by the Purchaser in Section 3 hereof shall be true and correct in all
material respects as of the date made and on the Closing Date.
6.2 Performance. All covenants, agreements and conditions contained
-----------
in this Agreement to be performed or complied with by the Purchaser on or prior
to the Closing Date shall have been performed or complied with in all material
respects.
6.3 Officer's Certificate. The Company shall have received separate
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certificates executed by an officer of each of the Purchaser and dated as of the
Closing Date to the effect that the conditions set forth in Sections 6.1, 6.2
and 6.4 have been satisfied at and as of the Closing Date.
6.4 Waiting Periods; Prohibitions. Any applicable waiting periods
-----------------------------
under the HSR Act shall have expired or been terminated and there shall have
been no statute, rule, injunction or other order promulgated, enacted, entered
or enforced by any state, federal or foreign government or governmental
authority or by any court, domestic or foreign, of competent jurisdiction which
restrains, prohibits or delays the performance of this Agreement.
6.5 Registration Statement. The Registration Statement shall have
----------------------
been declared effective by the SEC on or before June 30, 1994.
SECTION 7
Closing, Payment and Delivery
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7.1 Closing Date and Place of Closing. The Closing shall occur at
---------------------------------
10:00 a.m., local time, on the date the Registration Statement has been declared
effective by the SEC (the "Closing Date"), or on such later date as the Company
and the Purchaser shall agree. The Company shall give the Purchaser at least
two business days' notice of the Closing Date. The place of the Closing shall
be at the Los Angeles offices of Riordan & McKinzie, 200 South Grand Avenue,
29th Floor, Los Angeles, California 90071 or at such other place as the
Purchaser and the Company shall agree. If for any reason the Closing Date shall
not have occurred on or before June 30, 1994, this Agreement shall be null and
void without recourse to the parties hereto.
7.2 Payment and Delivery. At the Closing the Purchaser shall deliver
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written evidence of the cancellation of Merisel FAB's obligation to pay the
Additional Receivable Amount,
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and the Company shall immediately deliver to the Purchaser a certificate or
certificates representing the Shares registered in the Purchaser's name. At the
Closing, the Company shall pay to the Purchaser, by wire transfer in immediately
available funds, all unpaid and accrued interest on the Additional Receivable
Amount.
SECTION 8
Miscellaneous
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8.1 Governing Law. This Agreement shall be governed in all respects
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by the laws of the State of California.
8.2 Successors and Assigns; Assignment. Except as otherwise
----------------------------------
expressly provided herein, the terms and provisions hereof shall inure to the
benefit of, and be binding upon, the successors, assigns, heirs, executors and
administrators of the parties hereto. This Agreement may not be assigned
without the written consent of the parties hereto except to (i) an Affiliate or
a Secured Lender to the Purchaser (as defined in Article IX of the Services
Agreement) on the terms and conditions set forth in Article IX of the Services
Agreement and (ii) a transferee of all of the Shares that is an entity that
meets the requirements of Section 11.7 of the Asset Purchase Agreement (as
defined in Exhibit A).
8.3 Notices. All notices, requests, demands and other communications
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which are required or may be given under this Agreement shall be given by
personal delivery or by Federal Express or similar overnight courier, addressed
as follows:
If to the Company:
Merisel, Inc.
200 Continental Boulevard
El Segundo, California 90245
Attention: Mr. Michael D. Pickett,
Co-Chairman and Chief Executive Officer
with a copy to:
Riordan & McKinzie
300 South Grand Avenue
Los Angeles, California 90071
Attention: Robert G. Morrish, Esq.
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If to the Purchaser:
ComputerLand Corporation
5964 West Las Positas Boulevard
Post Office Box 9012
Pleasanton, California 94566-9012
Attention: Richard F. Vitkus, Esq.
with a copy to:
O'Sullivan, Graev & Karabell
30 Rockefeller Place
New York, New York 10112
Attention: Lawrence G. Graev, Esq.
8.4 No Third Party Beneficiaries. Nothing in this Agreement, express
----------------------------
or implied, is intended or shall be construed to confer upon or to give any
person, firm or corporation, other than the parties hereto, any rights or
remedies under or by reason of this Agreement.
8.5 Transfer Procedures. Should the Purchaser desire to sell or
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otherwise dispose of all or any part of the Shares to be purchased hereunder at
any time when the Registration Statement shall not be effective (or when notice
has been given by the Company pursuant to Section 2(d)(ii) through (v) of
Exhibit A), the Purchaser shall deliver to the Company a written opinion of
counsel, reasonably satisfactory in form and substance to the Company, that an
exemption from registration under the Securities Act is available and that the
proposed disposition would comply with the Securities Act and any applicable
state securities laws. Upon original issuance of the Shares and until such time
as the same is no longer required under the applicable requirements of the
Securities Act, the Shares shall bear a legend in substantially the following
form:
"SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR QUALIFIED UNDER ANY
STATE SECURITIES LAW. SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED,
OR OTHERWISE ASSIGNED UNLESS PURSUANT TO REGISTRATION UNDER THE
SECURITIES ACT AND SUCH LAWS OR EXCEPT PURSUANT TO AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT EXEMPTIONS FROM
THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS ARE
AVAILABLE."
The Company is hereby authorized to refuse to register a transfer of Shares that
would be in violation of Article IX of the Services Agreement.
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8.6 Counterparts. This Agreement may be executed in any number of
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counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
8.7 Titles and Subtitles. The titles of the sections of this
--------------------
Agreement are for convenience of reference only and are not to be considered in
construing this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their duly authorized officers as of the date first
written above.
THE COMPANY
- -----------
MERISEL, INC.
By /s/ Timothy N. Jenson
---------------------
Title: Vice President
--------------
THE PURCHASER
- -------------
COMPUTERLAND CORPORATION
By /s/ Ware Grove
--------------
Title: Vice President, Treasurer
-------------------------
-11-
<PAGE>
Exhibit A to
Stock Purchase Agreement
Registration Rights for Shares
------------------------------
Capitalized terms used herein and not otherwise defined shall have the
respective meanings given such terms in the Stock Purchase Agreement (the
"Agreement") to which Exhibit A is attached.
1. Definitions. For purposes of this Exhibit A;
-----------
(a) the term "registration statement" shall mean a registration
statement on Form S-3 (or other appropriate form) of the Company filed with the
SEC which covers the resale of the Shares, including any amendments or
supplements thereto;
(b) the terms "effective" and "declaration of the effectiveness"
refer to any declaration of the effectiveness of a registration statement by the
SEC;
(c) the term "registration expenses" means all reasonable
expenses incurred by the Company in complying with Section 2 hereof, including,
without limitation, all registration and filing fees and printing expenses but
shall not include the fees and disbursements of counsel and accountants for the
Company; and
(d) the term "prospectus" shall mean the prospectus included in
the registration statement, as amended or supplemented.
2. Obligations of the Company. In connection with the
--------------------------
registration of the resale of the Shares pursuant to the provisions of Section
4.1 of the Stock Purchase Agreement, the Company shall use it best efforts to:
(a) (i) Prepare and file the registration statement with
the SEC and cause the registration statement to become effective by as soon as
practicable, and (ii) keep the registration statement effective until the
earlier of (A) 36 months following the date of Closing (which period shall be
extended for the period during which any holder of Shares shall be required to
discontinue the disposition of the Shares pursuant to the last paragraph of this
Section 2) or (B) the date on which all Shares have been sold pursuant to the
registration statement or an exemption from registration is available.
(b) Prepare and file with the SEC such amendments and supplements
to the registration statement and any prospectus used in connection with the
registration statement as may be
1.
<PAGE>
necessary to keep the registration statement effective for the period set forth
in clause (a) above and to comply with the provisions of the Securities Act with
respect to the disposition of all Shares.
(c) Furnish to each holder of Shares such number of copies of the
registration statement, each amendment and supplement thereto (in each case
including all exhibits thereto and documents incorporated by reference therein)
and the prospectus included in the registration statement (including each
preliminary prospectus) as such holder may reasonably request in order to
facilitate the disposition of the Shares; and the Company hereby consents
(subject to the last paragraph of this Section 2) to the use of the prospectus
(or any supplement or amendment thereto) by each of the selling holders of
Shares in connection with the offering and sale of Shares.
(d) Promptly notify the selling holders of Shares (i) when the
registration statement, the prospectus or any prospectus or any prospectus
supplement or post-effective amendment has been filed, and, with respect to such
registration statement or any post-effective amendment, when the same has become
effective, (ii) of any request by the SEC for amendments or supplements to the
registration statement or the prospectus or for additional or supplemental
information, (iii) of the issuance by the SEC of any stop order suspending the
effectiveness of the registration statement or the initiation of any proceedings
for that purpose, (iv) at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the Company's becoming
aware that the prospectus included in the registration statement, as then in
effect, or any document incorporated or deemed to be incorporated therein by
reference includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing, or (v)
of the Company's reasonable determination that a post-effective amendment to the
registration statement would be appropriate.
(e) Make reasonable efforts to obtain the withdrawal of any
order suspending the effectiveness of the registration statement hereunder or
any post-effective amendment thereto as promptly as practicable.
(f) Upon the occurrence of any event contemplated by Section
2(d)(iv) or (v) above, as promptly as practicable prepare a supplement or
post-effective amendment to the registration statement or a supplement to the
prospectus or any document incorporated or deemed to be incorporated therein by
reference, or file any other required document so that, as
2.
<PAGE>
thereafter delivered to the purchasers of the Shares being sold thereunder, such
prospectus will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(g) Use its reasonable best efforts to cause all such Shares
which have been so registered to be listed on each securities exchange and the
National Association of Securities Dealers' interdealer quotation system on
which the Common Stock is then listed, if any.
(h) Register or qualify the Shares for offer and sale under the
securities or Blue Sky laws of such jurisdictions as any holder of Shares
requests in writing; keep each such registration or qualification (or exemption
therefrom) effective during the period the Registration Statement is required to
be kept effective; and do any and all other acts or things necessary or
advisable to enable the disposition in such jurisdictions of the Shares;
provided, however, that the Company will not be required to qualify generally to
- -------- -------
do business in any jurisdiction where it not then so qualified or to take any
action which would subject it to general service of process in any jurisdiction
where it is not then so subject; and provided that all out-of-pocket expenses
incurred by the Company in complying with this Section 2(h) shall be borne by
the requesting holder (and this amount shall not be limited by the proviso
contained in Section 4).
Each holder of Shares agrees by acquisition of such Shares that, upon
receipt of any notice from the Company of the happening of any event of the kind
described in Section 2(d)(ii), (iii), (iv) or (v), such holder will forthwith
discontinue disposition of Shares until such holder's receipt of the copies of
the supplemented or amended prospectus contemplated by Section 2(f), or until it
is advised in writing (the "Advice") by the Company that the use of the
applicable prospectus may be resumed, and has received copies of any amendments
or supplements thereto.
3. Furnish Information. Each holder of Shares shall furnish to
-------------------
the Company such information regarding itself, the Shares held by such holder,
and the intended method of disposition of such Shares as shall be required under
the Securities Act to effect the registration of the Shares. In that
connection, each holder of Shares shall be required to represent to the Company
that all such information which is given is both complete and accurate in all
material respects.
3.
<PAGE>
4. Expenses of Registration. All registration expenses
------------------------
incurred by the Company in connection with the registration pursuant to this
Exhibit A shall be borne by the Purchaser; provided, that the Purchaser's
--------
maximum obligations under this Section 4 shall be an amount equal to the actual
registration and listing fees paid by the Company to the SEC and the National
Association of Securities Dealers, Inc. plus $5,000.
5. Indemnification.
---------------
(a) To the extent permitted by the Securities Act, the
Company will indemnify and hold harmless each holder of Shares, each person, if
any, who controls each holder of Shares within the meaning of the Securities Act
or the Securities Exchange Act of 1934, as amended (the "Exchange Act") and
their respective employees, officers, directors, partners and agents
(collectively, the "Indemnifiable Parties"), against any and all losses,
claims, damages, expenses or liabilities (joint or several), insofar as such
losses, claims, damages, expenses or liabilities (or actions in respect thereof)
arise from or are based upon any of the following statements, omissions or
violations (collectively a "Violation"): (i) any untrue statement or alleged
untrue statement of a material fact contained in the registration statement,
including any preliminary prospectus or final prospectus contained therein, or
any amendments or supplements thereto or (ii) the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading; provided, however, that the
-------- -------
indemnity agreement contained in this Section 5(a) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability, expense or action
if such settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld), nor shall the Company be liable in any
such case for any such loss, claim, damage, liability, expense or action to the
extent that it arises from or is based upon a Violation which occurs in reliance
upon and in conformity with the Written Information (as defined in Section 5(b))
furnished by the Indemnifiable Party seeking indemnification, nor shall the
Company be liable to an Indemnifiable Party for any such loss, claim, damage,
liability, expense or action to the extent that it arises from or is based upon
(i) any untrue statement or omission or alleged untrue statement or omission
contained in any preliminary prospectus or final prospectus, or any amendments
or supplements thereto, delivered by such Indemnifiable Party after the Company
had provided notice to the holder of Shares, that such preliminary or final
prospectus or such amendment or supplement thereto contained such untrue
statement or omission or alleged untrue statement or omission or (ii) the
failure of such Indemnifiable Party to deliver any preliminary prospectus or
final prospectus,
4.
<PAGE>
or any amendments or supplements thereto, required under applicable securities
laws, including the Securities Act, to be so delivered, provided that a
sufficient number of copies thereof had been provided by the Company to such
Indemnifiable Party.
(b) To the extent permitted by the Securities Act, each
holder of Shares will indemnify and hold harmless the Company, each person, if
any, who controls the Company within the meaning of the Securities Act or the
Exchange Act, and their respective employees, officers, directors, partners and
agents (collectively, the "Company Indemnifiable Parties") against any and all
losses, claims, damages, expenses or liabilities (joint or several), insofar as
such losses, claims, damages, expenses or liabilities (or actions in respect
thereto) arise from or are based upon any Violations to the extent (and only to
the extent) that such Violation occurs in reliance upon and in conformity with
the respective written information furnished by such holder of Shares for use in
connection with such registration, including (without limitation) the Financial
Statements, (as defined in the Asset Purchase Agreement dated as of the date
hereof (the "Asset Purchase Agreement"), among the Purchaser, Merisel FAB and,
for purposes of Section 2.2 thereof, the Company) provided by the Purchaser
pursuant to the Asset Purchase Agreement, (the "Written Information"). If and
to the extent that the Company asserts claims hereunder with respect to the
Financial Statements, (i) such claim shall be treated, for the purposes of
determining the amount of liability only, as if it were a Loss under Section 7.6
of the Asset Purchase Agreement and shall be cumulated with any other Losses
thereunder for the purposes of applying the monetary limitations on
indemnification set forth therein, and (ii) in no event shall any indemnity
under this Section 5(b) exceed the gross proceeds from the offering received by
such holder of Shares. In no event will any holder of Shares have any liability
under this Section 5(b) for any Violations by any other holder of Shares.
(c) Promptly after receipt by an indemnified party under
this Section 5 of notice of the commencement of any action (including any action
by a governmental agency), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section 5,
notify the indemnifying party in writing of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
-------- -------
have the right to retain its own counsel, with the fees and expenses of one such
counsel to be paid by the indemnifying party, if, based upon the written opinion
of counsel for the indemnified
5.
<PAGE>
party, representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to an actual or potential conflict
of interests between such indemnified party and any other party represented by
such counsel in such proceeding. The failure to promptly notify an indemnifying
party of the commencement of any such action shall relieve such indemnifying
party of any liability to the indemnified party under this Section 5 to the
extent such failure was prejudicial to its ability to defend such action, but
the omission so to notify the indemnifying party will not relieve it of any
liability that it may have to any indemnified party otherwise than under this
Section 5.
(d) If the indemnification provided for in this Section 5
is unavailable to any indemnified party in respect of any losses, claims,
damages, expenses, liabilities actions referred to herein, then each such
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, expenses, liabilities or actions in such
proportion as is appropriate to reflect the relative fault of the Company and
the holders of Shares in connection with the statements or omissions which
resulted in such losses, claims, damages, expenses, liabilities or actions, as
well as any other relevant equitable considerations. The relative fault of the
Company and the holders of Shares shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by such party and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.
The Company and the holders of Shares agree that it would not be just
and equitable if contribution pursuant to this Section 5 were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of
the losses, claims, damages, expenses, liabilities or actions referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 5 no holder of
Shares shall be required to contribute any amount in excess of the amount by
which the proceeds of the offering (before deducting expenses) received by such
holder, exceeds the amount of any damages which such holder, has otherwise been
required to pay by reason of such untrue or
6.
<PAGE>
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
(e) The obligations of the Company and each holder of
Shares under this Section 5 shall survive the completion of any offering of
Shares in a registration statement made under the terms of the Agreement,
including this Exhibit A.
7.
<PAGE>
REDACTED
VERSION
================================================================================
ASSET PURCHASE AGREEMENT
DATED AS OF JANUARY 31, 1994,
AMONG
COMPUTERLAND CORPORATION,
MERISEL FAB, INC.
AND,
FOR PURPOSES OF SECTION 2.2,
MERISEL, INC.
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
ARTICLE I TRANSFER OF PURCHASED ASSETS, ASSUMPTION OF
LIABILITIES AND RELATED MATTERS 1
1.1. Transfer of Assets.......................................... 1
1.2. Assets Not Being Transferred................................ 3
1.3. Liabilities Being Assumed................................... 6
1.4. Liabilities Not Being Assumed............................... 6
1.5. Seller's Continued Performance of Certain Agreements........ 7
1.6. Use of Name................................................. 7
1.7. Instruments of Conveyance and Transfer, Etc................. 8
1.8. Further Assurances; Etc..................................... 8
1.9. Assignment of Contracts and Rights.......................... 8
1.10. Collection of Receivables, Royalties, Etc................... 9
1.11. Franchisee Audits........................................... 9
ARTICLE II PURCHASE PRICE; ALLOCATION.................................. 10
2.1. Purchase Price; Payment..................................... 10
2.2. Adjustable Portion of Purchase Price........................ 10
2.3. Allocation of Purchase Price................................ 19
ARTICLE III REPRESENTATIONS AND WARRANTIES.............................. 19
3.1. Representations and Warranties of the Seller................ 19
3.2. Certain Qualifications and Limitations Relating to
Representations and Warranties of the Seller............... 25
3.3. Representations and Warranties of the Buyer................. 26
ARTICLE IV [INTENTIONALLY OMITTED]..................................... 28
ARTICLE V CONDITIONS PRECEDENT TO CLOSING............................. 28
5.1. Conditions to Each Party's Obligations...................... 28
5.2. Conditions to Obligations of the Buyer...................... 29
ARTICLE VI CLOSING..................................................... 32
ARTICLE VII INDEMNIFICATION............................................. 33
7.1. Indemnification by the Seller............................... 33
7.2. Indemnification by the Buyer................................ 33
7.3. Assertion of Claims......................................... 34
7.4. Notice and Defense of Third Party Claims.................... 34
7.5. Survival of Representations, Warranties and Covenants....... 36
7.6. Limitations on Indemnification.............................. 36
7.7. Remedies Exclusive.......................................... 37
ARTICLE VIII ADDITIONAL POST-CLOSING AGREEMENTS.......................... 37
8.1. Mutual Protection of Goodwill in Trademarks, Etc............ 37
8.2. Seller's Restrictive Covenant............................... 38
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
8.3. Access...................................................... 39
8.4. Renewals and Assignments of Franchise Agreements............ 40
8.5. Confidentiality Matters..................................... 41
8.6. Sale of Certain Notes and Equity - Right of First Offer..... 41
8.7. Change of Name.............................................. 42
8.8. Vendor Consents............................................. 42
8.9. No Solicitation of Employees................................ 42
8.10. Financial Statements........................................ 42
ARTICLE IX [INTENTIONALLY OMITTED]..................................... 43
ARTICLE X EMPLOYMENT MATTERS.......................................... 43
10.1. Obligations of Buyer........................................ 43
10.2. Obligations of Seller....................................... 44
ARTICLE XI MISCELLANEOUS............................................... 44
11.1. Expenses; Transfer Taxes, Etc............................... 44
11.2. Entire Agreement............................................ 45
11.3. Descriptive Headings........................................ 45
11.4. Notices..................................................... 45
11.5. Counterparts................................................ 46
11.6. Governing Law............................................... 46
11.7. Benefits of Agreement....................................... 46
11.8. Pronouns.................................................... 47
11.9. Severability................................................ 47
11.10. Authorization............................................... 47
11.11. Amendment, Modification and Waiver.......................... 47
11.12. Confidentiality Agreement................................... 48
</TABLE>
-ii-
<PAGE>
ATTACHMENTS
-----------
<TABLE>
<CAPTION>
ANNEXES
- -------
<S> <C>
Annex 1.1(a) Trademarks
Annex 1.1(h) Additional Purchased Assets
Annex 1.1(i) Patents
Annex 1.1(j) Notes
Annex 1.2(t) Additional Excluded Assets
Annex 1.3(c) Assumed Obligations
Annex 2.3 Allocation of Purchase Price
Annex 5.1(g) Repurchase Agreements
SCHEDULES
- ---------
Schedule 2.2(b)(i) Seller's 11-Month Inventory Cost
Schedule 3.1(b) Authority
Schedule 3.1(c) Governmental Consents
Schedule 3.1(d) Financial Statements
Schedule 3.1(e) Equity Investments
Schedule 3.1(f) Franchisee Indebtedness
Schedule 3.1(g) Claims
Schedule 3.1(h) Reseller Contracts
Schedule 3.1(i) Intellectual Property Rights
Schedule 3.1(j) Litigation
Schedule 3.1(k) Compliance
Schedule 3.1(l) Seller's Brokers
Schedule 3.1(m) Absence of Changes
Schedule 3.1(n) Product Warranty Claims
Schedule 3.1(o) Franchise Matters
Schedule 3.1(p) Employee Benefits
Schedule 3.3(d) Buyer's Financing Commitments
Schedule 3.3(e) Buyer's Brokers
Schedule 7.6 Trademark Matters
Schedule 8.2 Companies Excluded From Restrictive Covenant
Schedule 8.3(a) Seller's Contracts Restricting Access
Schedule 8.3(b) Buyer's Contracts Restricting Access
Schedule 11.7(a)(ii) Prohibited Transferees
Schedule 11.7(a)(iii) Permitted Transferees
</TABLE>
-iii-
<PAGE>
DEFINITIONS
-----------
The following terms which may appear in more than one Section
of this Agreement are defined in the following Sections:
<TABLE>
<CAPTION>
SECTION OR
TERM OTHER LOCATION
- ---- --------------
<S> <C>
Ad Fund Agreement............................................ 1.1(e)
Affiliate.................................................... 2.2(a)
Audited Financial Statements................................. 4.11
Authorizations............................................... 3.1(k)
Base Volume.................................................. 2.2(a)
Baseline Period.............................................. 2.2(a)
Bill of Sale and Assumption.................................. 1.7
Business Day................................................. 11.4
Buyer........................................................ Caption
Buyer Datago Purchaser....................................... 2.2(a)
Buyer Franchisee............................................. 2.2(a)
Buyer Repurchase Agreements.................................. 5.1(g)
Buyer Subject Business....................................... 2.2(a)
Buyer Indemnitees............................................ 7.1
Claims....................................................... 3.1(g)
Closing...................................................... Article VI
Closing Date................................................. Article VI
Commencement Date............................................ 2.2(a)
ComputerLand Store........................................... 2.2(a)
Confidential Information..................................... 8.5(b)
Confidentiality Agreement.................................... 4.7
Contracts.................................................... 1.1
Copyright Assignment......................................... 1.7
Datago Agreements............................................ 1.1(c)
Datago Conversion Agreements................................. 1.1(d)
Datago Purchasers............................................ 1.1(c)
Designated Territory......................................... 1.1(a)
Earnout Amount............................................... 2.2(d)
Earnout Period............................................... 2.2(a)
Eligible Customer............................................ 2.2(a)
Eligible Vendor.............................................. 2.2(a)
Eligible Volume.............................................. 2.2(a)
Exchange Act................................................. 11.7
Excluded Assets.............................................. 1.2
Excluded Obligations......................................... 1.4
Financial Statements......................................... 3.1(d)
First Earnout Period......................................... 2.2(a)
First Year Volume............................................ 2.2(a)
Franchise Agreements......................................... 1.1(b)
Franchisees.................................................. 1.1(b)
GAAP......................................................... 2.2(a)
Guaranty Agreement........................................... Recital
</TABLE>
-iv-
<PAGE>
<TABLE>
<CAPTION>
SECTION OR
TERM OTHER LOCATION
- ---- --------------
<S> <C>
HSR Act...................................................... 3.1(c)
Indemnified Party............................................ 7.4
Indemnifying Party........................................... 7.3
Inventory Cost............................................... 2.2(a)
Investments.................................................. 8.6
Laws......................................................... 3.1(k)
License Agreement............................................ 1.6
Losses....................................................... 7.1
Material Adverse Effect...................................... 3.2(c)
Merisel...................................................... Recital
Merisel Americas............................................. 5.1(d)
Merisel Group................................................ 2.2(g)
Open Distribution............................................ 2.2(a)
Open Distribution Vendors.................................... 2.2(a)
Operative Contracts.......................................... 3.1(h)
Other Distribution Business.................................. 2.2(a)
Outside Accountants.......................................... 2.2(a)
Proceeding................................................... 7.4(a)
Products..................................................... 2.2(a)
Patent Assignment............................................ 1.7
Patents...................................................... 1.1(i)
Products..................................................... 2.2(a)
Purchased Assets............................................. 1.1
Reseller Contracts........................................... 3.1(h)
Restriction Period........................................... 8.2(a)
Restrictive Covenant......................................... 2.1
Retained Businesses.......................................... Recital
Second Earnout Period........................................ 2.2(a)
Second Year Volume........................................... 2.2(a)
Seller....................................................... Caption
Seller Indemnitees........................................... 7.2
Seller Repurchase Agreements................................. 5.1(g)
Seller Receivables........................................... 1.10
Services Agreement........................................... 5.1(e)
Stock Purchase Agreement..................................... 5.1(h)
Subject Business............................................. Recital
Survival Date................................................ 7.5
Third Party Resellers........................................ 1.1(c)
Trademark Assignment......................................... 1.7
Trademarks................................................... 1.1(a)
Volume Purchase Agreement.................................... 5.1(d)
</TABLE>
-v-
<PAGE>
ASSET PURCHASE AGREEMENT dated as of January 31, 1994,
among COMPUTERLAND CORPORATION, a Delaware corporation
(the "Seller"), MERISEL FAB, INC., a Delaware
corporation (the "Buyer"), and, for purposes of Section
2.2 hereof, MERISEL, INC., a Delaware corporation
("Merisel").
The Seller is engaged in the sale, distribution and servicing of
microcomputer systems and related products and services throughout the world.
Through its United States Franchise and Distribution Division, the Seller is
engaged in the business (the "Subject Business") of granting franchises to
dealers of microcomputer systems and products located in the Designated
Territory (as defined in Section 1.1(a)) and conducting the wholesale
distribution of microcomputer systems and products to such franchisees and to
independent dealers located in the Designated Territory. The Seller desires to
sell, transfer, convey and assign to the Buyer, and the Buyer desires to
purchase and acquire from the Seller, certain assets and rights of the Seller
relating to the Subject Business, subject to the assumption by the Buyer of
certain obligations and liabilities of the Seller, in accordance with the terms
and subject to the conditions set forth in this Agreement. For convenience of
reference, the Seller's businesses other than the Subject Business are referred
to herein as the "Retained Businesses".
The Buyer is a wholly-owned subsidiary of Merisel, which has been
organized by Merisel for the purpose of acquiring the Subject Business from the
Seller. In connection therewith, and as an inducement for the Seller to execute
and deliver this Agreement with the Buyer, Merisel is executing and delivering
to the Seller simultaneously herewith a Guaranty Agreement (the "Guaranty
Agreement") with respect to the payment and performance by the Buyer of all
Guaranteed Obligations (as defined therein), including, without limitation, the
obligations of the Buyer under Sections 2.1(b) and 2.2 hereof.
NOW THEREFORE, in consideration of the premises and of the mutual
representations, warranties, covenants and agreements hereinafter set forth, the
parties hereby agree as follows:
ARTICLE I
TRANSFER OF PURCHASED ASSETS, ASSUMPTION OF
LIABILITIES AND RELATED MATTERS
1.1. TRANSFER OF ASSETS. On the terms and subject to the conditions
------------------
of this Agreement, at the Closing, the Seller shall sell, transfer, convey and
assign to the Buyer, and the Buyer shall purchase and acquire from the Seller,
all of the
<PAGE>
Seller's right, title and interest in, to and under the following (and only the
following) assets, properties and rights relating to the Subject Business (other
than any such assets, properties or rights which constitute Excluded Assets (as
defined in Section 1.2)), as the same shall exist immediately prior to the
Closing:
(a) solely with respect to, and for use in, the 50 states of the
United States of America and the District of Columbia (collectively
referred to herein as the "Designated Territory"), the name and trademark
"ComputerLand" and the other trademarks, tradenames, service marks and
logos set forth on ANNEX 1.1(A) (collectively, the "Trademarks"), including
------------
all issued or pending registrations and applications for registrations
relating thereto and all goodwill appurtenant to any of the Trademarks
within the Designated Territory and the right to license and assign the
name and trademark "ComputerLand", the other Trademarks and the Patents (as
defined below) anywhere within the Designated Territory;
(b) all franchise agreements, including all amendments,
addendums and attachments thereto, and all collateral or related agreements
with respect thereto of the categories listed on SCHEDULE 3.1(H)
---------------
(collectively, the "Franchise Agreements"), between the Seller and its
franchisees (the "Franchisees") located in the Designated Territory (a
complete list of which Franchise Agreements as of the date of this
Agreement is included in SCHEDULE 3.1(H));
---------------
(c) subject to Section 1.9(b), all Datago distribution
agreements, including all amendments, addendums and attachments thereto,
and all collateral or related agreements with respect thereto of the
categories listed on SCHEDULE 3.1(H) (collectively, the "Datago
---------------
Agreements"), between the Seller and its Datago dealers (the "Datago
Purchasers"; and the Franchisees and the Datago Purchasers being
collectively referred to herein as the "Third Party Resellers") located in
the Designated Territory (a complete list of which Datago Agreements as of
the date of this Agreement is included in SCHEDULE 3.1(H));
---------------
(d) all agreements (the "Datago Conversion Agreements") between
the Seller and any of its Franchisees or former Franchisees relating to the
conversion of such Franchisees to Datago Purchasers (a complete list of
which Datago Conversion Agreements as of the date of this Agreement is
included in SCHEDULE 3.1(H));
---------------
(e) the Ad Fund Trust Account Agreement (the "Ad Fund
Agreement") relating to the advertising fund
-2-
<PAGE>
established for the Franchisees under the Franchise Agreements and all cash
balances held for the benefit of the Franchisees thereunder to the extent
of the Seller's interest therein;
(f) all signs in the possession of any of the Franchisees which
are owned by the Seller, all forms, labels, catalogs, brochures, art work,
photographs and advertising material in the Seller's possession to the
extent used exclusively in the Subject Business, including the Seller's
ACCESS advertising materials used exclusively in the Subject Business, and
all copyrights therein with respect to the Designated Territory;
(g) all training and marketing manuals used exclusively in the
Subject Business and all franchise and Datago operating manuals and all
copyrights therein with respect to the Designated Territory;
(h) the furniture, equipment, supplies and other assets set
forth on ANNEX 1.1(H);
------------
(i) solely with respect to, and for use in, the Designated
Territory, the patents set forth on ANNEX 1.1(I) (collectively, the
------------
"Patents"); and
(j) those promissory notes listed on ANNEX 1.1(J) (collectively,
------------
the "Notes"), and the agreements listed on ANNEX 1.1(J) relating to the
------------
Notes.
The foregoing assets, properties and rights of the Seller to be sold,
transferred, conveyed and assigned to the Buyer pursuant to this Section 1.1 are
hereinafter collectively referred to as the "Purchased Assets". The Franchise
Agreements, the Datago Agreements, the Datago Conversion Agreements and the Ad
Fund Agreement are hereinafter collectively referred to as the "Contracts".
1.2. ASSETS NOT BEING TRANSFERRED. Anything contained in Section 1.1
----------------------------
to the contrary notwithstanding, no assets, properties or rights (whether real,
personal or mixed, tangible or intangible) of the Seller, other than the
Purchased Assets, are being sold, transferred, conveyed and assigned to the
Buyer under this Agreement. Without limiting the foregoing, the following are
specifically excluded from the Purchased Assets:
(a) all of Seller's right, title and interest in and to the
"ComputerLand" name, the other Trademarks and the Patents anywhere in the
world outside of the Designated Territory, including all issued and pending
registrations and applications for registration relating thereto, all
goodwill appurtenant to any of the Trademarks outside the
-3-
<PAGE>
Designated Territory and the right to license and assign the
"ComputerLand" name, the other Trademarks and the Patents anywhere in the
world outside of the Designated Territory, including, without limitation,
Puerto Rico, Guam and Saipan;
(b) all franchise, distribution or other agreements between the
Seller and any Franchisee or dealer located anywhere in the world other
than in the Designated Territory;
(c) all inventories, parts, work in process, supplies and
shipping containers used by the Seller in the conduct of the Subject
Business;
(d) all cash and cash equivalents of the Subject Business
existing prior to the Closing;
(e) all accounts and notes receivable relating to the Subject
Business generated prior to the Closing;
(f) all equity investments in any Franchisee which are owned by
the Seller;
(g) all satellite dishes owned or leased by the Seller and used
in the Seller's satellite television network;
(h) all assets of the Seller relating to the ComputerLand
Learning Network, other than the name "ComputerLand Learning Center";
(i) all prepaid expenses, advances and deposits made in the
conduct of the Subject Business prior to the Closing;
(j) all purchase orders of the Seller and all other contracts
and agreements between the Seller and its vendors;
(k) all National Accounts Participating Dealer Agreements,
MASTER Agreements and Termination and Release Agreements in effect as of
the Closing between the Seller and any Franchisee, any former franchisee of
the Seller or any Datago Purchaser, including, without limitation, all
manuals and materials furnished by the Seller to Franchisees relating to
the Seller's National Accounts Program;
(l) all Participating Store Agreements for the National Service
Agreements Program in effect as of the Closing between the Seller and any
Franchisee, all National Service Agreements and all manuals and materials
furnished
-4-
<PAGE>
by the Seller to Franchisees relating to the Seller's National Service
Program;
(m) all CLTV Participation Agreements in effect as of the
Closing between the Seller and any Third Party Resellers with respect to
the Seller's satellite television network, and all related program manuals
and materials furnished by the Seller to Third Party Resellers, other than
the trademark "ComputerLand CLTV";
(n) all assets of the Seller related to the Seller's Help Desk
services, including, without limitation, all agreements for help desk
services entered into by Third Party Resellers and all manuals and
materials furnished to Third Party Resellers or customers thereof relating
to the Seller's Help Desk service;
(o) the Seller's proprietary store management system software
program, all other computer software developed, owned or used by the Seller
and all software license agreements relating to any of the foregoing in
effect as of the Closing between the Seller and the Third Party Resellers,
other than the license agreements between the Seller and the Franchisees
for ILS (as defined in the Services Agreement);
(p) all assets and rights (including, without limitation,
contracts) of the Seller used in the Retained Businesses;
(q) all rights in and to any claims against any Third Party
Resellers or any other third party arising out of or relating to
transactions or events occurring prior to the Closing;
(r) except as provided by Section 1.1(f) and the License
Agreement, all rights in and to any signs owned by the Seller, whether or
not such signs bear any of the Trademarks;
(s) all rights in and to any demonstration personal computers in
the possession of customers of the Subject Business; and
(t) those other assets of the Seller listed on ANNEX 1.2(T).
------------
The foregoing assets, properties and rights of the Seller which are not to be
sold, transferred, conveyed and assigned to the Buyer are herein collectively
referred to as the "Excluded Assets".
-5-
<PAGE>
1.3. LIABILITIES BEING ASSUMED. On the terms and subject to the
-------------------------
conditions of this Agreement, simultaneously with the sale, transfer, conveyance
and assignment to the Buyer of the Purchased Assets, the Buyer shall assume, and
hereby agrees to perform, pay and satisfy when due, the following liabilities
and obligations of the Seller:
(a) all liabilities and obligations under, arising out of or
relating to the Contracts, except for liabilities and obligations arising
out of or relating to transactions or events occurring prior to the
Closing, including, without limitation, any breach or other violation by
the Seller of any of the Contracts occurring prior to the Closing, whether
or not any claim for such breach or violation has been asserted at or prior
to the Closing;
(b) all liabilities arising out of or relating to (i) any of the
guarantees set forth on ANNEX 1.3(B) hereto with respect to liabilities of
------------
the primary obligor arising on or after the Closing and (ii) any of the
lease obligations set forth on ANNEX 1.3(B) hereto, except that the Buyer
------------
shall have no obligation to pay rent under any such lease obligation in
excess of the amount of rent payable to the Buyer by the tenant or
subtenant with respect thereto;
(c) those liabilities and obligations relating to employment
matters assumed by the Buyer pursuant to Section 10.1; and
(d) all liabilities and obligations under, arising out of or
relating to the agreements listed on ANNEX 1.1(J), except for liabilities
------------
and obligations relating thereto arising out of or relating to transactions
or events occurring prior to the Closing.
The foregoing liabilities and obligations of the Seller being assumed by the
Buyer are hereinafter collectively referred to as the "Assumed Obligations".
1.4. LIABILITIES NOT BEING ASSUMED. Except for the Assumed
-----------------------------
Obligations, the Buyer expressly does not, and shall not, assume or be deemed to
assume, under this Agreement or otherwise by reason of the transactions
contemplated hereby, any other liabilities, obligations or commitments of the
Seller or the Subject Business of any nature whatsoever, whether known or
unknown, or fixed or contingent, including, without limitation, any liabilities,
obligations or commitments relating to the ownership, interest in, use or
operation of any of the Purchased Assets or the Subject Business prior to the
Closing and those liabilities and obligations relating to employment matters
-6-
<PAGE>
retained by the Seller pursuant to Section 10.2 (collectively, the "Excluded
Obligations").
1.5. SELLER'S CONTINUED PERFORMANCE OF CERTAIN AGREEMENTS. The Buyer
----------------------------------------------------
acknowledges and agrees that following the Closing the Seller may elect, subject
to any obligations contained in the Services Agreement, to perform under, and
shall be entitled to receive all amounts due under, (a) all National Accounts
Participating Dealer Agreements and all MASTER Agreements between the Seller and
any Franchisee, (b) all Participating Store Agreements for the National Service
Agreements Program between the Seller and any Franchisee and all National
Service Agreements, (c) all Help Desk services to be provided under any Help
Desk contracts entered into between any Third Party Resellers and any customer
thereof prior to the Closing and all Help Desk services pursuant to direct calls
from customers of Third Party Resellers and (d) all CLTV Participation
Agreements between the Seller and Third Party Resellers relating to the Seller's
satellite television network. In connection therewith, the Buyer shall use its
reasonable efforts to assist the Seller in collecting any amounts due under such
agreements and shall promptly forward to the Seller any such amounts received by
the Buyer, with such endorsements of the Buyer as may be necessary for the
Seller to receive such payments; PROVIDED, that the Buyer shall not be obligated
--------
to incur any expenses in connection with rendering such assistance.
1.6. USE OF NAME. (a) At the Closing, the Seller and the Buyer
-----------
shall enter into a License Agreement (the "License Agreement"), pursuant to
which, among other things, the Buyer shall permit the Seller to use, without
charge, the "ComputerLand" name and the other Trademarks (other than the
"Datago" name) in the Designated Territory in connection with the operation of
the Seller's company-owned locations existing as of the Closing for the six-
month period following the Closing, and the Buyer shall be restricted from using
the "ComputerLand" name and the other Trademarks in certain specified
metropolitan areas within the Designated Territory, all in accordance with the
terms thereof.
(b) Anything contained herein to the contrary notwithstanding, the
Buyer acknowledges that the Seller has granted a non-exclusive, non-transferable
restricted license of the Seller's right, title and interest in and to the use
of the name "ComputerLand Express" to Micro Express, Inc. pursuant to the Asset
Purchase Agreement dated as of August 31, 1993, between the Seller and Micro
Express, Inc. Nothing contained in this Agreement or in the License Agreement
shall be deemed to affect such license; PROVIDED, that the Seller shall take
--------
such actions, at the Buyer's expense, as may be reasonably requested by the
Buyer to protect the Buyer's rights in the "ComputerLand" name.
-7-
<PAGE>
1.7. INSTRUMENTS OF CONVEYANCE AND TRANSFER, ETC. At the Closing,
--------------------------------------------
the Seller and the Buyer shall execute and deliver a bill of sale and assumption
agreement (the "Bill of Sale and Assumption"), a trademark assignment (the
"Trademark Assignment"), a copyright assignment (the "Copyright Assignment") and
a patent assignment (the "Patent Assignment"), and the Seller shall execute and
deliver such other endorsements, assignments and instruments of transfer as
shall be reasonably necessary to transfer the Purchased Assets to the Buyer.
1.8. FURTHER ASSURANCES; ETC. (a) The Seller shall, at any time and
------------------------
from time to time after the Closing, upon the written request of the Buyer, do,
execute, acknowledge and deliver, and cause to be done, executed, acknowledged
or delivered, such reasonable further acts, deeds, assignments, transfers,
conveyances, or assurances as may be reasonably required for (i) the better
transferring, assigning, conveying, granting, assuring and confirming to the
Buyer, or for aiding and assisting in the collection of or reducing to
possession by the Buyer, the Purchased Assets and (ii) the fulfillment of the
purposes of this Agreement. The Buyer shall, at any time and from time to time
following the Closing, at the request of the Seller, execute, acknowledge and
deliver, and cause to be done, executed, acknowledged and delivered, such
reasonable further acts, deeds, assumptions or assurances as may be reasonably
required for (A) the better assuming by the Buyer of the Assumed Obligations and
(B) the fulfillment of the purposes of this Agreement. Any expenses incurred by
the Buyer or the Seller in complying with this Section 1.8 shall be shared
equally by the Buyer and the Seller. The Seller shall promptly pay to the Buyer
any rent that the Buyer becomes obligated to under any lease obligation listed
on ANNEX 1.3(B) in excess of the amount of rent payable to the Buyer by the
------------
tenant or subtenant with respect thereto.
(b) The Seller shall promptly pay or deliver to the Buyer any
amounts or items which shall be received by the Seller following the Closing
which constitute Purchased Assets and any moneys, checks or other instruments of
payment to which the Buyer is entitled after the Closing under the Contracts.
The Buyer shall promptly pay or deliver to the Seller any amounts or items which
shall be received by the Buyer following the Closing which constitute Excluded
Assets.
1.9. ASSIGNMENT OF CONTRACTS AND RIGHTS. (a) Anything contained in
----------------------------------
this Agreement to the contrary notwithstanding, this Agreement shall not
constitute an agreement or an attempted agreement to transfer or assign any
Contract or any claim or right or any benefit arising thereunder or resulting
therefrom if an attempted transfer or assignment thereof, without the consent of
any other party thereto, would constitute a breach thereof or in any way affect
the rights of the Buyer thereunder. The Seller and the Buyer shall use
reasonable efforts to obtain
-8-
<PAGE>
the consent of any such other party to the transfer or assignment thereof to the
Buyer in all cases in which such consent is required; PROVIDED, HOWEVER, that
-------- -------
neither the Buyer nor the Seller shall be required to incur any further
obligations or liabilities in obtaining any such consent, except for ordinary
and necessary out-of-pocket expenses incurred in connection therewith, which
expenses shall be borne equally by the Buyer and the Seller. In connection
therewith, the Seller shall not modify or amend any of the terms of any Contract
in order to obtain the consent from such other party to the transfer or
assignment of such Contract without the prior written consent of the Buyer,
which consent shall not be unreasonably withheld.
(b) [*]
1.10. COLLECTION OF RECEIVABLES, ROYALTIES, ETC. (a) From and after
------------------------------------------
the Closing, the Buyer shall cooperate with the Seller and use its best efforts
to collect (which cooperation shall include the Buyer's assistance in delivering
invoices to Third Party Resellers), in a manner consistent with the Seller's
practices and policies with respect to the collection of receivables, all
accounts receivable, royalties and other fees owed to the Seller by any
Franchisee or any Datago Purchaser for sales of products by the Seller to such
Franchisee or Datago Purchaser which occurred within [*] days prior to the
Closing Date or with respect to any obligation to pay royalties under any
Franchise Agreement arising within [*] days prior to the Closing Date (all such
amounts being referred to as "Seller Receivables").
(b) [*]
1.11. FRANCHISEE AUDITS. During the 24-month period after the
-----------------
Closing, the Buyer shall conduct audits of the records of those Franchisees
selected by the Seller and for such periods ending on or prior to the Closing as
the Seller shall identify to the Buyer; PROVIDED, HOWEVER, that the Buyer shall
-------- -------
not be obligated to conduct more than one audit per Franchisee with respect to
any period; PROVIDED FURTHER, HOWEVER, that such audits shall be conducted by
-------- ------- -------
the Buyer in a manner that is consistent with the methodology used by the Seller
in conducting audits of the Franchisees prior to the Closing. The Buyer shall
advise the Seller of the results of each such audit in writing within ten days
of the completion thereof. The increase of any amount owing by any Franchisee
to the Seller determined as a result of any such audit shall be for the benefit
of the Seller. All expenses incurred by the Buyer in conducting audits of the
records of Franchisees for periods prior to the Closing shall be paid for
promptly by the Seller (it being understood that the
______________
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
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<PAGE>
cost to the Seller of such audits shall not exceed the cost thereof to the
Seller prior to the Closing); PROVIDED, HOWEVER, that if the Buyer shall conduct
-------- -------
an audit of any Franchisee for any period following the Closing at the same time
as the Buyer shall have conducted a pre-Closing audit of such Franchisee, then
the Buyer's expenses incurred in conducting such audit shall be allocated
proportionately based on the amount of time of the pre-Closing and post-Closing
periods being audited.
ARTICLE II
PURCHASE PRICE; ALLOCATION
2.1. PURCHASE PRICE; PAYMENT. The purchase price to be paid for the
-----------------------
Purchased Assets and the restrictive covenant of the Seller set forth in Section
8.2 hereof (the "Restrictive Covenant") shall consist of the following:
(a) $80,000,000, PLUS $187,400 (for the personal property
----
referred to in ANNEX 1.1(H)), PLUS $15,000, payable at the Closing by wire
------------ ----
transfer of immediately available funds to a bank account designated by the
Seller; and
(b) from zero to $30,000,000 payable following the Closing in
accordance with Section 2.2.
2.2. ADJUSTABLE PORTION OF PURCHASE PRICE. (a) As used in this
------------------------------------
Section 2.2, the following terms have the corresponding meanings:
"AFFILIATE" of Merisel or the Buyer means (i) any person or
---------
entity that owns, directly or indirectly, 50% or more of the voting
securities of Merisel or the Buyer, (ii) any corporation 50% or more of the
voting securities of which are directly or indirectly owned by Merisel, the
Buyer or any of their respective Affiliates, and/or (iii) any
unincorporated entity that is controlled by Merisel, the Buyer or any of
their respective Affiliates, where "control" means the power to direct the
management and policies of the entity controlled.
"BASE VOLUME" means the aggregate Inventory Cost of all Products
-----------
sold during the Baseline Period by the Seller and all members of the
Merisel Group (including all MASTER Sales (as defined in the Services
Agreement) by or for the benefit of the Seller during the Baseline Period)
to any entity that was a Franchisee or Datago Purchaser at the time of such
sale or was otherwise a franchisee or Datago purchaser of the Seller at the
time of such sale, as determined in accordance with Section 2.2(b) (or to
any entity that was a customer of any such entity in the case of
-10-
<PAGE>
MASTER Sales), and as adjusted after the Closing Date in accordance with
Section 2.2(i).
"BASELINE PERIOD" means the 12-month period ending January 31,
---------------
1994.
"BUYER DATAGO PURCHASER" means and includes (i) any Datago
----------------------
Purchaser and (ii) any other person or entity, other than a Buyer
Franchisee, that purchases Products pursuant to a Datago Agreement or any
other similar agreement or arrangement.
"BUYER FRANCHISEE" means and includes (i) any Franchisee and (ii)
----------------
any other person or entity that owns or operates any ComputerLand Store,
pursuant to a franchise agreement or any other similar agreement or
arrangement.
"BUYER SUBJECT BUSINESS" means the business of selling, leasing,
----------------------
renting and/or servicing computer hardware, software and/or related
products and services, as conducted by the Buyer after the Closing.
"COMMENCEMENT DATE" means, with respect to any Open Distribution
-----------------
Vendor, that date which is 30 days prior to the date on which such Open
Distribution Vendor first engages in Open Distribution.
"COMPUTERLAND STORE" means and includes any current or future
------------------
retail computer store, business center or other location using the trade
name "ComputerLand", alone or in conjunction with any other name or mark.
"EARNOUT AMOUNT" has the meaning ascribed thereto in Section
--------------
2.2(d).
"EARNOUT PERIOD" means the period from the Closing Date through
--------------
January 31, 1996, inclusive.
"ELIGIBLE CUSTOMER" means and includes (A) any Buyer Franchisee
-----------------
and (B) any Buyer Datago Purchaser; PROVIDED, HOWEVER, that after the
-------- -------
Commencement Date applicable to an Open Distribution Vendor, "ELIGIBLE
--------
CUSTOMER" shall also include any person or entity that was a Buyer Datago
--------
Purchaser on such Commencement Date, whether or not such person or entity
continues to be a Buyer Datago Purchaser thereafter.
"ELIGIBLE VENDOR" means and includes [*].
---------------
______________
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of
1934, as amended.
-11-
<PAGE>
"ELIGIBLE VOLUME" means, for any period, the aggregate Inventory
---------------
Cost of (i) all Products sold by all members of the Merisel Group during
such period to all Eligible Customers (including all MASTER Sales by or for
the benefit of the Seller during such period to any customer of any
Eligible Customer) and (ii) the aggregate Inventory Cost of all Products
purchased and resold by the Buyer in any period under the Services
Agreement to the extent not included in the preceding clause (i). Eligible
Volume is subject to adjustment as provided in Section 2.2(h).
"FIRST EARNOUT PERIOD" means the 12-month period ending January
--------------------
31, 1995.
"FIRST YEAR VOLUME" means Eligible Volume for the First Earnout
-----------------
Period.
"GAAP" means generally accepted accounting principles in the
----
United States applied in a manner consistent with the usual financial and
accounting practices of the Seller or Merisel, as the case may be.
"INVENTORY COST" means, for any product, the invoice price
--------------
charged by the vendor of such product to the Seller, the Buyer, Merisel or
any Affiliate of Merisel, as applicable, plus customs duties, taxes and
currency exchange costs, if any, but without reduction for any marketing
development funds or prompt payment discounts provided by the vendor with
respect to such product, determined in accordance with GAAP, as adjusted to
reflect any price protection relating to such product, determined in
accordance with GAAP.
"MERISEL GROUP" shall mean Merisel, the Buyer and their
-------------
respective Affiliates.
"OPEN DISTRIBUTION" occurs with respect to any Open Distribution
-----------------
Vendor when (i) such Open Distribution Vendor adds Merisel or any of its
Affiliates (in addition to the Buyer) as a primary distribution source in
the Designated Territory authorized to distribute all of the Products of
such Open Distribution Vendor that the Buyer is, as of the Commencement
Date, authorized to distribute, on substantially the same terms and
conditions as such Products are distributed by the Buyer as of the
Commencement Date (including terms and conditions imposed by the Open
Distribution Vendor) and (ii) all Buyer Franchisees and Buyer Datago
Purchasers are authorized to purchase Products sold by such Open
Distribution Vendor from Merisel or any of its Affiliates (in addition to
the Buyer) under substantially the same terms and conditions imposed by the
Open Distribution Vendor.
-12-
<PAGE>
"OPEN DISTRIBUTION VENDORS" means and includes [*].
-------------------------
"OTHER DISTRIBUTION BUSINESS" means the business of selling,
---------------------------
leasing, renting and/or servicing computer hardware, software and/or
related products, as conducted by any member of the Merisel Group (other
than the Buyer) during the Earnout Period, other than through the Buyer
Subject Business.
"OUTSIDE ACCOUNTANTS" means any "big six" accounting firm,
-------------------
jointly selected by the Seller and the Buyer, that shall not have been
retained by the Seller or Merisel within 24 months of the date on which
such firm is to be utilized under this Section 2.2.
"PRODUCTS" means and includes any products supplied by an
--------
Eligible Vendor and sold under any brand name owned or used by such
Eligible Vendor.
"SECOND EARNOUT PERIOD" means the 12-month period ending January
---------------------
31, 1996.
"SECOND YEAR VOLUME" means Eligible Volume for the Second Earnout
------------------
Period.
(b)(i) Within 60 days after the Closing Date, the Seller shall
certify the aggregate Inventory Cost of all Products sold by the Seller to any
entity that was a Franchisee or Datago Purchaser at the time of such sale or was
otherwise a franchisee or Datago purchaser of the Seller at the time of such
sale during the Baseline Period (including all MASTER Sales by or for the
benefit of the Seller during the Baseline Period). Any dispute regarding all or
any portion of the amount set forth in the certificate delivered by the Seller
pursuant to this Section 2.2(b)(i) that cannot be resolved by the Buyer and the
Seller within 30 days after delivery of such certificate shall be resolved by
the Outside Accountants, whose determination shall be binding and conclusive
upon all parties hereto. The Seller shall provide such information to the
Outside Accountants relating to the calculation of the amount set forth in the
certificate delivered by the Seller pursuant to this Section 2.2(b)(i) as shall
be reasonably requested by the Outside Accountants. The costs of any
determination by the Outside Accountants pursuant to this Section 2.2(b)(i)
shall be borne equally by the Buyer and the Seller. Any certificate delivered
by the Seller pursuant to this Section 2.2(b)(i) and not disputed by the Buyer
in writing within such 30 days shall be conclusive absent manifest error.
______________
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
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<PAGE>
(ii) Within 60 days after the Closing Date, Merisel shall certify the
aggregate Inventory Cost of all Products sold by all members of the Merisel
Group to any entity that was a Franchisee or Datago Purchaser at the time of
such sale or was otherwise a franchisee or Datago purchaser of the Seller at the
time of such sale during the Baseline Period. Any dispute regarding all or any
portion of the amount set forth in the certificate delivered by Merisel pursuant
to this Section 2.2(b)(ii) that cannot be resolved by Merisel and the Seller
within 30 days after delivery of such certificate shall be resolved by the
Outside Accountants, whose determination shall be binding and conclusive upon
all parties hereto. Merisel shall provide such information to the Outside
Accountants relating to the calculation of the amount set forth in the
certificate delivered by Merisel pursuant to this Section 2.2(b)(ii) as shall be
reasonably requested by the Outside Accountants. The costs of any determination
by the Outside Accountants pursuant to this Section 2.2(b)(ii) shall be borne
equally by the Buyer and the Seller. Any certificate delivered by Merisel
pursuant to this Section 2.2(b)(ii) and not disputed by the Seller in writing
within such 30 days shall be conclusive absent manifest error.
(iii) The amounts certified by the Seller and Merisel pursuant to
Sections 2.2(b)(i) and 2.2(b)(ii), respectively, as finally resolved in
accordance with such Sections, together with the amount set forth on SCHEDULE
--------
2.2(B)(I), shall be the Base Volume for all purposes hereof.
- ---------
(c) On or prior to each of April 30, 1995 and April 30, 1996, the
Buyer shall deliver to the Seller a certificate executed by an officer of the
Buyer setting forth Eligible Volume for the First Earnout Period and the Second
Earnout Period, respectively, each of which certificates shall set forth in
reasonable detail the basis for the calculation of Eligible Volume for the
relevant period, including subtotals for each Eligible Vendor. The Seller shall
have 30 days after receipt of either of the foregoing certificates to dispute
the amount shown thereon, so long as the amount in dispute involves a minimum of
$1 million. If the Seller does not so dispute the amount shown on a certificate
delivered pursuant to this Section 2.2(c) (the "Certificate"), then such amount
shall be Eligible Volume for the period in question and shall be binding on all
parties hereto. If the Seller disputes the amount shown on any certificate
delivered pursuant to this Section 2.2(c), then the amount of Eligible Volume
for the period in question shall be determined by the Outside Accountants. The
Buyer shall provide such information to the Outside Accountants relating to the
calculation of Eligible Volume for the period in question as shall be reasonably
requested by the Outside Accountants. The Outside Accountants shall confirm the
amount of Eligible Volume for such period, and such confirmation shall be
binding and conclusive on the Seller and the Buyer. If Eligible Volume for any
period, as determined by the Outside Accountants, shall be an
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<PAGE>
amount that is greater than the amount on the Certificate by at least $1
million, then the costs and expenses of the Outside Accountants in determining
Eligible Volume for such period shall be borne by the Buyer; otherwise, such
costs and expenses shall be borne by the Seller.
(d) Within two Business Days after the final determination of Eligible
Volume pursuant to Section 2.2(c), the Buyer shall pay to the Seller by wire
transfer of immediately available funds to an account designated by the Seller
an amount (the "Earnout Amount") determined as follows:
If (A) the net percentage point change determined by comparing the First
Year Volume to the Base Volume PLUS (B) the net percentage point change
----
determined by comparing the Second Year Volume to the Base Volume shall be
equal to or greater than zero, the Buyer shall pay to the Seller $6,000,000
PLUS an amount equal to $200,000 TIMES the net sum of such percentage point
---- -----
changes, including a PRO RATA portion of $200,000 for the portion of such
--- ----
increase that is less than a whole percentage point, subject to adjustment
as provided in Section 5.7 of the Services Agreement.
The Buyer shall pay to the Seller, in addition to the Earnout Amount, (1)
interest on the Earnout Amount, accruing from February 28, 1996 through and
including the date of payment, at an annual rate equal to the rate published on
February 28, 1996 in the national edition of The Wall Street Journal as the
-----------------------
prime rate in effect on such date plus 2% per annum and (2) all costs of
collection, including reasonable attorneys' fees, incurred by the Seller in
collecting under or enforcing the provisions of this Section 2.2(d). In no
event shall the Earnout Amount exceed $30,000,000 PLUS (x) interest due thereon
----
and (y) costs of collection referred to above. The obligations of the Buyer
under this Section 2.2 shall not be limited by the provisions of Section 7.6
hereof, nor shall the provisions of Section 7.7 hereof apply to the rights of
the Seller in collecting under or enforcing the provisions of this Section 2.2.
(e) By way of example:
(A) Base Volume = 100
First Year Volume = 120
Second Year Volume = 130
Net Percentage Point Increase = 50 (i.e., the sum of
20, or the 120 over 100,
and 30, or the increase
of 130 over 100)
Payment: $6,000,000 plus 50 times $200,000 = $16,000,000
-15-
<PAGE>
(B) Base Volume = 100
First Year Volume = 140
Second Year Volume = 14
Net Percentage Point Increase = 80 (i.e., the sum of 40, or the 140
over 100, and 40, or the increase of
the next 140 over 100)
Payment: $6,000,000 plus 80 times $200,000 = $22,000,000
(C) Base Volume = 100
First Year Volume = 160
Second Year Volume = 60
Net Percentage Point Increase = 20 (i.e., the sum of 60, or 160 over
100, and negative 40, or the decrease
of 100 to 60)
Payment: $6,000,000 plus 20 times $200,000 = $10,000,000
(D) Base Volume = 100
First Year Volume = 50
Second Year Volume = 100
Net Percentage Point Increase = negative 50 (i.e., the sum of
negative 50, or the decrease of 100 to
50, and 0, or the increase of 100 over
100)
Payment: 0
(f) Each of the Buyer and the Seller shall keep accurate records which
shall be sufficient for the computation of Eligible Volume for all relevant
periods hereunder and, upon reasonable advance notice, shall make such records
available to the other and such other's independent public accountants for
inspection during normal business hours. The expenses of any such inspection
shall be borne by the inspecting party unless such inspection reveals that
Eligible Volume for any period certified hereunder was inaccurate by $1 million
or more and resulted in or would have resulted in an incorrect payment to or by
the inspecting party.
(g) The parties acknowledge that if any Open Distribution Vendor
engages in Open Distribution, the Subject Business and the Other Distribution
Business may compete with one another in connection with some or all of the
Products of such Open Distribution Vendor. In that regard, during the Earnout
Period the Merisel Group will not engage in any practice if it is reasonably
established that the principal purpose of such
-16-
<PAGE>
practice is (i) to reduce or minimize the Earnout Amount or (ii) to render the
Buyer Subject Business uncompetitive vis-a-vis the Other Distribution Business
in a manner that is not reasonably justifiable. Without limiting the generality
of the foregoing, the Merisel Group will conduct the Buyer Subject Business and
the Other Distribution Business in accordance with the following general
guidelines, consistent with reasonable and prudent business practices:
(iii) The Merisel Group shall not cause or permit the Other
Distribution Business to adopt or pursue any programs or policies, or any
general terms and conditions with respect to the sale of Products, that
alone or in the aggregate, could reasonably be expected to result in
incremental sales of such Products being made for net consideration below
the marginal cost to the Other Distribution Business of such Products
unless such sale is justifiable in light of competitive business conditions
or is for the purpose of achieving higher rebate levels or liquidating
excess inventory;
(iv) The Merisel Group shall not prevent or prohibit the Buyer
Subject Business from adopting or pursuing any programs or policies, or
setting any pricing or other terms and conditions with respect to the
purchase or sale of Products, that the management of the Buyer Subject
Business reasonably believes to be in the best interests of the Buyer
Subject Business, except to the extent that (A) any such programs,
policies, pricing or other terms or conditions, alone or in the aggregate,
could reasonably be expected to result in incremental sales of Products
being made for net consideration below the marginal cost to the Buyer
Subject Business of such Products or (B) such programs, policies, pricing
or other terms or conditions are not likely to provide the Buyer Subject
Business with a competitive return on investment, taking into account,
without limitation, the risks associated with such programs, policies,
terms and conditions, the impact on the cost structure of the Buyer Subject
Business and the capital investment made and to be made in the Buyer
Subject Business (including, without limitation, the purchase price payable
by Buyer hereunder and the financing costs associated with operating the
Buyer Subject Business); and
(v) For purposes of the guideline set forth in clause (i) above,
for any period in which Applicable Revenue (as defined in the Services
Agreement) is reasonably projected to be in excess of Baseline Revenue
(as defined in the Services Agreement) for such period, the Merisel
Group shall assume that the marginal cost to the Other Distribution
Business of any incremental sale of such
-17-
<PAGE>
Products is at least [*] above the vendor cost of the Products sold
(without giving effect to any programs, policies, pricing or other terms or
conditions adopted by the Other Distribution Business after the date hereof
that would reasonably be expected to increase such marginal cost).
(h) Anything contained herein to the contrary notwithstanding, if,
for any period in which any Open Distribution Vendor engages in Open
Distribution, any member of the Merisel Group breaches any of its obligations
under Section 2.2(g), the Inventory Cost of those Products of such Open
Distribution Vendor sold by any member of the Merisel Group in connection with
the Other Distribution Business as a result of such violation will be included
in Eligible Volume for such period for all purposes of this Section 2.2. The
legal fees and expenses incurred by any party in connection with any legal
action involving an alleged breach by the Buyer and/or the Merisel Group, or any
member thereof, of Section 2.2(g) shall be borne by the party who shall not
prevail in such dispute.
(i) In the event that, at any time during the Earnout Period, there
is a material increase, decrease or change in the product lines of any Eligible
Vendor sold under the name of such Eligible Vendor, as a result of any merger,
acquisition, divestiture, reorganization or other event, Merisel, the Buyer and
the Seller shall cooperate with one another in good faith and use their
respective best efforts to agree on an appropriate modification of the products
included in measuring the Base Volume and Eligible Volume, so that the
comparisons between Base Volume and Eligible Volume provided for in this Section
2.2 shall better serve the purposes of this Section 2.2.
(j) Anything contained herein to the contrary notwithstanding, during
the Earnout Period the Buyer shall not assign or delegate to any other person or
entity any rights or interests of the Buyer in, to or under any franchise
agreement, distribution agreement or other similar instrument or agreement
between the Buyer and any Buyer Datago Purchaser or Buyer Franchisee without the
prior written consent of the Seller, and any such assignment or delegation (or
attempted assignment or delegation) shall be void ab initio; PROVIDED, HOWEVER,
-- ------ -------- -------
that the Buyer may make such an assignment or delegation to any member of the
Merisel Group without the consent of the Seller so long as all amounts that
otherwise would have been included in Eligible Volume (assuming that such member
of the Merisel Group was the Buyer) shall continue to be so included; PROVIDED
--------
FURTHER, HOWEVER, that the Seller shall not unreasonably withhold its consent to
- ------- -------
any other such assignment or delegation so long as
______________
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
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<PAGE>
arrangements are made, to the reasonable satisfaction of the Seller, to provide
for the inclusion in Eligible Volume of all amounts that otherwise would have
been included in Eligible Volume (assuming that such assignee or delegatee was
the Buyer).
(k) Except as provided in Section 5.7 of the Services Agreement, the
obligations of the Buyer and Merisel under this Section 2.2, including, without
limitation, the obligation to pay the Earnout Amount and other amounts due under
this Section 2.2, shall be absolute and unconditional, without any right of
offset whatsoever.
2.3. ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be
----------------------------
allocated among the Purchased Assets and the Restrictive Covenant in accordance
with the allocation set forth on ANNEX 2.3 hereto and the Seller and the Buyer
---------
shall prepare their Federal, state and local income tax returns employing such
allocation.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller
--------------------------------------------
represents and warrants to the Buyer as follows:
(A) ORGANIZATION; GOOD STANDING; QUALIFICATION AND POWER OF THE
-----------------------------------------------------------
SELLER. The Seller is a corporation duly organized, validly existing and in
- ------
good standing under the laws of the State of Delaware and has all requisite
corporate power and authority to own, lease and operate the Purchased Assets and
to carry on the Subject Business as now being conducted, to enter into this
Agreement, the Bill of Sale and Assumption, the Trademark Assignment, the
Copyright Assignment, the Patent Assignment, the License Agreement, the Volume
Purchase Agreement (as defined in Section 5.1(d)), the Sublease (as defined in
Section 5.1(f)), the Services Agreement, the Stock Purchase Agreement (as
defined in Section 5.1(h)) and all other instruments related to any of the
foregoing, to perform its obligations hereunder and thereunder and to consummate
the transactions contemplated hereby and thereby. The Seller is duly qualified
and in good standing to do business in all jurisdictions in which the failure to
be so qualified and in good standing to do business would have a Material
Adverse Effect.
(B) AUTHORITY. The execution, delivery and performance of this
---------
Agreement, the Bill of Sale and Assumption, the Trademark Assignment, the
Copyright Assignment, the Patent Assignment, the License Agreement, the Volume
Purchase Agreement, the Sublease, the Services Agreement, the Stock Purchase
Agreement and all other instruments related to any of the foregoing, and the
consummation of the transactions contemplated hereby and thereby, have been duly
and validly authorized by all
-19-
<PAGE>
necessary corporate action on the part of the Seller. This Agreement has been
and the Bill of Sale and Assumption, the Trademark Assignment, the Copyright
Assignment, the Patent Assignment, the License Agreement, the Volume Purchase
Agreement, the Sublease, the Stock Purchase Agreement and the Services Agreement
will be duly and validly executed and delivered by the Seller, and when validly
executed and delivered by the Buyer will be valid and binding obligations of the
Seller, enforceable in accordance with their respective terms, subject, as to
the enforcement of remedies, to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or similar laws affecting creditors'
rights generally and, with respect to the remedy of specific performance,
equitable doctrines applicable thereto. Except as set forth on SCHEDULE 3.1(B),
neither the execution, delivery or performance of this Agreement, the Bill of
Sale and Assumption, the Trademark Assignment, the Copyright Assignment, the
Patent Assignment, the License Agreement, the Volume Purchase Agreement, the
Sublease, the Services Agreement, the Stock Purchase Agreement or all other
instruments related to any of the foregoing, nor the consummation by the Seller
of the transactions contemplated hereby or thereby, nor compliance by the Seller
with any provision hereof or thereof will (i) conflict with or result in a
breach of the Seller's Restated Certificate of Incorporation or By-laws, (ii)
violate, conflict with, result (with or without notice or the passage of time,
or both) in a breach of or constitute (with or without notice, the passage of
time, or both) a default under (or cause or give rise to any right of
termination, cancellation, modification, imposition of fees or penalties or
acceleration) the terms of any of the Contracts, which individually or in the
aggregate could reasonably be expected to have a Material Adverse Effect, (iii)
require any consent, authorization or approval of any third party, including,
without limitation, any consent to the assignment of any of the Contracts, other
than those which if not obtained would not have a Material Adverse Effect, (iv)
violate any Federal, state, local or foreign law, statute, rule, regulation,
order, writ, judgment, injunction, award or decree of any court, administrative
agency or governmental body applicable to the Seller, any of the Purchased
Assets or the Subject Business, the violation of which would have a Material
Adverse Effect or would prohibit consummation of the transactions contemplated
hereby, (v) affect any license, permit or other governmental authorization or
approval or any other right, privilege, agreement or contract in a manner which
could reasonably be expected to have a Material Adverse Effect or (vi) result in
or require the creation or imposition of any Claim upon the Purchased Assets or
the Subject Business.
(C) NO CONSENT OR APPROVAL REQUIRED. Except with respect to the
-------------------------------
filing of a pre-merger notification report under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and expiration of the
applicable waiting period thereunder (which expiration, as to this Agreement but
not
-20-
<PAGE>
the Stock Purchase Agreement, occurred on November 15, 1993), and except as
otherwise disclosed on SCHEDULE 3.1(C), no consent, authorization, approval,
---------------
permit, license, exemption by or other order of, declaration to or filing with
any Federal, state, local or foreign governmental authority is required (i) to
be obtained by the Seller in connection with the execution, delivery and
performance by the Seller of the transactions contemplated by this Agreement,
the Bill of Sale and Assumption, the Trademark Assignment, the Copyright
Assignment, the Patent Assignment, the License Agreement, the Volume Purchase
Agreement, the Sublease, the Stock Purchase Agreement and the Services
Agreement, other than those which if not obtained or made would not have a
Material Adverse Effect or (ii) to prevent the termination, cancellation,
modification, amendment or waiver of any right, privilege, license, agreement or
contract of the Seller with respect to the Subject Business which, if
terminated, canceled, modified, amended or waived, could reasonably be expected
to have a Material Adverse Effect.
(D) FINANCIAL INFORMATION. SCHEDULE 3.1(D) sets forth the
--------------------- ---------------
audited statements of revenues and operating expenses of the Subject Business
for the fiscal years ended September 30, 1992 and 1993 (collectively, the
"Financial Statements"). The Financial Statements, including the notes thereto,
were prepared in accordance with the books and records of the Seller in
accordance with GAAP and present fairly, in all material respects, the revenues
and operating expenses of the Subject Business for the periods indicated.
(E) EQUITY INVESTMENTS IN FRANCHISEES. Except as otherwise set
---------------------------------
forth on SCHEDULE 3.1(E), the Seller does not own, directly or indirectly, any
---------------
capital stock, partnership interest, joint venture interest or other ownership
or proprietary interest in any Franchisee. The Seller does not own, directly or
indirectly, any capital Stock, partnership interest, joint venture interest or
other ownership or other proprietary interest in any Datago Purchaser.
(F) NOTES RECEIVABLE FROM FRANCHISEES. SCHEDULE 3.1(F) sets
--------------------------------- ---------------
forth a list of each promissory note issued by any Franchisee to the Seller that
is outstanding as of the date hereof.
(G) TITLE TO AND SUFFICIENCY OF PURCHASED ASSETS. The Seller
--------------------------------------------
owns and has good, valid and transferrable title to all of the Purchased Assets,
free and clear of all security interests, judgments, liens, pledges, claims,
licenses or other encumbrances (collectively, "Claims"), except for (i) those
Claims set forth on SCHEDULE 3.1(G) and (ii) liens for current taxes not yet due
---------------
and payable. Except as set forth in SCHEDULE 3.1(G) and except for (A)
---------------
corporate, administrative and support services heretofore provided to the
Subject Business by personnel employed by, and utilizing resources of, the
Retained Businesses,
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<PAGE>
and (B) compliance by the Buyer with applicable Federal and state franchise
laws, including, without limitation, any regulatory filings required to be made
by the Buyer in order to offer franchises in the Designated Territory, and
assuming that the Buyer hires and has available to it immediately after the
Closing the services of the employees of the Subject Business, the Purchased
Assets, together with the services to be provided by the Seller pursuant to the
Services Agreement, are sufficient to permit the Buyer to operate the Subject
Business immediately after the Closing in a manner substantially similar to the
manner in which it is operated by the Seller immediately prior to the Closing;
PROVIDED, HOWEVER, that nothing contained herein shall constitute a
- -------- -------
representation and warranty by the Seller that the Buyer will achieve
substantially equivalent operating results in its ownership and management of
the Subject Business.
(H) CONTRACTS. SCHEDULE 3.1(H) sets forth the following
--------- ---------------
(collectively, the "Operative Contracts"): (i) each Franchise Agreement, Datago
Agreement and Datago Conversion Agreement in effect on the date of this
Agreement, including any written modifications, amendments or waivers with
respect thereto (collectively, the "Reseller Contracts"); (ii) each supply
agreement with any vendor pursuant to which the Seller purchases goods for
resale to Third Party Resellers in effect on the date of this Agreement; (iii)
each agreement or commitment containing a covenant limiting the freedom of the
Seller (with respect to the Subject Business) to compete with any person, firm,
corporation, partnership, joint venture or other enterprise or engage in any
line of business in effect on the date of this Agreement; and (iv) each other
contract, commitment or agreement of any nature regardless of amount or subject
matter, which is material to the financial condition, results of operations,
properties, assets, liabilities (absolute, accrued, contingent or otherwise) or
business of the Seller (with respect to the Subject Business) in effect on the
date of this Agreement. Except as set forth on SCHEDULE 3.1(H), (A) the Seller
---------------
has performed in all material respects all obligations required to be performed
by it to date and is not in breach of or default under (nor, to the Seller's
knowledge, is the Seller alleged to be in default, nor has any event occurred
which, immediately, or upon the giving of notice or the passage of time or both,
would constitute a default) under any Operative Contract where such failure to
perform, breach or default, when taken together with all other existing failures
to perform, breaches and defaults by the Seller under any Operative Contracts or
such other instruments, agreements or contracts, could reasonably be expected to
have a Material Adverse Effect, (B) to the Seller's knowledge, no other party is
in default under any Operative Contract where such default, when taken together
with all other defaults by other parties to any Operative Contracts or such
other instruments, agreements or contracts, could reasonably be expected to have
a Material Adverse Effect, (C) each Operative Contract is a valid and binding
obligation of the Seller, enforceable against the
-22-
<PAGE>
Seller in accordance with its terms subject, as to enforcement of remedies, to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or similar laws affecting creditors' rights generally and, with
respect to the remedy of specific performance, equitable doctrines applicable
thereto and (D) the Seller has not previously assigned or transferred any of its
right, title or interest in and to any of the Contracts to any third party.
Except as set forth on SCHEDULE 3.1(H), the Seller has made available to the
---------------
Buyer true and complete copies of all Operative Contracts and all contracts
referred to in Sections 1.2(k) through (o). Each of the Seller and, to the
knowledge of the Seller, the Trustee (as defined in the Ad Fund Agreement) has
complied in all material respects with their obligations under the Ad Fund
Agreement and is not in breach or default under (nor, to the Seller's knowledge,
is the Seller or the Trustee alleged to be in default under) the Ad Fund
Agreement.
(I) INTELLECTUAL PROPERTY RIGHTS. Except for the logo "Network
----------------------------
Centers of Excellence", which is not being transferred to the Buyer, the
Trademarks, the copyrights constituting a portion of the Purchased Assets (the
"Copyrights") and the Patents constitute all of the material names, trademarks,
tradenames, service marks, logos, copyrights and patents presently used by the
Seller in the Subject Business. Except as set forth on SCHEDULE 3.1(I), (A) the
---------------
Seller has the right to use the Trademarks in the conduct of the Subject
Business in the Designated Territory, to sell and license the same in the
Designated Territory to third parties and to bring actions for the infringement
in the Designated Territory thereof and to prevent others from making, using or
selling articles which infringe on the Patents, (B) there is no pending claim
against the Seller alleging that any of the Trademarks or the Patents infringe
on any intellectual property rights of any party nor, to the Seller's knowledge,
is any such claim threatened, (C) to the Seller's knowledge, no party is
infringing on the rights of the Seller in the Trademarks or the Patents in the
Designated Territory, (D) except pursuant to the Reseller Contracts and as
described in Section 1.6(b), the Seller has not granted any license or right to
use any Trademark or Patent in the Designated Territory, (E) the Seller has no
knowledge of any claim by any other person that such other person is the legal
owner of any interest in any of the Trademarks or the Patents and (F) each of
the Trademarks is in use by the Seller in the Designated Territory.
(J) LITIGATION, ETC. Except as set forth on SCHEDULE 3.1(J),
---------------- ---------------
there are no (i) actions, suits, claims, investigations or legal or
administrative or arbitration proceedings pending or, to the Seller's knowledge,
threatened, against the Seller with respect to the Subject Business or the
Purchased Assets, whether at law or in equity, or before or by any Federal,
state, municipal or other governmental authority or
-23-
<PAGE>
(ii) judgments, decrees, injunctions or orders of any court or governmental
authority against the Seller which affect the Purchased Assets or the Subject
Business.
(K) COMPLIANCE; GOVERNMENTAL AUTHORIZATIONS. Except as set
---------------------------------------
forth on SCHEDULE 3.1(K), the Seller, in its conduct of the Subject Business,
---------------
(i) has complied in all material respects with all applicable Federal, state and
local laws, ordinances, regulations, rules, statutes and orders (collectively,
"Laws") applicable to its conduct of the Subject Business, the noncompliance
with which could reasonably be expected to have a Material Adverse Effect, and
(ii) has not received any written notice or complaint from any Federal, state or
local governmental authority alleging that the Seller's conduct of the Subject
Business is in violation of any Law.
(L) BROKERS. Except as set forth on SCHEDULE 3.1(L), the Seller
------- ---------------
has not engaged any broker or finder or incurred any liability for any brokerage
fees, commissions or finders' fees in connection with the transactions
contemplated hereby.
(M) ABSENCE OF CERTAIN CHANGES. Except as set forth on SCHEDULE
-------------------------- --------
3.1(M), since September 30, 1993, the Seller (solely in respect of the Subject
- ------
Business and the Purchased Assets) has not:
(i) suffered any Material Adverse Effect;
(ii) suffered any theft, damage, destruction or casualty loss,
which materially adversely affects the Subject Business or the Purchased
Assets;
(iii) sold, leased, transferred or otherwise disposed of any
Purchased Asset except in the ordinary course of business, consistent with
past practice;
(iv) permitted any Purchased Asset to be subject to any Claim
the imposition of which could reasonably be expected to have a Material
Adverse Effect;
(v) entered into, terminated, canceled, modified (in a manner
materially adverse to the Seller), relinquished or waived or received
notice of, or request for, termination, cancellation, modification,
relinquishment or waiver of any substantial right or claim of the Subject
Business or any Contract;
(vi) been subject to any labor dispute, material work stoppage
or threat thereof by or with respect to employees of the Subject Business;
-24-
<PAGE>
(vii) settled on its own behalf any material action or
proceeding; or
(viii) made any agreement to take any of the actions described
in this Section 3.1(m).
(N) PRODUCT WARRANTIES. Except as set forth on SCHEDULE 3.1(N),
------------------ ---------------
there is no pending claim against the Seller (with respect to the Subject
Business) on account of product warranties or with respect to the sale by the
Seller of defective or inferior products that would have a Material Adverse
Effect, and to the knowledge of the Seller, there is no such threatened claim
that could reasonably be expected to have a Material Adverse Effect.
(O) FRANCHISE MATTERS. (i) SCHEDULE 3.1(O) contains a copy of
----------------- ---------------
the Seller's Franchise Offering Circular as most recently filed with the
California Department of Corporations, together with all exhibits thereto (the
"California Offering Circular"). Each of the franchise offering circulars,
together with the exhibits thereto, other than the franchise agreements attached
as exhibits thereto, used by the Seller on the date hereof in the Designated
Territory are substantially similar in all material respects to the California
Offering Circular. SCHEDULE 3.1(O) sets forth a true and complete list of all
---------------
formal filings made by the Seller after December 31, 1992 with any state or
Federal regulatory authority with respect to franchising matters. True and
complete copies of any formal orders of state or Federal regulatory authorities
issued after December 31, 1992 with respect to such filings are attached to
SCHEDULE 3.1(O).
- ---------------
(ii) SCHEDULE 3.1(O) hereof sets forth a list of all Franchise
---------------
Agreements, Datago Agreements and Datago Conversion Agreements terminated or not
renewed and any notices of such termination or non-renewal received by the
Seller during the 12 months ending on the date of this Agreement.
(P) EMPLOYEE BENEFITS. SCHEDULE 3.1(P) contains a list of each
----------------- ---------------
employee benefit plan of general applicability made available to employees of
the Subject Business by the Seller as of the date hereof.
3.2. CERTAIN QUALIFICATIONS AND LIMITATIONS RELATING TO
--------------------------------------------------
REPRESENTATIONS AND WARRANTIES OF THE SELLER. The representations and
- --------------------------------------------
warranties of the Seller set forth in Section 3.1 hereof are subject to Article
VII and the following limitations and qualifications:
(A) NO OTHER REPRESENTATIONS AND WARRANTIES. Neither the Seller
---------------------------------------
nor any of its officers, directors, stockholders, employees or agents makes any
representation or warranty (express or implied) to the Buyer or any other party
-25-
<PAGE>
relating to the transactions contemplated hereby, except as specifically made in
Section 3.1 hereof and the Schedules related thereto or in any agreement
delivered pursuant to this Agreement. Without limiting the foregoing, except as
specifically made in Section 3.1, neither the Seller nor any of its officers,
directors, stockholders, employees or agents makes any representation or
warranty with respect to (i) the Confidential Information Memorandum dated June
1993 or other materials or supplements circulated in connection therewith or
(ii) any estimates, projections, forecasts, operating plans or budgets
concerning financial or other information relating to the Subject Business
delivered or made available to the Buyer or otherwise obtained by the Buyer.
The Buyer acknowledges and agrees that (a) it has been furnished with or been
given adequate access to such information concerning the Purchased Assets, the
Assumed Obligations and the Subject Business as it has requested and (b) it has
made its own independent investigation of the Purchased Assets, the Assumed
Obligations, the Subject Business and the representations and warranties of the
Seller set forth in Section 3.1. No investigation by the Buyer shall affect or
be deemed to modify any representation or warranty made by the Seller in this
Agreement (or any other agreement or instrument contemplated hereby).
(B) DEFINITION OF KNOWLEDGE. As used in Section 3.1, the term
-----------------------
"to the Seller's knowledge" shall mean the actual knowledge of the persons set
forth on SCHEDULE 3.2(B) and such knowledge as would be obtained by such persons
---------------
in exercising reasonable diligence in the ordinary course of their employment by
the Seller, including, without limitation, their review of the accuracy of the
Seller's representations and warranties set forth in this Agreement.
(C) DEFINITION OF MATERIAL ADVERSE EFFECT. As used in Section
-------------------------------------
3.1, the term "Material Adverse Effect" shall mean a material adverse effect on
the Purchased Assets or on the business, results of operations, financial
condition or prospects of the Subject Business, in each case taken as a whole.
(D) DISCLOSURE GENERALLY; AMENDMENT OF SCHEDULES. If, and to the
--------------------------------------------
extent that, any information required to be furnished in any section or
subsection of the Schedules relating to the representations and warranties set
forth in Section 3.1 is set forth in this Agreement, any other section or
subsection of such Schedules or any exhibit or annex hereto, such information
shall be deemed to be disclosed in the section or subsection of the Schedules
which require such disclosure. The inclusion of any information in such
Schedules or any part thereof shall not be deemed to be an admission or
indication of the materiality thereof or to create a standard of disclosure
generally.
3.3. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer
-------------------------------------------
represents and warrants to the Seller as follows:
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<PAGE>
(A) ORGANIZATION; GOOD STANDING; QUALIFICATION AND POWER OF THE
-----------------------------------------------------------
BUYER. The Buyer is a corporation duly organized, validly existing and in good
- -----
standing under the laws of Delaware and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted, to enter into this Agreement, the Bill of Sale and
Assumption, the License Agreement, the Sublease, the Services Agreement and all
other instruments related to any of the foregoing, to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby.
(B) AUTHORITY. The execution, delivery and performance of this
---------
Agreement, the Bill of Sale and Assumption, the License Agreement, the Sublease,
the Services Agreement and all other instruments related to any of the
foregoing, and the consummation of the transactions contemplated hereby and
thereby have been duly and validly authorized by all necessary corporate action
on the part of the Buyer. This Agreement has been and the Bill of Sale and
Assumption, the License Agreement, the Sublease, and the Services Agreement will
be duly and validly executed and delivered by the Buyer, and when validly
executed and delivered by the Seller will be valid and binding obligations of
the Buyer, enforceable in accordance with their respective terms, subject, as to
the enforcement of remedies, to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or similar laws affecting creditors'
rights generally and, with respect to the remedy of specific performance,
equitable doctrines applicable thereto. Neither the execution, delivery or
performance by the Buyer of this Agreement, the Bill of Sale and Assumption, the
License Agreement, the Sublease, the Services Agreement or all other instruments
related to any of the foregoing, nor the consummation by the Buyer of the
transactions contemplated hereby or thereby, nor compliance by the Buyer with
any provision hereof or thereof will (i) conflict with or result in a breach of
the articles of incorporation or by-laws of the Buyer, (ii) violate, conflict
with, result (with or without notice or the passage of time, or both) in a
breach of or constitute (with our without notice, the passage of time, or both)
a default under (or cause or give rise to any right of termination, cancellation
or acceleration) under the terms of any material contract or indenture to which
the Buyer is a party which could reasonably be expected to impair the ability of
the Buyer to consummate the transactions contemplated hereby or perform its
obligations hereunder or have a Material Adverse Effect, (iii) require any
consent, authorization or approval of any third party, other than those which if
not obtained would not have a Material Adverse Effect, (iv) violate any
provision of any Federal, state, local or foreign law, statute, rule or
regulation or order, writ, judgment, injunction, award or decree of any court,
administrative agency or governmental body applicable to the Buyer or would
prohibit consummation of the transactions contemplated hereby or (v) have a
Material Adverse Effect.
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(C) NO CONSENT OR APPROVAL REQUIRED. Except with respect to the
-------------------------------
filing of a pre-merger notification report under the HSR Act and expiration of
the applicable waiting period thereunder (which expiration, as to this Agreement
but not the Stock Purchase Agreement, occurred on November 15, 1993), no
consent, authorization, approval, permit, license, exemption by or other order
of, declaration to or filing with any Federal, state or local governmental
authority is required (i) to be obtained by the Buyer for the execution,
delivery and performance of the transactions contemplated by this Agreement, the
Bill of Sale and Assumption, the License Agreement, the Sublease or the Services
Agreement, other than those which if not obtained would not have a Material
Adverse Effect, or (ii) to prevent the termination, cancellation, modification,
amendment or waiver of any right, privilege, license, agreement or contract of
the Buyer which, if terminated, canceled, modified, amended or waived, could
reasonably be expected to have a Material Adverse Effect.
(D) FINANCING. The Buyer has, or has commitments from financing
---------
sources to provide, sufficient funds to pay to the Seller at the Closing by wire
transfer of immediately available funds the cash payment contemplated by Section
2.1(a). In connection therewith, SCHEDULE 3.3(D) includes true and correct
---------------
copies of all such commitments.
(E) BROKERS. Except as set forth on SCHEDULE 3.3(E), neither the
------- ---------------
Buyer, Merisel nor any of their respective officers, directors, employees or
agents has employed any broker or finder or incurred any liability for any
brokerage fees, commissions or finders' fees in connection with the transactions
contemplated hereby.
ARTICLE IV
[INTENTIONALLY OMITTED]
ARTICLE V
CONDITIONS PRECEDENT TO CLOSING
5.1. CONDITIONS TO EACH PARTY'S OBLIGATIONS. The obligation of the
--------------------------------------
Seller to sell the Purchased Assets, and of the Buyer to purchase the Purchased
Assets and assume the Assumed Obligations, are subject to the satisfaction of
the following conditions unless waived (to the extent such conditions can be
waived) by the Seller or the Buyer, as applicable:
(A) LEGAL ACTION. No temporary restraining order, preliminary
------------
injunction or permanent injunction or other order preventing the consummation of
transactions contemplated
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hereby shall have been issued by any Federal or state court and remain in
effect. Each party agrees to use its best efforts to have any such injunction
or order lifted.
(B) LEGISLATION. No Federal, state or local statute, rule or
-----------
regulation or ordinance shall have been enacted which prohibits, restricts or
delays the consummation of the transactions contemplated hereby or any of the
conditions to the consummation of such transactions.
(C) LICENSE AGREEMENT. The License Agreement shall have been
-----------------
duly executed and delivered by the Seller and the Buyer.
(D) VOLUME PURCHASE AGREEMENT. The Seller and Merisel Americas,
-------------------------
Inc., a Delaware corporation ("Merisel Americas"), shall have duly executed and
delivered a volume purchase agreement (the "Volume Purchase Agreement"),
pursuant to which Merisel Americas shall supply certain products to the Seller.
(E) SERVICES AGREEMENT. The Seller and the Buyer shall have
------------------
duly executed and delivered a distribution and services agreement (the "Services
Agreement"), pursuant to which the Seller shall provide to the Buyer certain
distribution and logistics services.
(F) SUBLEASE. The Seller and the Buyer shall have duly executed
--------
and delivered a sublease (the "Sublease"), pursuant to which the Seller shall
provide to the Buyer certain office space.
(G) REPURCHASE AGREEMENTS. The Buyer shall have entered into
---------------------
repurchase agreements (the "Buyer Repurchase Agreements") with each of the
finance companies listed on ANNEX 5.1(G), which finance companies and the Seller
------------
are currently parties to those repurchase agreements listed on ANNEX 5.1(G) (the
------------
"Seller Repurchase Agreements").
(H) STOCK PURCHASE AGREEMENT. The Seller and Merisel shall have
------------------------
duly executed and delivered a stock purchase agreement (the "Stock Purchase
Agreement"), pursuant to which the Seller shall purchase from Merisel and
Merisel shall sell to the Seller shares of Common Stock of Merisel.
5.2. CONDITIONS TO OBLIGATIONS OF THE BUYER. The obligation of the
--------------------------------------
Buyer to purchase the Purchased Assets and assume the Assumed Obligations is
subject to the satisfaction of the following conditions unless waived (to the
extent such conditions can be waived) by the Buyer:
(A) REPRESENTATIONS AND WARRANTIES. The representations and
------------------------------
warranties of the Seller set forth in Section 3.1
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shall be true and correct in all material respects as of the Closing as though
made at and as of the Closing, and the Buyer shall have received a certificate
from the Seller signed by an authorized officer of the Seller to that effect (it
being understood that the Seller shall have the right to make additions,
deletions or modifications to the Schedules relating to the representations and
warranties set forth in Section 3.1 after the date hereof but prior to the
Closing; PROVIDED, that if any such additions, deletions or modifications result
--------
in the failure of the Seller to satisfy the condition set forth in this
paragraph (a), then the Buyer shall not be obligated to purchase the Purchased
Assets or to assume the Assumed Obligations, but the Buyer shall not have any
claim against the Seller with respect to the additions, deletions or
modifications so disclosed to the Buyer).
(B) PERFORMANCE OF OBLIGATIONS OF THE SELLER. The Seller shall
----------------------------------------
have performed in all material respects all obligations required to be performed
by it under this Agreement prior to the Closing, and the Buyer shall have
received a certificate from the Seller signed by an authorized officer of the
Seller to that effect.
(C) AUTHORIZATION. All action necessary to authorize the
-------------
execution, delivery and performance of this Agreement, the Bill of Sale and
Assumption, the Trademark Assignment, the Copyright Assignment, the Patent
Assignment, the License Agreement, the Volume Purchase Agreement, the Sublease,
the Stock Purchase Agreement and the Services Agreement by the Seller and the
consummation of the transactions contemplated hereby and thereby shall have been
duly and validly taken by the Seller and the Buyer shall have received all such
counterpart originals, certified or other copies of such documents as the Buyer
may reasonably request.
(D) BILL OF SALE AND ASSUMPTION; CONVEYANCE INSTRUMENTS. The
---------------------------------------------------
Seller shall have duly executed and delivered to the Buyer the Bill of Sale and
Assumption, the Trademark Assignment, the Copyright Assignment, the Patent
Assignment and such other instruments of conveyance and transfer as shall be
reasonably requested by the Buyer to effect the transfer of the Purchased
Assets.
(E) OPINION OF COUNSEL TO THE SELLER. The Buyer shall have
--------------------------------
received the opinion dated the date of the Closing of O'Sullivan Graev &
Karabell, counsel to the Seller, in form and substance reasonably satisfactory
to counsel to the Buyer.
(F) GOVERNMENT CONSENTS, AUTHORIZATIONS, ETC. All material
-----------------------------------------
consents, authorizations, orders or approvals of, and filings or registrations
with or expiration of waiting periods imposed by, any Federal, state or local
governmental body which are required for or in connection with the execution and
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delivery by the Seller of this Agreement, the Bill of Sale and Assumption, the
License Agreement, the Volume Purchase Agreement, the Sublease and the Services
Agreement, and the consummation of the transactions contemplated thereby, and
the transfer to the Buyer of the Purchased Assets, shall have been obtained or
made.
(G) THIRD PARTY CONSENTS. Consents from the following persons
--------------------
shall have been obtained: Federal Express, IBM Credit Corporation and Rosewood
Associates.
(H) VENDOR LETTERS. The Buyer shall have received letters from
--------------
each of IBM, Compaq, Apple and Hewlett Packard relating to sales of products
sold by such vendors after the Closing in form and substance reasonably
satisfactory to the Buyer.
(I) AD FUND AGREEMENT. The Buyer shall have received that
-----------------
portion of the corpus of the trust under the Ad Fund Agreement held for the
benefit of the Franchisees to the extent of the Seller's interest therein, and a
new trustee thereunder, designated by the Buyer, shall have been appointed.
5.3. CONDITIONS TO OBLIGATIONS OF THE SELLER. The obligation of the
---------------------------------------
Seller to sell the Purchased Assets to the Buyer is subject to the satisfaction
of the following conditions unless waived (to the extent such conditions can be
waived) by the Seller:
(A) REPRESENTATIONS AND WARRANTIES. The representations and
------------------------------
warranties of the Buyer set forth in Section 3.3 shall be true and correct in
all material respects as of the Closing as though made at and as of the Closing,
and the Seller shall have received a certificate from the Buyer signed by an
authorized officer of the Buyer to that effect (it being understood that the
Buyer shall have the right to make additions, deletions or modifications to the
Schedules relating to the representations and warranties set forth in Section
3.3 after the date hereof but prior to the Closing; PROVIDED, that if any such
--------
additions, deletions or modifications result in the failure of the Buyer to
satisfy the condition set forth in this paragraph (a), then the Seller shall not
be obligated to sell the Purchased Assets, but the Seller shall not have any
claim against the Buyer with respect to the additions, deletions or
modifications so disclosed to the Seller).
(B) PERFORMANCE OF OBLIGATIONS OF THE BUYER. The Buyer shall
---------------------------------------
have performed in all material respects all obligations required to be
performed by it under this Agreement prior to the Closing, and the Seller shall
have received a certificate from the Buyer signed by an authorized officer of
the Buyer to that effect.
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<PAGE>
(C) AUTHORIZATION. All action necessary to authorize the execution,
-------------
delivery and performance of this Agreement, the Bill of Sale and Assumption, the
License Agreement, the Sublease and the Services Agreement by the Buyer and the
consummation of the transactions contemplated hereby and thereby shall have been
duly and validly taken by the Buyer and the Seller shall have received all such
counterpart originals or certified or other copies of such documents as the
Seller may reasonably request.
(D) BILL OF SALE AND ASSUMPTION; ASSUMPTION INSTRUMENTS. The
---------------------------------------------------
Buyer shall have duly executed and delivered to the Seller the Bill of Sale and
Assumption and such other instruments of assumption as shall be reasonably
requested by the Seller to effect the assumption by the Buyer of the Assumed
Obligations.
(E) OPINION OF COUNSEL TO THE BUYER. The Seller shall have
-------------------------------
received an opinion dated the date of the Closing of Riordan & McKinzie, counsel
to the Buyer, in form and substance reasonably satisfactory to counsel to the
Seller.
(F) GOVERNMENT CONSENTS, AUTHORIZATIONS, ETC. All material
-----------------------------------------
consents, authorizations, orders or approvals of, and filings or registrations
with or expiration of waiting periods imposed by, any Federal, state or local
governmental body which are required for or in connection with the execution and
delivery by the Buyer of this Agreement, the Bill of Sale and Assumption, the
License Agreement, the Volume Purchase Agreement, the Sublease and the Services
Agreement and the consummation of the transactions contemplated thereby shall
have been obtained or made.
(G) THIRD PARTY CONSENTS. Consents from the following persons shall
--------------------
have been obtained: Federal Express, IBM Credit Corporation and Rosewood
Associates.
(H) GUARANTY AGREEMENT. The Guaranty Agreement shall have been duly
------------------
executed and delivered to the Seller and shall be in full force and effect in
accordance with the terms thereof.
ARTICLE VI
CLOSING
The closing (the "Closing") for the consummation of the transactions
contemplated by this Agreement, is taking place at the offices of ComputerLand
Corporation, 5964 West Las Positas, Pleasanton, California 94566-8575 on the
date hereof (the "Closing Date") and shall be deemed effective immediately
following the close of the Business Day (as defined in the Services Agreement)
on the Closing Date.
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<PAGE>
ARTICLE VII
INDEMNIFICATION
7.1. INDEMNIFICATION BY THE SELLER. Subject to the terms and
-----------------------------
conditions of this Agreement, the Seller shall indemnify and hold harmless the
Buyer and its successors and assigns (the "Buyer Indemnitees") from and against
any and all losses, damages, costs, obligations, liabilities and expenses
(including reasonable attorneys' fees) (collectively, "Losses") incurred by any
Buyer Indemnitee as a result of any of the following:
(a) the breach of any representation and warranty of the Seller
set forth in Section 3.1 of this Agreement;
(b) the breach of any covenant or agreement required to be
performed by the Seller under this Agreement, other than the covenants and
agreements set forth in Section 2.2;
(c) any liability arising out of any Excluded Obligation;
(d) any liability arising out of any Excluded Asset or the
Retained Businesses;
(e) any brokerage or finder's fees arising out of the
transactions contemplated hereby owing or claimed to be owing to any party
engaged by the Seller; and
(f) any liability arising out of any of the Buyer Repurchase
Agreements which relate to the sale of products prior to the Closing;
PROVIDED, HOWEVER, that "Losses" shall be calculated net of (i) insurance
- -------- -------
proceeds actually received, (ii) amounts actually recovered in respect of
indemnification claims (other than any indemnification claims arising under this
Section 7.1), (iii) tax deductions, credits or other benefits actually received
or (iv) other amounts actually recovered pursuant to a cross-claim or
counterclaim arising from or in connection with the circumstances that give rise
to such Losses pursuant to a final adjudication.
7.2. INDEMNIFICATION BY THE BUYER. Subject to the terms and
----------------------------
conditions of this Agreement, the Buyer shall indemnify and hold harmless the
Seller and its successors and assigns (the "Seller Indemnitees") from and
against any and all Losses incurred by any Seller Indemnitee as a result of any
of the following:
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(a) the breach of any representation and warranty of the Buyer
set forth in Section 3.3;
(b) the breach of any covenant or agreement required to be
performed by the Buyer under this Agreement, other than the covenants and
agreements set forth in Section 2.2;
(c) any liability arising out of any Assumed Obligation;
(d) any brokerage or finder's fees arising out of the
transactions contemplated hereby owing or claimed to be owing to any party
engaged by the Buyer; and
(e) any liability arising out of any of the Seller Repurchase
Agreements which relate to the sale of products after the Closing;
PROVIDED, HOWEVER, that "Losses" shall be calculated net of (i) insurance
- -------- -------
proceeds actually received, (ii) amounts actually recovered in respect of
indemnification claims (other than any indemnification claims arising under this
Section 7.2), (iii) tax deductions, credits or other benefits actually received
or (iv) other amounts actually recovered pursuant to a cross-claim or
counterclaim arising from or in connection with the circumstances that give rise
to such Losses pursuant to a final adjudication.
7.3. ASSERTION OF CLAIMS. No claim, demand, suit or cause of action
-------------------
shall be brought under Section 7.1 or 7.2 unless the Buyer Indemnitee or the
Seller Indemnitee, as the case may be, gives the indemnifying party (the
"Indemnifying Party") written notice of the existence of any such claim, demand,
suit or cause of action and the amount thereof, to the extent known, and
provides to the extent available all written documentation relating thereto on
or prior to the Survival Date, if any, applicable to any representation forming
the basis of a claim, demand, suit or cause of action under Section 7.1 or 7.2.
7.4. NOTICE AND DEFENSE OF THIRD PARTY CLAIMS. (a) Any action, suit
----------------------------------------
or proceeding (a "Proceeding") brought by a third party against a Buyer
Indemnitee or Seller Indemnitee, as the case may be (the "Indemnified Party"),
with respect to which the Buyer or Seller may have an indemnification obligation
under this Article VII, shall be defended (including all proceedings on appeal
or for review which counsel for the defendant shall deem appropriate) by the
Indemnifying Party, unless otherwise agreed to in writing by the Indemnifying
Party, using counsel reasonably satisfactory to the Indemnified Party; PROVIDED,
--------
HOWEVER, that the Indemnifying Party shall not have the right to assume the
- -------
defense of any Proceeding if (i) such Proceeding seeks an
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<PAGE>
injunction, restraining order, declaratory relief or other nonmonetary relief
and, if decided adversely, such Proceeding could have a Material Adverse Effect
on the Indemnified Party or (ii) the named parties to any such Proceeding
(including any impleaded parties) include both the Indemnified Party and the
Indemnifying Party and (A) the Indemnified Party shall have been advised by
counsel that there are one or more legal or equitable defenses available to it
which are different from or additional to those available to the Indemnifying
Party and (B) in the reasonable opinion of counsel for the Indemnified Party,
counsel for the Indemnifying Party could not adequately represent the interests
of the Indemnifying Party because such interests could be in conflict with those
of the Indemnifying Party; PROVIDED,HOWEVER, that the Indemnifying Party shall
-------- -------
not be liable for the fees and expenses of more than one counsel for the
Indemnified Party. In addition, if the Indemnifying Party shall not assume the
defense of any Proceeding within a reasonable time after receipt of notice of
such Proceeding from the Indemnified Party, the Indemnified Party shall (upon
further notice to the Indemnifying Party) have the right to assume the defense
of such Proceeding.
(b) If the Indemnifying Party shall assume the defense of a
Proceeding (under circumstances in which the proviso to the Section 7.4(a) is
not applicable), the Indemnifying Party shall not be responsible for any legal
or other defense costs subsequently incurred by the Indemnified Party in
connection with the defense thereof. If the Indemnifying Party does not
exercise its right to assume defense of a Proceeding (but is not otherwise
restricted from so assuming such defense by the first proviso to Section
7.4(a)), it shall nevertheless be entitled to participate in such defense with
its own counsel and the fees and expenses of both counsel to the Indemnified
Party and the Indemnifying Party shall be aggregated and borne by the
Indemnifying Party. If the Indemnifying Party does not assume the defense of a
Proceeding because it is restricted from assuming such defense by the first
proviso to Section 7.4(a), it shall nevertheless be entitled to participate in
such defense with its own counsel and the fees and expenses of both counsel to
the Indemnified Party and the Indemnifying Party shall be aggregated and borne
50% by the Indemnifying Party and 50% by the Indemnified Party.
(c) Regardless of which party is controlling the defense of any
Proceeding, the controlling party shall keep the other party fully informed of
such Proceeding at all stages thereof, whether or not it is so represented, the
party not controlling the defense of such Proceeding shall make available to the
other party all books and records of such party relating to such Proceeding and
the parties hereto shall render to each other such assistance as they may
reasonably require of each other in order to ensure the proper and adequate
defense of such Proceeding.
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<PAGE>
(d) The party controlling the defense of any Proceeding shall not
make any settlement of any action, suit or proceeding without the written
consent of the other party which, consent shall not be unreasonably withheld.
7.5. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. (a)
-----------------------------------------------------
Subject to the further provisions of this Article VII, the representations and
warranties of the Seller contained in Section 3.1 and the representations and
warranties of the Buyer contained in Section 3.3 shall survive the Closing and
shall terminate at the end of the 18th month after the date of the Closing;
PROVIDED, HOWEVER, that (i) the representations and warranties of the Seller set
- -------- -------
forth in the first sentence of Section 3.1(g) hereof shall survive the Closing
and remain in full force and effect until the fifth anniversary of the Closing
and (ii) the representations and warranties of the Seller set forth in Sections
3.1(a), (b), (c), (h), (i) and (o) hereof shall survive the Closing and remain
in full force and effect until the 30th month anniversary of the Closing (each
of the foregoing termination dates, a "Survival Date"). Any representation or
warranty which would otherwise terminate after a Survival Date shall survive
until the final adjudication or settlement of any claim for the breach thereof
if notice of any inaccuracy or breach thereof, including a reasonably detailed
description of such alleged inaccuracy or breach, shall have been given in
writing to the Seller or the Buyer, as the case may be, on or prior to a
Survival Date.
(b) Except as otherwise expressly provided in this Agreement, all
covenants contained in this Agreement shall survive the Closing and remain in
full force and effect without time limit.
7.6. LIMITATIONS ON INDEMNIFICATION. Anything contained herein to
------------------------------
the contrary notwithstanding, the Seller shall not be obligated under Section
7.1(a) for the payment of Losses incurred by any Buyer Indemnitee unless and
until, and only to the extent that, the aggregate amount of all Losses incurred
by all Buyer Indemnitees with respect to which the Seller is obligated to
provide indemnification pursuant to Section 7.1(a) exceeds the amount by which
$1,000,000 is greater than the aggregate amount, if any, incurred by the Buyer
in connection with those matters set forth on SCHEDULE 7.6; PROVIDED, HOWEVER,
------------ -------- -------
that in no event shall Losses for which the Seller shall be liable under Section
7.1(a) exceed in the aggregate $25,000,000. Anything contained herein to the
contrary notwithstanding, the Buyer shall not be obligated under Section 7.2(a)
for the payment of Losses incurred by any Seller Indemnitee unless and until,
and only to the extent that, the aggregate amount of all Losses incurred by all
Seller Indemnitees with respect to which the Buyer is obligated to provide
indemnification pursuant to Section 7.2(a) exceeds $1,000,000; PROVIDED,
--------
HOWEVER, that in no event shall Losses for which the
- -------
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<PAGE>
Buyer shall be liable under Section 7.2(a) exceed in the aggregate $25,000,000.
7.7. REMEDIES EXCLUSIVE. The rights of the parties to
------------------
indemnification under this Article VII shall be the sole and exclusive
contractual right or remedy in connection with any Losses arising from or in
connection with this Agreement.
ARTICLE VIII
ADDITIONAL POST-CLOSING AGREEMENTS
8.1. MUTUAL PROTECTION OF GOODWILL IN TRADEMARKS, ETC. (a) The
-------------------------------------------------
Buyer acknowledges the validity, value and goodwill in the "ComputerLand" name
and the Seller's proprietary rights therein with respect to the Seller's use
thereof anywhere in the world other than the Designated Territory. All parties
acknowledge that no right, title and interest with respect to the Trademarks and
the goodwill appurtenant thereto shall be retained by the Seller in the
Designated Territory. In order to protect such validity, value and goodwill, to
the extent the Buyer uses the "ComputerLand" name, the Buyer shall use the
"ComputerLand" name and any mark confusingly similar with the "ComputerLand"
name in a commercially reasonable manner at all times and shall protect its
rights in each such name in the same manner in which Merisel has previously
protected its rights in the proprietary trade names, service marks and
trademarks of Merisel. The Buyer shall not challenge or interfere with the
Seller's use or ownership of the "ComputerLand" name or use or seek to register
or otherwise establish rights in the "ComputerLand" name, or any confusingly
similar name, anywhere in the world other than in the Designated Territory.
(b) The Seller acknowledges the validity, value and goodwill in the
Trademarks and the Buyer's proprietary rights therein within the Designated
Territory following the Closing. In order to protect such validity, value and
goodwill, to the extent the Seller uses one or more of the Trademarks, or any
mark confusingly similar with one or more of the Trademarks, outside of the
Designated Territory, the Seller shall use such terms in a commercially
reasonably manner at all times and shall protect its rights in such names in the
same manner in which the Seller has previously protected its rights in the
Trademarks anywhere in the world and in the same manner in which the Seller
protects its rights in any other proprietary trade names, service marks and
Trademarks owned by the Seller. The Seller shall not challenge or interfere
with the Buyer's use or ownership of any of the Trademarks or use or seek to
register or otherwise attempt to establish rights in any mark confusingly
similar with any of the Trademarks anywhere within the Designated Territory.
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<PAGE>
8.2. SELLER'S RESTRICTIVE COVENANT. (a) Except in connection with
-----------------------------
the performance of the agreements set forth in Section 1.5 hereof, from the
Closing until the 36th monthly anniversary of the Closing (the "Restriction
Period"), the Seller shall not, directly or indirectly, engage in the sale or
distribution of microcomputers or similar products to third party resellers of
such products located anywhere in the Designated Territory; PROVIDED, HOWEVER,
-------- -------
that the foregoing restriction shall not apply to:
(i) sales of any products to (A) any company that purchases such
products primarily for internal use, (B) any company that is engaged
in the resale of such products to third parties that are (1)
affiliates of such company or (2) otherwise engaged in an independent
business relationship with such company or an affiliate of such
company where the resale of such products is an ancillary activity of
such business relationship (e.g., an independent insurance broker that
acquires such products from a reseller division or subsidiary of an
insurance company or a hotel franchisee that acquires such products
from a reseller division or subsidiary of the hotel franchisor), (C)
any financial leasing company, (D) any rental company, (E) any company
engaged in the original equipment manufacturing of microcomputer
products, (F) any company set forth on SCHEDULE 8.2 or (G) any company
------------
whose primary business involves either of the following activities:
(x) the purchase of products as agent for ultimate end-users
where such end-users are billed directly by the Seller for such
products; or
(y) the purchase of products which are integrated into end-
users' systems where such company retains title to such products;
or
(ii) sales of spare parts to any person or entity.
As used in this Section 8.2, any legal entity or division thereof shall
constitute a "company" if such legal entity or division shall be the direct
purchaser of such products from the Seller. In addition, the Seller shall not,
during the Restriction Period, (1) perform any distribution services (including
configuration services) substantially similar to those provided to the Buyer
under the Services Agreement for computer resellers, aggregators or
distributors, (2) act as a franchisor with respect to franchisees that compete
with the Subject Business in any manner or (3) initiate any program if it is
reasonably established that the principal purpose of such program is to permit
the Seller to cause a third party reseller to change its method of doing
business so as to enable the Seller to be eligible to claim the benefit of
clause (G)(x) or (y) above. Anything contained in
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<PAGE>
this Agreement to the contrary notwithstanding, the Seller's performance under
the Services Agreement shall not be deemed a breach of this Section 8.2. In the
event the Buyer and the Seller shall enter into negotiations regarding the
extension of the Distribution Period (as defined in the Services Agreement),
then it is the intention of the Seller and the Buyer to discuss the extension of
the Restriction Period as part of conducting such negotiations.
(b) The Seller has carefully considered the nature and extent of the
restrictions set forth herein and acknowledges that the same are reasonable with
respect to scope, duration and territory. It is the desire and intent of the
Seller and the Buyer that the provisions of this Section 8.2 be enforced to the
fullest extent permissible under the laws and public policies of each
jurisdiction in which enforcement thereof is sought. Accordingly, if any
provision of this Section 8.2 shall be adjudicated to be invalid or
unenforceable, such provision, without any action on the part of the Seller or
the Buyer, shall be deemed amended to delete therefrom or to modify provisions
thereof so as to restrict (including, without limitation, a reduction in
duration, geographical area or prohibited business activities) the portion
adjudicated to be invalid or unenforceable, such deletion or modification to
apply only with respect to the operation of such provision in the particular
jurisdiction in which such adjudication is made, and such deletion or
modification to be made only to the extent necessary to cause the provision as
amended to be valid and enforceable. It is further acknowledged that any
monetary remedy for any breach of the Seller's covenant set forth in Section
8.2(a) will be inadequate and that the Buyer will be entitled to temporary and
permanent injunctive relief against the Seller in addition to any other relief
or remedies to which the Buyer may be entitled, without the necessity of proving
actual damages.
8.3. ACCESS. (a) To the extent permitted by applicable law or
------
existing contractual arrangement, the Seller shall, upon request, permit the
Buyer and its representatives, at reasonable times during normal business hours
and in a reasonable manner which is not disruptive to the operations of the
Seller, to inspect and to make copies of (at the expense of the Buyer) all
records of the Seller relating to the Subject Business prior to the Closing,
including, without limitation, sales and royalty records, accounting records and
employee records. The Seller shall use its reasonable efforts to avoid entering
into agreements prohibiting or restricting the Buyer's access to the records of
the Subject Business. The Seller represents and warrants to the Buyer that,
except with respect to vendor agreements and agreements set forth on SCHEDULE
--------
8.3(A), there are no existing contractual restrictions on the ability of the
- ------
Seller to provide access to such records to the Buyer. Any information provided
pursuant to this Section 8.3(a) shall be treated in accordance with Section 8.5.
The Seller shall not dispose of
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<PAGE>
such records during the five-year period commencing with the Closing without the
Buyer's prior written consent, which consent shall not be unreasonably withheld.
Following the expiration of such five-year period, the Seller may dispose of
such records at any time following 90 days' prior written notice to the Buyer.
During such 90-day period, the Buyer shall have the right, at the Buyer's sole
expense, to take possession of all or any part of such records at a time to be
agreed upon by the Seller and the Buyer. In addition to the foregoing, the
Seller shall provide to the Buyer copies of, and the Buyer shall have the
nonexclusive right to use within the Designated Territory, (i) all mailing
addresses of and any other data relating to the Franchisees and Datago
Purchasers, (ii) all vendor lists relating to the Subject Business and (iii all
forms, catalogs, brochures, advertising materials, training and marketing
manuals and franchise and Datago operating manuals relating to the Subject
Business, including, without limitation, ACCESS materials and materials relating
to the Agreements, Program and services referred to in Sections 1.2(k) through
(n).
(b) To the extent permitted by applicable law or existing contractual
arrangement, the Buyer shall, upon request, permit the Seller and its
representatives, at reasonable times during normal business hours and in a
reasonable manner which is not disruptive to the operations of the Buyer, to
inspect and to make copies of (at the expense of the Seller) all records of the
Buyer relating to the Buyer Subject Business. The Buyer shall use its
reasonable efforts to avoid entering into agreements prohibiting or restricting
the Seller's access to the records of the Buyer Subject Business. The Buyer
represents and warrants to the Seller that, except with respect to vendor
agreements and agreements set forth on SCHEDULE 8.3(B), there are no existing
---------------
contractual restrictions on the ability of the Buyer to provide access to such
records to the Seller. Any information provided pursuant to this Section 8.3(b)
shall be treated in accordance with Section 8.5. The Buyer shall not dispose of
such records during the five-year period commencing with the Closing without the
Seller's prior written consent, which consent shall not be unreasonably
withheld. Following the expiration of such five-year period, the Buyer may
dispose of such records at any time following 90 days' prior written notice to
the Seller. During such 90-day period, the Seller shall have the right, at the
Seller's sole expense, to take possession of all or any part of such records at
a time to be agreed upon by the Seller and the Buyer.
8.4. RENEWALS AND ASSIGNMENTS OF FRANCHISE AGREEMENTS. From and
------------------------------------------------
after the Closing, the Buyer shall cause each Franchisee renewing or assigning a
Franchise Agreement to enter into a new franchise agreement with the Buyer and
to release the Seller from its obligations thereunder as a condition to such
renewal or assignment.
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<PAGE>
8.5. CONFIDENTIALITY MATTERS. (a) At the Closing, the Seller shall
-----------------------
assign to the Buyer all of the Seller's right, title and interest in any
confidentiality agreements to the extent such agreements pertain to the sale of
the Subject Business entered into by the Seller in connection with the sale of
the Subject Business and, if available, shall deliver to the Buyer the executed
originals of such agreements. The Seller shall not amend, modify or supplement,
or grant any consent or waiver under or with respect to, any of such
confidentiality agreements without the Buyer's prior written consent.
(b) From and after the Closing, each of the Buyer and the Seller
shall maintain the confidentiality of all confidential or proprietary
information of the other party, including marketing, advertising and promotional
methods, agreements with vendors, manufacturers, distributors and other
suppliers, Franchise Agreements, Datago Agreements, customer lists, pricing
policies, financial information, sales volume, inventory procedures and amounts,
logistic systems, computer programs (including source code and object code),
ideas, concepts, processes, research and development and other information
related to the business or customers of such other party (collectively,
"Confidential Information"). Neither party will use (except in connection with
this Agreement or the transactions contemplated hereby), transfer, release,
publish or disclose, directly or indirectly, any Confidential Information of the
other party, without such other party's prior written consent, except as
required by law. Confidential Information does not include any information that
(i) becomes generally known or available to the public, through no fault of such
party, (ii) was known by such party, without any obligation of confidentiality,
prior to the date hereof or (iii) is lawfully obtained by such party after the
date hereof from a third party not bound by any obligation of confidentiality to
the other party. Each party understands that the other party will not have an
adequate remedy at law for a breach or threatened breach by such party of the
terms of this Section and therefore agrees that in the event of such a breach or
threatened breach, the other party may obtain an injunction or restraining order
to enjoin such breach or threatened breach, in addition to any other available
remedy.
8.6. SALE OF CERTAIN NOTES AND EQUITY - RIGHT OF FIRST OFFER. In the
-------------------------------------------------------
event the Seller desires to sell any of its right and interest in and to the
notes receivable set forth on SCHEDULE 3.1(F) or the equity interests set forth
---------------
on SCHEDULE 3.1(E) (collectively, the "Investments") at any time during the one-
---------------
year period following the Closing Date, the Seller shall first offer to sell any
such Investment to the Buyer pursuant to a written notice (the "Offer Notice")
setting forth the proposed purchase price for such Investment and all other
material terms relating to such sale. The Buyer shall have the right to accept
such offer by providing written notice (a "Notice of Acceptance") of its
acceptance thereof to the Seller at any time within 15 days
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<PAGE>
following the Buyer's receipt of the Offer Notice. The closing of the purchase
and sale of any Investment to the Buyer pursuant to this Section 8.6 shall occur
within 30 days of the Buyer's delivery to the Seller of a Notice of Acceptance
on the terms set forth in the Offer Notice. If the Buyer does not deliver a
Notice of Acceptance to the Seller within the aforementioned 15-day period, the
Seller shall have the right to sell such offered Investment to any party within
the six-month period following the Seller's delivery to the Buyer of the Offer
Notice upon terms no less favorable to another buyer than those set forth in the
Offer Notice delivered to the Buyer. In the event such sale is not consummated
within such six-month period or if the purchase price or other material terms of
such proposed sale are more favorable than those set forth in the Offer Notice,
the offered Investment shall again be offered to the Buyer pursuant to this
Section 8.6 if the one-year first offer period has not expired. The parties
shall use their best efforts and act in good faith in order to carry out the
intent of this Section 8.6, and shall enter into such agreements and execute
such instruments of transfer as shall be necessary and appropriate to effect the
sale, if any, contemplated by the provisions of this Section 8.6. Nothing
contained in this Section 8.6 shall prevent the Seller from amending or waiving
any provision of the Investments or any agreement or instrument relating to the
Seller's rights under the Investments.
8.7. CHANGE OF NAME. The Seller shall change its corporate name to a
--------------
name which does not include "ComputerLand", "Datago" or any name similar thereto
by filing an amendment to the Seller's Restated Certificate of Incorporation
with the Delaware Secretary of State within 90 days after the Closing.
8.8. VENDOR CONSENTS. After the Closing, at the written request of
----------------
the Buyer, the Seller shall cooperate with the Buyer and work in good faith with
the Buyer to obtain the consents of the vendors and Datago Purchasers
contemplated by SCHEDULE 3.1(B) identified in writing by the Buyer and which
---------------
were not obtained on or prior to the Closing; PROVIDED, HOWEVER, that neither
-------- -------
the Buyer nor the Seller shall be required to incur any obligations or
liabilities in obtaining any such consent, except for ordinary and necessary
out-of-pocket expenses incurred in connection therewith, which expenses shall be
borne equally by the Buyer and the Seller.
8.9. NO SOLICITATION OF EMPLOYEES. Except as provided in Article X,
----------------------------
from the date hereof through December 31, 1995, neither the Buyer nor the Seller
shall solicit the employees of the other or any other person who was employed by
the other within six months of his or her termination of such employment.
8.10. FINANCIAL STATEMENTS. After the Closing, at the written
--------------------
request of the Buyer, and at the Buyer's expense, the Seller shall cooperate
with the Buyer and its accountants to
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<PAGE>
prepare, modify or provide additional information with respect to any financial
statements or schedules relating to the Subject Business.
ARTICLE IX
[INTENTIONALLY OMITTED]
ARTICLE X
EMPLOYMENT MATTERS
10.1. OBLIGATIONS OF BUYER. Effective as of the Closing, the Buyer
--------------------
shall extend offers of employment to all employees of the Seller employed in
conducting the Subject Business immediately prior to the Closing on general
terms of employment, including base salary, commission, bonus, benefits and
similar arrangements, substantially comparable to those under which such
employees were employed by the Seller immediately prior to the Closing on an
aggregate basis (recognizing that individual differences in specific terms of
employment may exist), except for one employee of the Subject Business on leave
on the Closing Date, to whom the Buyer shall offer such employment upon return
from such leave. The Buyer shall reimburse the Seller promptly upon written
demand for any payroll amounts paid by the Seller to any employee of the Subject
Business who shall accept the Buyer's offer with respect to any period after the
date hereof. The Buyer shall credit the employees employed in conducting the
Subject Business who shall accept the Buyer's offer with the full length of
their period of service with the Seller for purposes of determining their
eligibility to participate in, and the calculation of benefits under, the
employee benefit plans of the Buyer and for purposes of calculating severance
obligations of the Buyer to such employees; PROVIDED, HOWEVER, that for purposes
-------- -------
of calculating the eligibility of employees of the Subject Business to
participate in the 401(k) plan maintained by the Merisel Group, no employee of
the Subject Business shall be credited with more than five years of service upon
being hired by the Buyer. In connection therewith, the Buyer shall be
responsible for and shall pay all claims for severance made by the employees
employed in conducting the Subject Business who shall accept the Buyer's offer
and shall be responsible for accrued and unpaid vacation of such employees to
the extent of the amount of the payment for such accrued and unpaid vacation
received from the Seller pursuant to Section 10.2(b). The Buyer shall be
responsible for all benefit claims of the employees employed in conducting the
Subject Business who shall accept the Buyer's offer arising after the Closing
relating to periods after to the Closing, including severance payments, COBRA
coverage, workmen's compensation, unemployment compensation and other government
mandated benefits. The Buyer acknowledges that the Seller makes no
representation
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<PAGE>
that any of its employees will accept the Buyer's offer of employment. The
Buyer shall have no liability with respect to the employment or termination of
employment of any of the Seller's employees who do not accept the Buyer's offer
of employment so long as such employees are not successful in asserting that
their employment by the Seller had been constructively terminated solely by
virtue of the offer of employment made by the Buyer. The Buyer represents and
warrants to the Seller that employees of the Merisel Group who are attributed
with at least five years of service by the Merisel Group shall be fully vested
under the 401(k) plan maintained by the Merisel Group.
10.2. OBLIGATIONS OF SELLER. The Seller shall (a) deliver to the
---------------------
Buyer no later than three days prior to the Closing a list of all employees of
the Seller then employed in conducting the Subject Business, (b) deliver to the
Buyer within 30 days after the Closing Date a check in an amount which shall
represent the Seller's calculation of all accrued and unpaid vacation pay on or
prior to the Closing due to the employees of the Subject Business who accept the
Buyer's offer and who are identified by the Buyer to the Seller prior to the
15th day after the Closing and (c) be responsible for all liabilities that have
accrued with respect to periods ending prior to the Closing with respect to the
employees of the Subject Business, except for severance obligations to the
employees of the Subject Business who accept the Buyer's offer and accrued and
unpaid vacation owed to such employees in the amount referred to in clause (b)
above. The Seller acknowledges that, after the Closing, the Buyer shall have
the right, subject to the Buyer's obligations set forth in Section 10.1, to make
all decisions regarding employment matters based on its sole determination as to
the Buyer's business needs and performance of its employees.
ARTICLE XI
MISCELLANEOUS
11.1. EXPENSES; TRANSFER TAXES, ETC. Except as set forth in this
------------------------------
Section 11.1 or otherwise in this Agreement, all fees, costs and expenses
incurred by any party to this Agreement in connection with, relating to or
arising out of the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby, including, without
limitation, attorneys', accountants' and other professional fees and expenses,
shall be borne by such party. The Buyer shall pay all (a) sales, use and excise
taxes and all registration, recording or transfer taxes which may be payable in
connection with the transactions contemplated by this Agreement and (b) costs
and expenses of the independent accountants of the Seller in preparing the
Financial Statements and delivering their report thereon, whether or not the
Closing shall occur.
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<PAGE>
11.2. ENTIRE AGREEMENT. This Agreement (including the Schedules and
----------------
Annexes attached hereto) contains the entire agreement among the parties hereto
with respect to the transactions contemplated hereby and supersedes all prior
agreements or understandings between the parties with respect thereto; PROVIDED,
--------
HOWEVER, that the provisions of the Confidentiality Agreement shall remain in
- -------
full force and effect to the extent not inconsistent herewith.
11.3. DESCRIPTIVE HEADINGS. Descriptive headings are for convenience
--------------------
only and shall not control or affect the meaning or construction of any
provisions of this Agreement.
11.4. NOTICES. All notices or other communications which are
-------
required or permitted hereunder shall be in writing and sufficient if (a)
delivered personally or sent by telecopier, (b) sent by nationally-recognized
overnight courier or (c) sent by certified mail, postage prepaid, return receipt
requested, addressed as follows:
if to the Buyer to:
Merisel FAB, Inc.
c/o Merisel, Inc.
200 Continental Boulevard
El Segundo, California 90245-0984
Attention: Michael D. Pickett
Co-Chairman, President and
Chief Executive Officer
Telecopier: (310) 615-1234;
with a copy to:
Riordan & McKinzie
300 South Grand Avenue
29th Floor
Los Angeles, California 90071-3155
Attention: Robert G. Morrish, Esq.
Telecopier: (213) 229-8550;
if to the Seller, to:
ComputerLand Corporation
59611 West Las Positas
Pleasanton, California 94566-8575
Attention: Richard F. Vitkus
Senior Vice President and
General Counsel
Telecopier: (510) 734-4802;
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<PAGE>
with a copy to:
O'Sullivan Graev & Karabell
30 Rockefeller Plaza
New York, New York 10112
Attention: Lawrence G. Graev, Esq.
Telecopier: (212) 408-2467;
or to such other address as the party to whom notice is to be given may have
furnished to each other party in writing in accordance herewith. Any such
communication shall be deemed to have been given (i) when delivered if
personally delivered or sent by telecopier, (ii) on the Business Day (as
hereinafter defined) after dispatch if sent by nationally-recognized, overnight
courier and (iii) three business days following the posted date, if sent by
mail. As used herein, "Business Day" means a day that is not a Saturday, Sunday
or a day on which banking institutions in California are not required to be
open.
11.5. COUNTERPARTS. This Agreement may be executed in any number of
------------
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
11.6. GOVERNING LAW. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of California applicable to
contracts made and performed wholly therein.
11.7. BENEFITS OF AGREEMENT. The terms and provisions of this
---------------------
Agreement shall be binding upon and inure to the benefit of each of the parties
hereto and their respective successors and assigns. Except as provided in the
previous sentence, this Agreement shall not inure to the benefit of any persons
or entities not a party hereto. Anything contained herein to the contrary
notwithstanding, this Agreement shall not be assignable by any party hereto
without the prior written consent of the other party hereto, except for an
assignment to any secured lender in connection with the financing provided by
such lender to the assigning party or to the purchaser of substantially all the
assets of the party so assigning this Agreement; provided, however, that from
-------- -------
and after the date hereof until the earlier of (1) the second anniversary of the
date hereof and (2) the termination of the Distribution Period (as defined in
the Services Agreement), (a) in the case of the Seller, such purchaser shall not
be one of the following:
[*]
______________
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
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<PAGE>
(b) in the case of the Buyer, such purchaser shall not be one of the following:
[*]
For purposes of this Section 11.7, any transaction or series of transactions by
way of merger, consolidation or other business combination or purchase of
beneficial ownership (as defined in Rule 13d-3 of the Securities Exchange Act of
1934, as amended (the "Exchange Act")), in which a "person" or "group" (within
the meaning of Section 13(d) and 14(d)(2) of the Exchange Act) becomes the
"beneficial owner" (as defined in Rule 13d-3 of the Exchange Act) of capital
stock representing 50% or more of the total voting power entitled to vote in the
election of the board of directors of the Seller, the Buyer, Merisel or such
other entity surviving the transaction, as the case may be, shall constitute an
assignment hereunder. [*]
11.8. PRONOUNS. As used herein, all pronouns shall include the
--------
masculine, feminine, neuter, singular and plural thereof whenever the context
and facts require such construction and the word "person" includes a corporation
or other entity or association as well as a natural person.
11.9. SEVERABILITY. Any provision of this Agreement which is invalid
------------
or unenforceable in any jurisdiction shall be ineffective to the extent of such
invalidity or unenforceability without invalidation or rendering unenforceable
the remaining provisions hereof, and any such invalidity or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction. If any provision is held to be invalid of
unenforceable, such provision shall be construed by the appropriate judicial
body by limiting or reducing it to the minimum extent necessary to make it
legally enforceable.
11.10. AUTHORIZATION. Effective as of the Closing Date, the Seller
-------------
appoints the Buyer its attorney-in-fact solely to open all mail of the Seller
relating to the Subject Business addressed to the locations of the facilities of
the Subject Business. Buyer will promptly send to Seller all mail not relating
to the Purchased Assets or the Subject Business, except personal mail of any
employee or former employee of the Subject Business.
11.11. AMENDMENT, MODIFICATION AND WAIVER. This Agreement shall not
----------------------------------
be amended, modified, supplemented or otherwise altered except pursuant to an
instrument in writing signed by each of the parties hereto. The failure by any
party
______________
[*] Omitted pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
amended.
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<PAGE>
hereto to comply with any obligation, covenant, agreement or condition contained
herein may be expressly waived in writing by the party or parties hereto
adversely affected by such failure, but such waiver or failure shall not operate
as a waiver of, or estoppel with respect to, any subsequent or other failure.
The delay in pursuing any remedy or in insisting upon full performance for any
breach or failure of any covenant, condition or promise shall not prevent a
party from later pursuing any remedies or insisting upon full performance for
the same or any similar breach or failure.
11.12. CONFIDENTIALITY AGREEMENT. The letter agreement dated June
-------------------------
28, 1993 (the "Confidentiality Agreement"), relating to the confidentiality
obligations of Merisel with respect to information obtained by Merisel in
connection with the review of the Subject Business shall remain in full force
and effect in the event of the termination of this Agreement for any reason
whatsoever prior to the Closing.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed on its behalf as of the date first above written.
COMPUTERLAND CORPORATION
By: /s/ Ware Grove
--------------
Name: Ware Grove
Title: Vice President
MERISEL FAB, INC.
By: /s/ Timothy N. Jenson
---------------------
Name: Timothy N. Jenson
Title: Vice President
For purposes of Section
2.2 hereof only.
MERISEL, INC.
By: /s/ James L. Brill
------------------
Name: James L. Brill
Title: Vice President
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<PAGE>
GUARANTY AGREEMENT dated as of January 31,
1994, between MERISEL, INC., a Delaware
corporation ("Merisel"), and COMPUTERLAND
CORPORATION, a Delaware corporation (the
"Seller").
Reference is made to the Asset Purchase Agreement dated as of January
31, 1994 (the "Asset Purchase Agreement"), among the Seller, Merisel FAB, Inc.,
a Delaware corporation which is a wholly owned subsidiary of Merisel (the
"Buyer"), and for purposes of Section 2.2 thereof, Merisel.
Capitalized terms used herein and not otherwise defined herein shall
have the meanings set forth in the Asset Purchase Agreement.
Pursuant to the Asset Purchase Agreement, the Seller has agreed to
sell, assign and deliver to the Buyer, and Buyer has agreed to purchase, assume
and pay for, the Purchased Assets, on the terms and conditions set forth
therein.
Merisel desires the Buyer to enter into and perform its obligations
under the Asset Purchase Agreement, to purchase, assume and pay for the
Purchased Assets as provided therein and to perform all of the Buyer's other
obligations incurred in connection therewith. Accordingly, in order to induce
the Seller to enter into the Asset Purchase Agreement, Merisel is willing to
guarantee unconditionally the payment and performance by the Buyer of the
Guaranteed Obligations (as hereinafter defined).
The Seller is relying on this Guaranty Agreement in entering into the
Asset Purchase Agreement and consummating the transactions contemplated thereby,
and is not willing to enter into the Asset Purchase Agreement, or to sell or
agree to sell the Purchased Assets to the Buyer on the terms and conditions set
forth therein, unless it receives the unconditional guaranty of Merisel in
accordance herewith.
Accordingly, in consideration of the premises and of other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Merisel and the Seller hereby agree as follows:
1. Merisel hereby guarantees to the Seller, its successors and
assigns, absolutely and unconditionally, the payment and performance in full,
when and as due, of all liabilities and obligations of the Buyer arising under
or in respect of the Asset Purchase Agreement, the License Agreement, the
Sublease, the Services Agreement or any other instrument or agreement entered
into in connection therewith, including, without limitation, the purchase of the
Purchased Assets, the assumption of the Assumed Obligations and the payment in
full of
-1-
<PAGE>
the aggregate purchase price for the Purchased Assets (collectively, the
"Guaranteed Obligations").
2. This Guaranty Agreement is a continuing guaranty and shall remain
in full force and effect so long as any Guaranteed Obligation remains
outstanding or shall exist; provided, however, that this Guaranty Agreement
-------- -------
shall expire on the fifth anniversary of the date hereof, except as to any claim
brought hereunder prior to such date.
3. Merisel hereby consents that from time to time, before or after
any default of any Guaranteed Obligation or any notice of termination hereof,
with or without further notice to or assent by Merisel, that (a) any security at
any time held by or available to the Seller for any obligation of the Buyer, or
any security at any time held by or available to the Seller for any obligation
of any other person secondarily or otherwise liable for any of the Guaranteed
Obligations, may be exchanged, surrendered or released, (b) any obligation of
the Buyer, or of any such other person, may be changed, altered, renewed,
extended, continued, surrendered, compromised, waived or released in whole or in
part, or any default with respect thereto waived, and (c) the Seller may fail to
set off or may release, in whole or in part, any balance of any deposit or
credit on its books in favor of the Buyer, or of any such other person, (d) the
Seller may extend further credit in any manner whatsoever to the Buyer, and (e)
the Seller may generally deal with the Buyer or any security or other person as
the Seller may see fit; and Merisel shall remain bound under this Guaranty
Agreement notwithstanding the occurrence of any of the foregoing.
4. Merisel hereby waives (a) notice of acceptance of this guaranty
and of any and all extensions of credit by the Seller to the Buyer; (b)
presentment and demand or payment of any of the Guaranteed Obligations; (c)
protest and notice of dishonor or default to Merisel or to any other party with
respect to any of the Guaranteed Obligations; (d) all other notices to which
Merisel might otherwise be entitled; and (e) any demand for payment under this
Guaranty Agreement.
5. This is a guaranty of payment and performance and not a guaranty
of collection. Merisel waives any right to require that any action be brought
against the Buyer or any other person or that resort be had to any security or
to any balance of any deposit or credit on the books of the Seller in favor of
the Buyer or any other person.
6. Merisel hereby represents and warrants to the Seller that:
(a) Due Authorization and Execution. Merisel has all necessary
-------------------------------
corporate power and authority to enter into this Guaranty Agreement and to
consummate the transactions contemplated hereby. The Board of Directors of
Merisel has duly authorized and approved the execution and delivery of this
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<PAGE>
Guaranty Agreement and the performance by Merisel of its obligations under this
Guaranty Agreement. No other corporate proceeding or action on the part of
Merisel or its stockholders is necessary to authorize and approve the execution
and delivery of this Guaranty Agreement or the performance by Merisel of its
obligations under this Agreement. This Guaranty Agreement has been duly and
validly executed and delivered by Merisel and, assuming due execution and
delivery by the Seller, constitutes the valid and binding obligation of Merisel
enforceable against it in accordance with its terms, except as such enforcement
may be limited by (a) bankruptcy, insolvency, reorganization, moratorium or
similar laws relating to creditors' rights generally or (b) equitable principles
(whether considered in an action at law or in equity).
(b) Organization of Merisel. Merisel is a corporation duly
-----------------------
organized, validly existing and in good standing under the laws of State of
Delaware and has all requisite corporate power and authority to own, operate and
lease its properties and to carry on its business as now conducted. Merisel has
made available or provided to the Seller complete and correct copies of its
charter and bylaws, each as amended to the date hereof. Each subsidiary of
Merisel (a "Subsidiary") is a corporation duly organized, validly existing and
in good standing under the laws of its respective state of incorporation, and
each has all requisite corporate power and authority to own, operate and lease
its properties and to carry on its business as now conducted. Merisel and each
Subsidiary are duly qualified or licensed to do business as a foreign
corporation and is in good standing in all other jurisdictions that require such
qualification or licensing except where the failure to so qualify would not have
a material adverse effect on the business prospects, properties, assets,
liabilities, results of operation, or financial condition of Merisel and the
Subsidiaries taken as a whole (a "Merisel Material Adverse Effect").
(c) Financial Statements and SEC Reports. Merisel heretofore has
------------------------------------
delivered to the Seller true and complete copies of its Annual Report on Form
10-K for the fiscal year ended December 31, 1992 (the "1992 10-K"), the Proxy
Statement for Merisel's 1992 Annual Meeting of Stockholders as filed with the
Securities and Exchange Commission (the "SEC") and any filings made with the SEC
since December 31, 1992 (the "SEC Reports") including any financial statements
or schedules included or incorporated by reference therein (the "Merisel
Financial Statements" and collectively with the SEC Reports, the "SEC Filings").
As of their respective dates, the SEC Filings complied in all material respects
with all applicable requirements of the Securities Act of 1933, as amended
(along with the rules regulations thereunder, the "Securities Act") and the
Securities Exchange Act of 1934, as amended (along with the rules regulations
thereunder, the "Exchange Act"). As of their respective dates, the SEC Filings
did not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
-3-
<PAGE>
therein, in light of the circumstances under which they were made, not
misleading. Merisel Financial Statements included in the SEC Filings were
prepared in accordance with generally accepted accounting principals (as in
effect from time to time) applied on a consistent basis (except as may be
indicated therein or in the notes thereto and except that the quarterly
financial statements do not contain all of the footnote disclosures required by
generally accepted accounting principles) and present fairly the consolidated
financial position, results of operations and cash flows of Merisel and its
Subsidiaries as of the dates and for the periods indicated (subject, in case of
unaudited quarterly financial statements, to normal year-end adjustments).
(d) No Violation. Neither the execution and delivery of, nor the
------------
consummation of the transactions contemplated by, this Guaranty Agreement will
result in any of the following: (a) a default or an event that, with notice or
lapse of time, or both, would constitute a default, breach or violation of the
charter, bylaws of other governing instruments of Merisel or any of its
Subsidiaries, or any contract, agreement, license or instrument to which Merisel
or any of its Subsidiaries is a party or by which any of them or their
properties are bound; (b) an event that would permit any Person, as such term is
defined in the Exchange Act, to terminate any contract, agreement, license or
instrument to which Merisel or any of its Subsidiaries is a party or by which
any of them or their properties are bound, or to accelerate the maturity of any
indebtedness or other obligation of Merisel or any of its Subsidiaries; (c) the
creation or imposition of any lien, mortgage, pledge, charge or encumbrance of
any kind upon any asset of Merisel or any of its Subsidiaries; (d) a violation
or breach of any statute, ordinance, rule or regulation applicable to Merisel or
any of its Subsidiaries, or any writ, injunction or decree of any court or
governmental instrumentality to which Merisel or any of its Subsidiaries is a
party or by which any of them or their properties are bound; or (e) the
necessity to obtain the consent or approval of, or give notice to or register
with any nongovernment third party, in each of the cases set forth in (a)
through (e) above subject to exceptions which will not, individually or in the
aggregate, have a Merisel Material Adverse Effect.
(e) Governmental Consents. No notice to or filing with, and no
---------------------
authorization, consent or approval of, any domestic or foreign court or any
public or governmental body or authority is necessary for the consummation by
Merisel of the transactions contemplated by this Guaranty Agreement, except for
notices or filings the failure to give or make, and authorizations, consents and
approvals the failure to obtain, would not, individually or in the aggregate,
have a Merisel Material Adverse Effect, or materially and adversely affect the
ability of Merisel to consummate the transactions contemplated hereby.
(f) Compliance with Law. Neither Merisel nor any of its Subsidiaries
-------------------
has been, or is now, in violation on any
-4-
<PAGE>
federal, state or local laws, regulations or orders relating to the operation,
conduct or ownership of the property or business of Merisel or any of its
Subsidiaries, which violations have or will have a Merisel Material Adverse
Effect. Each of Merisel and its Subsidiaries has all licenses, permits and
certificates from governmental agencies necessary for the conduct of its
business as now conducted, the failure of which would have a Merisel Material
Adverse Effect.
(g) Litigation. There is no action, suite, proceeding or
----------
investigation pending or, to the knowledge of Merisel, threatened against
Merisel or any of its Subsidiaries at law or in equity, or before or by any
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, which, if adversely
determined, would have a Merisel Material Adverse Effect. Neither Merisel nor
any of its Subsidiaries is subject to any judgment, award, decree, injunction,
rule or order of any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, which
has or could have a Merisel Material Adverse Effect.
(h) No Material Adverse Change. Since September 30, 1993 Merisel has
--------------------------
not suffered any Merisel Material Adverse Effect.
7. Each reference herein to the Seller shall be deemed to include
the Seller and its successors and assigns in whose favor the provisions of this
Guaranty Agreement shall also inure. Each reference herein to Merisel shall be
deemed to include the legal representatives, successors and assigns of Merisel,
all of whom shall be bound by the provisions of this Guaranty Agreement.
Anything contained in this Agreement to the contrary notwithstanding, this
Agreement may not be assigned without the written consent of the parties hereto,
except to (i) an Affiliate (as defined in Article IX of the Services Agreement)
on the terms and conditions set forth in the Services Agreement, (ii) a Secured
Lender (as defined in Article IX of the Services Agreement) to the Purchaser on
the terms and conditions set forth in the Services Agreement or (iii) a
transferee that is an entity that meets the requirements of Section 11.7 of the
Asset Purchase Agreement.
8. No delay on the part of the Seller in exercising any rights
hereunder or failure to exercise the same shall operate as a waiver of such
rights. No notice to or demand on Merisel shall be deemed to be a waiver of the
obligation of Merisel or of the right of the Seller to take further action
without notice or demand as provided herein, and in no event shall any
modification or waiver of the provisions of this Guaranty Agreement be effective
unless in writing nor shall any such waiver be applicable except in the specific
instance for which given.
-5-
<PAGE>
9. This Guaranty Agreement is, and shall be governed, construed,
applied and enforced in accordance with the laws of the State of California.
MERISEL, INC.
By: /s/ Timothy N. Jenson
-----------------------
Name: Timothy N. Jenson
Title: Vice President
ACCEPTED and AGREED to
as of the date first
above written:
COMPUTERLAND CORPORATION
By: /s/ Ware Grove
----------------
Name: Ware Grove
Title: Vice President, Treasurer
-6-
<PAGE>
DISTRIBUTION AND SERVICES AGREEMENT
DATED JANUARY 31, 1994
BETWEEN
COMPUTERLAND CORPORATION
AND
MERISEL FAB, INC.
A copy of this agreement has been omitted from this filing pursuant to
Rule 24b-2 of the Securities Exchange Act of 1934, as amended, but has
been separately filed with the Securities and Exchange Commission.
<PAGE>
************************************************************
MERISEL, INC.
_____________________________
CREDIT AGREEMENT
Dated as of December 23, 1993
NATIONSBANK OF TEXAS, N.A.
************************************************************
<PAGE>
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to which it is
attached but is inserted for convenience of reference only.
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
Section 1. Definitions and Accounting Matters........... 1
1.01 Certain Defined Terms........................ 1
1.02 Accounting Terms and Determinations.......... 14
1.03 Types of the Loan............................ 15
1.04 Interpretation............................... 15
Section 2. Commitment, Loans, Note and Prepayments...... 16
2.01 Loans........................................ 16
2.02 Borrowings................................... 16
2.03 Changes of Commitment........................ 16
2.04 Certain Fees................................. 17
2.05 Lending Offices.............................. 17
2.06 Note......................................... 17
2.07 Optional Prepayments and Conversions or
Continuations of Loans..................... 17
Section 3. Payments of Principal and Interest........... 18
3.01 Repayment of Loans........................... 18
3.02 Interest..................................... 18
Section 4. Payments; Computations; Etc.................. 19
4.01 Payments..................................... 19
4.02 Computations................................. 19
4.03 Certain Notices.............................. 20
4.04 Offset....................................... 21
Section 5. Yield Protection, Etc........................ 21
5.01 Additional Costs............................. 21
5.02 Limitation on the Eurodollar Loan............ 23
5.03 Illegality................................... 24
5.04 Treatment of Affected Loans.................. 24
5.05 Compensation................................. 24
5.06 Taxes........................................ 25
Section 6. Conditions Precedent......................... 26
6.01 Initial Conditions........................... 26
6.02 Funding Conditions........................... 27
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
Section 7. Representations and Warranties............... 29
7.01 Corporate Existence.......................... 29
7.02 Financial Condition.......................... 30
7.03 Litigation................................... 30
7.04 No Breach.................................... 31
7.05 Action....................................... 31
7.06 Approvals.................................... 31
7.07 Margin Stock................................. 31
7.08 ERISA........................................ 32
7.09 Taxes........................................ 32
7.10 Certain Regulations.......................... 32
7.11 Material Agreements and Liens................ 32
7.12 Environmental Matters........................ 33
7.13 Subsidiaries, Etc............................ 33
7.14 Title to Assets.............................. 34
7.15 Solvency of Guarantor........................ 34
7.16 True and Complete Disclosure................. 34
Section 8. Covenants of the Company..................... 35
8.01 Financial Statements, Etc.................... 35
8.02 Litigation................................... 38
8.03 Existence, Etc............................... 38
8.04 Insurance.................................... 39
8.05 Prohibition of Fundamental Changes........... 39
8.06 Limitation on Liens.......................... 40
8.07 Indebtedness................................. 41
8.08 Dividend Payments............................ 42
8.09 EBIT......................................... 42
8.10 Subordinated Indebtedness.................... 42
8.11 Lines of Business............................ 42
8.12 Transactions with Affiliates................. 42
8.13 Incorporation by Reference................... 43
8.14 Use of Proceeds.............................. 43
8.15 Certain Obligations Respecting Subsidiaries.. 43
8.16 Modifications of Certain Documents........... 44
8.17 Compliance with Other Agreements............. 44
Section 9. Events of Default............................ 45
Section 10. Miscellaneous................................ 48
10.01 Waiver....................................... 48
10.02 Notices...................................... 48
10.03 Expenses, Etc................................ 49
10.04 Amendments, Etc.............................. 50
10.05 Successors and Assigns....................... 50
10.06 Assignments and Participations............... 50
10.07 Survival..................................... 52
10.08 Agreements Superseded........................ 52
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
10.09 Severability................................. 52
10.10 Captions..................................... 52
10.11 Counterparts................................. 52
10.12 Treatment of Certain Information;
Confidentiality............................ 53
10.13 GOVERNING LAW; SUBMISSION TO JURISDICTION.... 53
10.14 WAIVER OF JURY TRIAL......................... 54
</TABLE>
ANNEX 1 - Addresses for Notices and Commitment of the Bank
SCHEDULE 7.03 - Litigation
SCHEDULE 7.11 - Material Agreements and Liens
SCHEDULE 7.12 - Hazardous Materials
SCHEDULE 7.13 - Subsidiaries and Investments
EXHIBIT A - Form of Note
EXHIBIT B - Form of Guarantee Agreement
EXHIBIT C - Form of Opinion of Counsel to the Obligors
-iii-
<PAGE>
This CREDIT AGREEMENT (this "Agreement") dated as of December 23,
---------
1993, is made between Merisel, Inc. a Delaware corporation (the "Company") and
-------
NationsBank of Texas, N.A. (the "Bank").
----
The Company has requested the Bank to extend credit to the Company in
an aggregate principal amount not exceeding $65,000,000 to fund the cash portion
of the purchase price of the Acquisition. To induce the Bank to extend such
credit, the Company and the Bank propose to enter into this Agreement pursuant
to which the Bank agrees to make a loan to the Company.
Accordingly, the parties hereto agree as follows:
Section 1. Definitions and Accounting Matters.
----------------------------------
1.01 Certain Defined Terms. As used in this Agreement, the
---------------------
following terms shall have the following meanings:
"Acquisition" shall mean the purchase by the Guarantor of the
-----------
franchise and distribution operations of ComputerLand pursuant to the
Acquisition Agreements.
"Acquisition Agreements" shall mean, collectively, (a) the Asset
----------------------
Purchase Agreement, the Seller Note, the Services Agreement and the related
guaranty by the Company and (b) the other material documents executed in
connection with the transaction contemplated by the documents referred to in
clause (a) above.
"Additional Cost" shall have the meaning assigned to that term in
---------------
Section 5.01.
- ------------
"Affiliate" shall mean any Person that directly or indirectly
---------
controls, or is under common control with, or is controlled by, the Company. As
used in this definition, "control" (including, with its correlative meanings,
-------
"controlled by" and "under common control with") shall mean the possession,
- -------------- -------------------------
directly or indirectly, of power to direct or cause the direction of the
management or policies (whether through ownership of securities or partnership
or other ownership interests, by contract or otherwise); provided that, in any
--------
event, any Person that owns directly or indirectly securities having 5% or more
of
Credit Agreement
----------------
-1-
<PAGE>
the voting power for the election of directors or other governing body of a
corporation or 5% or more of the partnership or other ownership interests of any
other Person (other than as a limited partner of such other Person) will be
deemed to control such corporation or other Person. Notwithstanding the
foregoing, the definition of "Affiliate" shall not encompass (a) any individual
solely by reason of his or her being a director, officer or employee of the
Company or any of its Subsidiaries, (b) any of the Subsidiaries of the Company
and (c) the Bank.
"Americas" shall mean Merisel Americas, Inc., a Delaware
--------
corporation.
"Americas Revolving Credit Agreement" shall mean the Revolving Credit
-----------------------------------
Agreement dated as of December 23, 1993 by and among Americas, Merisel Europe,
Inc., the Company, the lenders signatories to that agreement, Citibank, N.A. and
Citicorp USA, Inc.
"Applicable Lending Office" shall mean, for each Type of Loan, the
-------------------------
"Lending Office" of the Bank (or of an affiliate of the Bank) designated for
such Type of Loan on Annex 1 or such other office of the Bank (or of an
affiliate of the Bank) as the Bank may from time to time specify to the Company
as the office for its Loan of such Type.
"Applicable Margin" shall mean, in the case of the Base Rate Loan,
-----------------
1.0% per annum and, in the case of the Eurodollar Loan, 2.5% per annum; provided
--------
that, subsequent to the Funding Date, such percentages shall automatically
increase by .5% per annum at the end of each three month period subsequent to
the Funding Date until the Loan is paid in full.
"Asset Purchase Agreement" shall mean the Asset Purchase Agreement
------------------------
dated as of the date of the Acquisition between the Guarantor and ComputerLand.
"Bank" shall have the meaning assigned to that term in the
----
introductory paragraphs of this Agreement.
"Bankruptcy Code" shall mean the Federal Bankruptcy Code of 1978.
---------------
"Base Rate" shall mean, for any day, a rate per annum equal to the
---------
higher of (a) the Federal Funds Rate for such day plus 1/2 of 1% and (b) the
Prime Rate for such day. Each interest rate that this Agreement provides is to
be based upon the Base Rate shall change upon any change in the Base Rate,
Credit Agreement
----------------
-2-
<PAGE>
effective as of the opening of business on the day of such change in the Base
Rate.
"Base Rate Loan" shall mean the Loan when it bears interest at
--------------
rates based upon the Base Rate.
"Basic Documents" shall mean, collectively, this Agreement, the
---------------
Note and the FAB Guarantee Agreement.
"Business Day" shall mean (a) any day on which commercial banks are
------------
not authorized or required to close in New York City, New York or Los Angeles,
California or Dallas, Texas and (b) if such day relates to a borrowing of, a
payment or prepayment of principal of or interest on, a Conversion of or into,
or an Interest Period for, the Eurodollar Loan or a notice by the Company with
respect to any such borrowing, payment, prepayment, Conversion or Interest
Period, any day on which dealings in Dollar deposits are carried out in the
London interbank market.
"Capital Lease Obligations" shall mean, for any Person, all
-------------------------
obligations of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) Property to the extent such
obligations are required to be classified and accounted for as a capital lease
on a balance sheet of such Person under GAAP (including Statement of Financial
Accounting Standards No. 13 of the Financial Accounting Standards Board), and,
for purposes of this Agreement, the amount of such obligations shall be the
capitalized amount of such obligation, determined in accordance with GAAP
(including such Statement No. 13).
"Code" shall mean the Internal Revenue Code of 1986.
----
"Commitment" shall mean the obligation of the Bank to make a term loan
----------
in an aggregate amount up to but not exceeding $65,000,000 (as the same may be
reduced from time to time pursuant to Section 2.03).
------------
"Commitment Letter" shall mean the letter dated November 22, 1993 from
-----------------
the Bank to the Company and countersigned by the Company.
"Commitment Termination Date" shall mean April 25, 1994.
----------------------------
"Company" shall have the meaning assigned to that term in the
-------
introductory paragraphs of this Agreement.
Credit Agreement
----------------
-3-
<PAGE>
"ComputerLand" shall mean ComputerLand Corporation, a Delaware
------------
corporation.
"Consolidated Subsidiary" shall mean, for any Person, each Subsidiary
-----------------------
of such Person (whether now existing or hereafter created or acquired) the
financial statements of which shall be (or should have been) consolidated with
the financial statements of such Person in accordance with GAAP.
"Continue," "Continuation" and "Continued" shall refer to the
-------- ------------ ---------
continuation pursuant to Section 2.07 of the Eurodollar Loan as a Eurodollar
------------
Loan from one Interest Period to the next Interest Period.
"Convert," "Conversion" and "Converted" shall refer to a conversion
------- ---------- ---------
pursuant to Section 2.07 of the Loan from one Type into the other Type, which
------------
may be accompanied by the transfer by the Bank (at its sole discretion) of the
Loan from one Applicable Lending Office to another.
"Default" shall mean an Event of Default or an event that with notice
-------
or lapse of time or both would become an Event of Default.
"Dividend Payment" shall mean dividends (in cash, Property or
----------------
obligations) on, or other payments or distributions on account of, or the
setting apart of money for a sinking or other analogous fund for, or the
purchase, redemption, retirement or other acquisition of, any shares of any
class of stock of the Company or any of the Company's Subsidiaries or of any
warrants, options or other rights to acquire the same (or to make any payments
to any Person, such as "phantom stock" payments, where the amount is calculated
with reference to the fair market or equity value of the Company or any of its
Subsidiaries), but excluding dividends payable solely in shares of common stock
of the Company or any of the Company's Subsidiaries.
"Dollars" and "$" shall mean lawful money of the United States of
------- -
America.
"EBIT" shall mean, for any period, for the Company and its
----
Consolidated Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP), the net operating income (calculated
before taxes, Interest Expense, extraordinary and unusual items and income or
loss attributable to equity in Affiliates) for such period.
"Environmental Laws" shall mean any and all present and future
------------------
Governmental Rules relating to the regulation or
Credit Agreement
----------------
-4-
<PAGE>
protection of human or animal health or safety or of the environment or to
emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals or toxic or hazardous substances or wastes (including
Hazardous Materials) into the indoor or outdoor environment, including ambient
air, soil, surface water, ground water, wetlands, land or subsurface strata, or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of pollutants, contaminants, chemicals
or toxic or hazardous substances or wastes. The term "Environmental Law" shall
include the terms and conditions of any Governmental Approval issued under any
Environmental Law or with respect to any Hazardous Material.
"Equity or Debt Issuance" shall mean (a) any issuance or sale by the
-----------------------
Company or by any of its Subsidiaries after the Signing Date of (i) any capital
stock, (ii) any warrants or options exercisable in respect of capital stock
(other than any warrants or options issued to directors, officers or employees
of the Company or of any of its Subsidiaries and any capital stock of the
Company issued upon the exercise of such warrants), (iii) any other security or
instrument representing an equity interest (or the right to obtain any equity
interest) in the issuing or selling Person or (iv) without limiting the
Obligations of the Company under Section 8.07, any Indebtedness or (b) the
------------
receipt by the Company or by any of its Subsidiaries after the Signing Date of
any capital contribution received (whether or not evidenced by any equity
security issued by the recipient of such contribution); provided that the term
--------
"Equity or Debt Issuance" shall not include (x) any such issuance or sale by any
Subsidiary of the Company to the Company or to any Wholly Owned Subsidiary of
the Company or (y) any capital contribution by the Company or by any Wholly
Owned Subsidiary of the Company to any Subsidiary of the Company.
"Equity Rights" shall mean, with respect to any Person, any
-------------
outstanding subscriptions, options, warrants, commitments, preemptive rights or
agreements of any kind (including any stockholders' or voting trust agreements)
for the issuance, sale, registration or voting of, or outstanding securities
convertible into, any additional shares of capital stock of any class, or
partnership or other ownership interests of any type in, such Person.
"ERISA" shall mean the Employee Retirement Income Security Act of
-----
1974.
"ERISA Affiliate" shall mean any corporation or trade or business that
---------------
is a member of any group of organizations
Credit Agreement
----------------
-5-
<PAGE>
(i) described in Section 414(b) or (c) of the Code of which the Company is a
member and (ii) solely for purposes of potential liability under Section
302(c)(11) of ERISA and Section 412(c)(11) of the Code and the lien created
under Section 302(f) of ERISA and Section 412(n) of the Code, described in
Section 414(m) or (o) of the Code of which the Company is a member.
"Eurodollar Base Rate" shall mean, for any Interest Period, the
--------------------
arithmetic mean (rounded upwards, if necessary, to the nearest 1/16 of 1%), as
determined by the Bank, of the respective rates per annum quoted by the Bank at
approximately 11:00 a.m. London time (or as soon thereafter as practicable) on
the date two Business Days prior to the first day of such Interest Period for
the offering by the Bank to leading banks in the London interbank market of
Dollar deposits having a term comparable to such Interest Period and in an
amount comparable to the principal amount of the Eurodollar Loan.
"Eurodollar Loan" shall mean the Loan when it bears interest at
---------------
rates based on the Eurodollar Rate.
"Eurodollar Rate" shall mean, for any Interest Period, a rate per
---------------
annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) determined by
the Bank to be equal to the Eurodollar Base Rate for such Loan for such Interest
Period divided by 1 minus the Reserve Requirement for such Loan for such
Interest Period.
"Event of Default" shall have the meaning assigned to that term in
----------------
Section 9.
- ---------
"FAB Guarantee Agreement" shall mean the Guarantee Agreement, in
-----------------------
substantially the form of Exhibit B, executed by the Guarantor in favor of the
Bank.
"FAB Revolving Credit Agreement" shall mean the Revolving Credit
------------------------------
Agreement dated as of December 23, 1993, among the Company, the Guarantor and
the Bank.
"Federal Funds Rate" shall mean, for any day, the rate per annum
------------------
(rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day; provided that (a) if the day for which such rate is to
--------
be determined is not a Business Day, the Federal Funds Rate for such day shall
be such rate on such
Credit Agreement
----------------
-6-
<PAGE>
transactions on the next preceding Business Day as so published on the next
succeeding Business Day and (b) if such rate is not so published for any
Business Day, the Federal Funds Rate for such Business Day shall be the average
rate charged to the Bank on such Business Day on such transactions as determined
by the Bank.
"Funding Date" shall mean the date upon which the extension of
------------
credit under this Agreement is made.
"GAAP" shall mean generally accepted accounting principles applied on
----
a basis consistent with those which, in accordance with the last sentence of
Section 1.02(a), are to be used in making the calculations for purposes of
- ---------------
determining compliance with this Agreement.
"Governmental Approvals" shall mean any authorization, consent,
----------------------
approval, license, lease, ruling, permit, waiver, exemption, filing,
registration or notice by or with any Governmental Person.
"Governmental Person" shall mean any national (Federal or foreign),
-------------------
state or local government, any political subdivision or any governmental, quasi-
governmental, judicial, public or statutory instrumentality, authority, agency,
body or entity, including the PBGC, Federal Deposit Insurance Corporation, the
Comptroller of the Currency, the Board of Governors of the Federal Reserve
System, any central bank or any comparable authority.
"Governmental Rules" shall mean any law, rule, regulation, ordinance,
------------------
order, code, judgment, decree, directive, guideline, policy, or any similar form
of decision of, or any interpretation or administration of any of the foregoing
by, any Governmental Person.
"Guarantee" shall mean a guarantee, an endorsement, a contingent
---------
agreement to purchase or to furnish funds for the payment or maintenance of, or
otherwise to be or to become contingently liable under or with respect to, the
Indebtedness, other obligations, net worth, working capital or earnings of any
Person, or a guarantee of the payment of dividends or other distributions upon
the stock or equity interests of any Person, or an agreement to purchase, sell
or lease (as lessee or lessor) Property, products, materials, supplies or
services primarily for the purpose of enabling a debtor to make payment of such
debtor's obligations or an agreement to assure a creditor against loss,
including causing a bank or other financial institution to issue a letter of
credit or other similar instrument for the benefit of
Credit Agreement
----------------
-7-
<PAGE>
another Person, but excluding endorsements for collection or deposit in the
ordinary course of business. The terms "Guarantee" and "Guaranteed" used as
--------- ----------
verbs shall have correlative meanings.
"Guarantor" shall mean Merisel FAB, Inc., a Delaware corporation.
---------
"Hazardous Material" shall mean, collectively, (a) any petroleum or
------------------
petroleum products, flammable explosives, radioactive materials, asbestos in any
form that is or could become friable, urea formaldehyde foam insulation, and
transformers or other equipment that contain dielectric fluid containing
polychlorinated biphenyls (PCB's), (b) any chemicals or other materials or
substances which are now or hereafter become defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous materials,"
"extremely hazardous wastes," "restricted hazardous wastes," "toxic substances,"
"toxic pollutants," "contaminants," "infectious wastes," "pollutants" or words
of similar import under any Environmental Law and (c) any other chemical or
other material or substance, exposure to which or use of which is now or
hereafter prohibited, limited or regulated under any Environmental Law.
"Indebtedness" shall mean, for any Person (without duplication): (a)
------------
obligations created, issued or incurred by such Person for borrowed money
(whether by loan, the issuance and sale of debt securities or the sale of
Property (other than inventory and other goods held for sale or lease in the
ordinary course of business) to another Person subject to an understanding or
agreement, contingent or otherwise, to repurchase such Property from such
Person); (b) obligations of such Person to pay the deferred purchase or
acquisition price of Property or services, other than trade accounts payable
(other than for borrowed money) arising, and accrued expenses incurred, in the
ordinary course of business; (c) Indebtedness of others secured by a Lien on the
Property of such Person, whether or not the respective indebtedness so secured
has been assumed by such Person; (d) obligations of such Person in respect of
letters of credit or similar instruments issued or accepted by banks and other
financial institutions for the account of such Person; (e) Capital Lease
Obligations of such Person; and (f) Indebtedness of others Guaranteed by such
Person.
"Interest Expense" shall mean, for any period, the sum, for the
----------------
Company and its Consolidated Subsidiaries (determined on a consolidated basis
without duplication in accordance with GAAP), of the following: (a) all
interest in
Credit Agreement
----------------
-8-
<PAGE>
respect of Indebtedness accrued or capitalized during such period (whether or
not actually paid during such period) plus the net amounts payable (or minus the
---- -----
net amounts receivable) under Interest Rate Protection Agreements accrued during
such period (whether or not actually paid or received during such period).
"Interest Period" shall mean, with respect to the Eurodollar Loan,
---------------
each period commencing on the date the Eurodollar Loan is made or Converted from
the Base Rate Loan or the last day of the next preceding Interest Period for
such Loan and ending on the numerically corresponding day in the first, second,
or third calendar month thereafter, as the Company may select as provided in
Section 4.03 (or such longer period as may be requested by the Company and
- ------------
agreed to by the Bank), except that each Interest Period that commences on the
last Business Day of a calendar month (or on any day for which there is no
numerically corresponding day in the appropriate subsequent calendar month)
shall end on the last Business Day of the appropriate subsequent calendar month.
Notwithstanding the foregoing: (i) no Interest Period may end after the
Maturity Date; (ii) each Interest Period that would otherwise end on a day which
is not a Business Day shall end on the next succeeding Business Day (or, if such
next succeeding Business Day falls in the next succeeding calendar month, on the
next preceding Business Day); and (iii) notwithstanding clause (i) above, no
Interest Period shall have a duration of less than one month and, if the
Interest Period for the Eurodollar Loan would otherwise be a shorter period,
such Loan shall not be available under this Agreement for such period.
"Interest Rate Protection Agreement" shall mean, for any Person, an
----------------------------------
interest rate swap, cap or collar agreement or similar arrangement between such
Person and one or more financial institutions providing for the transfer or
mitigation of interest risks either generally or under specific contingencies.
For purposes of this Agreement, the "credit exposure" at any time of any Person
under an Interest Rate Protection Agreement to which such Person is a party
shall be determined at such time in accordance with the standard methods of
calculating credit exposure under similar arrangements as prescribed from time
to time by the Bank, taking into account potential interest rate movements and
the respective termination provisions and notional principal amount and term of
such Interest Rate Protection Agreement.
"Lien" shall mean, with respect to any Property, any mortgage, lien,
----
pledge, charge, security interest or encumbrance of any kind in respect of such
Property or any agreement to give, or notice of, any of the foregoing. For
purposes of this
Credit Agreement
----------------
-9-
<PAGE>
Agreement and the other Basic Documents, a Person shall be deemed to own subject
to a Lien any Property that it has acquired or holds subject to the interest of
a vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement (other than an operating lease) relating to such
Property.
"Loan" shall mean the term loan provided for by Section 2.01(a).
---- ---------------
"Margin Stock" shall mean "margin stock" within the meaning of
------------
Regulations U and X.
"Material Adverse Effect" shall mean a material adverse effect on (a)
-----------------------
the Property, business, operations, financial condition, liabilities or
capitalization of the Company and its Subsidiaries taken as a whole, (b) the
ability of the Company to perform its obligations under any of the Basic
Documents to which it is a party, (c) the validity or enforceability of any of
the Basic Documents, (d) the rights, remedies, powers and privileges of the Bank
under any of the Basic Documents or (e) the timely payment of the Obligations.
"Material Subsidiary" shall mean, at any time, a Subsidiary whose
-------------------
assets at such time exceed five percent (5%) of the assets of the Company and
its Subsidiaries on a consolidated basis in accordance with GAAP.
"Maturity Date" shall mean the 364th day subsequent to the Funding
-------------
Date.
"Multiemployer Plan" shall mean a multiemployer plan defined as such
------------------
in Section 3(37) of ERISA to which contributions have been made by the Company
or any ERISA Affiliate and which is covered by Title IV of ERISA.
"Net Available Proceeds" shall mean the aggregate amount of all cash
----------------------
received by the Company and its Subsidiaries in respect of any Equity or Debt
Issuance, net of reasonable expenses incurred by the Company and its
Subsidiaries in connection with such Equity or Debt Issuance.
"Note" shall mean the promissory note provided for by Section
---- -------
2.06(a).
- -------
"Obligations" shall mean the principal of the Loan, interest, fees and
-----------
any other amount payable by the Company under any Basic Document.
Credit Agreement
----------------
-10-
<PAGE>
"Obligors" shall mean, collectively, the Company and the Guarantor.
--------
"Other Agreements" shall mean, collectively, the Americas Revolving
----------------
Credit Agreement, the Senior Note Purchase Agreement, the Senior Note Guaranty,
the Subordinated Note Purchase Agreement and the Trade Receivables Agreement.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
----
"Person" shall mean any individual, corporation, company, voluntary
------
association, partnership, joint venture, trust, unincorporated organization or
Governmental Person.
"Plan" shall mean an employee benefit or other plan established or
----
maintained by the Company or any ERISA Affiliate and that is covered by Title IV
of ERISA, other than a Multiemployer Plan.
"Post-Default Rate" shall mean, in respect of any Obligation that is
-----------------
not paid when due (whether at stated maturity, by acceleration, by optional or
mandatory prepayment or otherwise), a rate per annum during the period from and
including the due date to but excluding the date on which such amount is paid in
full equal to 2.0% plus the Base Rate as in effect from time to time plus the
---- ----
Applicable Margin for the Base Rate Loan (provided that, if the amount so in
--------
default is principal of the Eurodollar Loan and its due date is a day other than
the last day of the Interest Period for such Loan, the "Post-Default Rate" for
such principal shall be, for the period from and including such due date to but
excluding the last day of the Interest Period, 2.0% plus the interest rate for
----
such Loan as provided in Section 3.02 and, thereafter, the rate provided for
------------
above in this definition).
"Prime Rate" shall mean the rate of interest from time to time
----------
announced by the Bank at the Principal Office as its prime rate. Such announced
rate is not necessarily the lowest rate offered by the Bank, and any other
extension of credit by the Bank may be at rates above, below or at such
announced rate.
"Principal Office" shall mean the principal office of the Bank located
----------------
on the Signing Date at NationsBank of Texas, N.A., 901 Main Street, Dallas,
Texas 75202.
"Property" shall mean any right or interest in or to property of any
--------
kind whatsoever, whether real, personal or mixed and whether tangible or
intangible.
Credit Agreement
----------------
-11-
<PAGE>
"Quarterly Dates" shall mean the last day of March, June, September
---------------
and December in each year, the first of which shall be the first such day after
the Signing Date; provided that if any such day is not a Business Day, then such
--------
Quarterly Date shall be the next succeeding Business Day.
"Regulations A, D, U and X" shall mean, respectively, Regulations A,
-------------------------
D, U and X of the Board of Governors of the Federal Reserve System.
"Regulatory Change" shall mean, with respect to the Bank (or its
-----------------
Applicable Lending Office), the occurrence after the Signing Date of any of the
following events: (a) the adoption of any applicable Governmental Rule, (b) any
change in any applicable Governmental Rule (including Regulation D) or in the
interpretation or administration of any Governmental Rule (including Regulation
D) by any Governmental Person charged with its interpretation or administration
or (c) the adoption or making of any interpretation, directive, guideline,
policy or request applying to a class of banks including the Bank of or under
any Governmental Rule or in the interpretation or administration of any
Governmental Rule (including Regulation D) (whether or not having the force of
law and whether or not failure to comply would be unlawful) by any Governmental
Person charged with its interpretation or administration.
"Release" shall mean any release, spill, emission, leaking, pumping,
-------
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the indoor or outdoor environment, including the movement of Hazardous Materials
through ambient air, soil, surface water, ground water, wetlands, land or
subsurface strata.
"Relevant Parties" shall have the meaning assigned to such term in
----------------
Section 9(b).
- ------------
"Reserve Requirement" shall mean, for any Interest Period, the average
-------------------
maximum rate at which reserves (including any marginal, supplemental or
emergency reserves) are required to be maintained during such Interest Period
under Regulation D by member banks of the Federal Reserve System in Dallas,
Texas with deposits exceeding one billion Dollars against "Eurocurrency
liabilities" (as such term is used in Regulation D). Without limiting the
effect of the foregoing, the Reserve Requirement shall include any other
reserves required to be maintained by such member banks by reason of any
Regulatory Change with respect to (i) any category of liabilities that includes
deposits by reference to which the Eurodollar Base Rate for the Eurodollar Loan
is to be determined as provided in the definition of
Credit Agreement
----------------
-12-
<PAGE>
"Eurodollar Base Rate" in this Section 1.01 or (ii) any category of extensions
------------
of credit or other assets that includes Eurodollar Loans.
"Seller Note" shall mean, collectively, the Seller Note and the Note
-----------
Purchase Agreement (as such terms are defined in the Asset Purchase Agreement).
"Senior Note Guaranty" shall mean, collectively, the guaranties of the
--------------------
Company, Merisel Europe, Inc. and Merisel Canada, Inc. provided pursuant to the
Senior Note Purchase Agreement.
"Senior Note Purchase Agreement" shall mean the Amended and Restated
------------------------------
Senior Note Purchase Agreement dated as of December 23, 1993 by and among
Americas and the noteholders signatories to that agreement.
"Services Agreement" shall mean the Distribution and Services
------------------
Agreement dated as of the date of the Acquisition between ComputerLand
Corporation and the Guarantor.
"Signing Date" shall mean the date on which the Company and the
------------
Bank have executed and delivered this Agreement.
"Solvent" shall mean, with respect to any Person on any date, that on
-------
such date (i) the fair salable value of the Property of such Person is greater
than the total amount of liabilities, including, without limitation, contingent
liabilities, of such Person, (ii) such Person is able to pay its debts and other
liabilities, contingent obligations and other commitments as they mature, (iii)
such Person does not intend to, and does not believe that it will, incur debts
or liabilities beyond such Person's ability to pay as such debts and liabilities
mature, and (iv) such Person is not engaged in a business or a transaction, for
which such Person's Property would constitute unreasonably small capital after
giving due consideration to the prevailing practice in the industry in which
such Person is engaged. In computing the amount of contingent liabilities at
any time, such liabilities shall be computed at the amount which, in light of
all the facts and circumstances existing at such time, represents the amount
that can reasonably be expected to become an actual or matured liability.
"Subordinated Intercompany Indebtedness" shall mean, collectively,
--------------------------------------
Indebtedness of Subsidiaries of the Company to the Company or to other
Subsidiaries of the Company, which is subordinated to the obligations of the
Obligors under the Basic Documents and the Other Agreements on terms, and
pursuant to
Credit Agreement
----------------
-13-
<PAGE>
documentation containing other terms (including interest, amortization,
covenants and events of default), in form and substance satisfactory to the
Bank.
"Subordinated Note Purchase Agreement" shall mean the Amended and
------------------------------------
Restated Subordinated Note Purchase Agreement dated as of December 23, 1993 by
and among Americas and the noteholders signatories to that agreement.
"Subsidiary" shall mean, for any Person, any corporation, partnership
----------
or other entity of which at least a majority of the securities or other
ownership interests having by their terms ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions
of such corporation, partnership or other entity (irrespective of whether or not
at the time securities or other ownership interests of any other class or
classes of such corporation, partnership or other entity shall have or might
have voting power by reason of the happening of any contingency) is at the time
directly or indirectly owned or controlled by such Person or one or more
Subsidiaries of such Person or by such Person and one or more Subsidiaries of
such Person. "Wholly Owned Subsidiary" shall mean any such corporation,
-----------------------
partnership or other entity of which all of the equity securities or other
ownership interests (other than, in the case of a corporation, directors'
qualifying shares) are so owned or controlled.
"Trade Receivable Agreement" shall mean the Trade Receivables Purchase
--------------------------
and Sale Agreement dated as of December 23, 1993 among the Company, CIESCO L.P.,
a New York limited partnership, and Citicorp North America, Inc., a Delaware
corporation, and the agreements related to such agreement.
"Type" shall have the meaning assigned to such term in Section
---- -------
1.03.
- ----
1.02 Accounting Terms and Determinations.
-----------------------------------
(a) Except as otherwise expressly provided in this Agreement, all
accounting terms used in this Agreement shall be interpreted, and all financial
statements and certificates and reports as to financial matters required to be
delivered to the Bank under this Agreement shall (unless otherwise disclosed to
the Bank in writing at the time of delivery in the manner described in
subsection (b) below) be prepared, in accordance with generally accepted
accounting principles applied on a basis consistent with those used in the
preparation of the latest financial statements furnished to the Bank under this
Agreement (which, prior to the delivery of the first financial statements
Credit Agreement
----------------
-14-
<PAGE>
under Section 8.01, shall mean the audited financial statements as at December
------------
31, 1992 referred to in Section 7.02). All calculations made for the purposes
------------
of determining compliance with this Agreement shall (except as otherwise
expressly provided in this Agreement) be made by application of generally
accepted accounting principles applied on a basis consistent with those used in
the preparation of the latest annual or quarterly financial statements furnished
to the Bank pursuant to Section 8.01 (or, prior to the delivery of the first
------------
financial statements under Section 8.01, used in the preparation of the audited
------------
financial statements as at December 31, 1992 referred to in Section 7.02) unless
------------
(i) the Company shall have objected to determining such compliance on such basis
at the time of delivery of such financial statements or (ii) the Bank shall so
object in writing within 30 days after delivery of such financial statements, in
either of which events such calculations shall be made on a basis consistent
with those used in the preparation of the latest financial statements as to
which such objection shall not have been made (which, if objection is made in
respect of the first financial statements delivered under Section 8.01, shall
------------
mean the financial statements referred to in Section 7.02).
------------
(b) The Company shall deliver to the Bank at the same time as the
delivery of any annual or quarterly financial statement under Section 8.01(i) a
---------------
description in reasonable detail of any material variation between the
application of accounting principles employed in the preparation of such
statement and the application of accounting principles employed in the
preparation of the next preceding annual or quarterly financial statements as to
which no objection has been made in accordance with the last sentence of
subsection (a) above and (ii) reasonable estimates of the difference between
such statements arising as a consequence of any such difference.
(c) To enable the ready and consistent determination of compliance
with the covenants set forth in Section 8, the Company will not change the last
---------
day of its fiscal year, or the last days of the first three fiscal quarters in
each of its fiscal years.
1.03 Types of the Loan. The "Type" of the Loan refers to whether
-----------------
such Loan is a Base Rate Loan or a Eurodollar Loan, each of which constitutes a
Type.
1.04 Interpretation. In this Agreement, unless otherwise indicated,
--------------
the singular includes the plural and plural the singular; words importing any
gender include the other gender; references to statutes or regulations are to be
construed as including all statutory or regulatory provisions
Credit Agreement
----------------
-15-
<PAGE>
consolidating, amending or replacing the statute or regulation referred to;
references to "writing" include printing, typing, lithography and other means of
reproducing words in a tangible visible form; the words "including," "includes"
and "include" shall be deemed to be followed by the words "without limitation";
references to articles, sections (or subdivisions of sections), exhibits,
annexes or schedules are to this Agreement; references to agreements and other
contractual instruments shall be deemed to include all subsequent amendments,
extensions and other modifications to such instruments (without, however,
limiting any prohibition on any such amendments, extensions and other
modifications by the terms of this Agreement); and references to Persons include
their respective permitted successors and assigns and, in the case of
Governmental Persons, Persons succeeding to their respective functions and
capacities.
Section 2. Commitment, Loans, Note and Prepayments.
---------------------------------------
2.01 Loans. The Bank agrees, on the terms and conditions of this
-----
Agreement, to make a term loan to the Company in Dollars on or before the
Commitment Termination Date in an aggregate amount up to but not exceeding the
amount of the Commitment. Thereafter, subject to the terms and conditions of
this Agreement, the Company may Convert the Loan from one Type into the other
Type (as provided in Section 2.07) or Continue the Loan as the same Type (as
------------
provided in Section 2.07). No more than one Type of Loan, and no more than one
------------
Interest Period in respect of the Eurodollar Loan, may be outstanding at any one
time.
2.02 Borrowings. The Company shall give the Bank notice of borrowing
----------
of the Loan as provided in Section 4.03. On the date specified for the
------------
borrowing in such notice, the Bank shall, subject to the terms and conditions of
this Agreement, make the amount of the Loan available to the Company by
depositing the same, in immediately available funds, in an account of the
Company maintained with a depositary institution located in Los Angeles,
California, New York, New York or Dallas, Texas and by written notice to the
Bank designated by the Company.
2.03 Changes of Commitment.
---------------------
(a) The Company shall have the right at any time prior to the Funding
Date to terminate in full (but not in part) the Commitment; provided that the
--------
Company shall give notice of such termination as provided in Section 4.03.
------------
Credit Agreement
----------------
-16-
<PAGE>
(b) The amount of the Commitment shall be automatically reduced to
the amount of the Loan made on the Funding Date.
(c) The amount of the Commitment shall be automatically reduced to
zero on the Commitment Termination Date.
(d) The Commitment once terminated or reduced may not be
reinstated.
2.04 Certain Fees.
------------
(a) Commitment Fee. On March 11, 1994, the Company shall pay to the
--------------
Bank a nonrefundable fee in the amount of $243,750, unless the Funding Date has
occurred prior to such date.
(b) Advising, Structuring and Facility Fee. On the Funding Date,
--------------------------------------
the Company shall pay to the Bank a nonrefundable fee equal to 1.125% of the
Loan made on the Funding Date.
(c) Maintenance Fee. On the 180th day subsequent to the Funding
---------------
Date, the Company shall pay to the Bank a nonrefundable fee in the amount of
$162,500, unless the Loan has been paid in full prior to such date.
2.05 Lending Offices. The Loan when made or maintained as one Type
---------------
shall be made and maintained at the Applicable Lending Office for such Type.
2.06 Note. The Loan made by the Bank shall be evidenced by a single
----
promissory note of the Company substantially in the form of Exhibit A, dated the
Funding Date, payable to the Bank in a principal amount equal to the amount of
the Loan and otherwise duly completed.
2.07 Optional Prepayments and Conversions or Continuations of Loans.
--------------------------------------------------------------
The Company shall have the right to prepay the Loan, or to Convert the Loan from
one Type into the other Type or Continue the Loan as the same Type, at any time
or from time to time; provided that: (a) the Company shall give the Bank notice
--------
of each such prepayment, Conversion or Continuation as provided in Section 4.03
------------
(and, upon the date specified in any such notice of prepayment, the amount to be
prepaid shall become due and payable under this Agreement); (b) the Eurodollar
Loan may be prepaid or Converted only on the last day of an Interest Period for
such Loan; and (c) each partial prepayment of the Loan shall be in an aggregate
amount at least equal to $1,000,000 or
Credit Agreement
----------------
-17-
<PAGE>
any larger multiple of $500,000. Notwithstanding the foregoing, and without
limiting the rights and remedies of the Bank under Section 9, in the event that
---------
any Event of Default shall have occurred and be continuing, the Bank may suspend
the right of the Company to Convert the Loan into a Eurodollar Loan, or to
Continue the Loan as a Eurodollar Loan, in which event the Loan shall be
Converted into (on the last day of its Interest Period) or Continued as, as the
case may be, a Base Rate Loan.
2.08 Mandatory Prepayments. Upon any Equity or Debt Issuance, the
---------------------
Company shall prepay the Loan, and the Commitment shall be subject to automatic
reduction, in an aggregate amount equal to 100% of the Net Available Proceeds of
such Equity or Debt Issuance.
Section 3. Payments of Principal and Interest.
----------------------------------
3.01 Repayment of Loans. The Company hereby promises to pay to the
------------------
Bank the entire outstanding principal amount of the Loan, and the Loan shall
mature, on the Maturity Date.
3.02 Interest. The Company hereby promises to pay to the Bank
--------
interest on the unpaid principal amount of the Loan for the period from and
including the date of such Loan to but excluding the date such Loan shall be
paid in full, at the following rates per annum:
(a) during such periods as such Loan is a Base Rate Loan, the Base
Rate (as in effect from time to time) plus the Applicable Margin; and
----
(b) during such periods as such Loan is a Eurodollar Loan, for each
Interest Period, the Eurodollar Rate for such Loan for such Interest Period plus
----
the Applicable Margin.
Notwithstanding the foregoing, the Company hereby promises to pay to the Bank
interest at the applicable Post-Default Rate on any Obligation which shall not
be paid in full when due (whether at stated maturity, by acceleration, by
mandatory prepayment or otherwise) for the period from and including the due
date of any such amount to but excluding the date the same is paid in full.
Accrued interest on each Loan shall be payable (i) in the case of the Base Rate
Loan, quarterly on the Quarterly Dates, (ii) in the case of the Eurodollar Loan,
on the last day of each Interest Period for such Loan, and (iii) in either case,
upon the payment or prepayment of such Loan (but only on the principal amount so
Credit Agreement
----------------
-18-
<PAGE>
paid or prepaid) or the Conversion of such Loan to the other Type, except that
interest payable at the Post-Default Rate shall be payable from time to time on
demand. Promptly after the determination of any interest rate provided for in
this Agreement or any change in any such interest rate, the Bank shall give
notice of the same to the Company.
Section 4. Payments; Computations; Etc.
----------------------------
4.01 Payments.
--------
(a) Except to the extent otherwise provided in this Agreement, all
payments of any Obligations, except to the extent otherwise provided in any
other Basic Document, shall be made in Dollars, in immediately available funds,
without deduction, set-off or counterclaim, to the Bank at account number
0180019828 maintained by the Bank at the Principal Office (or such other account
as the Bank shall have designated in writing to the Company), not later than
12:00 noon Dallas time on the date on which such payment shall become due (each
such payment made after such time on such due date to be deemed to have been
made on the next succeeding Business Day).
(b) The Company shall, at the time of making each payment under this
Agreement of any Obligation for the account of the Bank, specify to the Bank to
which Obligation such payment is to be applied (and in the event that the
Company fails to so specify, or if an Event of Default has occurred and is
continuing, the Bank may apply such payment in such manner as it may determine
to be appropriate).
(c) If the due date of any payment of any Obligation would otherwise
fall on a day that is not a Business Day, such date shall be extended to the
next succeeding Business Day, and interest shall be payable for any principal so
extended for the period of such extension.
4.02 Computations. Interest on the Eurodollar Loan shall be computed
------------
on the basis of a year of 360 days and the actual number of days elapsed
(including the first day but excluding the last day) occurring in the period for
which payable) and interest payable at the Base Rate and per annum fees shall be
computed on the basis of a year of 365 or 366 days, as the case may be, and the
actual number of days elapsed (including the first day but excluding the last
day) occurring in the period for which payable. Notwithstanding the foregoing,
for each day that the Base Rate is calculated by reference to the Federal Funds
Rate, interest payable at the Base Rate shall be computed
Credit Agreement
----------------
-19-
<PAGE>
on the basis of a year of 360 days and the actual number of days elapsed.
4.03 Certain Notices. Notices by the Company to the Bank of
---------------
termination of the Commitment, of borrowing, Conversions, Continuations and
optional prepayments of the Loan and of Types of the Loan and of the duration of
Interest Periods shall be irrevocable and shall be effective only if received by
the Bank not later than 12:00 noon Dallas time on the number of Business Days
prior to the date of the relevant termination, borrowing, Conversion,
Continuation or prepayment or the first day of such Interest Period specified
below:
<TABLE>
<CAPTION>
Number of
Business
Notice Days Prior
------ ----------
<S> <C>
Termination
of Commitment 3
Borrowing or prepayment of,
or Conversions into,
Base Rate Loans 1
Borrowing or prepayment of,
Conversions into, Continuations
as, or duration of Interest
Period for, Eurodollar Loans 3
</TABLE>
Each such notice of borrowing, Conversion, Continuation or optional prepayment
shall specify the date of borrowing, Conversion, Continuation or optional
prepayment (which shall be a Business Day) and the relevant Type and (in the
case of the Eurodollar Loan) the selected duration of an Interest Period, and
each notice of borrowing or optional prepayment shall specify the amount to be
borrowed or (subject to Section 2.07(c)) prepaid. In the event that the Company
---------------
fails to select the Type of Loan, or the duration of any Interest Period for the
Eurodollar Loan, within the time period and otherwise as provided in this
Section 4.03, such Loan (if outstanding as a Eurodollar Loan) will be
- ------------
automatically Converted into a Base Rate Loan on the last day of the then
current Interest Period for such Loan or (if outstanding as a Base Rate Loan)
will remain as, or (if not then outstanding) will be made as, a Base Rate Loan.
Credit Agreement
----------------
-20-
<PAGE>
4.04 Offset.
------
(a) The Company agrees that, in addition to (and without limitation
of) any right of set-off, banker's lien or counterclaim the Bank may otherwise
have, the Bank shall be entitled, at its option, to offset balances held by it
for the account of the Company at any of its offices, in Dollars or in any other
currency, against any Obligations of the Company to the Bank that are not paid
when due (regardless of whether such balances are then due to the Company). The
Bank shall promptly notify the Company of any offset effected by it; provided
--------
that the Bank's failure to give such notice shall not affect the validity of
such offset.
(b) The Company agrees that if the Bank sells a participation as
contemplated by Section 10.06, the purchaser may exercise all rights of set-off,
-------------
banker's lien, counterclaim or similar rights with respect to such participation
as fully as if it were a direct holder of Loan or other amounts (as the case may
be) owing to the Bank in the amount of such participation.
Section 5. Yield Protection, Etc.
---------------------
5.01 Additional Costs.
----------------
(a) The Company shall pay to the Bank from time to time on demand
such amounts as the Bank may determine to be necessary to compensate the Bank
for any costs that the Bank determines are attributable to its making or
maintaining of the Eurodollar Loan or its obligation to make the Eurodollar
Loan, or any reduction in any amount receivable by the Bank in respect of any of
such Loans or such obligation (collectively, "Additional Costs"), resulting from
----------------
any Regulatory Change that:
(i) changes the basis of taxation of any amounts payable to the Bank
under this Agreement or the Note in respect of such Loan (other than changes in
the rate of taxation imposed on or measured by the overall net income of the
Bank or of its Applicable Lending Office for such Loan by the jurisdiction in
which the Bank has its principal office or such Applicable Lending Office); or
(ii) imposes or modifies any reserve, special deposit or similar
requirements (other than the Reserve Requirement utilized in the determination
of the Eurodollar Rate for such Loan) relating to any extensions of credit or
other assets of, or any deposits with or other liabilities of, the Bank
(including any of such Loan or any deposits referred to in the
Credit Agreement
----------------
-21-
<PAGE>
definition of "Eurodollar Base Rate" in Section 1.01), or any commitment of the
------------
Bank (including the Commitment of the Bank); or
(iii) imposes any other condition affecting this Agreement or its
Note (or any of such extensions of credit or liabilities) or its Commitment.
If the Bank requests compensation from the Company under this Section 5.01(a),
---------------
the Company may, by notice to the Bank, suspend the obligation of the Bank
thereafter to make or to Continue the Loan as the Eurodollar Loan, or to Convert
the Base Rate Loan into the Eurodollar Loan until the Regulatory Change giving
rise to such request ceases to be in effect (in which case the provisions of
Section 5.04 shall be applicable); provided that such suspension shall not
- ------------ --------
affect the right of the Bank to receive the compensation so requested.
(b) Without limiting the effect of the foregoing provisions of this
Section 5.01, in the event that, by reason of any Regulatory Change, the Bank
- ------------
either (i) incurs (or would incur) Additional Costs as a result of its exceeding
a specified level of a category of deposits or other liabilities of the Bank
that includes deposits by reference to which the interest rate on Eurodollar
Loan is determined as provided in this Agreement or of a category of extensions
of credit or other assets of the Bank that includes the Eurodollar Loan or (ii)
becomes subject to restrictions on the amount of such a category of liabilities
or assets that it may hold, then, if the Bank so elects by notice to the
Company, the obligation of the Bank to make or Continue the Loan as, or to
Convert the Base Rate Loan into, the Eurodollar Loan shall be suspended until
such Regulatory Change ceases to be in effect (in which case the provisions of
Section 5.04 shall be applicable).
- ------------
(c) Without limiting the effect of the foregoing provisions of this
Section 5.01 (but without duplication), the Company shall pay to the Bank from
- ------------
time to time on demand such amounts as the Bank may determine to be necessary to
compensate the Bank (or, without duplication, the bank holding company of which
the Bank is a subsidiary) for any costs that it determines are attributable to
the maintenance by the Bank (or any Applicable Lending Office or such bank
holding company), pursuant to any Governmental Rule following any Regulatory
Change, of capital in respect of its Commitment or the Loan (such compensation
to include an amount equal to any reduction of the rate of return on assets or
equity of the Bank (or any Applicable Lending Office or such bank holding
company) to a level below that which the Bank (or any Applicable Lending Office
or such
Credit Agreement
----------------
-22-
<PAGE>
bank holding company) could have achieved but for such Governmental Rule.
(d) The Bank shall notify the Company of any event occurring after
the date of this Agreement entitling the Bank to compensation under paragraph
(a) or (c) of this Section 5.01 as promptly as practicable, but in any event
------------
within 90 days, after the Bank obtains actual knowledge of such event; provided
--------
that (i) if the Bank fails to give such notice within 90 days after it obtains
actual knowledge of such event, the Bank shall, with respect to compensation
payable pursuant to this Section 5.01 in respect of any costs resulting from
------------
such event, only be entitled to payment under this Section 5.01 for costs
------------
incurred from and after the date 90 days prior to the date that the Bank does
give such notice and (ii) the Bank will designate a different Applicable Lending
Office for the Loan if such designation will avoid the need for, or reduce the
amount of, such compensation by an amount determined by the Bank to be material
and will not, in the sole opinion of the Bank, be disadvantageous to the Bank,
except that the Bank shall have no obligation to designate an Applicable Lending
Office located in the United States of America. The Bank will furnish to the
Company a certificate setting forth the basis and amount of each request by the
Bank for compensation under paragraph (a) or (c) of this Section 5.01.
------------
Determinations and allocations by the Bank for purposes of this Section 5.01 of
------------
the effect of any Regulatory Change pursuant to paragraph (a) or (b) of this
Section 5.01, or of the effect of capital maintained pursuant to paragraph (c)
- ------------
of this Section 5.01, on its costs or rate of return of maintaining the Loan or
------------
its obligation to make the Loan, or on amounts receivable by it in respect of
the Loan, and of the amounts required to compensate the Bank under this Section
-------
5.01, shall be conclusive absent manifest error; provided that such
- ---- --------
determinations and allocations are made on a reasonable basis.
5.02 Limitation on the Eurodollar Loan. Notwithstanding any other
---------------------------------
provision of this Agreement, if, on or prior to the determination of any
Eurodollar Base Rate for any Interest Period:
(a) the Bank determines, which determination shall be conclusive,
that quotations of interest rates for the relevant deposits referred to in the
definition of "Eurodollar Base Rate" in Section 1.01 are not being provided in
------------
the relevant amounts or for the relevant maturities for purposes of determining
rates of interest for the Eurodollar Loan as provided in this Agreement; or
Credit Agreement
----------------
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<PAGE>
(b) if the Bank determines, which determination shall be conclusive,
that the relevant rates of interest referred to in the definition of "Eurodollar
Base Rate" in Section 1.01 upon the basis of which the rate of interest for the
------------
Eurodollar Loan for such Interest Period is to be determined are not likely to
cover adequately the cost to the Bank of making or maintaining the Eurodollar
Loan for such Interest Period;
then the Bank shall give the Company prompt notice of such determination and, so
long as such condition remains in effect, the Bank shall be under no obligation
to make the Loan as a Eurodollar Loan, to Continue the Eurodollar Loan or to
Convert the Base Rate Loan into the Eurodollar Loan, and the Company shall, on
the last day of the then current Interest Period for the outstanding Eurodollar
Loan, either prepay such Loan or Convert such Loan into the Base Rate Loan in
accordance with Section 2.07.
------------
5.03 Illegality. Notwithstanding any other provision of this
----------
Agreement, in the event that it becomes unlawful or, by reason of a Regulatory
Change, impossible for the Bank or its Applicable Lending Office to honor its
obligation to make or maintain the Eurodollar Loan, then the Bank shall promptly
notify the Company of such event and the Bank's obligation to make or to
Continue, or to Convert the Base Rate Loan into, the Eurodollar Loan shall be
suspended until such time as such Bank may again make and maintain the
Eurodollar Loan (in which case the provisions of Section 5.04 shall be
------------
applicable).
5.04 Treatment of Affected Loans. If the obligation of the Bank to
---------------------------
make the Eurodollar Loan or to Continue, or to Convert the Base Rate Loan into,
the Eurodollar Loan shall be suspended pursuant to Section 5.01 or 5.03, such
------------ ----
Eurodollar Loan shall be automatically Converted into the Base Rate Loan on the
last day of the then current Interest Period (or, in the case of a Conversion
required by Section 5.01(b) or 5.03, on such earlier date as the Bank may
--------------- ----
specify to the Company) and, unless and until the Bank gives notice as provided
below that the circumstances specified in Section 5.01 or 5.03 that gave rise to
------------ ----
such Conversion no longer exist, the Loan shall be made or maintained as a Base
Rate Loan. The Bank agrees, promptly upon such circumstances ceasing to exist,
to give notice to the Company that the circumstances specified in Section 5.01
------------
or 5.03 that gave rise to the Conversion of the Eurodollar Loan pursuant to this
----
Section 5.04 no longer exist.
- ------------
5.05 Compensation. The Company shall pay to the Bank, upon the
------------
request of the Bank, such amount or amounts as shall be sufficient (in the
reasonable opinion of the Bank) to
Credit Agreement
----------------
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<PAGE>
compensate it for any loss, cost or expense that the Bank determines is
attributable to:
(a) any payment, mandatory or optional prepayment or Conversion of
the Eurodollar Loan for any reason (including the acceleration of the Loan
pursuant to Section 9) on a date other than the last day of the Interest Period
---------
for such Loan; or
(b) any failure by the Company for any reason (including the failure
of any of the conditions precedent specified in Section 6 to be satisfied) to
---------
borrow the Eurodollar Loan from the Bank on the date for such borrowing
specified in the relevant notice of borrowing given pursuant to Section 2.02.
------------
Without limiting the effect of the preceding sentence, such compensation shall
include an amount equal to the excess, if any, of (i) the amount of interest
that otherwise would have accrued on the principal amount so paid, prepaid or
Converted or not borrowed for the period from the date of such payment,
prepayment, Conversion or failure to borrow to the last day of the then current
Interest Period for such Loan (or, in the case of a failure to borrow, the
Interest Period for such Loan that would have commenced on the date specified
for such borrowing) at the applicable rate of interest for such Loan provided
for in this Agreement over (ii) the amount of interest that otherwise would have
accrued on such principal amount at a rate per annum equal to the interest
component of the amount the Bank would have bid in the London interbank market
for Dollar deposits of leading banks in amounts comparable to such principal
amount and with maturities comparable to such period (as reasonably determined
by the Bank).
5.06 Taxes. The Company agrees to pay to the Bank such additional
-----
amounts as are necessary in order that the net payment of any Obligation due to
the Bank after deduction for or withholding in respect of any Tax imposed with
respect to such payment (or for payment of such Tax by the Bank), will not be
less than the amount of the Obligation then due and payable. For the purposes
of this Section 5.06, "Taxes" shall mean any present or future tax, assessment
------------ -----
or other charge or levy imposed by or on behalf of any Governmental Person
(other than taxes imposed on or measured by the overall net income of the Bank
or of its Applicable Lending Office by the jurisdiction in which the Bank has
its principal office or any Applicable Lending Office). Within 30 days after
paying any amount to the Bank from which it is required by law to make any
deduction or withholding, and within 30 days after it is required by law to
remit such deduction or withholding to any relevant taxing or other authority,
the Company shall deliver to the Bank evidence
Credit Agreement
----------------
-25-
<PAGE>
satisfactory to the Bank of such deduction, withholding or payment (as the case
may be).
Section 6. Conditions Precedent.
--------------------
6.01 Initial Conditions. The obligation of the Bank to make the Loan
------------------
under this Agreement is subject to the receipt on the Signing Date by the Bank
of the following documents, each of which shall be satisfactory to the Bank in
form and substance:
(a) Corporate Documents. The following documents, each certified
-------------------
as indicated below:
(i) a copy of the charter, as amended and in effect, of each Obligor
certified as of a recent date by the Secretary of State of its jurisdiction of
incorporation, and such evidence from such Governmental Persons as to the good
standing of and information regarding such charter filed by such Obligor as the
Bank may reasonably request;
(ii) a certificate of the Secretary or an Assistant Secretary of
each Obligor dated the Signing Date and certifying (A) that attached to such
certificate is a true and complete copy of the by-laws of such Obligor as
amended and in effect at all times from the date on which the resolutions
referred to in clause (B) were adopted to and including the date of such
certificate, (B) that attached to such certificate is a true and complete copy
of resolutions duly adopted by the board of directors of such Obligor
authorizing the execution, delivery and performance of such of the Basic
Documents to which such Obligor is or is intended to be a party and, the
extensions of credit under this Agreement and that such resolutions have not
been modified, rescinded or amended and are in full force and effect, (C) that
the charter of such Obligor has not been amended since the date of the
certification furnished pursuant to clause (i) above, and (D) as to the
incumbency and specimen signature of each officer of such Obligor executing such
of the Basic Documents to which such Obligor is or is intended to be a party and
each other document to be delivered by such Obligor from time to time in
connection with any Basic Document (and the Bank may conclusively rely on such
certificate until the Bank receives notice in writing from such Obligor); and
(iii) a certificate of another officer of such Obligor, dated the
Signing Date as to the incumbency and specimen signature of the Secretary or
Assistant Secretary, as the case may be, of such Obligor.
Credit Agreement
----------------
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<PAGE>
(b) Opinion of Counsel to the Obligors. An opinion, dated the
----------------------------------
Signing Date, of Riordan & McKinzie, counsel to the Obligors, in substantially
the form of Exhibit C and covering such other matters as the Bank may reasonably
request (and each Obligor hereby instructs such counsel to deliver such opinion
to the Bank).
(c) FAB Guarantee Agreement. The FAB Guarantee Agreement, duly
-----------------------
completed and executed by the Guarantor.
(d) Balance Sheet. The balance sheet of the Guarantor as at
-------------
September 30, 1993, on a pro forma basis to give effect to the Acquisition,
certified as of the Signing Date by a senior financial officer to be complete
and correct.
(e) Other Agreements. Each Other Agreement, certified as of the
----------------
Signing Date by a senior officer of the Company to be a true and complete copy
of such agreement and to be in full force and effect.
(f) Other Documents. Such other documents as the Bank or counsel
---------------
to the Bank may reasonably request.
The obligation of the Bank to make the Loan under this Agreement is also subject
to the Bank being satisfied that neither the Guarantor nor any other Subsidiary
is subject to any restrictions of the type reflected in the last sentence of
Section 8.15 and to the payment or delivery on or before the Signing Date by the
Company of such fees and other consideration as the Company shall have agreed to
pay or deliver on or before such date to the Bank or an affiliate of the Bank in
connection with this Agreement, including the reasonable fees and expenses of
Milbank, Tweed, Hadley & McCloy, counsel to the Bank, in connection with the
negotiation, preparation, execution and delivery of this Agreement and the Note
and the other Basic Documents (to the extent that statements for such fees and
expenses have been delivered to the Company) and including pursuant to the
Commitment Letter.
6.02 Funding Conditions. The obligation of the Bank to make the Loan
------------------
is subject to the further conditions precedent that:
(a) the Commitment Termination Date shall not have occurred;
(b) both immediately prior to the making of the Loan and also after
giving effect to, and to the intended use of, the Loan: (i) no Default shall
have occurred and be continuing;
Credit Agreement
----------------
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<PAGE>
and (ii) the representations and warranties made by the Company in Section 7,
---------
and by each Obligor in each of the other Basic Documents to which it is a party,
shall be true and complete on and as of the date of the making of the Loan with
the same force and effect as if made on and as of such date (or, if any such
representation or warranty is expressly stated to have been made as of a
specific date, as of such specific date);
(c) the Acquisition shall have been consummated (on terms and
conditions satisfactory to it) in accordance with the Acquisition Agreements and
in compliance with all applicable Governmental Rules and Governmental Approvals;
(d) all Governmental Approvals (including pursuant to the Hart-Scott-
Rodino Antitrust Improvements Act of 1978) necessary or advisable in connection
with the Acquisition shall have been duly obtained or made and remain in effect,
with all applicable waiting periods having expired or having been terminated and
without any action having been taken by any Governmental Person to enjoin,
restrict or prevent the consummation of the Acquisition or otherwise to impose
any materially adverse condition upon the consummation of the Acquisition or on
the operations of the Company and its Subsidiaries after the Acquisition;
(e) no legal or arbitral proceedings shall be pending or, to the
knowledge of the Company, threatened by or before any Governmental Person with
respect to the Acquisition or the making of the Loan that seeks to enjoin,
restrict or prevent the consummation of the Acquisition or the making of the
Loan or otherwise to impose materially adverse conditions upon the consummation
of the Acquisition or the making of the Loan or on the operations of the Company
and its Subsidiaries after the Acquisition or that could, if adversely
determined, have a Material Adverse Effect.
(f) the Bank shall have received on the Funding Date the following
documents, each of which shall be satisfactory to the Bank in form and
substance:
(i) Note. The Note, duly completed and executed;
----
(ii) Acquisition Agreements. The Acquisition Agreements, duly
----------------------
executed by the parties to such Acquisition Agreements, together with copies of
all Governmental Approvals referred to in Section 6.02(c), certified by a senior
---------------
officer of the Company as true and complete copies of the foregoing;
Credit Agreement
----------------
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<PAGE>
(iii) Supplemental Opinion of Counsel to the Obligors. An opinion,
-----------------------------------------------
dated the Funding Date, of Riordan & McKinzie, counsel to the Obligors, in
substantially the form of Exhibit C and covering such other matters as the Bank
may reasonably request (and each Obligor hereby instructs such counsel to
deliver such opinion to the Bank);
(iv) Reconfirmation. If the Funding Date is not also the Signing
--------------
Date, a reconfirmation by the Guarantor of the FAB Guarantee Agreement;
(v) Officer's Certificate. A certificate of a senior officer of the
---------------------
Company, dated the Funding Date, to the effect set forth in Sections 6.02(b),
----------------
6.02(c), 6.02(d), 6.02(e) and 7.15;
- ------- ------- ------- ----
(vi) Certificate of No Breach. A certificate of a senior financial
------------------------
officer of the Company, dated the Funding Date: (a) to the effect that the
borrowing of the Loan, the execution, delivery and performance by the Company of
this Agreement and the Note and the execution, delivery and performance of the
FAB Guarantee Agreement by the Guarantor will not conflict with or result in a
breach of any of Sections 7.01(g), 7.01(k) and 7.02(g) of the Americas Revolving
Credit Agreement and (b) setting forth in reasonable detail the computations
necessary to determine whether the Obligors are in compliance with such
provisions; and
(vii) Senior Note Guaranty. The Senior Note Guaranty, including the
--------------------
provisions relating to the ComputerLand assets, the Company's assets and the
stock of the Company.
(viii) Other Documents. Such other documents as the Bank or
---------------
counsel to the Bank may reasonably request.
Section 7. Representations and Warranties. The Company represents
------------------------------
and warrants to the Bank that:
7.01 Corporate Existence. Each of the Company and its Subsidiaries:
-------------------
(a) is a corporation, partnership or other entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization; (b) has all requisite corporate or other power, and has all
material Governmental Approvals necessary, to own its assets and to carry on its
business as now being or as proposed to be conducted; and (c) is qualified to do
business and is in good standing in all jurisdictions in which the nature of the
business conducted by it
Credit Agreement
----------------
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<PAGE>
makes such qualification necessary and where failure so to qualify could have a
Material Adverse Effect.
7.02 Financial Condition. The Company has previously furnished to
-------------------
the Bank consolidated and consolidating balance sheets of the Company and its
Consolidated Subsidiaries as at December 31, 1992 and the related consolidated
and consolidating statements of income, retained earnings and cash flow of the
Company and its Consolidated Subsidiaries for the fiscal year ended on that
date, with the opinion (in the case of the consolidated balance sheet and
statements) of Deloitte & Touche, and the unaudited consolidated and
consolidating balance sheets of the Company and its Consolidated Subsidiaries as
at September 30, 1993 and the related consolidated and consolidating statements
of income, retained earnings and cash flow of the Company and its Consolidated
Subsidiaries for the nine-month period ended on such date.
All such financial statements are complete and correct and fairly
present the consolidated financial condition of the Company and its Consolidated
Subsidiaries, and (in the case of the consolidating financial statements) the
respective unconsolidated financial condition of the Company and of each of its
respective Consolidated Subsidiaries, as at those dates and the consolidated and
unconsolidated results of their operations for the fiscal year and nine-month
period ended on those dates (subject, in the case of such financial statements
as at September 30, 1993, to normal year-end audit adjustments), all in
accordance with GAAP and practices applied on a consistent basis. Except as
incurred in the ordinary course of business, neither the Company nor any of its
respective Subsidiaries has on the Signing Date any material contingent
liabilities, liabilities for taxes, unusual forward or long-term commitments or
unrealized or anticipated losses from any unfavorable commitments, except as
referred to or reflected or provided for in the most recent balance sheet
referred to above. Since December 31, 1992, there has been no material adverse
change in the consolidated financial condition, operations or business taken as
a whole of the Company and its Consolidated Subsidiaries from that set forth in
the financial statements as at December 31, 1992 for the period ending on that
date.
7.03 Litigation. Except as disclosed to the Bank in Schedule 7.03,
----------
there are no legal or arbitral proceedings, or any proceedings by or before any
Governmental Person now pending or (to the knowledge of the Company) threatened
against the Company or any of its Subsidiaries which, if adversely determined,
could have a Material Adverse Effect.
Credit Agreement
----------------
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<PAGE>
7.04 No Breach. None of the execution and delivery of the Basic
---------
Documents to which the Company is a party, the consummation of the transactions
contemplated in such Basic Documents or compliance with the terms and provisions
of such Basic Documents will conflict with or result in a breach of, or require
any consent under, the charter or by-laws of the Company or any of its
Subsidiaries, or any applicable Governmental Rule or any material agreement or
instrument to which the Company or any of its Subsidiaries is a party or by
which any of them or any of their Property is bound or to which any of them is
subject, or constitute a default under, or result in the acceleration or
mandatory prepayment of, any Indebtedness evidenced by or termination of any
such agreement or instrument, or result in the creation or imposition of any
Lien upon any Property of the Company or any of its Subsidiaries pursuant to the
terms of any such agreement or instrument.
7.05 Action. The Company has all necessary corporate power and
------
authority to execute, deliver and perform its obligations under each of the
Basic Documents to which the Company is a party; the execution, delivery and
performance by the Company of each of such Basic Documents have been duly
authorized by all necessary corporate action on its part (including any required
shareholder approvals); and this Agreement has been duly and validly executed
and delivered by the Company and constitutes, and the Note when executed and
delivered by the Company for value will constitute, its legal, valid and binding
obligation, enforceable against the Company in accordance with its terms, (a)
except as limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws of general applicability affecting the enforcement of creditors'
rights and (b) except as such enforceability may be limited by the application
of general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
7.06 Approvals. No Governmental Approvals are necessary for the
---------
execution, delivery or performance by the Company of the Basic Documents to
which it is a party or for the legality, validity or enforceability of any such
Basic Document.
7.07 Margin Stock. Neither the Company nor any of its Subsidiaries
------------
is engaged principally, or as one of its important activities, in the business
of extending credit for the purpose, whether immediate, incidental or ultimate,
of buying or carrying Margin Stock, and no part of the proceeds of any extension
of credit under this Agreement will be used to buy or carry any Margin Stock.
Credit Agreement
----------------
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<PAGE>
7.08 ERISA. Each Plan, and, to the knowledge of the Company, each
-----
Multiemployer Plan, is in compliance in all material respects with, and has been
administered in all material respects in compliance with, the applicable
provisions of ERISA, the Code and any other Governmental Rule, and no event or
condition has occurred and is continuing as to which the Company would be under
an obligation to furnish a report to the Bank under Section 8.01(g).
---------------
7.09 Taxes. There is no tax sharing, tax allocation or similar
-----
agreement currently in effect providing for the manner in which tax payments
owing by the Company or any of its Subsidiaries (whether in respect of Federal
or state income or other taxes) are allocated among such Persons. The Company
and its Subsidiaries have filed all Federal income tax returns and all other
material tax returns that are required to be filed by them and have paid all
taxes due pursuant to such returns or pursuant to any assessment received by the
Company or any of its Subsidiaries and all other related penalties and charges.
The charges, accruals and reserves on the books of the Company and its
Subsidiaries in respect of taxes and other governmental charges are, in the
opinion of the Company, adequate. The Company has not given or been requested
to give a waiver of the statute of limitations relating to the payment of
Federal or other taxes.
7.10 Certain Regulations. Neither the Company nor any of its
-------------------
Subsidiaries is (a) an "investment company," or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act of 1940;
(b) a "holding company," or an "affiliate" of a "holding company" or a
"subsidiary company" of a "holding company," within the meaning of the Public
Utility Holding Company Act of 1935; or (c) subject to any other Governmental
Rule restricting its ability to incur debt.
7.11 Material Agreements and Liens.
-----------------------------
(a) Part A of Schedule 7.11 is a complete and correct list, as of
the Signing Date of each credit agreement, loan agreement, indenture, guarantee,
letter of credit or other arrangement providing for or otherwise relating to any
Indebtedness or any extension of credit (or commitment for any extension of
credit) to, or guarantee by, the Company or any of its Subsidiaries the
aggregate principal or face amount of which equals or exceeds (or may equal or
exceed) $5,000,000, and the aggregate principal or face amount outstanding or
that may become outstanding under each such arrangement is correctly described
in Part A of Schedule 7.11.
Credit Agreement
----------------
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<PAGE>
(b) Part B of Schedule 7.11 is a complete and correct list, as of
the Signing Date, of each Lien securing Indebtedness of any Person the aggregate
principal or face amount of which equals or exceeds (or may equal or exceed)
$5,000,000 and covering any Property of the Company or any of its Subsidiaries,
and the aggregate Indebtedness secured (or which may be secured) by each such
Lien and the Property covered by each such Lien is correctly described in Part B
of Schedule 7.11.
7.12 Environmental Matters. Each of the Company and its
---------------------
Subsidiaries has obtained all Governmental Approvals required under all
Environmental Laws to carry on its business as now being or as proposed to be
conducted, except to the extent failure to have any such Governmental Approvals
would not have a Material Adverse Effect. Each of such Governmental Approvals
is in full force and effect and each of the Company and its Subsidiaries is in
compliance with the terms and conditions of such Governmental Approvals and is
also in compliance with all other provisions of any applicable Environmental Law
or of any Governmental Rule issued, entered, promulgated or approved under any
Environmental Law, except to the extent failure to comply with such provisions
would not have a Material Adverse Effect.
In addition, except as set forth in Schedule 7.12, no notice,
notification, demand, request for information, citation, summons or order has
been issued, no complaint has been filed, no penalty has been assessed and no
investigation or review is pending or threatened by any Governmental Person with
respect to any alleged failure by the Company or any of its Subsidiaries to have
any Governmental Approval required under any Environmental Law in connection
with the conduct of the business of the Company or any of its Subsidiaries or
with respect to any generation, treatment, storage, recycling, transportation or
Release of any Hazardous Materials generated by the Company or any of its
Subsidiaries.
7.13 Subsidiaries, Etc.
------------------
(a) Set forth in Part A of Schedule 7.13 is a complete and correct
list, as of the Signing Date, of all of the Subsidiaries of the Company,
together with, for each such Subsidiary, (i) the jurisdiction of organization of
such Subsidiary, (ii) each Person holding ownership interests in such Subsidiary
and (iii) the nature of the ownership interests held by each such Person and the
percentage of ownership of such Subsidiary represented by such ownership
interests. Except as disclosed in Part A of Schedule 7.13, (x) each of the
Company and its Subsidiaries owns, free and clear of Liens, and has the
unencumbered right to vote, all outstanding ownership interests
Credit Agreement
----------------
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<PAGE>
in each Person shown to be held by it in Part A of Schedule 7.13, (y) all of the
issued and outstanding capital stock of each such Person organized as a
corporation is validly issued, fully paid and nonassessable and (z) there are no
outstanding Equity Rights with respect to such Person.
(b) Set forth in Part B of Schedule 7.13 is a complete and correct
list, as of the Signing Date, of all investments (other than investments
disclosed in Part A of Schedule 7.13) held by the Company or any of its
Subsidiaries in any Person and, for each such investment, (x) the identity of
the Person or Persons holding such investment and (y) the nature of such
investment. Except as disclosed in Part B of Schedule 7.13 each of the Company
and its Subsidiaries owns, free and clear of all Liens, all such investments.
(c) None of the Subsidiaries of the Company is, on the Signing Date,
subject to any indenture, agreement, instrument or other arrangement of the type
described in the last sentence of 8.15.
7.14 Title to Assets. The Company or a Subsidiary owns and has on
---------------
the Signing Date, and will own and have on the Funding Date, good and marketable
title (subject only to Liens permitted by Section 8.06) to the Properties shown
------------
to be owned in the most recent financial statements referred to in Section 7.02
------------
(other than Properties disposed of in the ordinary course of business or
otherwise permitted to be disposed of pursuant to Section 8.05). The Company or
------------
a Subsidiary owns and has on the Signing Date and will own and have on the
Funding Date, good and marketable title to, and enjoys on the Signing Date and
will enjoy on the Funding Date, peaceful and undisturbed possession of, all
Properties (subject only to Liens permitted by Section 8.06) that are necessary
------------
for the operation and conduct of its businesses.
7.15 Solvency of Guarantor. The Guarantor individually, and taken
---------------------
as a whole with its Consolidated Subsidiaries, is, and after giving effect to
the FAB Guarantee Agreement and the Acquisition Agreements will be, Solvent.
7.16 True and Complete Disclosure. The information, reports,
----------------------------
financial statements, exhibits and schedules furnished in writing by or on
behalf of the Company to the Bank in connection with the negotiation,
preparation or delivery of the Basic Documents or included in or delivered
pursuant to any Basic Document, when taken as a whole do not contain any untrue
statement of material fact or omit to state any material fact necessary to make
the statements in any Basic
Credit Agreement
----------------
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<PAGE>
Document, in light of the circumstances under which they were made, not
misleading. All written information furnished after the Signing Date by the
Company and its Subsidiaries to the Bank in connection with the Basic Documents
and the transactions contemplated by the Basic Documents will be true, complete
and accurate in every material respect, or (in the case of projections) based on
reasonable estimates, on the date as of which such information is stated or
certified. There is no fact known to the Company that could have a Material
Adverse Effect that has not been disclosed in the Basic Documents or in a
report, financial statement, exhibit, schedule, disclosure letter or other
writing furnished to the Bank for use in connection with the transactions
contemplated by the Basic Documents.
Section 8. Covenants of the Company. The Company covenants and
------------------------
agrees with the Bank that, so long as any Commitment or the Loan is outstanding
and until payment in full of all Obligations:
8.01 Financial Statements, Etc. The Company shall deliver to the
--------------------------
Bank:
(a) as soon as available and in any event within 50 days after the
end of each quarterly fiscal period of each fiscal year of the Company,
consolidated and consolidating statements of income, retained earnings and cash
flow of the Company and its Consolidated Subsidiaries for such period and for
the period from the beginning of the respective fiscal year to the end of such
period, and the related consolidated and consolidating balance sheets of the
Company and its Consolidated Subsidiaries as at the end of such period, setting
forth in each case in comparative form the corresponding consolidated and
consolidating figures for the corresponding period in the preceding fiscal year,
accompanied by a certificate of a senior financial officer of the Company, which
certificate shall state that those consolidated financial statements fairly
present the consolidated financial condition and results of operations of the
Company and its Consolidated Subsidiaries, and those consolidating financial
statements fairly present the respective individual unconsolidated financial
condition and results of operations of the Company and of each of its
Consolidated Subsidiaries, in each case in accordance with generally accepted
accounting principles, consistently applied, as at the end of, and for, such
period (subject to normal year-end audit adjustments);
(b) as soon as available and in any event within 95 days after the
end of each fiscal year of the Company,
Credit Agreement
----------------
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<PAGE>
consolidated and consolidating statements of income, retained earnings and cash
flow of the Company and its Consolidated Subsidiaries for such fiscal year and
the related consolidated and consolidating balance sheets of the Company and its
Consolidated Subsidiaries as at the end of such fiscal year, setting forth in
each case in comparative form the corresponding consolidated and consolidating
figures for the preceding fiscal year, and accompanied (i) in the case of those
consolidated statements and balance sheet of the Company, by an opinion of
independent certified public accountants of recognized national standing, which
opinion shall state that those consolidated financial statements fairly present
the consolidated financial condition and results of operations of the Company
and its Consolidated Subsidiaries as at the end of, and for, such fiscal year in
accordance with generally accepted accounting principles, consistently applied,
and a certificate of such accountants stating that, in making the examination
necessary for their opinion, they obtained no knowledge, except as specifically
stated, of any Default, and (ii) in the case of those consolidating statements
and balance sheets, by a certificate of a senior financial officer of the
Company, which certificate shall state that those consolidating financial
statements fairly present the respective individual unconsolidated financial
condition and results of operations of the Company and of each of its
Consolidated Subsidiaries, in each case in accordance with generally accepted
accounting principles, consistently applied, as at the end of, and for, such
fiscal year;
(c) promptly upon their becoming available, copies of all
registration statements and regular periodic reports, if any, which the Company
shall have filed with the Securities and Exchange Commission or any national
securities exchange;
(d) promptly upon their being mailed or provided to the shareholders
of the Company generally or to holders of Subordinated Indebtedness generally,
copies of all financial statements, reports and proxy statements so mailed or
provided;
(e) as soon as possible, and in any event within ten days after the
Company knows or has reason to believe that any of the events or conditions
specified below with respect to any Plan or Multiemployer Plan has occurred or
exists, a statement signed by a senior financial officer of the Company setting
forth details respecting such event or condition and the action, if any, that
the Company or its ERISA Affiliate proposes to take with respect such event or
condition (and a copy of any report or notice required to be filed with or given
to PBGC by the Company or an ERISA Affiliate with respect to such event or
condition):
Credit Agreement
----------------
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<PAGE>
(i) any reportable event, as defined in Section 4043(b) of ERISA and
the regulations issued under that Section, with respect to a Plan, as to which
PBGC has not by regulation waived the requirement of Section 4043(a) of ERISA
that it be notified within 30 days of the occurrence of such event (provided
--------
that a failure to meet the minimum funding standard of Section 412 of the Code
or Section 302 of ERISA, including the failure to make on or before its due date
a required installment under Section 412(m) of the Code or Section 302(e) of
ERISA, shall be a reportable event regardless of the issuance of any waivers in
accordance with Section 412(d) of the Code); and any request for a waiver under
Section 412(d) of the Code for any Plan;
(ii) the distribution under Section 4041 of ERISA of a notice of
intent to terminate any Plan or any action taken by the Company or an ERISA
Affiliate to terminate any Plan;
(iii) the institution by PBGC of proceedings under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
Plan, or the receipt by the Company or any ERISA Affiliate of a notice from a
Multiemployer Plan that such action has been taken by PBGC with respect to such
Multiemployer Plan;
(iv) the complete or partial withdrawal from a Multiemployer Plan by
the Company or any ERISA Affiliate that results in liability under Section 4201
or 4204 of ERISA (including the obligation to satisfy secondary liability as a
result of a purchaser default) or the receipt by the Company or any ERISA
Affiliate of notice from a Multiemployer Plan that it is in reorganization or
insolvency pursuant to Section 4241 or 4245 of ERISA or that it intends to
terminate or has terminated under Section 4041A of ERISA;
(v) the institution of a proceeding by a fiduciary of any
Multiemployer Plan against the Company or any ERISA Affiliate to enforce Section
515 of ERISA, which proceeding is not dismissed within 30 days; and
(vi) the adoption of an amendment to any Plan that, pursuant to
Section 401(a)(29) of the Code or Section 307 of ERISA, would result in the loss
of tax-exempt status of the trust of which such Plan is a part if the Company or
an ERISA Affiliate fails to timely provide security to the Plan in accordance
with the provisions of those Sections;
(f) promptly after the Company knows or has reason to believe that
any Default has occurred, a notice of such
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----------------
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<PAGE>
Default describing the same in reasonable detail and, together with such notice
or as soon thereafter as possible, a description of the action that the Company
has taken or proposes to take with respect to such Default; and
(g) from time to time such other information regarding the financial
condition, operations, business or prospects of the Company or any of its
Subsidiaries (including with respect to any Plan or Multiemployer Plan and any
reports or other information required to be filed under ERISA) as the Bank may
reasonably request.
The Company will furnish to the Bank, at the time it furnishes each set of
financial statements pursuant to paragraph (a) or (b) above, a certificate of a
senior financial officer of the Company (i) to the effect that no Default has
occurred and is continuing (or, if any Default has occurred and is continuing,
describing the same in reasonable detail and describing the action that the
Company has taken or proposes to take with respect to such Default) and (ii)
setting forth in reasonable detail the computations necessary to determine
whether the Company is in compliance with Section 8.09 and Sections 7.01(g) and
------------
7.01(k) of the Americas Revolving Credit Agreement as of the end of the
respective quarterly fiscal period or fiscal year.
8.02 Litigation. The Company will promptly give to the Bank
----------
notice of all legal, arbitral or investigatory proceedings, and of all
proceedings by or before any Governmental Person, and any material development
in respect of any such proceedings, affecting the Company or any of its
Subsidiaries, except proceedings which, if adversely determined, would not have
a Material Adverse Effect.
8.03 Existence, Etc. The Company will, and will cause each of its
---------------
Subsidiaries to:
(a) preserve and maintain its legal existence and all of its material
rights, privileges, licenses and franchises (provided that nothing in this
--------
Section 8.03 shall prohibit any transaction expressly permitted under
- ------------
Section 8.05);
- ------------
(b) comply with the requirements of all applicable Governmental
Rules, if failure to comply with such requirements could have a Material Adverse
Effect;
(c) pay and discharge all taxes, assessments and governmental charges
or levies imposed on it or on its income or profits or on any of its Properties
prior to the date on which penalties attach except for any such tax, assessment,
charge or
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----------------
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<PAGE>
levy the payment of which is being contested in good faith and by proper
proceedings and against which adequate reserves are being maintained;
(d) maintain all of its Properties used or useful in its business in
good working order and condition, ordinary wear and tear excepted;
(e) keep adequate records and books of account, in which complete
entries will be made in accordance with generally accepted accounting principles
consistently applied; and
(f) permit representatives of the Bank, during normal business hours,
to examine, copy and make extracts from its books and records, to inspect any of
its Properties, and to discuss its business and affairs with its officers, all
to the extent reasonably requested by the Bank.
8.04 Insurance. The Company will, and will cause each of its
---------
Subsidiaries to, keep insured by financially sound and reputable insurers all
Property of a character usually insured by corporations engaged in the same or
similar business similarly situated against loss or damage of the kinds and in
the amounts customarily insured against by such corporations and carry such
other insurance as is usually carried by such corporations.
8.05 Prohibition of Fundamental Changes. The Company will not,
----------------------------------
nor will it permit any of its Material Subsidiaries to, enter into any
transaction of merger or consolidation or amalgamation, or liquidate, wind up or
dissolve itself (or suffer any liquidation or dissolution). The Company will
not, nor will it permit any of its Material Subsidiaries to, acquire any
business or Property comprising a substantial part of the business of, or
capital stock of, or be a party to any acquisition of, any Person except for the
Acquisition. The Company will not, nor will it permit any of its Material
Subsidiaries to, convey, sell, lease, transfer or otherwise dispose of, in one
transaction or a series of transactions, all or a substantial part of its
business or Property, whether now owned or hereafter acquired (including
receivables and leasehold interests, but excluding (i) any inventory or other
Property sold or disposed of in the ordinary course of business and on ordinary
business terms) and (ii) assets having an aggregate net book value of not more
than five percent of the consolidated total assets of the Company and its
Consolidated Subsidiaries in any fiscal year (on a non-cumulative basis).
Notwithstanding the foregoing provisions of this Section 8.05, so long as no
------------
Default shall have occurred and be continuing:
Credit Agreement
----------------
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<PAGE>
(a) any Subsidiary of the Company may be merged or consolidated
with or into: (i) the Company if the Company shall be the continuing or
surviving corporation or (ii) in the case of any of the Guarantor's
Subsidiaries, into the Guarantor or any other Subsidiary of the Guarantor or, in
the case of Subsidiaries of the Company other than the Guarantor or any
Subsidiary of the Guarantor, into the parent of such Subsidiary or into another
Subsidiary of the parent of such Subsidiary; provided that if any such
--------
transaction shall be between a Subsidiary and a Wholly Owned Subsidiary, the
Wholly Owned Subsidiary shall be the continuing or surviving corporation and
that if such transaction shall be between a Subsidiary and a Guarantor the
Guarantor shall be the Continuing or Surviving Corporation;
(b) any Subsidiary of the Company (other than the Guarantor) may
sell, lease, transfer or otherwise dispose of any or all of its Property (upon
voluntary liquidation or otherwise) to the Company or, in the case of any of the
Guarantor's Subsidiaries, to the Guarantor or any other Subsidiary of the
Guarantor or, in the case of Subsidiaries of the Company other than the
Guarantor or any Subsidiary of the Guarantor, to the parent of such Subsidiary
or to another Subsidiary of the parent of such Subsidiary; and
8.06 Limitation on Liens. The Company will not, nor will it
-------------------
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 the Company or any of its
Subsidiaries as debtor, or sign, or permit any of its Subsidiaries to sign, any
security agreement authorizing any secured party 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 7.09;
------------
(ii) Liens imposed by law such as materialmen's, mechanics',
carriers', workmen's, and repairmen's
Credit Agreement
----------------
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<PAGE>
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 Company or any of its 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 Company or any of its Subsidiaries;
(v) Liens caused by any judgment if such judgment has not resulted in
an Event of Default pursuant to Section 8.01(g) of the Americas Revolving Credit
Agreement or Section 9(h);
------------
(vi) Liens in connection with Indebtedness of the Company incurred
under the Basic Documents, Liens in connection with the FAB Revolving Credit
Agreement 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) of the Americas
Revolving Credit Agreement;
(vii) Liens in favor of the Company on the assets of any of
its Subsidiaries;
(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;
and
(ix) the Lien under Section 2.08(b) of the FAB Guarantee
Agreement.
8.07 Indebtedness. The Company will not, nor will it permit any
------------
of its Subsidiaries to, create, incur, assume or suffer to exist any
Indebtedness except:
(a) Indebtedness to the Bank under the Basic Documents;
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----------------
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<PAGE>
(b) Indebtedness outstanding on the Signing Date and listed in
Part A of Schedule 7.11;
(c) Subordinated Intercompany Indebtedness;
(d) In the case of Subsidiaries of the Company (other than the
Guarantor), Indebtedness permitted by the Americas Revolving Credit Agreement;
(e) The FAB Revolving Credit Agreement; and
(f) The Seller Note.
8.08 Dividend Payments. The Company will not, nor will it permit
-----------------
any of its Subsidiaries to, declare or make any Dividend Payment at any time;
provided, however, that Wholly Owned Subsidiaries may declare and make Dividend
- --------
Payments.
8.09 EBIT. The Company shall not permit EBIT of the Company and
----
its Consolidated Subsidiaries to be less than $15,000,000 for any fiscal
quarter.
8.10 Subordinated Indebtedness. Neither the Company nor any of its
-------------------------
Subsidiaries shall purchase, redeem, retire or otherwise acquire for value, or
set apart any money for a sinking, defeasance or other analogous fund for, the
purchase, redemption, retirement or other acquisition of, or make any payment or
prepayment of the principal of or interest on, or any other amount owing in
respect of, any Subordinated Intercompany Indebtedness, or the Subordinated Note
Purchase Agreement (other than, in the case of the Subordinated Note Purchase
Agreement, but subject to the subordination provisions of that agreement,
regularly scheduled payments and prepayments pursuant to Section 7.1(a) of the
Subordinated Note Purchase Agreement).
8.11 Lines of Business. Neither the Company nor any of its
-----------------
Subsidiaries shall engage to any substantial extent in any line or lines of
business activity other than those in which they are currently engaged or will,
by reason of the Acquisitions, be engaged or other businesses directly related
to the distribution or marketing of computer products, services and information.
8.12 Transactions with Affiliates. Except as expressly permitted by
----------------------------
this Agreement, the Company will not, directly or indirectly, nor will it permit
any of its Subsidiaries, directly or indirectly, to: (a) make any investment
in, or loans or advances to, an Affiliate; (b) transfer, sell, lease, assign or
otherwise dispose of any Property to an Affiliate; (c) merge into or consolidate
with or
Credit Agreement
----------------
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<PAGE>
purchase or acquire Property from an Affiliate; or (d) enter into any other
transaction directly or indirectly with or for the benefit of an Affiliate
(including guarantees and assumptions of obligations of an Affiliate); provided
--------
that (x) any Affiliate who is an individual may serve as a director, officer or
employee of the Company or any of its Subsidiaries and receive reasonable
compensation for his or her services in such capacity and (y) the Company and
its Subsidiaries may enter into transactions (other than extensions of credit by
the Company or any of its Subsidiaries to an Affiliate) providing for the
leasing of Property, the rendering or receipt of services or the purchase or
sale of inventory and other Property in the ordinary course of business if the
monetary or business consideration arising from such activity would be
substantially as advantageous to the Company and its Subsidiaries as the
monetary or business consideration which would obtain in a comparable
transaction with a Person not an Affiliate.
8.13 Incorporation by Reference. The Company agrees, for the benefit
--------------------------
of the Bank, to perform, to comply with and to be bound by each of its
covenants, agreements and obligations contained in Sections 7.01(g), 7.01(k) and
7.02(m) of the Americas Revolving Credit Agreement, as in effect on the Signing
Date and without giving effect to any modifications or supplements to the
Americas Revolving Credit Agreement, or termination of the Americas Revolving
Credit Agreement, after the Signing Date. Without limiting the generality of
the foregoing, the above-mentioned provisions of the Americas Revolving Credit
Agreement, together with, for purposes of such provisions only, related
definitions and ancillary provisions and schedules and exhibits, are hereby
incorporated in this Agreement by reference, as if set forth in this Agreement
in full, mutatis mutandis; provided that, as incorporated in this Agreement, (i)
------- -------- --------
each reference in the Americas Revolving Credit Agreement to "this Agreement" or
"the Notes" or the like shall be deemed to be a reference to this Agreement and
the Note, as the case may be, (ii) each reference in the Americas Revolving
Credit Agreement to any "Agent," "Bank" or "holder of any Note" or the like,
shall be deemed to be a reference to the Bank under this Agreement.
8.14 Use of Proceeds. The Company shall use the proceeds of the
---------------
Loans solely to fund the cash portion of the purchase price of the Acquisition
and related costs (in compliance with all applicable Governmental Rules);
provided that the Bank shall have no responsibility as to the use of any of such
- --------
proceeds.
8.15 Certain Obligations Respecting Subsidiaries. The Company will,
-------------------------------------------
and will cause each of its Subsidiaries to, take such action from time to time
as shall be necessary to
Credit Agreement
----------------
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<PAGE>
ensure that each of the Guarantor and Americas is a Wholly Owned Subsidiary and
the Company and each of its Material Subsidiaries taken as a whole at all times
own at least the same percentage of the issued and outstanding shares of each
class of stock of each of its Material Subsidiaries as is owned on the Signing
Date. Without limiting the generality of the foregoing, none of the Company nor
any of its Material Subsidiaries shall sell, transfer or otherwise dispose of
any shares of stock in any Material Subsidiary owned by them, nor permit any
Material Subsidiary to issue any shares of stock of any class whatsoever to any
Person (other than to the Company or another Material Subsidiary). The Company
will not permit any of its Subsidiaries to enter into, after the Signing Date,
any agreement or instrument (other than pursuant to any Basic Document) that,
directly or indirectly, prohibits or restrains, or has the effect of prohibiting
or restraining, or imposes materially adverse conditions upon, the incurrence or
payment of Indebtedness, the granting of Liens, the declaration or making of
Dividend Payments, the making of loans, advances or investments or the sale,
assignment, transfer or other disposition of Property; provided, however, that
--------
this sentence shall not apply to agreements or instruments to which the Company
or any of its Subsidiaries is a party existing as of the Signing Date or to
agreements or instruments amending, modifying, supplementing or replacing such
agreements or instruments unless such amendment, modification, supplement or
replacement agreement or instrument creates new or expands the existing
obligations of the Company or any of its Subsidiaries in respect of such
provisions.
8.16 Modifications of Certain Documents. The Company will not, nor
----------------------------------
shall it permit any of its Subsidiaries to, consent to any modification,
supplement or waiver of any of the provisions of the Acquisition Agreements
(except for modifications, supplements or waivers of the Services Agreement that
are not adverse to the Bank) without the prior consent of the Bank. The Company
will provide the Bank with a copy of any written modification, supplement or
waiver to the Services Agreement.
8.17 Compliance with Other Agreements. The Company shall, and shall
--------------------------------
cause each of its Subsidiaries to, comply with each of the terms, covenants and
conditions contained in (i) Section 7 of the Americas Revolving Credit Agreement
as in effect on the Signing Date and without giving effect to any modifications
or supplements to such agreement, or termination of such agreement, (ii) Section
6 of the Senior Note Purchase Agreement and (iii) Section 9 of the Subordinated
Note Purchase Agreement.
Credit Agreement
----------------
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<PAGE>
Section 9. Events of Default. If one or more of the following events
-----------------
("Events of Default") shall occur and be continuing:
-----------------
(a) The Company shall: (i) default in the payment of any principal
of any Loan when due (whether at stated maturity or at mandatory or optional
prepayment); or (ii) default in the payment of any interest on any Loan or any
other Obligation when due and such default shall have continued unremedied for 3
or more days; or
(b) The Company or any of its Subsidiaries (collectively, the
"Relevant Parties") shall default in the payment when due of any principal of or
- -----------------
interest on any of its other Indebtedness aggregating $5,000,000 or more, or in
the payment when due of any amount under any Interest Rate Protection Agreement
having a credit exposure amount exceeding $5,000,000; or any event specified in
any note, agreement, indenture or other document evidencing or relating to any
such Indebtedness or any event specified in any Interest Rate Protection
Agreement shall occur if the effect of such event is to cause, or (with the
giving of any notice or the lapse of time or both) to permit the holder or
holders of such Indebtedness (or a trustee or agent on behalf of such holder or
holders) to cause, such Indebtedness to become due, or to be prepaid in full
(whether by redemption, purchase, offer to purchase or otherwise), prior to its
stated maturity or to have the interest rate on such Indebtedness reset to a
level so that securities evidencing such Indebtedness trade at a level specified
in relation to its par value or, in the case of an Interest Rate Protection
Agreement, to permit the payments owing under such Interest Rate Protection
Agreement to be liquidated; or
(c) Any representation, warranty or certification made or deemed made
in any Basic Document by the Company or any Guarantor or any certificate
furnished to the Bank pursuant to the provisions of any Basic Document shall
prove to have been false or misleading as of the time made or furnished or
deemed made or furnished in any material respect; or
(d) The Company shall default in the performance of any of its
obligations under any of Sections 8.01(h), 8.05, 8.06, 8.07, 8.08, 8.09, 8.10 or
---------------- ---- ---- ---- ---- ---- ----
8.12, or the Sections of the Other Agreements incorporated by reference in this
- ----
Agreement pursuant to Section 8.13; or any Obligor shall default in the
------------
performance of any of its other obligations in this Agreement or any other Basic
Document and such default shall continue unremedied for a period of 10 days
after notice of such default to the Company by the Bank; or
Credit Agreement
----------------
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<PAGE>
(e) Any event or condition described as an "Event of Default"
----------------
under the FAB Revolving Credit Agreement shall occur; or
(f) Any Relevant Party shall admit in writing its inability to, or be
generally unable to, pay its debts as such debts become due; or
(g) Any Relevant Party shall (i) apply for or consent to the
appointment of, or the taking of possession by, a receiver, custodian, trustee,
examiner or liquidator of itself or of all or a substantial part of its
Property, (ii) make a general assignment for the benefit of its creditors, (iii)
commence a voluntary case under the Bankruptcy Code, (iv) file a petition
seeking to take advantage of any other law relating to bankruptcy, insolvency,
reorganization, liquidation, dissolution, arrangement or winding-up, or
composition or readjustment of debts, (v) fail to controvert in a timely and
appropriate manner, or acquiesce in writing to, any petition filed against it in
an involuntary case under the Bankruptcy Code or (vi) take any corporate action
for the purpose of effecting any of the foregoing; or
(h) A proceeding or case shall be commenced, without the application
or consent of the affected Relevant Party, in any court of competent
jurisdiction, seeking (i) its reorganization, liquidation, dissolution,
arrangement or winding-up, or the composition or readjustment of its debts, (ii)
the appointment of a receiver, custodian, trustee, examiner, liquidator or the
like of such Relevant Party or of all or any substantial part of its Property,
or (iii) similar relief in respect of such Relevant Party under any law relating
to bankruptcy, insolvency, reorganization, winding-up, or composition or
adjustment of debts, and such proceeding or case shall continue undismissed, or
an order, judgment or decree approving or ordering any of the foregoing shall be
entered and continue unstayed and in effect, for a period of 60 or more days; or
an order for relief against any Relevant Party shall be entered in an
involuntary case under the Bankruptcy Code; or
(i) A final judgment or judgments for the payment of money in excess
of $5,000,000 in the aggregate shall be rendered by a one or more Governmental
Persons having jurisdiction against any Relevant Party and the same shall not be
discharged (or provision shall not be made for such discharge), or a stay of
execution of the relevant judgment shall not be procured, within 30 days from
the date of entry of such judgment and such Relevant Party shall not, within
that thirty-day period, or such longer period during which execution of the same
shall
Credit Agreement
----------------
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<PAGE>
have been stayed, appeal from and cause the execution of such judgment to be
stayed during such appeal; or
(j) An event or condition specified in Section 8.01(g) shall occur or
---------------
exist with respect to any Plan or Multiemployer 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 shall be reasonably likely to
incur a liability to a Plan, a Multiemployer Plan or PBGC (or any combination of
the foregoing) which would constitute a Material Adverse Effect; or
(k) A reasonable basis shall exist for the assertion against any
Relevant Party of (or there shall have been asserted against any Relevant Party)
claims or liabilities, whether accrued, absolute or contingent, based on or
arising from the generation, storage, transport, handling or Release of
Hazardous Materials by any Relevant Party or any of its respective Affiliates,
or any predecessor in interest of any Relevant Party or any of its respective
Affiliates, or relating to any site, facility or vessel owned, operated or
leased by any Relevant Party or its respective Affiliates, which claims or
liabilities (insofar as they are payable by any Relevant Party but after
deducting any portion which is reasonably expected to be paid by other credit
worthy Persons jointly and severally liable for such portion), in the judgment
of the Bank, are reasonably likely to be determined adversely to any Relevant
Party, and the amount of such claims or liabilities is, singly or in the
aggregate, reasonably likely to have a Material Adverse Effect; or
(l) The FAB Guarantee Agreement shall cease to be in full force and
effect, or the Guarantor shall repudiate or revoke or seek to repudiate or
revoke any of its obligations under the FAB Guarantee Agreement; or
(m) During any period of 25 consecutive calendar months, a majority
of the Board of Directors of the Company or the Guarantor shall no longer be
composed of individuals (i) who were members of such Board on the first day of
such period, (ii) whose election or nomination to such Board was approved by
individuals referred to in clause (i) above constituting at the time of such
election or nomination at least a majority of such Board or (iii) whose election
or nomination to such Board was approved by individuals referred to in clauses
(i) and (ii) above constituting at the time of such election or nomination at
least a majority of such Board; or
(n) Any Person alone or together with its Affiliates, directly or
indirectly through one or more
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----------------
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<PAGE>
intermediaries, gains control of more than 50% of the Company's outstanding
capital stock entitled (without regard to the occurrence of any contingency) to
vote in the election of directors of the Company; or
(o) Any circumstance or event resulting in a Material Adverse
Effect shall have occurred.
THEREUPON: (1) in the case of an Event of Default other than one referred to in
clause (g) or (h) of this Section 9 with respect to the Company, the Bank may,
---------
by notice to the Company, (A) terminate the Commitment and it shall thereupon
terminate and (B) declare the principal amount then outstanding of, and the
accrued interest on, the Loan and all other Obligations (including any amounts
payable under Section 5) to be forthwith due and payable, whereupon such amounts
---------
shall be immediately due and payable without presentment, demand, protest or
other formalities of any kind, all of which are hereby expressly waived by the
Company; and (2) in the case of the occurrence of an Event of Default referred
to in clause (g) or (h) of this Section 9 with respect to the Company, the
---------
Commitment shall automatically be terminated and the principal amount then
outstanding of, and the accrued interest on, the Loan and all other Obligations
(including any amounts payable under Section 5) shall automatically become
---------
immediately due and payable without presentment, demand, protest or other
formalities of any kind, all of which are hereby expressly waived by the
Company.
Section 10. Miscellaneous.
-------------
10.01 Waiver. No failure on the part of the Bank to exercise and no
------
delay in exercising, and no course of dealing with respect to, any right,
remedy, power or privilege under this Agreement or the Note shall operate as a
waiver of such right, remedy, power or privilege, nor shall any single or
partial exercise of any right, power or privilege under this Agreement or the
Note preclude any other or further exercise of any such right, remedy, power or
privilege or the exercise of any other right, remedy, power or privilege. The
rights, remedies, powers and privileges provided in this Agreement and the Note
are cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.
10.02 Notices. All notices, requests and other communications
-------
provided for in this Agreement and under the Basic Documents making reference to
this Section 10.02 (including any modifications of, or waivers or consents
-------------
under, this Agreement) shall be given or made in writing, delivered to the
intended recipient at the "Address for Notices" specified below its name
Credit Agreement
----------------
-48-
<PAGE>
on Annex 1 or, as to any party, at such other address as shall be designated by
such party in a notice to each other party. Except as otherwise provided in any
Basic Document, all such communications shall be deemed to have been duly given
when transmitted by telex or telefacsimile or personally delivered or, in the
case of a mailed notice, upon receipt, in each case given or addressed as set
forth above.
10.03 Expenses, Etc. The Company agrees to pay or reimburse the
--------------
Bank for paying:
(a) all reasonable out-of-pocket costs and expenses of the Bank
(including the reasonable fees and expenses of Milbank, Tweed, Hadley & McCloy,
counsel to the Bank, in connection with (i) the negotiation, preparation,
execution and delivery of the Basic Documents and the extension of credit under
this Agreement and (ii) any modification, supplement or waiver of any of the
terms of any Basic Document;
(b) all reasonable costs and expenses of the Bank (including
reasonable counsels' fees) in connection with (i) any Default and any
enforcement or collection proceedings (including any bankruptcy, reorganization,
workout or other similar proceedings) resulting from such Default or in
connection with the negotiation of any restructuring or "work-out" (whether or
not consummated) of the obligations of the Company under the Basic Documents and
(ii) the enforcement of this Section 10.03; and
-------------
(c) all transfer, stamp, documentary or other similar taxes,
assessments or charges levied by any governmental or revenue authority in
respect of any Basic Document or any other document referred to in any Basic
Document.
The Company hereby agrees (i) to indemnify the Bank and its respective
affiliates, directors, officers, employees, attorneys and agents from, and hold
each of them harmless against, any and all losses, liabilities, damages or
expenses incurred by any of them in connection with or by reason of any actual
or threatened investigation, litigation or other proceedings relating to the
extension of credit under, and the transactions contemplated by, the Basic
Documents or any actual or proposed use by the Company or any of its
Subsidiaries of the proceeds of any such extension of credit, including the
reasonable fees and disbursements of counsel incurred in connection with any
such investigation, litigation or other proceedings (but excluding any such
losses, liabilities, damages or expenses incurred by reason of the gross
negligence or willful misconduct of the Person to be indemnified) and (ii) not
to assert any claim against the Bank or any of its affiliates,
Credit Agreement
----------------
-49-
<PAGE>
directors, officers, employees, attorneys and agents, on any theory of
liability, for special, indirect, consequential or punitive damages arising out
of or otherwise relating to any of the transactions contemplated in any Basic
Document. It shall not be a condition to any such indemnification that the Bank
be a party to any such investigation, litigation or other proceeding.
10.04 Amendments, Etc. Except as otherwise expressly provided in
----------------
this Agreement, any provision of this Agreement may be modified or supplemented
only by an instrument in writing signed by the Company and the Bank, and any
provision of this Agreement for the benefit of the Bank may be waived by the
Bank. Any modification, supplement or waiver shall be for such period and shall
be subject to such conditions as shall be specified in the instrument effecting
the same, and any such waiver shall be effective only in the specific instance
and for the purpose for which given.
10.05 Successors and Assigns. This Agreement shall be binding upon
----------------------
and inure to the benefit of its parties and their respective successors and
permitted assigns.
10.06 Assignments and Participations.
------------------------------
(a) The Company may not assign any of its rights or obligations under
this Agreement or the Note without the prior consent of the Bank.
(b) The Bank may assign all or any part of its Loan, its Note and its
Commitment (but only with the consent of, in the case of the outstanding
Commitment, the Company, which consent shall not be unreasonably withheld),
together with, in any such case, its related rights, remedies, powers and
privileges under the Basic Documents; provided that any such assignment shall be
--------
in an amount at least equal to $5,000,000. Upon execution and delivery by the
assignee to the Company and the Bank of an instrument in writing pursuant to
which such assignee assumes the Commitment or portion of the Loan specified in
such instrument, and upon the consent of the Company to the extent required
above, the assignee shall have, to the extent of such assignment (unless
otherwise provided in such assignment with the consent of the Company), the
obligations, rights and benefits of the Bank under the Basic Documents in
respect of the Commitment and portion of the Loan assigned to it and the Bank
shall, to the extent of such assignment, be released from the Commitment so
assigned.
(c) The Bank may sell or agree to sell to one or more other Persons a
participation in all or any part of its Loan, its Note, its Commitment and its
related rights, remedies,
Credit Agreement
----------------
-50-
<PAGE>
powers and privileges under the Basic Documents, in which event each purchaser
of a participation (a "Participant") shall be entitled to the rights and
-----------
benefits of the provisions of Section 8.01(g) with respect to such participation
---------------
as if (and the Company shall be directly obligated to such Participant under
such provisions as if) such Participant were the "Bank" for purposes of Section
-------
8.01(g), but, except as otherwise provided in Section 4.04(b), shall not have
- ------- ---------------
any other rights, remedies, powers or privileges under any Basic Document (the
Participant's rights against the Bank in respect of such participation to be
those set forth in the agreements executed by the Bank in favor of the
Participant); provided that any such participation shall be in an amount at
--------
least equal to $5,000,000. All amounts payable by the Company to the Bank under
Section 5 in respect of the Loan and Commitment shall be determined as if the
- ---------
Bank had not sold or agreed to sell any participations in the Loan, Note and
Commitment, and as if the Bank were funding in the same way that it is funding
the portion of the Loan and Commitment in which no participations have been
sold. In no event shall the Bank in selling a participation agree with the
Participant to take or to refrain from taking any action under any Basic
Document except that the Bank may agree with the Participant that it will not,
without the consent of the Participant, agree to (i) increase or extend the
term, or extend the time or to waive any requirement for the reduction or
termination, of the Bank's related Commitment, (ii) extend the date fixed for
the payment of principal of or interest on the Loan or any portion of any fee
under this Agreement payable to the Participant, (iii) reduce the amount of any
such payment of principal, (iv) reduce the rate at which interest or any fee
under this Agreement in which the Bank has sold an interest is payable to the
Participant, to a level below the rate at which the Participant is entitled to
receive such interest or fee under its agreements with the Bank or (v) alter the
rights or obligations of the Company to prepay the Loan.
(d) In addition to the assignments and participations permitted under
the foregoing provisions of this Section 10.06, the Bank may assign and pledge
-------------
all or any portion of its Loan and its Note to any Federal Reserve Bank as
collateral security pursuant to Regulation A and any Operating Circular issued
by such Federal Reserve Bank. No such assignment shall release the Bank from
its obligations under the Basic Documents.
(e) The Bank may furnish any information concerning the Company or
any of its Subsidiaries in the possession of the Bank from time to time to
assignees and participants (including prospective assignees and participants),
subject, however, to the provisions of Section 10.12(b).
----------------
Credit Agreement
----------------
-51-
<PAGE>
10.07 Survival. The obligations of the Company under Sections 5.01,
-------- -------------
5.05, 5.06 and 10.03 shall survive the repayment of the Obligations and the
- ---- ---- -----
termination of the Commitment. In addition, each representation and warranty
made, or deemed to be made by a notice of any extension of credit, in or
pursuant to any Basic Document, shall survive the making or deemed making of
such representation and warranty, and the Bank shall not be deemed to have
waived, by reason of making any extension of credit, any Default which may arise
by reason of such representation or warranty proving to have been false or
misleading, notwithstanding that the Bank may have had notice or knowledge or
reason to believe that such representation or warranty was false or misleading
at the time such extension of credit was made.
10.08 Agreements Superseded. This Agreement supersedes all prior
---------------------
agreements and understandings, written or oral, among the parties with respect
to the subject matter of this Agreement.
10.09 Severability. Any provision of this Agreement or the Note that
------------
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this Agreement
or the Note, and any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction.
10.10 Captions. The table of contents and captions and section
--------
headings appearing in this Agreement are included solely for convenience of
reference and are not intended to affect the interpretation of any provision of
this Agreement.
10.11 Counterparts. This Agreement may be executed in any number of
------------
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties to this Agreement may execute this Agreement
by signing any such counterpart.
10.12 Treatment of Certain Information; Confidentiality.
-------------------------------------------------
(a) The Company acknowledges that from time to time financial
advisory, investment banking and other services may be offered or provided to
the Company or one or more of its Subsidiaries (in connection with this
Agreement or otherwise) by the Bank or by one or more subsidiaries or affiliates
of the Bank and the Company hereby authorizes the Bank to share any information
delivered to the Bank by the Company and its
Credit Agreement
----------------
-52-
<PAGE>
Subsidiaries and Affiliates pursuant to this Agreement, or in connection with
the decision of the Bank to enter into this Agreement, to any such subsidiary or
affiliate, it being understood that any such subsidiary or affiliate receiving
such information shall be bound by the provisions of clause (b) below as if it
were the Bank.
(b) The Bank agrees (on behalf of itself and each of its affiliates,
directors, officers, employees and representatives) to use reasonable
precautions to keep confidential, in accordance with customary procedures for
handling confidential information of this nature and in accordance with safe and
sound banking practices, any nonpublic information supplied to it by the Company
pursuant to this Agreement; provided that nothing in this Agreement shall limit
--------
the disclosure of any such information (i) to the extent required by any
Governmental Rule, (ii) to counsel for the Bank, (iii) to bank examiners,
auditors or accountants, (iv) in connection with any litigation to which the
Bank is a party, (v) to a subsidiary or affiliate of the Bank as provided in
clause (a) above or (vi) to any assignee or participant (or prospective assignee
or participant) so long as such assignee or participant (or prospective assignee
or participant) first agrees to be bound by the provisions of this Section
-------
10.12(b). In no event shall the Bank be obligated or required to return any
- --------
materials furnished by the Company. The obligations of the Bank under this
Section 10.12 shall supersede and replace the obligations of the Bank under any
- -------------
confidentiality letter in respect of this financing signed and delivered by the
Bank to the Company prior to the Signing Date.
10.13 GOVERNING LAW; SUBMISSION TO JURISDICTION. THIS AGREEMENT AND
-----------------------------------------
THE NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF CALIFORNIA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THE STATE OF
CALIFORNIA. THE COMPANY HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE
UNITED STATES DISTRICT COURT FOR THE CENTRAL DISTRICT OF CALIFORNIA AND OF ANY
CALIFORNIA STATE COURT SITTING IN LOS ANGELES, CALIFORNIA FOR THE PURPOSES OF
ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. THE COMPANY IRREVOCABLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN
SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM.
10.14 WAIVER OF JURY TRIAL. EACH OF THE COMPANY AND THE BANK HEREBY
--------------------
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND
ALL RIGHT TO TRIAL BY JURY
Credit Agreement
----------------
-53-
<PAGE>
IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the day and year first above written.
MERISEL, INC.
By: /s/ Timothy N. Jenson
---------------------
Title: Vice President and Treasurer
NATIONSBANK OF TEXAS, N.A.
By: /s/ Janet E. Sockwell
---------------------
Title: Asst. Vice President
Credit Agreement
----------------
-54-
<PAGE>
FIRST AMENDMENT TO CREDIT AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is entered into
as of January 31, 1994, between Merisel, Inc., a Delaware corporation (the
"Company") and NationsBank of Texas, N.A. (the "Bank").
- -------- ----
WHEREAS, the Company and the Bank are parties to that certain Credit
Agreement dated as of December 23, 1993 (the "Credit Agreement");
WHEREAS, the Company has modified the structure of the Acquisition from
that described in the Credit Agreement and has requested that the Credit
Agreement be amended to reflect such modifications; and
WHEREAS, the Bank has agreed to such amendments,
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and the Bank agree as follows:
1. Defined Terms. Capitalized terms used but not defined in this
-------------
Amendment shall have the meanings assigned to such terms in the Credit
Agreement.
2. Amendments. The Credit Agreement is hereby amended as follows:
----------
(a) Amendment to Section 1.01.
-------------------------
(i) Section 1.01 of the Credit Agreement is hereby amended by deleting
the definition of the term "Seller Note" in its entirety.
(ii) Section 1.01 of the Credit Agreement is hereby further amended by
deleting the words "the Seller Note," in the definition of the term "Acquisition
Agreements."
(iii) Section 1.01 of the Credit Agreement is hereby further amended by
adding the following definition in the proper alphabetical order:
"FAB Term Loan Agreement" shall mean the Credit Agreement dated as of
-----------------------
January 31, 1994 among Merisel FAB, Inc., the Company and the Bank.
(b) Amendment to Section 8.07.
-------------------------
(i) Section 8.07(e) is hereby amended by deleting the word "and" at the
end of such section.
(ii) Section 8.07(f) is hereby amended by being deleted in its entirety
and the following substituted for such section:
-1-
<PAGE>
"(f) Indebtedness under the Acquisition Agreements as such
agreements are in effect on the Funding Date and without giving effect
to any amendments or modifications to such agreements; and"
(iii) Section 8.07 is further amended by adding to such section the
following Section 8.07(g), which reads as follows:
"(g) Indebtedness under the FAB Term Loan Agreement."
(c) Amendment to Section 8.10. Section 8.10 is hereby amended by
-------------------------
inserting the words "and other than payments made in accordance with the terms
of the Promissory Note dated January 31, 1994 between the Company and FAB"
immediately prior to the end of the parenthetical on the last line of such
section.
3. Effect. Except as specifically amended by this Amendment, the Credit
------
Agreement shall remain in full force and effect and is hereby ratified and
confirmed.
4. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
-------------
ACCORDANCE WITH, THE LAW OF THE STATE OF CALIFORNIA APPLICABLE TO CONTRACTS MADE
AND PERFORMED IN THE STATE OF CALIFORNIA.
5. Counterparts. This Amendment may be executed in any number of
------------
counterparts all of which when taken together shall constitute one and the same
instrument and any of the parties to this Amendment may execute this Amendment
by signing any such counterpart.
-2-
<PAGE>
IN WITNESS WHEREOF, the parties to this Amendment have caused this
Amendment to be duly executed as of the day and year first above written.
MERISEL, INC.
By: /s/ Timothy N. Jenson
---------------------
Title: Vice President
--------------
NATIONSBANK OF TEXAS, N.A.
By: /s/ Janet E. Sockwell
---------------------
Title: Assistant Vice President
------------------------
ACKNOWLEDGED, AGREED AND
CONSENTED TO:
MERISEL FAB, INC.
By: /s/ Timothy N. Jenson
---------------------
Title: Vice President and Treasurer
----------------------------
-3-
<PAGE>
************************************************************
MERISEL FAB, INC.
MERISEL, INC.
_____________________________
CREDIT AGREEMENT
Dated as of January 31, 1994
NATIONSBANK OF TEXAS, N.A.
************************************************************
<PAGE>
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to which it is attached
but is inserted for convenience of reference only.
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
Section 1. Definitions and Accounting Matters.................. 1
1.01 Certain Defined Terms............................... 1
1.02 Accounting Terms and Determinations................. 9
1.03 Interpretation...................................... 9
Section 2. Commitment, Loan, Note and Prepayments.............. 9
2.01 The Loan............................................ 9
2.02 Borrowing of the Loan............................... 10
2.03 Note................................................ 10
2.04 Optional Prepayments................................ 10
2.05 Mandatory Prepayments............................... 10
2.06 Advising, Structuring and Facility Fee.............. 10
Section 3. Payments of Principal and Interest.................. 10
3.01 Repayment of Loans.................................. 10
3.02 Interest............................................ 11
Section 4. Payments; Computations; Etc. ....................... 11
4.01 Payments............................................ 11
4.02 Computations........................................ 12
4.03 Offsets, Etc. ...................................... 12
4.04 Taxes............................................... 12
Section 5. The Guarantee....................................... 12
5.01 Guarantee........................................... 12
5.02 Acknowledgements, Waivers and Consents.............. 13
5.03 Understanding With Respect to Waivers and
Consents............................................ 19
5.04 Subrogation......................................... 19
5.05 Reinstatement....................................... 20
5.06 Remedies............................................ 20
5.07 Separate Action..................................... 20
5.08 Subordination of Indebtedness of the Company........ 20
5.09 Revocation.......................................... 21
Section 6. Conditions Precedent................................ 21
6.01 Extension of Credit................................. 21
</TABLE>
- i -
<PAGE>
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
Section 7. Representations and Warranties...................... 23
7.01 Corporate Existence................................. 23
7.02 Financial Condition................................. 24
7.03 Litigation.......................................... 24
7.04 No Breach........................................... 25
7.05 Action.............................................. 25
7.06 Approvals........................................... 25
7.07 Margin Stock........................................ 25
7.08 ERISA............................................... 26
7.09 Taxes............................................... 26
7.10 Certain Regulations................................. 26
7.11 Environmental Matters............................... 26
7.12 Title to Assets..................................... 27
7.13 True and Complete Disclosure........................ 27
Section 8. Covenants........................................... 28
8.02 Use of Proceeds..................................... 28
8.03 The Company Revolving Credit Agreement.............. 28
Section 9. Events of Default................................... 29
Section 10. Miscellaneous....................................... 32
10.01 Waiver.............................................. 32
10.02 Notices............................................. 33
10.03 Expenses, Etc. ..................................... 33
10.04 Amendments, Etc. ................................... 34
10.05 Successors and Assigns.............................. 34
10.06 Assignments......................................... 34
10.07 Survival............................................ 35
10.08 Agreements Superseded............................... 35
10.09 Severability........................................ 35
10.10 Captions............................................ 35
10.11 Counterparts........................................ 35
10.12 Treatment of Certain Information;
Confidentiality..................................... 36
10.13 GOVERNING LAW; SUBMISSION TO JURISDICTION........... 36
10.14 WAIVER OF JURY TRIAL................................ 37
</TABLE>
EXHIBIT A - Form of Note
EXHIBIT B - Form of Opinion of Counsel to
the Obligors
- ii -
<PAGE>
This CREDIT AGREEMENT (this "Agreement") dated as of January 31, 1994,
---------
is made among Merisel FAB, Inc., a Delaware corporation (the "Company"),
-------
Merisel, Inc., a Delaware corporation (the "Parent") and NationsBank of Texas,
------
N.A. (the "Bank").
----
The Company has requested the Bank to extend credit to the Company in
an aggregate principal amount not exceeding $16,000,000 to fund a portion of the
purchase price of the Acquisition. To induce the Bank to extend such credit,
the Company, the Bank and the Parent propose to enter into this Agreement
pursuant to which the Bank agrees to make a loan to the Company and the Parent
agrees to guarantee the Obligations (as defined in this Agreement).
Accordingly, the parties hereto agree as follows:
Section 1. Definitions and Accounting Matters.
----------------------------------
1.01 Certain Defined Terms. As used in this Agreement, the
---------------------
following terms shall have the following meanings:
"Acquisition" shall have the meaning assigned to that term in the
-----------
Parent Credit Agreement.
"Acquisition Agreements" shall have the meaning assigned to that
----------------------
term in the Parent Credit Agreement.
"Affiliate" shall mean any Person that directly or indirectly
---------
controls, or is under common control with, or is controlled by, the Company.
As used in this definition, "control" (including, with its correlative meanings,
-------
"controlled by" and "under common control with") shall mean the possession,
------------- -------------------------
directly or indirectly, of power to direct or cause the direction of the
management or policies (whether through ownership of securities or partnership
or other ownership interests, by contract or otherwise), provided that, in any
event, any Person that owns directly or indirectly securities having 5% or more
of the voting power for the election of directors or other governing body of a
corporation or 5% or more of the partnership or other ownership interests of any
other Person (other than as a limited partner of such other Person) will be
deemed to control such corporation or other Person. Notwithstanding the
foregoing, the
Credit Agreement
________________
- 1 -
<PAGE>
definition of "Affiliate" shall not encompass (a) any individual solely by
reason of his or her being a director, officer or employee of the Company or any
of its Subsidiaries, (b) any of the Subsidiaries of the Parent and (c) the Bank.
"Americas Revolving Credit Agreement" shall mean the Revolving Credit
-----------------------------------
Agreement dated as of December 23, 1993 by and among Merisel Americas, Inc.,
Merisel Europe, Inc., the Parent, the Lenders who are signatories to that
agreement, Citibank, N.A. and Citicorp U.S.A., Inc.
"Applicable Margin" shall mean 2.0% per annum.
-----------------
"Asset Purchase Agreement" shall mean the Asset Purchase Agreement
------------------------
dated as of January 31, 1994 by and among ComputerLand, the Company and the
Parent.
"Bank" shall have the meaning assigned to that term in the
----
introductory paragraphs of this Agreement.
"Bankruptcy Code" shall mean the Federal Bankruptcy Code of 1978.
---------------
"Base Rate" shall mean, for any day, a rate per annum equal to the
---------
higher of (a) the Federal Funds Rate for such day plus 1/2 of 1% and (b) the
Prime Rate for such day. Each interest rate that this Agreement provides is to
be based upon the Base Rate shall change upon any change in the Base Rate,
effective as of the opening of business on the day of such change in the Base
Rate.
"Business Day" shall mean any day on which commercial banks are not
------------
authorized or required to close in New York City, New York or Los Angeles,
California or Dallas, Texas.
"Capital Lease Obligations" shall mean, for any Person, all
-------------------------
obligations of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) Property to the extent such
obligations are required to be classified and accounted for as a capital lease
on a balance sheet of such Person under GAAP (including Statement of Financial
Accounting Standards No. 13 of the Financial Accounting Standards Board), and,
for purposes of this Agreement, the amount of such obligations shall be the
capitalized amount of such obligation, determined in accordance with GAAP
(including such Statement No. 13).
Credit Agreement
________________
- 2 -
<PAGE>
"Closing Date" shall mean the date upon which the extension of credit
------------
under this Agreement is made, which date must occur no later than February 14,
1994.
"Code" shall mean the Internal Revenue Code of 1986.
----
"Company" shall have the meaning assigned to that term in the
-------
introductory paragraphs of this Agreement.
"Company Revolving Credit Agreement" shall mean the Revolving Credit
----------------------------------
Agreement dated as of December 23, 1993 among the Company, the Parent and the
Bank.
"ComputerLand" shall mean ComputerLand Corporation, a Delaware
------------
corporation.
"Default" shall mean an Event of Default or an event that with notice
-------
or lapse of time or both would become an Event of Default.
"Dollars" and "$" shall mean lawful money of the United States of
------- -
America.
"Environmental Laws" shall mean any and all present and future
------------------
Governmental Rules relating to the regulation or protection of human or animal
health or safety or of the environment or to emissions, discharges, releases or
threatened releases of pollutants, contaminants, chemicals or toxic or hazardous
substances or wastes (including Hazardous Materials) into the indoor or outdoor
environment, including ambient air, soil, surface water, ground water, wetlands,
land or subsurface strata, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, chemicals or toxic or hazardous substances or wastes.
The term "Environmental Law" shall include the terms and conditions of any
Governmental Approval issued under any Environmental Law or with respect to any
Hazardous Material.
"ERISA" shall mean the Employee Retirement Income Security Act of
-----
1974.
"ERISA Affiliate" shall mean any corporation or trade or business that
---------------
is a member of any group of organizations (i) described in Section 414(b) or (c)
of the Code of which the Company is a member and (ii) solely for purposes of
potential liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of
the Code and the lien created under Section 302(f) of ERISA and Section 412(n)
of the Code, described
Credit Agreement
________________
- 3 -
<PAGE>
in Section 414(m) or (o) of the Code of which the Company is a member.
"Event of Default" shall have the meaning assigned to that term in
----------------
Section 9.
- ---------
"FAB Guarantee" shall mean the Guarantee Agreement executed by the
-------------
Company in connection with the Parent Credit Agreement.
"Federal Funds Rate" shall mean, for any day, the rate per annum
------------------
(rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day; provided that (a) if the day for which such rate is to
--------
be determined is not a Business Day, the Federal Funds Rate for such day shall
be such rate on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day and (b) if such rate is not so
published for any Business Day, the Federal Funds Rate for such Business Day
shall be the average rate charged to the Bank on such Business Day on such
transactions as determined by the Bank.
"GAAP" shall have the meaning assigned to that term in the Company
----
Revolving Credit Agreement.
"Governmental Approvals" shall mean any authorization, consent,
----------------------
approval, license, lease, ruling, permit, waiver, exemption, filing,
registration or notice by or with any Governmental Person.
"Governmental Person" shall mean any national (Federal or foreign),
-------------------
state or local government, any political subdivision or any governmental, quasi-
governmental, judicial, public or statutory instrumentality, authority, agency,
body or entity, including the PBGC, Federal Deposit Insurance Corporation, the
Comptroller of the Currency, the Board of Governors of the Federal Reserve
System, any central bank or any comparable authority.
"Governmental Rules" shall mean any law, rule, regulation, ordinance,
------------------
order, code, judgment, decree, directive, guideline, policy, or any similar form
of decision of, or any interpretation or administration of any of the foregoing
by, any Governmental Person.
Credit Agreement
________________
- 4 -
<PAGE>
"Guarantee" shall mean a guarantee, an endorsement, a contingent
---------
agreement to purchase or to furnish funds for the payment or maintenance of, or
otherwise to be or to become contingently liable under or with respect to, the
Indebtedness, other obligations, net worth, working capital or earnings of any
Person, or a guarantee of the payment of dividends or other distributions upon
the stock or equity interests of any Person, or an agreement to purchase, sell
or lease (as lessee or lessor) Property, products, materials, supplies or
services primarily for the purpose of enabling a debtor to make payment of such
debtor's obligations or an agreement to assure a creditor against loss,
including causing a bank or other financial institution to issue a letter of
credit or other similar instrument for the benefit of another Person, but
excluding endorsements for collection or deposit in the ordinary course of
business. The terms "Guarantee" and "Guaranteed" used as verbs shall have
--------- ----------
correlative meanings.
"Hazardous Material" shall mean, collectively, (a) any petroleum or
------------------
petroleum products, flammable explosives, radioactive materials, asbestos in any
form that is or could become friable, urea formaldehyde foam insulation, and
transformers or other equipment that contain dielectric fluid containing
polychlorinated biphenyls (PCB's), (b) any chemicals or other materials or
substances which are now or hereafter become defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous materials,"
"extremely hazardous wastes," "restricted hazardous wastes," "toxic substances,"
"toxic pollutants," "contaminants," "infectious wastes," "pollutants" or words
of similar import under any Environmental Law and (c) any other chemical or
other material or substance, exposure to which or use of which is now or
hereafter prohibited, limited or regulated under any Environmental Law.
"Indebtedness" shall mean, for any Person (without duplication): (a)
------------
obligations created, issued or incurred by such Person for borrowed money
(whether by loan, the issuance and sale of debt securities or the sale of
Property (other than inventory and other goods held for sale or lease in the
ordinary course of business) to another Person subject to an understanding or
agreement, contingent or otherwise, to repurchase such Property from such
Person); (b) obligations of such Person to pay the deferred purchase or
acquisition price of Property or services, other than trade accounts payable
(other than for borrowed money) arising, and accrued expenses incurred, in the
ordinary course of business; (c) Indebtedness of others secured by a Lien on the
Property of such Person, whether or not the respective indebtedness so secured
has been assumed by such
Credit Agreement
________________
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<PAGE>
Person; (d) obligations of such Person in respect of letters of credit or
similar instruments issued or accepted by banks and other financial institutions
for the account of such Person; (e) Capital Lease Obligations of such Person;
and (f) Indebtedness of others Guaranteed by such Person.
"Interest Rate Protection Agreement" shall mean, for any Person, an
----------------------------------
interest rate swap, cap or collar agreement or similar arrangement between such
Person and one or more financial institutions providing for the transfer or
mitigation of interest risks either generally or under specific contingencies.
For purposes of this Agreement, the "credit exposure" at any time of any Person
under an Interest Rate Protection Agreement to which such Person is a party
shall be determined at such time in accordance with the standard methods of
calculating credit exposure under similar arrangements as prescribed from time
to time by the Bank, taking into account potential interest rate movements and
the respective termination provisions and notional principal amount and term of
such Interest Rate Protection Agreement.
"Lien" shall mean, with respect to any Property, any mortgage, lien,
----
pledge, charge, security interest or encumbrance of any kind in respect of such
Property or any agreement to give, or notice of, any of the foregoing. For
purposes of this Agreement and the Note, a Person shall be deemed to own subject
to a Lien any Property that it has acquired or holds subject to the interest of
a vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement (other than an operating lease) relating to such
Property.
"Loan" shall mean the loan provided for by Section 2.01(a).
---- ---------------
"Margin Stock" shall mean "margin stock" within the meaning of
------------
Regulations U and X.
"Material Adverse Effect" shall mean a material adverse effect on (a)
-----------------------
the Property, business, operations, financial condition, liabilities or
capitalization of the Company and its Subsidiaries taken as a whole, (b) the
ability of the Company to perform its obligations under this Agreement and the
Note, (c) the validity or enforceability of this Agreement and the Note, (d) the
rights, remedies, powers and privileges of the Bank under this Agreement and the
Note or (e) the timely payment of the Obligations.
"Material Subsidiary" shall mean, at any time, a Subsidiary whose
-------------------
assets at such time exceed five percent (5%) of
Credit Agreement
________________
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<PAGE>
the assets of, as to the Parent, the Parent and its Subsidiaries and, as to the
Company, the Company and its Subsidiaries, each on a consolidated basis in
accordance with GAAP.
"Maturity Date" shall mean the 15th day subsequent to the Closing
-------------
Date.
"Multiemployer Plan" shall mean a multiemployer plan defined as such
------------------
in Section 3(37) of ERISA to which contributions have been made by the Company
or any ERISA Affiliate and which is covered by Title IV of ERISA.
"Note" shall mean the promissory note provided for by Section 2.03.
---- ------------
"Obligations" shall mean the principal of the Loan, interest, fees and
-----------
any other amount payable by the Company under this Agreement or the Note.
"Obligors" shall mean, collectively, the Company and the Parent.
--------
"Parent" shall have the meaning assigned to that term in the
------
introductory paragraphs of this Agreement.
"Parent Credit Agreement" shall mean the Credit Agreement dated as of
-----------------------
December 23, 1993 between the Parent and the Bank.
"Parent Senior Note Guaranty" shall mean the General Continuing
---------------------------
Guarantee dated as of December 23, 1993 issued by the Parent in connection with
the Senior Note Purchase Agreement.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
----
"Person" shall mean any individual, corporation, company, voluntary
------
association, partnership, joint venture, trust, unincorporated organization or
Governmental Person.
"Plan" shall mean an employee benefit or other plan established or
----
maintained by the Company or any ERISA Affiliate and that is covered by Title IV
of ERISA, other than a Multiemployer Plan.
"Post-Default Rate" shall mean, in respect of any Obligation that is
-----------------
not paid when due (whether at stated maturity, by acceleration, by optional or
mandatory prepayment or otherwise), a rate per annum during the period from and
including
Credit Agreement
________________
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<PAGE>
the due date to but excluding the date on which such amount is paid in full
equal to 2.0% plus the Base Rate as in effect from time to time plus the
----
Applicable Margin.
"Prime Rate" shall mean the rate of interest from time to time
----------
announced by the Bank at the Principal Office as its prime rate. Such announced
rate is not necessarily the lowest rate offered by the Bank, and any other
extension of credit by the Bank may be at rates above, below or at such
announced rate.
"Principal Office" shall mean the principal office of the Bank located
----------------
on the Signing Date at NationsBank of Texas, N.A., 901 Main Street, Dallas,
Texas 75202.
"Property" shall mean any right or interest in or to property of any
--------
kind whatsoever, whether real, personal or mixed and whether tangible or
intangible.
"Regulations A, U and X" shall mean, respectively, Regulations A, U
----------------------
and X of the Board of Governors of the Federal Reserve System.
"Release" shall mean any release, spill, emission, leaking, pumping,
-------
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the indoor or outdoor environment, including the movement of Hazardous Materials
through ambient air, soil, surface water, ground water, wetlands, land or
subsurface strata.
"Relevant Parties" shall have the meaning assigned to such term in
----------------
Section 9(b).
- ------------
"Senior Note Purchase Agreement" shall mean the Amended and Restated
------------------------------
Senior Note Purchase Agreement dated as of December 23, 1993 between Americas
and the purchasers which are signatories thereto.
"Signing Date" shall mean the date on which each of the Obligors and
------------
the Bank have executed and delivered this Agreement.
"Subsidiary" shall mean, for any Person, any corporation, partnership
----------
or other entity of which at least a majority of the securities or other
ownership interests having by their terms ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions
of such corporation, partnership or other entity (irrespective of whether or not
at the time securities or other ownership interests of any other class or
classes of such corporation,
Credit Agreement
________________
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<PAGE>
partnership or other entity shall have or might have voting power by reason of
the happening of any contingency) is at the time directly or indirectly owned or
controlled by such Person or one or more Subsidiaries of such Person or by such
Person and one or more Subsidiaries of such Person. "Wholly Owned Subsidiary"
-----------------------
shall mean any such corporation, partnership or other entity of which all of the
equity securities or other ownership interests (other than, in the case of a
corporation, directors' qualifying shares) are so owned or controlled.
1.02 Accounting Terms and Determinations. Except as otherwise
-----------------------------------
expressly provided in this Agreement, all accounting terms used in this
Agreement shall be interpreted, and all financial statements and certificates
and reports as to financial matters required to be delivered to the Bank under
this Agreement shall be prepared, in accordance with generally accepted
accounting principles applied on a basis consistent with those used in the
preparation of the audited financial statements as at December 31, 1992 referred
to in Section 7.02.
------------
1.03 Interpretation. In this Agreement, unless otherwise
--------------
indicated, the singular includes the plural and plural the singular; words
importing any gender include the other gender; references to statutes or
regulations are to be construed as including all statutory or regulatory
provisions consolidating, amending or replacing the statute or regulation
referred to; references to "writing" include printing, typing, lithography and
other means of reproducing words in a tangible visible form; the words
"including," "includes" and "include" shall be deemed to be followed by the
words "without limitation"; references to articles, sections (or subdivisions of
sections), exhibits, annexes or schedules are to this Agreement; references to
agreements and other contractual instruments shall be deemed to include all
subsequent amendments, extensions and other modifications to such instruments
(without, however, limiting any prohibition on any such amendments, extensions
and other modifications by the terms of this Agreement); and references to
Persons include their respective permitted successors and assigns and, in the
case of Governmental Persons, Persons succeeding to their respective functions
and capacities.
Section 2. Commitment, Loan, Note and Prepayments.
--------------------------------------
2.01 The Loan. The Bank agrees, on the terms and conditions of
--------
this Agreement, to make a term loan to the Company in Dollars on the Closing
Date (which shall be no later than February 14, 1994) in an aggregate principal
amount up to but not exceeding $16,000,000.
Credit Agreement
________________
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<PAGE>
2.02 Borrowing of the Loan. The Company shall give the Bank notice
---------------------
of the borrowing of the Loan no later than 12:00 noon Dallas time on the date of
borrowing, which notice shall specify such date (which shall be a Business Day)
and the amount to be borrowed. Not later than the close of business of the
Bank, Dallas time, on the date specified for the borrowing in such notice, the
Bank shall, subject to the terms and conditions of this Agreement, make the
amount of the Loan available to the Company by depositing the same, in
immediately available funds, in an account of the Company maintained with a
depositary institution located in Los Angeles, California, New York, New York or
Dallas, Texas and by written notice to the Bank designated by the Company.
2.03 Note. The Loan made by the Bank shall be evidenced by a
----
single promissory note of the Company in substantially the form of Exhibit A,
dated the Closing Date, payable to the Bank in a principal amount equal to the
amount of the Loan.
2.04 Optional Prepayments. The Company shall have the right to
--------------------
prepay the Loan at any time and from time to time, provided that the Company
--------
shall give the Bank notice, including the amount, of such prepayment at least
one Business Day prior to the date of prepayment specified in such notice (and,
upon the date specified in any such notice of prepayment, the amount to be
prepaid shall become due and payable under this Agreement). Each partial
prepayment of the Loan shall be in an aggregate amount at least equal to
$500,000 or any larger multiple of $100,000.
2.05 Mandatory Prepayments. On each Business Day during the
---------------------
period from but excluding the Closing Date to but excluding the Maturity Date,
the Company shall prepay the Loan in the amount equal to the higher of (a)
$500,000 and (b) the total amount of collections of accounts receivable (rounded
down to the nearest multiple of $100,000) received by the Company on the
immediately preceding Business Day.
2.06 Advising, Structuring and Facility Fee. On the Closing Date,
--------------------------------------
the Company shall pay to the Bank a nonrefundable fee equal to $50,000.
Section 3. Payments of Principal and Interest.
----------------------------------
3.01 Repayment of Loans. The Company hereby promises to pay to
------------------
the Bank the entire outstanding principal amount of the Loan, and the Loan shall
mature on the Maturity Date.
Credit Agreement
________________
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<PAGE>
3.02 Interest. The Company hereby promises to pay to the Bank
--------
interest on the unpaid principal amount of the Loan for the period from and
including the date of the Loan to but excluding the date the Loan shall be paid
in full, at the Base Rate plus the Applicable Margin. Notwithstanding the
----
foregoing, the Company hereby promises to pay to the Bank interest at the
applicable Post-Default Rate on any Obligation which shall not be paid in full
when due (whether at stated maturity, by acceleration, by mandatory prepayment
or otherwise) for the period from and including the due date of any such amount
to but excluding the date the same is paid in full. Accrued interest on the
Loan shall be payable upon the earlier to occur of (i) the Maturity Date and
(ii) the payment of the Loan in full, except that interest payable at the Post-
Default Rate shall be payable from time to time on demand. Promptly after the
determination of any interest rate provided for in this Agreement or any change
in any such interest rate, the Bank shall give notice of the same to the
Company.
Section 4. Payments; Computations; Etc.
----------------------------
4.01 Payments.
--------
(a) Except to the extent otherwise provided in this Agreement,
all payments of any Obligations shall be made in Dollars, in immediately
available funds, without deduction, set-off or counterclaim, to the Bank at
account number 0180019828 maintained by the Bank at the Principal Office (or
such other account as the Bank shall have designated in writing to the Company),
not later than 12:00 noon Dallas time on the date on which such payment shall
become due (each such payment made after such time on such due date to be deemed
to have been made on the next succeeding Business Day).
(b) The Company shall, at the time of making each payment under
this Agreement of any Obligation, specify to the Bank to which Obligation such
payment is to be applied (and in the event that the Company fails to so specify,
or if an Event of Default has occurred and is continuing, the Bank may apply
such payment in such manner as it may determine to be appropriate).
(c) If the due date of any payment of any Obligation would
otherwise fall on a day that is not a Business Day, such date shall be extended
to the next succeeding Business Day, and interest shall be payable for any
principal so extended for the period of such extension.
Credit Agreement
________________
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<PAGE>
4.02 Computations. Interest on the Loan shall be computed on the
------------
basis of a year of 360 days and the actual number of days elapsed (including the
first day but excluding the last day) occurring in the period for which
payable).
4.03 Offsets, Etc.
-------------
Each Obligor agrees that, in addition to (and without limitation of)
any right of set-off, banker's lien or counterclaim the Bank may otherwise have,
the Bank shall be entitled, at its option, to offset balances held by it for the
account of such Obligor at any of its offices, in Dollars or in any other
currency, against any Obligations to the Bank that are not paid when due
(regardless of whether such balances are then due to such Obligor). The Bank
shall promptly notify such Obligor of any offset effected by it, provided that
--------
the Bank's failure to give such notice shall not affect the validity of such
offset.
4.04 Taxes.
-----
(a) The Company agrees to pay to the Bank such additional amounts
as are necessary in order that the net payment of any Obligation due to the Bank
after deduction for or withholding in respect of any Tax imposed with respect to
such payment (or for payment of such Tax by the Bank), will not be less than the
amount of the Obligation then due and payable.
(b) For the purposes of this Section 4.04, "Taxes" shall mean any
------------ -----
present or future tax, assessment or other charge or levy imposed by or on
behalf of any Governmental Person (other than taxes imposed on or measured by
the overall net income of the Bank or of its Applicable Lending Office by the
jurisdiction in which the Bank has its principal office or any Applicable
Lending Office).
(c) Within 30 days after paying any amount to the Bank from which
it is required by law to make any deduction or withholding, and within 30 days
after it is required by law to remit such deduction or withholding to any
relevant taxing or other authority, the Company shall deliver to the Bank
evidence satisfactory to the Bank of such deduction, withholding or payment (as
the case may be).
Section 5. The Guarantee
-------------
5.01 Guarantee. The Parent hereby guarantees to the Bank the
---------
timely payment in full when due (whether at stated
Credit Agreement
________________
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<PAGE>
maturity, by acceleration or otherwise) and performance of the Obligations in
each case strictly in accordance with their terms. The Parent hereby further
agrees that if the Company shall fail to pay in full when due (whether at stated
maturity, by acceleration or otherwise), or to perform, all or any part of the
Obligations, the Parent will immediately pay or perform the same, without any
demand or notice whatsoever, and that in the case of any extension of time of
payment or renewal of all or any part of the Obligations, the same will be
timely paid in full when due (whether at extended maturity, by acceleration or
otherwise) in accordance with the terms of such extension or renewal. The
obligations of the Parent under this Section 5 are irrevocable and unconditional
---------
in nature and are made with respect to any Obligations now existing or in the
future arising. The Parent's liability under this Section 5 shall continue
---------
until full satisfaction of all Obligations. The obligations of the Parent under
this Section 5 constitute a guarantee of due and punctual payment and
---------
performance and is not merely a guarantee of collection.
5.02 Acknowledgements, Waivers and Consents. The Parent
--------------------------------------
acknowledges that the obligations undertaken by it under this Section 5 involve
---------
the guarantee of obligations of Persons other than the Parent and that such
obligations of the Parent are absolute, irrevocable and unconditional under any
and all circumstances. In full recognition and in furtherance of the foregoing,
the Parent agrees that:
(a) Without affecting the enforceability or effectiveness of this
Section 5 in accordance with its terms and without affecting, limiting,
- ---------
reducing, discharging or terminating the liability of the Parent, or the rights,
remedies, powers and privileges of the Bank under this Section 5, the Bank may,
---------
at any time and from time to time and without notice or demand of any kind or
nature whatsoever:
(i) amend, supplement, modify, extend, renew, waive, accelerate or
otherwise change the time for payment or performance of, or the terms of, all or
any part of the Obligations (including any increase or decrease in the rate or
rates of interest on all or any part of the Obligations);
(ii) amend, supplement, modify, extend, renew, waive or otherwise
change, or enter into or give, any Basic Document or any agreement, security
document, guarantee, approval, consent or other instrument with respect to all
or any part of the Obligations, any Basic Document or any such other instrument
or any term or provision of the foregoing;
Credit Agreement
________________
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<PAGE>
(iii) accept or enter into new or additional agreements, security
documents, guarantees (including letters of credit) or other instruments in
addition to, in exchange for or relative to any Basic Document, all or any part
of the Obligations or any collateral now or in the future serving as security
for the Obligations;
(iv) accept or receive (including from any other guarantor) partial
payments or performance on the Obligations (whether as a result of the exercise
of any right, remedy, power or privilege or otherwise);
(v) accept, receive and hold any additional collateral for all or any
part of the Obligations (including from any other guarantor);
(vi) release, reconvey, terminate, waive, abandon, allow to lapse or
expire, fail to perfect, subordinate, exchange, substitute, transfer, foreclose
upon or enforce any collateral, security documents or guarantees (including
letters of credit or the obligations of any other guarantor) for or with respect
to all or any part of the Obligations;
(vii) apply any collateral or the proceeds of any collateral or
guarantee (including any letter of credit or the obligations of any other
guarantor) to all or any part of the Obligations in such manner and to such
extent as the Bank may in its discretion determine;
(viii) release any Person (including any other guarantor) from any
personal liability with respect to all or any part of the Obligations;
(ix) settle, compromise, release, liquidate or enforce upon such
terms and in such manner as the Bank may determine or as applicable law may
dictate all or any part of the Obligations or any collateral on or guarantee of
(including any letter of credit issued with respect to) all or any part of the
Obligations (including with any other guarantor);
(x) consent to the merger or consolidation of, the sale of
substantial assets by, or other restructuring or termination of the corporate
existence of the Company or any other Person (including any other guarantor);
(xi) proceed against the Company, the Parent or any other guarantor
of (including any issuer of any letter of credit issued with respect to) all or
any part of the Obligations or any collateral provided by any Person and
exercise the rights,
Credit Agreement
________________
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<PAGE>
remedies, powers and privileges of the Bank under this Agreement and the Note or
otherwise in such order and such manner as the Bank may, in its sole discretion,
determine, without any necessity to proceed upon or against or exhaust any
collateral, right, remedy, power or privilege before proceeding to call upon or
otherwise enforce the obligations of the Parent under this Section 5 as to the
---------
Parent;
(xii) foreclose upon any deed of trust, mortgage or other instrument
creating or granting liens on any interest in real property by judicial or
nonjudicial sale or by deed in lieu of foreclosure, bid any amount or make no
bid in any foreclosure sale or make any other election of remedies with respect
to such liens or exercise any right of set-off;
(xiii) obtain the appointment of a receiver with respect to any
collateral for all or any part of the Obligations and apply the proceeds of such
receivership as the Bank may in its discretion determine (it being agreed that
nothing in this clause (xiii) shall be deemed to make the Bank a party in
possession in contemplation of law, except at its option);
(xiv) enter into such other transactions or business dealings with
any other guarantor, the Company, any Subsidiary or Affiliate of the Company or
any other guarantor of all or any part of the Obligations as the Bank may
desire; and
(xv) do all or any combination of the actions set forth in this
Section 5.02(a).
- ---------------
(b) The enforceability and effectiveness of this Section 5 and
---------
the liability of the Parent, and the rights, remedies, powers and privileges of
the Bank, under this Section 5 shall not be affected, limited, reduced,
---------
discharged or terminated, and the Parent hereby expressly waives to the fullest
extent permitted by law any defense now or in the future arising, by reason of:
(i) the illegality, invalidity or unenforceability of all or any part
of the Obligations, any Basic Document or any agreement, security document,
guarantee or other instrument related to all or any part of the Obligations;
(ii) any disability or other defense with respect to all of any part
of the Obligations of the Company, any other guarantor or any other guarantor of
all or any part of the Obligations (including any issuer of any letters of
credit), including the effect of any statute of limitations that may bar
Credit Agreement
________________
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<PAGE>
the enforcement of all or any part of the Obligations or the obligations of any
such other guarantor;
(iii) the illegality, invalidity or unenforceability of any security
or guarantee (including any letter of credit) for all or any part of the
Obligations or the lack of perfection or continuing perfection or failure of the
priority of any lien on any collateral for all or any part of the Obligations;
(iv) the cessation, for any cause whatsoever, of the liability of the
Company or any other guarantor of all or any part of the Obligations (other
than, subject to Section 5.05, by reason of the full payment and performance
------------
of all Obligations);
(v) any failure of the Bank to marshal assets in favor of the Company
or any other Person (including any other guarantor), to exhaust any collateral
for all or any part of the Obligations, to pursue or exhaust any right, remedy,
power or privilege it may have against the Company or any other guarantor of all
or any part of the Obligations (including any issuer of any letter of credit) or
any other Person or to take any action whatsoever to mitigate or reduce such or
any other guarantor's liability under this Section 5, the Bank being under no
---------
obligation to take any such action notwithstanding the fact that all or any part
of the Obligations may be due and payable and that the Company may be in default
of its obligations under any Basic Document;
(vi) any failure of the Bank to give notice of sale or other
disposition of any collateral (including any notice of any judicial or
nonjudicial foreclosure or sale of any interest in real property serving as
collateral for all or any part of the Obligations) for all or any part of the
Obligations to the Company, the Parent or any other Person or any defect in, or
any failure by the Parent or any other Person to receive, any notice that may be
given in connection with any sale or disposition of any collateral;
(vii) any failure of the Bank to comply with applicable laws in
connection with the sale or other disposition of any collateral for all or any
part of the Obligations;
(viii) any judicial or nonjudicial foreclosure or sale of, or other
election of remedies with respect to, any interest in real property or other
collateral serving as security for all or any part of the Obligations, even
though such foreclosure, sale or election of remedies may impair the
Credit Agreement
________________
- 16 -
<PAGE>
subrogation rights of the Parent or may preclude the Parent from obtaining
reimbursement, contribution, indemnification or other recovery from any other
guarantor, the Company, any other guarantor or any other Person and even though
the Company may not, as a result of such foreclosure, sale or election of
remedies, be liable for any deficiency;
(ix) any benefits the Company, any Parent or any other guarantor may
otherwise derive from Section 580a, 580b, 580d or 726 of the California Code of
Civil Procedure or any comparable provisions of the laws of any other
jurisdiction;
(x) any act or omission of the Bank or any other Person that directly
or indirectly results in or aids the discharge or release of the Company or any
other guarantor of all or any part of the Obligations or any security or
guarantee (including any letter of credit) for all or any part of the
Obligations by operation of law or otherwise;
(xi) any law which provides that the obligation of a surety or
guarantor must neither be larger in amount nor in other respects more burdensome
than that of the principal or which reduces a surety's or guarantor's obligation
in proportion to the principal obligation;
(xii) the possibility that the obligations of the Company to the Bank
may at any time and from time to time exceed the aggregate liability of the
Parent under this Section 5;
---------
(xiii) any counterclaim, set-off or other claim which the Company or
any other guarantor has or alleges to have with respect to all or any part of
the Obligations;
(xiv) any failure of the Bank to file or enforce a claim in any
bankruptcy or other proceeding with respect to any Person;
(xv) the election by the Bank, in any bankruptcy proceeding of any
Person, of the application or nonapplication of Section 1111(b)(2) of the
Bankruptcy Code;
(xvi) any extension of credit or the grant of any Lien under Section
364 of the Bankruptcy Code;
(xvii) any use of cash collateral under Section 363 of the Bankruptcy
Code;
Credit Agreement
________________
- 17 -
<PAGE>
(xviii) any agreement or stipulation with respect to the provision of
adequate protection in any bankruptcy proceeding of any Person;
(xix) the avoidance of any Lien in favor of the Bank for any reason;
(xx) any bankruptcy, insolvency, reorganization, arrangement,
readjustment of debt, liquidation or dissolution proceeding commenced by or
against any Person, including any discharge of, or bar or stay against
collecting, all or any part of the Obligations (or any interest on all or any
part of the Obligations) in or as a result of any such proceeding;
(xxi) any action taken by the Bank that is authorized by this Section
-------
5.02 or otherwise in this Section 5 or by any other provision of any Basic
- ---- ---------
Document or any omission to take any such action; or
(xxii) any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a surety or guarantor,
including by reason of Sections 2809, 2810, 2819, 2839, 2845, 2850, 2899, 3275
and 3433 of the California Civil Code, and any future judicial decisions or
legislation or of any comparable provisions of the laws of any other
jurisdiction.
(c) The Parent expressly waives, for the benefit of the Bank, all
set-offs and counterclaims and all presentments, demands for payment or
performance, notices of nonpayment or nonperformance, protests, notices of
protest, notices of dishonor and all other notices or demands of any kind or
nature whatsoever with respect to the Obligations, and all notices of acceptance
of the obligations of the Parent under this Section 5 or of the existence,
---------
creation, incurring or assumption of new or additional Obligations. The Parent
further expressly waives the benefit of any and all statutes of limitation and
any and all laws providing for the exemption of property from execution or for
valuation and appraisal upon foreclosure, to the fullest extent permitted by
applicable law.
(d) The Parent represents and warrants to the Bank that it has
established adequate means of obtaining financial and other information
pertaining to the business, operations and condition (financial and otherwise)
of the Company and its properties on a continuing basis and that the Parent is
now and will in the future remain fully familiar with the business, operations
and condition (financial and otherwise) of the Company
Credit Agreement
________________
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<PAGE>
and its properties. The Parent further represents and warrants that it has
reviewed and approved each of this Agreement and the Note and is fully familiar
with the transaction contemplated by this Agreement and the Note and that it
will in the future remain fully familiar with such transaction and with any new
Agreement and Note and the transactions contemplated by this Agreement and the
Note. The Parent hereby expressly waives and relinquishes any duty on the part
of the Bank (should any such duty exist) to disclose to the Parent any matter of
fact or other information related to the business, operations or condition
(financial or otherwise) of the Company or its properties or to any Basic
Document or the transactions undertaken pursuant to, or contemplated by, any
such Basic Document, whether now or in the future known by the Bank.
(e) The Parent intends that its rights and obligations shall be
those expressly set forth in this Section 5 and that its obligations shall not
---------
be affected, limited, reduced, discharged or terminated by reason of any
principles or provisions of law which conflict with the terms of this Section 5.
---------
5.03 Understanding With Respect to Waivers and Consents. The
--------------------------------------------------
Parent warrants and agrees that each of the waivers and consents set forth in
this Section 5 is made voluntarily and unconditionally after consultation with
---------
outside legal counsel and with full knowledge of its significance and
consequences, with the understanding that events giving rise to any defense or
right waived may diminish, destroy or otherwise adversely affect rights which
the Parent otherwise may have against the Company, the Bank or any other Person
or against any collateral. If, notwithstanding the intent of the parties that
the terms of this Section 5 shall control in any and all circumstances, any such
---------
waivers or consents are determined to be unenforceable under applicable law,
such waivers and consents shall be effective to the fullest extent permitted by
law.
5.04 Subrogation. The Parent hereby waives, and agrees not to
-----------
exercise, all rights, remedies, powers or privileges, such as rights of
subrogation, contribution, reimbursement or indemnity or related remedies,
powers or privileges, arising against the Company, any Obligor or any other
guarantor of all or any part of the Obligations or any collateral for all or any
part of the Obligations (whether by contract or operation of law, including
under the Bankruptcy Code) by reason of any payment or other performance by any
Parent pursuant to the provisions of this Section 5 and agrees for the benefit
---------
of each of the Company's creditors (including the Bank) that any such payment by
it shall constitute a contribution of capital by the
Credit Agreement
________________
- 19 -
<PAGE>
Parent to the Company. The Parent further agrees that, to the extent that the
waiver of, or agreement not to exercise, any such rights, remedies, powers or
privileges is found by a court of competent jurisdiction to be void or voidable
for any reason, any such rights, remedies, powers or privileges the Parent may
have shall be junior and subordinate to the rights, remedies, powers and
privileges of the Bank against the Parent under this Section 5.
---------
5.05 Reinstatement. The obligations of the Parent under this
-------------
Section 5 shall be automatically reinstated if and to the extent that for any
- ---------
reason any payment by or on behalf of the Company or any other Person or any
other application of funds (including the proceeds of any collateral for all or
any part of the Obligations) in respect of all or any part of the Obligations is
rescinded or must be otherwise restored by any holder of such Obligations,
whether as a result of any proceedings in bankruptcy, reorganization or
otherwise and the Parent agrees that it will indemnify the Bank on demand for
all reasonable costs and expenses (including fees and expenses of counsel)
incurred by the Bank in connection with such rescission or restoration.
5.06 Remedies. The Parent hereby agrees that, between it and the
--------
Bank, the obligations of the Company under the Credit Agreement and the Note may
be declared to be forthwith (or may become automatically) due and payable as
provided in Section 9 for purposes of Section 5.01 notwithstanding any stay,
--------- ------------
injunction or other prohibition preventing such declaration (or such obligations
becoming due and payable as against the Company) and that, in the event of such
declaration (or such obligation being deemed due and payable), such obligations
(whether or not due and payable by the Company) shall forthwith become due and
payable for purposes of Section 5.01.
------------
5.07 Separate Action. The Bank may bring and prosecute a separate
---------------
action or actions against the Parent whether or not the Company, any other
guarantor or any other Person is joined in any such action or a separate action
or actions are brought against any the Company, any other guarantor, any other
Person, or any collateral for all or any part of the Obligations. The
obligations of the Parent under, and the effectiveness of, this Section 5 are
---------
not conditioned upon the existence or continuation of any other guarantee
(including any letter of credit) of all or any part of the Obligations.
5.08 Subordination of Indebtedness of the Company. The Parent
--------------------------------------------
agrees that any indebtedness of the Company now or in the future owed to the
Parent is hereby subordinated to the
Credit Agreement
________________
- 20 -
<PAGE>
Obligations. If the Bank so requests, any such indebtedness shall be collected,
enforced and received by the Parent as trustee for the Bank and shall be paid
over to the Bank in kind on account of the Obligations. If, after the Bank's
request, the Parent fails to collect or enforce any such indebtedness or to pay
the proceeds of such indebtedness to the Bank, the Bank as the Parent's
attorney-in-fact may do such acts and sign such documents in the Parent's name
and on the Parent's behalf as the Bank considers necessary or desirable to
effect such collection, enforcement or payment, the Bank being hereby appointed
the Parent's attorney-in-fact for such purpose.
5.09 Revocation. To the fullest extent permitted by law, the
----------
Parent hereby waives all right of revocation with respect to the Obligations.
Section 6. Conditions Precedent.
--------------------
6.01 Extension of Credit. The obligation of the Bank to make the
-------------------
Loan under this Agreement is subject to the conditions precedent that
(1) each of the conditions under Sections 6.01 and 6.02 of the Parent
Credit Agreement shall have been satisfied;
(2) both immediately prior to the making of the Loan and also after
giving effect to, and to the intended use of, the Loan:
(a) no Default shall have occurred and be continuing; and
(b) the representations and warranties made by the Company in Section
-------
7 shall be true and complete on and as of the date of the making of the Loan
- -
with the same force and effect as if made on and as of such date (or, if any
such representation or warranty is expressly stated to have been made as of a
specific date, as of such specific date); and
(3) the Bank shall have received on the Closing Date the following
documents, each of which shall be satisfactory to the Bank in form and
substance:
(a) Note. The Note, which shall have been duly completed and
----
executed;
Credit Agreement
________________
- 21 -
<PAGE>
(b) Corporate Documents. The following documents, each certified
-------------------
as indicated below:
(i) a certificate of the Secretary or an Assistant Secretary of the
Company dated the Closing Date and certifying (A) that attached to such
certificate is a true and complete copy of the by-laws of the Company as amended
and in effect at all times from the date on which the resolutions referred to in
clause (B) were adopted to and including the date of such certificate, (B) that
attached to such certificate is a true and complete copy of resolutions duly
adopted by the board of directors of the Company authorizing the execution,
delivery and performance of this Agreement and the Note and the extension of
credit under this Agreement and that such resolutions have not been modified,
rescinded or amended and are in full force and effect, (C) that the charter of
the Company has not been amended since the date of the certification furnished
pursuant to the Company Revolving Credit Agreement, and (D) as to the incumbency
and specimen signature of each officer of the Company executing this Agreement
and the Note and each other document to be delivered by the Company from time to
time in connection with any Basic FAB Document (and the Bank may conclusively
rely on such certificate until the Bank receives notice in writing from the
Company); and
(ii) a certificate of another officer of the Company, dated the
Closing Date as to the incumbency and specimen signature of the Secretary or
Assistant Secretary, as the case may be, of the Company;
(c) Officer's Certificate. A certificate of a senior officer of
---------------------
the Company, dated the Closing Date, to the effect set forth in Sections
--------
6.01(2)(a), 6.01(2)(b) and 7.13;
- ---------- ---------- ----
(d) Certificate of No Breach. A certificate of a senior financial
------------------------
officer of the Parent (i) to the effect that the borrowings of the Loan by the
Company and the execution, delivery and performance by the Company and the
Parent of this Agreement and the Note will not conflict with or result in a
breach by the Parent of Sections 7.01(g), 7.01(k) and 7.02(g) of the Americas
Revolving Credit Agreement and (ii) setting forth in reasonable detail the
computations necessary
Credit Agreement
________________
- 22 -
<PAGE>
to determine whether the Parent is in compliance with such provisions;
(e) Certificate Regarding Guaranty. A certificate of a senior
------------------------------
financial officer of the Parent to the effect that the guaranty of the Loan by
the Parent pursuant to Section 5 is duly authorized by existing resolutions duly
adopted by the board of directors of the Parent.
(f) Opinion of Counsel to the Obligors. An opinion, dated the
----------------------------------
Closing Date, of Riordan & McKinzie, counsel to the Obligors, in substantially
the form of Exhibit B, and covering such other matters as the Bank may
reasonably request (and each Obligor hereby instructs such counsel to deliver
such opinion to the Bank); and
(g) Other Documents. Such other documents as the Bank or counsel
---------------
to the Bank may reasonably request.
The obligation of the Bank to make the Loan under this Agreement is also subject
to the payment or delivery by the Company of (i) the advising, structuring and
facility fee under Section 2.06 and (ii) the reasonable fees and expenses of
------------
Milbank, Tweed, Hadley & McCloy,counsel to the Bank, in connection with the
negotiation, preparation, execution and delivery of this Agreement and the Note
(to the extent that statements for such fees and expenses have been delivered
to the Company).
Section 7. Representations and Warranties. The Company represents
------------------------------
and warrants to the Bank that:
7.01 Corporate Existence. Each of the Obligors and their
-------------------
respective Subsidiaries:
(a) is a corporation, partnership or other entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization;
(b) has all requisite corporate or other power, and has all
material Governmental Approvals necessary, to own its assets and to carry on its
business as now being or as proposed to be conducted; and
(c) is qualified to do business and is in good standing in all
jurisdictions in which the nature of the business
Credit Agreement
________________
- 23 -
<PAGE>
conducted by it makes such qualification necessary and where failure so to
qualify could have a Material Adverse Effect.
7.02 Financial Condition. The Parent has previously furnished to
-------------------
the Bank consolidated and consolidating balance sheets of the Parent and its
Consolidated Subsidiaries as at December 31, 1992 and the related consolidated
and consolidating statements of income, retained earnings and cash flow of the
Parent and its Consolidated Subsidiaries for the fiscal year ended on that date,
with the opinion (in the case of the consolidated balance sheet and statements)
of Deloitte & Touche, and the unaudited consolidated and consolidating balance
sheets of the Parent and its Consolidated Subsidiaries as at September 30, 1993
and the related consolidated and consolidating statements of income, retained
earnings and cash flow of the Parent and its Consolidated Subsidiaries for the
nine-month period ended on such date.
All such financial statements are complete and correct and fairly
present the consolidated financial condition of the Parent and its Consolidated
Subsidiaries, and (in the case of the consolidating financial statements) the
respective unconsolidated financial condition of the Parent and of each of its
Consolidated Subsidiaries, as at those dates and the consolidated and
unconsolidated results of their operations for the fiscal year and nine-month
period ended on those dates (subject, in the case of such financial statements
as at September 30, 1993, to normal year-end audit adjustments), all in
accordance with GAAP and practices applied on a consistent basis. Except as
incurred in the ordinary course of business, neither the Parent nor any of its
Subsidiaries has on the Closing Date any material contingent liabilities,
liabilities for taxes, unusual forward or long-term commitments or unrealized or
anticipated losses from any unfavorable commitments, except as referred to or
reflected or provided for in the most recent balance sheet referred to above.
Since December 31, 1992, there has been no material adverse change in the
consolidated financial condition, operations or business taken as a whole of the
Parent and its Consolidated Subsidiaries from that set forth in the financial
statements as at December 31, 1992 for the period ending on that date.
7.03 Litigation. Except as disclosed to the Bank in Schedule 8.03
----------
to the Company Revolving Credit Agreement, there are no legal or arbitral
proceedings, or any proceedings by or before any Governmental Person now pending
or (to the knowledge of each of the Obligors) threatened against the Obligors or
any of their respective Subsidiaries which, if adversely determined, could have
a Material Adverse Effect.
Credit Agreement
________________
- 24 -
<PAGE>
7.04 No Breach. None of the execution and delivery of this Agreement
---------
or the Note, the consummation of the transactions contemplated in this Agreement
or the Note or compliance with the terms and provisions of this Agreement or the
Note will conflict with or result in a breach of, or require any consent under,
the charter or by-laws of such Obligor or any of its Subsidiaries, or any
applicable Governmental Rule or any material agreement or instrument to which
such Obligor or any of its Subsidiaries is a party or by which any of them or
any of their Property is bound or to which any of them is subject, or constitute
a default under, or result in the acceleration or mandatory prepayment of, any
Indebtedness evidenced by or termination of any such agreement or instrument, or
result in the creation or imposition of any Lien upon any Property of such
Obligor or any of its Subsidiaries pursuant to the terms of any such agreement
or instrument.
7.05 Action. Each Obligor has all necessary corporate power and
------
authority to execute, deliver and perform its obligations under this Agreement
and the Note, the execution, delivery and performance by such Obligor of this
Agreement and the Note have been duly authorized by all necessary corporate
action on its part (including any required shareholder approvals); and this
Agreement has been duly and validly executed and delivered by such Obligor and
constitutes, and the Note when executed and delivered by the Company for value
will constitute, such Obligor's legal, valid and binding obligation, enforceable
against such Obligor in accordance with its terms, (a) except as limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws of general
applicability affecting the enforcement of creditors' rights and (b) except as
such enforceability may be limited by the application of general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law).
7.06 Approvals. No Governmental Approvals are necessary for the
---------
execution, delivery or performance by any Obligor of this Agreement or the Note
or for the legality, validity or enforceability of any such Basic Document.
7.07 Margin Stock. Neither Obligor nor any of its Subsidiaries is
------------
engaged principally, or as one of its important activities, in the business of
extending credit for the purpose, whether immediate, incidental or ultimate, of
buying or carrying Margin Stock, and no part of the proceeds of any extension of
credit under this Agreement will be used to buy or carry any Margin Stock.
Credit Agreement
________________
- 25 -
<PAGE>
7.08 ERISA. Each Plan, and, to the knowledge of any Obligor, each
-----
Multiemployer Plan, is in compliance in all material respects with, and has been
administered in all material respects in compliance with, the applicable
provisions of ERISA, the Code and any other Governmental Rule, and no event or
condition has occurred and is continuing as to which such Obligor would be under
an obligation to furnish a report to the Bank under Section 9.01(g) of the
---------------
Company Revolving Credit Agreement.
7.09 Taxes. There is no tax sharing, tax allocation or similar
-----
agreement currently in effect providing for the manner in which tax payments
owing by any Obligor or any of its Subsidiaries (whether in respect of Federal
or state income or other taxes) are allocated among such Persons. Each Obligor
and such Obligor's Subsidiaries have filed all Federal income tax returns and
all other material tax returns that are required to be filed by them and have
paid all taxes due pursuant to such returns or pursuant to any assessment
received by such Obligor or any of its Subsidiaries and all other related
penalties and charges. The charges, accruals and reserves on the books of such
Obligor and such Obligor's Subsidiaries in respect of taxes and other
governmental charges are, in the opinion of such Obligor, adequate. Neither
Obligor has given or been requested to give a waiver of the statute of
limitations relating to the payment of Federal or other taxes.
7.10 Certain Regulations. Neither Obligor nor any of its
-------------------
Subsidiaries is (a) an "investment company," or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940;
(b) a "holding company," or an "affiliate" of a "holding company" or a
"subsidiary company" of a "holding company," within the meaning of the Public
Utility Holding Company Act of 1935; or (c) subject to any other Governmental
Rule restricting its ability to incur debt.
7.11 Environmental Matters. Each Obligor and such Obligor's
---------------------
Subsidiaries has obtained all Governmental Approvals required under all
Environmental Laws to carry on its business as now being or as proposed to be
conducted, except to the extent failure to have any such Governmental Approvals
would not have a Material Adverse Effect. Each of such Governmental Approvals
is in full force and effect and each of the Obligors and its Subsidiaries is in
compliance with the terms and conditions of such Governmental Approvals, and is
also in compliance with all other provisions of any applicable Environmental Law
or of any Governmental Rule issued, entered, promulgated or approved under any
Environmental Law, except to the extent failure to comply with such provisions
would not have a Material Adverse Effect.
Credit Agreement
________________
- 26 -
<PAGE>
In addition, except as set forth in Schedule 8.12 of the Company
Revolving Credit Agreement, no notice, notification, demand, request for
information, citation, summons or order has been issued, no complaint has been
filed, no penalty has been assessed and no investigation or review is pending or
threatened by any Governmental Person with respect to any alleged failure by any
Obligor or any of its Subsidiaries to have any Governmental Approval required
under any Environmental Law in connection with the conduct of the business of
such Obligor or any of its Subsidiaries or with respect to any generation,
treatment, storage, recycling, transportation or Release of any Hazardous
Materials generated by such Obligor or any of its Subsidiaries.
7.12 Title to Assets. The Parent or a Subsidiary of the Parent
---------------
owns and has on the Closing Date, and will own and have on the Funding Date (as
defined in the Parent Credit Agreement), good and marketable title (subject only
to Liens permitted by Section 9.06 of the Company Revolving Credit Agreement) to
the Properties shown to be owned in the most recent financial statements
referred to in Section 7.02 (other than Properties disposed of in the ordinary
------------
course of business or otherwise permitted to be disposed of pursuant to Section
9.05 of the Company Revolving Credit Agreement). The Parent or a Subsidiary of
the Parent owns and has on the Closing Date and will own and have on the Funding
Date (as defined in the Parent Credit Agreement), good and marketable title to,
and enjoys on the Closing Date and will enjoy on the Funding Date (as defined in
the Parent Credit Agreement), peaceful and undisturbed possession of, all
Properties (subject only to Liens permitted by Section 9.06 of the Company
Revolving Credit Agreement) that are necessary for the operation and conduct of
its respective businesses.
7.13 True and Complete Disclosure. The information, reports,
----------------------------
financial statements, exhibits and schedules furnished in writing by or on
behalf of any Obligor to the Bank in connection with the negotiation,
preparation or delivery of this Agreement and the Note, when taken as a whole do
not contain any untrue statement of material fact or omit to state any material
fact necessary to make the statements in any such document, in light of the
circumstances under which they were made, not misleading. All written
information furnished after the Closing Date by any Obligor and its Subsidiaries
to the Bank in connection with this Agreement and the Note and the transactions
contemplated by this Agreement and the Note will be true, complete and accurate
in every material respect, or (in the case of projections) based on reasonable
estimates, on the date as of which such information is stated or certified.
There is no fact known to either Obligor that could have a Material Adverse
Credit Agreement
________________
- 27 -
<PAGE>
Effect that has not been disclosed in this Agreement and the Note or in a
report, financial statement, exhibit, schedule, disclosure letter or other
writing furnished to the Bank for use in connection with the transactions
contemplated by this Agreement and the Note.
Section 8. Covenants. The Obligors covenant and agree with the Bank
---------
that, so long as the Loan is outstanding and until payment in full of all
Obligations:
8.01 Incorporation by Reference. Each of the Parent and the Company
--------------------------
agrees, for the benefit of the Bank, to perform, to comply with and to be bound
by each of its covenants, agreements and obligations contained in Section 8 of
the Parent Credit Agreement and Section 9 of the Company Revolving Credit
Agreement, respectively, in each case as in effect on the Signing Date, and
without giving effect to any modifications or supplements to, or termination of,
the Parent Credit Agreement or the Company Revolving Credit Agreement, after the
Signing Date. Without limiting the generality of the foregoing, the above-
mentioned provisions of the Parent Credit Agreement or the Company Revolving
Credit Agreement, together with, for purposes of such provisions only, related
definitions and ancillary provisions and schedules and exhibits, are hereby
incorporated in this Agreement by reference, as if set forth in this Agreement
in full, mutatis mutandis; provided that, as incorporated in this Agreement, (i)
------- -------- --------
each reference in the Parent Credit Agreement or the Company Revolving Credit
Agreement to "this Agreement" or "the Notes" or the like shall be deemed to be a
reference to this Agreement and the Note, as the case may be, (ii) each
reference in the Parent Credit Agreement or the Company Revolving Credit
Agreement to any "Bank" or "holder of any Note" or the like, shall be deemed to
be a reference to the Bank under this Agreement.
8.02 Use of Proceeds. The Company shall use the proceeds of the
---------------
Loan solely to fund a portion of the purchase price of the Acquisition and
related costs (in compliance with all applicable Governmental Rules); provided
--------
that the Bank shall have no responsibility as to the use of any of such
proceeds.
8.03 The Company Revolving Credit Agreement. The Company agrees
--------------------------------------
that it will not borrow, or have any amount outstanding, under the Company
Revolving Credit Agreement at any time during the period from the Signing Date
to the date that is fifteen Business Days after the later of the termination of
this Agreement and the payment in full of the Obligations. The Company agrees
that this Section 8.03 constitutes, to the extent
------------
Credit Agreement
________________
- 28 -
<PAGE>
necessary to implement the purpose of this Section 8.03, an amendment of the
------------
Company Revolving Credit Agreement.
Section 9. Events of Default. If one or more of the following events
-----------------
("Events of Default") shall occur and be continuing:
-----------------
(a) The Company shall: (i) default in the payment of any
principal of any Loan when due (whether at stated maturity or at mandatory or
optional prepayment); or (ii) default in the payment of any interest on any Loan
or any other Obligation when due and such default shall have continued
unremedied for 3 or more days; or
(b) Any Obligor or any of such Obligor's Material Subsidiaries
(collectively, the "Relevant Parties") shall default in the payment when due of
----------------
any principal of or interest on any of its other Indebtedness aggregating
$1,000,000 with respect to the Company or any of its Material Subsidiaries or
$5,000,000 with respect to the Parent or any of its Material Subsidiaries or
more, or in the payment when due of any amount under any Interest Rate
Protection Agreement having a credit exposure amount exceeding $1,000,000 with
respect to the Company or any of its Material Subsidiaries or $5,000,000 with
respect to the Parent or any of its Material Subsidiaries; or any event
specified in any note, agreement, indenture or other document evidencing or
relating to any such Indebtedness or any event specified in any Interest Rate
Protection Agreement shall occur if the effect of such event is to cause, or
(with the giving of any notice or the lapse of time or both) to permit the
holder or holders of such Indebtedness (or a trustee or agent on behalf of such
holder or holders) to cause, such Indebtedness to become due, or to be prepaid
in full (whether by redemption, purchase, offer to purchase or otherwise), prior
to its stated maturity or to have the interest rate on such Indebtedness reset
to a level so that securities evidencing such Indebtedness trade at a level
specified in relation to its par value or, in the case of an Interest Rate
Protection Agreement, to permit the payments owing under such Interest Rate
Protection Agreement to be liquidated; or
(c) Any representation, warranty or certification made or deemed
made in any Basic Document by any Obligor or any certificate furnished to the
Bank pursuant to the provisions of any Basic Document shall prove to have been
false or misleading as of the time made or furnished or deemed made or furnished
in any material respect; or
Credit Agreement
________________
- 29 -
<PAGE>
(d) The Company shall default in the performance of any of its
other obligations in this Agreement or any other Basic Document and such default
shall continue unremedied for a period of 10 days after notice of such default
to the Company by the Bank; or
(e) Any event or condition described as an "Event of Default"
----------------
under the Parent Credit Agreement or the Company Revolving Credit Agreement
shall occur;
(f) Any Relevant Party shall admit in writing its inability to,
or be generally unable to, pay its debts as such debts become due; or
(g) Any Relevant Party shall (i) apply for or consent to the
appointment of, or the taking of possession by, a receiver, custodian, trustee,
examiner or liquidator of itself or of all or a substantial part of its
Property, (ii) make a general assignment for the benefit of its creditors, (iii)
commence a voluntary case under the Bankruptcy Code, (iv) file a petition
seeking to take advantage of any other law relating to bankruptcy, insolvency,
reorganization, liquidation, dissolution, arrangement or winding-up, or
composition or readjustment of debts, (v) fail to controvert in a timely and
appropriate manner, or acquiesce in writing to, any petition filed against it in
an involuntary case under the Bankruptcy Code or (vi) take any corporate action
for the purpose of effecting any of the foregoing; or
(h) A proceeding or case shall be commenced, without the
application or consent of the affected Relevant Party, in any court of competent
jurisdiction, seeking (i) its reorganization, liquidation, dissolution,
arrangement or winding-up, or the composition or readjustment of its debts, (ii)
the appointment of a receiver, custodian, trustee, examiner, liquidator or the
like of such Relevant Party or of all or any substantial part of its Property,
or (iii) similar relief in respect of such Relevant Party under any law relating
to bankruptcy, insolvency, reorganization, winding-up, or composition or
adjustment of debts, and such proceeding or case shall continue undismissed, or
an order, judgment or decree approving or ordering any of the foregoing shall be
entered and continue unstayed and in effect, for a period of 60 or more days; or
an order for relief against any Relevant Party shall be entered in an
involuntary case under the Bankruptcy Code; or
(i) A final judgment or judgments for the payment of money in
excess of $1,000,000 with respect to the Company or any of its Material
Subsidiaries, and $5,000,000 with respect to
Credit Agreement
________________
- 30 -
<PAGE>
the Parent or any of its Material Subsidiaries other than the Company, in the
aggregate shall be rendered by one or more Governmental Persons having
jurisdiction against any Relevant Party and the same shall not be discharged (or
provision shall not be made for such discharge), or a stay of execution of the
relevant judgment shall not be procured, within 30 days from the date of entry
of such judgment and such Relevant Party shall not, within that thirty-day
period, or such longer period during which execution of the same shall have been
stayed, appeal from and cause the execution of such judgment to be stayed during
such appeal; or
(j) An event or condition specified in Section 9.01(f) of the
Company Revolving Credit Agreement shall occur or exist with respect to any Plan
or Multiemployer Plan and, as a result of such event or condition, together with
all other such events or conditions, any Obligor or any ERISA Affiliate shall
incur or shall be reasonably likely to incur a liability to a Plan, a
Multiemployer Plan or PBGC (or any combination of the foregoing) which would
constitute a Material Adverse Effect; or
(k) A reasonable basis shall exist for the assertion against any
Relevant Party of (or there shall have been asserted against any Relevant Party)
claims or liabilities, whether accrued, absolute or contingent, based on or
arising from the generation, storage, transport, handling or Release of
Hazardous Materials by any Relevant Party or any of its respective Affiliates,
or any predecessor in interest of any Relevant Party or any of its respective
Affiliates, or relating to any site, facility or vessel owned, operated or
leased by any Relevant Party or its respective Affiliates, which claims or
liabilities (insofar as they are payable by any Relevant Party but after
deducting any portion which is reasonably expected to be paid by other
creditworthy Persons jointly and severally liable for such portion), in the
judgment of the Bank, are reasonably likely to be determined adversely to any
Relevant Party, and the amount of such claims or liabilities is, singly or in
the aggregate, reasonably likely to have a Material Adverse Effect; or
(l) The obligations of the Parent under Section 5 shall cease to
---------
be in full force and effect, or the Parent shall repudiate or revoke or seek to
repudiate or revoke any of the obligations under Section 5; or
---------
(m) During any period of 25 consecutive calendar months, a
majority of the Board of Directors of the Parent shall no longer be composed of
individuals (i) who were members of such
Credit Agreement
________________
- 31 -
<PAGE>
Board on the first day of such period, (ii) whose election or nomination to such
Board was approved by individuals referred to in clause (i) above constituting
at the time of such election or nomination at least a majority of such Board or
(iii) whose election or nomination to such Board was approved by individuals
referred to in clauses (i) and (ii) above constituting at the time of such
election or nomination at least a majority of such Board; or
(n) Any Person (other than the Parent) alone or together with its
Affiliates, directly or indirectly through one or more intermediaries, gains
control of more than 50% of the Parent's outstanding capital stock entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors of the Parent; or
(o) Any circumstance or event resulting in a Material Adverse
Effect shall have occurred.
THEREUPON: (1) in the case of an Event of Default other than one referred to in
clause (f) or (g) of this Section 9 with respect to any Obligor, the Bank may,
---------
by notice to the Company, (A) terminate this Agreement and it shall thereupon
terminate and (B) declare the principal amount then outstanding of, and the
accrued interest on, the Loan and all other Obligations to be forthwith due and
payable, whereupon such amounts shall be immediately due and payable without
presentment, demand, protest or other formalities of any kind, all of which are
hereby expressly waived by each Obligor; and (2) in the case of the occurrence
of an Event of Default referred to in clause (f) or (g) of this Section 9 with
---------
respect to any Obligor, this Agreement shall automatically be terminated and the
principal amount then outstanding of, and the accrued interest on, the Loan and
all other Obligations shall automatically become immediately due and payable
without presentment, demand, protest or other formalities of any kind, all of
which are hereby expressly waived by each Obligor.
Section 10. Miscellaneous.
-------------
10.01 Waiver. No failure on the part of the Bank to exercise and
------
no delay in exercising, and no course of dealing with respect to, any right,
remedy, power or privilege under this Agreement or the Note shall operate as a
waiver of such right, remedy, power or privilege, nor shall any single or
partial exercise of any right, power or privilege under this Agreement or the
Note preclude any other or further exercise of any such right, remedy, power or
privilege or the exercise of any other
Credit Agreement
________________
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<PAGE>
right, remedy, power or privilege. The rights, remedies, powers and privileges
provided in this Agreement and the Note are cumulative and not exclusive of any
rights, remedies, powers and privileges provided by law.
10.02 Notices. All notices, requests and other communications
-------
provided for in this Agreement and under the Note (including any modifications
of, or waivers or consents under, this Agreement) shall be given or made in
writing, delivered to the intended recipient at the "Address for Notices"
specified below its name on Annex I or, as to any party, at such other address
as shall be designated by such party in a notice to each other party. Except as
otherwise provided in any Basic Document, all such communications shall be
deemed to have been duly given when transmitted by telex or telefacsimile or
personally delivered or, in the case of a mailed notice, upon receipt, in each
case given or addressed as set forth above.
10.03 Expenses, Etc. The Company agrees to pay or reimburse the
--------------
Bank for paying: (a) all reasonable out-of-pocket costs and expenses of the Bank
(including the reasonable fees and expenses of Milbank, Tweed, Hadley & McCloy,
counsel to the Bank, in connection with (i) the negotiation, preparation,
execution and delivery of this Agreement and the Note and the extension of
credit under this Agreement and (ii) any modification, supplement or waiver of
any of the terms of any Basic Document; (b) all reasonable costs and expenses of
the Bank (including reasonable counsels' fees) in connection with (i) any
Default and any enforcement or collection proceedings (including any bankruptcy,
reorganization, workout or other similar proceeding) resulting from such Default
or in connection with the negotiation of any restructuring or "work-out"
(whether or not consummated) of the obligations of the Company under this
Agreement and the Note and (ii) the enforcement of this Section 10.03; and (c)
-------------
all transfer, stamp, documentary or other similar taxes, assessments or charges
levied by any governmental or revenue authority in respect of any Basic Document
or any other document referred to in any Basic Document.
The Company hereby agrees (i) to indemnify the Bank and its
affiliates, directors, officers, employees, attorneys and agents from, and hold
each of them harmless against, any and all losses, liabilities, damages or
expenses incurred by any of them in connection with or by reason of any actual
or threatened investigation, litigation or other proceedings relating to the
extensions of credit under, and the transactions contemplated by, this Agreement
and the Note or any actual or proposed use by any Obligor or any of its
Subsidiaries of the proceeds of any such extensions of credit, including the
Credit Agreement
________________
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<PAGE>
reasonable fees and disbursements of counsel incurred in connection with any
such investigation, litigation or other proceedings (but excluding any such
losses, liabilities, damages or expenses incurred by reason of the gross
negligence or willful misconduct of the Person to be indemnified) and (ii) not
to assert any claim against the Bank or any of its affiliates, directors,
officers, employees, attorneys and agents, on any theory of liability, for
special, indirect, consequential or punitive damages arising out of or otherwise
relating to any of the transactions contemplated in any Basic FAB Document. It
shall not be a condition to any such indemnification that the Bank be a party to
any such investigation, litigation or other proceeding.
10.04 Amendments, Etc. Except as otherwise expressly provided in
----------------
this Agreement, any provision of this Agreement may be modified or supplemented
only by an instrument in writing signed by the Company, the Parent and the Bank,
and any provision of this Agreement for the benefit of the Bank may be waived by
the Bank. Any modification, supplement or waiver shall be for such period and
shall be subject to such conditions as shall be specified in the instrument
effecting the same, and any such waiver shall be effective only in the specific
instance and for the purpose for which given.
10.05 Successors and Assigns. This Agreement shall be binding upon
----------------------
and inure to the benefit of its parties and their respective successors and
permitted assigns.
10.06 Assignments.
-----------
(a) Neither Obligor may assign any of its respective rights or
obligations under this Agreement or the Note without the prior consent of the
Bank.
(b) The Bank may assign all or any part of the Loan and the Note,
together with, in any such case, its related rights, remedies, powers and
privileges under this Agreement and the Note; provided that any such assignment
--------
shall be in an amount at least equal to $5,000,000. Upon execution and delivery
by the assignee to the Company and the Bank of an instrument in writing pursuant
to which such assignee assumes the portion of the Loan specified in such
instrument, the assignee shall have, to the extent of such assignment (unless
otherwise provided in such assignment with the consent of the Company), the
obligations, rights and benefits of the Bank under this Agreement and the Note
in respect of the portion of the Loan assigned to it.
Credit Agreement
________________
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<PAGE>
(c) In addition to the assignments permitted under the foregoing
provisions of this Section 10.06, the Bank may assign and pledge all or any
-------------
portion of its Loan and its Note to any Federal Reserve Bank as collateral
security pursuant to Regulation A and any Operating Circular issued by such
Federal Reserve Bank. No such assignment shall release the Bank from its
obligations under this Agreement or the Note.
(d) The Bank may furnish any information concerning each Obligor
or any of such Obligor's Subsidiaries in the possession of the Bank from time to
time to assignees (including prospective assignees), subject, however, to the
provisions of Section 10.12(b).
----------------
10.07 Survival. The obligations of the Company under Sections 4.04
-------- -------------
and 10.03 shall survive the repayment of the Obligations and the termination of
-----
the Commitment. In addition, each representation and warranty made, or deemed
to be made by a notice of any extension of credit, in or pursuant to any Basic
Document, shall survive the making or deemed making of such representation and
warranty, and the Bank shall not be deemed to have waived, by reason of making
any extension of credit, any Default which may arise by reason of such
representation or warranty proving to have been false or misleading,
notwithstanding that the Bank may have had notice or knowledge or reason to
believe that such representation or warranty was false or misleading at the time
such extension of credit was made.
10.08 Agreements Superseded. This Agreement supersedes all prior
---------------------
agreements and understandings, written or oral, among the parties with respect
to the subject matter of this Agreement.
10.09 Severability. Any provision of this Agreement or the Note
------------
that is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this Agreement
or the Note and any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction.
10.10 Captions. The table of contents and captions and section
--------
headings appearing in this Agreement are included solely for convenience of
reference and are not intended to affect the interpretation of any provision of
this Agreement.
10.11 Counterparts. This Agreement may be executed in any number
------------
of counterparts, all of which taken together shall
Credit Agreement
________________
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<PAGE>
constitute one and the same instrument and any of the parties to this Agreement
may execute this Agreement by signing any such counterpart.
10.12 Treatment of Certain Information; Confidentiality.
-------------------------------------------------
(a) Each Obligor acknowledges that from time to time financial
advisory, investment banking and other services may be offered or provided to
such Obligor or one or more of its Subsidiaries (in connection with this
Agreement or otherwise) by the Bank or by one or more subsidiaries or affiliates
of the Bank and such Obligor hereby authorizes the Bank to share any information
delivered to the Bank by such Obligor and its Subsidiaries and Affiliates
pursuant to this Agreement, or in connection with the decision of the Bank to
enter into this Agreement, to any such subsidiary or affiliate, it being
understood that any such subsidiary or affiliate receiving such information
shall be bound by the provisions of clause (b) below as if it were the Bank.
(b) The Bank agrees (on behalf of itself and each of its
affiliates, directors, officers, employees and representatives) to use
reasonable precautions to keep confidential, in accordance with customary
procedures for handling confidential information of this nature and in
accordance with safe and sound banking practices, any nonpublic information
supplied to it by each Obligor pursuant to this Agreement; provided that nothing
--------
in this Agreement shall limit the disclosure of any such information (i) to the
extent required by any Governmental Rule, (ii) to counsel for the Bank, (iii) to
bank examiners, auditors or accountants, (iv) in connection with any litigation
to which the Bank is a party, (v) to a subsidiary or affiliate of the Bank as
provided in clause (a) above or (vi) to any assignee or participant (or
prospective assignee or participant) so long as such assignee or participant (or
prospective assignee or participant) first agrees to be bound by the provisions
of this Section 10.12(b). In no event shall the Bank be obligated or required
----------------
to return any materials furnished by any Obligor. The obligations of the Bank
under this Section 10.12 shall supersede and replace the obligations of the Bank
-------------
under any confidentiality letter in respect of this financing signed and
delivered by the Bank to any Obligor prior to the Closing Date.
10.13 GOVERNING LAW; SUBMISSION TO JURISDICTION. THIS AGREEMENT
-----------------------------------------
AND THE NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF
THE STATE OF CALIFORNIA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THE STATE
OF CALIFORNIA. EACH
Credit Agreement
________________
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<PAGE>
OF THE COMPANY AND THE PARENT HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF
THE UNITED STATES DISTRICT COURT FOR THE CENTRAL DISTRICT OF CALIFORNIA AND OF
ANY CALIFORNIA STATE COURT SITTING IN LOS ANGELES, CALIFORNIA FOR THE PURPOSES
OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH OF THE COMPANY AND THE PARENT
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY
SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING
BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
10.14 WAIVER OF JURY TRIAL. EACH OF THE COMPANY, THE PARENT AND
--------------------
THE BANK HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT.
Credit Agreement
________________
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the day and year first above written.
MERISEL FAB, INC.
By: /s/ Timothy N. Jenson
-----------------------------------
Title: Vice President and Treasurer
MERISEL, INC.
By: /s/ Timothy N. Jenson
-----------------------------------
Title: Vice President and Treasurer
NATIONSBANK OF TEXAS, N.A.
By: /s/ Janet E. Sockwell
-----------------------------------
Title: Assistant Vice President
Credit Agreement
________________
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<PAGE>
CONSENT OF ERNST & YOUNG, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-8 Nos. 33-61592, 33-45781, 33-35648 and 33-34296) pertaining to the
Merisel, Inc. 1992 Stock Option Plan for Nonemployee Directors, the Merisel,
Inc. 1991 Employee Stock Option Plan, the Softsel Computer Products, Inc. 1983
Stock Option and Employee Stock Option Plans and the Softsel Computer Products,
Inc. Microamerica Substitute Stock Option Plan of our report dated January 7,
1994, with respect to the statement of revenues and operating expenses of the
United States Franchise and Distribution Division of ComputerLand Corporation
for the years ended September 30, 1993 and 1992 included in Merisel, Inc.'s Form
8-K dated February 14, 1994, filed with the Securities and Exchange Commission.
/s/ Ernst & Young
San Jose, California
February 11, 1994
<PAGE>
ERNST & YOUNG -55 Almaden Boulevard -Phone: 408 947 5500
San Jose, California 95115 Fax: 408 294 2744
Telex: 701974
Report of Independent Auditors
The Board of Directors
ComputerLand Corporation
We have audited the accompanying statement of revenues and operating expenses of
the United States Franchise and Distribution Division of ComputerLand
Corporation for the years ended September 30, 1993 and 1992. This statement of
revenues and operating expenses is the responsibility of ComputerLand
Corporation's management. Our responsibility is to express an opinion on this
statement of revenues and operating expenses 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 statement of revenues and operating
expenses is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the statement of
revenues and operating expenses. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall statement of revenues and operating expenses
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the statement of revenues and operating expenses referred to
above presents fairly, in all material respects, the revenues and operating
expenses of the United States Franchise and Distribution Division of
ComputerLand Corporation for the years ended September 30, 1993 and 1992, in
conformity with generally accepted accounting principles.
/s/ Ernst & Young
January 7, 1994
<PAGE>
United States Franchise and Distribution Division of
Computerland Corporation
Statement of Revenues and Operating Expenses
<TABLE>
<CAPTION>
Years Ended September 30,
-------------------------
1993 1992
------ ------
(In Thousands)
<S> <C> <C>
Net revenues $1,071,306 $1,135,862
Costs and expenses:
Cost of goods sold 1,016,584 1,071,510
Selling, general and administrative 38,135 50,917
---------- ----------
1,054,719 1,122,427
Net revenues in excess of costs and
expenses $ 16,587 $ 13,435
========== ==========
</TABLE>
See accompanying notes.
<PAGE>
United States Franchise and Distribution Division of
Computerland Corporation
Notes to Statement of Revenues and Operating Expenses
September 30, 1993
1. Basis of Presentation and Summary of Significant Accounting Policies
Organization
The United States Franchise and Distribution Division of ComputerLand
Corporation (the Division) is not an incorporated entity. The principal
activity of the Division is the wholesale distribution of microcomputer systems
and products to third party dealers, value-added resellers, and franchisees.
Historical Financial Information
Full historical statements of revenues and operating expenses,
including interest income, interest expense, and income taxes, have not been
presented due to the fact that ComputerLand Corporation has never maintained
separate accounting records for the Division, and, therefore, has not prepared
separate historical financial statements of the Division. Construction of such
full accounting records and financial statements is not practicable.
The statement of revenues and operating expenses may not necessarily
reflect the results of operations that would have been obtained had the Division
been operated as a separate stand-alone entity during the period presented.
Revenue and Revenue Recognition
Revenues consist primarily of product sales to third party dealers,
value-added resellers, franchisees, and end-users, as well as royalty income on
sales made by ComputerLand franchisees. Sales to end-users are sales of
products initiated by franchisees that are configured and shipped directly to
customers from ComputerLand Corporation's distribution centers for which
franchisees receive certain fees related to the sale. Product sales are
recognized at the time of shipment, while royalty income is recognized based
upon a percentage of reported sales by ComputerLand Corporation's franchisees.
2.
<PAGE>
United States Franchise and Distribution Division of
ComputerLand Corporation
Notes to Statement of Revenues and Operating Expenses (continued)
2. Allocated Expenses
Selling, general, and administrative expenses include allocations from
ComputerLand Corporation for expenses of the distribution centers and general
corporate overhead, including expenses for corporate functions and
administrative personnel. Such allocated expenses aggregated $27,340,000 and
$40,221,000 for the years ended September 30, 1993 and 1992, respectively.
The expenses have been allocated to the Division based upon such
factors as the ratio of the Division's shipments to total shipments by
ComputerLand Corporation and management's estimate of the time spent by shared
employees of ComputerLand Corporation. This is considered by management to be a
reasonable approximation of the costs that the Division would have had to incur
for the benefit received if it operated as an unaffiliated entity.
3. Subsequent Event
On September 23, 1993, ComputerLand Corporation signed a letter of
intent to sell certain assets and liabilities of the Division, including all
domestic franchise agreements, Datago distribution agreements, and the right to
the "ComputerLand" name and trademark within the United States to Merisel, Inc.
Concurrent with the proposed sale, ComputerLand Corporation will enter into a
distribution and services agreement with Merisel, Inc. Pursuant to this
agreement, ComputerLand Corporation will continue to supply product and provide
certain logistics and other support services to its former division for two
years following the closing date. ComputerLand Corporation will receive a
monthly distribution fee for such services.
3.
