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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM __________ TO ____________
COMMISSION FILE NUMBER 0-17156
MERISEL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 95-4172359
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
200 CONTINENTAL BOULEVARD
EL SEGUNDO, CALIFORNIA 90245-0948
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code: (310) 615-3080
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.01
Par Value
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO
----- ------
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to the
Form 10-K.
As of March 22, 1995 the aggregate market value of voting stock held by
non-affiliates of the Registrant based on the last sales price as reported by
the Nasdaq National Market was $98,791,300 (23,591,952 shares at a closing price
of $4.1875).
As of March 22, 1995 the Registrant had 29,757,424 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive Proxy Statement
for the fiscal year ended December 31, 1994
are incorporated by reference into Part III.
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INDEX TO FORM 10-K
MERISEL, INC.
Page Reference
PART I
Item 1. Business................................................ 1
Item 2. Properties.............................................. 14
Item 3. Legal Proceedings....................................... 15
Item 4. Submission of Matters to a Vote of Security Holders..... 15
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters..................................... 16
Item 6. Selected Financial Data................................. 17
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operation...................... 18
Item 8. Financial Statements and Supplementary Data............. 27
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure..................... 44
PART III
Item 10. Directors and Executive Officers of the Registrant..... 44
Item 11. Executive Compensation................................. 44
Item 12. Security Ownership of Certain Beneficial Owners and
Management............................................. 44
Item 13. Certain Relationships and Related Transactions......... 44
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K............................................ 44
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PART I
ITEM 1. BUSINESS.
OVERVIEW
Merisel, Inc. (together with its subsidiaries, "Merisel" or the "Company")
is the largest worldwide publicly-held wholesale distributor of microcomputer
hardware and software products. Through its full-line, channel-specialized
distribution business, Merisel combines the comprehensive product selection and
operational efficiency of a full-line distributor with the customer support of a
specialty distributor offering dedicated sales organizations to each of its
customer groups. On January 31, 1994, the Company completed the acquisition (the
"ComputerLand Acquisition") of certain assets of Vanstar Corporation's United
States franchise and aggregator business (the "ComputerLand Franchise and
Aggregation Business"). The ComputerLand Franchise and Aggregation Business is
a leading aggregator, or master reseller, of computer systems and related
products from major microcomputer manufacturers, including Apple, Compaq,
Hewlett-Packard and IBM, to a network of approximately 750 independently-owned
computer product resellers in the United States. With the acquisition of the
ComputerLand Franchise and Aggregation Business, the Company became the
industry's first "Master Distributor," combining the strengths of a full-line,
channel-specialized distributor with those of a master reseller. As a Master
Distributor, the Company believes it is well positioned to offer a wider
selection of microcomputer products to more categories of customers than any of
its competitors.
At December 31, 1994, Merisel stocked over 25,000 products from more than
850 of the microcomputer hardware and software industry's leading manufacturers
including Apple, AST, Borland, Colorado Memory Systems, Compaq, Creative Labs,
Digital Equipment Corporation, Epson, Hayes, Hewlett-Packard, IBM, Intel, Lotus,
Microsoft, NEC, Novell, Okidata, Sun Microsystems, Symantec, Texas Instruments,
3Com, Toshiba, Wordperfect and Wyse. Merisel sells products to over 65,000
computer resellers worldwide, including value-added resellers, large retail
chains, franchisees, computer superstores, mass merchants, Macintosh and Unix
resellers, system integrators and original equipment manufacturers. In order to
effectively service its large and diverse international customer base, the
Company currently maintains 20 distribution centers that serve North America,
Europe, Latin America, Australia and other international markets (although the
Company plans to shut down and consolidate certain warehouses in North America
and Europe in mid-to-late 1995). The breadth of the Company's product line,
together with its international distribution network, enable the Company to
provide its customers with a single source of supply and prompt delivery of
products. For the fiscal year ended December 31, 1994, the Company's net sales
by geographic region were generated as follows: United States, 68%; Canada, 10%;
Europe, 16%; and other international markets, 6%.
THE INDUSTRY
The microcomputer products distribution industry is large and growing,
reflecting both increasing demand worldwide for computer products and the use of
wholesale distribution channels by manufacturers for the distribution of their
products. The industry moves product from manufacturer to end-user through a
complex combination of distribution agreements between manufacturers, wholesale
distributors, aggregators and resellers. Historically, there have been two types
of companies within the industry: those that sell directly to the end-user
("resellers") and those that sell to resellers ("wholesale distributors" and
"aggregators", which are also called "master resellers").
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Resellers sell directly to end-users, including large corporate accounts,
small and medium-sized businesses and home users. The major reseller channels
are dealers and corporate resellers, value-added resellers ("VARs"), mail-
order firms and retailers (computer superstores, office supply chains and mass
merchants). VARs, which account for one of the largest segments of the overall
reseller channel, typically add value by combining proprietary software and/or
services with off-the-shelf hardware and software.
Wholesale distributors generally purchase a wide range of products in bulk
directly from manufacturers and then ship products in smaller quantities to many
different types of resellers, who typically include dealers, VARs, system
integrators, mail order resellers, computer products superstores and mass
merchants. Aggregators, or master resellers, are functionally similar to
wholesale distributors, but they focus on selling relatively few product lines,
typically high-volume, brand name computer systems, to a captive network of
franchised dealers and affiliates. The larger computer manufacturers, such as
Apple, Compaq, Hewlett-Packard and IBM, have historically required resellers to
purchase their products from an affiliated aggregator, such as the ComputerLand
Franchise and Aggregation Business. Wholesale distributors have not been
authorized to sell these manufacturers' key microcomputer components, except on
a limited basis. These restrictions have been eased recently, and may continue
to be eased and eventually be eliminated, with the result that the distinction
between wholesale distributors and master resellers may blur. With the
acquisition of the ComputerLand Franchise and Aggregation Business, the Company
became the industry's first Master Distributor, combining the strengths of a
full-line, channel-specialized distributor with those of a master reseller. See
"The ComputerLand Franchise and Aggregation Business."
BUSINESS STRATEGY
Merisel has achieved its leading position by pursuing a strategy of
offering the industry's leading products and services to its customers at
competitive prices, providing cost-effective service through operational
excellence, expanding the Company's international business and targeting its
various customer groups using dedicated sales forces and marketing programs.
Providing Leading Products and Services. The Company's objective is to
offer the broadest range of leading product brands in each of the product
categories it carries. By stocking the leading brands, the Company generates
sales of both those product brands as well as other products, as reseller
customers often prefer to deal with a single source for many of their product
needs. The Company continuously evaluates new products, the demand for its
current products and its overall product mix and seeks to develop distribution
relationships with suppliers of products that enhance the Company's product
offerings. The Company believes that the size of its reseller customer base, its
international distribution capability and both the breadth and quality of its
marketing support programs give it a competitive advantage over smaller,
regional distributors in developing supplier relationships.
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As a result of the ComputerLand Acquisition, the Company, through the
ComputerLand Franchise and Aggregation Business, is now able to offer to the
ComputerLand Franchise and Aggregation Business' franchisees and Datago
resellers a broad range of microcomputer systems and other products from Apple,
Compaq, Hewlett-Packard and IBM. Although the Company distributes certain
products of these leading manufacturers through its wholesale distribution
arrangements, the Company and its wholesale distribution competitors are limited
to distributing these products to the VAR reseller market. Certain of these
leading manufacturers have authorized wholesale distributors to act as second-
source providers of product to the dealer industry segment, if a particular
dealer's primary source does not have the product in stock. Certain of these
leading manufacturers have authorized a wholesale distributor owned aggregator-
type business to provide their products to the dealer market. Historically,
these manufacturers have distributed their products directly to reseller
exclusively through aggregators such as the ComputerLand Franchise and
Aggregation Business. See "- The Industry."
The Company believes that an opportunity exists to generate additional,
higher-margin revenues by offering fee-based services and information to
manufacturers and resellers. In 1993, the Company formed the Channel Services
Group to provide a variety of these services, including telemarketing,
merchandising services, electronic software services, education and training.
For the year ended December 31, 1994, Channel Service Group revenues were less
than 1% of the Company's total net sales. In January 1995, the Company formed
The Information Company, a division of Merisel, to respond to the growing demand
for information exchange between resellers and manufacturers. This division will
primarily be involved in establishing and maintenance of product data standards,
development and implementation of the on-line information network services and
the development and packaging of certain other marketing products.
Pursuing Operational Excellence. The Company believes that high levels of
customer satisfaction and operating efficiency, or "operational excellence,"
are important factors in achieving and maintaining success in the highly
competitive microcomputer products distribution industry. The Company measures
operational excellence by such standards as "ease of doing business," accuracy
and efficiency in delivering products and expediting the delivery of services
and information. Merisel constantly strives to improve its operational
processes. In furtherance of this strategy, the Company is in the process of
upgrading and improving its computer operating systems as well as its warehouse
management systems. See "--Operations and Distribution." In addition, the
Company is reorganizing its European operations, has added new management
personnel and is centralizing certain functions to achieve economies of scale.
Merisel will seek to continue to refine the operational systems at its foreign
sales offices and distribution centers in order to increase the uniformity and
efficiency of the Company's worldwide operations. See "--International
Operations." These changes are intended to enhance the Company's ability to
offer faster, more efficient and accurate service to its customers.
Expanding Internationally. Merisel is one of the largest U.S.-based
international distributors. The Company believes it is the largest wholesale
distributor of computer products in Canada and a leading distributor in Europe,
Mexico, Australia and Latin America. See "--International Operations." The
Company believes that certain international markets will continue to offer
growth and profit opportunities, due to the immature and fragmented nature of
the microcomputer distribution industry in these markets. Merisel believes it is
well positioned to capitalize on the opportunities presented in a number of
these markets because of the current scope of its international operations and
its ability to offer a broader range of products and specialized services than
many of its competitors. The Company's strategy is to expand its international
operations through internal growth and the possible acquisition of existing
distributors or the establishment of new operations in other countries.
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Targeting Customer Groups. Merisel serves a variety of reseller channels,
which have diverse product, financing and support needs. Merisel was the first
full-line distributor in the industry to offer its various customer groups a
channel-dedicated sales force as well as customized product offerings, financing
programs and marketing and technical support programs, all of which are tailored
to address the differing needs of these customer groups. The Company intends to
continue to monitor the markets it serves to identify customer opportunities and
develop sales and marketing programs that serve these groups more effectively.
To further promote this strategy, the Company completed the ComputerLand
Acquisition on January 31, 1994.
PRODUCTS AND MANUFACTURER SERVICES
Merisel provides its manufacturers with access to one of the largest bases
of computer resellers worldwide while offering these manufacturers the means to
reduce the inventory, credit, marketing and overhead costs associated with
establishing a direct relationship with these resellers. This factor, along with
Merisel's success in accessing financial resources and its economies of scale,
has allowed the Company to establish and develop long-term business
relationships with many of the leading manufacturers in the microcomputer
industry. Merisel distributes over 25,000 hardware and software products,
including products for the MS-DOS, OS/2, Macintosh, Apple and Unix operating
environments. For the fiscal year ended December 31, 1994, net worldwide sales
of hardware and accessories accounted for approximately 75% of the Company's
sales, and sales of software products accounted for the remaining 25% of net
sales.
Merisel's suppliers include many of the leading microcomputer software and
hardware manufacturers, such as Apple, AST, Borland, Colorado Memory Systems,
Compaq, Creative Labs, Digital Equipment Corporation, Epson, Hayes, Hewlett-
Packard, IBM, Intel, Lotus, Microsoft, NEC, Novell, Okidata, Sun Microsystems,
Symantec, Texas Instruments, 3Com, Toshiba, Wordperfect and Wyse. Merisel is one
of only two distributors in the U.S. of Sun Microsystem's products. Software
products include business applications such as spreadsheets, word processing
programs and desktop publishing and graphics packages, as well as a broad
offering of operating systems, including local area network operating systems,
advanced language and utility products. Hardware products offered by the Company
include computer systems, printers, monitors, disk drives and other storage
devices, modems and other connectivity products, plug-in boards and accessories.
The ComputerLand Acquisition increased the Company's ability, through the
ComputerLand Franchise and Aggregation Business, to distribute the product
offerings of Apple, Compaq, Hewlett-Packard and IBM to the ComputerLand
Franchise and Aggregation Business' franchisees and Datago resellers. See
"--The Industry."
In addition to providing manufacturers access to one of the largest bases
of computer resellers worldwide, the Company also enables manufacturers the
opportunity to efficiently offer a number of special promotions, training
programs and marketing services targeted to the needs of specific reseller
groups. Merisel runs a variety of special promotions for manufacturers'
products, ranging from price discounts and bundled purchase discounts to
specialized computer reseller marketing programs, including the Vantage program
for its distribution business and the Datago program for its ComputerLand
Franchise and Aggregation Business. These promotional programs are designed to
encourage computer resellers to increase their volume of purchases, motivate
resellers to purchase within a limited time period and highlight specific
manufacturers' products or promotion opportunities. Additionally, Merisel
provides marketing consultation services for manufacturers' strategic marketing
campaigns, as well as the opportunity to be included in Merisel-sponsored trade
advertisements.
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Merisel's marketing program specialists work with designated manufacturers to
develop and carry out marketing programs such as dealer commission programs,
sales contests and other promotions. Merisel can also provide dedicated
marketing support and targeted customer information from its database to enhance
manufacturers' product promotions.
The Company also offers two exclusive training programs: Softeach, a two-
day worldwide seminar series whereby manufacturers train resellers about their
products, and Selteach, a training seminar series that gives manufacturers an
opportunity to provide product information to Merisel's United States sales
force. In 1994, Merisel offered Softeach seminars in 21 cities and 9 countries.
Merisel, in conjunction with third-party consultants, also conducts training
classes regarding certain Novell, 3Com, The Santa Cruz Operation, Digital
Equipment Corporation, Sun Microsystems, Microsoft and Lotus products for its
reseller customers.
Merisel generally enters into written distribution agreements with the
manufacturers of the products it distributes. As is customary in the industry,
these agreements usually provide non-exclusive distribution rights and often
contain territorial restrictions that limit the countries in which Merisel is
permitted to distribute the products. The agreements generally provide Merisel
with stock balancing and price protection provisions which reduce in part
Merisel's risk of loss due to slow-moving inventory, supplier price reductions,
product updates or obsolescence. The Company's agreements generally have a term
of at least one year, but often contain provisions permitting earlier
termination by either party upon written notice. Some of these agreements
contain minimum purchase amounts. Failure to purchase at such minimum levels
could result in the termination of the agreement.
Although Merisel regularly stocks products and accessories supplied by more
than 850 manufacturers, 56% of the Company's net sales in 1994 (as compared
to 45% in 1993 and 46% in 1992) were derived from products supplied by Merisel's
ten largest manufacturers, with the sale of products manufactured by Microsoft
and Hewlett-Packard each accounting for approximately 12% of net sales in 1994
(as compared to 16% in 1993 and 17% in 1992 for Microsoft and 2.9% in 1993 and
0.2% in 1992 for Hewlett-Packard). The loss of the ability to distribute a
particularly popular product could result in losses of sales unrelated to that
product. The loss of a direct relationship between the Company and any of its
key suppliers could have an adverse impact on the Company's business and
financial results.
CUSTOMERS AND CUSTOMER SERVICES
Merisel sells to more than 65,000 computer resellers worldwide. Merisel's
customers include VARs, large hardware and software retail chains and
franchisees, computer superstores, mass merchants, Macintosh, Unix and other
corporate resellers, systems integrators, and original equipment manufacturers
as well as independently owned retail outlets and consultants. Merisel's smaller
customers often do not have the resources to establish a large number of direct
purchasing relationships or stock significant product inventories. Consequently,
they tend to purchase a high percentage of their products from distributors.
Larger resellers often establish direct relationships with manufacturers for
their more popular products, but utilize distributors for slower-moving products
and for fill-in orders of fast-moving products which may not be available on a
timely basis from manufacturers. No single customer accounted for more than 3.0%
of Merisel's net sales in 1992, 1993 or 1994.
In Merisel's wholesale distribution business, the Company offers its
customers a single source of supply, prompt delivery, financing programs and
customer support.
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Single Source Provider. Merisel offers computer resellers a single source
for over 25,000 competitively priced hardware and software products. By
purchasing from Merisel, the reseller only needs to comply with a single set of
ordering, billing and product return procedures and may also benefit from
attractive volume pricing. In addition, resellers are allowed, within specified
time limits and, for certain resellers, specified volume limits to return slow-
moving products from one manufacturer in exchange for more popular products from
other manufacturers. Merisel's policy is to not grant cash refunds. Merisel
provides incentives to ComputerLand franchisees and Datago resellers to make all
their product purchases from Merisel and the ComputerLand Franchise and
Aggregation Business.
Prompt Delivery. In the United States and Canada, orders received by 5:00
p.m. local time are typically shipped the same day, provided the required
inventory is in stock. Merisel maintains sufficient inventory levels in the
United States to fill consistently in excess of 95% of all units ordered on the
day of receipt. As part of the Company's effort to improve accuracy and
operational efficiency, the Company installed automated warehouse management
systems, which include infrared bar coding equipment and advanced computer
hardware and software systems, in three warehouses through 1994, and anticipates
installation in its remaining North American warehouses in 1995. Merisel
typically delivers products from its regional warehouses via United Parcel
Service and other common carriers, with customers in most areas in the United
States receiving orders within one to two working days of shipment. Merisel also
will provide overnight air handling if requested and paid for by the customer.
These services allow computer resellers to minimize inventory investment and
provide responsive service to their customers. For larger customers in the
United States, Merisel also provides a fulfillment service so that orders are
shipped directly to the computer resellers' customer, thereby reducing the need
for computer resellers to maintain inventories of certain products. The
Company's foreign subsidiaries may have lower fill rates and longer delivery
times due to differing market requirements and the smaller size of their
operations.
Financing Programs. Merisel's credit policy for qualified resellers
eliminates the need to establish multiple credit relationships with a large
number of manufacturers. In addition, the Company arranges floor plan and lease
financing through a number of credit institutions and offers a program that
permits credit card purchases by qualified customers. To allow certain resellers
to purchase larger orders in the United States, the Company offers to arrange
alternative financing such as escrow programs and special bid financing from
financial institutions.
Customer Support. Merisel offers a number of customer loyalty programs,
including the Vantage program for its distribution business and the Datago
program for its the ComputerLand Franchise and Aggregation Business, which
provide incentives to resellers to aggregate their purchases through Merisel.
The Vantage Programs offer Merisel's top-volume customers within the VAR and
value-added dealer channels increased levels of service and pricing advantages.
The Datago program offers incentives for Datago resellers to aggregate their
purchase through Merisel and the ComputerLand Franchise and Aggregation
Business.
Merisel furnishes its computer resellers with a series of publications
containing detailed information on products, pricing, promotions and
developments in the industry. Merisel publishes a Confidential Reseller Price
Book, which lists Merisel's current product offerings. Merisel also publishes
the Hot List, which ranks Merisel's current best-selling hardware and software
products in four different
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reseller channels. In addition, Merisel's On-Line Literature Library offers over
40,000 data sheets of product information literature on a fax-back system and on
CD-ROM.
Merisel provides training and product information to its reseller customers
through its well-respected Softeach program, a worldwide series of training
forums whereby manufacturers conduct seminars on how to sell their products.
Softeach is held periodically in major cities throughout the United States,
Canada, Australia and Europe. In 1994, the Company believes that over 20,000
computer resellers attended Softeach seminars held in 9 countries worldwide.
Merisel also provides computer resellers with a technical support ''hotline,''
as well as specialized technical support for virtually all product lines sold by
Merisel. In addition, Merisel's Technical Support department provides regular
product training seminars to Merisel's sales representatives to help them become
more product-knowledgeable.
SALES AND MARKETING
To reach diverse customer segments, the Company has organized its Sales
department for its core distribution business in the United States into nine
dedicated sales divisions, which serve the dealer, VAR consumer, and Sun
workstation channel segments.
DEALER CHANNEL. This channel is served by the following specialized sales
divisions:
. The RETAILER division serves franchisees, independent retail chains and
storefronts, corporate resellers and direct-mail marketers.
. The RESELLER FULFILLMENT division serves the needs of direct marketers
such as Dell, IBM, NEC Direct, AT&T GIS & IBM PC Company through the
fulfillment of orders for third-party hardware and software products.
. The MAJOR ACCOUNTS division serves Merisel's large franchisee accounts,
computer superstores and computer retail chains through a specialized
staff that offers enhanced services, volume purchase agreements,
corporate office coordination, marketing programs and sales report
data.
. The MACINTOSH division provides expertise in sale and support of third-
party Macintosh products worldwide through its own separate marketing,
sales, products and technical support and purchasing departments.
VAR CHANNEL. This channel is served by the following specialized sales
divisions:
. The VAR division provides value-added resellers with highly
knowledgeable sales representatives, a comprehensive line of computer
systems, Unix and connectivity products, education, financial services
and technical support.
. The OEM division supports Merisel's customers who integrate and/or
manufacture microprocessor-based systems and solutions utilizing OEM
versions of Merisel's hardware and software products.
. The SYSTEM INTEGRATOR division supports large system and network
integrators who require specialized programs and services.
CONSUMER CHANNEL.
. The CONSUMER PRODUCTS division targets mass merchants such as Circuit
City, Montgomery Ward and Office Depot by providing inventory selection
and control services, specialized marketing programs and other support
services tailored to the needs of mass-market merchandisers.
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SUN WORKSTATION CHANNEL.
. The ADVANCED PRODUCTS division (formerly the UNIX division) is
primarily dedicated to selling and supporting Sun Microsystems and Sun-
complimentary products through its own sales, marketing, operations and
technical support departments.
For each of the Company's international subsidiaries, the number and type
of specialized sales divisions vary based on market requirements, the size of
the subsidiary's sales force and the products carried by the subsidiary.
The Company's sales force is composed of field sales representatives who
manage relations with the larger accounts and inside telemarketing sales
representatives who receive product orders and answer customer inquiries. In the
United States and Canada, when a customer calls Merisel, screen synchronization
technology causes a sales profile to appear on the sales representative's
computer screen before greetings are exchanged. Customer orders generally are
placed via a toll-free telephone call to Merisel's inside sales representatives
and are entered on Merisel's SalesNet order entry system, a proprietary local
area network created by Merisel to speed the process of taking and processing
orders. Using the SalesNet database, sales representatives can immediately enter
customer orders, obtain descriptive information regarding products, check
inventory status, determine customer credit availability and obtain special
pricing and promotion information. Merisel also offers Dial-Up SalesNet, a
system that allows a customer, through the use of its own personal computer and
a modem, to access Merisel's database to examine pricing, credit information,
product description and availability and promotional information and to place
orders directly into Merisel's order processing system. For certain of its
larger customers, the Company has installed electronic data interchange (EDI)
systems which allow participating customers to directly access the Company's
mainframe computer system for order processing and account information.
OPERATIONS AND DISTRIBUTION
The Company operates 20 distribution centers around the world, including
eight in the United States, two in Canada, five in Europe, four serving Latin
America and one in Australia. The Company plans to shut down and consolidate
certain warehouses in North America and Europe in mid-to-late 1995. The
warehouse at Rancho Dominquez, California is scheduled to be closed in April
1995. All of these distribution centers are leased. The Company owns one
facility in Mexico, which used to serve as a distribution center. This facility
is in the process of being leased to a third party. In its place, the Company
has leased a larger distribution facility in the same city.
The Company's United States, Canadian and United Kingdom operations, other
than the ComputerLand Franchise and Aggregation Business, are conducted using a
mainframe-based computer system, originally implemented in the early 1980s, that
operates on hardware owned and operated by a third-party service provider. The
Company is currently making a significant investment in new advanced computer
and warehouse management systems for its North American operations to support
expected continued sales growth and to accommodate improved service levels.
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These new systems are designed to accommodate sales volumes significantly
greater than current volumes as well as provide greater transaction accuracy and
operating efficiency and more flexibility to accommodate a variety of
transaction types. The Company began designing the new computer system in early
1993 and anticipates converting its North America operations to the new system
beginning in mid 1995. The Company presently estimates that its aggregate
investment in the new computer systems, including costs of system design,
hardware, software, installation and training, will be approximately $35
million. In addition, the Company installed an automated new warehouse
management system, which includes infrared bar coding equipment and advanced
computer hardware and software systems, in three warehouses through 1994 and
anticipates installation in its remaining North American warehouses in 1995.
The design and implementation of these new systems are complex projects and
involve risks that unanticipated problems may delay implementation of the new
systems or cause them to perform below anticipated service levels. The Company
therefore is making a substantial investment (see above) in the design and
installation of these systems and is dedicating a significant number of its
personnel on a full-time basis (139 employees and independent contractors) to
these projects. In the event the Company experiences delays in implementation of
these new systems or such systems fail to perform at anticipated service levels,
the Company may not be able to accommodate anticipated increases in sales
volumes and transaction processing requirements.
INTERNATIONAL OPERATIONS
The Company distributes microcomputer products throughout the world.
Merisel formed its first international subsidiary in 1982 and now operates in
Canada, the United Kingdom, France, Germany, Australia, Switzerland, Austria and
Mexico. Merisel also has a subsidiary based in Miami, Florida, which primarily
sells products to customers in Latin America and in other parts of the world
where Merisel does not have a physical presence. In June 1990, the Company began
limited distribution of products in Russia as part of a joint venture. The
Company believes that certain of the markets for microcomputer products outside
the United States are less mature and therefore present opportunities for
further growth. Accordingly, the Company will seek to further expand its
international operations through internal growth and the possible acquisition of
existing distributors or establishment of new operations in other countries.
The products and services offered by Merisel's international subsidiaries
are generally similar to those offered in the United States, although the
breadth of the subsidiaries' product lines and the range of manufacturers' and
customers' services offered by the subsidiaries are usually smaller due to the
smaller size of the subsidiaries and differing market requirements. Certain
subsidiaries provide products or services not offered in the United States due
to differing manufacturer relationships and market requirements. Operationally,
the management and distribution systems at the Company's international
subsidiaries vary depending on the size of the subsidiary, its length of
operation and local market requirements. As each subsidiary expands, the Company
seeks to implement systems and procedures that are more similar to those used in
the United States.
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In Europe, the Company is revising its distribution strategy in response to
the reduction in cross-border shipment barriers instituted by the European
Economic Community in 1993. With the reduction of cross-border shipping
barriers, the Company believes it can more efficiently ship to a large number of
countries from a centralized master warehouse or warehouses, supplemented by
smaller warehouses in various locations across Europe. At present, the Company
maintains a full warehouse in each of the countries in which it has operations,
with the exception of Austria. The Company began construction of a master
warehouse in Helmond, The Netherlands in May 1994. The Company expects to begin
operating the warehouse in mid-to-late 1995.
The Company's European operations are managed through a European
headquarters, which operates with a staff of pan-European managers to oversee
the Company's various European subsidiaries and operations. Merisel's European
management team is implementing its long-term strategy to centralize
distribution, which includes a master warehouse, computer systems enhancements
and other operational changes.
Because the Company conducts business in a number of countries, that
portion of operating results and cash flows that is non-U.S. dollar denominated
is subject to certain currency fluctuations. The Company generally employs
forward exchange contracts to limit the impact of fluctuations in the relative
values of some of the currencies in which it does business. In 1994, the Company
incurred foreign currency losses of $1.4 million, primarily due to the
devaluation of the Mexican Peso. The Company expects the devaluation of the
Mexican Peso to continue in 1995 and, accordingly, is re-assessing its foreign
currency strategies in Mexico to minimize its foreign exchange transaction
exposure resulting from further devaluations.
In addition, international operations may also be subject to risks such as
the imposition of governmental controls, export license requirements,
restrictions on the export of certain technology, political instability, trade
restrictions, changes in tariffs, difficulties in staffing and managing
international operations and collecting accounts receivable and the impact of
local economic conditions and practices. As the Company continues to expand its
international operations, its success will be dependent, in part, on its ability
to anticipate and deal with these and other risks. There can be no assurance
that these or other factors will not have an adverse effect on the Company's
international operations.
For segment information regarding Merisel's United States and international
operations, see footnote 11 of Notes to Consolidated Financial Statements.
THE COMPUTERLAND FRANCHISE AND AGGREGATION BUSINESS
On January 31, 1994, the Company completed the ComputerLand Acquisition. As
a result of the ComputerLand Acquisition, Merisel, through the ComputerLand
Franchise and Aggregation Business, now operates as a master reseller of
computer systems and related products from the major microcomputer manufacturers
to a network of approximately 750 independently-owned product resellers composed
of two customer groups: ComputerLand franchisees, with whom Merisel FAB, Inc.,
("Merisel FAB") a wholly-owned subsidiary of Merisel, Inc., acts as franchisor
by licensing the ComputerLand name and providing both product supply and various
support services, and resellers purchasing under the ComputerLand Franchise and
Aggregation Business' Datago Program, which are independent dealers and value-
added resellers that purchase products from the ComputerLand Franchise and
Aggregation Business, but do not license the ComputerLand name. See
"Management's Discussion and Analysis of
10
<PAGE>
Financial Condition and Results of Operations--Acquisition of The ComputerLand
Franchise and Aggregation Business."
In connection with its purchase of the ComputerLand Franchise and
Aggregation Business, Merisel purchased the ComputerLand Franchise and
Aggregation Business' franchise and third-party reseller agreements as well as
the rights in the United States to Vanstar Corporation's trademarks, trade
names, service marks, copyrights, patents and logos. Merisel paid approximately
$80 million in cash at the closing of the ComputerLand Acquisition for the
acquired assets. In addition, Merisel has agreed to make an additional payment
in 1996 of up to $30 million, the amount of which will be determined based upon
the growth in the ComputerLand Franchise and Aggregation Business and the
Company's sales of products of designated manufacturers to specified customers
over the two-year period ending January 31, 1996. Sixty-five of the ComputerLand
Franchise and Aggregation Business' 66 employees became employees of the
ComputerLand Franchise and Aggregation Business in connection with the
ComputerLand Acquisition. Merisel did not purchase the order fulfillment
systems, warehouses or inventory used by the ComputerLand Franchise and
Aggregation Business. At some future date, the Company intends to integrate
these functions into its facilities and systems. In the interim, Merisel and
Vanstar Corporation have entered into a Distribution and Services Agreement (the
"Services Agreement") pursuant to which Vanstar Corporation continues to provide
products and distribution and other support services to the ComputerLand
Franchise and Aggregation Business for a contractually agreed upon fee until
January 31, 1996. In addition, pursuant to the terms of the Services Agreement,
the ComputerLand Franchise and Aggregation Business has been granted $20 million
in extended credit terms on its product purchases from Vanstar.
Following its sale of the ComputerLand Franchise and Aggregation Business,
Vanstar continues to operate as a reseller of computer products and services
through its company-owned locations throughout the United States and also
retains its international operations.
The ComputerLand Franchise and Aggregation Business' franchisees operate
locations under the ComputerLand name. The ComputerLand Franchise and
Aggregation Business currently sells products to franchisees at cost and
receives a royalty based upon gross sales of the franchisee, irrespective of
whether the products sold were purchased from the ComputerLand Franchise and
Aggregation Business. During 1994, the ComputerLand Franchise and Aggregation
Business offered franchisees the opportunity to revise such franchisees' pricing
structure by selling products to franchisees at cost plus a mark-up and reducing
the royalty on overall franchisee sales and requires the franchisee to achieve
minimum purchase targets. As of December 31, 1994, 47 franchisees had accepted
the revised cost structure. The franchise agreements purchased as part of the
ComputerLand Acquisition typically provide for a ten-year exclusive contract,
renewable at the option of the franchisee. In addition to the use of the
ComputerLand name, the ComputerLand Franchise and Aggregation Business provides
franchisees a range of services including sales and marketing materials,
management and sales support services and a proprietary dealer management
software system. At December 31, 1994, the ComputerLand Franchise and
Aggregation Business had agreements with 145 franchise owners operating 197
locations, located primarily in secondary metropolitan markets in the United
States. Franchise owners and operating locations have decreased since the
acquisition of the ComputerLand Franchise and Aggregation Business as a result
of conversion of certain franchises to Datago resellers, consolidation of
locations by franchise owners and franchises that are no longer in business.
11
<PAGE>
The ComputerLand Franchise and Aggregation Business' Datago resellers are
independent dealers and value-added resellers. These resellers generally enter
into non-exclusive one-year renewable contracts cancelable at the option of
either party on short notice. These contracts typically entitle Datago resellers
to purchase the full range of the ComputerLand Franchise and Aggregation
Business' products at cost plus a mark-up, depending on the dollar volume of
products purchased. At December 31, 1994, the ComputerLand Franchise and
Aggregation Business had 601 active Datago resellers. During the year ended
December 31, 1994, no individual franchisee or Datago reseller accounted for
more than 5% of the ComputerLand Franchise and Aggregation Business revenues.
Following the ComputerLand Acquisition, the Company began efforts to add
additional resellers as customers of the ComputerLand Franchise and Aggregation
Business under its Datago program. During 1994, the Company began to add new
ComputerLand franchisees, focusing in particular on locations where no reseller
is using the ComputerLand name. A total of 11 ComputerLand franchises were added
during 1994. Currently, new franchisees, as well as renewing franchisees, will
enter into three year franchise agreements that allow a franchisee the option to
convert to a Datago affiliate for the third year.
The ComputerLand Franchise and Aggregation Business offers its franchisees
and Datago resellers a selection of major microcomputer equipment and
peripherals provided by approximately 50 suppliers. For the year ended December
31, 1994, approximately 82% of the ComputerLand Franchise and Aggregation
Business revenues were generated by sales of Apple, Compaq, Hewlett-Packard and
IBM products. The loss of any one of these four manufacturers, or a change in
the way any of these manufacturers markets, prices or distributes its products,
could have a material adverse effect on the ComputerLand Franchise and
Aggregation Business' operations and financial results. In 1995, a change by one
of these manufacturers has allowed certain of the Company's larger customers to
purchase product directly from this manufacturer. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Acquisition of
The ComputerLand Franchise and Aggregation Business." In addition to the
products supplied directly by the ComputerLand Franchise and Aggregation
Business, franchisees and Datago resellers may purchase other products offered
by the Company's wholesale distribution business pursuant to separate agreements
negotiated on their behalf by the ComputerLand Franchise and Aggregation
Business.
Under the Services Agreement, until January 31, 1996, Vanstar Corporation
will continue to purchase and warehouse manufacturers' products and fulfill
reseller orders for the products offered by the ComputerLand Franchise and
Aggregation Business. The ComputerLand Franchise and Aggregation Business will
purchase such products from Vanstar, rather than directly from the supplier, and
will pay Vanstar a service fee for performing these distribution functions.
Resellers will continue to place product orders with the ComputerLand Franchise
and Aggregation Business through the order placement system operated by Vanstar.
Vanstar will typically ship products to a customer within two days of receipt of
an order. Until January 31, 1996, the ComputerLand Franchise and Aggregation
Business will be dependent upon Vanstar to purchase and maintain inventories of
products sufficient to meet resellers' requirements and to receive and fulfill
orders at acceptable service levels. Although Vanstar maintains the direct
contractual relationship with the suppliers, the ComputerLand Franchise and
Aggregation Business and Vanstar jointly maintain supplier relationships. While
the Company has no reason to believe that Vanstar will not be able to continue
to perform its obligations under the Services Agreement, in the event that
Vanstar becomes unable to continue to perform such obligations, there may be an
adverse effect on the operations and financial results of the Company. The
Services Agreement contains provisions for monetary penalties in the event that
Vanstar fails to achieve agreed-upon service levels, as well as provisions
permitting the ComputerLand Franchise and Aggregation Business to take over a
portion of Vanstar's operations to fulfill such obligations under certain
circumstances.
12
<PAGE>
Over 76% of the ComputerLand Franchise and Aggregation Business' sales to
its customers currently are financed on behalf of such customers by floor plan
financing companies, and the ComputerLand Franchise and Aggregation Business
typically receives payment from these financing companies within three business
days from the date of sale. Such floor plan financing is typically subsidized
for the ComputerLand Franchise and Aggregation Business' customers by its
suppliers. Any material change in the availability or the terms of financing
offered by such financing companies or the subsidies provided by suppliers could
require the ComputerLand Franchise and Aggregation Business to provide such
financing to its customers, thereby substantially increasing the working capital
necessary to operate its business.
COMPETITION
Competition in the microcomputer products distribution industry is intense
and is based primarily on price, brand selection, breadth and availability of
product offering, speed of delivery, level of training and technical support,
marketing services and programs and ability to influence a buyer's decision.
Certain of Merisel's competitors have substantially greater financial
resources than Merisel. Merisel's principal competitors include large United
States-based international distributors such as Ingram Micro and Tech Data
Corporation, non-U.S. based international distributors such as Computer 2000,
national distributors such as Gates/Arrow and Ameriquest Technologies, Inc. and
regional distributors and franchisors. The Company competes internationally with
a variety of national and regional distributors on a country-by-country basis.
Merisel also competes with manufacturers that sell directly to computer
resellers, sometimes at prices below those charged by Merisel for similar
products. The Company believes its broad product offering, product availability,
prompt delivery and support services may offset a manufacturer's price
advantage. In addition, many manufacturers focus their direct sales to large
computer resellers because of the high costs associated with dealing with a
large number of small-volume computer reseller customers.
The ComputerLand Franchise and Aggregation Business is subject to
competition from other franchisors and aggregators in obtaining and retaining
franchisees and third-party resellers, as well as competition from wholesale
distributors with respect to sales of products to customers in the ComputerLand
Franchise and Aggregation Business network. See "--The Industry." The Company
believes that the ComputerLand Franchise and Aggregation Business pricing,
brand selection, product availability and service levels are competitive in the
industry. With respect to brand selection, the Company believes that an
important factor in the ComputerLand Franchise and Aggregation Business ability
to attract customers is the fact that it is able to offer computer systems and
other hardware products from Apple, Compaq, Hewlett-Packard and IBM. These
manufacturers historically have sold their products directly to resellers and
through a limited number of master resellers such as the ComputerLand Franchise
and Aggregation Business. The loss of any of these manufacturers, or any change
in the way any such manufacturers markets, prices or distributes its products,
could have a material adverse effect on the ComputerLand Franchise and
Aggregation Business operations and financial results. In 1995, a change by one
of these manuacturers has allowed certain of the Company's larger customers to
purchase product directly from this manufacturer. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Acquisition of
The ComputerLand Franchise and Aggregation Business." The ComputerLand Franchise
and Aggregation Business principal competitors are Intelligent Electronics,
MicroAge and Inacom, all of which maintain networks of franchisees and third-
party dealers and which carry products of one or more of the Company's major
13
<PAGE>
manufacturers. Certain of the ComputerLand Franchise and Aggregation Business
competitors have greater financial resources than the Company.
EMPLOYEES
As of December 31, 1994 Merisel had 3,072 employees. Merisel considers its
relations with its employees to be good.
ITEM 2. PROPERTIES.
The Company maintains distribution centers in the following locations:
<TABLE>
<CAPTION>
Distribution
-------------
County/Area Served Centers
-------------------------- -------------
<S> <C>
United States............. 8
Australia................. 1
Canada.................... 2
France.................... 1
Germany................... 1
Latin America/Caribbean... 1*
Mexico.................... 3
Russia.................... 1
Switzerland............... 1
United Kingdom............ 1
--
Total..................... 20
==
</TABLE>
--------------
* Located in Miami, Florida.
The Company plans to shut down and consolidate certain warehouses in North
America and Europe in mid-to late 1995. The warehouse at Rancho Dominguez,
California is scheduled to be closed in April, 1995.
All of the Company's distribution centers are leased. The Company owns one
facility in Mexico, which used to serve as a distribution center. This facility
is in the process of being leased to a third party. In its place, the Company
has leased a larger distribution facility in the same city. Merisel FAB is
located in a 10,120 square-foot facility in Pleasanton, California. The facility
has been subleased from ComputerLand for a two-year period ending January 31,
1996. Merisel FAB's customers receive product shipments directly from Vanstar's
two warehouses located in Livermore, California and Indianapolis, Indiana.
In Europe, the Company is revising its distribution strategy in response to
the reduction in cross-border shipment barriers instituted by the European
Economic Community in 1993. With the reduction of cross-border shipping
barriers, the Company believes it can more efficiently ship to a large number of
countries from a centralized master warehouse or warehouses, supplemented by
smaller warehouses in various locations across Europe. At present, the Company
maintains a full warehouse in each of the countries in which it has operations,
with the exception of Austria. The Company began construction of a master
warehouse in Helmond, The Netherlands in May 1994. The Company expects to begin
operating the warehouse in mid-to-late 1995.
14
<PAGE>
The Company's world headquarters are located in El Segundo, California, and
the Company also maintains sales offices in various domestic and international
locations. The Company believes that its facilities currently provide sufficient
space for its present needs, and that suitable additional space will be
available on reasonable terms, if needed.
ITEM 3. LEGAL PROCEEDINGS.
In June 1994, the Company and certain of its officers and/or directors were
named in putative securities class actions filed in the United Sates District
Court for the Central District of California, consolidated as In re Merisel,
Inc. Securities Litigation. Plaintiffs, who are seeking damages in an
unspecified amount, purport to represent a class of all persons who purchased
Merisel common stock between November 8, 1993 and June 7, 1994 (the "Class
Period"). The complaints allege that the defendants inflated the market price
of Merisel's common stock with material misrepresentations and omissions during
the Class Period. Plaintiffs contend that such alleged misrepresentations are
actionable under Sections 10(b) and 20(a) of the Exchange Act of 1934 and Rule
10b-5 promulgated thereunder. Following the granting of defendant's first motion
to dismiss on December 5, 1994 plaintiffs filed a second consolidated and
amended complaint on December 22, 1994. Merisel believes that it has
meritorious defenses to this lawsuit and intends to defend the action
vigorously. Merisel believes that the outcome of this matter will not have a
material adverse effect on the consolidated financial position or results of
operations of the Company and, accordingly, no provision for loss has been made
in the accompanying financial statements.
The Company is involved in certain other legal proceedings arising in the
ordinary course of business, none of which is expected to have a material impact
on the financial condition or business of Merisel.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
15
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Company's Common Stock is traded in the over-the-counter market and is
quoted on the Nasdaq National Market under the symbol MSEL. The following table
sets forth the quarterly high and low sale prices for the Common Stock as
reported by the Nasdaq National Market.
<TABLE>
<CAPTION>
High Low
------- -------
<S> <C> <C>
FISCAL YEAR 1993
First quarter..... $ 13 $10 1/8
Second quarter.... 12 3/4 9 3/4
Third quarter..... 16 1/2 10 3/8
Fourth quarter.... 18 1/2 13 7/8
FISCAL YEAR 1994
First quarter..... 22 1/2 16 5/8
Second quarter.... 19 7/8 8
Third quarter..... 11 1/4 7
Fourth quarter... 10 3/4 6 1/4
FISCAL YEAR 1995
First quarter..... 8 1/2 3 7/8
</TABLE>
On March 22, 1995, the closing sale price for the Company's Common Stock
was $4.1875 per share. As of March 22, 1995, there were 1,164 record holders of
the Company's Common Stock.
Merisel has never declared or paid any dividends to stockholders. Certain
of the Company's debt agreements currently prohibit the payment of dividends by
the Company. At this time, the Company intends to continue its policy of
retaining earnings for the continued development and expansion of its business.
16
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------------
1990 1991 1992 1993 1994
----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
(In thousands, except per share amounts)
INCOME STATEMENT DATA:(1)
Net sales............................... $1,192,411 $1,585,446 $2,238,715 $3,085,851 $5,018,687
Cost of sales........................... 1,073,553 1,427,491 2,036,292 2,827,315 4,676,164
---------- ---------- ---------- ---------- ----------
Gross profit............................ 118,858 157,955 202,423 258,536 342,523
Selling, general & administrative
expenses............................... 102,361 119,682 150,905 187,152 281,796
---------- ---------- ---------- ---------- ----------
Operating income........................ 16,497 38,273 51,518 71,384 60,727
Interest expense........................ 13,720 15,972 15,742 17,810 29,024
Other (income) expense.................. (776) 823 1,299 2,722 11,752
---------- ---------- ---------- ---------- ----------
Income before income taxes.............. 3,553 21,478 34,477 50,852 19,951
Provision for income taxes.............. 2,918 10,652 14,812 20,413 8,341
---------- ---------- ---------- ---------- ----------
Net income.............................. $ 635 $ 10,826 $ 19,665 $ 30,439 $ 11,610
========== ========== ========== ========== ==========
PER SHARE DATA:
Net income per share.................... $0.03 $0.43 $0.67 $1.00 $0.38
Weighted average number of shares....... 21,766 24,897 29,274 30,454 30,389
BALANCE SHEET DATA:
Working capital......................... $ 212,993 $ 92,510 $ 294,626 $ 359,765 $ 399,848
Total assets............................ 431,706 508,586 667,313 936,283 1,191,870
Long-term and subordinated debt......... 158,949 25,316 153,433 208,500 357,685
Total debt.............................. 160,597 164,632 179,124 259,429 395,556
Stockholders' equity.................... 114,283 125,537 198,882 223,857 236,164
--------------
</TABLE>
(1) Merisel's fiscal year is the 52- or 53-week period ending on the Saturday
nearest to December 31. For clarity of presentation throughout this Annual
Report on Form 10-K, Merisel has described year ends presented as if the
year ended on December 31. Except for 1992, all fiscal years presented were
52 weeks in duration. On January 31, 1994, the Company acquired the
ComputerLand Franchise and Aggregation Business in a transaction accounted
for as a purchase. The selected financial data set forth above includes
that of Merisel prior to the acquisition of the ComputerLand Franchise and
Aggregation Business and that of the combined entities subsequent to the
acquisition of the ComputerLand Franchise and Aggregation Business. See
''Management's Discussion and Analysis of Financial Condition and Results of
Operations.''
17
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION.
OVERVIEW
The Company was founded in 1980 and has grown both through internal growth and
through acquisitions of other computer products distributors and an aggregator.
By 1989, the Company had achieved annual revenues of $629.4 million, principally
through internal expansion. In April 1990, the Company acquired Microamerica,
Inc. (''Microamerica''), another worldwide distributor of microcomputer
products, with net sales of approximately $526 million for the year ended
December 31, 1989. In the years following the Microamerica acquisition, the
Company's revenues increased from $2.2 billion in 1992 to $3.1 billion in 1993,
reflecting substantial growth in both domestic and international sales as the
worldwide market for computer products expanded and manufacturers increasingly
turned to wholesale distributors for distribution of their products. On January
31, 1994, the Company completed the acquisition of certain assets of the
ComputerLand Franchise and Aggregation Business from Vanstar Corporation. See
"Business--The ComputerLand Franchise and Aggregation Business" and "--
Acquisition of The ComputerLand Franchise and Aggregation Business.'' In 1994,
the Company's revenues increased to $5.0 billion, reflecting $1.1 billion in
revenue for eleven months from this acquisition in addition to the factors
provided above. The Company's net income as a percentage of sales, or net
margin, declined from 0.9% and 1.0% for 1992 and 1993, respectively, to 0.2% for
1994, primarily as a result of a decline in gross profit margins resulting from
continued competitive price pressures, an increase in selling, general and
administrative expenses associated with the Company's increase in net sales and
an increase in interest expense and asset securitization fees to finance the
Company's higher sales levels, investments in warehouse facilities and computer
systems, losses in Europe and the acquisition of the ComputerLand Franchise and
Aggregation Business.
The Company anticipates that gross margins will continue to decline in the
future due to industry price competition. In addition, the Company's
ComputerLand Franchise and Aggregation Business generates lower gross margins
than the Company's core distribution business. In 1994, the ComputerLand
Franchise and Aggregation Business' gross margin was 4.7% of net sales,
compared to 7.4% of net sales for the core distribution business. However, the
ComputerLand Franchise and Aggregation Business has lower selling, general and
administrative expenses as a percentage of sales than the Company's existing
wholesale distribution business. In 1994, the ComputerLand Franchise and
Aggregation Business' selling, general and administration expenses were 3.7% of
net sales, compared to 6.2% of net sales for the Company's core distribution
business. See ''--Acquisition of The ComputerLand Franchise and Aggregation
Business.'' Although management will continue its efforts to reduce selling,
general and administrative expenses as a percentage of sales, through (among
other things) the implementation of new computer operating systems and warehouse
management systems that the Company expects will enable it to utilize its
existing assets more productively, no assurance can be given as to whether such
reductions will, in fact, occur or as to the actual amount of any such
reductions. In an attempt to address competitive pressures, the Company is
currently assessing its cost structure and anticipates incurring a restructuring
charge of approximately $10 million in the first quarter of 1995. This
restructuring charge primarily includes reductions in the number of employees
and the consolidation of warehouse facilities. To the extent gross margins
continue to decline and the Company is not successful in sufficiently reducing
selling, general and administrative expenses as a percentage of sales, the
Company will continue to experience a negative impact on its operating income.
18
<PAGE>
RESULTS OF OPERATIONS
For the periods indicated, the following table sets forth selected items from
the Company's Consolidated Statements of Income, expressed as a percentage of
net sales:
<TABLE>
<CAPTION>
PERCENTAGE OF NET SALES
--------------------------
YEAR ENDED DECEMBER 31,
--------------------------
1992 1993 1994
------- ------- ------
<S> <C> <C> <C>
Net sales...................................... 100.0% 100.0% 100.0%
Cost of sales.................................. 91.0 91.6 93.2
----- ----- -----
Gross profit................................... 9.0 8.4 6.8
Selling, general and administrative expenses... 6.7 6.1 5.6
----- ----- -----
Operating income............................... 2.3 2.3 1.2
Interest expense............................... 0.7 0.6 0.6
Other expense.................................. 0.1 0.1 0.2
----- ----- -----
Income before income taxes..................... 1.5 1.6 0.4
Provision for income taxes..................... 0.6 0.6 0.2
----- ----- -----
Net income..................................... 0.9% 1.0% 0.2%
===== ===== =====
</TABLE>
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993
The Company's net sales increased 63% (28% excluding the ComputerLand
Franchise and Aggregation Business), to $5.0 billion in 1994 from $3.1 billion
in 1993. The increase in net sales was due to the impact of the ComputerLand
Acquisition, the growth of the overall market for hardware and software
products, as well as an increase in the number of vendors and products the
Company is authorized to sell in various geographic markets. The Company also
increased its market share of certain vendor products in various geographic
markets. Net sales for the ComputerLand Franchise and Aggregation Business for
the 11 months ended December 31, 1994 were $1.1 billion or 21% of consolidated
net sales for the year ended December 31, 1994.
Geographically, the Company's 1994 net sales were as follows: United States,
$3.4 billion, or 68%; Canada, $517 million, or 10%; Europe, $784 million, or
16%; and other international markets, $305 million, or 6%. From 1993 to 1994,
these geographic regions experienced sales growth rates of 75%, (21% without
the ComputerLand Franchise and Aggregation Business), 31%, 47% and 47%,
respectively. For additional information on the Company's operating results by
geographic region, see Note 11 of Notes to Consolidated Financial Statements.
The Company's sales of hardware and accessories, including the ComputerLand
Franchise and Aggregation Business, accounted for 75% of net sales, and software
accounted for 25% of net sales in 1994, as compared to 60% and 40%,
respectively, in 1993. The Company's hardware and accessories, excluding the
ComputerLand Franchise and Aggregation Business, accounted for 69% of net sales
and software accounted for 31% of net sales in 1994. The increase in hardware
sales was due to the Company obtaining additional rights to distribute hardware
products throughout the world from various vendors and that the ComputerLand
Franchise and Aggregation Business' revenues are predominantly hardware-related.
The decrease in software sales as a percentage of net sales was also partially
the result of lower prices on software products sold in the United States.
19
<PAGE>
Gross profit increased 32.5% to $342.5 million in 1994 from $258.5 million in
1993. Gross profit as a percentage of sales, or gross margin, decreased to
6.8%, from 8.4% in 1993. In 1994, the ComputerLand Franchise and Aggregation
Business's, gross margin was 4.7% of net sales, compared to 7.4% of net sales
for the Company's core distribution business. The decrease in gross margin was
principally attributable to competitive pressures on pricing worldwide and the
effect of the ComputerLand Acquisition. The ComputerLand Franchise and
Aggregation Business' operating expenses as a percentage of sales, however, were
lower than those of the Company's wholesale distribution business, which helped
offset its lower gross margins. See "--Acquisition of The ComputerLand Franchise
and Aggregation Business." The Company anticipates that it will continue to
experience downward pressure on gross margin due to industry price competition.
Selling, general and administrative expenses ("SG&A") increased 50.6% to
$281.8 million in 1994 from $187.2 million in 1993. SG&A decreased as a
percentage of net sales from 6.1% in 1993 to 5.6% in 1994. In 1994, the
ComputerLand Franchise and Aggregation Business' SG&A was 3.7% of net sales,
compared to 6.2% of net sales for the core distribution business. The absolute
dollar increase in SG&A is primarily due to costs associated with the Company's
63% increase in net sales and higher SG&A costs in Europe due to the costs
associated with the Company's implementation of its long-term strategy to
centralize its European operations. The decrease in SG&A as a percentage of net
sales was due to the ComputerLand Franchise and Aggregation Business' lower
operating expenses as a percentage of sales compared to those of Merisel's core
distribution business. The Company's number of full-time equivalent employees
increased from 2,502 at December 31, 1993 to 3,072 at December 31, 1994.
Operating income decreased 14.9% from $71.4 million in 1993 to $60.7 million
in 1994. Operating income as a percentage of net sales was 2.3% in 1993 and
1.2% in 1994. Operating income as a percentage of net sales for the Company's
U. S. distribution business declined as a result of lower gross margins and an
increase in operating expenses. The Company's European operations experienced
net operating losses in 1994 as a result of continued competitive pressure on
margins, increased operating expenses and the costs associated with the
implementation of the Company's long-term strategy to centralize European
operations. In the fourth quarter of 1994, the Company recorded certain items
which reduced operating income by approximately $7.8 million. These items
related primarily to changes made in estimates to certain asset and liability
values. In addition, the ComputerLand Franchise and Aggregation Business
generates lower operating income as a percentage of net sales than the Company's
wholesale distribution business, which has the effect of lowering overall
consolidated operating income as a percentage of net sales.
Interest expense increased 63.0% to $29.0 million in 1994 from $17.8 million
in 1993, but remained level as a percentage of sales at 0.6%. The dollar
increase in interest expense is primarily attributable to the Company's higher
average borrowings in 1994, reflecting the need to finance the acquisition of
the ComputerLand Franchise and Aggregation Business and the Company's higher
sales levels and, to a lesser extent, an increase in interest rates.
Other expense increased to $11.8 million in 1994 from $2.7 million in 1993.
The increase in other expense in 1994 primarily relates to an increase of $6.5
million in fees incurred in connection with accounts receivable securitizations
and an increase in the amortization of financing fees of $1.2 million primarily
related to the acquisition of the ComputerLand Franchise and Aggregation
Business. See "--Liquidity and Capital Resources." In addition, other
expenses includes foreign currency losses of $1.4 million, primarily due to the
devaluation of the Mexican Peso. The Company expects the devaluation of the
Mexican Peso to continue in 1995 and, accordingly, is re-assessing its foreign
currency strategies in Mexico to minimize its foreign currency transaction
exposure resulting from further devaluations.
20
<PAGE>
Provision for income taxes decreased to $8.3 million in 1994 from $20.4 in
1993, reflecting the Company's 60.8% decrease in income before income taxes.
The Company's effective tax rate was 41.8% in 1994 compared to 40.1% in 1993.
This increase was principally the result of certain of the Company's
subsidiaries that derived no tax benefit from such losses under local tax laws.
Net income decreased 61.9% to $11.6 million in 1994 from $30.4 million in
1993, while net income per share decreased to $0.38 from $1.00. In the fourth
quarter of 1994, the Company recorded a loss of $2.5 million compared to net
income of $11.9 million in the fourth quarter of 1993. In response to the 1994
operating results and fourth quarter loss, the Company is assessing its current
cost structure and anticipates incurring a restructuring charge of approximately
$10 million in the first quarter of 1995. This restructuring charge primarily
includes reductions in the number of employees and the consolidation of
warehouse facilities.
YEAR ENDED DECEMBER 31, 1993 COMPARED TO YEAR ENDED DECEMBER 31, 1992
The Company's net sales increased 38% to $3.1 billion in 1993 from $2.2
billion in 1992, reflecting significant growth in both domestic and
international sales. The Company believes this increase is due principally to
the establishment of new relationships with manufacturers in various markets
around the world, the introduction of new products by existing manufacturers,
increased customer demand for computer products and increased use of wholesale
distribution by manufacturers in their distribution channels. The Company's 1992
fiscal year included 53 weeks due to the timing of the fiscal year end, while
the 1993 fiscal year contained 52 weeks. See Note 1 of Notes to Consolidated
Financial Statements.
Geographically, the Company's 1993 net sales were as follows: United States,
$2.0 billion, or 63%; Canada, $395 million, or 13%; Europe, $532 million, or
17%; and other international markets, $207 million, or 7%. From 1992 to 1993,
these geographic regions experienced sales growth rates of 32%, 31%, 64% and
51%, respectively. The Company's higher sales growth rate in Europe has resulted
in part from the addition of new manufacturer relationships in various European
markets. In the United States, the Company's sales increase is due in part to
new product offerings from computer systems and other hardware manufacturers. In
the United States, hardware and accessories accounted for 60% of net sales, and
software accounted for 40% of net sales in 1993, as compared to 56% and 44%,
respectively, in 1992. For additional information on the Company's operating
results by geographic region, see Note 11 of Notes to Consolidated Financial
Statements.
Gross profit increased 27.7% to $258.5 million in 1993 from $202.4 million in
1992, reflecting the higher 1993 net sales. Gross margin declined to 8.4% in
1993 from 9.0% in 1992, principally as a result of continuing competitive
pricing pressures worldwide.
Selling, general and administrative (''SG&A'') expenses increased 24.0% to
$187.2 million in 1993 from $150.9 million in 1992, primarily as a result of
increased expenses associated with the Company's 38% increase in net sales. SG&A
expenses as a percentage of sales declined to 6.1% in 1993 from 6.7% in 1992,
reflecting economies of scale resulting from higher sales volumes as well as
improved operating efficiencies. The Company's number of full-time equivalent
employees increased from 1,939 at December 31, 1992 to 2,502 at December 31,
1993.
Operating income increased 38.6% to $71.4 million in 1993 from $51.5 million
in 1992, despite small operating losses at the Company's Swiss, Austrian and
French operations. Operating income as a
21
<PAGE>
percentage of sales was 2.3% in both 1993 and 1992, as the decline in gross
margin of 0.6% in 1993 was offset by a corresponding decline in SG&A as a
percentage of sales.
Interest expense increased 13.1% to $17.8 million in 1993 from $15.7 million
in 1992, but declined as a percentage of sales to 0.6% in 1993 from 0.7% in
1992. The increase in interest expense reflects higher average borrowings,
principally to finance the Company's higher sales levels, offset in part by
lower average interest rates in 1993.
Other expense increased to $2.7 million in 1993 from $1.3 million in 1992, but
other expense as a percentage of sales remained at 0.1% in both 1992 and 1993.
Other expense in 1993 includes the fees paid by the Company in connection with
the sale of an interest in its trade accounts receivables pursuant to an
accounts receivable securitization program instituted in the third quarter of
1993.
Provision for income taxes increased 37.8% to $20.4 million in 1993,
reflecting the Company's 47.5% increase in income before income taxes. The
Company's effective tax rate decreased to 40.1% in 1993 from 43.0% in 1992,
primarily as a result of a $1.7 million income tax benefit related to the
restructuring of the Company's Swiss operations in 1993. In addition, net losses
of certain of the Company's subsidiaries that derive no tax benefit from such
losses under local tax laws decreased in 1993.
Net income increased 54.8% to $30.4 million in 1993 from $19.7 million in
1992, while net income per share increased to $1.00 from $0.67. The Company's
weighted average number of shares outstanding increased from 29,274,000 shares
in 1992 to 30,454,000 shares in 1993, reflecting the issuance of 4,600,000
shares in a public offering of the Company's Common Stock in March 1992 and the
exercise of employee stock options.
VARIABILITY OF QUARTERLY RESULTS AND SEASONALITY
Historically, the Company has experienced variability in its net sales and
operating margins on a quarterly basis and expects these patterns to continue in
the future. Management believes that the factors influencing quarterly
variability include: (i) the overall growth in the microcomputer industry; (ii)
shifts in short-term demand for the Company's products resulting, in part, from
the introduction of new products or updates of existing products; and (iii) the
fact that virtually all sales in a given quarter result from orders booked in
that quarter. Due to the factors noted above, as well as the fact that the
Company participates in a highly dynamic industry, the Company's revenues and
earnings may be subject to material volatility, particularly on a quarterly
basis.
Additionally, the Company's net sales in the fourth quarter have been higher
than in its other three quarters. Management believes that the pattern of higher
fourth quarter sales is partially explained by customer buying patterns relating
to calendar year-end business purchases and holiday period purchases. For a
tabular presentation of certain quarterly financial data with respect to 1993
and 1994, see Note 12 of Notes to Consolidated Financial Statements.
ACQUISITION OF THE COMPUTERLAND FRANCHISE AND AGGREGATION BUSINESS
Through the ComputerLand Acquisition, Merisel, through its wholly-owned
subsidiary, Merisel FAB, now operates the ComputerLand Franchise and
Aggregation Business, a leading master reseller of computer systems and related
products from the major microcomputer manufacturers to a network of over 750
independently-owned computer products resellers, including ComputerLand
franchisees and
22
<PAGE>
affiliated resellers purchasing through the Datago program. See "Business--The
ComputerLand Franchise and Aggregation Business."
The Company acquired the ComputerLand Franchise and Aggregation Business on
January 31, 1994. For the eleven months ended December 31, 1994, the
ComputerLand Franchise and Aggregation Business generated net sales of $1.1
billion, and gross profit of $49.1 million and income from operations of $10.3
million. Gross margin and SG&A as a percentage of net sales for this period were
4.7% and 3.7%, respectively, reflecting the lower margins and lower SG&A
incurred in the master reseller, or aggregator, business as compared to the
Company's core distribution business. The ComputerLand Franchise and Aggregation
Business' operating margin as a percentage of net revenues for this period was
1.0%. The Company anticipates downward pressure on gross margins as a result
of intense price competition and the effect of revised pricing structure offered
to new and existing franchisees. See "Business--ComputerLand Franchise and
Aggregation Business."
For the eleven months ended December 31, 1994, approximately 82% of the
ComputerLand Franchise and Aggregation Business' revenues were generated from
the sale of products from four manufacturers: Apple, Compaq, Hewlett-Packard and
IBM. The loss of any one of these four manufacturers, or a change in the way any
of these manufacturers markets, prices or distributes its products, could have a
material adverse effect on the ComputerLand Franchise and Aggregation Business'
operating and financial results. In 1995, a change by one of these manufacturers
has allowed certain of the Company's larger customers to purchase product
directly from this manufacturer. Specifically, to the extent that one of the
leading four manufacturers changes its current system of limiting authorization
to sell its products to master resellers, the ComputerLand Franchise and
Aggregation Business' sales levels would be adversely affected. The Company
believes, however, that its distribution business may benefit from such changes.
All of the ComputerLand Franchise and Aggregation Business franchisees are
electronically linked for the purpose of order placement and other
communications, reducing the need for sales representatives and support
personnel in comparison to the Company's existing business. In addition, over
76% of the ComputerLand Franchise and Aggregation Business customers currently
finance their orders through "floor plan" financing companies or pay on a C.O.D.
basis, reducing the need for credit and collection personnel and reducing
financing costs because of improved cash flow.
As a result of the foregoing as well as other factors, master resellers such
as the ComputerLand Franchise and Aggregation Business tend to generate both
lower gross margins and lower operating expenses as a percentage of sales than
those generated by the Company in its existing distribution business.
Competition among master resellers is intense (see "Business--Competition"),
and the ComputerLand Franchise and Aggregation Business may experience downward
pressures on it gross margins due to competitive pricing decisions. Under the
Services Agreement, Vanstar will perform a significant portion of the
ComputerLand Franchise and Aggregation Business distribution functions for a
contractually agreed-upon fee for a two-year period. As a result of this
outsourcing arrangement, the ComputerLand Franchise and Aggregation Business
does not directly control the costs of those distribution functions, and
therefore will be limited in its ability to lower its costs in response to a
lower gross margin environment during the two-year term of the Services
Agreement. Due to this limitation, the Services Agreement provides that the
service fee, as a percentage of sales volume, decreases if the
23
<PAGE>
ComputerLand Franchise and Aggregation Business sales volume increases over a
specified amount. Further, in the event sales volume does not increase over a
specified amount, and the ComputerLand Franchise and Aggregation Business gross
margin declines, the Service Agreement provides for a limited reduction in the
service fee to offset partially the decline in gross margin. Notwithstanding
these contractual provisions, a material decline in the ComputerLand Franchise
and Aggregation Business gross margin could have a material adverse effect on
the Company's results of operations.
Over 76% of the ComputerLand Franchise and Aggregation Business sales
currently are financed on behalf of its customers by floor plan financing
companies. The ComputerLand Franchise and Aggregation Business typically
receives payment from these financing companies within three business days from
the date of sale, resulting in reduced cash requirements for the ComputerLand
Franchise and Aggregation Business as compared to the Company's existing
wholesale distribution business. This floor plan financing is typically
subsidized for the ComputerLand Franchise and Aggregation Business customers by
its manufacturers. Any material change in the availability or the terms of
financing offered by such financing companies or in the subsidies provided by
manufacturers could require the ComputerLand Franchise and Aggregation Business
to provide such financing to its customers, thereby substantially increasing the
working capital necessary to operate its business.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its growth and cash needs primarily through
borrowings, income from operations, the public and private sales of its
securities and securitizations of its accounts receivable.
Net cash used for operating activities in 1994 was $82.4 million and $125.4
million in 1993. The primary uses of cash in 1994 were increases in accounts
receivables of $152.9 million, reflecting the Company's higher sales volumes,
especially in December 1994, and greater sales to customers with extended credit
terms, and inventories of $75.3 million, reflecting the Company's higher sales
volumes. Sources of cash from operating activities included net income, after
adjustment for non-cash items, of $41.6 million and an increase in accounts
payable of $94.4 million.
Net cash used for investing activities in 1994 was $126.5 million, of which
$86.3 million related to the ComputerLand Acquisition and the acquisition of the
remaining 40% minority interest in the Company's Mexican subsidiary and $40.2
million related to property and equipment expenditures. The expenditures for
property and equipment were primarily for the upgrading of the Company's
computer systems, expenditures for a new warehouse management system and the
upgrading of facilities and leasehold improvements. The Company presently
anticipates that its capital expenditures for 1995 will be approximately $50
million, principally for completing the development and implementation of new
computer systems in North America, new warehouse management systems, new
computer systems for the Company's European operations and completion of the new
distribution center in Europe. The design and implementation of these new
systems are complex projects and involve risks that unanticipated problems may
delay implementation of the new systems or cause them to perform below
anticipated service levels. In the event the Company experiences delays in
implementation of these new systems or such systems fail to perform at
anticipated service levels, the Company may not be able to accommodate
anticipated increases in sales volumes and transaction processing requirements
which would adversely impact operating income and cash flows. See "Business--
Operations and Distribution" and "Business--International Operations." The
Company intends to finance its anticipated capital expenditures with funds from
the existing lines of credit and its ability to obtain additional credit.
24
<PAGE>
Net cash provided by financing activities in 1994 was $211.6 million,
comprised principally of proceeds received in connection with a $125 million
senior note offering during October 1994 and proceeds from the sale of an
interest in the Company's trade accounts receivable of $75 million. In
addition, the Company had net borrowings under domestic revolving lines of
credit of $24 million and net repayments under foreign bank facilities of $13
million during the year ended December 31, 1994.
To provide capital for the Company's operating and investing activities, the
Company and its subsidiaries, including Merisel Americas and Merisel Europe
maintain a number of credit facilities. Merisel Americas and Merisel Europe are
co-borrowers under a $150 million unsecured revolving bank credit facility, as
amended, expiring on May 31, 1997. At March 17, 1995, $91.1 million was
outstanding under this facility. See Note 6 to Notes to Consolidated Financial
Statements. The Company and its subsidiaries also maintain various local lines
of credit, primarily to facilitate overnight and other short-term borrowings.
The total amount of outstanding borrowings under these lines as of December 31,
1994 was $37.9 million.
Merisel Americas on an ongoing basis, sells its trade receivables to its
wholly-owned subsidiary, Merisel Capital Funding, Inc. ("Merisel Capital
Funding"). Pursuant to a trade receivables purchase and sale agreement with a
securitization company, as amended and restated in November, 1994, Merisel
Capital Funding, in turn, sells to a syndicate of purchasers on an ongoing basis
for a one year period up to $150 million of an undivided interest in such trade
receivables. The receivables are sold at face value and fees paid in connection
with such sales are recorded as other expense. This facility expires in October
1995. See Note 3 of Notes to Consolidated Financial Statements.
To finance the ComputerLand Acquisition, the Company borrowed $65 million
under an unsecured credit agreement with a bank lender which was repaid in full
during October 1994. Merisel FAB also borrowed $16 million, the balance of the
ComputerLand Acquisition purchase price, under a separate credit agreement,
which was repaid in full on February 15, 1994.
Effective October 24, 1994, the Company issued $125 million principal amount
of senior notes (the "Notes") due December 31, 2004. The Company used the
proceeds from the Notes to repay in full the $65 million in bank financing used
for the ComputerLand Acquisition and to repay approximately $55.8 million of
indebtedness under the $150 million revolving credit facility. The Notes
provide for an interest rate of 12.5% payable semiannually commencing December
31, 1994. The Notes are effectively subordinated to all liabilities of the
Company's subsidiaries, including trade payables. The Indenture relating to the
Notes contains certain covenants that, among other things, limit the type and
amount of additional indebtedness that may be incurred by the Company or any of
its subsidiaries and impose limitations on investment, loans, advances, sales
or transfers of assets, the making of dividends and other payments, the creation
of liens, sale-leaseback transactions with affiliates and certain mergers. See
Note 6 of Notes to Consolidated Financial Statements.
Merisel Americas also has outstanding $100 million of 8.58% senior notes, due
June 30, 1997, and $22 million of 11.28% subordinated notes, due in five equal
annual principal installments, beginning in March 1996. See Notes 6 and 7 of
Notes to Consolidated Financial Statements.
In connection with the ComputerLand Acquisition, Merisel FAB and Vanstar
entered into the Services Agreement pursuant to which Vanstar will provide
significant distribution and other support services until January 31, 1996 to
the ComputerLand Franchise and Aggregation Business for a
25
<PAGE>
contractually agreed upon fee. Under the Services Agreement, the ComputerLand
Franchise and Aggregation Business has been granted $20 million in extended
credit terms on its product purchases from Vanstar. The Vanstar payable
currently accrues interest at the prime rate, less 2% per annum (6.5% at
December 31, 1994), with the principal balance due on February 1, 1996.
Merisel continues to monitor its working capital requirements. Assuming the
Company can obtain a renewal of its accounts receivable securitization facility,
the Company believes that its existing cash balances, proceeds from receivable
securitizations, borrowings under existing lines of credit and its ability to
obtain additional credit will be sufficient to meet its working capital and
capital investment needs through at least the next twelve months.
ASSET MANAGEMENT
Merisel attempts to manage its inventory position to maintain levels
sufficient to achieve high product availability and same-day order fill rates.
Inventory levels may vary from period to period, due in part to increases or
decreases in sales levels, Merisel's practice of making large-volume purchases
when it deems the terms of such purchases to be attractive and the addition of
new manufacturers and products. The Company has negotiated agreements with many
of its manufacturers which contain stock balancing and price protection
provisions intended to reduce, in part, Merisel's risk of loss due to slow
moving or obsolete inventory or manufacturer price reductions. The Company is
not assured that these agreements will succeed in reducing this risk. In the
event of a manufacturer price reduction, the Company generally receives a credit
for products in inventory. In addition, the Company has the right to return a
certain percentage of purchases, subject to certain limitations. Historically,
price protection and stock return privileges as well as the Company's inventory
management procedures have helped to reduce the risk of loss of carrying
inventory.
The Company offers credit terms to qualifying customers and also sells on a
prepay, credit card and cash-on-delivery basis. With respect to credit sales,
the Company attempts to control its bad debt exposure through monitoring of
customers' creditworthiness and, where practicable, through participation in
credit associations that provide credit rating information about its customers.
In certain markets, the Company may elect to purchase credit insurance for
certain accounts.
26
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEPENDENT AUDITORS' REPORT
Merisel, Inc.:
We have audited the accompanying consolidated balance sheets of Merisel, Inc.
and subsidiaries as of December 31, 1993 and 1994, and the related consolidated
statements of income, changes in stockholders' equity, and cash flows for each
of the three years in the period ended December 31, 1994. Our audits also
included the financial statement schedules listed at Item 14. These financial
statements and financial statement schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Merisel, Inc. and subsidiaries at
December 31, 1993 and 1994, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1994 in
conformity with generally accepted accounting principles. Also, in our opinion,
such financial statement schedules, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
Deloitte & Touche LLP
Los Angeles, California
February 27, 1995
27
<PAGE>
MERISEL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1993 1994
---------- -----------
<S> <C> <C>
A S S E T S
CURRENT ASSETS:
Cash..................................................................................... $ 14 $ 3,533
Accounts receivable (net of allowance for doubtful accounts of $16,543
and $16,511 at December 31, 1993 and 1994, respectively)............................... 393,252 451,246
Inventories.............................................................................. 442,392 517,706
Prepaid expenses and other current assets................................................ 15,443 13,256
Deferred income tax benefit.............................................................. 8,942 12,128
-------- ----------
Total current assets.................................................................. 860,043 997,869
PROPERTY AND EQUIPMENT, NET................................................................ 39,858 69,511
COST IN EXCESS OF NET ASSETS ACQUIRED, NET................................................. 32,832 113,115
OTHER ASSETS............................................................................... 3,550 11,375
-------- ----------
TOTAL ASSETS............................................................................. $936,283 $1,191,870
======== ==========
L I A B I L I T I E S A N D S T O C K H O L D E R S ' E Q U I T Y
CURRENT LIABILITIES:
Accounts payable......................................................................... $414,841 $ 509,226
Accrued liabilities...................................................................... 26,811 46,502
Short-term bank debt..................................................................... 50,929 37,871
Income taxes payable..................................................................... 7,697 4,422
-------- ----------
Total current liabilities............................................................. 500,278 598,021
LONG-TERM DEBT............................................................................. 186,500 335,685
SUBORDINATED DEBT.......................................................................... 22,000 22,000
DEFERRED INCOME TAX LIABILITY.............................................................. 1,787
MINORITY INTEREST.......................................................................... 1,861
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; authorized 1,000,000 shares; none issued
or outstanding
Common stock, $.01 par value; authorized 50,000,000 shares; outstanding 29,604,300
and 29,716,600 at December 31, 1993 and 1994, respectively............................. 296 297
Additional paid-in capital.............................................................. 140,775 141,249
Retained earnings........................................................................ 91,512 103,122
Cumulative translation adjustment........................................................ (8,726) (8,504)
-------- ----------
Total stockholders' equity............................................................ 223,857 236,164
-------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY............................................... $936,283 $1,191,870
======== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
28
<PAGE>
MERISEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNT)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
------------------------------------
1992 1993 1994
---------- ---------- ----------
<S> <C> <C> <C>
NET SALES........................... $2,238,715 $3,085,851 $5,018,687
COST OF SALES....................... 2,036,292 2,827,315 4,676,164
---------- ---------- ----------
GROSS PROFIT........................ 202,423 258,536 342,523
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES.......................... 150,905 187,152 281,796
---------- ---------- ----------
OPERATING INCOME.................... 51,518 71,384 60,727
INTEREST EXPENSE.................... 15,742 17,810 29,024
OTHER EXPENSE....................... 1,299 2,722 11,752
---------- ---------- ----------
INCOME BEFORE INCOME TAXES.......... 34,477 50,852 19,951
PROVISION FOR INCOME TAXES.......... 14,812 20,413 8,341
---------- ---------- ----------
NET INCOME.......................... $ 19,665 $ 30,439 $ 11,610
---------- ---------- ----------
NET INCOME PER SHARE................ $0.67 $1.00 $0.38
---------- ---------- ----------
WEIGHTED AVERAGE NUMBER OF SHARES... 29,274 30,454 30,389
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
29
<PAGE>
MERISEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
NOTES
ADDITIONAL CUMULATIVE RECEIVABLE
PAID-IN RETAINED TRANSLATION COMMON
COMMON STOCK CAPITAL EARNINGS ADJUSTMENT STOCK TOTAL
------------------- ---------- -------- ---------- ----------- ---------
SHARES AMOUNT
---------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1991............ 24,450,900 $245 $ 82,825 $ 41,408 $ 1,640 $(581) $125,537
Exercise of stock options and other.... 246,300 2 676 678
Amortization of deferred compensation.. 124 124
Payments on notes due from sale of
stock................................. 581 581
Issuance of common stock from public
offering.............................. 4,600,000 46 55,694 55,740
Cumulative translation adjustment...... (3,443) (3,443)
Net income............................. 19,665 19,665
---------- ------ ---------- -------- ----------- ---------- --------
BALANCE AT DECEMBER 31, 1992............ 29,297,200 293 139,319 61,073 (1,803) 198,882
Exercise of stock options and other.... 307,100 3 1,456 1,459
Cumulative translation adjustment...... (6,923) (6,923)
Net income............................. 30,439 30,439
---------- ------ ---------- -------- ----------- ---------- --------
BALANCE AT DECEMBER 31, 1993 29,604,300 296 140,775 91,512 (8,726) 223,857
Exercise of stock options and other.... 112,300 1 474 475
Cumulative translation adjustment...... 222 222
Net income............................. 11,610 11,610
---------- ------ ---------- -------- ----------- ---------- --------
BALANCE AT DECEMBER 31, 1994 29,716,600 $297 $141,249 $103,122 $(8,504) $236,164
========== ==== ======== ======== ============ ========== ========
</TABLE>
See accompanying notes to consolidated financial statements.
30
<PAGE>
MERISEL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------
1992 1993 1994
---------- ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................ $ 19,665 $ 30,439 $ 11,610
Adjustments to reconcile net income
to net cash provided by (used for)
operating activities:
Depreciation and amortization......... 9,185 10,476 16,101
Provision for bad debts............... 15,471 17,441 18,851
Deferred income taxes................. (789) (2,451) (4,973)
Amortization of deferred compensation. 124
Changes in assets and liabilities,
net of the effects from acquisitions:
Accounts receivable................... (91,298) (194,214) (152,912)
Inventories........................... (72,010) (142,866) (75,314)
Prepaid expenses and other assets..... (1,257) (6,613) (6,604)
Accounts payable...................... 59,080 166,296 94,385
Accrued liabilities................... 2,592 (4,124) 19,690
Income taxes payable.................. 629 208 (3,275)
--------- ----------- -----------
Net cash used for operating activities (58,608) (125,408) (82,441)
--------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment..... (9,969) (24,576) (40,163)
Proceeds from sale of property and
equipment............................. 1,004
Investments in unconsolidated
affiliates............................ (844)
Acquisitions, net of cash acquired..... (685) (86,343)
Cash acquired in connection with
acquisition of subsidiary............. 15
--------- ----------- -----------
Net cash (used for) investing
activities............................ (9,954) (25,101) (126,506)
--------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under revolving line of
credit................................ 29,500 1,113,967 1,766,300
Repayments under revolving line of
credit................................ (1,043,900) (1,742,114)
Net borrowings(repayments) under
foreign bank facilities............... 12,790 10,237 (13,058)
Repayment of prior revolving lines of
credit................................ (128,394)
Borrowings under senior notes.......... 100,000 125,000
Proceeds from sale of account
receivables........................... 75,000 75,000
Net proceeds from sale of common stock. 55,740
Proceeds from issuance of common stock. 679 1,459 475
Payments received from notes due from
sale of stock......................... 581
--------- ----------- -----------
Net cash provided by financing
activities............................ 70,896 156,763 211,603
--------- ----------- -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH. (2,742) (6,373) 863
--------- ----------- -----------
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS....................... (408) (119) 3,519
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD................................. 541 133 14
--------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 133 $ 14 $ 3,533
========= =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION--
Cash paid during the year for:
Interest (net of interest
capitalized of $1,053 for 1994).... $ 10,582 $ 20,741 $ 21,237
Income taxes........................ 14,811 20,924 11,185
</TABLE>
See accompanying notes to consolidated financial statements.
31
<PAGE>
MERISEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1992, 1993 AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General--Merisel, Inc. ("Merisel" or the "Company") is a worldwide
distributor of microcomputer hardware and software products. In addition, as a
result of the ComputerLand Acquisition (see Note 2), the Company, through its
wholly-owned subsidiary Merisel FAB, Inc. ("Merisel FAB"), is a leading
aggregator, or master reseller, of computer systems and related products from
major microcomputer manufacturers to ComputerLand franchisees and Datago
resellers. The consolidated financial statements include the accounts of
Merisel and its consolidated subsidiaries. All significant intercompany balances
and transactions have been eliminated in consolidation.
Revenue Recognition, Returns and Sales Incentives--The Company recognizes
revenue from hardware and software sales as products are shipped. The Company,
subject to certain limitations, permits its customers to exchange products or
receive credits against future purchases. The Company offers its customers
several sales incentive programs which, among others, include funds available
for cooperative promotion of product sales. Customers earn credit under such
programs based upon volume of purchases. The cost of these programs is partially
subsidized by marketing allowances provided by the Company's manufacturers. The
allowance for sales returns and costs of customer incentive programs is accrued
concurrently with the recognition of revenue.
In connection with its ComputerLand franchising operations, the Company
collects initial franchise fees and royalties based on a percentage of
franchise sales. Initial franchise fees, which were not material in 1994, are
recognized as income when substantially all services and conditions relating to
the sale of the franchise have been performed or satisfied. Royalties which
range from .75% to 4.95% of franchise sales are recognized as such sales occur.
Royalty revenues were $19.2 million in 1994. Franchise agreements range from 3
to 10 years in length.
Cash Equivalents--The Company considers all highly liquid investments
purchased with initial maturities of three months or less to be cash
equivalents.
Inventories--Inventories are valued at the lower of cost or market; cost is
determined on the average cost method.
Property and Depreciation--Property and equipment are stated at cost less
accumulated depreciation. Depreciation is provided on the straight-line method
over the estimated useful lives of the assets, generally three to seven years.
Leasehold improvements are amortized over the shorter of the life of the lease
or the improvement.
The Company capitalizes all direct costs incurred in the construction of
facilities and the development and installation of new computer and warehouse
management systems. Such amounts include the costs of materials and other
direct construction costs, purchased computer hardware and software, outside
programming and consulting fees, direct employee salaries, and interest.
32
<PAGE>
MERISEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Cost in Excess of Net Assets Acquired--Cost in excess of net assets acquired
results principally from the acquisition in January 1994 of the ComputerLand
Franchise and Aggregation Business and the acquisition in 1990 of Microamerica,
Inc. The cost in excess of net assets acquired from MicroAmerica, Inc. is being
amortized over a period of forty years using the straight line method. The cost
in excess of net assets acquired from the ComputerLand Franchise and Aggregation
Business is being amortized over an aggregate period of 25 years. Accumulated
amortization was $3,468,000 and $7,405,000 at December 31, 1993 and 1994
respectively.
The Company reviews the recoverability of intangible assets to determine if
there has been any permanent impairment. This assessment is performed based on
the estimated undiscounted future cash flows from operating activities compared
with the carrying value of intangible assets. If the undiscounted future cash
flows are less than the carrying value, a writedown would be recorded measured
by the amount of the difference.
Income Taxes--Deferred income taxes represent the amounts which will be paid
or received in future periods based on the tax rates that are expected to be in
effect when the temporary differences are scheduled to reverse.
At December 31, 1993 and 1994, the cumulative amount of undistributed earnings
on which the Company has not recognized United States income taxes was
approximately $15 million and $16 million, respectively. The Company intends to
invest the undistributed earnings of its foreign subsidiaries indefinitely.
Concentration of Credit Risks - Financial instruments which subject the
Company to credit risk consist primarily of trade accounts receivables and
forward foreign currency exchange contracts. Concentration of credit risk with
respect to trade accounts receivables are generally diversified due to the large
number of entities comprising the Company's customer base and their geographic
dispersion. The Company performs ongoing credit evaluations of its customers
and maintains an allowance for potential credit losses. The Company diversifies
its credit risk with respect to forward foreign exchange contracts due to the
number of institutions with which it enters into contracts. The Company actively
evaluates the creditworthiness of the financial institutions with which it
conducts business.
Fair Values of Financial Instruments--The fair values of financial
instruments, other than long-term debt, closely approximate their carrying
value. The estimated fair value of long-term debt including current maturities,
based on reference to quoted market prices, exceeded the carrying value by
approximately $8,700,000 as of December 31, 1993 and was less than the carrying
value by approximately $6,900,000 as of December 31, 1994.
33
<PAGE>
MERISEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Foreign Currency Translation--Assets and liabilities of foreign subsidiaries
are translated into United States dollars at the exchange rate in effect at the
close of the period. Revenues and expenses of these subsidiaries are translated
at the average exchange rate during the period. The aggregate effect of
translating the financial statements of foreign subsidiaries at the above rates
is included in a separate component of stockholders' equity entitled Cumulative
Translation Adjustment. In addition, the Company advances funds in the normal
course of business, to certain of its foreign subsidiaries, which are not
expected to be repaid in the foreseeable future. Translation adjustments
resulting from these advances are also included in Cumulative Translation
Adjustment.
Foreign Exchange Instruments--The Company's use of derivitives is limited to
the purchase of foreign exchange contracts, which are used to minimize foreign
exchange transaction gain and losses. The Company purchases forward dollar
contracts to hedge short-term advances to its foreign subsidiaries and to hedge
commitments to acquire inventory for sale. The Company's foreign exchange rate
contracts minimize the Company's exposure to exchange rate movement risk, as any
gains or losses on these contracts are offset by gains and losses on the
transactions being hedged. The foreign exchange contracts have varying
maturities which generally do not exceed one year. At December 31, 1993 and
1994, the Company had approximately $85 million and $110 million of foreign
exchange contracts outstanding, the carrying value of which does not differ
significantly from their fair value. In 1992 and 1993 there were net foreign
currency gains of $843,000 and $283,000, respectively, and a net foreign
currency loss of $1,422,000 in 1994, primarily due to the devaluation of the
Mexican Peso. These amounts are recorded as other expense.
Net Income per Share--Net income per share is computed by dividing net income
by the weighted average number of shares of common stock and common stock
equivalents (common stock options) outstanding during the related period, unless
such inclusion is antidilutive. The weighted average number of shares includes
shares issuable upon the assumed exercise of stock options less the number of
shares assumed purchased with the proceeds available from such exercise.
Fiscal Periods--The Company's fiscal year is the 52- or 53-week period ending
on the Saturday nearest to December 31 and its fiscal quarters are the 13- or
14-week periods ending on the Saturday nearest to March 31, June 30, September
30, and December 31. For clarity of presentation, the Company has described
year-ends presented as if the years ended on December 31 and quarter-ends
presented as if the quarters ended on March 31, June 30, September 30, and
December 31. The 1993 and 1994 fiscal years were 52 weeks, while the 1992 fiscal
year was 53 weeks in duration. All quarters presented for 1993 and 1994 were 13
weeks in duration.
34
<PAGE>
MERISEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. ACQUISITIONS
On January 31, 1994, the Company, through its wholly-owned subsidiary, Merisel
FAB, acquired certain assets of the United States Franchise and Distribution
Division (the "F&D Division") of Vanstar Corporation (formerly ComputerLand
Corporation) (the "ComputerLand Acquisition"). The Company paid $80.2 million
in cash at closing for the acquired assets and $2.1 million of direct
acquisition costs. In addition, the Company has agreed to make an additional
payment in 1996 of up to $30 million, based upon the growth of the Company's and
Merisel FAB's sales of products of designated vendors to specified customers
over the two-year period ending January 31, 1996. The acquisition has been
accounted for as a purchase. Under the purchase method of accounting, an
allocation of the purchase price to the Merisel FAB assets and liabilities is
required to reflect fair values. Based on an independent valuation prepared for
the Company, $82 million of the purchase price has been allocated to intangible
assets with an estimated aggregate life of 25 years.
Merisel FAB has also entered into a Distribution and Services Agreement (the
"Services Agreement") with Vanstar whereby Vanstar will provide products and
distribution and other support services to Merisel FAB until January 31, 1996.
Under the Services Agreement, Merisel has been granted $20 million in extended
credit terms on its product purchases from Vanstar (the "Vanstar Payable"). The
Vanstar Payable accrues interest at prime less 2%, per annum (6.5% at December
31, 1994), payable monthly, with the principal balance due on February 1, 1996.
Following is summarized unaudited pro forma operating results assuming that
the Company had acquired the F&D Division on January 1, 1993.
<TABLE>
<CAPTION>
1993 1994
---------- ----------
<S> <C> <C> <C>
(in thousands)
Net sales $4,160,158 $5,120,419
Income before taxes 56,498 20,289
Net income 33,826 11,839
Net income per share 1.11 0.39
Weighted average shares
outstanding 30,454 30,389
</TABLE>
In addition, effective August 1994, the Company acquired the remaining 40%
minority interest in the Company's Mexican subsidiary for approximately $5.0
million. Pro forma income statement information for this acquisition has not
been provided as the financial statement impact is not significant.
35
<PAGE>
MERISEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. SALE OF ACCOUNTS RECEIVABLE
The Company's subsidiary, Merisel Americas, Inc. ("Americas"), on an ongoing
basis sells its trade receivables to its wholly-owned subsidiary, Merisel
Capital Funding, Inc. ("Merisel Capital Funding"). Pursuant to a trade
receivables purchase and sales agreement with a securitization company, as
amended and restated in November, 1994, Merisel Capital Funding, in turn, sells
to the securitization company on an ongoing basis for a one year period up to
$150 million of an undivided interest in such trade receivables. The
receivables are sold at face value and fees paid in connection with such sales
are recorded as other expense. Merisel Capital Funding's business consists
solely of the purchase of such trade receivables from Americas and the sale of
such trade receivables to the securitization company. Merisel Capital Funding is
a separate corporate entity with its own separate creditors which will be
entitled to be satisfied out of Merisel Capital Funding's assets prior to any
value in Merisel Capital Funding becoming available to Merisel Capital Funding's
equity holders. At December 31, 1994, $150 million of net accounts receivable
were sold to the securitization company. Fees of $685,000 and $7,151,000 were
incurred in connection with the sale of accounts receivable for 1993 and 1994,
respectively.
4. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following (in thousands):
<TABLE>
<CAPTION>
ESTIMATED DECEMBER 31,
USEFUL LIFE ---------------------
(IN YEARS) 1993 1994
------------ --------- ---------
<S> <C> <C> <C>
Land and building..................... 20 $ 390 $ 433
Equipment 3 to 7 37,988 47,947
Furniture and fixtures................ 3 to 5 7,886 9,701
Leasehold improvements................ 3 to 20 11,514 12,546
Construction in progress.............. 10,687 37,511
-------- --------
Total................................. 68,465 108,138
-------- --------
Less accumulated depreciation and (28,607) (38,627)
amortization......................... -------- --------
Property and equipment, net........... $ 39,858 $ 69,511
======== ========
</TABLE>
36
<PAGE>
MERISEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. INCOME TAXES
The components of income before income taxes consisted of the following (in
thousands):
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------------
1992 1993 1994
---------- ---------------- ---------------
<S> <C> <C> <C>
Domestic.............................. $31,208 $46,080 $23,430
Foreign............................... 3,269 4,772 (3,479)
------- ------- -------
Total.............................. $34,477 $50,852 $19,951
======= ======= =======
The provision for income taxes consisted of the following (in thousands):
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1992 1993 1994
------- ------- -------
Current:
Federal............................ $10,046 $15,552 $10,675
State.............................. 2,596 3,994 2,429
Foreign............................ 2,341 3,318 210
------- ------- -------
Total Current...................... 14,983 22,864 13,314
------- ------- -------
Deferred:
Domestic........................... (744) (2,636) (4,325)
Foreign............................ 573 185 (648)
------- ------- -------
Total deferred..................... (171) (2,451) (4,973)
------- ------- -------
Total provision................. $14,812 $20,413 $ 8,341
======= ======= =======
</TABLE>
37
<PAGE>
MERISEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Deferred tax liabilities and assets were comprised of the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1993 1994
-------- --------
<S> <C> <C>
Deferred tax liabilities
State taxes................................. $ 203 $ 1,143
Depreciation................................ 3,343 564
------- -------
Total................................... $ 3,546 $ 1,707
======= =======
Deferred tax assets
Net operating loss of foreign subsidiaries.. $ 3,200 $ 4,400
Expense accruals............................ 8,642 11,128
Other, net.................................. 2,059 2,707
------- -------
13,901 18,235
Valuation allowances........................ (3,200) (4,400)
------- -------
Total................................... $10,701 $13,835
======= ========
</TABLE>
The major elements contributing to the difference between the federal
statutory tax rate and the effective tax rate are as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1992 1993 1994
--------- -------- --------
<S> <C> <C> <C>
Statutory rate....................... 34.0% 35.0% 35.0%
State income taxes, less effect of
federal deduction................... 4.6 4.1 4.0
Foreign income subject to tax at
other than statutory rate........... 1.2 1.0 2.5
Goodwill amortization................ 0.7 0.5 1.3
Foreign losses with benefits at less
than statutory rate................. 3.7 2.6 6.7
Utilization of net operating losses
of foreign subsidiary............... (3.3) (5.3)
Other................................ (1.2) 0.2 (2.4)
---- ---- ----
Effective tax rate................... 43.0% 40.1% 41.8%
==== ==== ====
</TABLE>
6. DEBT
At December 31, 1994, the Company's subsidiaries Merisel Americas and Merisel
Europe, Inc. ("Merisel Europe") had unsecured senior borrowing commitments of
$250 million, which consisted of $100 million of 8.58% senior notes (the "Senior
Notes") by Merisel Americas, and a $150 million revolving credit agreement (the
"Revolver") by Merisel Americas and Merisel Europe. The Senior Notes are due on
June 30, 1997, and the Revolver is due on May 31, 1997. At December 31, 1994,
there was $100 million outstanding under the Senior Notes, and $110.7 million
outstanding under the Revolver. Advances under the Revolver bear interest at
specific rates based upon market reference rates and the Company's performance
relative to specific levels of debt to total capitalization. The combined
average interest rate for the Revolver at December 31, 1994 was approximately
7.8%. The Company is also required to pay a commitment fee on the unused
available funds on the Revolver. The Revolver Agreement, which was amended in
February 1995, and the Senior Notes agreement both contain various covenants,
including those which prohibit the payment of cash dividends, require a minimum
amount of tangible net worth and place limitations on the acquisition of assets.
The agreements also require the Company to maintain certain specified financial
ratios, including interest coverage, total debt to total capitalization and
inventory turnover.
38
<PAGE>
MERISEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Effective October 24, 1994, the Company issued $125 million principal amount
of senior notes (the "Notes") due December 31, 2004. The Company used the
proceeds from the Notes to repay in full the $65 million borrowed under an
unsecured credit agreement with a bank to finance the ComputerLand Acquisition
and to repay approximately $55.8 million of indebtedness under the Revolver.
The Notes provide for an interest rate of 12.5% payable semiannually commencing
December 31, 1994. The Notes are effectively subordinated to all liabilities of
the Company's subsidiaries, including trade payables. The Indenture relating to
the Notes contains certain covenants that, among other things, limit the type
and amount of additional indebtedness that may have incurred by the Company or
any of its subsidiaries and impose limitations on investment, loans, advances,
sales or transfers of assets, the making of dividends and other payments, the
creation of liens, sale-leaseback transactions with affiliates and certain
mergers.
In addition, the Company and its subsidiaries have various unsecured lines of
credit denominated in their local currencies under which they may borrow an
aggregate of $64.4 million. The Company had borrowings under such lines of
credit of $50.9 million and $37.9 million outstanding at December 31, 1993 and
1994, respectively. The weighted average interest rate for such lines of credit
at December 31, 1994 was 7.8%. At December 31, 1994, approximately $100.2
million of outstanding debt was advanced to foreign subsidiaries.
7. LONG-TERM SUBORDINATED DEBT
Merisel Americas has outstanding an aggregate of $22,000,000 of privately
placed subordinated notes. The notes provide for interest at the rate of 11.28%
per annum and are repayable in five equal annual installments beginning March
1996. The subordinated debt agreement contains certain restrictive covenants,
including those that limit the Company's ability to incur debt, acquire the
stock of or merge with other corporations, or sell certain assets and prohibits
the payment of dividends. The subordinated debt agreement also requires
Merisel Americas to maintain specified financial ratios similar in nature, but
generally less restrictive, than those described in the preceding note.
8. COMMITMENTS AND CONTINGENCIES
The Company leases its facilities and certain equipment under noncancelable
operating leases. Future minimum rental payments, under leases that have initial
or remaining noncancelable lease terms in excess of one year are $14,744,000 in
1995, $12,323,000 in 1996, $10,826,000 in 1997, $10,256,000 in 1998, $9,371,000
in 1999 and $28,123,000 thereafter. Certain of the leases contain inflation
escalation clauses and requirements for the payment of property taxes,
insurance, and maintenance expenses. Rent expense for 1992, 1993 and 1994 was
$11,007,000, $12,617,000, and $13,447,000, respectively.
39
<PAGE>
MERISEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In June 1994, the Company and certain of its officers and/or directors were
named in putative securities class actions filed in the United Sates District
Court for the Central District of California, consolidated as In re Merisel,
Inc. Securities Litigation. Plaintiffs, who are seeking damages in an
unspecified amount, purport to represent a class of all persons who purchased
Merisel common stock between November 8, 1993 and June 7, 1994 (the "Class
Period"). The complaints allege that the defendants inflated the market price
of Merisel's common stock with material misrepresentations and omissions during
the Class Period. Plaintiffs contend that such alleged misrepresentations are
actionable under Sections 10(b) and 20(a) of the Exchange Act of 1934 and Rule
10b-5 promulgated thereunder. Following the granting of defendant's first motion
to dismiss on December 5, 1994, plaintiffs filed a second consolidated and
amended complaint on December 22, 1994. Merisel believes that it has
meritorious defenses to this lawsuit and intends to defend the action
vigorously. Merisel believes that the outcome of this matter will not have a
material adverse effect on the consolidated financial position or results of
operations of the Company and, accordingly, no provision for loss has been made
in the accompanying financial statements.
The Company is involved in certain other legal proceedings arising in the
ordinary course of business, none of which is expected to have a material impact
on the Company's financial statements.
9. EMPLOYEE STOCK OPTIONS AND BENEFIT PLANS
Under the Company's stock option plans, incentive stock options and
nonqualified stock options may be granted to employees, directors, and
consultants. The plans authorize the issuance of an aggregate of 4,616,200
shares upon exercise of options granted thereunder. The optionees, option
prices, vesting provisions, dates of grant and number of shares granted under
the plans are determined primarily by the Board of Directors or the option
committee under the stock option plans, though incentive stock options must be
granted at prices which are no less than the fair market value of the Company's
common stock at the date of grant. Options granted under the plans expire ten
years from the date of grant. The following summarizes activity in the plans for
the three years ended December 31, 1994:
<TABLE>
<CAPTION>
OPTION EXERCISES PRICE
----------------------------
NUMBER OF
----------
OPTIONS PER SHARE TOTAL
---------- ------------- ------------
<S> <C> <C> <C>
Outstanding, December 31, 1991... 1,440,430 $ 1.11- $8.41 $ 4,257,000
Granted.......................... 741,500 11.38 8,434,000
Exercised........................ (239,580) 1.11 - 6.25 (685,000)
Canceled......................... (78,810) 3.00 - 6.25 (446,000)
--------- -----------
Outstanding, December 31, 1992... 1,863,540 1.11 -11.38 11,560,000
Granted.......................... 327,000 11.75 -11.88 3,883,000
Exercised........................ (307,100) 1.11 -11.38 (1,051,000)
Canceled......................... (27,300) 3.00 -11.38 (266,000)
--------- -----------
Outstanding, December 31, 1993... 1,856,140 2.00 -11.88 14,126,000
Granted.......................... 243,500 15.00 -19.88 4,492,000
Exercised........................ (112,300) 2.00 -11.88 (475,000)
Canceled......................... (84,715) 2.00 -19.88 (953,000)
--------- -----------
Outstanding, December 31, 1994... 1,902,625 2.20 -19.88 $17,190,000
========= ===========
</TABLE>
A total of 1,089,500 and 1,293,100 options were exercisable under the stock
option plans at December 31, 1993 and 1994, respectively.
40
<PAGE>
MERISEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
During 1987, the Company's Board of Directors authorized the issuance of
350,000 nonqualified stock options to an officer of the Company for the purchase
of common stock at an exercise price of $.01 per share. The options vested over
five years from the date of grant and are exercisable for a period of up to ten
years. The difference between the fair market value of the common stock
underlying the nonqualified stock options as of the date of grant and the
exercise price, an aggregate of $1,484,000, was amortized as compensation
expense over the five-year vesting period. Compensation expense related to these
stock options was $124,000 in 1992. As of December 31, 1994, 150,000 options
remained outstanding.
The Company offers a 401(k) savings plan under which all employees who are 21
years of age with at least one month of service are eligible to participate. The
plan permits eligible employees to make contributions up to certain limitations,
with the Company matching certain of those contributions. The Company's
contributions vest 25% per year. The Company contributed $378,000, $443,000,
and $579,000 to the plan during the years ended December 31, 1992, 1993 and
1994, respectively.
10. SUBSEQUENT EVENT (UNAUDITED)
The Company is currently assessing its cost structure and anticipates
incurring a restructuring charge of approximately $10 million in the first
quarter of 1995. This restructuring charge primarily includes reductions in the
number of employees and the consolidation of facilities.
11. SEGMENT INFORMATION
The Company's operations primarily involve a single industry segment--the
wholesale distribution of microcomputer hardware and software products. The
geographic areas in which the Company operates are the United States, Canada,
Europe (United Kingdom, France, Germany, Switzerland, and Austria), and Other
International (Latin America, Australia and Mexico). Net sales, operating income
(before interest, other nonoperating expenses and income taxes) and identifiable
assets by geographical area were as follows (in thousands):
<TABLE>
<CAPTION>
UNITED OTHER
----------- -------------
STATES CANADA EUROPE INTERNATIONAL ELIMINATIONS CONSOLIDATED
----------- --------- ---------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
1992:
Net sales:
Unaffiliated customers................ $1,475,222 $302,512 $324,180 $136,801 $2,238,715
Transfers between geographical areas.. 39,047 502 $(39,549)
---------- --------- --------- -------- -------- ------------
Total............................... $1,514,269 $302,512 $324,180 $137,303 $(39,549) $2,238,715
========== ======== ======== ======== ======== ==========
Operating income (loss)............... $ 45,151 $ 5,489 $ (664) $ 1,542 $ 51,518
========== ======== ======== ======== ==========
Identifiable assets................... $ 414,161 $100,592 $126,953 $ 50,917 $(25,310) $ 667,313
========== ======== ======== ======== ======== ==========
1993:
Net sales:
Unaffiliated customers................ $1,951,411 $395,375 $531,938 $207,127 $3,085,851
Transfers between geographical areas.. 40,193 113 $(40,306)
---------- --------- --------- -------- -------- ------------
Total............................... $1,991,604 $395,375 $531,938 $207,240 $(40,306) $3,085,851
========== ======== ======== ======== ======== ===========
Operating income (loss)............... $ 59,945 $ 7,421 $ 372 $ 3,646 $ 71,384
========== ======== ======== ======== ==========
Identifiable assets................... $ 588,711 $123,844 $192,097 $ 68,951 $(37,320) $ 936,283
========== ======== ======== ======== ======== ==========
1994:
Net sales:
Unaffiliated customers................ $3,413,614 $516,616 $783,637 $304,820 $5,018,687
Transfers between geographical areas.. 33,072 $(33,072)
---------- --------- --------- -------- -------- ----------
Total............................... $3,446,686 $516,616 $783,637 $304,820 $(33,072) $5,018,687
========== ======== ======== ======== ======== ==========
Operating income (loss)............... $ 52,150 $ 9,871 $ (6,370) $ 5,076 $ 60,727
========== ======== ======== ======== ==========
Identifiable assets................... $ 715,082 $147,483 $231,470 $105,613 $ (7,778) $1,191,870
========== ======== ======== ======== ======== ==========
</TABLE>
41
<PAGE>
MERISEL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
12. QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected financial information for the quarterly periods for the fiscal years
ended 1993 and 1994 is presented below (in thousands, except per share amounts):
<TABLE>
<CAPTION>
1993
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
---------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Net sales..................... $ 692,458 $ 713,422 $ 731,442 $ 948,529
Gross profit.................. 59,423 59,132 61,556 78,425
Net income.................... 6,353 6,072 6,108 11,906
Net income per share.......... 0.21 0.20 0.20 0.39
1994
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
---------- ---------- ------------ -----------
Net sales..................... $1,154,622 $1,210,498 $1,230,562 $1,423,005
Gross profit.................. 82,306 81,764 83,726 94,727
Net income (loss)............. 8,596 2,718 2,793 (2,497)
Net income (loss) per share... 0.28 0.09 0.09 (0.08)
</TABLE>
In the fourth quarter of 1994, the Company recorded certain items which
reduced operating income by approximately $7.8 million. These items related
primarily to changes made in estimates to certain asset and liability values.
42
<PAGE>
SCHEDULE II
MERISEL, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
DECEMBER 31, 1992, 1993 AND 1994
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE AT
------------ ----------- ------------
DECEMBER 31, COSTS AND DECEMBER 31,
------------ ----------- ------------
1991 EXPENSES DEDUCTIONS 1992
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
Accounts receivable--Doubtful accounts.. $ 9,225,000 $15,471,000 $13,536,000 $11,160,000
Accounts receivable--Other (1).......... 1,947,000 13,117,000 11,868,000 3,196,000
BALANCE AT CHARGED TO BALANCE AT
------------ ----------- ------------
DECEMBER 31, COSTS AND DECEMBER 31,
------------ ----------- ------------
1992 EXPENSES DEDUCTIONS 1993
------------ ----------- ----------- ------------
Accounts receivable--Doubtful accounts.. $11,160,000 $17,441,000 $12,058,000 $16,543,000
Accounts receivable--Other (1).......... 3,196,000 22,565,000 21,498,000 4,263,000
BALANCE AT CHARGED TO BALANCE AT
------------ ----------- ------------
DECEMBER 31, COSTS AND DECEMBER 31,
------------ ----------- ------------
1993 EXPENSES DEDUCTIONS 1994
------------ ----------- ----------- ------------
Accounts receivable--Doubtful accounts.. $16,543,000 $18,851,000 $18,883,000 $16,511,000
Accounts receivable--Other (1).......... 4,263,000 34,694,000 29,909,000 9,048,000
</TABLE>
(1) Accounts receivable--Other includes allowances for net sales returns and
uncollectible cooperative advertising credits.
43
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information called for by this item is hereby incorporated by reference
from the Registrant's definitive Proxy Statement for the fiscal year ended
December 31, 1994, which Proxy Statement will be filed with the Securities and
Exchange Commission on or about April 15, 1995.
ITEM 11. EXECUTIVE COMPENSATION.
The information called for by this item is hereby incorporated by reference
from the Registrant's definitive Proxy Statement for the fiscal year ended
December 31, 1994, which Proxy Statement will be filed with the Securities and
Exchange Commission on or about April 15, 1995.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information called for by this item is hereby incorporated by reference
from the Registrant's definitive Proxy Statement for the fiscal year ended
December 31, 1994, which Proxy Statement will be filed with the Securities and
Exchange Commission on or about April 15, 1995.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information called for by this item is hereby incorporated by reference
from the Registrant's definitive Proxy Statement for the fiscal year ended
December 31, 1994, which Proxy Statement will be filed with the Securities and
Exchange Commission on or about April 15, 1995.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) List of documents filed as part of this Report:
(1) FINANCIAL STATEMENTS INCLUDED IN ITEM 8:
Independent Auditors' Report
Consolidated Balance Sheets at December 31, 1993 and 1994.
Consolidated Statements of Income for each of the three years in the
period ended December 31, 1994.
Consolidated Statements of Changes in Stockholders' Equity for each of
the three years in the period ended December 31, 1994.
Consolidated Statements of Cash Flows for each of the three years in
the period ended December 31, 1994.
Notes to Consolidated Financial Statements.
(2) FINANCIAL STATEMENT SCHEDULES INCLUDED IN ITEM 8:
44
<PAGE>
Schedule II--Valuation and Qualifying Accounts.
Schedules other than that referred to above have been omitted because
they are not applicable or are not required under the instructions
contained in Regulation S-X or because the information is included
elsewhere in the Consolidated Financial Statements or the Notes
thereto.
(3) EXHIBITS
The exhibits listed on the accompanying Index of Exhibits are filed as
part of this Annual Report.
(b) No Reports on Form 8-K were filed during the quarter ended December 31,
1994.
45
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES ACT OF
1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY
THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
DATE: MARCH 29, 1995
Merisel, Inc.
By /s/ JAMES L. BRILL
-----------------------------------------
James L. Brill
Senior Vice President, Finance,
Chief Financial Officer and Secretary
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
------------------------------ ------------------------------- --------------
<S> <C> <C>
/s/ Michael D. Pickett Co-Chairman of the Board of March 29, 1995
------------------------------ Directors, President and Chief
Michael D. Pickett Executive Officer
(Principal Executive Officer)
/s/ David S. Wagman Vice-Chairman of the Board of March 29, 1995
------------------------------ Directors
David S. Wagman
/s/ James L. Brill Senior Vice President--Finance, March 29, 1995
------------------------------ Chief Financial Officer,
James L. Brill Secretary and Director
(Principal Financial Officer)
/s/ Gary A. Schultz Corporate Controller March 29, 1995
------------------------------ (Principal Accounting Officer)
Gary A. Schultz
/s/ Dr. Arnold Miller Director March 29, 1995
------------------------------
Dr. Arnold Miller
/s/ Joseph Abrams Director March 29, 1995
------------------------------
Joseph Abrams
/s/ Lawrence J. Schoenberg Director March 29, 1995
------------------------------
Lawrence J. Schoenberg
/s/ Dwight Steffensen Director March 29, 1995
------------------------------
Dwight Steffensen
/s/ David L. House Director March 29, 1995
------------------------------
David L. House
</TABLE>
46
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- ----------------------------------------------------------------
<C> <S>
3.1 Restated Certificate of Incorporation of Registrant. (1)
3.2 Amendment to Certificate of Incorporation of Registrant dated
August 22, 1990.(6)
3.3 Bylaws, as amended, of Merisel, Inc. (8)
4 Indenture dated October 15, 1994
between the Company and NationsBank of Texas, N.A. as Trustee,
relating to the Company's 12 1/2% Senior Notes Due 2004, including
the form of such Senior Notes attached as Exhibit A thereto (14)
10.1 Micro america Substitute Stock Option Plan of Registrant together
with related forms of Stock Option Agreements.(4)*
10.2 1983 Stock Option Plan of Softsel Computer Products, Inc., as
amended, together with Form of Incentive Stock Option Agreement
and Form of Nonqualified Stock Option Agreement under 1983
Employee Stock Option Plan.(7)*
10.3 1983 Employee Stock Option Plan of Softsel Computer Products,
Inc., as amended, together with Form of Incentive Stock Option
Agreement and Form of Nonqualified Stock Option Agreement under
the 1983 Employee Stock Option Plan.(7)*
10.4 1991 Employee Stock Option Plan of Merisel, Inc. together with
Form of Incentive Stock Option Agreement and Form of Nonqualified
Stock Option Agreement under the 1991 Employee Stock Option
Plan.(8)*
10.5 Merisel, Inc. 1992 Stock Option Plan for Nonemployee
Directors.(10)*
10.6 Incentive Stock Option Agreements between Registrant and Michael
D. Pickett dated as of October 1, 1986 and March 4, 1987.(1)*
10.7 Nonqualified Stock Option Agreement between Registrant and Michael
D. Pickett dated as of December 11, 1987.(1)*
10.8 Amendment to Stock Option Agreements together with Joint Escrow
Instructions between Michael D. Pickett and Registrant dated as of
August 11, 1988.(1)*
10.9 Softsel Computer Products, Inc. Executive Deferred Compensation
Plan.(9)*
10.10 Merisel, Inc. 1994 Management Incentive Program.*
10.11 Employment Agreement between Registrant and Michael D. Pickett
dated as of August 14, 1992.(11)*
10.12 Merisel, Inc. Amended and Restated 401(k) Retirement Savings
Plan.*
10.13 Asset Transfer, Assignment and Assumption Agreement dated as of
December 23, 1993 by and between Registrant and Merisel Americas,
Inc.(13)
10.14 Asset Transfer, Assignment and Assumption Agreement dated as of
December 23, 1993 by and between Registrant and Merisel Europe,
Inc.(13)
10.15 Lease between Registrant and Pacifica Holding Company dated
April 6, 1989.(2)
10.16 Lease Agreement dated October 27, 1988 by and between Rosewood
Development Corporation and Microamerica, Inc. re: property
located in Marlborough, Massachusetts.(3)
10.17 Lease Agreement dated May 23, 1990 by and between Kilroy-Freehold
El Segundo Company and Softsel/Microamerica, Inc., re: property
located in El Segundo, California. (5)
10.18 Lease Agreement dated October 1991 by and between Koll Hayward
Associates II and Merisel, Inc.(9)
10.19 Asset Purchase Agreement dated January 31, 1994 between
ComputerLand Corporation, Merisel FAB, Inc. and for purposes of
Section 2.2 thereof, the Registrant. Portions of this agreement
have been omitted pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934, as amended.(12)
10.20 Guaranty Agreement dated January 31, 994 between ComputerLand
Corporation and the Registrant.(12)
10.21 Distribution and Services Agreement dated January 31, 1994 between
ComputerLand Corporation and Merisel FAB, Inc. Portions of this
agreement has been omitted pursuant to Rule 24b-2 of Securities
Act of 1934, as amended.(12)
</TABLE>
47
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- ----------------------------------------------------------------
<C> <S>
10.22 Stock Purchase Agreement dated January 31, 1994 between the
Registrant and ComputerLand Corporation.(12)
10.23 Amended and Restated Senior Note Purchase Agreement by and among
each of the purchasers named therein and Merisel Americas, Inc.,
dated as of December 23, 1993 ("Senior Note Purchase Agreement")
(13).
10.24 First Amendment, dated as of September 30, 1994 to Senior Note
Purchase Agreement, by and among the Noteholders named therein and
Merisel Americas, Inc. (15)
10.25 Amended and Restated Subordinated Note Purchase Agreement by and
among each of the purchasers named therein and Merisel Americas,
Inc., dated as of December 23, 1993 ("Subordinated Note Purchase
Agreement") (13).
10.26 First Amendment, dated as of September 30, 1994, to Subordinated
Note Purchase Agreement, by and among the Noteholders named
therein and Merisel Americas, Inc. (15)
10.27 Revolving Credit Agreement dated as of December 23, 1993 among
Merisel Americas, Inc., Merisel Europe, Inc., the Registrant, the
lender parties thereto, Citicorp USA, Inc., as agent, and
Citibank, N.A., as designated issuer ("Revolving Credit
Agreement").(13)
10.28 First Amendment, dated as of September 29, 1994, to Revolving
Credit Agreement, by and among Merisel Americas, Inc., Merisel
Europe, Inc., Merisel, Inc. and the financial institutions named
therein. (15)
10.29 Second Amendment, dated as of December 1, 1994, to Revolving
Credit Agreement, by and among Merisel, Americas, Inc., Merisel
Europe, Inc., Merisel, Inc., and the financial institutions named
therein.
10.30 Third Amendment, dated as of February 27, 1995, to Revolving
Credit Agreement, by and among Merisel Americas, Inc., Merisel
Europe, Inc., Merisel, Inc., and the financial institutions named
therein.
10.31 Amended and Restated Trade Receivables Purchase and Sale
Agreement, dated as of November 29, 1994, by and among Merisel
Capital Funding, Inc., Corporate Receivables Corporation, Citicorp
North America, Inc., and the other owners named therein.
10.32 Receivables Contribution and Sale Agreement, dated as of November
29, 1994, by and among Merisel Americas, Inc., and Merisel Capital
Funding, Inc.
10.33 Amended and Restated Trade Receivables and Purchase Agreement,
dated as of November 29, 1994 , by and among Merisel Capital
Funding, Inc., Citibank and the financial institutions party
thereto.
21 Subsidiaries of the Registrant.
23 Consent of Deloitte & Touche.
27 Financial Data Schedule for the year ended December 31, 1994.
</TABLE>
---------------------------
* Management contract or executive compensation plan or arrangement.
(1) Filed as an exhibit to the Form S-1 Registration Statement of Softsel
Computer Products, Inc., No. 33-23700, and incorporated herein by this
reference.
(2) Filed as an exhibit to the Quarterly Report on Form 10-Q for the quarter
ended September 30, 1989 of Softsel Computer Products, Inc., and
incorporated herein by this reference.
(3) Filed as an exhibit to the Quarterly Report on Form 10-Q for the quarter
ended March 31, 1990 of Softsel Computer Products, Inc., and incorporated
herein by this reference.
(4) Filed as an exhibit to the Form S-8 Registration Statement of Softsel
Computer Products, Inc., No. 33-34296, filed with the Securities and
Exchange Commission April 12, 1990, and incorporated herein by this
reference.
(5) Filed as an exhibit to the Quarterly Report on Form 10-Q for the quarter
ended June 30, 1990 of Softsel Computer Products, Inc., and incorporated
herein by this reference.
(6) Filed as an exhibit to the Quarterly Report on Form 10-Q for the quarter
ended September 30, 1990, and incorporated herein by this reference.
(7) Filed as an exhibit to the Form S-8 Registration Statement of Softsel
Computer Products, Inc., No. 33-35648, filed with the Securities and
Exchange Commission June 29, 1990, and incorporated herein by this
reference.
(8) Filed as an exhibit to the Quarterly Report on Form 10-Q for the quarter
ended June 30, 1991, and incorporated herein by this reference.
(9) Filed as an exhibit to the Form S-3 Registration Statement of Merisel,
Inc., No. 33-45696, filed with the Securities and Exchange Commission on
February 14, 1992, and incorporated herein by this reference.
(10) Filed as an exhibit to the Quarterly Report on Form 10-Q for the quarter
ended June 30, 1992, and incorporated herein by this reference.
(11) Filed as an exhibit to the Quarterly Report on Form 10-Q for the quarter
ended September 30, 1992 of Merisel, Inc., and incorporated herein by this
reference.
(12) Filed as an exhibit to the Current Report on Form 8-K dated February 14,
1994, as amended on March 24, 1994 and October 4, 1994, and incorporated
herein by this reference.
(13) Filed as an exhibit to the Annual Report on Form 10-K for the year ended
December 31, 1993 and incorporated herein by this reference.
(14) Filed as an exhibit to the Quarterly Report on Form 10-Q for the quarter
ended September 30, 1994 and incorporated herein by this reference.
(15) Filed as an exhibit to the Form S-3 Registration Statement of the
Registrant, No. 33-55195, filed with the Securities and Exchange
Commission August 23, 1994, and incorporated herein by this reference.
48
<PAGE>
EXHIBIT 10.10
MERISEL, INC.
MANAGEMENT INCENTIVE PROGRAM
1994
PURPOSE
-------
To incent and reward Associates to contribute to the Company achieving its
Short-Term Corporate Objectives (less than one year).
ELIGIBLE PARTICIPANTS
---------------------
Any Associate who can have a measurable impact on the Company's quarterly
earnings per share.
Interpretation:
---------------
Corporate: Chief Executive Officer, Senior Vice Presidents,
Vice Presidents and Directors
Domestic
Operation: President, Vice Presidents reporting to the President
and their direct reports
International
Companies: Any regional or company Managing Director/President/
Vice Presidents whose net sales exceed 10% of the
Company's Consolidated Net Sales
EARN
----
Cash bonus, paid quarterly generally based on achievement as follows:
<TABLE>
<CAPTION>
WEIGHTING
Approximate -----------------------------------------
Percentage Unit Net Cost Center Priority
of Base Income Budget Task
----------- --------- ---------- --------
<S> <C> <C> <C> <C>
Corporate:
---------
Chief Executive Officer 60% 100% -0- -0-
SVP, CIO 35% 50% 25% 25%
SVP, OPS;
MD Pacific Region 35% 75% -0- 25%
SVP, Finance, CFO 35% 70% -0- 30%
VP, Treasurer 25% 50% 25% 25%
SVP, Strategic Development 20% 100% -0- -0-
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
WEIGHTING
Approximate ------------------------------------------
Percentage Unit Net Cost Center Priority
of Base Income Budget Task
----------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Domestic Operation:
------------------
President 35% 100% -0- -0-
Vice Presidents reporting
to President 25% 50% 25% 25%
Directors 25% 50% 25% 25%
International Operations:
--------------------------
MD Europe 35% 70% -0- 30%
President Canada 50% 70% -0- 30%
Vice Presidents 25% 75% -0- 25%
</TABLE>
For the Net Income portion, the following Formula will be applied:
<TABLE>
<CAPTION>
Net Income Payment as a %
% of Operating Plan of Target
------------------- -------------
<S> <C>
greater than 120% 150%
greater than 110%, less than 120% 125%
greater than 100%, less than 110% 100%
greater than 80%, less than 100% 50%
less than 80% -0-
</TABLE>
For the Cost Center Budget Portion, the following Pro Rata will be applied:
<TABLE>
<CAPTION>
Expenses as % Payout as %
of Budget of Target
------------------- -----------
<S> <C>
less than 100% 100%
less than 105%, greater than 100% 50%
greater than 105% -0-
</TABLE>
Merisel Associates who qualify for this MIP are to have Priority Tasks with
quarter-end milestones. Generally, such Management Associate has 5-10 Priority
Tasks. For the Priority Tasks portion, the percentage of milestones achieved
will be applied to the portion of the quarterly bonus related to Priority Tasks.
Finally, Associates must be employed at date of payment to be eligible to
receive this bonus.
<PAGE>
EXHIBIT 10.12
MERISEL, INC.
401(k) RETIREMENT SAVINGS PLAN
EFFECTIVE JANUARY 1, 1988
RESTATED EFFECTIVE 1, 1995
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I - OVERVIEW................................................. 2
ARTICLE II - DEFINITIONS 3
2.1 Account................................................... 3
2.2 Affiliated Company........................................ 3
2.3 Aggregation Group......................................... 3
2.4 Alternate Payee........................................... 3
2.5 Annual Additions.......................................... 4
2.6 Average Deferral Percentage............................... 4
2.7 Beneficiary............................................... 5
2.8 Board of Directors........................................ 5
2.9 Break in Service.......................................... 5
2.10 Code...................................................... 5
2.11 Committee................................................. 5
2.12 Company................................................... 6
2.13 Company Contributions..................................... 6
2.14 Compensation.............................................. 6
2.15 Computation Period........................................ 6
2.16 Covered Employees......................................... 7
2.17 Determination Date........................................ 7
2.18 Disability................................................ 7
2.19 Effective Date............................................ 7
2.20 Employee.................................................. 7
2.21 Employment Commencement Date.............................. 7
2.22 Entry Date................................................ 7
2.23 ERISA..................................................... 8
2.24 Excess Aggregate Contributions............................ 8
2.25 Excess Contributions...................................... 8
2.26 Excess Deferrals.......................................... 8
2.27 Fail-Safe Contributions................................... 8
2.28 Family Member............................................. 8
2.29 Five Percent Owner........................................ 9
2.30 Forfeiture................................................ 9
2.31 Highly Compensated Employee............................... 9
2.32 Hour of Service........................................... 11
2.33 Investment Manager........................................ 12
2.34 Key Employee.............................................. 12
2.35 Leave of Absence.......................................... 13
2.36 Limitation Year........................................... 13
2.37 Matching Contributions.................................... 13
2.38 Matching Contributions Account............................ 14
2.39 Maternity or Paternity Leave of Absence................... 14
2.40 Non-Key Employee.......................................... 15
2.41 Normal Retirement Age..................................... 15
2.42 Officer................................................... 15
2.43 One Percent Owner......................................... 16
2.44 Participant............................................... 16
2.45 Plan...................................................... 16
2.46 Plan Administrator........................................ 16
i
<PAGE>
2.47 Plan Year................................................. 16
2.48 Reemployment Commencement Date............................ 16
2.49 Rollover Contribution..................................... 16
2.50 Rollover Contribution Account............................. 16
2.51 Salary Reduction Contributions............................ 16
2.52 Salary Reduction Contributions Account.................... 17
2.53 Severance................................................. 17
2.54 Spouse.................................................... 17
2.55 Testing Period............................................ 17
2.56 Top-Heavy Group........................................... 17
2.57 Top-Heavy Plan............................................ 17
2.58 Trust and Trust Fund...................................... 18
2.59 Trustee................................................... 18
2.60 Valuation Date............................................ 18
2.61 Vested Interest........................................... 18
2.62 Year of Service........................................... 18
ARTICLE III - ELIGIBILITY AND PARTICIPATION.......................... 20
3.1 Eligibility to Participate................................ 20
3.2 Special Participation Rules............................... 20
3.3 Participation Beyond Normal Retirement Age................ 21
ARTICLE IV - TRUST FUND AND CONTRIBUTIONS............................ 22
4.1 Trust Fund................................................ 22
4.2 Company Contribution...................................... 22
4.3 Irrevocability............................................ 23
4.4 Employer Securities and Employer Real Property............ 23
4.5 Investment Direction by Participants...................... 23
ARTICLE V - SALARY REDUCTION CONTRIBUTIONS........................... 24
5.1 Special Rules............................................. 24
5.2 Maximum Amount of Salary Reduction Contributions.......... 24
5.3 Average Deferral Percentage Tests......................... 24
5.4 Prospective Reductions of Salary Reduction Contributions.. 25
5.5 Distributions of Excess Deferrals......................... 26
5.6 Distributions of Excess Contributions..................... 26
5.7 Special Rules Applicable to Matching Contributions........ 27
5.8 Fail-Safe Contributions................................... 29
5.9 Rollover Contributions.................................... 29
ARTICLE VI - ALLOCATIONS TO PARTICIPANTS' ACCOUNTS................... 31
6.1 Participants' Accounts.................................... 31
6.2 Allocation of Contributions............................... 31
6.3 Revaluation of Accounts................................... 32
6.4 Forfeitures............................................... 33
6.5 Miscellaneous Allocation Rules............................ 33
ARTICLE VII - VESTING................................................ 34
7.1 General Rule.............................................. 34
7.2 Special Vesting Rules..................................... 34
7.3 Fully Vested Accounts..................................... 34
ii
<PAGE>
ARTICLE VIII - PAYMENT OF BENEFITS................................... 35
8.1 Payment of Benefits....................................... 35
8.2 Latest Payment Date....................................... 35
8.3 Required Beginning Date................................... 36
8.4 Distributions to Partially Vested Participants............ 36
8.5 Distributions of Salary Reduction Contributions........... 37
8.6 Payees under Legal Disability............................. 38
8.7 Notice Regarding Tax Treatment of Distributions........... 38
8.8 Hardship Distributions.................................... 38
8.9 Mailing of Payments....................................... 41
8.10 Withholding For Taxes..................................... 41
8.11 Rollover Rules............................................ 41
ARTICLE IX - SURVIVOR ANNUITY REQUIREMENTS........................... 43
9.1 Application of Article.................................... 43
9.2 Definitions............................................... 43
9.3 Form of Benefits Provided................................. 44
9.4 Elections With Respect to Survivor Annuities.............. 45
9.5 Disclosure Requirements................................... 46
9.6 Consent to Receive Early Distribution..................... 47
ARTICLE X - TOP-HEAVY PLAN RULES..................................... 48
10.1 Applicability............................................. 48
10.2 Special Valuation Rules................................... 48
10.3 Minimum Contributions..................................... 49
10.4 Maximum Annual Addition................................... 50
10.5 Non-Eligible Employees.................................... 51
ARTICLE XI - OPERATION AND ADMINISTRATION OF THE PLAN................ 52
11.1 Named Fiduciaries......................................... 52
11.2 Composition of Committee.................................. 52
11.3 Committee Powers.......................................... 53
11.4 Reporting and Disclosure.................................. 54
11.5 Multiple Fiduciary Capacities............................. 54
11.6 Funding Policy............................................ 54
11.7 Prohibition Against Certain Actions....................... 54
11.8 Committee Procedure....................................... 55
11.9 Indemnification........................................... 55
11.10 Compensation of Committee Members and Plan Expenses....... 56
11.11 Bonding................................................... 56
11.12 Notices and Communications................................ 56
11.13 Standard of Care.......................................... 56
ARTICLE XII - MERGER OF COMPANY, MERGER OF PLAN...................... 58
12.1 Effect of Reorganization or Transfer of Assets............ 58
12.2 Plan Merger Restriction................................... 58
ARTICLE XIII - TERMINATION AND - DISCONTINUANCE OF CONTRIBUTIONS..... 59
13.1 Plan Termination.......................................... 59
13.2 Discontinuance of Contributions........................... 59
13.3 Replacement Plan.......................................... 59
13.4 Partial Termination....................................... 59
iii
<PAGE>
ARTICLE XIV - APPLICATION FOR BENEFITS............................... 60
14.1 Application for Benefits.................................. 60
14.2 Content of Denial......................................... 60
14.3 Appeals................................................... 61
14.4 Exhaustion of Remedies.................................... 61
ARTICLE XV - LIMITATIONS ON CONTRIBUTIONS............................ 62
15.1 General Rule.............................................. 62
15.2 Other Defined Contribution Plans.......................... 62
15.3 Defined Benefit Plans..................................... 62
15.4 Adjustments for Excess Annual Additions................... 64
ARTICLE XVI - RESTRICTION ON ALIENATION.............................. 66
16.1 General Restrictions Against Alienation................... 66
16.2 QDRO Definition........................................... 66
16.3 Impermissible Terms....................................... 66
16.4 Special Rules............................................. 67
16.5 Procedures................................................ 67
16.6 Segregation of Funds...................................... 68
16.7 Authorized Participant Loans.............................. 69
ARTICLE XVII - AMENDMENTS............................................ 72
17.1 Amendments................................................ 72
17.2 Effect of Amendments...................................... 72
17.3 Securities Restrictions................................... 73
17.4 Changes to Vesting Schedule............................... 73
ARTICLE XVIII - MISCELLANEOUS MATTERS................................ 74
18.1 No Enlargement of Employee Rights......................... 74
18.2 Interpretation............................................ 74
iv
<PAGE>
PREAMBLE
The Merisel, Inc. Retirement Savings Plan ("Plan") is intended to be
a tax-qualified retirement plan. The Plan shall be maintained for the
exclusive benefit of the Employees of the Company, and to comply with the
applicable provisions of the Internal Revenue Code and of the Employee
Retirement Income Security Act of 1974 ("ERISA").
-1-
<PAGE>
ARTICLE I.
OVERVIEW
The following is intended to be a brief overview of some of the
significant provisions of the Merisel, Inc. 401(k) Retirement Savings Plan
("Plan").
Employees become eligible to participate in the Plan after satisfying the
eligibility conditions set forth in Article III.
Participants can contribute up to 15% of compensation, in accordance with
the rules of Article V.
The Board of Directors may elect to contribute an amount to the Plan on
behalf of each Participant who has made contributions to the Plan. This
Company contribution will be allocated to Participants in proportion to the
amount of their salary reduction contributions. However, in order to be
entitled to receive an allocation of Company contributions, Participants
generally must be employed by the Company on the last day of the year. Also,
the Board of Directors has the discretion as to how much the Company is to
contribute each year. The rules regarding allocations of Company contributions
are located in Article VI.
The rules regarding vesting are contained in Article VII. Pursuant to
these rules, Participants are always vested in their contributions to the Plan.
Participants become fully vested in the Company contributions made on their
behalf upon death, disability, or attainment of age 65 while employed by the
Company. In all other cases, Participants become vested in the Company
contributions on their behalf according to the following schedule:
YEARS OF SERVICE VESTED PERCENTAGE
---------------- -----------------
Less than 1 0%
1 25%
2 50%
3 75%
4 or more 100%
Provided certain restrictions are satisfied, Participants may borrow funds
from their accounts. The rules regarding loans are contained in Article XVI.
Participants may withdraw some of their contributions after reaching age
59- 1/2 or upon incurring a financial hardship. The rules regarding
withdrawals are located in Article VIII.
Benefit will generally be paid in the form of an annuity, unless the
Participant elects otherwise. The rules regarding annuities are located in
Article IX.
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ARTICLE II.
DEFINITIONS
Whenever capitalized in the text, the following terms shall have the
meaning set forth below.
A. ACCOUNT. "Account" or "Accounts" shall mean the Matching
Contributions Account, the Salary Reduction Contributions Account, and the
Rollover Contribution Account (if applicable) maintained for each Participant.
B. AFFILIATED COMPANY.
1. "Affiliated Company" shall mean any entity that is aggregated
with the Company under Code Section 414(b), (c), (m), or (o).
2. For purposes of applying the limitations of Article XV below,
whether or not an entity is an Affiliated Company shall be determined by
applying the percentage modifications contained in Code Section 415(h).
C. AGGREGATION GROUP.
1. "Aggregation Group" means--
a. Each plan of the Company or an Affiliated Company in which a
Key Employee is or was a Participant during the Testing Period
(regardless of whether the plan has been terminated), and
b. Each other plan of the Company or an Affiliated Company
(regardless of whether the plan has been terminated) which enables
any plan described in Subparagraph (i) above to meet the requirements
of Code Sections 401(a)(4) or 410.
2. Any plan not required to be included in an Aggregation Group
under the rules of Paragraph (a) above may be treated as being part of the
group if the group would continue to meet the requirements of Code
Sections 401(a)(4) and 410 with the plan being taken into account.
3. Each plan maintained by the Company or an Affiliated Company
required to be included in an Aggregation Group shall be treated as a Top-
Heavy Plan if the Aggregation Group is a Top-Heavy Group.
D. ALTERNATE PAYEE. "Alternate Payee" means any Spouse, former Spouse,
child, or other dependent of a Participant who is recognized by a domestic
relations order as having a right to receive all, or a portion of the benefits
payable with respect to the Participant.
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E. ANNUAL ADDITIONS.
1. "Annual Additions" shall include, for any Limitation Year--
a. The amount credited to a Participant's Accounts under this
Plan or to a Simplified Employee Pension from Company Contributions
(including Salary Reduction Contributions and Fail-Safe
Contributions),
b. The Participant's after-tax contributions,
c. Forfeitures, and
d. In the case of a Key Employee, any amounts allocated to an
account established under a funded welfare benefit plan or a defined
benefit plan to provide medical benefits with respect to the
Participant after retirement.
2. The following amounts shall not be considered part of the
Participant's Annual Additions:
a. Rollover Contributions;
b. Repayments of loans; and
c. Any recontributions (of prior distributions) made pursuant to
Section 8.4 below.
3. The following amounts shall be considered part of the
Participant's Annual Additions:
a. Excess Deferrals that are distributed later than April 15
of the calendar year following the calendar year to which the amounts
relate;
b. Excess Contributions (even if timely distributed); and
c. Excess Aggregate Contribution (even if timely distributed or
forfeited).
F. AVERAGE DEFERRAL PERCENTAGE.
1. The "Average Deferral Percentage" for the Highly Compensated
Employees and for all other Covered Employees is the average of the
ratios, calculated separately for each Employee in the group, of the
amount of his Salary Reduction Contributions (including any Fail-Safe
Contributions made on his behalf) to the amount of his Compensation.
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a. In the case of a Covered Employee who does not defer anything
under the Plan, his deferral percentage shall be zero percent (0%).
b. The Average Deferral Percentage for each group shall be
calculated to the nearest one-hundredth percent of Compensation.
c. The computation of the Average Deferral Percentage in the
case of Family Members shall be done in accordance with the
regulations under Code Section 401(k).
2. If the Plan is treated as a single plan for purposes of
satisfying the requirements of Code Sections 401(a)(4) and 410 along with
another plan that contains a cash or deferred arrangement, all of the cash
or deferred arrangements shall be treated as a single arrangement.
3. If a Highly Compensated Employee is also a participant in one or
more other cash or deferred arrangements maintained by the Company, all
such arrangements shall be treated as a single arrangement.
4. For purposes of this Section 2.6, a Participant's Compensation
shall be determined in accordance with the rules of Code Sections 414(s)
and 401(k).
G. BENEFICIARY. "Beneficiary" shall mean the person designated in
Article VIII to receive the Vested Interest of a deceased Participant.
H. BOARD OF DIRECTORS. "Board of Directors" or "Board" shall mean the
Board of Directors (or its delegate) of the Company.
I. BREAK IN SERVICE. "Break in Service" shall mean a Computation Period
in which the Employee does not complete more than five hundred (500) Hours of
Service, including Hours of Service completed while on a Maternity or Paternity
Leave of Absence.
J. CODE. "Code" shall mean the Internal Revenue Code of 1986.
K. COMMITTEE. "Committee" shall mean the Merisel, Inc. 401(k)
Retirement Savings Plan Committee described in Article XI below.
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L. COMPANY. "Company" shall mean Merisel, Inc. and any Affiliated
Companies (or similar entities) which may be included within the coverage of
the Plan with the consent of the Board of Directors.
M. COMPANY CONTRIBUTIONS.
1. "Company Contributions" shall mean all amounts paid by the
Company into the Trust Fund.
2. Except where the context indicates to the contrary, Company
Contributions shall not include Salary Reduction Contributions and Fail-
Safe Contributions.
N. COMPENSATION.
1. A Participant's "Compensation" shall mean the amount indicated in
Box 10 on the Form W-2 issued to him, excluding all fringe benefits.
2. Except as otherwise expressly provided in this Plan to the
contrary, the term "Compensation" shall include those amounts which
represent the Participant's Salary Reduction Contributions and pre-tax
contributions to a cafeteria plan under Section 125 of the Code.
3. For Plan Years beginning after December 31, 1988, in no event
will the amount of Compensation taken into account on behalf of any
Participant exceed two hundred thousand dollars ($200,000). This dollar
amount will be adjusted at the same time and in the same manner as under
Code Section 415(d).
4. For Plan Years beginning after December 31, 1993, in no event
will the amount of Compensation taken into account on behalf of any
Participant exceed one hundred fifty thousand dollars ($150,000). This
dollar amount shall be adjusted at the same time and in the same manner as
under Code Section 415(d).
5. Notwithstanding anything in this Plan to the contrary, for
purposes of the applying the nondiscrimination rules of Article V, only
amounts earned while a Participant in the Plan will be taken into account.
O. COMPUTATION PERIOD.
1. "Computation Period" is the relevant twelve (12) consecutive
month period for determining whether the Employee is to be credited with a
Year of Service or a Break in Service.
2. For purposes of determining vesting, in all cases the Computation
Period shall be the Plan Year.
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P. COVERED EMPLOYEES. "Covered Employees" means those Employees who have
satisfied all of the requirements for eligibility to participate in the Plan
and are not otherwise precluded from participating in the Plan.
Q. DETERMINATION DATE.
1. "Determination Date" means, with respect to any plan year, the
last day of the preceding plan year.
2. In the case of the first plan year, "Determination Date" shall
mean the last day of that plan year.
R. DISABILITY. An individual is disabled if he is entitled to benefits
under the long-term disability plan maintained by the Company.
S. EFFECTIVE DATE.
1. The original "Effective Date" of the Plan was January 1, 1988.
2. The Effective Date of this amendment and restatement of the Plan
is January 1, 1989, except as required to be earlier to comply with the
law.
3. In the case of an Employee who Severance occurred prior to the
Effective Date of this restatement, his benefit under the Plan will be
determined under the provisions of the Plan as it existed prior to this
restatement.
T. EMPLOYEE. "Employee" shall mean each person qualifying as a common
law employee of the Company or an Affiliated Company.
U. EMPLOYMENT COMMENCEMENT DATE.
1. The term "Employment Commencement Date" shall mean the date on
which an Employee first performs an Hour of Service.
2. For purposes of determining his Employment Commencement Date, an
Employee shall not be deemed to have commenced employment with an
Affiliated Company prior to the effective date on which the entity became
an Affiliated Company, except as is expressly provided otherwise in this
Plan or in resolutions of the Board of Directors.
V. ENTRY DATE. "Entry Date" shall mean the first day of a calendar
quarter following the date on which the Employee has satisfied the eligibility
requirements listed in Section 3.1 below.
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W. ERISA. "ERISA" shall mean the Employee Retirement Income Security
Act of 1974.
X. EXCESS AGGREGATE CONTRIBUTIONS. "Excess Aggregate Contributions"
shall mean those contributions in excess of the limitations of Section 5.7
below.
Y. EXCESS CONTRIBUTIONS. "Excess Contributions" shall mean those Salary
Reduction Contributions in excess of the limitations of Section 5.3 below.
Z. EXCESS DEFERRALS. "Excess Deferrals" shall mean those Salary
Reduction Contributions in excess of the dollar limitation of Section 5.2(b)
below.
AA. FAIL-SAFE CONTRIBUTIONS. "Fail-Safe Contributions" shall mean those
Contributions made pursuant to Section 5.8 below that are designed to insure
compliance with the Average Deferral Percentage Tests of Section 5.3 below.
BB. FAMILY MEMBER.
1. If any individual is a member of the Family of a Five Percent
Owner or of a Highly Compensated Employee in the group consisting of the
ten (10) Highly Compensated Employees paid the greatest Compensation
during the year, then for purposes of applying the various
nondiscrimination rules applicable to this Plan--
a. The individual ("Family Member") shall not be considered a
separate Employee, and
b. Any Compensation paid to the Family Member (and any
applicable contribution or benefit on behalf of the Family Member)
shall be treated as if it were paid to (or on behalf of) the Five
Percent Owner or Highly Compensated Employee.
2. For purposes of this Section 2.28, "Family" means the Employee's
Spouse, lineal ascendants and descendants, and the spouses of lineal
ascendants and descendants.
3. For purposes of the Compensation limitation of Section 2.14(d)
above, the term "Family" shall include only-
(i) The Spouse of the Employee, and
(ii) Any lineal descendants who have not attained age nineteen
(19) before the close of the year.
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That dollar limitation shall be divided among the various members of the
Family in the proportion that the Compensation of each member bears to the
total Compensation of all members of the Family.
CC. FIVE PERCENT OWNER.
1. "Five Percent Owner" means any person who owns (or is considered
as owning within the meaning of Section 318 of the Code) more than five
percent (5%) of the--
a. Outstanding stock of the Company or an Affiliated Company,
or
b. The total combined voting power of all stock of the Company
or an Affiliated Company.
2. The rules of Subsections (b), (c), and (m) of Code Section 414
shall not apply for purposes these ownership rules. Thus, this ownership
test shall be applied separately with respect to the Company and every
Affiliated Company.
3. The constructive ownership rules of Code Section 318(a)(2)(C)
shall be applied by substituting "five percent (5%)" for "fifty percent
(50%)" where it appears therein.
4. For purposes of this Section 2.29, if an Employee's ownership
interest varies during a Plan Year, his ownership interest shall be the
largest interest he owned at any time during the year.
DD. FORFEITURE. "Forfeiture" means the nonvested portion of a
Participant's Matching Contributions Account that is forfeited in accordance
with the rules of Article VII below.
EE. HIGHLY COMPENSATED EMPLOYEE.
1. "Highly Compensated Employee" means any Employee who, during the
relevant Plan Year ("Determination Year") or the preceding Plan Year
("Lookback Year")--
a. Was at any time a Five Percent Owner,
b. Received Compensation from the Company and all Affiliated
Companies in excess of seventy-five thousand dollars ($75,000), as
indexed for inflation,
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c. Received Compensation in excess of fifty thousand dollars
($50,000), as indexed for inflation, and was in the top twenty
percent (20%) of all Employees when ranked on the basis of
Compensation paid during the year ("Top-Paid Group"), or
d. Was at any time an Officer of the Company or any Affiliated
Company.
2. An Employee described in Subparagraphs (ii), (iii), or (iv) of
Paragraph (a) above shall not be treated as described therein for the
Determination Year unless the Employee is a member of the group consisting
of the one hundred (100) Employees paid the greatest Compensation during
the Determination Year.
3. For purposes of this Section 2.31, the amount of an Employee's
Compensation shall be determined--
a. In accordance with Code Section 414(q)(7), and
b. Without regard to the dollar limitation of Section 2.14(d)
above.
4. For purposes of determining the number of Employees in the Top-
Paid Group (described in Paragraph (a)(iii) above), the following
Employees shall be excluded--
a. Employees who have not completed six (6) months of service,
b. Employees who normally work less than seventeen and one-half
(17-1/2) hours per week,
c. Employees who normally work during not more than six (6)
months during any year, and
d. Employees who have not attained age twenty-one (21) by the
end of the relevant Plan Year.
Except to the extent provided in the regulations under Code Section
414(q), Employees who are included in a unit of Employees covered by an
agreement which the Secretary of Labor finds to be a collective bargaining
agreement between Employee representatives and the Company must be taken
into account.
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5. A former Employee shall be treated as a Highly Compensated
Employee if--
a. He was a Highly Compensated Employee when he separated from
service, or
b. He was a Highly Compensated Employee at any time after
attaining age fifty-five (55).
6. Notwithstanding the foregoing, non-resident aliens without U.S.
source income from the Company or an Affiliated Company shall be
disregarded for all purposes in determining who are the Highly Compensated
Employees.
FF. HOUR OF SERVICE.
1. "Hour of Service" of an Employee shall mean each hour for which
he is paid or is entitled to payment by the Company or an Affiliated
Company:
a. For the performance of services as an Employee;
b. Which is attributable to a period of time during which he
performs no duties (irrespective of whether or not his employment has
been terminated) due to a vacation, holiday, illness, incapacity
(including pregnancy or disability), layoff, jury duty, military
duty, or a leave of absence.
(1) However, no such hours shall be credited to an Employee
if he is directly or indirectly paid or entitled to payment for
the hours and the payment or entitlement--
(a) Is made or due under a plan maintained solely for
the purpose of complying with applicable worker's
compensation, unemployment compensation, or disability
insurance laws, or
(b) Is a payment which solely reimburses the Employee
for his medical or medically-related expenses; or
c. For which he is entitled to back pay, irrespective of
mitigation of damages, whether awarded or agreed to by the Company or
an Affiliated Company, provided that he has not previously been
credited with an Hour of Service with respect to that hour under
Subparagraph (i) or (ii) above.
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2. Notwithstanding the provisions of Paragraph (a) above, no
Employee shall be entitled to credit for more than five hundred and one
(501) Hours of Service for any single continuous period during which he
performs no duties, whether or not the period occurs in a single
Computation Period.
3. All Hours of Service determined under the rules of Paragraph (a)
above shall be credited to the Computation Period in which the payment is
actually made, determined in accordance with rules prescribed by the
Committee. The provisions of this Paragraph (c) shall be applied in a
manner consistent with the provisions of Department of Labor Regulation
Section 2530.200b-2.
4. Unless the Board of Directors shall expressly determine
otherwise, and except as may be expressly provided otherwise in this Plan,
an Employee shall not receive credit for his Hours of Service completed
with an Affiliated Company prior to the effective date on which the entity
became an Affiliated Company.
GG. INVESTMENT MANAGER. "Investment Manager" shall have the meaning set
forth in Section 3(38) of ERISA.
HH. KEY EMPLOYEE.
1. "Key Employee" shall mean any Employee or former Employee who, at
any time during the Testing Period, is or was:
a. An Officer;
b. One of the ten (10) Employees--
(1) Having annual Compensation from the Company or an
Affiliated Company of more than the limitation in effect under
Section 15.1(a)(i) below, and
(2) Owning (or considered as owning within the meaning of
Code Section 318) during the Testing Period both more than one-
half percent (1/2%) interest and the largest interests in the
Company or an Affiliated Company.
For purposes of this Subparagraph (ii), if two (2) Employees have the
same interest in the Company or an Affiliated Company, the Employee
having the greater annual Compensation shall be treated as having the
larger interest;
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c. A Five Percent Owner of the Company or an Affiliated
Company; or
d. A One Percent Owner of the Company or an Affiliated Company
having an annual Compensation of more than one hundred fifty thousand
dollars ($150,000).
2. The term "Key Employee" shall include his Beneficiaries.
3. For purposes of this Section 2.34, an Employee's Compensation
shall be the amount indicated on the Form W-2 issued to him for the
calendar year ending with or within the Plan Year. Notwithstanding the
preceding sentence, for purposes of determining whether an individual is a
Key Employee, his compensation shall be increased by Deferrals and his
pre-tax contributions to a cafeteria plan under Section 125 of the Code.
II. LEAVE OF ABSENCE.
1. "Leave of Absence" shall mean any unpaid personal leave from
active employment duly authorized by the Company under the Company's
standard personnel practices. All persons under similar circumstances
shall be treated in a uniform and nondiscriminatory manner in the granting
of Leaves of Absence.
2. An Employee shall not be deemed to have incurred a Break in
Service while on a Leave of Absence, provided he returns to employment on
or before the date on which the leave expires.
3. In the event an Employee does not return to employment on or
before the end of the leave, he shall be deemed to have incurred a
Severance as of the first day of the leave, unless--
a. The failure was due to his death or disability, or
b. The provisions of Section 2.39 below apply.
JJ. LIMITATION YEAR. In connection with the adoption of this Plan, the
Company hereby elects a "Limitation Year" corresponding to the Plan Year for
purposes of the limitations on contributions contained in Article XV below.
KK. MATCHING CONTRIBUTIONS. "Matching Contributions" shall mean the
Company Contributions that are allocated to Participants pursuant to the
provisions of Section 6.2(a) below.
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LL. MATCHING CONTRIBUTIONS ACCOUNT. The "Matching Contributions Account"
of a Participant shall mean his individual account in the Trust Fund in which
are held his allocated share of the Matching Contributions, and the earnings
thereon.
MM. MATERNITY OR PATERNITY LEAVE OF ABSENCE.
1. The provisions of this Section 2.39 shall apply with respect to
an Employee who is absent from work without pay for any period--
a. By reason of the pregnancy of the Employee,
b. By reason of the birth of a child of the Employee,
c. By reason of the placement of a child with the Employee in
connection with the adoption of the child by the Employee, or
d. For purposes of caring for the child for a period beginning
immediately following the birth or placement.
2. The number of Hours of Service to which an Employee described in
Paragraph (a) above shall be credited with shall be--
a. The number which otherwise would normally have been credited
to the Employee but for the absence, or
b. If the number described in Subparagraph (i) above is not
capable of being determined, eight (8) Hours of Service per day of
the absence.
3. However, the total number of hours treated as Hours of Service
under Paragraph (b) above shall not exceed five hundred one (501).
Furthermore, these Hours of Service shall be taken into account solely for
the purpose of determining whether or not the Employee has incurred a
Break in Service.
4. The Hours described in Paragraph (b) above shall be credited to
the Computation Period--
a. In which the absence from work begins, if the Employee would
be prevented from incurring a Break in Service in that Computation
Period solely because the period of absence is treated as Hours of
Service under this Section 2.39, or
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b. In any other case, in the immediately following Computation
Period.
5. The above provisions of this Section 2.39 shall not apply unless
the Employee provides such timely information as the Committee may
reasonably require to establish that--
a. The absence is for reasons described in Paragraph (a) above,
and
b. The number of days for which there was an absence.
NN. NON-KEY EMPLOYEE.
1. "Non-Key Employee" shall mean any Employee who is not a Key
Employee.
2. The term "Non-Key Employee" shall include his Beneficiaries.
OO. NORMAL RETIREMENT AGE. "Normal Retirement Age" shall mean the
Participant's sixty-fifth (65th) birthday.
PP. OFFICER.
1. "Officer" shall mean any Employee who was at any time an officer
of the Company or an Affiliated Company and received Compensation from the
Company and all Affiliated Companies greater than fifty percent (50%) of
the amount in effect under Code Section 415(b)(1)(A) for the year.
2. However, no more than the lesser of--
a. Fifty (50) Employees, or
b. The greater of three (3) Employees or ten percent (10%) of
the Employees,
shall be treated as Officers.
3. If no officer is described in Paragraph (a) above, then the
highest paid officer of the Company shall be treated as being described
therein.
4. For purposes of Paragraph (b) above--
a. All Leased Employees (within the meaning of Section 414(n)
of the Code) and all part-time Employees shall be taken into account,
and
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b. The number of Employees shall be the greatest number at any
time during the relevant period.
QQ. ONE PERCENT OWNER. "One Percent Owner" means any person who would be
a Five Percent Owner if the minimum ownership threshold were one percent (1%)
instead of five percent (5%).
RR. PARTICIPANT.
1. "Participant" shall mean any Employee who has satisfied the
participation eligibility requirements and has been enrolled in this Plan
in accordance with the provisions of Article III below.
2. "Participant" does not include an Employee who has incurred a
Severance and either--
(i) Does not have a Vested Interest, or
(ii) Has been paid the full amount of his Vested Interest.
SS. PLAN. "Plan" shall mean the Merisel, Inc. 401(k) Retirement Savings
Plan.
TT. PLAN ADMINISTRATOR. "Plan Administrator" shall mean the
administrator of the Plan within the meaning of ERISA Section 3(16)(A), which
shall be the Company.
UU. PLAN YEAR. "Plan Year" shall mean the twelve (12) month period
ending on December 31.
VV. REEMPLOYMENT COMMENCEMENT DATE. In the case of an Employee who
incurs a Severance and who is subsequently reemployed by the Company or an
Affiliated Company, the term "Reemployment Commencement Date" shall mean the
first day following the Severance on which the Employee performs an Hour of
Service.
WW. ROLLOVER CONTRIBUTION. "Rollover Contribution" shall mean a
contribution made by a Participant pursuant to Section 5.9 below.
XX. ROLLOVER CONTRIBUTION ACCOUNT. "Rollover Contribution Account" of a
Participant shall mean his individual Account in the Trust Fund in which are
held his Rollover Contributions and the earnings thereon.
YY. SALARY REDUCTION CONTRIBUTIONS. "Salary Reduction Contributions"
shall mean the pre-tax contributions made by Participants pursuant to Article V
below.
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ZZ. SALARY REDUCTION CONTRIBUTIONS ACCOUNT. "Salary Reduction
Contributions Account" of a Participant shall mean his individual account in
the Trust Fund in which are held his Salary Reduction Contributions, any Fail-
Safe Contributions made on his behalf, and the earnings thereon.
AAA. SEVERANCE. "Severance" shall mean the termination of an Employee's
employment with the Company or an Affiliated Company, by reason of his
retirement, death, resignation, dismissal, or otherwise.
BBB. SPOUSE. "Spouse" shall mean the person to whom a Participant is
married (determined under local law) as of the relevant date.
CCC. TESTING PERIOD. "Testing Period" means the Plan Year containing the
Determination Date and the preceding four (4) Plan Years.
DDD. TOP-HEAVY GROUP. "Top-Heavy Group" means any Aggregation Group if
the sum (as of the Determination Date) of--
1. The present value of the cumulative accrued benefits for Key
Employees under all defined benefit plans included in the group, and
2. The aggregate of the account balances of Key Employees under all
defined contribution plans included in the group,
exceeds sixty percent (60%) of a similar sum determined for all Employees.
EEE. TOP-HEAVY PLAN.
1. Any defined benefit plan is a Top Heavy Plan if, as of the
Determination Date, the present value of the cumulative accrued benefits
under the plan for Key Employees exceeds sixty percent (60%) of the
present value of the cumulative accrued benefits under the plan for all
Employees.
a. For purposes of this Paragraph (a), the present value of an
Employee's accrued benefit shall be determined by using the interest
rate and the mortality assumptions specified in that plan. The same
actuarial assumptions shall be used in measuring accrued benefits
under all defined benefit plans.
b. The accrued benefit of any Employee (other than a Key
Employee) shall be determined--
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(1) Under the method that is used for benefit accrual
purposes for all plans of the Company and all Affiliated
Companies, or
(2) If there is no such method, as if the benefit accrued
no more rapidly than the slowest accrual rate permitted under
Section 411(b)(1)(C) of the Code.
c. The date on which the accrued benefit of each Employee is
measured (with respect to each Determination Date) shall be the date
used for computing costs under the minimum funding standards of Code
Section 412, determined as if he had terminated service as of that
date.
2. Any defined contribution plan shall be a Top Heavy Plan if, as of
the Determination Date, the aggregate account balances of Key Employees
under the plan exceeds sixty percent (60%) of the present value of the
aggregate of the account balances of all Employees under the plan.
a. The date on which the account balance of each Employee is
measured (with respect to each Determination Date) shall be the last
day of the relevant plan year.
3. For purposes of this Section 2.57, the accrued benefit and
account balances of a Participant shall include amounts attributable to
Participant contributions (whether or not the contributions are includible
in income). Furthermore, the same date shall be used for valuing benefits
under all plans.
FFF. TRUST AND TRUST FUND. "Trust" or "Trust Fund" shall mean the Trust
created by this Agreement.
GGG. TRUSTEE. "Trustee" shall mean the person(s) or entity acting as the
Trustee of the Trust created under this Plan.
HHH. VALUATION DATE. "Valuation Date" shall mean the last day of each
Plan Year, or such other date or dates as may be selected by the Committee for
valuing the assets of the Plan.
III. VESTED INTEREST. "Vested Interest" shall mean the interest of a
Participant in the Trust Fund which has become vested pursuant to the
provisions of Article VII below.
JJJ. YEAR OF SERVICE.
1. "Year of Service" shall mean a Computation Period during which
the Employee completes at least one thousand (1,000) Hours of Service.
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2. In no event will an Employee be credited with more than one (1)
Year of Service with respect to service performed in a single Computation
Period.
3. A Participant's Years of Service completed prior to commencing
participation in the Plan shall be taken into account.
4. In the case of an individual who became an Employee by reason of
the Company's acquisition of the United States Franchise and Distribution
Division of ComputerLand Corporation, his service completed prior to
February 1, 1994 shall be taken into account for purposes of this Plan.
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ARTICLE III.
ELIGIBILITY AND PARTICIPATION
A. ELIGIBILITY TO PARTICIPATE.
1. Effective January 1, 1994, every Employee of the Company who has
completed a Year of Service and attained age (21) shall become eligible to
participate in the Plan as of the first day of the calendar quarter
following the date on which those requirements are satisfied.
a. The preceding rule shall not apply to Employees who became
Participants before January 1, 1994; they shall become eligible to
participate under the rules in effect prior to January 1, 1994.
b. Employees of Computerland Corporation subject to the special
rule contained in Section 2.62(d) above who had satisfied the
applicable eligibility standards of the Plan as of January 31, 1994
shall be eligible to participate in the Plan on that date.
2. Notwithstanding the above, the following classes of Employees
shall not be eligible to participate in the Plan:
a. Employees who are included in a unit of Employees covered by
a collective bargaining agreement, if there is evidence that
retirement benefits were the subject of good faith bargaining between
the Employee representatives and the Company, unless the collective
bargaining agreement expressly provides for coverage under this Plan;
3. Nonresident aliens who receive no earned income (within the
meaning of Section 911(d)(2) of the Code) from the Company that
constitutes income from sources within the United States (within the
meaning of Section 861(a)(3) of the Code); and
a. Leased Employees (within the meaning of Section 414(n) of
the Code).
B. SPECIAL PARTICIPATION RULES.
1. In the case of an Employee whose Entry Date occurs after the
Employee incurred a Severance, the Employee shall commence participation
in this Plan as of the later of--
(i) His Entry Date, or
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(ii) His Reemployment Commencement Date following the Severance.
2. A Participant who incurs a Severance and is thereafter reemployed
by the Company shall be entitled to recommence participation in the Plan
as of his Reemployment Commencement Date following the Severance.
C. PARTICIPATION BEYOND NORMAL RETIREMENT AGE. Participants who
have attained their Normal Retirement Age will continue to participate in the
Plan to the same extent as those Participants who have not yet attained their
Normal Retirement Age.
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ARTICLE IV.
TRUST FUND AND CONTRIBUTIONS
A. TRUST FUND.
1. Pursuant to the terms of the Plan, the Company established a
trust, with the Trustee as the trustee thereunder.
2. The Trustee has agreed to hold and administer in trust all
amounts accumulated under the Plan under the terms of this Plan.
B. COMPANY CONTRIBUTION.
1. For each Plan Year the Company shall contribute to the Trust
Fund--
(i) The Salary Reduction Contributions by Participants, and
(ii) The amount determined under Section 6.2(a) below.
2. In no event shall the amount of the contribution by the Company
under this Plan (including Salary Reduction Contributions) exceed the
maximum allowable deduction available to the Company for its taxable year
under Code Section 404.
3. No contribution shall be made by the Company at any time when its
allocation would be precluded by the limitations of Article XV below.
4. All contributions by the Company under this Plan may be made in
kind or in cash, or in both, and shall be made directly to the Trustee on
any date or dates selected by the Company. Any stock of the Company that
is contributed to the Plan by the Company shall be valued at its fair
market value. The purchase price of any stock of the Company that is
acquired by the Plan with its assets shall be its fair market value.
5. All contributions by the Company for a Plan Year shall be made
within the time prescribed by law for filing the Company's federal income
tax return (including extensions) for the Company's taxable year
corresponding to the Plan Year.
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C. IRREVOCABILITY. In no event shall any of the assets of the Plan
revert to the Company except as provided in this Section 4.3.
1. In the case of a Company Contribution which is made by reason of
a mistake of fact, at the Company's election, the contribution shall be
returned to the Company within one (1) year after it is made.
2. All Company Contributions to the Plan are hereby conditioned on
their deductibility under Code Section 404. To the extent a deduction is
disallowed, at the Company's election, the contribution shall be returned
to the Company within one (1) year after the disallowance.
3. In the case where amounts are held in a Suspense Account under
Section 15.4 below that may not be allocated to the Accounts of
Participants when the Plan is terminated, the excess amounts may revert to
the Company in accordance with the regulations under Code Section 415.
D. EMPLOYER SECURITIES AND EMPLOYER REAL PROPERTY.
1. The Plan is authorized to invest in employer securities and
employer real property (as those terms are defined in Section 407 of
ERISA), to the extent permitted in ERISA.
2. The assets of the Plan may be invested, primarily or exclusively,
in employer securities (as defined in Section 407 of ERISA).
E. INVESTMENT DIRECTION BY PARTICIPANTS. Pursuant to such rules and
procedures as may be prescribed by the Committee, Participants may direct the
investment of the assets in some or all of their Accounts.
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ARTICLE V.
SALARY REDUCTION CONTRIBUTIONS
A. SPECIAL RULES.
1. Pursuant to such rules and procedures as the Committee may
prescribe, each Participant may elect to make contributions to the Plan
("Salary Reduction Contributions".)
2. Participants may increase or decrease the amount of their Salary
Reduction Contributions four times a year, on January 1, April 1, July 1,
and October 1 ("Quarterly Date"). Participants may suspend their Salary
Reduction Contributions at any time, although they cannot recommence
making them until the next Quarterly Date. All changes or suspensions of
Salary Reduction Contributions require at least fourteen (14) days prior
notice.
3. Salary Reduction Contributions shall be treated as Company
Contributions for purposes of Code Sections 401(k) and 414(h).
4. Salary Reduction Contributions shall be collected by the Company
only through payroll deductions. The Company shall remit the Salary
Reduction Contributions to the Trustee as soon as practicable, but in no
event more than ninety (90) days after the amounts are withheld from
payroll.
B. MAXIMUM AMOUNT OF SALARY REDUCTION CONTRIBUTIONS.
1. The amount of a Participant's Compensation that may be
contributed to the Plan subject to the election provided in Section 5.1
above shall be a whole percentage of the Participant's Compensation, not
to exceed fifteen (15) or a fixed dollar amount per payroll period.
2. Notwithstanding anything in this Plan to the contrary, the
maximum amount that a Participant may contribute in a single calendar year
beginning on or after January 1, 1995 is limited to nine thousand two
hundred forty dollars ($9,240). This amount shall be adjusted for
increases in the cost-of-living, as determined under Section 402(g) of the
Code.
3. In no event will a Participant be permitted to make Salary
Reduction Contributions in excess of the maximum amount permitted under
Sections 5.3 or 5.7 below.
C. AVERAGE DEFERRAL PERCENTAGE TESTS.
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1. The Committee shall monitor the Salary Reduction Contributions by
Participants to insure that the requirements of either Paragraph (b) or
(c) are satisfied.
2. The requirements of this Paragraph (b) are satisfied if the
Average Deferral Percentage for Highly Compensated Employees for the Plan
Year is not more than the Average Deferral Percentage for all other
Covered Employees multiplied by 1.25.
3. The requirements of this Paragraph (c) are satisfied if--
a. The excess of the Average Deferral Percentage of the group
of Highly Compensated Employees over that of all other Covered
Employees is not more than two (2) percentage points, and
b. The Average Deferral Percentage for the group of Highly
Compensated Employees is not more than twice the Average Deferral
Percentage for all other Covered Employees.
4. The Company shall maintain records sufficient to demonstrate
satisfaction of the requirements of this Section 5.3, including the extent
to which Fail-Safe Contributions are taken into account (if applicable).
D. PROSPECTIVE REDUCTIONS OF SALARY REDUCTION CONTRIBUTIONS.
1. The Committee may determine prior to the end of the Plan Year
whether or not the Average Deferral Percentage tests of Section 5.3 are
satisfied. If it appears that the tests will not be satisfied, the
Committee may elect to reduce the Salary Reduction Contributions by the
Highly Compensated Employees on a prospective basis.
2. In the event that Salary Reduction Contributions by Highly
Compensated Employees are reduced by Committee action, these reductions
will be accomplished reducing the rate of contributions for the Highly
Compensated Employee whose Deferral Percentage is the highest to the
extent required to--
a. Enable the Plan to satisfy one of the Average Deferral
Percentage Tests of Section 5.3 above, or
b. Cause his Deferral Percentage to equal that of the Highly
Compensated Employee with the next highest Deferral Percentage. If
this action does not cause the Plan to satisfy one of the Average
Deferral
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Percentage Tests, this process will be repeated until one of those
tests is satisfied.
E. DISTRIBUTIONS OF EXCESS DEFERRALS. In the event a Participant
deferred more than the maximum permitted under Section 5.2(b) above ("Excess
Deferrals"), whether under only this Plan, or under this Plan and another plan,
the Participant may notify the Plan of the portion of his Excess Deferrals
allocable to the Plan no later than March 1 following the calendar year in
which the Excess Deferrals were made.
1. Notwithstanding anything in this Plan to the contrary, the
Committee shall attempt to distribute the amount of the Participant's
Excess Deferrals (and the earnings thereon) to the Participant no later
than April 15th of the calendar year following the calendar year in which
the Excess Deferrals were made.
a. However, any income earned after the end of the calendar
year but before the date of the distribution need not be distributed.
2. Distributions may be made under this Section 5.5 without regard
to the consent requirement of Section 9.6 below.
3. Amounts that are distributed under this Section 5.5 shall be
treated as part of a Participant's Annual Addition.
4. Amounts that are distributed under this Section 5.5 will not be
taken into account for purposes of the minimum distribution rules of
Section 8.3 below.
F. DISTRIBUTIONS OF EXCESS CONTRIBUTIONS. In the event that the Plan
fails to satisfy the Average Deferral Percentage Tests of Section 5.3 above as
of the last day of the Plan Year, the contributions in excess of those limits
and the earnings thereon ("Excess Contributions") shall be distributed from the
Plan.
1. The Committee shall attempt to distribute these amounts within
two and one-half (2-1/2) months after the end of the Plan Year for which
the contributions were made, but in no event later than the last day of
the Plan Year following the Plan Year in which the Excess Contributions
were made.
a. However, any income earned after the end of the Plan Year
but before the date of the distribution need not be distributed.
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2. In the event that the Excess Contributions are distributed, the
distributions will be accomplished by distributing amounts to the Highly
Compensated Employee whose Deferral Percentage is the highest to the
extent required to--
a. Enable the Plan to satisfy one of the Average Percentage
Tests of Section 5.3 above, or
b. Cause his Deferral Percentage to equal that of the Highly
Compensated Employee with the next highest Deferral Percentage. If
this action does not cause the Plan to satisfy one of the Average
Deferral Percentage Tests, this process will be repeated until one of
those tests is satisfied.
3. The amount to be distributed to a Highly Compensated Employee
under Paragraph (b) above shall be determined on the basis of the portion
of the Excess Contributions attributable to him.
4. The amount of the distributions of Excess Contributions of Family
Members shall be determined in accordance with the regulations under Code
Section 401(k).
5. Distributions may be made under this Section 5.6 above without
regard to the consent requirement of Section 9.6 below.
6. Amounts that are distributed under this Section 5.6 shall be
treated as part of a Participant's Annual Addition.
7. Amounts that are distributed under this Section 5.6 will not be
taken into account for purposes of the minimum distribution rules of
Section 8.3 below.
G. SPECIAL RULES APPLICABLE TO MATCHING CONTRIBUTIONS.
1. Any Matching Contributions made under this Plan shall satisfy one
or both of the numerical tests set forth in Section 5.3(b) and (c) above,
treating the Matching Contributions as if they were Salary Reduction
Contributions.
a. In addition, the Plan shall comply with the rules of
Treasury Regulation Section 1.401(m)-2, which precludes multiple use
of the limitation contained in Section 5.3(c) above.
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b. Pursuant to regulations under Code Section 401(m), a
Participant's Salary Reduction Contributions and any Fail-Safe
Contributions on his behalf may be taken into account for purposes of
this Section 5.7.
2. In the event that the Company maintains two or more plans that
must be treated as a single plan for purposes of Code Sections 401(a)(4)
and 410--
a. All such plans shall be treated as a single plan for
purposes of this Section 5.7, and
b. All of the Matching Contributions shall be aggregated if a
Highly Compensated Employee participates in more than one plan that
provides for Matching Contributions.
3. In the event that the Plan fails to satisfy the above tests of
this Section 5.7, the contributions in excess of those limits and the
earnings thereon ("Excess Aggregate Contributions") shall be distributed
from the Plan.
a. The Committee will attempt to distribute these amounts
within two and one-half (2-1/2) months after the end of the Plan
Year, but in no event later than the last day of the following Plan
Year. Alternatively, any amounts that are forfeitable may be
forfeited, provided that no such forfeitures may be allocated to
Highly Compensated Employees whose contributions are reduced under
this Section 5.7.
(1) However, any income earned after the end of the Plan
Year but before the date of the distribution need not be
distributed.
b. The distributions shall be made by reducing the
contributions made on behalf of Highly Compensated Employees,
beginning with individual with the highest contribution percentages.
The amount to be distributed to a Highly Compensated Employee shall
be determined on the basis of the portion of the Excess Aggregate
Contributions attributable to him.
4. The amount of the Excess Aggregate Contributions shall be
determined after--
a. First determining the amount of Excess Deferrals under
Section 5.5 above; and
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b. Then determining the amount of Excess Contributions under
Section 5.6 above.
5. The Company shall not be obligated to make any Matching
Contributions in excess of the maximum amount permitted under the above
rules of this Section 5.7.
6. Distributions may be made under this Section 5.7 without regard
to the consent requirement of Section 9.6 below.
7. The amount of the distributions of Excess Aggregate Contributions
of Family Members shall be determined in accordance with the regulations
under Code Section 401(m).
8. Amounts that are distributed or forfeited under this Section 5.7
shall be treated as part of a Participant's Annual Addition.
9. Amounts that are distributed under this Section 5.7 will not be
taken into account for purposes of the minimum distribution rules of
Section 8.3 below.
10. The Company shall maintain records sufficient to demonstrate
satisfaction of the requirements of this Section 5.7, including the extent
to which Salary Reduction Contributions and Fail-Safe Contributions are
taken into account (if applicable).
H. FAIL-SAFE CONTRIBUTIONS.
1. In addition to those amounts which may be contributed to the
Trust Fund by the Company under Sections 4.2 above, the Company may, in
the sole discretion of the Board of Directors, contribute such additional
amounts to the Salary Reduction Contributions Accounts of various
Participants as it deems necessary or appropriate for any Plan Year to
insure satisfaction of at least one of the Average Deferral Percentage
tests set forth in Section 5.3.
2. Such Fail-Safe Contributions shall be treated as Deferrals for
purposes of Articles VII and VIII.
I. ROLLOVER CONTRIBUTIONS.
1. Any Participant may make a Rollover Contribution to the Plan.
However, a Rollover Contribution will not be permitted unless it satisfies
the applicable requirements of:
(i) Section 402(c) of the Code, or
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(ii) Section 12.2 below.
2. A Rollover Contribution shall not be considered a Salary
Reduction Contribution for purposes of the rules of Articles V, VIII, or
XV.
3. The Committee shall prescribe such rules and procedures as it
deems appropriate regarding Rollover Contributions.
J. UNION EMPLOYEES.
1. The provisions of Section 5.7 (relating to Matching
Contributions) shall not apply to Participants subject to the terms of a
collective bargaining agreement.
2. The provisions of Section 5.3 (relating to Average Deferral
Percentage Test)--
a. Shall be applied separately to each group of Participants
subject to the terms of a different collective bargaining agreement,
and
b. Shall not apply to Participants described in Paragraph (a)
above for Plan Years beginning before January 1, 1993.
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ARTICLE VI.
ALLOCATIONS TO PARTICIPANTS' ACCOUNTS
A. PARTICIPANTS' ACCOUNTS. The Committee shall open and maintain a
separate Matching Contributions Account, Rollover Contribution Account (if
applicable), and a Salary Reduction Contributions Account for each Participant.
B. ALLOCATION OF CONTRIBUTIONS.
1. The Matching Contribution for each Plan Year shall be allocated
to the Accounts of each Participant according to the following rules:
a. Each Participant who made Salary Reduction Contributions
during the Plan Year is entitled to receive an allocation of the
Matching Contributions (if any) in proportion to his Salary Reduction
Contributions. The amount of the Matching Contribution will be
determined each year by the Board of Directors in its discretion,
which may even determine that no Matching Contributions shall be made
with respect to a particular Plan Year.
(1) However, no Matching Contributions will be made with
respect to Fail-Safe Contributions.
(ii) A Participant will not be entitled to receive an allocation
of Matching Contributions on behalf of a particular Plan Year,
though, unless he is employed on the last day of the Plan Year.
However, the rule specified in the previous sentence shall not apply
in the event the Participant's employment was terminated during the
year by reason of his death, Disability, or after attaining Normal
Retirement Age.
2. A Participant's Salary Reduction Contributions shall be allocated
to his Salary Reduction Contributions Account.
3. Fail-Safe Contributions shall be made only on behalf of those
Participants who do not qualify as Highly Compensated Employees.
a. These contributions shall be allocated to those Participants
whose Compensation for the relevant Plan Year is the least, starting
with the Participant whose Compensation is the lowest.
b. The amount to be allocated to each such Participant's Salary
Reduction Contributions Account shall be the lesser of the amount
necessary to--
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(A) Subject to the limitations of Article XV below, to
raise his Deferral Percentage to twenty-five percent (25%), or
(B) Satisfy one of the Average Deferral Percentage tests of
Section 5.3 above.
4. For purposes of making the allocations of Company contributions
under this Article VI, any Company contributions made with respect to a
particular Plan Year that are made after the end of the year but on or
before the due date for the Company's federal income tax return (including
extensions) for its fiscal year relating to the Plan Year shall be
considered as having been made on the last day of the Plan Year.
5. Allocations made pursuant to this Section 6.2 shall not be made
until after the allocations required by Sections 6.3, 6.4, and 15.4 below
have been made.
C. REVALUATION OF ACCOUNTS.
1. Within sixty (60) days after each Valuation Date, the Trustee
shall value the assets of the Trust on the basis of fair market values.
2. Upon receipt of the valuations from the Trustee, the Committee
shall revalue the Accounts of each Participant as of the applicable
Valuation Date so as to reflect a proportionate share in any increase or
decrease in the fair market value of the assets in the Trust Fund,
determined as of that date as compared with the value of the assets in the
Trust Fund determined as of the immediately preceding Valuation Date.
3. The increase or decrease shall be allocated to each Account in
the proportion that the cumulative amount previously allocated to the
Account bears to the total of the amounts previously allocated to all
Accounts, adjusted for any contributions to or distributions from the
Account since the immediately preceding Valuation Date.
4. Notwithstanding the above, the following rules shall apply in the
event some or all of the Accounts of Participants are invested on a
segregated basis.
a. The investment gain or loss attributable to the segregated
investments shall be allocated to the corresponding Accounts.
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b. Any expenses incurred solely by reason of a segregated
Account shall be borne by that Account.
5. The allocation of profits or losses and appreciation or
depreciation under this Section 6.3 shall be made prior to the allocations
under Sections 6.2, 6.4, and 15.4.
D. FORFEITURES. Any amount of a Participant's Matching Contributions
Account that is forfeited shall be used in the following manner:
1. First, to restore the Accounts of former Participants under
Section 8.4 below; and
2. Second, any remaining amounts will used to reduce future Company
Contributions to the Plan.
E. MISCELLANEOUS ALLOCATION RULES.
1. Upon a Participant's Severance, pending distribution of the
Participant's Vested Interest, the Participant's Accounts shall continue
to be maintained and accounted for in accordance with all applicable
provisions of this Plan.
2. The Committee and the Trustee may establish accounting procedures
for the purpose of making the allocations, valuations, and adjustments to
Participants' Accounts provided for in this Article VI.
3. The Company, the Committee, and the Trustee do not guarantee that
the value of a Participant's Accounts shall at any time equal or exceed
the amount previously contributed thereto.
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ARTICLE VII.
VESTING
A. GENERAL RULE. The Vested Interest of each Participant in his
Matching Contributions Account shall be determined on the basis of his Years of
Service, in accordance with the following schedule:
YEARS OF SERVICE VESTED PERCENTAGE
---------------- -----------------
Less than 1 0%
1 25%
2 50%
3 75%
4 or more 100%
B. SPECIAL VESTING RULES. Notwithstanding the rules of Section 7.1
above, the determination of a Participant's Vested Interest in his Matching
Contributions Account shall be subject to the following rules:
1. A Participant's Years of Service completed prior to the Effective
Date of the Plan shall not be taken into account in applying the
provisions of Section 7.1 above; and
2. During a Participant's period of employment with the Company or
an Affiliated Company, in the event of his death, Disability, or
attainment of Normal Retirement Age, he shall become one hundred percent
(100%) vested in his Matching Contributions Account.
C. FULLY VESTED ACCOUNTS. A Participant shall always be one hundred
percent (100%) vested in his Salary Reduction Contributions Account and in his
Rollover Contributions Account.
D. FORFEITURES. The nonvested portion of a Participant's Matching
Contributions Account shall be forfeited as of the date of the distribution of
his benefit.
1. In the event the Participant elects to defer the distribution of
his Vested Interest, the forfeiture shall occur on the date on which the
Participant incurs five (5) consecutive Breaks in Service, if that occurs
prior to the date on which his benefit is distributed.
2. If the Participant does not have any Vested Interest in the Plan,
the distribution shall be deemed to have occurred on the date of his
Severance.
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ARTICLE VIII.
PAYMENT OF BENEFITS
A. PAYMENT OF BENEFITS.
1. Subject to the following rules of this Article VIII, a
Participant's Vested Interest shall not be distributed prior to his
Severance.
2. All distributions to Participants or their Beneficiaries shall be
based on the amount of the Participant's Accounts as of the Valuation Date
immediately preceding the date on which the Participant's Vested Interest
is distributed.
3. In the event that a Participant elects that his benefit be paid
in a form other than as provided in the form of a type of annuity
described in Article IX, any Employer Securities held in the Participant's
Accounts shall be distributed in cash or in kind, at the election of the
Participant. The Committee shall prescribe such rules and procedures as
it deems appropriate regarding distribution attributable to Company Stock.
B. LATEST PAYMENT DATE.
1. Subject to the following rules of this Article VIII, payment of
the Participant's entire Vested Interest under the Plan shall begin in no
event later than his "Latest Payment Date," which is the sixtieth (60th)
day after the close of the Plan Year in which the latest of the following
events occurs:
a. The Participant's Normal Retirement Age;
b. The tenth (10th) anniversary of the date on which he
commenced participation in the Plan; or
c. The termination of his employment with the Company or an
Affiliated Company.
2. If it is not possible to make payment to a Participant by his
Latest Payment Date because the amount of his benefit cannot be
ascertained by that date, or because the Committee has been unable to
locate the Participant after making reasonable efforts to do so, the
payment shall be made no later than sixty (60) days after the earliest
date on which the amount of the payment can be ascertained or the date on
which the Participant is located (whichever is applicable).
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C. REQUIRED BEGINNING DATE.
1. The interest of each Participant shall be distributed not later
than his Required Beginning Date.
2. "Required Beginning Date" shall mean April 1 of the calendar year
following the calendar year in which the Participant attains age seventy
and one-half (70-1/2), whether or not he has yet incurred a Severance.
3. If a Participant dies before distribution of his Vested Interest
has begun, his entire Vested Interest shall be distributed within five (5)
years of his death.
4. If a Participant dies after distribution of his Vested Interest
has begun, the remaining Vested Interest shall be distributed at least as
rapidly as the method being used as of the date of his death.
5. Notwithstanding anything herein to the contrary, all
distributions under this Plan shall be made in accordance with the
requirements of this Section 8.3, Code Section 401(a)(9), and Sections
1.401(a)(9)-1 and -2 of the Treasury Regulations.
D. DISTRIBUTIONS TO PARTIALLY VESTED PARTICIPANTS. The following rules
shall apply if a Participant incurs a Severance prior to becoming fully vested.
1. In the event that a distribution of Matching Contributions is
made to a Participant at a time when he is not fully vested in such
amounts, the nonvested portion of the Participant's Account shall be
forfeited in accordance with the rules of Article VII above.
2. A Participant who received a distribution described in Paragraph
(a) above may recontribute the amount of the distribution he received.
The repayment must be made (if at all), however, not later than the date
specified below:
a. In the case of a distribution upon Severance, the earlier
of--
(1) The fifth (5th) anniversary of his Reemployment
Commencement Date, or
(2) The date on which he incurs five (5) consecutive Breaks
in Service.
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b. In any other case, the fifth (5th) anniversary of the date of
the withdrawal.
3. If the Participant repays the amount of the distribution within
the prescribed time period, the amount of his Matching Contributions
Account balance shall be completely restored. Neither the amount
recontributed nor the Account balance (previously forfeited) shall be
adjusted for gains, losses, or interest in the interim period.
4. If the Participant does not repay the amount of the distribution
and he incurs a second Severance prior to becoming fully vested, the
amount to be distributed to him shall be equal to the sum of--
(i) The amount in his Account as of the date of the second
distribution, and
(ii) The amount previously distributed to him,
multiplied by his vested percentage, but reduced by the amount previously
distributed to him.
5. Forfeitures shall be used as provided in Section 6.4 above.
E. DISTRIBUTIONS OF SALARY REDUCTION CONTRIBUTIONS. Any distributions
authorized pursuant to this Section 8.5 shall be subject to the survivor
annuity rules of Article IX below.
1. Notwithstanding anything in this Plan to the contrary, the amount
of a Participant's Salary Reduction Contributions may not be distributed
prior to the occurrence of the earliest of any of the events described
below:
a. Separation from service, death, or disability;
b. Termination of the Plan without establishment of a
successor plan (as defined in the regulations under Section 401(k) of
the Code);
c. Sale of substantially all of the assets used by the Company
in a trade or business (applicable only to the Employees who continue
employment with the corporation acquiring such assets); or
d. Sale of the Company's interest in a subsidiary corporation
(applicable only to the transferred Employees).
Distributions made pursuant to Subparagraphs (ii), (iii), or (iv) above
must be made in the form of a lump sum distribution.
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2. The Committee may prescribe rules and procedures which permit a
Participant to make withdrawals of his Salary Reduction Contributions
prior to termination of employment if the Participant--
a. Has attained age fifty-nine and one-half (59-1/2), or
b. Incurs a Hardship under the rules of Section 8.8 below. In
the case of a hardship distribution, only the amount of the
Participant's Salary Reduction Contributions and the interest accrued
before January 1, 1989 may be distributed.
3. The Committee shall prescribe such rules as it deems necessary
regarding the timing of payments under this Section 8.5.
F. PAYEES UNDER LEGAL DISABILITY.
1. If the Committee believes that any payee is--
a. A minor, or
b. Legally incapable of giving a valid receipt and discharge
for any payment due him,
the Committee may have the payment, or any part of it, made to the
person(s) or institution that it believes is caring for or supporting the
payee.
2. Any such payment shall be a payment for the account of the payee
and shall, to the extent thereof, be a complete discharge of any liability
under the Plan to the payee.
G. NOTICE REGARDING TAX TREATMENT OF DISTRIBUTIONS. The Plan
Administrator shall provide a written explanation regarding the Code provisions
relating to the tax treatment of distributions to each distributee receiving a
distribution any portion of which may be rolled over tax-free to another tax-
qualified retirement plan or to an individual retirement account.
H. HARDSHIP DISTRIBUTIONS. A Participant will be entitled to receive a
distribution of his Salary Reduction Contributions because of a Hardship only
in accordance with the provisions of this Section 8.8. The distribution must
both made on account of an immediate and heavy financial need (as determined
under Paragraph (a) below) and be necessary to satisfy that need (as determined
under Paragraph (b) below).
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1. The determination of whether a Participant has an immediate and
heavy financial need will be made on the basis of all relevant facts and
circumstances. However, the need may still qualify even if it was
reasonably foreseeable or was voluntarily incurred by the Participant. A
distribution on account of any of the following reasons will automatically
qualify:
a. Medical expenses necessary to obtain medical care described
in Section 213(d) of the Code incurred by the Participant, his
Spouse, or Dependent (as defined in Section 152 of the Code);
b. Costs directly related to the purchase of the principal
residence for the Participant (excluding mortgage payments);
c. Payment of tuition and related educational fees for the next
twelve (12) months of post-secondary education for the Participant,
or for his Spouse, children, or dependents (as defined in Section 152
of the Code); or
d. Need to prevent the eviction of the Participant from his
principal residence or foreclosure on the mortgage on his principal
residence.
Furthermore, the amount of the distribution may include any amounts
necessary to pay the taxes reasonably anticipated to result from the
distribution.
2. Except as is provided below, the determination as to whether a
distribution is necessary to satisfy an immediate and heavy financial need
is determined on the basis of the facts and circumstances. A distribution
will not satisfy this requirement if--
a. The amount of the distribution is in excess of the amount
required to relieve the financial need, or
b. The need may be satisfied from other resources that are
reasonably available to the Participant.
3. A distribution will qualify under Paragraph (b) above if the
Committee reasonably relies upon the Participant's representation that the
need cannot be relieved--
a. Through reimbursement or compensation by insurance or
otherwise;
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b. By reasonable liquidation of the Participant's assets, to
the extent the liquidation itself would not cause an immediate and
heavy financial need. For this purpose, the Participant's resources
shall include those of his Spouse and minor children that are
reasonably available to him;
c. By cessation of his Salary Reduction Contributions or after-
tax contributions to the Plan;
d. By other distributions or nontaxable loans from plans
maintained by the Company or any other employer; or
e. By borrowing from commercial sources on reasonable
commercial terms.
However, it will not be necessary for the Participant to obtain a loan if
the purpose of the funds is for the downpayment on the principal residence
of the Participant.
4. A distribution will automatically be deemed to meet the
requirements of Paragraphs (a) and (b) above if all of the following
conditions are satisfied:
a. The distribution is not in excess of the immediate and heavy
financial need of the Participant;
b. The Participant has obtained all distributions, other than
hardship distributions, and all nontaxable loans currently available
under all tax-qualified retirement plans maintained by the Company;
c. The Plan and all other plans of deferred compensation
(whether or not tax-qualified) maintained by the Company, provide
that the Participant's Salary Reduction Contributions and after-tax
contributions will be suspended for at least twelve (12) months after
receipt of the hardship distribution.
(1) Furthermore, the Participant will be precluded from
making any contributions to any stock option, stock purchase, or
similar plans for the twelve (12) month period by means of a
legally enforceable agreement.
(2) However, the Participant will still be treated as being
eligible to participate in this Plan for purposes of the Average
Deferral Percentage Tests of Section 5.3 above; and
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d. The Plan, and all other tax-qualified retirement plans
maintained by the Company, preclude the Participant from making
Salary Reduction Contributions and after-tax contributions for the
calendar year following the calendar year in which the hardship
distribution was made in excess of the amount determined under the
following sentence.
(1) The Participant's maximum Salary Reduction
Contributions for the next calendar year will be the maximum
Salary Reduction Contributions allowed for that calendar year,
reduced by the amount of the Participant's Salary Reduction
Contributions for the prior calendar year.
I. MAILING OF PAYMENTS.
1. All payments under the Plan shall be delivered in person or
mailed to the last address of the Participant (or, in the case of the
death of the Participant, to the last address of his Beneficiary).
2. Each Participant shall be responsible for furnishing the
Committee with his current address and the name and current address of his
Beneficiary.
J. WITHHOLDING FOR TAXES. Any payments from the Plan may be subject to
withholding for taxes as may be required by any applicable federal or state
law.
K. ROLLOVER RULES.
1. This Section applies to distributions made on or after January 1,
1993.
2. Notwithstanding any provision of the Plan to the contrary that
would otherwise limit a Distributee's election under this Section 8.11, a
Distributee may elect, at the time and in the manner prescribed by the
Plan Administrator, to have any portion of an Eligible Rollover
Distribution paid directly to an Eligible Retirement Plan specified by the
Distributee in a Direct Rollover.
3. An "Eligible Rollover Distribution" is any distribution of all or
any portion of the balance to the credit of the Distributee, except that
an Eligible Rollover Distribution does not include:
a. Any distribution that is one of a series of substantially
equal periodic payments (not less frequently than annually) made for
the life (or life expectancy) of the Distributee or the joint lives
(or
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joint life expectancies) of the Distributee and the Distributee's
designated beneficiary, or for a specified period of ten (10) years
or more;
b. Any distribution to the extent such distribution is required
under Section 401(a)(9) of the Code; and
c. The portion of any distribution that is not includible in
gross income (determined without regard to the exclusion for net
unrealized appreciation with respect to employer securities).
4. An "Eligible Retirement Plan" is--
a. An individual retirement account described in Section
408(a) of the Code,
b. An individual retirement annuity described in Section
408(b) of the Code,
c. An annuity plan described in Section 403(a) of the Code, or
d. A qualified trust described in Section 401(a) of the Code,
that accepts the Distributee's Eligible Rollover Distribution. However,
in the case of an Eligible Rollover Distribution to the surviving spouse,
an Eligible Retirement Plan is limited to an individual retirement account
or individual retirement annuity.
5. A "Distributee" includes an Employee or former Employee. In
addition, the Employee's or former Employee's surviving spouse and the
Employee's or former Employee's spouse or former spouse who is the
Alternate Payee under a qualified domestic relations order, as defined in
Section 414(p) of the Code, are Distributees with regard to the interest
of the spouse or former spouse.
6. A "Direct Rollover" is a payment by the Plan to the Eligible
Retirement Plan specified by the Distributee.
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ARTICLE IX.
SURVIVOR ANNUITY REQUIREMENTS
A. APPLICATION OF ARTICLE.
1. The provisions of this Article IX shall apply with respect to the
payment of all benefits under the Plan in which the Participant was vested
immediately prior to death.
2. This Article IX will not apply to distributions subject to
Article XVI below, except to the extent provided in the Qualified
Domestic Relations Order.
B. DEFINITIONS.
1. "Annuity Starting Date" means--
(i) The first day of the first period for which an amount is
received as an annuity, or
(ii) In the case of a benefit not payable in the form of an
annuity, the first day on which all events have occurred which
entitle the Participant to the benefit.
2. "Applicable Election Period" means--
a. In the case of an election to waive the Qualified Joint and
Survivor Annuity, the ninety (90) day period ending on the Annuity
Starting Date, and
b. In the case of an election to waive the Qualified
Preretirement Survivor Annuity, the period--
(1) Which begins on the first day of the Plan Year in which
the Participant attains age thirty-five (35), and
(2) Which ends on the date of the Participant's death.
In the case of a Participant who has separated from service, the
Applicable Election Period shall begin not later than the date of
separation.
3. "Qualified Joint and Survivor Annuity" means an annuity--
(i) The payment of which commences immediately,
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(ii) For the life of the Participant with a survivor annuity for
the life of the Spouse which is not less than fifty percent (50%) of,
and is not greater than one hundred percent (100%) of, the amount of
the annuity which is payable during the joint lives of the
Participant and the Spouse, and
(iii) Which is the actuarial equivalent of a single life annuity
for the life of the Participant.
Qualified Joint and Survivor Annuity shall also refer to any annuity in a
form having the effect of an annuity described above. In any event, for
purposes of calculating the amount of the annuity, the amount of the
Participant's Vested Interest shall be reduced by the outstanding balance
of any loans.
4. "Qualified Preretirement Survivor Annuity" means an annuity for
the life of the surviving Spouse, the actuarial equivalent of which is not
less than fifty percent (50%) of the Participant's Vested Interest,
reduced by the outstanding balance of any loans. The payment of this
benefit must commence within a reasonable time after the date of the
Participant's death.
C. FORM OF BENEFITS PROVIDED. Except as otherwise provided in Section
9.4 below--
(a) In the case of a Participant with a Vested Interest in the Plan
who does not die before his Annuity Starting Date and who has a Surviving
Spouse, his benefit shall be paid in the form of a fifty percent (50%)
Qualified Joint and Survivor Annuity.
(b) In the case of a Participant with a Vested Interest who dies
before his Annuity Starting Date and who has a Surviving Spouse, a
Qualified Preretirement Survivor Annuity shall be paid to his Surviving
Spouse, in the form of the survivor portion of a fifty percent (50%)
Qualified Joint and Survivor Annuity.
(c) In the case of a Participant with a Vested Interest in the Plan
who is not married, his benefit shall be paid in the form of a single life
annuity.
(d) Any benefits payable under Paragraph (a) or (b) shall be the
Actuarial Equivalent of the retirement benefits of the Participant payable
in the form of the annuity described in Paragraph (c) and commencing on
his Normal Retirement Age.
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D. ELECTIONS WITH RESPECT TO SURVIVOR ANNUITIES.
1. At any time during the Applicable Election Period, each
Participant may--
(i) Elect to waive the Qualified Joint and Survivor Annuity or
the Qualified Pre-retirement Survivor Annuity (or both), and
(ii) Revoke any such election.
2. An election under Paragraph (a)(i) above shall not take effect
unless the requirements of Subparagraphs (i) or (ii) below are satisfied.
a. The requirements of this Subparagraph (i) are satisfied if
the requirements of Clauses (A), (B) and (C) below are met.
(1) The Spouse of the Participant consents in writing to
the designation of Beneficiary,
(2) The election designates a Beneficiary (or a form of
benefits) which may not be changed without spousal consent (or
the spousal consent expressly permits designations without any
requirement of further consent by the Spouse), and
(3) The Spouse's consent acknowledges the effect of the
designation and is witnessed by a Plan Representative or a
notary public.
b. The requirements of this Subparagraph (ii) are satisfied if
it is established to the satisfaction of a Plan Representative that
the consent required by Clause (i) above may not be obtained
because--
(1) There is no Spouse,
(2) The Spouse cannot be located, or
(3) Of such other circumstances as may be set forth in
regulations under Section 417(a)(2) of the Code.
3. For purposes of Paragraph (b) above, "Plan Representative" shall
mean the person or persons designated by the Committee to perform the
duties specified herein.
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4. Notwithstanding the above, a Participant may elect that his
benefit be paid in a form other than as provided in Section 9.3 above.
Any such form of benefit, however, must comply with the rules of Section
401(a)(9) of the Code.
5. Any consent by a Spouse (or establishment that the consent of the
Spouse may not be obtained) will be effectively only with respect to that
Spouse.
E. DISCLOSURE REQUIREMENTS.
1. Within a reasonable period of time before the Participant's
Annuity Starting Date (and consistent with regulations under Section
417(a)(3)(A) of the Code) each Participant shall receive a written
explanation of--
a. The terms and conditions of the Qualified Joint and
Survivor Annuity,
b. The Participant's right to make, and the effect of, an
election under Section 9.4(a) above to waive the Qualified Joint and
Survivor Annuity form of benefit,
c. The rights of the Participant's Spouse under Section 9.4(a)
above, and
d. The right to make, and the effect of, a revocation of an
election under Section 9.4(a) above.
2. Each Participant shall receive a written explanation with respect
to the Qualified Preretirement Survivor Annuity comparable to that
required pursuant to Paragraph (a) above within whichever of the following
periods ends last:
a. The period beginning with the first day of the Plan Year in
which the Participant attains age thirty-two (32) and ending with the
close of the Plan Year preceding the Plan Year in which the
Participant attains age thirty-five (35);
b. A reasonable period after the individual becomes a
Participant;
c. A reasonable period after the provisions of this Article IX
first to apply to the Participant, or
d. A reasonable period after separation from service, in the
case of a Participant who separates before attaining age thirty-five
(35).
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F. CONSENT TO RECEIVE EARLY DISTRIBUTION.
1. If the present value of the Participant's Vested Interest exceeds
thirty-five hundred dollars ($3,500), a distribution shall not occur prior
to the later of--
(i) The Participant's Normal Retirement Age, or
(ii) The Participant's attainment of age sixty-five (65),
unless the Participant and the Spouse (or Surviving Spouse) of the
Participant elect to receive the distribution (in a manner consistent with
the regulations under Section 417 of the Code) within ninety (90) days
prior to the distribution.
2. Failure to consent to such a distribution shall be deemed an
election to defer the distribution until the earlier of (i) attainment of
age sixty-two (62) or (ii) death.
3. No distribution may be made under Paragraph (a) above after the
Annuity Starting Date, unless the Participant and Spouse (or where the
Participant has died, the surviving Spouse) consent in writing to the
distribution. This consent requirement shall not apply in the case of
the--
a. Death of the Participant, or
b. Termination of the Plan, provided neither the Company nor
any Affiliated Company maintains any other defined contribution plan,
other than an employee stock ownership plan. If the Participant does
not consent to an immediate distribution from this Plan, the benefit
shall be transferred to the other defined contribution plan.
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ARTICLE X.
TOP-HEAVY PLAN RULES
A. APPLICABILITY. Notwithstanding any provision in this Plan to the
contrary, the provisions of this Article X shall apply in the case of any Plan
Year in which the Plan is determined to be a Top-Heavy Plan.
B. SPECIAL VALUATION RULES.
1. For purposes of determining--
a. The present value of the cumulative accrued benefit of any
Employee, or
b. The account balance of any Employee,
the present value or account balance shall be increased by the aggregate
distributions made with respect to the Employee under the plan during the
five (5) year period ending on the Determination Date. The preceding rule
shall also apply to distributions under a terminated plan that, if it had
not been terminated, would have been required to be included in the
Aggregation Group that includes the transferee Plan.
2. Any Rollover Contribution or similar transfer initiated by the
Employee and made after December 31, 1983 to a plan shall not be taken
into account with respect to the transferee plan for purposes of
determining whether the transferee plan is a Top-Heavy Plan (or whether
any Aggregation Group which includes the transferee plan is a Top-Heavy
Group).
3. If any individual--
a. Is a Non-Key Employee with respect to any plan for any plan
year, but the individual was a Key Employee with respect to the plan
for any prior plan year, or
b. Has not performed any services for the Company or an
Affiliated Company at any time during the five (5) year period ending
on the Determination Date,
his accrued benefit and account balance shall not be taken into account
for purposes of determining whether or not the plan is a Top-Heavy Plan.
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C. MINIMUM CONTRIBUTIONS. For each Plan Year in which the Plan is Top-
Heavy, the minimum contributions for that year shall be determined in
accordance with the rules of this Section 10.3.
1. Except as provided below, the minimum contribution for each
Participant who is a Non-Key Employee who is employed on the last day of
the Plan Year shall be not less than three percent (3%) of his
Compensation, regardless of the number of Hours of Service he completes
that Plan Year or his level of Compensation.
2. The minimum required contribution under Paragraph (a) above shall
be reduced by--
a. The Company contributions and forfeitures allocated to the
Participant in any other defined contribution plan included in the
Aggregation Group that includes the Plan, and
b. Any Fail-Safe Contributions on behalf of the Participant.
However, Matching Contributions may not be taken into account for
this purpose.
3. Subject to the following rules of this Paragraph (c), the
percentage set forth in Paragraph (a) above shall not be required to
exceed the percentage at which contributions (including any Salary
Reduction Contributions) are made (or are required to be made) under the
Plan for the year for the Key Employee for whom the percentage is the
highest for the year.
a. For purposes of this Paragraph (c), all defined contribution
plans required to be included in an Aggregation Group shall be
treated as one plan.
b. The rules of this Paragraph (c) shall not apply to any plan
required to be included in an Aggregation Group if the plan enables a
defined benefit plan to meet the requirements of Sections 401(a)(4)
or 410 of the Code.
4. The requirements of this Section 10.3 must be satisfied without
taking into account contributions under chapters 2 or 21 of the Code,
title II of the Social Security Act, or any other Federal or State law.
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5. In the event a Participant is covered by both a defined
contribution and a defined benefit plan maintained by the Company or an
Affiliated Company, both of which are determined to be Top-Heavy, the
minimum benefit shall be provided under this Plan, which shall be a
contribution of at least five percent (5%) of Compensation.
D. MAXIMUM ANNUAL ADDITION.
1. Except as set forth below, in the case of any Top-Heavy Plan, the
rules of Sections 15.3(b)(ii) and 15.3(c)(ii) below shall be applied by
substituting "1.0" for "1.25".
2. The rule set forth in Paragraph (a) above shall not apply if the
requirements of both Subparagraphs (i) and (ii) are satisfied.
a. The requirements of this Subparagraph (i) are satisfied if
the Plan would not be a Top-Heavy Plan if "ninety percent (90%)" were
substituted for "sixty percent (60%)" each place it appears in
Section 2.57 above.
b. The requirements of this Subparagraph (ii) are satisfied if
the required minimum contribution under Section 10.3(a) above would
be satisfied if it were applied by substituting "four percent (4%)"
for "three percent (3%)" each place it appears therein.
(1) Notwithstanding the provisions of the preceding
sentence, in the case of an Employee covered by both this Plan
and a defined benefit plan maintained by the Company or an
Affiliated Company, both of which are Top-Heavy, the minimum
contribution/benefit shall be provided solely under this Plan,
which shall be applied by substituting "seven and one-half
percent (7-1/2%)" for "three percent" each place it appears in
Section 10.3 above.
3. The rules of Paragraph (a) shall not apply with respect to any
Employee for any Plan Year as long as there are no--
a. Annual Additions allocated to the Employee under a defined
contribution plan maintained by the Company or an Affiliated Company,
or
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b. Accruals by the Employee under a defined benefit plan
maintained by the Company or an Affiliated Company.
E. NON-ELIGIBLE EMPLOYEES. The rules of Sections 10.3 and 10.4 above
shall not apply to any Employee--
1. Included in a unit of Employees covered by an agreement which the
Secretary of Labor finds to be a collective bargaining agreement between
Employee representatives and one or more employers, if there is evidence
that retirement benefits were the subject of good faith bargaining between
the Employee representatives and the Company, or
2. Whose employment was terminated before the Plan became Top-Heavy.
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ARTICLE XI.
OPERATION AND ADMINISTRATION OF THE PLAN
A. NAMED FIDUCIARIES. The provisions of this Section 11.1 shall
determine the various parties who are the "Named Fiduciaries" (within the
meaning of Section 402(a) of ERISA) of the Plan and their respective
responsibilities.
1. The Board of Directors shall be the Named Fiduciary with respect
to appointing and/or removing the Trustee, an Investment Manager, and the
members of the Committee.
2. The Trustee shall be the Named Fiduciary with respect to the
management and investment of the assets of the Plan, except to the extent
that the Trustee is subject to the directions of an Investment Manager,
the Committee, or Participants.
3. The Committee shall be the Named Fiduciary with respect to all of
the administrative matters relating to the Plan, except to the extent the
management and investment of the assets of the Plan is the responsibility
of the Trustee, an Investment Manager, or the Participants.
B. COMPOSITION OF COMMITTEE.
1. The members of the Committee (who need not be Participants or
even Employees) shall be appointed by the Board of Directors of the
Company and shall hold office until termination of such status in
accordance with the provisions of this Article XI.
2. Any member of the Committee may resign at any time by giving
written notice to the other members and to the Board of Directors of the
Company, effective as of the date stated in the notice. Any member of the
Committee may be removed by the Board of Directors of the Company at any
time. In the case of a Committee member who is also an Employee of the
Company, his status as a Committee member shall terminate as of the
effective date of his Severance, except as otherwise provided in
resolutions of the Board of Directors.
3. Upon the death, resignation, or removal of any Committee member,
the Board of Directors may appoint a successor. Notice of appointment of
a successor member shall be given by the Company in writing to the Trustee
and to the other members of the Committee.
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C. COMMITTEE POWERS. The Committee shall have all powers necessary to
supervise the administration of the Plan and control its operations. In
addition to any powers and authority conferred on the Committee elsewhere in
the Plan or by law, the Committee shall have the following powers and
authority:
1. To allocate fiduciary responsibilities among the Named
Fiduciaries and to designate one or more other persons, including
Investment Managers, to carry out fiduciary responsibilities.
a. However, no allocation or delegation under this Paragraph
(a) shall be effective--
(1) Until the person or persons to whom the
responsibilities have been allocated or delegated agree to
assume the responsibilities, or
(2) With respect to Trustee Responsibilities (within the
meaning of Section 405(c) of ERISA);
2. To designate agents to carry out responsibilities relating to the
Plan, other than fiduciary responsibilities;
3. To employ such legal, actuarial, medical, accounting, clerical
and other assistance as it may deem appropriate in carrying out the
provisions of this Plan, including one or more persons to render advice
with regard to any responsibility any Committee member or any other
fiduciary may have under the Plan;
4. To establish rules and procedures for the conduct of the
Committee's business and the administration of this Plan;
5. To administer this Plan for the exclusive benefit of Participants
and their Beneficiaries;
6. To decide all questions which may arise or which may be raised
under this Plan. The decisions of the Committee shall be binding upon all
persons, to the maximum extent permitted under ERISA;
7. To determine the manner in which the assets of this Plan, or any
part thereof, shall be disbursed;
8. To direct the Trustee how to invest the assets of the Plan; and
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9. To perform or cause to be performed such further acts as it may
deem to be necessary or appropriate to administer the Plan.
D. REPORTING AND DISCLOSURE. The Plan Administrator shall be
responsible for the reporting and disclosure of information required to be
reported or disclosed pursuant to ERISA or any other applicable law.
E. MULTIPLE FIDUCIARY CAPACITIES. Any person or group of persons may
serve in more than one fiduciary capacity with respect to the Plan.
F. FUNDING POLICY.
1. At periodic intervals, not less frequently than annually, the
Committee shall review the financial needs of the Plan and shall determine
a funding policy for the Plan consistent with the objectives of the Plan.
2. In establishing the funding policy, the Committee shall review and
take into account--
a. The short-term and long-term financial objectives and
liquidity requirements of the Plan, determined by reference to the
age and tenure characteristics of the Participants,
b. The current and projected market conditions, and
c. Such other considerations as appear pertinent under the
circumstances,
all with a view toward the realization by the Plan of its maximum
investment potential consistent with prudent asset management and the need
to pay benefits in accordance with the terms of the Plan, taking into
account (if applicable) the ability of Participants to direct the
investment of the amounts in their Accounts.
G. PROHIBITION AGAINST CERTAIN ACTIONS.
1. In administering this Plan, the Committee shall not discriminate
in favor of Highly Compensated Employees.
2. The Committee shall not cause the Plan to engage in any
transaction that constitutes a nonexempt prohibited transaction under
Section 4975(c) of the Code or ERISA Section 406(a).
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3. Any member of the Committee who is also a Participant shall not be
qualified to act or vote on any matter relating solely to himself.
H. COMMITTEE PROCEDURE.
1. A majority of the members of the Committee shall constitute a
quorum, and any action authorized by a majority of the members--
a. Present at any meeting, or
b. In writing without a meeting,
shall constitute the actions of the Committee.
2. The Committee may designate one or more of its members
("Designated Members") as authorized to execute any document or documents
on behalf of the Committee. In such a case, the Committee shall notify
the Trustee of this action and the name or names of the Designated
Members.
I. INDEMNIFICATION.
1. To the maximum extent permitted by law, the Company shall
indemnify each member of the Board of Directors and of the Committee, and
any other Employee with duties under the Plan, against expenses (including
any amount paid in settlement) reasonably incurred by him in connection
with any claims against him by reason of the performance of his duties
under the Plan.
2. This indemnity shall not apply if the individual acted
fraudulently or in bad faith in the performance of his duties.
3. Notwithstanding the above, the Company shall have the right to
select counsel and to control the prosecution or defense of the suit.
Furthermore, the Company shall not be required to indemnify any person for
any amount incurred through any settlement or compromise of any action
unless the Company consents in writing to the settlement or compromise.
4. Payment of the indemnity, fees, or other expenses shall be made
solely from the assets of the Company, and shall not be paid, directly or
indirectly, from the assets of the Plan.
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J. COMPENSATION OF COMMITTEE MEMBERS AND PLAN EXPENSES.
1. Members of the Committee shall serve without compensation unless
the Board of Directors shall otherwise determine. However, in no event
shall any member of the Committee who receives full-time pay from the
Company receive compensation from the Plan for his services as a member of
the Committee, except for reimbursement of expenses properly and actually
incurred.
2. The expenses incurred in the administration of the Plan,
including but not limited to the expenses incurred by the members of the
Committee in exercising their duties, shall be borne by the Plan However,
the Company may elect to pay these expenses.
K. BONDING. Members of the Committee and all other Employees handling
the assets of the Plan shall be bonded to the extent required by Section 412 of
ERISA or any other applicable law.
L. NOTICES AND COMMUNICATIONS.
1. All communications from Participants to the Committee shall be in
writing, on forms prescribed by the Committee.
a. These documents shall be mailed or delivered to the office
designated by the Committee, and shall be deemed to have been given
when received by the office.
2. Each communication directed to a Participant or Beneficiary shall
be in writing and may be delivered in person or by mail.
a. An item shall be deemed to have been delivered and received
by the Participant three (3) days after the date when it is deposited
in the United States Mail with postage prepaid, addressed to the
Participant or Beneficiary at his last address of record with the
Committee.
M. STANDARD OF CARE. The Fiduciaries (as defined in ERISA) of the Plan,
including the Trustee, the Committee, and any Investment Manager, shall act in
accordance with the following standards of care and fiduciary responsibility
imposed under ERISA (to the extent they are applicable).
1. Each Fiduciary shall discharge his duties with respect to the
Plan solely in the interest of the Participants and Beneficiaries, and--
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a. For the exclusive purposes of--
(1) Providing benefits to Participants and their
Beneficiaries, and
(2) Defraying reasonable expenses of administering the
Plan,
b. With the care, skill, prudence, and diligence under the
circumstances then prevailing that a prudent man acting in a like
capacity and familiar with such matters would use in the conduct of
an enterprise of a like character and with like aims,
c. Subject to the exception for "eligible individual account
plans" under Section 404(a)(2) of ERISA, by diversifying the
investments of the Plan so as to minimize the risk of large losses,
unless under the circumstances it is clearly prudent not to do so,
and
d. In accordance with the terms of the Plan and Trust
Agreement, insofar as those documents are consistent with the
provisions of ERISA.
2. A Fiduciary shall be liable for a breach of fiduciary
responsibility by another Fiduciary if--
a. He participates knowingly in, or knowingly undertakes to
conceal an act or omission of the other Fiduciary, knowing the act or
omission is a breach,
b. By his failure to fulfill his fiduciary responsibilities, he
has enabled the other Fiduciary to commit a breach, or
c. He has knowledge of a breach by the other Fiduciary, unless
he makes reasonable efforts under the circumstances to remedy the
breach.
3. The inclusion of this Section 11.13 in this document is for the
sole purpose of informing the appropriate Fiduciaries of the standard of
care that is demanded of them under ERISA. It is not intended that this
provision impose any additional duties, responsibilities, or
liabilities upon such Fiduciaries than would otherwise apply under ERISA.
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ARTICLE XII.
MERGER OF COMPANY, MERGER OF PLAN
A. EFFECT OF REORGANIZATION OR TRANSFER OF ASSETS.
1. In the event of a consolidation, merger, sale, liquidation, or
other transfer of substantially all of the operating assets of the Company
to any other company, the ultimate successor to the business of the
Company shall automatically be deemed to have elected to continue this
Plan in full force and effect, in the same manner as if the Plan had been
adopted by resolution of its board of directors.
2. The presumption set forth in Paragraph (a) above shall not apply
if the successor, by resolution of its board of directors, elects not to
so continue this Plan in effect. In such a case, the Plan shall terminate
as of the effective date set forth in the board resolution.
B. PLAN MERGER RESTRICTION.
1. This Plan shall not merge or consolidate with, or transfer its
assets and/or liabilities to any other plan unless each affected
Participant in this Plan would receive a benefit immediately after the
merger, consolidation, or transfer (if the Plan then terminated) which is
equal to or greater than the benefit he would have been entitled to
receive immediately before the merger, consolidation, or transfer (if the
Plan had then terminated).
2. Provided the requirements set forth in Paragraph (a) above are
satisfied, the Committee may direct that the Plan may merge, consolidate
with, or transfer its assets and/or liabilities to, or receive such a
transfer from another tax-qualified retirement plan.
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ARTICLE XIII.
TERMINATION AND
DISCONTINUANCE OF CONTRIBUTIONS
A. PLAN TERMINATION.
1. The Company may terminate the Plan at any time by an instrument
in writing executed in the name of the Company by an officer duly
authorized to execute the instrument.
2. The rights of all Employees who are employed by the Company on
the date of the termination of the Plan to the amounts in their accounts
shall automatically become fully vested as of that date.
B. DISCONTINUANCE OF CONTRIBUTIONS. On and after the effective date of
a discontinuance of Company Contributions, the rights of all Employees who are
employed by the Company on the date of the discontinuance to the amounts in
their Accounts shall automatically become fully vested as of that date.
C. REPLACEMENT PLAN. The provisions of Sections 13.1 and 13.2 above
shall not apply in the event that the Plan is replaced by a comparable plan.
D. PARTIAL TERMINATION.
1. In the event of a partial termination of the Plan within the
meaning of Code Section 411(d)(3), all Employees who are employed by the
Company on the date of the partial termination and who are affected by the
partial termination to the amounts in their Accounts shall become fully
vested as of that date.
2. This Section 13.4 is intended solely to meet the requirements of
Code Section 411 and is not intended to create, nor shall it be construed
as creating, any contractual rights whatsoever.
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ARTICLE XIV.
APPLICATION FOR BENEFITS
A. APPLICATION FOR BENEFITS.
1. The Committee may require any person claiming benefits under the
Plan ("Claimant") to submit an application therefor, together with such
other documents and information as the Committee may require.
2. Within ninety (90) days following receipt of the application and
all necessary documents and information, the Committee's authorized
delegate reviewing the claim shall furnish the Claimant with written
notice of the decision rendered with respect to the application.
3. Should special circumstances require an extension of time for
processing the claim, written notice of the extension shall be furnished
to the Claimant prior to the expiration of the initial ninety (90) day
period.
a. The notice shall indicate the special circumstances
requiring an extension of time and the date by which a final decision
is expected to be rendered.
b. In no event shall the period of the extension exceed ninety
(90) days from the end of the initial ninety (90) day period.
B. CONTENT OF DENIAL. In the case of a denial of the Claimant's
application, the written notice shall set forth:
1. The specific reasons for the denial;
2. References to the Plan provisions upon which the denial is based;
3. A description of any additional information or material necessary
for perfection of the application (together with an explanation of why the
material or information is necessary); and
4. An explanation of the Plan's claim review procedure.
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C. APPEALS.
1. In order to appeal the decision rendered with respect to his
application for benefits or with respect to the amount of his benefits,
the Claimant must follow the appeal procedures set forth in this Section
14.3.
2. The appeal must be made, in writing--
a. In the case where the claim is expressly rejected, within
sixty-five (65) days after the date of notice of the decision with
respect to the application, or
b. In the case where the claim has neither been approved nor
denied within the applicable period provided in Section 14.1 above,
within sixty-five (65) days after the expiration of the period.
3. The Claimant may request that his application be given full and
fair review by the Committee. The Claimant may review all pertinent
documents and submit issues and comments in writing in connection with the
appeal.
4. The decision of the Committee shall be made promptly, and not
later than sixty (60) days after the Committee's receipt of a request for
review, unless special circumstances require an extension of time for
processing. In such a case, a decision shall be rendered as soon as
possible, but not later than one hundred twenty (120) days after receipt
of the request for review.
5. The decision on review shall be in writing and shall include
specific reasons for the decision, written in a manner designed to be
understood by the Claimant, with specific references to the pertinent Plan
provisions upon which the decision is based.
D. EXHAUSTION OF REMEDIES. No legal action for benefits under the Plan
may be brought unless and until the Claimant has exhausted his remedies under
this Article XIV.
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ARTICLE XV.
LIMITATIONS ON CONTRIBUTIONS
A. GENERAL RULE.
1. Notwithstanding anything to the contrary contained in this Plan,
the total Annual Additions under this Plan to a Participant's Accounts for
any Plan Year shall not exceed the lesser of:
a. Thirty thousand dollars ($30,000) or such greater amount as
may be permitted pursuant to Code Section 415(d)(1) ("Dollar
Limitation"); or
b. Twenty-five percent (25%) of the Participant's Compensation
("Percentage Limitation").
2. Because the Limitation Year is also the Plan Year, in the case of
a Plan Year of less than twelve (12) months duration, the Dollar
Limitation shall be prorated by multiplying it by a fraction, the
numerator of which is the number of months in the short Plan Year and the
denominator of which is twelve (12).
3. The Dollar Limitation shall be adjusted annually by the Internal
Revenue Service for increases in the cost of living, effective January 1
of the year for which the adjustment is made. This adjustment shall apply
to the Limitation Year ending with or within that calendar year.
B. OTHER DEFINED CONTRIBUTION PLANS.
1. If the Company or an Affiliated Company is or was contributing to
any other defined contribution plan, then the Participant's Annual
Additions in the other plan shall be aggregated with the Participant's
Annual Additions under this Plan for purposes of applying the limitations
of this Article XV.
2. The rule of Paragraph (a) above shall apply whether or not the
other defined contribution plan has been terminated.
C. DEFINED BENEFIT PLANS. If the Company or an Affiliated Company is or
was contributing to a defined benefit plan, then in addition to the limitations
contained in Section 15.1 of this Plan, the "Combined Plan Fraction" shall not
exceed 1.0. This rule shall apply whether or not the defined benefit plan has
been terminated.
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1. "Combined Plan Fraction" means a fraction determined in
accordance with the provisions of Code Section 415(e) and the following
rules. This fraction shall be the sum of the Defined Contribution Plan
Fraction and the Defined Benefit Plan Fraction. In the event that the
Combined Plan Fraction would exceed 1.0:
a. The amount in the numerator of the Defined Contribution Plan
Fraction shall be reduced in accordance with the applicable
regulations; then, if necessary,
b. The limit otherwise applicable to the Participant under any
or all defined benefit plans shall be accordingly reduced.
2. "Defined Contribution Plan Fraction" means a fraction determined
in accordance with the provisions of Code Section 415(e) and the following
rules with respect to the combined participation by a Participant in all
defined contribution plans of the Company and all Affiliated Companies.
a. The numerator of the fraction is the sum of all Annual
Additions to the Participant's accounts under all such plans as of
the close of the Plan Year.
b. The denominator of the fraction is the sum of the lesser of
the following amounts determined separately with respect to the
current Plan Year and each prior year of service:
(1) The product of 1.25 multiplied by the Dollar Limitation
under Section 15.1(a)(i) above in effect for that Plan Year; or
(2) The product of 1.4 multiplied by the Percentage
Limitation under Section 15.1(a)(ii) above with respect to the
Participant for the Plan Year.
3. "Defined Benefit Plan Fraction" means a fraction determined in
accordance with the provisions of Code Section 415(e) and the following
rules with respect to the combined participation by a Participant in all
defined benefit plans of the Company and all Affiliated Companies.
a. The numerator of the fraction is the projected annual benefit
of the Participant under all the plans (determined as of the close of
the Plan Year).
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b. The denominator of this fraction is the lesser of:
(1) The product of 1.25 multiplied by the dollar limitation
under Code Section 415(b)(1)(A) for the Plan Year; or
(2) The product of 1.4 multiplied by the percentage of
compensation limitation under Code Section 415(b)(1)(B) with
respect to the Participant for the Plan Year.
D. ADJUSTMENTS FOR EXCESS ANNUAL ADDITIONS. In the event the Annual
Additions to a Participant's Accounts under this Plan would exceed the
applicable limitations described in Sections 15.1 through 15.3 above, the
excess amount shall be subject to the following rules.
1. If the Participant had made any after-tax contributions for the
Plan Year to the Plan or to any other defined contribution plan that is
maintained by the Company or an Affiliated Company, these contributions
and the earnings thereon shall be returned to the Participant to the
extent of any excess Annual Additions.
2. If excess Annual Additions remain, amounts which give rise to the
excess Annual Additions under this Plan shall be transferred to a Suspense
Account.
3. Any amounts held in the Suspense Account shall be used to reduce
future Company Contributions to the Plan as of the next allocation date on
a first-in, first-out basis.
4. The Suspense Account shall be exhausted before any Company
Contributions or Salary Reduction Contributions shall be allocated to the
Accounts of Participants subsequent to the date on which the excess
described in Paragraph (b) is credited to the Suspense Account.
5. The Trustee shall segregate any amounts held in the Suspense
Account from other assets of the Plan and may place the cash portions
thereof in an interest-bearing account in any bank or savings and loan
institution, including the Trustee's own banking department (if
applicable).
a. Any amounts held in the Suspense Account shall not
participate in any allocation of Forfeitures, or net income or loss
of other assets of the Trust Fund under Article VI above.
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6. In the event the Plan shall terminate at a time when all amounts
in the Suspense Account have not been allocated to the Accounts of the
Participants, the amounts in the Suspense Account shall be applied as
follows:
a. The amount in the Suspense Account shall first be allocated,
as of the date of the termination of the Plan, to Participants on the
same basis as specified in Paragraph (c) above, with the allocation
to be made to the maximum extent permissible under the limitations of
this Article XV; and
b. If after those allocations have been made, any further amounts
remain in the Suspense Account, the residue shall revert to the
Company in accordance with the applicable Treasury Regulations.
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ARTICLE XVI.
RESTRICTION ON ALIENATION
A. GENERAL RESTRICTIONS AGAINST ALIENATION. Benefits under the Plan may
not be assigned or alienated. The preceding sentence shall not apply with
respect to a "Qualified Domestic Relations Order" described below.
B. QDRO DEFINITION. A "Qualified Domestic Relations Order" is a
judgment, decree, or order (including approval of a property settlement
agreement) that--
1. Creates or recognizes the existence of an Alternate Payee's right
to, or assigns to an Alternate Payee the right to receive all or a portion
of the benefits payable with respect to a Participant,
2. Relates to the provision of child support, alimony payments, or
marital property rights to a Spouse, child, or other dependent of a
Participant,
3. Is made pursuant to a State domestic relations law (including a
community property law), and
4. Clearly specifies:
a. The name and last known mailing address (if any) of the
Participant and the name and mailing address of each Alternate Payee
covered by the order (if the Plan Administrator does not have reason
to know that address independently of the order);
b. The amount or percentage of the Participant's benefits to be
paid to each Alternate Payee, or the manner in which the amount or
percentage is to be determined;
c. The number of payments or period to which the order applies;
and
d. Each plan to which the order applies.
C. IMPERMISSIBLE TERMS. A domestic relations order is not a Qualified
Domestic Relations Order if it requires--
1. The Plan to provide any type or form of benefit, or any option
not otherwise provided under the Plan,
2. The Plan to provide increased benefits (determined on the basis
of actuarial value), or
3. The payment of benefits to an Alternate Payee that
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are required to be paid to another Alternate Payee under a previous
Qualified Domestic Relations Order.
D. SPECIAL RULES.
1. A domestic relations order will not be considered to fail to
satisfy the requirements of Section 16.3(a) above with respect to any
payment made before a Participant has separated from service solely
because the order requires that payment of benefits be made to an
Alternate Payee--
a. In the case of any payment before a Participant has
separated from service, on or after the date on which the Participant
attains (or would have attained) Earliest Retirement Age. "Earliest
Retirement Age" means the earlier of--
(1) The date on which the Participant is entitled to a
distribution, or
(2) The later of--
(I) The date the Participant attains age fifty (50),
or
(II) The earliest date on which the Participant could
begin receiving benefits if he separated from service,
b. As if the Participant had retired on the date on which such
payment is to begin under the order (based on the value of the
Participant's Account balances at that time), and
c. In any form in which the benefits may be paid under the Plan
to the Participant.
2. However, if the Participant dies before his Earliest Retirement
Age, the Alternate Payee is entitled to benefits (as the Beneficiary of
the Participant) only if the Qualified Domestic Relations Order requires
survivor benefits to be paid to the Alternate Payee.
E. PROCEDURES.
1. In the case of any domestic relations order received by the
Plan--
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a. The Plan Administrator shall promptly notify the Participant
and any Alternate Payee of the receipt of the order and the Plan's
procedures for determining the qualified status of domestic relations
orders, and
b. Within a reasonable period after the receipt of the order,
the Plan Administrator shall determine whether the order is a
Qualified Domestic Relations Order and shall notify the Participant
and each Alternate Payee of the determination.
2. The Plan Administrator shall establish reasonable procedures to
determine the qualified status of domestic relations orders and to
administer distributions under Qualified Domestic Relations Orders.
F. SEGREGATION OF FUNDS.
1. During any period in which the issue of whether a domestic
relations order is a Qualified Domestic Relations Order is being
determined (by the Plan Administrator, by a court of competent
jurisdiction, or otherwise), the Plan Administrator shall separately
account for the amounts which would have been payable to the Alternate
Payee during the period if the order had been determined to be a Qualified
Domestic Relations Order.
2. If within the eighteen (18) month period beginning with the date
on which the first payment would be required to be made under the domestic
relations order, the order (or a modification thereof) is determined to be
a Qualified Domestic Relations Order, the Plan Administrator shall pay the
segregated amounts (including any interest thereon) to the person or
persons entitled thereto.
3. If within the eighteen (18) month period beginning with the date
on which the first payment would be required to be made under the domestic
relations order--
a. It is determined that the order is not a Qualified Domestic
Relations Order, or
b. The issue as to whether or not the order is a Qualified
Domestic Relations Order is not resolved,
then the Plan Administrator shall pay the segregated amounts (including
any interest thereon) to the person or persons who would have been
entitled to the amounts if there had been no order, or restore the amount
to the Participant's Account, whichever is applicable.
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4. Any determination that an order is a Qualified Domestic Relations
Order that is made after the close of the eighteen (18) month period shall
be applied prospectively only.
G. AUTHORIZED PARTICIPANT LOANS. Notwithstanding any other provision of
this Plan (including the provisions of Section 16.1 above), Participants may
borrow amounts from the Plan in accordance with the rules of this Section 16.7
for any reason whatsoever.
1. Any Participant desiring to borrow funds from the Plan must
submit an application to the Committee, which shall be the person
responsible for administering the loan program.
a. An application for a loan will be denied by the Committee
only if the loan would be less than the minimum required under
Paragraph (b) below or would be greater than the maximum permitted
under Paragraph (c) below. However, a Participant may not have more
than one (1) loan outstanding at any time.
b. A denial of an application for a loan shall be treated the
same as a claim for benefits under Article XIV, 14.1 above.
2. The loans must be available to all Participants on a reasonably
equivalent basis and must not be made available to Highly Compensated
Employees in amounts greater than the amounts made available for other
Employees. However, the minimum amount of a loan is one thousand dollars
($1,000).
3. The maximum amount of the loan may not exceed the lesser of:
a. Fifty thousand dollars ($50,000.00), reduced by the highest
outstanding balance of loans from the Plan to the Participant during
the one year period ending on the day before the date on which the
loan is made; or
b. One-half (1/2) of the value of the Participant's Vested
Interest.
4. The loan must state the date upon which the loan must be repaid,
which may not exceed five (5) years, except where the proceeds of the loan
are used to purchase the principal residence of the Participant.
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a. In all cases, however, the loan shall require substantially
level amortization payment (accomplished through payroll withholding)
over the term of the loan.
5. The loan will bear interest at the rate of two percent points
more than the prime rate published in the Wall Street Journal on the day
the loan is made. The rate of interest will be determined at the time the
loan is made, and will remain fixed throughout the duration of the
original term of the loan, unless the loan is extended or renegotiated.
6. The loan will be secured by the Participant's Vested Interest.
The Participant may not use more than fifty percent (50%) of his Vested
Interest as security for the loan. No other forms of security may be
given for the loan.
7. Upon the Participant's Severance, the entire amount of the loan
shall become immediately due and payable (including the interest accrued
thereon). In the event that the Participant has not completely repaid the
loan by the date on which his Vested Interest becomes payable, his Vested
Interest shall be reduced by the outstanding balance due on the loan on
that date.
8. The Committee shall require the Spouse of the Participant to
consent to the loan within the ninety (90) day period before the making of
the loan. This consent shall be in writing, shall acknowledge the effect
of the loan, and shall be witnessed by a notary public or a Plan
representative.
a. The consent of the spouse, once given, is irrevocable.
b. This consent shall be both to the use of the Participants'
Vested Interest--
(1) As security for the loan, and
(2) To satisfy the repayment obligation if the Participant
defaults.
c. The requirement of spousal consent shall be waived, in the
event a married Participant has been abandoned by his Spouse.
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9. Notwithstanding anything to the contrary, in no event will there
be a reduction of a Participant's Salary Reduction Contributions Account
because of a default on a loan until the Participant is otherwise entitled
to receive a distribution of his Salary Reduction Contributions.
10. The Committee will charge the Participant the administrative
costs incurred in making the loan.
11. Pursuant to such rules and procedures as may be prescribed by
the Committee, the amount of interest that a Participant pays on the loan
shall be allocated to his Account.
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ARTICLE XVII.
AMENDMENTS
A. AMENDMENTS. The Company may at any time amend the Plan by an
instrument in writing executed in the name of the Company by an officer duly
authorized to execute the instrument. However, except as otherwise permitted
by law, no amendment shall be made, the effect of which would be:
1. To cause any assets of the Plan, at any time prior to the
satisfaction of all liabilities with respect to Participants and their
Beneficiaries, to be used for or diverted to purposes other than--
a. Providing benefits to the Participants and their
Beneficiaries, and
b. Defraying reasonable expenses of administering the Plan;
2. To have any retroactive effect so as to decrease the accrued
benefit of any Participant (within the meaning of Section 411(d)(6) of the
Code). This requirement will not be considered to be violated, however,
by amendments to the rules regarding hardship distributions under Section
8.8 (including amendments eliminating such form of distributions); or
3. To increase or alter the responsibilities or liabilities of a
Trustee or an Investment Manager without its written consent.
B. EFFECT OF AMENDMENTS.
1. All amendments to the Plan are effective only on the date on
which the amendments are adopted, unless--
a. A different effective date is expressly provided by
resolution of the Board of Directors of the Company, or
b. The amendment by its own express terms becomes effective at
another date.
2. Unless and to the extent expressly stated to the contrary in the
terms of any amendment, the amendment shall not be construed to enlarge
the rights of any Participant whose Severance occurred prior to the
effective date of the amendment.
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C. SECURITIES RESTRICTIONS. The Plan is intended to qualify under Rule
16b-3 promulgated by the Securities Exchange Commission. Accordingly, the
provisions of the Plan relating to the following topics may not be amended more
frequently than once every six (6), except as otherwise required to comply with
ERISA and/or the Code:
1. The amount and price of Company stock to be acquired under the
Plan;
2. The eligibility conditions; and
3. The timing of contributions to the Plan that may be invested in
Company stock.
D. CHANGES TO VESTING SCHEDULE. In the event that the vesting schedule
of the Plan is amended--
1. In no event will the vested percentage (determined as of the
later of the date on which the amendment is adopted or becomes effective)
of a Participant be decreased, and
2. Each Participant who has at least three (3) Years of Service with
the Company may elect to have his vested percentage determined without
regard to the amendment.
3. An election described in Paragraph (b) above must be made during
the period beginning no later than the date on which the amendment is
adopted, and ending no later than sixty (60) days after the latest of the
following events:
a. The amendment is adopted;
b. The amendment becomes effective; or
c. The Participant receives written notice of the amendment.
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ARTICLE XVIII.
MISCELLANEOUS MATTERS
A. NO ENLARGEMENT OF EMPLOYEE RIGHTS.
1. This Plan is strictly a voluntary undertaking on the part of the
Company and shall not be deemed to constitute a contract between the
Company and any Employee, or to be consideration for, or an inducement to,
or a condition of the employment of any Employee.
2. Nothing contained in the Plan shall be deemed to give any
Employee the right to be retained in the employ of the Company or to
interfere with the right of the Company to discharge any Employee at any
time.
3. No Employee shall have any right to, or interest in any assets of
the Plan, other than as specifically provided in this Plan.
B. INTERPRETATION.
1. Article and Section headings are for convenient reference only
and shall not be deemed to be part of the substance of this instrument or
in any way to enlarge or limit the contents of any Article or Section.
2. Unless the context clearly indicates otherwise, the masculine
gender shall include the feminine, the singular shall include the plural,
and the plural shall include the singular.
3. The provisions of this Plan shall be interpreted in a manner that
is consistent with this Plan satisfying the applicable requirements of the
Code and ERISA.
IN WITNESS WHEREOF, Merisel, Inc. has caused this instrument to be
executed by its duly authorized officer.
MERISEL, INC.,
BY: __________________________
ITS: __________________________
DATE: __________________________
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EXHIBIT 10.29
SECOND AMENDMENT
Dated as of December 1, 1994
SECOND AMENDMENT dated as of December 1, 1994 (this "Amendment") to
REVOLVING CREDIT AGREEMENT dated as of December 23, 1993 (as amended by First
Amendment dated as of September 29, 1994, the "Credit Agreement") among MERISEL
AMERICAS, INC. and MERISEL EUROPE, INC. as Borrowers, MERISEL, INC. as
Guarantor, the lenders parties thereto (the "Lenders"), CITICORP USA, INC. as
Agent (the "Agent"), NATIONSBANK OF TEXAS, N.A. as Co-Agent and CITIBANK, N.A.
as Issuing Lender.
PRELIMINARY STATEMENTS. The parties hereto wish to modify the Credit
Agreement in certain respects as hereinafter set forth. Terms defined in the
Credit Agreement are used in this Amendment as defined in the Credit Agreement
and, except as otherwise indicated, all references to Sections refer to the
corresponding Sections of the Credit Agreement.
The parties hereto therefore agree as follows:
SECTION 1. Amendments. Effective as of the Amendment Effective Date (as
defined in Section 2 hereof), subject to the satisfaction of the conditions
precedent set forth in Section 2 hereof, Section 7.02(g) is hereby deleted and
restated as follows:
(g) Investments in Other Persons. Make, or permit any of its
Subsidiaries to make, any loan or advance to any Person, or purchase or
otherwise acquire, or permit any of its Subsidiaries to purchase or
otherwise acquire, any capital stock, obligations or other securities of,
make any capital contribution to, or otherwise invest in, any Person,
except:
(i) Cash Equivalents;
(ii) loans and advances by Merisel Americas to its wholly-owned
Subsidiaries, provided that the aggregate amount of all such loans and
advances at any time outstanding shall not exceed 15% of the Total
Capitalization of Merisel Americas;
(iii) loans, advances and investments by a Borrower, Merisel Parent
or their respective Subsidiaries, provided that the aggregate amount of
such loans, advances and investments made in any Person on any day shall
not exceed one percent of the aggregate consolidated total assets of the
Borrowers;
(iv) with the consent of the Majority Lenders pursuant to a waiver
and consent letter substantially in the form of Exhibit Q hereto,
investments in a wholly-owned Subsidiary of a Borrower in connection
with a recapitalization of such Subsidiary;
(v) loans and advances by Merisel Americas, provided that, at any
date of determination, (A) the aggregate amount of such loans and advances then
outstanding, plus (B) the aggregate amount of all Debt of Merisel Europe and its
Subsidiaries then outstanding which is guaranteed by Merisel Americas (including
so much of the Obligations as have been allocated to Merisel Europe as indicated
on compliance certificates delivered under Sections 7.01(m)(ii) and (iii)), plus
(C) the aggregate amount of intercompany loans and advances then outstanding
made by Merisel Americas or its Subsidiaries to Merisel Europe or its
Subsidiaries, shall not exceed an amount equal to 35% of the sum of (y) the
Consolidated Debt Equivalents of Merisel Americas plus (z) the Consolidated
Tangible Net Worth of Merisel Americas at that date of determination;
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(vi) loans and advances by Merisel Europe to its wholly-owned
Subsidiaries so long as no violation of Section 7.02(g)(v) exists or
would exist before or after the making of such loan or advance;
(vii) investments consisting of mergers, consolidations and
acquisitions permitted by Section 7.02(e);
(viii) both Merisel Parent and Computerland Acquisition Subsidiary
may make loans, advances and investments to or in each other without
restriction;
(ix) loans and advances by Merisel Parent to any of its direct and
indirect Subsidiaries, provided that such loans and advances shall be
subordinated (both as to payment and remedies) to the Obligations in
form and substance satisfactory to the Agent; and
(x) loans, advances and investments to or in a Subsidiary in
connection with a sale, transfer or securitization of accounts
receivable permitted by Section 7.02(f)(ii);
provided, however, that even if otherwise permitted by this Section 7.02(g),
no loan, advance or other investment shall be made by any Borrower or any of
its Subsidiaries to or in Merisel Parent or any Subsidiary of Merisel Parent
which is not also a Subsidiary of either Borrower (including, without
limitation, Computerland Acquisition Subsidiary or otherwise in connection
with the Computerland Acquisition or the operation of the business or assets
so acquired). The amount of any loan, advance or investment shall be
determined in accordance with GAAP.
SECTION 2. Conditions to Effectiveness. This Amendment shall be effective as
of December 23, 1993 (the "Amendment Effective Date"), subject to the Agent's
receipt of the following in form and substance satisfactory to the Agent: (a)
counterparts of this Amendment duly executed by the Borrowers and the Majority
Lenders (or, as to any Lender, advice satisfactory to the Agent that such Lender
has executed a counterpart of this Amendment), (b) a Consent and Acknowledgement
in the form of Annex A hereto executed by the Guarantor, and (c) a certificate
of the Secretary or an Assistant Secretary of each Borrower attaching a copy of
the resolutions of its Board of Directors authorizing its execution and delivery
of this Amendment, and certifying the name and true signature of each of its
officers executing the same on its behalf.
SECTION 3. Representations and Warranties. Each Borrower represents and
warrants that (a) such Borrower is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction indicated at
the beginning of this Amendment; (b) the execution, delivery by such Borrower of
this Amendment and the performance by such Borrower of the Credit Agreement as
hereby amended, are within such Borrower's corporate powers, have been duly
authorized by all necessary corporate action and do not contravene such
Borrower's charter or by-laws, any law, regulation or order binding on or
affecting such Borrower or the terms of any indenture, loan or credit agreement
or other agreement or instrument by which such Borrower is bound or to which
such Borrower is a party; (c) no authorization, approval or other action by, and
no notice to or filing with, any governmental authority or regulatory body is
required for the due execution or delivery by such Borrower of this Amendment or
the performance by such Borrower of the Credit Agreement as hereby amended; (d)
each of this Amendment and the Credit Agreement as amended hereby constitutes
the legal, valid and binding obligation of such Borrower enforceable against
such Borrower in accordance with their respective terms; (e) all representations
and warranties of such Borrower contained in Section 6.01 and the other Loan
Documents are true and correct, as if repeated and restated in full herein; (f)
no event has occurred and is continuing, or would result from the execution or
delivery of this Amendment or performance of the Credit Agreement as amended
hereby, which constitutes an Event of Default or would constitute an Event of
Default but for the requirement that notice be given or time elapse or both.
SECTION 4. Reference to and Effect on the Credit Agreement. On and after the
Amendment Effective Date, each reference in the Credit Agreement to "this
Agreement," "hereunder," "hereof," "herein" or words of like import, and each
reference in the other Loan Documents to "the Credit Agreement," "thereunder,"
"thereof,"
<PAGE>
"therein" or words of like import referring to the Credit Agreement shall mean
and be a reference to the Credit Agreement as amended by this Amendment. Except
as specifically amended herein, the Credit Agreement shall continue to be in
full force and effect and is hereby in all respects ratified and confirmed.
SECTION 5. Execution in Counterparts. This Amendment may be executed in any
number of counterparts and by any combination of the parties hereto in separate
counterparts, each of which counterparts shall be an original and all of which
taken together shall constitute one and the same Amendment.
SECTION 6. Governing Law. This amendment shall be governed by, and construed
in accordance with, the laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
MERISEL AMERICAS, INC. CITICORP USA, INC.
By: __________________________ By: ____________________________________
Title: _______________________ Title: _________________________________
MERISEL EUROPE, INC. NATIONSBANK OF TEXAS, N.A.
By: __________________________ By: ____________________________________
Title: _______________________ Title: _________________________________
UNION BANK
By: ____________________________________
Title: _________________________________
THE LONG TERM CREDIT BANK OF JAPAN, LTD.
LOS ANGELES AGENCY
By: ____________________________________
Title: _________________________________
THE INDUSTRIAL BANK OF JAPAN, LTD.
LOS ANGELES AGENCY
By: ____________________________________
Title: _________________________________
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA
By: ____________________________________
Title: _________________________________
<PAGE>
NBD BANK, N.A.
By: _____________________________
Title: __________________________
WESTDEUTSCHE LANDESBANK GIROZENTRALE,
NEW YORK AND CAYMAN ISLANDS BRANCHES
By: _____________________________
Title: __________________________
By: _____________________________
Title: __________________________
THE DAIWA BANK, LTD.
By: _____________________________
Title: __________________________
By: _____________________________
Title: __________________________
COMMERZBANK AG
LOS ANGELES BRANCH
By: _____________________________
Title: __________________________
By: _____________________________
Title: __________________________
<PAGE>
ANNEX A
CONSENT AND ACKNOWLEDGEMENT
Each of the undersigned hereby consents to the terms of the Second Amendment
dated as of December 1, 1994 (the "Amendment") to Revolving Credit Agreement
dated as of December 23, 1993 among Merisel Americas, Inc. and Merisel Europe,
Inc. as Borrowers, Merisel, Inc. as Guarantor, the Lenders party thereto,
Citicorp USA, Inc. as Agent, NationsBank of Texas, N.A. as Co-Agent and
Citibank, N.A. as Designated Issuer (as amended, the "Credit Agreement"), and
hereby confirms and agrees that each Loan Document executed by the undersigned
pursuant to and as defined in the Credit Agreement is, and shall continue to be,
in full force and effect and is hereby ratified and confirmed in all respects
except that, on and after the effective date of the Amendment, each reference in
each such Loan Document to "the Credit Agreement," "thereunder," "thereof,"
"therein" or words of like import referring to the Credit Agreement shall mean
and be a reference to the Credit Agreement as amended by the Amendment.
MERISEL, INC.
By:_________________________
Title:______________________
MERISEL CANADA, INC.
By:_________________________
Title:______________________
<PAGE>
EXHIBIT 10.30
THIRD AMENDMENT TO REVOLVING CREDIT AGREEMENT
Dated as of February 27, 1995
This Third Amendment to Revolving Credit Agreement (this
"Amendment") is dated as of February 27, 1995 by and among
Merisel Americas, Inc., a Delaware corporation ("Merisel
Americas"), Merisel Europe, Inc., a Delaware corporation
("Merisel Europe") (Merisel Americas and Merisel Europe each
referred to herein individually as a "Borrower" and collectively
as the "Borrowers"), Merisel, Inc., a Delaware corporation
("Merisel Parent"), as guarantor, the financial institutions
listed on the signature pages hereof, Citicorp USA, Inc. as Agent
for the Lenders, NationsBank of Texas, N.A. as Co-Agent for the
Lenders, and Citibank, N.A. as Designated Issuer, and is made
with reference to that certain Revolving Credit Agreement dated
as of December 23, 1993 (the "Original Agreement") by and among
the parties listed on the signature pages thereof, as amended by
the First Amendment dated as of September 29, 1994 (the "First
Amendment") by and among the parties listed on the signature
pages thereof and as further amended by the Second Amendment
dated as of December 1, 1994 (the "Second Amendment") by and
among the parties listed on the signature pages thereof; the
Original Agreement, the First Amendment and the Second Amendment
are hereinafter collectively referred to as the "Existing
Agreement." Capitalized terms used herein without definition
shall have the same meanings herein as set forth in the Existing
Agreement.
RECITAL
The parties hereto have agreed to further amend the Existing
Agreement as hereinafter set forth.
IN CONSIDERATION of the mutual promises and covenants set
forth herein, the parties hereto agree as follows:
SECTION 1. AMENDMENT TO THE EXISTING AGREEMENT
1.1 The Existing Agreement is hereby amended by inserting
the following definition after the definition of
Consolidated in Section 1.01:
<PAGE>
""Consolidated Adjusted Net Worth" means Consolidated
Net Worth calculated without giving effect to any
foreign currency translation adjustments."
1.2 The Existing Agreement is hereby amended by deleting in
its entirety the proviso at the end of the definition
of "Applicable Margin" in Section 1.01 and inserting as
follows:
";provided, however, that at any time that the
Consolidated Debt Equivalents/Capital Ratio of Merisel
Parent (as more fully described in Section 7.01(g))
is greater than 0.625:1.00, (i) the Eurodollar Margin
shall be 2.0000, (ii) the Commitment Fee shall be
0.5000, (iii) the Commission shall be 2.000 and (iv)
the Standby Fee shall be 2.000."
1.3 The Existing Agreement is hereby amended by replacing
the term "Consolidated Net Worth" wherever it appears
in Section 7.01(f) with the term "Consolidated Adjusted
Net Worth".
1.4 The Existing Agreement is hereby amended by replacing
the term "Consolidated Net Worth" wherever it appears
in Section 7.01(g) with the term "Consolidated Adjusted
Net Worth".
1.5 The Existing Agreement is hereby amended by deleting in
its entirety Section 7.01(j) and inserting the
following:
"(j) Maintenance of Borrowers' Interest Coverage Ratio.
Maintain, for each period of four consecutive fiscal
quarters, a ratio of the aggregate Consolidated EBITDA
of both of the Borrowers to the aggregate Consolidated
Interest Charges (including such portion of
Consolidated Interest Charges as represents interest on
intercompany Debt paid to Merisel Parent, and excluding
such portion of Consolidated Interest Charges as
represents interest on all other intercompany Debt) of
both of the Borrowers, of not less than (w) 1.5:1.00,
for each of the periods ending March 31, 1995, June 30,
1995 and September 30, 1995, (x) 1.80:1.00, for the
period ending December 31, 1995, (y) 2.50:1.00, for the
period ending March 31, 1996, and (z) 2.75:1.00, after
March 31, 1996; provided that, for purposes of this
Section 7.01(j), in calculating Consolidated EBITDA for
the quarter ending
<PAGE>
March 31, 1995 only, Consolidated EBITDA shall be increased by the
amount and type of the charges identified in that certain letter dated
February 24, 1995 by the Borrowers to the Agent for the Lenders, but
in no event in an amount greater than $5,000,000."
1.6 The Existing Agreement is hereby amended by deleting in
its entirety Section 7.01(k) and inserting the
following:
"(k) Maintenance of Merisel Parent's Interest Coverage
Ratio. Maintain, for each period of four consecutive
fiscal quarters, a ratio of Consolidated EBITDA of
Merisel Parent to Consolidated Interest Charges of
Merisel Parent, of not less than (w) 1.50:1.00, for
each of the periods ending March 31, 1995, June 30,
1995 and September 30, 1995, (x) 1.80:1.00, for the
period ending December 31, 1995, (y) 2.50:1.00, for the
period ending March 31, 1996, and (z) 2.75:1.00, after
March 31, 1996; provided that, for purposes of this
Section 7.01(k), in calculating Consolidated EBITDA for
the quarter ending March 31, 1995 only, Consolidated
EBITDA shall be increased by the amount and type of the
charges identified in that certain letter dated
February 24, 1995 from the Borrowers to the Agent for
the Lenders, but in no event in an amount greater than
$5,000,000."
1.7 The Existing Agreement is hereby amended by deleting
item (g) of paragraph 1 of section E of Exhibit K to
the Existing Agreement in its entirety and inserting
the following:
"(g) Charges increasing Consolidated
EBITDA as permitted under Section
7.01(j):
(i) [charge 1] $ ________
(ii) [charge 2] $ ________
(iii) Total charges $ ________
(h) Merisel Americas' Consolidated
EBITDA ((a) + (b) + (c) + (d)
+ (e) + or - (f) + or - [for
quarter ending March 31, 1995
only] the lesser of (g) or
$5,000,000) $ _______."
<PAGE>
1.8 The Existing Agreement is hereby amended by deleting
item 7 of section F of Exhibit K to the Existing
Agreement in its entirety and inserting the following:
"6A. Charges increasing Consolidated
EBITDA as permitted under Section
7.01(k):
(i) [charge 1] $ ________
(ii) [charge 2] $ ________
(iii) Total charges $ ________
7. Merisel Americas' Consolidated
EBITDA (1 + 2 + 3 + 4 + 5 + or
- 6 + or - [for quarter ending
March 31, 1995 only] the lesser
of 6A or $5,000,000) $ ________."
SECTION 2. CONDITIONS TO EFFECTIVENESS
This Amendment shall become effective upon the satisfaction
of the following conditions precedent (the date of satisfaction
of such conditions being referred to herein as the "Amendment
Effective Date"): (i) the execution of this Amendment by the
Borrowers, Merisel Parent and the Majority Lenders in accordance
with Section 11.01 of the Existing Agreement; (ii) a Consent and
Acknowledgement in the form of Annex A hereto executed by Merisel
Canada; (iii) the delivery by the Borrowers and Merisel Parent to
the Lenders (or to the Agent with sufficient originally executed
copies, where appropriate, for each Lender) of (a) certified
resolutions of their respective Board of Directors approving and
authorizing the execution, delivery, and performance of this
Amendment, (b) signature and incumbency certificates of the
officers executing this Amendment, and (c) executed copies of
this Amendment; (iv) on or before the Amendment Effective Date,
all corporate and other proceedings taken or to be taken in
connection with the transactions contemplated hereby and all
documents incidental thereto not previously found acceptable by
the Agent, acting on behalf of the Lenders, and their counsel
shall be satisfactory in form and substance to the Agent and such
counsel, and the Agent and such counsel shall have received all
such counterpart originals or certified copies of such documents
as the Agent may reasonably request; (v) on or before the
Amendment Effective Date, the Borrowers shall have paid all fees
and expenses of the Agent in connection with the negotiation,
preparation and execution of this Amendment; (vi) on or before
the Amendment Effective Date, the Borrowers shall have paid to
each Lender that shall have executed and delivered to the Agent
by 9:00 a.m. (Los Angeles time) on February 27, 1995, signature
pages to
<PAGE>
this Amendment, a consent fee in an amount equal to 0.20% of such Lender's
Commitment; and (vii) on or before the Amendment Effective Date, the Borrowers
shall have delivered to the Agent on behalf of the Lenders that certain letter
dated February 24, 1995.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE BORROWERS
AND MERISEL PARENT
In order to induce the Lenders to enter into this Amendment
and to amend the Existing Agreement in the manner provided
herein, the Borrowers and Merisel Parent represent and warrant to
each Lender that the following statements are true, correct and
complete:
Corporate Power and Authority
Each Borrower and Merisel Parent has all requisite corporate
power and authority to enter into this Amendment and to carry out
the transactions contemplated by, and perform its respective
obligations under, the Existing Agreement as amended by this
Amendment (the "Amended Agreement").
Authorization of Agreements
The execution and delivery of this Amendment and the
performance of the Amended Agreement have been duly authorized by
all necessary corporate action by each Borrower and Merisel
Parent.
No Conflict
The execution and delivery by each Borrower and Merisel
Parent of this Amendment and the performance by each Borrower and
Merisel Parent of the Amended Agreement do not and will not (i)
violate any provision of law, rule or regulation applicable to
the Borrowers, Merisel Parent or any of their respective
Subsidiaries, the Certificate of Incorporation or bylaws of
the Borrowers, Merisel Parent or any of their respective
Subsidiaries, (ii) conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default
under any material contractual obligation of the Borrowers,
Merisel Parent or any of their respective Subsidiaries, (iii)
result in or require the creation or imposition of any Lien upon
any of their properties or assets, or (iv) require any approval
of stockholders or any approval or consent of any Person under
any contractual obligation of the Borrowers, Merisel Parent or
any of their respective Subsidiaries.
Governmental Consents
The execution and delivery by the Borrowers and Merisel
Parent and the performance by the Borrowers and Merisel Parent of
the Amended Agreement do not and will not require any
registration
<PAGE>
with, consent or approval of, or notice to, or other action to, with or
by, any Federal, state or other governmental authority or
regulatory body or other Person.
Binding Obligation
This Amendment and the Amended Agreement are the legally
valid and binding obligation of the Borrowers and Merisel Parent,
enforceable against each of them in accordance with their
respective terms, except as enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or limiting creditors' rights generally
or by equitable principles relating to enforceability.
Incorporation of Representations and Warranties From Existing
Agreement
The representations and warranties contained in Article VI
of the Existing Agreement are and will be true, correct and
complete in all material respects on and as of the effective date
of this Amendment to the same extent as though made on and as of
that date, except to the extent that such representations and
warranties specifically relate to an earlier date, in which case
they are true, correct and complete in all material respects as
of such earlier date.
Absence of Default
No event has occurred and is continuing or will result from
the consummation of the transactions contemplated by this
Amendment which would constitute an Event of Default, or an event
that with the passage of time, the giving of notice or both would
constitute an Event of Default.
SECTION 4. MISCELLANEOUS
Reference to and Effect on the Existing Agreement and the
Other Loan Documents
(i) On and after the effective date of this Amendment,
each reference in the Existing Agreement to "this Agreement",
"hereunder", "hereof", "herein", or words of like import
referring to the Existing Agreement, and each reference in
the other Loan Documents to the "Revolving Credit Agreement",
"thereunder", "thereof" or words of like import referring to the
<PAGE>
Existing Agreement shall mean and be a reference to the Existing
Agreement as amended by this Amendment.
(ii) Except as specifically amended by this Amendment, the
Existing Agreement and the other Loan Documents shall remain in
full force and effect and are hereby ratified and confirmed.
(iii) The execution, delivery and performance of this
Amendment shall not, except as expressly provided herein,
constitute a waiver of any provision of, or operate as a waiver
of any right, power or remedy of the Agent or any Lender under,
the Existing Agreement or any of the other Loan Documents.
Execution and Counterparts
This Amendment may be executed in any number of
counterparts, and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall
be deemed an original, but all such counterparts taken together
shall constitute one and the same instrument.
Headings
Section and subsection headings in this Amendment are
included herein for convenience of reference only and shall not
constitute a part of this Amendment for any other purpose or be
given any substantive effect.
Applicable Law
THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HERETO AND ALL OTHER ASPECTS HEREOF SHALL BE DEEMED TO BE MADE
UNDER, SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Third Amendment to Revolving Credit Agreement to be executed by
their respective officers thereunto duly authorized as of the
date first above written.
THE BORROWERS
MERISEL AMERICAS, INC.
By:______________________________
Name:
Title:
MERISEL EUROPE, INC.
By:_______________________________
Name:
Title:
<PAGE>
THE PARENT GUARANTOR
MERISEL, INC.
By:______________________________
Name:
Title:
THE AGENT
CITICORP USA, INC., as Agent
By:______________________________
Name:
Title:
THE CO-AGENT
NATIONSBANK OF TEXAS, N.A., as Co-Agent
By:______________________________
Name:
Title:
THE DESIGNATED ISSUER
CITIBANK, N.A., as Designated Issuer
By:______________________________
Name:
Title:
THE LENDERS
CITICORP USA, INC.
By:_______________________________
Name:
Title:
NATIONSBANK OF TEXAS, N.A.
By:______________________________
Name:
Title:
UNION BANK
By:______________________________
Name:
Title:
By:______________________________
Name:
Title:
THE LONG-TERM CREDIT BANK OF JAPAN,
LTD., LOS ANGELES AGENCY
By:______________________________
Name:
Title:
<PAGE>
THE INDUSTRIAL BANK OF JAPAN,
LIMITED, LOS ANGELES AGENCY
By:________________________________
Name:
Title:
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA
By:______________________________
Name:
Title:
NBD BANK
By:______________________________
Name:
Title:
WESTDEUTSCHE LANDESBANK
GIROZENTRALE, NEW YORK AND CAYMAN
ISLANDS BRANCHES
By:______________________________
Name:
Title:
By:______________________________
Name:
Title:
THE DAIWA BANK, LTD.
By:______________________________
Name:
Title:
By:______________________________
Name:
Title:
COMMERZBANK AG, LOS ANGELES BRANCH
By:______________________________
Name:
Title:
<PAGE>
ANNEX A
CONSENT AND ACKNOWLEDGEMENT
The undersigned hereby consents to the terms of the
Third Amendment to Revolving Credit Agreement dated as of
February 27, 1995 (the "Amendment") with respect to the Revolving
Credit Agreement dated as of December 23, 1993 (as amended, the
"Credit Agreement") among Merisel Americas, Inc. and Merisel
Europe, Inc. as Borrowers, Merisel, Inc. as Guarantor, the
Lenders party thereto, Citicorp USA, Inc. as Agent, NationsBank
of Texas, N.A. as Co-Agent and Citibank, N.A. as Designated
Issuer, and hereby confirms and agrees that each Loan Document
executed by the undersigned pursuant to and as defined in the
Credit Agreement is, and shall continue to be, in full force and
effect and is hereby ratified and confirmed in all respects
except that, on and after the effective date of the Amendment,
each reference in each such Loan Document to "the Credit
Agreement," "thereunder," "thereof," "therein" or words of like
import referring to the Credit Agreement shall mean and be a
reference to the Credit Agreement as amended by the Amendment.
MERISEL CANADA, INC.
By: ________________________
Title: _____________________
Dated: February __, 1995
<PAGE>
EXHIBIT 10.31
AMENDED AND RESTATED TRADE RECEIVABLES
PURCHASE AND SALE AGREEMENT
Dated as of November 29, 1994
MERISEL CAPITAL FUNDING, INC., a Delaware corporation
(the "Seller"), CORPORATE RECEIVABLES CORPORATION, a California
corporation (the "Investor"), and CITICORP NORTH AMERICA, INC., a
Delaware corporation ("CNA"), as agent for the Investor and the
other Owners (as defined below) (the "Agent"), agree as follows:
PRELIMINARY STATEMENTS.
(1) Certain terms which are capitalized and used
throughout this Agreement (in addition to those defined above)
are defined in Article I of this Agreement.
(2) Merisel Americas, Inc., a Delaware corporation
("Americas"), the Investor and CNA, as Agent, were each party to
that certain Trade Receivables Purchase and Sale Agreement dated
as of September 24, 1993, as amended by the Assumption and
Second Amendment dated as of December 23, 1993, the Third
Amendment dated as of March 24, 1994, the Fourth Amendment dated
as of October 7, 1994 and the Fifth Amendment dated as of
November 29, 1994 (said Agreement, as so amended, being the
"Original Agreement"), whereby Americas had from time to time
sold to Ciesco L.P. ("Ciesco"), and Ciesco had from time to time
purchased from Americas, "Eligible Assets" (as defined in the
Original Agreement) -- namely undivided percentage ownership
interests in all the outstanding "Pool Receivables" as defined
therein and all "Related Security" and "Collections" as defined
therein and other proceeds thereof and with respect thereto.
(3) On the Effective Date, the Seller and Americas
each will have entered into, and fully performed, the Purchase
and Sale Assignment and Assumption Agreement dated as of
November 29, 1994 (the "Assignment and Assumption"), whereby the
Seller takes the place of Americas in and under the Original
Agreement.
(4) On the Effective Date, the Investor and Ciesco
each will have entered into, and fully performed, the Assignment
and Acceptance dated as of November 29, 1994 (the "Ciesco
Assignment and Acceptance"), whereby the Investor takes the
place of Ciesco in and under the Original Agreement.
(5) The Seller will from time to time purchase from
Americas additional Pool Receivables in which the Seller intends
to sell interests represented by Eligible Assets hereunder.
<PAGE>
2
(6) The parties hereto have agreed to amend and
restate the Original Agreement, as modified by the Assignment
and Assumption and the Ciesco Assignment and Acceptance, on the
terms and conditions hereinafter set forth, to provide for,
among other things, the sale of such additional Pool
Receivables.
(7) CNA has been requested and is willing to continue
to act as Agent.
NOW, THEREFORE, the parties agree that, effective as of
the Effective Date and subject to the satisfaction of the
conditions precedent set forth in Section 3.01 hereof, the
Original Agreement, as modified by the Assignment and Assumption
and the Ciesco Assignment and Acceptance, is hereby amended and
restated in its entirety to read as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. As used in this
Agreement, the following terms shall have the following meanings
(such meanings to be equally applicable to both the singular and
plural forms of the terms defined):
"Adjusted LIBO Rate" means, for any Fixed Period, an
interest rate per annum equal to the rate per annum obtained
by dividing (i) the rate per annum at which deposits in U.S.
dollars are offered by the principal office of Citibank in
London, England to prime banks in the London interbank
market at 11:00 A.M. (London time) two Business Days before
the first day of such Fixed Period for a period equal to
such Fixed Period by (ii) a percentage equal to 100% minus
Citibank's Eurodollar Reserve Percentage for such Fixed
Period.
"Administration Fee" has the meaning specified in
Section 2.10.
"Adverse Claim" means a lien (other than inchoate and
unperfected tax liens), security interest or other charge or
encumbrance, or other type of preferential arrangement
having the effect of a lien or security interest.
"Affiliate" means (i) as to any Person, any other
Person that, directly or indirectly, beneficially owns or
holds 100% of any class of voting securities of such Person
or otherwise is in control of, is controlled by or is under
common control with such Person, with "control"
<PAGE>
3
with respect to any such Person being the power to exercise,
directly or indirectly, a controlling influence over the
management or policies of such Person, and (ii) as to CNA or
the Investor, shall also include the Investor and CNA,
respectively, and any other Person who has a relationship to
CNA comparable to that of the Investor.
"Affiliated Obligor" means any Obligor which is an
Affiliate of another Obligor.
"Agent's Account" means the special account (account
number 4063-2221) of the Agent maintained at the office of
Citibank at 399 Park Avenue, New York, New York 10043.
"Alternate Base Rate" means, for any period, a
fluctuating interest rate per annum as shall be in effect
from time to time, which rate per annum shall at all times
be equal to the higher of:
(a) the rate of interest announced publicly by
Citibank in New York, New York, from time to time as
Citibank's base rate; or
(b) 1/2 of one percent above the latest
three-week moving average of secondary market morning
offering rates in the United States for three-month
certificates of deposit of major United States money
market banks, such three-week moving average being
determined weekly on each Monday (or, if such day is
not a Business Day, on the next succeeding Business
Day) for the three-week period ending on the previous
Friday by Citibank on the basis of such rates reported
by certificate of deposit dealers to and published by
the Federal Reserve Bank of New York or, if such
publication shall be suspended or terminated, on the
basis of quotations for such rates received by Citibank
from three New York certificate of deposit dealers of
recognized standing selected by Citibank, in either
case adjusted to the nearest 1/4 of one percent or, if
there is no nearest 1/4 of one percent, to the next
higher 1/4 of one percent.
"Americas" has the meaning specified in Preliminary
Statement (2).
"Assignee" means Citibank, CNA or the Investor, or any
of their respective Affiliates, as the assignee of an
Eligible Asset pursuant to Article IX and, in the case of
any assignment pursuant to Section 9.02, all but not part of
the rights and obligations of the Investor hereunder.
<PAGE>
4
"Assignee Rate" for any Fixed Period for any Eligible
Asset means an interest rate per annum equal to .8 of 1% per
annum, or, upon the occurrence and during the continuance of
any Rating Period, 1.75% per annum, in each case above the
Adjusted LIBO Rate for such Fixed Period; provided, however,
that:
(i) In the case of any such Fixed Period of one
to and including 13 days, the "Assignee Rate" for such
Fixed Period for such Eligible Asset shall be an
interest rate per annum equal to the Alternate Base
Rate in effect on the first day of such Fixed Period;
and
(ii) If either (A) the introduction of or any
change in or in the interpretation of any law or
regulation shall make it unlawful, or any central bank
or other governmental authority asserts that it is
unlawful, for Citibank to obtain funds in the London
interbank market during such Fixed Period or
(B) Citibank is unable for any reason to establish its
Adjusted LIBO Rate for such Fixed Period or (C) the
Adjusted LIBO Rate will not adequately reflect the cost
to the Owner of such Eligible Asset (or if such Owner
is the Participants, the Participants owning 51% in
aggregate amount of the undivided interests in such
Eligible Asset) of making a Purchase of or maintaining
such Eligible Asset during such Fixed Period, then the
"Assignee Rate" for such Fixed Period for such Eligible
Asset shall be an interest rate per annum equal to the
Alternate Base Rate in effect from time to time;
provided, however, that the Agent and the Seller may
agree in writing from time to time upon a different
"Assignee Rate".
"Assignment" means an assignment, in substantially the
form of Exhibit A hereto, by which an Eligible Asset may be
assigned pursuant to Section 9.01.
"Assignment and Acceptance" means an assignment and
acceptance entered into by the Investor and an Assignee in
substantially the form of Exhibit G hereto.
"Assignment and Assumption" has the meaning specified
in Preliminary Statement (3).
"Average Maturity" means, on any day, that period
(expressed in days) equal to the average maturity of the
Pool Receivables as shall be calculated by the Collection
<PAGE>
5
Agent as set forth in the most recent Investor Report in
accordance with the provisions thereof; provided, however,
that, if any such calculation shall be manifestly incorrect,
the Agent may recalculate the Average Maturity for such day.
"Business Day" means any day on which banks are not
authorized or required to close in New York City or the City
of Los Angeles and, if the applicable Business Day relates
to any computation made with respect to the Adjusted LIBO
Rate, on which dealings are carried on in the London
interbank market.
"Capital" of any Eligible Asset means the original
amount paid for such Eligible Asset at the time of its
acquisition by the Investor pursuant to Sections 2.01 and
2.02 (including, without limitation, Sections 2.01 and 2.02
of the Original Agreement), or such amount divided or
combined by any dividing or combining of such Eligible Asset
pursuant to Section 2.09 (including, without limitation,
Section 2.10 of the Original Agreement), in each case
reduced from time to time by Collections received and
distributed on account of such Capital pursuant to
Section 2.06; provided, however, that if such Capital of
such Eligible Asset shall have been reduced by any
distribution of any portion of Collections and thereafter
such distribution is rescinded or must otherwise be returned
for any reason, such Capital of such Eligible Asset shall be
increased by the amount of such distribution, all as though
such distribution had not been made.
"Certificate" means a certificate of assignment by the
Seller to the Agent in the form of Exhibit B hereto,
evidencing each Eligible Asset.
"Citibank" means Citibank, N.A., a national banking
association.
"Collateral" has the meaning specified in
Section 11.01.
"Collection Agent" means at any time the Person
(including the Agent or the Seller) then authorized pursuant
to Article VI to service, administer and collect Pool
Receivables.
"Collection Agent Fee" has the meaning specified in
Section 2.10.
<PAGE>
6
"Collection Agent Fee Reserve" for any Eligible Asset
at any time means the sum of (i) the Liquidation Collection
Agent Fee for such Eligible Asset at such time plus (ii) the
unpaid Collection Agent Fee relating to such Eligible Asset
accrued to such time.
"Collection Date" means the date following the
Termination Date on which the aggregate outstanding Capital
of all Eligible Assets shall have been reduced to zero and
each of the Agent, the Collection Agent, the Owners of the
Eligible Assets and the Indemnified Parties shall have
received all Yield, Capital, Collection Agent Fee and other
fees and other amounts payable to it hereunder with respect
to the Eligible Assets or otherwise.
"Collection Delay Period" means 10 days or such other
number of days in excess of 10 as the Agent may select upon
three Business Days' notice to the Seller.
"Collections" means, with respect to any Pool
Receivable, all cash collections and other cash proceeds of
such Pool Receivable, including, without limitation, all
cash proceeds of Related Security with respect to such Pool
Receivable, and any Collection of such Pool Receivable
deemed to have been received pursuant to Section 2.07
(including, without limitation, Section 2.08 of the Original
Agreement). "Collected" shall have a similar meaning.
"Concentration Limit" for any Obligor means at any time
4%; provided, however, that in the case of an Obligor with,
to the best knowledge of the Seller, any Affiliated Obligor,
the Concentration Limit shall be calculated as if such
Obligor and such Affiliated Obligor are one Obligor.
"Consent and Agreement" means a consent and agreement,
in substantially the form of Exhibit H hereto, with respect
to the Receivables Contribution and Sale Agreement, duly
executed by Americas.
"Contingent Obligation" means, as applied to any
Person, any direct or indirect liability, contingent or
otherwise, of that Person with respect to any Debt, lease,
dividend, letter of credit or other obligation of another
Person, including, without limitation, any such obligation
directly or indirectly guaranteed, endorsed (otherwise than
for collection or deposit in the ordinary course of
business), co-made, or discounted or sold with recourse by
that Person, or in respect of which that Person is otherwise
directly or indirectly liable, including, without
limitation, any such obligation for which that
<PAGE>
7
Person is in effect liable through any agreement (contingent
or otherwise) to purchase, repurchase or otherwise acquire
such obligation or any security therefor, or to provide
funds for the payment or discharge of such obligation
(whether in the form of loans, advances, stock purchases,
capital contributions or otherwise), or to maintain the
solvency or any balance sheet, income or other financial
condition of the obligor of such obligation, or to make
payment for any products, materials or supplies or for any
transportation, services or lease regardless of the
non-delivery or non-furnishing thereof, in any case if the
purpose or intent of such agreement is to provide assurance
that such obligation will be paid or discharged, or that any
agreements relating thereto will be complied with, or that
the holders of such obligation will be protected (in whole
or in part) against loss in respect thereof. The amount of
any Contingent Obligation shall be equal to the amount of
the obligation so guaranteed or otherwise supported.
"Contract" means (i) an agreement between Americas and
an Obligor, in substantially the form of one of the forms of
written contract delivered to the Agent prior to the date
hereof (or in substantially the form of any other form of
written contract delivered from time to time to the Agent by
the Seller after the date hereof if such other form shall
have been approved by the Agent in its reasonable
discretion) or containing payment terms and conditions and
covering sales of merchandise or services of a type
substantially similar thereto, or in the case of an open
account agreement, as evidenced by an invoice of Americas in
substantially the form of one of the forms of invoices
delivered to the Agent prior to the date hereof (or in
substantially the form of any other form of written invoice
delivered from time to time to the Agent by the Seller after
the date hereof if such other form shall have been approved
by the Agent in its reasonable discretion) or containing
payment terms and conditions and covering sales of
merchandise or services of a type substantially similar
thereto, in each case pursuant to or under which such
Obligor shall be obligated to pay for its purchase of
merchandise or services from time to time, or (ii) in the
case of a Receivable of the type described in clause (ii) of
the definition of the term "Receivable", the agreement or
arrangement of the type described in clause (iii) of the
definition of the term "Related Security" under which such
Receivable arose.
"CP Determination Date" means, for any Fixed Period for
any Eligible Asset, the date of Purchase of such Eligible
Asset and thereafter the tenth day of each
<PAGE>
8
calendar month (or, if such day is not a Business Day, the
immediately succeeding Business Day) or any other day as
shall have been agreed to in writing by the Agent and the
Seller prior to the first day of the preceding Fixed Period
for such Eligible Asset or, if there is no preceding Fixed
Period, prior to the first day of such Fixed Period.
"Credit Agreement" means the Revolving Credit Agreement
dated as of December 23, 1993, as amended by the First
Amendment to Revolving Credit Agreement dated as of
September 29, 1994, among Americas and Merisel Europe, Inc.,
as borrowers, Merisel, as guarantor, the lenders party
thereto, Citibank, as designated issuer, and Citicorp USA,
Inc. as agent for such lenders, without giving effect to any
other amendment, supplement or other modification thereof or
thereto or any waiver of any provision or any termination
thereof.
"Credit and Collection Policy" means those credit and
collection policies and practices of the Seller in effect on
the date hereof relating to Contracts and Receivables
described in a writing or writings delivered to the Agent,
and identified as such credit and collection policies and
practices, by the Seller prior to the date hereof, as
modified in compliance with Section 5.03(c).
"Debt" means (i) indebtedness for borrowed money,
(ii) obligations evidenced by bonds, debentures, notes or
other similar instruments, (iii) obligations to pay the
deferred purchase price of property or services (it being
understood that "Debt" shall not include obligations both
(a) classified as accounts payable, accrued liabilities or
income taxes payable under generally accepted accounting
principles and (b) incurred in the ordinary course of the
Seller's business), (iv) principal obligations as lessee
under leases of property (whether real, personal or mixed)
which shall have been or should be, in accordance with
generally accepted accounting principles, recorded as
capital leases, (v) reimbursement obligations under letters
of credit, (vi) obligations under direct or indirect
guaranties in respect of, and obligations (contingent or
otherwise) to purchase or otherwise acquire, or otherwise to
assure a creditor against loss in respect of, indebtedness
or obligations of others of the kinds referred to in
clauses (i) through (v) above, (vii) liabilities in respect
of unfunded vested benefits under plans covered by Title IV
of ERISA, and (viii) "Debt" as such term is defined in the
Senior Note Purchase Agreement referred to in the Credit
Agreement; provided, that no obligation included in "Debt"
hereunder
<PAGE>
9
shall be included in more than one of clauses (i) through
(viii); provided, further, that "Debt" shall not include any
obligation hereunder or, other than in the case of the
Seller, otherwise under or resulting from any agreement for
the sale, transfer or securitization of accounts receivable
permitted by Section 7.02(f)(ii) and Section 7.02(a)(vii) of
the Credit Agreement or by equivalent clauses of
replacements thereof.
"Default Ratio" means the ratio (expressed as a
percentage) computed as of the last day of each Fiscal Month
by dividing (i) the aggregate Outstanding Balance of all
Pool Receivables that were Defaulted Receivables on such
date or would have been Defaulted Receivables on such date
had they not been written off the books of the Seller during
such Fiscal Month by (ii) the aggregate Outstanding Balance
of all Pool Receivables on such date.
"Defaulted Receivable" means:
(i) a Receivable or any portion thereof as to
which any payment, or part thereof, remains unpaid for
45 days or more from the original due date for such
payment; provided, however, that (A) for purposes of
the definition of "Loss Percentage" contained in this
Section 1.01, such "45 days" shall be extended to "90
days" in the case of each Receivable, and (B) for
purposes of the definition of "Eligible Receivable"
contained in this Section 1.01, such "45 days" shall be
extended to "75 days" in the case of each Receivable
owed by [Office Depot];
(ii) a Receivable as to which the Obligor thereof
has taken any action, or suffered any event to occur,
of the type described in Section 7.01(g); or
(iii) a Receivable or any portion thereof which,
consistent with the Credit and Collection Policy,
should be written off the Seller's books as
uncollectible.
"Delinquency Ratio" means the ratio (expressed as a
percentage) computed as of the last day of each Fiscal Month
by dividing (i) the aggregate Outstanding Balance of all
Pool Receivables that were Delinquent Receivables at the end
of such Fiscal Month by (ii) the aggregate Outstanding
Balance of all Pool Receivables on such date.
"Delinquent Receivable" means a Receivable or any
portion thereof that is not a Defaulted Receivable and:
<PAGE>
10
(i) as to which any payment, or part thereof,
remains unpaid for 30 days or more from the original
due date for such payment; or
(ii) which, consistent with the Credit and
Collection Policy, would be classified as delinquent by
the Seller.
"Designated Obligor" means, at any time, each Obligor;
provided, however, that any Obligor shall cease to be a
Designated Obligor upon 30 days' prior written notice by the
Agent to the Seller made in accordance with a reasonable
exercise of the Agent's discretion.
"Dilution Horizon" means, for any Fiscal Month, a ratio
computed by dividing (1) the aggregate Outstanding Balance
of all Pool Receivables acquired by the Seller during such
Fiscal Month by (ii) the Outstanding Balance of Pool
Receivables as at the last day of such Fiscal Month.
"Dilution Percentage" means, for any Eligible Asset as
of any date, the sum of (a) 1.5 times the product of (i) the
average of the Dilution Ratios as of the last day of each of
the 12 Fiscal Months ended immediately preceding such date
and (ii) the average of the Dilution Horizons for each of
the three Fiscal Months ended immediately preceding such
date plus (b) the Dilution Volatility as of such date.
"Dilution Ratio" means the ratio (expressed as a
percentage) computed as of the last day of each Fiscal Month
by dividing (i) the aggregate Outstanding Balance of Pool
Receivables with respect to which credit memoranda were
issued by the Seller (it being agreed that the Seller will
be deemed to issue a credit memorandum as to any Pool
Receivable by the Seller's making credit entries on the
books of the Seller which reduce the Outstanding Balance of
such Pool Receivables) or by the Collection Agent, if other
than the Seller, during such Fiscal Month by (ii) the
aggregate Outstanding Balance of Pool Receivables which
arose during the immediately preceeding Fiscal Month;
provided, however, that in computing the "Dilution Ratio" as
of the last day of each Fiscal Month for purposes of the
Event of Investment Ineligibility referred to in
Section 7.01(h), the aggregate Outstanding Balance of Pool
Receivables referred to in clauses (i) and (ii) above shall
be calculated for, and during, the period of four Fiscal
Months ending with and including such Fiscal Month.
<PAGE>
11
"Dilution Reserve" means, for any Eligible Asset at any
date, an amount equal to
DP x (C + YR)
where:
DP = the Dilution Percentage for such Eligible
Asset at the close of business of the
Collection Agent as of such date.
C = the Capital of such Eligible Asset at the
close of business of the Collection Agent on
such date.
YR = the Yield Reserve for such Eligible Asset at
the close of business of the Collection Agent
as of such date.
"Dilution Volatility" means, as of any date, a ratio
(expressed as a percentage) equal to the product of (a) the
highest Dilution Ratio as of the last day of any Fiscal
Month occurring in the 12 Fiscal Months ended immediately
preceding such date minus the average of the Dilution Ratios
as of the last day of each of such 12 Fiscal Months and
(b) a ratio calculated by dividing the highest Dilution
Ratio as of the last day of any Fiscal Month occurring in
the 12 Fiscal Months ended immediately preceding such date
by the average of the Dilution Ratios as of the last day of
each of such 12 Fiscal Months and (c) the average of the
Dilution Horizons for each of the three Fiscal Months ended
immediately preceding such date.
"Effective Date" has the meaning assigned to that term
in Section 3.01.
"Eligible Asset" means, at any time, an undivided
percentage ownership interest at such time in (i) all then
outstanding Pool Receivables arising prior to the time of
the most recent computation or recomputation of such
undivided percentage interest pursuant to Section 2.04,
(ii) all Related Security with respect to such Pool
Receivables and (iii) all Collections with respect to, and
other proceeds of, such Pool Receivables. Such undivided
percentage interest for such Eligible Asset shall be
computed as
C + YR + LR + DR + CAFR
-----------------------
NRPB
where:
<PAGE>
12
C = the Capital of such Eligible Asset at the
time of such computation.
YR = the Yield Reserve of such Eligible Asset at
the time of such computation.
LR = the Loss Reserve of such Eligible Asset at
the time of such computation.
DR = the Dilution Reserve of such Eligible Asset
at the time of such computation.
CAFR = the Collection Agent Fee Reserve of such
Eligible Asset at the time of such
computation.
NRPB = the Net Receivables Pool Balance at the time
of such computation.
Each Eligible Asset shall be determined from time to time
pursuant to the provisions of Section 2.04.
"Eligible Receivable" means, at any time and with
respect to any Eligible Asset, a Receivable or any portion
thereof:
(i) the Obligor of which is a United States
resident, is not an Affiliate of any of the parties
hereto or to the Receivables Contribution and Sale
Agreement, and is not a government or a governmental
subdivision or agency (including, without limitation,
the government, or any governmental subdivision or
agency, of the United States or any state or
municipality thereof or any other subdivision thereof);
(ii) the Obligor of which at the time of the
initial creation of an interest therein hereunder
(including, without limitation, under the Original
Agreement) is a Designated Obligor;
(iii) the Obligor of which at the time of the
initial creation of an interest therein hereunder
(including, without limitation, under the Original
Agreement) is not the Obligor of any Defaulted
Receivables in the aggregate amount of 20% or more of
the aggregate Outstanding Balance of all Pool
Receivables of such Obligor;
(iv) which at the time of the initial creation of
an interest therein hereunder (including, without
<PAGE>
13
limitation, under the Original Agreement) is not a
Defaulted Receivable or Delinquent Receivable;
(v) which is not indebtedness arising from the
sale of merchandise that has not been shipped by
Americas to the Obligor thereof;
(vi) which, according to the Contract related
thereto, is required to be paid in full within 61 days
of the original invoice date therefor, in the case of
any Receivable of the type described in clause (i) of
the definition of the term "Receivable", or, in the
case of any Receivable of the type described in
clause (ii) of the definition of such term, by the date
by which the Pool Receivable the sale of which gave
rise to such Receivable was so required to have been
paid in full;
(vii) which is an account receivable representing
all or part of the sales price of merchandise or
insurance within the meaning of Section 3(c)(5) of the
Investment Company Act of 1940, as amended;
(viii) a purchase of which with the proceeds of
notes would constitute a "current transaction" within
the meaning of Section 3(a)(3) of the Securities Act of
1933, as amended;
(ix) which is an "account" within the meaning of
Section 9-106 of the UCC of the jurisdiction the law of
which governs the perfection of the interest created by
an Eligible Asset;
(x) which is denominated and payable only in
United States dollars in the United States;
(xi) which arises under a Contract which has been
duly authorized and which, together with such
Receivable, is in full force and effect and constitutes
the legal, valid and binding obligation of the Obligor
of such Receivable enforceable against such Obligor in
accordance with its terms, and is not subject to any
active, asserted or effected chargeback, allowance,
credit, rebate, discount, dispute, offset,
counterclaim, other dilution factor or defense
whatsoever (except the discharge in bankruptcy of such
Obligor);
(xii) which, together with the Contract related
thereto, does not contravene in any material respect
any laws, rules or regulations applicable thereto
<PAGE>
14
(including, without limitation, laws, rules and
regulations relating to usury, consumer protection,
truth in lending, fair credit billing, fair credit
reporting, equal credit opportunity, fair debt
collection practices and privacy);
(xiii) with respect to which performance (other than
by the Obligor or any guarantor thereof) under the
related Contract has been completed;
(xiv) the Obligor of which, if a natural person, to
the best knowledge of the Seller or Americas, (a) is
living, (b) is not a minor under the laws of his or her
state of residence, and (c) is competent to enter into a
contract and incur debt;
(xv) which is, immediately prior to the time of
the initial creation of an interest therein hereunder
(including, without limitation, under the Original
Agreement), legally and beneficially owned by the
Seller free of any Adverse Claim;
(xvi) which is not evidenced by any "instrument" or
"chattel paper" within the meaning of the UCC in effect
in the State of California;
(xvii) which (A) satisfies all applicable
requirements of the Credit and Collection Policy and
(B) complies with such other criteria and requirements
(other than those relating to the collectibility of
such Receivable) as the Agent may from time to time
specify to the Seller upon 30 days' notice; and
(xviii) as to which, at least 30 days prior to the
time of the initial creation of an interest therein
through a Purchase, the Agent has not notified the
Seller that the Agent has determined, in its sole
discretion, that such Receivable (or class of
Receivables) is not acceptable for purchase by the
Investor hereunder;
provided that if and so long as the aggregate Outstanding
Balance of the Pool Receivables financed or to be financed
by Floor Plan Obligors is less than 12% of the aggregate
Outstanding Balance of the Eligible Receivables in the
Receivables Pool, the term "Obligor" referred to above in
this definition of "Eligible Receivable" shall apply only to
the Original Obligor of the Receivable referred to therein,
and if and so long as the aggregate Outstanding
<PAGE>
15
Balance of the Pool Receivables financed or to be financed
by Floor Plan Obligors is 12% or more of the aggregate
Outstanding Balance of the Eligible Receivables in the
Receivables Pool, such term "Obligor" shall apply to the
Floor Plan Obligor of the Receivable referred to therein if
financed or to be financed by such Floor Plan Obligor and to
the Original Obligor of such Receivable if not financed or
to be financed by any Floor Plan Obligor.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended from time to time, and the
regulations promulgated and rulings issued thereunder.
"Eurodollar Reserve Percentage" of Citibank means, for
any Fixed Period, the reserve percentage applicable two
Business Days before the first day of such Fixed Period
under regulations issued from time to time by the Board of
Governors of the Federal Reserve System (or any successor)
for determining the maximum reserve requirement (including,
but not limited, to any emergency, supplemental or other
marginal reserve requirement) for Citibank in respect of
liabilities or assets consisting of or including
Eurocurrency liabilities (as that term is defined in
Regulation D of the Board of Governors of the Federal
Reserve System as in effect from time to time), or with
respect to any other category of liabilities which includes
deposits by reference to which the Adjusted LIBO Rate is
determined, having a term equal to such Fixed Period.
"Event of Investment Ineligibility" has the meaning
specified in Section 7.01.
"Event of Purchase Ineligibility" means any failure to
satisfy the condition set forth in Section 3.02(b)(iii) or
(iv).
"FAB" means Merisel FAB, Inc., a Delaware corporation
and a wholly-owned subsidiary of Merisel, created to acquire
and operate the assets comprising the franchise and
distribution division of ComputerLand Corporation, a
Delaware corporation.
"Facility" means the willingness of the Investor to
consider, in its sole discretion pursuant to Article II, the
purchase from the Seller of Eligible Assets from time to
time.
"Facility Termination Date" means the earlier of
October 6, 1995, or the date of termination of the Facility
pursuant to Section 2.03 or Section 7.01.
<PAGE>
16
"Fee Letter" means the letter agreement regarding
additional fees, dated the date hereof, between the Seller
and the Agent.
"Fiscal Month" means any of the accounting months
designated as such on Schedule III hereto.
"Fixed Period" means, with respect to any Eligible
Asset, a period determined pursuant to Section 2.02;
provided, however, that:
(i) any Fixed Period in respect of which Yield is
computed by reference to the Investor Rate shall be a
period from each CP Determination Date for such
Eligible Asset to the next succeeding CP Determination
Date for such Eligible Asset;
(ii) any Fixed Period in respect of which Yield is
computed by reference to the Assignee Rate shall be a
period of from one to and including 14 days, or a
period of one, two, three or six months, as the Seller
shall select (subject to clause (v) below) on notice by
the Seller received by the Agent (including notice by
telephone, confirmed in writing) not later than
1:00 P.M. (New York City time) on the day which occurs
three Business Days before the first day of such Fixed
Period, each such Fixed Period for any Eligible Asset
to commence on the last day of the immediately
preceding Fixed Period for such Eligible Asset (or, if
there is no such Fixed Period, on the date of Purchase
of such Eligible Asset), except that if the Agent shall
not have received such notice before 1:00 P.M. (New
York City time) on such day, such Fixed Period shall be
one day;
(iii) any Fixed Period (other than of one day)
which would otherwise end on a day which is not a
Business Day shall be extended to the next succeeding
Business Day, except that if such Fixed Period relates
to the Adjusted LIBO Rate and such extension would
cause the last day of such Fixed Period to occur in the
next succeeding month, the last day of such Fixed
Period shall occur on the immediately preceding
Business Day;
(iv) in the case of any Fixed Period of one day
for any Eligible Asset, (a) if such Fixed Period is
such Eligible Asset's initial Fixed Period, such Fixed
Period shall be the day of the related Purchase;
(b) any subsequently occurring Fixed Period
<PAGE>
17
which is one day shall, if the immediately preceding
Fixed Period is more than one day, be the last day of
such immediately preceding Fixed Period, and, if the
immediately preceding Fixed Period is one day, be the
day next following such immediately preceding Fixed
Period; and (c) if such Fixed Period occurs on a day
immediately preceding a day which is not a Business
Day, such Fixed Period shall be extended to the next
succeeding Business Day; and
(v) in the case of any Fixed Period for any
Eligible Asset which commences before the Termination
Date for such Eligible Asset and would otherwise end on
a date occurring after such Termination Date, such
Fixed Period shall end on such Termination Date and the
duration of each Fixed Period which commences on or
after the Termination Date for such Eligible Asset
shall be of such duration as shall be selected by the
Agent.
"Floor Plan Obligor" means any Obligor referred to in
clause (ii) of the definition of "Obligor" contained in this
Section 1.01.
"Indemnified Party" means any of the Investor,
Citibank, CNA, any Owner, any Participant, the Agent or any
Affiliate of any thereof, and "Indemnified Parties" means
all of the Investor, Citibank, CNA, the Owners, the
Participants, the Agent and their respective Affiliates.
"Investor" has the meaning assigned to that term at the
beginning of this Agreement; provided, however, that upon
any assignment of all of the Eligible Assets owned by the
Investor together with all of the rights and obligations of
the Investor hereunder pursuant to Section 9.02, the
Assignee thereof shall be the Investor for all purposes
hereunder.
"Investor Investment Fee" has the meaning specified in
Section 2.10.
"Investor Rate" for any Fixed Period for any Eligible
Asset means the rate per annum, as determined by Citibank on
the first day of such Fixed Period, equal to the average of
offering rates on one month commercial paper placed by
several leading dealers for firms whose bond rating is "AA"
or the equivalent, as such average is published by the
Federal Reserve Bank of New York for such day, or, if such
average of such rates is not so published for such day,
equal to the average of such rates received
<PAGE>
18
for such day by Citibank from several such leading dealers
selected by Citibank, which rate per annum includes
commercial paper dealer commissions; provided, however, that
if such average of such rates for such day is a discount
rate, the "Investor Rate" for such Fixed Period shall be the
rate resulting from converting such discount rate to an
interest-bearing equivalent rate per annum; provided,
further, however, that if the Owner of such Eligible Asset
so requests and the Seller consents thereto, the "Investor
Rate" for any Fixed Period of one day shall be the Assignee
Rate for such Fixed Period.
"Investor Report" means a report, in substantially the
form of Exhibit C hereto, furnished by the Collection Agent
to the Agent for each Owner pursuant to Section 2.07.
"Liquidation Collection Agent Fee" means for any
Eligible Asset at any date an amount equal to (i) the
Capital of such Eligible Asset as at such date multiplied by
(ii) the product of (a) the percentage per annum as at such
date of the Collection Agent Fee and (b) a fraction having
as its numerator the number of days in the period equal to
the sum of the Average Maturity plus the Collection Delay
Period (each as in effect at such date) and 360 as its
denominator.
"Liquidation Day" for any Eligible Asset means either
(i) each day during any Settlement Period for such Eligible
Asset on which the conditions set forth in Section 3.02 are
not satisfied (and such failure of conditions is not waived
by the Agent), provided that such conditions are also not
satisfied (and such failure of conditions is not waived by
the Agent) on any succeeding day during such Settlement
Period, or (ii) each day which occurs on or after the
Termination Date for such Eligible Asset.
"Liquidation Fee" means, for each Eligible Asset for
any Fixed Period (computed without regard to clause (v) of
the definition of "Fixed Period") during which any
Liquidation Day or Termination Date for such Eligible Asset
occurs, the amount, if any, by which (i) the additional
Yield (calculated without taking into account any
Liquidation Fee) which would have accrued on the reductions
of Capital of such Eligible Asset during such Fixed Period
(as so computed) if such reductions had remained as Capital,
exceeds (ii) the income, if any, received by the Owner of
such Eligible Asset from such Owner's investing the proceeds
of such reductions of Capital.
<PAGE>
19
"Liquidation Yield" means, for any Eligible Asset at
any date, an amount equal to the Rate Variance Factor as at
such date multiplied by the product of (i) the Capital of
such Eligible Asset as at such date and (ii) the product of
(a) the Assignee Rate for such Eligible Asset for a Fixed
Period deemed to commence at such time for a period of 30
days and (b) a fraction having as its numerator the number
of days in the period equal to the sum of the Average
Maturity plus the Collection Delay Period (each as in effect
at such date) and 360 as its denominator.
"Lock-Box Account" means a lock-box account or special
depositary account maintained in the name of the Seller at a
bank for the purpose of receiving Collections.
"Lock-Box Agreement" means an agreement, in
substantially the form of Exhibit D hereto, among the
Seller, as assignee of Americas or otherwise, the Agent and
any Lock-Box Bank.
"Lock-Box Bank" means any of the banks holding one or
more Lock-Box Accounts.
"Lock-Box Notice" means a notice, in substantially the
form of Annex 1 to the Lock-Box Agreement, from the Seller
to any Lock-Box Bank.
"Loss Amount" means, for any Eligible Asset on any
date, the sum of, for each of the three Non-Investment Grade
Obligors (as defined below) that, out of all Non-Investment
Grade Obligors owing such Pool Receivables, owe the three
largest aggregate Outstanding Balances of such Pool
Receivables, the lesser of (i) the aggregate Outstanding
Balance of Pool Receivables which are Eligible Receivables
on such date and are owed on such date by such
Non-Investment Grade Obligor or (ii) the Special
Concentration Limit, if any, for such Non-Investment Grade
Obligor or, if none, the product of (A) the Concentration
Limit for such Obligor on such date multiplied by (B) the
aggregate outstanding Capital of all Eligible Assets on such
date. The term "Non-Investment Grade Obligor" means any
Obligor the long-term public senior unsecured debt
securities of which either are not rated by Standard &
Poor's Ratings Group and by Moody's Investors Service or, if
so rated, are rated below BBB- by Standard & Poor's Ratings
Group or below Baa3 by Moody's Investors Service.
"Loss Percentage" means, for any Eligible Asset at any
date, the greatest of (i) three times the highest
<PAGE>
20
Default Ratio as of the last day of any Fiscal Month
occurring in the 12 Fiscal Months ended immediately
preceding such date, (ii) 12% and (iii) three times the
Loss-to-Liquidation Ratio as of the last day of the Fiscal
Month ended immediately preceding such date.
"Loss-to-Liquidation Ratio" means the ratio (expressed
as a percentage) computed as of the last day of each Fiscal
Month by dividing (i) an amount equal to the aggregate
Outstanding Balance of all Pool Receivables written off by
the Seller, or which should have been written off by the
Seller under its Credit and Collection Policy, during the
period of 12 Fiscal Months ending with and including such
Fiscal Month by (ii) the aggregate amount of Collections
received during such period with respect to Pool
Receivables.
"Loss Reserve" means, for any Eligible Asset at any
date, an amount equal to the greater of (i)
LP x (C + YR)
where:
LP = the Loss Percentage for such Eligible Asset
at the close of business of the Collection
Agent on such date.
C = the Capital of such Eligible Asset at the
close of business of the Collection Agent on
such date.
YR = the Yield Reserve for such Eligible Asset at
the close of business of the Collection Agent
on such date.
or (ii) the Loss Amount for such Eligible Asset at the close
of business of the Collection Agent on such date.
"Merisel" means Merisel, Inc., a Delaware corporation.
"Net Receivables Pool Balance" means at any time the
Outstanding Balance of the Eligible Receivables (subject to
the below proviso) in the Receivables Pool at such time
reduced by the sum of:
(i) the aggregate Outstanding Balance of the
Defaulted Receivables in the Receivables Pool at such
time;
<PAGE>
21
(ii) the aggregate amount by which the then
Outstanding Balance of all Pool Receivables (other than
Defaulted Receivables) of each Obligor exceeds (x) the
product of (A) the Concentration Limit for such Obligor
at such time multiplied by (B) the aggregate
outstanding Capital of all Eligible Assets at such time
or (y) the Special Concentration Limit for such
Obligor, as the case may be;
(iii) the aggregate amount by which the then
Outstanding Balance of all Pool Receivables (other than
Defaulted Receivables) of each Floor Plan Obligor the
long-term public senior unsecured debt securities of
which are not rated "A" or higher by Standard & Poor's
Ratings Group and by Moody's Investors Service, exceeds
the product of (A) the Concentration Limit for such
Obligor as such time multiplied by (B) the aggregate
outstanding Capital of all Eligible Assets at such
time;
(iv) the aggregate amount of accrued and unpaid
volume rebates owed by the Seller or Americas to
Obligors of Pool Receivables at such time; and
(v) the lesser of (x) the aggregate payables
(unless of the type set forth in clause (iii) above)
owed at any time by the Seller or Americas (or any
Affiliate thereof if, for contractual or other reasons,
the Seller or Americas and such Affiliate could be
viewed as a single entity for purposes of offset
rights) to any Obligor of any Pool Receivable (or, to
the best knowledge of the Seller, any Affiliate of any
such Obligor if, for contractual or other reasons, such
Obligor and such Affiliate could be viewed as a single
entity for purposes of offset rights) and (y) the
aggregate Outstanding Balance of Pool Receivables which
are Eligible Receivables and are owed by such Obligor
(or any such Affiliate) at such time;
provided, however, that if and so long as the aggregate
Outstanding Balance of the Pool Receivables financed or to
be financed by Floor Plan Obligors is less than 12% of the
aggregate Outstanding Balance of the Eligible Receivables in
the Receivables Pool, clause (ii) above shall apply only to
the Original Obligors of the Pool Receivables referred to
therein, and if and so long as the aggregate Outstanding
Balance of the Pool Receivables financed or to be financed
by Floor Plan Obligors is 12% or more of the aggregate
Outstanding Balance of the Eligible Receivables
<PAGE>
22
in the Receivables Pool, clause (ii) above shall apply to
the Floor Plan Obligors of the Pool Receivables financed or
to be financed by such Floor Plan Obligors and to the
Original Obligors of the other Pool Receivables referred to
therein.
"Obligations" has the meaning specified in
Section 11.02.
"Obligor" means a Person (other than the Seller or
Americas) either (i) which is obligated to make payments
pursuant to a Contract of the type described in clause (i)
of the definition of the term "Contract" contained in this
Section 1.01 or (ii) which has financed or is obligated to
finance (by lending to an Obligor referred to in clause (i)
above, or by purchasing from Americas, if the consideration
to be paid by such Person for such purchase is in the form
of indebtedness, or the Seller, if such consideration is in
the form of cash, or otherwise), or is a party to an
agreement that contemplates that such Person may so finance,
a Receivable.
"Original Agreement" has the meaning assigned to that
term in Preliminary Statement (2).
"Original Obligor" means any Obligor referred to in
clause (i) of the definition of "Obligor" contained in this
Section 1.01.
"Origination Fee" has the meaning specified in
Section 2.10.
"Outstanding Balance" of any Receivable at any time
means the then outstanding principal balance thereof;
provided, however, that it is understood by the parties
hereto that in any computation or other determination of the
Outstanding Balance of any Pool Receivable, or the aggregate
Outstanding Balance of Pool Receivables, owed by any
Obligors hereunder, the amount of such Outstanding Balance
shall not be reduced by any negative balances owed by any
other Obligors.
"Owner" means, for each Eligible Asset, upon its
purchase the Investor as the purchaser thereof and, if
applicable, each Participant which shall have purchased from
the Investor or any Assignee thereof an undivided interest
in such Eligible Asset from time to time; provided, however,
that, upon any assignment thereof pursuant to Article IX,
the Assignee thereof shall be the Owner thereof.
<PAGE>
23
"Parallel Purchase Commitment" means the Amended and
Restated Trade Receivables Purchase and Sale Agreement,
dated as of the date hereof, among the Seller, Citibank and
the other financial institutions party thereto from time to
time as "Banks" and CNA, individually and as Agent, as the
same may, from time to time, be amended, modified or
supplemented.
"Participant" means, at any time for each Eligible
Asset, each Person which at such time shall have purchased
from the Investor or any Assignee thereof an undivided
interest in such Eligible Asset or shall have made a
commitment to the Agent to so purchase such an interest.
"Permitted Transaction" means any transaction permitted
under the Certificate of Incorporation and by-laws of the
Seller delivered to the Agent pursuant to Section 3.01, as
the same may, from time to time, be amended, modified or
otherwise supplemented with the prior written consent of the
Agent.
"Person" means an individual, partnership, corporation
(including a business trust), joint stock company, trust,
unincorporated association, joint venture or other entity,
or a government or any political subdivision or agency
thereof.
"Pool Receivable" means a Receivable in the Receivables
Pool.
"Preliminary Lock-Box Notice" means a notice, in
substantially the form of Exhibit F hereto, from the Seller
to a Lock-Box Bank.
"Program Fee" has the meaning specified in
Section 2.10.
"Provisional Liquidation Day" means any day which could
be a Liquidation Day but for the proviso in clause (i) of
the definition of "Liquidation Day".
"Purchase" means a purchase by the Investor of an
Eligible Asset from the Seller pursuant to Article II
(including, without limitation, Article II of the Original
Agreement).
"Purchase Limit" means $150,000,000, as such amount may
be reduced pursuant to Section 2.03.
"Rate Variance Factor" means that number which reflects
the potential variance in selected interest rates
<PAGE>
24
over a period of time designated by the Agent, as shall be
computed by the Collection Agent each Fiscal Month as set
forth in the Investor Report in accordance with the
provisions thereof; provided, however, that the "factors" in
line 7 of the "Rate Variance Factor" section of such
Investor Report may be changed from time to time upon at
least five days' prior notice by the Agent to the Collection
Agent.
"Rating Period" means any period during which either
(i) any of Americas' long-term public senior unsecured debt
securities shall be rated below BBB- by Standard & Poor's
Ratings Group or below Baa3 by Moody's Investors Service, or
(ii) if such securities are not rated by Standard & Poor's
Ratings Group or Moody's Investors Service, such securities
shall have a deemed rating of less than BBB or Baa2, as
determined by the Agent in its reasonable discretion, based
on (A) the most recent audited financial statements for
Americas and its subsidiaries, (B) the financial effect on
Americas of its issuance of any equity securities during the
90-day period following the date of such financial
statements, and (C) any material adverse change in the
financial condition or operations of Americas since
September 30, 1994.
"Receivable" means (i) the indebtedness of any Original
Obligor under a Contract of the type described in clause (i)
of the definition of the term "Contract" arising from a sale
of merchandise by Americas (except for sales of merchandise
by the "Channel Services Group" of Americas) to such
Original Obligor, including without limitation any such
indebtedness which may be financed by any Floor Plan
Obligor, and (ii) the indebtedness of any Floor Plan Obligor
arising from the sale by Americas of any indebtedness
referred to in clause (i) above to such Floor Plan Obligor
under the agreement or arrangement of the type described in
clause (iii) of the definition of the term "Related
Security" contained herein relating to such indebtedness,
and, in the case of clauses (i) and (ii) above, includes the
right to payment of any interest or finance charges and
other obligations of such Obligor with respect thereto.
Unless otherwise stated, the term "Obligor" of any
Receivable refers to both the Original Obligor that owes
such Receivable and, if applicable, the Floor Plan Obligor
that finances, or may finance, such Receivable.
"Receivables Contribution and Sale Agreement" means the
Receivables Contribution and Sale Agreement, dated as of the
date hereof and in substantially the form of
<PAGE>
25
Exhibit I hereto, between the Seller and Americas, as the
same may, from time to time, be amended, modified or
supplemented with the prior written consent of the Agent.
"Receivables Pool" means at any time the aggregation of
each then outstanding Receivable in respect of which the
Obligor is a Designated Obligor or, as to any Receivable in
existence on such date, was a Designated Obligor on the date
of any Purchase, or reinvestment to purchase, such
Receivable pursuant to Section 2.05 (including, without
limitation, Section 2.06 of the Original Agreement), other
than any such Receivable (i) which shall have been
repurchased by the Seller as contemplated by Section 2.07
(including, without limitation, Section 2.08 of the Original
Agreement) or (ii) with respect to which Collections in the
entire amount of the Outstanding Balance of such Receivable
shall have been received in respect of any Related Security
supporting or securing payment of such Receivable and
applied and distributed pursuant to Section 2.05 or 2.06, as
applicable at the time of such receipt (if and so long as
neither the Agent nor any Owner is at any time required to
return all or any portion of such amount for any reason).
"Records" means all Contracts and other documents,
books, records, and other tangible information (including,
without limitation, computer programs, tapes, disks, punch
cards, data processing software and related property and
rights) maintained by or in possession of the Seller or
Americas with respect to Receivables, Related Security or
the related Obligors in connection with this Agreement, the
Receivables Contribution and Sale Agreement or the
Contracts.
"Reinvestment Termination Date" for any Eligible Asset
means that Business Day which Americas or the Seller
designates or, if the conditions precedent in Section 3.02
are not satisfied, such Business Day which the Agent
designates, as the Reinvestment Termination Date for such
Eligible Asset by notice to the Agent, and to the Seller or
Americas, as applicable (if Americas or the Seller so
designates), or to the Seller (if the Agent so designates)
at least three Business Days prior to such Business Day in
the case of any such designation by Americas or the Seller,
and at least one Business Day prior to such Business Day in
the case of any such designation by the Agent.
"Related Security" means with respect to any
Receivable:
<PAGE>
26
(i) all of the Seller's and Americas' interest in
the merchandise (including returned merchandise), if
any, relating to the sale which gave rise to such
Receivable until such Receivable shall be paid in full
pursuant to Sections 2.07 and 5.01(j);
(ii) all other security interests or liens and
property subject thereto from time to time purporting
to secure payment of such Receivable, whether pursuant
to the Contract related to such Receivable or
otherwise, together with all financing statements
signed by an Obligor describing any collateral securing
such Receivable;
(iii) all floorplan repurchase agreements,
repurchase agreements, inventory financing agreements,
and other floorplan agreements, and guarantees,
insurance and other agreements or arrangements of
whatever character, from time to time financing or
otherwise supporting or securing payment of such
Receivable whether pursuant to the Contract related to
such Receivable or otherwise; and
(iv) all Records.
"Restructuring Fee" has the meaning specified in
Section 2.10.
"Resyndication Fee" has the meaning specified in
Section 2.10.
"Settlement Period" for any Eligible Asset means each
period commencing on the first day of each Fixed Period for
such Eligible Asset and ending on the last day of such Fixed
Period, and, on and after the Termination Date for such
Eligible Asset, such period (including, without limitation, a
period of one day) as shall be selected from time to time by
the Agent or, in the absence of any such selection, each
period of thirty days from the last day of the immediately
preceding Settlement Period.
"Special Concentration Limit" for any Obligor means at
any time such dollar amount specified for such Obligor by
the Agent in writing delivered to the Seller; provided,
however, that the Agent may cancel any Special Concentration
Limit upon three Business Days' notice to the Seller.
"Termination Date" for any Eligible Asset means the
earlier of (i) the Reinvestment Termination Date for such
Eligible Asset and (ii) the Facility Termination Date.
<PAGE>
27
"UCC" means the Uniform Commercial Code as from time to
time in effect in the specified jurisdiction.
"Yield" means:
(i) for each Eligible Asset for any Fixed Period
on the first day of which the Owner thereof will be
funding such Eligible Asset for such Fixed Period
through the issuance of commercial paper, the product
of
IR x C x ED + LF
---
360
(ii) for each Eligible Asset for any Fixed Period
on the first day of which the Owner thereof will not be
funding such Eligible Asset for such Fixed Period
through the issuance of commercial paper, the product
of
AR x C x ED + LF
---
360
where:
IR = the Investor Rate for such Eligible Asset for such
Fixed Period.
AR = the Assignee Rate for such Eligible Asset for such
Fixed Period.
C = the Capital of such Eligible Asset during such
Fixed Period.
ED = the actual number of days elapsed during such
Fixed Period.
LF = the Liquidation Fee, if any, for such Eligible
Asset for such Fixed Period.
provided, however, that no provision of this Agreement or
the Certificate shall require the payment or permit the
collection of Yield in excess of the maximum permitted by
applicable law; and provided, further, that Yield for any
Eligible Asset shall not be considered paid by any
distribution if at any time such distribution is rescinded
or must otherwise be returned for any reason.
"Yield Reserve" for any Eligible Asset at any time
means the sum of (i) the Liquidation Yield at such time for
such Eligible Asset, plus (ii) the accrued and unpaid Yield
for such Eligible Asset.
<PAGE>
28
SECTION 1.02. Other Terms. All accounting terms not
specifically defined herein shall be construed in accordance
with generally accepted accounting principles. All terms used
in Division 9 of the UCC in the State of California, and not
specifically defined herein, are used herein as defined in such
Division 9.
SECTION 1.03. Computation of Time Periods. Unless
otherwise stated in this Agreement, in the computation of a
period of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to"
and "until" each means "to but excluding".
ARTICLE II
AMOUNTS AND TERMS OF THE PURCHASES
SECTION 2.01. Facility. On the terms and conditions
hereinafter set forth, the Investor may, in its sole discretion,
make Purchases from time to time during the period from the
Effective Date to the Facility Termination Date. Under no
circumstances shall the Investor make any Purchase if, after
giving effect to such Purchase, the aggregate outstanding
Capital of Eligible Assets, together with the aggregate
outstanding "Capital" of "Eligible Assets" under the Parallel
Purchase Commitment, would exceed the Purchase Limit. The Owner
of each Eligible Asset shall, with the proceeds of Collections
attributable to such Eligible Asset, reinvest pursuant to
Section 2.05 in additional undivided percentage interests in the
Pool Receivables by making an appropriate readjustment of such
Eligible Asset. Nothing in this Agreement shall be deemed to be
or construed as a commitment by the Investor to purchase any
Eligible Asset at any time.
SECTION 2.02. Making Purchases. Each Purchase shall
be made on notice from the Seller to the Agent, given not later
than 1:00 P.M. (New York City time) on the second Business Day
before the date of such Purchase. Each such notice of a
proposed Purchase shall be by telephone, telecopier, telex or
cable, specifying the requested (A) amount of such Purchase to
be paid to the Seller and (B) Business Day of such Purchase and,
if Yield for such Eligible Asset is to be computed by reference
to the Assignee Rate, duration of the initial Fixed Period for
such Eligible Asset. The Investor shall promptly notify the
Agent whether it has determined to make such Purchase. The
Agent shall promptly thereafter notify the Seller whether the
Investor has determined to make such Purchase and, if
applicable, whether the desired duration of the initial Fixed
Period for the Eligible Asset to be purchased is acceptable. On
the date of each Purchase, the Investor shall, upon satisfaction
of the applicable conditions set forth in Article III, make
available
<PAGE>
29
to the Agent the amount of its Purchase by deposit of such
amount in same day funds to the Agent's Account, and, after
receipt by the Agent of such funds, the Agent will cause such
funds to be made immediately available to the Seller at
Citibank's office at 399 Park Avenue, New York, New York. The
Investor shall on the date of each Purchase, and the Owner of
each Eligible Asset shall on the first day of each Fixed Period
(other than the initial Fixed Period) for such Eligible Asset,
notify the Agent of the Investor Rate for such Fixed Period.
SECTION 2.03. Termination or Reduction of the Purchase
Limit.
(a) Optional. The Seller may, upon at least five
Business Days' notice to the Agent, terminate in whole or reduce
in part the unused portion of the Purchase Limit; provided,
however, that for purposes of this Section 2.03(a), the unused
portion of the Purchase Limit shall be computed as the excess of
(A) the Purchase Limit immediately prior to giving effect to
such termination or reduction over (B) the sum of (i) the
aggregate Capital of Eligible Assets outstanding at the time of
such computation and (ii) the aggregate "Capital" of "Eligible
Assets" outstanding under the Parallel Purchase Commitment at
such time; provided, further, that each partial reduction shall
be in an amount equal to $1,000,000 or an integral multiple
thereof.
(b) Mandatory. On each day on which the Seller shall,
pursuant to Section 2.03(a) of the Parallel Purchase Commitment,
reduce in part the unused portions of the Commitments (as
defined in the Parallel Purchase Commitment), the Purchase Limit
shall automatically reduce by an equal amount. The Purchase
Limit shall automatically terminate in whole on any day on which
the Seller shall terminate in whole the Commitments pursuant to
Section 2.03(a) of the Parallel Purchase Commitment.
SECTION 2.04. Eligible Asset. (a) Each Eligible
Asset shall be initially computed as of the opening of business
of the Collection Agent on the date of Purchase of such Eligible
Asset. Thereafter until the Termination Date for such Eligible
Asset, such Eligible Asset shall be automatically recomputed as
of the close of business of the Collection Agent on each
Business Day (other than a Liquidation Day). Such Eligible
Asset shall remain constant from the time as of which any such
computation or recomputation is made until the time as of which
the next such recomputation, if any, shall be made. Any
Eligible Asset, as computed as of the day immediately preceding
the Termination Date for such Eligible Asset, shall remain
constant at all times on and after such Termination Date. Such
Eligible Asset shall become zero at such time as the Owner of
such Eligible
<PAGE>
30
Asset shall have received the accrued Yield for such Eligible
Asset and shall have recovered the Capital of such Eligible
Asset and all amounts owed to such Owner by the Seller hereunder
(other than pursuant to indemnification obligations of the
Seller under Article X that shall not have become liquidated or
fixed by such time), and the Collection Agent shall have
received the accrued Collection Agent Fee for such Eligible
Asset.
(b) If any Eligible Asset would otherwise be reduced
on any day on account of Receivables arising as or becoming Pool
Receivables, the Owner of such Eligible Asset may prevent such
reduction by giving notice to the Collection Agent, before the
close of business of the Collection Agent on such day, that such
Eligible Asset's interest in such Receivables is to be limited
so as to prevent such reduction. If such notice is given for
any day for any Eligible Asset, the Receivables Pool for such
Eligible Asset and the Net Receivables Pool Balance for such
Eligible Asset, will include, with respect to Receivables
arising as or becoming Pool Receivables on such day, only such
number of such Receivables or such portion of such Receivables
as shall cause such Eligible Asset to remain constant, such
Receivables or portion thereof being included in the Receivables
Pool for such Eligible Asset in the order of the Seller's
invoice numbers for such Receivables up to an aggregate amount
so as to cause such Eligible Asset to remain constant, and the
remainder of such Receivables or portion thereof shall be
treated as Receivables arising on the next succeeding Business
Day.
SECTION 2.05. Non-Liquidation Settlement Procedures.
On each day (other than a Liquidation Day or a Provisional
Liquidation Day) during each Settlement Period for each Eligible
Asset, the Collection Agent shall: (i) out of Collections of
Pool Receivables attributable to such Eligible Asset received on
such day, set aside and hold in trust for the Owner of such
Eligible Asset an amount equal to the Yield and Collection Agent
Fee accrued through such day for such Eligible Asset and not so
previously set aside and (ii) reinvest the remainder of such
Collections, for the benefit of such Owner, by recomputation of
such Eligible Asset pursuant to Section 2.04 as of the end of
such day and the payment of such remainder to the Seller;
provided, however, that, to the extent that the Agent or any
Owner shall be required for any reason to pay over any amount of
Collections which shall have been previously reinvested for the
account of such Owner pursuant hereto, such amount shall be
deemed not to have been so applied but rather to have been
retained by the Seller and paid over for the account of such
Owner and, notwithstanding any provision hereof to the contrary,
such
<PAGE>
31
Owner shall have a claim for such amount. On the last day of
each Settlement Period for each Eligible Asset, the Collection
Agent shall deposit to the Agent's Account for the account of
the Owner of such Eligible Asset the amounts set aside as
described in clause (i) of the first sentence of this
Section 2.05. Upon receipt of such funds by the Agent, the
Agent shall distribute them to the Owner of such Eligible Asset
in payment of the accrued Yield for such Eligible Asset and to
the Collection Agent in payment of the accrued Collection Agent
Fee payable with respect to such Eligible Asset. If there shall
be insufficient funds on deposit for the Agent to distribute
funds in payment in full of the aforementioned amounts, the
Agent shall distribute funds, first, in payment of the accrued
Yield for such Eligible Asset, and second, in payment of the
accrued Collection Agent Fee payable with respect to such
Eligible Asset.
SECTION 2.06. Liquidation Settlement Procedures. On
each Liquidation Day and on each Provisional Liquidation Day
during each Settlement Period for each Eligible Asset, the
Collection Agent shall set aside and hold in trust for the Owner
of such Eligible Asset the Collections of Pool Receivables
attributable to such Eligible Asset received on such day. On
the last day of each Settlement Period for each Eligible Asset,
the Collection Agent shall deposit to the Agent's Account for
the account of the Owner of such Eligible Asset the amounts set
aside pursuant to the preceding sentence but not to exceed the
sum of (i) the accrued Yield for such Eligible Asset, (ii) the
Capital of such Eligible Asset, (iii) the accrued Collection
Agent Fee payable with respect to such Eligible Asset and
(iv) the aggregate amount of other amounts owed hereunder by the
Seller to the Owner of such Eligible Asset. Any amounts set
aside pursuant to the first sentence of this Section 2.06 and
not required to be deposited to the Agent's Account pursuant to
the preceding sentence shall be paid to the Seller by the
Collection Agent; provided, however, that if amounts are set
aside pursuant to the first sentence of this Section 2.06 on any
Provisional Liquidation Day which is subsequently determined not
to be a Liquidation Day, such amounts shall be applied pursuant
to the first sentence of Section 2.05 on the day of such
subsequent determination. Upon receipt of funds deposited to
the Agent's Account pursuant to the second sentence of this
Section 2.06, the Agent shall distribute them (A) to the Owner
of such Eligible Asset (x) in payment of the accrued Yield for
such Eligible Asset, (y) in reduction (to zero) of the Capital
of such Eligible Asset and (z) in payment of any other amounts
owed by the Seller hereunder to such Owner and (B) to the
Collection Agent in payment of the accrued Collection Agent Fee
payable with respect to such Eligible Asset. If there shall be
insufficient funds on deposit for the Agent to
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32
distribute funds in payment in full of the aforementioned
amounts, the Agent shall distribute funds, first, in payment of
the accrued Yield for such Eligible Asset, second, in reduction
of Capital of such Eligible Asset, third, in payment of other
amounts payable to such Owner, and fourth, in payment of the
accrued Collection Agent Fee payable with respect to such
Eligible Asset.
SECTION 2.07. General Settlement Procedures. If on
any day (i) the Outstanding Balance of a Pool Receivable is
either (A) reduced as a result of any defective, rejected or
returned merchandise or services, or any credit, rebate,
discount, dispute, chargeback, allowance or other dilution
factor or any other adjustment by the Seller or Americas or any
other Affiliate thereof, or (B) reduced or cancelled as a result
of a setoff in respect of any claim by the Obligor thereof
against the Seller or Americas or any other Affiliate thereof
(whether such claim arises out of the same or a related
transaction or an unrelated transaction), or (ii) in connection
with any sale by the Seller of any Pool Receivable to any Floor
Plan Obligor, the consideration paid by such Floor Plan Obligor
as contemplated by Section 5.03(a) shall be less than the
Outstanding Balance of such Pool Receivable as a result of
finance charges payable by the Seller to such Floor Plan Obligor
in connection with such sale, the Seller shall be deemed to have
received on such day a Collection of such Receivable in the
amount of such reduction or cancellation, in the case of
clause (i), or, in the case of clause (ii), in the amount of the
excess of the Outstanding Balance of such Receivable over the
consideration paid by such Floor Plan Obligor in connection with
the Seller's sale thereof as contemplated by Section 5.03(a).
If on any day any of the representations or warranties in
Section 4.01(h) is no longer true with respect to all or any
portion of a Pool Receivable, the Seller shall be deemed to have
received on such day a Collection in full of such Pool
Receivable or portion, as the case may be. In the case of each
of the two preceding sentences, upon any such payment by the
Seller of any amount of any such Receivable, the Seller shall be
deemed to have repurchased (without recourse and without
representation or warranty, express or implied) such Receivable
to the extent of such amount and such amount of such Receivable
shall cease to be a "Pool Receivable" for purposes of this
Agreement (unless and until the Agent or the Investor or any
Owner is at any time required to return all or any portion of
such amount for any reason). Except as otherwise provided in
the preceding three sentences or as otherwise required by law or
the underlying Contract, all Collections received from an
Obligor of any Receivable shall be applied to Receivables then
outstanding of such Obligor in the order of the age of such
Receivables, starting with the oldest such Receivable, except
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33
if payment is designated by such Obligor for application to
specific Receivables. Prior to the 15th Business Day of each
Fiscal Month, the Collection Agent shall prepare and forward to
the Agent for each Owner of an Eligible Asset (A) an Investor
Report, relating to each Eligible Asset, as of the close of
business of the Collection Agent on the last day of the
immediately preceding Fiscal Month, computed in accordance with
the proviso to the definition of the term "Outstanding Balance"
and excluding any Obligor which owes an aggregate negative
balance, and (B) (1) in the case of each Obligor owing Pool
Receivables the aggregate Outstanding Balance of which exceeds
the Concentration Limit or, if applicable, the Special
Concentration Limit for such Obligor at such time, a listing by
Obligor of the aggregate Outstanding Balance of the Pool
Receivables owed by such Obligor, together with an analysis as
to the aging of such aggregate Receivables, as of such last day,
and (2) an analysis as to the aging of the aggregate Pool
Receivables owed by all Obligors, and (3) in the case of each
Obligor, if and to the extent requested by the Agent, a listing
by Obligor of each Pool Receivable owed by such Obligor,
together with an analysis as to the aging of such Receivables,
as of such last day. On or prior to the day the Collection
Agent is required to make a deposit with respect to a Settlement
Period pursuant to Section 2.05 or 2.06, the Seller will advise
the Agent of each Liquidation Day and each Provisional
Liquidation Day occurring during such Settlement Period and of
the allocation of the amount of such deposit to each outstanding
Eligible Asset; provided, however, that, if the Seller is not
the Collection Agent, the Seller shall advise the Collection
Agent of the occurrence of each such Liquidation Day and each
Provisional Liquidation Day occurring during such Settlement
Period on or prior to such day.
SECTION 2.08. Payments and Computations, Etc. All
amounts to be paid or deposited by the Seller or the Collection
Agent hereunder shall be paid or deposited in accordance with
the terms hereof no later than 1:00 P.M. (New York City time) on
the day when due in lawful money of the United States of America
in same day funds to the Agent's Account. The Seller shall, to
the extent permitted by law, pay to the Agent interest on all
amounts not paid or deposited when due hereunder at 2% per annum
above the Alternate Base Rate, payable on demand, provided,
however, that such interest rate shall not at any time exceed
the maximum rate permitted by applicable law. Such interest
shall be retained by the Agent except to the extent that such
failure to make a timely payment or deposit has continued beyond
the date for distribution by the Agent of such overdue amount to
an Owner of an Eligible Asset, in which case such interest
accruing
<PAGE>
34
after such date shall be for the account of, and distributed by
the Agent to, the Owners ratably in accordance with their
respective interests in such overdue amount. All computations
of interest and all computations of Yield, Liquidation Yield and
fees hereunder shall be made on the basis of a year of 360 days
for the actual number of days (including the first but excluding
the last day) elapsed.
SECTION 2.09. Dividing or Combining of Eligible
Assets. The Seller may, on notice received by the Agent not
later than 1:00 P.M. (New York City time) three Business Days
before the last day of any Fixed Period for any then existing
Eligible Asset (an "Existing Eligible Asset"), divide such
Existing Eligible Asset on such last day into two or more new
Eligible Assets, each such new Eligible Asset having Capital as
designated in such notice and all such new Eligible Assets
collectively having aggregate Capital equal to the Capital of
such Existing Eligible Asset. The Seller may, on notice
received by the Agent not later than 1:00 P.M. (New York City
time) three Business Days before the last day of any Fixed
Periods ending on the same day for two or more Existing Eligible
Assets owned by the same Owner or the date of any proposed
Purchase (if the last day of such Fixed Period is the date of
such proposed Purchase), either (i) combine such Existing
Eligible Assets or (ii) combine such Existing Eligible Asset or
Eligible Assets, if owned by the Investor, and such proposed
Eligible Asset to be purchased, on such last day into one new
Eligible Asset, such new Eligible Asset having Capital equal to
the aggregate Capital of such Existing Eligible Assets, or such
Existing Eligible Asset or Eligible Assets and such proposed
Eligible Asset, as the case may be. On and after any division
or combination of Eligible Assets as described above, each of
the new Eligible Assets resulting from such division, or the new
Eligible Asset resulting from such combination, as the case may
be, shall be a separate Eligible Asset having Capital as set
forth above, and shall take the place of such Existing Eligible
Asset or Eligible Assets or proposed Eligible Asset, as the case
may be, in each case under and for all purposes of this
Agreement, and the Agent shall annotate the Certificate
accordingly.
SECTION 2.10. Fees. (a) The Seller shall pay, from
the Effective Date until the Collection Date, the following
fees:
(i) to the Agent for its account an
administration fee (the "Administration Fee") as set forth
in the Fee Letter;
(ii) to the Agent for the account of Citibank, in
consideration for its support of the Eligible Assets
purchased hereunder, a program fee (the "Program Fee") on
<PAGE>
35
the entire Purchase Limit (whether used or unused), at the
rate of 20/100 of 1% per annum for the fiscal quarter next
following each fiscal quarter at the end of which the ratio
of Consolidated Debt Equivalents (as defined in the Credit
Agreement) for Americas to the sum of such Consolidated Debt
Equivalents plus Consolidated Net Worth (as defined in the
Credit Agreement) for Americas is equal to or less than .55
to 1, or 25/100 of 1% per annum for the fiscal quarter next
following each fiscal quarter at the end of which such ratio
is greater than .55 to 1 but equal to or less than .625 to
1, or 375/1000 of 1% per annum for the fiscal quarter next
following each fiscal quarter at the end of which such ratio
is greater than .625 to 1; and
(iii) to the Agent for the account of the Investor
an investor investment fee (the "Investor Investment Fee")
as set forth in the Fee Letter;
provided, however, that the Seller shall be entitled to a credit
against the Administration Fee and Program Fee payable under
this Agreement equal to the full amount of the "Administration
Fee" and "Commitment Fee", respectively, actually paid by the
Seller under the Parallel Purchase Commitment. The
Administration Fee and the Program Fee are payable in arrears
monthly on the last day of each month during the term of this
Agreement and on the Collection Date. The Investor Investment
Fee is payable in arrears annually on the last Business Day of
November of each year and on the Collection Date.
(b) The Seller shall also pay to the Agent for the
account of CNA an origination fee (the "Origination Fee") as set
forth in the Fee Letter.
(c) Each Owner shall pay to the Collection Agent a
collection fee (the "Collection Agent Fee") of 1% per annum on
the average daily amount of Capital of each Eligible Asset owned
by such Owner, from the date of the initial Purchase under the
Original Agreement until the Collection Date, payable on the
last day of each Settlement Period for such Eligible Asset;
provided, however, that, upon three Business Days' notice to the
Agent, the Collection Agent may (if not the Seller or any
Affiliate thereof) elect to be paid, as such fee, another
percentage per annum on the average daily amount of Capital of
each such Eligible Asset, but in no event in excess of 110% of
the costs and expenses referred to in Section 6.02(b); and
provided, further, that such fee shall be payable only from
Collections pursuant to, and subject to the priority of payment
set forth in, Sections 2.05 and 2.06.
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36
(d) The Seller shall also pay to the Agent, on the
Effective Date, (i) for the account of the Agent a restructuring
fee (the "Restructuring Fee") as set forth in the Fee Letter,
and (ii) for the account of Citibank, in consideration for its
support of the Eligible Assets purchased hereunder, a
resyndication fee (the "Resyndication Fee") in the amount of
1/20 of 1% of the entire Purchase Limit (whether used or unused)
on such date; provided, however, that the Seller shall be
entitled to a credit against the Restructuring Fee and the
Resyndication Fee payable under this Agreement equal to the full
amount of the "Restructuring Fee" and the "Resyndication Fee",
respectively, actually paid by the Seller under the Parallel
Purchase Commitment.
SECTION 2.11. Increased Costs. If, due to either
(i) any change in Regulation D of the Board of Governors of the
Federal Reserve System (to the extent any cost incurred pursuant
to such regulation is not included in the calculation of
Adjusted LIBO Rate), (ii) the introduction of or any change in
or in the interpretation of any law or regulation or (iii) the
compliance with any guideline or request from any central bank
or other governmental authority made after the date hereof
(whether or not having the force of law), there shall be any
increase in the cost to (or, in the case of Regulation D of the
Board of Governors of the Federal Reserve System, there shall be
imposed a cost on) any Indemnified Party of agreeing to make or
making the Purchases or purchasing or maintaining Eligible
Assets or portions thereof or interests therein hereunder, or,
in the case of any Indemnified Party which is a Participant,
under any agreement entered into by such Participant with
respect to this Agreement or the Parallel Purchase Commitment,
then the Seller shall from time to time, within ten days after
demand, and delivery to the Seller of the certificate referred
to in the last sentence of this Section 2.11, by such
Indemnified Party (or by the Agent for the account of such
Indemnified Party) (with a copy of such demand and certificate
to the Agent), pay to the Agent for the account of such
Indemnified Party additional amounts sufficient to compensate
such Indemnified Party for such increased or imposed cost. Each
Indemnified Party party hereto agrees to use its best efforts
promptly to notify the Seller of any event referred to in
clause (i), (ii) or (iii) above, provided that the failure to
give such notice shall not affect the rights of any Indemnified
Party under this Section 2.11. A certificate in reasonable
detail as to the basis for and the amount of such increased
cost, submitted to the Seller and the Agent by such Indemnified
Party (or by the Agent for the account of such Indemnified
Party) shall be conclusive and binding for all purposes, absent
manifest error.
<PAGE>
37
SECTION 2.12. Increased Capital. If any Indemnified
Party determines that the introduction of or any change in any
law or regulation or any guideline or request from any central
bank or other governmental authority made after the date hereof
(whether or not having the force of law) affects or would affect
the amount of capital required or expected to be maintained by
such Indemnified Party or any corporation controlling such
Indemnified Party and that the amount of such capital is
increased by or based upon the existence of such Indemnified
Party's commitment to purchase Eligible Assets or portions
thereof or interests therein, or to maintain such Eligible
Assets or portions or interests, hereunder or under the Parallel
Purchase Commitment or, in the case of any Indemnified Party
which is a Participant, under any agreement entered into by such
Participant with respect to this Agreement or the Parallel
Purchase Commitment, then, within ten days after demand, and
delivery to the Seller of the certificate referred to in the
last sentence of this Section 2.12, by such Indemnified Party
(or by the Agent for the account of such Indemnified Party) the
Seller shall pay to such Indemnified Party from time to time, as
specified by such Indemnified Party, additional amounts
sufficient to compensate such Indemnified Party in light of such
circumstances, to the extent that such Indemnified Party
reasonably determines such increase in capital to be allocable
to the existence of any such commitment. Each Indemnified Party
party hereto agrees to use its best efforts promptly to notify
the Seller of any event referred to in the first sentence of
this Section 2.12, provided that the failure to give such notice
shall not affect the rights of any Indemnified Party under this
Section 2.12. A certificate in reasonable detail as to the
basis for, and the amount of, such compensation submitted to the
Seller by such Indemnified Party (or by the Agent for the
account of such Indemnified Party) shall, in the absence of
manifest error, be conclusive and binding for all purposes.
ARTICLE III
CONDITIONS OF EFFECTIVENESS AND PURCHASES
SECTION 3.01. Conditions Precedent to Effectiveness.
This Agreement shall become effective when, and only when,
(i) the Agent shall have received counterparts of this Agreement
executed by the Seller, the Investor and CNA, as Agent, (ii) the
Agent shall have received payment of (A) the Restructuring Fee
and the Resyndication Fee referred to in Section 2.10(d) and
(B) the "Administration Fee", the "Program Fee" and the
"Investor Investment Fee" under and as defined in the Original
Agreement, accrued to and including the Effective
<PAGE>
38
Date (as defined below), and (iii) the Agent shall have
received, on or before December 15, 1994, the following
documents, each (unless otherwise indicated) dated, or dated as
of or effective as of, December 15, 1994 (such date being the
"Effective Date"), in form and substance satisfactory to the
Agent:
(a) The Certificate dated the date hereof.
(b) The Receivables Contribution and Sale Agreement,
duly executed by the Seller and Americas and acknowledged by
the Agent together with:
(i) Proper Financing Statements naming Americas
as seller, the Seller as purchaser and CNA, as Agent,
as assignee, together with evidence reasonably
satisfactory to the Agent of the due filing thereof on
or before the Effective Date, under the UCC of all
jurisdictions that the Agent may deem necessary or
desirable in order to perfect the Seller's interests
created or purported to be created by the Receivables
Contribution and Sale Agreement;
(ii) Proper Financing Statements, if any,
necessary to release all security interests and other
rights of any Person in the Receivables, Related
Security, Collections or Contracts previously granted
by Americas (other than pursuant to the Original
Agreement);
(iii) Completed requests for information, dated on
or a date reasonably near to the Effective Date,
listing all effective financing statements which name
Americas (under its present name and any previous name)
as debtor or seller and which are filed in the
jurisdictions in which filings were made pursuant to
subsection (b)(i) above, together with copies of such
financing statements (none of which, except those filed
pursuant to subsection (b)(i) above or in connection
with the Original Agreement, shall cover any
Receivables, Related Security, Collections or
Contracts); and
(iv) The Consent and Agreement dated the date
hereof with respect hereto and to the Certificate, the
Parallel Purchase Commitment and the "Certificate"
thereunder, duly executed by Americas.
(c) Certified copies of the charter and by-laws, as
amended, of the Seller and Americas, respectively.
<PAGE>
39
(d) Good standing certificates issued by the Secretary
of State of the States of Delaware and California with
respect to the Seller and Americas.
(e) Certified copies of the resolutions of the Board
of Directors of each of (i) the Seller approving this
Agreement, the Fee Letter, the Receivables Contribution and
Sale Agreement, the Assignment and Assumption and the
Certificate and the other documents to be delivered by it
hereunder and the transactions contemplated hereby and
thereby, and (ii) Americas approving the Receivables
Contribution and Sale Agreement, the Assignment and
Assumption and the Consent and Agreement and the other
documents to be delivered by it hereunder or thereunder and
the transactions contemplated thereby.
(f) A certificate of the Secretary or Assistant
Secretary of each of (i) the Seller certifying the names and
true signatures of the officers of the Seller authorized to
sign this Agreement, the Fee Letter, the Receivables
Contribution and Sale Agreement, the Assignment and
Assumption and the Certificate and the other documents to be
delivered by it hereunder, and (ii) Americas certifying the
names and true signatures of the officers of Americas
authorized to sign the Receivables Contribution and Sale
Agreement, the Assignment and Assumption, the Consent and
Agreement and the other documents to be delivered by it
hereunder or thereunder.
(g) Proper financing statements naming the Seller as
seller and CNA, as Agent, as purchaser, together with
evidence reasonably satisfactory to the Agent of the due
filing thereof on or before the Effective Date, under the
UCC of all jurisdictions that the Agent may deem necessary
or desirable in order to perfect the ownership and security
interests created or purported to be created hereby.
(h) Proper financing statements, if any, necessary to
release all security interests and other rights of any
Person in the Receivables, Contracts, Related Security,
Collections or Collateral previously granted by the Seller.
(i) Completed requests for information, dated on or a
date reasonably near to the Effective Date, listing all
effective financing statements filed in the jurisdictions
referred to in subsection (g) above that name the Seller as
debtor or seller, together with copies of such other
financing statements (none of which, except those filed
<PAGE>
40
pursuant to subsection (g) above, shall cover any
Receivables, Contracts, Related Security, Collections or
Collateral).
(j) (i) Lock-Box Agreements dated the date hereof
with Citibank and The First National Bank of Chicago ("First
Chicago"), respectively, as Lock-Box Banks, executed by the
Seller, and undated Lock-Box Notices to Citibank and First
Chicago, respectively, as Lock-Box Banks, executed by the
Seller, (ii) undated Preliminary Lock-Box Notices to Harris
Trust and Savings Bank, Citibank and First Chicago,
respectively, executed by the Seller, (iii) an undated
Lock-Box Notice to Union Bank executed by the Seller, and
(iv) the written consent (dated the date set forth therein)
of each of Union Bank, Citibank and First Chicago to the
assignment by Americas to the Seller of Americas' rights and
obligations with respect to the Lock-Box Accounts maintained
with such Lock-Box Banks and the related Lock-Box
Agreements.
(k) Copies of all agreements relating to the Lock-Box
Accounts (other than any standard ministerial agreement
relating to the opening of an account, such as signature
cards and the like) between each Lock-Box Bank and the
Seller.
(l) Favorable opinions of Riordan & McKinzie, counsel
for the Seller, and Sidley & Austin, special counsel for the
Seller, respectively, substantially in the forms of
Exhibits E-1 and E-2, respectively, hereto and as to such
other matters as the Agent may reasonably request.
(m) A favorable opinion of Shearman & Sterling,
counsel for the Agent, as the Agent may reasonably request.
(n) The Fee Letter, in form and substance satisfactory
to the Agent and the Seller, duly executed by the Seller and
the Agent.
(o) The Assignment and Assumption, duly executed by
Americas and the Seller and consented to by the Investor,
Citibank, the Participants, CNA and the Agent.
SECTION 3.02. Conditions Precedent to All Purchases
and Reinvestments. Each Purchase hereunder and the right of the
Collection Agent to reinvest in Pool Receivables those
Collections attributable to an Eligible Asset pursuant to
Section 2.05 or 2.06 shall be subject to satisfaction of the
conditions precedent set forth in Section 3.01 and to the
further conditions precedent that (a) with respect to any such
Purchase, on or prior to the date of such Purchase, the
Collection Agent shall have delivered to the Agent, in form
<PAGE>
41
and substance reasonably satisfactory to the Agent, a completed
Investor Report and computed in accordance with the proviso to
the definition of the term "Outstanding Balance", dated within
55 days prior to the date of such Purchase, together with a
listing by Obligor of all Pool Receivables and such additional
information as may be reasonably requested by the Agent, and
(b) on the date of such Purchase or reinvestment the following
statements shall be true (and the acceptance by the Seller of
the proceeds of such Purchase or reinvestment shall constitute a
representation and warranty by the Seller that on the date of
such Purchase or reinvestment such statements are true):
(i) The representations and warranties contained in
Section 4.01 of this Agreement and in the Receivables
Contribution and Sale Agreement are correct in all material
respects on and as of the date of such Purchase or
reinvestment, before and after giving effect to such
Purchase or reinvestment and to the application of the
proceeds therefrom, as though made on and as of such date,
(ii) No event has occurred and is continuing, or would
result from such Purchase or reinvestment or from the
application of the proceeds therefrom, which constitutes an
Event of Investment Ineligibility or would constitute an
Event of Investment Ineligibility but for the requirement
that notice be given or time elapse or both,
(iii) The Agent shall not have delivered to the Seller a
notice that the Investor shall not make any further
Purchases hereunder and/or that the Collection Agent shall
not reinvest in any Pool Receivables on behalf of the Owner
of an Eligible Asset, and
(iv) On such date, no Rating Period shall have occurred
and be continuing,
and (c) the Agent shall have received such other approvals,
opinions or documents as the Agent may reasonably request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the
Seller. The Seller represents and warrants as follows:
(a) The Seller is a corporation duly incorporated,
validly existing and in good standing under the laws of
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42
the jurisdiction indicated at the beginning of this
Agreement and is in good standing under the laws of the
State of California.
(b) The execution, delivery and performance by the
Seller of this Agreement, the Certificate, the Receivables
Contribution and Sale Agreement, the Assignment and
Assumption and the Fee Letter, and all other instruments and
documents to be delivered by it hereunder, and the
transactions contemplated hereby and thereby, and the
Seller's use of the proceeds of Purchases and reinvestments,
are within the Seller's corporate powers, have been duly
authorized by all necessary corporate action, do not
contravene (i) the Seller's charter or by-laws or (ii) law
or any Contract, the Receivables Contribution and Sale
Agreement or any other contractual restriction binding on or
affecting the Seller, and do not result in or require the
creation of any Adverse Claim (other than pursuant hereto)
upon or with respect to any of its properties; and no
transaction contemplated hereby requires compliance with any
bulk sales act or similar law.
(c) No authorization or approval or other action by,
and no notice to or filing with, any governmental authority
or regulatory body is required for the due execution,
delivery and performance by the Seller of this Agreement,
the Certificate, the Receivables Contribution and Sale
Agreement, the Assignment and Assumption or the Fee Letter,
or any other instrument or document to be delivered by it
hereunder, or for the perfection of or the exercise by the
Agent or any Owner of their respective rights and remedies
under this Agreement, the Certificate, the Receivables
Contribution and Sale Agreement, the Assignment and
Assumption and the Fee Letter and such other instruments and
documents, except for the filings of the financing
statements referred to in Article III, all of which, on or
prior to the date of the initial Purchase under the Original
Agreement, will have been duly made and be in full force and
effect, and except for the filing of continuation
statements, if applicable, with respect to such financing
statements.
(d) This Agreement and the Assignment and Assumption
are, and the Certificate, the Receivables Contribution and
Sale Agreement and the Fee Letter when delivered hereunder
will be, the legal, valid and binding obligations of the
Seller enforceable against the Seller in accordance with
their respective terms, except as may be limited by the
effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting
<PAGE>
43
creditors' rights generally and by general principles of
equity.
(e) The pro forma balance sheet of the Seller as at
September 30, 1994, a copy of which has been furnished to
the Agent, fairly presents (subject to normal year-end
adjustments and the absence of footnotes required under
generally accepted accounting principles) the pro forma
financial condition of the Seller as at such date, all in
accordance with generally accepted accounting principles
consistently applied.
(f) There is no pending or, to the best knowledge of
the Seller, threatened action or proceeding affecting the
Seller before any court, governmental agency or arbitrator
which may materially adversely affect (i) the financial
condition or operations of the Seller or (ii) the ability of
the Seller to perform its obligations under this Agreement,
the Certificate, the Receivables Contribution and Sale
Agreement, the Assignment and Assumption or the Fee Letter,
or any other instrument or document to be delivered by it
hereunder, or which purports to affect the legality,
validity or enforceability of this Agreement, the
Certificate, the Receivables Contribution and Sale
Agreement, the Assignment and Assumption or the Fee Letter
or any such other instrument or document.
(g) No proceeds of any Purchase or reinvestment will
be used to acquire any equity security of a class which is
registered pursuant to Section 12 of the Securities Exchange
Act of 1934.
(h) Immediately prior to the time of the initial
creation of an interest hereunder in any Pool Receivable,
the Seller will be the legal and beneficial owner of such
Pool Receivable and the Related Security with respect
thereto, and is the legal and beneficial owner of the
Collateral, in each case free and clear of any Adverse Claim
except as created or permitted by this Agreement. Each Pool
Receivable is, as of the date of the initial creation of an
interest therein hereunder (other than, in the case of any
Receivable that is not an Eligible Receivable solely because
it is a Defaulted Receivable or a Delinquent Receivable, on
the date of the initial Purchase under the Original
Agreement), an Eligible Receivable or, if such Receivable is
not an Eligible Receivable on such date, the Seller has paid
when due all amounts payable by it pursuant to the second
sentence of Section 2.07 and Section 5.01(j) as a result of
such Receivable not being an Eligible Receivable on such
date. Upon each Purchase or reinvestment, the Owner making
such
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44
Purchase or reinvestment will acquire a valid and perfected
first priority undivided percentage ownership interest to
the extent of the pertinent Eligible Asset in each Pool
Receivable then existing or thereafter arising and in the
Related Security and Collections with respect thereto free
and clear of any Adverse Claim except as created or
permitted by this Agreement. The Agent for the benefit of
itself, the Owners and each other Indemnified Party from
time to time has a valid and perfected first priority
security interest in the Collateral, securing payment of the
Obligations, free and clear of any Adverse Claim except as
created or permitted by this Agreement. No effective
financing statement or other instrument similar in effect
covering any Contract or any Pool Receivable, Collateral,
Related Security or Collections with respect thereto is on
file in any recording office, except those filed in favor of
the Agent relating to this Agreement (including without
limitation the Original Agreement) or in favor of the Seller
and the Agent and relating to the Receivables Contribution
and Sale Agreement or those listing the Seller or Americas
as secured party and the applicable Obligor as debtor.
(i) In the case of each Investor Report (if prepared
by the Seller or any Affiliate thereof, or to the extent
that information contained therein is supplied by the Seller
or any Affiliate thereof), information, exhibit, financial
statement, document, book, record or report furnished or to
be furnished at any time by the Seller to the Agent or any
Owner in connection with this Agreement, (i) as of the date
so furnished, all facts stated as such in any such document
were true and complete in all material respects and, in the
case of any projections contained in any such documents, all
facts upon which such projections were based were true and
complete in all material respects and no material fact was
omitted from that basis, and all estimates and assumptions
made on that basis were made in good faith and believed to
be reasonable at the time made, it being recognized by the
Agent and the Owners that such projections as to future
events are not to be viewed as facts and that actual results
during the period or periods covered thereby may differ from
such projections, and (ii) no such document contains or will
contain as of the date so furnished any material
misstatement of fact or omits or will omit to state a
material fact or any fact necessary in order to make the
statements contained therein, in the light of the
circumstances under which they were made, not misleading.
(j) The chief place of business and chief executive
office of the Seller is located at the address specified
<PAGE>
45
in Section 12.02 hereto and the offices where the Seller
keeps its Records are located at such address and such other
addresses as are specified on Schedule I hereto (or at such
other locations, notified to the Agent in accordance with
Section 5.01(h), in jurisdictions where all action required
by Section 6.05 has been taken and completed).
(k) The names and addresses of all the Lock-Box Banks,
together with the account numbers of the Lock-Box Accounts
of the Seller at such Lock-Box Banks, are specified in
Schedule II hereto (or at such other Lock-Box Banks and/or
with such other Lock-Box Accounts as have been notified to
the Agent and for which Lock-Box Agreements and the related
Lock-Box Notices have been executed in accordance with
Section 5.03(d)).
(l) Neither the Seller nor any Affiliate of the Seller
has any direct or indirect ownership or other financial
interest in any Owner.
(m) Each Purchase and each reinvestment of Collections
in Pool Receivables will constitute (i) a "current
transaction" within the meaning of Section 3(a)(3) of the
Securities Act of 1933, as amended, and (ii) a purchase or
other acquisition of notes, drafts, acceptances, open
accounts receivable or other obligations representing part
or all of the sales price of merchandise, insurance or
services within the meaning of Section 3(c)(5) of the
Investment Company Act of 1940, as amended.
(n) The aggregate Outstanding Balance at any time of
the Pool Receivables evidenced at such time by any
"instrument" or "chattel paper" within the meaning of the
UCC in effect in the State of California does not exceed 5%
of the aggregate Outstanding Balance of all Pool Receivables
at such time.
(o) With respect to each Pool Receivable (other than
those Pool Receivables existing at the close of business of
Americas on the Effective Date, Americas' interest in which
shall have been transferred to the Seller by Americas, to
the extent of an amount equal to 12% of the aggregate
Outstanding Balance of such Pool Receivables, as a capital
contribution and, in the case of the remainder of such
interest, as a sale and purchase, all in accordance with and
as contemplated by the Assignment and Assumption), the
Seller shall have purchased such Pool Receivable from
Americas in exchange for payment (made by the Seller to
Americas in accordance with the provisions
<PAGE>
46
of the Receivables Contribution and Sale Agreement) in an
amount which constitutes fair consideration and approximates
fair market value for such Pool Receivable and in a sale the
terms and conditions of which (including, without
limitation, the purchase price thereof) reasonably
approximate an arm's-length transaction between unaffiliated
parties. Each such sale shall not have been made for or on
account of an antecedent debt owed by Americas to the Seller
and no such sale is or may be voidable or subject to
avoidance under any section of the Federal Bankruptcy Code.
(p) The Seller has no subsidiaries as of the date
hereof and shall not establish or acquire any subsidiaries.
(q) The Seller has filed, or caused to be filed or be
included in, all tax reports and returns (federal, state,
local and foreign), if any, required to be filed by it and
paid, or cause to be paid, all amounts of taxes, including
interest and penalties required to be paid by it, except for
such taxes (i) as are being contested in good faith by
proper proceedings and (ii) against which adequate reserves
shall have been established in accordance with and to the
extent required by generally accepted accounting principles,
but only so long as the proceedings referred to in
clause (i) above could not subject the Agent or any other
Indemnified Party to any civil or criminal penalty or
liability or involve any material risk of the loss, sale or
forfeiture of any property, rights or interests covered
hereunder or under the Receivables Contribution and Sale
Agreement or the Assignment and Assumption.
(r) Americas has confirmed in writing to the Seller
and the Agent that Americas will not cause the Seller to
file a voluntary petition under the Federal Bankruptcy Code
or any other bankruptcy or insolvency laws so long as the
Seller is not "insolvent" within the meaning of the Federal
Bankruptcy Code, and unless, and only unless, such filing
has been authorized in accordance with the Seller's
Certificate of Incorporation, and by all "Independent
Directors" (as defined in such Certificate of Incorporation)
on the Seller's Board of Directors which "Independent
Directors" have taken into consideration the interests of
the creditors of the Seller, rather than solely the
interests of the shareholder(s) of the Seller.
(s) There are no Adverse Claims (including, without
limitation, liens or retained security titles of conditional
vendors) of any nature whatsoever on any properties
(excluding those properties covered by
<PAGE>
47
Section 4.01(h)) of the Seller. The Seller is not a party
to any contract, agreement, lease or instrument the
performance of which, either unconditionally or upon the
happening of an event, will result in or require the
creation of any Adverse Claim on the property or assets of
the Seller, or otherwise result in a violation of this
Agreement.
(t) (i) The Seller is not a party to any indenture,
loan or credit agreement or any lease or other agreement or
instrument or subject to any charter or corporate
restriction that could reasonably be expected to have, and
no provision of applicable law or governmental regulation
could reasonably be expected to have, a material adverse
effect on the condition (financial or otherwise), business,
operations, properties or prospects of the Seller, or may
reasonably be expected to have such an effect on the ability
of the Seller to carry out its obligations hereunder or
under the Receivables Contribution and Sale Agreement or the
Assignment and Assumption, and (ii) neither the Seller nor,
to the best of the knowledge of the Seller, any other party
is in default under or with respect to the Receivables
Contribution and Sale Agreement or the Assignment and
Assumption or any other contract, agreement, lease or other
instrument to which the Seller is a party and which is
material to the Seller's condition (financial or otherwise),
business, operations, properties or prospects, and neither
the Seller nor any such other party has delivered or
received any notice of default thereunder.
(u) The Seller has advised its independent certified
public accountants that the Agent and the Owners have been
authorized to review and discuss with such accountants, upon
the written request of the Agent, any and all financial
statements and other information that they may have
reasonably requested with respect to the Seller and has
directed such accountants to comply with any reasonable
request of the Agent for such information.
(v) The Seller has no tradenames, fictitious names,
assumed names or "doing business as" names other than
"Merisel".
ARTICLE V
GENERAL COVENANTS OF THE SELLER
SECTION 5.01. Affirmative Covenants of the Seller.
Until the Collection Date, the Seller will, unless the Agent
shall otherwise consent in writing:
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48
(a) Compliance with Laws, Etc. Comply in all material
respects with all applicable laws, rules, regulations and
orders with respect to it, its business and properties and
all Pool Receivables and related Contracts, Related Security
and Collections with respect thereto and the Collateral,
including without limitation paying promptly when due all
taxes, assessments and governmental charges or levies
imposed upon it or any Pool Receivables, Related Security,
Collections or Collateral (including, but not limited to,
any intangibles property or similar tax), or in respect of
its income or profits therefrom, and any and all claims of
any kind (including, without limitation, claims for labor,
materials and supplies), other than any such tax,
assessment, charge or levy (i) which is being contested in
good faith and by proper proceedings and (ii) with respect
to which the obligation to pay such amount is adequately
reserved against in accordance with and to the extent
required by generally accepted accounting principles (but
only so long as the proceedings referred to in clause (i)
above could not subject the Agent or any other Indemnified
Party to any civil or criminal penalty or liability or
involve any material risk of the loss, sale or forfeiture of
any property, rights or interests covered hereunder or under
the Receivables Contribution and Sale Agreement or the
Assignment and Assumption).
(b) Preservation of Corporate Existence. Preserve and
maintain its corporate existence, rights, franchises and
privileges in the jurisdiction of its incorporation, and
qualify and remain qualified in good standing as a foreign
corporation in the State of California and in each other
jurisdiction where the failure to preserve and maintain such
existence, rights, franchises, privileges and qualification
would materially adversely affect the interests of the
Owners or the Agent hereunder or in the Pool Receivables,
Related Security or Collateral, or the ability of the Seller
or the Collection Agent to perform their respective
obligations hereunder or under the Fee Letter or the
Receivables Contribution and Sale Agreement or the
Assignment and Assumption or the ability of the Seller to
perform its obligations under the Contracts.
(c) Maintenance of Separate Existence. Do all things
necessary to maintain its corporate existence separate and
apart from Americas, Merisel, FAB and other Affiliates of
the Seller, including, without limitation, (i) maintaining
proper corporate records and books of account, and telephone
numbers, separate from those of such Affiliates;
(ii) maintaining its assets, funds and
<PAGE>
49
transactions separate from those of such Affiliates,
reflecting such assets and transactions in financial
statements separate and distinct from those of such
Affiliates, and evidencing such assets, funds and
transactions by appropriate entries in the books and records
referred to in clause (i) above, and providing for its own
operating expenses and liabilities from its own assets and
funds other than certain expenses and liabilities relating
to basic corporate overhead which may be allocated between
the Seller and such Affiliates; (iii) holding such
appropriate meetings or obtaining such appropriate consents
of its Board of Directors as are necessary to authorize all
the Seller's corporate actions required by law to be
authorized by the Board of Directors, keeping minutes of
such meetings and of meetings of its stockholders and
observing all other customary corporate formalities (and any
successor Seller not a corporation shall observe similar
procedures in accordance with its governing documents and
applicable law); (iv) at all times entering into its
contracts and otherwise holding itself out to the public
under the Seller's own name as a legal entity separate and
distinct from such Affiliates; and (v) conducting all
transactions and dealings between the Seller and such
Affiliates on an arm's-length basis; provided, however, that
nothing contained herein shall prohibit any Permitted
Transaction or any action or transaction necessary in
connection therewith.
(d) Compliance with Opinion Assumptions and Charter
and By-Laws. Without limiting the generality of
subsection (c) above, maintain in place all policies and
procedures, and take and continue to take all actions,
described in the assumptions as to facts set forth in, and
forming the basis of, the opinions set forth in the opinion
delivered to the Agent in substantially the form of
Exhibit E-2 hereto pursuant to Section 3.01, and comply
with, and cause compliance with, the provisions of the
Certificate of Incorporation and by-laws of the Seller
delivered to the Agent pursuant to Section 3.01 as the same
may, from time to time, be amended, modified or otherwise
supplemented with the prior written consent of the Agent.
(e) Audits. (i) At any time and from time to time
during regular business hours, permit the Agent, or its
agents or representatives, (A) to examine and make copies of
and abstracts from all books, records and documents
(including, without limitation, computer tapes and disks) in
the possession or under the control of the Seller
<PAGE>
50
relating to Pool Receivables and the Related Security,
including, without limitation, the related Contracts, and
(B) to visit the offices and properties of the Seller for
the purpose of examining such materials described in
clause (A) above, and to discuss matters relating to Pool
Receivables and the Related Security or the Seller's
performance hereunder or under the Contracts with any of the
officers or employees of the Seller having knowledge of such
matters, and (ii) within 120 days after the end of each
fiscal year of the Seller, cause its independent public
accountants to review, and deliver to the Agent a written
review of, an audit conducted by the Seller with respect to
the Pool Receivables, Credit and Collection Policy and
Lock-Box Account activity on a scope and in a form
reasonably requested by the Agent for such audit.
(f) Keeping of Records and Books of Account.
(i) Keep, or cause to be kept, proper books of record and
account, which shall be maintained or caused to be
maintained by the Seller and shall be separate and apart
from those of any Affiliate of the Seller, in which full and
correct entries shall be made of all financial transactions
and the assets and business of the Seller in accordance with
generally accepted accounting principles consistently
applied, and (ii) maintain and implement administrative and
operating procedures (including, without limitation, an
ability to recreate records evidencing Pool Receivables in
the event of the destruction of the originals thereof), and
keep and maintain, all documents, books, records and other
information reasonably necessary or advisable for the
collection of all Pool Receivables (including, without
limitation, records adequate to permit the daily
identification of each new Pool Receivable and all
Collections of and adjustments to each existing Pool
Receivable).
(g) Performance and Compliance with Receivables and
Contracts. At its expense timely and fully (i) perform, or
cause to be performed, and comply with, or cause to be
complied with, all material provisions, covenants and other
promises required to be observed by it under the Contracts
related to the Pool Receivables, and (ii) as beneficiary of
any Related Security, enforce such Related Security as
reasonably requested by the Agent.
(h) Location of Records. Keep its chief place of
business and chief executive office and the office where it
keeps the originals of its Records at the address of the
Seller referred to in Section 4.01(j) or, upon 30 days'
prior written notice to the Agent, at any other
<PAGE>
51
locations in a jurisdiction where all action required by
Section 6.05 shall have been taken.
(i) Credit and Collection Policies. Comply in all
material respects with the Credit and Collection Policy in
regard to each Pool Receivable and the related Contract;
provided, however, that on any Liquidation Day or
Provisional Liquidation Day the Seller shall not accept any
returned merchandise the sale of which gave rise to any Pool
Receivable unless the Seller shall have (i) paid, or shall
pay on the day of such return, all amounts the payment of
which would be required under Sections 2.07 and 5.01(j) as a
result of such returned merchandise, and (ii) notified, or
shall notify no later than two Business Days following such
day, the Agent in writing of such returned merchandise.
(j) Collections. Instruct, or cause to be instructed,
all Obligors to cause all Collections to be deposited
directly to a Lock-Box Account in the name of the Seller,
and, if the Seller shall otherwise receive any Collections
(including, without limitation, any Collections deemed to
have been received by the Seller pursuant to Section 2.07),
segregate and hold in trust such Collections and deposit
such Collections directly to any such Lock-Box Account
within one Business Day following its receipt thereof.
(k) Lock-Box Agreements. Deliver, or cause to be
delivered, to the Agent on or before December 31, 1994
Lock-Box Agreements with Harris Trust and Savings Bank or
any replacement Lock-Box Bank therefor, and with Citibank
and The First National Bank of Chicago, respectively, in
each case duly executed by the Seller and such Lock-Box
Bank, together with Lock-Box Notices related thereto
executed by the Seller.
(l) Purchase of Pool Receivables from Americas. With
respect to each Pool Receivable outstanding from time to
time (other than Pool Receivables existing at the close of
business of Americas on the Effective Date, Americas'
interest in which shall have been transferred to the Seller
by Americas, to the extent of an amount equal to 12% of the
aggregate Outstanding Balance of such Pool Receivables, as a
capital contribution and, in the case of the remainder of
such interest, as a sale and purchase, all in accordance
with and as contemplated by the Assignment and Assumption),
pay to Americas (in accordance with the Receivables
Contribution and Sale Agreement) an amount which constitutes
fair consideration and approximates fair market value for
such Pool Receivable
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52
and in a sale the terms and conditions of which (including,
without limitation, the purchase price thereof) reasonably
approximate an arm's-length transaction between unaffiliated
parties.
(m) Nature of Business and Permitted Transactions.
Engage solely in the following businesses and transactions,
directly or indirectly: (i) purchasing Receivables and
Related Security from Americas and selling interests in such
Receivables and Related Security to the Owners hereunder and
the other transactions permitted or contemplated hereby and
(ii) taking the actions, and engaging in the transactions,
necessary in connection with any Permitted Transaction.
(n) Receivables Contribution and Sale Agreement;
Assignment and Assumption. At its expense, timely and fully
perform and comply in all material respects with all
provisions, covenants and other promises required to be
observed by it under the Receivables Contribution and Sale
Agreement or the Assignment and Assumption, maintain the
Receivables Contribution and Sale Agreement and the
Assignment and Assumption in full force and effect, enforce
the Receivables Contribution and Sale Agreement and the
Assignment and Assumption in accordance with their
respective terms, take all such action to such end as may be
from time to time reasonably requested by the Agent, and
make to any party to the Receivables Contribution and Sale
Agreement or the Assignment and Assumption such demands and
requests for information and reports or for action as the
Seller is entitled to make thereunder and as may be from
time to time reasonably requested by the Agent.
SECTION 5.02. Reporting Requirements of the Seller.
Until the Collection Date, the Seller will, unless the Agent
shall otherwise consent in writing, furnish to the Agent:
(a) as soon as available and in any event within
75 days after the end of each of the first three quarters of
each fiscal year of the Seller, a balance sheet of the
Seller as of the end of such quarter and statements of
income and retained earnings and of cash flows of the Seller
for the period commencing at the end of the previous fiscal
year and ending with the end of such quarter, certified by
the Treasurer of the Seller;
(b) as soon as available and in any event within
120 days after the end of each fiscal year of the Seller, a
copy of the annual report for such year for the Seller,
containing financial statements for such year certified in a
manner acceptable to the Agent by Deloitte & Touche or
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53
other independent public accountants acceptable to the
Agent;
(c) as soon as possible and in any event within five
days after any officer of the Seller obtains knowledge of
the occurrence of each Event of Investment Ineligibility and
each event which, with the giving of notice or lapse of
time, or both, would constitute an Event of Investment
Ineligibility, continuing on the date of such statement, a
statement of the chief financial officer of the Seller
setting forth details of such Event of Investment
Ineligibility or event and the action which the Seller has
taken and proposes to take with respect thereto;
(d) promptly and in any event within five Business
Days after the Seller's receipt or delivery thereof, copies
of all notices, requests, reports, certificates, and other
information and documents delivered or received by the
Seller from time to time under or in connection with the
Receivables Contribution and Sale Agreement; and
(e) such other information, documents, records or
reports respecting the Receivables, the Related Security or
the Contracts or the Collateral or the condition or
operations, financial or otherwise, of the Seller as the
Agent may from time to time reasonably request.
SECTION 5.03. Negative Covenants of the Seller. Until
the Collection Date, the Seller will not, without the written
consent of the Agent:
(a) Sales, Liens, Etc. Except as otherwise provided
herein (including without limitation in Sections 5.03(f) and
6.02), or pursuant to the Parallel Purchase Commitment, and
except for sales of Pool Receivables to Floor Plan Obligors
for consideration in cash at least equal to the excess of
the Outstanding Balance of such Pool Receivables at the
respective times of such sales over the finance charges
payable by the Seller to such Floor Plan Obligors in
connection with such sales (provided that the Seller shall
have paid all amounts the payment of which would be required
in connection therewith under Sections 2.07 and 5.01(j)), in
the form of Collections received from such Floor Plan
Obligors with respect to such Pool Receivables and applied
pursuant to Section 2.05 or 2.06, as applicable, sell,
assign (by operation of law or otherwise) or otherwise
dispose of, or grant any option with respect to, or create
or suffer to exist any Adverse Claim upon or with respect
to, the Seller's undivided interest in any Pool Receivable
or Related Security or Collections in respect thereof, or
any
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54
Collateral, or upon or with respect to any related Contract
or any Lock-Box Account to which any Collections of any Pool
Receivable are sent, or assign any right to receive income
in respect thereof.
(b) Extension or Amendment of Receivables. Except as
otherwise permitted in Section 6.02, extend the terms of any
Pool Receivable, or amend or otherwise modify the terms of
any Pool Receivable or amend, modify or waive any term or
condition of any Contract related thereto if in any such
case such amendment, modification or waiver would be
reasonably likely to impair the collectibility of any Pool
Receivable.
(c) Change in Credit and Collection Policy. Make any
change in the Credit and Collection Policy, which change
would be reasonably likely to impair the collectibility of
any Pool Receivable.
(d) Change in Payment Instructions to Obligors. Add
or terminate any bank as a Lock-Box Bank from those listed
in Schedule II hereto, or make any change in its
instructions to Obligors made pursuant to Section 5.01(j)
regarding payments to be made to any Lock-Box Bank, unless
the Agent shall have received notice of such addition,
termination or change, a Lock-Box Agreement executed by each
new Lock-Box Bank and the Seller and acknowledged by the
Agent, and undated executed copies of Lock-Box Notices to
each new Lock-Box Bank.
(e) Deposits to Lock-Box Accounts. Deposit or
otherwise credit, or cause or permit to be so deposited or
credited, to any Lock-Box Account cash or cash proceeds
other than Collections of Pool Receivables except for
immaterial amounts the deposit of which is beyond the
Seller's control.
(f) Mergers, Etc. Merge or consolidate with or into,
or convey, transfer, lease or otherwise dispose of (whether
in one transaction or in a series of transactions) all or
substantially all of its assets (whether now owned or
hereafter acquired) to, or acquire all or substantially all
of the assets or capital stock or other ownership interest
of, or enter into any joint venture or partnership agreement
with, any Person, other than, with respect to asset
acquisitions and dispositions, in connection herewith or as
necessary in connection with any Permitted Transaction.
(g) Change of Name, Etc. Change its name, identity or
structure or its chief executive office, or use any
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55
tradenames, fictitious names, assumed names or "doing
business as" names, unless prior to the effective date of
any such change or use the Seller delivers to the Agent
(i) UCC financing statements, executed by the Seller and, if
applicable, Americas, necessary to reflect such change or
use and to continue the perfection of the ownership
interests created by the Eligible Assets and the security
interest in the Collateral, and (ii) new Lock-Box Agreements
and Lock-Box Notices, executed by the Seller and, in the
case of the Lock-Box Agreements, the Lock-Box Banks
necessary to reflect such change and to continue to enable the
Agent to exercise its rights contained in Section 6.03(a), and
(iii) in the case of any such change in its structure or chief
executive office, a favorable opinion of Sidley & Austin (or other
counsel acceptable to the Agent) in substantially the form of
Exhibit E-2 hereto, giving effect to such change, in each case of
clauses (i), (ii) and (iii) together with such other documents and
instruments that the Agent may reasonably request in connection
therewith.
(h) Pool Receivables Not Evidenced by Instruments.
Cause or permit Pool Receivables the aggregate Outstanding
Balance of which at any time exceeds 5% of the aggregate
Outstanding Balance of all the Pool Receivables at such time
to be evidenced by an "instrument" or "chattel paper" within
the meaning of the UCC in effect in the State of California.
(i) Other Adverse Claims. Except as otherwise
provided herein or in the Parallel Purchase Commitment,
create or suffer to exist any Adverse Claim upon or with
respect to any of the Seller's property other than of the
type described in Section 5.03(a) (which shall be subject to
the restrictions contained in such Section), or assign any
right to receive income, to secure any Debt of any Person.
(j) Debt. Except as otherwise provided herein or in
the Parallel Purchase Commitment, create, incur, assume or
suffer to exist any Debt other than as necessary in
connection with any Permitted Transaction.
(k) Contingent Obligations. Except as otherwise
provided herein or in the Parallel Purchase Commitment,
create, incur, assume or suffer to exist any Contingent
Obligation.
(l) Distributions, Etc. Declare or make any dividend
payment or other distribution of assets, properties, cash,
rights, obligations or securities on
<PAGE>
56
account of any shares of any class of capital stock of the
Seller, or return any capital to its shareholders as such,
or purchase, retire, defease, redeem or otherwise acquire
for value or make any payment in respect of any shares of
any class of capital stock of the Seller or any warrants,
rights or options to acquire any such shares, now or
hereafter outstanding, other than, in any such case, as
shall have been duly authorized by all necessary corporate
action of the Seller and in accordance with applicable law,
provided that no event has occurred and is continuing, or
would result from such declaration, dividend, distribution,
return, purchase, retirement, defeasance, redemption,
acquisition or payment, which constitutes an Event of
Investment Ineligibility or would constitute an Event of
Investment Ineligibility but for the requirement that notice
be given or time elapse or both.
(m) Transactions with Shareholders and Affiliates.
Enter into or permit to exist any transaction (including,
without limitation, the purchase, sale, lease or exchange of
any property or the rendering of any service) with Americas
or Merisel or with any other Affiliate of the Seller, other
than as necessary in connection with any Permitted
Transactions and on terms that are fair and reasonable in
the circumstances and that reasonably approximate an arm's
length transaction between unaffiliated parties.
(n) Accounting of Purchases. Prepare any financial
statements which shall account for the transactions
contemplated hereby in any manner other than the sale of the
Eligible Assets by the Seller to the Owners, and will not in
any other respect account for or treat the transactions
contemplated hereby (including but not limited to accounting
purposes, but excluding tax reporting purposes) in any
manner other than as a sale of the Eligible Assets by the
Seller to the Owners.
(o) Receivables Contribution and Sale Agreement;
Assignment and Assumption. (i) Cancel or terminate the
Receivables Contribution and Sale Agreement or the
Assignment and Assumption or consent to or accept any
cancellation or termination thereof, (ii) amend or otherwise
modify any term or condition of the Receivables Contribution
and Sale Agreement or the Assignment and Assumption or give
any consent, waiver or approval thereunder, (iii) waive any
default under or breach of the Receivables Contribution and
Sale Agreement or the Assignment and Assumption or (iv) take
any other action under the Receivables Contribution and Sale
Agreement or
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the Assignment and Assumption not required by the terms
thereof that would impair the value of any Collateral or the
rights or interests of the Seller thereunder or of the Agent
or any Owner or Indemnified Party hereunder or thereunder.
(p) Organization. Permit its Certificate of
Incorporation or by-laws to be amended, supplemented or
otherwise modified.
(q) Capital Stock. Issue to, or permit to be
transferred to, any Person (other than Americas) any shares
of the Seller's stock.
ARTICLE VI
ADMINISTRATION AND COLLECTION
SECTION 6.01. Designation of Collection Agent. The
Pool Receivables shall be serviced, administered and collected
by the Person (the "Collection Agent") designated to do so from
time to time in accordance with this Section 6.01. Until the
Agent designates a new Collection Agent, the Seller is hereby
designated as, and hereby agrees to perform the duties and
obligations of, the Collection Agent pursuant to the terms
hereof. The Agent may at any time designate as Collection Agent
any Person (including itself) to succeed the Seller or any
successor Collection Agent, if such Person (other than itself)
shall agree in writing to perform the duties and obligations of
the Collection Agent pursuant to the terms hereof. The
Collection Agent may, with the prior consent of the Agent,
subcontract with any other Person to service, administer or
collect the Pool Receivables, provided that the Person with whom
the Collection Agent so subcontracts shall not become the
Collection Agent hereunder and the Collection Agent shall remain
liable for the performance of the duties and obligations of the
Collection Agent pursuant to the terms hereof. The Agent hereby
consents to the subcontracting by the Seller, as Collection
Agent, with Americas to service, administer and collect the Pool
Receivables, subject to the proviso to the preceding sentence,
and provided that the Agent may at any time require the
Collection Agent to, and the Collection Agent shall at the
Agent's request, terminate such subcontracting with Americas.
SECTION 6.02. Duties of Collection Agent. (a) The
Collection Agent shall take or cause to be taken all such
actions as may be reasonably necessary or advisable to collect
each Pool Receivable from time to time, all in accordance in all
material respects with applicable laws, rules and
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regulations, with reasonable care and diligence, and in
accordance in all material respects with the Credit and
Collection Policy (subject to the provisions of
Section 5.01(i)). Each of the Seller, the Investor and the
Agent hereby appoints as its agent the Collection Agent, from
time to time designated pursuant to Section 6.01, to enforce its
respective rights and interests in and under the Pool
Receivables, the Related Security and the related Contracts.
The Collection Agent shall set aside and hold in trust for the
account of the Seller and each Owner their respective allocable
shares of the Collections of Pool Receivables in accordance with
Sections 2.05 and 2.06 but shall not be required (unless
otherwise requested by the Agent) to segregate the funds
constituting such portion of such Collections prior to the
remittance thereof in accordance with said Sections. If
instructed by the Agent, the Collection Agent shall segregate
and deposit with a bank (which may be Citibank) designated by
the Agent such allocable share of Collections of Pool
Receivables set aside for each Owner on the first Business Day
following receipt by the Collection Agent of such Collections.
If no Event of Investment Ineligibility or Event of Purchase
Ineligibility shall have occurred and be continuing, the Seller,
while it is the Collection Agent, may extend the maturity or
adjust the Outstanding Balance of, or sell or transfer to any
other collection agents of the Seller, any Defaulted Receivable
as the Seller may determine to be appropriate to maximize
Collections thereof. In no event shall the Collection Agent be
entitled to make the Agent or any Owner or Indemnified Party a
party to any litigation without the Agent's or such Owner's or
such Indemnified Party's prior written consent. The Seller
shall deliver to the Collection Agent, and the Collection Agent
shall hold in trust for the Seller and each Owner in accordance
with their respective interests, all Records (including, without
limitation, computer tapes or disks).
(b) The Collection Agent shall as soon as practicable
following receipt turn over to the Seller (i) that portion of
Collections of Pool Receivables representing its undivided
interest therein, less, in the event the Seller is not the
Collection Agent, all reasonable out-of-pocket costs and
expenses of such Collection Agent of servicing, administering
and collecting the Pool Receivables to the extent not covered by
the Collection Agent Fee received by it and (ii) the Collections
of any Receivable which is not a Pool Receivable. The
Collection Agent, if other than the Seller, shall as soon as
practicable upon demand deliver to the Seller all documents,
instruments and records in its possession which evidence or
relate to Receivables of the Seller other than Pool Receivables,
and copies of Records in its possession
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which evidence or relate to Pool Receivables. The Collection
Agent's authorization under this Agreement shall terminate on
the Collection Date.
SECTION 6.03. Rights of the Agent. (a) The Agent is
hereby authorized at any time to date and deliver to the
Lock-Box Banks, the Lock-Box Notices and Preliminary Lock-Box
Notices delivered hereunder. The Seller hereby transfers to the
Agent the exclusive ownership and dominion and, when the Agent
shall deliver the Lock-Box Notices or Preliminary Lock-Box
Notices to the Lock-Box Banks, control of the related Lock-Box
Accounts to which the Obligors of Pool Receivables shall make
payments, and shall take any further action that the Agent may
reasonably request to effect such transfer. In case any
authorized signatory of the Seller whose signature shall appear
on any Lock-Box Notice or Preliminary Lock-Box Notice shall
cease to have such authority before the delivery of such
Lock-Box Notice or Preliminary Lock-Box Notice, such signature
shall nevertheless be valid and sufficient for all purposes as
if such authority had remained in force at the time of such
delivery. Further, the Agent may notify at any time after the
occurrence and during the continuance of any Event of Investment
Ineligibility, and at the Seller's expense, the Obligors of Pool
Receivables, or any of them, of the ownership of Eligible Assets
by the Owners.
(b) At any time following the designation of a
Collection Agent other than the Seller pursuant to Section 6.01:
(i) The Agent may direct the Obligors of Pool
Receivables, or any of them, to make payment of all amounts
due or to become due to the Seller under any Pool Receivable
directly to the Agent or its designee.
(ii) The Seller shall, at the Agent's request and
at the Seller's expense, give notice of such ownership to
such Obligors and direct them to make such payments directly
to the Agent or its designee.
(iii) The Seller shall, at the Agent's request,
(A) assemble all of the Records (including, without
limitation, computer tapes and disks), and the related
Contracts and Related Security, and shall make the same
available to the Agent at a place selected by the Agent or
its designee, and (B) segregate all cash, checks and other
instruments received by it from time to time constituting
Collections of Pool Receivables in a manner acceptable to
the Agent and shall, promptly upon receipt, remit all such
cash, checks and instruments, duly endorsed or with duly
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executed instruments of transfer, to the Agent or its
designee.
(iv) The Agent may take any and all steps in the
Seller's name and on behalf of the Seller and the Owners
necessary or desirable, in the determination of the Agent,
to collect all amounts due under any and all Pool
Receivables, including, without limitation, endorsing the
Seller's name on checks and other instruments representing
Collections, enforcing such Pool Receivables and the related
Contracts, and adjusting, settling or compromising the
amount or payment thereof, in the same manner and to the
same extent as the Seller might have done.
SECTION 6.04. Responsibilities of the Seller.
Anything herein to the contrary notwithstanding:
(a) The Seller shall perform all of its obligations,
and shall cause the performance of all obligations, under
the Contracts related to the Pool Receivables to the same
extent as if Eligible Assets had not been sold hereunder and
the exercise by the Agent of its rights hereunder shall not
relieve the Seller from such obligations or its obligations
with respect to Pool Receivables; and
(b) Neither the Agent nor the Owners nor any other
Indemnified Party shall have any obligation or liability
with respect to any Pool Receivables or related Contracts,
nor shall any of them be obligated to perform any of the
obligations of the Seller thereunder.
SECTION 6.05. Further Action Evidencing Purchases.
(a) The Seller agrees that from time to time, at its expense,
it will promptly execute and deliver all further instruments and
documents, and take all further action, that may be necessary or
desirable, or that the Agent may reasonably request, in order to
perfect, protect or more fully evidence the Eligible Assets
purchased by the Owners, or to enable any of them or the Agent
to exercise and enforce any of their respective rights and
remedies hereunder or under the Certificate. Without limiting
the generality of the foregoing, the Seller will upon the
request of the Agent: (i) execute and file such financing or
continuation statements, or amendments thereto or assignments
thereof, and such other instruments or notices, as may be
necessary or desirable, or as the Agent may request, in order to
perfect, protect or evidence such Eligible Assets; (ii) mark
conspicuously each invoice evidencing each Pool Receivable and
the related Contract with a legend, acceptable to the Agent,
evidencing that such Eligible Assets have been sold in
accordance with this Agreement; and (iii) mark its master data
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processing records evidencing such Pool Receivables and related
Contracts with such legend.
(b) The Seller hereby authorizes the Agent to file one
or more financing or continuation statements, and amendments
thereto and assignments thereof, relating to all or any of the
Contracts, or Pool Receivables and the Related Security and
Collections with respect thereto now existing or hereafter
arising without the signature of the Seller where permitted by
law. A photocopy or other reproduction of this Agreement or any
financing statement covering all or any of the Contracts, or
Pool Receivables and the Related Security and Collections with
respect thereto shall be sufficient as a financing statement
where permitted by law.
(c) If the Seller fails to perform any agreement
contained herein, the Agent may itself perform, or cause
performance of, such agreement, and the reasonable expenses of
the Agent incurred in connection therewith shall be payable by
the Seller under Section 10.01 or Section 12.06, as applicable.
ARTICLE VII
EVENTS OF INVESTMENT INELIGIBILITY
SECTION 7.01. Events of Investment Ineligibility. If
any of the following events ("Events of Investment
Ineligibility") shall occur and be continuing:
(a) (i) The Collection Agent (if the Seller or any of
its Affiliates) shall fail to perform or observe any term,
covenant or agreement hereunder (other than as referred to
in clause (ii) of this Section 7.01(a)) and such failure
shall remain unremedied for three Business Days, or (ii) the
Seller or the Collection Agent (if the Seller or any of its
Affiliates) shall fail to make any payment or deposit to be
made by it hereunder or under the Fee Letter, in the case of
any such payment in respect of Yield or any fees, no later
than two Business Days after the date when due or, in the
case of payment or deposit of any other amount, when due; or
(b) The Seller shall fail to perform or observe any
term, covenant or agreement contained in Section 5.02(c),
5.03(e) or 6.03(a); or
(c) Any representation or warranty or statement made
by the Seller or Americas (or any of their respective
officers) in this Agreement or the Receivables Contribution
and Sale Agreement or the Assignment and
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Assumption or any Investor Report or any other written
certificate or report delivered pursuant hereto shall prove
to have been incorrect in any material respect when made; or
(d) The Seller or Americas fail to perform or observe
any other term, covenant or agreement contained in this
Agreement or the Receivables Contribution and Sale Agreement
or the Assignment and Assumption on its part to be performed
or observed and any such failure shall remain unremedied for
10 days after written notice thereof shall have been given
to the Seller or Americas, as the case may be, by the Agent;
or
(e) Americas shall fail to pay any principal of or
premium or interest on any Debt under the Credit Agreement,
as the same may from time to time be amended, modified,
supplemented or replaced, when the same becomes due and
payable (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise), and such failure shall
continue after the applicable grace period, if any,
specified in such Credit Agreement; or any other event shall
occur or condition shall exist under such Credit Agreement
(or, if at the time of determination such Credit Agreement
is not in full force and effect, would have occurred or
existed under such Credit Agreement, if such Credit
Agreement was in full force and effect at such time) and
shall continue after the applicable grace period, if any,
specified in such Credit Agreement, if the effect of such
event or condition is (or would have been) to accelerate, or
to permit the acceleration of, the maturity of any Debt
thereunder; or any Debt under such Credit Agreement shall be
(or would have been, pursuant to the terms of such Credit
Agreement) declared to be due and payable, or required to be
prepaid (other than by a regularly scheduled required
prepayment), redeemed, purchased or defeased, or an offer to
prepay, redeem, purchase or defease such Debt shall be (or
would have been, pursuant to the terms of such Credit
Agreement) required to be made, in each case prior to the
stated maturity thereof; provided, however, that in the case
of any such event or condition consisting of Americas'
failure to perform or observe any covenant under such Credit
Agreement, if such failure is waived in writing by the
requisite holders of the Debt thereunder during the 90-day
period following such failure, such failure shall not
constitute an "Event of Investment Ineligibility" hereunder
if such failure is remedied during such 90-day period; or
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63
(f) Any Purchase or any reinvestment pursuant to
Section 2.05 shall for any reason (other than pursuant to
the terms hereof) cease to create, or any Eligible Asset
shall for any reason cease to be, a valid and perfected
first priority undivided percentage ownership interest to
the extent of the pertinent Eligible Asset in each
applicable Pool Receivable and the Related Security and
Collections with respect thereto or the Certificate shall
for any reason cease to evidence in the Owner of such
Eligible Asset legal and equitable title to, and ownership
of, an undivided percentage ownership interest in Pool
Receivables and Related Security to the extent of such
Eligible Asset, or the Agent for the benefit of itself, the
Owners and each other Indemnified Party from time to time
shall cease to have a valid and perfected first priority
security interest in the Collateral; or
(g) The Seller or Americas shall generally not pay its
debts as such debts become due, or shall admit in writing
its inability to pay its debts generally, or shall make a
general assignment for the benefit of creditors; or any
proceeding shall be instituted by or against the Seller
seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief, or composition of it or its
debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of
an order for relief or the appointment of a receiver,
trustee, custodian or other similar official for it or for
any substantial part of its property and, in the case of any
such proceeding instituted against it (but not instituted by
it), either such proceeding shall remain undismissed or
unstayed for a period of 30 days, or any of the actions
sought in such proceeding (including, without limitation,
the entry of an order for relief against, or the appointment
of a receiver, trustee, custodian or other similar official
for, it or for any substantial part of its property) shall
occur; or the Seller or Americas shall take any corporate
action to authorize any of the actions set forth above in
this subsection (g); or
(h) The Default Ratio as at the last day of any Fiscal
Month shall exceed 8.5%, or the Delinquency Ratio as at the
last day of any Fiscal Month shall exceed 5%, or the
Loss-to-Liquidation Ratio as at the last day of any Fiscal
Month shall exceed 2%, or the Dilution Ratio as at the last
day of any Fiscal Month shall exceed 15%; or
(i) The Net Receivables Pool Balance shall for a
period of three consecutive Business Days be less than the
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greater of (i) 120% of the sum of the aggregate outstanding
Capital of all Eligible Assets and of the aggregate
outstanding "Capital" of all "Eligible Assets" under the
Parallel Purchase Commitment, respectively, or (ii) the sum
of the aggregate outstanding Capital and of the aggregate
outstanding "Capital", respectively, plus the aggregate Loss
Reserve and the aggregate "Loss Reserve", respectively, plus
the aggregate Dilution Reserve and the aggregate "Dilution
Reserve", respectively, plus the aggregate Yield Reserve and
the aggregate "Yield Reserve", respectively, plus the
aggregate Collection Agent Fee Reserve and the aggregate
"Collection Agent Fee Reserve", respectively, plus 2% of
aggregate outstanding Capital and aggregate outstanding
"Capital", respectively, in each case for all Eligible
Assets and all "Eligible Assets" under the Parallel Purchase
Commitment; or
(j) There shall have been any material adverse change
in the financial condition or operations of Americas since
September 30, 1994, or there shall have occurred any event
which materially adversely affects the collectibility of the
Pool Receivables, or there shall have occurred any other
event which materially adversely affects the ability of the
Seller or Americas to collect Pool Receivables or the
ability of the Seller or Americas to perform hereunder or
under the Receivables Contribution and Sale Agreement, as
applicable; or
(k) The Receivables Contribution and Sale Agreement or
the Assignment and Assumption or the Fee Letter shall for
any reason cease to be in full force and effect or any
provision thereof shall for any reason cease to be valid and
binding on the Seller or Americas, as applicable, or the
Seller or Americas, as applicable, shall so state in
writing; or
(l) Americas shall cease to own all the issued and
outstanding shares of stock of the Seller; or
(m) The Seller shall fail to maintain a tangible net
worth of at least 12.0% of the aggregate Outstanding Balance
of the Pool Receivables and such failure shall remain
unremedied for a period of 31 days after an officer of the
Seller or Americas knew or should have known of such failure
(the term "tangible net worth" to mean the excess of total
assets of the Seller over total liabilities of the Seller);
then, and in any such event, the Agent shall, at the request, or
may with the consent, of the Investor, by notice to the Seller
declare the Facility Termination Date to have occurred,
whereupon the Facility Termination Date shall forthwith occur,
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65
without demand, protest or further notice of any kind, all of
which are hereby expressly waived by the Seller; provided,
however, that in the event of an actual or deemed entry of an
order for relief with respect to the Seller or Americas under
the Federal Bankruptcy Code, the Facility Termination Date shall
automatically occur, without demand, protest or any notice of
any kind, all of which are hereby expressly waived by the
Seller. Upon any such termination of the Facility, the Agent
and the Owners shall have, in addition to all other rights and
remedies under this Agreement or otherwise, all other rights and
remedies provided under the UCC of the applicable jurisdiction
and other applicable laws, which rights shall be cumulative.
Without limiting the foregoing or the general applicability of
Article IX hereof, any Owner may elect to assign any Eligible
Asset owned by such Owner to an Assignee following the
occurrence of any Event of Investment Ineligibility.
ARTICLE VIII
THE AGENT
SECTION 8.01. Authorization and Action. The Investor
hereby appoints and authorizes the Agent to take such action as
agent on its behalf and to exercise such powers under this
Agreement, the Certificate, the Receivables Contribution and
Sale Agreement, the Assignment and Assumption, the Fee Letter
and the other instruments and documents furnished pursuant
hereto as are delegated to the Agent by the terms hereof,
together with such powers as are reasonably incidental thereto
(including without limitation executing and delivering such UCC
amendments or partial releases as may be necessary from time to
time in connection with any Receivable ceasing to be a Pool
Receivable pursuant to clause (i) or (ii) of the definition of
the term "Receivables Pool").
SECTION 8.02. Agent's Reliance, Etc. Neither the
Agent nor any of its directors, officers, agents or employees
shall be liable for any action taken or omitted to be taken by
it or them as Agent under or in connection with this Agreement,
the Certificate, the Receivables Contribution and Sale
Agreement, the Assignment and Assumption, the Fee Letter or any
other instrument or document furnished pursuant hereto
(including, without limitation, the Agent's servicing,
administering or collecting Pool Receivables as Collection Agent
pursuant to Section 6.01), except for its or their own gross
negligence or willful misconduct. Without limiting the
generality of the foregoing, except as otherwise agreed by the
Agent and any Owner, the Agent: (i) may consult with legal
counsel (including counsel for the Seller), independent public
accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken in good
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66
faith by it in accordance with the advice of such counsel,
accountants or experts; (ii) makes no warranty or representation
to any Owner and shall not be responsible to any Owner for any
statements, warranties or representations (whether written or
oral) made in or in connection with this Agreement, the
Certificate, the Receivables Contribution and Sale Agreement,
the Assignment and Assumption, the Fee Letter or any other
instrument or document furnished pursuant hereto; (iii) shall
not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or
conditions of this Agreement, the Certificate, the Receivables
Contribution and Sale Agreement, the Assignment and Assumption,
the Fee Letter or any other instrument or document furnished
pursuant hereto on the part of the Seller or Americas or to
inspect the property (including the books and records) of the
Seller or Americas; (iv) shall not be responsible to any Owner
for the due execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement, the
Certificate, the Receivables Contribution and Sale Agreement,
the Assignment and Assumption, the Fee Letter or any other
instrument or document furnished pursuant hereto, or the
perfection, priority or value of any ownership interest or
security interest created or purported to be created hereunder
or under the Receivables Contribution and Sale Agreement or the
Assignment and Assumption; and (v) shall incur no liability
under or in respect of this Agreement, the Certificate, the
Receivables Contribution and Sale Agreement, the Fee Letter or
any other instrument or document furnished pursuant hereto by
acting upon any notice (including notice by telephone), consent,
certificate or other instrument or writing (which may be by
telecopier, telegram, cable or telex) believed by it to be
genuine and signed or sent by the proper party or parties.
SECTION 8.03. CNA and Affiliates. With respect to any
Eligible Asset owned by it, CNA shall have the same rights and
powers under this Agreement as any other Owner and may exercise
the same as though it were not the Agent. CNA and its
Affiliates may generally engage in any kind of business with the
Seller or any Obligor, any of their respective Affiliates and
any Person who may do business with or own securities of the
Seller or any Obligor or any of their respective Affiliates, all
as if CNA were not the Agent and without any duty to account
therefor to the Owners.
ARTICLE IX
ASSIGNMENT
SECTION 9.01. Assignment of Eligible Assets. (a) The
Investor may assign to Citibank, CNA or any other
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Assignee, and any such Assignee may assign to any other
Assignee, any Eligible Asset. Upon any such assignment, (i) the
Assignee shall become the Owner of such Eligible Asset for all
purposes of this Agreement and (ii) the Owner assignor thereof
shall relinquish its rights with respect to such Eligible Asset
for all purposes of this Agreement. Such assignments shall be
upon such terms and conditions as the assignor and the Assignee
of such Eligible Asset may mutually agree, the parties thereto
shall deliver to the Agent an Assignment, duly executed by such
parties, and such assignor shall promptly execute and deliver
all further instruments and documents, and take all further
action, that the Assignee may reasonably request in order to
perfect, protect or more fully evidence the Assignee's right,
title and interest in and to such Eligible Asset, and to enable
the Assignee to exercise or enforce any rights hereunder or
under the Certificate or the Fee Letter. The Agent shall
provide notice to the Seller of any assignment of an Eligible
Asset hereunder.
(b) By executing and delivering an Assignment, the
Owner assignor thereunder and the Assignee thereunder confirm to
and agree with each other and the other parties hereto as
follows: (i) other than as provided in such Assignment, such
assigning Owner makes no representation or warranty and assumes
no responsibility with respect to any statements, warranties or
representations made in or in connection with this Agreement,
the Certificate, the Receivables Contribution and Sale
Agreement, the Assignment and Assumption, the Fee Letter or any
other instrument or document furnished pursuant hereto or the
execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement, the Certificate, the
Receivables Contribution and Sale Agreement, the Assignment and
Assumption, the Fee Letter or any other instrument or document
furnished pursuant hereto, or the perfection, priority or value
of any ownership interest or security interest created or
purported to be created hereunder or under the Receivables
Contribution and Sale Agreement or the Assignment and
Assumption; (ii) such assigning Owner makes no representation or
warranty and assumes no responsibility with respect to the
financial condition of the Seller or Americas or the performance
or observance by the Seller or Americas of any of its
obligations under this Agreement, the Certificate, the
Receivables Contribution and Sale Agreement, the Assignment and
Assumption, the Fee Letter or any other instrument or document
furnished pursuant hereto; (iii) such Assignee confirms that it
has received a copy of this Agreement, the Certificate, the
Receivables Contribution and Sale Agreement and the Assignment
and Assumption, together with copies of the financial statements
referred to in Section 4.01 and such other documents and
information as it has deemed appropriate to make its own credit
analysis and
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decision to enter into such Assignment and to purchase such
Eligible Asset; (iv) such Assignee will, independently and
without reliance upon the Agent, any of its Affiliates, such
assigning Owner or any other Owner and based on such documents
and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not
taking action under this Agreement and the Fee Letter; (v) such
Assignee appoints and authorizes the Agent to take such action
as agent on its behalf and to exercise such powers under this
Agreement, the Certificate, the Receivables Contribution and
Sale Agreement, the Assignment and Assumption, the Fee Letter
and any other instruments or documents furnished pursuant hereto
as are delegated to the Agent by the terms hereof, together with
such powers as are reasonably incidental thereto; (vi) such
Assignee appoints as its agent the Collection Agent from time to
time designated pursuant to Section 6.01 to enforce its
respective rights and interests in and under the Pool
Receivables, the Related Security and the related Contracts;
(vii) such Assignee agrees that it will not institute against
the Investor any proceeding of the type referred to in
Section 7.01(g) so long as any commercial paper issued by the
Investor shall be outstanding or there shall not have elapsed
one year plus one day since the last day on which any such
commercial paper shall have been outstanding; and (viii) such
Assignee agrees that it will comply with the provisions of
Section 12.08(b).
SECTION 9.02. Assignment of Rights and Obligations.
(a) The Investor may assign to any Assignee all of its rights
and obligations under this Agreement (including, without
limitation, its right to make Purchases and reinvestments from
time to time hereunder and all Eligible Assets owned by it);
provided, however, that (i) each such assignment shall be of all
but not part of the Investor's rights and obligations under this
Agreement and all Eligible Assets owned by it, (ii) each such
assignment shall be to an Assignee, (iii) the parties to each
such assignment shall execute and deliver to the Agent, for its
acceptance, an Assignment and Acceptance, and (iv) the consent
of the Agent shall first have been obtained. Upon such
execution, delivery, acceptance and recording, from and after
the effective date specified in each Assignment and Acceptance,
which effective date shall be the later of (x) the date the
Agent receives the executed Assignment and Acceptance and
(y) the date of such Assignment and Acceptance, (I) the assignee
thereunder shall be a party hereto and shall have all the rights
and obligations of the Investor hereunder and (II) the assigning
Investor shall relinquish all of its rights and be released from
all of its obligations under this Agreement.
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(b) By executing and delivering an Assignment and
Acceptance, the assigning Investor and the assignee thereunder
confirm to and agree with each other and the other parties
hereto as follows: (i) other than as provided in such
Assignment and Acceptance, the assigning Investor makes no
representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made in
or in connection with this Agreement, the Certificate, the
Receivables Contribution and Sale Agreement, the Assignment and
Assumption, the Fee Letter or any other instrument or document
furnished pursuant hereto or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this
Agreement, the Certificate, the Receivables Contribution and
Sale Agreement, the Assignment and Assumption, the Fee Letter or
any other instrument or document furnished pursuant hereto, or
the perfection, priority or value of any ownership interest or
security interest created or purported to be created hereunder
or under the Receivables Contribution and Sale Agreement or the
Assignment and Assumption; (ii) the assigning Investor makes no
representation or warranty and assumes no responsibility with
respect to the financial condition of the Seller or Americas or
the performance or observance by the Seller or Americas of any
of its obligations under this Agreement, the Certificate, the
Receivables Contribution and Sale Agreement, the Assignment and
Assumption, the Fee Letter or any other instrument or document
furnished pursuant hereto; (iii) such assignee confirms that it
has received a copy of this Agreement, the Receivables
Contribution and Sale Agreement, the Assignment and Assumption,
the Certificate and the Fee Letter, together with copies of the
financial statements referred to in Section 4.01, information
regarding the Obligors and such other documents and information
as it has deemed appropriate to make its own analysis and
decision to enter into such Assignment and Acceptance; (iv) such
assignee will, independently and without reliance upon the
Agent, any of its Affiliates, the assigning Investor or any
former Owner and based on such documents and information as it
shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this
Agreement and the Fee Letter; (v) such assignee confirms that it
is an Assignee; (vi) such assignee appoints and authorizes the
Agent to take such action as agent on its behalf and to exercise
such powers under this Agreement, the Certificate, the
Receivables Contribution and Sale Agreement, the Assignment and
Assumption, the Fee Letter and any other instruments and
documents furnished pursuant hereto as are delegated to the
Agent by the terms hereof, together with such powers as are
reasonably incidental thereto; (vii) such Assignee appoints as
its agent the Collection Agent from time to time designated
pursuant to Section 6.01 to enforce its respective rights and
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interests in and under the Pool Receivables, the Related
Security and the related Contracts; (viii) such Assignee agrees
that it will not institute against the assigning Investor or any
former Investor any proceeding of the type referred to in
Section 7.01(g) so long as any commercial paper issued by the
assigning Investor or any former Investor shall be outstanding
or there shall not have elapsed one year plus one day since the
last day on which any such commercial paper shall have been
outstanding; and (ix) such Assignee agrees that it will comply
with the provisions of Section 12.08(b) and perform in
accordance with their terms all of the obligations which by the
terms of this Agreement are required to be performed by it as
the Investor.
(c) The Agent shall maintain at its office referred to
in Section 12.02 a copy of each Assignment and Acceptance
delivered to and accepted by it, which shall be available for
inspection by the Seller at any reasonable time and from time to
time upon reasonable prior notice.
(d) Upon its receipt of an Assignment and Acceptance
executed by any assigning Investor and an assignee representing
that it is an Assignee, the Agent shall, if such Assignment and
Acceptance has been completed and is in substantially the form
of Exhibit G hereto, (i) accept such Assignment and Acceptance
and (ii) give prompt notice thereof to the Seller.
SECTION 9.03. Annotation of Certificate. The Agent
shall annotate the Certificate to reflect any assignments made
pursuant to Section 9.01 or 9.02 or otherwise.
ARTICLE X
INDEMNIFICATION
SECTION 10.01. Indemnities by the Seller. Without
limiting any other rights which any Indemnified Party may have
hereunder or under applicable law, the Seller hereby agrees to
indemnify each Indemnified Party from and against any and all
claims, losses and liabilities (including reasonable attorneys'
fees) (all of the foregoing being collectively referred to as
"Indemnified Amounts") growing out of or resulting from this
Agreement or the Receivables Contribution and Sale Agreement or
the Assignment and Assumption or the use of proceeds of
Purchases or reinvestments or the ownership of Eligible Assets
or the security interest in Collateral or in respect of any
Receivable (or any portion thereof) or any Contract or
Collateral, excluding, however, (a) Indemnified Amounts to the
extent resulting from gross negligence or
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71
willful misconduct on the part of any Indemnified Party or
(b) any income taxes incurred by such Indemnified Party arising
out of or as a result of this Agreement or the Receivables
Contribution and Sale Agreement or the Assignment and Assumption
or the ownership of Eligible Assets or the security interest in
Collateral or in respect of any Receivable or any Contract or
Collateral; provided, however, that this indemnification shall
not constitute or include or provide for recourse against the
Seller (except as otherwise specifically provided in this
Agreement or the Assignment and Assumption) for uncollectible
Receivables. Without limiting the foregoing or being limited by
the foregoing (other than the foregoing proviso), the Seller
shall pay on demand to each Indemnified Party any and all
amounts necessary to indemnify such Indemnified Party from and
against any and all Indemnified Amounts relating to or resulting
from:
(i) any Receivable (or any portion thereof) becoming a
Pool Receivable which is not at the date thereof an Eligible
Receivable, or which (except for the passage or expiration
of a time limitation contained in the definition of the term
"Eligible Receivable" herein) thereafter ceases to be an
Eligible Receivable;
(ii) reliance on any representation or warranty or
statement made or deemed made by the Seller or Americas (or
any of their respective officers) under or in connection
with this Agreement, the Receivables Contribution and Sale
Agreement, the Assignment and Assumption or any Investor
Report or other written certificate or report delivered
pursuant hereto which shall have been incorrect in any
material respect when made;
(iii) the failure by the Seller or Americas to comply
with any applicable law, rule or regulation with respect to
any Pool Receivable (or any portion thereof) or the related
Contract or any Related Security, or the nonconformity of
any Pool Receivable (or any portion thereof) or the related
Contract or any Related Security with any such applicable
law, rule or regulation, in any such case to the extent that
such failure or non-conformity was within the Seller's or
Americas' control;
(iv) the failure to vest in the Owner of an Eligible
Asset an undivided percentage ownership interest, to the
extent of such Eligible Asset, in the Receivables in, or
purporting to be in, the Receivables Pool and the Related
Security and Collections in respect thereof, and a perfected
security interest in the Collateral, in each
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72
case free and clear of any Adverse Claim (whether existing
on the date of the initial Purchase under the Original
Agreement or at any time thereafter); or the failure of the
Seller to have obtained a perfected interest in the Pool
Receivables, Related Security and Collections with respect
thereto transferred or purported to be transferred to the
Seller under the Receivables Contribution and Sale Agreement
or the Assignment and Assumption, free and clear of any such
Adverse Claim;
(v) the failure of the Seller or Americas to have
filed, or any delay in filing by the Seller or Americas,
financing statements or other similar instruments or
documents under the UCC of any applicable jurisdiction or
other applicable laws with respect to any Receivables in, or
purporting to be in, the Receivables Pool and the Related
Security and Collections in respect thereof, or any
Collateral, whether at the time of any Purchase or
reinvestment or at any subsequent time;
(vi) any credit, rebate, discount, dispute, claim,
chargeback, allowance, offset, counterclaim, other dilution
factor or defense (other than discharge in bankruptcy of the
Obligor) of the Obligor to the payment of any Receivable (or
any portion thereof) in, or purporting to be in, the
Receivables Pool (including, without limitation, a defense
based on such Receivable or the related Contract not being a
legal, valid and binding obligation of such Obligor
enforceable against it in accordance with its terms), or any
other claim resulting from the sale of the merchandise or
services related to such Receivable or portion or the
furnishing or failure to furnish such merchandise or
services;
(vii) any failure of the Seller, as Collection Agent or
otherwise, to perform its duties or obligations in
accordance with the provisions of Article VI, or any failure
of the Seller or Americas to perform its duties or
obligations under the Contracts, this Agreement, the
Receivables Contribution and Sale Agreement or the
Assignment and Assumption;
(viii) any products liability claim allegedly arising out
of or in connection with merchandise or services which are
the subject of any Contract and any related personal injury
or damage suit;
(ix) any investigation, litigation or proceeding (other
than any investigation, litigation or proceeding solely
between the parties hereto, except as otherwise
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73
determined therein) related to this Agreement, the
Receivables Contribution and Sale Agreement, the Assignment
and Assumption, the Fee Letter or any other instrument or
document furnished pursuant hereto or the use of proceeds of
Purchases or reinvestments or the ownership of Eligible
Assets or the security interest in Collateral or in respect
of any Receivable (or any portion thereof), Related Security
or Contract or Collateral;
(x) the commingling of Collections of Pool Receivables
at any time with other funds; or
(xi) the Net Receivables Pool Balance being less than
the greater of (A) 120% of the sum of aggregate outstanding
Capital plus aggregate outstanding "Capital" under the
Parallel Purchase Commitment or (B) the sum of the aggregate
outstanding Capital and of the aggregate outstanding
"Capital", plus the aggregate Loss Reserve and the aggregate
"Loss Reserve", plus the aggregate Dilution Reserve and the
aggregate "Dilution Reserve", plus the aggregate Yield
Reserve and the aggregate "Yield Reserve", plus the
aggregate Collection Agent Fee Reserve and the aggregate
"Collection Agent Fee Reserve", plus 2% of aggregate
outstanding Capital and aggregate outstanding "Capital", in
each case for all Eligible Assets and all "Eligible Assets"
under the Parallel Purchase Commitment, or the occurrence of
any other Event of Investment Ineligibility.
ARTICLE XI
GRANT OF SECURITY INTEREST
SECTION 11.01. Grant of Security Interest. The Seller
hereby assigns and pledges to the Agent for the benefit of
itself, the Owners and each other Indemnified Party from time to
time, and hereby grants to the Agent for the benefit of itself,
the Owners and each other Indemnified Party from time to time, a
security interest in and to, all of the Seller's right, title
and interest in and to the following (collectively the
"Collateral"):
(a) the Receivables Contribution and Sale Agreement;
(b) the Assignment and Assumption;
(c) all rights to receive moneys due and to become due
under or pursuant to the Receivables Contribution and Sale
Agreement or the Assignment and Assumption;
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(d) all rights to receive proceeds of any indemnity,
warranty or guaranty with respect to the Receivables
Contribution and Sale Agreement or the Assignment and
Assumption;
(e) claims for damages arising out of or for breach of
or default under the Receivables Contribution and Sale
Agreement or the Assignment and Assumption;
(f) the right to perform under the Receivables
Contribution and Sale Agreement or the Assignment and
Assumption and to compel performance and otherwise exercise
all remedies thereunder; and
(g) all proceeds of any and all of the foregoing
Collateral (including, without limitation, proceeds which
constitute property of the types described in clauses (a)
through (f) of this Section 11.01).
SECTION 11.02. Security for Obligations. The
assignment, pledge and security interest granted under this
Article XI secures the payment of all obligations of the Seller
now or hereafter existing from time to time under this
Agreement, the Fee Letter, any other instruments and documents
furnished by the Seller pursuant hereto and otherwise in
connection with this Agreement, whether for Collections received
or deemed to have been received or otherwise payable by the
Seller, either individually or as Collection Agent, repurchases
of interests in Pool Receivables, interest, fees, costs,
expenses, taxes, indemnification or otherwise (all such
obligations being the "Obligations").
SECTION 11.03. Seller Remains Liable. Anything herein
to the contrary notwithstanding, (a) the Seller shall remain
liable under the Receivables Contribution and Sale Agreement and
the Assignment and Assumption to the extent set forth therein to
perform all of its duties and obligations thereunder to the same
extent as if this Agreement had not been executed, (b) the
exercise by the Agent of any of the rights hereunder shall not
release the Seller from any of its duties or obligations under
the Receivables Contribution and Sale Agreement or the
Assignment and Assumption, and (c) neither the Agent nor the
Investor nor any other Indemnified Party shall have any
obligation or liability under the Receivables Contribution and
Sale Agreement or the Assignment and Assumption by reason of
this Article XI, nor shall the Agent or the Investor or any
other Indemnified Party be obligated to perform any of the
obligations or duties of the Seller thereunder.
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SECTION 11.04. Further Assurances. (a) The Seller
agrees that from time to time, at the expense of the Seller, the
Seller will promptly execute and deliver all further instruments
and documents, and take all further action, that may be
necessary or reasonably desirable, or that the Agent may
reasonably request, in order to perfect and protect the
assignment and security interest granted or purported to be
granted hereby or to enable the Agent to exercise and enforce
its rights and remedies hereunder with respect to any
Collateral. Without limiting the generality of the foregoing,
the Seller will: (i) execute and file such financing or
continuation statements, or amendments thereto, and such other
instruments or notices, as may be necessary or reasonably
desirable, or as the Agent may reasonably request, in order to
perfect and preserve the assignment and security interest
granted or purported to be granted hereby, and (ii) upon the
request of the Agent, mark conspicuously each copy of each
chattel paper which evidences any of the Collateral and each of
its records pertaining to the Collateral with a legend, in form
and substance satisfactory to the Agent, indicating that such
chattel paper or Collateral is subject to the assignment and
security interest granted pursuant hereto.
(b) The Seller hereby authorizes the Agent to file one
or more financing or continuation statements, and amendments
thereto, relating to all or any part of the Collateral without
the signature of the Seller where permitted by law, and the
Agent shall notify the Seller of each such filing. A photocopy
or other reproduction of this Agreement or any financing
statement covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law.
SECTION 11.05. Payments With Respect to Collateral.
(a) The Seller agrees, and has effectively so instructed each
other party to the Receivables Contribution and Sale Agreement
and the Assignment and Assumption, respectively, that all
payments due or to become due under or in connection with the
Receivables Contribution and Sale Agreement or the Assignment
and Assumption shall be made directly to the Agent by direct
deposit to the Agent's Account specified in the Consent and
Agreement. If the Seller receives any such payments, within two
Business Days following its receipt thereof, it will deposit
such payments to the appropriate Agent's Account.
(b) Except as set forth in Section 11.09, all moneys
received pursuant to subsection (a) above shall be applied to
the payment of any Obligations payable, and remaining unpaid, by
the Seller at the time of such receipt, and all remaining moneys
shall be released by the Agent to the Seller or at its order.
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SECTION 11.06. Agent Appointed Attorney-in-Fact. The
Seller hereby irrevocably appoints the Agent the Seller's
attorney-in-fact, with full authority in the place and stead of
the Seller and in the name of the Seller or otherwise, from time
to time in the Agent's discretion following the occurrence and
during the continuance of an Event of Investment Ineligibility,
to take any action and to execute any instrument which the Agent
may deem necessary or advisable to accomplish the purposes of
the assignment, grant and security interest granted hereunder,
including, without limitation:
(a) to ask, demand, collect, sue for, recover,
compromise, receive and give acquittance and receipts for
moneys due and to become due under or in connection with the
Collateral,
(b) to receive, indorse and collect any drafts or
other instruments, documents and chattel paper in connection
therewith, and
(c) to file any claims or take any action or institute
any proceedings which the Agent may deem necessary or
desirable for the collection of any of the Collateral or
otherwise to enforce compliance with the terms and
conditions of the Receivables Contribution and Sale
Agreement or the Assignment and Assumption or the rights of
the Agent with respect to any of the Collateral.
SECTION 11.07. Agent May Perform. If the Seller fails
to perform any agreement contained herein, the Agent may itself
perform, or cause performance of, such agreement, and the
reasonable expenses of the Agent incurred in connection
therewith shall be payable by the Seller under Section 12.06(a).
SECTION 11.08. The Agent's Duties. The powers
conferred on the Agent hereunder are solely to protect its
interest in the Collateral and shall not impose any duty upon it
to exercise any such powers. Except for the safe custody of any
Collateral in its possession and the accounting for moneys
actually received by it hereunder, the Agent shall have no duty
as to any Collateral or as to the taking of any necessary steps
to preserve rights against any parties or any other rights
pertaining to any Collateral. The Agent shall be deemed to have
exercised reasonable care in the custody and preservation of any
Collateral in its possession if such Collateral is accorded
treatment substantially equal to that which it accords its own
property.
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SECTION 11.09. Remedies. If any Event of Investment
Ineligibility shall have occurred and be continuing:
(a) The Agent may exercise any and all rights and
remedies of the Seller under or in connection with the
Receivables Contribution and Sale Agreement or the
Assignment and Assumption or otherwise in respect of the
Collateral, including, without limitation, any and all
rights of the Seller to demand or otherwise require
performance of any provision of the Receivables Contribution
and Sale Agreement or the Assignment and Assumption.
(b) The Agent may exercise in respect of the
Collateral, in addition to other rights and remedies
provided for herein or otherwise available to it, all the
rights and remedies of a secured party on default under the
UCC in effect in the State of California (whether or not
such UCC applies to the affected Collateral).
(c) All payments received by the Seller in respect of
the Collateral shall be received in trust for the benefit of
the Agent, shall be segregated from other funds of the
Seller and shall be forthwith paid over to the Agent in the
same form as so received (with any necessary indorsement).
(d) All payments made in respect of the Collateral,
and all cash proceeds in respect of any sale of, collection
from, or other realization upon all or any part of the
Collateral, received by the Agent will be promptly applied
(after payment of any amounts payable to the Agent pursuant
to Section 12.06(a)) in whole or in part by the Agent for
the Owners or the applicable Indemnified Parties against all
or any part of the Obligations in such order as the Agent
shall elect. Any surplus of such payments or cash proceeds
held by the Agent and remaining after payment in full of all
the Obligations shall be paid over to the Seller or to
whomsoever may be lawfully entitled to receive such surplus.
ARTICLE XII
MISCELLANEOUS
SECTION 12.01. Amendments, Etc. No amendment or
waiver of any provision of this Agreement, and no consent to any
departure by the Seller herefrom, shall in any event be
effective unless the same shall be in writing and signed by the
Agent, the Investor and the Seller, and, if the Investor
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is Corporate Receivables Corporation, unless prior written
notice of the same shall have been delivered to Standard &
Poor's Ratings Group and Moody's Investors Service (and, in the
case of any material amendment, waiver or consent, the then
current ratings of the commercial paper of such Investor shall
have been confirmed in writing by Standard & Poor's Ratings
Group and Moody's Investors Service, giving effect to such
amendment, waiver or consent, it being understood that
extensions of the Facility Termination Date from time to time
are not material amendments, waivers or consents), and then such
amendment, waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
SECTION 12.02. Notices, Etc. All notices and other
communications provided for hereunder shall, unless otherwise
stated herein, be in writing (including telecommunication) and
mailed, telecommunicated or delivered, as to each party hereto,
at its address set forth under its name on the signature pages
hereof or at such other address as shall be designated by such
party in a written notice to the other parties hereto. All such
notices and communications shall, when mailed or
telecommunicated, be effective when deposited in the mails or
telecommunicated, respectively, except that notices and
communications to the Agent pursuant to Article II shall not be
effective until received by the Agent.
SECTION 12.03. No Waiver; Remedies. No failure on the
part of any Owner or the Agent to exercise, and no delay in
exercising, any right hereunder or under the Certificate or the
Fee Letter shall operate as a waiver thereof; nor shall any
single or partial exercise of any right hereunder preclude any
other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 12.04. Binding Effect; Assignability. This
Agreement shall be binding upon and inure to the benefit of the
Seller, the Agent, the Investor and each Owner and their
respective successors and assigns, except that the Seller shall
not have the right to assign its rights or obligations hereunder
or any interest herein without the prior written consent of the
Agent, and neither the Agent nor the Investor nor any Owner
shall have the right to assign its rights or obligations
hereunder or any interest herein to any Person other than any
Assignee without the prior written consent of the Seller and
(other than in the case of any assignment by the Agent) the
Agent. This Agreement shall create and constitute the
continuing obligation of the parties hereto in accordance with
its terms, and shall remain in full force and effect until the
Collection Date; provided, however, that rights and remedies
with respect to the indemnification
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provisions of Article X and Section 12.06 shall be continuing
and shall survive termination of this Agreement.
SECTION 12.05. Governing Law. This Agreement and the
Certificate shall be governed by, and construed in accordance
with, the laws of the State of California, except to the extent
that the validity or perfection of the interests of the Owners,
or remedies hereunder, in respect of the Receivables, any
Related Security or any Collections in respect thereof or any
Collateral are governed by the laws of a jurisdiction other than
the State of California.
SECTION 12.06. Costs, Expenses and Taxes. (a) In
addition to the rights of indemnification granted to the
Indemnified Parties under Article X hereof, the Seller agrees to
pay on demand all reasonable out-of-pocket costs and expenses of
the Agent in connection with the preparation, execution,
delivery, administration (including the annual audit
contemplated by Section 5.01(f), but no other audits),
modification and amendment of this Agreement, the Certificate,
the Fee Letter, the Receivables Contribution and Sale Agreement,
the Assignment and Assumption and the other documents to be
delivered hereunder, including, without limitation, the
reasonable fees and out-of-pocket expenses of counsel for the
Agent, with respect thereto and with respect to advising the
Agent as to its rights and remedies under this Agreement, the
Certificate, the Fee Letter, the Receivables Contribution and
Sale Agreement, the Assignment and Assumption and such other
documents, provided that the fees (excluding out-of-pocket
disbursements) of counsel for the Agent in connection with such
preparation, execution and delivery shall not exceed $75,000.
The Seller further agrees to pay on demand all reasonable costs
and expenses, if any (including, without limitation, reasonable
counsel fees and expenses), of the Agent, the Investor and the
Owners in connection with the enforcement (whether through
negotiations, legal proceedings or otherwise) of this Agreement,
the Certificate, the Fee Letter, the Receivables Contribution
and Sale Agreement, the Assignment and Assumption and the other
documents to be delivered hereunder, including, without
limitation, reasonable counsel fees and expenses in connection
with the enforcement of rights under this Section 12.06(a).
(b) In addition, the Seller shall pay any and all
stamp and other taxes and like fees payable or determined to be
payable in connection with the execution, delivery, filing and
recording of this Agreement, the Certificate, the Receivables
Contribution and Sale Agreement, the Assignment and Assumption
or the other documents to be delivered hereunder, and agrees to
save each Indemnified Party harmless from and against any and
all liabilities with respect to or
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resulting from any delay in paying or omission to pay such taxes
and fees.
(c) In addition, the Seller shall pay on demand all
other costs, expenses and taxes (excluding income taxes)
incurred by the Owner or any general or limited partner or
shareholder of the Owner ("Other Costs") with respect to the
cost of issuing the Owner's commercial paper, the taxes
(excluding income taxes) resulting from the Owner's operations,
and the reasonable fees and out-of-pocket expenses of counsel
for the Owner or any counsel for any general or limited partner
or shareholder of the Owner with respect to (i) advising the
Owner or any general or limited partner or shareholder of the
Owner as to its rights and remedies under this Agreement and the
Fee Letter, (ii) the enforcement (whether through negotiations,
legal proceedings or otherwise) of this Agreement, the
Certificate, the Fee Letter, the Receivables Contribution and
Sale Agreement, the Assignment and Assumption and the other
documents to be delivered hereunder, (iii) advising the Owner or
any general or limited partner or shareholder of the Owner as to
matters relating to the Owner's operations (other than any such
matter arising solely from the Owner's gross negligence or
willful misconduct), or (iv) advising the Owner or any general
or limited partner or shareholder of the Owner as to the
issuance of the Owner's commercial paper, and acting in
connection with such issuance; provided, however, that if the
Owner enters into agreements for the purchase of interests in
receivables from one or more other Persons ("Other Sellers"),
the Seller and such Other Sellers shall each be liable for such
Other Costs ratably in accordance with the usage under the
respective facilities of the Owner to purchase receivables or
interests therein from the Seller and each Other Seller; and
provided, further, that if such Other Costs are attributable to
the Seller and not attributable to any Other Seller, the Seller
shall be solely liable for such Other Costs.
SECTION 12.07. No Proceedings. The Seller and the
Agent each hereby agrees that it will not institute against the
Investor any proceeding of the type referred to in
Section 7.01(g) so long as any commercial paper issued by the
Investor shall be outstanding or there shall not have elapsed
one year plus one day since the last day on which any such
commercial paper shall have been outstanding.
SECTION 12.08. Confidentiality. (a) Except to the
extent otherwise required by applicable law, the Seller agrees
to maintain, and to cause its Affiliates to maintain, the
confidentiality of this Agreement, the Receivables Contribution
and Sale Agreement, the Assignment and Assumption and the Fee
Letter (and all drafts thereof) and not to disclose, and to
cause its Affiliates not to disclose, this
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Agreement, the Receivables Contribution and Sale Agreement, the
Assignment and Assumption or the Fee Letter or such drafts to
third parties (other than to its directors, officers, employees,
accountants or counsel, who shall in each case be instructed to
maintain such confidentiality); provided, however, that this
Agreement, the Assignment and Assumption and the Receivables
Contribution and Sale Agreement may be disclosed to third
parties to the extent such disclosure is (i) required in
connection with a sale of securities of the Seller, Merisel or
Americas or pursuant to reporting requirements of applicable
securities laws, (ii) made solely to persons who are legal
counsel for the purchaser or underwriter of such securities,
(iii) limited in scope to the provisions of Articles V, VII, X
and, to the extent defined terms are used in Articles V, VII and
X, such terms defined in Article I of this Agreement and
(iv) made pursuant to a written agreement of confidentiality in
form and substance reasonably satisfactory to the Agent.
(b) Each of the Agent and the Investor agrees to
maintain the confidentiality of, and not to disclose (other than
to employees, auditors, accountants, counsel or other
representatives of the Agent, the Investor and their respective
Affiliates, whether existing at the date of this Agreement or
any subsequent time, or to another Person if such Person or such
Person's holding or parent company or the Agent or the Investor
in its sole discretion determines that any such Person needs to
have access to such information in connection with the business
or operations of the Agent or the Investor, who shall in each
case be instructed to maintain such confidentiality), any
information with respect to the Seller, Merisel or Americas
which is furnished pursuant to this Agreement, provided that
each of the Agent and the Investor may disclose any such
information (i) as has become generally available to the public,
(ii) as may be required or appropriate in any report, statement
or testimony submitted to any municipal, state or Federal
regulatory body having or claiming to have jurisdiction over the
Agent or the Investor or to the Federal Reserve Board or the
Federal Deposit Insurance Corporation or similar organizations
(whether in the United States or elsewhere) or their successors,
(iii) as may be required or appropriate in response to any
summons or subpoena or in connection with any litigation or
regulatory proceeding, (iv) in order to comply with any law,
order, regulation or ruling applicable to the Agent or the
Investor, or (v) to any prospective Assignee or Participant;
provided, that such prospective Assignee or Participant, as the
case may be, executes an agreement containing provisions
substantially identical to those contained in this
subsection (b); and provided, further, that the Seller
acknowledges that the Agent has disclosed and may continue to
disclose such information as
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the Agent in its sole discretion determines is appropriate to
the Participants as of the date hereof.
SECTION 12.09. Execution in Counterparts. This
Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of
which when taken together shall constitute one and the same
agreement.
IN WITNESS WHEREOF, the parties have caused this
Agreement to be executed by their respective officers thereunto
duly authorized, as of the date first above written.
MERISEL CAPITAL FUNDING, INC.
By:_________________________________
Title:
200 Continental Boulevard
Suite 301
El Segundo, California 90245-0984
Attention: Treasurer
Telecopier No.: 310-615-6882
CORPORATE RECEIVABLES CORPORATION
By: Citicorp North America, Inc.,
as Attorney-in-Fact
By:____________________________
Vice President
450 Mamaroneck Avenue
Harrison, New York 10528
Attention: President
Telecopier No.: 914-899-7015
CITICORP NORTH AMERICA, INC., as
Agent
By:_________________________________
Vice President
450 Mamaroneck Avenue
Harrison, New York 10528
Attention: Corporate Asset Funding
Department
Telecopier No.: 914-899-7015
<PAGE>
EXHIBIT 10.32
RECEIVABLES CONTRIBUTION AND SALE AGREEMENT
Dated as of November 29, 1994
MERISEL AMERICAS, INC., a Delaware corporation (the
"Seller"), and MERISEL CAPITAL FUNDING, INC., a Delaware
corporation (the "Buyer"), agree as follows:
PRELIMINARY STATEMENTS.
(1) The Seller in the ordinary course of business
generates, and will generate from time to time, Receivables (as
hereinafter defined) from time to time owing to it.
(2) The Seller has, pursuant to the Purchase and Sale
Assignment and Assumption Agreement dated as of November 29,
1994 (the "Assignment and Assignment") between the Seller and
the Buyer, and effective as of December 15, 1994 (the "Effective
Date"), assigned to the Buyer all of the Seller's right, title
and interest in and to the Receivables existing at the close of
business of the Seller on the Effective Date in respect of each
of which, on such date, the Obligor is a "Designated Obligor"
(as defined in the Purchase Agreements referred to and as
defined below) (such Receivables being "Assigned Pool
Receivables").
(3) The Seller wishes to sell all Receivables arising
from time to time after the Effective Date in respect of each of
which, on the date of the sale of such Receivable to the Buyer
hereunder, the Obligor is a "Designated Obligor" (as defined in
the Purchase Agreements) (each such Receivable, and each
Assigned Pool Receivable, being a "Pool Receivable", each such
Receivable, and each Assigned Pool Receivable, continuing to be a
"Pool Receivable" hereunder until, and except to the extent,
such Receivable, or such Assigned Pool Receivable, shall have
been repurchased by the Seller as contemplated by Section 2.03
(unless and until the Buyer or the Agent, the Investor or any
Owner (in each case as defined in the Purchase Agreements) is at
any time required to return all or any portion of the amount of
such repurchase for any reason)), together with Related Security
and Collections (as hereinafter defined) related thereto, to the
Buyer from time to time as set forth in this Agreement.
(4) The Seller as predecessor to the Buyer as "Seller"
under and as defined in the Investor Agreement referred to and
as defined below, has sold interests, to the extent of the now
existing "Eligible Assets" referred to and as defined in the
Investor Agreement, in the Assigned Pool Receivables; and the
Buyer as the current "Seller" under and as defined in the
Invester Agreement wishes to sell interests, to the extent of
the "Eligible Assets" now existing or
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2
hereafter outstanding under the Investor Agreement, in each of
the other "Pool Receivables" (as defined in the Investor
Agreement) arising from time to time after the Effective Date,
together with "Related Security" and "Collections" (as defined
in the Investor Agreement) related thereto, owed from time to
time by "Designated Obligors" (as defined in the Investor
Agreement) pursuant to the Amended and Restated Trade
Receivables Purchase and Sale Agreement dated as of November 29,
1994 (as the same may from time to time be amended, supplemented
or otherwise modified, the "Investor Agreement") among the Buyer
(as the "Seller" thereunder), Corporate Receivables Corporation
(the "Investor"), and Citicorp North America, Inc. ("CNA"), as
agent (the "Agent") for the Investor and any other Owners of
Eligible Assets.
(5) If the Buyer does not, or can no longer, sell such
interests to the Investor pursuant to the Investor Agreement,
the Buyer would wish to sell similar interests to the Banks or
the Banks (other than Citibank, if applicable) and CNA under and
as defined in the Amended and Restated Trade Receivables
Purchase and Sale Agreement dated as of November 29, 1994 (as
the same may from time to time be amended, supplemented or
otherwise modified, the "Parallel Purchase Commitment", and
together with the Investor Agreement, collectively the "Purchase
Agreements" and individually a "Purchase Agreement") among the
Buyer, such Banks including Citibank, N.A., and CNA individually
and as Agent.
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. Capitalized
terms used herein but not otherwise defined herein shall have
the meanings specified in the Purchase Agreements. In addition,
as used in this Agreement, the following terms shall have the
following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
"Buyer's Collection Agent" has the meaning specified in
Section 5.01.
"Buyer's Collection Agent Fee" has the meaning
specified in Section 2.05.
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3
"Collections" means, with respect to any Pool
Receivable, all cash collections and other cash proceeds of
such Pool Receivable, including, without limitation, all
cash proceeds of Related Security with respect to such Pool
Receivable, and any Collection of such Pool Receivable
deemed to have been received pursuant to Section 2.03.
"Collected" shall have a similar meaning.
"Contract" means (i) an agreement between the Seller
and an Obligor, in substantially the form of one of the
forms of written contract delivered to the Buyer and the
Agent prior to the date hereof (or in substantially the form
of any other form of written contract delivered from time to
time to the Buyer and the Agent by the Seller after the date
hereof if such other form shall have been approved by the
Agent in its reasonable discretion) or containing payment
terms and conditions and covering sales of merchandise or
services of a type substantially similar thereto, or in the
case of an open account agreement, as evidenced by an
invoice of the Seller in substantially the form of one of
the forms of invoices delivered to the Buyer and the Agent
prior to the date hereof (or in substantially the form of
any other form of written invoice delivered from time to
time to the Buyer and the Agent by the Seller after the date
hereof if such other form shall have been approved by the
Agent in its reasonable discretion) or containing payment
terms and conditions and covering sales of merchandise or
services of a type substantially similar thereto, in each
case pursuant to or under which such Obligor shall be
obligated to pay for its purchase of merchandise or services
from time to time, or (ii) in the case of a Receivable of
the type described in clause (ii) of the definition of the
term "Receivable", the agreement or arrangement of the type
described in clause (iii) of the definition of the term
"Related Security" under which such Receivable arose.
"Discount Percentage" has the meaning specified for
such term in Schedule I to this Agreement.
"Indemnified Party" means any of the Buyer, the
Investor, Citibank, CNA, any Owner, any Bank, the Agent or
any Affiliate of any thereof, and "Indemnified Parties"
means all of the Buyer, the Investor, Citibank, CNA, the
Owners, the Banks, the Agent and their respective
Affiliates.
"Obligor" means a Person (other than the Seller or the
Buyer) either (i) which is obligated to make payments
pursuant to a Contract of the type described in clause (i)
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4
of the definition of the term "Contract" contained in this
Section 1.01 or (ii) which has financed or is obligated to
finance (by lending to an Obligor referred to in clause (i)
above, or by purchasing from the Seller, if the
consideration to be paid by such Person for such purchase is
in the form of indebtedness, or the Buyer, if such
consideration is in the form of cash, or otherwise), or is a
party to an agreement that contemplates that such Person may
so finance, a Receivable.
"Original Obligor" means any Obligor referred to in
clause (i) of the definition of "Obligor" contained in this
Section 1.01.
"Pool Receivable" has the meaning specified in
Preliminary Statement (3).
"Purchase Price" has the meaning specified in
Section 2.02(a).
"Receivable" means (i) the indebtedness of any Original
Obligor under a Contract of the type described in clause (i)
of the definition of the term "Contract" arising from a sale
of merchandise by the Seller (except for sales of
merchandise by the "Channel Services Group" of the Seller)
to such Original Obligor, including without limitation any
such indebtedness which may be financed by any Floor Plan
Obligor, and (ii) the indebtedness of any Floor Plan Obligor
arising from the sale by the Seller of any indebtedness
referred to in clause (i) above to such Floor Plan Obligor
under the agreement or arrangement of the type described in
clause (iii) of the definition of the term "Related
Security" contained herein relating to such indebtedness,
and, in the case of clauses (i) and (ii) above, includes the
right to payment of any interest or finance charges and
other obligations of such Obligor with respect thereto.
Unless otherwise stated, the term "Obligor" of any
Receivable refers to both the Original Obligor that owes
such Receivable and, if applicable, the Floor Plan Obligor
that finances, or may finance, such Receivable.
"Receivable Assets" has the meaning specified in
Section 2.01(a).
"Receivables Activity Report" means the monthly report
prepared by the Buyer's Collection Agent, in substantially
the form of Exhibit A hereto, pursuant to Section 2.03.
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5
"Records" means all Contracts and other documents,
books, records, and other tangible information (including,
without limitation, computer programs, tapes, disks, punch
cards, data processing software and related property and
rights) maintained by or in possession of the Seller with
respect to Receivables, Related Security or the related
Obligors in connection with this Agreement.
"Related Security" means with respect to any
Receivable:
(i) all of the Seller's interest in the
merchandise (including returned merchandise), if any,
relating to the sale which gave rise to such Receivable
until such Receivable shall be paid in full pursuant to
Sections 2.03 and 4.01(i);
(ii) all other security interests or liens and
property subject thereto from time to time purporting
to secure payment of such Receivable, whether pursuant
to the Contract related to such Receivable or
otherwise, together with all financing statements
signed by an Obligor describing any collateral securing
such Receivable;
(iii) all floorplan repurchase agreements,
repurchase agreements, inventory financing agreements,
and other floorplan agreements, and guarantees,
insurance and other agreements or arrangements of
whatever character, from time to time financing or
otherwise supporting or securing payment of such
Receivable whether pursuant to the Contract related to
such Receivable or otherwise; and
(iv) all Records.
"Settlement Date" means the 15th Business Day of each
calendar month (or, if such day is not a Business Day, the
immediately succeeding Business Day).
"Subordinated Note" means a subordinated promissory
note, in substantially the form of Exhibit B hereto,
executed by the Buyer to the order of the Seller.
"Subsidiary" means, as applied to any Person, any
corporation of which 50% or more of the outstanding voting
securities of such corporation shall at the time be owned or
controlled, directly or indirectly, by such Person or by one
or more Subsidiaries of such Person or by such Person and
one or more of its Subsidiaries, or any similar business
organization which is so owned or controlled.
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"Termination Date" means the later of (i) the Facility
Termination Date under and as defined in the Investor
Agreement and (ii) the Commitment Termination Date under and
as defined in the Parallel Purchase Commitment.
SECTION 1.02. Other Terms. All accounting terms not
specifically defined herein shall be construed in accordance
with generally accepted accounting principles. All terms used
in Division 9 of the UCC in the State of California, and not
specifically defined herein, are used herein as defined in such
Division 9.
SECTION 1.03. Computation of Time Periods. Unless
otherwise stated in this Agreement, in the computation of a
period of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to"
and "until" each means "to but excluding".
ARTICLE II
SALE OF POOL RECEIVABLES
SECTION 2.01. Sale of Pool Receivables. (a) The
Seller hereby sells and assigns, without recourse (except as
expressly provided herein), to the Buyer, on the terms and
subject to the conditions specifically set forth herein, all its
right, title and interest in, to and under all Pool Receivables
arising from time to time after the Effective Date, all Related
Security with respect thereto, all Collections and other amounts
received with respect thereto and all proceeds of the foregoing,
together with all the Seller's rights, remedies, powers and
privileges with respect to such Pool Receivables (collectively,
the "Receivable Assets") during the period from the Effective
Date to the Termination Date.
(b) The parties to this Agreement intend that the
transactions contemplated hereby shall be, and shall be created
as, a purchase by the Buyer and a sale by the Seller of
Receivable Assets and not as a lending transaction. The
foregoing sales and assignments do not constitute and are not
intended to result in a creation or assumption by the Buyer of
any obligation or liability with respect to any Pool Receivable
or Contract, nor shall the Buyer be obligated to perform or
otherwise be responsible for any obligation of the Seller or any
other Person in connection with any Receivable Assets or under
any agreement or instrument relating thereto, including any
Contract or any other obligation to any Obligor.
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(c) In connection with the foregoing sales and
assignments, the Seller agrees to record and file, at its own
expense, proper financing statements (and proper continuation
statements with respect to such financing statements when
applicable) with respect to the Receivable Assets now and
hereafter from time to time acquired by the Buyer under this
Agreement, in such manner and in such jurisdictions as are
necessary to perfect the sales and assignments of the Receivable
Assets to the Buyer hereunder, and to deliver file-stamped
copies of such financing statements or other evidence of such
filings to the Buyer and the Agent on or prior to the initial
Purchase under either Purchase Agreement. Such financing
statements shall name the Buyer as buyer/secured party, the
Seller as seller/debtor and the Agent, as assignee.
SECTION 2.02. Terms of Sales. (a) On each Business
Day after the Effective Date, the Buyer shall buy from the
Seller, and the Seller shall sell and assign to the Buyer, the
Seller's right, title and interest in, to and under those
Receivable Assets that are created on such Business Day. As
consideration for such continuing sale and assignment of
Receivable Assets after the Effective Date, the Buyer shall pay
(or cause to be paid) to the Seller on or before each Settlement
Date an amount (the "Purchase Price") equal to the product of
(i) the aggregate Outstanding Balance of Pool Receivables that
are newly created from time to time during the Fiscal Month
ended immediately preceding such Settlement Date and (ii) the
Discount Percentage applicable to such Pool Receivables.
(b) On each Settlement Date, the actual Purchase Price
for Receivable Assets sold during the Fiscal Month ended
immediately preceding such Settlement Date shall be determined
in the Receivables Activity Report and shall be paid by the
Buyer. Such Purchase Price to be so paid by the Buyer shall be
paid in any of the following ways:
(i) in cash paid to the Seller in U.S. dollars in
same day funds on or before the end of such Fiscal Month; or
(ii) by contribution on such Settlement Date by
the Seller to the Buyer as a capital contribution that
amount in cash required to enable the Buyer to pay the
Purchase Price, and by the Buyer's payment of such cash to
the Seller; or
(iii) upon the agreement of the Seller and the
Buyer, by means of indebtedness owed by the Buyer to the
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8
Seller evidenced by, and payable with interest pursuant to,
the Subordinated Note; or
(iv) a combination of any of the above;
provided, however, that to the extent that on such Settlement
Date the Buyer shall not pay such Purchase Price for such
Receivable Assets by way of cash referred to in clause
(i) above, on such Settlement Date the Seller shall contribute
to the Buyer as a capital contribution, and the Buyer shall pay
in respect of such Purchase Price, in accordance with clause
(ii) above that amount of cash such that the total equity
capital of the Buyer is at least 12% of the then aggregate
Outstanding Balance of the then existing Pool Receivables
(including such Receivable Assets) before the Buyer may make any
payment in respect of such Purchase Price by means of
indebtedness owed by the Buyer to the Seller evidenced by the
Subordinated Note as contemplated by clause (iii) above.
SECTION 2.03. General Settlement Procedures. If on
any day (i) the Outstanding Balance of a Pool Receivable is
either (A) reduced as a result of any defective, rejected or
returned merchandise or services, or any credit, rebate,
discount, dispute, chargeback, allowance or other dilution
factor or any other adjustment by the Seller or any Affiliate
thereof, or (B) reduced or cancelled as a result of a setoff in
respect of any claim by the Obligor thereof against the Seller
or any Affiliate thereof (whether such claim arises out of the
same or a related transaction or an unrelated transaction), or
(ii) in connection with any sale of any Pool Receivable to any
Floor Plan Obligor contemplated by Section 5.03(a) of the
Purchase Agreements, the consideration paid by such Floor Plan
Obligor as contemplated by such Section 5.03(a) shall be less
than the Outstanding Balance of such Pool Receivable as a result
of finance charges payable to such Floor Plan Obligor in
connection with such sale, the Seller shall be deemed to have
received on such day a Collection of such Receivable in the
amount of such reduction or cancellation, in the case of
clause (i), or, in the case of clause (ii), in the amount of the
excess of the Outstanding Balance of such Receivable over the
consideration paid by such Floor Plan Obligor in connection with
the sale thereof as contemplated by such Section 5.03(a). If on
any day any of the representations or warranties in
Section 3.01(h) is no longer true with respect to all or any
portion of a Pool Receivable, the Seller shall be deemed to have
received on such day a Collection in full of such Pool
Receivable or portion, as the case may be. In the case of each
of the two preceding sentences, upon any such payment by the
Seller of any amount of any such Receivable, the Seller shall be
deemed
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9
to have repurchased (without recourse and without representation
or warranty, express or implied) such Receivable to the extent
of such amount and such amount of such Receivable shall cease to
be a "Pool Receivable" for purposes of this Agreement (unless
and until the Buyer, the Agent, the Investor or any Owner is at
any time required to return all or any portion of such amount
for any reason). Except as otherwise provided in the preceding
three sentences or as otherwise required by law or the
underlying Contract, all Collections received from an Obligor of
any Receivable shall be applied to Receivables then outstanding
of such Obligor in the order of the age of such Receivables,
starting with the oldest such Receivable, except if payment is
designated by such Obligor for application to specific
Receivables. Prior to the 15th Business Day of each Fiscal
Month, the Buyer's Collection Agent shall prepare and forward to
the Buyer and to the Agent for each Owner of an Eligible Asset
(A) a Receivables Activity Report relating to the sale of
Receivable Assets to the Buyer hereunder during the immediately
preceding Fiscal Month, and (B) (1) in the case of each Obligor
owing Pool Receivables the aggregate Outstanding Balance of
which exceeds the Concentration Limit or, if applicable, the
Special Concentration Limit for such Obligor at such time, a
listing by Obligor of the aggregate Outstanding Balance of the
Pool Receivables owed by such Obligor, together with an analysis
as to the aging of such aggregate Receivables, as of such last
day, and (2) an analysis as to the aging of the aggregate Pool
Receivables owed by all Obligors, and (3) in the case of each
Obligor, if and to the extent requested by the Buyer or the
Agent, a listing by Obligor of each Pool Receivable owed by such
Obligor, together with an analysis as to the aging of such
Receivables, as of such last day. On or prior to the day the
Collection Agent is required to make a deposit with respect to a
Settlement Period pursuant to Section 2.06 or 2.07 of the
Purchase Agreements, the Seller will advise the Buyer and the
Agent of each Liquidation Day and each Provisional Liquidation
Day occurring during such Settlement Period and of the
allocation of the amount of such deposit to each outstanding
Eligible Asset; provided, however, that, if the Seller is not
the Buyer's Collection Agent, the Seller shall advise the
Buyer's Collection Agent of the occurrence of each such
Liquidation Day and each Provisional Liquidation Day occurring
during such Settlement Period on or prior to such day.
SECTION 2.04. Payments and Computations, Etc.
(a) All amounts to be paid or deposited by the Seller or the
Buyer's Collection Agent hereunder shall be paid or deposited in
accordance with the terms hereof no later than 1:00 P.M.
(New York City time) on the day when due in lawful money of the
United States of America in same day funds to the Buyer as
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10
directed by the Buyer to the Seller in writing. The Seller
shall, to the extent permitted by law, pay to the Buyer interest
on all amounts not paid or deposited when due hereunder at 2%
per annum above the Alternate Base Rate, payable on demand,
provided, however, that such interest rate shall not at any time
exceed the maximum rate permitted by applicable law. All
computations of interest and fees hereunder shall be made on the
basis of a year of 360 days for the actual number of days
(including the first but excluding the last day) elapsed.
(b) The Seller hereby irrevocably and unconditionally
waives and relinquishes to the fullest extent it may legally do
so (i) any express or implied vendor's lien, and any other lien,
security interest, charge or encumbrance, which would otherwise
be imposed on or affect any Assigned Pool Receivable or any
Receivable Asset on account of any unpaid amount of the Initial
Purchase Price or any Purchase Price therefor or on account of
any other unpaid amounts otherwise payable by the Buyer under or
in connection with this Agreement or the Subordinated Note or
otherwise and (ii) with respect to the obligations of the Seller
to make payments or deposits under this Agreement (including,
without limitation, payments under Sections 2.03 and 6.01), any
set-off, counterclaim, recoupment, defense and other right or
claim which the Seller may have against the Buyer as a result of
or arising out of the failure of the Buyer to pay any amount on
account of the Initial Purchase Price or any Purchase Price
under Sections 2.01 and 2.02 or any other amount payable by the
Buyer to the Seller under this Agreement or the Subordinated
Note or otherwise.
SECTION 2.05. Buyer's Collection Agent Fee. The Buyer
shall pay to the Buyer's Collection Agent a collection fee (the
"Buyer's Collection Agent Fee") from the Effective Date until
the Collection Date, payable on each Settlement Date, in an
amount equal to the amount payable to the Collection Agent (if
not the Seller or any Affiliate thereof) under the Purchase
Agreements or such other amount calculated on an arm's-length
basis for services performed as a subcontractor on terms common
to collection agency arrangements in comparable asset sale
transactions.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. Representations and Warranties of the
Seller. The Seller represents and warrants as follows:
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(a) The Seller is a corporation duly incorporated,
validly existing and in good standing under the laws of the
jurisdiction indicated at the beginning of this Agreement
and is in good standing under the laws of the State of
California. All of the issued and outstanding shares of
stock of the Buyer are owned by the Seller free and clear of
any Adverse Claim.
(b) The execution, delivery and performance by the
Seller of this Agreement, the Consent and Agreement and the
Assignment and Assumption, and all other instruments and
documents to be delivered by it hereunder or in connection
herewith, and the transactions contemplated hereby and
thereby, and the Seller's use of the proceeds of the sales
of Receivable Assets hereunder, are within the Seller's
corporate powers, have been duly authorized by all necessary
corporate action, do not contravene (i) the Seller's charter
or by-laws or (ii) law or any Contract or other contractual
restriction binding on or affecting the Seller, and do not
result in or require the creation of any Adverse Claim
(other than pursuant hereto or pursuant to the Assignment
and Assumption) upon or with respect to any of its
properties; and no transaction contemplated hereby requires
compliance with any bulk sales act or similar law.
(c) No authorization or approval or other action by,
and no notice to or filing with, any governmental authority
or regulatory body is required for the due execution,
delivery and performance by the Seller of this Agreement,
the Consent and Agreement or the Assignment and Assumption,
or any other instrument or document to be delivered by it
hereunder or in connection herewith, or for the perfection
of or the exercise by any Indemnified Party of its rights
and remedies under this Agreement, the Consent and Agreement
and the Assignment and Assumption and such other instruments
and documents, except for the filing of the financing
statements referred to in Section 2.01(c), all of which, on
or prior to the Effective Date under either Purchase
Agreement, will have been duly made and be in full force and
effect, and except for the filing of continuation
statements, if applicable, with respect to such financing
statements.
(d) This Agreement and the Assignment and Assumption
are, and the Consent and Agreement when delivered will be,
the legal, valid and binding obligations of the Seller
enforceable against the Seller in accordance with their
respective terms, except as may be limited by the effect of
any applicable bankruptcy, insolvency, reorganization,
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12
moratorium or similar laws affecting creditors' rights
generally and by general principles of equity.
(e) The consolidated and consolidating balance sheets
of the Seller and its consolidated subsidiaries as at
September 30, 1994, and the related consolidated and
consolidating statements of income and of retained earnings
and of cash flows of the Seller and its consolidated
subsidiaries for the nine month period ended on such date, a
copy of which has been furnished to the Agent, fairly
present (subject to normal year-end adjustments and the
absence of footnotes required under generally accepted
accounting principles) the consolidated financial condition
of the Seller and its consolidated subsidiaries as at such
date and the consolidated results of operations of the
Seller and its consolidated subsidiaries for such period,
all in accordance with generally accepted accounting
principles consistently applied, and since September 30,
1994, there has been no material adverse change in such
condition or operations.
(f) Except as disclosed in Merisel's 1993 annual
report on Form 10-K, a copy of which has been furnished to
the Buyer and the Agent, or as set forth on Schedule II
hereto, there is no pending or, to the best knowledge of the
Seller, threatened action or proceeding affecting the Seller
or any of its subsidiaries before any court, governmental
agency or arbitrator which may materially adversely affect
(i) the financial condition or operations of the Seller and
its subsidiaries taken as a whole or (ii) the ability of the
Seller to perform its obligations under this Agreement, the
Consent and Agreement or the Assignment and Assumption, or
any other instrument or document to be delivered by it
hereunder or in connection herewith, or which purports to
affect the legality, validity or enforceability of this
Agreement, the Consent and Agreement or the Assignment and
Assumption or any such other instrument or document.
(g) No proceeds of any Purchase or reinvestment will
be used to acquire any equity security of a class which is
registered pursuant to Section 12 of the Securities Exchange
Act of 1934.
(h) Immediately prior to the time of the initial
creation of an interest hereunder or under the Assignment
and Assumption in any interest in any Pool Receivable, the
Seller will be the legal and beneficial owner of such
interest and the Related Security with respect thereto, free
and clear of any Adverse Claim except as created by this
Agreement or the Assignment and Assumption, as
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applicable to such Pool Receivable, and the Purchase
Agreements. Each Pool Receivable is, as of the date of the
initial creation of an interest therein hereunder or the
effective date of the Assignment and Assumption, as
applicable to such Pool Receivable (other than, in the case
of any Receivable that is not an Eligible Receivable solely
because it is a Defaulted Receivable or a Delinquent
Receivable, on the date of the initial purchase and sale
hereunder or the effective date of the Assignment and
Assumption, as applicable to such Pool Receivable), an
Eligible Receivable or, if such Receivable is not an
Eligible Receivable on such date, the Seller has paid when
due all amounts payable by it pursuant to the second
sentence of Section 2.03 and Section 4.01(i) as a result of
such Receivable not being an Eligible Receivable on such
date. Upon each sale and assignment of each interest in
each Pool Receivable hereunder or under the Assignment and
Assumption, as applicable to such Pool Receivable, the Buyer
will acquire a valid and perfected undivided 100% ownership
interest in such interest and in the Related Security and
Collections with respect thereto free and clear of any
Adverse Claim except as created by this Agreement or the
Assignment and Assumption, as applicable to such Pool
Receivable, and the Purchase Agreements. No effective
financing statement or other instrument similar in effect
covering any Contract or any Pool Receivable, Related
Security or Collections with respect thereto is on file in
any recording office, except those filed in favor of the
Agent relating to the Purchase Agreements or in favor of the
Buyer and the Agent and relating to this Agreement or the
Assignment and Assumption, as applicable to such Pool
Receivable, or those listing the Seller or the Buyer as
secured party and the applicable Obligor as debtor.
(i) In the case of each Receivables Activity Report
and each Investor Report (if prepared by the Seller or any
Affiliate thereof, or to the extent that information
contained therein is supplied by the Seller or any Affiliate
thereof), information, exhibit, financial statement,
document, book, record or report furnished or to be
furnished at any time by the Seller to the Buyer or the
Agent or any Owner in connection with this Agreement or
either Purchase Agreement, (i) as of the date so furnished,
all facts stated as such in any such document were true and
complete in all material respects and, in the case of any
projections contained in any such documents, all facts upon
which such projections were based were true and complete in
all material respects and no material fact was omitted from
that basis, and all
<PAGE>
14
estimates and assumptions made on that basis were made in
good faith and believed to be reasonable at the time made,
it being recognized by the Buyer, the Agent and the Owners
that such projections as to future events are not to be
viewed as facts and that actual results during the period or
periods covered thereby may differ from such projections,
and (ii) no such document contains or will contain as of the
date so furnished any material misstatement of fact or omits
or will omit to state a material fact or any fact necessary
in order to make the statements contained therein, in the
light of the circumstances under which they were made, not
misleading.
(j) The chief place of business and chief executive
office of the Seller is located at the address specified in
Section 7.02 hereto and the offices where the Seller keeps
its Records are located at such address and such other
addresses as are specified on Schedule III hereto (or at
such other locations, notified to the Buyer and the Agent in
accordance with Section 4.01(g), in jurisdictions where all
action required by Section 5.04 has been taken and
completed).
(k) The names and addresses of all the Lock-Box Banks,
together with the account numbers of the Lock-Box Accounts
at such Lock-Box Banks, are specified in Schedule II to the
Purchase Agreements (or at such other Lock-Box Banks and/or
with such other Lock-Box Accounts as have been notified to
the Agent and for which Lock-Box Agreements and the related
Lock-Box Notices have been executed in accordance with
Section 5.03(d) of the Purchase Agreements).
(l) Neither the Seller nor any Affiliate of the Seller
has any direct or indirect ownership or other financial
interest in any Owner.
(m) Each sale of Pool Receivables hereunder and each
Purchase and each reinvestment of Collections in Pool
Receivables under the Purchase Agreements will constitute
(i) a "current transaction" within the meaning of
Section 3(a)(3) of the Securities Act of 1933, as amended,
and (ii) a purchase or other acquisition of notes, drafts,
acceptances, open accounts receivable or other obligations
representing part or all of the sales price of merchandise,
insurance or services within the meaning of Section 3(c)(5)
of the Investment Company Act of 1940, as amended.
(n) The aggregate Outstanding Balance at any time of
the Pool Receivables evidenced at such time by any
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15
"instrument" or "chattel paper" within the meaning of the
UCC in effect in the State of California does not exceed 5%
of the aggregate Outstanding Balance of all Pool Receivables
at such time.
(o) The Purchase Price payable on each Settlement Date
pursuant to Section 2.02 for the Receivable Assets created
after the Effective Date constitutes fair consideration and
approximates fair market value for such Receivable Assets,
and the terms and conditions (including, without limitation,
the Purchase Price) of the sale of such Receivable Assets
pursuant to Sections 2.01 and 2.02 reasonably approximate an
arm's-length transaction between unaffiliated parties. Each
such sale will not be made for or on account of an
antecedent debt owed by the Seller to the Buyer and no such
sale will be voidable or subject to avoidance under any
section of the Federal Bankruptcy Code.
(p) The Seller has filed, or caused to be filed or be
included in, all tax reports and returns (federal, state,
local and foreign), if any, required to be filed by it or
any of its subsidiaries and paid or cause to be paid all
amounts of taxes, including interest and penalties required
to be paid by it or any of its subsidiaries, except for such
taxes (i) as are being contested in good faith by proper
proceedings and (ii) against which adequate reserves shall
have been established in accordance with and to the extent
required by generally accepted accounting principles, but
only so long as the proceedings referred to in clause (i)
above could not subject any Indemnified Party to any civil
or criminal penalty or liability or involve any material
risk of the loss, sale or forfeiture of any property, rights
or interests covered hereunder or under the Assignment and
Assumption or the Purchase Agreements.
(q) The Seller has confirmed in writing to the Buyer
and the Agent that the Seller will not cause the Buyer to
file a voluntary petition under the Federal Bankruptcy Code
or any other bankruptcy or insolvency laws so long as the
Buyer is not "insolvent" within the meaning of the Federal
Bankruptcy Code, and unless, and only unless, such filing
has been authorized in accordance with the Buyer's
Certificate of Incorporation, and by all "Independent
Directors" (as defined in such Certificate of Incorporation)
on the Buyer's Board of Directors, which "Independent
Directors" have taken into consideration the interests of
the creditors of the Buyer, rather than solely the interests
of the shareholder(s) of the Buyer.
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16
(r) The Seller has advised its independent certified
public accountants that the Buyer, the Agent and the Owners
have been authorized to review and discuss with such
accountants, upon the written request of the Buyer or the
Agent, any and all financial statements and other
information that they may have reasonably requested with
respect to the Seller and has directed such accountants to
comply with any reasonable request of the Buyer or the Agent
for such information.
(s) The Seller has no tradenames, fictitious names,
assumed names or "doing business as" names, except "Channel
Services Group" and "Merisel".
ARTICLE IV
GENERAL COVENANTS OF THE SELLER
SECTION 4.01. Affirmative Covenants of the Seller.
Until the Collection Date, the Seller will, unless the Buyer and
the Agent shall otherwise consent in writing:
(a) Compliance with Laws, Etc. Comply in all material
respects with all applicable laws, rules, regulations and
orders with respect to it, its business and properties and
all Pool Receivables and related Contracts, Related Security
and Collections with respect thereto, including without
limitation paying promptly when due all taxes, assessments
and governmental charges or levies imposed upon it or any
Pool Receivables, Related Security or Collections
(including, but not limited to, any intangibles property or
similar tax), or in respect of its income or profits
therefrom, and any and all claims of any kind (including,
without limitation, claims for labor, materials and
supplies), other than any such tax, assessment, charge or
levy (i) which is being contested in good faith and by
proper proceedings and (ii) with respect to which the
obligation to pay such amount is adequately reserved against
in accordance with and to the extent required by generally
accepted accounting principles (but only so long as the
proceedings referred to in clause (i) above could not
subject any Indemnified Party to any civil or criminal
penalty or liability or involve any material risk of the
loss, sale or forfeiture of any property, rights or
interests covered hereunder or under the Assignment and
Assumption or the Purchase Agreements).
(b) Preservation of Corporate Existence. Preserve and
maintain its corporate existence, rights, franchises and
privileges in the jurisdiction of its incorporation,
<PAGE>
17
and qualify and remain qualified in good standing as a
foreign corporation in the State of California and in each
other jurisdiction where the failure to preserve and
maintain such existence, rights, franchises, privileges and
qualification would materially adversely affect the
interests of the Buyer or the Owners or the Agent hereunder
or in the Pool Receivables or Related Security, or the
ability of the Seller or the Buyer's Collection Agent to
perform their respective obligations hereunder or under the
Assignment and Assumption or the ability of the Seller or
the Buyer to perform its obligations under the Contracts.
(c) Maintenance of Separate Existence. Do all things
necessary to maintain its corporate existence separate and
apart from Merisel, FAB, the Buyer and other Affiliates of
the Seller, including, without limitation, (i) maintaining
proper corporate records and books of account separate from
those of such Affiliates; (ii) maintaining its assets, funds
and transactions separate from those of such Affiliates,
reflecting such assets and transactions in financial
statements separate and distinct from those of such
Affiliates, and evidencing such assets, funds and
transactions by appropriate entries in the books and records
referred to in clause (i) above, and providing for its own
operating expenses and liabilities from its own assets and
funds other than certain expenses and liabilities relating
to basic corporate overhead which may be allocated between
the Seller and such Affiliates; (iii) holding such
appropriate meetings or obtaining such appropriate consents
of its Board of Directors as are necessary to authorize all
the Seller's corporate actions required by law to be
authorized by the Board of Directors, keeping minutes of
such meetings and of meetings of its stockholders and
observing all other customary corporate formalities (and any
successor Seller not a corporation shall observe similar
procedures in accordance with its governing documents and
applicable law); (iv) at all times entering into its
contracts under the Seller's own name as a legal entity
separate and distinct from such Affiliates; and
(v) conducting all transactions and dealings between the
Seller and such Affiliates on an arm's-length basis;
provided, however, that nothing contained herein shall
prohibit any Permitted Transaction or any action or
transaction necessary in connection therewith.
(d) Audits. (i) At any time and from time to time
during regular business hours, permit the Buyer or Agent, or
their respective agents or representatives, (A) to
<PAGE>
18
examine and make copies of and abstracts from all books,
records and documents (including, without limitation,
computer tapes and disks) in the possession or under the
control of the Seller relating to Pool Receivables and the
Related Security, including, without limitation, the related
Contracts, and (B) to visit the offices and properties of
the Seller for the purpose of examining such materials
described in clause (A) above, and to discuss matters
relating to Pool Receivables and the Related Security or the
Seller's performance hereunder or under the Contracts with
any of the officers or employees of the Seller having
knowledge of such matters, and (ii) within 120 days after
the end of each fiscal year of the Seller, cause its
independent public accountants to review, and deliver to the
Buyer and the Agent a written review of, an audit conducted
by the Seller with respect to the Pool Receivables, Credit
and Collection Policy and Lock-Box Account activity on a
scope and in a form reasonably requested by the Agent for
such audit.
(e) Keeping of Records and Books of Account. Maintain
and implement administrative and operating procedures
(including, without limitation, an ability to recreate
records evidencing Pool Receivables in the event of the
destruction of the originals thereof), and keep and
maintain, all documents, books, records and other
information reasonably necessary or advisable for the
collection of all Pool Receivables (including, without
limitation, records adequate to permit the daily
identification of each new Pool Receivable and all
Collections of and adjustments to each existing Pool
Receivable).
(f) Performance and Compliance with Receivables and
Contracts. At its expense timely and fully (i) perform, or
cause to be performed, and comply with, or cause to be
complied with, all material provisions, covenants and other
promises required to be observed by it under the Contracts
related to the Pool Receivables, and (ii) as beneficiary of
any Related Security, enforce such Related Security as
reasonably requested by the Agent.
(g) Location of Records. Keep its chief place of
business and chief executive office and the office where it
keeps the originals of its Records at the address of the
Seller referred to in Section 3.01(j) or, upon 30 days'
prior written notice to the Buyer and the Agent, at any
other locations in a jurisdiction where all action required
by Section 5.04 shall have been taken.
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19
(h) Credit and Collection Policies. Comply in all
material respects with the Credit and Collection Policy in
regard to each Pool Receivable and the related Contract;
provided, however, that on any Liquidation Day or
Provisional Liquidation Day the Seller shall not accept any
returned merchandise the sale of which gave rise to any Pool
Receivable unless the Seller shall have (i) paid, or shall
pay on the day of such return, all amounts the payment of
which would be required under Sections 2.03 and 4.01(i) as a
result of such returned merchandise, and (ii) notified, or
shall notify no later than two Business Days following such
day, the Buyer and the Agent in writing of such returned
merchandise.
(i) Collections. Instruct, or cause to be instructed,
all Obligors to cause all Collections to be deposited
directly to a Lock-Box Account, and, if the Seller shall
otherwise receive any Collections (including, without
limitation, any Collections deemed to have been received by
the Seller pursuant to Section 2.03), segregate and hold in
trust such Collections and deposit such Collections directly
to any Lock-Box Account within one Business Day following
its receipt thereof.
SECTION 4.02. Reporting Requirements of the Seller.
Until the Collection Date, the Seller will, unless the Buyer and
Agent shall otherwise consent in writing, furnish to the Buyer
and the Agent:
(a) as soon as available and in any event within
75 days after the end of each of the first three quarters of
each fiscal year of Merisel, consolidated and consolidating
balance sheets of Merisel, the Seller and Merisel's other
consolidated subsidiaries as of the end of such quarter and
consolidated and consolidating statements of income and
retained earnings and of cash flows of Merisel, the Seller
and such other consolidated subsidiaries for the period
commencing at the end of the previous fiscal year and ending
with the end of such quarter, certified by the Treasurer of
the Seller or Merisel;
(b) as soon as available and in any event within
120 days after the end of each fiscal year of Merisel, a
copy of the annual report for such year for Merisel, the
Seller and Merisel's other consolidated subsidiaries,
containing consolidated and consolidating financial
statements for such year certified in a manner acceptable to
the Buyer and the Agent by Deloitte & Touche or other
independent public accountants acceptable to the Buyer and
the Agent;
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20
(c) as soon as possible and in any event within five
days after any officer of the Seller obtains knowledge of
the occurrence of each Event of Investment Ineligibility and
each event which, with the giving of notice or lapse of
time, or both, would constitute an Event of Investment
Ineligibility, continuing on the date of such statement, a
statement of the chief financial officer of the Seller
setting forth details of such Event of Investment
Ineligibility or event and the action which the Seller has
taken and proposes to take with respect thereto;
(d) promptly after the sending or filing thereof,
copies of all reports which the Seller sends to any of its
securityholders, and copies of all reports and registration
statements which the Seller or any subsidiary thereof files
with the Securities and Exchange Commission or any national
securities exchange;
(e) promptly after the filing or receiving thereof,
copies of all reports and notices which the Seller or any
subsidiary thereof files under ERISA with the Internal
Revenue Service or the Pension Benefit Guaranty Corporation
or the U.S. Department of Labor or which the Seller or any
subsidiary thereof receives from such Corporation;
(f) as soon as possible and in any event by each
Settlement Date, a report setting forth the calculation of
the actual Purchase Price for the Receivable Assets sold in
the preceding Fiscal Month, and the reconciliation of how
the Purchase Price has been paid reflecting the cash
advanced from the Buyer to the Seller during the preceding
Fiscal Month, the amount of capital contribution made by the
Seller to the Buyer to provide additional cash for payment
of such Purchase Price, the adjustments to and current
balance, if any, due from the Buyer to the Seller under the
Subordinated Note, and the amount of additional cash, if
any, to be paid by the Buyer to the Seller on such
Settlement date;
(g) (i) to the Buyer, as soon as possible and in any
event within three Business Days following the end of the
second week of each Fiscal Month, a report which provides on
a daily basis for such two weeks the gross sales of the
Seller (excluding cash sales) and all Collections that have
been advanced from the Lock-Box Accounts to the Seller, and
(ii) to the Agent, by the date of the delivery of such
report to the Buyer or, if such date is not a Settlement
Date, by the next occurring Settlement Date, a certificate
of the Treasurer or chief financial officer of the Seller
certifying that such report has been so delivered (with a
copy of such report, if requested by the Agent); and
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21
(h) such other information, documents, records or
reports respecting the Receivables, the Related Security or
the Contracts or the condition or operations, financial or
otherwise, of the Seller or Merisel as the Buyer or the
Agent may from time to time reasonably request.
SECTION 4.03. Negative Covenants of the Seller. Until
the Collection Date, the Seller will not, without the written
consent of the Buyer and the Agent:
(a) Sales, Liens, Etc. Except pursuant to this
Agreement or the Assignment and Assumption, sell, assign (by
operation of law or otherwise) or otherwise dispose of, or
grant any option with respect to, or create or suffer to
exist any Adverse Claim upon or with respect to, any Pool
Receivable or Related Security or Collections in respect
thereof, or upon or with respect to any related Contract or
any account to which any Collections of any Pool Receivable
are sent, or assign any right to receive income in respect
thereof.
(b) Extension or Amendment of Receivables. Except as
otherwise permitted in the Purchase Agreements, extend or
cause or permit the extension of the terms of any Pool
Receivable, or amend or otherwise modify the terms of any
Pool Receivable or amend, modify or waive any term or
condition of any Contract related thereto, or cause or
permit any of the same to occur, if in any such case such
amendment, modification or waiver would be reasonably likely
to impair the collectibility of any Pool Receivable.
(c) Change in Credit and Collection Policy. Make or
cause or permit to be made any change in the Credit and
Collection Policy, which change would be reasonably likely
to impair the collectibility of any Pool Receivable.
(d) Change in Payment Instructions to Obligors. Cause
or permit the addition or termination of any bank as a
Lock-Box Bank from those listed in Schedule II to the
Purchase Agreements, or make or cause or permit to be made
any change in the instructions to Obligors made pursuant to
Section 4.01(i) regarding payments to be made to any
Lock-Box Bank, unless the Agent shall have received notice
of such addition, termination or change, a Lock-Box
Agreement executed by each new Lock-Box Bank and the Buyer
and acknowledged by the Agent, and undated executed copies
of Lock-Box Notices to each new Lock-Box Bank.
(e) Deposits to Lock-Box Accounts. Deposit or
otherwise credit, or cause or permit to be so deposited or
<PAGE>
22
credited, to any Lock-Box Account cash or cash proceeds
other than Collections of Pool Receivables except for
immaterial amounts the deposit of which is beyond the
Seller's control.
(f) Mergers, Etc. Merge or consolidate with or into,
or convey, transfer, lease or otherwise dispose of (whether
in one transaction or in a series of transactions) all or
substantially all of its assets (whether now owned or
hereafter acquired) to, or acquire all or substantially all
of the assets or capital stock or other ownership interest
of, or enter into any joint venture or partnership agreement
with, any Person, except that the Seller may merge or
consolidate with or into any other Person (other than the
Buyer), or any other Person (other than the Buyer) may merge
or consolidate with or into the Seller, provided that in
each case (i) immediately after giving effect to such merger
or consolidation, no Event of Investment Ineligibility under
the Investor Agreement or Event of Termination under the
Parallel Purchase Commitment or event which, with the giving
of notice or lapse of time, or both, would constitute an
Event of Investment Ineligibility or Event of Termination,
shall occur and be continuing, and (ii) if the Seller is not
the surviving corporation of such merger or consolidation,
the corporation into which the Seller shall be merged or
consolidated or which is otherwise formed pursuant to such
merger or consolidation shall assume the Seller's
obligations and grants of interests hereunder and under the
Consent and Agreement and the Assignment and Assumption and
the other documents delivered hereunder on in connection
herewith in a written agreement reasonably satisfactory in
form and substance to the Buyer and the Agent and shall
furnish to the Buyer and the Agent, together with and with
reference to such agreement, documents reasonably
satisfactory in form and substance to the Buyer and the
Agent and of the kinds referred to in subsections (c)
through (i) and (l) of Section 3.01 of the Purchase
Agreements in each applicable case giving effect to such
merger or consolidation.
(g) Change of Name, Etc. Change its name, identity or
structure or its chief executive office, or use any
tradenames, fictitious names, assumed names or "doing
business as" names, unless prior to the effective date of
any such change or use the Seller delivers to the Buyer and
the Agent UCC financing statements, executed by the Seller,
necessary to reflect such change or use and to continue the
perfection of the ownership interests of the Receivable
Assets sold hereunder, together with such other
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23
documents and instruments that the Buyer or the Agent may
reasonably request in connection therewith.
(h) Pool Receivables Not Evidenced by Instruments.
Cause or permit Pool Receivables the aggregate Outstanding
Balance of which at any time exceeds 5% of the aggregate
Outstanding Balance of all the Pool Receivables at such time
to be evidenced by an "instrument" or "chattel paper" within
the meaning of the UCC in effect in the State of California.
(i) Other Adverse Claims. Except as otherwise
provided herein or in the Assignment and Assumption, create
or suffer to exist any Adverse Claim upon or with respect to
any of the Seller's property, or assign any right to receive
income, to secure any Debt of any Person other than as
permitted under Section 7.02(a) of the Credit Agreement.
(j) Debt. Except as otherwise provided herein,
create, incur, assume or suffer to exist, or permit any of
its Subsidiaries to create, incur, assume or suffer to
exist, any Debt other than for its own, or its
Subsidiaries', corporate purposes; provided, however, that
in the case of any intercompany Debt between the Seller and
the Buyer, the same shall be subordinated (both as to
payment and remedies) to the obligations of the Seller
hereunder in form and substance satisfactory to the Buyer
and the Agent.
(k) Contingent Obligations. Except as otherwise
provided herein, create, incur, assume or suffer to exist,
or permit any of its Subsidiaries to create, incur, assume
or suffer to exist, any Contingent Obligation other than as
permitted under Section 7.02(c) of the Credit Agreement.
(l) Distributions, Etc. Declare or make any dividend
payment or other distribution of assets, properties, cash,
rights, obligations or securities on account of any shares
of any class of its capital stock, or return any capital to
its shareholders as such, or purchase, retire, defease,
redeem or otherwise acquire for value or make any payment in
respect of any shares of any class of its capital stock or
any warrants, rights or options to acquire any such shares,
now or hereafter outstanding, other than, in any such case,
as permitted under Section 7.02(d) of the Credit Agreement
and as shall have been duly authorized by all necessary
corporate action of the Seller and in accordance with
applicable law.
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24
(m) Transactions with Shareholders and Affiliates.
Enter into or permit to exist any transaction (including,
without limitation, the purchase, sale, lease or exchange of
any property or the rendering of any service) with Merisel
or with any other Affiliate of the Seller, on terms that are
not fair and reasonable in the circumstances or that
reasonably approximate an arm's-length transaction between
unaffiliated parties.
(n) Accounting of Purchases. Prepare any financial
statements which shall account for the transactions
contemplated hereby in any manner other than the sale of the
Receivable Assets by the Seller to the Buyer, and will not
in any other respect account for or treat the transactions
contemplated hereby (including but not limited to accounting
purposes, but excluding tax reporting purposes) in any
manner other than as a sale of the Receivable Assets by the
Seller to the Buyer.
(o) Organization. Cause or permit the Buyer's
Certificate of Incorporation or by-laws to be amended,
supplemented or otherwise modified.
(p) Capital Stock. Cause or permit to be issued to,
or cause or permit to be transferred to, any Person (other
than the Seller) any shares of the Buyer's stock.
(q) FAB. Anything herein to the contrary
notwithstanding, until such time, if any, after the date
hereof as Merisel or the Seller shall have completed a new
issuance of common stock or other equity securities from
which it shall have received at least $60,000,000 in net
cash proceeds:
(i) merge or consolidate with or into, or convey,
transfer, lease or otherwise dispose of (whether in one
transaction or in a series of transactions) any or all
or substantially all of its assets (whether now owned
or hereafter acquired) to, or acquire any or all or
substantially all of the assets of, directly or
indirectly in any such case, FAB or any successor
thereof, or permit any of its Subsidiaries to do any of
the foregoing; or
(ii) make any loan or advance to, or purchase or
otherwise acquire any stock or other securities of, or
make any capital contribution to, or otherwise invest
in, directly or indirectly in any such case, FAB or any
successor thereof, or permit any of its Subsidiaries to
do any of the foregoing.
<PAGE>
25
ARTICLE V
ADMINISTRATION AND COLLECTION
SECTION 5.01. Designation of Collection Agent. The
Pool Receivables shall be serviced, administered and collected
by the Person (the "Buyer's Collection Agent") subcontracted to
perform the duties of Collection Agent under the Purchase
Agreements from time to time in accordance with Section 6.01 of
the Purchase Agreements, and shall be serviced, administered and
collected by the Buyer's Collection Agent in the manner set
forth in Section 6.02 of the Purchase Agreements. Until the
Agent designates a new Collection Agent under the Purchase
Agreements, or until the Agent requires the Buyer to terminate
such subcontracting, the Buyer as Collection Agent hereby
subcontracts with the Seller to act as, and the Seller hereby
agrees to perform the duties and obligations of, the Collection
Agent under, and pursuant to the terms of, the Purchase
Agreements.
SECTION 5.02. Rights of the Buyer and the Agent.
(a) Each of the Buyer and the Agent acting together or alone
may notify at any time after the occurrence and during the
continuance of any Event of Investment Ineligibility under the
Investor Agreement or Event of Termination under the Parallel
Purchase Commitment, and at the Seller's expense, the Obligors
of Pool Receivables, or any of them, of the ownership of
Eligible Assets by the Owners.
(b) At any time following the designation of a
Collection Agent other than the Seller pursuant to Section 6.01
of the Purchase Agreements:
(i) Each of the Buyer and the Agent acting
together or alone may direct the Obligors of Pool
Receivables, or any of them, to make payment of all amounts
due or to become due to the Seller under any Pool Receivable
directly to the Agent or its designee.
(ii) The Seller shall, at the Buyer's or the
Agent's request and at the Seller's expense, give notice of
such ownership to such Obligors and direct them to make such
payments directly to the Agent or its designee.
(iii) The Seller shall, at the Buyer's or the
Agent's request, (A) assemble all of the Records (including,
without limitation, computer tapes and disks), and the
related Contracts and Related Security, and shall make the
same available to the Agent at a place selected by the Agent
or its designee, and (B) segregate all cash,
<PAGE>
26
checks and other instruments received by it from time to
time constituting Collections of Pool Receivables in a
manner acceptable to the Agent and shall, promptly upon
receipt, remit all such cash, checks and instruments, duly
endorsed or with duly executed instruments of transfer, to
the Agent or its designee.
(iv) The Agent may take any and all steps in the
Seller's or the Buyer's name and on behalf of the Seller,
the Buyer and the Owners necessary or desirable, in the
determination of the Agent, to collect all amounts due under
any and all Pool Receivables, including, without limitation,
endorsing the Seller's name on checks and other instruments
representing Collections, enforcing such Pool Receivables
and the related Contracts, and adjusting, settling or
compromising the amount or payment thereof, in the same
manner and to the same extent as the Seller might have done.
SECTION 5.03. Responsibilities of the Seller.
Anything herein to the contrary notwithstanding:
(a) The Seller shall perform all of its obligations,
and shall cause the performance of all obligations, under
the Contracts related to the Pool Receivables to the same
extent as if Receivable Assets had not been sold hereunder
and the exercise by the Buyer or the Agent of its rights
hereunder shall not relieve the Seller from such obligations
or its obligations with respect to Pool Receivables; and
(b) Neither the Buyer nor the Agent nor the Owners
shall have any obligation or liability with respect to any
Pool Receivables or related Contracts, nor shall any of them
be obligated to perform any of the obligations of the Seller
thereunder.
SECTION 5.04. Further Action Evidencing Purchases.
(a) The Seller agrees that from time to time, at its expense,
it will promptly execute and deliver all further instruments and
documents, and take all further action, that may be necessary or
desirable, or that the Buyer or the Agent may reasonably
request, in order to perfect, protect or more fully evidence the
Assigned Pool Receivables assigned to the Buyer under the
Assignment and Assumption or the Receivable Assets purchased by
the Buyer hereunder or the Eligible Assets purchased by the
Owners under the Purchase Agreements, or to enable any of them
or the Agent to exercise and enforce any of their respective
rights and remedies hereunder or under the Assignment and
Assumption, the Purchase Agreements or the
<PAGE>
27
Certificates. Without limiting the generality of the foregoing,
the Seller will upon the request of the Buyer or the Agent:
(i) execute and file such financing or continuation statements,
or amendments thereto or assignments thereof, and such other
instruments or notices, as may be necessary or desirable, or as
the Buyer or the Agent may request, in order to perfect, protect
or evidence the assignment of such Assigned Pool Receivables,
such Receivable Assets and Eligible Assets; (ii) mark
conspicuously each invoice evidencing each Pool Receivable and
the related Contract with a legend, acceptable to the Buyer or
the Agent, as applicable to such request, evidencing that such
Assigned Pool Receivables have been assigned in accordance with
the Assignment and Assumption, such Receivable Assets have been
sold in accordance with this Agreement and such Eligible Assets
have been sold in accordance with the Purchase Agreements; and
(iii) mark its master data processing records evidencing such
Pool Receivables and related Contracts with such legend.
(b) The Seller hereby authorizes each of the Buyer and
the Agent acting together or alone to file one or more financing
or continuation statements, and amendments thereto and
assignments thereof, relating to all or any of the Contracts, or
Pool Receivables and the Related Security and Collections with
respect thereto now existing or hereafter arising without the
signature of the Seller where permitted by law. A photocopy or
other reproduction of this Agreement or the Assignment and
Assumption, as applicable, or any financing statement covering
all or any of the Contracts, or Pool Receivables and the Related
Security and Collections with respect thereto shall be
sufficient as a financing statement where permitted by law.
(c) If the Seller fails to perform any agreement
contained herein, the Buyer or the Agent may itself perform, or
cause performance of, such agreement, and the reasonable
expenses of the Buyer and the Agent incurred in connection
therewith shall be payable by the Seller under Section 6.01 or
Section 7.06, as applicable.
ARTICLE VI
INDEMNIFICATION
SECTION 6.01. Indemnities by the Seller. Without
limiting any other rights which any Indemnified Party may have
hereunder or under applicable law, the Seller hereby agrees to
indemnify each Indemnified Party from and against any and all
<PAGE>
28
claims, losses and liabilities (including reasonable attorneys'
fees) (all of the foregoing being collectively referred to as
"Indemnified Amounts") growing out of or resulting from this
Agreement or the Assignment and Assumption or either Purchase
Agreement or the use of proceeds of purchases hereunder or the
ownership of Assigned Pool Receivables or Receivable Assets or
Eligible Assets or in respect of any Receivable (or any portion
thereof) or any Contract, excluding, however, (a) Indemnified
Amounts to the extent resulting from gross negligence or willful
misconduct on the part of any Indemnified Party or (b) any
income taxes incurred by such Indemnified Party arising out of
or as a result of this Agreement or the Assignment and
Assumption or either Purchase Agreement or the ownership of
Assigned Pool Receivables or Receivable Assets or Eligible
Assets or in respect of any Receivable or any Contract;
provided, however, that this indemnification shall not
constitute or include or provide for recourse against the Seller
(except as otherwise specifically provided in this Agreement or
the Assignment and Assumption) for uncollectible Receivables.
Without limiting the foregoing or being limited by the foregoing
(other than the foregoing proviso), the Seller shall pay on
demand to each Indemnified Party any and all amounts necessary
to indemnify such Indemnified Party from and against any and all
Indemnified Amounts relating to or resulting from:
(i) any Receivable (or any portion thereof) becoming a
Pool Receivable which is not at the date thereof an Eligible
Receivable or which (except for the passage or expiration of
a time limitation contained in the definition of the term
"Eligible Receivable" contained in either Purchase
Agreement) thereafter ceases to be an Eligible Receivable;
(ii) reliance on any representation or warranty or
statement made or deemed made by the Seller (or its
officers) under or in connection with this Agreement or the
Assignment and Assumption or any Receivables Activity Report
or other written certificate or report delivered pursuant
hereto or pursuant to the Purchase Agreements which shall
have been incorrect in any material respect when made;
(iii) the failure by the Seller to comply with any
applicable law, rule or regulation with respect to any Pool
Receivable (or any portion thereof) or the related Contract
or any Related Security, or the nonconformity of any Pool
Receivable (or any portion thereof) or the related Contract
or any Related Security with any such applicable law, rule
or regulation, in any such case to
<PAGE>
29
the extent that such failure or non-conformity was within
the Seller's control;
(iv) the failure to vest in the Buyer a 100% ownership
interest in the Receivables in, or purporting to be in, the
Receivables Pool and the Related Security and Collections in
respect thereof, free and clear of any Adverse Claim
(whether existing on the date of the initial sale and
assignment hereunder or under the Assignment and Assumption,
as applicable, or at any time thereafter);
(v) the failure of the Seller to have filed, or any
delay in filing by the Seller, financing statements or other
similar instruments or documents under the UCC of any
applicable jurisdiction or other applicable laws with
respect to any Receivables in, or purporting to be in, the
Receivables Pool and the Related Security and Collections in
respect thereof, whether at the time of any sale and
assignment hereunder or under the Assignment and Assumption,
as applicable, or at any subsequent time;
(vi) any credit, rebate, discount, dispute, claim,
chargeback, allowance, offset, counterclaim, other dilution
factor or defense (other than discharge in bankruptcy of the
Obligor) of the Obligor to the payment of any Receivable (or
any portion thereof) in, or purporting to be in, the
Receivables Pool (including, without limitation, a defense
based on such Receivable or the related Contract not being a
legal, valid and binding obligation of such Obligor
enforceable against it in accordance with its terms), or any
other claim resulting from the sale of the merchandise or
services related to such Receivable or portion or the
furnishing or failure to furnish such merchandise or
services;
(vii) any failure of the Seller, as Buyer's Collection
Agent or otherwise, to perform its duties or obligations in
accordance with the provisions of Article V, or any failure
of the Seller to perform its duties or obligations under the
Contracts or this Agreement or the Assignment and
Assumption;
(viii) any products liability claim allegedly arising out
of or in connection with merchandise or services which are
the subject of any Contract and any related personal injury
or damage suit;
(ix) any investigation, litigation or proceeding (other
than any investigation, litigation or proceeding solely
between the parties hereto, except as otherwise
<PAGE>
30
determined therein) related to this Agreement, the
Assignment and Assumption, either Purchase Agreement, or any
other instrument or document furnished pursuant hereto or in
connection herewith or thereto or the use of proceeds of
sales hereunder or the ownership of Assigned Pool
Receivables or Receivable Assets or Eligible Assets or in
respect of any Receivable (or any portion thereof), Related
Security or Contract; or
(x) the commingling of Collections of Pool Receivables
at any time with other funds.
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. Amendments, Etc. No amendment or waiver
of any provision of this Agreement, and no consent to any
departure by the Seller or the Buyer herefrom, shall in any
event be effective unless the same shall be in writing and
signed by the Agent, the Buyer and the Seller, and then such
amendment, waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
SECTION 7.02. Notices, Etc. All notices and other
communications provided for hereunder shall, unless otherwise
stated herein, be in writing (including telecommunication) and
mailed, telecommunicated or delivered, as to each party hereto,
at its address set forth under its name on the signature pages
hereof or at such other address as shall be designated by such
party in a written notice to the other parties hereto. All such
notices and communications shall, when mailed or
telecommunicated, be effective when deposited in the mails or
telecommunicated, respectively, except that notices and
communications to the Buyer and the Agent pursuant to Article II
shall not be effective until received by the Buyer and the
Agent.
SECTION 7.03. No Waiver; Remedies. No failure on the
part of the Buyer or any Owner or the Agent to exercise, and no
delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof
or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies
provided by law.
SECTION 7.04. Binding Effect; Assignability. This
Agreement shall be binding upon and inure to the benefit of
<PAGE>
31
the Seller, the Buyer, the Agent, the Investor and each Owner
and their respective successors and assigns, except that the
Seller shall not have the right to assign its rights or
obligations hereunder or any interest herein without the prior
written consent of the Buyer and the Agent, and the Buyer shall
not have the right to assign its rights or obligations hereunder
or any interest herein without the prior written consent of the
Seller and the Agent. This Agreement shall create and
constitute the continuing obligation of the parties hereto in
accordance with its terms, and shall remain in full force and
effect until the Collection Date; provided, however, that rights
and remedies with respect to the indemnification provisions of
Article VI and Section 7.06 shall be continuing and shall
survive any termination of this Agreement.
SECTION 7.05. Governing Law. This Agreement shall be
governed by, and construed in accordance with, the laws of the
State of California, except to the extent that the validity or
perfection of the interests of the Buyer, or remedies hereunder,
in respect of the Receivables, any Related Security or any
Collections in respect thereof are governed by the laws of a
jurisdiction other than the State of California.
SECTION 7.06. Costs, Expenses and Taxes. (a) In
addition to the rights of indemnification granted to the
Indemnified Parties under Article VI hereof, the Seller agrees
to pay on demand all reasonable out-of-pocket costs and expenses
in connection with the preparation, execution, delivery,
administration (including the annual audit contemplated by
Section 4.01(d), but no other audits), modification and
amendment of this Agreement, the Assignment and Assumption and
the other documents to be delivered hereunder or in connection
herewith, including, without limitation, the reasonable fees and
out-of-pocket expenses of counsel for the Agent, with respect
thereto and with respect to advising the Agent as to its rights
and remedies under this Agreement, the Assignment and Assumption
and such other documents, provided that the fees (excluding
out-of-pocket disbursements) of counsel for the Agent in
connection with such preparation, execution and delivery shall
not exceed $75,000. The Seller further agrees to pay on demand
all reasonable costs and expenses, if any (including, without
limitation, reasonable counsel fees and expenses), of the Agent,
the Investor and the Owners in connection with the enforcement
(whether through negotiations, legal proceedings or otherwise)
of this Agreement, the Assignment and Assumption and the other
documents to be delivered hereunder or in connection herewith,
including, without limitation, reasonable counsel fees and
expenses in connection with the enforcement of rights under this
Section 6.06(a).
<PAGE>
32
(b) In addition, the Seller shall pay any and all
stamp and other taxes and like fees payable or determined to be
payable in connection with the execution, delivery, filing and
recording of this Agreement, the Assignment and Assumption or
the other documents to be delivered hereunder or in connection
herewith, and agrees to save each Indemnified Party harmless
from and against any and all liabilities with respect to or
resulting from any delay in paying or omission to pay such taxes
and fees.
SECTION 7.07. No Proceedings. The Seller hereby
agrees that it will not institute against the Investor any
proceeding of the type referred to in Section 7.01(g) of the
Purchase Agreements so long as any Commercial Paper Notes or
Medium Term Notes issued by the Investor shall be outstanding or
there shall not have elapsed one year plus one day since the
last day on which any such Commercial Paper Notes or Medium Term
Notes shall have been outstanding.
SECTION 7.08. Confidentiality. Except to the extent
otherwise required by applicable law, the Seller agrees to
maintain, and to cause its Affiliates to maintain, the
confidentiality of this Agreement, the Assignment and
Assumption, the Purchase Agreements and the Fee Letter (and all
drafts thereof) and not to disclose, and to cause its Affiliates
not to disclose, this Agreement, the Assignment and Assumption,
the Purchase Agreements or the Fee Letter or such drafts to
third parties (other than to its directors, officers, employees,
accountants or counsel, who shall in each case be instructed to
maintain such confidentiality); provided, however, that this
Agreement, the Assignment and Assumption and the Purchase
Agreements may be disclosed to third parties to the extent such
disclosure is (i) required in connection with a sale of
securities of the Seller or the Buyer or pursuant to reporting
requirements of applicable securities laws, (ii) made solely to
persons who are legal counsel for the purchaser or underwriter
of such securities, (iii) limited in scope to the provisions of
Articles IV and VI and, to the extent defined terms are used in
Articles IV and VI, such terms defined in Article I of this
Agreement and (iv) made pursuant to a written agreement of
confidentiality in form and substance reasonably satisfactory to
the Agent.
SECTION 7.08. Execution in Counterparts. This
Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of
which when taken together shall constitute one and the same
agreement.
<PAGE>
33
IN WITNESS WHEREOF, the parties have caused this
Agreement to be executed by their respective officers thereunto
duly authorized, as of the date first above written.
MERISEL AMERICAS, INC.
By:________________________________
Title:
200 Continental Boulevard
El Segundo, California 90245-0984
Attention: Treasurer
Telecopier No.: 310-615-6882
MERISEL CAPITAL FUNDING, INC.
By:_________________________________
Title:
200 Continental Boulevard
Suite 30l
El Segundo, California 90245-0984
Attention: Treasurer
Telecopier No.: 310-615-6882
<PAGE>
EXHIBIT 10.33
AMENDED AND RESTATED TRADE RECEIVABLES
PURCHASE AND SALE AGREEMENT
Dated as of November 29, 1994
MERISEL CAPITAL FUNDING, INC., a Delaware corporation
(the "Seller"), CITIBANK, N.A. ("Citibank"), the other financial
institutions listed on the signature pages hereof under the
heading "ORIGINAL BANKS" (together with Citibank, the "Original
Banks"), and CITICORP NORTH AMERICA, INC., a Delaware corporation,
individually ("CNA") and as agent for itself, the Banks and the
other Owners (in each case as defined below) (the "Agent"), agree
as follows:
PRELIMINARY STATEMENTS.
(1) Certain terms which are capitalized and used
throughout this Agreement (in addition to those defined above) are
defined in Article I of this Agreement.
(2) Merisel Americas, Inc., a Delaware corporation
("Americas"), Citibank, the other Original Banks and CNA,
individually and as Agent, were each party to that certain Trade
Receivables Purchase and Sale Agreement dated as of September 24,
1993, as amended by the Amendment dated as of October 20, 1993,
the Assumption and Second Amendment dated as of December 23, 1993,
the Third Amendment dated as of March 24, 1994, the Fourth
Amendment dated as of October 7, 1994 and the Fifth Amendment
dated as of November 29, 1994 (said Agreement, as so amended,
being the "Original Agreement").
(3) On the Effective Date, the Seller and Americas each
will have entered into, and fully performed, the Purchase and Sale
Assignment and Assumption Agreement dated as of November 29, 1994
(the "Assignment and Assumption"), whereby the Seller takes the
place of Americas in and under the Original Agreement.
(4) The Seller will from time to time purchase from
Americas additional Pool Receivables in which the Seller intends
to sell interests represented by Eligible Assets hereunder. The
Banks desire to purchase Eligible Assets from the Seller.
(5) The parties hereto have agreed to amend and restate
the Original Agreement, as modified by the Assignment and
Assumption, on the terms and conditions hereinafter set forth, to
provide for, among other things, the sale of such additional Pool
Receivables.
(6) CNA has been requested and is willing to continue to
act as Agent.
<PAGE>
2
NOW, THEREFORE, the parties agree that, effective as of
the Effective Date and subject to the satisfaction of the
conditions precedent set forth in Section 3.01 hereof, the
Original Agreement, as modified by the Assignment and Assumption,
is hereby amended and restated in its entirety to read as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. As used in this
Agreement, the following terms shall have the following meanings
(such meanings to be equally applicable to both the singular and
plural forms of the terms defined):
"Adjusted LIBO Rate" means, for any Fixed Period, an
interest rate per annum equal to the rate per annum obtained
by dividing (i) the rate per annum at which deposits in U.S.
dollars are offered by the principal office of Citibank in
London, England to prime banks in the London interbank market
at 11:00 A.M. (London time) two Business Days before the first
day of such Fixed Period for a period equal to such Fixed
Period by (ii) a percentage equal to 100% minus Citibank's
Eurodollar Reserve Percentage for such Fixed Period.
"Administration Fee" has the meaning specified in
Section 2.10.
"Adverse Claim" means a lien (other than inchoate and
unperfected tax liens), security interest or other charge or
encumbrance, or other type of preferential arrangement having
the effect of a lien or security interest.
"Affiliate" means (i) as to any Person, any other Person
that, directly or indirectly, beneficially owns or holds 100%
of any class of voting securities of such Person or otherwise
is in control of, is controlled by or is under common control
with such Person, with "control" with respect to any such
Person being the power to exercise, directly or indirectly, a
controlling influence over the management or policies of such
Person, and (ii) as to CNA or Citibank, shall also include
Citibank and CNA, respectively, and any other Person who has a
relationship to CNA comparable to that of Citibank.
"Affiliated Obligor" means any Obligor which is an
Affiliate of another Obligor.
<PAGE>
3
"Agent's Account" means the special account (account
number 4063-2221) of the Agent maintained at the office of
Citibank at 399 Park Avenue, New York, New York 10043.
"Alternate Base Rate" means, for any period, a
fluctuating interest rate per annum as shall be in effect from
time to time, which rate per annum shall at all times be equal
to the higher of:
(a) the rate of interest announced publicly by
Citibank in New York, New York, from time to time as
Citibank's base rate; or
(b) 1/2 of one percent above the latest three-week
moving average of secondary market morning offering rates
in the United States for three-month certificates of
deposit of major United States money market banks, such
three-week moving average being determined weekly on each
Monday (or, if such day is not a Business Day, on the
next succeeding Business Day) for the three-week period
ending on the previous Friday by Citibank on the basis of
such rates reported by certificate of deposit dealers to
and published by the Federal Reserve Bank of New York or,
if such publication shall be suspended or terminated, on
the basis of quotations for such rates received by
Citibank from three New York certificate of deposit
dealers of recognized standing selected by Citibank, in
either case adjusted to the nearest 1/4 of one percent
or, if there is no nearest 1/4 of one percent, to the
next higher 1/4 of one percent.
"Americas" has the meaning specified in Preliminary
Statement (2).
"Applicable Office" means, with respect to any Bank or
CNA, the address set forth under its name on the signature
pages hereof or, in the case of any Bank that is not an
Original Bank, in the Assignment and Acceptance pursuant to
which it became a Bank hereunder, or such other office of such
Bank as such Bank may from time to time specify to the Seller
and the Agent, or of CNA as CNA may from time to time specify
to the Seller.
"Assignee" means (i) in the case of any assignment of any
Eligible Asset or any portion thereof pursuant to
Section 9.01, Citibank, CNA or any of their respective
Affiliates, or, in the case of any assignment by CNA, any
Eligible Assignee, in any such case as the assignee of an
Eligible Asset or a portion thereof, and (ii) in the case of
<PAGE>
4
any assignment of any rights and obligations pursuant to
Section 9.02, any Eligible Assignee as the assignee of such
rights and obligations.
"Assignment" means an assignment, in substantially the
form of Exhibit A hereto, by which an Eligible Asset or any
portion thereof may be assigned pursuant to Section 9.01.
"Assignment and Acceptance" means an assignment and
acceptance entered into by any Bank and any Eligible Assignee
in substantially the form of Exhibit G hereto.
"Assignment and Assumption" has the meaning specified in
Preliminary Statement (3).
"Average Maturity" means, on any day, that period
(expressed in days) equal to the average maturity of the Pool
Receivables as shall be calculated by the Collection Agent as
set forth in the most recent Investor Report in accordance
with the provisions thereof; provided, however, that, if any
such calculation shall be manifestly incorrect, the Agent may
recalculate the Average Maturity for such day.
"Bank" means any Original Bank or any Eligible Assignee
that shall become a party hereto on any date pursuant to
Section 9.02.
"Business Day" means any day on which banks are not
authorized or required to close in New York City or the City
of Los Angeles and, if the applicable Business Day relates to
any computation made with respect to the Adjusted LIBO Rate,
on which dealings are carried on in the London interbank
market.
"Capital" of any Eligible Asset means the original amount
paid for such Eligible Asset at the time of its acquisition by
the purchasers thereof pursuant to Sections 2.01 and 2.02
(including, without limitation, Sections 2.01 and 2.02 of the
Original Agreement), or such amount divided or combined by any
dividing or combining of such Eligible Asset pursuant to
Section 2.09 (including, without limitation, Section 2.10 of
the Original Agreement), in each case reduced from time to
time by Collections received and distributed on account of
such Capital pursuant to Section 2.06; provided, however, that
if such Capital of such Eligible Asset shall have been reduced
by any distribution of any portion of Collections and
thereafter such distribution is rescinded or must otherwise be
returned for any reason, such Capital of such Eligible Asset
shall be increased by the amount of such distribution, all as
though such distribution had not been made.
<PAGE>
5
"Certificate" means a certificate of assignment by the
Seller to the Agent for the benefit of the Owners, in
substantially the form of Exhibit B hereto, evidencing each
Eligible Asset.
"Citibank Rate" for any Fixed Period for any Eligible
Asset means an interest rate per annum equal to .8 of 1% per
annum, or, upon the occurrence and during the continuance of
any Rating Period, 1.75% per annum, in each case above the
Adjusted LIBO Rate for such Fixed Period; provided, however,
that:
(i) In the case of any such Fixed Period of one to
and including 13 days, the "Citibank Rate" for such Fixed
Period for such Eligible Asset shall be an interest rate
per annum equal to the Alternate Base Rate in effect on
the first day of such Fixed Period; and
(ii) If either (A) the introduction of or any change
in or in the interpretation of any law or regulation
shall make it unlawful, or any central bank or other
governmental authority asserts that it is unlawful, for
any Bank to obtain funds in the London interbank market
during such Fixed Period or (B) Citibank is unable for
any reason to establish its Adjusted LIBO Rate for such
Fixed Period or (C) the Adjusted LIBO Rate will not
adequately reflect the cost to the Majority Banks of
making a Purchase of or maintaining such Eligible Asset
during such Fixed Period, then the "Citibank Rate" for
such Fixed Period for such Eligible Asset shall be an
interest rate per annum equal to the Alternate Base Rate
in effect from time to time; provided, however, that the
Agent, the Banks and the Seller may agree in writing from
time to time upon a different "Citibank Rate".
"Collateral" has the meaning specified in Section 11.01.
"Collection Agent" means at any time the Person
(including the Agent or the Seller) then authorized pursuant
to Article VI to service, administer and collect Pool
Receivables.
"Collection Agent Fee" has the meaning specified in
Section 2.10.
"Collection Agent Fee Reserve" for any Eligible Asset at
any time means the sum of (i) the Liquidation Collection Agent
Fee for such Eligible Asset at such time plus (ii) the
<PAGE>
6
unpaid Collection Agent Fee relating to such Eligible Asset
accrued to such time.
"Collection Date" means the date following the
Termination Date on which the aggregate outstanding Capital of
all Eligible Assets shall have been reduced to zero and each
of the Agent, the Collection Agent, the Owners of the Eligible
Assets and the Indemnified Parties shall have received all
Yield, Capital, Collection Agent Fee and other fees and other
amounts payable to it hereunder with respect to the Eligible
Assets or otherwise.
"Collection Delay Period" means 10 days or such other
number of days in excess of 10 as the Agent may select upon
three Business Days' notice to the Seller.
"Collections" means, with respect to any Pool Receivable,
all cash collections and other cash proceeds of such Pool
Receivable, including, without limitation, all cash proceeds
of Related Security with respect to such Pool Receivable, and
any Collection of such Pool Receivable deemed to have been
received pursuant to Section 2.07 (including, without
limitation, Section 2.08 of the Original Agreement).
"Collected" shall have a similar meaning.
"Commitment" means (i) with respect to any Original Bank,
the amount set forth next to the name of such Original Bank on
the signature pages hereof under the heading "Commitments"
(subject to any assignment thereof pursuant to Section 9.02),
or (ii) with respect to each Bank that became a Bank by
entering into an Assignment and Acceptance, the amount set
forth for such Bank in the Register maintained by the Agent
pursuant to Section 9.02(c), in each case as such amount may
be reduced pursuant to Section 2.03, and provided that the
total of the Commitments of the Banks hereunder shall not at
any time exceed $150,000,000.
"Commitment Fee" has the meaning specified in
Section 2.10.
"Commitment Termination Date" means the earlier of
October 6, 1995, or the date of termination of the Commitments
pursuant to Section 2.03 or Section 7.01.
"Concentration Limit" for any Obligor means at any time
4%; provided, however, that in the case of an Obligor with, to
the best knowledge of the Seller, any Affiliated Obligor, the
Concentration Limit shall be calculated as if such Obligor and
such Affiliated Obligor are one Obligor.
<PAGE>
7
"Consent" means the consent executed by the Seller with
respect to an Assignment and Acceptance, in substantially the
form of Annex 1 to Exhibit G hereto.
"Consent and Agreement" means a consent and agreement, in
substantially the form of Exhibit H hereto, with respect to
the Receivables Contribution and Sale Agreement, duly executed
by Americas.
"Contingent Obligation" means, as applied to any Person,
any direct or indirect liability, contingent or otherwise, of
that Person with respect to any Debt, lease, dividend, letter
of credit or other obligation of another Person, including,
without limitation, any such obligation directly or indirectly
guaranteed, endorsed (otherwise than for collection or deposit
in the ordinary course of business), co-made, or discounted or
sold with recourse by that Person, or in respect of which that
Person is otherwise directly or indirectly liable, including,
without limitation, any such obligation for which that Person
is in effect liable through any agreement (contingent or
otherwise) to purchase, repurchase or otherwise acquire such
obligation or any security therefor, or to provide funds for
the payment or discharge of such obligation (whether in the
form of loans, advances, stock purchases, capital
contributions or otherwise), or to maintain the solvency or
any balance sheet, income or other financial condition of the
obligor of such obligation, or to make payment for any
products, materials or supplies or for any transportation,
services or lease regardless of the non-delivery or
non-furnishing thereof, in any case if the purpose or intent
of such agreement is to provide assurance that such obligation
will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such
obligation will be protected (in whole or in part) against
loss in respect thereof. The amount of any Contingent
Obligation shall be equal to the amount of the obligation so
guaranteed or otherwise supported.
"Contract" means (i) an agreement between Americas and an
Obligor, in substantially the form of one of the forms of
written contract delivered to the Agent prior to the date
hereof (or in substantially the form of any other form of
written contract delivered from time to time to the Agent by
the Seller after the date hereof if such other form shall have
been approved by the Agent in its reasonable discretion) or
containing payment terms and conditions and covering sales of
merchandise or services of a type substantially similar
thereto, or in the case of an open account agreement, as
evidenced by an invoice of Americas in
<PAGE>
8
substantially the form of one of the forms of invoices
delivered to the Agent prior to the date hereof (or in
substantially the form of any other form of written invoice
delivered from time to time to the Agent by the Seller after
the date hereof if such other form shall have been approved by
the Agent in its reasonable discretion) or containing payment
terms and conditions and covering sales of merchandise or
services of a type substantially similar thereto, in each case
pursuant to or under which such Obligor shall be obligated to
pay for its purchase of merchandise or services from time to
time, or (ii) in the case of a Receivable of the type
described in clause (ii) of the definition of the term
"Receivable", the agreement or arrangement of the type
described in clause (iii) of the definition of the term
"Related Security" under which such Receivable arose.
"Credit Agreement" means the Revolving Credit Agreement
dated as of December 23, 1993, as amended by the First
Amendment to Revolving Credit Agreement dated as of
September 29, 1994, among Americas and Merisel Europe, Inc.,
as borrowers, Merisel, as guarantor, the lenders party
thereto, Citibank, as designated issuer, and Citicorp USA,
Inc. as agent for such lenders, without giving effect to any
other amendment, supplement or other modification thereof or
thereto or any waiver of any provision or any termination
thereof.
"Credit and Collection Policy" means those credit and
collection policies and practices of the Seller in effect on
the date hereof relating to Contracts and Receivables
described in a writing or writings delivered to the Agent, and
identified as such credit and collection policies and
practices, by the Seller prior to the date hereof, as modified
in compliance with Section 5.03(c).
"Debt" means (i) indebtedness for borrowed money,
(ii) obligations evidenced by bonds, debentures, notes or
other similar instruments, (iii) obligations to pay the
deferred purchase price of property or services (it being
understood that "Debt" shall not include obligations both
(a) classified as accounts payable, accrued liabilities or
income taxes payable under generally accepted accounting
principles and (b) incurred in the ordinary course of the
Seller's business), (iv) principal obligations as lessee under
leases of property (whether real, personal or mixed) which
shall have been or should be, in accordance with generally
accepted accounting principles, recorded as capital leases,
(v) reimbursement obligations under letters of credit,
(vi) obligations under direct or indirect
<PAGE>
9
guaranties in respect of, and obligations (contingent or
otherwise) to purchase or otherwise acquire, or otherwise to
assure a creditor against loss in respect of, indebtedness or
obligations of others of the kinds referred to in clauses (i)
through (v) above, (vii) liabilities in respect of unfunded
vested benefits under plans covered by Title IV of ERISA, and
(viii) "Debt" as such term is defined in the Senior Note
Purchase Agreement referred to in the Credit Agreement;
provided, that no obligation included in "Debt" hereunder
shall be included in more than one of clauses (i) through
(viii); provided, further, that "Debt" shall not include any
obligation hereunder or, other than in the case of the Seller,
otherwise under or resulting from any agreement for the sale,
transfer or securitization of accounts receivable permitted by
Section 7.02(f)(ii) and Section 7.02(a)(vii) of the Credit
Agreement or by equivalent clauses of replacements thereof.
"Default Ratio" means the ratio (expressed as a
percentage) computed as of the last day of each Fiscal Month
by dividing (i) the aggregate Outstanding Balance of all Pool
Receivables that were Defaulted Receivables on such date or
would have been Defaulted Receivables on such date had they
not been written off the books of the Seller during such
Fiscal Month by (ii) the aggregate Outstanding Balance of all
Pool Receivables on such date.
"Defaulted Receivable" means:
(i) a Receivable or any portion thereof as to which
any payment, or part thereof, remains unpaid for 45 days
or more from the original due date for such payment;
provided, however, that (A) for purposes of the
definition of "Loss Percentage" contained in this
Section 1.01, such "45 days" shall be extended to "90
days" in the case of each Receivable, and (B) for
purposes of the definition of "Eligible Receivable"
contained in this Section 1.01, such "45 days" shall be
extended to "75 days" in the case of each Receivable owed
by [Office Depot];
(ii) a Receivable as to which the Obligor thereof
has taken any action, or suffered any event to occur, of
the type described in Section 7.01(g); or
(iii) a Receivable or any portion thereof which,
consistent with the Credit and Collection Policy, should
be written off the Seller's books as uncollectible.
<PAGE>
10
"Delinquency Ratio" means the ratio (expressed as a
percentage) computed as of the last day of each Fiscal Month
by dividing (i) the aggregate Outstanding Balance of all Pool
Receivables that were Delinquent Receivables at the end of
such Fiscal Month by (ii) the aggregate Outstanding Balance of
all Pool Receivables on such date.
"Delinquent Receivable" means a Receivable or any portion
thereof that is not a Defaulted Receivable and:
(i) as to which any payment, or part thereof,
remains unpaid for 30 days or more from the original due
date for such payment; or
(ii) which, consistent with the Credit and
Collection Policy, would be classified as delinquent by
the Seller.
"Designated Obligor" means, at any time, each Obligor;
provided, however, that any Obligor shall cease to be a
Designated Obligor upon 30 days' prior written notice by the
Agent to the Seller made in accordance with a reasonable
exercise of the Agent's discretion.
"Dilution Horizon" means, for any Fiscal Month, a ratio
computed by dividing (1) the aggregate Outstanding Balance of
all Pool Receivables acquired by the Seller during such Fiscal
Month by (ii) the Outstanding Balance of Pool Receivables as
at the last day of such Fiscal Month.
"Dilution Percentage" means, for any Eligible Asset as of
any date, the sum of (a) 1.5 times the product of (i) the
average of the Dilution Ratios as of the last day of each of
the 12 Fiscal Months ended immediately preceding such date and
(ii) the average of the Dilution Horizons for each of the
three Fiscal Months ended immediately preceding such date plus
(b) the Dilution Volatility as of such date.
"Dilution Ratio" means the ratio (expressed as a
percentage) computed as of the last day of each Fiscal Month
by dividing (i) the aggregate Outstanding Balance of Pool
Receivables with respect to which credit memoranda were issued
by the Seller (it being agreed that the Seller will be deemed
to issue a credit memorandum as to any Pool Receivable by the
Seller's making credit entries on the books of the Seller
which reduce the Outstanding Balance of such Pool Receivables)
or by the Collection Agent, if other than the Seller, during
such Fiscal Month by (ii) the aggregate Outstanding Balance of
Pool Receivables which arose during the immediately preceeding
Fiscal Month;
<PAGE>
11
provided, however, that in computing the "Dilution Ratio" as
of the last day of each Fiscal Month for purposes of the Event
of Termination referred to in Section 7.01(h), the aggregate
Outstanding Balance of Pool Receivables referred to in clauses
(i) and (ii) above shall be calculated for, and during, the
period of four Fiscal Months ending with and including such
Fiscal Month.
"Dilution Reserve" means, for any Eligible Asset at any
date, an amount equal to
DP x (C + YR)
where:
DP = the Dilution Percentage for such Eligible Asset
at the close of business of the Collection
Agent as of such date.
C = the Capital of such Eligible Asset at the close
of business of the Collection Agent on such
date.
YR = the Yield Reserve for such Eligible Asset at
the close of business of the Collection Agent
as of such date.
"Dilution Volatility" means, as of any date, a ratio
(expressed as a percentage) equal to the product of (a) the
highest Dilution Ratio as of the last day of any Fiscal Month
occurring in the 12 Fiscal Months ended immediately preceding
such date minus the average of the Dilution Ratios as of the
last day of each of such 12 Fiscal Months and (b) a ratio
calculated by dividing the highest Dilution Ratio as of the
last day of any Fiscal Month occurring in the 12 Fiscal Months
ended immediately preceding such date by the average of the
Dilution Ratios as of the last day of each of such 12 Fiscal
Months and (c) the average of the Dilution Horizons for each
of the three Fiscal Months ended immediately preceding such
date.
"Effective Date" has the meaning assigned to that term in
Section 3.01.
"Eligible Asset" means, at any time, an undivided
percentage ownership interest at such time in (i) all then
outstanding Pool Receivables arising prior to the time of the
most recent computation or recomputation of such undivided
percentage interest pursuant to Section 2.04, (ii) all Related
Security with respect to such Pool
<PAGE>
12
Receivables and (iii) all Collections with respect to, and
other proceeds of, such Pool Receivables. Such undivided
percentage interest for such Eligible Asset shall be computed
as
C + YR + LR + DR + CAFR
-----------------------
NRPB
where:
C = the Capital of such Eligible Asset at the time
of such computation.
YR = the Yield Reserve of such Eligible Asset at the
time of such computation.
LR = the Loss Reserve of such Eligible Asset at the
time of such computation.
DR = the Dilution Reserve of such Eligible Asset at
the time of such computation.
CAFR = the Collection Agent Fee Reserve of such
Eligible Asset at the time of such computation.
NRPB = the Net Receivables Pool Balance at the time of
such computation.
Each Eligible Asset shall be determined from time to time
pursuant to the provisions of Section 2.04.
"Eligible Assignee" means any financial institution that
has been approved in writing as an "Eligible Assignee" by the
Seller and the Agent.
"Eligible Receivable" means, at any time and with respect
to any Eligible Asset, a Receivable or any portion thereof:
(i) the Obligor of which is a United States
resident, is not an Affiliate of any of the parties
hereto or to the Receivables Contribution and Sale
Agreement, and is not a government or a governmental
subdivision or agency (including, without limitation, the
government, or any governmental subdivision or agency, of
the United States or any state or municipality thereof or
any other subdivision thereof);
(ii) the Obligor of which at the time of the initial
creation of an interest therein hereunder
<PAGE>
13
(including, without limitation, under the Original
Agreement) is a Designated Obligor;
(iii) the Obligor of which at the time of the initial
creation of an interest therein hereunder (including,
without limitation, under the Original Agreement) is not
the Obligor of any Defaulted Receivables in the aggregate
amount of 20% or more of the aggregate Outstanding
Balance of all Pool Receivables of such Obligor;
(iv) which at the time of the initial creation of an
interest therein hereunder (including, without
limitation, under the Original Agreement) is not a
Defaulted Receivable or Delinquent Receivable;
(v) which is not indebtedness arising from the sale
of merchandise that has not been shipped by Americas to
the Obligor thereof;
(vi) which, according to the Contract related
thereto, is required to be paid in full within 61 days of
the original invoice date therefor, in the case of any
Receivable of the type described in clause (i) of the
definition of the term "Receivable", or, in the case of
any Receivable of the type described in clause (ii) of
the definition of such term, by the date by which the
Pool Receivable the sale of which gave rise to such
Receivable was so required to have been paid in full;
(vii) which is an account receivable representing all
or part of the sales price of merchandise or insurance
within the meaning of Section 3(c)(5) of the Investment
Company Act of 1940, as amended;
(viii) a purchase of which with the proceeds of notes
would constitute a "current transaction" within the
meaning of Section 3(a)(3) of the Securities Act of 1933,
as amended;
(ix) which is an "account" within the meaning of
Section 9-106 of the UCC of the jurisdiction the law of
which governs the perfection of the interest created by
an Eligible Asset;
(x) which is denominated and payable only in United
States dollars in the United States;
(xi) which arises under a Contract which has been
duly authorized and which, together with such
<PAGE>
14
Receivable, is in full force and effect and constitutes
the legal, valid and binding obligation of the Obligor of
such Receivable enforceable against such Obligor in
accordance with its terms, and is not subject to any
active, asserted or effected chargeback, allowance,
credit, rebate, discount, dispute, offset, counterclaim,
other dilution factor or defense whatsoever (except the
discharge in bankruptcy of such Obligor);
(xii) which, together with the Contract related
thereto, does not contravene in any material respect any
laws, rules or regulations applicable thereto (including,
without limitation, laws, rules and regulations relating
to usury, consumer protection, truth in lending, fair
credit billing, fair credit reporting, equal credit
opportunity, fair debt collection practices and privacy);
(xiii) with respect to which performance (other than
by the Obligor or any guarantor thereof) under the
related Contract has been completed;
(xiv) the Obligor of which, if a natural person, to
the best knowledge of the Seller or Americas, (a) is
living, (b) is not a minor under the laws of his or her
state of residence, and (c) is competent to enter into a
contract and incur debt;
(xv) which is, immediately prior to the time of the
initial creation of an interest therein hereunder
(including, without limitation, under the Original
Agreement), legally and beneficially owned by the Seller
free of any Adverse Claim;
(xvi) which is not evidenced by any "instrument" or
"chattel paper" within the meaning of the UCC in effect
in the State of California;
(xvii) which (A) satisfies all applicable requirements
of the Credit and Collection Policy and (B) complies with
such other criteria and requirements (other than those
relating to the collectibility of such Receivable) as the
Agent may from time to time specify to the Seller upon 30
days' notice; and
(xviii) as to which, at least 30 days prior to the time
of the initial creation of an interest therein through a
Purchase, the Agent has not notified the Seller that such
Receivable (or class of Receivables)
<PAGE>
15
is not acceptable for purchase by the Banks, or the Banks
(other than Citibank) and CNA, hereunder;
provided that if and so long as the aggregate Outstanding
Balance of the Pool Receivables financed or to be financed by
Floor Plan Obligors is less than 12% of the aggregate
Outstanding Balance of the Eligible Receivables in the
Receivables Pool, the term "Obligor" referred to above in this
definition of "Eligible Receivable" shall apply only to the
Original Obligor of the Receivable referred to therein, and if
and so long as the aggregate Outstanding Balance of the Pool
Receivables financed or to be financed by Floor Plan Obligors
is 12% or more of the aggregate Outstanding Balance of the
Eligible Receivables in the Receivables Pool, such term
"Obligor" shall apply to the Floor Plan Obligor of the
Receivable referred to therein if financed or to be financed
by such Floor Plan Obligor and to the Original Obligor of such
Receivable if not financed or to be financed by any Floor Plan
Obligor.
"ERISA" means the Employee Retirement Income Security Act
of 1974, as amended from time to time, and the regulations
promulgated and rulings issued thereunder.
"Eurodollar Reserve Percentage" of Citibank means, for
any Fixed Period, the reserve percentage applicable two
Business Days before the first day of such Fixed Period under
regulations issued from time to time by the Board of Governors
of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including, but
not limited, to any emergency, supplemental or other marginal
reserve requirement) for Citibank in respect of liabilities or
assets consisting of or including Eurocurrency liabilities (as
that term is defined in Regulation D of the Board of Governors
of the Federal Reserve System as in effect from time to time),
or with respect to any other category of liabilities which
includes deposits by reference to which the Adjusted LIBO Rate
is determined, having a term equal to such Fixed Period.
"Event of Termination" has the meaning specified in
Section 7.01.
"FAB" means Merisel FAB, Inc., a Delaware corporation and
a wholly-owned subsidiary of Merisel, created to acquire and
operate the assets comprising the franchise and distribution
division of ComputerLand Corporation, a Delaware corporation.
"Federal Funds Rate" means, for any day, a fluctuating
interest rate per annum equal to the weighted average of the
<PAGE>
16
rates on overnight Federal funds transactions with members of
the Federal Reserve System arranged by Federal funds brokers,
as published for such day (or, if such day is not a Business
Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York, or, if such rate is not so published
for any day which is a Business Day, the average of the
quotations for such day on such transactions received by the
Agent from three Federal funds brokers of recognized standing
selected by it.
"Fee Letter" means the letter agreement regarding
additional fees, dated the date hereof, between the Seller and
the Agent.
"Fiscal Month" means any of the accounting months
designated as such on Schedule III hereto.
"Fixed Period" means, with respect to any Eligible Asset,
a period determined pursuant to Section 2.02; provided,
however, that:
(i) any Fixed Period shall be a period of from one
to and including 14 days, or a period of one, two, three
or six months, as the Seller shall select (subject to
clause (iv) below) on notice by the Seller received by
the Agent (including notice by telephone, confirmed in
writing) not later than 1:00 P.M. (New York City time) on
the day which occurs three Business Days before the first
day of such Fixed Period, each such Fixed Period for any
Eligible Asset to commence on the last day of the
immediately preceding Fixed Period for such Eligible
Asset (or, if there is no such Fixed Period, on the date
of Purchase of such Eligible Asset), except that if the
Agent shall not have received such notice before
1:00 P.M. (New York City time) on such day, such Fixed
Period shall be one day;
(ii) any Fixed Period (other than of one day) which
would otherwise end on a day which is not a Business Day
shall be extended to the next succeeding Business Day,
except that if such Fixed Period relates to the Adjusted
LIBO Rate and such extension would cause the last day of
such Fixed Period to occur in the next succeeding month,
the last day of such Fixed Period shall occur on the
immediately preceding Business Day;
(iii) in the case of any Fixed Period of one day for
any Eligible Asset, (a) if such Fixed Period is
<PAGE>
17
such Eligible Asset's initial Fixed Period, such Fixed
Period shall be the day of the related Purchase; (b) any
subsequently occurring Fixed Period which is one day
shall, if the immediately preceding Fixed Period is more
than one day, be the last day of such immediately
preceding Fixed Period, and, if the immediately preceding
Fixed Period is one day, be the day next following such
immediately preceding Fixed Period; and (c) if such Fixed
Period occurs on a day immediately preceding a day which
is not a Business Day, such Fixed Period shall be
extended to the next succeeding Business Day; and
(iv) in the case of any Fixed Period for any
Eligible Asset which commences before the Termination
Date for such Eligible Asset and would otherwise end on a
date occurring after such Termination Date, such Fixed
Period shall end on such Termination Date and the
duration of each Fixed Period which commences on or after
the Termination Date for such Eligible Asset shall be of
such duration as shall be selected by the Agent.
"Floor Plan Obligor" means any Obligor referred to in
clause (ii) of the definition of "Obligor" contained in this
Section 1.01.
"Indemnified Party" means any of Citibank, CNA, any Bank,
any Owner, the Agent or any Affiliate of any thereof, and
"Indemnified Parties" means all of Citibank, CNA, the Banks,
the Owners, the Agent and their respective Affiliates.
"Investor" means Corporate Receivables Corporation, a
California corporation, or any other "Investor" under and as
defined in the Investor Agreement from time to time.
"Investor Agreement" means the Amended and Restated Trade
Receivables Purchase and Sale Agreement, dated as of the date
hereof, among the Seller, the Investor and CNA, as Agent, as
the same may, from time to time, be amended, modified or
supplemented.
"Investor Report" means a report, in substantially the
form of Exhibit C hereto, furnished by the Collection Agent to
the Agent for each Owner pursuant to Section 2.07.
"Liquidation Collection Agent Fee" means for any Eligible
Asset at any date an amount equal to (i) the Capital of such
Eligible Asset as at such date multiplied by (ii) the product
of (a) the percentage per annum as at such
<PAGE>
18
date of the Collection Agent Fee and (b) a fraction having as
its numerator the number of days in the period equal to the
sum of the Average Maturity plus the Collection Delay Period
(each as in effect at such date) and 360 as its denominator.
"Liquidation Day" for any Eligible Asset means either
(i) each day during any Settlement Period for such Eligible
Asset on which the conditions set forth in Section 3.02 are
not satisfied (and such failure of conditions is not waived by
the Agent and the Majority Banks), provided that such
conditions are also not satisfied (and such failure of
conditions is not waived by the Agent and the Majority Banks)
on any succeeding day during such Settlement Period, or
(ii) each day which occurs on or after the Termination Date
for such Eligible Asset.
"Liquidation Fee" means, for each Eligible Asset for any
Fixed Period (computed without regard to clause (iv) of the
definition of "Fixed Period") during which any Liquidation Day
or Termination Date for such Eligible Asset occurs, the
amount, if any, by which (i) the additional Yield (calculated
without taking into account any Liquidation Fee) which would
have accrued on the reductions of Capital of such Eligible
Asset during such Fixed Period (as so computed) if such
reductions had remained as Capital, exceeds (ii) the income,
if any, received by the Owners of such Eligible Asset from
such Owners' investing the proceeds of such reductions of
Capital.
"Liquidation Yield" means, for any Eligible Asset at any
date, an amount equal to the Rate Variance Factor as at such
date multiplied by the product of (i) the Capital of such
Eligible Asset as at such date and (ii) the product of (a) the
Citibank Rate for such Eligible Asset for a Fixed Period
deemed to commence at such time for a period of 30 days and
(b) a fraction having as its numerator the number of days in
the period equal to the sum of the Average Maturity plus the
Collection Delay Period (each as in effect at such date) and
360 as its denominator.
"Lock-Box Account" means a lock-box account or special
depositary account maintained in the name of the Seller at a
bank for the purpose of receiving Collections.
"Lock-Box Agreement" means an agreement, in substantially
the form of Exhibit D hereto, among the Seller, as assignee of
Americas or otherwise, the Agent and any Lock-Box Bank.
<PAGE>
19
"Lock-Box Bank" means any of the banks holding one or
more Lock-Box Accounts.
"Lock-Box Notice" means a notice, in substantially the
form of Annex 1 to the Lock-Box Agreement, from the Seller to
any Lock-Box Bank.
"Loss Amount" means, for any Eligible Asset on any date,
the sum of, for each of the three Non-Investment Grade
Obligors (as defined below) that, out of all Non-Investment
Grade Obligors owing such Pool Receivables, owe the three
largest aggregate Outstanding Balances of such Pool
Receivables, the lesser of (i) the aggregate Outstanding
Balance of Pool Receivables which are Eligible Receivables on
such date and are owed on such date by such Non-Investment
Grade Obligor or (ii) the Special Concentration Limit, if any,
for such Non-Investment Grade Obligor or, if none, the product
of (A) the Concentration Limit for such Obligor on such date
multiplied by (B) the aggregate outstanding Capital of all
Eligible Assets on such date. The term "Non-Investment Grade
Obligor" means any Obligor the long-term public senior
unsecured debt securities of which either are not rated by
Standard & Poor's Ratings Group and by Moody's Investors
Service or, if so rated, are rated below BBB- by Standard &
Poor's Ratings Group or below Baa3 by Moody's Investors
Service.
"Loss Percentage" means, for any Eligible Asset at any
date, the greatest of (i) three times the highest Default
Ratio as of the last day of any Fiscal Month occurring in the
12 Fiscal Months ended immediately preceding such date,
(ii) 12% and (iii) three times the Loss-to-Liquidation Ratio
as of the last day of the Fiscal Month ended immediately
preceding such date.
"Loss-to-Liquidation Ratio" means the ratio (expressed as
a percentage) computed as of the last day of each Fiscal Month
by dividing (i) an amount equal to the aggregate Outstanding
Balance of all Pool Receivables written off by the Seller, or
which should have been written off by the Seller under its
Credit and Collection Policy, during the period of 12 Fiscal
Months ending with and including such Fiscal Month by (ii) the
aggregate amount of Collections received during such period
with respect to Pool Receivables.
"Loss Reserve" means, for any Eligible Asset at any date,
an amount equal to the greater of (i)
LP x (C + YR)
where:
<PAGE>
20
LP = the Loss Percentage for such Eligible Asset at
the close of business of the Collection Agent
on such date.
C = the Capital of such Eligible Asset at the close
of business of the Collection Agent on such
date.
YR = the Yield Reserve for such Eligible Asset at
the close of business of the Collection Agent
on such date.
or (ii) the Loss Amount for such Eligible Asset at the close
of business of the Collection Agent on such date.
"Majority Banks" means at any time such of the Banks and
CNA as own at least 51% of the then aggregate outstanding
Eligible Assets held by the Banks and CNA or, if no such
Eligible Assets are then outstanding, Banks having at least
51% of the Commitments.
"Merisel" means Merisel, Inc., a Delaware corporation.
"Net Receivables Pool Balance" means at any time the
Outstanding Balance of the Eligible Receivables (subject to
the below proviso) in the Receivables Pool at such time
reduced by the sum of:
(i) the aggregate Outstanding Balance of the
Defaulted Receivables in the Receivables Pool at such
time;
(ii) the aggregate amount by which the then
Outstanding Balance of all Pool Receivables (other than
Defaulted Receivables) of each Obligor exceeds (x) the
product of (A) the Concentration Limit for such Obligor
at such time multiplied by (B) the aggregate outstanding
Capital of all Eligible Assets at such time or (y) the
Special Concentration Limit for such Obligor, as the case
may be;
(iii) the aggregate amount by which the then
Outstanding Balance of all Pool Receivables (other than
Defaulted Receivables) of each Floor Plan Obligor the
long-term public senior unsecured debt securities of
which are not rated "A" or higher by Standard & Poor's
Ratings Group and by Moody's Investors Service, exceeds
the product of (A) the Concentration Limit for such
Obligor as such time multiplied by (B) the aggregate
outstanding Capital of all Eligible Assets at such time;
<PAGE>
21
(iv) the aggregate amount of accrued and unpaid
volume rebates owed by the Seller or Americas to Obligors
of Pool Receivables at such time; and
(v) the lesser of (x) the aggregate payables
(unless of the type set forth in clause (iii) above) owed
at any time by the Seller or Americas (or any Affiliate
thereof if, for contractual or other reasons, the Seller
or Americas and such Affiliate could be viewed as a
single entity for purposes of offset rights) to any
Obligor of any Pool Receivable (or, to the best knowledge
of the Seller, any Affiliate of any such Obligor if, for
contractual or other reasons, such Obligor and such
Affiliate could be viewed as a single entity for purposes
of offset rights) and (y) the aggregate Outstanding
Balance of Pool Receivables which are Eligible
Receivables and are owed by such Obligor (or any such
Affiliate) at such time;
provided, however, that if and so long as the aggregate
Outstanding Balance of the Pool Receivables financed or to be
financed by Floor Plan Obligors is less than 12% of the
aggregate Outstanding Balance of the Eligible Receivables in
the Receivables Pool, clause (ii) above shall apply only to
the Original Obligors of the Pool Receivables referred to
therein, and if and so long as the aggregate Outstanding
Balance of the Pool Receivables financed or to be financed by
Floor Plan Obligors is 12% or more of the aggregate
Outstanding Balance of the Eligible Receivables in the
Receivables Pool, clause (ii) above shall apply to the Floor
Plan Obligors of the Pool Receivables financed or to be
financed by such Floor Plan Obligors and to the Original
Obligors of the other Pool Receivables referred to therein.
"Obligations" has the meaning specified in Section 11.02.
"Obligor" means a Person (other than the Seller or
Americas) either (i) which is obligated to make payments
pursuant to a Contract of the type described in clause (i) of
the definition of the term "Contract" contained in this
Section 1.01 or (ii) which has financed or is obligated to
finance (by lending to an Obligor referred to in clause (i)
above, or by purchasing from Americas, if the consideration to
be paid by such Person for such purchase is in the form of
indebtedness, or the Seller, if such consideration is in the
form of cash, or otherwise), or is a party to an agreement
that contemplates that such Person may so finance, a
Receivable.
<PAGE>
22
"Original Agreement" has the meaning assigned to that
term in Preliminary Statement (2).
"Original Obligor" means any Obligor referred to in
clause (i) of the definition of "Obligor" contained in this
Section 1.01.
"Origination Fee" has the meaning specified in
Section 2.10.
"Outstanding Balance" of any Receivable at any time means
the then outstanding principal balance thereof; provided,
however, that it is understood by the parties hereto that in
any computation or other determination of the Outstanding
Balance of any Pool Receivable, or the aggregate Outstanding
Balance of Pool Receivables, owed by any Obligors hereunder,
the amount of such Outstanding Balance shall not be reduced by
any negative balances owed by any other Obligors.
"Owner" means, for each Eligible Asset, upon its purchase
hereunder any of the Banks that purchased such Eligible Asset
or any of the Banks and CNA, as the case may be, as the
purchaser thereof; provided, however, that, upon any
assignment thereof or of any portion thereof pursuant to
Article IX, the Assignee thereof shall be the Owner thereof or
an Owner thereof.
"Permitted Transaction" means any transaction permitted
under the Certificate of Incorporation and by-laws of the
Seller delivered to the Agent pursuant to Section 3.01, as the
same may, from time to time, be amended, modified or otherwise
supplemented with the prior written consent of the Agent.
"Person" means an individual, partnership, corporation
(including a business trust), joint stock company, trust,
unincorporated association, joint venture or other entity, or a
government or any political subdivision or agency thereof.
"Pool Receivable" means a Receivable in the Receivables
Pool.
"Preliminary Lock-Box Notice" means a notice, in
substantially the form of Exhibit F hereto, from the Seller to
a Lock-Box Bank.
"Program Fee" has the meaning specified in Section 2.10.
<PAGE>
23
"Provisional Liquidation Day" means any day which could
be a Liquidation Day but for the proviso in clause (i) of the
definition of "Liquidation Day".
"Purchase" means a purchase by the Banks or the Banks
(other than Citibank) and CNA, as the case may be, of an
Eligible Asset from the Seller pursuant to Article II
(including, without limitation, Article II of the Original
Agreement).
"Rate Variance Factor" means that number which reflects
the potential variance in selected interest rates over a
period of time designated by the Agent, as shall be computed
by the Collection Agent each Fiscal Month as set forth in the
Investor Report in accordance with the provisions thereof;
provided, however, that the "factors" in line 7 of the "Rate
Variance Factor" section of such Investor Report may be
changed from time to time upon at least five days' prior
notice by the Agent to the Collection Agent.
"Rating Period" means any period during which either
(i) any of Americas' long-term public senior unsecured debt
securities shall be rated below BBB- by Standard & Poor's
Ratings Group or below Baa3 by Moody's Investors Service, or
(ii) if such securities are not rated by Standard & Poor's
Ratings Group or Moody's Investors Service, such securities
shall have a deemed rating of less than BBB or Baa2, as
determined by the Agent in its reasonable discretion, based on
(A) the most recent audited financial statements for Americas
and its subsidiaries, (B) the financial effect on Americas of
its issuance of any equity securities during the 90-day period
following the date of such financial statements, and (C) any
material adverse change in the financial condition or
operations of Americas since September 30, 1994.
"Receivable" means (i) the indebtedness of any Original
Obligor under a Contract of the type described in clause (i)
of the definition of the term "Contract" arising from a sale
of merchandise by Americas (except for sales of merchandise by
the "Channel Services Group" of Americas) to such Original
Obligor, including without limitation any such indebtedness
which may be financed by any Floor Plan Obligor, and (ii) the
indebtedness of any Floor Plan Obligor arising from the sale
by Americas of any indebtedness referred to in clause (i)
above to such Floor Plan Obligor under the agreement or
arrangement of the type described in clause (iii) of the
definition of the term "Related Security" contained herein
relating to such indebtedness, and, in the case of clauses (i)
and (ii) above, includes the
<PAGE>
24
right to payment of any interest or finance charges and other
obligations of such Obligor with respect thereto. Unless
otherwise stated, the term "Obligor" of any Receivable refers
to both the Original Obligor that owes such Receivable and, if
applicable, the Floor Plan Obligor that finances, or may
finance, such Receivable.
"Receivables Contribution and Sale Agreement" means the
Receivables Contribution and Sale Agreement, dated as of the
date hereof and in substantially the form of Exhibit I hereto,
between the Seller and Americas, as the same may, from time to
time, be amended, modified or supplemented with the prior
written consent of the Agent.
"Receivables Pool" means at any time the aggregation of
each then outstanding Receivable in respect of which the
Obligor is a Designated Obligor or, as to any Receivable in
existence on such date, was a Designated Obligor on the date
of any Purchase, or reinvestment to purchase, such Receivable
pursuant to Section 2.05 (including, without limitation,
Section 2.06 of the Original Agreement), other than any such
Receivable (i) which shall have been repurchased by the Seller
as contemplated by Section 2.07 (including, without
limitation, Section 2.08 of the Original Agreement) or
(ii) with respect to which Collections in the entire amount of
the Outstanding Balance of such Receivable shall have been
received in respect of any Related Security supporting or
securing payment of such Receivable and applied and
distributed pursuant to Section 2.05 or 2.06, as applicable at
the time of such receipt (if and so long as neither the Agent
nor any Owner is at any time required to return all or any
portion of such amount for any reason).
"Records" means all Contracts and other documents, books,
records, and other tangible information (including, without
limitation, computer programs, tapes, disks, punch cards, data
processing software and related property and rights)
maintained by or in possession of the Seller or Americas with
respect to Receivables, Related Security or the related
Obligors in connection with this Agreement, the Receivables
Contribution and Sale Agreement or the Contracts.
"Register" has the meaning assigned to that term in
Section 9.02(c).
"Reinvestment Termination Date" for any Eligible Asset
means that Business Day which Americas or the Seller
designates or, if the conditions precedent in Section 3.02 are
not satisfied, such Business Day which the Agent (with the
consent or at the request of the Majority Banks) designates,
as the Reinvestment Termination Date for such Eligible Asset
by notice to the Agent, and to the Seller or Americas, as
applicable (if Americas or the Seller so
<PAGE>
25
designates), or to the Seller (if the Agent so designates) at
least three Business Days prior to such Business Day in the case
of any such designation by Americas or the Seller, and at least
one Business Day prior to such Business Day in the case of any
such designation by the Agent.
"Related Security" means with respect to any Receivable:
(i) all of the Seller's and Americas' interest in
the merchandise (including returned merchandise), if any,
relating to the sale which gave rise to such Receivable
until such Receivable shall be paid in full pursuant to
Sections 2.07 and 5.01(j);
(ii) all other security interests or liens and
property subject thereto from time to time purporting to
secure payment of such Receivable, whether pursuant to
the Contract related to such Receivable or otherwise,
together with all financing statements signed by an
Obligor describing any collateral securing such
Receivable;
(iii) all floorplan repurchase agreements, repurchase
agreements, inventory financing agreements, and other
floorplan agreements, and guarantees, insurance and other
agreements or arrangements of whatever character, from
time to time financing or otherwise supporting or
securing payment of such Receivable whether pursuant to
the Contract related to such Receivable or otherwise; and
(iv) all Records.
"Restructuring Fee" has the meaning specified in
Section 2.10.
"Resyndication Fee" has the meaning specified in
Section 2.10.
"Settlement Period" for any Eligible Asset means each
period commencing on the first day of each Fixed Period for
such Eligible Asset and ending on the last day of such Fixed
Period, and, on and after the Termination Date for such
Eligible Asset, such period (including, without limitation, a
period of one day) as shall be selected from time to time by
the Agent or, in the absence of any such selection, each
period of thirty days from the last day of the immediately
preceding Settlement Period.
"Special Concentration Limit" for any Obligor means at
any time such dollar amount specified for such Obligor by the
Agent in writing delivered to the Seller; provided, however,
that the Agent may cancel any Special Concentration Limit upon
three Business Days' notice to the Seller.
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26
"Termination Date" for any Eligible Asset means the
earlier of (i) the Reinvestment Termination Date for such
Eligible Asset and (ii) the Commitment Termination Date.
"UCC" means the Uniform Commercial Code as from time to
time in effect in the specified jurisdiction.
"Yield" means the product of
CR x C x ED + LF
---
360
where:
CR = the Citibank Rate for such Eligible Asset for such
Fixed Period.
C = the Capital of such Eligible Asset during such Fixed
Period.
ED = the actual number of days elapsed during such Fixed
Period.
LF = the Liquidation Fee, if any, for such Eligible Asset
for such Fixed Period.
provided, however, that no provision of this Agreement or the
Certificate shall require the payment or permit the collection
of Yield in excess of the maximum permitted by applicable law;
and provided, further, that Yield for any Eligible Asset shall
not be considered paid by any distribution if at any time such
distribution is rescinded or must otherwise be returned for
any reason.
"Yield Reserve" for any Eligible Asset at any time means
the sum of (i) the Liquidation Yield at such time for such
Eligible Asset, plus (ii) the accrued and unpaid Yield for
such Eligible Asset.
SECTION 1.02. Other Terms. All accounting terms not
specifically defined herein shall be construed in accordance with
generally accepted accounting principles. All terms used in
Division 9 of the UCC in the State of California, and not
specifically defined herein, are used herein as defined in such
Division 9.
SECTION 1.03. Computation of Time Periods. Unless
otherwise stated in this Agreement, in the computation of a period
of time from a specified date to a later specified date, the word
"from" means "from and including" and the words "to" and "until"
each means "to but excluding".
<PAGE>
27
ARTICLE II
AMOUNTS AND TERMS OF THE PURCHASES
SECTION 2.01. Commitment. On the terms and conditions
hereinafter set forth, each Bank, severally shall, and CNA (in
place of Citibank hereunder) may in its sole discretion, make
Purchases of Eligible Assets from time to time during the period
from the Effective Date to the Commitment Termination Date in an
aggregate amount for such Bank or CNA not to exceed at any time
outstanding such Bank's Commitment, or, in the case of CNA,
Citibank's Commitment; provided, however that no Bank shall be
obligated to make, and CNA shall not make, any Purchase if, after
giving effect to such Purchase, the aggregate outstanding Capital
of Eligible Assets, together with the aggregate outstanding
"Capital" of "Eligible Assets" under the Investor Agreement, would
exceed the aggregate Commitments of all the Banks. Each Purchase
shall be made ratably by the Banks according to their respective
Commitments, provided, that in the case of a Purchase by the Banks
(other than Citibank) and CNA, CNA's portion of such Purchase
shall be determined ratably in accordance with Citibank's
Commitment. Each Bank or, if applicable, each Bank (other than
Citibank) and CNA, shall make their respective ratable portions of
each Purchase on the same day as the other parties making such
Purchase. The Owners of each Eligible Asset shall, with the
proceeds of Collections attributable to such Eligible Asset,
reinvest pursuant to Section 2.05 in additional undivided
percentage interests in the Pool Receivables by making an
appropriate readjustment of such Eligible Asset.
SECTION 2.02. Making Purchases. (a) Each Purchase shall
be made on at least three Business Days' notice from the Seller to
the Agent, given not later than 1:00 P.M. (New York City time),
which shall give to each Bank and CNA prompt notice thereof by
telephone, telecopier, telex or cable. Each such notice of a
proposed Purchase shall be by telephone, telecopier, telex or
cable, specifying the requested (A) amount of such Purchase to be
paid to the Seller and (B) Business Day of such Purchase and
duration of the initial Fixed Period for such Eligible Asset. CNA
shall have the right in its sole discretion, and shall promptly
notify the Agent whether CNA has determined, to make such Purchase
with the Banks (other than Citibank), in place of Citibank. The
Agent shall promptly thereafter notify the Seller whether CNA has
determined to make such Purchase and whether the desired duration
of the initial Fixed Period for the Eligible Asset to be purchased
is acceptable. On the date of each Purchase, each Bank or each
Bank (other than Citibank) and CNA, as the case may be, shall,
upon satisfaction of the applicable conditions set forth in
<PAGE>
28
Article III, make available to the Agent its ratable portion of
the amount of such Purchase by deposit of such amount in same day
funds to the Agent's Account, and, after receipt by the Agent of
such funds, the Agent will cause such funds to be made immediately
available to the Seller at Citibank's office at 399 Park Avenue,
New York, New York. The Agent shall, on the first day of each
Fixed Period for each Eligible Asset, notify the Seller and each
Bank of the Citibank Rate for such Fixed Period.
(b) Each notice of a Purchase from the Seller delivered
pursuant to Section 2.02(a) shall be irrevocable and binding on
the Seller. The Seller shall indemnify each Bank and CNA against
any actual loss or expense incurred by such Bank or CNA as a
result of any failure to fulfill on or before the date of any
Purchase the applicable conditions set forth in Article III which
loss or expense arises as a result of any actual loss or expense
incurred by reason of the liquidation or reemployment of deposits
or other funds acquired by such Bank or CNA to fund its ratable
portion of such Purchase when such Purchase, as a result of such
failure, is not made on such date.
(c) Unless the Agent shall have received notice from a
Bank prior to the date of any Purchase that such Bank will not
make available to the Agent such Bank's ratable portion of such
Purchase, the Agent may assume that such Bank has made such
portion available to the Agent on the date of such Purchase in
accordance with subsection (a) of this Section 2.02 and the Agent
may, in reliance upon such assumption, make available to the
Seller on such date a corresponding amount. However, if the Agent
has received such notice from such Bank, the Agent may not make
such assumption and may not make available to the Seller on such
date such corresponding amount. If and to the extent that such
Bank shall not have so made such ratable portion available to the
Agent but the Agent shall have made such ratable portion available
to the Seller, such Bank and the Seller severally agree to repay
(to the extent not repaid by the Seller or such Bank,
respectively) to the Agent forthwith on demand such corresponding
amount together with interest thereon, for each day from the date
such amount is made available to the Seller until the date such
amount is repaid to the Agent, at (i) in the case of the Seller,
the Yield rate applicable to such amount and (ii) in the case of
such Bank, the Federal Funds Rate. If such Bank shall repay to
the Agent such corresponding amount, such amount so repaid shall
constitute such Bank's ratable portion of such Purchase for
purposes of this Agreement.
(d) The failure of any Bank or CNA to make available
such Bank's or CNA's ratable portion of any Purchase shall not
relieve any other Bank or CNA of its obligation, if any, hereunder
to make available such other Bank's ratable portion of
<PAGE>
29
such Purchase on the date of such Purchase, but no Bank or CNA
shall be responsible for the failure of any other Bank or CNA to
make available such other Bank's or CNA's ratable portion of such
Purchase on the date of any Purchase.
SECTION 2.03. Termination or Reduction of the
Commitments.
(a) Optional. The Seller may, upon at least five
Business Days' notice to the Agent, terminate in whole or reduce
ratably in part the unused portions of the Commitments; provided,
however, that for purposes of this Section 2.03(a), the unused
portions of the Commitments shall be computed as the excess of
(A) the aggregate Commitments of the Banks immediately prior to
giving effect to such termination or reduction over (B) the sum of
(i) the aggregate Capital of Eligible Assets outstanding at the
time of such computation and (ii) the aggregate "Capital" of
"Eligible Assets" outstanding under the Investor Agreement at such
time; provided, further, that each partial reduction shall be in
an amount equal to $1,000,000 or an integral multiple thereof.
(b) Mandatory. On each day on which the Seller shall,
pursuant to Section 2.03(a) of the Investor Agreement, reduce in
part the unused portion of the Purchase Limit (as defined in the
Investor Agreement), the aggregate Commitments shall automatically
(and ratably for each Bank) reduce by an equal amount. The
Commitments shall automatically terminate in whole on any day on
which the Seller shall terminate in whole the Purchase Limit
pursuant to Section 2.03(a) of the Investor Agreement.
SECTION 2.04. Eligible Asset. (a) Each Eligible Asset
shall be initially computed as of the opening of business of the
Collection Agent on the date of Purchase of such Eligible Asset.
Thereafter until the Termination Date for such Eligible Asset,
such Eligible Asset shall be automatically recomputed as of the
close of business of the Collection Agent on each Business Day
(other than a Liquidation Day). Such Eligible Asset shall remain
constant from the time as of which any such computation or
recomputation is made until the time as of which the next such
recomputation, if any, shall be made. Any Eligible Asset, as
computed as of the day immediately preceding the Termination Date
for such Eligible Asset, shall remain constant at all times on and
after such Termination Date. Such Eligible Asset shall become
zero at such time as the Owners of such Eligible Asset shall have
received the accrued Yield for such Eligible Asset and shall have
recovered the Capital of such Eligible Asset and all amounts owed
to such Owners by the Seller hereunder (other than pursuant to
indemnification obligations of
<PAGE>
30
the Seller under Article X that shall not have become liquidated
or fixed by such time), and the Collection Agent shall have
received the accrued Collection Agent Fee for such Eligible Asset.
(b) If any Eligible Asset would otherwise be reduced on
any day on account of Receivables arising as or becoming Pool
Receivables, the Owners of such Eligible Asset may prevent such
reduction by giving notice to the Collection Agent, before the
close of business of the Collection Agent on such day, that such
Eligible Asset's interest in such Receivables is to be limited so
as to prevent such reduction. If such notice is given for any day
for any Eligible Asset, the Receivables Pool for such Eligible
Asset and the Net Receivables Pool Balance for such Eligible
Asset, will include, with respect to Receivables arising as or
becoming Pool Receivables on such day, only such number of such
Receivables or such portion of such Receivables as shall cause
such Eligible Asset to remain constant, such Receivables or
portion thereof being included in the Receivables Pool for such
Eligible Asset in the order of the Seller's invoice numbers for
such Receivables up to an aggregate amount so as to cause such
Eligible Asset to remain constant, and the remainder of such
Receivables or portion thereof shall be treated as Receivables
arising on the next succeeding Business Day.
SECTION 2.05. Non-Liquidation Settlement Procedures.
On each day (other than a Liquidation Day or a Provisional
Liquidation Day) during each Settlement Period for each Eligible
Asset, the Collection Agent shall: (i) out of Collections of Pool
Receivables attributable to such Eligible Asset received on such
day, set aside and hold in trust for the Owners of such Eligible
Asset an amount equal to the Yield and Collection Agent Fee
accrued through such day for such Eligible Asset and not so
previously set aside and (ii) reinvest the remainder of such
Collections, for the benefit of such Owners, by recomputation of
such Eligible Asset pursuant to Section 2.04 as of the end of such
day and the payment of such remainder to the Seller; provided,
however, that, to the extent that the Agent or any Owner shall be
required for any reason to pay over any amount of Collections
which shall have been previously reinvested for the account of
such Owner pursuant hereto, such amount shall be deemed not to
have been so applied but rather to have been retained by the
Seller and paid over for the account of such Owner and,
notwithstanding any provision hereof to the contrary, such Owner
shall have a claim for such amount. On the last day of each
Settlement Period for each Eligible Asset, the Collection Agent
shall deposit to the Agent's Account for the account of the Owners
of such Eligible Asset the amounts set aside as described in
clause (i) of the first sentence of this
<PAGE>
31
Section 2.05. Upon receipt of such funds by the Agent, the Agent
shall distribute them to the Owners of such Eligible Asset in
payment of the accrued Yield for such Eligible Asset and to the
Collection Agent in payment of the accrued Collection Agent Fee
payable with respect to such Eligible Asset. If there shall be
insufficient funds on deposit for the Agent to distribute funds in
payment in full of the aforementioned amounts, the Agent shall
distribute funds, first, in payment of the accrued Yield for such
Eligible Asset, and second, in payment of the accrued Collection
Agent Fee payable with respect to such Eligible Asset.
SECTION 2.06. Liquidation Settlement Procedures. On
each Liquidation Day and on each Provisional Liquidation Day
during each Settlement Period for each Eligible Asset, the
Collection Agent shall set aside and hold in trust for the Owner
of such Eligible Asset the Collections of Pool Receivables
attributable to such Eligible Asset received on such day. On the
last day of each Settlement Period for each Eligible Asset, the
Collection Agent shall deposit to the Agent's Account for the
account of the Owners of such Eligible Asset the amounts set aside
pursuant to the preceding sentence but not to exceed the sum of
(i) the accrued Yield for such Eligible Asset, (ii) the Capital of
such Eligible Asset, (iii) the accrued Collection Agent Fee
payable with respect to such Eligible Asset and (iv) the aggregate
amount of other amounts owed hereunder by the Seller to the Owners
of such Eligible Asset. Any amounts set aside pursuant to the
first sentence of this Section 2.06 and not required to be
deposited to the Agent's Account pursuant to the preceding
sentence shall be paid to the Seller by the Collection Agent;
provided, however, that if amounts are set aside pursuant to the
first sentence of this Section 2.06 on any Provisional Liquidation
Day which is subsequently determined not to be a Liquidation Day,
such amounts shall be applied pursuant to the first sentence of
Section 2.05 on the day of such subsequent determination. Upon
receipt of funds deposited to the Agent's Account pursuant to the
second sentence of this Section 2.06, the Agent shall distribute
them (A) to the Owners of such Eligible Asset (x) in payment of
the accrued Yield for such Eligible Asset, (y) in reduction (to
zero) of the Capital of such Eligible Asset and (z) in payment of
any other amounts owed by the Seller hereunder to such Owners and
(B) to the Collection Agent in payment of the accrued Collection
Agent Fee payable with respect to such Eligible Asset. If there
shall be insufficient funds on deposit for the Agent to distribute
funds in payment in full of the aforementioned amounts, the Agent
shall distribute funds, first, in payment of the accrued Yield for
such Eligible Asset, second, in reduction of Capital of such
Eligible Asset, third, in payment of other amounts payable to such
Owners, and fourth, in payment of the accrued Collection Agent Fee
payable with respect to such Eligible Asset.
<PAGE>
32
SECTION 2.07. General Settlement Procedures. If on any
day (i) the Outstanding Balance of a Pool Receivable is either
(A) reduced as a result of any defective, rejected or returned
merchandise or services, or any credit, rebate, discount, dispute,
chargeback, allowance or other dilution factor or any other
adjustment by the Seller or Americas or any other Affiliate
thereof, or (B) reduced or cancelled as a result of a setoff in
respect of any claim by the Obligor thereof against the Seller or
Americas or any other Affiliate thereof (whether such claim arises
out of the same or a related transaction or an unrelated
transaction), or (ii) in connection with any sale by the Seller of
any Pool Receivable to any Floor Plan Obligor, the consideration
paid by such Floor Plan Obligor as contemplated by Section 5.03(a)
shall be less than the Outstanding Balance of such Pool Receivable
as a result of finance charges payable by the Seller to such Floor
Plan Obligor in connection with such sale, the Seller shall be
deemed to have received on such day a Collection of such
Receivable in the amount of such reduction or cancellation, in the
case of clause (i), or, in the case of clause (ii), in the amount
of the excess of the Outstanding Balance of such Receivable over
the consideration paid by such Floor Plan Obligor in connection
with the Seller's sale thereof as contemplated by Section 5.03(a).
If on any day any of the representations or warranties in
Section 4.01(h) is no longer true with respect to all or any
portion of a Pool Receivable, the Seller shall be deemed to have
received on such day a Collection in full of such Pool Receivable
or portion, as the case may be. In the case of each of the two
preceding sentences, upon any such payment by the Seller of any
amount of any such Receivable, the Seller shall be deemed to have
repurchased (without recourse and without representation or
warranty, express or implied) such Receivable to the extent of
such amount and such amount of such Receivable shall cease to be a
"Pool Receivable" for purposes of this Agreement (unless and until
the Agent or any Bank or any Owner is at any time required to
return all or any portion of such amount for any reason). Except
as otherwise provided in the preceding three sentences or as
otherwise required by law or the underlying Contract, all
Collections received from an Obligor of any Receivable shall be
applied to Receivables then outstanding of such Obligor in the
order of the age of such Receivables, starting with the oldest
such Receivable, except if payment is designated by such Obligor
for application to specific Receivables. Prior to the 15th
Business Day of each Fiscal Month, the Collection Agent shall
prepare and forward to the Agent for each Owner of an Eligible
Asset (A) an Investor Report, relating to each Eligible Asset, as
of the close of business of the Collection Agent on the last day
of the immediately preceding Fiscal Month, computed in accordance
with the proviso to the definition of the term "Outstanding
Balance"
<PAGE>
33
and excluding any Obligor which owes an aggregate negative
balance, and (B) (1) in the case of each Obligor owing Pool
Receivables the aggregate Outstanding Balance of which exceeds the
Concentration Limit or, if applicable, the Special Concentration
Limit for such Obligor at such time, a listing by Obligor of the
aggregate Outstanding Balance of the Pool Receivables owed by such
Obligor, together with an analysis as to the aging of such
aggregate Receivables, as of such last day, and (2) an analysis as
to the aging of the aggregate Pool Receivables owed by all
Obligors, and (3) in the case of each Obligor, if and to the
extent requested by the Agent, a listing by Obligor of each Pool
Receivable owed by such Obligor, together with an analysis as to
the aging of such Receivables, as of such last day. On or prior
to the day the Collection Agent is required to make a deposit with
respect to a Settlement Period pursuant to Section 2.05 or 2.06,
the Seller will advise the Agent of each Liquidation Day and each
Provisional Liquidation Day occurring during such Settlement
Period and of the allocation of the amount of such deposit to each
outstanding Eligible Asset; provided, however, that, if the Seller
is not the Collection Agent, the Seller shall advise the
Collection Agent of the occurrence of each such Liquidation Day
and each Provisional Liquidation Day occurring during such
Settlement Period on or prior to such day.
SECTION 2.08. Payments and Computations, Etc. (a) All
amounts to be paid or deposited by the Seller or the Collection
Agent hereunder shall be paid or deposited in accordance with the
terms hereof no later than 1:00 P.M. (New York City time) on the
day when due in lawful money of the United States of America in
same day funds to the Agent's Account for the account of the
Owners or any other Indemnified Party, as applicable. The Agent
will promptly thereafter cause to be distributed like funds
relating to the payment of Yield, Liquidation Yield, Capital or
fees to the Banks or to the Banks (other than Citibank) and CNA,
as the case may be, ratably in accordance with their respective
interests, and like funds relating to the payment of any other
amount payable to any Indemnified Party to such Indemnified Party,
in each case to be applied in accordance with the terms of this
Agreement. Upon the Agent's acceptance of an Assignment and
Acceptance and recording of the information contained therein in
the Register pursuant to Section 9.02(c), from and after the
effective date specified in such Assignment and Acceptance, the
Agent shall make all payments hereunder in respect of the interest
assigned thereby to the assignee thereunder, and the parties to
such Assignment and Acceptance shall make all appropriate
adjustments in such payments for periods prior to such effective
date directly between themselves.
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34
(b) The Seller hereby authorizes each Bank, if and to
the extent payment owed by the Seller to such Bank is not made to
the Agent when due hereunder, to charge from time to time against
any or all of the Seller's accounts with such Bank any amount so
due.
(c) The Seller shall, to the extent permitted by law,
pay to the Agent interest on all amounts not paid or deposited
when due hereunder at 2% per annum above the Alternate Base Rate,
payable on demand, provided, however, that such interest rate
shall not at any time exceed the maximum rate permitted by
applicable law. Such interest shall be for the ratable account
of, and distributed by the Agent ratably to, the Owners, former
Owners or Indemnified Parties to which the amounts referred to
above were owed (either as a payment or as a deposit).
(d) All computations of interest and all computations of
Yield, Liquidation Yield and fees hereunder shall be made on the
basis of a year of 360 days for the actual number of days
(including the first but excluding the last day) elapsed.
(e) Unless the Agent shall have received notice from the
Collection Agent or the Seller prior to the date on which any
payment is due to the Banks or the Banks (other than Citibank) and
CNA, as the case may be, hereunder that the Collection Agent or
the Seller, as the case may be, will not make such payment in
full, the Agent may assume that the Collection Agent or the
Seller, as the case may be, has made such payment in full to the
Agent on such date and the Agent may, in reliance upon such
assumption, cause to be distributed to each Bank on such due date
an amount equal to the amount then due such Bank. If and to the
extent the Collection Agent or the Seller, as the case may be,
shall not have so made such payment in full to the Agent, each
Bank shall repay to the Agent forthwith on demand such amount
distributed to such Bank together with interest thereon, for each
day from the date such amount is distributed to such Bank until
the date such Bank repays such amount to the Agent, at the Federal
Funds Rate.
SECTION 2.09. Dividing or Combining of Eligible Assets.
The Seller may, on notice received by the Agent not later than
1:00 P.M. (New York City time) three Business Days before the last
day of any Fixed Period for any then existing Eligible Asset (an
"Existing Eligible Asset"), divide such Existing Eligible Asset on
such last day into two or more new Eligible Assets, each such new
Eligible Asset having Capital as designated in such notice and all
such new Eligible Assets collectively having aggregate Capital
equal to the Capital of such Existing Eligible Asset. The Seller
may, on notice received by the Agent not later than 1:00 P.M. (New
York City
<PAGE>
35
time) three Business Days before the last day of any Fixed Periods
ending on the same day for two or more Existing Eligible Assets
owned by the same Owners or the date of any proposed Purchase of
an Eligible Asset by the same Owners (if the last day of such
Fixed Period is the date of such proposed Purchase) as own one or
more existing Eligible Assets, either (i) combine such Existing
Eligible Assets or (ii) combine such Existing Eligible Asset or
Eligible Assets and such proposed Eligible Asset to be purchased,
on such last day into one new Eligible Asset, such new Eligible
Asset having Capital equal to the aggregate Capital of such
Existing Eligible Assets, or such Existing Eligible Asset or
Eligible Assets and such proposed Eligible Asset, as the case may
be. On and after any division or combination of Eligible Assets
as described above, each of the new Eligible Assets resulting from
such division, or the new Eligible Asset resulting from such
combination, as the case may be, shall be a separate Eligible
Asset having Capital as set forth above, and shall take the place
of such Existing Eligible Asset or Eligible Assets or proposed
Eligible Asset, as the case may be, in each case under and for all
purposes of this Agreement, and the Agent shall annotate the
Certificate accordingly.
SECTION 2.10. Fees. (a) The Seller shall pay, from the
Effective Date until the Collection Date, the following fees:
(i) to the Agent for its account an administration
fee (the "Administration Fee") as set forth in the Fee Letter;
and
(ii) to the Agent for the account of each Bank, a
commitment fee (the "Commitment Fee"), from the Effective Date
in the case of any Original Bank, and from the effective date
specified in the Assignment and Acceptance pursuant to which
it became a Bank in the case of each other Bank, until the
Collection Date, on the amount of such Bank's entire
Commitment (whether used or unused) at the rate of 20/100 of
1% per annum for the fiscal quarter next following each fiscal
quarter at the end of which the ratio of Consolidated Debt
Equivalents (as defined in the Credit Agreement) for Americas
to the sum of such Consolidated Debt Equivalents plus
Consolidated Net Worth (as defined in the Credit Agreement)
for Americas is equal to or less than .55 to 1, or 25/100 of
1% per annum for the fiscal quarter next following each fiscal
quarter at the end of which such ratio is greater than .55 to 1
but equal to or less than .625 to 1, or 375/1000 of 1% per
annum for the fiscal quarter next following each fiscal
quarter at the end of which such ratio is greater than .625 to
1.
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36
The Administration Fee and the Commitment Fee are payable in
arrears monthly on the last day of each month during the term of
this Agreement and on the Collection Date.
(b) The Seller shall also pay to the Agent for the
account of CNA an origination fee (the "Origination Fee") as set
forth in the Fee Letter.
(c) The Owners shall pay to the Collection Agent a
collection fee (the "Collection Agent Fee") of 1% per annum on the
average daily amount of Capital of each Eligible Asset owned by
such Owners, from the date of the initial Purchase under the
Original Agreement until the Collection Date, payable on the last
day of each Settlement Period for such Eligible Asset; provided,
however, that, upon three Business Days' notice to the Agent, the
Collection Agent may (if not the Seller or any Affiliate thereof)
elect to be paid, as such fee, another percentage per annum on the
average daily amount of Capital of each such Eligible Asset, but
in no event in excess of 110% of the costs and expenses referred
to in Section 6.02(b); and provided, further, that such fee shall
be payable only from Collections pursuant to, and subject to the
priority of payment set forth in, Sections 2.05 and 2.06.
(d) The Seller shall also pay to the Agent, on the
Effective Date, (i) for the account of the Agent a restructuring
fee (the "Restructuring Fee") as set forth in the Fee Letter, and
(ii) for the account of each Original Bank, a resyndication fee
(the "Resyndication Fee") in the amount of 1/20 of 1% of such
Bank's entire Commitment (whether used or unused) on such date.
SECTION 2.11. Increased Costs. If, due to either
(i) any change in Regulation D of the Board of Governors of the
Federal Reserve System (to the extent any cost incurred pursuant
to such regulation is not included in the calculation of Adjusted
LIBO Rate), (ii) the introduction of or any change in or in the
interpretation of any law or regulation or (iii) the compliance
with any guideline or request from any central bank or other
governmental authority made after the date hereof (whether or not
having the force of law), there shall be any increase in the cost
to (or, in the case of Regulation D of the Board of Governors of
the Federal Reserve System, there shall be imposed a cost on) any
Indemnified Party of agreeing to make or making the Purchases or
purchasing or maintaining Eligible Assets or portions thereof or
interests therein hereunder or under any agreement entered into by
such Indemnified Party with respect to this Agreement or the
Investor Agreement, then the Seller shall from time to time,
within ten days after demand, and delivery to the Seller of the
certificate referred to in the
<PAGE>
37
last sentence of this Section 2.11, by such Indemnified Party (or
by the Agent for the account of such Indemnified Party) (with a
copy of such demand and certificate to the Agent), pay to the
Agent for the account of such Indemnified Party additional amounts
sufficient to compensate such Indemnified Party for such increased
or imposed cost. Each Indemnified Party party hereto agrees to
use its best efforts promptly to notify the Seller of any event
referred to in clause (i), (ii) or (iii) above, provided that the
failure to give such notice shall not affect the rights of any
Indemnified Party under this Section 2.11. A certificate in
reasonable detail as to the basis for and the amount of such
increased cost, submitted to the Seller and the Agent by such
Indemnified Party (or by the Agent for the account of such
Indemnified Party) shall be conclusive and binding for all
purposes, absent manifest error.
SECTION 2.12. Increased Capital. If any Indemnified
Party determines that the introduction of or any change in any law
or regulation or any guideline or request from any central bank or
other governmental authority made after the date hereof (whether
or not having the force of law) affects or would affect the amount
of capital required or expected to be maintained by such
Indemnified Party or any corporation controlling such Indemnified
Party and that the amount of such capital is increased by or based
upon the existence of such Indemnified Party's commitment to
purchase Eligible Assets or portions thereof or interests therein,
or to maintain such Eligible Assets or portions or interests,
hereunder or under the Investor Agreement or any agreement entered
into by such Indemnified Party with respect to this Agreement or
the Investor Agreement, then, within ten days after demand, and
delivery to the Seller of the certificate referred to in the last
sentence of this Section 2.12, by such Indemnified Party (or by
the Agent for the account of such Indemnified Party) the Seller
shall pay to such Indemnified Party from time to time, as
specified by such Indemnified Party, additional amounts sufficient
to compensate such Indemnified Party in light of such
circumstances, to the extent that such Indemnified Party
reasonably determines such increase in capital to be allocable to
the existence of any such commitment. Each Indemnified Party
party hereto agrees to use its best efforts promptly to notify the
Seller of any event referred to in the first sentence of this
Section 2.12, provided that the failure to give such notice shall
not affect the rights of any Indemnified Party under this
Section 2.12. A certificate in reasonable detail as to the basis
for, and the amount of, such compensation submitted to the Seller
by such Indemnified Party (or by the Agent for the account of such
Indemnified Party) shall, in the absence of manifest error, be
conclusive and binding for all purposes.
<PAGE>
38
SECTION 2.13. Sharing of Payments, Etc. If any Bank or
CNA shall obtain any payment (whether voluntary, involuntary,
through the exercise of any right of set-off, or otherwise) on
account of the Purchases made by it (other than with respect to
payments due to such Bank or CNA pursuant to Section 2.11 or 2.12)
in excess of its ratable share of payments on account of the
Purchases obtained by all the Banks and CNA, such Bank or CNA
shall forthwith purchase from the other Banks and CNA such
interests in the Eligible Assets purchased by them as shall be
necessary to cause such purchasing Bank or CNA to share the excess
payment ratably with each of them, provided, however, that if all
or any portion of such excess payment is thereafter recovered from
such purchasing Bank or CNA, such purchase from each Bank and CNA
shall be rescinded and such Bank or CNA shall repay to the
purchasing Bank or CNA the purchase price to the extent of such
recovery together with an amount equal to such Bank's or CNA's
ratable share (according to the proportion of (i) the amount of
such Bank's or CNA's required repayment to (ii) the total amount
so recovered from the purchasing Bank or CNA) of any interest or
other amount paid or payable by the purchasing Bank or CNA in
respect of the total amount so recovered. The Seller agrees that
any Bank or CNA so purchasing an interest in Eligible Assets from
another Bank or CNA pursuant to this Section 2.13 may, to the
fullest extent permitted by law, exercise all its rights of
payment (including the right of set-off) with respect to such
interest in Eligible Assets as fully as if such Bank or CNA were
the direct creditor of the Seller in the amount of such interest
in Eligible Assets.
SECTION 2.14. Maintenance of Purchase Account.
(a) Each Bank and CNA shall maintain in accordance with its usual
practice a Purchase account in which shall be recorded from time
to time the amount and tenor of each portion of each Purchase made
by such Bank or CNA and all amounts received by such Bank or CNA
hereunder.
(b) The Register maintained by the Agent pursuant to
Section 9.02(c) shall include a control account, and a monitoring
account for each Bank and CNA, in which accounts (taken together)
shall be recorded (i) the date and amount of each Purchase made
hereunder and each Fixed Period applicable to each Eligible Asset
purchased hereunder, (ii) the terms of each Assignment and
Acceptance delivered to and accepted by it, (iii) the amount of
any Capital or Yield due and payable or to become due and payable
to the Banks and CNA out of Collections hereunder, and (iv) the
amount of any sum received by the Agent from the Seller hereunder
and each Bank's and CNA's share thereof.
(c) The entries made in the Register shall be prima
facie evidence of the existence and the accuracy of the
<PAGE>
39
Purchases and other information to be recorded by the Agent
pursuant to subsections (a) and (b) of this Section 2.14.
ARTICLE III
CONDITIONS OF EFFECTIVENESS AND PURCHASES
SECTION 3.01. Conditions Precedent to Effectiveness.
This Agreement shall become effective when, and only when, (i) the
Agent shall have received counterparts of this Agreement executed
by the Seller, the Original Banks and CNA, individually and as
Agent, (ii) the Agent shall have received payment of (A) the
Restructuring Fee and the Resyndication Fee referred to in
Section 2.10(d) and (B) the "Administration Fee" and the
"Commitment Fee" under and as defined in the Original Agreement,
accrued to and including the Effective Date (as defined below),
and (iii) the Agent shall have received, on or before December 15,
1994, the following documents, each (unless otherwise indicated)
dated, or dated as of or effective as of, December 15, 1994 (which
date, unless otherwise agreed by the Agent, shall be the same for
all such documents, such date being the "Effective Date"), in form
and substance satisfactory to the Agent:
(a) The Certificate dated the date hereof.
(b) The Receivables Contribution and Sale Agreement,
duly executed by the Seller and Americas and acknowledged by
the Agent together with:
(i) Proper Financing Statements naming Americas as
seller, the Seller as purchaser and CNA, as Agent, as
assignee, together with evidence reasonably satisfactory
to the Agent of the due filing thereof on or before the
Effective Date, under the UCC of all jurisdictions that
the Agent may deem necessary or desirable in order to
perfect the Seller's interests created or purported to be
created by the Receivables Contribution and Sale
Agreement;
(ii) Proper Financing Statements, if any, necessary
to release all security interests and other rights of any
Person in the Receivables, Related Security, Collections
or Contracts previously granted by Americas (other than
pursuant to the Original Agreement);
(iii) Completed requests for information, dated on or
a date reasonably near to the Effective Date,
<PAGE>
40
listing all effective financing statements which name
Americas (under its present name and any previous name)
as debtor or seller and which are filed in the
jurisdictions in which filings were made pursuant to
subsection (b)(i) above, together with copies of such
financing statements (none of which, except those filed
pursuant to subsection (b)(i) above or in connection with
the Original Agreement, shall cover any Receivables,
Related Security, Collections or Contracts); and
(iv) The Consent and Agreement dated the date hereof
with respect hereto and to the Certificate, the Parallel
Purchase Commitment and the "Certificate" thereunder,
duly executed by Americas.
(c) Certified copies of the charter and by-laws, as
amended, of the Seller and Americas, respectively.
(d) Good standing certificates issued by the Secretary
of State of the States of Delaware and California with respect
to the Seller and Americas.
(e) Certified copies of the resolutions of the Board of
Directors of each of (i) the Seller approving this Agreement,
the Fee Letter, the Receivables Contribution and Sale
Agreement, the Assignment and Assumption and the Certificate
and the other documents to be delivered by it hereunder and
the transactions contemplated hereby and thereby, and
(ii) Americas approving the Receivables Contribution and Sale
Agreement, the Assignment and Assumption and the Consent and
Agreement and the other documents to be delivered by it
hereunder or thereunder and the transactions contemplated
thereby.
(f) A certificate of the Secretary or Assistant
Secretary of each of (i) the Seller certifying the names and
true signatures of the officers of the Seller authorized to
sign this Agreement, the Fee Letter, the Receivables
Contribution and Sale Agreement, the Assignment and Assumption
and the Certificate and the other documents to be delivered by
it hereunder, and (ii) Americas certifying the names and true
signatures of the officers of Americas authorized to sign the
Receivables Contribution and Sale Agreement, the Assignment
and Assumption, the Consent and Agreement and the other
documents to be delivered by it hereunder or thereunder.
(g) Proper financing statements naming the Seller as
seller and CNA, as Agent, as purchaser, together with
<PAGE>
41
evidence reasonably satisfactory to the Agent of the due
filing thereof on or before the Effective Date, under the UCC
of all jurisdictions that the Agent may deem necessary or
desirable in order to perfect the ownership and security
interests created or purported to be created hereby.
(h) Proper financing statements, if any, necessary to
release all security interests and other rights of any Person
in the Receivables, Contracts, Related Security, Collections
or Collateral previously granted by the Seller.
(i) Completed requests for information, dated on or a
date reasonably near to the Effective Date, listing all
effective financing statements filed in the jurisdictions
referred to in subsection (g) above that name the Seller as
debtor or seller, together with copies of such other financing
statements (none of which, except those filed pursuant to
subsection (g) above, shall cover any Receivables, Contracts,
Related Security, Collections or Collateral).
(j) (i) Lock-Box Agreements dated the date hereof with
Citibank and The First National Bank of Chicago ("First
Chicago"), respectively, as Lock-Box Banks, executed by the
Seller, and undated Lock-Box Notices to Citibank and First
Chicago, respectively, as Lock-Box Banks, executed by the
Seller, (ii) undated Preliminary Lock-Box Notices to Harris
Trust and Savings Bank, Citibank and First Chicago,
respectively, executed by the Seller, (iii) an undated
Lock-Box Notice to Union Bank executed by the Seller, and
(iv) the written consent (dated the date set forth therein) of
each of Union Bank, Citibank and First Chicago to the
assignment by Americas to the Seller of Americas' rights and
obligations with respect to the Lock-Box Accounts maintained
with such Lock-Box Banks and the related Lock-Box Agreements.
(k) Copies of all agreements relating to the Lock-Box
Accounts (other than any standard ministerial agreement
relating to the opening of an account, such as signature cards
and the like) between each Lock-Box Bank and the Seller.
(l) Favorable opinions of Riordan & McKinzie, counsel
for the Seller, and Sidley & Austin, special counsel for the
Seller, respectively, substantially in the forms of
Exhibits E-1 and E-2, respectively, hereto and as to such
other matters as the Agent may reasonably request.
(m) A favorable opinion of Shearman & Sterling, counsel
for the Agent, as the Agent may reasonably request.
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42
(n) The Fee Letter, in form and substance satisfactory
to the Agent and the Seller, duly executed by the Seller and
the Agent.
(o) The Assignment and Assumption, duly executed by
Americas and the Seller and consented to by the Investor,
Citibank, the other Original Banks, CNA and the Agent.
SECTION 3.02. Conditions Precedent to All Purchases and
Reinvestments. Each Purchase hereunder and the right of the
Collection Agent to reinvest in Pool Receivables those Collections
attributable to an Eligible Asset pursuant to Section 2.05 or 2.06
shall be subject to satisfaction of the conditions precedent set
forth in Section 3.01 and to the further conditions precedent that
(a) with respect to any such Purchase, on or prior to the date of
such Purchase, the Collection Agent shall have delivered to the
Agent, in form and substance reasonably satisfactory to the Agent,
a completed Investor Report and computed in accordance with the
proviso to the definition of the term "Outstanding Balance", dated
within 55 days prior to the date of such Purchase, together with a
listing by Obligor of all Pool Receivables and such additional
information as may be reasonably requested by the Agent, and
(b) on the date of such Purchase or reinvestment the following
statements shall be true (and the acceptance by the Seller of the
proceeds of such Purchase or reinvestment shall constitute a
representation and warranty by the Seller that on the date of such
Purchase or reinvestment such statements are true):
(i) The representations and warranties contained in
Section 4.01 of this Agreement and in the Receivables
Contribution and Sale Agreement are correct in all material
respects on and as of the date of such Purchase or
reinvestment, before and after giving effect to such Purchase
or reinvestment and to the application of the proceeds
therefrom, as though made on and as of such date, and
(ii) No event has occurred and is continuing, or would
result from such Purchase or reinvestment or from the
application of the proceeds therefrom, which constitutes an
Event of Termination or would constitute an Event of
Termination but for the requirement that notice be given or
time elapse or both,
and (c) the Agent shall have received such other approvals,
opinions or documents as the Agent may reasonably request.
<PAGE>
43
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the
Seller. The Seller represents and warrants as follows:
(a) The Seller is a corporation duly incorporated,
validly existing and in good standing under the laws of the
jurisdiction indicated at the beginning of this Agreement and
is in good standing under the laws of the State of California.
(b) The execution, delivery and performance by the
Seller of this Agreement, the Certificate, the Receivables
Contribution and Sale Agreement, the Assignment and Assumption
and the Fee Letter, and all other instruments and documents to
be delivered by it hereunder, and the transactions
contemplated hereby and thereby, and the Seller's use of the
proceeds of Purchases and reinvestments, are within the
Seller's corporate powers, have been duly authorized by all
necessary corporate action, do not contravene (i) the Seller's
charter or by-laws or (ii) law or any Contract, the
Receivables Contribution and Sale Agreement or any other
contractual restriction binding on or affecting the Seller,
and do not result in or require the creation of any Adverse
Claim (other than pursuant hereto) upon or with respect to any
of its properties; and no transaction contemplated hereby
requires compliance with any bulk sales act or similar law.
(c) No authorization or approval or other action by, and
no notice to or filing with, any governmental authority or
regulatory body is required for the due execution, delivery
and performance by the Seller of this Agreement, the
Certificate, the Receivables Contribution and Sale Agreement,
the Assignment and Assumption or the Fee Letter, or any other
instrument or document to be delivered by it hereunder, or for
the perfection of or the exercise by the Agent or any Owner of
their respective rights and remedies under this Agreement, the
Certificate, the Receivables Contribution and Sale Agreement,
the Assignment and Assumption and the Fee Letter and such
other instruments and documents, except for the filings of the
financing statements referred to in Article III, all of which,
on or prior to the date of the initial Purchase under the
Original Agreement, will have been duly made and be in full
force and effect, and except for the filing of continuation
statements, if applicable, with respect to such financing
statements.
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44
(d) This Agreement and the Assignment and Assumption
are, and the Certificate, the Receivables Contribution and
Sale Agreement and the Fee Letter when delivered hereunder
will be, the legal, valid and binding obligations of the
Seller enforceable against the Seller in accordance with their
respective terms, except as may be limited by the effect of
any applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights
generally and by general principles of equity.
(e) The pro forma balance sheet of the Seller as at
September 30, 1994, a copy of which has been furnished to the
Agent, fairly presents (subject to normal year-end adjustments
and the absence of footnotes required under generally accepted
accounting principles) the pro forma financial condition of
the Seller as at such date, all in accordance with generally
accepted accounting principles consistently applied.
(f) There is no pending or, to the best knowledge of the
Seller, threatened action or proceeding affecting the Seller
before any court, governmental agency or arbitrator which may
materially adversely affect (i) the financial condition or
operations of the Seller or (ii) the ability of the Seller to
perform its obligations under this Agreement, the Certificate,
the Receivables Contribution and Sale Agreement, the
Assignment and Assumption or the Fee Letter, or any other
instrument or document to be delivered by it hereunder, or
which purports to affect the legality, validity or
enforceability of this Agreement, the Certificate, the
Receivables Contribution and Sale Agreement, the Assignment
and Assumption or the Fee Letter or any such other instrument
or document.
(g) No proceeds of any Purchase or reinvestment will be
used to acquire any equity security of a class which is
registered pursuant to Section 12 of the Securities Exchange
Act of 1934.
(h) Immediately prior to the time of the initial
creation of an interest hereunder in any Pool Receivable, the
Seller will be the legal and beneficial owner of such Pool
Receivable and the Related Security with respect thereto, and
is the legal and beneficial owner of the Collateral, in each
case free and clear of any Adverse Claim except as created or
permitted by this Agreement. Each Pool Receivable is, as of
the date of the initial creation of an interest therein
hereunder (other than, in the case of any Receivable that is
not an Eligible Receivable solely because
<PAGE>
45
it is a Defaulted Receivable or a Delinquent Receivable, on
the date of the initial Purchase under the Original
Agreement), an Eligible Receivable or, if such Receivable is
not an Eligible Receivable on such date, the Seller has paid
when due all amounts payable by it pursuant to the second
sentence of Section 2.07 and Section 5.01(j) as a result of
such Receivable not being an Eligible Receivable on such date.
Upon each Purchase or reinvestment, the Owner making such
Purchase or reinvestment will acquire a valid and perfected
first priority undivided percentage ownership interest to the
extent of the pertinent Eligible Asset in each Pool Receivable
then existing or thereafter arising and in the Related
Security and Collections with respect thereto free and clear
of any Adverse Claim except as created or permitted by this
Agreement. The Agent for the benefit of itself, the Owners
and each other Indemnified Party from time to time has a valid
and perfected first priority security interest in the
Collateral, securing payment of the Obligations, free and
clear of any Adverse Claim except as created or permitted by
this Agreement. No effective financing statement or other
instrument similar in effect covering any Contract or any Pool
Receivable, Collateral, Related Security or Collections with
respect thereto is on file in any recording office, except
those filed in favor of the Agent relating to this Agreement
(including without limitation the Original Agreement) or in
favor of the Seller and the Agent and relating to the
Receivables Contribution and Sale Agreement or those listing
the Seller or Americas as secured party and the applicable
Obligor as debtor.
(i) In the case of each Investor Report (if prepared by
the Seller or any Affiliate thereof, or to the extent that
information contained therein is supplied by the Seller or any
Affiliate thereof), information, exhibit, financial statement,
document, book, record or report furnished or to be furnished
at any time by the Seller to the Agent or any Owner in
connection with this Agreement, (i) as of the date so
furnished, all facts stated as such in any such document were
true and complete in all material respects and, in the case of
any projections contained in any such documents, all facts
upon which such projections were based were true and complete
in all material respects and no material fact was omitted from
that basis, and all estimates and assumptions made on that
basis were made in good faith and believed to be reasonable at
the time made, it being recognized by the Agent and the Owners
that such projections as to future events are not to be viewed
as facts and that actual results during the period or periods
covered thereby may differ from such projections, and (ii) no
such document contains or will contain as of the date so
furnished any material misstatement of fact or omits or will
omit to state a
<PAGE>
46
material fact or any fact necessary in order to make the
statements contained therein, in the light of the
circumstances under which they were made, not misleading.
(j) The chief place of business and chief executive
office of the Seller is located at the address specified in
Section 12.02 hereto and the offices where the Seller keeps
its Records are located at such address and such other
addresses as are specified on Schedule I hereto (or at such
other locations, notified to the Agent in accordance with
Section 5.01(h), in jurisdictions where all action required by
Section 6.05 has been taken and completed).
(k) The names and addresses of all the Lock-Box Banks,
together with the account numbers of the Lock-Box Accounts of
the Seller at such Lock-Box Banks, are specified in Schedule
II hereto (or at such other Lock-Box Banks and/or with such
other Lock-Box Accounts as have been notified to the Agent and
for which Lock-Box Agreements and the related Lock-Box Notices
have been executed in accordance with Section 5.03(d)).
(l) Neither the Seller nor any Affiliate of the Seller
has any direct or indirect ownership or other financial
interest in any Bank or CNA.
(m) Each Purchase and each reinvestment of Collections
in Pool Receivables will constitute (i) a "current
transaction" within the meaning of Section 3(a)(3) of the
Securities Act of 1933, as amended, and (ii) a purchase or
other acquisition of notes, drafts, acceptances, open accounts
receivable or other obligations representing part or all of
the sales price of merchandise, insurance or services within
the meaning of Section 3(c)(5) of the Investment Company Act
of 1940, as amended.
(n) The aggregate Outstanding Balance at any time of the
Pool Receivables evidenced at such time by any "instrument" or
"chattel paper" within the meaning of the UCC in effect in the
State of California does not exceed 5% of the aggregate
Outstanding Balance of all Pool Receivables at such time.
(o) With respect to each Pool Receivable (other than
those Pool Receivables existing at the close of business of
Americas on the Effective Date, Americas' interest in which
shall have been transferred to the Seller by Americas, to the
extent of an amount equal to 12% of the aggregate Outstanding
Balance of such Pool Receivables, as a capital contribution
and, in the case of the remainder of such interest, as a sale
and purchase, all in accordance with and
<PAGE>
47
as contemplated by the Assignment and Assumption), the Seller
shall have purchased such Pool Receivable from Americas in
exchange for payment (made by the Seller to Americas in
accordance with the provisions of the Receivables Contribution
and Sale Agreement) in an amount which constitutes fair
consideration and approximates fair market value for such Pool
Receivable and in a sale the terms and conditions of which
(including, without limitation, the purchase price thereof)
reasonably approximate an arm's-length transaction between
unaffiliated parties. Each such sale shall not have been made
for or on account of an antecedent debt owed by Americas to
the Seller and no such sale is or may be voidable or subject
to avoidance under any section of the Federal Bankruptcy Code.
(p) The Seller has no subsidiaries as of the date hereof
and shall not establish or acquire any subsidiaries.
(q) The Seller has filed, or caused to be filed or be
included in, all tax reports and returns (federal, state,
local and foreign), if any, required to be filed by it and
paid, or cause to be paid, all amounts of taxes, including
interest and penalties required to be paid by it, except for
such taxes (i) as are being contested in good faith by proper
proceedings and (ii) against which adequate reserves shall
have been established in accordance with and to the extent
required by generally accepted accounting principles, but only
so long as the proceedings referred to in clause (i) above
could not subject the Agent or any other Indemnified Party to
any civil or criminal penalty or liability or involve any
material risk of the loss, sale or forfeiture of any property,
rights or interests covered hereunder or under the Receivables
Contribution and Sale Agreement or the Assignment and
Assumption.
(r) Americas has confirmed in writing to the Seller and
the Agent that Americas will not cause the Seller to file a
voluntary petition under the Federal Bankruptcy Code or any
other bankruptcy or insolvency laws so long as the Seller is
not "insolvent" within the meaning of the Federal Bankruptcy
Code, and unless, and only unless, such filing has been
authorized in accordance with the Seller's Certificate of
Incorporation, and by all "Independent Directors" (as defined
in such Certificate of Incorporation) on the Seller's Board of
Directors which "Independent Directors" have taken into
consideration the interests of the creditors of the Seller,
rather than solely the interests of the shareholder(s) of the
Seller.
(s) There are no Adverse Claims (including, without
limitation, liens or retained security titles of conditional
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48
vendors) of any nature whatsoever on any properties (excluding
those properties covered by Section 4.01(h)) of the Seller.
The Seller is not a party to any contract, agreement, lease or
instrument the performance of which, either unconditionally or
upon the happening of an event, will result in or require the
creation of any Adverse Claim on the property or assets of the
Seller, or otherwise result in a violation of this Agreement.
(t) (i) The Seller is not a party to any indenture,
loan or credit agreement or any lease or other agreement or
instrument or subject to any charter or corporate restriction
that could reasonably be expected to have, and no provision of
applicable law or governmental regulation could reasonably be
expected to have, a material adverse effect on the condition
(financial or otherwise), business, operations, properties or
prospects of the Seller, or may reasonably be expected to have
such an effect on the ability of the Seller to carry out its
obligations hereunder or under the Receivables Contribution
and Sale Agreement or the Assignment and Assumption, and
(ii) neither the Seller nor, to the best of the knowledge of
the Seller, any other party is in default under or with
respect to the Receivables Contribution and Sale Agreement or
the Assignment and Assumption or any other contract,
agreement, lease or other instrument to which the Seller is a
party and which is material to the Seller's condition
(financial or otherwise), business, operations, properties or
prospects, and neither the Seller nor any such other party has
delivered or received any notice of default thereunder.
(u) The Seller has advised its independent certified
public accountants that the Agent and the Owners have been
authorized to review and discuss with such accountants, upon
the written request of the Agent, any and all financial
statements and other information that they may have reasonably
requested with respect to the Seller and has directed such
accountants to comply with any reasonable request of the Agent
for such information.
(v) The Seller has no tradenames, fictitious names,
assumed names or "doing business as" names other than
"Merisel".
ARTICLE V
GENERAL COVENANTS OF THE SELLER
SECTION 5.01. Affirmative Covenants of the Seller.
Until the Collection Date, the Seller will, unless the Agent and
the Majority Banks shall otherwise consent in writing:
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49
(a) Compliance with Laws, Etc. Comply in all material
respects with all applicable laws, rules, regulations and
orders with respect to it, its business and properties and all
Pool Receivables and related Contracts, Related Security and
Collections with respect thereto and the Collateral, including
without limitation paying promptly when due all taxes,
assessments and governmental charges or levies imposed upon it
or any Pool Receivables, Related Security, Collections or
Collateral (including, but not limited to, any intangibles
property or similar tax), or in respect of its income or
profits therefrom, and any and all claims of any kind
(including, without limitation, claims for labor, materials
and supplies), other than any such tax, assessment, charge or
levy (i) which is being contested in good faith and by proper
proceedings and (ii) with respect to which the obligation to
pay such amount is adequately reserved against in accordance
with and to the extent required by generally accepted
accounting principles (but only so long as the proceedings
referred to in clause (i) above could not subject the Agent or
any other Indemnified Party to any civil or criminal penalty
or liability or involve any material risk of the loss, sale or
forfeiture of any property, rights or interests covered
hereunder or under the Receivables Contribution and Sale
Agreement or the Assignment and Assumption).
(b) Preservation of Corporate Existence. Preserve and
maintain its corporate existence, rights, franchises and
privileges in the jurisdiction of its incorporation, and
qualify and remain qualified in good standing as a foreign
corporation in the State of California and in each other
jurisdiction where the failure to preserve and maintain such
existence, rights, franchises, privileges and qualification
would materially adversely affect the interests of the Owners
or the Agent hereunder or in the Pool Receivables, Related
Security or Collateral, or the ability of the Seller or the
Collection Agent to perform their respective obligations
hereunder or under the Fee Letter or the Receivables
Contribution and Sale Agreement or the Assignment and
Assumption or the ability of the Seller to perform its
obligations under the Contracts.
(c) Maintenance of Separate Existence. Do all things
necessary to maintain its corporate existence separate and
apart from Americas, Merisel, FAB and other Affiliates of the
Seller, including, without limitation, (i) maintaining proper
corporate records and books of account, and telephone numbers,
separate from those of such Affiliates; (ii) maintaining its
assets, funds and transactions separate from those of such
Affiliates, reflecting such assets and
<PAGE>
50
transactions in financial statements separate and distinct
from those of such Affiliates, and evidencing such assets,
funds and transactions by appropriate entries in the books and
records referred to in clause (i) above, and providing for its
own operating expenses and liabilities from its own assets and
funds other than certain expenses and liabilities relating to
basic corporate overhead which may be allocated between the
Seller and such Affiliates; (iii) holding such appropriate
meetings or obtaining such appropriate consents of its Board
of Directors as are necessary to authorize all the Seller's
corporate actions required by law to be authorized by the
Board of Directors, keeping minutes of such meetings and of
meetings of its stockholders and observing all other customary
corporate formalities (and any successor Seller not a
corporation shall observe similar procedures in accordance
with its governing documents and applicable law); (iv) at all
times entering into its contracts and otherwise holding itself
out to the public under the Seller's own name as a legal
entity separate and distinct from such Affiliates; and
(v) conducting all transactions and dealings between the
Seller and such Affiliates on an arm's-length basis; provided,
however, that nothing contained herein shall prohibit any
Permitted Transaction or any action or transaction necessary
in connection therewith.
(d) Compliance with Opinion Assumptions and Charter and
By-Laws. Without limiting the generality of subsection (c)
above, maintain in place all policies and procedures, and take
and continue to take all actions, described in the assumptions
as to facts set forth in, and forming the basis of, the
opinions set forth in the opinion delivered to the Agent in
substantially the form of Exhibit E-2 hereto pursuant to
Section 3.01, and comply with, and cause compliance with, the
provisions of the Certificate of Incorporation and by-laws of
the Seller delivered to the Agent pursuant to Section 3.01 as
the same may, from time to time, be amended, modified or
otherwise supplemented with the prior written consent of the
Agent.
(e) Audits. (i) At any time and from time to time
during regular business hours, permit the Agent, or its agents
or representatives, (A) to examine and make copies of and
abstracts from all books, records and documents (including,
without limitation, computer tapes and disks) in the
possession or under the control of the Seller relating to Pool
Receivables and the Related Security, including, without
limitation, the related Contracts, and (B) to visit the
offices and properties of the Seller for the purpose of
examining such materials described in clause (A) above, and
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51
to discuss matters relating to Pool Receivables and the
Related Security or the Seller's performance hereunder or
under the Contracts with any of the officers or employees of
the Seller having knowledge of such matters, and (ii) within
120 days after the end of each fiscal year of the Seller,
cause its independent public accountants to review, and
deliver to the Agent a written review of, an audit conducted
by the Seller with respect to the Pool Receivables, Credit and
Collection Policy and Lock-Box Account activity on a scope and
in a form reasonably requested by the Agent for such audit.
(f) Keeping of Records and Books of Account. (i) Keep,
or cause to be kept, proper books of record and account, which
shall be maintained or caused to be maintained by the Seller
and shall be separate and apart from those of any Affiliate of
the Seller, in which full and correct entries shall be made of
all financial transactions and the assets and business of the
Seller in accordance with generally accepted accounting
principles consistently applied, and (ii) maintain and
implement administrative and operating procedures (including,
without limitation, an ability to recreate records evidencing
Pool Receivables in the event of the destruction of the
originals thereof), and keep and maintain, all documents,
books, records and other information reasonably necessary or
advisable for the collection of all Pool Receivables
(including, without limitation, records adequate to permit the
daily identification of each new Pool Receivable and all
Collections of and adjustments to each existing Pool
Receivable).
(g) Performance and Compliance with Receivables and
Contracts. At its expense timely and fully (i) perform, or
cause to be performed, and comply with, or cause to be
complied with, all material provisions, covenants and other
promises required to be observed by it under the Contracts
related to the Pool Receivables, and (ii) as beneficiary of
any Related Security, enforce such Related Security as
reasonably requested by the Agent.
(h) Location of Records. Keep its chief place of
business and chief executive office and the office where it
keeps the originals of its Records at the address of the
Seller referred to in Section 4.01(j) or, upon 30 days' prior
written notice to the Agent, at any other locations in a
jurisdiction where all action required by Section 6.05 shall
have been taken.
(i) Credit and Collection Policies. Comply in all
material respects with the Credit and Collection Policy in
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52
regard to each Pool Receivable and the related Contract;
provided, however, that on any Liquidation Day or Provisional
Liquidation Day the Seller shall not accept any returned
merchandise the sale of which gave rise to any Pool Receivable
unless the Seller shall have (i) paid, or shall pay on the day
of such return, all amounts the payment of which would be
required under Sections 2.07 and 5.01(j) as a result of such
returned merchandise, and (ii) notified, or shall notify no
later than two Business Days following such day, the Agent in
writing of such returned merchandise.
(j) Collections. Instruct, or cause to be instructed,
all Obligors to cause all Collections to be deposited directly
to a Lock-Box Account in the name of the Seller, and, if the
Seller shall otherwise receive any Collections (including,
without limitation, any Collections deemed to have been
received by the Seller pursuant to Section 2.07), segregate
and hold in trust such Collections and deposit such
Collections directly to any such Lock-Box Account within one
Business Day following its receipt thereof.
(k) Lock-Box Agreements. Deliver, or cause to be
delivered, to the Agent on or before December 31, 1994
Lock-Box Agreements with Harris Trust and Savings Bank or any
replacement Lock-Box Bank therefor, and with Citibank and The
First National Bank of Chicago, respectively, in each case
duly executed by the Seller and such Lock-Box Bank, together
with Lock-Box Notices related thereto executed by the Seller.
(l) Purchase of Pool Receivables from Americas. With
respect to each Pool Receivable outstanding from time to time
(other than Pool Receivables existing at the close of business
of Americas on the Effective Date, Americas' interest in which
shall have been transferred to the Seller by Americas, to the
extent of an amount equal to 12% of the aggregate Outstanding
Balance of such Pool Receivables, as a capital contribution
and, in the case of the remainder of such interest, as a sale
and purchase, all in accordance with and as contemplated by
the Assignment and Assumption), pay to Americas (in accordance
with the Receivables Contribution and Sale Agreement) an
amount which constitutes fair consideration and approximates
fair market value for such Pool Receivable and in a sale the
terms and conditions of which (including, without limitation,
the purchase price thereof) reasonably approximate an
arm's-length transaction between unaffiliated parties.
(m) Nature of Business and Permitted Transactions.
Engage solely in the following businesses and transactions,
directly or indirectly: (i) purchasing Receivables and
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53
Related Security from Americas and selling interests in such
Receivables and Related Security to the Owners hereunder and
the other transactions permitted or contemplated hereby and
(ii) taking the actions, and engaging in the transactions,
necessary in connection with any Permitted Transaction.
(n) Receivables Contribution and Sale Agreement;
Assignment and Assumption. At its expense, timely and fully
perform and comply in all material respects with all
provisions, covenants and other promises required to be
observed by it under the Receivables Contribution and Sale
Agreement or the Assignment and Assumption, maintain the
Receivables Contribution and Sale Agreement and the Assignment
and Assumption in full force and effect, enforce the
Receivables Contribution and Sale Agreement and the Assignment
and Assumption in accordance with their respective terms, take
all such action to such end as may be from time to time
reasonably requested by the Agent, and make to any party to
the Receivables Contribution and Sale Agreement or the
Assignment and Assumption such demands and requests for
information and reports or for action as the Seller is
entitled to make thereunder and as may be from time to time
reasonably requested by the Agent.
SECTION 5.02. Reporting Requirements of the Seller.
Until the Collection Date, the Seller will, unless the Agent and
the Majority Banks shall otherwise consent in writing, furnish to
the Agent and the Banks:
(a) as soon as available and in any event within 75 days
after the end of each of the first three quarters of each
fiscal year of the Seller, a balance sheet of the Seller as of
the end of such quarter and statements of income and retained
earnings and of cash flows of the Seller for the period
commencing at the end of the previous fiscal year and ending
with the end of such quarter, certified by the Treasurer of
the Seller;
(b) as soon as available and in any event within
120 days after the end of each fiscal year of the Seller, a
copy of the annual report for such year for the Seller,
containing financial statements for such year certified in a
manner acceptable to the Agent by Deloitte & Touche or other
independent public accountants acceptable to the Agent;
(c) as soon as possible and in any event within five
days after any officer of the Seller obtains knowledge of the
occurrence of each Event of Termination and each event which,
with the giving of notice or lapse of time, or both, would
constitute an Event of Termination, continuing on the date of
such statement, a statement of the chief financial
<PAGE>
54
officer of the Seller setting forth details of such Event of
Termination or event and the action which the Seller has taken
and proposes to take with respect thereto;
(d) promptly and in any event within five Business Days
after the Seller's receipt or delivery thereof, copies of all
notices, requests, reports, certificates, and other
information and documents delivered or received by the Seller
from time to time under or in connection with the Receivables
Contribution and Sale Agreement; and
(e) such other information, documents, records or
reports respecting the Receivables, the Related Security or
the Contracts or the Collateral or the condition or
operations, financial or otherwise, of the Seller as the Agent
may from time to time reasonably request.
SECTION 5.03. Negative Covenants of the Seller. Until
the Collection Date, the Seller will not, without the written
consent of the Agent and the Majority Banks:
(a) Sales, Liens, Etc. Except as otherwise provided
herein (including without limitation in Sections 5.03(f) and
6.02), or pursuant to the Investor Agreement, and except for
sales of Pool Receivables to Floor Plan Obligors for
consideration in cash at least equal to the excess of the
Outstanding Balance of such Pool Receivables at the respective
times of such sales over the finance charges payable by the
Seller to such Floor Plan Obligors in connection with such
sales (provided that the Seller shall have paid all amounts
the payment of which would be required in connection therewith
under Sections 2.07 and 5.01(j)), in the form of Collections
received from such Floor Plan Obligors with respect to such
Pool Receivables and applied pursuant to Section 2.05 or 2.06,
as applicable, sell, assign (by operation of law or otherwise)
or otherwise dispose of, or grant any option with respect to,
or create or suffer to exist any Adverse Claim upon or with
respect to, the Seller's undivided interest in any Pool
Receivable or Related Security or Collections in respect
thereof, or any Collateral, or upon or with respect to any
related Contract or any Lock-Box Account to which any
Collections of any Pool Receivable are sent, or assign any
right to receive income in respect thereof.
(b) Extension or Amendment of Receivables. Except as
otherwise permitted in Section 6.02, extend the terms of any
Pool Receivable, or amend or otherwise modify the terms of any
Pool Receivable or amend, modify or waive any term or
condition of any Contract related thereto if in any such
<PAGE>
55
case such amendment, modification or waiver would be
reasonably likely to impair the collectibility of any Pool
Receivable.
(c) Change in Credit and Collection Policy. Make any
change in the Credit and Collection Policy, which change would
be reasonably likely to impair the collectibility of any Pool
Receivable.
(d) Change in Payment Instructions to Obligors. Add or
terminate any bank as a Lock-Box Bank from those listed in
Schedule II hereto, or make any change in its instructions to
Obligors made pursuant to Section 5.01(j) regarding payments
to be made to any Lock-Box Bank, unless the Agent shall have
received notice of such addition, termination or change, a
Lock-Box Agreement executed by each new Lock-Box Bank and the
Seller and acknowledged by the Agent, and undated executed
copies of Lock-Box Notices to each new Lock-Box Bank.
(e) Deposits to Lock-Box Accounts. Deposit or otherwise
credit, or cause or permit to be so deposited or credited, to
any Lock-Box Account cash or cash proceeds other than
Collections of Pool Receivables except for immaterial amounts
the deposit of which is beyond the Seller's control.
(f) Mergers, Etc. Merge or consolidate with or into, or
convey, transfer, lease or otherwise dispose of (whether in
one transaction or in a series of transactions) all or
substantially all of its assets (whether now owned or
hereafter acquired) to, or acquire all or substantially all of
the assets or capital stock or other ownership interest of, or
enter into any joint venture or partnership agreement with,
any Person, other than, with respect to asset acquisitions and
dispositions, in connection herewith or as necessary in
connection with any Permitted Transaction.
(g) Change of Name, Etc. Change its name, identity or
structure or its chief executive office, or use any
tradenames, fictitious names, assumed names or "doing business
as" names, unless prior to the effective date of any such
change or use the Seller delivers to the Agent (i) UCC
financing statements, executed by the Seller and, if
applicable, Americas, necessary to reflect such change or use
and to continue the perfection of the ownership interests
created by the Eligible Assets and the security interest in
the Collateral, and (ii) new Lock-Box Agreements and Lock-Box
Notices, executed by the Seller and, in the case of the
Lock-Box Agreements, the Lock-Box Banks necessary to reflect
such change and to continue to enable
<PAGE>
56
the Agent to exercise its rights contained in Section 6.03(a),
and (iii) in the case of any such change in its structure or
chief executive office, a favorable opinion of Sidley & Austin
(or other counsel acceptable to the Agent) in substantially
the form of Exhibit E-2 hereto, giving effect to such change,
in each case of clauses (i), (ii) and (iii) together with such
other documents and instruments that the Agent may reasonably
request in connection therewith.
(h) Pool Receivables Not Evidenced by Instruments.
Cause or permit Pool Receivables the aggregate Outstanding
Balance of which at any time exceeds 5% of the aggregate
Outstanding Balance of all the Pool Receivables at such time
to be evidenced by an "instrument" or "chattel paper" within
the meaning of the UCC in effect in the State of California.
(i) Other Adverse Claims. Except as otherwise provided
herein or in the Investor Agreement, create or suffer to exist
any Adverse Claim upon or with respect to any of the Seller's
property other than of the type described in Section 5.03(a)
(which shall be subject to the restrictions contained in such
Section), or assign any right to receive income, to secure any
Debt of any Person.
(j) Debt. Except as otherwise provided herein or in the
Investor Agreement, create, incur, assume or suffer to exist
any Debt other than as necessary in connection with any
Permitted Transaction.
(k) Contingent Obligations. Except as otherwise
provided herein or in the Investor Agreement, create, incur,
assume or suffer to exist any Contingent Obligation.
(l) Distributions, Etc. Declare or make any dividend
payment or other distribution of assets, properties, cash,
rights, obligations or securities on account of any shares of
any class of capital stock of the Seller, or return any
capital to its shareholders as such, or purchase, retire,
defease, redeem or otherwise acquire for value or make any
payment in respect of any shares of any class of capital stock
of the Seller or any warrants, rights or options to acquire
any such shares, now or hereafter outstanding, other than, in
any such case, as shall have been duly authorized by all
necessary corporate action of the Seller and in accordance
with applicable law, provided that no event has occurred and
is continuing, or would result from such declaration,
dividend, distribution, return, purchase, retirement,
defeasance, redemption, acquisition or payment, which
constitutes an Event of Termination or would constitute an
Event of Termination but for the requirement that notice be
given or time elapse or both.
<PAGE>
57
(m) Transactions with Shareholders and Affiliates.
Enter into or permit to exist any transaction (including,
without limitation, the purchase, sale, lease or exchange of
any property or the rendering of any service) with Americas or
Merisel or with any other Affiliate of the Seller, other than
as necessary in connection with any Permitted Transactions and
on terms that are fair and reasonable in the circumstances and
that reasonably approximate an arm's length transaction
between unaffiliated parties.
(n) Accounting of Purchases. Prepare any financial
statements which shall account for the transactions
contemplated hereby in any manner other than the sale of the
Eligible Assets by the Seller to the Owners, and will not in
any other respect account for or treat the transactions
contemplated hereby (including but not limited to accounting
purposes, but excluding tax reporting purposes) in any manner
other than as a sale of the Eligible Assets by the Seller to
the Owners.
(o) Receivables Contribution and Sale Agreement;
Assignment and Assumption. (i) Cancel or terminate the
Receivables Contribution and Sale Agreement or the Assignment
and Assumption or consent to or accept any cancellation or
termination thereof, (ii) amend or otherwise modify any term
or condition of the Receivables Contribution and Sale
Agreement or the Assignment and Assumption or give any
consent, waiver or approval thereunder, (iii) waive any
default under or breach of the Receivables Contribution and
Sale Agreement or the Assignment and Assumption or (iv) take
any other action under the Receivables Contribution and Sale
Agreement or the Assignment and Assumption not required by the
terms thereof that would impair the value of any Collateral or
the rights or interests of the Seller thereunder or of the
Agent or any Owner or Indemnified Party hereunder or
thereunder.
(p) Organization. Permit its Certificate of
Incorporation or by-laws to be amended, supplemented or
otherwise modified.
(q) Capital Stock. Issue to, or permit to be
transferred to, any Person (other than Americas) any shares of
the Seller's stock.
ARTICLE VI
ADMINISTRATION AND COLLECTION
SECTION 6.01. Designation of Collection Agent. The Pool
Receivables shall be serviced, administered and collected
<PAGE>
58
by the Person (the "Collection Agent") designated to do so from
time to time in accordance with this Section 6.01. Until the
Agent designates a new Collection Agent, the Seller is hereby
designated as, and hereby agrees to perform the duties and
obligations of, the Collection Agent pursuant to the terms hereof.
The Agent may at any time designate as Collection Agent any Person
(including itself) to succeed the Seller or any successor
Collection Agent, if such Person (other than itself) shall agree
in writing to perform the duties and obligations of the Collection
Agent pursuant to the terms hereof. The Collection Agent may,
with the prior consent of the Agent, subcontract with any other
Person to service, administer or collect the Pool Receivables,
provided that the Person with whom the Collection Agent so
subcontracts shall not become the Collection Agent hereunder and
the Collection Agent shall remain liable for the performance of
the duties and obligations of the Collection Agent pursuant to the
terms hereof. The Agent hereby consents to the subcontracting by
the Seller, as Collection Agent, with Americas to service,
administer and collect the Pool Receivables, subject to the
proviso to the preceding sentence, and provided that the Agent may
at any time require the Collection Agent to, and the Collection
Agent shall at the Agent's request, terminate such subcontracting
with Americas.
SECTION 6.02. Duties of Collection Agent. (a) The
Collection Agent shall take or cause to be taken all such actions
as may be reasonably necessary or advisable to collect each Pool
Receivable from time to time, all in accordance in all material
respects with applicable laws, rules and regulations, with
reasonable care and diligence, and in accordance in all material
respects with the Credit and Collection Policy (subject to the
provisions of Section 5.01(i)). Each of the Seller, the Banks,
CNA and the Agent hereby appoints as its agent the Collection
Agent, from time to time designated pursuant to Section 6.01, to
enforce its respective rights and interests in and under the Pool
Receivables, the Related Security and the related Contracts. The
Collection Agent shall set aside and hold in trust for the account
of the Seller and each Owner their respective allocable shares of
the Collections of Pool Receivables in accordance with
Sections 2.05 and 2.06 but shall not be required (unless otherwise
requested by the Agent) to segregate the funds constituting such
portion of such Collections prior to the remittance thereof in
accordance with said Sections. If instructed by the Agent, the
Collection Agent shall segregate and deposit with a bank (which
may be a Bank) designated by the Agent such allocable share of
Collections of Pool Receivables set aside for each Owner on the
first Business Day following receipt by the Collection Agent of
such Collections. If no Event of Termination or "Event of
Purchase
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Ineligibility" under and as defined in the Investor Agreement
shall have occurred and be continuing, the Seller, while it is the
Collection Agent, may extend the maturity or adjust the
Outstanding Balance of, or sell or transfer to any other
collection agents of the Seller, any Defaulted Receivable as the
Seller may determine to be appropriate to maximize Collections
thereof. In no event shall the Collection Agent be entitled to
make the Agent or any Owner or Indemnified Party a party to any
litigation without the Agent's or such Owner's or such Indemnified
Party's prior written consent. The Seller shall deliver to the
Collection Agent, and the Collection Agent shall hold in trust for
the Seller and each Owner in accordance with their respective
interests, all Records (including, without limitation, computer
tapes or disks).
(b) The Collection Agent shall as soon as practicable
following receipt turn over to the Seller (i) that portion of
Collections of Pool Receivables representing its undivided
interest therein, less, in the event the Seller is not the
Collection Agent, all reasonable out-of-pocket costs and expenses
of such Collection Agent of servicing, administering and
collecting the Pool Receivables to the extent not covered by the
Collection Agent Fee received by it and (ii) the Collections of
any Receivable which is not a Pool Receivable. The Collection
Agent, if other than the Seller, shall as soon as practicable upon
demand deliver to the Seller all documents, instruments and
records in its possession which evidence or relate to Receivables
of the Seller other than Pool Receivables, and copies of Records
in its possession which evidence or relate to Pool Receivables.
The Collection Agent's authorization under this Agreement shall
terminate on the Collection Date.
SECTION 6.03. Rights of the Agent. (a) The Agent is
hereby authorized at any time to date and deliver to the Lock-Box
Banks, the Lock-Box Notices and Preliminary Lock-Box Notices
delivered hereunder. The Seller hereby transfers to the Agent the
exclusive ownership and dominion and, when the Agent shall deliver
the Lock-Box Notices or Preliminary Lock-Box Notices to the
Lock-Box Banks, control of the related Lock-Box Accounts to which
the Obligors of Pool Receivables shall make payments, and shall
take any further action that the Agent may reasonably request to
effect such transfer. In case any authorized signatory of the
Seller whose signature shall appear on any Lock-Box Notice or
Preliminary Lock-Box Notice shall cease to have such authority
before the delivery of such Lock-Box Notice or Preliminary
Lock-Box Notice, such signature shall nevertheless be valid and
sufficient for all purposes as if such authority had remained in
force at the time of such delivery. Further, the Agent may notify
at any time after the
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occurrence and during the continuance of any Event of Termination,
and at the Seller's expense, the Obligors of Pool Receivables, or
any of them, of the ownership of Eligible Assets by the Owners.
(b) At any time following the designation of a
Collection Agent other than the Seller pursuant to Section 6.01:
(i) The Agent may direct the Obligors of Pool
Receivables, or any of them, to make payment of all amounts
due or to become due to the Seller under any Pool Receivable
directly to the Agent or its designee.
(ii) The Seller shall, at the Agent's request and at
the Seller's expense, give notice of such ownership to such
Obligors and direct them to make such payments directly to the
Agent or its designee.
(iii) The Seller shall, at the Agent's request,
(A) assemble all of the Records (including, without
limitation, computer tapes and disks), and the related
Contracts and Related Security, and shall make the same
available to the Agent at a place selected by the Agent or its
designee, and (B) segregate all cash, checks and other
instruments received by it from time to time constituting
Collections of Pool Receivables in a manner acceptable to the
Agent and shall, promptly upon receipt, remit all such cash,
checks and instruments, duly endorsed or with duly executed
instruments of transfer, to the Agent or its designee.
(iv) The Agent may take any and all steps in the
Seller's name and on behalf of the Seller and the Owners
necessary or desirable, in the determination of the Agent, to
collect all amounts due under any and all Pool Receivables,
including, without limitation, endorsing the Seller's name on
checks and other instruments representing Collections,
enforcing such Pool Receivables and the related Contracts, and
adjusting, settling or compromising the amount or payment
thereof, in the same manner and to the same extent as the
Seller might have done.
SECTION 6.04. Responsibilities of the Seller. Anything
herein to the contrary notwithstanding:
(a) The Seller shall perform all of its obligations, and
shall cause the performance of all obligations, under the
Contracts related to the Pool Receivables to the same extent
as if Eligible Assets had not been sold hereunder and
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61
the exercise by the Agent of its rights hereunder shall not
relieve the Seller from such obligations or its obligations
with respect to Pool Receivables; and
(b) Neither the Agent nor the Owners nor any other
Indemnified Party shall have any obligation or liability with
respect to any Pool Receivables or related Contracts, nor
shall any of them be obligated to perform any of the
obligations of the Seller thereunder.
SECTION 6.05. Further Action Evidencing Purchases. (a)
The Seller agrees that from time to time, at its expense, it will
promptly execute and deliver all further instruments and
documents, and take all further action, that may be necessary or
desirable, or that the Agent may reasonably request, in order to
perfect, protect or more fully evidence the Eligible Assets
purchased by the Owners, or to enable any of them or the Agent to
exercise and enforce any of their respective rights and remedies
hereunder or under the Certificate. Without limiting the
generality of the foregoing, the Seller will upon the request of
the Agent: (i) execute and file such financing or continuation
statements, or amendments thereto or assignments thereof, and such
other instruments or notices, as may be necessary or desirable, or
as the Agent may request, in order to perfect, protect or evidence
such Eligible Assets; (ii) mark conspicuously each invoice
evidencing each Pool Receivable and the related Contract with a
legend, acceptable to the Agent, evidencing that such Eligible
Assets have been sold in accordance with this Agreement; and
(iii) mark its master data processing records evidencing such Pool
Receivables and related Contracts with such legend.
(b) The Seller hereby authorizes the Agent to file one
or more financing or continuation statements, and amendments
thereto and assignments thereof, relating to all or any of the
Contracts, or Pool Receivables and the Related Security and
Collections with respect thereto now existing or hereafter arising
without the signature of the Seller where permitted by law. A
photocopy or other reproduction of this Agreement or any financing
statement covering all or any of the Contracts, or Pool
Receivables and the Related Security and Collections with respect
thereto shall be sufficient as a financing statement where
permitted by law.
(c) If the Seller fails to perform any agreement
contained herein, the Agent may itself perform, or cause
performance of, such agreement, and the reasonable expenses of the
Agent incurred in connection therewith shall be payable by the
Seller under Section 10.01 or Section 12.06, as applicable.
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ARTICLE VII
EVENTS OF TERMINATION
SECTION 7.01. Events of Termination. If any of the
following events ("Events of Termination") shall occur and be
continuing:
(a) (i) The Collection Agent (if the Seller or any of
its Affiliates) shall fail to perform or observe any term,
covenant or agreement hereunder (other than as referred to in
clause (ii) of this Section 7.01(a)) and such failure shall
remain unremedied for three Business Days, or (ii) the Seller
or the Collection Agent (if the Seller or any of its
Affiliates) shall fail to make any payment or deposit to be
made by it hereunder or under the Fee Letter, in the case of
any such payment in respect of Yield or any fees, no later
than two Business Days after the date when due or, in the case
of payment or deposit of any other amount, when due; or
(b) The Seller shall fail to perform or observe any
term, covenant or agreement contained in Section 5.02(c),
5.03(e) or 6.03(a); or
(c) Any representation or warranty or statement made by
the Seller or Americas (or any of their respective officers)
in this Agreement or the Receivables Contribution and Sale
Agreement or the Assignment and Assumption or any Investor
Report or any other written certificate or report delivered
pursuant hereto shall prove to have been incorrect in any
material respect when made; or
(d) The Seller or Americas fail to perform or observe
any other term, covenant or agreement contained in this
Agreement or the Receivables Contribution and Sale Agreement
or the Assignment and Assumption on its part to be performed
or observed and any such failure shall remain unremedied for
10 days after written notice thereof shall have been given to
the Seller or Americas, as the case may be, by the Agent; or
(e) Americas shall fail to pay any principal of or
premium or interest on any Debt under the Credit Agreement, as
the same may from time to time be amended, modified,
supplemented or replaced, when the same becomes due and
payable (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise), and such failure shall
continue after the applicable grace period, if any, specified
in such Credit Agreement; or any other event shall occur or
condition shall exist under such Credit Agreement
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63
(or, if at the time of determination such Credit Agreement is
not in full force and effect, would have occurred or existed
under such Credit Agreement, if such Credit Agreement was in
full force and effect at such time) and shall continue after
the applicable grace period, if any, specified in such Credit
Agreement, if the effect of such event or condition is (or
would have been) to accelerate, or to permit the acceleration
of, the maturity of any Debt thereunder; or any Debt under
such Credit Agreement shall be (or would have been, pursuant
to the terms of such Credit Agreement) declared to be due and
payable, or required to be prepaid (other than by a regularly
scheduled required prepayment), redeemed, purchased or
defeased, or an offer to prepay, redeem, purchase or defease
such Debt shall be (or would have been, pursuant to the terms
of such Credit Agreement) required to be made, in each case
prior to the stated maturity thereof; provided, however, that
in the case of any such event or condition consisting of
Americas' failure to perform or observe any covenant under
such Credit Agreement, if such failure is waived in writing by
the requisite holders of the Debt thereunder during the 90-day
period following such failure, such failure shall not
constitute an "Event of Termination" hereunder if such failure
is remedied during such 90-day period; or
(f) Any Purchase or any reinvestment pursuant to
Section 2.05 shall for any reason (other than pursuant to the
terms hereof) cease to create, or any Eligible Asset shall for
any reason cease to be, a valid and perfected first priority
undivided percentage ownership interest to the extent of the
pertinent Eligible Asset in each applicable Pool Receivable
and the Related Security and Collections with respect thereto
or the Certificate shall for any reason cease to evidence in
the Owners of such Eligible Asset legal and equitable title
to, and ownership of, an undivided percentage ownership
interest in Pool Receivables and Related Security to the
extent of such Eligible Asset, or the Agent for the benefit of
itself, the Owners and each other Indemnified Party from time
to time shall cease to have a valid and perfected first
priority security interest in the Collateral; or
(g) The Seller or Americas shall generally not pay its
debts as such debts become due, or shall admit in writing its
inability to pay its debts generally, or shall make a general
assignment for the benefit of creditors; or any proceeding
shall be instituted by or against the Seller seeking to
adjudicate it a bankrupt or insolvent, or seeking liquidation,
winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of it or its
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64
debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of
an order for relief or the appointment of a receiver, trustee,
custodian or other similar official for it or for any
substantial part of its property and, in the case of any such
proceeding instituted against it (but not instituted by it),
either such proceeding shall remain undismissed or unstayed
for a period of 30 days, or any of the actions sought in such
proceeding (including, without limitation, the entry of an
order for relief against, or the appointment of a receiver,
trustee, custodian or other similar official for, it or for
any substantial part of its property) shall occur; or the
Seller or Americas shall take any corporate action to
authorize any of the actions set forth above in this
subsection (g); or
(h) The Default Ratio as at the last day of any Fiscal
Month shall exceed 8.5%, or the Delinquency Ratio as at the
last day of any Fiscal Month shall exceed 5%, or the
Loss-to-Liquidation Ratio as at the last day of any Fiscal
Month shall exceed 2%, or the Dilution Ratio as at the last
day of any Fiscal Month shall exceed 15%; or
(i) The Net Receivables Pool Balance shall for a period
of three consecutive Business Days be less than the greater of
(i) 120% of the sum of the aggregate outstanding Capital of
all Eligible Assets and of the aggregate outstanding "Capital"
of all "Eligible Assets" under the Investor Agreement,
respectively, or (ii) the sum of the aggregate outstanding
Capital and of the aggregate outstanding "Capital",
respectively, plus the aggregate Loss Reserve and the
aggregate "Loss Reserve", respectively, plus the aggregate
Dilution Reserve and the aggregate "Dilution Reserve",
respectively, plus the aggregate Yield Reserve and the
aggregate "Yield Reserve", respectively, plus the aggregate
Collection Agent Fee Reserve and the aggregate "Collection
Agent Fee Reserve", respectively, plus 2% of aggregate
outstanding Capital and aggregate outstanding "Capital",
respectively, in each case for all Eligible Assets and all
"Eligible Assets" under the Investor Agreement; or
(j) There shall have been any material adverse change in
the financial condition or operations of Americas since
September 30, 1994, or there shall have occurred any event
which materially adversely affects the collectibility of the
Pool Receivables, or there shall have occurred any other event
which materially adversely affects the ability of the Seller
or Americas to collect Pool Receivables or the ability of the
Seller or Americas to perform hereunder or
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65
under the Receivables Contribution and Sale Agreement, as
applicable; or
(k) The Receivables Contribution and Sale Agreement or
the Assignment and Assumption or the Fee Letter shall for any
reason cease to be in full force and effect or any provision
thereof shall for any reason cease to be valid and binding on
the Seller or Americas, as applicable, or the Seller or
Americas, as applicable, shall so state in writing; or
(l) Americas shall cease to own all the issued and
outstanding shares of stock of the Seller; or
(m) The Seller shall fail to maintain a tangible net
worth of at least 12.0% of the aggregate Outstanding Balance
of the Pool Receivables and such failure shall remain
unremedied for a period of 31 days after an officer of the
Seller or Americas knew or should have known of such failure
(the term "tangible net worth" to mean the excess of total
assets of the Seller over total liabilities of the Seller); or
(n) There shall have occurred any event which
constitutes or would, with the giving of notice or the lapse
of time or both, constitute an "Event of Investment
Ineligibility" under the Investor Agreement or the Investor
Agreement shall cease for any reason to be in full force and
effect;
then, and in any such event, the Agent shall, at the request, or
may with the consent, of the Majority Banks, by notice to the
Seller declare the Commitment Termination Date to have occurred,
whereupon the Commitment Termination Date shall forthwith occur,
without demand, protest or further notice of any kind, all of
which are hereby expressly waived by the Seller; provided,
however, that in the event of an actual or deemed entry of an
order for relief with respect to the Seller or Americas under the
Federal Bankruptcy Code, the Commitment Termination Date shall
automatically occur, without demand, protest or any notice of any
kind, all of which are hereby expressly waived by the Seller.
Upon any such termination of the Facility, the Agent and the
Owners shall have, in addition to all other rights and remedies
under this Agreement or otherwise, all other rights and remedies
provided under the UCC of the applicable jurisdiction and other
applicable laws, which rights shall be cumulative. Without
limiting the foregoing or the general applicability of Article IX
hereof, any Owner may elect to assign any Eligible Asset owned by
such Owner to an Assignee following the occurrence of any Event of
Termination.
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66
ARTICLE VIII
THE AGENT
SECTION 8.01. Authorization and Action. Each of the
Banks and CNA hereby appoints and authorizes the Agent to take
such action as agent on its behalf and to exercise such powers
under this Agreement, the Certificate, the Receivables
Contribution and Sale Agreement, the Assignment and Assumption,
the Fee Letter and the other instruments and documents furnished
pursuant hereto as are delegated to the Agent by the terms hereof,
together with such powers as are reasonably incidental thereto
(including without limitation executing and delivering such UCC
amendments or partial releases as may be necessary from time to
time in connection with any Receivable ceasing to be a Pool
Receivable pursuant to clause (i) or (ii) of the definition of the
term "Receivables Pool"). As to any matters not expressly
provided for by this Agreement (including, without limitation,
enforcement of the Certificate, the Receivables Contribution and
Sale Agreement, the Assignment and Assumption and the Fee Letter),
the Agent shall not be required to exercise any discretion or take
any action, but shall be required to act or to refrain from acting
(and shall be fully protected in so acting or refraining from
acting) upon the instructions of the Majority Banks, and such
instructions shall be binding upon all Banks, CNA and all Owners;
provided, however, that the Agent shall not be required to take
any action which exposes the Agent to personal liability or which
is contrary to this Agreement or applicable law. The Agent agrees
to give each Bank prompt notice of each notice given to it by the
Seller pursuant to the terms of this Agreement.
SECTION 8.02. Agent's Reliance, Etc. Neither the Agent
nor any of its directors, officers, agents or employees shall be
liable for any action taken or omitted to be taken by it or them
as Agent under or in connection with this Agreement, the
Certificate, the Receivables Contribution and Sale Agreement, the
Assignment and Assumption, the Fee Letter or any other instrument
or document furnished pursuant hereto (including, without
limitation, the Agent's servicing, administering or collecting
Pool Receivables as Collection Agent pursuant to Section 6.01),
except for its or their own gross negligence or willful
misconduct. Without limiting the generality of the foregoing,
except as otherwise agreed by the Agent and any Owner, the Agent:
(i) may consult with legal counsel (including counsel for the
Seller), independent public accountants and other experts selected
by it and shall not be liable for any action taken or omitted to
be taken in good faith by it in accordance with the advice of such
counsel, accountants or experts; (ii) makes no warranty or
representation to any Person and shall not be responsible to any
Person for any statements, warranties or representations (whether
written or oral) made in or in connection with this Agreement, the
Certificate, the Receivables Contribution and Sale Agreement,
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67
the Assignment and Assumption, the Fee Letter or any other
instrument or document furnished pursuant hereto; (iii) shall not
have any duty to ascertain or to inquire as to the performance or
observance of any of the terms, covenants or conditions of this
Agreement, the Certificate, the Receivables Contribution and Sale
Agreement, the Assignment and Assumption, the Fee Letter or any
other instrument or document furnished pursuant hereto on the part
of the Seller or Americas or to inspect the property (including
the books and records) of the Seller or Americas; (iv) shall not
be responsible to any Owner for the due execution, legality,
validity, enforceability, genuineness, sufficiency or value of
this Agreement, the Certificate, the Receivables Contribution and
Sale Agreement, the Assignment and Assumption, the Fee Letter or
any other instrument or document furnished pursuant hereto, or the
perfection, priority or value of any ownership interest or
security interest created or purported to be created hereunder or
under the Receivables Contribution and Sale Agreement or the
Assignment and Assumption; and (v) shall incur no liability under
or in respect of this Agreement, the Certificate, the Receivables
Contribution and Sale Agreement, the Fee Letter or any other
instrument or document furnished pursuant hereto by acting upon
any notice (including notice by telephone), consent, certificate
or other instrument or writing (which may be by telecopier,
telegram, cable or telex) believed by it to be genuine and signed
or sent by the proper party or parties.
SECTION 8.03. CNA and Affiliates. With respect to any
Eligible Asset owned by it, CNA shall have the same rights and
powers under this Agreement as any other Owner and may exercise
the same as though it were not the Agent. CNA and its Affiliates
may generally engage in any kind of business with the Seller or
any Obligor, any of their respective Affiliates and any Person who
may do business with or own securities of the Seller or any
Obligor or any of their respective Affiliates, all as if CNA were
not the Agent and without any duty to account therefor to the
Owners.
SECTION 8.04. Purchase Decision. Each Bank acknowledges
that it has, independently and without reliance upon the Agent,
any of its Affiliates or any other Bank or Owner and based on the
financial statements referred to in Section 4.01, information
regarding the Obligors and such other documents and information as
it has deemed appropriate, made its own analysis and decision to
enter into this Agreement and, if it so determines, to purchase
undivided ownership interests in Pool Receivables hereunder. Each
Bank also acknowledges that it will, independently and without
reliance upon the Agent, any of its Affiliates or any other Owner
and based on such documents and information as it shall deem
appropriate at the time,
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continue to make its own credit decisions in taking or not taking
action under this Agreement.
SECTION 8.05. Indemnification. The Banks agree to
indemnify the Agent (to the extent not reimbursed by the Seller),
ratably accordingly to the respective portions of the Eligible
Assets then owned by them (or if no Eligible Assets are at that
time outstanding, ratably according to their respective
Commitments), from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses, or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by, or asserted
against the Agent in any way relating to or arising out of this
Agreement, the Certificate, the Receivables Contribution and Sale
Agreement, the Assignment and Assumption, the Fee Letter or any
other instrument or document furnished pursuant hereto or any
action taken or omitted by the Agent under this Agreement, the
Certificate, the Receivables Contribution and Sale Agreement, the
Assignment and Assumption, the Fee Letter or any other instrument
or document furnished pursuant hereto, provided that no Bank shall
be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from the Agent's gross
negligence or willful misconduct. Without limitation of the
foregoing, each Bank agrees to reimburse the Agent promptly upon
demand for its ratable share of any reasonable out-of-pocket
expenses (including counsel fees) incurred by the Agent in
connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether
through negotiations, legal proceedings or otherwise) of, or legal
advice in respect of rights or responsibilities under, this
Agreement, the Certificate, the Receivables Contribution and Sale
Agreement, the Assignment and Assumption, the Fee Letter or any
other instrument or document furnished pursuant hereto, to the
extent that the Agent is not reimbursed for such expenses by the
Seller.
ARTICLE IX
ASSIGNMENT
SECTION 9.01. Assignment of Eligible Assets. (a) Each
Bank may, with the written consent of Citibank or CNA, as
applicable, assign to Citibank or CNA, and Citibank or CNA may
each assign to each other, and CNA may, in connection with any
assignment by Citibank to an Eligible Assignee of a portion of
Citibank's rights and obligations hereunder pursuant to Section
9.02, assign to such Eligible Assignee, its portion of any
Eligible Asset. Upon any such assignment, (i) the Assignee
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69
shall become the Owner of such portion of such Eligible Asset for
all purposes of this Agreement and (ii) the Owner assignor thereof
shall relinquish its rights with respect to such portion of such
Eligible Asset for all purposes of this Agreement. Such
assignments shall be upon such terms and conditions as the
assignor and the Assignee of such portion of such Eligible Asset
may mutually agree, the parties thereto shall deliver to the Agent
an Assignment, duly executed by such parties, and such assignor
shall promptly execute and deliver all further instruments and
documents, and take all further action, that the Assignee may
reasonably request in order to perfect, protect or more fully
evidence the Assignee's right, title and interest in and to such
portion of such Eligible Asset, and to enable the Assignee to
exercise or enforce any rights hereunder or under the Certificate
or the Fee Letter. The Agent shall provide notice to the Seller
of any assignment of a portion of an Eligible Asset hereunder.
(b) By executing and delivering an Assignment, the Owner
assignor thereunder and the Assignee thereunder confirm to and
agree with each other and the other parties hereto as follows:
(i) other than as provided in such Assignment, such assigning
Owner makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or
representations made in or in connection with this Agreement, the
Certificate, the Receivables Contribution and Sale Agreement, the
Assignment and Assumption, the Fee Letter or any other instrument
or document furnished pursuant hereto or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of
this Agreement, the Certificate, the Receivables Contribution and
Sale Agreement, the Assignment and Assumption, the Fee Letter or
any other instrument or document furnished pursuant hereto, or the
perfection, priority or value of any ownership interest or
security interest created or purported to be created hereunder or
under the Receivables Contribution and Sale Agreement or the
Assignment and Assumption; (ii) such assigning Owner makes no
representation or warranty and assumes no responsibility with
respect to the financial condition of the Seller or Americas or
the performance or observance by the Seller or Americas of any of
its obligations under this Agreement, the Certificate, the
Receivables Contribution and Sale Agreement, the Assignment and
Assumption, the Fee Letter or any other instrument or document
furnished pursuant hereto; (iii) such Assignee confirms that it
has received a copy of this Agreement, the Certificate, the
Receivables Contribution and Sale Agreement and the Assignment and
Assumption, together with copies of the financial statements
referred to in Section 4.01 and such other documents and
information as it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and to
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purchase such portion of such Eligible Asset; (iv) such Assignee
will, independently and without reliance upon the Agent, any of
its Affiliates, such assigning Owner or any other Owner or Bank
and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions
in taking or not taking action under this Agreement and the Fee
Letter; (v) such Assignee appoints and authorizes the Agent to
take such action as agent on its behalf and to exercise such
powers under this Agreement, the Certificate, the Receivables
Contribution and Sale Agreement, the Assignment and Assumption,
the Fee Letter and any other instruments or documents furnished
pursuant hereto as are delegated to the Agent by the terms hereof,
together with such powers as are reasonably incidental thereto;
(vi) such Assignee appoints as its agent the Collection Agent from
time to time designated pursuant to Section 6.01 to enforce its
respective rights and interests in and under the Pool Receivables,
the Related Security and the related Contracts; and (vii) such
Assignee agrees that it will comply with the provisions of
Section 12.07(b).
SECTION 9.02. Assignment of Rights and Obligations.
(a) Citibank may assign to one or more Eligible Assignees a
portion of its rights and obligations under this Agreement
(including, without limitation, a portion of its Commitment and a
portion of any Eligible Assets owned by it), and each other Bank
may assign to one or more Eligible Assignees all, but not a
portion, of its rights and obligations under this Agreement
(including, without limitation, all, but not a portion, of its
Commitment and of the portion of the Eligible Assets owned by it);
provided, however, in each case that (i) in the case of any
assignment by Citibank, each such assignment shall be of a
constant, and not a varying, percentage of all of its rights and
obligations under this Agreement, and in the case of any
assignment by any such other Bank, each such assignment shall be
of all, but not a portion, of such Bank's rights and obligations
under this Agreement, (ii) in the case of any assignment by
Citibank, the amount of the Commitment being assigned pursuant to
each such assignment (determined as of the date of the Assignment
and Acceptance with respect to such assignment) shall be an
integral multiple of $1,000,000, (iii) in the case of any
assignment by Citibank, its Commitment, after giving effect to
each partial assignment of its Commitment pursuant to this
Section 9.02, shall be at all times equal to or greater than 10%
of the aggregate Commitments of the Banks from time to time,
(iv) each such assignment shall be to an Eligible Assignee,
(v) the parties to each such assignment shall execute and deliver
to the Agent, for its acceptance and recording in the Register, an
Assignment and Acceptance, together with a processing and
recordation fee as shall be agreed between such
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parties, and (vi) the Consent of the Seller shall first have been
obtained, which Consent shall not be unreasonably withheld. Upon
such execution, delivery, acceptance and recording and
satisfaction of the conditions set forth in the proviso to the
immediately preceding sentence, from and after the effective date
specified in each Assignment and Acceptance, which effective date
shall be the later of (x) the date on which the Agent receives the
executed Assignment and Acceptance and the executed Consent
relating thereto, and (y) the date of such Assignment and
Acceptance, Citibank or any other assigning Bank, as applicable,
shall, to the extent that rights and obligations hereunder have
been assigned by it pursuant to such Assignment and Acceptance,
relinquish its rights and be released from its obligations under
this Agreement.
(b) By executing and delivering an Assignment and
Acceptance, Citibank, or any other assigning Bank, as applicable,
and the assignee thereunder confirm to and agree with each other
and the other parties hereto as follows: (i) other than as
provided in such Assignment and Acceptance, Citibank or such other
Bank makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or
representations made in or in connection with this Agreement, the
Certificate, the Receivables Contribution and Sale Agreement, the
Assignment and Assumption, the Fee Letter or any other instrument
or document furnished pursuant hereto or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of
this Agreement, the Certificate, the Receivables Contribution and
Sale Agreement, the Assignment and Assumption, the Fee Letter or
any other instrument or document furnished pursuant hereto, or the
perfection, priority or value of any ownership interest or
security interest created or purported to be created hereunder or
under the Receivables Contribution and Sale Agreement or the
Assignment and Assumption; (ii) Citibank or such other Bank makes
no representation or warranty and assumes no responsibility with
respect to the financial condition of the Seller or Americas or
the performance or observance by the Seller or Americas of any of
its obligations under this Agreement, the Certificate, the
Receivables Contribution and Sale Agreement, the Assignment and
Assumption, the Fee Letter or any other instrument or document
furnished pursuant hereto; (iii) such assignee confirms that it
has received a copy of this Agreement, the Receivables
Contribution and Sale Agreement, the Assignment and Assumption,
the Certificate and a fee letter setting forth the fees payable to
such Assignee under the Fee Letter, together with copies of the
financial statements referred to in Section 4.01, information
regarding the Obligors and such other documents and information as
it has deemed appropriate to make its own analysis and decision to
enter into such Assignment and
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Acceptance; (iv) such assignee will, independently and without
reliance upon the Agent, any of its Affiliates, Citibank, CNA, any
other Bank or Owner or any former Owner and based on such
documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not
taking action under this Agreement, the Certificate and the Fee
Letter; (v) such assignee confirms that it is an Eligible
Assignee; (vi) such assignee appoints and authorizes the Agent to
take such action as agent on its behalf and to exercise such
powers under this Agreement, the Certificate, the Receivables
Contribution and Sale Agreement, the Assignment and Assumption,
the Fee Letter and any other instruments and documents furnished
pursuant hereto as are delegated to the Agent by the terms hereof,
together with such powers as are reasonably incidental thereto;
(vii) such Assignee appoints as its agent the Collection Agent
from time to time designated pursuant to Section 6.01 to enforce
its respective rights and interests in and under the Pool
Receivables, the Related Security and the related Contracts; and
(viii) such Assignee agrees that it will comply with the
provisions of Section 12.07(b) and perform in accordance with
their terms all of the obligations which by the terms of this
Agreement are required to be performed by it as a Bank or an
Owner.
(c) The Agent shall maintain at its office referred to
in Section 12.02 a copy of each Assignment and Acceptance
delivered to and accepted by it and a register for the recordation
of the names and addresses of the Banks and the Commitment of, and
the portion of each Eligible Asset owned by, each Bank and CNA
from time to time (the "Register"). The entries in the Register
shall constitute prima facie evidence of the accuracy of the
information contained therein, and the Seller, the Agent, CNA and
the Banks may treat each Person (other than CNA) whose name is
recorded in the Register as a Bank hereunder for all purposes of
this Agreement. The Register shall be available for inspection by
the Seller or any Bank at any reasonable time and from time to
time upon reasonable prior notice.
(d) Upon its receipt of an Assignment and Acceptance
executed by Citibank, or any other assigning Bank, as applicable,
and an assignee representing that it is an Eligible Assignee, the
Agent shall, if such Assignment and Acceptance has been completed
and is in substantially the form of Exhibit G hereto, (i) accept
such Assignment and Acceptance, (ii) record the information
contained therein in the Register, and (iii) give prompt notice
thereof to the Seller.
SECTION 9.03. Annotation of Certificate. The Agent
shall annotate the Certificate to reflect any assignments made
pursuant to Section 9.01 or 9.02 or otherwise.
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ARTICLE X
INDEMNIFICATION
SECTION 10.01. Indemnities by the Seller. Without
limiting any other rights which any Indemnified Party may have
hereunder or under applicable law, the Seller hereby agrees to
indemnify each Indemnified Party from and against any and all
claims, losses and liabilities (including reasonable attorneys'
fees) (all of the foregoing being collectively referred to as
"Indemnified Amounts") growing out of or resulting from this
Agreement or the Receivables Contribution and Sale Agreement or
the Assignment and Assumption or the use of proceeds of Purchases
or reinvestments or the ownership of Eligible Assets or the
security interest in Collateral or in respect of any Receivable
(or any portion thereof) or any Contract or Collateral, excluding,
however, (a) Indemnified Amounts to the extent resulting from
gross negligence or willful misconduct on the part of any
Indemnified Party or (b) any income taxes incurred by such
Indemnified Party arising out of or as a result of this Agreement
or the Receivables Contribution and Sale Agreement or the
Assignment and Assumption or the ownership of Eligible Assets or
the security interest in Collateral or in respect of any
Receivable or any Contract or Collateral; provided, however, that
this indemnification shall not constitute or include or provide
for recourse against the Seller (except as otherwise specifically
provided in this Agreement or the Assignment and Assumption) for
uncollectible Receivables. Without limiting the foregoing or
being limited by the foregoing (other than the foregoing proviso),
the Seller shall pay on demand to each Indemnified Party any and
all amounts necessary to indemnify such Indemnified Party from and
against any and all Indemnified Amounts relating to or resulting
from:
(i) any Receivable (or any portion thereof) becoming a
Pool Receivable which is not at the date thereof an Eligible
Receivable, or which (except for the passage or expiration of a
time limitation contained in the definition of the term
"Eligible Receivable" herein) thereafter ceases to be an
Eligible Receivable;
(ii) reliance on any representation or warranty or
statement made or deemed made by the Seller or Americas (or
any of their respective officers) under or in connection with
this Agreement, the Receivables Contribution and Sale
Agreement, the Assignment and Assumption or any Investor
Report or other written certificate or report delivered
pursuant hereto which shall have been incorrect in any
material respect when made;
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(iii) the failure by the Seller or Americas to comply with
any applicable law, rule or regulation with respect to any
Pool Receivable (or any portion thereof) or the related
Contract or any Related Security, or the nonconformity of any
Pool Receivable (or any portion thereof) or the related
Contract or any Related Security with any such applicable law,
rule or regulation, in any such case to the extent that such
failure or non-conformity was within the Seller's or Americas'
control;
(iv) the failure to vest in the Owners of an Eligible
Asset an undivided percentage ownership interest, to the
extent of such Eligible Asset, in the Receivables in, or
purporting to be in, the Receivables Pool and the Related
Security and Collections in respect thereof, and a perfected
security interest in the Collateral, in each case free and
clear of any Adverse Claim (whether existing on the date of
the initial Purchase under the Original Agreement or at any
time thereafter); or the failure of the Seller to have
obtained a perfected interest in the Pool Receivables, Related
Security and Collections with respect thereto transferred or
purported to be transferred to the Seller under the
Receivables Contribution and Sale Agreement or the Assignment
and Assumption, free and clear of any such Adverse Claim;
(v) the failure of the Seller or Americas to have filed,
or any delay in filing by the Seller or Americas, financing
statements or other similar instruments or documents under the
UCC of any applicable jurisdiction or other applicable laws
with respect to any Receivables in, or purporting to be in,
the Receivables Pool and the Related Security and Collections
in respect thereof, or any Collateral, whether at the time of
any Purchase or reinvestment or at any subsequent time;
(vi) any credit, rebate, discount, dispute, claim,
chargeback, allowance, offset, counterclaim, other dilution
factor or defense (other than discharge in bankruptcy of the
Obligor) of the Obligor to the payment of any Receivable (or
any portion thereof) in, or purporting to be in, the
Receivables Pool (including, without limitation, a defense
based on such Receivable or the related Contract not being a
legal, valid and binding obligation of such Obligor
enforceable against it in accordance with its terms), or any
other claim resulting from the sale of the merchandise or
services related to such Receivable or portion or the
furnishing or failure to furnish such merchandise or services;
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(vii) any failure of the Seller, as Collection Agent or
otherwise, to perform its duties or obligations in accordance
with the provisions of Article VI, or any failure of the
Seller or Americas to perform its duties or obligations under
the Contracts, this Agreement, the Receivables Contribution
and Sale Agreement or the Assignment and Assumption;
(viii) any products liability claim allegedly arising out
of or in connection with merchandise or services which are the
subject of any Contract and any related personal injury or
damage suit;
(ix) any investigation, litigation or proceeding (other
than any investigation, litigation or proceeding solely
between the parties hereto, except as otherwise determined
therein) related to this Agreement, the Receivables
Contribution and Sale Agreement, the Assignment and
Assumption, the Fee Letter or any other instrument or document
furnished pursuant hereto or the use of proceeds of Purchases
or reinvestments or the ownership of Eligible Assets or the
security interest in Collateral or in respect of any
Receivable (or any portion thereof), Related Security or
Contract or Collateral;
(x) the commingling of Collections of Pool Receivables
at any time with other funds; or
(xi) the Net Receivables Pool Balance being less than the
greater of (A) 120% of the sum of aggregate outstanding
Capital plus aggregate outstanding "Capital" under the
Investor Agreement or (B) the sum of the aggregate outstanding
Capital and of the aggregate outstanding "Capital", plus the
aggregate Loss Reserve and the aggregate "Loss Reserve", plus
the aggregate Dilution Reserve and the aggregate "Dilution
Reserve", plus the aggregate Yield Reserve and the aggregate
"Yield Reserve", plus the aggregate Collection Agent Fee
Reserve and the aggregate "Collection Agent Fee Reserve", plus
2% of aggregate outstanding Capital and aggregate outstanding
"Capital", in each case for all Eligible Assets and all
"Eligible Assets" under the Investor Agreement, or the
occurrence of any other Event of Termination.
ARTICLE XI
GRANT OF SECURITY INTEREST
SECTION 11.01. Grant of Security Interest. The Seller
hereby assigns and pledges to the Agent for the benefit of
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itself, the Owners and each other Indemnified Party from time to
time, and hereby grants to the Agent for the benefit of itself,
the Owners and each other Indemnified Party from time to time, a
security interest in and to, all of the Seller's right, title and
interest in and to the following (collectively the "Collateral"):
(a) the Receivables Contribution and Sale Agreement;
(b) the Assignment and Assumption;
(c) all rights to receive moneys due and to become due
under or pursuant to the Receivables Contribution and Sale
Agreement or the Assignment and Assumption;
(d) all rights to receive proceeds of any indemnity,
warranty or guaranty with respect to the Receivables
Contribution and Sale Agreement or the Assignment and
Assumption;
(e) claims for damages arising out of or for breach of
or default under the Receivables Contribution and Sale
Agreement or the Assignment and Assumption;
(f) the right to perform under the Receivables
Contribution and Sale Agreement or the Assignment and
Assumption and to compel performance and otherwise exercise
all remedies thereunder; and
(g) all proceeds of any and all of the foregoing
Collateral (including, without limitation, proceeds which
constitute property of the types described in clauses (a)
through (f) of this Section 11.01).
SECTION 11.02. Security for Obligations. The
assignment, pledge and security interest granted under this
Article XI secures the payment of all obligations of the Seller
now or hereafter existing from time to time under this Agreement,
the Fee Letter, any other instruments and documents furnished by
the Seller pursuant hereto and otherwise in connection with this
Agreement, whether for Collections received or deemed to have been
received or otherwise payable by the Seller, either individually
or as Collection Agent, repurchases of interests in Pool
Receivables, interest, fees, costs, expenses, taxes,
indemnification or otherwise (all such obligations being the
"Obligations").
SECTION 11.03. Seller Remains Liable. Anything herein
to the contrary notwithstanding, (a) the Seller shall remain
liable under the Receivables Contribution and Sale Agreement and
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the Assignment and Assumption to the extent set forth therein to
perform all of its duties and obligations thereunder to the same
extent as if this Agreement had not been executed, (b) the
exercise by the Agent of any of the rights hereunder shall not
release the Seller from any of its duties or obligations under the
Receivables Contribution and Sale Agreement or the Assignment and
Assumption, and (c) neither the Agent nor any Bank nor any other
Indemnified Party shall have any obligation or liability under the
Receivables Contribution and Sale Agreement or the Assignment and
Assumption by reason of this Article XI, nor shall the Agent or
any Bank or any other Indemnified Party be obligated to perform
any of the obligations or duties of the Seller thereunder.
SECTION 11.04. Further Assurances. (a) The Seller
agrees that from time to time, at the expense of the Seller, the
Seller will promptly execute and deliver all further instruments
and documents, and take all further action, that may be necessary
or reasonably desirable, or that the Agent may reasonably request,
in order to perfect and protect the assignment and security
interest granted or purported to be granted hereby or to enable
the Agent to exercise and enforce its rights and remedies
hereunder with respect to any Collateral. Without limiting the
generality of the foregoing, the Seller will: (i) execute and
file such financing or continuation statements, or amendments
thereto, and such other instruments or notices, as may be
necessary or reasonably desirable, or as the Agent may reasonably
request, in order to perfect and preserve the assignment and
security interest granted or purported to be granted hereby, and
(ii) upon the request of the Agent, mark conspicuously each copy
of each chattel paper which evidences any of the Collateral and
each of its records pertaining to the Collateral with a legend, in
form and substance satisfactory to the Agent, indicating that such
chattel paper or Collateral is subject to the assignment and
security interest granted pursuant hereto.
(b) The Seller hereby authorizes the Agent to file one
or more financing or continuation statements, and amendments
thereto, relating to all or any part of the Collateral without the
signature of the Seller where permitted by law, and the Agent
shall notify the Seller of each such filing. A photocopy or other
reproduction of this Agreement or any financing statement covering
the Collateral or any part thereof shall be sufficient as a
financing statement where permitted by law.
SECTION 11.05. Payments With Respect to Collateral.
(a) The Seller agrees, and has effectively so instructed each
other party to the Receivables Contribution and Sale Agreement and
the Assignment and Assumption, respectively, that all
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payments due or to become due under or in connection with the
Receivables Contribution and Sale Agreement or the Assignment and
Assumption shall be made directly to the Agent by direct deposit
to the Agent's Account specified in the Consent and Agreement. If
the Seller receives any such payments, within two Business Days
following its receipt thereof, it will deposit such payments to
the appropriate Agent's Account.
(b) Except as set forth in Section 11.09, all moneys
received pursuant to subsection (a) above shall be applied to the
payment of any Obligations payable, and remaining unpaid, by the
Seller at the time of such receipt, and all remaining moneys shall
be released by the Agent to the Seller or at its order.
SECTION 11.06. Agent Appointed Attorney-in-Fact. The
Seller hereby irrevocably appoints the Agent the Seller's
attorney-in-fact, with full authority in the place and stead of
the Seller and in the name of the Seller or otherwise, from time
to time in the Agent's discretion following the occurrence and
during the continuance of an Event of Termination, to take any
action and to execute any instrument which the Agent may deem
necessary or advisable to accomplish the purposes of the
assignment, grant and security interest granted hereunder,
including, without limitation:
(a) to ask, demand, collect, sue for, recover,
compromise, receive and give acquittance and receipts for
moneys due and to become due under or in connection with the
Collateral,
(b) to receive, indorse and collect any drafts or other
instruments, documents and chattel paper in connection
therewith, and
(c) to file any claims or take any action or institute
any proceedings which the Agent may deem necessary or
desirable for the collection of any of the Collateral or
otherwise to enforce compliance with the terms and conditions
of the Receivables Contribution and Sale Agreement or the
Assignment and Assumption or the rights of the Agent with
respect to any of the Collateral.
SECTION 11.07. Agent May Perform. If the Seller fails
to perform any agreement contained herein, the Agent may itself
perform, or cause performance of, such agreement, and the
reasonable expenses of the Agent incurred in connection therewith
shall be payable by the Seller under Section 12.06(a).
SECTION 11.08. The Agent's Duties. The powers conferred
on the Agent hereunder are solely to protect its interest in the
Collateral and shall not impose any duty upon it
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to exercise any such powers. Except for the safe custody of any
Collateral in its possession and the accounting for moneys
actually received by it hereunder, the Agent shall have no duty as
to any Collateral or as to the taking of any necessary steps to
preserve rights against any parties or any other rights pertaining
to any Collateral. The Agent shall be deemed to have exercised
reasonable care in the custody and preservation of any Collateral
in its possession if such Collateral is accorded treatment
substantially equal to that which it accords its own property.
SECTION 11.09. Remedies. If any Event of Termination
shall have occurred and be continuing:
(a) The Agent may exercise any and all rights and
remedies of the Seller under or in connection with the
Receivables Contribution and Sale Agreement or the Assignment
and Assumption or otherwise in respect of the Collateral,
including, without limitation, any and all rights of the
Seller to demand or otherwise require performance of any
provision of the Receivables Contribution and Sale Agreement
or the Assignment and Assumption.
(b) The Agent may exercise in respect of the Collateral,
in addition to other rights and remedies provided for herein
or otherwise available to it, all the rights and remedies of a
secured party on default under the UCC in effect in the State
of California (whether or not such UCC applies to the affected
Collateral).
(c) All payments received by the Seller in respect of
the Collateral shall be received in trust for the benefit of
the Agent, shall be segregated from other funds of the Seller
and shall be forthwith paid over to the Agent in the same form
as so received (with any necessary indorsement).
(d) All payments made in respect of the Collateral, and
all cash proceeds in respect of any sale of, collection from,
or other realization upon all or any part of the Collateral,
received by the Agent will be promptly applied (after payment
of any amounts payable to the Agent pursuant to Section
12.06(a)) in whole or in part by the Agent for the Owners or
the applicable Indemnified Parties against all or any part of the
Obligations in such order as the Agent shall elect. Any surplus of
such payments or cash proceeds held by the Agent and remaining
after payment in full of all the Obligations shall be paid over to
the Seller or to whomsoever may be lawfully entitled to receive
such surplus.
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ARTICLE XII
MISCELLANEOUS
SECTION 12.01. Amendments, Etc. No amendment or waiver
of any provision of this Agreement, and no consent to any
departure by the Seller herefrom, shall in any event be effective
unless the same shall be in writing and signed by the Agent, the
Majority Banks and the Seller, and then such amendment, waiver or
consent shall be effective only in the specific instance and for
the specific purpose for which given; provided, however, that no
amendment, waiver or consent shall, unless in writing and signed
by all the Banks and CNA (as well as the Agent), do any of the
following: (a) waive any of the conditions specified in
Section 3.01 or Section 3.02 (if and to the extent that the
Purchase which is the subject of such waiver would involve an
increase in the aggregate outstanding amount of Eligible Assets
over the aggregate amount of Eligible Assets outstanding
immediately prior to such Purchase), (b) increase the Commitments
of the Banks or subject the Banks or CNA to any additional
obligations, (c) reduce the amount of Capital or Yield with
respect to any Eligible Asset or any fees or other amounts payable
hereunder, (d) postpone any date fixed for any payment of Capital
or Yield with respect to any Eligible Asset or any fees or other
amounts payable hereunder, (e) change the percentage of the
Commitments, or the number of Owners or Banks, which shall be
required for the Banks or CNA or any of them to taken any action
hereunder or (f) amend this Section 12.01; and provided, further,
that no amendment, waiver or consent shall, unless in writing and
signed by the Agent in addition to the Banks and CNA as required
above to take such action, affect the rights or duties of the
Agent under this Agreement.
SECTION 12.02. Notices, Etc. All notices and other
communications provided for hereunder shall, unless otherwise
stated herein, be in writing (including telecommunication) and
mailed, telecommunicated or delivered, as to each party hereto, at
its address set forth under its name on the signature pages hereof
or at such other address as shall be designated by such party in a
written notice to the other parties hereto. All such notices and
communications shall, when mailed or telecommunicated, be
effective when deposited in the mails or telecommunicated,
respectively, except that notices and communications to the Agent
pursuant to Article II shall not be effective until received by
the Agent.
SECTION 12.03. No Waiver; Remedies. No failure on the
part of any Owner or the Agent to exercise, and no delay in
exercising, any right hereunder or under the Certificate or the
Fee Letter shall operate as a waiver thereof; nor shall any
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single or partial exercise of any right hereunder preclude any
other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law. Without limiting the
foregoing, each Bank is hereby authorized by the Seller at any
time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held
and other indebtedness at any time owing by such Bank to or for
the credit or the account of the Seller against any and all of the
obligations of the Seller now or hereafter existing under this
Agreement to such Bank or, if such Bank is Citibank, to the Agent
or CNA or any Affiliate thereof, irrespective of whether or not
any demand shall have been made under this Agreement and although
such obligations may be unmatured. Each Bank agrees promptly to
notify the Seller after any such set-off and application;
provided, however, that the failure to give such notice shall not
affect the validity of such set-off and application. The rights
of each Bank under this Section are in addition to other rights
and remedies (including, without limitation, other rights of
set-off) which such Bank may have.
SECTION 12.04. Binding Effect; Assignability. This
Agreement shall be binding upon and inure to the benefit of the
Seller, the Agent, each Bank and each Owner and their respective
successors and assigns, except that the Seller shall not have the
right to assign its rights or obligations hereunder or any
interest herein without the prior written consent of the Agent,
and neither the Agent nor any Bank nor any Owner shall have the
right to assign its rights or obligations hereunder or any
interest herein to any Person other than any Eligible Assignee
without the prior written consent of the Seller and (other than in
the case of any assignment by the Agent) the Agent. This
Agreement shall create and constitute the continuing obligation of
the parties hereto in accordance with its terms, and shall remain
in full force and effect until the Collection Date; provided,
however, that rights and remedies with respect to the
indemnification provisions of Article X and Section 12.06 shall be
continuing and shall survive termination of this Agreement.
SECTION 12.05. Governing Law. This Agreement and the
Certificate shall be governed by, and construed in accordance
with, the laws of the State of California, except to the extent
that the validity or perfection of the interests of the Owners, or
remedies hereunder, in respect of the Receivables, any Related
Security or any Collections in respect thereof or any Collateral
are governed by the laws of a jurisdiction other than the State of
California.
SECTION 12.06. Costs, Expenses and Taxes. (a) In
addition to the rights of indemnification granted to the
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Indemnified Parties under Article X hereof, the Seller agrees to
pay on demand all reasonable out-of-pocket costs and expenses of
the Agent in connection with the preparation, execution, delivery,
administration (including the annual audit contemplated by
Section 5.01(f), but no other audits), modification and amendment
of this Agreement, the Certificate, the Fee Letter, the
Receivables Contribution and Sale Agreement, the Assignment and
Assumption and the other documents to be delivered hereunder,
including, without limitation, the reasonable fees and
out-of-pocket expenses of counsel for the Agent, with respect
thereto and with respect to advising the Agent as to its rights
and remedies under this Agreement, the Certificate, the Fee
Letter, the Receivables Contribution and Sale Agreement, the
Assignment and Assumption and such other documents, provided that
the fees (excluding out-of-pocket disbursements) of counsel for
the Agent in connection with such preparation, execution and
delivery shall not exceed $75,000. The Seller further agrees to
pay on demand all reasonable costs and expenses, if any
(including, without limitation, reasonable counsel fees and
expenses), of the Agent, the Banks, CNA and the Owners in
connection with the enforcement (whether through negotiations,
legal proceedings or otherwise) of this Agreement, the
Certificate, the Fee Letter, the Receivables Contribution and Sale
Agreement, the Assignment and Assumption and the other documents
to be delivered hereunder, including, without limitation,
reasonable counsel fees and expenses in connection with the
enforcement of rights under this Section 12.06(a).
(b) In addition, the Seller shall pay any and all stamp
and other taxes and like fees payable or determined to be payable
in connection with the execution, delivery, filing and recording
of this Agreement, the Certificate, the Receivables Contribution
and Sale Agreement, the Assignment and Assumption or the other
documents to be delivered hereunder, and agrees to save each
Indemnified Party harmless from and against any and all
liabilities with respect to or resulting from any delay in paying
or omission to pay such taxes and fees.
SECTION 12.07. Confidentiality. (a) Except to the
extent otherwise required by applicable law, the Seller agrees to
maintain, and to cause its Affiliates to maintain, the
confidentiality of this Agreement, the Receivables Contribution
and Sale Agreement, the Assignment and Assumption and the Fee
Letter (and all drafts thereof) and not to disclose, and to cause
its Affiliates not to disclose, this Agreement, the Receivables
Contribution and Sale Agreement, the Assignment and Assumption or
the Fee Letter or such drafts to third parties (other than to its
directors, officers, employees, accountants or counsel, who shall
in each case be instructed to maintain such confidentiality);
provided, however, that this Agreement, the Assignment and
Assumption and the Receivables Contribution
<PAGE>
83
and Sale Agreement may be disclosed to third parties to the extent
such disclosure is (i) required in connection with a sale of
securities of the Seller, Merisel or Americas or pursuant to
reporting requirements of applicable securities laws, (ii) made
solely to persons who are legal counsel for the purchaser or
underwriter of such securities, (iii) limited in scope to the
provisions of Articles V, VII, X and, to the extent defined terms
are used in Articles V, VII and X, such terms defined in Article I
of this Agreement and (iv) made pursuant to a written agreement of
confidentiality in form and substance reasonably satisfactory to
the Agent.
(b) Each of the Agent, CNA and each Bank agrees to
maintain the confidentiality of, and not to disclose (other than
to employees, auditors, accountants, counsel or other
representatives of the Agent, CNA, the Banks and their respective
Affiliates, whether existing at the date of this Agreement or any
subsequent time, or to another Person if such Person or such
Person's holding or parent company or the Agent or CNA or any Bank
in its sole discretion determines that any such Person needs to
have access to such information in connection with the business or
operations of the Agent or CNA or such Bank, who shall in each
case be instructed to maintain such confidentiality), any
information with respect to the Seller, Merisel or Americas which
is furnished pursuant to this Agreement, provided that each of the
Agent, CNA and each Bank may disclose any such information (i) as
has become generally available to the public, (ii) as may be
required or appropriate in any report, statement or testimony
submitted to any municipal, state or Federal regulatory body
having or claiming to have jurisdiction over the Agent, CNA or
such Bank or to the Federal Reserve Board or the Federal Deposit
Insurance Corporation or similar organizations (whether in the
United States or elsewhere) or their successors, (iii) as may be
required or appropriate in response to any summons or subpoena or
in connection with any litigation or regulatory proceeding,
(iv) in order to comply with any law, order, regulation or ruling
applicable to the Agent, CNA or such Bank, or (v) to any
prospective Assignee; provided, that such prospective Assignee
executes an agreement containing provisions substantially
identical to those contained in this subsection (b); and provided,
further, that the Seller acknowledges that the Agent has disclosed
and may continue to disclose such information as the Agent in its
sole discretion determines is appropriate to the Banks as of the
date hereof.
SECTION 12.08. Execution in Counterparts. This
Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of
<PAGE>
84
which when taken together shall constitute one and the same
agreement.
IN WITNESS WHEREOF, the parties have caused this
Agreement to be executed by their respective officers thereunto
duly authorized, as of the date first above written.
MERISEL CAPITAL FUNDING, INC.
By:_________________________________
Title:
200 Continental Boulevard
Suite 301
El Segundo, California 90245-0984
Attention: Treasurer
Telecopier No.: 310-615-6882
CITICORP NORTH AMERICA, INC.,
individually and as Agent
By:_________________________________
Vice President
450 Mamaroneck Avenue
Harrison, New York 10528
Attention: Corporate Asset Funding
Department
Telecopier No.: 914-899-7015
COMMITMENTS ORIGINAL BANKS
----------- --------------
$ 45,000,000 CITIBANK, N.A.
By:__________________________________
Vice President
450 Mamaroneck Avenue
Harrison, New York 10528
Attention: President
Telecopier No.: 914-899-7015
$ 35,000,000 WESTDEUTSCHE LANDESBANK GIROZENTRALE -
NEW YORK BRANCH
By:___________________________________
Title:
1211 Avenue of the Americas
New York, New York 10036
<PAGE>
85
$ 25,000,000 THE BANK OF NOVA SCOTIA
By:___________________________________
Title:
101 California Street
48th Floor
San Francisco, California 94111
$ 20,000,000 THE INDUSTRIAL BANK OF JAPAN,
LIMITED, LOS ANGELES AGENCY
By:___________________________________
Title:
350 South Grand Avenue
Suite 1500
Los Angeles, California 90071
$ 10,000,000 THE SUMITOMO BANK, LIMITED, LOS
ANGELES BRANCH
By:___________________________________
Title:
777 South Figueroa Street
Suite 2600
Los Angeles, California 90017
$ 15,000,000 UNION BANK
By:___________________________________
Title:
445 South Figueroa Street
Los Angeles, California 90071
___________________________
Aggregate Commitments:
$150,000,000
<PAGE>
EXHIBIT 21
----------
SUBSIDIARIES OF THE REGISTRANT
------------------------------
<TABLE>
<CAPTION>
JURISDICTION OF
NAME INCORPORATION
<S> <C>
Merisel (UK) Limited................. United Kingdom
Merisel Canada, Inc.................. Canada
Merisel E.U.R.L....................... France
Merisel Pty Limited................... State of Victoria, Australia
Merisel GESmbH........................ Austria
MIFINCO, Inc.......................... Delaware
Merisel Latin America, Inc........... Delaware
Merisel C.A.T. S.A................. Switzerland
Softsel Foreign Sales Corporation.... U.S. Virgin Islands
Merisel GmbH......................... Germany
Merisel Mexico S.A. de C.V........... Mexico
Computer Aided Technologies Ltd....... Russia
Merisel Americas, Inc................ Delaware
Merisel Europe, Inc.................. Delaware
Merisel FAB, Inc..................... Delaware
Merisel Asia, Inc.................... Delaware
Merisel Information Services, Inc.... Delaware
Merisel Licensing, Inc............... Delaware
Merisel Properties, Inc.............. Delaware
Merisel Capital Funding, Inc......... Delaware
Merisel Netherlands B.V.............. Netherlands
Intersell, Inc....................... California
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registation Statements
Nos. 33-61592, 33-45781, 33-35648 and 33-34296 on Form S-8, of our report dated
February 27, 1995 appearing in this Annual Report on Form 10-K of Merisel, Inc.
for the year ended December 31, 1994.
Deloitte & Touche LLP
Los Angeles, California
March 28, 1995
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
FINANCIAL STATEMENTS FOR MERISEL, INC. FOR THE YEAR ENDED DECEMBER 31, 1994 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 3,533
<SECURITIES> 0
<RECEIVABLES> 467,757
<ALLOWANCES> 16,511
<INVENTORY> 517,706
<CURRENT-ASSETS> 997,869
<PP&E> 108,138
<DEPRECIATION> 38,627
<TOTAL-ASSETS> 1,191,870
<CURRENT-LIABILITIES> 598,021
<BONDS> 357,685
<COMMON> 297
0
0
<OTHER-SE> 235,867
<TOTAL-LIABILITY-AND-EQUITY> 1,191,870
<SALES> 5,018,687
<TOTAL-REVENUES> 5,018,687
<CGS> 4,676,164
<TOTAL-COSTS> 4,676,164
<OTHER-EXPENSES> 262,945
<LOSS-PROVISION> 18,851
<INTEREST-EXPENSE> 29,024
<INCOME-PRETAX> 19,951
<INCOME-TAX> 8,341
<INCOME-CONTINUING> 11,610
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,610
<EPS-PRIMARY> 0.38
<EPS-DILUTED> 0.38
</TABLE>
