<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report: October 18, 1996
MERISEL, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-17156 95-4172359
(State or other jurisdiction of (Commission (I.R.S. Employer
of incorporation or organiazation) File Number) Identification No.)
200 Continental Boulevard
El Segundo, CA 90245-0984
(Address of principal executive offices)
(Zip code)
(310) 615-3080
(Registrant's telephone number, including area code)
<PAGE>
Item 2. Acquisition or Disposition of Assets
On October 4, 1996 (the "Closing Date"), Merisel, Inc. (the
"Company") completed the sale of substantially all of its
European, Mexican and Latin American businesses (such businesses
are referred to herein as "EML") to CHS Electronics, Inc.
("CHS"). The sale was effective as of September 27, 1996,
pursuant to a Purchase Agreement dated August 29, 1996, and
amended as of October 4, 1996 among the Company, Merisel Europe,
Inc. and CHS (copies of which are attached hereto as Exhibit 2.1
and 2.2). The sale included substantially all of the assets and
related liabilities of Merisel Europe, Inc. and the stock of the
following subsidiaries of Merisel, Inc.:
Merisel (U.K.) Limited, a United Kingdom limited company
Merisel (U.K.)-Swiss Branch, a Swiss Branch of Merisel
(U.K.) Limited
Merisel Ges.M.B.H., an Austrian limited company
Merisel GMBH, a German limited company
Merisel Factoring GMBH, a German limited company and a
subsidiary of Merisel GMBH
Merisel Netherlands B.V., a Netherlands corporation
Merisel France, Inc., a Delaware corporation
Merisel SNC, a partnership whose partners are Merisel
France, Inc. and MIFINCO, Inc.
MIFINCO, Inc., a Delaware corporation
Merisel Latin America, Inc., a Delaware corporation
Merisel Argentina, S.A., an Argentinean corporation and a
subsidiary of Merisel Latin America, Inc.
Merisel Mexico, S.A. de C.V, a Mexican corporation
Merisel Services, S.A. de C.V., a Mexican corporation and a
subsidiary of Merisel Mexico, S.A. de C.V.
The Purchase Price was approximately $154 million. The
purchase price consists of CHS's assumption of Merisel's $34
million European asset securitization facility against which $21
million was outstanding at August 31, 1996, and approximately
$133 million in cash, of which $10 million is being retained by
CHS, subject to the completion of closing balance sheet
audits of EML. The Purchase Price is subject to adjustment,
based on among other things, changes in book value since August
31, 1996. Forty million of the $154 million of the purchase price
was for the stock of Merisel Latin America, Inc. and Merisel Mexico, S.A.
de C.V. and the remainder was for the European assets and stock of the
European subsidiaries.
For additional information see the October 4, 1996 press
release of Merisel, Inc., which is incorporated herein by this
reference and a copy of which is attached hereto as an Exhibit.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Business Acquired.
Not Applicable
(b) Pro Forma Financial Information
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<PAGE>
The Following unaudited pro forma financial statements are filed
with this report:
Pro Forma Condensed Consolidated Balance Sheet
as of June 30, 1996......................................... Page 5
Pro Forma Condensed Consolidated Statements of Operations:
Six Months Ended June 30, 1996...............................Page 6
Year Ended December 31, 1995................................ Page 7
Notes to Unaudited ProForma Condensed
Consolidated Financial Statements............................Pages 8-9
The unaudited Pro Forma Condensed Consolidated Balance Sheet of the
Company as of June 30, 1996 reflects the financial position of
the Company after giving effect to the disposition of
substantially all of EML as discussed in Item 2 and assumes
the disposition took place on June 30, 1996. The unaudited Pro Forma
Condensed Consolidated Statements of Operations for the year ended December
31, 1995 and the six months ended June 30, 1996 assume that the
disposition occurred on the first date of the period presented,
and are based on the operations of the Company for the year ended
December 31, 1995 and the six months ended June 30, 1996. Such
pro forma statements also reflect the $72,500,000 repayment of
the Company's senior debt, which was made from the proceeds of
the sale.
The unaudited pro forma condensed consolidated financial
statements presented herein are shown for illustrative purposes
only and are not necessarily indicative of the future financial
position or future results of operations of the Company, or of
the financial position or results of operations of the Company
that would have actually occurred had the transaction or the
repayment of the senior debt occurred as of the date or for the
periods presented.
The unaudited pro forma condensed consolidated financial
statements should be read in conjunction with the historical
financial statements and related notes of the Company for the year
ended December 31, 1995 as filed on Form 10-K and for the six months
ended June 30, 1996 as filed on Form 10-Q.
(c) Exhibits
2.1 Purchase Agreement dated as of August 29, 1996.
2.2 Amendment 1 to Purchase Agreement dated as of
October 4, 1996.
2.3 Amended and Restated Receivables Transfer
Agreement, dated as of September 27, 1996, by and
between Merisel Americas, Inc. and Merisel Capital
Funding, Inc.
2.4 Amended and Restated Receivables Purchase and
Servicing Agreement dated as of September 27, 1996 by and
between Merisel Capital Funding, Inc., Redwood
Receivables Corp., Merisel Americas, Inc. and
General Electric Capital Corporation.
4.1 First Amendment to Amended and Restated Revolving
Credit Agreement dated as of June 30, 1996
by and among Merisel Americas, Inc.,
Merisel Europe, Inc., Merisel, Inc. and the lender
parties thereto.
4.2 Second Amendment and Waiver to Amended and
Restated Revolving Credit Agreement
dated as of October 2, 1996 by and among
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<PAGE>
Merisel Americas, Inc., Merisel Europe, Inc.,
Merisel, Inc. and the lender parties thereto.
4.3 Third Amendment to Amended and Restated
Subordinated Note Purchase Agreement dated
as of June 30, 1996 by and among Merisel
Americas, Inc. and the Noteholders signatory thereto.
4.4 Fourth Amendment and Waiver to Amended and
Restated Subordinated Note Purchase
Agreement dated as of October 2, 1996 by
and among Merisel Americas, Inc. and the Noteholders
signatory thereto.
4.5 Fourth Amendment to Amended and Restated
Senior Note Purchase Agreement dated
as of June 30, 1996 by and among Merisel
Americas, Inc., Merisel, Inc. and the Noteholders
signatory thereto.
4.6 Fifth Amendment and Waiver to Amended and
Restated Senior Note Purchase Agreement
dated as of October 2, 1996 by and among
Merisel Americas, Inc., Merisel, Inc. and the
Noteholders signatory thereto.
10.51 Employment Agreement between Merisel,
Inc. and James Illson dated August 19, 1996.
10.52 Severance Agreement between Merisel, Inc. and
James Brill dated August 27, 1996.
20 Press release of Merisel, Inc. dated October 4, 1996.
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<PAGE>
PRO FORMA FINANCIAL INFORMATION
MERISEL, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
<TABLE>
<CAPTION>
(In thousands)
Pro Forma
Adjustments
Historical EML (a) Other Pro Forma
6/30/96
<S> <C> <C> <C> <C>
Current Assets:
Cash & Cash Equivalents $35,959 $2,390 $50,738(b) $84,307
Accounts Receivable (net of
allowances) 363,151 155,325 10,000(c) 217,826
Inventories 399,474 111,803 - 287,671
Prepaid Expenses 14,118 2,251 - 11,867
Income Taxes Recievable 13,043 1,269 - 11,774
Total current assets 825,745 273,038 60,738 613,445
Property and Equipment, Net 85,465 17,006 - 68,459
Cost in Excess of Net
Assets Acquired 91,009 6,001 - 85,008
Other Assets 12,067 2,444 - 9,623
Total Assets $1,014,286 $298,489 $60,738 $776,535
---------- -------- ------- --------
---------- -------- ------- --------
Current Liabilities:
Accounts Payable 424,922 112,255 - 312,667
Accrued Liabilities 70,786 16,443 2,500(d) 56,843
Short-Term Debt 231,524 86,161 (137,863)(e) 7,500
Long-Term Debt - Current 4,296 132 - 4,164
Subordinated Debt - Current 4,400 - - 4,400
Deferred Income Taxes 396 880 - (484)
Total Current Liabilities 736,324 215,871 (135,363) 385,090
Long-Term Debt 134,373 - 151,524 285,897
Subordinated Debt 13,200 - - 13,200
Capitalized Lease
Obligations 4,765 4,765 - -
Total Liabilities 888,662 220,636 16,161 684,187
Total Stockholders'
Equity 125,624 77,853 44,577 92,348
------- ------ ------ ------
------- ------ ------ ------
Total Liabilities and
Stockholders Equity 1,014,268 298,489 60,738 776,535
</TABLE>
See accompanying notes to unaudited pro forma condensed
consolidated financial statements.
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<PAGE>
PRO FORMA FINANCIAL INFORMATION
MERISEL, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Pro Forma
Adjustments
Historical
6/30/96 EML (a) Other Pro Forma
<S> <C> <C> <C> <C>
Net Sales 2,979,257 737,682 - 2,241,575
Cost of Sales 2,812,447 685,862 - 2,126,585
Gross Profit 166,810 51,820 - 114,990
Selling, General &
Administrative Expenses 161,558 49,739 4,310(b) 116,129
Operating Income (Loss) 5,252 2,081 (4,310) (1,139)
Interest Expense 19,472 4,910 (1,336)(c) 13,226
Other Expense 10,766 - - 10,766
Loss Before
Income Taxes (24,986) (2,829) (2,974) (25,131)
Income Tax Benefit
(Expense) 74 (527) - 601
Net Loss (24,912) (3,356) (2,974) (24,530)
-------- ------- ------- --------
-------- ------- ------- --------
Net Loss Per Share (0.83) - - (0.82)
-------- ------- ------ --------
-------- ------- ------ --------
Weighted Average Number
of Shares Outstanding 29,871 - - 29,871
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
See accompanying notes to unaudited pro forma condensed
consolidated financial statements.
-6-
<PAGE>
PRO FORMA FINANCIAL INFORMATION
MERISEL, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Pro Forma
Adjustments
Historical
12/31/95 EML (a) Other Pro Forma
<S> <C> <C> <C> <C>
Net Sales 5,956,967 1,279,482 - 4,677,485
Cost of Sales 5,633,278 1,193,673 - 4,439,605
Gross Profit 323,689 85,809 - 237,880
Selling, General &
Administrative Expenses 317,195 91,176 4,495(b) 230,514
Impairment Losses 51,383 - - 51,383
Restructuring Charge 9,333 - - 9,333
Operating (Loss) Income (54,222) (5,367) - (53,350)
Interest Expense 37,583 8,948 (2,369)(c) 26,266
Other Expense 13,885 - - 13,885
(Loss) Income Before
Income Taxes (105,690) (14,315) (2,126) (93,501)
Income Tax Benefit
(Expense) 21,779 5,567 (280) 15,932
Net Loss (83,911) (8,748) (2,406) (77,569)
-------- ------- ------- --------
-------- ------- ------- --------
Net Loss Per Share (2.82) - - (2.60)
-------- ------- ------- --------
-------- ------- ------- --------
Weighted Average Number
of Shares Outstanding 29,806 - - 29,806
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
See accompanying notes to unaudited pro forma condensed
consolidated financial statements.
-7-
<PAGE>
Notes to the Unaudited Pro Forma Condensed Consolidated Financial
Statements
1. General
The foregoing unaudited pro forma condensed consolidated financial
statements illustrate the effect of the sale by the Company of
its European, Latin American and Mexican businesses ("EML"),
pursuant to a Purchase Agreement among Merisel, Inc., Merisel
Europe, Inc., and CHS Electronics, Inc. ("CHS"). EML is not a
separate incorporated entity for which historical consolidated
financial statements were prepared. The historical balances
included herein represent combined balances obtained from the
separate unaudited financial statements for the individual entities
comprising EML. The sale price consisted of approximately $133
million in cash, of which $10 million is being retained by
CHS, subject to completion of closing balance sheet audits, and
CHS' assumption of Merisel's European asset securitization
agreement against which $21 million was outstanding. Assuming
the transaction was completed on June 30, 1996, the Company
experienced a $36.945 million loss from the sale of EML, as
follows:
Purchase price (net of $21 million asset
securitization facility assumed by CHS) 133,238
EML equity (77,853)
EML debt not assumed by buyer (86,161)
Cumulative foreign currency translation adjustment
related to EML residing in equity (3,669)
Estimated direct costs associated with transaction (2,500)
Loss on Sale of EML (36,945)
2. Pro Forma Balance Sheet Adjustments
a)EML - Represents the historical unaudited June 30, 1996 balances for EML
which are eliminated to reflect the sale to CHS.
b)Cash - Cash proceeds resulting from the sale of EML in excess
of the amount used to pay down short term debt and amount
retained by the buyer.
c)Accounts Receivable - Cash retained by the buyer pending the
results of an independent audit of the combined closing balance
sheets of EML.
d)Accrued Liabilities - Direct costs associated with the sale of
EML.
e)Debt -Adjustment to debt resulting from the reclassification of short
- -term debt to long-term debt relating to the renegotiation of the Company's
senior debt agreements as a result of the completion of the sale to CHS,
net of payments made from the proceeds of the sale as follows:
EML short term debt retained by the Company 86,161
Debt repayment made from cash proceeds (72,500)
Short-term debt reclassified to long-term debt (151,524)
Net adjustment (137,863)
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<PAGE>
3. Pro Forma Income Statement Adjustments for the Six Months
Ended June 30, 1996
a)EML - Represents the historical unaudited balances for EML for the six
months ended June 30, 1996 which are eliminated to reflect the sale to CHS.
b)Selling, General and Administrative Expenses- Corporate costs allocated by
Merisel to EML(corporate overhead, administrative expenses, etc.) that would
not have been elimated due to the sale of EML.
c)Interest Expense - Elimination of interest expense resulting from
the repayment of $72,500 of debt at a weighted average interest rate of 11.2%
with a portion of the proceeds from the sale, net of the effect of
an interest rate increase of approximately 2.5% resulting from the
renegotiation of the senior debt agreements.
4. Pro Forma Income Statement Adjustments for the Year Ended
December 31, 1995
a)EML - Represents the historical unaudited balances for EML for the year
ended December 31, 1995 which are eliminated to reflect the sale to CHS.
b)Selling, General and Administrative Expense-Corporate costs allocated by
Merisel to EML(corporate overhead, administrative expenses, etc.) that would
not have been elimated due to the sale of EML.
c)Interest Expense - Elimination of interest expense resulting from the
repayment of $72,000 of debt at a weighted average interest rate of 10.75%
with a portion of the proceeds from the sale, net of the effect of an
interest rate increase of approximately 2.5 % resulting from the
renegotiation of the senior debt agreements.
-9-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, hereto duly authorized.
MERISEL, INC.
Date: October 18, 1996 __/_s/_______________________________
James E. Illson, Senior Vice
President Finance, and Chief Financial Officer
(Duly authorized officer and
principal financial officer)
<PAGE>
PURCHASE AGREEMENT
By and Among
CHS ELECTRONICS, INC.
As Buyer
And
MERISEL, INC.,
and
MERISEL EUROPE, INC.
As Sellers
Dated as of August 29, 1996
<PAGE>
TABLE OF CONTENTS
Page
Background 1
Terms 1
ARTICLE 1 THE TRANSACTIONS 1
1.1Sale and Purchase of the Stock and Europe Assets 1
1.2Purchase Price; Post-Closing Adjustments; Payment 2
1.3 Closing 7
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF SELLERS 8
2.1 Organization 8
2.2Capitalization and Ownership: Power and Authority 9
2.3 Subsidiaries 9
2.4 Qualification; Location of Business and Assets 9
2.5 Authorization and Enforceability 10
2.6 No Violation of Laws or Agreements 10
2.7 Financial Statements 12
2.8 No Undisclosed Liabilities 13
2.9 No Changes 13
2.10 Taxes 15
2.11 Inventory 17
2.12 Accounts Receivable 17
2.13 No Pending Litigation or Proceedings 17
2.14 Contracts; Compliance 18
2.15 Compliance With Laws 18
2.16 Consents 19
2.17 Title 19
2.18 Real Estate 20
2.19 Transactions with Related Parties 20
2.20 Condition of Assets 20
2.21Compensation Arrangements; Officers and Directors 20
2.22 Labor Relations 21
2.23 Products Liability 21
2.24 Insurance 21
2.25 Patents and Intellectual Property Rights 22
2.26 Employee Benefits 22
2.27 Brokerage 25
2.28 Questionable Payments 25
2.29 Disclosure 25
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF BUYER 26
3.1 Organization 26
3.2 Power and Authority 26
3.3 Authorization and Enforceability 26
3.4 Brokerage 26
3.5 Securities Act 26
3.6 No Violation of Laws or Agreements 26
3.7 Consents 27
3.8 Litigation 27
3.9 Financing 27
3.10 Disclosure 27
<PAGE>
ARTICLE 4 CERTAIN OBLIGATIONS OF THE PARTIES 28
4.1 Conduct of Business Pending Closing 28
4.2 Insurance 30
4.3 Fulfillment of Agreements by Sellers 30
4.4 Access, Information and Documents 31
4.5 Exclusivity 31
4.6 Section 338(h)(10) Election 32
4.7 Resignations 32
4.8 Accounts Payable 32
4.9 Fulfillment of Agreements by Buyer 32
4.10 Elimination of 30-Day Automatic Return Policy 33
ARTICLE 5 CONDITIONS TO CLOSING; TERMINATION 33
5.1 Conditions Precedent to Obligations of Buyer 33
5.2Conditions Precedent to the Obligations of Sellers 36
5.3 Termination 37
ARTICLE 6 CERTAIN ADDITIONAL COVENANTS 39
6.1 Costs and Expenses 39
6.2 Covenant Not to Compete 39
6.3 Confidential Information 40
6.4 Indemnification By Sellers 40
6.5 Indemnification by Buyer 42
6.6 Indemnification Procedures 42
6.7Claims Against Latin America, Mexico or any Subsidiary 44
6.8 European Anti-Competition Legislation 44
6.9 Brokers 44
6.10 Access 44
6.11 Cooperation With Respect to Tax Matters 45
6.12 Released Obligations 46
6.13 Employee Obligations 46
6.14 Reduction of Revolving Credit Agreement 47
6.15 Fulfillment Agreement 47
6.16 Audits of Purchased Entities 47
ARTICLE 7 MISCELLANEOUS 47
7.1 Nature and Survival of Representations 47
7.2 Certain Definitions 47
7.3 Notices 49
7.4 Successors and Assigns 49
7.5 Governing Law 49
7.6 Headings 49
7.7 Counterparts 50
7.8 Further Assurances 50
7.9 Amendment and Waiver 50
7.10 Entire Agreement 50
7.11 Interpretations 50
7.12 Attorney's Fees 50
7.13 Public Announcement 51
7.14 Knowledge of Sellers and Buyer 51
7.15 Material Adverse Effect 51
<PAGE>
LIST OF SCHEDULES
Schedule 1.1 Europe Assets and Assumed Liabilities
Schedule 2.1 List of Subsidiaries
Schedule 2.2 Capitalization
Schedule 2.4 Jurisdictions of Qualification; Location of
Business and Assets
Schedule 2.6 No Violations
Schedule 2.7 July Balance Sheets
Schedule 2.8 No Undisclosed Liabilities
Schedule 2.9 Changes Since Balance Sheet Date
Schedule 2.10 Taxes
Schedule 2.11 Inventory
Schedule 2.13 Pending Litigation or Proceedings
Schedule 2.14 Contracts
Schedule 2.15 Compliance with Laws
Schedule 2.16 Consents
Schedule 2.17 Permitted Liens and Encumbrances
Schedule 2.18 Real Estate
Schedule 2.19 Transactions with Related Parties
Schedule 2.20 Condition of Assets
Schedule 2.21 Compensation Arrangements, Bank Accounts and
Officers and Directors
Schedule 2.22 Labor Relations
Schedule 2.23 Products Liability
Schedule 2.24 Insurance
Schedule 2.25 Patents and Intellectual Property Rights
Schedule 2.26 Employee Benefit Plans
Schedule 4.1(b) Preservation of Business
Schedule 4.1(c) Material Transactions
Schedule 4.6 Consolidated Group
Schedule 5.1(viii) Executive Management
Schedule 5.1(xx) Miami, Florida Leases
Schedule 6.11 Cooperation Group
Schedule 6.12 Guarantees
Schedule 6.13 Certain Employees
Schedule 7.14 Individuals with Knowledge
LIST OF EXHIBITS
Exhibit A Formula to Adjust Net Book
Value of Merisel Europe, Inc.
Exhibit B Escrow Agreement
Exhibit C Landlord Estoppel Certificate
Exhibit D Vendors
<PAGE>
PURCHASE AGREEMENT
THIS IS A PURCHASE AGREEMENT (the "Agreement") dated August
29, 1996 by and among CHS Electronics, Inc., a Florida
corporation ("Buyer"), and Merisel, Inc., a Delaware corporation
("Merisel"), and Merisel Europe, Inc., a Delaware corporation
("Europe"). Merisel and Europe are collectively referred to
herein as the "Sellers."
Background
Merisel, through a wholly-owned subsidiary, owns all of the
issued and outstanding capital stock (the term "capital stock"
shall mean, for purposes of this Agreement, ownership interest,
which may be measured in terms of stock or registration with the
appropriate governmental agency) of Merisel Latin America, Inc.
("Latin America" and with respect to its capital stock, the
"Latin America Stock") and Merisel Mexico S.A. de C.V. ("Mexico"
and with respect to its capital stock, the "Mexico Stock") (the
Latin America Stock and the Mexico Stock are collectively
referred to herein as the "Latin/Mexico Stock"). Europe owns all
of the issued and outstanding capital stock of the European
Subsidiaries (as such term is defined in Section 2.1) (such stock
is collectively referred to herein as the "Europe Stock" and
together with the Latin/Mexico Stock, the "Stock") and certain
assets as set forth on Schedule 1.1 (the "Europe Assets"). Buyer
desires to purchase and Sellers desire to sell the Europe Stock,
the Latin America Stock and the Mexico Stock and the Europe
Assets on the terms and subject to the conditions set forth in
this Agreement.
Terms
In consideration of the mutual covenants contained herein
and intending to be legally bound hereby, the parties hereto
agree as follows:
ARTICLE 1
THE TRANSACTIONS
1.1 Sale and Purchase of the Stock and Europe Assets. At
the Closing referred to in Section 1.3 below, Sellers will sell
and assign to Buyer, and Buyer will purchase from Sellers, the
Stock and Europe Assets, as set forth on Schedule 1.1 hereto,
free and clear of all liens and encumbrances of any nature
whatsoever except as set forth in Schedule 2.17. Buyer will
assume the liabilities and obligations set forth on Schedule 1.1.
<PAGE>
1.2 Purchase Price; Post-Closing Adjustments; Payment.
(a) Purchase Price. The aggregate purchase price for all
of the Stock and the Europe Assets (the "Purchase Price") shall
be as follows: (i) Forty Million Dollars ($40,000,000) for the
Latin America Stock and the Mexico Stock, subject to adjustment
as set forth in Section 1.2(d)(ii) hereof (the "Latin/Mexico
Purchase Price"), (ii) with respect to the Europe Stock, an
amount equal to the Total Adjusted Capital of the European
Subsidiaries and (iii) with respect to the Europe Assets, the
book value of the Europe Assets (the "Europe Assets Value") as of
the Closing Date (the aggregate of items (ii) and (iii) are
defined as the "Purchase Price of Europe Stock and the Europe
Assets"). Each of the Latin/Mexico Purchase Price and the
Purchase Price of the Europe Stock and the Europe Assets shall be
apportioned between the Latin American Stock and the Mexico Stock
and among the Europe Stock and Europe Assets, respectively, in
accordance with the apportionment schedules set forth on Schedule
1.2(a). "Total Adjusted Capital of the European Subsidiaries" is
hereby defined to be Net Assets, excluding any Amounts Due to or
from Related Parties, as defined hereafter, as adjusted by the
formula set forth in Exhibit A. "Net Assets" is defined as
assets reflected on the Europe Closing Balance Sheet (as such
term is defined in Section 1.2(c)(i)) increased by any
receivables subject to the Asset Amortization Agreement (as such
term is defined in Section 1.2(b), but decreased by liabilities
to third parties reflected on such balance sheet. The Europe
Closing Balance Sheet shall be deemed to have cash on hand and
marketable securities of no more than $500,000, with the excess
being distributed to Sellers immediately upon the determination
of the actual amount thereof. "Amounts Due to or from Related
Parties" shall include any payables to or receivables from
Related Parties (as such term is defined in Section 2.19)
including, without limitation, any amounts outstanding under the
Revolving Credit Agreement dated as of December 26, 1993 and
amended and restated as of April 12, 1996 among Europe and
Merisel America, Inc. as borrowers and Citicorp USA Inc. as agent
(the "Revolving Credit Agreement") and intercompany tax accounts
but excluding deferred tax liabilities and deferred tax assets
which will be assumed by the Buyer. The Purchase Price shall be
further reduced by (X) $4 million for the cost of eliminating
duplicative facilities and severance of redundant personnel and
relocation costs and (Y) $3,216,000 representing the rent payable
under certain leases in the Netherlands during the 12 months
following the Closing Date. Attached as Schedule 1.2(a) is a
sample calculation of what the Purchase Price would be if the
same were determined on the June 30, 1996 balance sheet. Merisel
and Buyer shall cause a physical inventory to be taken on the
Closing Date in connection with the foregoing calculation.
(b) Payments. The Purchase Price shall be payable as
follows: on the Closing Date, Buyer shall pay (i) to Europe, by
wire transfer, a cash amount (the "Europe Cash Payment") equal to
the Estimated Purchase Payment Amount (as defined below) less Ten
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<PAGE>
Million Dollars ($10,000,000) and less the amount payable to
Deutsche Financial Services (UK) Ltd. under the Asset
Amortization Agreement as of the Closing Date, (ii) to Merisel,
by wire transfer, a cash amount (the "Latin/Mexico Cash Payment")
equal to Forty Million Dollars ($40,000,000) and (iii) to an
escrow agent reasonably satisfactory to Buyer and Sellers
("Escrow Agent"), by wire transfer, a cash amount equal to Ten
Million Dollars ($10,000,000) (the "Escrow Payment") to be held
in accordance with the terms of the escrow agreement in the form
of Exhibit B (the "Escrow Agreement"). For purposes of this
Agreement, the term "Estimated Purchase Payment Amount" means the
dollar amount of an estimate of the Purchase Price of the Europe
Stock and Europe Assets, prepared by Europe in good faith based
upon the combining balance sheets and underlying supporting
information of Europe and the European Subsidiaries as of August
31, 1996, which estimate shall be in reasonable detail with sup
porting documentation and shall be subject to the approval of
Buyer (such approval not to be unreasonably withheld). In addi
tion, Buyer shall assume the liability of Europe under the Asset
Amortization Agreement between Deutsche Financial Services, (UK)
Ltd., and Merisel (U.K.) Limited dated as of October 12, 1995
(the "Asset Amortization Agreement") and the liabilities and
obligations set forth on Schedule 1.1.
(c) Regarding the Closing Balance Sheets. (i) Promptly
after the Closing Date, but in any event no later than 60 days
after the Closing Date, Europe shall prepare and deliver to
Buyer, or cause to be prepared and delivered to Buyer, a
combining balance sheet of the European Subsidiaries and Europe
Assets as of the close of business on the Closing Date (the
"Europe Closing Balance Sheet"), together with the draft audit
report of Deloitte & Touche, LLP thereon. The Europe Closing
Balance Sheet shall be prepared in accordance with United States
generally accepted accounting principles ("U.S. GAAP") applied
consistently with those U.S. GAAP principles applied in the
preparation of the 1995 Balance Sheets (as defined in Section
2.7) (such accounting principles being, the "Accounting
Principles"), except that the accounts receivable and inventory
on the Europe Closing Balance Sheet will be valued utilizing the
adjustments listed in Exhibit A. In addition, the combining
closing balance sheet will convert foreign currencies to U.S.
dollars at the closing exchange rate published in the Wall Street
Journal as of the Closing Date, and the Europe Closing Balance
Sheet will be prior to the application of purchase accounting and
recordation of the transactions contemplated in the Agreement.
MIFINCO, Inc.'s investment in shares of Merisel France, Inc. and
Mexico will be valued at zero for the combining Closing Balance
Sheet. The report of Deloitte & Touche, LLP shall state (without
qualification as to scope of audit or other matters) that in
their opinion the Europe Closing Balance Sheet presents fairly in
all material respects, the net assets of Europe sold as of the
Closing Date, on the basis of accounting defined in this
Agreement and Exhibit A. The Europe Closing Balance Sheet shall
be subject to the review of Grant Thornton L.L.P. The parties
shall allow and cause the European Subsidiaries to allow the
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parties, Grant Thornton, L.L.P. and other representatives of the
parties full and complete access to all work papers, books and
records and all additional information used in preparing the
Europe Closing Balance Sheet and will make their and the European
Subsidiaries' officers and employees reasonably available to
discuss with the parties and their representatives such papers,
books, records and information. Buyer and its representatives
shall be provided complete access to all work papers and other
information used by Deloitte & Touche, LLP in examining the
Europe Closing Balance Sheet which are not proprietary to
Deloitte & Touche, LLP and Sellers and their representatives
shall be provided complete access to all work papers and other
information used by Grant Thornton, L.L.P. in reviewing the
Europe Closing Balance Sheet which are not proprietary to Grant
Thornton, LLP. The Europe Closing Balance Sheet, when delivered
by Europe to Buyer, shall be deemed final, conclusive and binding
on the parties and will be deemed to be the Europe Closing
Balance Sheet, upon which the Purchase Price of the Europe Stock
and the Europe Assets will be based, unless either Europe or
Buyer notifies the other, within 10 days after receipt of the
Europe Closing Balance Sheet, of its disagreement therewith
(which notice shall state with reasonable specificity the reasons
for any disagreement and the amounts in dispute). If neither
Europe nor Buyer disagrees with the draft Europe Closing Balance
Sheet, Deloitte & Touche, LLP will issue their final audit
report. In the event that the parties agree the Purchase Price
of the Europe Stock and the Europe Assets is higher (or lower)
than the Estimated Purchase Price Amount and agree on the minimum
amount of such difference, pending resolution of any other dis
agreements, such minimum amount shall be paid by the Escrow Agent
from the Escrow Fund (as defined in the Escrow Agreement) to
Europe (if the Purchase Price of the Europe Stock and the Europe
Assets is higher than the Estimated Purchase Price Amount), or to
Buyer (if the Purchase Price of the Europe Stock and the Europe
Assets is lower than the Estimated Purchase Price Amount). If
there is a disagreement, and such disagreement cannot be resolved
by Buyer and Europe (each of which shall use their "reasonable
efforts" to so resolve the claim) within 30 days following the
receipt by Europe of the Europe Closing Balance Sheet, the items
in dispute shall be submitted to a nationally recognized firm of
independent auditors acceptable to both Buyer and Europe (or, in
the absence of agreement, the auditing firm of KPMG Peat Marwick
L.L.P.) (the "Resolution Accountants"). The sole function of the
Resolution Accountants shall be to select as most accurately
reflecting the Europe Closing Balance Sheet, without adjustment
or alteration, the Europe Closing Balance Sheet submitted by
Buyer or the Europe Closing Balance Sheet submitted by Europe as
the true Europe Closing Balance Sheet, and the determination by
such independent auditing firm shall be binding and conclusive
upon the parties. If the Resolution Accountants select the
Europe Closing Balance Sheet submitted by Buyer, Europe shall pay
the fees and expenses of the Resolution Accountants; if the
Resolution Accountants select the Europe Closing Balance Sheet
submitted by Europe, Buyer shall pay the fees and expenses of the
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Resolution Accountants. Europe shall pay the cost of the fees
and expenses of Deloitte & Touche, L.L.P. and Buyer shall pay the
cost of the fees and expenses of Grant Thornton L.L.P. There
shall be no adjustment to the Purchase Price unless and until
such adjustment exceeds $250,000 and only to the extent of that
excess of $250,000.
(i) Promptly after the Closing Date, but in any event no
later than 60 days after the Closing Date, Merisel shall prepare
and deliver to Buyer, or cause to be prepared and delivered to
Buyer, a combining balance sheet of Latin America and Mexico (the
"Latin/Mexico Closing Balance Sheet") as of the close of business
on the Closing Date, together with the draft audit report of
Deloitte & Touche, LLP thereon. The Latin/Mexico Closing Balance
Sheet shall be prepared in accordance with U.S. GAAP applied con
sistently with those U.S. GAAP principles applied in the prepara
tion of the 1995 Balance Sheets, except that the Latin/Mexico
Closing Balance Sheet will convert Mexican pesos to U.S. dollars
at the closing exchange rate published in the Wall Street Journal
as of the Closing Date and the Latin/Mexico Closing Balance Sheet
will be prior to the application of purchase accounting and
recordation of the transactions contemplated in this Agreement
(the "Latin American Accounting Principles"). The report of
Deloitte & Touche, L.L.P. shall state (without qualification as
to scope of audit or other matters) that in their opinion the
Latin/Mexico Closing Balance Sheet presents fairly in all
material respects, the net assets of Mexico and Latin America
sold as of the Closing Date, on the basis of the Latin American
Accounting Principles defined in this Agreement. The parties
shall allow and cause Latin America and Mexico to allow the
parties, Grant Thornton, L.L.P. and other representatives of the
parties, full and complete access to all work papers, books and
records and all additional information used in preparing the
Latin/Mexico Closing Balance Sheet and will make their and will
use their reasonable efforts to make Latin America's and Mexico's
officers and employees available to discuss with the parties and
their representatives such papers, books, records and
information. Buyer and all its representatives shall be provided
complete access to all work papers and other information used by
Deloitte & Touche, LLP in auditing the Latin/Mexico Closing
Balance Sheet which are not proprietary to Deloitte & Touche LLP
and Sellers and their representatives should be provided complete
access to all work papers and other information used by Grant
Thornton L.L.P. in reviewing the Latin/Mexico Closing Balance
Sheet which are not proprietary to Grant Thornton L.L.P. The
Latin/Mexico Closing Balance Sheet, when delivered by Sellers to
Buyer, shall be deemed final, conclusive and binding on the
parties and will be deemed to be the Latin/Mexico Closing Balance
Sheet upon which the Latin/Mexico Purchase Price may be adjusted,
unless either Merisel or Buyer notifies the other, within 10 days
after receipt of the Latin/Mexico Closing Balance Sheet, of its
disagreement therewith (which notice shall state with reasonable
specificity the reasons for any disagreement and the amounts in
dispute). If neither Sellers nor Buyer disagrees with the draft
Latin/Mexico Closing Balance Sheet, Deloitte & Touche, LLP will
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issue their final audit report. If such disagreement cannot be
resolved by Buyer and Merisel (each of which shall use their
"reasonable efforts" to so resolve the claim) within 30 days
following the receipt from Latin America and Mexico of the
Latin/Mexico Closing Balance Sheet, the items in dispute shall be
submitted to the Resolution Accountants. The sole function of
the Resolution Accountants shall be to select as most accurately
reflecting the Latin/Mexico Closing Balance Sheet, without adjust
ment or alteration, the Latin/Mexico Closing Balance Sheet sub
mitted by Buyer to the Resolution Accountants, which closing
balance sheet reflects the results of any previous discussions
between the parties or the Latin/Mexico Closing Balance Sheet
submitted by Merisel to the Resolution Accountants, which closing
balance sheet reflects the results of any previous discussions
between the parties as the true Latin/Mexico Closing Balance
Sheet, and the determination by such independent auditing firm
shall be binding and conclusive upon the parties. If the
Resolution Accountants select the Latin/Mexico Closing Balance
Sheet submitted by Buyer, Merisel shall pay the fees and expenses
of the Resolution Accountants; if the Resolution Accountants
select the Latin/Mexico Closing Balance Sheet submitted by
Merisel, Buyer shall pay the fees and expenses of the Resolution
Accountants. Merisel shall pay the cost of the fees and expenses
of Deloitte & Touche, LLP and Buyer shall pay the cost of the
fees and expenses of Grant Thornton L.L.P.
(ii) The balance sheet of each European Subsidiary to be
used in the preparation of the Europe Closing Balance Sheet and
the balance sheet of each entity included in the Latin/Mexico
Closing Balance Sheet shall be prepared by the individual who is
the Managing Director and the individual who is the Chief
Financial Officer of the respective entity on the date hereof.
If one of these individuals is unavailable, the other will act
solely. Grant Thornton, L.L.P. shall be permitted to review the
draft balance sheets and work papers of each entity prepared
under the supervision of said individuals. Buyer shall have the
right to meet with Deloitte & Touche, LLP in conjunction with
their planning of the procedures with respect to the audit of the
Europe Closing Balance Sheet and the Latin/Mexico Balance Sheet,
such approval not to be unreasonably withheld.
(d) Post-Closing Determination.
(i) To the extent that the Estimated Purchase Payment
Amount shall have been more than the sum of the Total Adjusted
Capital of the European Subsidiaries and Europe Assets Value, the
amount of such difference (less any interim payments to Buyer
pursuant to Section 1.2(c)(i)) shall be paid to Buyer by Escrow
Agent in accordance with the terms of the Escrow Agreement within
five business days after the determination of such amount. The
balance of the Escrow Fund together with interest earned on all
amounts distributed to Seller, if any, shall thereafter be paid
to Seller. To the extent the amount of the Escrow Fund is
insufficient to pay to Buyer the excess of the Estimated Purchase
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Payment Amount over the Total Adjusted Capital of the European
Subsidiaries and the Europe Assets Value, Merisel shall pay to
Buyer any shortfall within five business days of the
determination of such amount by wire transfer. To the extent
that the Estimated Purchase Payment Amount is less than the Total
Adjusted Capital of the European Subsidiaries and the Europe
Assets Value, the total Escrow Payment plus a cash consideration
equal to the amount of any remaining difference (less any interim
payments to Europe, pursuant to Section 1.2(c)(i)) shall be paid
by Buyer to Europe, within five business days after the
determination of such amount, by wire transfer. Notwithstanding
anything to the contrary in this Agreement, the terms of the
Escrow Agreement shall govern all payments to Buyer or Europe
from the Escrow Fund.
(ii) To the extent that the amount of the shareholders
equity of Latin America and Mexico as set forth on the
Latin/Mexico Closing Balance Sheet, assuming all liabilities of
Latin America and Mexico to Merisel or any of its other
affiliates have been capitalized (the "Closing Equity Value"), is
less than the sum of (x) the amount of adjusted shareholders
equity of Latin America and Mexico as of June 30, 1996 which the
parties hereby agree is $36,698,191 computed as shown on Schedule
1.2(a) plus (y) the net pretax earnings of Latin America and the
net earnings of Mexico between July 1, 1996 and the Closing Date
as reflected in the monthly financial statements of Latin America
and Mexico plus any provision which would increase the reserve
for inventory, receivables and/or other accruals in excess of
normal provisions for inventory, receivables and/or other
accruals, computed consistently with past practice, less (z) $1.5
million (the "Minimum Latin/Mexico Equity Value"), the amount of
such difference shall be deducted from the Escrow Fund and paid
to Buyer by Escrow Agent in accordance with the terms of the
Escrow Agreement within five business days after the determin
ation of such amount; provided, however, that no amount in excess
of $2,000,000 shall be so deducted. The balance of the Escrow
Fund, if any, shall thereafter be paid to Merisel unless further
obligations exist under Section 1.2(d)(i), in which case the
funds shall continue to be held in accordance with that Section.
To the extent that the amount of the Escrow Fund is insufficient
to pay to Buyer the excess of the Minimum Latin/Mexico Equity
Value over the Closing Equity Value, Merisel shall pay to Buyer
any shortfall within five business days after the determination
of such amount, by wire transfer. Notwithstanding anything to
the contrary in this Agreement, the terms of the Escrow Agreement
shall govern all payments to Buyer or Merisel from the Escrow
Fund.
1.3 Closing.
(a) Time and Place. The closing under this Agreement (the
"Closing") will take place at 9:00 a.m., local time, on September
27, 1995 as prescribed by Section 4.8 hereof or on such later
date as the conditions precedent contained in Section 5.1 and 5.2
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hereof are satisfied or waived (subject, however, to the provi
sions of Section 5.3(a)(iv)), at the offices of Greenberg,
Traurig, Hoffman, Lipoff, Rosen & Quentel, P.A., 1221 Brickell
Avenue, Miami, Florida, or at such other time, date or place as
the parties shall mutually agree. The date on which the Closing
occurs is referred to herein as the "Closing Date."
(b) Deliveries and Proceedings at the Closing. At the
Closing:
(i) Deliveries by Europe. Europe will deliver to Buyer
(A) certificates evidencing its shares of the Europe Stock
accompanied by stock powers duly executed in blank or duly
executed instruments of transfer, and any other documents that
are necessary to transfer to Buyer good title to the Europe
Stock, free and clear of all liens, claims, security interests,
pledges, charges, equities, options, restrictions and
encumbrances of whatever nature, and (B) such documents and
instruments of conveyance, including but not limited to, bills of
sale, warranty deeds, assignments, or their equivalents, as shall
be sufficient to convey to the Buyer all right, title and
interest in and to the Europe Assets, free and clear of all
liens, mortgages, pledges, claims, encumbrances or other restric
tions or limitations whatsoever except as set forth on Schedule
2.17.
(ii) Deliveries by Merisel. Merisel will deliver to Buyer
certificates evidencing its shares of the Latin/Mexico Stock
accompanied by stock powers duly executed in blank or duly
executed instruments of transfer, and any other documents that
are necessary to transfer to Buyer good title to the Latin/Mexico
Stock, free and clear of all liens, claims, security interests,
pledges, charges, equities, options, restrictions and
encumbrances of whatever nature.
(iii) Deliveries By Buyer. Buyer will deliver (A) to
Europe the Europe Cash Payment, (B) to Merisel the Latin/Mexico
Cash Payment and (C) to the Escrow Agent the Escrow Payment.
(iv) Other Deliveries. The closing certificates, opinions
of counsel and other documents required to be delivered pursuant
to this Agreement will be exchanged.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLERS
The Sellers represent and warrant to Buyer as follows,
except as set forth in the Disclosure Schedule attached hereto
specifically identifying the Section number to which it relates:
2.1 Organization. Each of Merisel, Europe, Latin America
and Mexico is a corporation duly organized, validly existing and
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in good standing under the laws of Delaware, Delaware, Delaware
and Mexico, respectively. Each Subsidiary of Europe listed on
Schedule 2.1 (the "European Subsidiaries"), and any subsidiaries
of Latin America and Mexico (the "Latin/Mexico Subsidiaries")
listed on Schedule 2.1 (each a "Subsidiary" and, collectively,
the "Subsidiaries") is duly organized, validly existing and in
good standing (to the extent such concept is applicable) in the
countries of their organization. Each of Merisel, Europe, Latin
America, Mexico, and the Subsidiaries has all requisite power and
authority to own or lease its properties and assets as now owned
or leased and to carry on its business as and where now being con
ducted, except in each such case as would not have a Material
Adverse Effect. The copies of each of Merisel's, Europe's, Latin
America's, Mexico's and the Subsidiaries' charter documents, as
amended to date, which have been delivered to Buyer, are correct
and complete and are in full force and effect.
2.2 Capitalization and Ownership: Power and Authority. Set
forth on Schedule 2.2 is a list of the authorized and outstanding
capital stock of Latin America, Mexico and each of the
Subsidiaries together with the holders thereof. All of the
foregoing outstanding shares have been duly authorized, validly
issued and are fully paid and nonassessable. None of such shares
were issued in violation of the terms of any agreement or other
understanding, and all were issued in compliance with all
applicable securities laws and regulations except where such
violation or lack of compliance could not reasonably be expected
to have a Material Adverse Effect. There are no outstanding
options, warrants, rights, agreements, calls, commitments or
demands of any character relating to such capital stock and no
securities convertible into or exchangeable for any of such
capital stock. All of such stock owned by the Sellers is owned,
free and clear of any lien, security interest, restriction,
encumbrance or claim. Sellers have the right, power and
authority to enter into this Agreement, transfer the Stock or
Europe Assets, as the case may be, to Buyer in accordance with
this Agreement and to perform its other respective obligations
hereunder.
2.3 Subsidiaries. Except as set forth in Schedule 2.1,
none of Merisel, Europe, Latin America or Mexico, directly or
indirectly, owns any stock of, or any other interest in, any
other corporation, joint venture, partnership, trust or other
business entity that conducts business in a country located on
the continents of Europe (including Eastern Europe, but excluding
the Russian Federation) and South America, any country in Latin
America or in Mexico.
2.4 Qualification; Location of Business and Assets. Each of
Merisel, Europe, Latin America, Mexico and the Subsidiaries is
duly qualified and in good standing as a corporation (to the
extent such concept is applicable), duly authorized to do
business in those jurisdictions wherein the character of the
properties owned or leased or the nature of activities conducted
by such entities make such qualification necessary, except in
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such case would not have a Material Adverse Effect. Set forth on
Schedule 2.4 is each location (specifying country and city) where
each of Merisel, Europe, Latin America, Mexico and any Subsidiary
(a) has a place of business, (b) owns or leases real property or
(c) owns or leases any other property, including inventory,
equipment or furniture with an aggregate value at such location
in excess of $100,000.
2.5 Authorization and Enforceability. This Agreement has
been, and each other agreement and instrument required to be exe
cuted and delivered by Sellers in connection with or pursuant
hereto, will be, duly executed and delivered by Sellers and con
stitutes and will constitute, as applicable, the legal, valid and
binding obligations of Sellers, enforceable in accordance with
their terms, subject to the qualification that enforcement of the
rights and remedies created hereby and thereby may be limited by
bankruptcy, insolvency, reorganization and other similar laws of
general application relating to or affecting the rights and
remedies of creditors and that the remedy of specific enforcement
or of injunctive relief is subject to the discretion of the court
before which any proceeding therefor may be brought. Upon
delivery to Buyer at the Closing of instruments of title and
conveyance, including but not limited to, bills of sale, warranty
deeds and assignments, or their equivalents, for the Europe
Assets in accordance herewith, Buyer will acquire good and valid
title to the Europe Assets free and clear of all liens, claims,
security interests, mortgages, pledges, charges, equities,
options, restrictions and encumbrances of whatsoever nature
(collectively, "Liens"), other than a Lien arising as a result of
any action by Buyer and other than as set forth on Schedule 2.17.
The execution, delivery and performance of this Agreement shall
have been duly authorized by all necessary corporate action on
the part of Sellers (including stockholder approval).
2.6 No Violation of Laws or Agreements. Except as set forth
on Schedule 2.6 hereto, the execution and delivery of this Agree
ment does not, and the performance of this Agreement by Sellers
will not (a) contravene any provision of Merisel's, Europe's,
Latin America's, Mexico's or any Subsidiary's charter documents;
(b) conflict with or result in a breach of or constitute a
default (or an event which could reasonably be expected to, with
the passage of time or the giving of notice or both, constitute a
default) under any of the terms, conditions or provisions of
(i) any Material Contract to which Merisel (with respect to
Europe, Latin America or Mexico), Europe, Latin America, Mexico,
or any Subsidiary is a party or by which any of them or any of
their respective assets may be bound or affected, or (ii) any
judgment or order of any court or governmental department,
commission, board, agency or instrumentality, domestic or
foreign, or any applicable law, rule or regulation except in the
case of such judgment, order, law, rule or regulation as would
not reasonably be expected to have a Material Adverse Effect on
such entity; (c) result in the creation or imposition of any
lien, charge or encumbrance of any nature whatsoever upon any of
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Europe's, Latin America's, Mexico's or any Subsidiary's assets or
give to others any interests or rights therein other than
pursuant to this Agreement, which lien, charge, encumbrance,
interest or right could reasonably be expected to have a Material
Adverse Effect; (d) result in the maturation or acceleration of
any liability or obligation of Merisel (with respect to the
Europe Stock, the Europe Assets and Latin/Mexico Stock), Europe
(with respect to the Europe Stock and the Europe Assets), Latin
America, Mexico or any Subsidiary (or give others the right to
cause such a maturation or acceleration); or (e) result in the
termination of or loss of any right (or give others the right to
cause such a termination or loss) under any Material Contract to
which Merisel, Europe, Latin America, Mexico or any Subsidiary is
a party or by which any of them may be bound. For the purposes of
this Agreement, the term "Material Contract" shall mean those
contracts, agreements and commitments, written or, to the
Knowledge of Sellers (as such term is defined in Section 7.14
hereof), Latin America, Mexico or any Subsidiary, oral, to which
any of Merisel (with respect to the Europe Stock, the Europe
Assets or the Latin/Mexico Stock), Europe (with respect to the
Europe Stock and the Europe Assets), Latin America, Mexico or any
Subsidiary are a party or by which any of their respective assets
are bound and which constitute:
(a) an agreement to purchase or sell any capital assets
(excluding inventory) involving an amount in excess of $100,000;
(b) any union or other collective bargaining contracts;
(c) any management, consulting, employment, personal
service, agency or other contract or contracts providing for
employment or rendition of services at an annual base
compensation of $100,000 or more (including any promised,
expected or customary bonus);
(d) the Revolving Credit Agreement, the Asset Amortization
Agreement or any other agreements or notes evidencing any
liabilities or obligations of Merisel (with respect to Europe,
Latin America or the Subsidiaries), Europe, Latin America, Mexico
or any Subsidiary, whether primary or secondary or absolute or
contingent: (i) for borrowed money; or (ii) evidenced by notes,
bonds, debentures or similar instruments; or (iii) secured by or
granting Liens on any assets of Merisel, Europe, Latin America,
Mexico or any Subsidiary;
(e) a power of attorney (whether revocable or irrevocable)
given to any person by Merisel (with respect to Latin America or
Mexico), Europe (with respect to the European Subsidiaries),
Latin America, Mexico or any Subsidiary that is in force;
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(f) an agreement by Merisel (with respect to Latin America
or Mexico), Europe (with respect to the European Subsidiaries),
Latin America, Mexico or any Subsidiary not to compete in any
business or in any geographical area;
(g) a partnership, joint venture or similar arrangement;
(h) an Intellectual Property license other than the right
to distribute computer products in the ordinary course of
business;
(i) an agreement with any affiliate of either Seller other
than agreements between or among the European Subsidiaries, Latin
America or Mexico;
(j) any lease, sublease, license, or occupancy agreement
for real property and equipment leases with an annual rental in
excess of $100,000 ("Lease"); or
(k) any other agreement in excess of $100,000 individually
or $250,000 in the aggregate, which is not in the ordinary course
of business of Europe, Latin America, Mexico or any Subsidiary.
2.7 Financial Statements. Sellers have delivered to Buyer
the following financial statements (the "Financial Statements"):
(a) statements of income and retained earnings and cash
flows of Europe, Latin America, Mexico and each Subsidiary for
the years ended December 31, 1993 through December 31, 1995,
inclusive, and balance sheets of Europe, Latin America, Mexico
and the Subsidiaries as at each of such dates.
(b) a statement of income, cash flows and stockholders'
equity of Europe, Latin America, Mexico and each Subsidiary for
the six-month period ended June 30, 1996 and a balance sheet of
Europe, Latin America, Mexico, and each Subsidiary as at such
date.
The Financial Statements: (a) are correct and complete and
in accordance with the books and records of Europe, Latin
America, Mexico and each Subsidiary, respectively, (b) fairly pre
sent the financial condition, assets and liabilities of Europe,
Latin America, Mexico, and each Subsidiary as at their respective
dates and the results of operations and cash flows for the
periods covered thereby, (c) have been prepared in accordance
with GAAP consistently applied, except as may be indicated
therein or in the notes thereto and except that the Interim
Statements do not contain footnotes, and except for normal
year-end adjustments. All references in this Agreement to the
"1995 Balance Sheets" shall mean the balance sheets of Europe,
Latin America, Mexico and the Subsidiaries as at December 31,
1995 included in the Financial Statements, all references in this
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Agreement to the "June Balance Sheets" shall mean the balance
sheets of Europe, Latin America, Mexico and the Subsidiaries as
at June 30, 1996 included in the Financial Statements, and all
references to the "Balance Sheet Date" shall mean December 31,
1995. Attached as Schedule 2.7 are the Financial Statements, as
adjusted to be presented in accordance with the Accounting
Principles.
2.8 No Undisclosed Liabilities. None of Europe, Latin
America, Mexico or the Subsidiaries has any material liability or
obligation of any nature, whether due or to become due, absolute,
contingent or otherwise, except (a) to the extent reflected as a
liability or adequately reserved, disclosed or otherwise provided
for, on the June Balance Sheets, (b) liabilities incurred in the
ordinary course of business since June 30, 1996 and of the same
character, kind and magnitude as are consistent with past prac
tice and fully reflected as liabilities on their books of account
and (c) liabilities disclosed on Schedule 2.8.
2.9 No Changes. Except as disclosed on Schedule 2.9, since
June 30, 1996, each of Europe, Latin America, Mexico and the Sub
sidiaries has conducted its business only in the ordinary course
consistent with past practice. Without limiting the generality
of the foregoing sentence, since June 30, 1996, there has not
been:
(a) any change in the financial condition, assets,
liabilities, net worth or business of Europe, Latin America,
Mexico or the Subsidiaries, except changes in the ordinary course
of business, none of which, individually or in the aggregate, has
been or will be materially adverse to any of Europe, Latin
America, Mexico or any Subsidiary;
(b) any damage, destruction or loss, whether or not covered
by insurance, other than normal wear and tear, of assets with an
aggregate book value of $50,000 or greater adversely affecting
the properties, business or prospects of any of Europe, Latin
America, Mexico or any Subsidiary, or any material deterioration
in the operating condition of the assets of Europe, Latin
America, Mexico or any Subsidiary;
(c) any mortgage, pledge or subjection to lien, charge or
encumbrance of any kind of any of the assets, tangible or intan
gible with a value in excess of $50,000 individually, or $250,000
in the aggregate, of Europe, Latin America, Mexico or any Subsidi
ary not set forth on the June Balance Sheets;
(d) any declaration, setting aside or payment of a dividend
or other distribution in respect of any of the capital stock of
Latin America, Mexico or a subsidiary of Mexico, or any direct or
indirect redemption, purchase or other acquisition of any capital
stock of Latin America, Mexico or a subsidiary of Mexico or any
rights to purchase such capital stock or securities convertible
into or exchangeable for such capital stock;
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(e) Except as set forth on Schedule 4.1 and except for the
obligations to employees for which Sellers are responsible after
the Closing Date which Sellers hereby agree shall be fulfilled,
any increase in the salaries or other compensation payable or to
become payable to, or any advance (excluding advances for
ordinary business expenses) or loan to, any officer, director or
shareholder of Latin America, Mexico or any Subsidiary, any in
crease in the salaries or other compensation payable or to become
payable to, or any advance (excluding advances for ordinary busi
ness expenses) or loan to, any employee of Latin America, Mexico
or any Subsidiary (except those made in the ordinary course of
business and consistent with past practice), any increase in, or
any addition to, other benefit (including without limitation any
bonus, profit sharing, pension or other plan) to which any of
their respective officers, directors or employees may be entitled
(excluding as to employees only, those made in the ordinary
course of business consistent with prior practice), or any pay
ment to any pension, retirement, profit sharing, bonus or similar
plan except payments in the ordinary course of business and
consistent with past practice made pursuant to the employee
benefit plans described on Schedule 2.26.
(f) any making or authorization of any capital expenditures
in excess of $100,000 in the aggregate;
(g) any sale, transfer or other disposition of any capital
asset with a value on the 1995 Balance Sheets of Europe, Latin
America, Mexico or any Subsidiary in excess of $50,000
individually or $250,000 in the aggregate, except sales of inven
tory and receivables in the ordinary course of business
consistent with past practices;
(h) any adverse change or any threat of any adverse change
in the relations of Europe, Latin America, Mexico or any
Subsidiary with, or any loss or threat of loss of, any of the
suppliers listed on Exhibit D or any customers representing
individually in excess of 5% and in the aggregate more than 10%
of the sales in the eighteen months ended June 30, 1996 of any of
Europe, Latin America, Mexico or any Subsidiary;
(i) other than intercompany accounts, any writeoffs as
uncollectible of any notes or accounts receivable of Latin
America, Mexico or any Subsidiary or write-downs of the value of
any assets or inventory by Europe, Latin America, Mexico or any
Subsidiary other than in the ordinary course of business
consistent with past practice;
(j) except as set forth on Schedule 2.9(j), any change by
Europe, Latin America, Mexico or any Subsidiary in any accounting
practices, method of accounting or the accounting principles
applicable to the keeping its books of account;
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(k) any creation, incurrence, assumption or guarantee by
Latin America, Mexico or any Subsidiary of the obligations or
liabilities of any person other than Latin America, Mexico or any
Subsidiary (whether absolute, accrued, contingent or otherwise
and whether due or to become due), except in the ordinary course
of business, or any creation, incurrence, assumption or guarantee
by Europe, Latin America, Mexico or any Subsidiary of any
indebtedness for money borrowed in excess of $100,000
individually or $500,000 in the aggregate;
(l) any purchase, sale or other transfer of inventory from
or to any Related Party at other than arms-length prices; or
(m) any disposition of or failure to keep in effect any
rights in, to or for the use of any patent, trademark, service
mark, trade name or copyright, material to the operation of
Europe, Latin America, Mexico or the Subsidiaries.
2.10 Taxes.
(a) For the purpose of this Agreement:
"Audit" means any audit, assessment of Taxes, reassess
ment of Taxes, or other examination by any taxing authority or
any judicial or administrative proceedings or appeal of such
proceedings.
"Code" means the Internal Revenue Code of 1986, as
amended.
"Governmental Body" means any foreign, federal, state,
local or other governmental authority or regulatory body.
"Tax" or "Taxes" means any federal, state, local,
foreign or other net income, gross income, gross receipts,
windfall profits, severance, property, production, sales, use,
transfer, gains, license, excise, franchise, employment, payroll,
withholding, value added, estimated, alternative or add on
minimum tax, or any other tax, custom, duty, governmental fee or
other like assessment or charge of any kind whatsoever, together
with any interest or any penalty, addition to tax or additional
amount imposed by any Governmental Body.
"Tax Return" means any return, report or similar state
ment required to be filed with respect to any Taxes (including
any attached schedules), including, without limitation, any
information return, claim for refund, amended return and
declaration of estimated Tax.
"Tax Ruling" means a written private ruling of a taxing
authority to or with respect to Europe, Latin America, Mexico or
any Subsidiary relating to Taxes.
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(b) Except as set forth in Schedule 2.10:
(i) Filing of Tax Returns. Europe (with respect to the
Europe Assets and the European Subsidiaries), and each of Latin
America, Mexico and the Subsidiaries have filed (or have had
filed on their behalf) all material Tax Returns required to be
filed by each of them and such Tax Returns are in all material
respects true, complete and correct and filed on a timely basis.
(ii) Payment of Taxes. Europe (with respect to the Europe
Assets and the European Subsidiaries), and each of Latin America,
Mexico and the Subsidiaries have, within the time and in the
manner prescribed by law, paid (or have had paid on their behalf)
all Taxes currently due and payable, except for those for which
adequate reserves have been established on the books and records
of such companies, and none of such companies is or will be
required to pay any Tax attributable to any other person by
reason of filing a consolidated, combined, unitary or other
return or report with any such other person in respect of any
Taxable period closing on or prior to the Closing Date.
(iii) Extensions of Time for Filing. None of Merisel
(with respect to Europe, Latin America and Mexico), Latin
America, Mexico or the Subsidiaries has requested (or has had
requested on its behalf) any extension of time within which to
file any material Tax Return, which Tax Return has not yet been
filed.
(iv) Waivers of Statute of Limitations. None of Merisel
(with respect to Europe, Latin America and Mexico), Latin
America, Mexico or the Subsidiaries has executed any outstanding
waivers or comparable consents (or has had any such waivers or
consents executed on its behalf) regarding the application of the
statute of limitations with respect to any material Taxes or Tax
Returns.
(v) Audit, Administrative and Court Proceedings. No Audits
are presently pending with regard to any Tax Returns of Merisel
(with respect to Europe, Latin America and Mexico), Europe (with
respect to the European Subsidiaries), Latin America, Mexico or
the Subsidiaries.
(vi) Powers of Attorney. No power of attorney currently in
force has been granted by Merisel (with respect to Europe, Latin
America and Mexico), Europe (with respect to the European
Subsidiaries), Latin America, Mexico or the Subsidiaries
concerning any material Taxes or Tax Returns.
(vii) Tax Rulings. None of Merisel (with respect to
Europe, Latin America and Mexico), Europe (with respect to the
European Subsidiaries), Mexico, Latin America or any Subsidiary
has received a Tax Ruling with any taxing authority that has or
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would have a continuing effect on Mexico, Latin America, any
Subsidiary or any of the European Assets.
(viii) Tax Sharing Agreements. None of Merisel (with
respect to Europe, Latin America and Mexico), Europe (with
respect to the European Subsidiaries), Mexico, Latin America or
any Subsidiary is a party to any agreement relating to allocating
or sharing of Taxes other than any such agreements solely between
or among Latin America, Mexico and the Subsidiaries.
2.11 Inventory. All of the inventories reflected in the
1995 Balance Sheets are valued at the lower of cost or market,
the cost thereof being determined on a first-in, first-out basis,
except as disclosed in the Financial Statements. Except as set
forth on Schedule 2.11, all of the inventories reflected in the
June Balance Sheets, and all inventories acquired by Latin
America, Mexico and the Subsidiaries since the date of the June
Balance Sheets consist of items of a quality and quantity usable
and saleable in the ordinary course of the business of Latin
America, Mexico and the Subsidiaries.
2.12 Accounts Receivable. All of the accounts and notes
receivable of Latin America, Mexico and the Subsidiaries
represent amounts receivable for merchandise actually delivered
or services actually provided (or, in the case of non-trade
accounts or notes represent amounts receivable in respect of
other bona-fide business transactions), have arisen in the
ordinary course of business, are not subject to any defenses,
counterclaims or offsets, except to the extent of a reserve in an
amount not in excess of the reserve for doubtful accounts
reflected on the June Balance Sheets, and have been billed and
are generally due within 45 days after such billing. All such
receivables are fully collectible in the normal and ordinary
course of business, except to the extent of a reserve in an
amount not in excess of the reserve for doubtful accounts
reflected on the June Balance Sheets.
2.13 No Pending Litigation or Proceedings. Except as set
forth on Schedule 2.13 there are no actions, suits,
investigations, or proceedings pending or, to the Knowledge of
Sellers, threatened against or affecting Merisel (with respect to
Europe, Latin America and Mexico), Europe (with respect to the
European Subsidiaries), Latin America, Mexico or the Subsidiaries
or any of their assets or affecting the Stock, at law or in
equity, by or before any court or governmental department, agency
or instrumentality, and no party has manifested an intention to
commence such action, suit, investigation or proceeding. There
are presently no outstanding judgments, decrees or orders of any
court or any governmental or administrative agency against
Merisel (with respect to Europe, Latin America and Mexico),
Europe (with respect to the European Subsidiaries), or against
Europe, Latin America, Mexico or the Subsidiaries.
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2.14 Contracts; Compliance. All Material Contracts are
listed on Schedule 2.14, and copies of all of which have been
provided to Buyer. All Material Contracts to which Europe, Latin
America, Mexico or the Subsidiaries is a party or by which any of
them is bound are in full force and effect and each of Europe,
Latin America, Mexico and the Subsidiaries has complied with the
provisions thereof; and to the Knowledge of Sellers, all parties
to such Material Contracts have complied with the provisions
thereof, no party is in default under any of the terms thereof,
and no event has occurred that with the passage of time or the
giving of notice or both would constitute a default by any party
under any provision thereof which default could reasonably be
expected to have a Material Adverse Effect.
2.15 Compliance With Laws.
(a) Except as set forth in Schedule 2.15(a) (and any sub-
schedules thereto),
(i) each of Europe, Latin America, Mexico and the
Subsidiaries are in material compliance with Statutes regulating
any hazardous, toxic or polluting contaminant, substance or
waste, including petroleum products and radioactive materials
("Hazardous Substances") (such Statutes hereinafter defined as
"Environmental Laws"), including material compliance with
permits, certificates, licenses, approvals, registrations and
authorizations ("Permits") required under such Environmental
Laws, in connection with its respective business;
(ii) none of Europe, Latin America, Mexico or the
Subsidiaries have received written notice that remains outstand
ing from any governmental entity or third party alleging that
their respective businesses, or any property owned or leased by
any of them, is not in compliance with any Environmental Law;
(iii) there has been no release, spill, discharge,
disposal, emission, injection or dumping of a Hazardous Substance
by Europe, Latin America, Mexico or the Subsidiaries,
respectively, in violation of any Environmental Law on any of
their respective owned or leased real property, which could
reasonably be expected to have a Material Adverse Effect; and
(iv) there are no environmental priority liens or other deed
restrictions on any properties owned by Latin America, Mexico or
any Subsidiary or which have attached as a result of actions of
Sellers, Latin America, Mexico or any Subsidiary with respect to
leased property.
(b) Other Laws. All material permits, certificates,
licenses, orders, registrations, franchises, authorizations and
other approvals from all federal, state, local and foreign
governmental and regulatory bodies held by Merisel (with respect
to Europe, Latin America and Mexico), Europe (with respect to the
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European Subsidiaries), Latin America, Mexico or any Subsidiary
are in full force and effect and each of Merisel (with respect to
Europe, Latin America and Mexico), Europe (with respect to the
European Subsidiaries), Latin America, Mexico and the
Subsidiaries is in material compliance with the terms and condi
tions thereof. Except where the failure to have the same would
not reasonably be expected to have a Material Adverse Effect, no
other permits, certificates, licenses, orders, registrations,
franchises or authorizations or other approvals are necessary for
the operation of the business of such entities as currently
conducted. No notice, citation, summons or order has been issued
that remain outstanding, no complaint has been filed, no penalty
has been assessed that remains unpaid and no investigation or
review is pending or, to the Knowledge of Sellers, threatened by
any governmental or other entity (a) with respect to any alleged
violation by Merisel (with respect to Europe, Latin America and
Mexico), Europe (with respect to the European Subsidiaries),
Latin America, Mexico or any Subsidiary of any law, ordinance,
rule, regulation or order of any governmental entity or (b) with
respect to any alleged failure by Merisel (with respect to
Europe, Latin America and Mexico), Europe (with respect to the
European Subsidiaries), Latin America, Mexico or any Subsidiary
to have any permit, certificate, license, approval, registration
or authorization required in connection with its business.
2.16 Consents. Except as set forth in Schedule 2.16 or 3.7
or where the failure to obtain the same could not be reasonably
expected to have a Material Adverse Effect, no consent, approval
or authorization of, or registration or filing with, any person,
including any governmental authority or other regulatory agency,
is required in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated
hereby.
2.17 Title. Each of Europe, Latin America, Mexico and the
Subsidiaries has good and marketable title to all of its
properties and assets, including the properties and assets
reflected in the June Balance Sheets (except those disposed of in
the ordinary course of business since June 30, 1996), free and
clear of any mortgage, pledge, lien, restriction, encumbrance,
tenancy, license, encroachment, covenant, condition, right of
way, easement, claim, security interest, charge or any other
matter affecting title, except (a) minor imperfections of title,
none of which, individually or in the aggregate, materially
detracts from the value of or impairs the use of the affected
properties or impairs the operations of Latin America, Mexico or
the Subsidiaries, (b) liens for current taxes not yet due and
payable, and (c) as disclosed on Schedule 2.17 (collectively
"Permitted Encumbrances"). All real property owned is listed on
Schedule 2.17.
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2.18 Real Estate. Except as set forth on Schedule 2.18,
Sellers have delivered to Buyer a true, correct and complete copy
of each Lease with respect to real property. Europe, Latin
America, Mexico or the applicable Subsidiary is in quiet and
undisturbed possession of the real property with respect to which
it is the lessee and each Lease is valid and subsisting and in
full force and effect in accordance with its terms and has not
been modified, in writing or otherwise except with respect to
those modifications, copies of which have been delivered to
Buyer.
2.19 Transactions with Related Parties. Except as disclosed
on Schedule 2.19, no Related Party currently:
(a) has any contractual or other claim, express or implied,
of any kind whatsoever against Europe, Latin America, Mexico or
any Subsidiary; or
(b) has any interest in any property or assets used by
Europe, Latin America, Mexico or any Subsidiary in its business.
For purposes of this Agreement, a "Related Party" means each of
the Sellers, any of the officers or directors of Sellers, Latin
America, Mexico or any Subsidiary, any affiliate, or relative of
Sellers, Latin America, Mexico or any Subsidiary, or any business
or entity in which Sellers, Latin America, Mexico or any Subsidi
ary, or any affiliate, associate or relative of any such person
has any direct or material indirect interest. For the purposes
of this Section 2.19, a transaction solely among any of Latin
America, Mexico or any of the Subsidiaries shall not be deemed to
be a Related Party transaction.
2.20 Condition of Assets. Except as set forth on Schedule
2.20 and except for assets which in the aggregate do not have a
book value in excess of $100,000, the buildings, machinery, equip
ment, furniture, improvements and other assets of Latin America,
Mexico and the Subsidiaries are in good operating condition and
repair, subject to normal wear and tear, and are suitable for the
purposes for which they are used in its business.
.21 Compensation Arrangements; Officers and Directors.
Schedule 2.21 sets forth the following information:
(a) the names and current annual salary, including any
bonus or amounts payable upon a "change in control" as such term
is defined in Section 280G of the Code, if applicable, of all
present officers and employees of Europe, Latin America, Mexico
and each Subsidiary whose current annual salary, including any
promised, expected or customary bonus, equals or exceeds
$100,000, together with a statement of the full amount of all
remuneration paid by Europe, Latin America, Mexico and each
Subsidiary to each such person and to any director of Europe,
Latin America, Mexico and each Subsidiary, during the twelve-
month period ending December 31, 1995 and the six-month period
ending June 30, 1996; and
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(b) as of the date hereof, the names and titles of all
directors and officers of Europe, Latin America, Mexico and each
Subsidiary and of each trustee, fiduciary or plan administrator
of each employee benefit plan of Europe, Latin America, Mexico
and each Subsidiary.
2.22 Labor Relations. Except as disclosed on Schedule 2.22
(a) no employee of Europe, Latin America, Mexico or any
Subsidiary is represented by any union or other labor
organization; (b) there is no unfair labor practice complaint
against Europe, Latin America, Mexico or any Subsidiary pending
or to Seller's Knowledge threatened;(c) there is no labor strike,
dispute, slow down or stoppage actually pending or, to the
Knowledge of Sellers, threatened against or involving Europe,
Latin America, Mexico or any Subsidiary; (d) no grievance which
could reasonably be expected to have a Material Adverse Effect on
Europe, Latin America, Mexico or any Subsidiary or the conduct of
their respective businesses is pending; (e) no agreement
restricts Europe, Latin America, Mexico or any Subsidiary from
relocating, closing or terminating any of its operations or faci
lities; and (f) none of Europe, Latin America, Mexico or any
Subsidiary in the past year has experienced any work stoppage,
other event set forth in (b)-(d) above or has committed any
unfair labor practice.
2.23 Products Liability. Except as set forth in Schedule
2.23 and except for lawsuits, claims, damages and expenses
adequately covered by insurance or indemnified by the suppliers
of Europe, Latin America, Mexico and each Subsidiary in
accordance with industry practice, there are no (a) liabilities,
fixed or contingent, asserted or unasserted, with respect to any
product liability or any similar claim that relates to any
product stored, distributed or sold by Latin America, Mexico or
any Subsidiary to others, or (b) liabilities, fixed or
contingent, asserted or unasserted, with respect to any claim for
the breach of any express or implied product warranty or any
other similar claim with respect to any product stored, dis
tributed or sold by Latin America, Mexico or any Subsidiary to
others.
2.24 Insurance. Attached hereto as Schedule 2.24 is a com
plete and correct list of all policies or binders of insurance of
which Merisel (with respect to Europe, Latin America and Mexico),
Europe (with respect to the European Subsidiaries), Latin
America, Mexico or any Subsidiary is the owner, insured or
beneficiary, or covering any of its property or product liability
or general liability, copies of each of which have been provided
to Buyer. Also set forth on Schedule 2.24 is a loss history for
the past three years with respect to each of Latin America,
Mexico and each Subsidiary and a list of all pending claims with
respect to any insurance policies and a description of any
provision contained in such policies which provides for retrospec
tive or retroactive premium adjustments. All such policies are
outstanding and in full force and effect. No notice of
cancellation or non-renewal with respect to, or disallowance of
any claim under, any such policy has been received by Sellers,
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Latin America, Mexico or any Subsidiary. None of Merisel (with
respect to Europe, Latin America or Mexico), Europe, Latin
America, Mexico or any Subsidiary has been refused any insurance,
nor has coverage of any of them been limited by any insurance
carrier to which any of them has applied for insurance or with
which any of them has carried insurance during the last two
years. Since 1994, all general liability policies have been
"occurrence policies."
2.25 Patents and Intellectual Property Rights. Attached
hereto as Schedule 2.25 is a correct list of all material
patents, patent applications, trademarks, service marks and any
applications for registrations therefor, copyrights, trade names,
brand names, logos and the like, and any registrations therefor,
and all material licenses, sublicenses or other rights entered
into with respect thereto (other than rights to distribute
computer products in the ordinary course of business), both U.S.
and foreign, presently held, owned or used by Merisel (with
respect to Europe, Latin America and Mexico), Europe (with
respect to the European Subsidiaries), Latin America, Mexico or
any Subsidiary. All of the Intellectual Property presently held,
owned or used by Merisel (with respect to Europe, Latin America
and Mexico), Europe (with respect to the European Subsidiaries),
Europe, Latin America, Mexico or any Subsidiary (the
"Intellectual Property") is held of record in the name of Europe,
Latin America, Mexico or the applicable Subsidiary, is valid and
in good standing and none of which infringes the intellectual
property rights of others. To the Knowledge of Sellers, there
are no pending claims by any Person that challenges the rights of
Europe, Latin America, Mexico or the applicable Subsidiary with
respect to any of the Intellectual Property. To the Knowledge of
Sellers, the operation of the business of Europe, Latin America,
Mexico and the Subsidiaries did not and does not infringe (nor
has any claim been made that any such operation infringes) the
intellectual property rights of others. For purposes of this
Agreement, the term "Intellectual Property" shall mean all
material patents, patent applications, trademarks, service marks
and any applications for registrations therefor, copyrights,
trade names, brand names, logos and the like, and any
registrations therefor, and all licenses, sublicenses or other
rights entered into with respect thereto, trade secrets, know-how
or other proprietary information, which is used in such Person's
business.
2.26 Employee Benefits.
(a) Schedule 2.26 sets forth a true and complete list of
each bonus, deferred compensation, incentive compensation, stock
purchase, stock option, severance or termination pay, hospitaliza
tion or other medical, life or other insurance, supplemental un
employment benefits, profit-sharing, pension, or retirement plan,
program, agreement or arrangement, vacation pay, sick pay and
each other employee benefit plan, program, agreement or
arrangement, sponsored, maintained or contributed to or required
to be contributed to by Merisel, Europe, Latin America, Mexico or
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any Subsidiary or by any trade or business, whether or not
incorporated (an "ERISA Affiliate"), that together with Merisel,
Europe, Latin America, Mexico or any Subsidiary would be deemed a
"single employer" within the meaning of Section 4001 of the
Employee Retirement Income Security Act of 1974, as amended
("ERISA"), for the benefit of any U.S. Employee (each a "U.S.
Plan") and each bonus, deferred compensation, incentive
compensation, stock purchase, stock option, severance or termina
tion pay, hospitalization or other medical, life or other insur
ance, supplemental unemployment benefits, profit-sharing,
pension, or retirement plan, program, agreement or arrangement,
vacation pay, sick pay and each other employee benefit plan,
program, agreement or arrangement, sponsored, maintained or con
tributed to or required to be contributed to by Merisel, Europe,
Latin America, Mexico or any Subsidiary for the benefit of any
Non-U.S. Employee (each a "Non-U.S. Plan", the U.S. Plans and the
Non-U.S. Plans being referred to collectively as the "Plans").
(b) With respect to each U.S. Plan, Sellers have heretofore
delivered to Buyer true and complete copies of each of the follow
ing documents;
(i) a copy thereof;
(ii) a copy of the most recent form 5500 as filed with the
Internal Revenue Service for the most recent plan year and, for
all funded U.S. Plans the most recent annual audit and accounting
of Plan assets.
(iii) a copy of the most recent Summary Plan
Description required under ERISA with respect thereto;
(iv) if the Plan is funded through a trust or any third
party funding vehicle, a copy of the trust or other funding
agreement and the latest financial statements thereof; and
(v) the most recent determination letter received from
the Internal Revenue Service with respect to each Plan intended to
qualify under Section 401 of the Code.
(c) No U.S. Plan (or other employee benefit plan, program,
agreement or arrangement to which any Employer or any ERISA
Affiliate made, or was required to make, contributions during the
five (5) year period ending on the Closing Date) is subject to
Title IV of ERISA.
(d) With respect to each U.S. Plan, neither any Employer
nor any ERISA Affiliate, or any trust created thereunder, or, to
the Knowledge of Sellers, any trustee or administrator thereof
has engaged in a transaction in connection with which any
Employer or any such ERISA Affiliate, any such trust, or any such
trustee or administrator thereof, could be subject to either a
material civil penalty assessed pursuant to Section 409 or 502(i)
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of ERISA or a material tax imposed pursuant to Section 4975 or
4976 of the Code or any other applicable law or regulation.
(e) No U.S. Plan or any trust established thereunder has
incurred any "accumulated funding deficiency" (as defined in
Section 302 of ERISA and Section 412 of the Code), whether or not
waived, as of the last day of the most recent fiscal year of each
Plan ended prior to the Closing Date; and all contributions
required to be made with respect thereto on or prior to the
Closing Date have been timely made or will be timely made.
(f) No U.S. Plan is a "multiemployer pension plan," as
defined in Section 3(37) or ERISA, nor is any U.S. Plan a plan
described in Section 4063(a) of ERISA.
(g) Each Plan has been operated and administered in all
material respects in accordance with its terms and applicable
law, including but not limited to ERISA and the Code.
(h) Each U.S. Plan intended to be "qualified" within the
meaning of Section 401(a) of the Code is so qualified and the
trusts maintained thereunder are exempt from taxation under
Section 501(a) of the Code.
(i) No Plan provides benefits, including without limitation
death or medical benefits (whether or not insured), with respect
to any U.S. Employee or Non-U.S. Employee beyond their retirement
or other termination of service (other than (i) coverage mandated
by applicable law, or (ii) death benefits or retirement benefits
under any "employee pension plan," as that term is defined in
Section 3(2) of ERISA) or any Non-U.S. Plan.
(j) Except as set forth in Schedule 2.26, the consummation
of the transactions contemplated by this Agreement will not (i)
entitle any U.S. Employee or Non-U.S. Employee to severance pay,
unemployment compensation or any other payment, except as
expressly provided in this Agreement or as it relates to Non-U.S.
Employees required by applicable law or (ii) accelerate the time
of payment or vesting, or increase the amount of compensation due
any such employee.
(k) There are no pending, anticipated, or to the knowledge
of any Employer, threatened claims by or on behalf of any Plan,
by any U.S. Employee or Non-U.S. Employee, or otherwise involving
any such Plan (other than routine claims for benefits).
(l) Each Non-U.S. Plan has at all times prior to the
Closing Date has been maintained and operated in all material
respects in accordance with its terms and applicable laws and
regulations of the jurisdiction governing such Non-U.S. Plans
including, but not limited to laws and regulations related to
funding, reporting, disclosure and the provision of benefits to
eligible participants.
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(m) As used in this Section 2.26, the following terms have
the following meanings:
(i) "U.S. Employee" means each current or former employee
of an Employer who (A) is (or at the time of his employment by an
Employer was) a citizen or legal resident of the United States
and (B) worked for (or at the time of his employment with an
Employer, worked for) an Employer in the United States (and each
such employee's eligible beneficiaries under a Plan) and who is
eligible or receiving benefits under a U.S. Plan.
(ii) "Non-U.S. Employee" means each current or former
employee of an Employer who is not a U.S. Employee (and each such
employee's eligible beneficiaries under a Plan) and who is
eligible or receiving benefits under a Non-U.S. Plan.
(iii) "Employer" means Merisel, Europe, Latin America,
Mexico and any Subsidiary.
2.27 Brokerage. Except as described in Section 6.9, none of
Merisel, Europe, Latin America, Mexico or any Subsidiary has made
any agreement or taken any other action which might cause anyone
to become entitled to a broker's fee or commission as a result of
the transactions contemplated hereunder.
2.28 Questionable Payments. None of Merisel (with respect
to Europe, Latin America, Mexico or any Subsidiary), Europe,
Latin America, Mexico or any Subsidiary or any of the current or
former stockholders, directors, officers, agents, and/or
employees of Merisel, Europe, Latin America, Mexico or any
Subsidiary, has on behalf of such entity (a) used any corporate
funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity, (b) made any
direct or indirect unlawful payments to foreign or domestic
government officials or employees from corporate funds, (c)
violated any provision of the Foreign Corrupt Practices Act of
1977, (d) established or maintained any unlawful or unrecorded
fund of corporate monies or other assets, or (e) made any
unlawful bribe, rebate, payoff, influence payment, kickback or
other unlawful payment of any nature, (collectively, a
"Questionable Payment"). None of Merisel (with respect to
Europe, Latin America, Mexico or any Subsidiary), Europe, Latin
America, Mexico or any Subsidiary or any of their current or
former stockholders, directors, officers, agents, employees,
sales persons or other persons associated with or active on
behalf of any of them has on behalf of any of them or in connec
tion with their respective businesses made or received a Question
able Payment.
2.29 Disclosure. No representation or warranty by the
Sellers with respect to the Sellers, Latin America, Mexico or any
Subsidiary in this Agreement, and no exhibit, statement, certi
ficate or schedule furnished or to be furnished to Buyer pursuant
hereto, or in connection with the transactions contemplated
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hereby, contains or will contain any untrue statement of a
material fact, or omits or will omit to state a material fact
necessary to make the statements or facts contained herein or
therein not misleading or necessary to provide Buyer with
adequate and complete information as to Merisel, Europe, Latin
America, Mexico or any Subsidiary and their affairs, the Stock
and the Europe Assets.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers as follows:
3.1 Organization. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State
of Florida.
3.2 Power and Authority. Buyer has full corporate power
and authority to make, execute, deliver and perform this
Agreement.
3.3 Authorization and Enforceability. This Agreement has
been, and each other agreement and instrument required to be exe
cuted and delivered by Buyer in connection with or pursuant
hereto will be, duly executed and delivered by Buyer and
constitutes and will constitute, as applicable, the legal, valid
and binding obligation of Buyer, enforceable in accordance with
their terms subject to the qualification that the enforcement of
the rights and remedies created hereby and thereby may be limited
by bankruptcy, insolvency, reorganization and other similar laws
of general application relating to or affecting the rights and
remedies of creditors and that the remedy of specific enforcement
or injunctive relief is subject to the discretion of the court
before which any proceeding therefor may be brought.
3.4 Brokerage. Except as set forth in Section 6.9, Buyer
has not made any agreement or taken any other action which might
cause anyone to become entitled to a broker's fee or commission
as a result of the transactions contemplated hereunder.
3.5 Securities Act. The Stock purchased by Buyer pursuant
to this Agreement will be acquired without a view to any public
distribution thereof, and Buyer will not offer to sell or
otherwise dispose of any shares of the Stock so acquired by it in
violation of the registration requirements of the Securities Act
of 1933, as amended.
3.6 No Violation of Laws or Agreements. The execution and
delivery of this Agreement do not, and the performance of this
Agreement by Buyer, will not: (a) contravene any provision of the
Buyer's Articles of Incorporation or Bylaws; (b) conflict with or
result in a breach of or constitute a default (or an event which
could reasonably be expected to, with the passage of time or the
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giving of notice or both, constitute a default) under the terms,
conditions or provisions of any material contract to which the
Buyer is a party or by which it or any of its assets may be bound
or affected or any judgment or any order of any court or
governmental department, commission, board, agency or
instrumentality, domestic or foreign, or any applicable law, rule
or regulation except in the case of such judgment, order, law,
rule or regulation as would not reasonably be expected to have a
Material Adverse Effect on Buyer; (c) result in the creation or
imposition of any lien, charge or encumbrance of any nature what
soever upon any of Buyer's assets or give to others any interests
or rights therein which lien, charge, encumbrance, interest or
right could reasonably be expected to have a Material Adverse
Effect; (d) result in the maturation or acceleration of any liabi
lity or obligation of Buyer (or give others the right to cause
such a maturation or acceleration); or (e) result in the termin
ation of or loss of any right (or give others the right to cause
such a termination or loss) under any Material Contract to which
Buyer is a party or by which it may be bound.
3.7 Consents. Except as set forth in Schedule 2.16 or
where the failure to obtain the same could not reasonably be
expected to have a Material Adverse Effect, no consent, approval,
or authorization of, or registration or filing with, any person,
including any governmental authority or other regulatory agency,
is required in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated
hereby.
3.8 Litigation. There are no actions, suits, claims, or
proceedings pending, or to the knowledge of Buyer, threatened
against or affecting Buyer or any of its assets or properties, at
law or in equity, by or before any court or governmental
department, agency or instrumentality (an "Authority") that
question the validity of this Agreement or seek to prohibit,
enjoin or otherwise challenge the consummation of the
transactions contemplated hereby and no party has manifested an
intention to commence such action, suit, investigation or
proceeding. There are presently no outstanding orders,
judgments, injunctions, stipulations, awards, decrees or orders
of any Authority against the Buyer or any of its assets or
properties which prohibit or enjoin the consummation of the
transactions contemplated hereby.
3.9 Financing. Buyer has obtained letters regarding finan
cing from bona fide financial institutions in connection with the
transactions contemplated hereby, copies of which letters have
been delivered to Merisel.
3.10 Disclosure. No representation or warranty by Buyer in
this Agreement, and no exhibit, statement, certificate or
schedule furnished or to be furnished to Sellers pursuant hereto,
or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact,
or omits or will omit to state a fact necessary to make the
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statements or facts contained herein or therein not misleading or
necessary to provide Sellers with adequate and complete
information as to Buyer and its affairs.
ARTICLE 4
CERTAIN OBLIGATIONS OF THE PARTIES
4.1 Conduct of Business Pending Closing. From and after
the date hereof and to and including the Closing Date, and unless
Buyer shall otherwise consent or agree in writing, Sellers
covenant and agree that:
(a) Ordinary Course. The businesses of Latin America,
Mexico and each of the Subsidiaries will be conducted only in the
ordinary course and consistent with past practice, including
billing, shipping and collection practices, inventory
transactions and payment of accounts payable except as indicated
in Sections 4.8 and 4.10 and except that Seller may sell
inventory and collect accounts receivable so as to minimize
adjustments to the Purchase Price.
(b) Preservation of Businesses. Except as set forth in
Schedule 4.1, Sellers, Latin America, Mexico and each of the
Subsidiaries will use all reasonable efforts to preserve the busi
ness organizations of Latin America, Mexico and each of the Sub
sidiaries intact, and except as may otherwise be required by this
Agreement, will not, without the prior consent of Buyer which con
sent will not be unreasonably withheld, terminate the services of
the present officers and key employees of Latin America, Mexico
or any of the Subsidiaries, and will use all reasonable efforts
to preserve for Buyer the good will of the suppliers, customers
and others having business relations with Latin America, Mexico
and each of the Subsidiaries.
(c) Material Transactions. Except as set forth on Schedule
4.1(c), Sellers will not permit Latin America, Mexico or any of
the Subsidiaries to:
(i) amend its articles of incorporation or bylaws;
(ii) change its authorized or issued equity interests or
issue any rights or options to acquire shares of its equity
interests;
(iii) enter into or commit to enter into any Material
Contract except in the ordinary course of business;
(iv) enter into any employment or consulting contract or
arrangement except in the ordinary course of business with any
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person that is not terminable at will, without penalty or
continuing obligation to the Buyer;
(v) sell, transfer, lease or otherwise dispose of any of
its assets other than inventory, receivables and obsolete
equipment in the ordinary course of business and consistent with
past practice;
(vi) except as set forth in Schedule 4.1, incur, create or
assume any mortgage, pledge, lien, restriction, encumbrance,
tenancy, encroachment, covenant, condition, right-of-way,
easement, claim, security interest, charge or other matter affect
ing title on any of its assets or other property, except
Permitted Encumbrances;
(vii) except as set forth in Schedule 4.1, make,
change or revoke any tax election or make any agreement or
settlement with any taxing authority;
(viii) declare or pay any dividend or other dis
tribution (except in respect of the payment of any Taxes) in
respect of any of its equity interests, or make any payment to
redeem, purchase or otherwise acquire, or call for redemption,
any of such equity interests; provided, however, that this subsec
tion shall not apply to the European Subsidiaries;
(ix) except to the extent set forth in Schedule 4.1,
increase or otherwise change the compensation payable or to
become payable to any officer, employee or agent;
(x) make or authorize the making of any capital
expenditure in excess of $50,000 in the aggregate;
(xi) except as set forth in Schedule 4.1, incur any
debt or other obligation for money borrowed;
(xii) incur any other obligation or liability,
absolute or contingent except in the ordinary course of business
and consistent with past practice;
(xiii) cancel or permit the waiver of any right
material to the operation of the business of Latin America,
Mexico or any Subsidiary relating to any of its suppliers listed
on Exhibit D or any customers representing individually in excess
of 5% and in the aggregate more than 10% of sales in the 18
months ended June 30, 1996 of any of Europe, Latin America,
Mexico or any Subsidiary;
(xiv) guarantee or become a co-maker or accommodation
maker or otherwise become or remain contingently liable in
connection with any liability or obligation of any person other
than endorsement of checks received for deposit;
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(xv) loan, advance funds or make an investment in or
capital contribution to any person, except advances made in the ordinary
course of business to employees in the ordinary course of
business consistent with past practices;
(xvi) increase any prepaid expenses or other in
tangible asset the full right, title, interest and benefit of
which will not be available to Latin America, Mexico or the
applicable Subsidiary after Closing (other than ordinary course
one-month prepayments in respect of rent and health insurance);
(xvii) take any action or omit to take any action which
will result in a violation of any applicable law and which could
reasonably be expected to have a Material Adverse Effect or cause
a breach of any Material Contracts;
(xviii) impose or collect any intercompany charge with
respect to Latin America or Mexico in excess of the average of
the amounts charged during the months of April, May and June of
1996 other than with respect to products saleable in the ordinary
course of business at normal markups at "arms length" prices; or
(xix) enter into any agreement to do any of the
foregoing.
(xx) Notwithstanding any of the foregoing, nothing in this
Agreement shall prohibit Merisel from engaging in intercompany
transactions with any of its subsidiaries other than Latin
America and Mexico, or Europe from engaging in any intercompany
transactions with any of the European Subsidiaries, provided
that, except with respect to Latin America, Mexico and the
Subsidiaries other than the European Subsidiaries, all such inter
company transactions shall be permitted so long as they are
settled or forgiven on or prior to the Closing Date and are in
accordance with Section 4.1(c)(xviii) above.
4.2 Insurance. Sellers shall cause Latin America, Mexico
and each of the Subsidiaries to maintain in full force and effect
the policies of insurance listed on Schedule 2.24, subject only
to variations required by the ordinary operations of its
business, or else will use its reasonable efforts to obtain,
prior to the lapse of any such policy, substantially similar
coverage with insurers of recognized standing and approved in
writing by the Buyer. Sellers shall promptly advise the Buyer in
writing of any change of insurer or type of coverage in respect
of the policies listed on Schedule 2.24.
4.3 Fulfillment of Agreements by Sellers. Sellers shall
use their reasonable efforts to cause all of the conditions to
the obligations of Buyer under Section 5.1 of this Agreement to
be satisfied on or prior to the Closing, including, but not
limited to, not permitting Latin America, Mexico or any of the
Subsidiaries to take any action, omit to take any action or
permit to occur any event that would make any of the representa
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tions and warranties of Sellers contained herein untrue. Sellers
shall cause Latin America, Mexico and each Subsidiary to use
their reasonable efforts, to conduct their business in such a
manner that at the Closing the representations and warranties of
Sellers contained in this Agreement shall be true and correct as
though such representations and warranties were made on, as of,
and with reference to such date. Sellers will promptly notify
Buyer in writing of any event or fact which represents a breach
of any of its representations, warranties, covenants or
agreements. To the extent that the Sellers have Knowledge of the
same, Sellers shall promptly advise Buyer in writing of the
occurrence of any condition or development of a nature that is
materially adverse to the business, operations, properties,
assets or conditions (financial or otherwise) of Europe, Latin
America, Mexico or any of the Subsidiaries.
4.4 Access, Information and Documents. Sellers will cause
Latin America, Mexico and each of the Subsidiaries to give to
Buyer and to Buyer's counsel, accountants and other
representatives full access during normal business hours to all
of their respective properties, books, tax returns, contracts,
commitments, records, officers, personnel and accountants and
will furnish to Buyer all such documents and copies of documents
(certified to be true copies if requested) and all information
with respect to the affairs of Latin America, Mexico and each of
the Subsidiaries as Buyer may reasonably request. Sellers shall
further cause the counsel for each of Europe, Mexico, Latin
America and the Subsidiaries to cooperate with Buyer and hereby
waive any claim of confidentiality with respect to Buyer's access
pursuant this Section 4.4. Without limiting the generality of
the foregoing, the Buyer shall have the right to have a
reasonable number of its representatives present on-site and have
access, from time to time, to all facilities of Latin America,
Mexico and the Subsidiaries during business hours for the purpose
of monitoring the activities conducted.
4.5 Exclusivity. Sellers shall not and shall ensure that
none of Latin America, Mexico or any of the Subsidiaries or any
of their affiliates, officers, directors, employees and other
agents, directly or indirectly (x) take any action to encourage,
solicit or initiate any Acquisition Proposal (as hereinafter
defined), or (y) respond to, continue, initiate or engage in
discussions or negotiations concerning any Acquisition Proposal
with, or disclose any non-public information relating to Europe,
Latin America, Mexico or any of the Subsidiaries to or afford
access to their properties, books or records to, any person
(except Buyer and its representatives). Sellers shall provide
the Buyer with notice and copies of any Acquisition Proposal
received by Sellers not later than twenty-four (24) hours after
receipt. The term "Acquisition Proposal" as used herein means
any offer or proposal for, or indication of interest in, any
acquisition of Europe, Latin America, Mexico or any of the
Subsidiaries, whether by way of a merger, consolidation or other
business combination involving any equity interest in, or a
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substantial portion of the assets of Europe, Latin America,
Mexico or any of the Subsidiaries.
4.6 Section 338(h)(10) Election. Merisel and Buyer shall,
at Buyer's request, make a joint election under section
338(h)(10) of the Code with respect to the purchase of the stock
of the companies listed on Schedule 4.6 (the "Consolidated
Group"). Buyer represents that it is qualified to make such elec
tion. Buyer and Sellers shall (i) negotiate in good faith and
agree to an allocation of the Purchase Price among the assets of
companies that are deemed to have been acquired pursuant to
section 338(h)(10) of the Code (the "Section 338 Asset Allocation
Schedule") on a basis consistent with the preliminary asset
allocation schedule set forth in Schedule 4.6 and (ii) on the
Closing Date, exchange completed and properly executed copies of
Internal Revenue Service Form 8023-A and required schedules
related thereto, all of which are to be prepared on a basis
consistent with the Section 338 Asset Allocation Schedule. If
any changes are required to be made to these forms or schedules
(including the Section 338 Asset Allocation Schedule) as a result
of information that first becomes available after the Closing
Date, the parties shall promptly and in good faith reach an
agreement as to the precise changes required to be made. The
parties shall use the Section 338 Asset Allocation Schedule for
purposes of preparing all reports and returns with respect to
Taxes, including, if necessary, Internal Revenue Service Form
8594.
4.7 Resignations. At the Closing, Sellers will deliver the
written resignation of each of Latin America's, Mexico's and each
of the Subsidiaries' directors, officers, trustees, plan adminis
trators and fiduciaries of the Benefit Plans. Each of Europe,
Latin America, Mexico and each of the Subsidiaries shall also
deliver to Buyer evidence satisfactory to Buyer, in its sole dis
cretion, of the revocation of any powers of attorney or any
authorization of any person to draw on the bank accounts set
forth on the list prepared pursuant to Schedule 5.1(xix) of this
Agreement.
4.8 Accounts Payable. With respect to each of Latin
America, Mexico and the Subsidiaries, Sellers shall use their
reasonable efforts to obtain the consent of the ten vendors and
suppliers listed on Exhibit D from which the Subsidiaries
purchased the greatest volume of products in the eighteen months
ended June 30, 1996, to the deferral of payment of accounts and
shall cause the Subsidiaries not to pay any accounts payables to
the extent that the respective vendor or supplier shall have
consented to such payment deferral; provided, however, that the
obtaining of such consents and the failure to pay accounts
payable to the vendors so consenting shall not constitute a
breach of any representation, warranty or covenant of Sellers
hereunder.
4.9 Fulfillment of Agreements by Buyer. Buyer shall use
its reasonable efforts to cause all of the conditions to the
obligations of Sellers under Section 5.2 of this Agreement to be
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satisfied on or prior to the Closing. Buyer shall use its best
efforts to conduct its business in such a manner that at the
Closing the representations and warranties of Buyer contained in
this Agreement shall be true and correct as though such
representations and warranties were made on, as of, and with
reference to such date. Buyer will promptly notify Merisel in
writing of any event or fact which represents a breach of any of
its representations, warranties, covenants or agreements.
4.10 Elimination of 30-Day Automatic Return Policy.
Effective upon the signing of this Agreement, Europe (with
respect to the European Subsidiaries) and each Subsidiary shall
discontinue any existing 30-day automatic return policy;
provided, however, that the discontinuance of such return policy
shall not constitute a breach of any representation, warranty or
covenant of Sellers hereunder.
ARTICLE 5
CONDITIONS TO CLOSING; TERMINATION
5.1 Conditions Precedent to Obligations of Buyer. The
obligations of Buyer to proceed with the Closing under this
Agreement are subject to the fulfillment prior to or at Closing
of the following conditions (any one or more of which may be
waived in whole or in part by Buyer at Buyer's option):
(i) Bringdown of Representations and Warranties. The
representations and warranties of Sellers in this Agreement shall
be true and correct in all material respects on and as of the
time of Closing, with the same force and effect as though such
representations and warranties had been made on, as of and with
reference to such time and Buyer shall have received a certi
ficate to such effect, signed by Sellers.
(ii) Performance and Compliance. Sellers shall have
performed all of the covenants and complied with all of the
provisions required by this Agreement to be performed or complied
with by them on or before the Closing, and Buyer shall have
received a certificate to such effect, signed by Sellers.
(iii) Accounts Receivable Certificate. Buyer shall
have received a certificate from the Chief Executive Officer of
Merisel certifying as to a summary of the amount and an aging of
the accounts and notes receivable of Latin America, Mexico and
each of the Subsidiaries and a certificate of the Chief Executive
Officer of Europe certifying as to a summary of the amount and an
aging of the accounts and notes receivable of each of the
European Subsidiaries as of the close of business on the last day
of the month prior to the date of Closing.
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(iv) Satisfactory Instruments. All instruments and
documents required on Sellers' part to effectuate and consummate
the transactions contemplated hereby shall be delivered to Buyer
and shall be in form and substance reasonably satisfactory to
Buyer and its counsel.
(v) Required Consents. All consents and approvals
of third parties, including consents of those vendors representing 90% of
purchases for the eighteen months ended June 30, 1996 by Europe,
Latin America, Mexico or the Subsidiaries from the vendors
identified on Exhibit D, but excluding all other vendors to Latin
America, Mexico or any Subsidiary to the transactions
contemplated hereby shall have been obtained, and all waiting
periods specified by law the passing of which is necessary for
the consummation of such transactions (including without
limitation any waiting periods under applicable governmental
laws) shall have passed or been terminated.
(vi) Litigation. No order of any court or
administrative agency shall be in effect which restrains or
prohibits the transactions contemplated hereby or which would
materially adversely affect Buyer's ownership or control of Latin America,
Mexico, or any of the Subsidiaries or their respective businesses
or the Europe Assets or seeking monetary relief by reason of the
consummation of such transactions, and there shall not have been
threatened, nor shall there be pending, any such action or
proceeding by or before any court or governmental agency or other
regulatory or administrative agency or commission.
(vii) Executive Management. Sellers shall have
terminated, without cost to any of Europe, Latin America, Mexico
or any of the Subsidiaries, and without liability to any of the
foregoing, all employment and other agreements with those
individuals listed on Schedule 5.1; provided, however, that if
Buyer or its affiliates rehire any individual listed on Schedule
5.1 prior to or on the date of Closing, or within one year
thereafter, Buyer will reimburse Sellers for any severance costs
paid by them to such individual.
(viii) Related Party Receivables and Payables. All
loans or payables by Europe, Latin America, Mexico, or any of the
Subsidiaries to, and any receivables of Europe, Latin America,
Mexico or any Subsidiary from, any Related Party shall have been
repaid or forgiven in full and there shall be no outstanding
debts or obligations (including, without limitation, amounts
outstanding under the Revolving Credit Agreement and any
intercompany tax accounts) between any Related Party on the one
hand, and Europe, Latin America, Mexico, or any of the
Subsidiaries on the other hand.
(ix) Escrow Agreement. Sellers and the Escrow Agent shall
have executed and delivered the Escrow Agreement to Buyer.
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(x) Material Changes. Since the date hereof, there shall
not have been any material adverse change in the financial
condition, assets, liabilities, net worth, earning power or
business of Latin America, Mexico, or any of the Subsidiaries,
and Buyer shall have received a certificate to such effect,
signed by Sellers and the chief executive officer of Sellers.
(xi) Permits and Licenses Required. Buyer shall have
received all licenses, permits and certificates and governmental
approvals listed on Schedule 2.16 applicable to it.
(xii) Lender Release. The European Assets and Latin
America, Mexico and each of the Subsidiaries and all of their
assets shall have been released from any liability under the
Revolving Credit Agreement and any liens arising under said agree
ment on any of their assets shall have been released.
(xiii) Use of Merisel Name. Merisel and/or Europe, as
may be required, shall have granted, for no additional con
sideration, to Buyer the right and license to the unrestricted
use of the "Merisel" name for a period of one year commencing on
the Closing Date in the countries located on the continents of
Europe (including Eastern Europe but excluding the Russian
Federation) and South America, in each country in Latin America
and in Mexico.
(xiv) CAMBAR System. Sellers shall have provided
Buyer with the use of the CAMBAR System for no longer than 90
days after the Closing Date; provided, however, that Sellers
shall not be responsible for the successful transmission
(uploading) of data from remote systems to CAMBAR. Use of the
CAMBAR System shall include use of the McCormick & Dodge
financial software package, a license for the use of Sales net
for DOS and source code technical support for downloads, use of
the Dell EDI, network access to ISSC (from Los Angeles,
California to Boulder, Colorado) and utilization of two United
States based employees to support the system. Such license shall
(A) provide for the payment to Sellers of $100,000 per 30-day
month, (B) be terminable at any time by Buyer at its election
without the payment by Buyer of any additional consideration and
(C) include access to the source code but with no right to modify
the same. The operation of the CAMBAR system by Buyer for 90
days shall be in accordance with past practice.
(xv) TOLAS System. Sellers shall transfer to Buyer their
rights with respect to the use of the TOLAS System; provided that
Buyer shall have assumed all obligations with respect thereto.
Such use shall include access to the source code and the right to
modify the same. Sellers shall have no right to any improvements
or modifications of said system.
(xvi) SBT System and Site Licenses. Sellers shall
have transferred to Buyer their rights with respect to the use of
the SBT System; provided that Buyer shall have assumed all
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obligations with respect thereto. Such use shall include access
to the respective source codes and the right to modify the same.
Sellers shall have no right to any improvements or modifications
of said system and uses by Buyer.
(xvii) SoftTeach Trademark and Program. Sellers shall
have allowed Buyer, without additional charge, the non-exclusive
right to use the SoftTeach trademark program in the countries
located on the continent of Europe (including Eastern Europe, but
excluding the Russian Federation) and South America, in each
country in Latin America and in Mexico for a period of one year
commencing on the Closing Date and shall execute any and all
assignment documents reasonably required by Buyer to permit the
registration of said mark in the name of Buyer or any of its
assignees in all jurisdictions in which the mark is registered.
(xviii) Estoppel Certificates. To the extent reasonably
available, Seller shall have delivered to Buyer an original land
lord estoppel certificate and consent in substantially the form
attached hereto and made a part hereof as Exhibit C
(collectively, the "Landlord Estoppel Certificates") from each
landlord and sub-landlord, if any, under each Lease of real
property.
(xix) Bank Accounts. Sellers shall have provided a
list setting forth the name of each bank in which Latin America,
Mexico and each Subsidiary has an account or safe deposit box,
the identifying numbers or symbols thereof and the names of all
persons authorized to draw thereon or to have access thereto.
(xx) Miami, Florida Lease. Sellers shall have delivered to
Buyer an assignment of the lease or a sublease and agreements set
forth on Schedule 5.1(xx) to the extent permitted by the terms of
such agreements; provided, in each case that Buyer assumes all
obligations thereunder.
(xxi) Financing. Financing necessary to fund the
Purchase Price shall have been obtained by Buyer in connection
with the transactions contemplated hereby on terms reasonably
satisfactory to Buyer.
5.2 Conditions Precedent to the Obligations of Sellers.
The obligation of Sellers to proceed with the Closing hereunder
is subject to the fulfillment prior to or at Closing of the
following conditions (any one or more of which may be waived in
whole or in part by Sellers at Sellers' option):
(i) Bringdown of Representations and Warranties. The
representations and warranties of Buyer contained in this
Agreement shall be true and correct in all material respects on
and as of the time of the Closing, with the same force and effect
as though such representations and warranties had been made on,
as of and with reference to such time and Buyer shall have
delivered to Sellers a certificate to such effect.
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(ii) Performance and Compliance. Buyer shall have performed
in all material respects all of the covenants and complied in all
material respects with all the provisions required by this
Agreement to be performed or complied with by it on or before the
Closing and Buyer shall have delivered to Sellers a certificate
to such effect.
(iii) Litigation. No order of any court or admin
istrative agency shall be in effect which restrains or prohibits
the transactions contemplated hereby and there shall not have
been threatened, nor shall there be pending, any action or
proceeding by or before any court or governmental agency or other
regulatory or administrative agency or commission, challenging
any of the transactions contemplated by this Agreement or seeking
monetary relief by reason of the consummation of such
transactions.
(iv) Satisfactory Instruments. All instruments and
documents required on the part of Buyer to effectuate and con
summate the transactions contemplated hereby shall be delivered
to Sellers and shall be in form and substance reasonably
satisfactory to Merisel and its counsel.
(v) Required Consents. All consents and approvals of all
governmental departments, agencies, authorities and commissions
required for the transactions contemplated hereby shall have been
obtained, and all waiting periods specified by law the passing of
which is necessary for the consummation of such transactions
(including without limitation any particular waiting periods)
shall have passed or been terminated.
(vi) Escrow Agent. Buyer and Escrow Agent shall have
executed and delivered the Escrow Agreement to Sellers.
(vii) DFS Release. Sellers and all of their assets
shall have been released from any liability under the Asset
Amortization Agreement and any liens arising under said agreement
on any of their assets shall have been released.
(viii) Lender Consents. All consents and approvals of
all lenders for borrowed money of either or both of Merisel or
Europe required for the transactions contemplated hereby shall
have been obtained on terms reasonably satisfactory to Sellers,
including without limitation, the rescheduling of amortization
payments and obtaining covenant amendments on terms reasonably
satisfactory to Sellers.
5.3 Termination.
(a) When Agreement May Be Terminated. This Agreement may
be terminated at any time prior to Closing:
(i) By mutual consent of Buyer and Sellers;
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(ii) By Buyer if the representations and warranties of
Sellers contained in this Agreement shall not be true and correct
in all material respects as at any date prior to Closing, or if
Sellers shall have failed to perform all of the covenants and
comply with all of the provisions required by this Agreement to
be performed or complied with by them on or before the Closing
unless such are not material in the aggregate, or if any of the
conditions specified in Section 5.1 hereof shall not have been
fulfilled by the time required and shall not have been waived by
Buyer;
(iii) By Merisel if the representations and warranties
of Buyer contained in this Agreement shall not be true and
correct in all material respects as at any date prior to Closing,
or Buyer shall have failed to perform all of the covenants and
comply with all of the provisions required by this Agreement to
be performed or complied with by it on or before the Closing
unless such are not material in the aggregate or if any of the
conditions specified in Section 5.2 hereof shall not have been
fulfilled by the time required and shall not have been waived by
Seller; or
(iv) By Buyer or Merisel, if the Closing shall not have
occurred prior to November 29, 1996; provided, that Buyer or
Merisel may terminate this Agreement pursuant to this subpara
graph (iv) only if Closing shall not have occurred by such date
for a reason other than a failure by such party to satisfy the
conditions to Closing of the other party set forth in Section 5.1
or 5.2 hereof.
(v) Notwithstanding the provisions of (ii) or (iii)
above,in the event that Buyer does not proceed with the Closing on
September 27, 1996 as a result of its failure to obtain financing
pursuant to Section 5.1(xxi) or Sellers do not proceed with the
Closing on September 27, 1996 as a result of their failure to
obtain lender consents pursuant to Section 5.2(viii) hereof, then
the Closing shall be extended to such date as the financing or
consents are obtained, but in no event beyond November 29, 1996.
(b) Effect of Termination. In the event of termination of
this Agreement by either Merisel or Buyer, as provided above,
this Agreement shall forthwith terminate and there shall be no
liability on the part of the Sellers or Buyer, except for lia
bilities arising from a material breach of this Agreement prior
to such termination; provided, however, that the obligations of
the parties set forth in Section 6.4 and 6.5 hereof shall survive
such termination and further provided that if at any time prior
to December 7, 1996, Sellers accept an Acquisition Proposal and
at such time as this Agreement is terminated Buyer is not in
material breach of its obligations hereunder and Buyer had the
financial ability to consummate this transaction, then Sellers
shall pay Buyer a fee equal to Three Million Dollars
($3,000,000). Notwithstanding any of the foregoing, if Buyer
does not proceed with the Closing under this Agreement as a
result of its failure to obtain financing pursuant to Section
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5.1(xxi) hereof, or if Sellers do not proceed with the Closing
under this Agreement as a result of their failure to obtain
lender consents pursuant to Section 5.2(viii) hereof, then the
party which failed to satisfy such condition shall reimburse the
other party's reasonable out-of-pocket expenses incurred in
connection with the negotiation of this Agreement and the
consummation of the transactions contemplated hereby up to a
maximum of $500,000. Sellers acknowledge that the agreements
contained in this Section are an integral part of the
transactions contemplated by this Agreement and that, without
these agreements, Buyer would not enter into this Agreement.
Accordingly, if Sellers fail to pay any amounts pursuant to this
Section and, in order to obtain such payment, legal action is
commenced which results in a judgment against Sellers therefor,
Sellers will pay the plaintiff's reasonable costs (including
reasonable attorneys' fees) in connection with such suit,
together with interest computed on any amounts determined pur
suant to this Section (computed from the date when such amounts
were due and payable pursuant to this Section) and such costs
(computed from the date or dates incurred) at the prime rate of
interest announced from time to time by Citibank, N.A. Sellers'
obligations pursuant to this Section will survive any termination
of this Agreement.
ARTICLE 6
CERTAIN ADDITIONAL COVENANTS
6.1 Costs and Expenses. Sellers will pay all costs and
expenses, including legal fees, in connection with the per
formance of and compliance with this Agreement by Sellers, Latin
America, Mexico and the Subsidiaries, and all transfer, documen
tary and similar taxes in connection with the delivery of the
shares of Stock to be made hereunder. Buyer will pay all costs
and expenses, including legal fees, of Buyer's performance of and
compliance with this Agreement, except for the fees paid to
Deloitte & Touche, L.L.P. pursuant to Section 1.2(c).
6.2 Covenant Not to Compete. For a period of three years
from and after the Closing, neither the Sellers nor any of their
affiliates, will, in any country located on the continent of
Europe (excluding the Russian Federation) or South America, any
country in Latin America or in Mexico, directly or indirectly,
own, manage, operate, join, control or participate in the
ownership, management, operation or control of, any business
conducting business under any name similar to the name of Latin
America, Mexico or any Subsidiary. For a period of three years
from and after the Closing, neither the Sellers nor any of their
affiliates will, directly or indirectly, own, manage, operate,
join, control or participate in the ownership, management, opera
tion or control of, any entity, person, firm, corporation or busi
ness that engages in the Business in, or sells to customers
either located in or sells to customers which sell to end users
located in any country located on the continent of Europe
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(excluding the Russian Federation) or South America, any country
in Latin America or in Mexico; provided, however that any bona
fide third party acquiror of the stock or all or substantially
all of the assets of Merisel shall be subject to only the
provisions of the first sentence of this Section 6.2. For
purposes of this Agreement, the term "Business" includes
distribution of microcomputer products, networking products and
software. The restrictive covenant contained in this Section is
a covenant independent of any other provision of this Agreement
and the existence of any claim which Sellers may allege against
Buyer, whether based on this Agreement or otherwise, will not
prevent the enforcement of this covenant. Sellers agree that
Buyer's remedies at law for any breach or threat of breach by
Sellers of the provisions of this Section will be inadequate, and
that Buyer shall be entitled to an injunction or injunctions to
prevent breaches of the provisions of this Section and to enforce
specifically the terms and provisions hereof, in addition to any
other remedy to which Buyer may be entitled at law or equity. In
the event of litigation regarding the covenant not to compete,
the prevailing party in such litigation shall, in addition to any
other remedies the prevailing party may obtain in such
litigation, be entitled to recover from the other party its rea
sonable legal fees and out of pocket costs incurred by such party
in enforcing or defending its rights hereunder. The length of
time for which this covenant not to compete shall be in force
shall not include any period of violation or any other period
required for litigation during which Buyer seeks to enforce this
covenant. Should any provision of this Section be adjudged to
any extent invalid by any competent tribunal, such provision will
be deemed modified to the extent necessary to make it
enforceable.
6.3 Confidential Information. Sellers acknowledge that for
a period of three years after the Closing, Buyer could be irrepar
ably damaged if Sellers' or any of their affiliates' confidential
knowledge of the operations of Latin America, Mexico and the Sub
sidiaries were disclosed to or utilized on behalf of any person,
firm, corporation or other business entity other than Buyer or
its affiliates, and Sellers covenant and agree that they will not
following the Closing, without the prior written consent of
Buyer, disclose (or permit to be disclosed) or use in any way any
such confidential information, unless (i) compelled to disclose
such confidential information by judicial or administrative
process or, in the opinion of its counsel, by other requirements
of law, or (ii) such confidential information is generally
available to the public through no fault of Sellers.
6.4 Indemnification By Sellers.
(a) Extent of Indemnity. Sellers hereby agree to
indemnify, defend and hold harmless Buyer and its affiliates from
and against:
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(i) any and all claims, actions, proceedings, judgments,
damages, losses, costs, expenses or liabilities incurred or
suffered by, or brought or made against Buyer arising out of or
resulting from any misrepresentation, breach of warranty or non
fulfillment of any covenant or agreement on the part of Sellers
contained in this Agreement or in any statement or certificate
furnished or to be furnished to Buyer pursuant to this Agreement;
(ii) any actions, judgments, costs and expenses (including
reasonable attorneys' fees and all other expenses reasonably
incurred in investigating, preparing or defending any litigation
or proceeding, commenced or threatened) incident to any such
breach or nonfulfillment, including the enforcement of this
Section in connection therewith.
For purposes of this Agreement, the aggregate amount of such
losses, liabilities, claims, obligations, damages, costs,
expenses and fees shall be hereinafter referred to as "Damage" or
"Damages". In addition, the amount of any Damages for which
indemnification may be sought hereunder shall be determined on an
after-tax basis. Notwithstanding the foregoing, Sellers, with
respect to the European Subsidiaries, shall have no liability to
Buyer for a breach of Sections 2.11 and 2.12 unless and until the
value of any claims shall have exceeded the total of the
adjustments made pursuant to items (i) through (v) on Exhibit A
with respect to Section 2.11 and items (vi) through (ix) with
respect to Section 2.12, respectively. With respect to Latin
America and Mexico, Sellers shall have no liability unless and
until the value of any claims shall have exceeded the adjustments
made pursuant to Section 1.2(d)(ii) but in no event in excess of
$2,000,000.
(b) Time Limit on Certain Indemnification Claims. No
action or claim for Damages resulting from breaches of the repre
sentations and warranties of Sellers shall be brought or made
after the expiration of a one-year period from the Closing Date,
as the case may be, except that such time limitation shall not
apply to (i) claims for misrepresentations or breaches of
warranty relating to Section 2.10 (relating to Taxes), which may
be asserted until 60 days after the running of the applicable
statute of limitations with respect to the taxable period to
which the particular claims relate, (ii) claims for misrepresenta
tions or breaches of warranty relating to Sections 2.15 or 2.26,
which may be asserted until three years following the Closing,
(iii) any claims which have been the subject of a good faith
written notice from Buyer to Sellers prior to the expiration of
any of the foregoing periods, which notice specifies in
reasonable detail the nature of the claim and that Buyer requests
indemnity hereunder, or (iv) claims for misrepresentations or
breaches of warranty related to Sections 2.11 or 2.12, which may
not be asserted after the calculation of the post-closing
adjustment as finally determined by the Resolution Accountants
pursuant to Section 1.2 hereof and any claims based thereon shall
be resolved by such Resolution Accountants at or prior to the
determination of the post-closing adjustment.
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(c) Limitations on Liability. Sellers shall not be liable
to Buyer for breaches of representations and warranties under
Section 6.4(a) unless the cumulative total of Damages for
breaches of representations and warranties under Section 6.4(a)
including any amounts that would not individually give rise to a
breach because they are not otherwise material, exceeds
$1,000,000 (less any amount that would have constituted an
adjustment to the Purchase Price but for the fact it was less
than $250,000 pursuant to Section 1.2(c)(i)), and then only to
the extent of such excess.
(d) Certain Matters Excluded. Notwithstanding anything to
the contrary in this Section 6.4, no limitation or condition of
liability provided in this Section shall apply to the breach of
any of the representations and warranties contained herein if
such representation or warranty was made in bad faith with the
intent that (i) it contain an untrue statement of a material fact
or (ii) omit to state a material fact necessary to make the state
ments or facts contained therein not misleading.
(e) Continuation of Indemnity. In the event of a merger,
consolidation or other business combination of Merisel with any
other entity (the "Transferee") or any other transaction which
results in the sale, lease, exchange, transfer or other
disposition of all or substantially all of the assets of Merisel
and its affiliates, provision shall be made for the Transferee to
specifically assume the indemnification obligations set forth in
this Agreement.
6.5 Indemnification by Buyer. Buyer hereby agrees to indem
nify and hold harmless Sellers from and against:
(a) any loss, liability, claim, obligation, damage or
deficiency arising out of or resulting from any
misrepresentation, breach of warranty or nonfulfillment of any
covenants, agreement on the part of Buyer contained in this
Agreement or in any statement or certificate furnished or to be
furnished to Sellers pursuant to this Agreement, and
(b) any actions, judgments, costs and expenses (including
reasonable attorneys' fees and all other expenses incurred in
investigating, preparing or defending any litigation or pro
ceeding, commenced or threatened) incident to any of the fore
going or the enforcement of this Section.
6.6 Indemnification Procedures.
(a) The provisions of this Section shall govern any claim
for indemnification by Sellers pursuant to Section 6.4, or by the
Buyer, pursuant to Section 6.5, (each such indemnified party, an
"Indemnitee") against the party or parties agreeing to provide
indemnification hereunder (each such indemnifying party, an
"Indemnitor") with respect to third party claims made against the
Indemnitee.
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(b) The Indemnitee shall promptly give notice hereunder to
the Indemnitor, after obtaining notice of any claim as to which
recovery may be sought against the Indemnitor pursuant to
Sections 6.4 or 6.5, and, the Indemnitor shall have the right to
assume the defense of any such claim; provided, that (x) the
Indemnitee shall not be required to permit the Indemnitor to
assume the defense of any third party claim that seeks an
injunction, restraining order, declaratory relief or other non-
monetary relief that, if granted, is reasonably likely to have a
Material Adverse Effect on the Indemnitee (but Indemnitor shall
have the right to participate therein), and (y) the Indemnitee
shall have the right to participate in the defense of any third
party claim where the named parties to any such action include
both the Indemnitee and the Indemnitor and the Indemnitee shall
have been advised by counsel that there are one or more legal or
equitable defenses available to the Indemnitee which are differ
ent from those available to the Indemnitor. If the Indemnitor
assumes the defense of such claim or litigation resulting there
from, the obligations of the Indemnitor hereunder as to such
claim shall include taking all steps reasonably necessary in the
defense or settlement of such claim or litigation resulting
therefrom including the retention of counsel, which counsel must
be to the Indemnitee's reasonable satisfaction, and holding the
Indemnitee harmless from and against any and all Damage resulting
from, arising out of, or incurred with respect to any settlement
approved by the Indemnitor or any judgment in connection with
such claim or litigation resulting therefrom and so long as the
Indemnitor performs in accordance with this Section, the
Indemnitor shall not be liable to the Indemnitee for any legal or
other expenses subsequently incurred by the Indemnitee in con
nection with the defenses thereof other than reasonable costs of
investigation. The Indemnitor shall not, in the defense of such
claim or litigation, consent to the entry of any judgment or
enter into any settlement involving equitable or non-monetary
damages or claims which in the reasonable judgment of the
Indemnitee would have a continuing Material Adverse Effect on the
Indemnitee's business (including any material impairment of its
relationships with customers and suppliers) except with the
written consent of the Indemnitee, which consent shall not be
unreasonably withheld, unless the Indemnitee is released and held
harmless from and against any and all Damages resulting from,
arising out of or incurred with respect to such judgment or
settlement.
(c) If the Indemnitor shall not assume the defense of any
such claim by a third party or litigation resulting therefrom,
the Indemnitee may defend against such claim or litigation in
such manner as it deems appropriate, provided that the Indemnitee
may not settle such claim or litigation without the consent of
the Indemnitor, which consent shall not be unreasonably withheld
and the Indemnitor shall promptly reimburse the Indemnitee for
the amount of any such settlement and for all Damages incurred by
the Indemnitee in connection with the defense against or
settlement of such claim or litigation.
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(d) The parties hereto shall cooperate in the defense of
any such claims and shall furnish records, information and
testimony, and attend such conferences, discovery, proceedings,
hearings, trials and appeals in each case as may be reasonably
required in connection therewith.
6.7 Claims Against Latin America, Mexico or any Subsidiary.
Notwithstanding any provision in this Agreement to the contrary,
Sellers agree that they shall not be entitled to any indemnifica
tion from, or to make or receive any amount for any claim
against, Latin America, Mexico or any Subsidiary in respect of
any Damage or Damages arising out of or resulting from this
Agreement or the transactions contemplated by this Agreement.
6.8 European Anti-Competition Legislation. Buyer and
Sellers have caused to be filed or will promptly cause to be
filed the required notifications with the applicable European
governmental authorities concerning the nature, terms and
conditions of this Agreement. The parties hereto shall not
intentionally or negligently delay submission of information
requested by any such applicable governmental authority and shall
use their respective reasonable efforts promptly to supply, or
cause to be supplied, such information and shall use their best
efforts to obtain early termination of any applicable waiting
period.
6.9 Brokers. Sellers have engaged Merrill Lynch & Co.,
Inc. as a broker in connection with this transaction, and any
fee, commission or other amount payable to such broker will be
paid by Sellers. Buyer has engaged Raymond James & Associates,
Inc. as a broker in connection with this transaction, and any
fee, commission or other amount payable to such broker will be
paid by Buyer.
6.10 Access. Until the date which is seven years after the
Closing Date, Buyer will give, and will cause Latin America,
Mexico and the Subsidiaries to give, to the Sellers reasonable
access to (and the right to make copies at the expense of the
Sellers) the books, files, records and tax returns of Europe,
Latin America, Mexico and the Subsidiaries to the extent that
such relate to the respective businesses and operations of
Europe, Latin America, Mexico and the Subsidiaries on or prior to
the Closing Date. Any access pursuant to this Section 6.10 will
be conducted by the Sellers in good faith, with a reasonable
purpose and in such manner as not to interfere unreasonably with
the operations of Buyer, Latin America, Mexico or any of the
Subsidiaries following the Closing. None of Buyer, Latin
America, Mexico or any of the Subsidiaries will destroy or
dispose of any such books, files, records or tax returns prior to
the expiration of such seven-year period or such longer period as
may be required by applicable laws.
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6.11 Cooperation With Respect to Tax Matters.
(a) Sellers and Buyers recognize that the entities listed
on Schedule 6.11 (the "Cooperation Group") have joined with
Merisel in filing unitary, consolidated, or combined Tax Returns.
After the Closing Date (i) Merisel shall include (to the extent
required by law) the taxable income or loss, and all other items,
of the Cooperation Group for periods ending before or on the
Closing Date, in its unitary, consolidated or combined Tax
Returns, and (ii) with respect to any other Tax Returns of the
Cooperation Group for any taxable period that includes but does
not end on the Closing Date (the "Straddle Tax Returns"), Sellers
shall prepare a schedule apportioning, on a basis consistent with
the preparation of Sellers' consolidated Federal income tax
return for the taxable period ending on the Closing Date, the
taxable income or loss, and all other items, of the Cooperation
Group allocable to the period up to and including the Closing
Date (the "Pre-Closing Period") and the period after the Closing
Date (the "Post-Closing Period") by an interim closing of the
books as of the end of the day on the Closing Date.
(b) Sellers shall be responsible for, and shall have
ultimate discretion with respect to, (i) all Tax Returns required
or permitted by applicable law to be filed by Latin America with
respect to periods that end on or before the Closing Date, (ii)
any elections related to such Tax Returns, provided, that, any
such election shall be subject to the review of Buyer prior to
the filing of any Tax Returns, and (iii) any Audit (including the
execution of any waiver of limitation with respect to any Audit)
relating to any such Tax Returns; further, Buyer and the
Cooperation Group shall cooperate with Sellers for the purpose of
making any election under applicable law. Sellers shall consult
in good faith with Buyer in respect to the issues set forth in
this Section 6.11(b).
(c) Buyer and the Cooperation Group shall be responsible
for, and shall have ultimate discretion with respect to, (i) all
Tax Returns required to be filed by the Cooperation Group with
respect to periods that begin after the Closing Date and (ii) the
Straddle Tax Returns, if any, and (iii) any Audit (including the
execution of any waiver of limitation with respect to any Audit)
relating to any such Tax Returns; provided, however, that (x) in
the case of any Straddle Tax Return, the preparation and filing
of such Return shall be subject to review and approval of
Sellers, and (y) in the event that any Audit for which Buyer or
the Cooperation Group is responsible pursuant to this Section
6.11(c) could reasonably be expected to result in a material
increase in Tax liability for which the Sellers would be liable,
Buyer shall consult in good faith with Sellers in respect of the
specific issues that could give rise to such increased Tax
liability.
(d) After the Closing Date, each of Buyer and the members
of the Cooperation Group on the one hand, and Sellers, on the
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other, shall (i) provide, or cause to be provided, to each
other's respective subsidiaries, officers, employees, representa
tives and affiliates, such assistance as may reasonably be
requested by any of them in connection with the preparation of
any Tax Return or any Audit of the companies in respect of which
Buyer, the members of Cooperation Group or Sellers, as the case
may be, is responsible pursuant to Section 6.11(b) or (c) hereof
and (ii) retain, or cause to be retained, for so long as any such
taxable years or Audits shall remain open for adjustments, any
records or information which may be relevant to any such Tax
Returns or Audits. The assistance provided for in this Section
6.11 shall include without limitation each of Buyer, the members
of the Cooperation Group and Sellers (x) making their agents and
employees and the agents and employees of their respective
subsidiaries and affiliates available to each other on a mutually
convenient basis to provide such assistance as might reasonably
be expected to be of use in connection with any such Tax Returns
or Audits and (y) providing, or causing to be provided, such
information as might be reasonably expected to be of use in
connection with any such Tax Returns or Audits, including without
limitation records, returns, schedules, documents, work papers,
opinions, letters or memoranda, or other relevant materials
relating thereto.
(e) Each of Buyer, the members of the Cooperation Group and
Sellers, shall promptly inform, keep regularly apprised of the
progress with respect to, and notify the other party in writing
not later than (i) ten business days after the receipt of any
notice of any Audit, or (ii) fifteen business days prior to the
settlement or final determination of any Audit for which it was
responsible pursuant to Section 6.11(b) or (c) hereof which could
affect the Tax liability of such other party for any taxable
year.
6.12 Released Obligations. Buyer will indemnify Sellers
from and against any and all claims, actions, proceedings,
judgments, damages, losses, costs, expenses or liabilities
incurred or suffered by, or brought or made against Sellers with
respect to any accounts payable reflected on the Europe and
Latin/Mexico Closing Balance Sheet and any accounts payable of
Latin America or Mexico guaranteed by Sellers in existence at the
Closing and the leases and agreements being transferred or
assigned through the transfer of stock or otherwise under this
Agreement to the extent that the existence of any of the
foregoing does not constitute a breach of any representation or
warranty contained in this Agreement and will enter into an
agreement reasonably satisfactory to Sellers with respect to such
guarantees set forth on Schedule 6.12.
6.13 Employee Obligations. Seller agrees to indemnify Buyer
against all claims and liabilities arising from any Plan (as
defined in Section 2.26(a)) or any obligations thereunder or
liabilities relating thereto (the "Employee Benefits") arising
prior to the Closing Date to the extent that such claims or
liabilities are not reflected as a liability on the Europe and
Latin/Mexico Closing Balance Sheet; and Buyer agrees to indemnify
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Seller and its affiliates against all claims and liabilities
arising from any Employee Benefits arising on or after the
Closing Date or reflected as a liability on the Europe and
Latin/Mexico Closing Balance Sheet.
6.14 Reduction of Intercompany Balances. Sellers shall
cause Latin America, Mexico and the Subsidiaries to use all cash
and marketable securities held by them to repay outstanding bal
ances to the maximum extent practicable as of the Closing Date.
6.15 Fulfillment Agreement. Latin America and Merisel
Americas, Inc. shall enter into a Fulfillment Agreement on sub
stantially the terms set forth on Schedule 6.15 for a period of
up to one year.
6.16 Audits of Purchased Entities. Sellers shall engage
Deloitte & Touche, LLP to perform audits of the combined
financial statements of the Europe, Latin America, Mexico and the
Subsidiaries for the three years ended December 31, 1993, 1994
and 1995. Buyer shall be responsible for the cost of the same.
ARTICLE 7
MISCELLANEOUS
7.1 Nature and Survival of Representations. The representa
tions, warranties, covenants and agreements of Buyer and Sellers
contained in this Agreement, and all statements contained in this
Agreement or any exhibit or schedule hereto or any certificate,
financial statement or report or other document delivered
pursuant to this Agreement, shall be deemed to constitute
representations, warranties, covenants and agreements of the
respective party delivering the same. All such representations,
warranties, covenants and agreements shall survive the Closing
for the period set forth in Section 6.4(b) of this Agreement.
Sellers acknowledge that their representations and warranties in
this Agreement shall not be affected or mitigated by any
investigation conducted by Buyer or its representatives prior to
Closing or any Knowledge of Buyer.
7.2 Certain Definitions. For the purpose of this
Agreement, the following terms are defined in the Sections
indicated:
Term Section
"1995 Balance Sheets" 2.7
"Accounting Principles" 1.2(c)
"Acquisition Proposal" 4.5
"Amounts Due to or From
Related Parties" 1.2(a)
"Asset Amortization Agreement" 1.2(b)
"Authority" 3.8
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"Balance Sheet Date" 2.7
"Business" 6.2
"Buyer" First Paragraph
"Closing Date" 1.3(a)
"Closing" 1.3
"Code" 2.10(a)
"Consolidated Group" 4.6
"Cooperation Group" 6.11
"Damage" or "Damages" 6.4(a)(ii)
"ERISA Affiliate" 2.26(a)
"ERISA" 2.26(a)
"Escrow Agent" 1.2(b)
"Escrow Agreement" 1.2(b)
"Escrow Payment" 1.2(b)
"Estimated Purchase Payment
Amount" 1.2(b)
"Europe Assets" Page 1
"Europe Cash Payment" 1.2(b)
"Europe and Latin/Mexico
Closing Balance Sheet" 1.2(c)(i)
"Europe Stock" Page 1
"Financial Statements" 2.7
"Governmental Body" 2.10(a)
"Hazardous Substances" 2.15
"Indemnitee" 6.6(a)
"Indemnitor" 6.6(a)
"Intellectual Property" 2.25
"Interim Statements" 2.7(b)
"June Balance Sheet" 2.7
"Latin American Accounting Principles" 1.2(c)(ii)
"Latin/Mexico Stock" Page 1
"Latin/Mexico Cash Payment" 1.2(b)
"Lease" 2.6(j)
"Liens" 2.5
"Material Contract" 2.6
"Minimum Latin/Mexico
Equity Value 1.2(d)(ii)
"Net Assets" 1.2(a)
"Permitted Encumbrances" 2.17
"Purchase Price" 1.2(a)
"Questionable Payment" 2.28
"Regulations" 2.10(a)
"Related Party" 2.19(b)
"Resolution Accountants" Page 1
"Revolving Credit Agreement" 1.2(a)
"Seller" First Paragraph
"Stock" Background
"Tax Return" 2.10(a)
"Tax" or "Taxes" 2.10(a)
"Total Adjusted Capital of
the European Subsidiaries" 1.2(a)
"U.S. GAAP" 1.2(c)
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7.3 Notices. All notices, requests, demands and other com
munications hereunder shall be in writing and shall be deemed to
have been duly given if personally delivered or, if sent by recog
nized overnight courier (in which case they shall be deemed
received on the business day following the day of delivery to
said courier if delivered pursuant to such courier's next day
delivery service) at the following addresses (or at such other
address as shall be given in writing by any party to the other):
If to Buyer, to:
CHS ELECTRONICS, INC.
2153 N.W. 86th Avenue
Miami, Florida 33122
Attention: Claudio Osorio, President
With a required copy to:
Greenberg, Traurig, Hoffman,
Lipoff, Rosen & Quentel, P.A.
1221 Brickell Avenue
Miami, FL 33131
Attention: Paul Berkowitz, Esq.
If to Sellers, to:
Merisel, Inc.
200 Continental Boulevard
El Segundo, California 90245
Attention: Kelly Martin,Esq.
With a required copy to:
Skadden Arps Slate Meagher & Flom
300 South Grand Avenue
Los Angeles, California 90071-3144
Attention: Joseph Giunta, Esq.
7.4 Successors and Assigns. This Agreement, and all rights
and powers granted and obligations created hereby, will bind and
inure to the benefit of and bind the parties hereto and their
respective successors and assigns. Buyer shall have the right to
assign its rights, but not delegate its obligations, under this
Agreement, to an affiliate of Buyer.
7.5 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of
Florida, without giving effect to principles of conflicts of
laws.
7.6 Headings. The headings preceding the text of the sec
tions and subsections hereof are inserted solely for convenience
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of reference, and shall not constitute a part of this Agreement,
nor shall they affect its meaning, construction or effect.
7.7 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but
which together shall constitute one and the same instrument.
7.8 Further Assurances. Each party shall cooperate and
take such action as may be reasonably requested by another party
in order to carry out the provisions and purposes of this
Agreement and the transactions contemplated hereby.
7.9 Amendment and Waiver. The parties may by mutual agree
ment amend this Agreement in any respect, and any party, as to
such party, may (a) extend the time for the performance of any of
the obligations of any other party, (b) waive any inaccuracies in
representations or warranties by any other party, (c) waive
compliance by any other party with any of the agreements
contained herein and performance of any obligations by such other
party, and (d) waive the fulfillment of any condition that is
precedent to the performance by such party of any of its
obligations under this Agreement. To be effective, any such
amendment or waiver must be in writing and be signed by the party
against whom enforcement of the same is sought.
7.10 Entire Agreement. This Agreement and the Schedules and
Exhibits hereto, each of which is hereby incorporated herein, and
the Confidentiality Agreement between Merisel and Buyer dated
February 29, 1996 (which Sellers and Buyer hereby agree to abide
by and as to which Sellers waive any alleged breaches based on
any allegations raised to date raised by either Sellers or their
affiliates) set forth all of the promises, covenants, agreements,
conditions and undertakings between the parties hereto with
respect to the subject matter hereof, and supersede all prior and
contemporaneous agreements and understandings, inducements or
conditions, express or implied, oral or written.
7.11 Interpretations. Neither this Agreement nor any uncer
tainty or ambiguity herein shall be construed or resolved against
any party hereto, whether under any rule of construction or other
wise. No party to this Agreement shall be considered the drafts
man. On the contrary, this Agreement has been reviewed,
negotiated and accepted by all parties and their attorneys and
shall be construed and interpreted according to the ordinary
commercial meaning of the words used so as fairly to accomplish
the purposes and intentions of all parties hereto.
7.12 Attorney's Fees. If Buyer on the one hand or Sellers
on the other hand initiates any action or proceeding to enforce
or interpret any provision hereof, the prevailing party in such
action or proceeding shall be entitled to recover from the other
party, in addition to any damages or other relief granted as a
result of or in connection with such action or proceeding, all
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costs and expenses of such suit (including any appeals
proceedings), including, without limitation, reasonable
attorneys' fees and the cost of investigation and discovery
related to such action or proceeding.
7.13 Public Announcement. No party to this Agreement shall
make or issue, or cause to be made or issued, any public announce
ment (whether oral or written) or written statement concerning
this Agreement or the transactions contemplated hereby (except as
may be required by applicable law or legal process and except to
the respective directors, officers, agents and creditors of each
party and, with respect to Buyer, parties from which financing
for the transactions contemplated herein is sought) without the
prior written consent of all other parties or as may be otherwise
required by law or the rules of any stock exchange or market on
which the equity securities of such party are listed or traded.
7.14 Knowledge of Sellers and Buyer. For the purposes
hereof, the term "Knowledge of Sellers" shall mean the knowledge
of each of the individuals listed on Schedule 7.14. For the
purposes hereof, the term "Knowledge of Buyer" shall mean
knowledge of the President or Chief Financial Officer of Buyer.
7.15 Material Adverse Effect. For the purposes hereof, the
term "Material Adverse Effect" or a variation thereof shall mean
any change or effect that, individually or when taken together
with all other such changes or effects, is, or could reasonably
be, or is reasonably likely to be, materially adverse to the
business, condition (financial or otherwise), results of
operations, properties, assets or liabilities of (i) with respect
to Buyer, Buyer and its subsidiaries taken as a whole, and
(ii) with respect to Sellers, Latin America, Mexico or the
Subsidiaries (A) Merisel (U.K.) Limited and Merisel-UK Swiss
Branch, together taken as a whole, (B) Merisel France, Inc. taken
as a whole, (C) Merisel GESmbh, Merisel GmbH and Merisel
Netherlands B.V., together taken as a whole and (D) Mexico and
Latin America and their subsidiaries, together taken as a whole.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the date set forth above.
CHS ELECTRONICS, INC.
By: /s/ Claudio Osorio
Claudio Osorio, President
MERISEL, INC.
By: /s/ Dwight Steffensen
MERISEL EUROPE, INC.
By: /s/ Dwight Steffensen
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EXHIBIT A
The following adjustments shall be in lieu of reserves for inventory
and trade and vendor receivables reflected on the Europe Closing Balance
Sheet. The inventory and receivables aging will be based on the inventory
and receivables reports prepared as of the Closing Dated by the Company in
the ordinary course of business on the same basis as the reports were prepared
for May 1996 and as ajusted by the physical inventory taken at the Closing.
(i) The value of inventory (prior to reserves will be reduced
by 0.3% of the recorded value of all inventory in stock for less than 90
days.
(ii) The value of inventory (prior to reserves) will be
reduced by the indicated percentages of the recorded value of all inven
tory in stock for over 90 days: (A) 0% for all Microsoft products; (b) 50%
for all products of vendors listed on Exhibit D attached hereto; and (c) 70%
for all products of all other vendors;
(iii) The value of inventory (prior to reserves) will be reduced
by 70% of the recorded value of all defective or under repair inventory;
(iv) The value of inventory (prior to reserves) will be
reduced by 75% of the recorded value of inventory classified as "non-received"
(v) The value of inventory (prior to reserves) less than 90
days which is in excess of 12 weeks' anticipated sales based on the rate of
actual sales recorded during the prior four weeks ("excess under 90 days"),
except for such inventory held by Merisel GmbH that is comprised of Sun Micro
systems products, shall be reduced by 50% unless such inventory is reasonably
determined by Buyer to be saleable at book value;
(vi) The vaule of trade accounts receivable (prior to reserves)
shall be reduced by 0.6% of the recorded valued of any receivables outstanding
less than 60 days (45 days in Germany);
(vii) The value of trade accounts receivable (prior to reserves)
shall be reduced by 50% of the recorded value of any receivables outstanding
in exess of 60 days (45 days in Germand);
(viii) The value of trade accounts receivalbe (prior to reserves)
placed for collection ("PFC") will be reduced by 50% or the recorded value;
and
(ix) The value of receivables from vendors including, without
limitation, those arising from returns, rebates and marketing allowances
shall be reduced to that amount which the applicable vendor confirms to
the reasonable satisfaction of Buyer will be paid uncontionally provided that
Sellers shall have the right to pursue for their own accout, claims agians the
Unites States representatives of vendors which refused to grant such confir
mations.
A-1
<PAGE>
EXHIBIT D
Vendors
Hewlett Packard
IBM
Compaq
Epson
3 Com
Canon
NEC
Sun Micro
Digital
Intel
<PAGE>
FIRST AMENDMENT TO PURCHASE AGREEMENT
THIS IS A FIRST AMENDMENT TO PURCHASE AGREEMENT (the
"Amendment") dated as of October 4, 1996 by and among CHS
Electronics, Inc., a Florida corporation ("Buyer"), and Merisel,
Inc., a Delaware corporation ("Merisel"), and Merisel Europe,
Inc., a Delaware corporation ("Europe"). Merisel and Europe are
collectively referred to herein as the "Sellers." All
capitalized terms without definition used in this Amendment shall
retain their respective meanings as specified in the Purchase
Agreement (as defined hereafter).
Background
Pursuant to the Purchase Agreement (the "Purchase
Agreement") dated August 29, 1996 by and among the Buyer and the
Sellers, the Buyer agreed to purchase and the Sellers agreed to
sell the Europe Stock, the Latin America Stock and the Mexico
Stock and the Europe Assets on the terms and subject to the
conditions set forth in such Purchase Agreement. The Buyer and
the Sellers have deemed it advisable to amend certain terms of
the Purchase Agreement, subject to the terms and conditions of
this Amendment.
Terms
In consideration of the mutual covenants contained herein
and intending to be legally bound hereby, the parties hereto
agree as follows:
ARTICLE I.
1.1. Amendment to Section 1.2(a). Section 1.2(a) of the
Purchase Agreement is hereby amended in its entirety as follows:
(a) Purchase Price. The aggregate purchase price for all
of the Stock and the Europe Assets (the "Purchase Price") shall
be as follows: (i) Forty Million Dollars ($40,000,000) for the
Latin America Stock and the Mexico Stock, subject to adjustment
as set forth in Section 1.2(d)(ii) hereof (the "Latin/Mexico
Purchase Price"), (ii) with respect to the Europe Stock, an
amount equal to the Total Adjusted Capital of the European
Subsidiaries and (iii) with respect to the Europe Assets, the
book value of the Europe Assets (the "Europe Assets Value") as of
the Closing Date (the aggregate of items (ii) and (iii) are
defined as the "Purchase Price of Europe Stock and the Europe
Assets"). Each of the Latin/Mexico Purchase Price and the
Purchase Price of the Europe Stock and the Europe Assets shall be
apportioned between the Latin American Stock and the Mexico Stock
and among the Europe Stock and Europe Assets, respectively, in
accordance with the apportionment schedules set forth on Schedule
1.2(a). "Total Adjusted Capital of the European Subsidiaries" is
hereby defined to be Net Assets, excluding any Amounts Due to or
<PAGE>
from Related Parties, as defined hereafter, as adjusted by the
formula set forth in Exhibit A. "Net Assets" is defined as
assets reflected on the Europe Closing Balance Sheet (as such
term is defined in Section 1.2(c)(i)) increased by any
receivables subject to the Asset Amortization Agreement (as such
term is defined in Section 1.2(b), but decreased by liabilities
to third parties reflected on such balance sheet. "Amounts Due
to or from Related Parties" shall include any payables to or
receivables from Related Parties (as such term is defined in
Section 2.19) including, without limitation, any amounts
outstanding under the Revolving Credit Agreement dated as of
December 26, 1993 and amended and restated as of April 12, 1996
among Europe and Merisel Americas, Inc. as borrowers and Citicorp
USA Inc. as agent (the "Revolving Credit Agreement") and inter
company tax accounts but excluding deferred tax liabilities and
deferred tax assets which will be assumed by the Buyer. The
Purchase Price shall be further reduced by (X) $4 million for the
cost of eliminating duplicative facilities and severance of
redundant personnel and relocation costs and (Y) $3,216,000
representing the rent payable under certain leases in the
Netherlands during the 12 months following the Closing Date.
Attached as Schedule 1.2(a) is a sample calculation of what the
Purchase Price would be if the same were determined on the June
30, 1996 balance sheet. Merisel and Buyer shall cause a physical
inventory to be taken on the Closing Date in connection with the
foregoing calculation.
1.2. Amendment to Sections 1.2(b), (c)(i) and (d). Sections
1.2(b), (c)(i) and (d) of the Purchase Agreement are hereby
amended in their entirety as follows:
(b) Payments. The Purchase Price shall be payable as
follows: on the Closing Date, Buyer shall pay (i) to Europe, by
wire transfer, a cash amount (the "Europe Cash Payment") equal to
the Estimated Purchase Payment Amount (as defined below) less the
amount payable to Deutsche Financial Services (UK) Ltd. under the
Asset Amortization Agreement as of the Closing Date and (ii) to
Merisel, by wire transfer, a cash amount (the "Latin/Mexico Cash
Payment") equal to Forty Million Dollars ($40,000,000). For
purposes of this Agreement, the term "Estimated Purchase Payment
Amount" means the dollar amount of One Hundred and Twenty Eight
Million Two Hundred and Thirty Eight Thousand One Hundred and
Forty Five Dollars ($128,238,145) less the amounts paid pursuant
to clause (ii) above less cash transfers to Merisel prior to
Closing of $16,408,000. In addition, Buyer shall assume the
liability of Europe under the Asset Amortization Agreement
between Deutsche Financial Services, (UK) Ltd., and Merisel
(U.K.) Limited dated as of October 12, 1995 (the "Asset
Amortization Agreement") and the liabilities and obligations set
forth on Schedule 1.1.
(c)(ii) Regarding the Closing Balance Sheets. (i) Prompt
ly after the Closing Date, but in any event no later than 60 days
after the Closing Date, Europe shall prepare and deliver to
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Buyer, or cause to be prepared and delivered to Buyer, a
combining balance sheet of the European Subsidiaries and Europe
Assets as of the close of business on the Closing Date (the
"Europe Closing Balance Sheet"), together with the draft audit
report of Deloitte & Touche, LLP thereon. The Europe Closing
Balance Sheet shall be prepared in accordance with United States
generally accepted accounting principles ("U.S. GAAP") applied
consistently with those U.S. GAAP principles applied in the
preparation of the 1995 Balance Sheets (as defined in Section
2.7) (such accounting principles being, the "Accounting
Principles"), except that the accounts receivable and inventory
on the Europe Closing Balance Sheet will be valued utilizing the
adjustments listed in Exhibit A. In addition, the combining
closing balance sheet will convert foreign currencies to U.S.
dollars at the closing exchange rate published in the Wall Street
Journal as of the Closing Date, and the Europe Closing Balance
Sheet will be prior to the application of purchase accounting and
recordation of the transactions contemplated in the Agreement.
MIFINCO, Inc.'s investment in shares of Merisel France, Inc. and
Mexico will be valued at zero for the combining Closing Balance
Sheet. The report of Deloitte & Touche, LLP shall state (without
qualification as to scope of audit or other matters) that in
their opinion the Europe Closing Balance Sheet presents fairly in
all material respects, the net assets of Europe sold as of the
Closing Date, on the basis of accounting defined in this
Agreement and Exhibit A. The Europe Closing Balance Sheet shall
be subject to the review of Grant Thornton L.L.P. The parties
shall allow and cause the European Subsidiaries to allow the
parties, Grant Thornton, L.L.P. and other representatives of the
parties full and complete access to all work papers, books and
records and all additional information used in preparing the
Europe Closing Balance Sheet and will make their and the European
Subsidiaries' officers and employees reasonably available to
discuss with the parties and their representatives such papers,
books, records and information. Buyer and its representatives
shall be provided complete access to all work papers and other
information used by Deloitte & Touche, LLP in examining the
Europe Closing Balance Sheet which are not proprietary to
Deloitte & Touche, LLP and Sellers and their representatives
shall be provided complete access to all work papers and other
information used by Grant Thornton, L.L.P. in reviewing the
Europe Closing Balance Sheet which are not proprietary to Grant
Thornton, LLP. The Europe Closing Balance Sheet, when delivered
by Europe to Buyer, shall be deemed final, conclusive and binding
on the parties and will be deemed to be the Europe Closing
Balance Sheet, upon which the Purchase Price of the Europe Stock
and the Europe Assets will be based, unless either Europe or
Buyer notifies the other, within 10 days after receipt of the
Europe Closing Balance Sheet, of its disagreement therewith
(which notice shall state with reasonable specificity the reasons
for any disagreement and the amounts in dispute). If neither
Europe nor Buyer disagrees with the draft Europe Closing Balance
Sheet, Deloitte & Touche, LLP will issue their final audit
report. If there is a disagreement, and such disagreement cannot
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<PAGE>
be resolved by Buyer and Europe (each of which shall use their
"reasonable efforts" to so resolve the claim) within 30 days
following the receipt by Europe of the Europe Closing Balance
Sheet, the items in dispute shall be submitted to a nationally
recognized firm of independent auditors acceptable to both Buyer
and Europe (or, in the absence of agreement, the auditing firm of
KPMG Peat Marwick L.L.P.) (the "Resolution Accountants"). The
sole function of the Resolution Accountants shall be to select as
most accurately reflecting the Europe Closing Balance Sheet,
without adjustment or alteration, the Europe Closing Balance
Sheet submitted by Buyer or the Europe Closing Balance Sheet
submitted by Europe as the true Europe Closing Balance Sheet, and
the determination by such independent auditing firm shall be
binding and conclusive upon the parties. If the Resolution
Accountants select the Europe Closing Balance Sheet submitted by
Buyer, Europe shall pay the fees and expenses of the Resolution
Accountants; if the Resolution Accountants select the Europe
Closing Balance Sheet submitted by Europe, Buyer shall pay the
fees and expenses of the Resolution Accountants. Europe shall
pay the cost of the fees and expenses of Deloitte & Touche,
L.L.P. and Buyer shall pay the cost of the fees and expenses of
Grant Thornton L.L.P. There shall be no adjustment to the
Purchase Price unless and until such adjustment exceeds $250,000
and only to the extent of that excess of $250,000.
(d) Post-Closing Determination.
(i) To the extent that the Estimated Purchase Payment
Amount shall have been more than the sum of the Total Adjusted
Capital of the European Subsidiaries and Europe Assets Value, the
amount of such difference shall be paid by Sellers to Buyer
within five business days after the determination of such amount.
To the extent that the Estimated Purchase Payment Amount is less
than the Total Adjusted Capital of the European Subsidiaries and
the Europe Assets Value, the amount of such difference shall be
paid by Buyer to Europe, within five business days after the
determination of such amount, by wire transfer.
(ii) To the extent that the amount of the shareholders
equity of Latin America and Mexico as set forth on the
Latin/Mexico Closing Balance Sheet, assuming all liabilities of
Latin America and Mexico to Merisel or any of its other
affiliates have been capitalized (the "Closing Equity Value"), is
less than the sum of (x) the amount of adjusted shareholders
equity of Latin America and Mexico as of June 30, 1996 which the
parties hereby agree is $36,698,191 computed as shown on Schedule
1.2(a) plus (y) the net pretax earnings of Latin America and the
net earnings of Mexico between July 1, 1996 and the Closing Date
as reflected in the monthly financial statements of Latin America
and Mexico plus any provision which would increase the reserve
for inventory, receivables and/or other accruals in excess of
normal provisions for inventory, receivables and/or other
accruals, computed consistently with past practice, less (z) $1.5
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<PAGE>
million (the "Minimum Latin/Mexico Equity Value"), the amount of
such difference shall be paid to Buyer by Sellers within five
business days after the determination of such amount; provided,
however, that no amount in excess of $2,000,000 shall be so
deducted.
1.3. Amendment to Sections 1.3(a) and (b)(iii). Sections 1.3(a)
and (b)(iii) of the Purchase Agreement are hereby amended in
their entirety as follows:
(a) Time and Place. The closing under this Agreement (the
"Closing") will take place at 9:00 a.m., local time, on September
27, 1996 or on such later date as the conditions precedent
contained in Section 5.1 and 5.2 hereof are satisfied or waived
(subject, however, to the provisions of Section 5.3(a)(iv)), at
the offices of Greenberg, Traurig, Hoffman, Lipoff, Rosen &
Quentel, P.A., 1221 Brickell Avenue, Miami, Florida, or at such
other time, date or place as the parties shall mutually agree;
provided, however, that notwithstanding the actual date of
Closing, the Closing shall be deemed to have occurred on
September 27, 1996. The date on which the Closing occurs is
referred to herein as the "Closing Date."
(b)(iii) Deliveries By Buyer. Buyer will deliver (A) to
Europe the Europe Cash Payment and (B) to Merisel the
Latin/Mexico Cash Payment.
1.4 Amendment to Section 5.1(i). Section 5.1(i) of the
Purchase Agreement is hereby amended in its entirety as follows:
(i) Bringdown of Representations and Warranties. The
representations and warranties of Sellers in this Agreement shall
be true and correct in all material respects on and as of the
time of Closing, except as set forth on Exhibit 5.1 attached
hereto and incorporated herein by reference, with the same force
and effect as though such representations and warranties had been
made on, as of and with reference to such time and Buyer shall
have received a certificate to such effect, signed by Sellers.
1.5 Amendment to Section 5.1(ii). Section 5.1(ii) of the
Purchase Agreement is hereby amended in its entirety as follows:
(ii) Performance and Compliance. Sellers shall have
performed all of the covenants and complied with all of the
provisions required by this Agreement to be performed or complied
with by them on or before the Closing, except as set forth on
Exhibit 5.1 attached hereto and incorporated herein by reference,
and Buyer shall have received a certificate to such effect,
signed by Sellers.
1.6 Amendment to Section 5.1(v). Section 5.1(v) of the
Purchase Agreement is hereby amended in its entirety as follows:
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(v) Required Consents. All consents and approvals of
third parties, including consents of those vendors representing
90% of purchases for the eighteen months ended June 30, 1996 by
Europe, Latin America, Mexico or the Subsidiaries from the
vendors identified on Exhibit D, but excluding all other vendors
to Latin America, Mexico or any Subsidiary to the transactions
contemplated hereby shall have been obtained, except as set forth
on Exhibit 5.1 attached hereto and incorporated herein by
reference, and all waiting periods specified by law the passing
of which is necessary for the consummation of such transactions
(including without limitation any waiting periods under
applicable governmental laws) shall have passed or been
terminated.
1.7 Amendment to Section 5.1(vii). Section 5.1(vii) of the
Purchase Agreement is hereby amended in its entirety as follows:
(vii) Executive Management. Sellers shall have
terminated, without cost to any of Europe, Latin America, Mexico
or any of the Subsidiaries, and without liability to any of the
foregoing, all employment and other agreements with those
individuals listed on Schedule 5.1, except as set forth on
Exhibit 5.1 attached hereto and incorporated herein by reference;
provided, however, that if Buyer or its affiliates rehire any
individual listed on Schedule 5.1 prior to or on the date of
Closing, or within one year thereafter, Buyer will reimburse
Sellers for any severance costs paid by them to such individual.
1.8 Deletion of Section 5.1(ix). Section 5.1(ix) is hereby
deleted in its entirety.
1.9 Amendment to Section 5.1(x). Section 5.1(x) of the
Purchase Agreement is hereby amended in its entirety as follows:
(x) Material Changes. Since the date hereof, there
shall not have been any material adverse change in the financial
condition, assets, liabilities, net worth, earning power or
business of Latin America, Mexico or any of the Subsidiaries,
except as set forth on Exhibit 5.1 attached hereto and
incorporated herein by reference, and Buyer shall have received a
certificate to such effect, signed by the chief executive officer
of each of the Sellers on behalf of each of the Sellers.
1.10 Amendment to Section 5.1(xi). Section 5.1(xi) of the
Purchase Agreement is hereby amended in its entirety as follows:
(xi) Permits and Licenses Required. Buyer shall have
received all licenses, permits and certificates and governmental
approvals listed on Schedule 2.16, except as set forth on Exhibit
5.1 attached hereto and incorporated herein by reference,
applicable to it.
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<PAGE>
1.11 Amendment to Section 5.1(xvi). Section 5.1(xvi) of the
Purchase Agreement is hereby deleted in its entirety.
1.12 Amendment to Section 5.1(xx). Section 5.1(xx) of the
Purchase Agreement is hereby amended in its entirety as follows:
(xx) Miami, Florida Lease. Sellers shall have delivered
to Buyer an assignment of the lease or a sublease and agreements
set forth on Schedule 5.1(xx), except as set forth on Exhibit 5.1
attached hereto and incorporated herein by reference, to the
extent permitted by the terms of such agreements; provided, in
each case that Buyer assumes all obligations thereunder.
1.13 Deletion of Section 5.2(vi). Section 5.2(vi) is hereby
deleted in its entirety.
1.14 Amendment to Article VI. Article VI of the Purchase
Agreement is hereby amended to include the following additional
Section:
6.17 Conditional Acquisition of the Mexico Stock. Buyer
and Sellers hereby agree that the consummation of the acquisition
of the Mexico Stock (the "Acquisition") upon the Closing of this
Purchase Agreement is subject to revocation upon the disapproval
of the Mexican Federal Competence Commission ("Comision Federal
de Competencia Economica" hereinafter referred to as the "CFC")
of such Acquisition. Therefore, if the CFC disapproves the
Acquisition, the Buyer shall return the Mexico Stock to Sellers
and Sellers shall return all consideration received from Buyer
with respect to such Mexico Stock within five business days of
the date of such disapproval. In addition, Buyer and Sellers
hereby agree to take all necessary action to obtain CFC approval
of the Acquisition, including the filing of appropriate
notification applications.
1.15 Amendment to Section 7.2. Section 7.2 is hereby amended to
delete the terms "Escrow Agent," "Escrow Agreement" and "Escrow
Payment."
1.16 Amendment to Schedule 1.1. Schedule 1.1 of the Purchase
Agreement is hereby amended to include such additional text as
set forth in Exhibit A attached hereto.
1.17 Amendment to Schedule 1.2(a). Schedule 1.2(a) of the
Purchase Agreement is hereby amended in its entirety to read as
provided in Exhibit B attached hereto.
1.18 Deletion of Exhibit B. Exhibit B of the Purchase Agreement
is hereby deleted.
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<PAGE>
ARTICLE II.
2.1 Effect of Amendment. Except as expressly provided in
Article I of this Amendment, nothing shall affect or be deemed to
affect any provisions of the Purchase Agreement, and, except only
to the extent that they may be varied hereby, the Buyer and
Sellers hereby ratify and confirm all of their agreements and
obligations contained in the Purchase Agreement, as amended
hereby.
2.2 Counterparts. This Amendment may be executed in two or
more counterparts, each of which shall be deemed an original, but
which together shall constitute one and the same instrument.
2.3 Governing Law. This Amendment shall be governed by and
construed in accordance with the internal laws of the State of
Florida without giving effect to principles of conflicts of laws.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed or
caused this Amendment to be executed by their duly authorized
representatives as of the day and year first above written.
CHS ELECTRONICS,INC.
By:
Claudio Osorio, Chief Executive Officer
MERISEL, INC.
By:
Dwight Steffensen, Chief Executive Officer
MERISEL EUROPE, INC.
By:
Dwight Steffensen, Chief Executive Officer
<PAGE>
AMENDED AND RESTATED
RECEIVABLES TRANSFER AGREEMENT
Dated as of September 27, 1996
by and between
MERISEL AMERICAS, INC.
and
MERISEL CAPITAL FUNDING, INC.
<PAGE>
Amended and Restated Receivables Transfer Agreement,
dated as of September 27, 1996 (this "Agreement"), between
MERISEL AMERICAS, INC., a Delaware corporation (the "Originator")
and MERISEL CAPITAL FUNDING, INC., a Delaware corporation
("MCF").
R E C I T A L S
A. The Originator and MCF entered into a
Receivables Transfer Agreement, dated as of October 2, 1995 (the
"Initial Receivables Transfer Agreement").
B. The Originator and MCF desire to enter into an
amendment and restatement of the Initial Receivables Transfer
Agreement pursuant to the terms and conditions set forth herein.
C. MCF is a wholly owned subsidiary of the
Originator.
D. MCF has been formed for the sole purpose of
purchasing or otherwise acquiring certain trade receivables
originated by Merisel, Inc., the Originator and/or their
subsidiaries.
E. The Originator intends to sell, and MCF intends to
purchase, such trade receivables, from time to time, as described
herein.
F. The Originator may, from time to time, contribute
capital to MCF in the form of Contributed Receivables or cash.
The parties agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.01. Definitions. Except as otherwise
expressly provided herein or unless the context otherwise
requires, capitalized terms not otherwise defined herein shall
have the meanings assigned to such terms in Annex X hereto, which
is incorporated by reference herein. All other capitalized terms
used herein shall have the meanings specified herein.
SECTION 1.02. Other Terms and Interpretation. All
other terms and the interpretation of this Agreement shall be as
set out in Annex X hereto.
<PAGE>
ARTICLE II
TRANSFERS OF RECEIVABLES
SECTION 2.01. Agreement to Transfer. (a) On and
after the date of this Agreement, the Originator agrees to sell
or contribute to MCF all Receivables originated by the
Originator. On or before the Effective Date, the Originator and
MCF shall enter into a separate Certificate of Assignment
substantially in the form of Exhibit A hereto (the "Assignment").
(b) The Originator shall, on the date hereof and on
each date thereafter (or if such date is not a Business Day, the
following Business Day, each such date, a "Transfer Date"),
transfer to MCF all outstanding Receivables originated and owned
by the Originator through such date. On each Transfer Date, the
Originator shall identify (i) all outstanding Receivables
originated through such date which are owned by the Originator on
such date, (ii) at its option a certain number of Receivables to
be contributed to MCF (the "Contributed Receivables"), and (iii)
all such Receivables not previously identified as purchased and
sold or contributed or identified as to be contributed pursuant
to clause (ii) of this sentence, to be purchased by MCF and sold
by the Originator (the "Sold Receivables"). Each such
identification shall be made as of the opening of business of the
Originator on each Transfer Date. The Originator may deliver to
MCF a Request Notice making the identification of such
Receivables, provided that the Originator shall keep such records
necessary to promptly deliver a Request Notice in respect of each
prior Transfer Date if requested by MCF or the Operating Agent.
To the extent not identified by the Originator as being
contributed or sold, the transfer of such Receivables to MCF
shall be deemed to have been a purchase by MCF and sale by the
Originator on such Transfer Date. The Originator confirms that
it has, pursuant to the Initial Receivables Purchase Agreement,
heretofore sold or contributed to MCF all of its Receivables
existing on the Effective Date or arising thereafter.
(c) The price paid for the Sold Receivables shall be
the Sale Price. Such Sale Price shall be paid by means of (i) an
immediate cash payment to the Originator or, (ii) upon the
agreement of the Originator and MCF, indebtedness owed by MCF to
the Originator evidenced by, and payable with interest pursuant
to a note in the form of Exhibit B (the "Subordinated Note") or
both, provided that the indebtedness under the Subordinated Note
shall not be increased on any day if, after giving effect
thereto, MCF's Net Worth Percentage would be less than 15%. On
each Transfer Date the Sold Receivables and Contributed
Receivables shall be assigned, and on such Transfer Date MCF
shall pay the Sale Price for such Sold Receivables. The portion
of the Sale Price payable in cash shall be payable by wire
transfer on the Transfer Date to an account designated by the
Originator (and approved by the Operating Agent).
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(d) On and after each Transfer Date hereunder, MCF
shall own the Transferred Receivables (assuming payment by MCF in
accordance with Section 2.01(c) hereof in the case of Sold
Receivables) and the Originator shall not take any action
inconsistent with such ownership, nor shall the Originator claim
any ownership interest in any such Transferred Receivables.
(e) Until the occurrence of an Event of Servicer
Termination or a resignation of the Servicer pursuant to the
Purchase Agreement, (i) the Originator, as Servicer, shall
conduct the servicing, administration and collection of such
Transferred Receivables and shall take, or cause to be taken, all
such actions as may be necessary or advisable to service,
administer and collect such Transferred Receivables, from time to
time, all in accordance with (A) the terms of the Purchase
Agreement, (B) customary and prudent servicing procedures for
trade receivables of a similar type and (C) all applicable laws,
rules and regulations, and (ii) documents relating to Transferred
Receivables shall be held in trust by the Originator, as
Servicer, for the benefit of MCF and its assignees as the owners
thereof, and possession of any incident relating to the
Transferred Receivables and Contracts so retained is for the sole
purpose of facilitating the servicing of the Transferred
Receivables. Such retention and possession thereof is at the will
of MCF and its assignees and in a custodial capacity for their
benefit only.
Each sale and contribution by the Originator to MCF is made
without recourse to the Originator, except as set forth in
Section 4.04 hereof
SECTION 2.02. Grant of Security Interest. It is the
intention of the parties hereto that each transfer of Transferred
Receivables to be made hereunder shall constitute a purchase and
sale or capital contribution, as the case may be, and not a loan.
In the event, however, that a court of competent jurisdiction
were to hold that any transaction provided for hereby constitutes
a loan and not a purchase and sale or capital contribution, it is
the intention of the parties hereto that this Agreement shall
constitute a security agreement under applicable law and that the
Originator shall be deemed to have granted to MCF a first
priority security interest in all of the Originator's right,
title and interest in, to and under the Transferred Receivables,
all payments of principal, interest, fees, charges and
indemnities on or under such Transferred Receivables and all
Proceeds of any such Transferred Receivables.
SECTION 2.03. Addition of Originator. Any Subsidiary
or Affiliate of the Parent may become an Originator hereunder if
the Rating Agency Condition is satisfied with respect to such
addition and there is no event that has occurred and is
continuing which constitutes a Termination Event or would
constitute a Termination Event but for the requirement that
notice be given or time elapse or both. The Originator and any
Subsidiary or Affiliate of the Parent that is proposed to be
added as an Originator shall give to MCF and its assigns prior
written notice of its desire to add such Subsidiary or Affiliate
as an Originator. Once the notice has been given, any addition
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of a Subsidiary or Affiliate of the Parent as an Originator
pursuant to this Section 2.03 shall become effective on the first
Business Day following the date on which (i) the Rating Agency
Condition has been satisfied, (ii) the Subsidiary or Affiliate
and the parties hereto shall have executed and delivered the
agreements, instruments and other documents and the amendments or
other modifications to the Related Documents, in form and
substance reasonably satisfactory to MCF and the Operating Agent,
that MCF or the Operating Agent reasonably determine are
necessary or appropriate to effect the addition and (iii) the
Operating Agent shall have given written notice of its approval
of such addition.
SECTION 2.04. Termination of Status as an Originator.
(a) At any time when more than one Person is an Originator, an
Originator may terminate its obligations as an Originator
hereunder if:
(i) the Originator (a "Terminating Originator") shall
have given MCF and its assigns not less than 60 days' prior
written notice of its intention to terminate,
(ii) an Authorized Officer of the Terminating
Originator shall have certified that the termination by the
Terminating Originator of its status as an Originator will
not have a material adverse effect on the business,
financial condition or operations of MCF, and
(iii) both immediately before and after giving
effect to the termination by the Terminating Originator, no
Termination Event shall have occurred and be continuing or
shall reasonably be expected to occur as a result of such
termination.
Any termination by an Originator shall become effective
on the first Business Day that follows the day on which the
requirements of clauses (a)(i) through (iii) shall have been
satisfied (or such later date specified in the notice or
certificate referred to in the clauses). Any termination by an
Originator shall terminate its rights and obligations hereunder;
provided, however, that the termination shall not relieve the
Terminating Originator of obligations which relate to Transferred
Receivables originated by or obligations of the Terminating
Originator prior to the effective date of the termination.
(b) An Originator's right and obligation to sell its
Receivables to MCF shall terminate immediately if the Originator
ceases to be a Subsidiary or Affiliate of the Parent; provided,
however, that the termination shall not relieve the Originator of
obligations which relate to Transferred Receivables originated by
or obligations of the Originator prior to the effective date of
the termination.
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ARTICLE III
CONDITIONS OF SALE
SECTION 3.01. Conditions Precedent to the Initial
Sale. The initial Sale hereunder is subject to the conditions
precedent that MCF shall have received on or before the Effective
Date, each dated such date (unless otherwise indicated), in form
and substance satisfactory to MCF:
(i) an Assignment executed by the Originator;
(ii) a copy of resolutions duly adopted by the
Board of Directors of the Originator approving this
Agreement, the Assignment and the other documents to be
delivered by it hereunder and the transactions and matters
contemplated hereby, certified by its Secretary or Assistant
Secretary;
(iii) the charter, as amended, of the Originator,
certified by the Secretary of State of the Originator's
state of incorporation, dated not earlier than 10 days prior
to the Effective Date;
(iv) a good standing certificate for the
Originator issued by the Secretary of State of the
Originator's state of incorporation, dated not earlier than
10 days prior to the Effective Date;
(v) a copy of the Originator's by-laws, as
amended, certified by the Originator's Secretary or
Assistant Secretary;
(vi) a certificate of the Secretary or Assistant
Secretary of the Originator certifying the names and true
signatures of the officers authorized on behalf of the
Originator to sign this Agreement, the Assignment, and the
other documents to be delivered by the Originator hereunder
(on which certificate MCF may conclusively rely until such
time as MCF shall receive from the Originator a revised
certificate meeting the requirements of this Subsection
(vi)) and certifying that (A) the charter of the Originator
has not changed since the date of the certificate referred
to in Section 3.01(iii), (B) the Originator is still in good
standing in all jurisdictions where it is qualified to do
business, including, without limitation, that referred to in
Section 3.01(iv), (C) all representations and warranties
made by the Originator in this Agreement are true and
correct in all material respects (except with respect to
Section 4.01(b) and those already so qualified which are
true and correct in all respects) and (D) no financing
statements or other similar instruments relating to the
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Receivables have been filed in any jurisdiction, other than
those financing statements, other similar instruments and
documents shown on the certified copies of the requests for
information or copies (Form UCC-11)(or a similar search
report certified by a party acceptable to the Operating
Agent) provided pursuant to clause (ix);
(vii) copies of proper financing statements (Form
UCC-1), dated on or prior to the Effective Date, naming the
Originator as the assignor of the Transferred Receivables
and MCF as assignee, or other similar instruments or
documents, in form and substance sufficient for filing under
the UCC or any comparable law of any and all jurisdictions
as may be necessary or, in the reasonable opinion of the
Operating Agent desirable to perfect MCF's ownership
interest in all Transferred Receivables, in each case in
which an interest may be assigned hereunder;
(viii) copies of properly executed termination
statements or statements of release (Forms UCC-2 or UCC-3)
or other similar instruments or documents, if any, in form
and substance satisfactory for filing under the UCC or any
comparable law of any and all jurisdictions as may be
necessary or, in the reasonable opinion of the Operating
Agent, desirable to release all security interests and
similar rights of any Person in the Transferred Receivables
previously granted by the Originator;
(ix) certified copies of requests for information
or copies (Form UCC-11) (or a similar search report
certified by a party acceptable to the Operating Agent),
dated a date reasonably near and prior to the Effective
Date, listing all effective financing statements and other
similar instruments and documents, which name the Originator
(under its present name and any previous name) as debtor and
which are filed in the jurisdictions in which filings are to
be made pursuant to such Subsections (vii) and (viii) above,
together with copies of such financing statements, none of
which shall cover any Transferred Receivables unless
termination statements or statements of release are provided
with respect thereto pursuant to Subsection (viii) above;
(x) any necessary third party consents to the
closing of the transactions contemplated hereby, in the form
and substance reasonably satisfactory to the Operating
Agent; and
(xi) the Lockbox Agreements in respect of each
Lockbox Account, in each case duly executed by the parties
thereto and acknowledged and agreed to by the applicable
Lockbox Bank.
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SECTION 3.02. Conditions Precedent to All Sales. The
obligation of MCF to pay for each Sold Receivable on each
Transfer Date (including the initial Transfer Date) shall be
subject to the further conditions precedent that on such Transfer
Date:
(a) The following statements shall be true (and
delivery by the Originator of a Request Notice and the acceptance
by the Originator of the Sale Price for any Receivables on any
Transfer Date shall constitute a representation and warranty by
the Originator that on such Transfer Date such statements are
true):
(i) the representations and warranties of the
Originator contained in Section 4.01 shall be correct on and
as of such Transfer Date in all material respects (except
with respect to Section 4.01(b) and those already so
qualified which are true and correct in all respects),
before and after giving effect to the Sale of Receivables on
such Transfer Date and to the application of proceeds
therefrom, as though made on and as of such date; and
(ii) the Originator is in compliance with each of
its covenants and other agreements set forth herein.
(b) The Originator shall have taken such other action,
including delivery of approvals, consents, opinions, documents
and instruments as MCF may reasonably request.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS
SECTION 4.01. Representations and Warranties of the
Originator. The Originator represents and warrants to MCF as of
each Transfer Date, that:
(a) With respect to the Originator:
(i) the Originator is a corporation duly
organized, validly existing and in good standing under the
laws of its respective jurisdiction of incorporation and is
duly qualified to do business and is in good standing in
every jurisdiction in which the nature of its business
requires it to be so qualified except where the failure to
be so qualified would not materially and adversely affect
(1) the performance of MCF or the Originator of its
obligations under this Agreement or any of the Related
Documents, (2) the validity or enforceability of this
Agreement or any of the Related Documents, (3) the
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Transferred Receivables, the Contracts or the interests of
MCF or its assigns therein, or (4) the business, operations,
financial condition or prospects of MCF or the Originator;
(ii) the Originator has the corporate power and
authority to own, pledge, mortgage, operate and convey all
of its properties and assets, to execute and deliver this
Agreement and the Related Documents and to perform the
transactions contemplated hereby and thereby;
(iii) the execution, delivery and performance by
the Originator of this Agreement and the Related Documents
and the transactions contemplated hereby and thereby (A)
have been duly authorized by all necessary corporate or
other action on the part of the Originator, (B) do not
contravene or cause the Originator to be in default under
(1) the Originator's certificate or articles of
incorporation or by-laws, (2) any contractual restriction
with respect to any Debt of the Originator or contained in
any material indenture, loan or credit agreement, lease,
mortgage, security agreement, bond, note, or other material
agreement or instrument binding on or affecting the
Originator, its affiliates or their or its respective
property or (3) any law, rule, regulation, order, writ,
judgment, award, injunction or decree applicable to, binding
on or affecting the Originator, or its property and (C) do
not result in or require the creation of any Adverse Claim
upon or with respect to any of its properties (other than in
favor of MCF with respect to this Agreement and Redwood and
the Collateral Agent under the Purchase Agreement);
(iv) this Agreement and the Related Documents have
each been duly executed and delivered by the Originator;
(v) no approval or consent of, notice to, filing
with or licenses, permits, qualifications or other action by
any Governmental Authority or any other party, is required
or necessary for the conduct of the Originator's business as
currently conducted and for the due execution, delivery and
performance by the Originator of this Agreement or any of
the Related Documents or for the perfection of or the
exercise by MCF, Redwood, the Operating Agent or the
Collateral Agent of any of their rights or remedies
thereunder or hereunder, except (A) approvals, consents,
notices, filings and other actions which have been obtained
or made and complete copies of which have been provided to
Redwood, the Operating Agent and the Collateral Agent (other
than confirmation statements in respect of any such filings)
and (B) where the failure to obtain such approval, consent,
license, permit or qualification, make or present such
notice or filing, or take such other action would not
materially and adversely affect (1) the performance of MCF
or the Originator of its obligations under this Agreement or
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any of the Related Documents, (2) the validity or
enforceability of this Agreement or any of the Related
Documents, (3) the Transferred Receivables, the Contracts or
the interests of MCF or its assigns therein, or (4) the
business, operations, financial condition or prospects of
MCF or the Originator;
(vi) this Agreement and the other Related
Documents delivered by the Originator are the legal, valid
and binding obligations of the Originator enforceable
against the Originator in accordance with their respective
terms subject to (A) any applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or
hereafter in effect relating to or affecting the
enforceability of creditors' rights generally and (B)
general equitable principles, whether applied in a
proceeding at law or in equity;
(vii) there is no pending or, to the knowledge of
the Originator, threatened, nor, to the knowledge of the
Originator, any reasonable basis for, any action, suit or
proceeding against or affecting the Originator, its officers
or directors, or the property of the Originator, in any
court or tribunal, or before any arbitrator of any kind or
before or by any Governmental Authority (A) asserting the
invalidity of this Agreement or any of the Related
Documents, (B) seeking to prevent the transfer, sale, pledge
or contribution of any Receivable or the consummation of any
of the transactions contemplated hereby or thereby, (C)
seeking any determination or ruling that might materially
and adversely affect (1) the performance by MCF or the
Originator of its obligations under this Agreement or any of
the Related Documents, (2) the validity or enforceability of
this Agreement or any of the Related Documents, or (3) the
Transferred Receivables, the Contracts or the interests of
MCF or its assigns therein, or (D) reasonably likely to
result in damages or penalties in an uninsured amount in
excess of $1,000,000;
(viii) no injunction, writ, restraining order or
other order (collectively, "Orders") of any nature adverse
to the Originator or the conduct of its business or which is
inconsistent with the due consummation of the transactions
contemplated by this Agreement or the Purchase Agreement or
any of the other Related Documents has been issued by a
Governmental Authority nor been sought by any Person except
such Orders that would not materially and adversely affect
(1) the performance of MCF or the Originator of its
obligations under this Agreement or any of the Related
Documents, (2) the validity or enforceability of this
Agreement or any of the Related Documents, (3) the
Transferred Receivables or the Contracts or the interests of
MCF or its assigns therein, or the business, operations,
financial condition or prospects of MCF or the Originator;
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(ix) the principal place of business, the chief
executive office and all other places of business of the
Originator are located at the addresses of the Originator
referred to in Schedule 1 and there are now no, and during
the past four months there have not been any, other
locations where the Originator is located (as that term is
used in the UCC of the jurisdiction where such principal
place of business is located) or keeps Records;
(x) the legal name of the Originator is as set
forth at the beginning of this Agreement and the Originator
has not changed its name in the last six years, and during
such period the Originator did not use, nor does the
Originator now use, any trade names, fictitious names,
assumed names or "doing business as" names other than as set
forth in Schedule 1;
(xi) the Originator is solvent and will not become
insolvent after giving effect to the transactions
contemplated by this Agreement and the Related Documents;
the Originator is paying its Debts as they mature; the
Originator has not incurred Debts beyond its ability to pay
as they mature; and the Originator, after giving effect to
the transactions contemplated by this Agreement and the
Related Documents, will have an adequate amount of capital
to conduct its business in the foreseeable future;
(xii) for federal income tax, reporting and
accounting purposes (except in any consolidated financial
statements and consolidated tax returns), the Originator
will treat the sale of each Sold Receivable sold or assigned
pursuant to this Agreement as a sale of, or absolute
assignment of, its full right, title and ownership interest
in such Receivable to MCF (and those Receivables contributed
to MCF by the Originator pursuant to this Agreement shall be
accounted for as an increase in the stated capital of MCF),
and the Originator has not in any other respect accounted
for or treated the transactions contemplated by this
Agreement or the Related Documents.
(xiii) the Originator has complied in all material
respects with all applicable laws, rules, regulations, and
orders with respect to it, its business and properties and
all Transferred Receivables and related Contracts (including
without limitation, all applicable environmental, health and
safety requirements) and all restrictions contained in any
indenture, loan or credit agreement, mortgage, security
agreement, bond, note or other agreement or instrument
binding on or affecting the Originator or its property;
(xiv) without limiting the generality of the prior
representation, no condition exists or event has occurred
which, in itself or with the giving of notice or lapse of
time or both, would result in the suspension, revocation,
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impairment, forfeiture or non-renewal of any Governmental
Consent applicable to the Originator or any Subsidiary
except where such conditions or events would not, separately
or in the aggregate, have a material adverse effect on (A)
the performance by MCF or the Originator of its obligations
under this Agreement or any of the Related Documents, (B)
the validity or enforceability of this Agreement or any of
the Related Documents, or (C) the Transferred Receivables
or the Contracts or the interests of MCF or Redwood therein;
(xv) the Originator has filed on a timely basis
all tax returns (federal, state and local) required to be
filed and has paid or made adequate provisions for the
payment of all taxes, fees, assessments and other
governmental charges due from the Originator (other than
taxes, fees, amendments or governmental charges which the
Originator is contesting in good faith with such taxing
authority and in respect of which no final unappealable
order has been made against the Originator), no tax lien or
similar Adverse Claim has been filed, and no claim is being
asserted, with respect to any such tax, fee, assessment, or
other governmental charge. Any taxes, fees, assessments and
other governmental charges payable by the Originator in
connection with the execution and delivery of this Agreement
and the Related Documents and the transactions contemplated
hereby or thereby have been paid or shall have been paid
when due, at or prior to such Transfer Date;
(xvi) the Originator is licensed or otherwise has
the lawful right to use all patents, trademarks,
servicemarks, tradenames, copyrights, technology, know-how
and processes used in or necessary for the conduct of its
business as currently conducted which are material to its
financial condition, business, operations, assets and
prospects, individually or taken as a whole;
(xvii) as of the date of each Request Notice
delivered by the Originator, such Request Notice contains an
accurate list of the aggregate amount of all Transferred
Receivables contributed or sold by the Originator to MCF as
of the relevant Transfer Date;
(xviii) each Obligor of a Transferred Receivable has
been directed, and is required to, remit all payments with
respect to such Receivable for deposit in a Lockbox Account
or a Lockbox;
(xix) except as set forth on Schedule 2, the
Originator is in compliance with ERISA and has not incurred
and does not expect to incur any liabilities (except for
premium payments arising in the ordinary course of business)
payable to the PBGC (or any successor thereof) under ERISA
or the Internal Revenue Code;
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(xx) except as set forth on Schedule 2, each
pension plan or profit sharing plan to which the Originator
or any Affiliate is a party has been administered and fully
funded in accordance with the obligations the Originator
under law and as set forth in such plan, and the Originator
has complied with the applicable provisions of ERISA or the
Internal Revenue Code in effect as of such Transfer Date;
(xxi) the Originator has not agreed to pay any fee
or commission to any agent, broker, finder or other person
for or on account of services rendered as a broker or finder
in connection with this Agreement or the Related Documents
or the transactions contemplated hereby or thereby which
would give rise to any valid claim against MCF for any
brokerage commission or finder's fee or like payment;
(xxii) all information heretofore or hereafter
furnished with respect to the Originator to MCF in
connection with any transaction contemplated by this
Agreement or the Related Documents is and will be true and
complete in all material respects and does not and will not
omit to state a material fact necessary to make the
statements contained herein or therein not misleading,
provided that any projections, pro forma or preliminary
financial information furnished are based on good faith
estimates and assumptions believed by the Originator to be
reasonable at the time made and MCF acknowledges that such
projections as to future events are not to be viewed as
facts and that actual results for such period may differ
from the projected results;
(xxiii) no part of the proceeds received by the
Originator or any Affiliate from the Sale Price will be used
directly or indirectly for the purpose of purchasing or
carrying, or for payment in full or in part of, Debt that
was incurred for the purposes of purchasing or carrying any
"margin stock," as such term is defined in Regulations G and
U of the Board of Governors of the Federal Reserve System;
(xxiv) other than the Services Agreement, there are
not now, nor will there be at any time in the future, any
agreement or understanding between the Originator and MCF
(other than as expressly set forth herein) providing for the
allocation or sharing of obligations to make payments or
otherwise in respect of any taxes, fees, assessments or
other governmental charges;
(xxv) no transaction contemplated by this Agreement
or any of the Related Documents requires compliance with any
bulk sales act or similar law;
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(xxvi) the Request Notice with respect to such
Transfer Date is accurate in all material respects;
(xxvii) each purchase of Receivables under this
Agreement will constitute (A) a "current transaction" within
the meaning of Section 3(a)(3) of the Securities Act of
1933, as amended, and (B) 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;
(xxviii) (A) the Originator 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
corporation restriction that is reasonably likely to have,
and no provision of applicable law or governmental
regulation is reasonably likely to have, a material adverse
effect on the ability of the Originator to carry out its
obligations under this Agreement and the other Related
Documents to which the Originator is a party and (B) the
Originator is not in default under or with respect to any
contract, agreement, lease or other instrument to which the
Originator is a party and which is material to the
Originator's ability to perform its obligations hereunder or
to the quality or collectibility of the receivables, and
the Originator has not delivered or received any notice of
default thereunder;
(xxix) the Originator is not an "investment company"
or an "affiliated person" of, or "promoter" or "principal
underwriter" for, an "investment company," as such terms are
defined in the Investment Company Act of 1940, as amended.
The purchase or acquisition of the Transferred Receivables
by MCF, the application of the proceeds and the consummation
of the transactions contemplated by this Agreement and the
other Related Documents to which the Originator is a party
will not violate any provision of such Act or any rule,
regulation or order issued by the Securities and Exchange
Commission thereunder;
(xxx) the bylaws or the articles of incorporation
of the Originator require it to maintain (A) books and
records of account, and (B) minutes of the meetings and
other proceedings of its shareholders and board of
directors;
(xxxi) the Lockboxes and the Lockbox Accounts are
the only lockboxes and accounts maintained by the Originator
into which Collections of any Transferred Receivables are
deposited; and
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(xxxii) each of the representations and warranties of
the Originator contained in the Related Documents (other
than this Agreement) is true and correct in all material
respects and the Originator hereby makes each such
representation and warranty to, and for the benefit of, the
Collateral Agent, the Operating Agent and Redwood as if the
same were set forth in full herein.
(b) On each Transfer Date and as of the date of each
Investment Base Certificate delivered under the Purchase
Agreement with respect to each Transferred Receivable designated
as an Eligible Receivable:
(i) such Receivable is an Eligible Receivable and
is a receivable created through the provision of
merchandise, goods or services by the Originator in the
ordinary course of its business;
(ii) such Receivable was created in accordance
with and satisfies in all material respects all applicable
requirements of the Credit and Collection Policies;
(iii) such Receivable represents the genuine,
legal, valid and binding obligation in writing of the
Obligor enforceable by the holder thereof in accordance with
its terms, subject to (A) any applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws
now or hereafter in effect relating to or affecting the
enforceability of creditors' rights generally and (B)
general equitable principles, whether applied in a
proceeding at law or in equity and neither such Receivable
nor its related Contract has been satisfied, subordinated,
rescinded or amended in any manner which would impair the
collectibility of such Receivable, adjust the value of such
Receivable, or modify the payment terms of such Receivable
after its creation;
(iv) such Receivable is not and will not be
subject to any exercise of any right of rescission, set-off,
recoupment, counterclaim or defense;
(v) prior to its sale or contribution to MCF such
Receivable was owned by the Originator free and clear of any
Adverse Claim, and the Originator had the right to
contribute, sell, assign and transfer the same and interests
therein as contemplated under this Agreement, upon such sale
or contribution, MCF will have acquired good and marketable
title to and the sole record and beneficial ownership
interest in such Receivable, free and clear of any Adverse
Claim and, after such sale or contribution, such Receivable
did not become subject to any Adverse Claim as a result of
any action or inaction of the Originator;
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(vi) this Agreement and the Assignment constitute
a valid sale, contribution, transfer, assignment, setover
and conveyance to MCF of all right, title and interest of
the Originator in and to such Receivable;
(vii) such Receivable is entitled to be paid
pursuant to the terms of the related Contract, has not been
paid in full or been compromised, adjusted, extended,
satisfied, subordinated, rescinded or modified, and is not
subject to compromise, adjustment, extension, satisfaction,
subordination, rescission, or modification by the Originator
except in accordance with any applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws
now or hereafter in effect relating to or affecting the
enforceability of creditors' rights generally;
(viii) the Originator has submitted all necessary
documentation for payment of such Receivable to the Obligor
and has fulfilled all its other obligations in respect
thereof;
(ix) the stated term of such Receivable, if any,
is not greater than 90 days;
(x) such Receivable is an "account" within the
meaning of the UCC of the jurisdiction where the
Originator's chief executive office is located;
(xi) neither such Receivable nor its related
Contract contravenes 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) and no party to such
related Contract is in violation of any such law, rule or
regulation in any material respect;
(xii) such Receivable does not represent "billed
but not yet shipped" goods or merchandise, unperformed
services, consigned goods or "sale or return" goods; nor
does such Receivable arise from a transaction for which any
additional performance by MCF or acceptance or other act of
the Obligor remains to be performed as a condition to any
payments on such Receivable;
(xiii) there are no proceedings or investigations
pending or to the Originator's knowledge threatened before
any Governmental Authority (A) asserting the invalidity of
such Receivable or such Contract, (B) asserting the
bankruptcy or insolvency of the related Obligor, (C) seeking
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the payment of such Receivable or payment and performance of
such Contract, or (D) seeking any determination or ruling
that might materially and adversely affect the validity or
enforceability of such Receivable or such Contract;
(xiv) as of the relevant Transfer Date hereunder,
no Obligor on such Receivable is bankrupt or insolvent, is
unable to make payment of its obligations when due, is the
debtor in a voluntary or involuntary bankruptcy proceeding,
or is the subject of a comparable receivership or insolvency
proceeding, other than Obligors under the protection of a
bankruptcy court or receivership which has approved payment
by any such Obligor of such Receivable; and
(xv) the Originator has no knowledge of any fact
(including any defaults by the Obligor on any other
accounts) which leads it or should have led it to expect
that any payments on such Receivable will not be paid in
full when due or to expect any other material adverse effect
on (A) the performance by MCF or the Originator of its
obligations under this Agreement or any of the Related
Documents, (B) the validity or enforceability of this
Agreement or any of the Related Documents, or (C) the
Transferred Receivables or the Contracts or the interests of
MCF or Redwood therein.
It is understood and agreed that the representations and
warranties described in this Section 4.01 shall survive the sale
or contribution of the Transferred Receivables to MCF, any
subsequent assignment of the Transferred Receivables by MCF, and
the termination of this Agreement and the Purchase Agreement and
shall continue so long as any Transferred Receivable shall remain
outstanding.
SECTION 4.02. Covenants of the Originator.
(a) Offices and Records. The Originator shall keep
its chief place of business and chief executive offices and the
office where it keeps its Records at the respective locations
specified in Schedule 1 hereto or, upon at least 30 days prior
written notice to MCF and the Collateral Agent, at such other
location in a jurisdiction where all action required by Section
4.02(d) shall have been taken with respect to the Transferred
Receivables. The Originator shall, for not less than three years
or for such longer period as may be required by law, from the
date on which any Transferred Receivable arose, maintain adequate
Records with respect to each Transferred Receivable, including
records of all payments received, credits granted and merchandise
returned. Upon prior notice to the Originator, except after the
occurrence of any Termination Event, the Originator will permit
representatives of MCF, the Servicer, the Operating Agent or the
Collateral Agent at any time and from time to time during normal
business hours, and at such times outside of normal business
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hours as MCF, the Servicer, the Operating Agent or the Collateral
Agent shall reasonably request, (i) to inspect and make copies of
and abstracts from such records, (ii) to visit the properties of
the Originator utilized in connection with the collection,
processing or servicing of the Transferred Receivables for the
purpose of examining such Records, and (iii) to discuss matters
relating to the Transferred Receivables or the Originator's
performance under this Agreement or the affairs, finances and
accounts of the Originator with any of its officers, directors,
employees, representatives or agents and with its independent
certified accountants. The Originator will advise its
independent certified accountants that MCF, the Operating Agent,
the Servicer and the Collateral Agent have been authorized to
review and discuss with such accountants any and all financial
statements and other information of any kind that they may have
with respect to the Originator and deliver a letter (the
"Accountants' Letter") addressed to such accountants instructing
them to make available to MCF, the Operating Agent, the Servicer
and the Collateral Agent such information and records as MCF, the
Operating Agent, the Servicer and the Collateral Agent may
reasonably request and to otherwise comply with the provisions of
this Section 4.02(a). The Originator shall be given prior notice
of any discussions with its accountants and the opportunity to
participate; provided that the Originator's failure or inability
to participate shall not prevent any of MCF, the Operating Agent,
the Servicer and the Collateral Agent from engaging in such
discussions. After the Effective Date, if the Originator engages
the services of accountants other than Deloitte & Touche, it
shall deliver a letter addressed to such accountants containing
the same terms and provisions as the Accountants' Letter. In
connection with the foregoing, in the event any of the
Originator, the Operating Agent or the Collateral Agent
determines that a deterioration has or is reasonably likely to
occur in the quality of servicing of the Transferred Receivables,
any of them, individually or collectively, may institute
procedures to permit it to confirm the Obligor's outstanding
balances in respect of any Transferred Receivables. The
Originator agrees to render to MCF, the Operating Agent and the
Collateral Agent, at the Originator's own cost and expense, such
clerical and other assistance as may be reasonably requested with
regard to the foregoing. If a Termination Event under the
Purchase Agreement shall have occurred and be continuing,
promptly upon request therefor, the Originator shall assist MCF
in delivering to the Operating Agent records reflecting activity
through the close of business on the immediately preceding
Business Day.
(b) Compliance With Credit and Collection Policies.
The Originator shall comply in all material respects with the
Credit and Collection Policies with regard to each Transferred
Receivable and the related Contracts, and with the terms of such
Receivables and Contracts.
(c) Notice of Adverse Claim. The Originator shall
advise MCF and any assignees, promptly, in reasonable detail, (i)
of any Adverse Claim known to it made or asserted against any of
the Transferred Receivables, (ii) of any determination that a
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Sold Receivable, or any other Receivable designated as an
Eligible Receivable in a Request Notice or otherwise, was not an
Eligible Receivable at such time and (iii) of the occurrence of
any event which would have a material adverse effect on the
aggregate value of the Transferred Receivables or on the validity
of the transfers in this Agreement.
(d) Further Assurances; Financing Statements.
(i) The Originator agrees that at any time and
from time to time, at its expense, upon the request of MCF
or MCF's assignees it shall promptly execute and deliver all
further instruments and documents, and take all further
action, that may be necessary or, in the reasonable opinion
of MCF or any assignee, desirable or that MCF or any
assignee may reasonably request to perfect, preserve,
continue and maintain fully and protect the transfers made
and the right, title and interests (including any security
interests) granted to MCF by this Agreement or to enable MCF
or any assignee to exercise and enforce its rights and
remedies under this Agreement or any of the Related
Documents with respect to any Transferred Receivables.
Without limiting the generality of the foregoing, the
Originator shall execute and file such financing or
continuation statements, or amendments thereto, and such
other instruments or notices as may be necessary or in the
reasonable opinion of MCF or any assignee desirable or that
MCF or any assignee may reasonably request to protect and
preserve and perfect the transfers and security interests
granted by this Agreement, free and clear of all Adverse
Claims.
(ii) The Originator hereby authorizes MCF and the
Collateral Agent to file one or more financing or
continuation statements, and amendments thereto, relating to
all or any part of the Transferred Receivables without the
signature of the Originator where permitted by law. A
carbon, photographic or other reproduction of this Agreement
or any notice or financing statement covering the
Transferred Receivables or any part thereof shall be
sufficient as a notice or financing statement where
permitted by law. The Seller will promptly send to the
Originator any financing or continuation statements thereto
which it files without the signature of the Originator
except, in the case of filings of copies of this Agreement
as financing statements, the Seller will promptly send the
Originator the filing or recordation information with
respect thereto.
(e) Assignment. The Originator acknowledges and
agrees that, to the extent permitted under the Purchase
Agreement, MCF may assign all of its right, title and interest
in, to and under the Transferred Receivables and its right, title
and interest under this Agreement, including its right to
exercise the remedies created by Section 4.04. The Originator
agrees that, upon such assignment, the assignee under the
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Purchase Agreement may enforce directly, without joinder of MCF,
the repurchase obligations of the Originator set forth in Section
4.04 with respect to breaches of the representations and
warranties or covenants set forth in Section 4.01 and 4.02.
(f) Compliance With Agreements and Applicable Laws.
The Originator shall perform each of its obligations under this
Agreement and the Related Documents and comply with all material
requirements of any law, rule or regulation applicable to it,
provided that the Originator shall be deemed to have complied
with any such requirements for as long as the Originator contests
in good faith the application of such requirement, a stay has
been granted with respect to any penalty imposed on the
Originator in respect of such requirement and no final
unappealable order in respect of such requirement has been made
against the Originator except for any noncompliance with laws
which would not have a material adverse effect on (1) the
performance of MCF or the Originator of its obligations under
this Agreement or any of the Related Documents, (2) the validity
or enforceability of this Agreement or any of the Related
Documents, (3) the Transferred Receivables or the Contracts or
the interests of MCF or its assigns therein, or the business,
operations, financial condition or prospects of MCF or the
Originator.
(g) Corporate Existence. Subject to Section 4.03(d),
the Originator shall maintain its corporate existence and shall
at all times continue to be duly organized under the laws of the
state of its incorporation and duly qualified and duly authorized
(as described in Section 4.01) and shall conduct its business in
accordance with the terms of its certificate of incorporation and
bylaws.
(h) Notice of Material Event. The Originator shall
promptly inform MCF and any assignee (except in respect of clause
(i), in which event the Originator shall immediately inform MCF
and any assignee) in writing of the occurrence of any of the
following:
(i) the submission of any claim or the initiation
of any legal process, litigation or administrative or
judicial investigation against the Originator or with
respect to or in connection with all or any portion of the
Transferred Receivables, in excess of $1,000,000 or which,
if adversely determined, would be reasonably likely to have
a material adverse effect on the Originator;
(ii) any change in the location of the
Originator's principal office or any change in the location
of the Originator's books and records;
(iii) the commencement or threat of any rule making
or disciplinary proceedings or any proceedings instituted by
or against the Originator in any federal, state or local
court or before any governmental body or agency, or before
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any arbitration board, or the promulgation of any proceeding
or any proposed or final rule which, if adversely
determined, would have a material adverse effect with
respect to the Originator;
(iv) the commencement of any proceedings by or
against the Originator under any applicable bankruptcy,
reorganization, liquidation, rehabilitation, insolvency or
other similar law now or hereafter in effect or of any
proceeding in which a receiver, liquidator, conservator,
trustee or similar official shall have been, or may be,
appointed or requested for the Originator or any of its
assets;
(v) the receipt of notice that (A) the Originator
is being placed under regulatory supervision, (B) any
license, permit, charter, registration or approval necessary
for the conduct of the Originator's business is to be, or
may be, suspended or revoked, or (C) the Originator is to
cease and desist any practice, procedure or policy employed
by the Originator in the conduct of its business, and such
cessation may have a material adverse effect with respect to
the Originator; or
(vi) any other event, circumstance or condition
that has had, or has a material possibility of having, a
material adverse effect in respect of the Originator.
(i) Maintenance of Licenses. The Originator shall
maintain all licenses, permits, charters and registrations which
are material to the conduct of its business.
(j) Use of Proceeds. The Originator shall apply its
funds towards general corporate purposes (including the
retirement or repayment of third party debt) and towards the
other sums payable by the Originator under this Agreement and the
Related Documents in connection with the transactions
contemplated hereby and by the Related Documents and for no other
purpose.
(k) Separate Identity.
(i) The Originator shall maintain corporate
records and books of account separate from those of MCF.
(ii) The financial statements of the Parent and
its consolidated Subsidiaries shall (i) disclose the effects
of the Originator's transactions in accordance with GAAP and
(ii) either (a) disclose that the assets of MCF are not
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available to pay creditors of the Originator or any other
Affiliate of the Originator or (b) contain the language set
forth in Section 4.02(k)(iii)(b).
(iii) The annual financial statements of the Parent
and its consolidated subsidiaries (including MCF) will
contain footnotes or other information to the effect that
with respect to MCF: (a) MCF's business consists of the
purchase of the Receivables from the Originator and (b) MCF
is a separate corporate entity with its own separate
creditors, which upon its liquidation will be entitled to be
satisfied out of MCF's assets prior to any value in MCF
becoming available to MCF's equityholders.
(iv) The resolutions and other instruments
underlying the transactions described in this Agreement
shall be continuously maintained by the Originator as
official records.
(v) Except as set forth in the Services
Agreement, the Originator shall use its best efforts to
maintain an arm's-length relationship with MCF and will not
hold itself out as being liable for the debts of MCF.
(vi) Except as set forth in the Services
Agreement, the Originator shall use its best efforts to keep
its assets (except with respect to any Records necessary for
the servicing of the Transferred Receivables) and its
liabilities wholly separate from those of MCF.
(vii) The Originator will conduct its business
solely in its own name (including any trade or fictitious
name) through its duly authorized officers or agents so as
not to mislead others as to the identity of the Originator.
(viii) The Originator will use its best efforts to
avoid the appearance of conducting business on behalf of MCF
or that the assets of the Originator are available to pay
the creditors of MCF.
(ix) Except as set forth in the Services
Agreement, the Originator will cause operating expenses and
liabilities of MCF to be paid from MCF's funds.
(l) ERISA. The Originator shall give the Operating
Agent prompt notice of each of the following events (but in no
event more than 30 days after the occurrence of the event): (i)
an Accumulated Funding Deficiency, (ii) the failure to make a
material required contribution to a Plan or Multiemployer Plan
(but in no event will a contribution failure sufficient to give
rise to a lien under 302(f) of ERISA be considered immaterial),
(iii) a Reportable Event, (iv) any action by a Commonly
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Controlled Entity to terminate any Plan or withdraw from any
Multiemployer Plan, (v) any action by the PBGC to terminate or
appoint a trustee to administer a Plan, (vi) the reorganization
or insolvency of any Multiemployer Plan and (vii) an aggregate
Underfunding for all Underfunded Plans in excess of $100,000.
(m) Cooperation With Requests for Information or
Documents. The Originator will cooperate fully with all
reasonable requests of MCF or any assignee regarding the
provision of any information or documents, necessary, including
the provision of such information or documents in electronic or
machine-readable format, or desirable to allow MCF and each
assignee to carry out its responsibilities under the Related
Documents.
(n) Payment, Performance and Discharge of Obligations.
The Originator will pay, perform and discharge all of its
obligations and liabilities, including, without limitation, all
taxes, assessments and governmental charges upon its income and
properties when due the non-payment, performance or discharge of
which would materially and adversely affect (1) the performance
of MCF or the Originator of its obligations under this Agreement
or any of the Related Documents, (2) the validity or
enforceability of this Agreement or any of the Related Documents,
(3) the Transferred Receivables or the Contracts or the interests
of MCF or its assigns therein, or (4) the business, operations,
financial condition or prospects of MCF or the Originator, unless
and to the extent only that such obligations, liabilities, taxes,
assessments and governmental charges shall be contested in good
faith and by appropriate proceedings and that, to the extent
required by GAAP, proper and adequate book reserves relating
thereto are established by the Originator and then only to the
extent that a bond is filed in cases where the filing of a bond
is necessary to avoid the creation of an Adverse Claim against
any of its properties.
SECTION 4.03. Negative Covenants of the Originator.
The Originator shall not, without the written consent of MCF and
each assignee of MCF's rights:
(a) sell, assign (by operation of law or otherwise) or
otherwise dispose of, or create or suffer to exist any Adverse
Claim upon or with respect to, or assign any right to receive
income in respect of any Transferred Receivable or related
Contract with respect thereto, or upon or with respect to any
Lockbox or any Lockbox Account;
(b) extend, amend, forgive, discharge, compromise,
cancel or otherwise modify the terms of any Transferred
Receivable, or amend, modify or waive any term or condition of
any Contract related thereto (except as to the Originator in its
capacity as the Servicer under the Purchase Agreement and in the
case of any such Contracts, any amendments or modifications to
any provision thereof other than payment terms or any term
adversely affecting the payment of such Receivable), provided
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that the foregoing shall not prohibit the Servicer from offering
early pay discounts to the extent permitted by the Credit and
Collection Policy;
(c) make any change in its instructions to Obligors
regarding payments to be made to MCF or payments to be deposited
to a Lockbox or a Lockbox Account other than (i) changes of a
purely administrative nature which do not alter any directions to
Obligors regarding the method, timing or place of payment, or
(ii) changes to the method or timing of payments which are in
accordance with the Credit and Collections Policy or (iii)
changes redirecting payments from one Lockbox or Lockbox Account
to another Lockbox Account in respect of which all actions
required under Section 6.01 of the Purchase Agreement have been
taken;
(d) merge with or into, consolidate with or into,
convey, transfer, lease or otherwise dispose of 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, any Person
(whether in one transaction or in a series of transactions)
except where such action would not have a material adverse effect
on the business of the Originator or the ability of the
Originator to perform its obligations under this Agreement and
the Rating Agency Condition is satisfied;
(e) make statements or disclosures or prepare any
financial statements which shall account for the transactions
contemplated by this Agreement in any manner other than as a sale
or absolute assignment of the Transferred Receivables to MCF, or
in any other respect account for or treat the transactions
contemplated hereby (including but not limited to, for
accounting, tax and reporting purposes) in any manner other than
as a sale or absolute assignment of the Transferred Receivables;
(f) (i) take any action, or fail to take any action,
with respect to the Transferred Receivables, if such action or
failure to take action may interfere with the enforcement of any
rights under this Agreement or the Related Documents that are
material to the rights, benefits or obligations of MCF or any
assignee (however, nothing herein shall be construed to
constitute a guarantee of collectibility by the Originator); (ii)
take any action, with respect to the Transferred Receivables, or
fail to take any action, if such action or failure to take action
may materially interfere with the enforcement of any rights with
respect to the Transferred Receivables; or (iii) fail to pay any
tax, assessment, charge, fee or other obligation of the
Originator with respect to the Transferred Receivables, or fail
to defend any action, if such failure to pay or defend may
adversely affect the priority or enforceability of the first
priority perfected interest of MCF in the Transferred Receivables
or the Originator's right, title or interest in the Transferred
Receivables;
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(g) neither the Originator nor any Commonly Controlled
Entity will:
(i) terminate any Plan so as to incur any
material liability to the PBGC;
(ii) knowingly participate in any "prohibited
transaction" (as defined in ERISA) involving any Plan or
Multiemployer Plan or any trust created thereunder which
would subject any of them to a material tax or penalty on
prohibited transactions imposed under Section 4975 of the
Internal Revenue Code or ERISA;
(iii) fail to pay to any Plan or Multiemployer Plan
any contribution which it is obligated to pay under the
terms of such Plan or Multiemployer Plan, if such failure
would cause such plan to have any material Accumulated
Funding Deficiency, whether or not waived; or
(iv) allow or suffer to exist any occurrence of a
Reportable Event, or any other event or condition, which
presents a material risk of termination by the PBGC on any
Plan or Multiemployer Plan, to the extent that the
occurrence or nonoccurrence of such Reportable Event or
other event or condition is within the control of it or any
Commonly Controlled Entity;
(h) make any material change to the Credit and
Collection Policies without the prior written consent of MCF and
each assignee;
(i) take or permit (other than with respect to actions
taken or to be taken solely by a Government Authority) to be
taken any action which would have the effect directly or
indirectly of subjecting interest on any of the Purchases or the
Commercial Paper to withholding taxation in the hands of,
respectively, MCF, Redwood or holders of the Commercial Paper
generally who are residents of the United States, and will
perform all of the Originator's obligations under this Agreement
and the Related Documents to prevent or cure any default by the
Originator which would have the effect, directly or indirectly,
of subjecting interest on any of the Purchases or the Commercial
Paper to withholding taxation; or
(j) amend the Services Agreement.
SECTION 4.04. Breach of Representations, Warranties or
Covenants. Upon discovery by the Originator, MCF, or any
assignee of MCF's rights hereunder, that any of the
representations, warranties or covenants described in
Sections 4.01(b), 4.02(b) or (c) or 4.03(a), (b) or (c) have been
breached such that they are or were untrue or incorrect in any
respect, which breach is reasonably likely to have a material
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adverse effect on the value of a Transferred Receivable or the
interests of MCF or any assignee therein, the party discovering
the same shall give prompt written notice to the other parties.
Thereafter, if requested by notice from MCF or any assignee, or
if the Originator so desires, the Originator shall, on the next
succeeding Business Day, either (i) repurchase such Transferred
Receivable from MCF in consideration of cash or a reduction of
the outstanding indebtedness under the Subordinated Note or both,
(ii) transfer ownership of a new Eligible Receivable or new
Eligible Receivables on such Business Day; or (iii) make a
capital contribution of the Rejected Amount in cash to MCF by
remitting the amount of such capital contribution to the
Collection Account in accordance with the terms of the Purchase
Agreement, in the case of clauses (i), (ii) and (iii) in an
amount equal to the Billed Amount of such Transferred Receivable
less Collections received in respect thereof. Notwithstanding
the foregoing, if any Receivable is not paid in full on account
of any Dilution Factors, the Originator's repurchase obligation
under this Section 4.04 shall be reduced by the amount of any
such Dilution Factors taken into account in the Sale Price.
ARTICLE V
INDEMNIFICATION
SECTION 5.01. Indemnification. (a) Without limiting
any other rights that MCF, any of its shareholders, officers or
agents, or any assignee of MCF's rights hereunder or such
assignee's shareholders, officers, employees or agents (each, an
"Indemnified Party") may have hereunder or under applicable law,
the Originator hereby agrees to indemnify each Indemnified Party
from and against any and all claims, losses, liabilities,
obligations, damages, penalties, actions, judgments, suits, and
costs and expenses of any nature whatsoever related thereto,
including reasonable attorneys' fees and disbursements (all of
the foregoing being collectively referred to as "Indemnified
Amounts") which may be imposed on, incurred by or asserted
against an Indemnified Party in any way arising out of or
resulting from this Agreement or the use by the Originator of
proceeds of any purchase or assignment hereunder or in respect of
any Transferred Receivable or any Contract, excluding, however,
(A) Indemnified Amounts to the extent resulting from gross
negligence or willful misconduct on the part of such Indemnified
Party, (B) recourse for uncollectible or uncollected Transferred
Receivables or (C) consequential, indirect, punitive or exemplary
damages; provided, however, that if a court of competent
jurisdiction in a final non-appealable order determines that such
Indemnified Amounts arose in part from such Indemnified Party's
gross negligence or wilful misconduct, the Originator shall
reimburse such Indemnified Party for the portion of such Claim
not resulting from such Indemnified Party's gross negligence or
wilful misconduct. To the extent such a determination of gross
negligence or wilful misconduct is made, after payment of any
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Indemnified Amounts related thereto, the Originator shall be
repaid any amounts reimbursed under the preceding clause that due
to such determination it should not have paid. Without limiting
or being limited by the foregoing, the Originator shall pay on
demand to each Indemnified Party any and all Indemnified Amounts
necessary to indemnify such Indemnified Party from and against
any and all Indemnified Amounts relating to or resulting from:
(i) reliance on any representation or warranty
made or deemed made by the Originator (or any of its
officers) under or in connection with this Agreement or any
Related Document, any report or any other information
delivered by the Originator pursuant hereto, which shall
have been incorrect in any material respect when made or
deemed made or delivered;
(ii) the failure by the Originator to comply with
any term, provision or covenant contained in this Agreement,
any Related Document or any agreement executed in connection
with this Agreement, with any applicable law, rule or
regulation with respect to any Transferred Receivable or the
related Contract, or the nonconformity of any Transferred
Receivable or the related Contract with any such applicable
law, rule or regulation; or
(iii) the failure to vest and maintain vested in
MCF, or to transfer to MCF, legal and equitable title to and
ownership of the Receivables which are, or are purported to
be, Transferred Receivables, together with all Collections
and Proceeds in respect thereof, free and clear of any
Adverse Claim (except as permitted hereunder) whether
existing at the time of the proposed sale of such Receivable
or at any time thereafter;
excluding, however, (A) Indemnified Amounts to the extent
resulting from gross negligence or willful misconduct on the part
of such Indemnified Party or (B) recourse for uncollectible or
uncollected Transferred Receivables or (C) consequential,
indirect, punitive or exemplary damages; provided, however, that
if a court of competent jurisdiction in a final non-appealable
order determines that such Indemnified Amounts arose in part from
such Indemnified Party's gross negligence or wilful misconduct,
the Originator shall reimburse such Indemnified Party for the
portion of such Claim not resulting from such Indemnified Party's
gross negligence or wilful misconduct. To the extent such a
determination of gross negligence or wilful misconduct is made,
after payment of any Indemnified Amounts related thereto, the
Originator shall be repaid any amounts reimbursed under the
preceding clause that due to such determination it should not
have paid.
(b) If indemnification is to be sought hereunder by an
Indemnified Party, then such Indemnified Party shall promptly
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<PAGE>
notify the Originator of the commencement of any litigation,
proceeding or other action in respect thereof; provided, however,
that the failure to notify the Originator shall not relieve the
Originator from any liability or obligation that it may have
hereunder or otherwise to such Indemnified Party, except to the
extent the Originator is actually prejudiced thereby. Each
Indemnified Party shall have the right to control its own
defense, but shall consult from time to time with the Originator
and in no event shall the Originator, in connection with any one
action or proceeding or separate but substantially similar or
related actions or proceedings arising out of the same general
allegations or circumstances, be liable for the fees and expense
of more than one firm of attorneys (together with any appropriate
local counsel) at any time acting for GE Capital, GE Capital
Markets Group Inc. or their employees, directors or officers
(collectively "GE Persons"), unless any such GE Person has been
advised by legal counsel that (a) the representation of such GE
Person by legal counsel acting for other GE Persons would be
inappropriate due to actual or potential conflicts of interest or
(b) there may be legal defenses available to such GE Person that
are different from or additional to those available to any other
GE Person represented by such legal counsel; provided, that any
Indemnified Party other than any GE Person shall not be
restricted from hiring separate legal counsel the fees and
expenses for which the Originator shall be liable as provided
herein. Notwithstanding anything to the contrary contained
herein, the Originator shall not have any obligation to hold
harmless or indemnify any Indemnified Party for the amount of any
cash settlement if any Indemnified Party enters into any such
cash settlement of a claim without the prior written consent of
the Originator, which consent will not be unreasonably withheld
or delayed and in the event the Originator shall not consent to
any proposed settlement, then the Originator shall notify such
Indemnified Party in writing of the amount which the Originator
is willing to pay (and if no such written notification is
provided, the Originator will be deemed to consent to the entire
cash settlement); provided that the Originator shall in any event
continue to be obligated to hold harmless and indemnify such
Indemnified Party for legal costs in relation to such Indemnified
Amount as provided herein. If, for any reason, no settlement is
made, all indemnity obligations under this Article V shall
continue.
SECTION 5.02. Assignment of Indemnities. The
Originator acknowledges that, to the extent permitted under the
Purchase Agreement, MCF may assign its rights of indemnity
granted hereunder and upon such assignment, such assignee shall
have all rights of MCF hereunder and may in turn assign such
rights. The Originator agrees that, upon such assignment, such
assignee may enforce directly, without joinder of MCF, the
indemnities set forth in this Article V.
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<PAGE>
ARTICLE VI
MISCELLANEOUS
SECTION 6.01. Notices, Etc. All notices and other
communications provided for hereunder shall, unless otherwise
stated herein, be in writing (including facsimile, telex and
express mail) and mailed or telecommunicated, or delivered as to
each party hereto, at its address set forth under its name on the
signature page 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 not be
effective until received by the party to whom such notice or
communication is addressed.
SECTION 6.02. No Waiver; Remedies. No failure on the
part of an Originator or MCF or any assignee of MCF to exercise,
and no delay in exercising, any right hereunder or under any
Assignment 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 other remedies provided by law.
SECTION 6.03. Binding Effect; Assignability. This
Agreement shall be binding upon and inure to the benefit of the
Originator and MCF, and their respective successors and permitted
assigns. Except as contemplated herein, none of the parties may
assign any of its rights and obligations hereunder or any
interest herein without the prior written consent of the other
parties. This Agreement shall create and constitute the
continuing obligations of the parties hereto in accordance with
its terms, and shall remain in full force and effect until its
termination; provided, that the rights and remedies pursuant to
Section 4.04 with respect to any breach of any representation,
warranty or covenants made by the Originator pursuant to
Sections 4.01, 4.02 and 4.03 and the indemnification and payment
provisions of Article V shall be continuing and shall survive any
termination of this Agreement.
SECTION 6.04. No Proceedings. The Originator hereby
agrees that it will not, directly or indirectly, institute, or
cause to be instituted, against MCF any proceeding of the type
referred to in Section 9.01(c) of the Purchase Agreement so long
as there shall not have elapsed one year plus one day since the
latest maturing commercial paper issued by Redwood and allocated
to MCF has been paid in full in cash.
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<PAGE>
SECTION 6.05. Amendments; Consents and Waivers. No
modification, amendment or waiver of, or with respect to, any
provision of this Agreement, the Purchase Agreement and any
exhibits or schedules hereto or thereto, nor consent to any
departure by the Originator or MCF from any of the terms or
conditions hereof or thereof, shall be effective unless it shall
be in writing and signed by each of the parties hereto, and prior
written consent is given by Redwood and the Collateral Agent.
Any waiver or consent shall be effective only in the specific
instance and for the purpose for which given. No consent or
demand in any case shall, in itself, entitle any party to any
other consent or further notice or demand in similar or other
circumstances. This Agreement and the documents referred to
herein embody the entire agreement of the Originator and MCF with
respect to the Transferred Receivables and supersede all prior
agreements and understandings relating to the subject hereof.
SECTION 6.06. GOVERNING LAW; CONSENT TO JURISDICTION;
WAIVER OF JURY TRIAL. (a) THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS (AS OPPOSED
TO CONFLICT OF LAWS PROVISIONS) OF THE STATE OF CALIFORNIA.
(b) THE ORIGINATOR AND MCF HEREBY SUBMIT TO THE
EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF CALIFORNIA,
AND EACH WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT
AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY
REGISTERED MAIL DIRECTED TO THE ADDRESS SET FORTH ON THE
SIGNATURE PAGE HEREOF AND SERVICE SO MADE SHALL BE DEEMED TO BE
COMPLETED FIVE DAYS AFTER THE SAME SHALL HAVE BEEN DEPOSITED IN
THE U.S. MAILS, POSTAGE PREPAID. THE ORIGINATOR AND MCF HEREBY
WAIVE ANY OBJECTION BASED ON FORUM NON CONVENIENS, AND ANY
OBJECTION TO VENUE OF ANY ACTION INSTITUTED HEREUNDER AND
CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS
DEEMED APPROPRIATE BY THE COURT. NOTHING IN THIS SECTION SHALL
AFFECT THE RIGHT OF THE ORIGINATOR OR MCF TO SERVE LEGAL PROCESS
IN ANY OTHER MANNER PERMITTED BY LAW.
(c) THE ORIGINATOR AND MCF HEREBY WAIVE ANY RIGHT TO
HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT, OR OTHERWISE ARISING OUT OF,
CONNECTED WITH, RELATED TO, OR IN CONNECTION WITH THIS AGREEMENT.
INSTEAD, ANY DISPUTE RESOLVED IN COURT WILL BE RESOLVED IN A
BENCH TRIAL WITHOUT A JURY.
SECTION 6.07. Execution in Counterparts; Severability.
This Agreement may be executed by the parties hereto in separate
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<PAGE>
counterparts, each of which when so executed shall be deemed to
be an original and both of which when taken together shall
constitute one and the same agreement. In case any provision in
or obligation under this Agreement shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and
enforceability of the remaining provisions or obligations in any
jurisdiction, or of such provision or obligation in any
jurisdiction, shall not in any way be affected or impaired
thereby.
SECTION 6.08. Descriptive Headings. The descriptive
headings of the various sections of this Agreement are inserted
for convenience of reference only and shall not be deemed to
affect the meaning or construction of any of the provisions
hereof.
SECTION 6.09. No Setoff. The Originator's obligations
under this Agreement shall not be affected by any right of
setoff, counterclaim, recoupment, defense or other right the
Originator might have against MCF, Redwood, the Operating Agent,
the Collateral Agent or any assignee, all of which rights are
hereby waived by the Originator.
SECTION 6.10. Further Assurances. The Originator
agrees to do such further acts and things and to execute and
deliver to MCF, Redwood, the Operating Agent or any assignee such
additional assignments, agreements, powers and instruments as
MCF, Redwood, the Operating Agent or any assignee may require or
deem advisable to carry into effect the purposes of this
Agreement or to better assure and confirm unto any such party its
respective rights, powers and remedies hereunder.
SECTION 6.11. Confidentiality. (a) The Originator and
MCF agree to maintain the confidentiality of this Agreement (and
all drafts of this agreement and documents ancillary to this
Agreement) in their communications with third parties other than
any Affected Party or any Indemnified Party and otherwise and not
to disclose, deliver or otherwise make available to any third
party (other than its directors, officers, employees, accountants
or counsel) the original or any copy of all or any part of this
Agreement (or any draft of this Agreement and documents ancillary
to this Agreement) except to an Affected Party or an Indemnified
Party.
(b) Notwithstanding Section 6.11(a), (i) the general
terms of the transactions contemplated by this Agreement and the
Related Documents may be disclosed to any existing lender to or
potential investor in the Parent that has agreed in writing not
to disclose such terms, and (ii) this Agreement and the Related
Documents may be disclosed (A) if required to be filed publicly
with the Securities and Exchange Commission, (B) to the certified
public accountants of the Parent to the extent necessary, (C) to
the extent otherwise required by applicable law, rule or
regulation,
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<PAGE>
(D) to the extent required under a valid and
appropriately limited subpoena or equivalent legal process or (E)
if the Affected Party otherwise consents in writing.
(c) The Originator agrees that it shall not (and shall
not permit any of its Subsidiaries to) issue any news release or
make any public announcement pertaining to the transactions
contemplated by this Agreement and the Related Documents without
the prior written consent of MCF and its assignees (which consent
shall not be unreasonably withheld) unless such news release or
public announcement is required by law, in which case the
Originator shall consult with MCF and its assignees prior to the
issuance of such news release or public announcement.
SECTION 6.12. Assignment of Agreement. The Originator
acknowledges that, to the extent permitted under the Purchase
Agreement, MCF may assign its rights granted hereunder, including
any rights in the Collateral granted under Article VII, and upon
such assignment, such assignee shall have all rights of MCF
hereunder and, to the extent permitted under the Purchase
Agreement, may in turn assign such rights. The Originator agrees
that, upon such assignment, such assignee may enforce directly,
without joinder of MCF, the rights set forth in this Agreement.
SECTION 6.13. Amendment and Restatement. Upon the
execution and delivery of this Agreement by the parties hereto,
the Initial Receivables Transfer Agreement shall be amended and
restated in its entirety by this Agreement, effective as of the
date hereof, with all rights, obligations and ownership or
security interests created under or granted pursuant to the
Initial Receivables Transfer Agreement continuing from the date
thereof, through the date hereof including, without limitation,
rights of the parties with respect to representations and
indemnifications made pursuant to the Initial Receivables
Transfer Agreement. Each reference in the Assignment, the
Subordinated Note and any other agreement and document delivered
pursuant to the Initial Receivables Transfer Agreement to the
"Receivables Transfer Agreement dated as of October 2, 1995"
shall be deemed to refer to the Initial Receivables Transfer
Agreement for the period from the date thereof until the date of
this Agreement and shall be deemed to refer to this Agreement
from and after the date hereof.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this
Receivables Transfer Agreement to be executed by their respective
officers thereunto duly authorized, as of the date first above
written.
MERISEL AMERICAS, INC.
By: _____________________________
Name: _______________________
Title: ______________________
Address: 200 Continental Boulevard
El Segundo, CA 90245
Attention: Timothy Jenson, Treasurer
Phone number: (310) 615-6850
Telecopier number: (310) 615-6882
MERISEL CAPITAL FUNDING, INC.
By: _____________________________
Name: _______________________
Title: ______________________
Address: 200 Continental Boulevard
Suite 301
El Segundo, CA 90245
Attention: Charles Freedman
Phone number: (310) 615-6861
Telecopier number: (310) 615-6882
<PAGE>
Schedule 1 to
Transfer Agreement
LIST OF CHIEF EXECUTIVE
OFFICES OF THE ORIGINATOR
200 Continental Blvd.
El Segundo, California 90245
LIST OF OTHER OFFICES OF THE
ORIGINATOR WHERE RECORDS ARE KEPT
ATLANTA, GA 4100 West Park Drive SW, Atlanta, GA 30336
CARY-N.C. 305 Gregson Drive, Cary, NC 27511
CHICAGO, IL 160 Hansen Court Ste. 112 Woodale, IL 60191
CHICAGO, IL 1269 Wood Dale Road, Woodale, IL 60191
DALLAS, TX 1221 Champion Cr. Suite 128, Carrolton,
TX 75006
HARTFORD, CT 21 Hyde Rd., Farmington, CT 06032
LEE SUMMIT, MO 3050 N. Independence Ave., Lee Summit, MO
64064
MARLBORO, MA 293 Boston Post Road West, Marlboro MA 01752
PLEASANTON, CA 5964 W. Las Positas Blvd., Pleasanton, CA
94566-9012
RICHMOND, VA 5700 Eastport Blvd., Richmond, VA 23231
SAN FRANCISCO, CA 30750 San Clemente St., Hayward, CA 94544
HAYWARD, CA 2399 West Winton, Hayward, CA 94545
<PAGE>
Schedule 2 to
Transfer Agreement
Employee Benefit Plans
Section 4.01(a)(xx)
A recent audit of the Merisel Inc. 401(k) Retirement Savings
Plan, which is sponsored by the Parent and covers eligible
employees of the Originator, disclosed the following operational
qualification defect: due to a deficiency in a prior payroll
system, during 1993 and 1994 salary deferral contributions
erroneously were not withheld from the portion of a participant's
compensation that was paid in the form of a supplemental
paycheck, i.e., bonuses, commissions, SPIFFs, retroactive pay or
vacation advances; the payroll system deficiency was corrected
effective January 1, 1995. The operational qualification defect
is eligible for correction under the Voluntary Compliance
Resolution (VCR) Program established by the Internal Revenue
Service (the "IRS"), and the Originator will take or will cause
the Parent to take whatever action is necessary to correct the
defect and retain the qualified status of the Plan, and to secure
a VCR compliance statement form the IRS. The Originator
represents and warrants that (1) the Parent will file a request
for a VCR compliance statement as soon as practicable, but no
later than January 1, 1996, and (2) the total amount that it will
have to pay to correct the defect, including any required Plan
contributions and interest thereon and any VCR fee payable to the
IRS (but excluding legal fees) will not exceed $200,000.
<PAGE>
TRADE NAMES, FICTITIOUS NAMES, ASSUMED NAMES
AND "DOING BUSINESS AS" NAMES OF THE ORIGINATOR
1. Merisel Americas, Inc. dba Channel Services Group
2. E. Information Company, trade name of Merisel Americas, Inc.
3. Merchandising Solutions, trade name of Merisel Americas,
Inc.
<PAGE>
EXHIBIT A
FORM OF ASSIGNMENT
ASSIGNMENT, dated as of October 2, 1995 between MERISEL
AMERICAS, INC. (the "Originator") and MERISEL CAPITAL FUNDING,
INC. ("MCF").
1. We refer to the Receivables Transfer Agreement
(the "Transfer Agreement") dated as of October 2, 1995 between
the Originator and MCF. All provisions of such Transfer
Agreement are incorporated herein by reference. All capitalized
terms shall have the meanings set forth in the Transfer
Agreement.
2. The Originator does hereby sell or contribute, to
MCF, without recourse, except as provided in Section 4.04 of the
Transfer Agreement, all right, title and interest of the
Originator in and to all Transferred Receivables transferred from
time to time from the Originator under the Transfer Agreement.
3. THIS CERTIFICATE OF ASSIGNMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
CALIFORNIA.
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. MERISEL CAPITAL FUNDING, INC.
By: ________________________ By: _________________________
Name: Name:
Title: Title:
<PAGE>
EXHIBIT B
FORM OF SUBORDINATED NOTE
$300,000,000 October 2, 1995
FOR VALUE RECEIVED, MERISEL CAPITAL FUNDING, INC., a
Delaware corporation (the "MCF"), hereby promises to pay to the
order of MERISEL AMERICAS, INC., a Delaware corporation (the
"Originator"), for its account, the principal sum of THREE
HUNDRED MILLION DOLLARS ($300,000,000) (or such lesser amount as
shall equal the aggregate unpaid principal indebtedness owed by
MCF to the Originator under Section 2.01 of the Transfer
Agreement referred to below), in lawful money of the United
States of America and in immediately available funds immediately
on the demand of the Originator.
The date, amount and interest rate, of each amount owed
by MCF to the Originator, and each payment made on account of the
principal thereof, shall be recorded by the Originator on its
books and, prior to any transfer of this Note, endorsed by the
Originator on the schedule attached hereto or any continuation
thereof. MCF shall pay interest to the Originator at a rate
equal to the sum of 5% per annum plus the rate prevailing on the
25th day of the month preceding such first day established by the
Federal Reserve Bank of San Francisco on advances to member banks
under Section 13 and 13a of the Federal Reserve Act as now in
effect or hereafter from time to time amended, but in no event
shall such rate exceed the maximum rate permitted by law,
<page
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.01. Definitions 1
SECTION 1.02. Other Terms and Interpretation 1
ARTICLE II
TRANSFERS OF RECEIVABLES
SECTION 2.01. Agreement to Transfer. 1
SECTION 2.02. Grant of Security Interest. 3
SECTION 2.03. Addition of Originator. 3
SECTION 2.04. Termination of Status as an Originator 3
ARTICLE III
CONDITIONS OF SALE
SECTION 3.01. Conditions Precedent to the Initial Sale 4
SECTION 3.02. Conditions Precedent to All Sales 6
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS
SECTION 4.01. Representations and Warranties of the
Originator. 7
SECTION 4.02. Covenants of the Originator. 16
SECTION 4.03. Negative Covenants of the Originator. 22
SECTION 4.04. Breach of Representations, Warranties or
Covenants. 24
ARTICLE V
INDEMNIFICATION
SECTION 5.01. Indemnification. 25
SECTION 5.02. Assignment of Indemnities. 27
<PAGE>
ARTICLE VI
MISCELLANEOUS
SECTION 6.01. Notices, Etc. 27
SECTION 6.02. No Waiver; Remedies. 28
SECTION 6.03. Binding Effect; Assignability. 28
SECTION 6.04. No Proceedings. 28
SECTION 6.05. Amendments; Consents and Waivers. 28
SECTION 6.06. GOVERNING LAW; CONSENT TO JURISDICTION;
WAIVER OF JURY TRIAL. 29
SECTION 6.07. Execution in Counterparts; Severability. 29
SECTION 6.08. Descriptive Headings. 29
SECTION 6.09. No Setoff. 30
SECTION 6.10. Further Assurances. 30
SECTION 6.11. Confidentiality. 30
SECTION 6.12. Assignment of Agreement 30
<PAGE>
AMENDED AND RESTATED
RECEIVABLES PURCHASE AND SERVICING AGREEMENT
Dated as of September 27, 1996
by and among
MERISEL CAPITAL FUNDING, INC.,
as Seller,
REDWOOD RECEIVABLES CORPORATION,
as Purchaser,
MERISEL AMERICAS, INC.,
as Servicer
and
GENERAL ELECTRIC CAPITAL CORPORATION,
as Operating Agent and Collateral Agent
<PAGE>
AMENDED AND RESTATED RECEIVABLES PURCHASE AND SERVICING
AGREEMENT, dated as of September 27, 1996 (the "Agreement") by
and among MERISEL CAPITAL FUNDING, INC., a Delaware corporation
(the "Seller"), REDWOOD RECEIVABLES CORPORATION, a Delaware
corporation, as Purchaser (as such, together with its successors
and assigns, the "Purchaser"), GENERAL ELECTRIC CAPITAL
CORPORATION, in its capacity as operating agent hereunder (as
such, together with its successors and assigns, the "Operating
Agent") and in its capacity as Collateral Agent for the Purchaser
Secured Parties (as such, together with its successors and
assigns, the "Collateral Agent"), and MERISEL AMERICAS, INC., a
Delaware corporation, as servicer hereunder (as such, together
with its successors and permitted assigns, the "Servicer").
RECITALS
A. The Seller, the Purchaser, the Operating Agent,
the Collateral Agent and the Servicer entered into a Receivables
Purchase and Servicing Agreement, dated as of October 2, 1995 (
the "Initial Receivables Purchase and Servicing Agreement").
B. The Seller, the Purchaser, the Operating Agent,
the Collateral Agent and the Servicer desire to enter into an
amendment and restatement of the Initial Receivables Purchase
Agreement pursuant to the terms and conditions set forth herein.
C. The Seller is a wholly-owned bankruptcy remote
Subsidiary of the Originator.
D. The Seller has been formed for the sole purpose of
purchasing or otherwise acquiring certain trade receivables
originated by Merisel, Inc., the Originator and/or their
subsidiaries.
E. The Seller intends that such trade receivables
shall be purchased by or contributed to the Seller pursuant to
the Receivables Transfer Agreement, dated as of October 2, 1995,
as amended or restated from time to time (the "Transfer
Agreement"), by and among the Originator and the Seller.
F. The Seller and the Purchaser intend that the
Purchaser purchase the Receivables.
G. The Operating Agent has been requested and is
willing to act as operating agent on behalf of the Purchaser in
connection with the making and financing of such advances.
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<PAGE>
H. In order to effectuate the purposes of this
Agreement, the Purchaser and the Operating Agent desire that a
servicer be appointed to perform certain servicing,
administrative and collection functions in respect of the
receivables acquired by the Purchaser under this Agreement.
I. The Originator has been requested and is willing
to act as the Servicer.
NOW, THEREFORE, the parties agree as follows:
ARTICLE
DEFINITIONS AND INTERPRETATION
Section 1.01. Definitions. Except as otherwise expressly
provided herein or unless the context otherwise requires,
capitalized terms not otherwise defined herein shall have the
meanings assigned to such terms in Annex X hereto, which is
incorporated by reference herein. All other capitalized terms
used herein shall have the meanings specified herein.
Section 1.02. Other Terms and Interpretation. All other
terms and the interpretation of this Agreement shall be as set
out in Annex X hereto.
ARTICLE
AMOUNTS AND TERMS OF THE PURCHASES
Section 2.01. Purchases. On the terms and conditions
hereinafter set forth, the Purchaser shall purchase Transferred
Receivables (each, a "Purchase") from the Seller from time to
time during the Revolving Period. Under no circumstances shall
the Purchaser make any Purchase if, after giving effect to such
Purchase, the aggregate outstanding Capital Investment would
exceed the Availability. The aggregate price for each such
Purchase shall consist of the Cash Purchase Price and the
Deferred Purchase Price.
Section 2.02. Optional Changes in Purchase Limit.
(a) The Seller may, not more than twice during each
calendar year, reduce the Maximum Purchase Limit permanently;
provided that (i) the Seller shall give notice of such reduction
to the Purchaser in the form of Exhibit A-2, (ii) any partial
reduction of the Maximum Purchase Limit shall be in an amount
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<PAGE>
equal to Five Million Dollars ($5,000,000) or an integral
multiple thereof, and (iii) no such reduction shall reduce the
Maximum Purchase Limit below Capital Investment.
(b) The Seller shall be entitled at its option to
terminate the Maximum Purchase Limit, provided that the Purchaser
shall be given no less than 90 days' prior notice by the Seller
of such termination in the form of Exhibit A-3. Any such
termination shall be permanent and irrevocable.
(c) Each written notice required to be delivered
pursuant to clauses (a) and (b) above shall be irrevocable and
shall be effective only if received by the Purchaser and the
Operating Agent not later than 5:00 p.m., New York City time on
the Business Day prior to the date of the related termination or
reduction. Each such notice of termination or reduction shall
specify the amount thereof.
Section 2.03. Notices Relating to Purchases.
(a) As directed by the Operating Agent, but no later
than 11:00 a.m. each Business Day with respect to the period to
and including the commencement of the prior business Day, the
Seller shall file with the Operating Agent an Investment Base
Certificate and, upon request, copies of all applicable Request
Notices under the Transfer Agreement delivered since the date of
the most recent Investment Base Certificate filed with the
Operating Agent; provided, however, that if, upon six months
from the date hereof, no event has occurred and is continuing
which constitutes a Termination Event or would constitute a
Termination Event but for the requirement that notice be given or
time elapse or both, then the Seller shall file an Investment
Base Certificate with the Operating Agent no later than 11:00
a.m. on the third Business Day of each week with respect to the
period to and including the close of business as of the last
Business Day of the preceding calendar week and, upon request,
copies of all applicable Request Notices under the Transfer
Agreement delivered since the date of the most recent Investment
Base Certificate filed with the Operating Agent. Availability
will be calculated by the Operating Agent based on the most
recent Investment Base Certificate delivered to the Purchaser and
the Operating Agent and such other information as may then be
available to the Operating Agent including, without limitation,
any information from any audit performed pursuant to Section
5.01(f), which information may be used in calculating
Availability in accordance with the definition thereof.
(b) The Seller shall give the Purchaser and the
Operating Agent written notice of each Purchase resulting in an
increase in Capital Investment (in each case, a "Seller Notice").
Each such written notice shall be substantially in the form of
Exhibit A-1, shall be irrevocable and shall be effective only if
received by the Purchaser and the Operating Agent not later than
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<PAGE>
2:00 p.m., New York City time on the Business Day prior to the
date of the related Purchase. Each such notice requesting a
Purchase shall specify the amount by which the Seller wishes the
Capital Investment of the Purchaser to be increased and the
Purchase Date (which shall be a Business Day).
Section 2.04. Conveyance of Receivables.
(a) On the Effective Date, the Seller will complete,
execute and deliver a Purchase Assignment in the form of Exhibit
B to the Purchaser.
(b) (i) Following receipt of a Seller Notice, subject
to the satisfaction of the conditions set forth in Section 3.02,
the Purchaser shall make available to or on behalf of the Seller,
in same day funds, in accordance with the Seller's instructions
(after taking into account amounts on deposit in the Collection
Account which may be applied to any Capital Investment pursuant
to Section 6.03(a)(iii)) the lesser of the amount specified in
such Seller Notice and Capital Investment Available.
(ii) On each Business Day during the Revolving
Period, subject to the terms of Section 6.03 hereof, the
Purchaser shall make available to or on behalf of the Seller, in
same day funds, amounts on deposit in the Collection Account
which may be disbursed to the Seller as payment for the
Transferred Receivables.
(c) Effective on the date of each Purchase, the
ownership of all Transferred Receivables (including Transferred
Receivables transferred prior to the Purchase Date) will be
vested in the Purchaser. The Seller shall not take any action
inconsistent with such ownership and shall not claim any
ownership interest in any such Transferred Receivable. The
Seller shall indicate in its Records that ownership of the
Transferred Receivable is held by the Purchaser. In addition,
the Seller shall respond to any inquiries with respect to
ownership of a Transferred Receivable by stating that it is no
longer the owner of such Transferred Receivable and that
ownership of such Transferred Receivable is held by the
Purchaser. Documents relating to the Transferred Receivables
shall be held in trust by the Seller and the Servicer, for the
benefit of the Purchaser as the owner thereof, and possession of
any incident relating to the Transferred Receivables so retained
is for the sole purpose of facilitating the servicing of the
Transferred Receivables. Such retention and possession is at the
will of the Purchaser and in a custodial capacity for the benefit
of the Purchaser only.
(d) If the Originator is required to repurchase
Transferred Receivables from the Seller pursuant to Section
4.04(i) of the Transfer Agreement, the Purchaser shall sell such
Transferred Receivables to the Seller for cash in an amount equal
to the Outstanding Balance of such Transferred Receivables.
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Section 2.05. Facility Termination Date. Notwithstanding
anything to the contrary herein, on and after the Facility
Termination Date, the Purchaser shall have no obligation to
purchase any additional Receivables.
Section 2.06. Daily Yield.
(a) The Seller shall pay to the Purchaser, as set
forth in Sections 6.03, 6.04 and 6.05, Daily Yield on the Capital
Investment of the Purchaser from time to time.
(b) Notwithstanding the foregoing, the Seller shall
pay interest on unpaid Daily Yield and on any other amount
payable by the Seller hereunder (to the extent permitted by law)
that shall not be paid in full when due (whether at stated
maturity, by acceleration or otherwise) for the period commencing
on the due date thereof to (but excluding) the date the same is
paid in full at the applicable Daily Yield Rate.
Section 2.07. Fees.
(a) The Seller shall pay to the Purchaser the fees set
forth in the Fee Letter.
(b) On each Settlement Date, the Seller shall pay to
the Servicer, the Servicing Fee, or to the Successor Servicer,
the Successor Servicing Fees and Expenses.
Section 2.08. Time and Method of Payments. Subject to the
provisions of Sections 6.03, 6.04 and 6.05, all payments of
principal, interest, fees and other amounts payable by the Seller
hereunder shall be made in dollars, in immediately available
funds, to the Purchaser not later than 3:00 p.m., New York City
time, on the date on which such payment shall become due. Any
such payment made on such date but after such time shall be
deemed to have been made on, and Daily Yield shall continue to
accrue and be payable thereon until, the next succeeding Business
Day. If any payment becomes due on a day other than a Business
Day, such payment may be made on the next succeeding Business Day
and such extension shall be included in computing Daily Yield in
connection with such payment. All payments hereunder shall be
made without setoff or counterclaim and in such amounts as may be
necessary in order that all such payments shall not be less than
the amounts otherwise specified to be paid under this Agreement
(after withholding for or on account of any present or future
taxes, levies, imposts, duties or other similar charges of
whatever nature imposed upon an Affected Party by any
Governmental Authority, other than any tax on or measured by the
net income of the Affected Party to which any such payment is due
pursuant to applicable foreign, federal, state and local income
tax laws).
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Section 2.09. 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 appropriate, in the reasonable opinion of the
Purchaser, or that the Purchaser or the Operating Agent may
reasonably request, in order to perfect, protect or more fully
evidence the transfer of ownership of Transferred Receivables or
to enable the Purchaser to exercise or enforce any of its rights
hereunder or under any Purchase Assignment. Without limiting the
generality of the foregoing, the Seller will, upon the reasonable
request of the Purchaser, (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 appropriate, or as the Purchaser may request, (ii)
mark, or cause the Servicer to mark, conspicuously each invoice
evidencing each Transferred Receivable with a legend, acceptable
to the Purchaser, evidencing that the Purchaser has purchased all
right and title thereto and interest therein as provided in the
Transfer Agreement, (iii) send notification to Obligors as to the
transfer of Transferred Receivables, and (iv) mark, or cause the
Servicer to mark, its master data processing records evidencing
such Transferred Receivables with such legend.
(b) The Seller hereby authorizes the Purchaser to file
one or more financing or continuation statements, and amendments
thereto and assignments thereof, relating to all or any of the
Transferred Receivables and Collections with respect thereto
without the signature of the Seller where permitted by law. A
carbon, photographic or other reproduction of this Agreement or
any notice or financing statement covering the Transferred
Receivables or any part thereof shall be sufficient as a notice
or financing statement where permitted by law. The Purchaser
will promptly send to the Seller after receipt of any
acknowledgment copies from the appropriate governmental agency
any financing or continuation statements thereto which it files
without the signature of the Seller except, in the case of
filings of copies of this Agreement as financing statements, the
Purchaser will promptly send the Seller after receipt from the
appropriate governmental agency the filing or recordation
information with respect thereto.
Section 2.10. Additional Costs; Capital Requirements.
(a) In the event that any existing or future law,
regulation or guideline, or interpretation thereof, by any court
or administrative or governmental authority charged with the
administration thereof, or compliance by any Affected Party with
any request or directive (whether or not having the force of law)
of any such authority shall impose, modify or deem applicable or
result in the application of, any capital maintenance, capital
ratio or similar requirement against commitments made by any
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Affected Party under this Agreement or a Program Document, and
the result of any event referred to above is to impose upon any
Affected Party or increase any capital requirement applicable as
a result of the making or maintenance of, such Affected Party's
commitment (which imposition of capital requirements may be
determined by each Affected Party's reasonable allocation of the
aggregate of such capital increases or impositions), then, upon
demand made by the Operating Agent on behalf of such Affected
Party as promptly as practicable after it obtains knowledge that
such law, regulation, guideline, interpretation, request or
directive exists and determines to make such demand, the Seller
shall immediately pay to the Collateral Agent on behalf of such
Affected Party from time to time as specified by the Operating
Agent, additional amounts which shall be sufficient to compensate
such Affected Party for the Seller's Share of such imposition of
or increase in capital requirements together with interest on
each such amount from the date demanded until payment in full
thereof at the Daily Yield Rate. A certificate setting forth in
reasonable detail the amount necessary to compensate such
Affected Party as a result of an imposition of or increase in
capital requirements submitted by the Operating Agent to the
Seller shall be conclusive, absent manifest error, as to the
amount thereof.
(b) In the event that any Regulatory Change shall:
(i) change the basis of taxation of any amounts payable to any
Affected Party in respect of any Purchases, Capital Investment,
LOC Draws, Liquidity Loans or Transaction Liquidity Loans (other
than taxes imposed on the overall net income of such Affected
Party for any such Purchases, Capital Investment, LOC Draws,
Liquidity Loans or Transaction Liquidity Loans by the United
States of America or the jurisdiction in which such Affected
Party has its principal office); (ii) impose or modify any
reserve, Federal Deposit Insurance Corporation premium or
assessment, special deposit or similar requirements relating to
any extensions of credit or other assets of, or any deposits with
or other liabilities of, such Affected Party; or (iii) impose any
other conditions affecting this Agreement in respect of
Purchases, Capital Investment, LOC Draws, Liquidity Loans, and
Transaction Liquidity Loans (or any of such extensions of credit,
assets, deposits or liabilities); and the result of any event
referred to in clause (i), (ii) or (iii) above shall be to
increase such Affected Party's costs of making or maintaining any
Purchases, Capital Investment, LOC Draws, Liquidity Loans or
Transaction Liquidity Loans or its commitment under a Program
Document, or to reduce any amount receivable by such Affected
Party hereunder in respect of any of its Purchases, Capital
Investment, LOC Draws and Liquidity Loans or its commitment (such
increases in costs and reductions in amounts receivable are
hereinafter referred to as "Additional Costs") then, upon demand
made by the Operating Agent on behalf of such Affected Party, as
promptly as practicable after it obtains knowledge that such a
Regulatory Change exists and determines to make such demand, the
Seller shall pay to the Collateral Agent on behalf of such
Affected Party, from time to time as specified by the Operating
Agent, additional commitment fees or other amounts which shall be
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sufficient to compensate such Affected Party for the Seller's
Share of such increased cost or reduction in amounts receivable
by such Affected Party from the date of such change, together
with interest on each such amount from the date demanded until
payment in full thereof at the Daily Base Yield Rate.
(c) Determinations by any Affected Party for purposes
of this Section 2.10 of the effect of any Regulatory Change on
its costs of making or maintaining Purchases, Capital Investment,
LOC Draws, Liquidity Loans or Transaction Liquidity Loans or on
amounts receivable by it in respect of Purchases, LOC Draws,
Liquidity Loans, Transaction Liquidity Loans and of the
additional amounts required to compensate such Affected Party in
respect of any Additional Costs, shall be set forth in a written
notice to the Seller in reasonable detail and shall be
conclusive, absent manifest error.
Section 2.11. Breakage Costs. The Seller shall pay to the
Collateral Agent for the account of the Purchaser, upon the
request of the Purchaser, such amount or amounts as shall
compensate the Purchaser for any loss (excluding loss of profit),
cost or expense incurred by the Purchaser (as determined by the
Purchaser) as a result of any repayment of a Purchase (and
interest thereon) other than on the maturity date of the
Commercial Paper funding such Purchase, such compensation to
include, without limitation, an amount equal to any loss or
expense suffered by the Purchaser during the period from the date
of receipt of such repayment to (but excluding) the maturity date
of such Commercial Paper, if the rate of interest obtainable by
the Purchaser upon the redeployment of an amount of funds equal
to the amount of such repayment is less than the rate of interest
applicable to such Commercial Paper (such expense to be referred
to as "Breakage Costs"). The determination by the Purchaser of
the amount of any such loss or expense shall be set forth in a
written notice to the Seller in reasonable detail and shall be
conclusive, absent manifest error.
Section 2.12. Purchase Excess. After completion of the
disbursements specified in Subsections 6.03(a), (b) and (c), the
Operating Agent shall notify the Seller of any remaining Purchase
Excess, and the Seller shall deposit the amount of such Purchase
Excess remaining in the Collection Account by 11:30 a.m. on the
following Business Day.
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ARTICLE III
CONDITIONS TO PURCHASE
Section 3.01. Conditions Precedent to Effectiveness of
Agreement. The effectiveness of this Agreement is subject to the
condition precedent that the Purchaser, the Operating Agent and
the Collateral Agent shall each have received on or before the
Effective Date the following, in form and substance satisfactory
to the Operating Agent:
(a) An executed copy of the Transfer Agreement.
(b) A certificate from an officer of the Originator in
the form of Exhibit D (Solvency Certificate as to Seller).
(c) With respect to the Seller:
(i) the certificate or articles of incorporation
of the Seller certified, as of a date no more than ten (10)
days prior to the Effective Date, by the Secretary of State
of its state of incorporation;
(ii) a good standing certificate, dated no more
than ten (10) days prior to the Effective Date, from the
respective Secretary of State of its state of incorporation
and each state in which the Seller is required to qualify,
or represents that it is qualified, to do business;
(iii) a certificate of the Secretary or
Assistant Secretary of the Seller certifying as of the
Effective Date: (A) the names and true signatures of the
officers authorized on its behalf to sign this Agreement,
(B) a copy of the Seller's by-laws, and (C) a copy of the
resolutions of the board of directors of the Seller
approving this Agreement, the Related Documents to which it
is a party and the transactions contemplated hereby and
thereby; and
(iv) an Officer's Certificate in the form of
Exhibit E (Bringdown Certificate).
(d) With respect to the Servicer:
(i) the certificate or articles of incorporation
of the Servicer certified, as of a date no more than ten
(10) days prior to the Effective Date, by the Secretary of
State of its state of incorporation;
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(ii) a good standing certificate, dated no more
than ten (10) days prior to the Effective Date, from the
respective Secretary of State of its state of incorporation
and each state in which the Servicer is required to qualify,
or represents that it is qualified, to do business;
(iii) a certificate of the Secretary or
Assistant Secretary of the Servicer certifying as of the
Effective Date: (A) the names and true signatures of the
officers authorized on its behalf to sign this Agreement,
(B) a copy of the Servicer's by-laws, and (C) a copy of the
resolutions of the board of directors of the Servicer
approving this Agreement, the Related Documents to which it
is a party and the transactions contemplated thereby and
hereby; and
(iv) an Officer's Certificate in the form of
Exhibit F (Servicer's Certificate).
(e) Certified copies of requests for information or
copies on form UCC-11 (or a similar search report certified by a
party acceptable to the Operating Agent), dated a date no more
than fourteen (14) days prior to the Effective Date listing all
effective financing statements and other similar instruments and
documents which name the Originator and the Seller (under their
present names and any previous names) as debtor, together with
copies of such financing statements none of which shall cover any
Transferred Receivables unless termination statements or
statements of release are provided with respect thereto pursuant
to subsection (f) below.
(f) Executed termination statements (form UCC-3), if
any, necessary to release all security interests and other rights
of any Person in Transferred Receivables previously granted by
the Originator including, without limitation, all such releases
specified by the Originator prior to the date hereof.
(g) Any necessary third party consents to the closing
of the transactions contemplated hereby.
(h) Executed financing statements (form UCC-1), in
respect of Transferred Receivables, (i) pursuant to the Transfer
Agreement, naming each Originator as the assignor and the Seller
as the assignee, and (ii) pursuant to Article VIII, naming the
Seller as the debtor/seller, the Purchaser as secured
party/purchaser and the Collateral Agent as the assignee, or
other, similar instruments or documents, as may be necessary or,
in the reasonable opinion of the Operating Agent, desirable under
the UCC of all appropriate jurisdictions or any other applicable
law (including the Assignment of Claims Act) to perfect the
Purchaser's and the Collateral Agent's interests in all
Transferred Receivables in which an interest may be assigned
hereunder.
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(i) Fully executed copies of each Lockbox Agreement
(other than the agreement with Harris Bank which shall be
delivered no later than 30 days after the Effective Date).
(j) The favorable opinion of counsel to the Seller and
the Originator as to corporate and security interest/perfection
matters and such other matters as the Operating Agent may
require.
(k) The favorable opinion of counsel to the Seller and
the Originator, as to the true sale of the Transferred
Receivables from each Originator to the Seller, the
nonconsolidation of the Seller's assets into the bankruptcy
estate of each Originator and such other matters as the Operating
Agent may require.
(l) Payment of all fees due hereunder or under the Fee
Letter.
(m) (i) Consolidated balance sheets, statements of
income and statements of cash flow of the Parent and its
Subsidiaries for each of the years in the three year period
ended December 31, 1994, audited by a nationally recognized
accounting firm (accompanied by consolidating financial
information and a satisfactory management letter, together
with management's response thereto); and
(ii) Unaudited consolidated and consolidating
balance sheets and statements of income and statements of
cash flow of the Parent and its Subsidiaries for the 6 month
period ended June 30, 1995.
(n) Confirmation of the ratings of the Commercial
Paper as A-1+ by S&P and P-1 by Moody's.
(o) A copy of the Servicer's Credit and Collection
Policies.
(p) An Investment Base Certificate as of August 31,
1995.
(q) All taxes (other than income taxes) including
without limitation, any stamp duty, imposed on any party hereto
as a result of this transaction, shall have been paid by the
Originator.
(r) An Officer's Certificate certifying the approval
by the Parent's 8.58% privately placed senior note holders in
accordance with the applicable note purchase agreement.
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(s) Such other approvals, consents, opinions,
documents and instruments, as the Operating Agent may reasonably
request.
Section 3.02. Conditions Precedent to All Purchases. Each
Purchase (including the initial Purchase) shall be subject to the
further conditions precedent as follows:
(a) On the related Purchase Date, the Seller shall
have certified in the related Investment Base Certificate that,
except as specifically disclosed in writing to the Purchaser, and
specifically consented to by the Purchaser in its sole
discretion:
(i) the representations and warranties of the
Seller, the Originator and the Servicer set forth in
Sections 4.01 and 4.02 are true and correct in all material
respects (except with respect to those already so qualified
which are true and correct in all respects) on and as of
such date, before and after giving effect to such Purchase
and to the application of the proceeds therefrom, as though
made on and as of such date;
(ii) no event has occurred, or would result from
such Purchase or from the application of the proceeds
therefrom, which is continuing and constitutes a Termination
Event or would constitute a Termination Event but for the
requirement that notice be given or time elapse or both
(other than a Termination Event under Section 9.01(m) which
has not been declared as a Facility Termination Date and in
respect of which Transaction Liquidity Loans have been
provided pursuant to the Transaction Liquidity Agreement);
(iii) the Seller is in compliance with each of
its covenants set forth herein; and
(iv) no event has occurred which constitutes an
Event of Servicer Termination or would constitute an Event
of Servicer Termination but for the requirement that notice
be given or time elapse or both.
(b) The Facility Termination Date has not occurred.
(c) Before and after giving effect to such purchase
and to the application of proceeds therefrom, there exists no
Purchase Excess.
(d) The Originator and Seller shall have taken such
other action, including delivery of approvals, consents,
opinions, documents and instruments to the Purchaser and the
Operating Agent, as the Operating Agent may reasonably request.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.01. Representations and Warranties of the Seller.
The Seller represents and warrants to the Purchaser, the
Operating Agent and the Collateral Agent as of the date hereof,
as of the Effective Date and on each subsequent Purchase Date as
follows:
(a) The Seller is a corporation duly organized,
validly existing and in good standing under the laws of its
jurisdiction of incorporation and is duly qualified to do
business, and is in good standing, in each jurisdiction in which
the nature of its business requires it to be so qualified.
(b) The Seller has the power and authority to own,
pledge, mortgage, operate and convey all of its properties, to
conduct its business as now or proposed to be conducted and to
execute and deliver this Agreement and the Related Documents and
to perform the transactions contemplated hereby and thereby.
(c) The Seller is and has been a wholly-owned
subsidiary of Merisel Americas, Inc.
(d) The Seller is and has been operated in such a
manner that the separate corporate existence of the Seller and
each Originator would not be disregarded in the event of a
bankruptcy or insolvency of any Originator and in such regard:
(i) the Seller is and has been a limited purpose
corporation whose activities are restricted in its
certificate or articles of incorporation;
(ii) except as provided in the Services Agreement,
no Originator nor any Affiliate of the Originator is nor has
been involved in the day-to-day management of the Seller;
(iii) except as provided in the Services
Agreement, other than the purchase and contribution of
Receivables, the incurring and payment of indebtedness and
interest pursuant to the Subordinated Note, the payment of
dividends and the return of capital to the Originator, any
lease or sub-lease of office space or equipment, the payment
of Servicing Fees to the Servicer under this Agreement and
the intercorporate transactions engaged in pursuant to the
CIESCO Agreement, the Seller engages or has engaged in no
intercorporate transactions with the Originator or any
Affiliate of the Originator;
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(iv) the Seller maintains separate corporate
records and books of account from each Originator, holds
regular corporate meetings and otherwise observes corporate
formalities and has a separate business office from each
Originator;
(v) the financial statements and books and
records of the Seller and each Originator prepared after the
Effective Date reflect the separate corporate existence of
the Seller;
(vi) the Seller maintains its assets separately
from the assets of each Originator and any other Affiliate
of each Originator (including through the maintenance of
separate bank accounts and except for any Records to the
extent necessary for the servicing of the Transferred
Receivables), the Seller's funds and assets, and records
relating thereto, have not been and are not commingled with
those of the Originator or any other Affiliate of the
Originator and the separate creditors of the Seller will be
entitled to be satisfied out of the Seller's assets prior to
any value in the Seller becoming available to the Seller's
equityholders;
(vii) except as provided in the Services
Agreement, this Agreement or the Related Documents, no
Originator nor any Affiliate of the Originator (excluding
the Seller) (A) pays the Seller's expenses; (B) guarantees
the Seller's obligations, or (C) advances funds to the
Seller for the payment of expenses or otherwise;
(viii) all business correspondence of the
Seller and other communications are conducted in the
Seller's own name, on its own stationery and through a
separately-listed telephone number;
(ix) the Seller does not act as agent for the
Originator or any Affiliates of the Originator, but instead
presents itself to the public as a corporation separate from
each Originator, independently engaged in the business of
purchasing and financing Receivables;
(x) the Seller maintains at least two independent
directors each of whom, at all times after the Effective
Date, shall not be a shareholder, director, officer,
employee or associate of the Originator or any Affiliate of
the Originator (other than the Seller) as provided in its
certificate or articles of incorporation; and
(xi) the bylaws or Articles of Incorporation of
the Seller require it to maintain (A) correct and complete
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books and records of account, and (B) minutes of the
meetings and other proceedings of its shareholders and board
of directors.
(e) The Seller has not engaged, and does not presently
engage, in any activity other than the activities undertaken
pursuant to this Agreement, the Related Documents, the Services
Agreement and the CIESCO Agreement, nor has the Seller entered
into any agreement other than this Agreement, the Related
Documents, the Services Agreement, the CIESCO Agreement and any
agreement necessary to undertake any activity pursuant to this
Agreement, the Related Documents or the CIESCO Agreement.
(f) The execution, delivery and performance by the
Seller of this Agreement, the Related Documents and the
transactions contemplated hereby and thereby (i) have been duly
authorized by all necessary corporate or other action on the part
of the Seller, (ii) do not contravene or cause the Seller to be
in default under (A) the Seller's certificate or articles of
incorporation or by-laws, (B) any contractual restriction
contained in any (or, in the case of the Originator only, any
material) indenture, loan or credit agreement, lease, mortgage,
security agreement, bond, note, or other (or,in the case of the
Originator only, any material) agreement or instrument binding on
or affecting the Seller or its property or the Originator or its
property, or (C) any law, rule, regulation, order, license
requirement, writ, judgment, award, injunction, or decree
applicable to, binding on or affecting the Seller or its property
or the Originator or its property, and (iii) do not result in or
require the creation of any Adverse Claim upon or with respect to
any of the property of the Seller or the Originator (other than
in favor of the Purchaser and the Collateral Agent as
contemplated hereunder).
(g) This Agreement and the Related Documents have each
been duly executed and delivered by the Seller.
(h) No consent of, notice to, filing with or permits,
qualifications or other action by any Governmental Authority or
any other party is required (i) for the due execution, delivery
and performance by the Seller of this Agreement or any of the
Related Documents, (ii) for the perfection of or the exercise by
each of the Purchaser, the Operating Agent or the Collateral
Agent of any of its rights or remedies hereunder or thereunder,
(iii) for the grant by the Seller of the security interests
granted under Section 8.01 of this Agreement, (iv) for the
perfection of or the exercise by each of the Purchaser or the
Collateral Agent of its rights and remedies provided for in this
Agreement, or (v) to ensure the legality, validity,
enforceability or admissibility into evidence of this Agreement
in any jurisdiction in which any of the Collateral is located, in
each case other than consents, notices, filings and other actions
which have been obtained or made and complete copies of which
have been provided to the Purchaser, the Operating Agent or
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the Collateral Agent and continuation statements in respect of any
such filings.
(i) No transaction contemplated by this Agreement
requires compliance with any bulk sales act or similar law.
(j) Each of this Agreement and each Related Document
is the legal, valid and binding obligation of the Seller
enforceable against the Seller in accordance with its respective
terms. Each of the Seller Assigned Agreements to which the
Originator or the Seller is a party constitutes the legal, valid
and binding obligation of such Person, enforceable against such
Person in accordance with its terms, subject to any applicable
bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to or affecting
the enforceability of creditors' rights generally and general
equitable principles, whether applied in a proceeding at law or
in equity.
(k) There is no pending or threatened, nor any
reasonable basis for any, action, suit or proceeding against or
affecting the Seller, its officers or directors, or the property
of the Seller, in any court or tribunal, before any arbitrator of
any kind or before or by any Governmental Authority.
(l) No injunction, writ, restraining order or other
order of any nature adverse to the Seller or the conduct of its
business or which is inconsistent with the due consummation of
the transactions contemplated by this Agreement or the Related
Documents has been issued by a Governmental Authority nor been
sought by any Person.
(m) The principal place of business and chief
executive office of the Seller, and the offices where the Seller
keeps its Records and the original copies of the Seller Assigned
Agreements are located at the address of the Seller for notices
under Section 14.01 and as set forth on Schedule 5 and there are
currently no, and during the past four months (or such shorter
time as the Seller has been in existence) there have not been,
any other locations where the Seller is located (as that term is
used in the UCC of the jurisdiction where such principal place of
business is located) or keeps Records.
(n) The Seller does not have and has never conducted
business using tradenames, fictitious names, assumed names or
"doing business as" names and has not changed its name during the
last five years.
(o) The Seller does not have any Subsidiaries.
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(p) The Seller is solvent and will not become
insolvent after giving effect to the transactions contemplated by
this Agreement and the Related Documents. The Seller has no
Debts to any Person other than pursuant to this Agreement, the
Related Documents and the Services Agreement. The Seller, after
giving effect to the transactions contemplated by this Agreement
and the Related Documents, will have an adequate amount of
capital to conduct its business in the foreseeable future.
(q) For federal income tax, reporting and accounting
purposes, the Seller will treat the purchase or assignment of
each Transferred Receivable pursuant to the Transfer Agreement as
a purchase or absolute assignment of each Originator's full
right, title and ownership interest in such Transferred
Receivable to the Seller (and those Receivables contributed to
the Seller by the Originator pursuant to the Transfer Agreement
shall be accounted for as an increase in the stated capital of
the Seller) and the Seller has not in any other manner accounted
for or treated the transactions in Transferred Receivables.
(r) The Seller has complied and will comply in all
respects with all applicable laws, rules, regulations, judgments,
agreements, decrees and orders with respect to its business and
properties and all Collateral.
(s) The Seller has filed on a timely basis all tax
returns (federal, state and local) required to be filed, is not
liable for taxes payable by any other Person (other than
Affiliates of the Seller with whom the Seller files a
consolidated tax return for which the Seller is liable on a
consolidated basis) and has paid or made adequate provisions for
the payment of all taxes, assessments and other governmental
charges due from the Seller (other than taxes, fees, amendments
or governmental charges which the Seller is contesting in good
faith with such taxing authority and in respect of which no final
unappealable order has been made against the Seller). No tax
lien or similar Adverse Claim has been filed, and no claim is
being asserted, with respect to any such tax, assessment or other
governmental charge. Any taxes, fees and other governmental
charges payable by the Originator in connection with the
execution and delivery of this Agreement and the Related
Documents and the transactions contemplated hereby or thereby
have been paid or shall have been paid if and when due at or
prior to such Transfer Date.
(t) Each Investment Base Certificate and Request
Notice is accurate in all material respects and the Investment
Base as of the Effective Date is not materially different than
the Investment Base as reported in the Investment Base
Certificate delivered pursuant to 3.01(p).
(u) Each Transferred Receivable is owned by the Seller
free and clear of any Adverse Claim and the Seller has the full
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right, corporate power and lawful authority to assign, transfer
and pledge the same and interests therein and all substitutions
therefor and additions thereto pursuant to Section 8.01, and upon
making each Purchase, the Purchaser will have acquired a
perfected, first priority and valid ownership interest in such
Transferred Receivables, free and clear of any Adverse Claim. No
effective financing statement or other instrument similar in
effect covering all or any part of the Seller Collateral is on
file in any recording office, except such as may have been filed
in favor of the Purchaser as "Secured Party/Purchaser" and the
Collateral Agent as "Assignee" pursuant to Article VIII of this
Agreement or, with respect to the Transferred Receivables, in
favor of the Seller pursuant to the Transfer Agreement unless
termination statements or statements of release are provided
thereto with respect to Section 3.01(f).
(v) Each Transferred Receivable was purchased by or
contributed to the Seller on the relevant Transfer Date pursuant
to the Transfer Agreement.
(w) Each purchase of Receivables under the Transfer
Agreement 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.
(x) All information heretofore or hereafter furnished
by or on behalf of the Seller to the Collateral Agent, the
Operating Agent or the Purchaser in connection with this
Agreement or any transaction contemplated hereby is and will be
true and complete in all material respects and does not and will
not omit to state a material fact necessary to make the
statements contained therein not misleading, provided that any
projections, pro forma or preliminary financial information
furnished are based on good faith estimates and assumptions
believed by the Seller to be reasonable at the time made and the
Collateral Agent, the Operating Agent and the Purchaser each
acknowledge that such projections as to future events are not to
be viewed as facts and that actual results for such period may
differ from the projected results.
(y) The Seller is in compliance with ERISA and has not
incurred and does not expect to incur any liabilities (except for
premium payments arising in the ordinary course of business)
payable to the PBGC (or any successor thereto) under ERISA.
(z) (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 corporation restriction
that could have, and no provision of applicable law or
governmental regulation is reasonably likely to have, a material
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adverse effect on the condition (financial or otherwise),
business, operations or properties of the Seller, or could have
such an effect on the ability of the Seller to carry out its
obligations under this Agreement and the other Related Documents
to which the Seller is a party, (ii) the Seller is not in
default under or with respect to any 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 or properties, and the Seller has not
delivered or received any notice of default thereunder, and (iii)
each contract, agreement, lease or other instrument to which the
Seller is a party is listed on Schedule 7.
(aa) The Seller is not an "investment company" or an
"affiliated person" of, or "promoter" or "principal underwriter"
for, an "investment company," as such terms are defined in the
Investment Company Act of 1940, as amended. The making of the
Purchases by the Purchaser, the application of the proceeds and
repayment thereof by the Seller and the consummation of the
transactions contemplated by this Agreement and the other Related
Documents to which the Seller is a party will not violate any
provision of such Act or any rule, regulation or order issued by
the Securities and Exchange Commission thereunder.
(bb) Except as provided in the Services Agreement,
there is not now, nor will there be at any time in the future,
any agreement or understanding between the Originator or any
other Affiliate of the Originator and the Seller (other than as
expressly set forth herein) providing for the allocation or
sharing of obligations to make payments or otherwise in respect
of any taxes, fees, assessments or other governmental charges.
(cc) Each of the representations and warranties of the
Seller contained in the Related Documents (other than this
Agreement) is true and correct in all material respects and the
Seller hereby makes each such representation and warranty to, and
for the benefit of, the Collateral Agent, the Operating Agent and
the Purchaser as if the same were set forth in full herein.
Section 4.02. Representations and Warranties of the
Servicer. The Servicer represents and warrants to the Purchaser,
the Operating Agent and the Collateral Agent as follows as of the
date hereof:
(a) The Servicer is a corporation duly organized,
validly existing and in good standing under the laws of its
jurisdiction of incorporation and is duly qualified to do
business, and is in good standing, in every jurisdiction in which
the nature of its business requires it to be so qualified except
where the failure to be so qualified would not materially and
adversely affect (1) the performance of the Servicer of its
obligations under this Agreement or any of the Related Documents,
(2) the validity or enforceability of this Agreement or any of
the Related Documents, (3) the Transferred Receivables, the
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Contracts or the interests of MCF, Redwood or their assigns
therein, or (4) the business, operations, financial condition or
prospects of the Servicer.
(b) The Servicer has the power and authority to
execute and deliver this Agreement and to perform the
transactions contemplated hereby.
(c) The execution, delivery and performance by the
Servicer of this Agreement, each other Related Document to which
it is a party and the transactions contemplated hereby and
thereby (i) have been duly authorized by all necessary corporate
or other action on the part of the Servicer, (ii) do not
contravene or cause the Servicer to be in default under (A) its
charter or by-laws, (B) any contractual restriction contained in
any or, in the case of the Originator only, any material
indenture, loan or credit agreement, lease, mortgage, security
agreement, bond, note or other or, in the case of the Originator
only, any material agreement or instrument binding on or
affecting it or its property, or (C) any law, rule, regulation,
order, writ, judgment, award, injunction or decree binding on or
affecting it or its property, and (iii) do not result in or
require the creation of any Adverse Claim upon or with respect to
any of its properties (other than in favor of the Seller, Redwood
and the Collateral Agent).
(d) This Agreement and each other Related Document to
which it is a party has been duly executed and delivered by the
Servicer.
(e) No consent of, notice to, filing with or permits,
qualifications or other action by any Governmental Authority or
any other party is required for the due execution, delivery and
performance by the Servicer of this Agreement, any Related
Document to which it is a party other than any consents, notices,
permits, qualifications, filings or other actions which have been
obtained or made and complete copies of which have been provided
to the Purchaser, the Operating Agent and the Collateral Agent.
(f) This Agreement and each other Related Document to
which it is a party is the legal, valid and binding obligation of
the Servicer enforceable against the Servicer in accordance with
its terms subject to any applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter
in effect relating to or affecting the enforceability of
creditors' rights generally and general equitable principles,
whether applied in a proceeding at law or in equity.
(g) There is no pending or, to the knowledge of the
Servicer, threatened, nor any reasonable basis for any, action,
suit, investigation or proceeding of a material nature against or
affecting the Servicer, its officers or directors, or the
property of the Servicer, in any court or tribunal, before any
arbitrator of any kind or before or by any Governmental Authority
(i) asserting the invalidity of this Agreement or any Related
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Document, or (ii) seeking any determination or ruling that might
materially and adversely affect (A) the performance by the
Servicer of its obligations under this Agreement or other Related
Document, or (B) the validity or enforceability of this Agreement
or any Related Document.
(h) No injunction, writ, restraining order or other
order of any material nature adverse to the Servicer or the
conduct of its business or which is inconsistent with the due
consummation of the transactions contemplated by this Agreement
and the Related Documents has been issued by a Governmental
Authority or, to the knowledge of the Servicer, has been sought
by any other Person.
(i) The Servicer has filed all tax returns (federal,
state and local) required to be filed by it and has paid or has
made adequate provision for the payment of all taxes, fees,
assessments and other governmental charges due from the Servicer,
no tax lien or other similar Adverse Claim has been filed, and no
claim has been filed, and no claim is being asserted, with
respect to any such tax, fee, assessment or other governmental
charge (other than taxes, fees, amendments or governmental
charges which the Servicer is contesting in good faith with such
taxing authority and in respect of which no final unappealable
order has been made against the Servicer). Any taxes, fees and
other governmental charges payable by the Servicer in connection
with the transactions contemplated by this Agreement and the
Related Documents and the execution and delivery of this
Agreement and the Related Documents have been paid or shall have
been paid at or prior to the Effective Date.
(j) The Servicer is not required to be registered as
an "investment company" under the Investment Company Act of 1940.
The Servicer is not subject to the information reporting
requirements of the Securities Exchange Act of 1934 or the
Securities Act of 1933.
(k) The Parent filed a request for a compliance
statement under the Voluntary Compliance Resolution ("VCR")
Program established by the Internal Revenue Service on or before
January 1, 1996 regarding an operational qualification defect
(the "Defect") caused due to a deficiency in a payroll system
utilized during the Parent's 1993 and 1994 fiscal years which
resulted in salary deferral contributions not being withheld from
the portion of a participant's compensation that was paid in the
form of a supplemental paycheck (i.e., bonuses, commissions,
SPIFFs, retroactive pay or vacation advances). The total amount
that the Parent will have to pay to correct the Defect, including
any required Plan contributions and interest thereon and any VCR
fee payable to the Internal Revenue Service (but excluding legal
fees), does not exceed $200,000.
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(l) Each of the representations and warranties of the
Servicer contained in this Agreement and the Related Documents is
true and correct in all material respects and the Servicer hereby
makes each such representation and warranty contained in the
Related Documents to, and for the benefit of, the Purchaser, the
Operating Agent and the Collateral Agent.
ARTICLE V
GENERAL COVENANTS OF THE SELLER
Section 5.01. Affirmative Covenants of the Seller. The
Seller shall, unless the Operating Agent shall otherwise consent
in writing:
(a) perform each of its obligations under this
Agreement and the Related Documents and comply in all respects
with all of its obligations under this Agreement and the Related
Documents and comply with all material requirements of applicable
law, rules, regulations and orders with respect to this
Agreement, the Related Documents, to its business and properties
and all Transferred Receivables, related Contracts and
Collections with respect thereto;
(b) preserve and maintain its corporate existence,
rights, franchises and privileges in the jurisdiction of its
incorporation and shall conduct its business in accordance with
the terms of its certificate of incorporation and bylaws;
(c) continue to operate its business in the manner set
forth in Sections 4.01(d) and (e);
(d) deposit all Collections it may receive in respect
of Transferred Receivables into the Collection Account within one
Business Day of receipt;
(e) use the proceeds of the Purchases made hereunder
solely for (i) the purchase of Receivables from the Originator,
(ii) payment of dividends to its shareholder, (iii) repayments
and interest under the Subordinated Note, and (iv) payment of
administrative fees or Servicing Fees or expenses to the
Originator or the Parent or routine administrative expenses
pursuant to this Agreement, the Related Documents or the Services
Agreement;
(f) permit the Purchaser, the Operating Agent and the
Collateral Agent to make or cause to be made (and, after the
occurrence of and during the continuance of a Termination Event,
at the Seller's expense) inspections and audits of any books,
records and papers of the Seller and the Servicer and to make
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<PAGE>
extracts therefrom and copies thereof, or to make inspections and
examinations of any properties and facilities of the Seller and
the Servicer, on reasonable notice, at all such reasonable times
and as often as reasonably required in order to assure that the
Seller is and will be in compliance with its obligations under
this Agreement and the Related Documents;
(g) pay, perform and discharge all of its obligations
and liabilities, including, without limitation, all taxes,
assessments and governmental charges upon its income and
properties when due, unless and to the extent only that such
obligations, liabilities, taxes, assessments and governmental
charges shall be contested in good faith and by appropriate
proceedings and that, to the extent required by GAAP, proper and
adequate book reserves relating thereto are established by the
Seller and then only to the extent that a bond is filed in cases
where the filing of a bond is necessary to avoid the creation of
an Adverse Claim against any of its properties;
(h) upon request of the Purchaser, the Collateral
Agent or the Operating Agent, mark its Records to show the
interests of the Purchaser and Collateral Agent;
(i) pay the Purchaser's reasonable attorney's
disbursements, reasonable travel and entertainment expenses and
rating agency fees (provided that (x) such travel and
entertainment expenses shall only be payable to the extent they
are consistent with the Parent's travel and entertainment policy
and (y) the liability of the Originator with respect to rating
agency fees incurred prior to the Effective Date shall not exceed
$40,000); and
(j) deliver an opinion of counsel to the Seller, the
Originator and the Servicer in form and substance reasonably
satisfactory to the Operating Agent no later than October 11,
1996, it being understood that such counsel may, in giving such
opinion, assume (or may state that it expresses no opinion as to
whether or not) in connection with any "no conflict" opinion with
respect to any agreements of the Originator that, other than the
Daily Yield Rate, the terms of the Purchase Agreement are not
more adverse than the terms of the Initial Receivables Purchase
and Servicing Agreement, as amended prior to the date hereof, and
the Originator shall deliver an Officer's Certificate to the
Operating Agent to the effect of such assumption on the date of
such opinion.
Section 5.02. Reporting Requirements of the Seller. The
Seller shall furnish, or cause to be furnished, to the Purchaser,
the Operating Agent, the Collateral Agent and (in the case of
Section 5.02(f) only) the Rating Agencies:
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(a) weekly, as soon as available, and in any event,
within three Business Days after the end of each week, an
Investment Base Certificate in the form of Exhibit C;
(b) monthly, as soon as available, and in any event,
within 20 days after the end of each fiscal month, a Monthly
Report in the form of Exhibit G;
(c) as soon as available and in any event within 95
days after the end of each fiscal year, a copy of the audited
consolidated financial statements (exclusive of the management
letter) for such year for the Parent and its consolidated
Subsidiaries, certified, in a manner acceptable to the Operating
Agent and the Collateral Agent, by Deloitte & Touche or other
nationally recognized independent public accountants acceptable
to the Operating Agent and the Collateral Agent (followed, within
105 days after the end of each fiscal year, by consolidating
financial information and followed, within 10 days of completion
thereof, a satisfactory management letter, together with
management's response) and each other report or statement sent to
shareholders or publicly filed by the Parent, the Originator or
the Seller;
(d) as soon as available and in any event within 20
days after the end of each fiscal month of the Parent, gross
sales, gross profits, capital expenditure, selling, general and
administrative expenses, and interest expense;
(e) as soon as available and in any event within 50
days after the end of each of the first three quarters of each
fiscal year of the Parent, a consolidated balance sheet of the
Parent and its consolidated Subsidiaries as of the end of such
quarter and including the prior comparable period, and
consolidated statements of income and retained earnings, and of
cash flow, of the Parent and its consolidated Subsidiaries for
such quarter and for the period commencing at the end of the
previous fiscal year and ending with the end of such quarter,
certified by the chief financial officer, chief accounting
officer or treasurer of the Parent identifying such documents as
being the documents described in this paragraph (d) and stating
that the information set forth therein fairly presents the
financial condition of the Parent and its consolidated
Subsidiaries as of and for the periods then ended, subject to
year-end adjustments consisting only of normal, recurring
accruals and confirming that the Servicer is in compliance with
all financial covenants in this Agreement;
(f) as soon as possible and in any event within seven
days after the occurrence of a Termination Event or an Incipient
Event, the statement of the chief executive officer, chief
financial officer or treasurer of the Seller setting forth
complete details of such Termination Event or Incipient Event and
the action which the Seller has taken, is taking and proposes to
take with respect thereto;
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(g) as soon as available and in any event within 105
days after the end of each fiscal year, a statement of the
President of the Seller (upon which statement the Operating Agent
and the Collateral Agent may rely) to the effect that such
officer has reviewed an examination by the internal auditors of
the Parent (the scope of which examination shall be consistent
with the standards for similar examinations conducted by
nationally recognized independent public accountants) of the
Weekly Reports delivered during the period covered by such report
(including the Investment Base Certificates attached thereto) and
such Records relating to the Transferred Receivables as such
officer deems necessary as a basis for the statement contemplated
by this Section 5.02(g) and that, on the basis of such review,
such Weekly Reports have been prepared in compliance with this
Agreement, except for such exceptions as shall be set forth in
such statement;
(h) promptly, from time to time, such other
information, documents, records or reports respecting the
Transferred Receivables or the Contracts or the condition or
operations, financial or otherwise, of the Seller, or the
Originator or any of its Subsidiaries, as the Purchaser, the
Operating Agent or the Collateral Agent may reasonably request
from time to time;
(i) on or before 105 days after the end of each fiscal
year, (i) an Officer's Certificate of the Seller, dated the date
of such delivery, bringing down to such date the matters set
forth in the Officer's Certificate in the form of Exhibit E, and
(ii) an Officer's Certificate of the Servicer, dated the date of
such delivery, bringing down to such date the matters set forth
in the Officer's Certificate in the form of Exhibit F; and
(j) promptly, notification in writing of any
litigation, legal proceeding or dispute, whether or not in the
ordinary course of business, affecting the Seller, whether or not
fully covered by insurance, and regardless of the subject matter
thereof.
Section 5.03. Negative Covenants of the Seller. The Seller
shall not, without the written consent of the Purchaser, the
Operating Agent and the Collateral Agent:
(a) sell, assign (by operation of law or otherwise) or
otherwise dispose of, or create or suffer to exist any Adverse
Claim upon or with respect to, or assign any right to receive
income in respect of, (i) any Transferred Receivable or related
Contract with respect thereto, or upon or with respect to any
Lockbox Account, any Lockbox, the Collection Account, the
Retention Account or other account in which any Collections of
any Transferred Receivable are deposited, or (ii) except as
permitted in the Seller's articles of incorporation, any of the
Seller's property;
(b) extend, amend, forgive, discharge, compromise,
waive, cancel or otherwise modify the terms of the Transfer
Agreement, any Related Document, the Credit and Collection
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Policies or of any Transferred Receivable, or amend, modify or
waive any term or condition of any Contract related thereto
provided that the foregoing shall not prohibit the Seller from
authorizing the Servicer to take such actions to the extent
permitted hereunder, under the Transfer Agreement or by the
Credit and Collection Policy;
(c) make any change in its instructions to Obligors
regarding payments to be made to the Seller or payments to be
deposited to the Lockbox Account or any Lockbox other than (i)
changes of a purely administrative nature which do not alter any
directions to Obligors regarding the method, timing or place of
payment, or (ii) changes to the method or timing of payments
which are in accordance with the Credit and Collections Policy;
(d) amend its articles or certificate of
incorporation, its by-laws or this Agreement, the Transfer
Agreement or the Services Agreement;
(e) merge with or into, consolidate with or into,
convey, transfer, lease or otherwise dispose of all or
substantially all of its assets (whether now owned or hereafter
acquired) to, or acquire all or substantially all of the assets
of, or any capital stock or other ownership interest of, any
Person (whether in one transaction or in a series of
transactions), or own any Subsidiary;
(f) prepare any financial statements which shall
account for the transactions contemplated by the Transfer
Agreement in any manner other than as a true sale or absolute
assignment of the Transferred Receivables to the Seller from the
Originator, or in any other respect account for or treat the
transactions contemplated hereby (including but not limited to,
for accounting, tax and reporting purposes) in any manner other
than as a true sale or absolute assignment of the Transferred
Receivables to the Seller from the Originator;
(g) at any time (i) advance credit to any Person), or
(ii) declare any dividends, repurchase any stock, return any
capital, or otherwise make any distribution of cash or any other
property, if after giving effect to such distribution, there
would be a Purchase Excess;
(h) create, incur, permit to exist or have outstanding
any indebtedness, except:
(i) indebtedness of the Seller to the Purchaser,
any Affected Party, any Indemnified Party, the Servicer,
the Originator or any other Person under the Transfer
Agreement, this Agreement and the Subordinated Note;
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(ii) taxes, assessments and governmental charges;
and
(iii) the endorsement of negotiable
instruments for deposit or collection in the ordinary course
of business;
(i) issue any additional shares or any right or option
to acquire any shares, or any security convertible into any
shares, of the capital stock of the Seller;
(j) enter into, or be a party to, any transaction with
any Person, other than pursuant to this Agreement, the Transfer
Agreement or the Services Agreement; or
(k) make or suffer to exist any purchases of assets or
investments in any Person, including, without limitation, any
shareholder, director, officer or employee of the Seller or any
of the Originator's other Subsidiaries, except (i) Transferred
Receivables, (ii) Permitted Investments, (iii) purchases and
investments in an aggregate amount no greater than $25,000 per
annum, and (iv) investments received in satisfaction of Defaulted
Receivables in connection with any insolvency proceedings related
to the Obligor thereof or out-of-court restructuring related to
the Obligor thereof.
ARTICLE VI
COLLECTIONS AND DISBURSEMENTS
Section 6.01. Establishment of Accounts.
(a) The Lockbox Account.
(i) The Seller has established with a Lockbox
Bank each Lockbox Account, into which the Servicer shall
deposit from time to time all monies, instruments and other
property received by it as Proceeds of the Transferred
Receivables. The Seller agrees that prior to a Termination
Event the Operating Agent, and upon the occurrence and
during the continuation of a Termination Event the
Collateral Agent, shall have exclusive dominion and control
of each Lockbox Account and all monies, instruments and
other property from time to time in each Lockbox Account.
The Seller will not make or cause to be made, or have any
ability to make or cause, any withdrawals from any Lockbox
Account, except as provided in Section 6.01(b)(ii).
(ii) The Seller and the Servicer have instructed
all existing Obligors of Transferred Receivables, and will
instruct all future Obligors, to make payments in respect of
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Transferred Receivables only (A) by check or money order
mailed to one or more lockboxes or post office boxes under
the control of the Operating Agent (each such box being a
"Lockbox"), or (B) by wire transfer or moneygram directly to
a Lockbox Account, or (C) by direct debits from such
Obligor's account to the Lockbox Account. The Lockboxes and
Lockbox Accounts to which mail payments are made as of the
date hereof are listed on the attached Schedule 6. The
Seller and the Servicer shall endorse, to the extent
necessary, all checks or other instruments received in any
Lockbox so that the same can be deposited in the Lockbox
Account, in the form so received (with all necessary
endorsements), on the next Business Day after the Business
Day on which such check or other instruments are received.
In addition, the Seller and Servicer shall deposit or cause
to be deposited in the Lockbox Account all cash, checks,
money orders or other Proceeds of Collateral received other
than in a Lockbox or by wire payments, in the form so
received (with all necessary endorsements), not later than
the close of business on the Business Day following the date
of such receipt, and until so deposited all such items or
other Proceeds shall be held in trust for the Collateral
Agent. Neither the Seller nor the Servicer shall deposit
any moneys not required or permitted under this Agreement or
the Related Documents into the Lockboxes or Lockbox
Accounts.
(iii) If a Lockbox Agreement terminates for
any reason or any Lockbox Bank fails to comply with its
obligations under the related Lockbox Agreement for any
reason, then the Seller shall promptly notify all Obligors
to make all future wire payments to a new Lockbox Account
with another Lockbox Bank. The Seller shall not close the
Lockbox Account unless it shall have (1) received the prior
written consent of the Operating Agent and the Collateral
Agent, (2) established a new account with the same Lockbox
Bank or with a new depositary institution reasonably
satisfactory to the Operating Agent and the Collateral
Agent, (3) entered into an agreement covering such new
account with the Lockbox Bank or with such new depositary
institution substantially in the form of the Lockbox
Agreement or which is otherwise satisfactory in all respects
to the Operating Agent and the Collateral Agent (whereupon,
for all purposes of this Agreement and the Related
Documents, such new account shall become the Lockbox
Account, such new agreement shall become the Lockbox
Agreement and any new depositary institution shall become
the Lockbox Bank), and (4) taken all such action as the
Collateral Agent shall require to grant and perfect a first
priority security interest in such new Lockbox Account to
the Collateral Agent under Section 8.01 of this Agreement.
Other than pursuant to this Section 6.01(a), the Seller or
Servicer shall not open any new Lockbox or Lockbox Account
without the consent of the Operating Agent, the Collateral
Agent and the Purchaser.
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(b) Collection Account.
(i) The Purchaser has established and shall
maintain a segregated deposit account with the Depositary
titled "Redwood Receivables Corporation - Collection Account
(Merisel Capital Funding, Inc.)" (the "Collection Account").
The Seller agrees that the Operating Agent shall have
exclusive dominion and control of the Collection Account and
all monies, instruments and other property from time to time
in the Collection Account.
(ii) Pursuant to Section 6.02, the Seller shall
instruct the Lockbox Bank to transfer, and the Seller hereby
grants each of the Operating Agent and the Collateral Agent
the authority to instruct each Lockbox Bank to transfer, on
each Business Day in same day funds, all available funds
deposited in the Lockbox Account before such Business Day to
the Collection Account. The Purchaser, the Operating Agent
and the Collateral Agent may deposit into the Collection
Account from time to time all monies, instruments and other
property received by any of them as Proceeds of the
Transferred Receivables. On each Business Day before the
Facility Termination Date, so long as no Termination Event
shall have occurred and be continuing, the Operating Agent
shall instruct and cause the Depositary (which instruction
may be in writing or by telephone confirmed promptly
thereafter in writing) to release funds on deposit in the
Collection Account in the order of priority set forth in
Section 6.03. On each Business Day on and after the
Facility Termination Date and on each Business Day during
any period while a Termination Event has occurred and is
continuing, the Collateral Agent may and the Operating Agent
shall apply all amounts when received in the Collection
Account in the order of priority set forth in Section 6.05.
(iii) If the Depositary wishes to resign as
depositary of the Collection Account for any reason or fails
to carry out the instructions of the Operating Agent or the
Collateral Agent for any reason, then the Purchaser or the
Operating Agent shall promptly notify the Purchaser Secured
Parties. The Purchaser shall not close the Collection
Account unless it shall have (1) received the prior written
consent of the Operating Agent and the Collateral Agent,
(2) established a new account with the Depositary or with a
new depositary institution reasonably satisfactory to the
Operating Agent and the Collateral Agent, (3) entered into
an agreement covering such new account with such new
depositary institution satisfactory in all respects to the
Operating Agent and the Collateral Agent (whereupon such new
account shall become the Collection Account for all purposes
of this Agreement and the Related Documents), and (4) taken
all such action as the Collateral Agent shall require to
grant and perfect a first priority security interest in such
new Collection Account to the Collateral Agent under this
Agreement.
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(c) Retention Account. The Purchaser has established
and shall maintain a segregated deposit account with the
Depositary and controlled by the Operating Agent titled "Redwood
Receivables Corporation - Retention Account (Merisel Capital
Funding, Inc.)" (the "Retention Account").
(d) Collateral Account. The Purchaser has established
and shall maintain a segregated deposit account with the
Depositary and controlled by the Operating Agent titled "Redwood
Receivables Corporation - Collateral Account" (the "Collateral
Account").
Section 6.02. Funding of Collection Account.
(a) As soon as practicable and in any event, no later
then 10:00 a.m., on each Business Day:
(i) the Operating Agent shall transfer all
Collections deposited in any Lockbox Account prior to such
Business Day to the Collection Account;
(ii) the Purchaser shall, or shall cause the
Collateral Agent to deposit in the Collection Account the
amount required, pursuant to Section 2.04(b)(i);
(iii) the Purchaser shall, or shall cause the
Collateral Agent to, deposit any Seller LOC Draws made on
such Business Day to the Collection Account;
(iv) if, on the prior Business Day, the Operating
Agent has notified the Seller of any Purchase Excess, the
Seller shall deposit cash in the amount of such Purchase
Excess in the Collection Account;
(v) if on such Business Day the Seller is
required to make other payments under this Agreement not
previously retained out of Collections (including
Indemnified Amounts not previously paid), the Seller shall
deposit an amount equal to such payments in the Collection
Account;
(vi) if, on the prior Business Day, the Originator
made a capital contribution of a Rejected Amount or
repurchased a Transferred Receivable, pursuant to the
Transfer Agreement, the Seller shall deposit cash in the
amount received from the Originator for such contribution or
repurchase in the Collection Account; and
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(vii) the Servicer shall deposit into the
Collection Account the Outstanding Balance of any
Transferred Receivable it elects to pay pursuant to
Section 7.04.
(b) If, two Business Days prior to any Settlement
Date, the Operating Agent notifies the Seller of any Retention
Account Deficiency pursuant to Section 6.04(b), the Seller shall
deposit cash in the amount of such deficiency into the Collection
Account no later than 1:00 p.m. on such Settlement Date.
(c) On and after the Facility Termination Date, the
Operating Agent shall transfer all amounts held in the Retention
Account as of that date to the Collection Account.
Section 6.03. Daily Disbursements From the Collection
Account - Revolving Period. On each Business Day, as soon as
practicable and in any event no later than 12:00 p.m., during the
Revolving Period, following the transfers made in accordance with
Section 6.02, the Operating Agent shall disburse all amounts in
the Collection Account in the following priority:
(a) transfer all amounts in the Collection Account in
the following priority:
(i) to the Retention Account for the account of
the Purchaser, the amount of any Retention Account
Deficiency deposited pursuant to Section 6.02(b);
(ii) to the Deferred Purchase Price Sub-Account,
all Deferred Purchase Price Collections;
(iii) to the Capital Investment Sub-Account,
the balance;
(b) transfer all amounts in the Deferred Purchase
Price Sub-Account, in the following priority:
(i) to the Retention Account for the account of
the Purchaser, an amount equal to the sum of
(A) Daily Yield;
(B) the Yield Shortfall for the prior
Business Day;
(C) the Sericing Fee;
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(D) the Servicing Fee Shortfall
for the prior Business Day;
(E) the Unused Commitment Fee; and
(F) the Unused Commitment Fee
Shortfall for the prior Business Day;
(ii) to the Capital Investment Sub-Account, an
amount equal to the Dilution Funded Amount;
(iii) if the Deferred Purchase Price
Adjustment is less than zero, to the Capital Investment Sub-
Account an amount equal to the absolute value of the
Deferred Purchase Price Adjustment; and
(iv) to an account previously designated by the
Seller, in partial payment of the Deferred Purchase Price,
the balance, if any; and
(c) transfer all amounts in the Capital Investment Sub-
Account, in the following priority:
(i) to the Retention Account for the account of
the Purchaser, the Yield Shortfall, the Servicing Fee
Shortfall and the Unused Commitment Fee Shortfall, if any,
following the transfer made pursuant to Section 6.03(b)(i);
(ii) to the Collateral Account for the account of
the Purchaser (or in the case of Indemnified Amounts, for
the account of the Indemnified Party), amounts deposited
into the Collection Account pursuant to Section 6.02(a)(v);
(iii) to the Collateral Account for the
account of the Purchaser, in reduction of its Capital
Investment if, as disclosed in the most recently submitted
Investment Base Certificate, there is a Purchase Excess, by
transfer of such Purchase Excess;
(iv) if, pursuant to a Seller Notice, the Seller
has requested to reduce the Capital Investment of the
Purchaser, to the Collateral Account for the account of the
Seller, the lesser of (A) the amount of such request, in
reduction of Capital Investment and the (B) the balance;
(v) if the Deferred Purchase Price Adjustment is
greater than zero, to the Seller an amount equal to the
Deferred Purchase Price Adjustment, as partial payment of
the Deferred Purchase Price;
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(vi) the balance, to an account previously
designated by the Seller, as payment of the Cash Purchase
Price for Purchases made on such day.
Section 6.04. Disbursements From the Retention Account -
Settlement Date Procedures - Revolving Period.
(a) As soon as practicable and in any event no later
than 12:00 p.m. on each Settlement Date during the Revolving
Period, the amounts held in the Retention Account shall be
disbursed or retained by the Operating Agent in the following
priority:
(i) to the Collateral Account for the account of
the Purchaser (or, if applicable, any Indemnified Party), in
an amount equal to:
(A) an amount equal to the accrued and
unpaid Daily Yield minus the Margin to the end of the
preceding Settlement Period;
(B) an amount equal to the Letter of Credit
Fee for the Preceding Settlement Period;
(C) all Additional Amounts incurred and
payable to any Affected Party through the end of the
preceding Settlement Period;
(D) all other amounts accrued and payable
under this Agreement (including Indemnified Amounts
incurred and payable to any Indemnified Party) through
the end of the preceding Settlement Period to the
extent not already transferred pursuant to Section
6.03(c)(ii); and
(E) if there is a Purchase Excess, an amount
equal to such excess, in reduction of Capital
Investment;
(ii) to the Operating Agent, the accrued and
unpaid Margin to the end of the preceding Settlement Period
for distribution to the applicable parties;
(iii) to the Servicer on behalf of the Seller,
in an amount equal to its accrued and unpaid Servicing Fee
to the end of the preceding Settlement Period;
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(iv) retained in the Retention Account, the
Accrued Monthly Yield, Accrued Unused Commitment Fee and
Accrued Servicing Fee as of that date; and
(v) to the extent that the balance in the
Retention Account exceeds the amount to be retained or
disbursed under Sections 6.04(a)(i) through (iv), the excess
to an account previously designated by the Seller.
(b) No later than two Business Days prior to each
Settlement Date, the Operating Agent shall determine and notify
the Seller of any Retention Account Deficiency for the preceding
Settlement Period, and the Seller shall deposit funds in the
amount of such Retention Account Deficiency to the Collection
Account pursuant to Section 6.02(b).
Section 6.05. Liquidation Settlement Procedures. On each
Business Day on and after the Facility Termination Date, the
Collateral Agent shall:
(a) transfer all amounts in the Collection Account in
the following priority:
(i) to the Deferred Purchase Price Sub-Account,
all Deferred Purchase Price Collections; and
(ii) to the Capital Investment Sub-Account,
the balance;
(b) transfer all amounts in the Deferred Purchase
Price Sub-Account, in the following priority:
(i) if an Event of Servicer Termination has
occurred and a Successor Servicer has been appointed, to the
Successor Servicer in an amount equal to its accrued and
unpaid Successor Servicing Fees and Expenses;
(ii) to the Collateral Account for the account of
the Purchaser, in an amount equal to, on any such Business
Day on which Capital Investment is being maintained through
the issuance of Commercial Paper (to the extent such Capital
Investment exceeds Transaction Liquidity Loans then
outstanding), accrued and unpaid CP Interest through and
including such date;
(iii) if there are Transaction Liquidity Loans outstanding, to
the Transaction Liquidity Agent on behalf of the Transaction Liquidity
Providers, in an amount equal to accrued and unpaid interest on the Transaction
Liquidity Loans;
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(iv) to the Capital Investment Sub-Account:
(A) an amount equal to the Dilution Funded
Amount; and
(B) if there are Transaction Liquidity Loans
then outstanding or Capital Investment exceeds the
Transaction Liquidity Loans then outstanding, the balance, if any;
(v) to the Letter of Credit Agent, if there are
any outstanding LOC Draws in respect of the Seller, in
an amount equal to accrued and unpaid interest on such
outstanding LOC Draws;
(vi) to the Collateral Account, an amount equal to
(A) accrued and unpaid Daily Yield minus (B) the sum of (1)
amounts paid pursuant to Section 6.05(b)(ii), (2) amounts
paid pursuant to 6.05(b)(iii) and (3) amounts paid under
6.05(b)(v);
(vii) if an Event of Servicer Termination has
not occurred, to the Servicer in an amount equal to its
accrued and unpaid Servicing Fee;
(viii) upon payment in full of all amounts set
forth in clauses (c)(i)-(c)(v) below, to an account
previously designated by the Seller, in partial payment of
the Deferred Purchase Price, the balance, if any; and
(c) transfer all amounts in the Capital Investment Sub-
Account, in the following priority:
(i) to the Collateral Account for the account of
the Purchaser, in an amount equal to,
(A) on any such Business Day on which
Capital Investment is being maintained through the
issuance of Commercial Paper (to the extent such
Capital Investment exceeds Transaction Liquidity Loans
then outstanding), accrued and unpaid CP Interest
through and including such date, to the extent not paid
pursuant to Sections 6.05(b)(ii) and 6.05(b)(vi); and
(B) on any such Business Day on which
Capital Investment is being maintained through the
issuance of Commercial Paper (to the extent such
Capital Investment exceeds Transaction Liquidity Loans
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then outstanding), the principal of all Capital
Investment in excess of such Transaction Liquidity
Loans;
(ii) if there are Transaction Liquidity Loans
outstanding, to the Transaction Liquidity Agent on behalf of
the Transaction Liquidity Providers, in an amount equal to:
(A) accrued and unpaid interest on the
Transaction Liquidity Loans to the extent not paid
pursuant to Section 6.05(b)(iii);
(B) the principal of outstanding
Transaction Liquidity Loans; and
(C) any other amounts, including any fees,
owing to the Transaction Liquidity Agent or Transaction
Liquidity Providers in connection with the Transaction
Liquidity Loans to the extent not paid pursuant to
Section 6.05(b)(iii);
(iii) to the Collateral Account for the
account of the Purchaser, in an amount equal to:
(A) all Additional Amounts incurred and
payable to any Affected Party; and
(B) all Indemnified Amounts incurred and
payable to any Indemnified Party;
(iv) to the Letter of Credit Agent, if there are
any outstanding LOC Draws in respect of the Seller, in an
amount equal to:
(A) accrued and unpaid interest on such
outstanding LOC Draws;
(B) the principal of such outstanding LOC Draws; and
(C) including fees, owing to the Letter of
Credit Agent in connection with such outstanding LOC
Draws; and
(v) if an Event of Servicer Termination has not
occurred, to the Servicer in an amount equal to its accrued
and unpaid Servicing Fee; and
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(vi) upon payment in full of all amounts set forth
in clauses (c)(i)-(c)(v) above, to an account previously
designated by the Seller, the balance, if any.
(d) after the Facility Termination Date, on each day
by no later than 11:00 a.m. the Operating Agent shall transfer
all amounts then on deposit in the Retention Account to the
Collateral Account;
Section 6.06. Investment of Accounts. During the Revolving
Period, to the extent there are uninvested amounts deposited in
the Collateral Account or the Retention Account, the Operating
Agent shall invest all such amounts in Permitted Investments
selected by the Operating Agent that mature no later than the
immediately succeeding Business Day, in the case of the
Collateral Account, and the immediately succeeding Settlement
Date, in the case of the Retention Account. On or after the
Facility Termination Date, any investment of such amounts shall
be solely at the discretion of the Operating Agent, subject to
the restrictions described above.
Section 6.07. Termination Procedure.
(a) On the earlier of (i) the first Business Day after
the Facility Termination Date on which the Capital Investment has
been reduced to zero or (ii) the Final Purchase Date, if the
payments required to be made pursuant to Sections 6.05(a), (b)
and (c) have not been made in full, the Seller shall immediately
deposit into the Collection Account an amount sufficient to make
such payments in full.
(b) On the first Business Day after the Facility
Termination Date on which the payments required pursuant to
Subsections 6.05(a), (b) and (c) have been made in full, all
amounts held in the Collection Account and the Retention Account,
if any, shall be disbursed in immediately available funds to the
Seller and all security interests of the Purchaser and the
Collateral Agent in all Transferred Receivables owned by the
Seller or other Seller Collateral shall be released by the
Purchaser and the Collateral Agent. Such disbursement shall
constitute the final payment to which the Seller is entitled
pursuant to the terms of this Agreement.
ARTICLE VII
APPOINTMENT OF THE SERVICER
Section 7.01. Appointment of the Servicer. The Purchaser
hereby appoints the Servicer as its agent to service the
Transferred Receivables and enforce its rights and interests in
and under each Transferred Receivable and each related Contract
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and to serve in such capacity until the termination of its
responsibilities pursuant to Sections 9.02 or 11.01. The
Servicer hereby agrees to perform the duties and obligations with
respect thereto set forth herein. The Servicer may, with the
prior consent of the Purchaser, the Operating Agent, and the
Collateral Agent subcontract with a Sub-Servicer for collection,
servicing or administration of the Transferred Receivables,
provided, that (a) the Servicer shall remain liable for the
performance of the duties and obligations of the Sub-Servicer
pursuant to the terms hereof, and (b) any Sub-Servicing Agreement
that may be entered into and any other transactions or services
relating to the Transferred Receivables involving a Sub-Servicer
shall be deemed to be between the Sub-Servicer and the Servicer
alone and the Purchaser, Operating Agent and the Collateral Agent
shall not be deemed parties thereto and shall have no
obligations, duties or liabilities with respect to the
Sub-Servicer.
Section 7.02. Duties and Responsibilities of the Servicer.
(a) The Servicer shall conduct the servicing,
administration and collection of the Transferred Receivables and
shall take, or cause to be taken, all such actions (i) as may be
necessary or advisable to service, administer and collect each
Transferred Receivable from time to time; (ii) as the Servicer
would take if the Transferred Receivables were owned and serviced
by the Servicer, and (iii) as are consistent with industry
practice for the servicing of such Transferred Receivables.
(b) The Purchaser, the Operating Agent and the
Collateral Agent shall not have any obligation or liability with
respect to any Transferred Receivables or related Contracts, nor
shall any of them be obligated to perform any of the obligations
of the Servicer hereunder.
Section 7.03. Collections on Receivables. In the event
that the Servicer is unable to determine the specific Receivables
on which Collections have been received from an Obligor, for the
purposes of this Agreement only, the parties agree that such
Collections shall be deemed to have been received on the
Receivables in the order in which they were originated with
respect to such Obligor. In the event that the Servicer is
unable to determine the specific Receivables on which discounts,
offsets or other non-cash reductions have been granted or made
with respect to an Obligor, the parties agree that such
reductions shall be deemed to have been granted or made (i) prior
to a Termination Event, in the reasonable discretion of the
Servicer, and (ii) after a Termination Event, in the reverse
order in which they were originated with respect to such Obligor.
Section 7.04. Authorization of the Servicer. Each of the
Seller and the Purchaser hereby authorizes the Servicer
(including any successor thereto) to take any and all reasonable
steps in its name and on its behalf necessary or desirable and
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not inconsistent with the ownership of the Transferred
Receivables by the Purchaser and the pledge to the Collateral
Agent, in the determination of the Servicer, to collect all
amounts due under any and all such Transferred Receivables,
including, without limitation, endorsing any of their names on
checks and other instruments representing Collections, executing
and delivering any and all instruments of satisfaction or
cancellation, or of partial or full release or discharge, and all
other comparable instruments, with respect to such Transferred
Receivables and, after the delinquency of any such Transferred
Receivable and to the extent permitted under and in compliance
with applicable law and regulations, to commence proceedings with
respect to enforcing payment of such Transferred Receivables and
the related Contracts, and adjusting, settling or compromising
the account or payment thereof, to the same extent as the
Originator could have done if it had continued to own such
Receivable. Each Originator, the Seller and the Purchaser shall
furnish the Servicer (and any successors thereto) with any powers
of attorney and other documents necessary or appropriate to
enable the Servicer to carry out its servicing and administrative
duties hereunder, and shall cooperate with the Servicer to the
fullest extent in order to ensure the collectibility of the
Transferred Receivables. Notwithstanding anything to the
contrary contained herein, the Purchaser, the Collateral Agent
and the Operating Agent shall have the absolute and unlimited
right to direct the Servicer (whether the Servicer is the
Originator or otherwise) to commence or settle any legal action
to enforce collection of any such Transferred Receivable or to
foreclose upon, repossess or take any other action which the
Collateral Agent or the Operating Agent deems necessary or
advisable with respect thereto; provided, that the Servicer may,
rather than commencing such action or taking other enforcement
action, at its option elect to pay the Purchaser the Outstanding
Balance of such Transferred Receivable. In no event shall the
Servicer be entitled to make the Purchaser, the Collateral Agent
or the Operating Agent a party to any litigation without such
party's express prior written consent, or to make the Seller a
party to any litigation without the Operating Agent's consent.
Section 7.05. Servicing Fees. As compensation for its
servicing activities and as reimbursement for its expenses in
connection therewith, the Servicer shall be entitled to receive
the Servicing Fees in the manner set forth in Sections 6.04 and
6.05, payable monthly in arrears on each Settlement Date with
respect to the preceding Settlement Period. The Servicer shall
be required to pay for all expenses incurred by the Servicer in
connection with its activities hereunder (including any payments
to accountants, counsel or any other Person) and shall not be
entitled to any payment therefor other than the Servicing Fees.
Section 7.06. Covenants of the Servicer. The Servicer
shall (unless having previously received the prior written
consent of the Operating Agent and the Collateral Agent):
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(a) not sell, assign (by operation of law or
otherwise) or otherwise dispose of, or create or suffer to exist
any Adverse Claim upon or with respect to (and any such purported
disposition shall be null and void), any Transferred Receivable
or related Contract with respect thereto, or upon or with respect
to the Lockbox Account, the Lockboxes, the Collection Account,
the Retention Account or any other account to which any
Collections of any Transferred Receivable are deposited, or
assign any right to receive income in respect thereof;
(b) not extend, amend or otherwise modify the terms of
any Transferred Receivable (other than adjusting, settling or
compromising the account or payment of a Transferred Receivable
pursuant to Section 7.04 and except for deferments in the
ordinary course of business which are consistent with the Credit
and Collection Policies), or amend, modify or waive any term or
condition of any Contract related thereto except in the case of
any such contracts for any amendments, modifications or waivers
that (i) do not affect the payment terms for any Transferred
Receivable or (ii) do not adversely affect the quality or
collectability of any such Transferred Receivable;
(c) not make any changes in the nature of its
business, purposes or operations which could reasonably result in
a material adverse effect on its ability to perform its servicing
obligations hereunder;
(d) not make any change in its instructions to
Obligors to make payments to the Lockboxes or Lockbox Accounts
other than (i) changes of a purely administrative nature which do
not alter any directions to Obligors regarding the method, timing
or place of payment, or (ii) changes to the method or timing of
payments which are in accordance with the Credit and Collections
Policy;
(e) not merge with or into, consolidate with or into,
or convey, transfer, lease or otherwise dispose of 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, any Person
(whether in one transaction or in a series of transactions)
except where such action would not have a material adverse effect
on the business of the Servicer or the ability of the Servicer to
perform its obligations under this Agreement or any Related
Document;
(f) not make any change to its corporate name or use
any tradenames, fictitious names, assumed names or "doing
business as" names except those disclosed on Schedule 1 to the
Transfer Agreement and after at least thirty days prior written
notice to the Operating Agent, Collateral Agent and Redwood;
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(g) identify the Transferred Receivables clearly and
unambiguously in its Servicing Records to reflect that such
Transferred Receivables are owned by the Seller;
(h) comply in all material respects with the Credit
and Collection Policies in regard to each Transferred Receivable
and the related Contracts; and
(i) comply in all material respects with all
applicable laws, rules, regulations and orders with respect to
it, its business and properties and all Transferred Receivables,
related Contracts and Collections with respect thereto, provided
that the Servicer shall be deemed to have complied with any such
requirements for as long as the Servicer contests in good faith
the application of such requirement, a stay has been granted with
respect to any penalty imposed on the Servicer in respect of such
requirement and no final unappealable order in respect of such
requirement has been made against the Servicer.
Section 7.07. Reporting. During the term of this
Agreement, if Merisel Americas, Inc. or any Affiliate thereof is
not the Servicer, the Servicer shall furnish to the Collateral
Agent, the Operating Agent and the Purchaser:
(a) as soon as available and in any event within 90
days after the end of each fiscal year of the Servicer, a copy of
the audited consolidated financial statement of the Servicer and
its consolidated Subsidiaries as of the end of such year and the
related consolidated statements of income and retained earnings,
and of cash flow, of the Servicer and its consolidated
Subsidiaries for such year, in each case reported on by Deloitte
& Touche or other firm of nationally recognized independent
public accountants acceptable to the Operating Agent (accompanied
by consolidating financial information received by such
accounting firm and a satisfactory management letter) and each
other report or statement sent to shareholders or publicly filed
by the Servicer;
(b) on or before the 45th day after each quarter, an
Officer's Certificate stating, as to each signer thereof, that
(i) a review of the activities of the Servicer during the
preceding calendar quarter and of its performance under this
Agreement has been made under such officer's supervision, (ii) to
the best of such officer's knowledge, based on such review, the
Servicer has fulfilled all its obligations under this Agreement
throughout such quarter, or, if there has been a default in the
fulfillment of any such obligation, specifying each such default
known to such officer and the nature and status thereof,
(iii) the Servicer has complied with the covenants set forth in
Section 7.06 and Exhibit H, and (iv) the representations and
warranties of the Servicer in Section 4.02 are true and correct
as if made on the date of such Officer's Certificate;
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(c) written notification of the occurrence of a
Termination Event (including, without limitation, a material
adverse change in the financial condition of the Originator) or
an Incipient Event;
(d) written notification of any action, suit,
proceeding, dispute, offset deduction, defense or counterclaim
that is or may be asserted by an Obligor with respect to any
Transferred Receivable; and
(e) such other periodic, special or other reports or
information as the Purchaser, the Operating Agent or the
Collateral Agent may require.
Section 7.08. Annual Statement as to Compliance. If
Merisel Americas, Inc. or any Affiliate thereof is not the
Servicer, the Servicer shall deliver to the Collateral Agent, the
Operating Agent and the Purchaser on or before 90 days after the
end of each fiscal year, an Officer's Certificate stating, as to
each signer thereof, that (a) a review of the activities of the
Servicer during the preceding calendar year and of its
performance under this Agreement has been made under such
officer's supervision, (b) to the best of such officer's
knowledge, based on such review, the Servicer has fulfilled all
its obligations under this Agreement throughout such year or, if
there has been a default in the fulfillment of any such
obligation, specifying each such default known to such officer
and the nature and status thereof, (c) the Servicer has complied
with the covenants set forth in Section 7.06 and Exhibit H, and
(d) the representations and warranties of the Servicer in
Section 4.02 are true and correct as if made on the date of such
Officer's Certificate.
Section 7.09. Annual Independent Public Accountants'
Servicing and Compliance Report. If Merisel Americas, Inc. or
any Affiliate thereof is not the Servicer, the Servicer shall
deliver to the Collateral Agent, the Operating Agent and the
Purchaser as soon as available and in any event within 90 days
after the end of each fiscal year, a report from Deloitte &
Touche or other firm of nationally recognized independent public
accountants acceptable to the Operating Agent (upon which report
the Operating Agent and the Collateral Agent may rely) to the
effect that such firm:
(a) certifies that the Servicer is in compliance in
all material respects with its covenants and conditions as set
forth herein (including those covenants set forth on Exhibit H);
and
(b) such firm has examined the Weekly Reports
delivered during the period covered by such report (including the
Investment Base Certificates attached thereto) and such Records
relating to the Transferred Receivables as such firm deems
necessary as a basis for the report contemplated by this Section
7.09(b) and that, on the basis of such examination, such Weekly
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Reports have been prepared in compliance with this Agreement,
except for such exceptions as shall be set forth in such
statement.
ARTICLE VIII
GRANT OF SECURITY INTERESTS
Section 8.01. Seller's Grant of Security Interest. It is
the intention of the parties hereto that each payment by the
Purchaser to the Seller with respect to Transferred Receivables
to be made hereunder shall constitute a purchase and sale of such
Transferred Receivables and not a loan. If, however, a court of
competent jurisdiction holds that the transaction evidenced
hereby constitutes a loan and not a purchase and sale, it is the
intention of the parties hereto that this Agreement shall
constitute a security agreement under applicable law. In such
regard and, in any event, as security for the prompt payment or
performance in full when due, whether at stated maturity, by
acceleration or otherwise, of all Seller Secured Obligations, the
Seller hereby assigns and pledges to the Purchaser, and grants to
the Purchaser a security interest in and lien upon, all of the
Seller's right, title and interest in and to the following, in
each case whether now or hereafter existing or in which Seller
now has or hereafter acquires an interest and wherever the same
may be located (collectively, the "Seller Collateral"):
(a) all Transferred Receivables, Contracts and
Collections;
(b) the Transfer Agreement, all Lockbox Agreements and
all other Related Documents now or hereafter in effect relating
to the purchase, servicing or processing of such Transferred
Receivables (the "Seller Assigned Agreements"), including (i) all
rights of the Seller to receive moneys due and to become due
under or pursuant to the Seller Assigned Agreements, (ii) all
rights of the Seller to receive proceeds of any insurance,
indemnity, warranty or guaranty with respect to the Seller
Assigned Agreements, (iii) claims of the Seller for damages
arising out of or for breach of or default under the Seller
Assigned Agreements, and (iv) the right of the Seller to amend,
waive or terminate the Seller Assigned Agreements, to perform
under the Seller Assigned Agreements and to compel performance
and otherwise exercise all remedies under the Seller Assigned
Agreements;
(c) all of the following (the "Seller Account
Collateral"):
(i) the Lockbox Account, the Lockboxes and all
funds held in the Lockbox Account and the Lockboxes and all
certificates and instruments, if any, from time to time
representing or evidencing the Lockbox Account, the
Lockboxes or such funds,
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(ii) the Collection Account and the Retention
Account, all funds held in the Collection Account and the
Retention Account, and all certificates and instruments, if
any, from time to time representing or evidencing the
Collection Account, the Retention Account or such funds,
(iii) all Investments from time to time of
amounts in the Collection Account and the Retention Account,
and all certificates and instruments, if any, from time to
time representing or evidencing such Investments,
(iv) all notes, certificates of deposit and other
instruments related to the Receivables or the Related
Documents from time to time delivered to or otherwise
possessed by the Purchaser or any assignee or agent on
behalf of the Purchaser in substitution for or in addition
to any of the then existing Seller Account Collateral, and
(v) all interest, dividends, cash, instruments
and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any
and all of the then existing Seller Account Collateral;
(d) all additional property related to the Receivables
and the Related Documents that may from time to time hereafter be
granted and pledged by the Seller or by anyone on its behalf
under this Agreement, including the deposit with the Purchaser,
the Operating Agent or the Collateral Agent of additional moneys
by the Seller; and
(e) all Proceeds, accessions, substitutions, rents and
profits of any and all of the foregoing Seller Collateral
(including Proceeds that constitute property of the types
described in Sections 8.01(a) through (d) above) and, to the
extent not otherwise included, all payments under insurance
(whether or not the Purchaser or any assignee or agent on behalf
of the Purchaser is the loss payee thereof) or any indemnity,
warranty or guaranty payable by reason of loss or damage to or
otherwise with respect to any of the foregoing Seller Collateral.
Section 8.02. Seller's Certification. The Seller hereby
certifies that (a) the benefits of the representations and
warranties of each Originator made under the Transfer Agreement
have been assigned to the Purchaser and the Collateral Agent;
(b) the rights of the Seller under the Transfer Agreement to
require a capital contribution or payment of a Rejected Amount
from an Originator may be enforced by the Purchaser and the
Collateral Agent; and (c) the Transfer Agreement provides that
the representations, warranties and covenants described in
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Sections 4.01 and 4.02 shall survive the sale of the Transferred
Receivables and the termination of the Transfer Agreement and
this Agreement.
Section 8.03. Consent to Assignment. Each of the Seller,
each Originator and the Servicer acknowledges and consents to the
security interest over the Seller Collateral created pursuant to
the Collateral Agent Agreement and acknowledges the rights of the
Collateral Agent and the covenants given by the Purchaser in
favor of the Collateral Agent set forth in the Collateral Agent
Agreement, and further acknowledges and consents that the
Collateral Agent shall be entitled to enforce the provisions of
the Seller Assigned Agreements to which the Seller, the
Originator or the Servicer is a party and shall be entitled to
all the rights and remedies of the Purchaser thereunder. In
addition, each of the Seller, each Originator and the Servicer
hereby authorizes the Collateral Agent to rely on the
representations and warranties of the Seller, each Originator or
the Servicer, respectively, contained in the Seller Assigned
Agreements to which the Seller, the Originator or the Servicer is
a party and in any other certificates and documents furnished by
the Seller, the Originator or the Servicer to any party in
connection therewith.
Section 8.04. Delivery of Collateral. All certificates or
instruments representing or evidencing Collateral shall be
delivered to and held by or on behalf of the Collateral Agent
pursuant to the Collateral Agent Agreement and shall be in
suitable form for transfer by delivery or shall be accompanied by
duly executed instruments of transfer or assignment in blank, all
in form and substance satisfactory to the Collateral Agent, and
to the extent not constituting an assignment shall be irrevocable
powers of attorney coupled with an interest. The Collateral
Agent shall have the right, at any time in its discretion
following the occurrence of and during the continuation of a
Termination Event and without prior notice to the Seller or the
Purchaser, to transfer to or to register in the name of the
Collateral Agent or any of its nominees any or all of the
Collateral. In addition, the Collateral Agent shall have the
right at any time to exchange certificates or instruments
representing or evidencing Collateral for certificates or
instruments of smaller or larger denominations.
Section 8.05. Seller Remains Liable. Notwithstanding
anything in this Agreement, (a) each of the Seller and each
Originator shall remain liable under the Transferred Receivables,
Contracts, Seller Assigned Agreements and other agreements
included in the Collateral 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 Purchaser or the
Collateral Agent of any of its rights under this Agreement or the
Collateral Agent Agreement shall not release the Seller or the
Servicer from any of their respective duties or obligations under
the Transferred Receivables, Contracts, Seller Assigned
Agreements or other agreements included in the Collateral,
(c) the Purchaser, the Collateral Agent and the Purchaser Secured
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Parties shall not have any obligation or liability under the
Transferred Receivables, Contracts, Seller Assigned Agreements or
other agreements included in the Collateral by reason of this
Agreement or the Collateral Agent Agreement, and (d) neither the
Collateral Agent nor any of the other Secured Parties shall be
obligated to perform any of the obligations or duties of the
Seller or the Servicer under the Transferred Receivables,
Contracts, Seller Assigned Agreements or other agreements
included in the Collateral or to take any action to collect or
enforce any claim for payment assigned under this Agreement or
the Collateral Agent Agreement.
Section 8.06. Covenants of the Seller and Servicer
Regarding the Collateral.
(a) Offices and Records. The Seller shall keep its
chief place of business and chief executive offices and the
office where it keeps its Records at the respective locations
specified in Schedule 5 or, upon at least 30 days prior written
notice to the Collateral Agent, at such other location in a
jurisdiction where all action required by Section 8.06(f) shall
have been taken with respect to the Collateral. The Seller and
the Servicer shall, for not less than three years or for such
longer period as may be required by law, from the date on which
any Transferred Receivable arose, maintain adequate Records with
respect to each Transferred Receivable, including records of all
payments received, credits granted and merchandise returned.
Upon prior notice to the Seller and the Servicer, except after
the occurrence of any Termination Event, the Seller and the
Servicer will permit representatives of the Operating Agent and
the Collateral Agent at any time and from time to time during
normal business hours, and at such times outside of normal
business hours as the Operating Agent and the Collateral Agent
shall reasonably request, (i) to inspect and make copies of and
abstracts from such records, and (ii) to visit the properties of
the Seller or the Servicer utilized in connection with the
collection, processing or servicing of the Transferred
Receivables for the purpose of examining such Records, and to
discuss matters relating to the Receivables or the Seller's or
Servicer's performance under this Agreement with any officer or
employee of the Seller or Servicer having knowledge of such
matters. In connection therewith, the Operating Agent or the
Collateral Agent may institute procedures to permit it to confirm
the Obligor balances in respect of any Transferred Receivables.
Each of the Seller and the Servicer agrees to render to the
Operating Agent and the Collateral Agent such clerical and other
assistance as may be requested with regard to the foregoing. If
a Termination Event shall have occurred and be continuing,
promptly upon request therefor, the Seller or the Servicer shall
deliver to the Collateral Agent records reflecting activity
through the close of business on the immediately preceding
Business Day.
(b) Collection of Transferred Receivables. Except as
otherwise provided in this Section 8.06(b), the Seller shall
continue to collect or cause to be collected, at its own expense,
all amounts due or to become due to the Seller under the
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Transferred Receivables, the Seller Assigned Agreements and any
other Seller Collateral. In connection with such collections,
the Seller may take (and at the Collateral Agent's direction
after a Termination Event has occurred and is continuing, shall
take) such action as the Seller or the Collateral Agent may deem
necessary or advisable to enforce collection of the Transferred
Receivables and the Seller Assigned Agreements; provided,
however, that the Collateral Agent may, at any time that a
Termination Event has occurred and is continuing, notify any
Obligor with respect to any Transferred Receivables or obligors
under the Seller Assigned Agreements of the assignment of such
Transferred Receivables or Seller Assigned Agreements, as the
case may be, to the Collateral Agent and direct that payments of
all amounts due or to become due to the Seller thereunder be made
directly to the Collateral Agent or any servicer, collection
agent or lockbox or other account designated by the Collateral
Agent and, upon such notification and at the expense of the
Seller, the Collateral Agent may enforce collection of any such
Transferred Receivables or the Seller Assigned Agreements and
adjust, settle or compromise the amount or payment thereof,
provided that the Seller may, rather than commencing such action
or taking other enforcement action, at its option, elect to cause
such Transferred Receivable to be subject to options (i) to (iii)
of Section 4.04 of the Transfer Agreement.
(c) Maintain Records of Transferred Receivables. The
Seller and the Servicer shall, at their own cost and expense,
maintain satisfactory and complete records of the Collateral,
including a record of all payments received and all credits
granted with respect to the Collateral and all other dealings
with the Collateral. Each of the Seller and the Servicer will
mark conspicuously with a legend, in form and substance
satisfactory to the Collateral Agent, its aged receivables
report, to evidence this Agreement and the assignment and
security interest granted by this Article VIII. Upon the
occurrence and during the continuation of a Termination Event,
the Seller and Servicer shall (i) deliver and turn over to the
Collateral Agent or to its representatives, or at the option of
the Collateral Agent shall provide the Collateral Agent or its
representatives with access to, after the occurrence of a
Termination Event, at any time, and during all other times,
during ordinary business hours, on demand of the Collateral
Agent, all of the Seller's and Servicer's facilities, personnel,
books and records pertaining to the Collateral, including all
Records, and (ii) allow the Collateral Agent to occupy the
premises of the Seller and the Servicer where such books, records
and Records are maintained, and utilize such premises, the
equipment thereon and any personnel of the Seller or the Servicer
that the Collateral Agent may wish to employ to administer,
service and collect the Transferred Receivables.
(d) Performance of Seller Assigned Agreements. The
Seller or the Servicer, as applicable, shall (i) perform and
observe all the terms and provisions of the Seller Assigned
Agreements to be performed or observed by it, maintain the Seller
Assigned Agreements in full force and effect, enforce the Seller
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Assigned Agreements in accordance with their terms and take all
such action to such end as may be from time to time reasonably
requested by the Collateral Agent, and (ii) upon request of the
Operating Agent or the Collateral Agent, make to any other party
to the Seller Assigned Agreements such demands and requests for
information and reports or for action as the Seller is entitled
to make under the Seller Assigned Agreements.
(e) Notice of Adverse Claim. Each of the Seller and
the Servicer shall advise the Purchaser, the Operating Agent and
the Collateral Agent promptly, in reasonable detail, (i) of any
Adverse Claim known to it made or asserted against any of the
Seller Collateral, (ii) of the occurrence of any event which
would have a material adverse effect on the aggregate value of
the Seller Collateral or on the assignments and security
interests granted by the Seller in this Agreement and (iii) of
the occurrence of any event described in Section 4.02(h)(iii),
(iv) or (v) of the Transfer Agreement with respect to any Obligor
with an Outstanding Balance of Transferred Receivables of $1
million or more at any one time.
(f) Further Assurances; Financing Statements.
(i) Each of the Seller and the Servicer severally
agrees that at any time and from time to time, at its
expense, it shall promptly execute and deliver all further
instruments and documents, and take all further action, that
may be necessary or reasonably desirable or that the
Purchaser, the Operating Agent or the Collateral Agent may
reasonably request to perfect and protect the assignments
and security interests granted or purported to be granted by
this Article VIII or to enable the Purchaser, the Operating
Agent or the Collateral Agent to exercise and enforce its
rights and remedies under this Agreement and the Collateral
Agent Agreement with respect to any Collateral. Without
limiting the generality of the foregoing, the Seller shall
execute and file such financing or continuation statements,
or amendments thereto, and such other instruments or notices
as may be necessary or, in the reasonable opinion of the
Purchaser, the Operating Agent or the Collateral Agent,
desirable or that the Purchaser, the Operating Agent or the
Collateral Agent may reasonably request to protect and
preserve the assignments and security interests granted by
this Agreement and the Collateral Agent Agreement.
(ii) The Seller and the Purchaser hereby severally
authorize the Collateral 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 or the Purchaser where permitted by law. A
carbon, photographic 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. The Collateral Agent will promptly
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send to the Seller any financing or continuation statements
thereto which it files without the signature of the Seller
and will promptly send to the Purchaser any financing or
continuation statements thereto which it files without the
signature of the Purchaser except, in the case of filings of
copies of this Agreement as financing statements, the
Collateral Agent will promptly send the Seller or the
Purchaser, as the case may be, the filing or recordation
information with respect thereto.
(iii) Each of the Seller and the Servicer
shall furnish to the Collateral Agent from time to time such
statements and schedules further identifying and describing
the Collateral and such other reports in connection with the
Collateral as the Collateral Agent may reasonably request,
all in reasonable detail.
ARTICLE IX
TERMINATION EVENTS
Section 9.01. Termination Events. If any of the
following events (each, a "Termination Event") shall occur and be
continuing:
(a) (i) the Seller shall default in the payment of any
amount owed by it hereunder and such failure shall remain
unremedied for one Business Day, (ii) the Seller shall fail to
perform or observe any covenant in Sections 5.03(a), (b), (c),
(e), (g), (h) or (k), or (iii) the Seller shall fail to perform
or observe any other term, covenant or agreement contained in
this Agreement or the Related Documents and such failure shall
remain unremedied for ten days, in each case after written notice
thereof shall have been given by the Operating Agent or the
Collateral Agent to the Seller; or
(b) (i) a payment default has occurred and is
continuing under any instrument or agreement to which GE Capital
or any of its Affiliates is a party, evidencing, securing or
providing for the issuance of Debt of the Originator or the
Seller, or (ii) a party has accelerated any payment of Debt under
any instrument or agreement evidencing, securing or providing for
the issuance of Debt of the Originator or the Seller in an amount
exceeding $1,000,000; or
(c) the Originator or the Seller shall generally not
pay any of its respective 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
Originator or the Seller seeking to adjudicate it bankrupt or
insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief or composition of it
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or any of its Debts under any law relating to bankruptcy,
insolvency, 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, 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 Originator
or the Seller shall take any corporate action to authorize any of
the actions set forth in this subsection; or
(d) judgments or orders for the payment of money
(other than such judgments or orders in respect of which adequate
insurance is maintained for the payment thereof) in excess of
$1,000,000 in the aggregate against the Originator or any
Affiliate of the Originator shall remain unpaid, unstayed on
appeal, undischarged, unbonded or undismissed for a period of 30
days or more; or
(e) a judgment or order for the payment of money is
rendered against the Seller; or
(f) there is a material breach of any of the
representations and warranties of the Seller set forth in
Section 4.01; or
(g) any Governmental Authority (including the Internal
Revenue Service or the PBGC) shall file notice of a lien in an
aggregate amount greater than $1,000,000 with regard to any
assets of the Originator (other than a lien (i) limited by its
terms to assets other than Receivables and (ii) not materially
adversely affecting the financial condition of such Originator or
the Originator's ability to perform as Servicer hereunder); or
(h) any Governmental Authority (including the Internal
Revenue Service or the PBGC) shall file notice of a lien with
regard to any of the assets of the Seller; or
(i) the Operating Agent or the Collateral Agent has
determined that any event which materially adversely affects the
collectibility of the Receivables has occurred, or that any other
event which materially adversely affects the financial condition
of the Seller, the ability of the Originator or the Seller to
collect Receivables or the ability of the Seller to perform
hereunder has occurred; or
(j) there shall occur a failure of the Originator to
make any payment, repurchase any Transferred Receivables or
substitute any Transferred Receivables with Eligible Receivables
as required under Section 4.04 of the Transfer Agreement for one
Business Day, or if the Transfer Agreement shall for any reason
cease to evidence the transfer to the Seller (or its assignees or
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transferees) of the legal and equitable title to, and ownership
of, the Transferred Receivables; or
(k) any Lockbox Agreement or the Transfer Agreement
have been amended or terminated without the written consent of
the Purchaser, the Operating Agent and the Collateral Agent; or
(l) an Event of Servicer Termination has occurred; or
(m) the Operating Agent has determined that the
funding of Receivables hereunder is impracticable due to a drop
in or withdrawal of any of the ratings assigned to the
Purchaser's Commercial Paper, the imposition of Additional
Amounts, restrictions on the amount of Transferred Receivables it
may finance or the inability of the Purchaser to issue Commercial
Paper; or
(n) the Purchaser and the Collateral Agent cease to
hold a first priority, perfected ownership interest in the
Transferred Receivables; or
(o) a Seller LOC Draw has occurred; or
(p) the obligations of the Transaction Liquidity
Providers to make Transaction Liquidity Loans, the proceeds of
which may be used by the Purchaser to make Purchases to the
Seller, have terminated; or
(q) a breach of the covenants in Exhibit H has
occurred; or
(r) a breach of a provision of the Transfer Agreement
has occurred that is not remedied within 1 Business Day in
accordance with Section 4.04 thereof;
(s) an Event of Default under the Collateral Agent
Agreement has occurred; or
(t) the short term debt rating of a Transaction
Liquidity Provider has been downgraded by a Rating Agency and
such Transaction Liquidity Provider has not been replaced in
accordance with the Transaction Liquidity Agreement within 30
days; or
(u) the Purchase Discount Rate shall be less than 50%
for two consecutive Settlement Periods; or
(v) (x) as of the last day of any fiscal month (except
as provided in clause (y) below), either the Default Ratio shall
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exceed 3.5% or the Delinquency Ratio shall exceed 10%, or (y) as
of the last day of any fiscal month occurring on or after
September 28, 1996 and ending on February 22, 1997, either the
Default Ratio shall exceed 5.5% or the Delinquency Ratio shall
exceed 12%; or
(w) as of the last day of any fiscal month, the
Receivable Collection Turnover shall exceed 50 days or the Gross
Dilution Ratio shall exceed 15% or the Net Dilution Ratio shall
exceed 8%;
then and in any such event, the Operating Agent shall, at the
request, or may with the consent, of the Purchaser or the
Collateral Agent, by notice to the Seller declare the Facility
Termination Date to have occurred, whereupon the Facility
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, that in the event that any of the
Termination Events described in subsections (b)(i), (c), (o),
(p), (s) or (t) have occurred or the Termination Event described
in subsection (a)(i) has occurred and remained unremedied for
four days, 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. The Operating
Agent shall (i) give notice to the Servicer of any downgrade of a
Transaction Liquidity Provider pursuant to subsection (t), and
(ii) give notice as soon as practicable, but no later than the
later of (x) 60 days' before the date of termination or (y)
promptly after receipt of notice by the Transaction Liquidity
Provider of termination of the obligations of the Transaction
Liquidity Provider to make Transaction Liquidity Loans, the
proceeds of which may be used by the Purchaser to make Purchases
to the Seller shall have terminated, notify the Seller and
Servicer, provided that the failure to give notice pursuant to
(i) and (ii) above shall not affect the operation of this Section
9.01.
Section 9.02. Events of Servicer Termination. If any of
the following events (each, an "Event of Servicer Termination")
shall occur and be continuing:
(a) the Servicer shall fail to perform or observe any
term, covenant or agreement contained in this Agreement and such
failure shall remain unremedied for ten days after written notice
thereof shall have been given by the Purchaser, the Collateral
Agent or the Operating Agent to the Servicer; or
(b) (i) a default has occurred and is continuing under
any instrument or agreement to which GE Capital or any of its
Affiliates is a party, evidencing, securing or providing for the
issuance of Debt of the Servicer, or (ii) a party has accelerated
any payment of Debt under any instrument or agreement evidencing,
securing or providing for the issuance of Debt of the Servicer in
an amount exceeding $1,000,000; or
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(c) the Servicer shall generally not pay any of 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 Servicer seeking to adjudicate it
a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief or
composition of it or any of its Debts under any law relating to
bankruptcy, insolvency, 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, 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
Servicer shall take any corporate action to authorize any of the
actions set forth in this subsection; or
(d) judgments or orders for the payment of money
(other than such judgments or orders in respect of which adequate
insurance is maintained for the payment thereof) in excess of
$1,000,000 in the aggregate against the Servicer or any of its
Affiliates shall remain unpaid, unstayed on appeal, undischarged,
unbonded or undismissed for a period of 30 days or more; or
(e) there is a breach of any of the representations
and warranties of the Servicer set forth in Section 4.02 that is
not remedied within 1 Business Day in accordance with Section
4.04 of the Transfer Agreement; or
(f) the Operating Agent or the Collateral Agent shall
have determined that any event which materially adversely affects
the ability of the Servicer to collect Receivables or to
otherwise perform hereunder has occurred; or
(g) a Termination Event shall have occurred or this
Agreement shall have been terminated; or
(h) a deterioration has taken place in the quality of
servicing of Transferred Receivables or other Receivables
serviced by the Servicer which either the Operating Agent or the
Collateral Agent, each in its sole discretion, determines to be
material, and such material deterioration has not been eliminated
within thirty (30) days of Purchaser's written notice to Servicer
of such deterioration or the Operating Agent or the Collateral
Agent determines that an event has occurred which materially
adversely affects the ability of the Servicer to perform
hereunder; or
(i) the Servicer shall assign or purport to assign any
of its obligations hereunder or under the Transfer Agreement
without the prior written consent of the Operating Agent and the
Collateral Agent; or
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(j) the Seller's board of directors has determined
that it is in the best interests of the Seller to terminate the
Servicer and shall have given the Servicer, the Operating Agent,
the Purchaser and the Collateral Agent at least 30 days written
notice thereof,
then, and in any such event, the Operating Agent shall (on behalf
of the Seller), at the request, or may with the consent, of the
Purchaser or the Collateral Agent, by delivery of a Servicer
Termination Notice to the Seller and the Servicer, terminate the
servicing responsibilities of the Servicer hereunder, without
demand, protest or further notice of any kind, all of which are
hereby waived by the Servicer. Upon any such declaration, all
authority and power of the Servicer under this Agreement and the
Transfer Agreement shall pass to and be vested in the Successor
Servicer appointed pursuant to Section 11.02; provided, that
notwithstanding anything to the contrary herein, the Seller
agrees that it will continue to follow the procedures set forth
in Section 7.02(a) with respect to Collections on Transferred
Receivables.
ARTICLE X
REMEDIES
Section 10.01. Actions Upon Termination Event. If any
Termination Event shall have occurred and be continuing and the
Operating Agent shall have declared the Facility Termination Date
to have occurred or the Facility Termination Date shall have been
deemed to have occurred pursuant to Section 9.01, then the
Collateral Agent may exercise in respect of the Seller
Collateral, in addition to any and all other rights and remedies
otherwise available to it, all of the rights and remedies of a
secured party upon default under the UCC (such rights and
remedies to be cumulative and nonexclusive), and, in addition,
may take the following remedial actions:
(a) The Collateral Agent may, without notice to the
Seller except as required by law and at any time or from time to
time, charge, set-off and otherwise apply all or any part of the
Seller Secured Obligations against amounts payable to the Seller
from the Collection Account, the Lockbox Account, the Retention
Account or any part of such accounts in accordance with the
priorities required by Sections 6.03, 6.04 and 6.05.
(b) The Collateral Agent may, without notice except as
specified below, solicit and accept bids for and sell the Seller
Collateral or any part of the Seller Collateral in one or more
parcels at public or private sale, at any exchange, broker's
board or at any of the Purchaser's, Operating Agent's or
Collateral Agent's offices or elsewhere, for cash, on credit or
for future delivery, and upon such other terms as the Collateral
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Agent may deem commercially reasonable. The Seller agrees that,
to the extent notice of sale shall be required by law, at least
ten Business Days' notice to the Seller of the time and place of
any public sale or the time after which any private sale is to be
made shall constitute reasonable notification. The Collateral
Agent shall not be obligated to make any sale of Seller
Collateral regardless of notice of sale having been given. The
Collateral Agent may adjourn any public or private sale from time
to time by announcement at the time and place fixed for such
sale, and such sale may, without further notice, be made at the
time and place to which it was so adjourned. Every such sale
shall operate to divest all right, title, interest, claim and
demand whatsoever of the Seller in and to the Seller Collateral
so sold, and shall be a perpetual bar, both at law and in equity,
against the Seller, the Originator, any Person claiming the
Seller Collateral sold through the Seller, the Originator and
their respective successors or assigns.
(c) Upon the completion of any sale under
Section 10.01(b), the Seller or the Servicer will deliver or
cause to be delivered all of the Seller Collateral sold to the
purchaser or purchasers at such sale on the date of sale, or
within a reasonable time thereafter if it shall be impractical to
make immediate delivery, but in any event full title and right of
possession to such property shall pass to such purchaser or
purchasers forthwith upon the completion of such sale.
Nevertheless, if so requested by the Collateral Agent or by any
purchaser, the Seller shall confirm any such sale or transfer by
executing and delivering to such purchaser all proper instruments
of conveyance and transfer and releases as may be designated in
any such request.
(d) At any public sale under Section 10.01(b), the
Purchaser, the Collateral Agent or any Purchaser Secured Party
may bid for and purchase the property offered for sale and, upon
compliance with the terms of sale, may hold, retain and dispose
of such property without further accountability therefor.
(e) The Collateral Agent may exercise at the Seller's
expense any and all rights and remedies of the Seller under or in
connection with the Seller Assigned Agreements or the other
Seller Collateral, including any and all rights of the Seller to
demand or otherwise require payment of any amount under, or
performance of any provisions of, the Seller Assigned Agreements.
Section 10.02. Exercise of Remedies. No failure or delay
on the part of the Collateral Agent to exercise any right, power
or privilege under this Agreement and no course of dealing
between the Seller, the Servicer, the Originator or the Operating
Agent, on the one hand, and the Collateral Agent, on the other
hand, shall operate as a waiver of such right, power or
privilege, nor shall any single or partial exercise of any right,
power or privilege under this Agreement preclude any other or
further exercise of such right, power or privilege or the
exercise of any other right, power or privilege. The rights and
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remedies expressly provided in this Agreement are cumulative and
not exclusive of any rights or remedies which the Collateral
Agent or the Secured Parties would otherwise have pursuant to law
or equity. No notice to or demand on any party in any case shall
entitle such party to any other or further notice or demand in
similar or other circumstances, or constitute a waiver of the
right of the other party to any other or further action in any
circumstances without notice or demand.
Section 10.03. Severability of Remedies. The invalidity of
any remedy in any jurisdiction shall not invalidate such remedy
in any other jurisdiction. The invalidity or unenforceability of
the remedies herein provided in any jurisdiction shall not in any
way affect the right of the enforcement in such jurisdiction or
elsewhere of any of the other remedies herein provided.
Section 10.04. Power of Attorney. Each of the Originator
and the Servicer hereby irrevocably appoints the Collateral Agent
its true and lawful attorney (with full power of substitution) in
its name, place and stead and at its expense, in connection with
the enforcement of the rights and remedies provided for in this
Article X, such power of attorney to take effect from the date
and during the continuance of any Termination Event, including
with the following powers: (a) to give any necessary receipts or
acquittance for amounts collected or received hereunder, (b) to
make all necessary transfers of the Originator Collateral in
connection with any sale or other disposition made pursuant
hereto, (c) to execute and deliver for value all necessary or
appropriate bills of sale, assignments and other instruments in
connection with any such sale or other disposition, the
Originator and the Servicer hereby ratifying and confirming all
that such attorney (or any substitute) shall lawfully do
hereunder and pursuant hereto, and (d) to sign any agreements,
orders or other documents in connection with or pursuant to this
Agreement and any Related Document. Nevertheless, if so requested
by the Collateral Agent or a purchaser of Originator Collateral,
the Originator shall ratify and confirm any such sale or other
disposition by executing and delivering to the Collateral Agent
or such purchaser all proper bills of sale, assignments, releases
and other instruments as may be designated in any such request.
Section 10.05. Continuing Security Interest. This
Agreement shall create a continuing security interest in the
Collateral until the satisfaction of Section 6.07(b).
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ARTICLE XI
SUCCESSOR SERVICER
Section 11.01. Servicer Not to Resign. The Servicer shall
not resign from the obligations and duties hereby imposed on it
except upon determination that (a) the performance of its duties
hereunder has become impermissible under applicable law or
regulation, and (b) there is no reasonable action which the
Servicer could take to make the performance of its duties
hereunder become permissible under applicable law. Any such
determination permitting the resignation of the Servicer shall be
evidenced as to clause (a) above by an opinion of counsel to such
effect delivered to the Purchaser, the Collateral Agent and the
Operating Agent. No such resignation shall become effective
until a successor servicer shall have assumed the
responsibilities and obligations of the Servicer in accordance
with Section 11.02.
Section 11.02. Appointment of the Successor Servicer. In
connection with the termination of the Servicer's
responsibilities under this Agreement pursuant to Section 9.02 or
11.01, the Operating Agent shall (a) succeed to and assume all of
the Servicer's responsibilities, rights, duties and obligations
as Servicer (but not in any other capacity, including
specifically not its obligations under Section 12.02) under this
Agreement (and except that the Operating Agent makes no
representations and warranties pursuant to Section 4.02), or
(b) appoint a successor servicer to the Servicer which shall be
acceptable to the Collateral Agent and shall succeed to all
rights and assume all of the responsibilities, duties and
liabilities of the Servicer under this Agreement (the Operating
Agent, in such capacity, or such successor servicer being
referred to as the "Successor Servicer"); provided, that the
Successor Servicer shall have no responsibility for any actions
of the Servicer prior to the date of its appointment as Successor
Servicer. In selecting a Successor Servicer, the Operating Agent
may obtain bids from any potential Successor Servicer and may
agree to any bid it deems appropriate. The Successor Servicer
shall accept its appointment by executing, acknowledging and
delivering to the Operating Agent and the Collateral Agent an
instrument in form and substance acceptable to the Operating
Agent and the Collateral Agent.
Section 11.03. Duties of the Servicer. At any time
following the appointment of a Successor Servicer:
(a) The Servicer agrees that it will terminate its
activities as Servicer hereunder in a manner acceptable to the
Collateral Agent so as to facilitate the transfer of servicing to
the Successor Servicer including, without limitation, timely
delivery (i) to the Collateral Agent of any funds that were
required to be remitted to the Collateral Agent for deposit in
the Collection Account, and (ii) to the Successor Servicer, at a
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place selected by the Successor Servicer, of all Servicing
Records and other information with respect to the Transferred
Receivables. The Servicer shall account for all funds and shall
execute and deliver such instruments and do such other things as
may be required to more fully and definitely vest and confirm in
the Successor Servicer all rights, powers, duties,
responsibilities, obligations and liabilities of the Servicer.
(b) The Servicer shall terminate each Sub-Servicing
Agreement that may have been entered into and the Successor
Servicer shall not be deemed to have assumed any of the
Servicer's interest therein or to have replaced the Servicer as a
party to any such Sub-Servicing Agreement.
Section 11.04. Effect of Termination or Resignation. Any
termination or resignation of the Servicer under this Agreement
shall not affect any claims that the Originator, the Collateral
Agent, the Purchaser or the Operating Agent may have against the
Servicer for events or actions taken or not taken by the Servicer
arising prior to any such termination or resignation.
ARTICLE XII
INDEMNIFICATION
Section 12.01. Indemnities by the Seller.
(a) Without limiting any other rights that the
Collateral Agent, the Purchaser, the Operating Agent, the
Transaction Liquidity Agent, any Transaction Liquidity Lender,
the Letter of Credit Agent or any Letter of Credit Provider or
any director, officer, employee, agent or incorporator of such
party (each an "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,
liabilities, obligations, damages, penalties, actions, judgments,
suits, and reasonable costs and expenses of any nature whatsoever
related thereto, including reasonable attorneys' fees and
disbursements (all of the foregoing being collectively referred
to as "Indemnified Amounts"), which may be imposed on, incurred
by or asserted against an Indemnified Party in any way arising
out of or relating to (i) any breach of the Seller's obligations
under this Agreement or any Related Document, (ii) the sale or
the pledge of the Transferred Receivables, or (iii) any
Receivable or any Contract, excluding, however, (A) Indemnified
Amounts to the extent resulting solely from gross negligence or
willful misconduct on the part of such Indemnified Party or
(B) consequential, indirect, punitive or exemplary damages;
provided, however, that if a court of competent jurisdiction in a
final non-appealable order determines that such Indemnified
Amounts arose in part from such Indemnified Party's gross
negligence or wilful misconduct, the Seller shall reimburse such
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Indemnified Party for the portion of such Claim not resulting
from such Indemnified Party's gross negligence or wilful
misconduct. To the extent such a determination of gross
negligence or wilful misconduct is made after payment of any
Indemnified Amounts related thereto, the Seller shall be repaid
any amounts reimbursed under the preceding clause that due to
such determination it should not have paid. Without limiting or
being limited by the foregoing, 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:
(A) reliance on any representation or warranty made or
deemed made by the Seller (or any of its officers) under or
in connection with this Agreement, any Related Document or
any report or other information delivered by the Seller
pursuant hereto which shall have been incorrect in any
material respect when made or deemed made or delivered;
(B) the failure by the Seller to comply with any term,
provision or covenant contained in this Agreement, any
Related Document or any agreement executed by it in
connection with this Agreement or with any applicable law,
rule or regulation with respect to any Transferred
Receivable or its related Contract, or the nonconformity of
any Transferred Receivable or its related Contract with any
such applicable law, rule or regulation; or
(C) the failure to vest and maintain vested in the
Purchaser legal and equitable title to and ownership of the
Receivables which are, or are purported to be, Transferred
Receivables, together with all Collections in respect
thereof, free and clear of any Adverse Claim (except as
permitted hereunder) whether existing at the time of the
purchase of such Receivable or at any time thereafter, and
to maintain or transfer to the Collateral Agent a first
priority, perfected security interest therein,
excluding, however, (A) Indemnified Amounts to the extent
resulting from gross negligence or willful misconduct on the part
of such Indemnified Party or (B) consequential, indirect,
punitive or exemplary damages provided, however, that if a court
of competent jurisdiction in a final non-appealable order
determines that such Indemnified Amounts arose in part from such
Indemnified Party's gross negligence or wilful misconduct, the
Seller shall reimburse such Indemnified Party for the portion of
such Claim not resulting from such Indemnified Party's gross
negligence or wilful misconduct. To the extent such a
determination of gross negligence or wilful misconduct is made
after payment of any Indemnified Amounts related thereto, the
Seller shall be repaid any amounts reimbursed under the preceding
clause that due to such determination it should not have paid.
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(b) Any Indemnified Amounts subject to the
indemnification provisions of this Section 12.01 not paid in
accordance with Article VI, to the extent that funds are
available therefor in accordance with the provisions of Article
VI, shall be paid to the Indemnified Party within five Business
Days following demand therefor.
(c) If indemnification is to be sought hereunder by
an Indemnified Party, then such Indemnified Party shall promptly
notify the Seller of the commencement of any litigation,
proceeding or other action in respect thereof; provided, however,
that the failure to notify the Seller shall not relieve the
Seller from any liability or obligation that it may have
hereunder or otherwise to such Indemnified Party, except to the
extent the Seller is actually prejudiced thereby. Each
Indemnified Party shall have the right to control its own
defense, but shall consult from time to time with the Seller and
in no event shall the Seller, in connection with any one action
or proceeding or separate but substantially similar or related
actions or proceedings arising out of the same general
allegations or circumstances, be liable for the fees and expense
of more than one firm of attorneys (together with any appropriate
local counsel) at any time acting for GE Capital, GE Capital
Markets Group Inc. or their employees, directors or officers
(collectively "GE Persons"), unless any such GE Person has been
advised by legal counsel that (a) the representation of such GE
Person by legal counsel acting for other GE Persons would be
inappropriate due to actual or potential conflicts of interest or
(b) there may be legal defenses available to such GE Person that
are different from or additional to those available to any other
GE Person represented by such legal counsel; provided, that any
Indemnified Party other than any GE Person shall not be
restricted from hiring separate legal counsel the fees and
expenses for which the Seller shall be liable as provided herein.
Notwithstanding anything to the contrary contained herein, the
Seller shall not have any obligation to hold harmless or
indemnify any Indemnified Party for the amount of any cash
settlement if any Indemnified Party enters into any such cash
settlement of a claim without the prior written consent of the
Seller, which consent will not be unreasonably withheld or
delayed and in the event the Seller shall not consent to any
proposed settlement, then the Seller shall notify such
Indemnified Party in writing of the amount which the Seller is
willing to pay (and if no such written notification is provided,
the Seller will be deemed to consent to the entire cash
settlement); provided that the Seller shall in any event continue
to be obligated to hold harmless and indemnify such Indemnified
Party for legal costs in relation to such Indemnified Amount as
provided herein. If, for any reason, no settlement is made, all
indemnity obligations under this Section 12.01 shall continue.
Section 12.02. Indemnities by the Servicer.
(a) Without limiting any other rights that an
Indemnified Party may have hereunder or under applicable law, the
Servicer hereby agrees to indemnify each Indemnified Party from
and against any and all Indemnified Amounts which may be imposed
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on, incurred by or asserted against an Indemnified Party in any
way arising out of or relating to any breach of the Servicer's
obligations under this Agreement, excluding, however, (A)
Indemnified Amounts to the extent resulting from gross negligence
or willful misconduct on the part of such Indemnified Party, (B)
recourse solely for uncollectible and uncollected Transferred
Receivables and (C) consequential, indirect, punitive or
exemplary damages; provided, however, that if a court of
competent jurisdiction in a final non-appealable order determines
that such Indemnified Amounts arose in part from such Indemnified
Party's gross negligence or wilful misconduct, the Servicer shall
reimburse such Indemnified Party for the portion of such Claim
not resulting from such Indemnified Party's gross negligence or
wilful misconduct. To the extent such a determination of gross
negligence or wilful misconduct is made after payment of any
Indemnified Amounts related thereto, the Servicer shall be repaid
any amounts reimbursed under the preceding clause that due to
such determination it should not have paid. Without limiting or
being limited by the foregoing, the Servicer 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) reliance on any representation or warranty
made or deemed made by the Servicer (or any of its officers)
under or in connection with this Agreement, any Related
Document or any report or other information delivered by the
Servicer pursuant hereto which shall have been incorrect in
any material respect when made or deemed made or delivered;
or
(ii) the failure by the Servicer to comply with
any term, provision or covenant contained in this Agreement,
any Related Document or any agreement executed by it in
connection with this Agreement or with any applicable law,
rule or regulation with respect to any Transferred
Receivable or its related Contract, or the imposition of any
Adverse Claim (except as permitted hereunder) with respect
to a Transferred Receivable as a result of the Servicer's
actions hereunder,
excluding, however, (A) Indemnified Amounts to the extent
resulting from gross negligence or willful misconduct on the part
of such Indemnified Party (B) recourse solely for uncollectible
and uncollected Transferred Receivables and (C) consequential,
indirect, punitive or exemplary damages; provided, however, that
if a court of competent jurisdiction in a final non-appealable
order determines that such Indemnified Amounts arose in part from
such Indemnified Party's gross negligence or wilful misconduct,
the Servicer shall reimburse such Indemnified Party for the
portion of such Claim not resulting from such Indemnified Party's
gross negligence or wilful misconduct. To the extent such a
determination of gross negligence or wilful misconduct is made
after payment of any Indemnified Amounts related thereto, the
Servicer shall be repaid any amounts reimbursed under the
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preceding clause that due to such determination it should not
have paid.
(b) Any Indemnified Amounts subject to the
indemnification provisions of this Section 12.02 shall be paid to
the Indemnified Party within five Business Days following demand
therefor.
(c) If indemnification is to be sought hereunder by
an Indemnified Party, then such Indemnified Party shall promptly
notify the Servicer of the commencement of any litigation,
proceeding or other action in respect thereof; provided, however,
that the failure to notify the Servicer shall not relieve the
Servicer from any liability or obligation that it may have
hereunder or otherwise to such Indemnified Party, except to the
extent the Servicer is actually prejudiced thereby. Each
Indemnified Party shall have the right to control its own
defense, but shall consult from time to time with the Servicer
and in no event shall the Servicer, in connection with any one
action or proceeding or separate but substantially similar or
related actions or proceedings arising out of the same general
allegations or circumstances, be liable for the fees and expense
of more than one firm of attorneys (together with any appropriate
local counsel) at any time acting for GE Persons, unless any such
GE Person has been advised by legal counsel that (a) the
representation of such GE Person by legal counsel acting for
other GE Persons would be inappropriate due to actual or
potential conflicts of interest or (b) there may be legal
defenses available to such GE Person that are different from or
additional to those available to any other GE Person represented
by such legal counsel; provided, that any Indemnified Party other
than any GE Person shall not be restricted from hiring separate
legal counsel the fees and expenses for which the Servicer shall
be liable as provided herein. Notwithstanding anything to the
contrary contained herein, the Servicer shall not have any
obligation to hold harmless or indemnify any Indemnified Party
for the amount of any cash settlement if any Indemnified Party
enters into any such cash settlement of a claim without the prior
written consent of the Servicer, which consent will not be
unreasonably withheld or delayed and in the event the Servicer
shall not consent to any proposed settlement, then the Servicer
shall notify such Indemnified Party in writing of the amount
which the Servicer is willing to pay (and if no such written
notification is provided, the Servicer will be deemed to consent
to the entire cash settlement); provided that the Servicer shall
in any event continue to be obligated to hold harmless and
indemnify such Indemnified Party for legal costs in relation to
such Indemnified Amount as provided herein. If, for any reason,
no settlement is made, all indemnity obligations under this
Article V shall continue.
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ARTICLE XIII
OPERATING AGENT
Section 13.01. Authorization and Action. The Operating
Agent may take such action and carry out such functions under
this Agreement as are delegated to it by the terms hereof,
pursuant to the Operating Agent Agreement or otherwise
contemplated hereby or thereby or are reasonably incidental
thereto; provided, that the duties of the Operating Agent shall
be determined solely by the express provisions of this Agreement
and other than the duties set forth in Section 13.02 any
permissive right of the Operating Agent hereunder shall not be
construed as a duty.
Section 13.02. Reliance, etc. None of the Operating Agent,
any Affiliate thereof nor any of their respective directors,
officers, agents or employees will be liable for any action taken
or omitted to be taken by any of them under or in connection with
this Agreement, the Program Documents or the Related Documents,
except when caused solely by their own gross negligence or
willful misconduct. Without limiting the generality of the
foregoing, and notwithstanding any term or provision hereof to
the contrary, the Seller, the Servicer and the Purchaser hereby
acknowledge and agree that the Operating Agent (a) acts as agent
hereunder for the Purchaser and has no duties or obligations to,
will incur no liabilities or obligations to, and does not act as
an agent in any capacity for, the Seller or the Originator,
(b) may consult with legal counsel, 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, (c) makes no warranty or representation hereunder and
shall not be responsible for any statements, warranties or
representations made in or in connection with this Agreement, the
Program Documents or the Related Documents, (d) 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 Program Documents or Related Documents on the part
of the Seller, the Servicer or the Purchaser or to inspect the
property (including the books and records) of the Seller, the
Servicer or the Purchaser, (e) shall not be responsible to the
Seller, the Servicer or the Purchaser for the due execution,
legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or any other instrument or document
furnished pursuant hereto (including the Related Documents),
(f) shall incur no liability under or in respect of this
Agreement, the Program Documents or the Related Documents by
acting upon any notice or communication (including a
communication by telephone), consent, certificate or other
instrument or writing believed by it to be genuine and signed,
sent or communicated by the proper party or parties and (g) shall
not be bound to make any investigation into the facts or matters
stated in any notice or other communication hereunder and may
rely on the accuracy of such facts or matters.
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Section 13.03. GE Capital and Affiliates. GE Capital and
its Affiliates may generally engage in any kind of business with
the Seller, the Originator, the Servicer, the Purchaser or any
Obligor, any of their respective Affiliates and any Person who
may do business with or own securities of such parties or any of
their respective Affiliates, all as if GE Capital were not the
Operating Agent, and without the duty to account therefor to the
Seller, the Originator, the Servicer, the Purchaser or any other
Person.
ARTICLE XIV
MISCELLANEOUS
Section 14.01. Notices, Etc. All notices and other
communications provided for hereunder, unless otherwise stated
herein, shall be in writing and mailed or telecommunicated, or
delivered as to each party hereto, at its address set forth below
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 not be effective until received by the
party to whom such notice or communication is addressed.
Section 14.02. Binding Effect; Assignability. This
Agreement shall be binding upon and inure to the benefit of the
Seller, the Servicer, the Purchaser, the Operating Agent and
their respective permitted successors and assigns. Neither the
Seller nor the Servicer may assign any of their rights and
obligations hereunder or any interest herein without the prior
written consent of the Purchaser, the Collateral Agent and the
Operating Agent and unless each Rating Agency shall have
confirmed in writing to the Purchaser and the Operating Agent
that such assignment would not result in a withdrawal or
reduction of the then current rating by such Rating Agency of the
Commercial Paper. The Purchaser, the Collateral Agent and the
Operating Agent may, at any time, without the consent of the
Seller, the Originator or the Servicer, assign any of their
respective rights and obligations hereunder or interest herein to
any Affiliate of GE Capital or any party to any Program Document.
Any such assignee may further assign at any time its rights and
obligations hereunder or interests herein to any other Affiliate
of GE Capital or any party to any Program Document without the
consent of the Seller, any Originator or the Servicer.
Otherwise, the Purchaser, the Collateral Agent and the Operating
Agent may not assign any of their rights hereunder or their
interests herein without the prior written consent of the Seller.
This Agreement shall create and constitute the continuing
obligations of the parties hereto in accordance with its terms,
and shall remain in full force and effect until its termination;
provided, that the rights and remedies with respect to any breach
of any representation and warranty made by the Seller or the
Servicer pursuant to Article IV and the indemnification and
payment provisions of Article XII shall be continuing and shall
survive any termination of this Agreement.
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Section 14.03. Costs, Expenses and Taxes.
(a) In addition to the rights of indemnification under
Article XII hereof, the Seller agrees to pay upon demand all
reasonable costs and expenses and taxes (excluding income and
similar taxes) incurred by the Purchaser, the Operating Agent or
the Collateral Agent in connection with the administration
(including periodic auditing after a Termination Event, Rating
Agency requirements, modification and amendment) of this
Agreement, the Related Documents and the other documents to be
delivered hereunder. The Seller further agrees to pay on demand
reasonable fees and out-of-pocket expenses of counsel for the
Purchaser, the Operating Agent and the Collateral Agent incurred
after the Effective Date with respect thereto and with respect to
advising the Purchaser, the Operating Agent or the Collateral
Agent as to its rights and remedies under this Agreement, the
Related Documents and the other agreements executed pursuant
hereto. The Seller further agrees to pay within 20 Business Days
after demand all reasonable and documented costs, counsel fees
and expenses in connection with the enforcement (whether through
negotiation, legal proceedings or otherwise) of this Agreement,
the Related Documents and the other agreements and documents to
be delivered hereunder, including, without limitation, reasonable
counsel fees and expenses in connection with the enforcement of
rights under this Section 14.03 in accordance with the provisions
of Article VI to the extent that funds are available therefor in
accordance therewith.
(b) In addition, the Seller shall pay on demand any
and all stamp, sales, excise and other taxes and fees payable or
determined to be payable in connection with the execution,
delivery, filing or recording of this Agreement, the Related
Documents or the other agreements and documents to be delivered
hereunder, and agrees to indemnify and save each Indemnified
Party 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.
(c) In the event that the Operating Agent reasonably
determines that any of the costs referred to in paragraphs (a) or
(b) above were in any part incurred on behalf of, or are
attributable to the actions of, borrowers or sellers under Other
Purchase Agreements, the Seller shall have no liability hereunder
in excess of the Seller's Share of such costs.
(d) If the Seller or the Servicer fails to perform any
agreement or obligation contained herein, the Purchaser, the
Collateral Agent or the Operating Agent may (but shall not be
required to) itself perform, or cause performance of, such
agreement or obligation, and the expenses of such party incurred
in connection therewith shall be payable by the party which has
failed to so perform upon such party's demand therefor.
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Section 14.04. Confidentiality.
(a) The Servicer and the Seller agree to maintain the
confidentiality of this Agreement (and all drafts of this
agreement and documents ancillary to this Agreement) in their
communications with third parties other than any Affected Party
or any Indemnified Party and otherwise and not to disclose,
deliver or otherwise make available to any third party (other
than its directors, officers, employees, accountants or counsel)
the original or any copy of all or any part of this Agreement (or
any draft of this Agreement and documents ancillary to this
Agreement) except to an Affected Party or an Indemnified Party.
The Purchaser and the Operating Agent agree to maintain the
confidentiality of this Agreement and any information furnished
by the Seller, the Servicer or any Originator pursuant to this
Agreement or the Transfer Agreement (and all drafts of this
agreement and documents ancillary to this Agreement) in their
communications with third parties other than any Affected Party
or any Indemnified Party and otherwise and not to disclose,
deliver or otherwise make available to any third party (other
than its directors, officers, employees, accountants or counsel)
the original or any copy of all or any part of this Agreement (or
any draft of this Agreement and documents ancillary to this
Agreement) except to an Affected Party or an Indemnified Party.
(b) Notwithstanding Section 14.04(a), (i) the general
terms of the transactions contemplated by this Agreement and the
Related Documents may be disclosed to any existing lender to or
potential investor in the Parent that has agreed in writing not
to disclose such terms, and (ii) this Agreement and the Related
Documents may be disclosed (A) if required to be filed publicly
with the Securities and Exchange Commission, (B) to the certified
public accountants of the Parent to the extent necessary, (C) to
the extent otherwise required by applicable law, rule or
regulation, (D) to the extent required under a valid and
appropriately limited subpoena or equivalent legal process or (E)
if the Affected Party otherwise consents in writing.
(c) The Seller and the Servicer agree that they shall
not (and the Servicer shall not permit any of its Subsidiaries
to) issue any news release or make any public announcement
pertaining to the transactions contemplated by this Agreement and
the Related Documents without the prior written consent of the
Operating Agent and its assignees (which consent shall not be
unreasonably withheld) unless such news release or public
announcement is required by law, in which case the Seller and the
Servicer shall consult with the Operating Agent and its assignees
prior to the issuance of such news release or public
announcement.
Section 14.05. No Proceedings. The Seller and the Servicer
each hereby agrees that it will not, directly or indirectly,
institute, or cause to be instituted, against the Purchaser any
proceeding of the type referred to in Section 9.01(c) so long as
-66-
<PAGE>
there shall not have elapsed one year plus one day since the
latest maturing Commercial Paper has been paid in full in cash.
Section 14.06. Amendments; Waivers; Consents. No
modification, amendment or waiver of or with respect to any
provision of this Agreement, the Related Documents or any other
agreements, instruments and documents delivered pursuant hereto
or thereto, nor consent to any departure by the Seller or the
Servicer from any of the terms or conditions hereof or thereof,
shall be effective unless it shall be in writing and signed by
each of the parties hereto and with respect to any material
modification, amendment or waiver, satisfies the Rating Agency
Condition. Any waiver or consent shall be effective only in the
specific instance and for the purpose for which given. No
consent to or demand on the Seller, the Originator or the
Servicer in any case shall, in itself, entitle it to any other
consent or further notice or demand in similar or other
circumstances. This Agreement, the Related Documents and the
documents referred to therein embody the entire agreement among
the Seller, the Purchaser, the Operating Agent, the Collateral
Agent and the Servicer and supersede all prior agreements and
understandings relating to the subject hereof.
Section 14.07. GOVERNING LAW; CONSENT TO JURISDICTION;
WAIVER OF JURY TRIAL.
(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAW OF THE STATE OF CALIFORNIA (WITHOUT
REGARD TO THE CONFLICT OF LAW PROVISIONS THEREOF).
(b) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY
SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE
OF CALIFORNIA, AND EACH WAIVES PERSONAL SERVICE OF ANY AND ALL
PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE
MADE BY REGISTERED MAIL DIRECTED TO THE ADDRESSES SET FORTH
BELOW, AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED FIVE
DAYS AFTER THE SAME SHALL HAVE BEEN DEPOSITED IN THE U.S. MAILS,
POSTAGE PREPAID. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY
WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS AND ANY
OBJECTION TO VENUE OF ANY ACTION INSTITUTED HEREUNDER, AND
CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS
DEEMED APPROPRIATE BY THE COURT. NOTHING IN THIS
SECTION 14.07(b) SHALL AFFECT THE RIGHT OF ANY PARTY TO THIS
AGREEMENT TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY
LAW.
(c) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY
WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY
DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE ARISING
-67-
<PAGE>
OUT OF, CONNECTED WITH, RELATED TO OR IN CONNECTION WITH THIS
AGREEMENT. INSTEAD, ANY DISPUTE RESOLVED IN COURT WILL BE
RESOLVED IN A BENCH TRIAL WITHOUT A JURY.
Section 14.08. Execution in Counterparts; Severability.
This Agreement may be executed by the 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 case any provision in
or obligation under this Agreement shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and
enforceability of the remaining provisions or obligations, or of
such provision or obligation shall not in any way be affected or
impaired thereby in such jurisdiction and the validity, legality
and enforceability of the remaining provisions or obligations, or
of such provision or obligation shall not be impaired thereby in
any other jurisdiction.
Section 14.09. Descriptive Headings. The descriptive
headings of the various sections of this Agreement are inserted
for convenience of reference only and shall not be deemed to
affect the meaning or construction of any of the provisions
hereof.
Section 14.10. Limited Recourse. The obligations of the
Purchaser under this Agreement and all Related Documents are
solely the corporate obligations of the Purchaser. No recourse
shall be had for the payment of any amount owing in respect of
Purchases or for the payment of any fee hereunder or any other
obligation or claim arising out of or based upon this Agreement
or any other Related Document against any shareholder, employee,
officer, director, agent or incorporator of the Purchaser. Any
accrued obligations owing by the Purchaser under this Agreement
shall be payable by the Purchaser solely to the extent that funds
are available therefor from time to time in accordance with the
provisions of Article VI of the Collateral Agent Agreement and
Article VI of this Agreement (and such accrued obligations shall
not be extinguished until paid in full).
Section 14.11. Amendment and Restatement. Upon the
execution and delivery of this Agreement by the parties hereto,
the Initial Receivables Purchase and Servicing Agreement shall be
amended and restated in its entirety by this Agreement, effective
as of the date hereof, with all rights, obligations and ownership
or security interests created under or granted pursuant to the
Initial Receivables Purchase and Servicing Agreement continuing
from the date thereof through the date hereof, including, without
limitation, rights of the parties with respect to representations
and indemnifications made pursuant to the Initial Receivables
Purchase and Servicing Agreement. Each reference in any
agreement or document delivered pursuant to the Initial
Receivables Purchase and Servicing Agreement to the "Receivables
Purchase and Servicing Agreement dated as of October 2, 1995"
shall be deemed to refer to the Initial Receivables Purchase and
Servicing Agreement for the period from the date thereof until
-68-
<PAGE>
the date of this Agreement and shall be deemed to refer to this
Agreement from and after the date hereof.
IN WITNESS WHEREOF, the parties have caused this Amended and
Restated Receivables Purchase and Servicing Agreement to be
executed by their respective officers thereunto duly authorized,
as of the date first above written.
MERISEL AMERICAS, INC., as Servicer
By
Name:
Title:
Address: 200 Continental Boulevard
El Segundo, CA 90245
Attention: Timothy Jenson, Treasurer
Phone number: (310) 615-6850
Telecopier number: (310) 615-6882
REDWOOD RECEIVABLES
CORPORATION, as Purchaser
By
Name:
Title:
Address: c/o General Electric Capital
Corporation
260 Long Ridge Road
Stamford, Connecticut 06727
Attention: Redwood Administrator
Phone number: (203) 961-5488
Telecopier number: (203) 357-6330
or (203) 961-2953
-69-
<PAGE>
MERISEL CAPITAL FUNDING, INC., as
Seller
By
Name:
Title:
Address: 200 Continental Boulevard
Suite 301
El Segundo, CA 90245
Attention: Charles Freedman
Phone number: (310) 615-6861
Telecopier number: (310) 615-6882
GENERAL ELECTRIC CAPITAL CORPORATION,
as Operating Agent and Collateral Agent
By
Name:
Title:
Address: 201 High Ridge Road
Stamford, Connecticut 06927
Attention: Vice President -
Portfolio/Merisel
Phone number: (203) 316-7606
Telecopier number: (203) 316-7821
-70-
<PAGE>
Schedule 1
CONCENTRATION LIMITS
Obligor Long-Term Concentration Limit
Debt Rating1 Percentage
AA/Aa2 or higher 15%
A/A3 8%
Less than A/A3 4%
<PAGE>
Schedule 2
EXCLUDED OBLIGORS
None
<PAGE>
Annex A
to
Schedule 2
FORM OF AMENDING LETTER
[Insert Date]
Merisel Capital Funding, Inc.
200 Continental Boulevard
El Segundo, California 90245
Attention:
Redwood Receivables Corporation
c/o General Electric Capital Corporation
260 Long Ridge Road
Stamford, CT 06727
Attention: Redwood Administrator
Merisel Americas, Inc.
200 Continental Boulevard
El Segundo, California 90245
Re: Amended and Restated Receivables
Purchase and Servicing Agreement, dated as of
_________________, 1996
Ladies and Gentlemen:
This notice is given pursuant to the Amended and
Restated Receivables Purchase and Servicing Agreement, dated as
of ____________, 1996 (the "Purchase Agreement"), between Redwood
Receivables Corporation (the "Purchaser"), General Electric
Capital Corporation, as agent for the Company (in such capacity,
the "Operating Agent") and as collateral agent for the Purchaser
Secured Parties (in such capacity, the "Collateral Agent"),
Merisel Capital Funding, Inc. (the "Seller") and Merisel
Americas, Inc. (the "Originator"). Capitalized terms used but
not defined in this notice have the meanings ascribed to such
terms in the Purchase Agreement.
The Operating Agent hereby amends Schedule 2 to the
Purchase Agreement as follows:
[The following Obligors are added to Schedule 2 as
"Excluded Obligors":]
[The following Obligors are removed from Schedule 2:]
The effective date of this amendment to Schedule 2 is
____________, 199_.
Very truly yours,
GENERAL ELECTRIC CAPITAL
CORPORATION
By:
Name:
<PAGE>
Schedule 3
DETERMINATION OF "DAILY YIELD"
#1) Daily Yield = Daily Yield Rate x Capital Investment
on the preceding day
#2) Daily Yield Rate
(a) Pre-Termination = Daily Base Yield Rate + Daily Margin
(b) Post-Termination = Daily Termination Yield Rate + Daily
Default Margin
#3) Daily Base Yield Rate = (Daily Weighted Average CP Rate +
Daily Weighted Average Liquidity Rate)
x Redwood Funding Factor
#4) Daily Termination Yield Rate= Average of Liquidity
Rates (being the greater Liquidity
Rate of NYCHA Prime or 30 Day CP +
1.00%) of Transaction Liquidity Loans
Outstanding weighted by the amount
of each Transaction Liquidity Loan
#5) Daily Weighted Average
CP Rate = (CP Outstanding/Senior Debt) x
(Weighted Average CP Rate/360)
#6) Weighted Average
CP Rate = Average of CP Rates for all
tranches of CP Outstanding issued
by the Purchaser, weighted by CP
Outstanding in each tranche
#7) Daily Weighted Average
Liquidity Rate = (Liquidity Loans Outstanding/Senior
Debt) x (Weighted Average Liquidity
Rate/360 Days)
#8) Weighted Average = Average of Liquidity Rates (being the
greater Liquidity Rate of
NYCHA Prime or 30 Day CP + 1.00%)
of Liquidity Loans Outstanding
weighted by the amount of each
Liquidity Loan
#9) Senior Debt = CP Outstanding + Liquidity Loans
Outstanding
<PAGE>
#10) Redwood Funding = Total Redwood
Debt/Total Purchases Factor Outstanding
<PAGE>
Definitions
"CP Interest" means (a) the Daily Weighted Average CP
Rate times (b)(i) the Capital Investment outstanding at the
beginning of the day minus (ii) Transaction Liquidity Loans
outstanding at the beginning of the day.
"CP Outstanding" means the sum of the face value of all
Commercial Paper.
"CP Rates" means the rate of interest on Commercial
Paper.
"Daily Margin" means 1.0% divided by 360.
"Daily Default Margin" means 3.0% divided by 360.
"Liquidity Loans Outstanding" means the sum of all
Liquidity Loans.
"LOC Deposits" means, for any day, the amount, if any,
of proceeds from LOC Draws Outstanding not used to pay maturing
Commercial Paper or Liquidity Loans and remaining in the
Collateral Account at the end of such day.
"LOC Draws" means any payments made to the Purchaser in
respect of the Letter of Credit.
"LOC Draws Outstanding" means, at any time, (a) any LOC
Draws to date minus (b) any payments made prior to such time to
reimburse such LOC Draws.
"RFC" means a receivables financing company that either
sells receivables to the Purchaser, or makes borrowings from the
Purchaser secured by receivables.
"Total Purchases Outstanding" means, at any time, the
aggregate of the Capital Investment at such time, plus the
amounts corresponding to advances outstanding for all other RFCs
other than the Seller that have pledged receivables as collateral
for such advances from the Purchaser at such time, plus the
purchases outstanding for all RFCs other than the Seller as
sellers of receivables to the Purchaser at such time.
"Total Redwood Debt" means, at any time, the aggregate
of the Purchaser's Senior Debt, plus LOC Draws Outstanding, minus
LOC Deposits for all RFCs at such time.
<PAGE>
Schedule 4
YIELD DISCOUNT AMOUNT
Yield Discount Amount = Purchase Rate Discount Amount
+ Yield Volatility Discount Amount
+ Unused Commitment Fee Discount
Amount
+ Servicing Fee Discount Amount
#1 Purchase Rate = Capital Investment
Discount Amount x Daily Yield Rate (see Schedule 3)
x Liquidation Term Factor
x 360
#2 Yield Volatility = Capital Investment
Discount Amount x Yield Volatility Percentage
x Liquidation Term Factor
#3 Unused Commitment Fee = Capital Investment Available
Discount Amount x Unused Commitment Fee Rate
x Liquidation Term Factor
#4 Servicing Fee = Outstanding Balances of Transferred
Discount Amount Receivables
x Servicing Fee Rate
x Liquidation Term Factor
#5 Liquidation Term = Expected Liquidation Period/360
Factor
"Expected Liquidation Period" means the product of (i) the
weighted average number of days from the date of the Investment
Base Certificate to the invoice due date for the Outstanding
Balance of Transferred Receivables and (ii) 2.
"Yield Volatility Percentage" means the maximum increase
in interest rates anticipated over the Expected Liquidation
Period, as determined from time to time by the Collateral Agent.
<PAGE>
Schedule 5
ADDRESSES OF THE SELLER
Merisel Capital Funding, Inc.
200 Continental Blvd.
Suite 301
El Segundo, California 90245
<PAGE>
Schedule 6
LOCKBOXES AND LOCKBOX ACCOUNTS
FIRST CHICAGO
Lockbox Type Lockbox Address Street Address
70826 TERMS P.O. Box 70826 First National Bank of
Chicago, IL Chicago
60661 525 West Monroe
Seventh Floor Mailroom
Chicago, IL 60661
Attn: Merisel Box
70826
100006 TERMS P.O. Box 100006 First Chicago National
Pasadena, CA Processing Center
91189 First Floor
1111 Arroyo Parkway
Plaza
Pasadena, CA 92205
13534 TERMS P. O. Box 13534 First Chicago National
Newark, NJ 07188 Processing Center
Third Floor
300 Harmon Meadow Blvd.
Secaucus, NJ 07094
905031 TERMS P.O. Box 905031 First Chicago National
Charlotte, NC Processing Center
28290-5031 Suite 108
806 Tyzola Road
Charlotte, NC 28217
730203 TERMS P.O. Box 730203 First Chicago National
Dallas, TX 75373- Processing Center
0203 Suite 600
1801 Royal Lane
Dallas, TX 75229
52-73900 DDA (N/A) LOCKBOX CONCENTRATION
First Chicago
525 W. Monroe
Chicago, IL 60671
CITIBANK
7798 TERMS P.O. Box 7247- Citibank (Delaware)
7798 Citicorp Plaza
Philadelphia, PA One Penn's Way
19170-7798 New Castle, DE 19720
3846-8303 DDA (N/A) Citibank, N.A. (NY)
399 Park Ave.
New York, NY 10020
UNION BANK
33595- DDA Union Bank Union Bank
00962 P.O. Box 90098 S. Figueroa
Los Angeles, CA Los Angeles, CA 90051
90009
MCF Conc- For GECC to Remit No direct customer
entration Funds to: receipts intended for
Account this account:
4066-0417 DDA (N/A) Citibank, N.A. (NY)
399 Park Ave.
New York, NY 10020
N/A Credit N/A Harris Bank
Card 700 East Lake Cook Road
Agree-ment Buffalo Grove, IL 60089
<PAGE>
Schedule 7
LIST OF SELLER AGREEMENTS
1. Amended and Restated Trade Receivables Purchase and Sale
Agreement
Dated as of November 29, 1994
Merisel Capital Funding, Inc. as Seller
Corporate Receivables Corporation as Investor
Citicorp North Americas, Inc. as Agent
2. Receivables Contribution and Sale Agreement
Dated as of November 29, 1994
Merisel Americas, Inc. as Seller
Merisel Capital Funding, Inc. as Buyer
3. Amended and Restated Ancillary Services Agreement
Dated as of October 2, 1995
Merisel, Inc.
Merisel Capital Funding, Inc.
4. Consent and Assignment
Dated November 29, 1994
Merisel Capital Funding, Inc.
5. Subordinated Promissory Note
Dated November 29, 1994
Merisel Capital Funding, Inc., as Buyer
Merisel Americas, Inc., as Seller
6. Purchase and Sale Assignment and Assumption Agreement
Dated as of November 29, 1994
Merisel Americas, Inc., as the Assignor
Merisel Capital Funding, Inc., as the Assignee
<PAGE>
Schedule 8
LIST OF ORIGINATOR/SERVICER TRADE,
FICTITIOUS, ASSUMED AND "DOING BUSINESS
AS" NAMES
1. Merisel Americas, Inc. dba Channel Services Group
2. E. Information Company, trade name of Merisel Americas, Inc.
3. Merchandising Solutions, trade name of Merisel Americas,
Inc.
<PAGE>
Exhibit A-1
to
Purchase Agreement
FORM OF SELLER NOTICE - Request for Purchase
[Insert Date]
Redwood Receivables Corporation
C/o General Electric Capital Corporation
260 Long Ridge Road
Stamford, CT 06727
Attention: Redwood Administrator
General Electric Capital Corporation,
as Operating Agent
C/o General Electric Capital Corporation
201 High Ridge Road
Stamford, CT 06927
Attention: Vice President - Portfolio/Merisel
Re: Amended
and Restated
Receivables
Purchase and
Servicing
Agreement,
dated as of
____________,
1996
Ladies and Gentlemen:
This notice is given pursuant to Section 2.03(b) of the
Amended and Restated Receivables Purchase and Servicing
Agreement, dated as of ____________, 1996 (the "Purchase
Agreement"), between Redwood Receivables Corporation (the
"Purchaser"), General Electric Capital Corporation, as agent for
the Company (in such capacity, the "Operating Agent") and as
collateral agent for the Purchaser Secured Parties (in such
capacity, the "Collateral Agent"), Merisel Capital Funding, Inc.
(the "Seller") and Merisel Americas, Inc. (the "Originator").
Capitalized terms used but not defined in this notice have the
meanings ascribed to such terms in the Purchase Agreement.
The Seller hereby requests that the Purchaser make a
Purchase from the Seller on ___________, 19__ pursuant to
Section 2.01 of the Purchase Agreement in the amount of
$____________ to be disbursed to the Seller in accordance with
Section 2.04 of the Purchase Agreement. The Company hereby
confirms that the conditions set forth in Section 3.02 of the
Purchase Agreement for the making of such Purchase have been met.
Very truly yours,
MERISEL CAPITAL FUNDING, INC.
By:____________________________
Name:
Title:
<PAGE>
Exhibit A-2
to
Purchase Agreement
FORM OF SELLER NOTICE - Reduction of Commitment
[Insert Date]
Redwood Receivables Corporation
C/o General Electric Capital Corporation
260 Long Ridge Road
Stamford, CT 06727
Attention: Redwood Administrator
General Electric Capital Corporation,
as Operating Agent
C/o General Electric Capital Corporation
201 High Ridge Road
Stamford, CT 06927
Attention: Vice President - Portfolio/Merisel
Re: Amended
and Restated
Receivables
Purchase and
Servicing
Agreement,
dated as of
____________,
1996
Ladies and Gentlemen:
This notice is given pursuant to Section 2.03(b) of the
Amended and Restated Receivables Purchase and Servicing
Agreement, dated as of ____________, 1996 (the "Purchase
Agreement"), between Redwood Receivables Corporation (the
"Purchaser"), General Electric Capital Corporation, as agent for
the Company (in such capacity, the "Operating Agent") and as
collateral agent for the Purchaser Secured Parties (in such
capacity, the "Collateral Agent"), Merisel Capital Funding, Inc.
(the "Seller") and Merisel Americas, Inc. (the "Originator").
Capitalized terms used but not defined in this notice have the
meanings ascribed to such terms in the Purchase Agreement.
The Seller hereby irrevocably notifies the Purchaser and
the Operating Agent pursuant to Section 2.02(a) of the Purchase
Agreement that on ____________, 19__ (which is a Business Day)
the Maximum Purchase Limit shall be reduced to $_________ This
reduction is the [first] [second] reduction permitted by
Section 2.02(a) of the Purchase Agreement. After such reduction,
the Maximum
Purchase Limit will not be less than the Capital Investment
[after giving effect to, and conditioned upon, the repayment of
Purchases set forth in the attached notice].
Very truly yours,
MERISEL CAPITAL FUNDING, INC.
By:____________________________
Name:
Title:
<PAGE>
Exhibit A-3
to
Purchase Agreement
FORM OF SELLER NOTICE - Termination of Commitment
[Insert Date]
Redwood Receivables Corporation
C/o General Electric Capital Corporation
260 Long Ridge Road
Stamford, CT 06727
Attention: Redwood Administrator
General Electric Capital Corporation,
as Operating Agent
C/o General Electric Capital Corporation
201 High Ridge Road
Stamford, CT 06927
Attention: Vice President - Portfolio/Merisel
Re: Amended and Restated Receivables
Purchase and Servicing Agreement,
dated as of ____________, 1996
Ladies and Gentlemen:
This notice is given pursuant to Section 2.03(b) of the
Amended and Restated Receivables Purchase and Servicing
Agreement, dated as of ____________, 1996 (the "Purchase
Agreement"), between Redwood Receivables Corporation (the
"Purchaser"), General Electric Capital Corporation, as agent for
the Company (in such capacity, the "Operating Agent") and as
collateral agent for the Purchaser Secured Parties (in such
capacity, the "Collateral Agent"), Merisel Capital Funding, Inc.
(the "Seller") and Merisel Americas, Inc. (the "Originator").
Capitalized terms used but not defined in this notice have the
meanings ascribed to such terms in the Purchase Agreement.
The Seller hereby irrevocably notifies the Purchaser and
the Operating Agent pursuant to Section 2.02(a) of the Purchase
Agreement that on ____________, 19__ (which is a Business Day at
least 90 days after the date this notice is given) the Maximum
Purchase Limit shall be terminated.
Very truly yours,
MERISEL CAPITAL FUNDING, INC.
By:____________________________
Name:
Title:
<PAGE>
Exhibit A-4
to
Purchase Agreement
FORM OF SELLER NOTICE - Repayment of Capital Investment
[Insert Date]
Redwood Receivables Corporation
C/o General Electric Capital Corporation
260 Long Ridge Road
Stamford, CT 06727
Attention: Redwood Administrator
General Electric Capital Corporation,
as Operating Agent
C/o General Electric Capital Corporation
201 High Ridge Road
Stamford, CT 06927
Attention: Vice President - Portfolio/Merisel
Re: Amended
and Restated
Receivables
Purchase and
Servicing
Agreement,
dated as of
____________,
1996
Ladies and Gentlemen:
This notice is given pursuant to Section 2.03(b) of the
Amended and Restated Receivables Purchase and Servicing
Agreement, dated as of ____________, 1996 (the "Purchase
Agreement"), between Redwood Receivables Corporation (the
"Purchaser"), General Electric Capital Corporation, as agent for
the Company (in such capacity, the "Operating Agent") and as
collateral agent for the Purchaser Secured Parties (in such
capacity, the "Collateral Agent"), Merisel Capital Funding, Inc.
(the "Seller") and Merisel Americas, Inc. (the "Originator").
Capitalized terms used but not defined in this notice have the
meanings ascribed to such terms in the Purchase Agreement.
The Seller hereby notifies the Purchaser and the Operating
Agent that on ___________, 19__ (which is a Business Day) the
Seller intends to repay $__________ of Purchases currently
outstanding to the Seller pursuant to Section 2.06(b) of the
Purchase Agreement, including (i) all Interest accrued on the
principal amount of Purchases being repaid through the date of
repayment, and
(ii) any and all Breakage Costs payable under Section 2.11 of the
Purchase Agreement.
Very truly yours,
MERISEL CAPITAL FUNDING, INC.
By:____________________________
Name:
Title:
<PAGE>
Exhibit B
to
Purchase Agreement
FORM OF PURCHASE ASSIGNMENT
ASSIGNMENT, dated as of October 2, 1995 between MERISEL
CAPITAL FUNDING, INC. (the "Seller") and REDWOOD RECEIVABLES
CORPORATION (the "Purchaser").
1. We refer to the Receivables Purchase and
Servicing Agreement (the "Purchase Agreement") dated as of
October 2, 1995 among the Seller, the Purchaser, Merisel
Americas, Inc. and General Electric Capital Corporation. All
provisions of such Purchase Agreement are incorporated herein by
reference. All capitalized terms shall have the meanings set
forth in the Purchase Agreement.
2. The Seller does hereby sell to the
Purchaser all right, title and interest of the Seller in and to
all Transferred Receivables transferred to the Seller from time
to time pursuant to the Receivables Transfer Agreement dated as
of October 2, 1995 between Merisel Americas, Inc. and the Seller.
3. THIS CERTIFICATE OF ASSIGNMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF CALIFORNIA.
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. REDWOOD RECEIVABLES
CORPORATION
By: ________________________ By: _________________________
Name: Name:
Title: Title:
<PAGE>
Exhibit C
to
Purchase Agreement
FORM OF INVESTMENT BASE CERTIFICATE
<PAGE>
Exhibit D
to
Purchase Agreement
FORM OF OFFICER'S CERTIFICATE AS TO SOLVENCY
MERISEL AMERICAS, INC.
Officer's Certificate
I, [Name of Officer], the duly elected [Insert Title] of
Merisel Americas, Inc. (the "Originator"), hereby certify in
connection with the Amended and Restated Receivables Purchase and
Servicing Agreement, dated as of ____________, 1996 (the
"Purchase Agreement"; capitalized terms used but not defined in
this Officer's Certificate having the meaning set forth in the
Purchase Agreement), between Merisel Capital Funding, Inc. (the
"Seller"), the Originator, Redwood Receivables Corporation (the
"Purchaser") and General Electric Capital Corporation, as agent
for the Purchaser (in such capacity, the "Operating Agent") and
as collateral agent for the Purchaser Secured Parties (in such
capacity, the "Collateral Agent"), and for the benefit of the
Purchaser, the Operating Agent and the Collateral Agent, as
follows:
(1) the performance of the Transfer
Agreement, dated as of ____________, 1995, between the
Originator, as seller, and the Seller, as buyer, will not
render the Seller insolvent; and
(2) the Seller will be able to remain
economically viable without further investments by the
Originator for the foreseeable future.
IN WITNESS WHEREOF, I have signed and delivered this
Officer's Certificate this _____ day of ___________, 199_;
MERISEL AMERICAS, INC.
By:____________________________
Name:
Title:
<PAGE>
Exhibit E
to
Purchase Agreement
FORM OF OFFICER'S CERTIFICATE OF SELLER
MERISEL CAPITAL FUNDING, INC.
Officer's Certificate
I, [Name of Officer], the duly elected [Insert Title] of
Merisel Capital Funding, Inc. (the "Seller"), hereby certify
pursuant to Section 3.01(c)(iv) of the Amended and Restated
Receivables Purchase and Servicing Agreement, dated as of
____________, 1996 (the "Purchase Agreement"; capitalized terms
used but not defined in this Officer's Certificate having the
meaning set forth in the Purchase Agreement), between the Seller,
Merisel Americas, Inc., Redwood Receivables Corporation (the
"Purchaser") and General Electric Capital Corporation, as agent
for the Purchaser (in such capacity, the "Operating Agent") and
as collateral agent (in such capacity, the "Collateral Agent")
for the Purchaser Secured Parties (as defined in the Purchase
Agreement), and for the benefit of the Purchaser, the Operating
Agent and the Collateral Agent, as follows:
(1) after giving effect to the
effectiveness of the Purchase Agreement, no Termination
Event or Incipient Event will have occurred and be
continuing; and
(2) the representations and warranties
of the Seller contained in Section 4.01 of the Purchase
Agreement, in the Transfer Agreement and in any other
document, certificate or financial or other statement
delivered by the Seller in connection with the Purchase
Agreement or the Transfer Agreement are true and correct in
all material respects and with the same force and effect as
though such representations and warranties had been made as
of such date, except to the extent any such representations
and warranties relate solely to an earlier date.
IN WITNESS WHEREOF, I have signed and delivered this
Officer's Certificate this _____ day of ___________, 199_.
MERISEL CAPITAL FUNDING, INC.
By:____________________________
Name:
Title:
<PAGE>
Exhibit F
to
Purchase Agreement
FORM OF OFFICER'S CERTIFICATE OF SERVICER
MERISEL AMERICAS, INC.
Officer's Certificate
I, [Name of Officer], the duly elected [Insert Title] of
Merisel Americas, Inc. (the "Servicer"), hereby certify pursuant
to Section 3.01(d)(iv) of the Amended and Restated Receivables
Purchase and Servicing Agreement, dated as of ____________, 1996
(the "Purchase Agreement"; capitalized terms used but not defined
in this Officer's Certificate having the meaning set forth in the
Purchase Agreement), between Merisel Capital Funding, Inc. (the
"Seller"), the Servicer, Redwood Receivables Corporation (the
"Purchaser") and General Electric Capital Corporation, as agent
for the Purchaser (in such capacity, the "Operating Agent") and
as collateral agent (in such capacity, the "Collateral Agent")
for the Purchaser Secured Parties (as defined in the Purchase
Agreement), and for the benefit of the Purchaser, the Operating
Agent and the Collateral Agent, as follows:
(1) after giving effect to the
effectiveness of the Purchase Agreement, no Event of
Servicer Termination or event which, with the giving of
notice or lapse of time, or both, will have occurred and be
continuing; and
(2) the representations and warranties
of the Servicer contained in Section 4.02 of the Purchase
Agreement and in any other document, certificate or
financial or other statement delivered by the Servicer in
connection with the Purchase Agreement are true and correct
in all material respects and with the same force and effect
as though such representations and warranties had been made
as of such date, except to the extent any such
representations and warranties relate solely to an earlier
date.
IN WITNESS WHEREOF, I have signed and delivered this
Officer's Certificate this _____ day of _____________, 1996.
MERISEL AMERICAS, INC.
By:____________________________
Name:
Title:
<PAGE>
Exhibit G
to
Purchase Agreement
FORM OF MONTHLY REPORT
MERISEL CAPITAL FUNDING, INC.
<PAGE>
Exhibit H
to
Purchase Agreement
FINANCIAL COVENANTS
Covenant Covenant Level
I. Parent Tangible Net
Worth
(minimum)
$100,000,000
Effective Date
to 12/30/1996
$125,000,000
12/31/1996 to
12/30/1997
$150,000,000
12/31/1997 to
termination
Fixed Charge
Coverage Ratio
(minimum)
Effective Date 1.0 to 1.0
to 9/30/1996
10/1/1996 to 1.4 to 1.0
6/30/1997
6/30/1997 to 1.5 to 1.0
termination
II. Seller Net Worth 15%
Percentage
(minimum)
Capitalized terms used above and not otherwise defined
below shall have the meanings specified in Annex X to the
Purchase Agreement.
"Capital Expenditures" means all payments for any fixed
amounts or improvements or for replacements, substitution, or
additions thereto, which are required to be capitalized in
accordance with GAAP, except for capital amounts financed.
<PAGE>
"Cash Interest Expense" means, with respect to any Person
and its consolidated subsidiaries for any period, (i) the sum of
the amount of cash interest payable on all Debt of such Person
and its consolidated Subsidiaries (other than interest expense
eliminated in consolidation in accordance with GAAP) and (ii)
Redwood Yield, if any, for such Person.
"EBITDA" means, for any Person with respect to any period,
(a) consolidated net income of such Person and its consolidated
subsidiaries for such period, plus to the extent deducted in
determining net income, (b) the sum of (i) such Person's and its
consolidated subsidiaries' depreciation and amortization for such
period, (ii) Cash Interest Expense for such period, (iii) any
provision for taxes based on income or profits that was deducted
in computing consolidated net income for such period, and (iv)
any other non-cash charges.
"Fixed Charges" means, with respect to any Person for any
period, the sum of the following amounts payable during such
period by such Person and its consolidated subsidiaries: (i)
Cash Interest Expense in respect of Funded Debt; (ii) regularly
scheduled principal payments on Funded Debt; and (iii) Capital
Expenditures.
"Fixed Charge Coverage Ratio" means with respect to any
Person and its consolidated subsidiaries, the ratio of (i) EBITDA
to (ii) Fixed Charges for the fiscal quarter ending December 31,
1995, for the two fiscal quarter period ending March 31, 1995,
for the three fiscal quarter period ending June 30, 1996 and for
each four fiscal quarter period on the last day of each fiscal
quarter thereafter.
"Funded Debt" means, with respect to any Person and its
consolidated subsidiaries, all Debt of such Person and its
consolidated subsidiaries which by the terms of the agreement
governing or instrument evidencing such Debt matures more than
one year from, or is directly or indirectly renewable or
extendible at the option of the debtor under a revolving credit
or similar agreement obligating the lender or lenders to extend
credit over a period of more than one year from, the date of
creation thereof, including current maturities of long-term debt,
revolving credit, and short-term debt extendable beyond one year
at the option of such Person and its consolidated subsidiaries.
"Net Worth Percentage" means a fraction (expressed as a
percentage) (i) the numerator of which is the excess of assets
over liabilities, each determined in accordance with GAAP on a
basis consistent with the last audited financial statements and
(ii) the denominator of which is the Outstanding Balance of
Transferred Receivables.
<PAGE>
SECOND AMENDMENT AND WAIVER
TO
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
Dated as of October 2, 1996
This Second Amendment and Waiver to Amended and Restated
Revolving Credit Agreement (this "Amendment") is dated as of
October 2, 1996 by and among Merisel Americas, Inc., a Delaware
corporation ("Merisel Americas"), Merisel Europe, Inc., a Dela
ware 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 and the Lenders
signatory hereto, and is made with reference to that certain
Amended and Restated Revolving Credit Agreement dated as of April
12, 1996 and amended as of June 30, 1996 (the "Existing
Agreement") by and among Merisel Americas, Merisel Europe,
Merisel Parent, as guarantor, and the Lenders (as defined there
in). 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 modify the Existing Agree
ment as hereinafter set forth in accordance with Section 11.01 of
the Existing Agreement.
IN CONSIDERATION of the mutual promises and covenants set
forth herein, the parties hereto agree as follows:
1. Waivers. (a) Effective as of the Effective Time (as
defined in Section 3 of this Amendment), the undersigned Lenders
hereby consent to the sale (the "Sale") by Merisel Parent and
Merisel Americas of certain of their direct and indirect wholly-
owned Subsidiaries described on Schedule I hereto to CHS
Electronics, Inc. (the "Buyer") pursuant to the Purchase Agree
ment, dated as of August 29, 1996 (the "Purchase Agreement"), as
amended, by and among the Buyer, Merisel Parent and Merisel
Americas. The undersigned Lenders also waive compliance by the
Borrowers with the provisions of Sections 7.02(f) and 2.07(b) of
the Existing Agreement (the "Waiver") commencing as of the Effec
tive Time solely to the extent that such Sections would otherwise
require a reduction of the Revolving Credit Facility Commitments
as a result of the Sale; provided, however, that as a condition
to the foregoing Waiver, the Borrowers and Merisel Parent shall
cause the sum of (x) $43,500,000 of the Net Asset Sale Proceeds
<PAGE>
from the Sale plus (y) 60% of the amount, if any, of aggregate
Net Asset Sale Proceeds from the Sale in excess of $130,000,000,
to be paid in immediately available funds to the Lenders (upon
receipt thereof by the Merisel Parent, the Borrowers or their
respective Subsidiaries, as applicable) as a prepayment of the
Obligations under the Existing Agreement and immediately
following such prepayment the Revolving Credit Facility
Commitments shall be reduced by the amount of such prepayment.
(a) Effective as of the Effective Time, the Lenders hereby
waive the provisions of (i) Section 7.02(m) of the Existing
Agreement to the extent necessary to permit the amendment and
waivers of the Subordinated Notes, Subordinated Note Purchase
Agreement, Senior Notes and Senior Note Purchase Agreement
contemplated by clauses (ii) and (iii) of Section 3 hereof and
(ii) with respect to facts, events or circumstances occurring at
or before the Effective Time, Sections 7.01(m), 7.01 (f)-(l) and
7.02(i).
2. Amendments to the Existing Agreement. The following
amendments to the Existing Agreement shall become effective at
the Effective Time:
(I) The Existing Agreement is hereby amended by deleting the
definition of "Consolidated Tangible Net Worth" in Section 1.01
and inserting in its place the following:
"Consolidated Tangible Net Worth" means, as of any date
of determination, the Consolidated Net Worth of a particular
Borrower or Merisel Parent (as indicated by the context)
without taking into consideration the effects of (i) Addi
tional Restructuring Fees, (ii) any write-downs in connec
tion with (A) any sale of any Subsidiaries of Merisel Parent
or any restructuring in connection with such sale or (B)
with respect to the first quarter of 1996 only, accounts
payable to the extent (but only to the extent) such write-
downs exceed $7,000,000 and (iii) with respect to the third
quarter of 1996 only, non-recurring charges and expenses,
including those relating to severance, relocations, asset
write-downs or losses in connection with dispositions, less
goodwill, patents, trademarks, organizational expense,
deferred research and development costs, deferred marketing
expenses and other intangible assets of such Borrower or
Merisel Parent and its Subsidiaries, determined on a consol
idated basis in accordance with GAAP.
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<PAGE>
(II) The Existing Agreement is hereby amended by
deleting the words "one month" from each place in which such
words appear in the definition of "Interest Period" in Section
1.01 and inserting in lieu thereof the words "three months."
(III) The Existing Agreement is hereby amended by deleting
the definition of "Termination Date" in Section 1.01 and
inserting in its place the following:
"Termination Date" means the earlier of (i) January 31,
1998 or (ii) the date of termination in whole of the Revolv
ing Facility Commitments pursuant to Section 8.01.
(IV) The Existing Agreement is hereby amended by inserting
the following in the appropriate alphabetical order:
"Business Plan" means the Merisel Business Plan for
1996 and 1997 dated September 13, 1996, copies of which have
been previously furnished to the Lenders.
"Excepted Commitment Reductions" means any permanent
reduction in the Revolving Facility Commitments pursuant to
(i) Section 2.07(b), but only with respect to an Asset Sale
of the North Carolina Property and (ii) Section 2.07(h).
"North Carolina Property" means the undeveloped land
located in Cary, North Carolina currently leased by Merisel
Properties, Inc.
"Planned Consolidated EBITSDA" means Consolidated
EBITSDA as set forth in the Business Plan.
"Planned Consolidated Net Income" means Consolidated
Net Income as set forth in the Business Plan.
"Second Amendment" means that certain Second Amendment
and Waiver to Amended and Restated Revolving Credit
Agreement, dated as of October 2, 1996, by and among the
Borrowers, Merisel Parent and the Lenders.
"Second Amendment Effective Time" means the Effective
Time (as defined in the Second Amendment).
(V) The Existing Agreement is hereby amended by deleting the
phrase "1.00%" contained in paragraph (a) of Section 2.04 and
inserting in its place the phrase "3.35%."
-3-
(VI) The Existing Agreement is hereby amended by
deleting the phrase "3.00%" contained in paragraph (b) of Section
2.04 and inserting in its place the phrase "5.35%."
(VII) The Existing Agreement is hereby amended by deleting
clause (i) in paragraph (b) of Section 2.04 and replacing such
clause with the following:
"(i) in arrears on the fifth day of
each month and"
(VIII) The Existing Agreement is hereby amended by deleting
the table set forth in Section 2.07(a) and inserting in lieu
thereof the following:
"February 28, 1997 $ 900,000
March 31, 1997 $ 900,000
April 30, 1997 $ 900,000
May 31, 1997 $ 900,000
June 30, 1997 $ 900,000
January 2, 1998 $4,500,000
In addition to the
foregoing, in the event that (x)
the payment due on June 30, 1997 in
respect of the 12.50% Senior Notes
issued pursuant to the Indenture is
paid in cash at any time prior to
the Termination Date, on the date
of such payment the Revolving
Facility Commitments shall be
reduced by $28,500,000 (less the
aggregate amount of any reductions
to the Revolving Facility
Commitments in excess of
$43,500,000 (other than Excepted
Commitment Reductions) made during
the period from the Second
Amendment Effective Time through
the date of such payment) and (y)
in the event that the payment due
on December 31, 1997 in respect of
the 12.50% Senior Notes issued
pursuant to the Indenture is paid
in cash at any time prior to the
Termination Date, on the date of
such payment the Revolving Facility
Commitments shall be reduced by
$46,500,000 (less the aggregate
amount of any reductions of the
Revolving Facility Commitments in
excess of $43,500,000 (other than
Excepted Commitment Reductions)
made during the period from the
Second Amendment Effective Time
through the date of such payment)."
(IX) The Existing Agreement is hereby amended by adding
a new clause (h) to Section 2.07 to read as follows:
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<PAGE>
"(h) On the date of receipt by Merisel Parent, any
Borrower or any of their respective domestic Subsidiaries
(from and after the Second Amendment Effective Time) of any
United States federal, state and local income tax refunds in
respect of loss carrybacks or research and development
credits more fully described in the attached Exhibit A
(currently estimated by the Borrowers to be $4,000,000 to
$6,000,000 in the aggregate, it being understood that the
actual amount thereof may be less than such estimate,
notwithstanding the Borrowers' use of their respective
reasonable best efforts to collect such refunds), the
Revolving Facility Commitments shall be permanently reduced
by 60% of the amount of such tax refunds (net of reasonable
professional fees and expenses associated with obtaining
such refunds and any required reserves associated therewith
in accordance with GAAP)."
(X) The Existing Agreement is hereby amended by deleting the
first sentence of paragraph (i) of Section 4.01 and inserting the
following in lieu thereof:
"Any mandatory reduction of the
Revolving Facility Commitments pursuant to Section
2.07 shall be applied to the reduction on the
Termination Date and otherwise in inverse order of
maturities."
(XI) The Existing Agreement is hereby amended by deleting
Sections 7.01(f) through (l) and inserting in their place the
following:
"(f) (Intentionally omitted).
(g) Maintenance of Merisel Parent's Consolidated
Adjusted Tangible Net Worth. Maintain Consolidated Adjusted
Tangible Net Worth of Merisel Parent as of the end of the
fourth quarter of 1996 and at the end of each quarter during
1997 equal to the Consolidated Tangible Net Worth at the end
of the third quarter of 1996, plus the Planned Consolidated
Net Income planned for the fourth quarter of 1996 and each
quarter of 1997 ending on or before the last day of the
quarter for which such determination is being made, less the
differential between the Planned Consolidated EBITSDA for
each such quarter and the minimum Consolidated EBITSDA for
such quarter provided in Section 7.01(h).
-5-
<PAGE>
(h) Minimum Consolidated EBITSDA of Merisel Parent.
The aggregate Consolidated EBITSDA of Merisel Parent as of
the last date of the periods indicated below shall not be
less than the correlative amounts indicated below:
Period Consolidated EBITSDA
4th Quarter of 1996 $ 8,000,000
1st Quarter of 1997 $11,000,000
2nd Quarter of 1997 $12,400,000
3rd Quarter of 1997 $14,560,000
4th Quarter of 1997 $19,280,000
(i) Maintenance of Merisel Parent's Fixed Charge
Coverage Ratio. Maintain, for each period indicated be
low, a ratio of (i) Consolidated EBITSDA of Merisel
Parent to (ii) Consolidated Interest Charges of Merisel
Parent, of not less than the correlative amount indicated
below:
Period Ratio
Fourth Quarter of 1996 0.61:1.00
First Quarter of 1997 0.83:1.00
Second Quarter of 1997 0.89:1.00
Third Quarter of 1997 1.13:1.00
Fourth Quarter of 1997 1.44:1.00
(j) Maintenance of Inventory Turnover Ratio. Main
tain, for each period indicated below, the ratio of (i)
the Consolidated aggregate cost of sales of Merisel
Parent at the end of such period multiplied by four to
(ii) the Average Consolidated Net Inventory of Merisel
Parent, of not less than the correlative amount indicated
below:
Minimum Permitted
Period Inventory Turnover
Fourth Quarter of 1996 9.00
First Quarter of 1997 9.00
Second Quarter of 1997 9.00
Third Quarter of 1997 9.00
Fourth Quarter of 1997 9.00
(k) Minimum Ratio of Accounts Payable to Inventory.
Maintain, for each period indicated below, the ratio of
the Consolidated amount of accounts payable of Merisel
Parent on the last day of such period to the Consolidated
amount of inventory of Merisel Parent on the last day of
such period, of not less than the correlative ratio indi
cated below (the "A/P Inventory Ratio"):
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<PAGE>
Minimum
Period Permitted Ratio
Fourth Quarter of 1996 0.90:1.00
First Quarter of 1997 0.90:1.00
Second Quarter of 1997 0.90:1.00
Third Quarter of 1997 0.90:1.00
Fourth Quarter of 1997 0.90:1.00
provided that Merisel Parent shall maintain an A/P In
ventory Ratio equal to or greater than 1.00:1.00 for one
out of each two consecutive periods indicated above.
(l) Minimum Accounts Payable. Maintain, on the
last day of each period indicated below, the Consolidated
amount of accounts payable of Merisel Parent of not less
than the correlative amount indicated below:
Period Amount
Fourth Quarter of 1996 $380,000,000
First Quarter of 1997 $390,000,000
Second Quarter of 1997 $390,000,000
Third Quarter of 1997 $390,000,000
Fourth Quarter of 1997 $500,000,000"
(XII) The Existing Agreement is hereby amended
by deleting (i) the references to Section 7.01(f) in clauses
(iii) and (iv) of Section 7.01(m) and (ii) the requirement in
clause (xx) of Section 7.01(m) that the Borrowers deliver writ
ten reports concerning the cash balances of Merisel Parent
alone.
(XIII) The Existing Agreement is hereby
amended by deleting Section 7.01(o) in its entirety and
inserting in lieu thereof the following:
"(o) (Intentionally omitted)."
(XIV) The Existing Agreement is hereby amended
by adding a new clause (t) to Section 7.01 to read as follows:
"(t) Use reasonable best efforts to (x) obtain any
United States federal, state and local income tax refunds
to which the Borrowers, Merisel Parent or any of their re
spective domestic Subsidiaries may be entitled and (y)
sell the North Carolina Property, in each case as soon as
practicable following the Second Amendment Effective
Time."
-7-
<PAGE>
(XV) The Existing Agreement is hereby amended
by deleting (i) the phrase "and (t)" in the introductory
clause to Section 7.02 and inserting in lieu thereof the
phrase ", (t) and (u)" and (ii) in its entirety clause (xi) of
Section 7.02(a) and inserting in its place the following:
"(xi) Liens permitted under
that certain letter dated as of October 2, 1996
between the Borrowers and the Majority Lenders,
as amended from time to time; and
(xii) Liens securing
obligations of the Borrowers and their
Subsidiaries under foreign exchange hedging
arrangements or other similar contracts and
agreements entered into for non-speculative
purposes to protect the Borrowers and their Sub
sidiaries against fluctuations in currency ex
change rates; provided, however, that the
maximum aggregate amount of assets subject to
such Liens shall not exceed $10,000,000."
(XVI) The Existing Agreement is hereby amended
by adding a new clause (x) to Section 7.02(c) as follows:
"(x) Contingent Obligations in
respect of foreign exchange hedging
arrangements or other similar contracts and
agreements entered into for non-speculative
purposes to protect the Borrowers and their
Subsidiaries against fluctuations in currency
exchange rates."
(XVII) The Existing Agreement is hereby
amended by deleting the table set forth in Section 7.02(i) and
inserting in lieu thereof the following:
"Fiscal Year 1996 $12,885,000
First Quarter of 1997 $ 4,000,000
First Two Quarters of 1997 $ 7,000,000
First Three Quarters of 1997 $11,000,000
Fiscal Year 1997 $13,000,000"
(XVIII) The Existing Agreement is hereby
amended by inserting the following at the end of Section 7.02:
"(u) Merisel Parent Debt Restructuring. Issue, or
cause or permit to be issued, Securities of Merisel
Parent to or for the benefit of the holders of Merisel
Parent Debt, except for the issuance of common equity
Securities of Merisel Parent or Merisel Parent Preferred
Securities (as hereinafter defined), in each case in ex
change for all outstanding principal, interest and other
-8-
<PAGE>
amounts owed or owing on or in respect of the Merisel Par
ent Debt. "Merisel Parent Preferred Securities" means
preferred equity securities of Merisel Parent ("Original
Preferred Securities") that are not mandatorily
redeemable, do not otherwise mature, will not be called
by or on behalf of Merisel Parent and with respect to
which the holders thereof have no right to receive cash
or other property (other than common equity Securities of
Merisel Parent or additional Securities having the same
terms as such Original Preferred Securities) on account
of liquidation preferences, accrued dividends or
otherwise, in each case unless and until there shall have
occurred the payment in full in cash of all outstanding
Obligations and the termination of the Commitments."
(XIX) Anything to the contrary in Section 8.01
of the Existing Agreement notwithstanding, neither (x) any
failure by Merisel FAB to make any payment when due, whether
at stated maturity or otherwise, of any amount in respect of
the accounts payable owed to Vanstar, Inc., any exercise of
remedies by the holder thereof against Merisel FAB or any
judgment rendered against Merisel FAB with respect thereto nor
(y) any default in the payment of interest on the Merisel
Parent Debt shall constitute an Event of Default or Default
for the purposes of the Amended Agreement or the Loan
Documents, except to the extent that the same is preceded or
followed by, or otherwise connected to, (i) the commencement,
if any, of an insolvency, bankruptcy or similar proceeding by
or against Merisel Parent or any of its Subsidiaries or (ii)
in the case of Merisel Parent, if earlier, the exercise of any
remedy in respect of such default by or on behalf of one or
more holders of Merisel Parent Debt or the indenture trustee
thereof (including without limitation the acceleration of the
outstanding principal amount of the Merisel Parent Debt or the
commencement of an action by one or more of such holders or
such indenture trustee in respect of such default).
(XX) The Existing Agreement is hereby amended
by deleting clause (o) of Section 8.01 in its entirety and in
serting in lieu thereof the following:
"(o) (Intentionally omitted)."
(XXI) The Existing Agreement is hereby amended
by (i) deleting the words "O'Melveny & Myers, counsel to the
Agent" in Section 11.03(a) and inserting in lieu thereof the
words "Wachtell, Lipton, Rosen & Katz, as counsel to the Agent
and/or the Lender group" and (ii) inserting at the end of Sec
tion 11.03(a) the following:
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<PAGE>
"Notwithstanding the foregoing, so long as
no Event of Default has occurred and is continuing the
Borrowers shall only be responsible for the fees, costs
and expenses of one financial advisor for all of the Lend
ers and the holders of the Senior Notes, and the
Borrowers shall only be responsible for the fees,
expenses and disbursements of such financial advisor to
the extent the same relate to the review of monthly and
quarterly financial information supplied by the Borrowers
and quarterly (or other periodic) management reviews.
3. Conditions to the Effective Time. The Waiver, amendments
and agreements set forth herein shall become effective (the time
of such effectiveness, the "Effective Time") upon the
satisfaction of all the following conditions:
(i) this Amendment shall have been executed and delivered
by all the Lenders, the Borrowers and Merisel Parent;
(ii) the Borrowers, Merisel Parent and all the Noteholders
(as defined in the Senior Note Purchase Agreement) shall have
executed and delivered the Fifth Amendment to the Senior Note
Purchase Agreement, which shall be in form and substance
acceptable to the Lenders;
(iii) the Borrowers, Merisel Parent and certain
holders of the Subordinated Notes shall have executed and de
livered the Fourth Amendment to the Subordinated Note Purchase
Agreement, which shall be in form and substance acceptable to the
Lenders;
(iv) the Sale contemplated by the Purchase Agreement shall
have been consummated, and the portion of the Net Asset Sale
Proceeds required to be paid pursuant to Section 1, shall have
been so paid substantially contemporaneously with such
consummation;
(v) all the representations and warranties made by the
Borrowers and Merisel Parent in Section 4 shall be true and
correct in all material respects as of the Effective Time;
(vi) the delivery by Merisel Canada of a Consent and
Acknowledgement in the form of Annex A hereto;
(vii) the delivery by the Borrowers and Merisel Parent
to the Lenders (or to the Agent with sufficient originally
executed copies, where appropriate, for the each Lender) of (x)
certified resolutions of their respective Boards of Directors
approving and authorizing the execution, delivery and
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<PAGE>
performance of this Amendment, (y) signature and incumbency
certificates of the officers executing this Amendment and (z)
executed copies of this Amendment; and
(viii) all corporate and other proceedings required to
be taken in connection with the transactions contemplated hereby
shall have been taken.
4. Representations and Warranties of Borrowers and Merisel
Parent. In order to induce the Lenders to enter into this
Amendment and to grant the Waiver with respect to the Existing
Agreement, the Borrowers and Merisel Parent represent and warrant
to each Lender that the following statements are true, correct
and complete:
(a) Corporate Power and Authority. Each Borrower and Merisel
Parent has all requisite corporate power and authority to enter
into this Agreement 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").
(b) 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.
(c) 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
shall not (i) violate any provision of law, rule or regulation
applicable to the Borrowers, Merisel Parent or any of their
respective Subsidiaries, or 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 Borrow
ers, 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, other than those that
have been obtained.
(d) 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 shall not
require any registration with, consent or approval of, or notice
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<PAGE>
to, or other action to, with or by, any Federal, state or other
governmental authority or regulatory body.
(e) 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 terms, except as enforcement may be limited
by bankruptcy, insolvency, reorganization, moratorium or other
similar law relating to or limiting creditors' rights generally
or by equitable principles relating to enforceability.
(f) Incorporation of Representations and Warranties from
Existing Agreement. The representations and warranties contained
in Article VI of the Existing Agreement are and shall be true,
correct and complete in all material respects on and as of the
Effective Date 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.
(g) Absence of Default. After giving effect to this
Amendment, no event has occurred and is continuing or shall
result from the consummation of the transactions contemplated by
this Amendment that 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.
5. Miscellaneous.
(a) On and after the Effective Time, 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 Existing Agreement shall mean and
be a reference to the Existing Agreement as amended by this
Amendment.
(b) Except as specifically waived by this Amendment, the
Existing Agreement and the other Loan Documents shall remain in
full force and effect and are hereby ratified and confirmed.
(c) The execution, delivery and performance of this Amendment
shall not, except as expressly provided herein, con stitute a
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<PAGE>
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 Loan Documents.
(d) This Amendment may be executed in any number of
counterparts, and by different parties hereto in separate coun
terparts, 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.
(e) Section 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.
(f) Notwithstanding anything to the contrary herein, if the
Effective Time does not occur on or before October 11, 1996, this
Amendment shall be of no force or effect, and the Existing
Agreement shall remain in full force and effect as if this
Amendment had not been executed or delivered by any party hereto.
(g) 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.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused
this Second Amendment and Waiver to Amended and Restated Re
volving 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:
THE PARENT GUARANTOR
MERISEL, INC.
By:
Name:
Title:
LENDERS
Name of Lender:__________________
By:__________________
Title:
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<PAGE>
ANNEX A
CONSENT AND ACKNOWLEDGEMENT
The undersigned hereby consents to the terms of the
Second Amendment to Amended and Restated Revolving Credit
Agreement dated as of October 2, 1996 (the "Amendment") with
respect to the Amended and Restated Revolving Credit Agreement
dated as of April 12, 1996 (as amended, the "Credit
Agreement") among Merisel Americas, Inc. and Merisel Europe,
Inc. as Borrowers, Merisel, Inc. as Guarantor and the Lenders
party thereto, 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: _____________________
Name:
Title:
Dated: As of October __, 1996
<PAGE>
FOURTH AMENDMENT AND WAIVER
TO
AMENDED AND RESTATED SUBORDINATED NOTE PURCHASE AGREEMENT
Dated as of October 2, 1996
This Fourth Amendment and Waiver to Amended and Restated
Subordinated Note Purchase Agreement (this "Amendment") is dated
as of October 2, 1996 by and among Merisel Americas, Inc., a Dela
ware corporation ("Merisel Americas"), and the Noteholders
signatory hereto, and is made with reference to that certain
Amended and Restated Subordinated Note Purchase Agreement dated
as of December 23, 1993 and amended as of September 30, 1994,
April 12, 1996 and June 30, 1996 (the "Existing Agreement") by
and among Merisel Americas. 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 modify the Existing Agree
ment as hereinafter set forth in accordance with Section 14.4 of
the Existing Agreement.
IN CONSIDERATION of the mutual promises and covenants set
forth herein, the parties hereto agree as follows:
1. Waivers and Consent. (a) Effective as of the Effective
Time (as defined in Section 3 of this Amendment), the undersigned
Lenders hereby consent to the sale (the "Sale") by Merisel, Inc.
and Merisel Americas of certain of their direct and indirect
wholly-owned Subsidiaries described on Schedule I hereto to CHS
Electronics, Inc. (the "Buyer") pursuant to the Purchase Agree
ment, dated as of August 29, 1996 (the "Purchase Agreement"), as
amended, by and among the Buyer, Merisel, Inc. and Merisel
Americas. The undersigned Lenders also waive compliance by the
Borrowers with the provisions of Sections 9.10 (which
incorporates Section 6.14 from the Senior Note Purchase
Agreement) and 9.17 of the Existing Agreement (the "Waiver")
commencing as of the Effective Time solely to the extent that
such Sections would otherwise require a repayment of the Debt out
standing under the Revolving Credit Agreement and the Senior Note
Purchase Agreement.
(a) Effective as of the Effective Time, the Noteholders
hereby waive the provisions of (i) Section 9.10 of the Existing
Agreement to the extent necessary to permit the amendment and
waivers of the Revolving Credit Agreement, Senior Notes and
Senior Note Purchase Agreement contemplated by clauses (ii) and
<PAGE>
(iii) of Section 3 hereof and hereby agree to the extent that any
covenants or other provisions of the Senior Note Agreement are
incorporated by reference into Section 9.10 of the Existing
Agreement, the Noteholders hereby consent to such amendments and
waivers to such incorporated covenants and other provisions and
(ii) with respect to facts, events or circumstances occurring at
or before the Effective Time, Section 9.10 of the Existing
Agreement with respect to Sections 6.6, 6.17, 6.25, 6.28, 6.31,
6.32 and 6.37 of the Senior Note Agreement as incorporated by
reference in said Section 9.10.
2. Amendments to the Existing Agreement. The following
amendment to the Existing Agreement shall become effective at the
Effective Time:
(I) Anything to the contrary in Section 11.1 of
the Existing Agreement notwithstanding, neither (x) any failure
by Merisel FAB to make any payment when due, whether at stated
maturity or otherwise, of any amount in respect of the accounts
payable owed to Vanstar, Inc., any exercise of remedies by the
holder thereof against Merisel FAB or any judgment rendered
against Merisel FAB with respect thereto nor (y) any default in
the payment of interest on the Merisel Parent Debt (as defined in
the Revolving Credit Agreement) shall constitute an Event of
Default or Default for the purposes of the Amended Agreement or
the Notes, except to the extent that the same is preceded or
followed by, or otherwise connected to, (i) the commencement, if
any, of an insolvency, bankruptcy or similar proceeding by or
against Merisel, Inc. or any of its Subsidiaries or (ii) in the
case of Merisel, Inc., if earlier, the exercise of any remedy in
respect of such default by or on behalf of one or more holders of
Merisel Parent Debt or the indenture trustee thereof (including
without limitation the acceleration of the outstanding principal
amount of the Merisel Parent Debt or the commencement of an
action by one or more of such holders or such indenture trustee
in respect of such default).
3. Conditions to the Effective Time. The Waiver, amendments
and agreements set forth herein shall become effective (the time
of such effectiveness, the "Effective Time") upon the
satisfaction of all the following conditions:
(i) this Amendment shall have been executed and delivered
by the holders of at least 66-2/3% in aggregate unpaid principal
amount of the Notes (the "Requisite Holders" and Merisel
Americas;
(ii) Merisel Americas, Merisel Europe, Merisel Inc. and all
the Lenders (as defined in the Revolving Credit Agreement) shall
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<PAGE>
have executed and delivered the Second Amendment to the Revolving
Credit Agreement, which shall be in form and substance acceptable
to the Requisite Noteholders;
(iii) Merisel Americas, Merisel Europe, Merisel Inc.
and all the holders of the Senior Notes shall have executed and
delivered the Fifth Amendment to the Senior Note Purchase
Agreement, which shall be in form and substance acceptable to the
Requisite Holders;
(iv) the Sale contemplated by the Purchase Agreement shall
have been consummated;
(v) all the representations and warranties made by Merisel
Americas in Section 4 shall be true and correct in all material
respects as of the Effective Time;
(vi) the delivery by Merisel Americas to the Noteholders of
(x) certified resolutions of its Board of Directors approving and
authorizing the execution, delivery and performance of this
Amendment, (y) signature and incumbency certificates of the
officers executing this Amendment and (z) executed copies of this
Amendment; and
(vii) all corporate and other proceedings required to
be taken in connection with the transactions contemplated hereby
shall have been taken.
4. Representations and Warranties of Merisel Americas. In
order to induce the Noteholders to enter into this Amendment and
to grant the Waiver with respect to the Existing Agreement,
Merisel Americas represents and warrants to each of the
Noteholders that the following statements are true, correct and
complete:
(a) Corporate Power and Authority. Merisel Americas has all
requisite corporate power and authority to enter into this
Agreement and to carry out the transactions contemplated by, and
perform its obligations under, the Existing Agreement as amended
by this Amendment (the "Amended Agreement").
(b) Authorization of Agreements. The execution and delivery
of this Agreement and the performance of the Amended Agreement
have been duly authorized by all necessary corporate action by
Merisel Americas.
(c) No Conflict. The execution and delivery by Merisel
Americas of this Amendment and the performance by Merisel
Americas of the Amended Agreement do not and shall not (i)
violate any provision of law, rule or regulation applicable
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<PAGE>
to Merisel Americas or any of its Subsidiaries, the Certificate of
Incorporation or bylaws of Merisel Americas or any of its
Subsidiaries, (ii) conflict with, result in a breach of or con
stitute (with due notice or lapse of time or both) a default
under any material contractual obligation of Merisel Americas or
any of its 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
Merisel Americas or any of its Subsidiaries, other than those
that have been obtained.
(d) Governmental Consents. The execution and delivery by
Merisel Americas and the performance by Merisel Americas of the
Amended Agreement do not and shall not require any registration
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.
(e) Binding Obligation. This Amendment and the Amended
Agreement are the legally valid and binding obligation of Merisel
Americas, enforceable against it in accordance with their terms,
except as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar law relating to or
limiting creditors' rights generally or by equitable principles
relating to enforceability.
(f) Incorporation of Representations and Warranties from
Existing Agreement. The representations and warranties contained
in Article 2 of the Existing Agreement are and shall be true,
correct and complete in all material respects on and as of the
Effective Date 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.
(g) Absence of Default. After giving effect to this
Amendment, no event has occurred and is continuing or shall
result from the consummation of the transactions contemplated by
this Amendment that 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.
5. Miscellaneous.
(a) On and after the Effective Time, 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 Notes to the "Note Purchase
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<PAGE>
Agreement", "thereunder", "thereof", or words of like import
referring to the Existing Agreement shall mean and be a reference
to the Existing Agreement as amended by this Amendment.
(b) Except as specifically waived by this Amendment, the
Existing Agreement and the Notes shall remain in full force and
effect and are hereby ratified and confirmed.
(c) 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 any Noteholder under, the Existing Agreement
or any of the Notes.
(d) This Amendment may be executed in any number of
counterparts, and by different parties hereto in separate coun
terparts, 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.
(e) Section 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.
(f) Notwithstanding anything to the contrary herein, if the
Effective Time does not occur on or before October 11, 1996, this
Amendment shall be of no force or effect, and the Existing
Agreement shall remain in full force and effect as if this
Amendment had not been executed or delivered by any party hereto.
(g) 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.
(h)
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Fourth Amendment and Waiver to Amended and Restated Subordinated
Note Purchase Agreement to be executed by their respective
officers thereunto duly authorized as of the date first above
written.
MERISEL AMERICAS, INC.
By:
Name:
Title:
NOTEHOLDERS
Name of Noteholder:______________
By:__________________
Title:
<PAGE>
FIFTH AMENDMENT AND WAIVER
TO
AMENDED AND RESTATED SENIOR NOTE PURCHASE AGREEMENT
Dated as of October 2, 1996
This Fifth Amendment and Waiver to Amended and Restated
Senior Note Purchase Agreement (this "Amendment") is dated as
of October 2, 1996 by and among Merisel Americas, Inc., a Dela
ware corporation ("the Company"), Merisel, Inc., a Delaware
corporation ("Merisel, Inc."), as guarantor and the
Noteholders signatory hereto, and is made with reference to
that certain Amended and Restated Senior Note Purchase
Agreement dated as of December 23, 1993 by and among the
Company and the original Purchasers of the Notes referred to
therein, and amended as of September 30, 1994, June 23, 1995,
April 12, 1996 and June 30, 1996 (the "Existing Agreement") by
and among the Company and the original Purchases of the Notes
referred to therein. 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 modify the Existing
Agreement as hereinafter set forth in accordance with Section
8.1 of the Existing Agreement.
IN CONSIDERATION of the mutual promises and covenants set
forth herein, the parties hereto agree as follows:
1. Waivers. (a) Effective as of the Effective Time (as
defined in Section 4 of this Amendment), the undersigned
Noteholders hereby consent to the sale (the "Sale") by
Merisel, Inc. and the Company of certain of their direct and
indirect wholly-owned Subsidiaries described on Schedule I
hereto to CHS Electronics, Inc. (the "Buyer") pursuant to the
Purchase Agreement, dated as of August 29, 1996 (the "Purchase
Agreement"), as amended, by and among the Buyer, Merisel, Inc.
and the Company. The undersigned Noteholders also waive com
pliance by the Company with the provisions of Sections 6.14,
3.4(a)(ii) and 3.4(c) of the Existing Agreement (the "Waiver")
commencing as of the Effective Time solely to the extent that
such Sections would otherwise require a prepayment of the
Notes and of the Debt outstanding under the New Revolving
Credit Agreement as a result of the Sale; provided, however,
that as a condition to the foregoing Waiver, the Company and
Merisel, Inc. shall cause the sum of (x) $29,000,000 of the
Net Asset Sale Proceeds from the Sale plus (y) 40% of the
amount, if any, of aggregate Net Asset Sale Proceeds from the
Sale in excess of $130,000,000, to be paid in immediately
<PAGE>
available funds to the Noteholders (upon receipt thereof by
Merisel, Inc., the Company or their respective Subsidiaries,
as applicable) as a prepayment of the Notes. No Make-Whole
Premium shall be owing in respect of such prepayment.
(a) Effective as of the Effective Time, the Noteholders
hereby waive the provisions of (i) Section 6.23 of the
Existing Agreement to the extent necessary to permit the amend
ment and waivers of the Subordinated Notes and Subordinated
Note Purchase Agreement contemplated by clause (iii) of
Section 3 hereof and (ii) with respect to facts, events or
circumstances occurring at or before the Effective Time,
Sections 6.6, 6.17, 6.25, 6.28, 6.31, 6.32 and 6.37.
2. Amendments to the Existing Agreement. The following
amendments to the Existing Agreement shall become effective at
the Effective Time:
(I) The Existing Agreement is hereby amended by deleting
Section 1.1 and inserting in its place the following:
"1.1 Description of Notes. The Company has
authorized the issuance for exchange of $100,000,000 ag
gregate principal amount of its Amended and Restated
11.5% Senior Notes (the "Notes") to be dated the date of
issue, to bear interest on the unpaid principal amount
from and after Fifth Amendment Effective Time to maturity
at the rate of (a) if no Event of Default has occurred
and is continuing, 11.5% per annum (the "Coupon Rate"),
or (b) if an Event of Default has occurred and is
continuing, the Overdue Rate, and on any overdue Make-
Whole Premium and (to the extent legally enforceable) any
overdue installment of interest at the Overdue Rate, to
mature on the Final Maturity Date, and to be
substantially in the form attached hereto as Exhibit A
(Revised as of April 12, 1996); provided that,
notwithstanding the terms of the Notes relating to the
payment of principal and interest, on and after the Fifth
Amendment Effective Time interest on and principal of
such Notes shall be paid at such times and in such
amounts as are provided in this Agreement; provided,
further, from and after May 31, 1997 no Make-Whole
Premium shall become payable with respect to the Notes.
The Company will pay interest monthly in arrears on the
fifth day of each month (beginning May 5, 1996).
Interest will be computed on the basis of a 360-day year
of twelve 30-day months. The term "Notes" as used herein
shall include each Note delivered pursuant to this Agree
ment.
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<PAGE>
(II) The Existing Agreement is hereby amended by deleting
the definition of "Consolidated Tangible Net Worth" in Section
2.1 and inserting in its place the following:
"Consolidated Tangible Net Worth" means, as of any
date of determination, the Consolidated Net Worth of the
Company, Merisel Europe or Merisel, Inc. (as indicated by
the context) without taking into consideration the
effects of (i) Additional Restructuring Fees, (ii) any
write-downs in connection with (A) any sale of any
Subsidiaries of Merisel, Inc. or any restructuring in
connection with such sale or (B) with respect to the
first quarter of 1996 only, accounts payable to the
extent (but only to the extent) such write-downs exceed
$7,000,000 and (iii) with respect to the third quarter of
1996 only, non-recurring charges and expenses, including
those relating to severance, relocations, asset write-
downs or losses in connection with dispositions, less
goodwill, patents, trademarks, organizational expense,
deferred research and development costs, deferred
marketing expenses and other intangible assets of the
Company, Merisel Europe or Merisel, Inc. and its
Subsidiaries, determined on a consolidated basis in
accordance with GAAP.
(III) The Existing Agreement is hereby amended by
deleting the definition of "Final Maturity Date" in Section
2.1 and inserting in its place the following:
"Final Maturity Date" shall mean January 31, 1998.
(IV) The Existing Agreement is hereby amended by inserting
the following in the appropriate alphabetical order:
"Business Plan" means the Merisel Business Plan for
1996 and 1997 dated September 13, 1996, copies of which
have been previously furnished to the Noteholders.
"Excepted Prepayments" means any permanent
prepayment of the Notes pursuant to (i) Section
3.4(a)(ii), but only with respect to an Asset Sale of the
North Carolina Property and (ii) Section 3.4(a)(vi).
"Fifth Amendment" means that certain Fifth Amendment
and Waiver to Amended and Restated Senior Note Purchase
Agreement, dated as of October 2, 1996, by and among the
Company, Merisel, Inc. and the Noteholders.
"Fifth Amendment Effective Time" means the Effective
Time (as defined in the Fifth Amendment).
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<PAGE>
"North Carolina Property" means the undeveloped land
located in Cary, North Carolina currently leased by Mer
isel Properties, Inc.
"Planned Consolidated EBITSDA" means Consolidated
EBITSDA as set forth in the Business Plan.
"Planned Consolidated Net Income" means Consolidated
Net Income as set forth in the Business Plan.
(V) The Existing Agreement is hereby amended by deleting
the table set forth in Section 3.4(a)(i) and inserting in lieu
thereof the following:
"February 28, 1997 $ 600,000
March 31, 1997 $ 600,000
April 30, 1997 $ 600,000
May 31, 1997 $ 600,000
June 30, 1997 $ 600,000
January 2, 1998 $3,000,000
In addition to
the foregoing, in the event that
(x) the payment due on June 30,
1997 in respect of the 12.50%
Senior Notes issued pursuant to
the Indenture is paid (other
than with Securities as
permitted pursuant to Section
6.43) at any time prior to the
Final Maturity Date, on the date
of such payment the Company
shall prepay the outstanding
Notes by an aggregate amount
equal to $19,000,000 (less the
aggregate amount of any
prepayments of the Notes in
excess of $29,000,000 (other
than Excepted Prepayments) made
during the period from the Fifth
Amendment Effective Time through
the date of such payment) and
(y) in the event that the
payment due on December 31, 1997
in respect of the 12.50% Senior
Notes issued pursuant to the
Indenture is paid (other than
with Securities as permitted
pursuant to Section 6.43) at any
time prior to the Final Maturity
Date, on the date of such
payment the Company shall prepay
the outstanding Notes by an
aggregate amount equal to
$31,000,000 (less the aggregate
amount of any prepayments of the
Notes in excess of $29,000,000
(other than Excepted
Prepayments) made during the
period from the Fifth Amendment
Effective Time through the date
of such payment)."
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<PAGE>
(VI) The Existing Agreement is hereby amended by adding a
new paragraph (vi) to Section 3.4(a) to read as follows:
"(VI) On the date of receipt by Merisel, Inc.,
the Company, Merisel Europe or any of their respective
domestic Subsidiaries (from and after the Fifth Amendment
Effective Time) of any United States federal, state and local
income tax refunds in respect of loss carrybacks or research
and development credits more fully described in the attached
Exhibit A (currently estimated by the Company to be $4,000,000
to $6,000,000 in the aggregate, it being understood that the
actual amount thereof may be less than such estimate, notwith
standing the Company's use of its reasonable best efforts to
collect such refunds), the Company shall prepay the out
standing Notes by an aggregate amount equal to 40% of the
amount of such tax refunds (net of reasonable professional
fees and expenses associated with obtaining such refunds and
any required reserves associated therewith in accordance with
GAAP). No Make-Whole Premium shall be owing with respect to
such payments."
(VII) The Existing Agreement is hereby amended by
deleting the first sentence of paragraph (c) of Section 3.4
and inserting the following in lieu thereof:
"Any mandatory prepayment of the Notes pursuant
to Section 3.4(a)(ii)-(vi) shall be applied to
reduce the final payment of the Notes due on the
Final Maturity Date and otherwise in inverse order
of maturities."
(VIII) The Existing Agreement is hereby amended by
deleting Section 6.28 and inserting in its place the follow
ing:
"6.28 (Intentionally omitted)."
(IX) The Existing Agreement is hereby amended by deleting
Section 6.6 and inserting in its place the following:
"6.6 Maintenance of Merisel, Inc.'s Consolidated Ad
justed Tangible Net Worth. Merisel, Inc. shall maintain
Consolidated Adjusted Tangible Net Worth as of the end of
the fourth quarter of 1996 and at the end of each quarter
during 1997 equal to the Consolidated Tangible Net Worth
at the end of the third quarter of 1996, plus the Planned
Consolidated Net Income planned for the fourth quarter of
1996 and each quarter of 1997 ending on or before the
last day of the quarter for which such determination is
being
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<PAGE>
made, less the differential between the Planned
Consolidated EBITSDA for each such quarter and the
minimum Consolidated EBITSDA for such quarter provided in
Section 6.29."
(X) The Existing Agreement is hereby amended by deleting
Section 6.29 and inserting in its place the following:
"6.29 Minimum Consolidated EBITSDA of Merisel, Inc.
The aggregate Consolidated EBITSDA of Merisel, Inc. as of
the last date of the periods indicated below shall not be
less than the correlative amounts indicated below:
Period Consolidated EBITSDA
4th Quarter of 1996 $ 8,000,000
1st Quarter of 1997 $11,000,000
2nd Quarter of 1997 $12,400,000
3rd Quarter of 1997 $14,560,000
4th Quarter of 1997 $19,280,000"
(XI) The Existing Agreement is hereby amended by deleting
Section 6.25 and inserting in its place the following:
"6.25 Maintenance of Merisel, Inc.'s Fixed Charge
Coverage Ratio. For each period indicated below, the ra
tio of (i) Consolidated EBITSDA of Merisel, Inc. to (ii)
Consolidated Interest Charges of Merisel, Inc., shall be
not less than the correlative amount indicated below:
Period Ratio
Fourth Quarter of 1996 0.61:1.00
First Quarter of 1997 0.83:1.00
Second Quarter of 1997 0.89:1.00
Third Quarter of 1997 1.13:1.00
Fourth Quarter of 1997 1.44:1.00"
(XII) The Existing Agreement is hereby amended by
deleting Sections 6.30 and 6.31 and inserting in their place
the following:
"6.30 Maintenance of Inventory Turnover Ratio. For
each period indicated below, the ratio of (i) the Consoli
dated aggregate cost of sales of Merisel, Inc. at the end
of such period multiplied by four to (ii) the Average Con
solidated Net Inventory of Merisel, Inc. shall be not
less than the correlative amount indicated below:
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<PAGE>
Minimum Permitted
Period Inventory Turnover
Fourth Quarter of 1996 9.00
First Quarter of 1997 9.00
Second Quarter of 1997 9.00
Third Quarter of 1997 9.00
Fourth Quarter of 1997 9.00
6.31 Minimum Ratio of Accounts Payable to
Inventory. For each period indicated below, the ratio of
the Consolidated amount of accounts payable of Merisel,
Inc. on the last day of such period to the Consolidated
amount of inventory of Merisel, Inc. on the last day of
such period shall be not less than the correlative ratio
indicated below (the "A/P Inventory Ratio"):
Minimum
Period Permitted Ratio
Fourth Quarter of 1996 0.90:1.00
First Quarter of 1997 0.90:1.00
Second Quarter of 1997 0.90:1.00
Third Quarter of 1997 0.90:1.00
Fourth Quarter of 1997 0.90:1.00
; provided that Merisel, Inc. shall maintain an A/P Inven
tory Ratio equal to or greater than 1.00:1.00 for one out
of each two consecutive periods indicated above."
(XIII) The Existing Agreement is herby amended by
deleting Section 6.37 and inserting in its place the follow
ing:
"6.37 Minimum Accounts Payable. On the last day of
each period indicated below, the Consolidated amount of
accounts payable of Merisel, Inc. shall be not less than
the correlative amount indicated below:
Period Amount
Fourth Quarter of 1996 $380,000,000
First Quarter of 1997 $390,000,000
Second Quarter of 1997 $390,000,000
Third Quarter of 1997 $390,000,000
Fourth Quarter of 1997 $500,000,000"
(XIV) The Existing Agreement is hereby amended by
deleting (i) the references to Section 6.28 in clauses (a) and
(b) of Section 6.17 and (ii) the requirement in clause (l) of
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<PAGE>
Section 6.17 that the Company deliver written reports con
cerning the cash balances of Merisel, Inc. alone.
(XV) The Existing Agreement is hereby amended by deleting
Section 6.35 in its entirety and inserting in lieu thereof the
following:
"6.35 (Intentionally omitted)."
(XVI) The Existing Agreement is hereby amended by adding
a new Section 6.42 to read as follows:
"6.42 The Company shall use reasonable best efforts
to (x) obtain any United States federal, state and local
income tax refunds to which the Company, Merisel Europe,
Merisel, Inc. or any of their respective domestic Subsid
iaries may be entitled and (y) sell the North Carolina
Property, in each case as soon as practicable following
the Fifth Amendment Effective Time."
(XVII) The Existing Agreement is hereby amended by
deleting in its entirety clause (i) in the definition of
"Permitted Liens" in Section 2.1 and inserting in its place
the following:
"(i) Liens permitted under that
certain letter dated as of October 2, 1996
between the Company and the Noteholders, as
amended from time to time;"
(XVIII) The Existing Agreement is hereby amended by adding
a new clause (k) to the definition of "Permitted Liens" in
Section 2.1 to read as follows:
"(k) Liens securing obligations
of the Company, Merisel Europe and their
Subsidiaries under foreign exchange hedging
arrangements or other similar contracts and
agreements entered into for non-speculative
purposes to protect the Company, Merisel Europe
and their Subsidiaries against fluctuations in
currency exchange rates; provided, however,
that the maximum aggregate amount of assets
subject to such Liens shall not exceed
$10,000,000."
(XIX) The Existing Agreement is hereby amended by
incorporating by reference into Section 6.7(b) the new clause
(x) that is being added to Section 7.02(c) of the Revolving
Credit Agreement.
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<PAGE>
(XX) The Existing Agreement is hereby amended by deleting
the table set forth in Section 6.32 and inserting in lieu
thereof the following:
"Fiscal Year 1996 $12,885,000
First Quarter of 1997 $ 4,000,000
First Two Quarters of 1997 $ 7,000,000
First Three Quarters of 1997 $11,000,000
Fiscal Year 1997 $13,000,000"
(XXI) The Existing Agreement is hereby amended by adding
a new Section 6.43 to read as follows:
"6.43 Merisel, Inc. Debt Restructuring. Neither
Merisel, Inc. nor the Company shall not, directly or indi
rectly, issue, or cause or permit to be issued,
Securities of Merisel, Inc. to or for the benefit of the
holders of Parent Notes, except for the issuance of
common equity Securities of Merisel, Inc. or Merisel,
Inc. Preferred Securities (as hereinafter defined), in
each case in exchange for all outstanding principal,
interest and other amounts owed or owing on or in respect
of the Parent Notes. "Merisel, Inc. Preferred
Securities" means preferred equity securities of Merisel,
Inc. ("Original Preferred Securities") that are not
mandatorily redeemable, do not otherwise mature, will not
be called by or on behalf of Merisel, Inc. and with
respect to which the holders thereof have no right to re
ceive cash or other property (other than common equity
Securities of Merisel, Inc. or additional Securities hav
ing the same terms as such Original Preferred Securities)
on account of liquidation preferences, accrued dividends
or otherwise, in each case unless and until there shall
have occurred the payment in full in cash of all outstand
ing principal, interest and other amounts due on or in
respect of the Notes or this Agreement."
(XXII) The Existing Agreement is hereby amended by
deleting Section 6.38 and inserting in its place the follow
ing:
"6.38 (Intentionally Deleted)"
(XXIII) Anything to the contrary in Section 7.1 of the
Existing Agreement notwithstanding, neither (x) any failure by
Merisel FAB to make any payment when due, whether at stated
maturity or otherwise, of any amount in respect of the
accounts payable owed to Vanstar, Inc., any exercise of rem
edies by the holder thereof against Merisel FAB or any
judgment rendered against Merisel FAB with respect thereto nor
-9-
<PAGE>
(y) any default in the payment of interest on the Parent
Notes shall constitute an Event of Default or Default for the
purposes of the Amended Agreement, the Notes or the other docu
ments referred to therein, except to the extent that the same
is preceded or followed by, or otherwise connected to, (i) the
commencement, if any, of an insolvency, bankruptcy or similar
proceeding by or against Merisel, Inc. or any of its Subsidiar
ies or (ii) in the case of Merisel, Inc., if earlier, the ex
ercise of any remedy in respect of such default by or on
behalf of one or more holders of Parent Notes or the indenture
trustee thereof (including without limitation the acceleration
of the outstanding principal amount of the Parent Notes or the
commencement of an action by one or more of such holders or
such indenture trustee in respect of such default).
(XXIV) The Existing Agreement is hereby amended by
deleting clause (n) of Section 7.1 in its entirety and in
serting in lieu thereof the following:
"(n) (Intentionally omitted)."
(XXV) The Existing Agreement is hereby amended by
inserting at the end of Section 9.5 the following:
"Notwithstanding the foregoing, so long as
no Event of Default has occurred and is continuing the
Company shall only be responsible for the fees, costs and
expenses of one financial advisor for all of the
Revolving Credit Lenders under the New Revolving Credit
Agreement and the holders of the Notes and, the Company
shall only be responsible for the fees, expenses and
disbursements of such financial advisor to the extent the
same relate to the review of monthly and quarterly
financial information supplied by the Company and
quarterly (or other periodic) management reviews.
Section 3. Reaffirmation of Parent Guaranty. By
its signature below, Merisel, Inc. (i) consents to the
amendment of the Existing Agreement by this Amendment, (ii)
acknowledges and reaffirms its obligations owing under the
Parent Guaranty and (iii) agrees that the Parent Guaranty is
and shall remain in full force and affect.
Section 4. Conditions to the Effective Time. The
Waiver, amendments and agreements set forth herein shall
become effective (the time of such effectiveness, the
"Effective Time") upon the satisfaction of all the following
conditions:
(i) this Amendment shall have been executed and
delivered by all the Noteholders, the Company and Merisel
Inc.;
(ii) the Company, Merisel Europe, Merisel, Inc.
and all the Lenders (as defined in the Revolving Credit Agree
ment) shall have executed and delivered the Second Amendment
to the Revolving Credit Agreement, which shall be in form and
substance acceptable to the Noteholders;
(iii) the Company, Merisel Europe, Merisel, Inc. and
certain holders of the Subordinated Notes shall have executed
and delivered the Fourth Amendment to the Subordinated Note
Purchase Agreement, which shall be in form and substance
acceptable to the Noteholders;
(iv) the Sale contemplated by the Purchase Agreement
shall have been consummated, and the portion of the Net Asset
Sale Proceeds required to be paid pursuant to Section 1, shall
have been so paid substantially contemporaneously with such
consummation;
(v) all the representations and warranties made by the
Company and Merisel, Inc. in Section 5 shall be true and
correct in all material respects as of the Effective Time;
(vi) the delivery by Merisel Canada of a Consent
and Acknowledgment in the form of Annex A hereto;
(vii) the delivery by Merisel Europe of a Consent
and Acknowledgement in the form of Annex B hereto;
(viii) the delivery by the Company and Merisel, Inc. to the
Noteholders executed copies of (x) certified resolutions of
their respective Boards of Directors approving and authorizing
the execution, delivery and performance of this Amendment, (y)
signature and incumbency certificates of the officers
executing this Amendment and (z) executed copies of this
Amendment; and
(ix) all corporate and other proceedings required to be
taken in connection with the transactions contemplated hereby
shall have been taken.
Section 5. Representations and Warranties of the
Company and Merisel, Inc. In order to induce the Noteholders
to enter into this Amendment and to grant the Waiver with re
spect to the Existing Agreement, the Company and Merisel, Inc.
represent and warrant to each Noteholder that the following
statements are true, correct and complete:
(a) Corporate Power and Authority. Each of the Company and
Merisel, Inc. has all requisite corporate power and authority
to enter into this Agreement and to carry out the
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<PAGE>
transactions contemplated by, and perform its respective obligations
under, the Existing Agreement as amended by this Amendment
(the "Amended Agreement").
(b) Authorization of Agreements. The execution and
delivery of this Agreement and the performance of the Amended
Agreement have been duly authorized by all necessary corporate
action by the Company and Merisel, Inc.
(c) No Conflict. The execution and delivery by the Company
and Merisel, Inc. of this Amendment and the performance by the
Company and Merisel, Inc. of the Amended Agreement do not and
shall not (i) violate any provision of law, rule or regulation
applicable to the Company, Merisel, Inc. or any of their re
spective Subsidiaries, or the Certificate of Incorporation or
bylaws of the Company, Merisel, Inc. or any of their respec
tive 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 Com
pany, Merisel, Inc. 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 Company, Mer
isel, Inc. or any of their respective Subsidiaries, other than
those that have been obtained.
(d) Governmental Consents. The execution and delivery by
the Company and Merisel, Inc. and the performance by the
Company and Merisel, Inc. of the Amended Agreement do not and
shall not require any registration 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.
(e) Binding Obligation. This Amendment and the Amended
Agreement are the legally valid and binding obligation of the
Company and Merisel, Inc., enforceable against each of them in
accordance with their terms, except as enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium
or other similar law relating to or limiting creditors' rights
generally or by equitable principles relating to en
forceability.
(f) Incorporation of Representations and Warranties from
Existing Agreement. The representations and warranties
contained in Section 5 of the Existing Agreement are and shall
be true, correct and complete in all material respects on and
as of the Effective Date to the same extent as though made on
and as of that date, except to the extent that such representa
tions and warranties specifically relate to an earlier date,
-12-
<PAGE>
in which case they are true, correct and complete in all
material respects as of such earlier date.
(g) Absence of Default. After giving effect to this
Amendment, no event has occurred and is continuing or shall
result from the consummation of the transactions contemplated
by this Amendment that 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 6. Miscellaneous.
(h) On and after the Effective Time, 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 Notes and the other
documents referred to in the Existing Agreement to the "Note
Purchase Agreement", "thereunder", "thereof", or words of like
import referring to the Existing Agreement shall mean and be a
reference to the Existing Agreement as amended by this
Amendment.
(i) Except as specifically waived by this Amendment, the
Existing Agreement, the Notes and the other documents referred
to in the Existing Agreement shall remain in full force and
effect and are hereby ratified and confirmed.
(j) The execution, delivery and performance of this
Amendment shall not, except as expressly provided herein, con
stitute 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, the Notes or any of the
documents referred to in the Existing Agreement.
(k) This Amendment may be executed in any number of
counterparts, and by different parties hereto in separate coun
terparts, 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.
(l) Section 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.
(m) Notwithstanding anything to the contrary herein, if the
Effective Time does not occur on or before October 11, 1996,
this Amendment shall be of no force or effect, and the
Existing Agreement shall remain in full force and effect as if
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<PAGE>
this Amendment had not been executed or delivered by any party
hereto.
(n) 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 CALI
FORNIA.
(p)
IN WITNESS WHEREOF, the parties hereto have caused
this Fifth Amendment and Waiver to Amended and Restated Senior
Note Purchase Agreement to be executed by their respective of
ficers thereunto duly authorized as of the date first above
written.
MERISEL AMERICAS, INC.
By:
Name:
Title:
MERISEL, INC.
By:
Name:
Title:
NOTEHOLDERS
Name of Holder:__________________
By:__________________
Title
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<PAGE>
ANNEX A
CONSENT AND ACKNOWLEDGEMENT
The undersigned hereby consents to the terms of the
Fifth Amendment to Amended and Restated Senior Note Purchase
Agreement dated as of October 2, 1996 (the "Amendment") with
respect to the Amended and Restated Senior Note Purchase Agree
ment dated as of December 23, 1993 (as amended, the "Note Pur
chase Agreement") among Merisel Americas, Inc. Merisel, Inc.
as Guarantor and the Noteholders party thereto, and hereby con
firms and agrees that each document executed by the
undersigned pursuant to and as defined in the Note Purchase
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 document to "the Note Purchase
Agreement," "thereunder," "thereof," "therein" or words of
like import referring to the Note Purchase Agreement shall
mean and be a reference to the Note Purchase Agreement as
amended by the Amendment.
MERISEL CANADA, INC.
By: _____________________
Name:
Title:
Dated: As of October __, 1996
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<PAGE>
ANNEX B
CONSENT AND ACKNOWLEDGEMENT
The undersigned hereby consents to the terms of the
Fifth Amendment to Amended and Restated Senior Note Purchase
Agreement dated as of October 2, 1996 (the "Amendment") with
respect to the Amended and Restated Senior Note Purchase Agree
ment dated as of December 23, 1993 (as amended, the "Note Pur
chase Agreement") among Merisel Americas, Inc. Merisel, Inc.
as Guarantor and the Noteholders party thereto, and hereby con
firms and agrees that each document executed by the
undersigned pursuant to and as defined in the Note Purchase
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 document to "the Note Purchase
Agreement," "thereunder," "thereof," "therein" or words of
like import referring to the Note Purchase Agreement shall
mean and be a reference to the Note Purchase Agreement as
amended by the Amendment.
MERISEL EUROPE, INC.
By: _____________________
Name:
Title:
Dated: As of October __, 1996
<PAGE>
FIRST AMENDMENT
TO
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
Dated as of June 30, 1996
This First Amendment to Amended and Restated Revolving
Credit Agreement (this "Amendment") is dated as of June 30, 1996
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 Lenders
signatory hereto, Citicorp USA, Inc. as Agent for the Lenders,
and Citibank, N.A., as Designated Issuer, and is made with
reference to that certain Amended and Restated Revolving Credit
Agreement dated as of April 12, 1996 (the "Existing Agreement")
by and among Merisel Americas, Merisel Europe, Merisel Parent, as
guarantor, the Lenders (as defined therein), 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.
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 amend the Existing
Agreement as hereinafter set forth in accordance with Section
11.01 of the Existing Credit Agreement.
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 deleting in
its entirety Section 7.01(l) and inserting in its place the
following:
"(l) Minimum Accounts Payable.
Maintain, on the last day of each period indicated
below, the Consolidated amount of accounts payable of
Merisel Parent of not less than the correlative amount
indicated below:
<PAGE>
Period Amount
First Quarter of 1996 $ 475,000,000
Second Quarter of 1996 $ 420,000,000
Third Quarter of 1996 $ 475,000,000
Fourth Quarter of 1996 $ 575,000,000
First Quarter of 1997 $ 575,000,000."
1.2 The Existing Agreement is hereby amended by deleting in
its entirety clause (xi) of Section 7.02(a) and inserting in its
place the following:
"(xi) Liens permitted under that certain letter
dated as of June 30, 1996 between the Borrowers and the
Majority Lenders, as amended from time to time."
SECTION 2. AMENDMENT EFFECTIVE DATE; SUBSEQUENT AMENDMENT
FEES
2.1 This Amendment shall become effective as of June 30,
1996 (the "Amendment Effective Date"); provided, however, that
this Amendment shall not be effective if the following conditions
are not satisfied on or before August 12, 1996: (i) the delivery
by Merisel Canada of a Consent and Acknowledgement in the form of
Annex A hereto; (ii) 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; (iii) all corporate and other
proceedings required to be taken in connection with the
transactions contemplated hereby shall have been taken; and (iv)
the Borrowers shall have paid to each Lender that shall have
executed and delivered to the Agent by 5:00 p.m. (Los Angeles
time) on August 9, 1996 signature pages to this Amendment, an
amendment fee in an amount equal to (x) the greater of (A) 0.10%
and (B) the percentage applicable to any amendment fee that the
holders of the Senior Notes may be paid in connection with the
amendments similar to those effected by this Amendment multiplied
by (y) such Lender's Commitment.
2.2 The Borrowers agree to promptly pay to each Lender that
shall have executed and delivered subsequent to 5:00 p.m. (Los
Angeles time) on August 9, 1996 and prior to 5:00 p.m. (Los
Angeles time) on August 20, 1996 counterpart signature pages to
this Amendment and the letter referred to in Section 7.02(a)(xi)
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<PAGE>
of the Amended Agreement (as amended by this Amendment) (the
"Letter"), the amendment fee referred to in clause (iv) of
Section 2.1 of this Amendment; provided however that if the
Majority Lenders shall not have executed and delivered by 5:00
p.m. (Los Angeles time) on August 9, 1996, counterpart signature
pages to this Amendment and the Letter or the conditions set
forth in Section 2.1 of this Amendment have not been satisfied or
waived on or prior to August 9, 1996, the Borrowers shall have no
obligation to pay any amendment fees pursuant to this Section
2.2. Failure of the Borrowers to comply with this provision
shall constitute and Event of Default under the Amended
Agreement.
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
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<PAGE>
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 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.
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 Amendment
Effective Date 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
After giving effect to this Amendment, 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 Amendment Effective Date,
each reference in the Existing Agreement to "this Agreement",
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<PAGE>
"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
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.
-5-
IN WITNESS WHEREOF, the parties hereto have caused this
First Amendment to Amended and Restated 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:
THE PARENT GUARANTOR
MERISEL, INC.
By:______________________________
Name:
Title:
<PAGE>
THE AGENT
CITICORP USA, INC., as Agent
By:______________________________
Name:
Title:
THE DESIGNATED ISSUER
CITIBANK, N.A., as Designated
Issuer
By:______________________________
Name:
Title:
PERCENT OF COMMITMENTS THE LENDERS
11.67% THE LONG-
TERM CREDIT BANK OF JAPAN, LTD.,
LOS ANGELES AGENCY
By:______________________________
Name:
Title:
10.00%
INDUSTRIAL BANK OF JAPAN, LIMITED,
LOS ANGELES AGENCY
By:_____________________________
Name:
Title:
8.33% NBD BANK
By:______________________________
Name:
Title
6.67%
WESTDEUTSCHE LANDESBANK
GIROZENTRALE, NEW YORK AND CAYMAN
ISLANDS BRANCHES
By:______________________________
Name:
Title:
By:______________________________
Name:
Title:
6.67% HEINE SECURITIES CORPORATION
By:______________________________
Name:
Title:
11.23% BEAR, STEARNS & CO. INC.
By:______________________________
Name:
Title:
13.33% NOMURA HOLDING AMERICA, INC.
By:______________________________
Name:
Title:
24.85% CARGILL FINANCIAL SERVICES
CORPORATION
By:______________________________
Name:
Title:
7.25% GOLDMAN SACHS CREDIT PARTNERS L.P.
By:______________________________
Name:
Title:
ANNEX A
CONSENT AND ACKNOWLEDGEMENT
The undersigned hereby consents to the terms of the
First Amendment to Amended and Restated Revolving Credit
Agreement dated as of June 30, 1996 (the "Amendment") with
respect to the Amended and Restated Revolving Credit Agreement
dated as of April 12, 1996 (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: As of June 30, 1996
<PAGE>
FOURTH AMENDMENT TO
AMENDED AND RESTATED SENIOR NOTE PURCHASE AGREEMENT
This FOURTH AMENDMENT TO AMENDED AND RESTATED SENIOR NOTE
PURCHASE AGREEMENT (this "Amendment"), dated as of June 30, 1996,
is entered into by and among MERISEL AMERICAS, INC., a Delaware
corporation (the "Company"), MERISEL, INC., a Delaware
corporation ("Merisel, Inc.") and each of the Noteholders
identified on the signature pages hereof (collectively, the
"Noteholders" and individually, a "Noteholder"), and amends that
certain Amended and Restated Senior Note Purchase Agreement dated
as of December 23, 1993, by and among the Company and the
original Purchasers of the Notes therein referred to, as amended
by that certain First Amendment to Amended and Restated Senior
Note Purchase Agreement dated as of September 30, 1994, that
certain Second Amendment to Amended and Restated Senior Note
Purchase Agreement dated as of June 23, 1995 and that certain
Third Amendment and Waiver to Amended and Restated Senior Note
Purchase Agreement dated as of April 12, 1996 (as so amended, the
"Existing Senior Note Purchase Agreement", and as amended hereby,
the "Senior Note Purchase Agreement"). Capitalized terms used
and not otherwise defined in this Amendment shall have the same
meanings in this Amendment as set forth in the Existing Senior
Note Purchase Agreement.
RECITALS
The parties hereto have agreed to amend the Existing
Senior Note Purchase Agreement as hereinafter set forth in
accordance with Section 8.1 of the Existing Senior Note Purchase
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants
and agreements set forth below and other good and valuable
consideration, the receipt and adequacy of which are hereby
acknowledged, the parties agree to amend the Existing Senior Note
Purchase Agreement as follows:
AGREEMENT
SECTION 1. Amendments. On the terms of this Amendment and
subject to the satisfaction of the conditions precedent set forth
in Section 3, the Existing Senior Note Purchase Agreement shall
be amended as follows:
a. The April 15 Letter referred to in clause (i) of
the definition of "Permitted Liens" is amended as set forth in
that certain letter dated as of June 30, 1996 among the Company,
Merisel, Inc. and the Noteholders (the "April 15 Letter
Amendment").
b. Section 6.37 of the Existing Senior Note
Purchase Agreement is amended to delete the figure therein which
<PAGE>
reads "$475,000,000" opposite the period therein which reads "2nd
Quarter of 1996" and the figure "$420,000,000" for such period
shall be substituted in lieu thereof.
c. Section 7.1(e) of the Existing Senior Note
Purchase Agreement is amended to read in its entirety as follows:
"(e) Any representation or warranty made by the
Company or Merisel, Inc. herein or under the Third Amendment
and Waiver to Amended and Restated Senior Note Purchase
Agreement dated as of April 12, 1996 (the "Third Amendment")
among the Company, Merisel, Inc. and the Noteholders or
under the Fourth Amendment to Amended and Restated Senior
Note Purchase Agreement dated as of June 30, 1996 (the
"Fourth Amendment") among the Company, Merisel, Inc. and the
Noteholders, or made by the Company or Merisel, Inc. in any
statement or certificate furnished by the Company or
Merisel, Inc., as the case may be, in connection with the
consummation of the issuance of the Notes or otherwise
pursuant to this Agreement, the Third Amendment or the
Fourth Amendment, is untrue in any material respect as of
the date of the issuance or making thereof; or"
d. Section 7.3 of the Existing Senior Note Purchase
Agreement is amended in the following respects:
(1) The words therein which read "paragraphs
(c) through (h), inclusive," shall be deleted in each place
where they appear and the words "paragraphs (c) through (j),
inclusive, and paragraphs (n) through (t), inclusive," shall
be substituted in lieu thereof.
(2) The words therein which read "paragraph
(i), (j) or (k)" shall be deleted in each place where they
appear and the words "paragraph (k), (l) or (m)" shall be
substituted in lieu thereof.
(3) The last paragraph thereof shall be deleted
in its entirety.
e. Section 7.4 of the Existing Senior Note Purchase
Agreement is amended by deleting the words therein which read
"paragraphs (c) through (h), inclusive," and substituting the
words "paragraphs (c) through (j), inclusive, and paragraphs (n)
through (t), inclusive," in lieu thereof.
SECTION 2. Reaffirmation of Parent Guaranty. By its signature
below, Merisel, Inc. (i) consents to the amendment of the
Existing Senior Note Purchase Agreement by this Amendment, (ii)
acknowledges and reaffirms its obligations owing under the Parent
Guaranty and (iii) agrees that the Parent Guaranty is and shall
remain in full force and affect.
-2-
<PAGE>
SECTION 3. Conditions To Effectiveness. The amendments set
forth in Section 1 of this Amendment shall become effective as of
June 30, 1996 upon the satisfaction of all of the following
conditions precedent on or prior to August 12, 1996 (such date
being referred to herein as the "Condition Satisfaction Date"):
a. On or before the Condition Satisfaction Date,
the Company shall deliver to each of the Noteholders the
following described documents (each of which shall be reasonably
satisfactory in form and substance to the Noteholders and their
counsel):
(i) This Amendment duly executed by the
Company and Merisel, Inc.;
(ii) Reaffirmation and Consent of Guarantor,
duly executed by Merisel Europe, in substantially the form
attached hereto as Exhibit A (the "Europe Reaffirmation").
(iii) Reaffirmation and Consent of Guarantor,
duly executed by Merisel Canada, in substantially the form
attached hereto as Exhibit B (the "Canada Reaffirmation").
(iv) Copies of resolutions of the board of
directors of each of the Company and Merisel, Inc.
authorizing the transactions contemplated by this Amendment,
certified as of the Condition Satisfaction Date by a senior
officer of the Company or Merisel, Inc., as the case may be;
(v) Copies of resolutions of the board of
directors of Merisel Europe authorizing the transactions
contemplated by the Europe Guaranty, as reaffirmed by the
Europe Reaffirmation, certified as of the Condition
Satisfaction Date by a senior officer of Merisel Europe;
(vi) Copies of resolutions of the sole
shareholder of Merisel Canada authorizing the transactions
contemplated by the Canada Guaranty, as reaffirmed by the
Canada Reaffirmation, certified as of the Condition
Satisfaction Date by a senior officer of Merisel Canada;
(vii) A certificate of a senior officer of
each of the Company and Merisel, Inc. certifying (A) the
names and true signatures of the officers of the Company or
Merisel, Inc., as the case may be, authorized to execute,
deliver and perform, as applicable, on behalf of the Company
or Merisel, Inc., as the case may be, this Amendment, the
-3-
<PAGE>
Senior Note Purchase Agreement and the Parent Guaranty and
(B) that the certificate of incorporation and bylaws of the
Company and Merisel, Inc., as applicable, remain in full
force and effect as of the Condition Satisfaction Date and
have not been amended, modified, supplemented or otherwise
altered in any respect since April 15, 1996;
(viii) A certificate of a senior officer of
Merisel Europe certifying (A) the names and true signatures
of the officers of Merisel Europe authorized to execute,
deliver and perform, as applicable, on behalf of Merisel
Europe the Europe Reaffirmation and the Europe Guaranty and
(B) that the certificate of incorporation and bylaws of
Merisel Europe remain in full force and effect as of the
Condition Satisfaction Date and have not been amended,
modified, supplemented or otherwise altered in any respect
since April 15, 1996; and
(ix) A certificate of a senior officer of
Merisel Canada certifying (A) the names and true signatures
of the officers of Merisel Canada authorized to execute,
deliver and perform, as applicable, on behalf of Merisel
Canada the Canada Reaffirmation and the Canada Guaranty and
(B) that the certificate of articles of amalgamation and the
bylaws of Merisel Canada remain in full force and effect as
of the Condition Satisfaction Date and have not been
amended, modified, supplemented or otherwise altered in any
respect since April 15, 1996.
b. On or before the Condition Satisfaction Date,
the New Revolving Credit Agreement shall have been amended in a
manner reasonably satisfactory to each Noteholder and its counsel
and such amendment shall be in full force and effect and by their
execution and delivery hereof the Noteholders signatory hereto
shall have consented to such amendment to the New Revolving
Credit Agreement.
c. On or before the Condition Satisfaction Date,
the Subordinated Note Purchase Agreement shall have been amended
in a manner reasonably satisfactory to each Noteholder and its
counsel and such amendment shall be in full force and effect.
d. On or before the Condition Satisfaction Date,
the Company shall have paid to each Noteholder that shall have
executed and delivered by 5:00 p.m. (Los Angeles time) on August
9, 1996 counterpart signature pages to this Amendment and the
-4-
<PAGE>
April 15 Letter Amendment, an amendment fee in an amount equal to
(x) the greater of (A) 0.10% and (B) the percentage applicable to
any amendment fee that the Revolving Credit Lenders may be paid
in connection with the amendments similar to those effected by
this Amendment multiplied by (y) such Noteholder's Pro Rata Share
of the aggregate principal amount of Notes outstanding on the
Condition Satisfaction Date.
e. On or before the Condition Satisfaction Date,
the Company shall have paid all out-of-pocket costs, fees and
expenses required under Section 9.5 of the Senior Note Purchase
Agreement which were incurred up to the Condition Satisfaction
Date and evidenced by invoice delivered to the Company; and the
Company shall have complied with their deposit obligations with
Orrick, Herrington & Sutcliffe as set forth in the OH&S Fee
Agreement.
f. On or before the Condition Satisfaction Date,
all corporate and other proceedings required to be taken in
connection with the transactions contemplated by this Amendment
shall have been taken.
g. All governmental actions or filings necessary
for the execution, delivery and performance of this Amendment
shall have been made, taken or obtained, and no order, statutory
rule, regulation, executive order, decree, judgment or injunction
shall have been enacted, entered, issued, promulgated or enforced
by any court or other governmental entity which prohibits or
restricts the transactions contemplated by this Amendment, nor
shall any action have been commenced or, to the Company's or
Merisel, Inc.'s knowledge, threatened seeking any injunction or
any restraining or other order to prohibit, restrain, invalidate
or set aside the transactions contemplated by this Amendment.
h. The representations and warranties set forth
in this Amendment shall be true and correct in all material
respects as of the Condition Satisfaction Date.
SECTION 4. Representations and Warranties. In order to
induce the Noteholders to enter into this Amendment and amend the
Existing Senior Note Purchase Agreement in the manner provided in
this Amendment, each of the Company and Merisel, Inc. represents
and warrants to each Noteholder as of the Condition Satisfaction
Date as follows:
-5-
<PAGE>
a. Corporate Existence and Power. Each of the
Company, Merisel, Inc., Merisel Europe and Merisel Canada:
(i) is a corporation duly organized, validly
existing and in good standing under the laws of the
jurisdiction of its formation;
(ii) has the power and authority and all
governmental licenses, authorizations, consents and
approvals to own its assets and carry on its business and to
execute, deliver, and perform its obligations under, and
carry out the transactions contemplated by, as applicable,
the Amendment, the Senior Note Purchase Agreement, the
Notes, the Parent Guaranty, the Europe Reaffirmation, the
Europe Guaranty, the Canada Reaffirmation and the Canada
Guaranty;
(iii) is duly qualified as a foreign
corporation and is licensed and in good standing under the
laws of each jurisdiction where its ownership, lease or
operation of property or the conduct of its business
requires such qualification or license or where the failure
so to qualify would not have a material adverse effect on
the condition (financial or otherwise), business or
prospects of Merisel, Inc. and its Subsidiaries taken as a
whole; and
(iv) is in material compliance with all
material requirements of law.
b. Corporate Authorization; No Contravention.
The execution and delivery of this Amendment and the Notes, and
performance of the Senior Note Purchase Agreement, the Notes and
the Parent Guaranty, by the Company and Merisel, Inc., as
applicable, and the execution and delivery of the Europe
Reaffirmation and the Canada Reaffirmation, and performance of
the Europe Guaranty and the Canada Guaranty, by Merisel Europe
and Merisel Canada, as applicable, have been duly authorized by
all necessary corporate action on behalf of such Person and do
not and will not:
(i) contravene the terms of any of such
Person's certificate of incorporation or bylaws;
(ii) conflict with or result in any breach or
contravention of, or the creation of any Lien under, any
document evidencing any Contractual Obligation to which such
Person is a party or any order, injunction, writ or decree
of any federal, state or other governmental authority or
regulatory body to which such Person or its property is
subject where such conflict, breach, contravention or Lien
could reasonably be expected to have a material adverse
effect on the condition (financial or otherwise), business
-6-
<PAGE>
or prospects of Merisel, Inc. and its Subsidiaries taken as
a whole; or
(iii) violate any material requirement of law.
c. Governmental Authorization. No approval,
consent, exemption, authorization, or other action by, or notice
to, or filing with, any federal, state or other governmental
authority or regulatory body is necessary or required in
connection with (i)Ethe execution and delivery of this Amendment
and performance of the Senior Note Purchase Agreement, the Notes
and the Parent Guaranty, by the Company and Merisel, Inc., as
applicable, and the execution and delivery of the Europe
Reaffirmation and the Canada Reaffirmation, and performance of
the Europe Guaranty and the Canada Guaranty, by Merisel Europe
and Merisel Canada, as applicable, or (ii)Ethe continued
operation of Merisel, Inc.'s or any of its Subsidiaries' business
as contemplated to be conducted after the date hereof by the
Senior Note Purchase Agreement, except in each case such
approvals, consents, exemptions, authorizations or other actions,
notices or filings (A)Eas have been obtained, (B)Eas may be
required under state securities or Blue Sky laws, (C)Eas are of a
routine or administrative nature and are either (x)Enot
customarily obtained or made prior to the consummation of
transactions such as the transactions described in clauses (i) or
(ii) or (y)Eexpected in the judgment of any such Person to be
obtained in the ordinary course of business subsequent to the
consummation of the transactions described in clauses (i) or
(ii), or (D) that, if not obtained, could reasonably be expected
to have a material adverse effect on the condition (financial or
otherwise), business or prospects of Merisel, Inc. and its
Subsidiaries taken as a whole.
d. Binding Effect. The Senior Note Purchase
Agreement and the Notes constitute the legal, valid and binding
obligation of the Company; the Senior Note Purchase Agreement and
the Parent Guaranty constitute the legal, valid and binding
obligation of Merisel, Inc.; and the Europe Guaranty and the
Canada Guaranty constitute the legal, valid and binding
obligations of Merisel Europe and Merisel Canada, respectively,
in each case, in accordance with their respective terms, except
as enforceability may be limited by applicable bankruptcy,
insolvency, or similar laws affecting the enforcement of
creditors' rights generally or by equitable principles relating
to enforceability.
e. No Default. After giving effect to this
Amendment, no Default or Event of Default exists or would result
from the transactions contemplated by this Amendment. As of the
Condition Satisfaction Date and giving effect to any amendment
received by Merisel, Inc. or any of its Subsidiaries on the
Condition Satisfaction Date, including, without limitation, this
Amendment, neither the Company, Merisel, Inc. nor any Affiliate
-7-
<PAGE>
of the Company or Merisel, Inc. is in default under or with
respect to any Contractual Obligation in any respect which,
individually or together with all such defaults, could reasonably
be expected to have a material adverse effect on the condition
(financial or otherwise), business or prospects of Merisel, Inc.
and its Subsidiaries taken as a whole, or that would, if such
default had occurred after the Condition Satisfaction Date,
create an Event of Default under subsection 7.1(c) of the Senior
Note Purchase Agreement.
f. Financial Statements. (i) The Noteholders
have been furnished with an unaudited consolidated balance sheet
of Merisel, Inc. as of March 31, 1996, and related unaudited
consolidated statements of income, cash flow and changes in
stockholders' equity for the fiscal quarter ended on said date.
Such financial statements have been prepared in accordance with
GAAP consistently applied, present fairly the consolidated
financial position of Merisel, Inc. as of such date, and the
consolidated results of operations and changes in cash flows and
stockholders' equity for such period.
(ii) Since March 31, 1996, there has been no material
adverse change in the Assets, business, profits, or condition
(financial or otherwise) of Merisel, Inc. or its Subsidiaries,
taken as a whole, as shown on the financial statements referenced
above.
g. Representations and Warranties in the
Existing Senior Note Purchase Agreement. The Company confirms
that as of the Condition Satisfaction Date the representations
and warranties contained in the Existing Senior Note Purchase
Agreement remain (before and after giving effect to this
Amendment) true and correct in all material respects, except to
the extent that such representations and warranties specifically
refer to an earlier date, in which case they are true and correct
in all material respects as of such earlier date.
SECTION 5. Miscellaneous.
a. Reference to and Effect on the Existing
Senior Note Purchase Agreement and the April 15 Letter.
(i) Except as specifically amended by this
Amendment and the April 15 Letter Amendment, and the
documents executed and delivered in connection therewith,
the Existing Senior Note Purchase Agreement and the April 15
Letter, respectively, shall remain in full force and effect
and are hereby ratified and confirmed.
(ii) The execution, delivery and performance
of this Amendment and the April 15 Letter Amendment shall
not, except as expressly provided herein, constitute a
waiver of any provision of, or operate as a waiver of any
-8-
<PAGE>
right, power or remedy of the Noteholders under, the
Existing Senior Note Purchase Agreement.
(iii) Upon the conditions precedent set forth
herein being satisfied, all references to the Senior Note
Purchase Agreement shall be deemed to be references to the
Existing Senior Note Purchase Agreement as amended by this
Amendment.
(iv) Upon the conditions precedent set forth
herein being satisfied, all references to the April 15
Letter shall be deemed to be references to the April 15
Letter as amended by the April 15 Letter Amendment.
b. Fees and Expenses. The Company acknowledges
that all out-of-pocket costs, fees and expenses incurred in
connection with this Amendment will be paid in accordance with
Section 9.5 of the Existing Senior Note Purchase Agreement; and
the Company further acknowledges that its deposit obligations
with Orrick, Herrington & Sutcliffe will be complied with in
accordance with the OH&S Fee Agreement.
c. Post-Closing Amendment Fees. The Company
agrees to promptly pay to each Noteholder that shall have
executed and delivered subsequent to 5:00 p.m. (Los Angeles time)
on August 9, 1996 and prior to 5:00 p.m. (Los Angeles time) on
August 20, 1996 counterpart signature pages to this Amendment and
the April 15 Letter Amendment, the amendment fee referred to in
Section 3.d. of this Amendment; provided however that if
Noteholders sufficient to constitute the Required Noteholders
shall not have executed and delivered by 5:00 p.m. (Los Angeles
time) on August 9, 1996, counterpart signature pages to this
Amendment and the April 15 Letter Amendment or the conditions
precedent set forth in Section 3 above have not been satisfied or
waived on or prior to the Condition Satisfaction Date, the
Company shall have no obligation to pay any amendment fees
pursuant to this Section 5.c. Failure by the Company to comply
with this provision shall constitute an Event of Default under
the Senior Note Purchase Agreement.
d. Headings. Section and subsection headings in
this Amendment are included for convenience of reference only and
shall not constitute a part of this Amendment for any other
purpose or be given any substantive effect.
e. Counterparts. This Amendment may be executed
in one or more counterparts, each of which shall be deemed an
original but all of which together shall constitute one and the
same instrument.
f. Complete Agreement. The Senior Note Purchase
Agreement, together with the exhibits and schedules thereto, the
Notes, the Parent Guaranty, the Canada Guaranty, the Europe
Guaranty, the April 11 Letter, the April 12 Letter, the April 14
Letter and the April 15 Letter, the Orrick, Herrington &
Sutcliffe Fee Agreement, the Houlihan Fee Agreement, the April 15
Letter Amendment and the other agreements referred to herein or
therein, is intended by the parties as a final expression of
their agreement and is intended as a complete statement of the
terms and conditions of their agreement.
-9-
<PAGE>
(g) Governing Law. This Amendment shall be
governed by and construed according to the laws of the State of
California.
[THIS SPACE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their proper and
duly authorized officers as of the day and year first above
written.
"Company"
MERISEL AMERICAS, INC.,
a Delaware corporation
By:
Name:
Title:
"Merisel, Inc."
MERISEL, INC.,
a Delaware corporation
By:
Name:
Title:
-10-
<PAGE>
"Noteholders"
_____% GOLDMAN, SACHS & CO.
By:
Name:
Title:
_____% PRINCIPAL MUTUAL LIFE
INSURANCE COMPANY
By:
Name:
Title:
By:
Name:
Title:
____% FIRST AUSA LIFE INSURANCE COMPANY
By:
Name:
Title:
-11-
<PAGE>
____% PFL LIFE INSURANCE COMPANY
By:
Name:
Title:
____% LIFE INVESTORS INSURANCE COMPANY
OF AMERICA
By:
Name:
Title:
____% BANKERS UNITED LIFE ASSURANCE
COMPANY
By:
Name:
Title:
____% INTERNATIONAL LIFE INVESTORS
INSURANCE COMPANY
By:
Name:
Title:
-12-
<PAGE>
____% INCE & CO., as nominee for
THE CANADA LIFE ASSURANCE COMPANY
By:
Name:
Title:
____% CUMMINGS & CO., as nominee for
CANADA LIFE INSURANCE COMPANY OF
AMERICA
By:
Name:
Title:
____% AMERITAS LIFE INSURANCE CORP.
By: Ameritas Investment Advisors,
Inc., as Agent
By:
Name:
Title:
____% PROVIDENT MUTUAL LIFE INSURANCE
COMPANY OF PHILADELPHIA
By:
Name:
Title:
____% PROVIDENT MUTUAL LIFE AND ANNUITY
COMPANY OF AMERICA
By:
Name:
Title:
-13-
<PAGE>
EXHIBIT A
Reaffirmation and Consent of Guarantor
All capitalized terms used and not otherwise defined
in this Reaffirmation and Consent of Guarantor (this
"Reaffirmation and Consent") shall have the same meanings in
this Reaffirmation and Consent as set forth in that certain
Fourth Amendment to Amended and Restated Senior Note Purchase
Agreement dated as of June 30, 1996 (the "Amendment").
The undersigned hereby (a) represents and warrants to
the Noteholders that the execution, delivery, and performance of
this Reaffirmation and Consent are within its corporate powers,
have been duly authorized by all necessary corporate action, and
are not in contravention of any law, rule, or regulation, or any
order, judgment, decree, writ, injunction, or award of any
arbitrator, court, or governmental authority, or of the terms of
its charter or bylaws, or of any contract or undertaking to
which it is a party or by which any of its properties may be
bound or affected; (b) consents to the amendment of the Existing
Senior Note Purchase Agreement by the Amendment; (c)
acknowledges and reaffirms its obligations owing under the
Europe Guaranty; and (d) agrees that (i) the Europe Guaranty
shall remain in full force and effect and hereby is ratified and
confirmed in all respects, and (ii) the execution, delivery, and
performance hereof shall not operate as a waiver, or except as
expressly set forth herein, as an amendment, of any right, power
or remedy of the Noteholders under the Europe Guaranty, as in
effect prior to the date hereof, or any further or other matter.
DATED as of June 30, 1996.
MERISEL EUROPE, INC.
By:
Name:
Title:
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<PAGE>
EXHIBIT B
Reaffirmation and Consent of Guarantor
All capitalized terms used and not otherwise defined
in this Reaffirmation and Consent of Guarantor (this
"Reaffirmation and Consent") shall have the same meanings in
this Reaffirmation and Consent as set forth in that certain
Fourth Amendment to Amended and Restated Senior Note Purchase
Agreement dated as of June 30, 1996 (the "Amendment").
The undersigned hereby (a) represents and warrants to
the Noteholders that the execution, delivery, and performance of
this Reaffirmation and Consent are within its corporate powers,
have been duly authorized by all necessary corporate action, and
are not in contravention of any law, rule, or regulation, or any
order, judgment, decree, writ, injunction, or award of any
arbitrator, court, or governmental authority, or of the terms of
its articles or bylaws, or of any contract or undertaking to
which it is a party or by which any of its properties may be
bound or affected; (b) consents to the amendment of the Existing
Senior Note Purchase Agreement by the Amendment; (c)
acknowledges and reaffirms its obligations owing under the
Canada Guaranty; and (d) agrees that (i) the Canada Guaranty
shall remain in full force and effect and hereby is ratified and
confirmed in all respects, and (ii) the execution, delivery, and
performance hereof shall not operate as a waiver, or except as
expressly set forth herein, as an amendment, of any right, power
or remedy of the Noteholders under the Canada Guaranty, as in
effect prior to the date hereof, or any further or other matter.
DATED as of June 30, 1996.
MERISEL CANADA INC.
By:
Name:
Title:
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<PAGE>
THIRD AMENDMENT TO AMENDED AND
RESTATED SUBORDINATED NOTE PURCHASE AGREEMENT
Re: $22,000,000 of Amended and Restated 11.78%
Subordinated Notes due March 10, 2000
Dated as of June 30, 1996
This Third Amendment (the "Amendment") to the
Amended and Restated Subordinated Note Purchase Agreement,
dated as of December 23, 1993, as amended as of September
30, 1994 and as of April 12, 1996 (the "Existing
Agreement"), is entered into as of June 30, 1996 by and
among the Noteholders identified on the signature pages
hereof (the "Noteholders") and Merisel Americas, Inc., a
Delaware corporation (the "Company"). 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 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. AMENDMENTS TO THE EXISTING AGREEMENTS.
(b) Section 9.10 of the Existing Agreement
is hereby amended by deleting Section 9.10 of the Existing
Agreement and inserting in its place the following:
" 9.10 Incorporated Covenants. The
covenants set forth in Sections 6.6, 6.7,
6.9, 6.13, 6.14, 6.23 (only insofar as it
relates to the Indenture (as defined
therein)), 6.25 through 6.32, and 6.35
through 6.40 (the "Incorporated Covenants")
of the Senior Note Purchase Agreement, as
last amended by the Fourth Amendment thereto
dated as of the date hereof (as amended, the
"Senior Note Agreement"), are incorporated by
reference into this agreement as if stated
herein in full, together with all defined
terms used therein, provided, however, that
(i) such Incorporated Covenants, as
incorporated herein, shall reflect that they
are delivered to run in favor of the
Noteholders, rather than to the parties set
forth therein, and (ii) any amendments or
modifications to, waivers as to, or
expiration or cancellation of (by
cancellation, amendment or termination of the
Senior Note Agreement or otherwise), such
Incorporated Covenants subsequent to August
12, 1996 shall only be deemed to amend, waive
<PAGE>
compliance with, or terminate, as the case
may be, such Incorporated Covenants, as
incorporated herein, if approved or consented
to by the holders of at least 66 2/3% in
aggregate unpaid principal amount of the
Notes then outstanding; and provided further
that all references in such Incorporated
Covenants, as incorporated herein, to
payments on the notes issued under the Senior
Note Agreement shall be deemed to continue to
refer to payments on such notes; and provided
further that the incorporation herein of the
Incorporation Covenants shall be limited to
the extent, and only to the extent necessary
to avoid any prohibition or limitation on any
payment to the Noteholders; and provided
further that if the Senior Note Agreement is
renewed or replaced by financing on terms
that contain covenants affording protection
to the Noteholders substantially equivalent
to, or greater than, the protection provided
by the Incorporated Covenants, as to
substantially the same matters as are covered
by the Incorporated Covenants (financing on
such terms, the "Replacement Financing"),
such covenants contained in such renewal or
replacement financing shall be deemed
incorporated herein. The Company shall, on
or before the later of (i) 60 days after the
date on which all Designated Senior Debt
(and, to the extent not otherwise included
herein, all interest, fees, costs, expenses,
and other obligations thereunder) has been
repaid in full in cash and all commitments
for such Debt have been terminated and (ii)
July 31, 1997, obtain such Replacement
Financing. In the event that the Company
renews or extends the Senior Note Agreement,
the last clause of the first sentence of this
Section 9.10 shall also apply to any
Replacement Financing that replaces such
Senior Note Agreement as renewed or
extended.";
SECTION 2. CONDITIONS TO EFFECTIVENESS.
The amendments set forth in Section 1 of this
Amendment shall become effective as of June 30, 1996
upon the satisfaction of each of the following
conditions precedent on or prior to August 12, 1996
(such latter date being referred to herein as the
"Condition Satisfaction Date"):
(a) the execution and delivery of this
Amendment by the Company and the requisite Noteholders
in accordance with Section 14.4 of the Existing
Agreement;
(b) the representations and warranties
in this Amendment, and the Existing Agreement as
amended by this Amendment (the "Amended Agreement"),
shall be true, correct and complete in all respects on
and as of the date hereof, and as of the Condition
Satisfaction Date, as though made on such dates (except
to the extent that such representations and warranties
relate solely to an earlier date, in which case they
are true, correct and complete in all material respects
as of such earlier date).
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<PAGE>
(c) no Default or Event of Default
shall result from the consummation of the transactions
contemplated herein;
(d) the Company shall have paid to each
Noteholder the fee required by that certain letter
dated on or about August 9, 1996 from the Company to
the Noteholders;
(e) the Company shall have paid all of
the reasonable fees, costs and expenses Andrews &
Kurth, L.L.P., incurred by the Noteholders in
connection with this Amendment as evidenced by invoice
delivered to the Company, and shall have complied with
their deposit obligations with Andrews & Kurth, L.L.P.;
(f) all conditions to the effectiveness
of the Fourth Amendment to the Senior Note Agreement,
dated as of the date hereof, shall have been satisfied
and such Fourth Amendment to the Senior Note Agreement
shall have become effective; and
(g) the Company shall have delivered to
each of the Noteholders the equivalent of the documents
described in, and/or required under, Sections 3(a)(iv)
and (vii) of the Fourth Amendment to the Senior Note
Agreement (each of which shall be reasonably
satisfactory in form and substance to the Noteholders
and their counsel), each as relates to the Company, and
each shall be delivered addressed to the Noteholders,
as applicable.
SECTION 3. REPRESENTATION AND WARRANTIES OF
THE COMPANY.
In order to induce the requisite Noteholders
under Section 14.4 of the Existing Agreement to enter
into this Amendment and to amend the Existing Agreement
in the manner provided herein, the Company represents
and warrants to each Note holder that the following
statements are true, correct and complete:
(a) Corporate Power and Authority. The
Company has all requisite corporate power and authority
to enter into this Amendment and to carry out the
transactions contemplated by, and perform its
obligations under, the Amended Agreement.
(b) 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 the
Company.
(c) No Conflict. The execution and
delivery by the Company of this Amendment and the
performance by the Company of the Amended Agreement do
not and will not (i) violate any provision of law, rule
or regulation applicable to the Company or any of its
Subsidiaries, the Certificate of Incorporation or
bylaws of the Company or any of its 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
Company or any of its Subsidiaries, (iii) result in or
require the creation or imposition of any Lien upon any
of its properties or assets, or (iv) require any
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<PAGE>
approval of stockholders or any approval or consent of
any Person under any contractual obligation of the
Company or any of its Subsidiaries.
(d) Conditions Met. The conditions
contained in Sections 2(b), (c) and (f) hereof have
been satisfied or will have been satisfied on or prior
to August 12, 1996.
(e) Governmental Consents. The
execution and delivery by the Company of this
Amendment, and the performance by the Company of the
Amended Agreement, do not and will not require any
registration 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.
(f) Binding Obligation. This Amendment
and the Amended Agreement are the legally valid and
binding obligations of the company, enforceable against
it 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 to enforceability.
(g) Other Representations And
Warranties. Each of the representations and warranties
contained in Section 4 of the Fourth Amendment to the
Senior Note Agreement is true and correct in all
material respects.
SECTION 4. MISCELLANEOUS.
(a) Reference to and Effect on the
Existing Agreement. 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, shall mean and be a reference to
the Existing Agreement as amended by this Amendment.
(b) Execution and Counterparts. This
Amendment may be executed, including by facsimile, 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.
(c) Headings. Section and subsection
headings in this Amendment are included herein for
evidence of reference only and shall not constitute a
part of this Amendment for any other purpose of be
given any substance effective.
(d) 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.
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<PAGE>
(e) Each of the Noteholders represents
that the portion of the principal balance of the Notes
held as of August 9, 1996 by such Noteholder is as set
forth on Schedule A hereto.
IN WITNESS WHEREOF, the Company and the
Noteholders have caused this Amendment to be duly
executed by this respect duly authorized officers, all
as of the day and year first above written.
MERISEL AMERICAS, INC.
By:
Name:
Title:
BEAR STEARNS & CO. INC.
By:
Name:
Title:
GOLDMAN, SACHS & CO.
By:
Name:
Title:
INCE & CO., as nominee for
THE CANADA LIFE ASSURANCE
COMPANY
By:
Name:
Title:
NOMURA HOLDING AMERICA, INC.
By:
Name:
Title:
PAN AMERICAN LIFE INSURANCE
COMPANY
By:
Name:
Title:
<PAGE>
EXHIBIT A
Bear Stearns & Co. Inc. $ 11,200,000
Goldman, Sachs & Co. $ 400,000
Ince & Co., as nominee for
The Canada Life Assurance Company $ 4,000,000
Nomura Holding America, Inc. $ 400,000
Pan American Life Insurance Company $ 1,600,000
TOTAL $ 17,600,000
<PAGE>
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement"), is dated as
of August 19, 1996 and is between Merisel, Inc. (the
"Company"), a Delaware corporation (the "Company" or
"Merisel"), and James E. Illson ("Executive").
The Company and Executive desire to set forth the terms
and conditions governing Executive's employment by the
Company. Accordingly, Executive and Merisel hereby agree as
follows:
1. Term of Employment. Executive and Merisel agree
that Executive shall be employed by Merisel and shall serve
in the capacities of Chief Financial Officer and Senior
Vice President of the Company, under the terms and
conditions of this Agreement commencing as of August __,
1996 and continuing for a three year period (such three year
period is referred to herein as the "Employment Term") or
until termination of Executive's employment pursuant to this
Agreement, and subject to renewal for additional periods as
may be mutually agreed by the Company and Executive. The
original term and any renewal terms of this Agreement may be
sooner terminated as provided herein.
2. Scope of Duties. Executive shall undertake and
assume the responsibility of performing for and on behalf of
Merisel those duties as shall be consistent with the
positions of Chief Financial Officer and Senior Vice
President of the Company. Executive shall report to either
the Chairman of the Board, the Chief Executive Officer or
the President of the Company, as determined by the Company.
Executive covenants and agrees that at all times during the
term of this Agreement, he shall devote his substantially
full-time and best efforts to the execution of his duties
pursuant hereto.
3. Compensation. As compensation for services
rendered pursuant to this Agreement, Merisel shall pay to
Executive, in installments customary with Merisel's standard
payroll periods, base annual compensation of $225,000
during the Employment Term, provided that the Board of
Directors (the "Board') may, in its sole discretion,
increase such base annual compensation as merited by the
performance of Executive. Merisel shall deduct from all
payments paid to Executive under this Agreement any required
amount for applicable income tax withholding or any other
required taxes or contributions.
4. Bonus and Additional Benefits. In addition to the
compensation to be paid to Executive pursuant to Section 3,
Merisel shall pay, reimburse or otherwise confer the
following items of benefit to Executive:
4.1 During the Employment Term, Executive shall be
eligible to receive an annual bonus of $125,000 based on the
Company's financial performance (the "Bonus Amount"). One
<PAGE>
quarter of the Bonus Amount shall be earned and paid
following each fiscal quarter in which Executive achieves
his financial/ performance objectives for that quarter,
which financial/ performance objectives shall be determined
from time to time by officer to whom Executive reports and
Executive. Whether or not such objectives are achieved, one
eighth of the Bonus Amount shall be guaranteed to Executive
for each of the third and fourth fiscal quarters of 1996.
4.2 Effective August 19, 1996, the Company granted
Executive a nonqualified stock option (the "Option") to
purchase 75,000 shares of the Company's Common Stock under
the Company's 1991 Stock Option Plan. The Option is
governed by the Option Agreement issued to Executive.
4.3 In the event there is a Successful Restructuring
(as defined below) of the Company's outstanding indebtedness
and as a part of that Successful Restructuring there is a
Dilution Event (as defined below), then upon completion of
such Successful Restructuring, Company shall pay Executive a
bonus of $125,000; provided, however, that in that case of
an out-of-court Successful Restructuring one half of such
bonus shall be paid when all of the documents evidencing
such restructuring are signed by the Company's and its
subsidiaries lenders and the remaining half of such bonus
shall be paid upon completion of such Successful
Restructuring. As used herein, an "out-of-court Successful
Restructuring" shall mean a restructuring of the Company's
and its subsidiaries' obligations under (a) that certain
Revolving Credit Agreement, as amended and restated as of
April 12, 1996, among Merisel Americas, Inc. Merisel Europe,
Inc. and Merisel, Inc. and the lenders party thereto, (b)
those certain Amended and Restated 8.58% Senior Notes issued
by Merisel Americas, Inc., (c) those certain 11.28%
Subordinated Notes, issued by Merisel Americas, Inc. and
(d) those certain 12 1/2% Senior Notes due 2004, issued by
the Company, that involves a restructuring of the maturity
dates, interest rates and covenants thereunder in such a
manner as to permit the Company to operate outside of the
control of its creditors for a period of at least one year
and does not contemplate further restructuring of such
obligations during such one year period, which "Successful
Restructuring" shall be deemed completed upon the completion
of such one year period. In addition, if a petition has
been filed pursuant to Section 301 or 303 (or any other
applicable Section) of the Bankruptcy Code with respect to
the Company, confirmation of a plan of reorganization shall
be deemed to be the completion of an "in-court Successful
Restructuring" under this Agreement. "Dilution Event" shall
mean the issuance by the Company in connection with a
Successful Restructuring of 3,000,000 or more shares of its
Common Stock or of warrants, options or rights containing
the right to purchase or subscribe for 3,000,000 or more
shares of the Common Stock of the Company or securities
convertible into or exchangeable therefor, in each case
excluding (a) options issued under the Company's 1991
Employee Stock Option Plan, as the same may be amended, and
under the Company's 1992 Stock Option Plan for Nonemployee
Directors, as the same may be amended and (b) stock issued
upon exercise of options outstanding or issued under the
Company's existing stock option plans as the same may be
amended from time to time.
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<PAGE>
4.4 Company will reimburse Executive for the cost of
Executive's COBRA payments under Executive's former
employer's health insurance plans until Executive is
eligible for coverage under Company's health insurance
plans. The amount of such reimbursement will be grossed up
so that Executive will receive an amount equal to the COBRA
payments, after taking into account all applicable taxes.
4.5 Company shall reimburse Executive for the premium
cost of term life insurance coverage, $1 million face value,
up to a maximum amount of $2,000 per year.
4.4 In addition, Executive shall be eligible to
participate in all other benefit programs and plans that may
be afforded to senior management of the Company. Merisel
shall make contributions to such plans and arrangements on
behalf of Executive as shall be required or consistent with
the terms and conditions of such plans. Such plans and
programs may included, by way of example, deferred
compensation, group insurance benefits, long-term or
permanent disability insurance and major medical coverage.
Executive shall be entitled, during the Employment Term, to
vacation time with compensation and time off with
compensation on account of illness or injury, in accordance
with the Company's written policies for employees in effect
from time to time.
5. Termination of Employment.
5.1 Notice. Executive may resign or Merisel may
terminate Executive's employment in either case prior to the
expiration of the Employment Term, upon 30 days written
notice by Executive or Merisel, as the case may be, to the
other party. Upon any such resignation or termination,
Merisel shall promptly pay Executive all salary and other
compensation, including amounts payable, if any, under
Section 3 and any unused vacation pay, earned by him through
the effective date of such termination or resignation.
5.2 Termination following a Sale. If there is a
Covered Termination (as defined below) within one year
following a Sale of the Company, then in addition to the
amounts due under Section 5.1:
(a) Company shall make a lump sum payment to Executive
within two weeks of the effective date of the Covered
Termination equal to (i) one and a half (1.5) times
Executive's annual base salary as then in effect plus (ii)
one and a half (1.5) times the average of the annual
performance bonus received by the Executive over the three
year period preceding the effective date of the Covered
Termination (excluding from such calculation however, any
performance bonus that was paid on a guaranteed basis and
was not earned as a result of achievement of financial/
performance criteria);
(b) Company will reimburse Executive for the cost of
Executive's COBRA payments under Company's health insurance
plans for a period of 18 months following such Covered
Termination. The amount of such reimbursement will be
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<PAGE>
grossed up so that Executive will receive an amount equal to
the COBRA payments, after taking into account all applicable
taxes; and
(c) Any remaining unvested portion of the Option shall
vest.
5.3 Termination by Company. If there is a Covered
Termination at any time other than within one year
following a Sale of the Company, then in addition to the
amounts due under Section 5.1:
(a) Company shall make a lump sum payment to Executive
within two weeks of the effective date of the Covered
Termination equal to (i) Executive's annual base salary as
then in effect plus (ii) the average of the annual
performance bonus received by the Executive over the three
year period preceding the effective date of the Covered
Termination (excluding from such calculation however, any
performance bonus that was paid on a guaranteed basis and
was not earned as a result of achievement of financial/
performance criteria); and
(b) Company will reimburse Executive for the cost of
Executive's COBRA payments under Company's health insurance
plans for a period of 12 months following such Covered
Termination. The amount of such reimbursement will be
grossed up so that Executive will receive an amount equal to
the COBRA payments, after taking into account all applicable
taxes.
.
5.4 Voluntary Resignation by Executive. In the event
that Executive resigns without Good Reason (as defined
below) prior to the expiration of the Employment Term,
then, at the time the resignation is effective, all benefits
and payments provided for hereunder shall terminate, and,
without limiting the foregoing, Executive shall not be
entitled to any severance payment other than amounts due
under Section 5.1.
5.5 Definitions. (a) A "Sale" of Merisel shall have
occurred if (i) any person, corporation, partnership, trust,
association, enterprise or group (collectively, an "Entity")
shall become the beneficial owner, directly or indirectly,
of outstanding capital stock of Merisel possessing at least
50% of the voting power (for the election of directors) of
the outstanding capital stock of Merisel, or (ii) there
shall be a sale of all or substantially all of Merisel's
assets or Merisel shall merge or consolidate with another
corporation and the stockholders of Merisel immediately
prior to such transaction do not own, immediately after such
transaction, stock of the purchasing or surviving
corporation in the transaction (or of the parent corporation
of the purchasing or surviving corporation) possessing more
than 50% of the voting power (for the election of directors)
of the outstanding capital stock of that corporation, which
ownership shall be measured without regard to any stock of
the purchasing, surviving or parent corporation owned by the
stock holders of Merisel before the transaction.
(b) "Covered Termination" shall mean any
termination of the Executive's employment by the Company
that occurs prior to completion of the Employment Term other
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<PAGE>
than as a result of (i) Termination for Cause, (ii)
Executive's death or permanent disability, or (iii)
Executive's resignation without Good Reason.
(c) A resignation by Executive shall be with "Good
Reason" if after a Sale of the Company, (A) there has been a
material reduction in Executive's job responsibilities from
those that existed immediately prior to the Sale, (B)
without Executive's prior written approval, the Company
requires Executive to be based anywhere other than the
Executive's then current location, or (C) a successor to all
or substantially all of the business and assets of the
Company fails to furnish Executive with the assumption
agreement required by Section 8 hereof.
(d) "Termination for Cause" shall mean if the Company
terminates Executive's employment for any of the following
reasons: Executive misconduct (misconduct shall mean
physical assault, falsification or misrepresentation of
facts on company records, fraud, dishonesty, creating or
contributing to unsafe working conditions, willful
destruction of company property or assets, or harassment of
another Associate by Executive); or Executive conviction for
or a plea of nolo contendere by Executive to a felony or to
any crime involving moral turpitude.
6. Mitigation. Executive shall have no obligation to
mitigate the amount of any payment provided for in this
Agreement by seeking employment or otherwise, unless the
Company in its sole discretion determines that Executive's
choice of new employer following a Covered Termination is
detrimental to the Company. Executive shall not be entitled
to payment hereunder if Executive's employment ceases as a
result of Executive's death or permanent disability.
7. Executive's Obligations.
7.1 Executive agrees that during the Employment Term
and for the Benefit Period (as defined below), Executive
will not directly or indirectly (a) engage in; (b) own or
control any debt equity, or other interest in (except as a
passive investor of less that 5% of the capital stock or
publicly traded notes or debentures of a publicly held
company); or (c) (1) act as director, officer, manager,
employee, participant or consultant to or (2) be obligated
to or connected in any advisory business enterprise or
ownership capacity with, any of Tech Data Corp., Ingram
Micro, Inc., Computer 2000 AG (C2000), Intelligent
Electronics, Inc., MicroAge, Inc., Inacom Corp., Compucom,
Entex Information Services, Inc. or Vanstar Corp. or with
any subsidiary, division or successor of any of them or with
any entity that acquires, whether by acquisition, merger or
otherwise, any significant amount of the assets or
substantial part of any of the business of any of them. As
used herein, "Benefit Period" shall mean either the 180 day
period following Executive's receipt of payment under
Section 5.3 or the 365 day period following Executive's
receipt of payment under Section 5.2.
7.2 During the term of this Agreement, or if longer,
the Benefit Period, Executive will not, on behalf of any
business enterprise other than the Company and its
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<PAGE>
subsidiaries, solicit the employment of or hire any person
that is or was employed by the Company or any of its
subsidiaries at any time on or after January 1, 1995.
7.3 Within two weeks of the effective date of a Covered
Termination, and prior to receiving any severance
compensation from Company in respect of such Covered
Termination, whether under this Agreement or otherwise,
Executive will execute and deliver to Company a Release and
a Confidentiality Agreement, each substantially in the form
provided to Executive with this Agreement, with such changes
as Company might request.
7.4 In the event of any breach by Executive of the
restrictions contained in this Agreement, Company shall have
no further obligation to compensate Executive hereunder and
Executive acknowledges that the harm to Company cannot be
reasonably or adequately compensated in damages in any
action at law. Accordingly, Executive agrees that, upon any
violation of such restrictions, Company shall be entitled to
preliminary and permanent injunctive relief in addition to
any other remedy, without the necessity of proving actual
damages.
8. Assumption Agreement. In the event of a Sale of the
Company, the Company will require any successor (whether
direct or indirect, by purchase, merger consolidation or
otherwise) to all or substantially all of the business and
assets of the Company, expressly to assume and agree to
perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it
whether or not such succession had taken place.
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<PAGE>
9. Miscellaneous. This Agreement shall be binding
upon and inure to the benefit of Company, its successors and
assigns and to Executive; provided that Executive shall not
assign any of Executive's rights or duties under this
Agreement without the express prior written consent of
Company. This Agreement sets forth the parties' entire
agreement with regard to the subject matter hereof. No
other agreements, representations, or warranties have been
made by either party to the other with respect to the
subject matter of this Agreement. This agreement may be
amended only by a written agreement signed by both parties.
This Agreement shall be governed by and construed in
accordance with the laws of the State of California. Any
waiver by either party of any breach of any provision of
this Agreement shall not operate as or be construed as a
waiver of any subsequent breach. If any legal action is
necessary to enforce the terms of this Agreement, the
prevailing party shall be entitled to reasonable attorneys'
fees in addition to any other relief to which that party may
be entitled.
WHEREOF, the parties hereto have executed this
Agreement, as of the day and year first written above.
MERISEL, INC.
By:_______________________
Dwight A. Steffensen, Chief Executive Officer
"EXECUTIVE"
__________________________
James E. Illson
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<PAGE>
SEPARATION AGREEMENT
THIS AGREEMENT entered into as of this ___ day of
August, 1996, by and between Merisel, Inc., a Delaware
corporation ("Merisel" or the "Company"), having its principal
offices at 200 Continental Boulevard, El Segundo, California
90245, and James L. Brill ("Brill").
RECITALS
WHEREAS, Brill and the Company are parties to that
certain Employment Agreement, dated as of October 3, 1995 (the
"Employment Agreement"), pursuant to which the Company is
obligated to provide certain benefits to Brill upon the
termination of his employment;
WHEREAS, Brill and the Company are parties to that
certain Split-Dollar Life Insurance Agreement, dated as of July
1, 1994 (the "Split-Dollar Agreement"), pursuant to which the
Company provided certain deferred compensation benefits to Brill;
WHEREAS, Brill and the Company are parties to that
certain Collateral Security Assignment Agreement, dated as of
July 1, 1994 (the "Security Agreement");
WHEREAS, Brill and the Company are parties to that
certain Merisel, Inc. Incentive Stock Option Agreement, dated as
of April 19, 1991, that certain Merisel, Inc. Non Qualified Stock
Option Agreement, dated as of April 19, 1991, that certain
Merisel, Inc. Non Qualified Stock Option Agreement, dated as of
May 27, 1992, that certain Merisel, Inc. Non Qualified Stock
Option Agreement, dated as of March 27, 1995, and that certain
Merisel, Inc. Non Qualified Stock Option Agreement, dated as of
June 9, 1995 (the "Option Agreements"), pursuant to which the
Company grants Brill the right to purchase shares of stock of the
company at certain set option prices;
WHEREAS, Brill has faithfully performed all obligations
required of him under his Employment Agreement, the Split-Dollar
Agreement and the Security Agreement;
WHEREAS, the Company acknowledges that it has no rights
under the Security Agreement since Brill has faithfully performed
all obligations secured thereby, and has no interest whatsoever
in the Policies (as that term is defined in the Security
Agreement) and the cash values thereof;
WHEREAS, Brill and the Company agree that Brill's
separation from the Company constitutes a CEO Covered Termination
as that term is defined in the Employment Agreement and a
Qualifying Termination as that term is defined in the Split
Dollar Agreement, and that Brill's separation from the Company is
not a termination for cause as defined by either agreement;
WHEREAS, Brill and the Company have agreed to provide
for the termination of Brill's employment by the Company and the
provision of services by Brill to the Company on a consultancy
basis on the terms and conditions set forth herein; and
WHEREAS, the Company has determined that because it
retains high confidence in Brill's judgment and veracity, such
consultancy services provide significant additional benefits to
the Company, and accordingly, the Company has decided to provide
additional benefits to Brill as provided herein.
<PAGE>
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises
and agreements contained herein, the parties hereby agree as
follows:
1. TERMINATION OF EMPLOYMENT
Effective as of September 3, 1996, Brill's employment
with the Company shall terminate (the "Termination Date"). Prior
to that date, Brill shall resign from all of his positions with
Merisel and its affiliates, including without limitation his
positions as a member of the Board of Directors (effective August
19, 1996), as well as Chief Financial Officer and Senior Vice
President, Finance, of Merisel (effective August 14, 1996).
2. CONSULTING
After the Termination Date, the Company
hereby agrees to continue to employ Brill, and Brill agrees
to continue to serve the Company as an independent
contractor on a consulting basis on the terms set forth in
this Agreement. In particular, Brill shall be available at
reasonable times and upon reasonable notice to provide
services to facilitate the Company's operations and the
conduct of Merisel and its subsidiaries' wholesale computer
distribution business (the "Business").
Brill shall perform his duties under
this Agreement personally and shall report to the Chief
Executive Officer of Merisel.
The Company shall make available to
Brill an office for his use and reasonable administrative
support to enable him to perform his duties hereunder.
3. TERM OF CONSULTANT AGREEMENT
Brill's employment as a consultant hereunder shall
begin the first business day after the Termination Date and,
unless terminated prior to that time pursuant to Section 9
hereof, shall continue until September 30, 1996 (such period
being the "Term").
4. COMPENSATION AND BENEFITS RELATED TO SEPARATION
In connection with Brill's separation
from the Company, the Company will pay to Brill the
following:
(i) an amount equal to Brill's "Base Salary"
(as defined in the Employment Agreement), one half of which shall
be paid in a lump sum payment on the Termination Date and one
half of which (the "Remaining Base Salary") shall be paid in a
lump sum on the closing date of the sale of the entities commonly
known as Merisel's European subsidiaries, Merisel Mexico and
Merisel Latin America (the "Closing"). If the Closing does not
occur before November 30, 1996, the Company shall pay the
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<PAGE>
Remaining Base Salary in equal monthly installments payable on
the last day of each month beginning on November 30, 1996 until
April 30, 1997, unless the Closing occurs during that period, in
which event, any unpaid balance of the Remaining Base Salary
shall be paid in a lump sum on the Closing date;
(ii) on the Termination Date, a lump sum
payment equal to the average of the annual performance bonus
received by Brill over the three year period preceding the
Termination Date; and
(iii) on the Termination Date, all salary and
other compensation including unused vacation pay, earned by him
through the Termination Date.
Any amounts owing to Brill under
Section 4(a) that remain unpaid, in the event that Brill
dies, shall be paid as a death benefit to Brill's estate on
the same terms. The Company shall deduct from all payments
paid to Brill under Section 4(a) any required amount for
social security, federal and state income tax withholding,
federal or state unemployment insurance contributions, and
state disability insurance or any other required taxes.
Unless Brill shall become eligible to
receive health insurance from another employer which is
substantially comparable to his current coverage, the
Company shall reimburse Brill for the cost of Brill's COBRA
payments under the Company's health insurance plans for a
one year period following the Termination Date. The amount
of such reimbursement shall be grossed up so that Brill will
receive an amount equal to the COBRA payments, after taking
into account all applicable taxes. To the extent any other
federal law regarding the transportability of health
insurance is implemented, this section shall be adjusted as
necessary to carry out the stated intentions of the parties
to reimburse Brill for the full cost of comparable health
insurance during the one year period following the
Termination Date or until Brill becomes eligible to receive
comparable health insurance from another employer.
Except for the payment under Section
4(a), Brill shall not be entitled to any bonus or other
incentive compensation or vacation pay or vacation benefits
during the Term.
The Company shall permit Brill to retain
as his property the car phone, lap top computer and home fax
machine previously provided to him for his use.
Under the Employment Agreement, the
Company previously agreed to vest all unvested options to
purchase the stock of the Company previously granted to
Brill (the "Unvested Options") as of the Termination Date.
Brill hereby waives such right and agrees that all of his
Unvested Options shall terminate as of the Termination Date.
This Agreement shall in no way affect Brill's vested
options, which he shall retain and which shall continue to
be exercisable for a period of three months after the
Termination Date, notwithstanding any other provision of the
Option Agreements.
The Company acknowledges and agrees that
Brill's separation from the Company constitutes a Qualifying
Termination (as that term is defined in the Split-Dollar
Agreement) and that, therefore, effective on the Termination
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Date, all rights of the Company with respect to the Policies
under the Split-Dollar Agreement and under the Security
Agreement will be terminated, the Company's security
interest and collateral assignment in the Policies and the
cash values thereof will be terminated and the Company's
rights in the Policies and the cash values thereof will be
released. Accordingly, the Company agrees that it will
execute, acknowledge and deliver any further documents and
instruments, and will take any further actions that may be
requested by Brill in order to carry out the purposes and
intent of this Agreement and effect the termination of the
Company's security interest in the Policies and the cash
values thereof. Such further actions shall include, without
limitation, providing to the insurer of the Policies notice
that such security interest and collateral assignment are
terminated and released and revoking any designations that
the Company may have made with respect to the Policies.
The Company agrees to reimburse Brill
for legal and accounting fees up to a total of $5,000.00.
The Company agrees to pay for
outplacement services to a maximum of $15,000 for Brill for
a period up to one year.
To the extent the Company maintains
Director's and Officer's liability insurance coverage for
its then existing Officer's and Director's, the Company
shall cause such insurance to cover Brill relating to any
occurrence during his tenure as an officer or director of
the Company, notwithstanding any limitation on the Company's
obligation to provide such coverage in the Indemnity
Agreement.
5. COMPENSATION AND BENEFITS RELATED TO CONSULTING
In full payment for the services to be
rendered under Section 2 during the Term of this Agreement,
Brill shall receive compensation of $2,000.00 per day
payable on the fifteenth day and thirtieth day of September.
The Company shall not deduct from the compensation paid to
Brill under this Section 5(a) any amounts for social
security, federal and state income tax withholding, federal
or state unemployment insurance contributions, and state
disability insurance. The Company shall not obtain workers'
compensation insurance for Brill. Brill shall pay all taxes
which may be due and arise out of the relationship between
the Company and Brill pursuant to Section 2 of this
Agreement.
Brill shall not incur any expenses in
rendering his services under Section 2 of this Agreement,
unless such expenses have received the prior approval of
Merisel's Chief Executive Officer. The Company shall from
time to time promptly reimburse Brill, upon receipt of
proper documentation, for all reasonable out-of-pocket pre-
approved expenses that are incurred by Brill in rendering
his advisory services.
6. PERFORMANCE
During the Term, Brill shall observe and comply with
all Company policies and all lawful and reasonable directions and
instructions by the Company.
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<PAGE>
7. INDEPENDENT CONTRACTOR; INDEMNIFICATION
It is understood and agreed, and it is
the intention of the parties hereto, that during the Term,
Brill shall be an independent contractor, and not the
employee, agent, joint venturer or partner of the Company
for any purpose whatsoever. Nothing contained in this
Agreement shall be construed to create an employment
relationship between Brill and the Company during the Term.
The terms of this Agreement shall be
independent of and shall not operate to terminate any of the
provisions of that certain Indemnity Agreement, dated as of
February 11, 1992 between Merisel and Brill, which Indemnity
Agreement shall continue in force and effect, except as
modified in Section 4(j) of this Agreement.
8. NON-COMPETITION AND RELATED COVENANTS
Brill agrees that for a period of one
year following the Termination Date, he will not directly or
indirectly (a) engage in; (b) own or control any debt or
equity, or other interest in (except as a passive investor
of less that 5% of the capital stock or publicly traded
notes or debentures of a publicly held company); or
(c) (1) act as director, officer, manager, employee,
participant or consultant to or (2) be obligated to or
connected in any advisory business enterprise or ownership
capacity with, any of Tech Data Corp., Ingram Micro, Inc.,
Inacom Corp., Computer 2000 AG (C2000), Intelligent
Electronics, Inc., MicroAge, Inc., Inacom Corp., Compucom,
Entrex Information Services, Inc. or Vanstar Corp. or with
any entity that or with any subsidiary, division or
successor of any of them or with any entity that acquires,
whether by acquisition, merger or otherwise, any significant
amount of the assets or substantial part of any of the
business of any of them (collectively, a "Prohibited
Entity"), provided however that the foregoing shall not
apply if Brill goes to work for a company which company is
subsequently acquired by any Prohibited Entity or if such
company acquires a Prohibited Entity.
For the one year period following the
Termination Date, Brill shall not solicit the employment of
any person that is employed by Merisel or any of its
subsidiaries at any time on or after the Termination Date.
In the event of any breach of the
restrictions contained in this Section 8, Brill acknowledges
that the harm to the Company cannot be reasonably or
adequately compensated in damages in any action at law.
Accordingly, Brill agrees that, upon any violation of such
restrictions, the Company shall be entitled to preliminary
and permanent injunctive relief in addition to any other
remedy, without the necessity of proving actual damages.
9. TERMINATION OF AGREEMENT
This Agreement shall terminate immediately at the
earliest of the following events: a finding by an Arbitrator
following the procedures set forth in Section 21 of fraud or
gross misconduct by Brill with respect to any fiduciary
obligations he has to the Company, or a finding by such
Arbitrator of a material violation of Section 8 hereof on the
part of Brill.
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<PAGE>
Upon such termination, the Company shall have no
further obligations under Section 2 of this Agreement.
10. SUCCESSORS AND ASSIGNS
This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their successors and assigns;
provided that Brill shall not assign any of his rights or duties
under this Agreement without the express prior written consent of
Merisel. The Company will require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and assets of the
Company, expressly to assume and agree to perform this Agreement
in the same manner and to the same extent that the Company would
be required to perform whether or not the succession had taken
place.
11. PRESERVATION OF CLAIMS BY BRILL SOLELY
FOR OFFSET AND AS AFFIRMATIVE DEFENSES
In the event the Company, its successors or assigns,
including, without limitation, any trustee or other entity with
the powers of a trustee in any bankruptcy of the Company, asserts
a claim against Brill which relates to this Agreement or to the
transactions contemplated hereby, then Brill shall be free to
assert any and all claims he may have against the Company, its
officers and agents, including, without limitation, any claims
that might otherwise have been released as part of the
transactions described in this Agreement, which claims are hereby
revived, but Brill may only assert such claims for the purpose of
asserting an affirmative defense or to effect an offset against
the claims being asserted against him. In no event may Brill
assert such claims in an attempt to obtain any other form of
affirmative relief from the Company.
12. ENTIRE AGREEMENT
This Agreement sets forth the entire agreement between
the parties with regard to the subject matter hereof. This
Agreement supersedes and replaces the terms of the Employment
Agreement, which shall be of no further force and effect. No
other agreements, representations, or warranties have been made
by either party to the other with respect to the subject matter
of this Agreement.
13. AMENDMENT
This Agreement may be amended only by a written
agreement signed by both parties.
14. CONFIDENTIALITY; RELEASE
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Brill agrees to execute and deliver to the Company a
Release and Brill and the Company agree to execute and deliver to
the other a Confidentiality Agreement, each in the form agreed to
by Brill and the Company.
15. COUNTERPARTS
This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but
which counterparts together shall constitute but one and the same
instrument. If any party elects to execute and deliver a
counterpart signature page by means of a facsimile transmission,
it shall deliver an original of such counterpart to the other
party within 5 business days of the facsimile date, but in no
event will the failure to do so affect in any way the validity of
the facsimile signature or its delivery.
16. APPLICABLE LAW
This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
17. WAIVER
Any waivers by either party of any breach of any
provision of this Agreement shall not operate as or be construed
as a waiver of any subsequent breach thereof.
18. ATTORNEYS' FEES
If any legal action is necessary to enforce the terms
of this Agreement, the prevailing party shall be entitled to
reasonable attorneys' fees in addition to any other relief to
which that party may be entitled.
19. SEVERABILITY
If any of the provisions of this Agreement is found or
deemed by a court of competent jurisdiction to be invalid or
unenforceable, such provision shall be considered severable from
the remainder of this Agreement and shall not cause the remainder
to be invalid or unenforceable.
20. PUBLIC ANNOUNCEMENTS
Except as required by applicable law, neither the
Company nor Brill shall make or issue or cause to be made or
issued any public dissemination concerning the subject matter of
this Agreement without the prior written consent of the other
party. No party shall make any statement which disparages the
personal or business reputation of any other party to this
Agreement.
21. ARBITRATION
Any dispute or controversy arising out of, or under, or
in connection with or in relating to this Agreement which cannot
be settled by the parties or their legal representatives shall be
determined and settled by arbitration conducted before a single
arbitrator in Los Angeles, California in accordance with the
rules of the American Arbitration Association then in effect.
The parties agree that the award rendered by the arbitrator shall
be final and binding upon the parties and their successors in
interest, and judgment thereon may be entered in any court of
competent jurisdiction. The arbitrator shall be mutually
selected by the parties. The cost of such proceeding shall be
paid by the party instigating the arbitration unless that party
is declared by said arbitrator to be substantially successful in
securing the award or determination sought by it, in which latter
event the cost of the proceedings shall be paid by the
unsuccessful party. The arbitrator may award reasonable
attorneys' fees to the substantially successful party.
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<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this
agreement as of the date first set forth above.
"COMPANY" or "MERISEL"
MERISEL, INC.
By:_____________________________
Dwight A. Steffensen, Chairman
and Chief Executive Officer
"BRILL"
By:_____________________________
James L. Brill
<PAGE>
Merisel, Inc., Contact: Susan T. Stillings
Director, Investor Relations
(310) 615-6868
For Immediate Release
Merisel, Inc. Completes the Sale of its European, Latin
American and Mexican
Operations to CHS Electronics, Inc.
El Segundo, Calif. (October 4, 1996) Merisel, Inc.
announced today that it has completed the previously
announced sale of substantially all of its European
operations plus its Latin American and Mexican businesses to
CHS Electronics, Inc. for approximately $154 million, in a
combination of cash and CHS Electronics' assumption of
Merisel's $34 million European asset securitization
facility. The purchase price is subject to adjustments based
on the audited closing balance sheets of the companies being
purchased.
Merisel applied $72.5 million of the cash received to
permanently reduce its outstanding senior bank debt and
senior privately issued debt. The Company's senior lenders
agreed to amend their lending agreements with the Company to
extend the final maturities of those agreements until
January 31, 1998. Under the terms of these amendments,
Merisel will make five amortization payments of $1.5 million
per month from February to June 1997. Merisel is also
working on a restructuring or refinancing of its publicly
traded debt, which, if successful, will not require the
Company to make any additional amortization payments on its
senior debt from June 1997 to January 1998.
"Closing this sale is another milestone that we have
achieved in our 1996 business plan," said Dwight A.
Steffensen, Merisel's chairman and chief executive officer.
"And, the extension of our senior debt facilities will give
Merisel's senior management team time to continue making
improvements to the business and focus on returning the
Company to profitability."
Merisel's remaining operations are its U.S. and Canadian
distribution businesses, and its ComputerLand Franchise and
Datago Aggregation businesses. In 1995, these units produced
$4.6 billion in revenue and $55 million in EBITDA (earnings
before interest, taxes and other non-cash depreciation and
amortization charges) before certain asset impairment and
other charges taken in the fourth quarter of 1995. After the
sale, Merisel's only remaining investment outside of North
America is a minority interest in a distribution business in
Russia.
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Merisel sold its distribution businesses in Austria, France,
Germany, Great Britain, Switzerland and The Netherlands,
including Merisel's European Distribution Center. Merisel
also sold an export operation that serves Latin America from
Miami, Florida, and a distribution operation in Mexico.
Merisel expects the book loss on the sale of these
operations to substantially increase its previously
anticipated third quarter net loss. Merrill Lynch & Co.
acted as financial advisor to Merisel.
Merisel, Inc. (NASDAQ:MSEL) is a leader in the distribution
of computer hardware, software and networking products. The
Company holds Fortune 500 status, with 1995 sales of $4.6
billion after giving effect of the asset sales to CHS
Electronics. Merisel distributes a full line of 25,000
products to more than 45,000 resellers in the U.S. and
Canada.
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