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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) JULY 15, 1997
MERISEL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 0-17156 95-4172359
(STATE OR OTHER JURISDICTION (COMMISSION (I.R.S. EMPLOYER
OF INCORPORATION OR FILE NUMBER) IDENTIFICATION NO.)
ORGANIZATION)
</TABLE>
<TABLE>
<S> <C>
200 CONTINENTAL BOULEVARD, 90245-0948
EL SEGUNDO, CALIFORNIA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (310) 615-3080
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ITEM 5. OTHER EVENTS
On July 15, 1997, Merisel, Inc. (the "Company") issued a press release
announcing its receipt of a proposal from Stonington Partners, Inc.,
("Stonington Partners") to make a $152 million equity investment in the
Company. The Stonington Partners offer, which is made on behalf of the firm's
$1.0 billion equity fund, would be subject to certain conditions, including
execution of a definitive agreement, shareholder approval and termination or
modification of the Company's existing agreement with the holders of its 12.5%
Senior Notes, which is also subject to shareholder approval. Management has
already contacted representatives of the noteholders to discuss the terms of
the Stonington Partners proposal, which is also subject to obtaining the
agreement of such noteholders to extend their interest payment waiver. There
can be no assurance that the Company will be able to obtain such a waiver. If
such noteholders do not support the Stonington Partners proposal, the Company
intends to proceed with a stockholder vote on its existing restructuring plan.
The press release is filed as Exhibit 99.1 hereto and the letter from
Stonington Partners setting forth the proposal is filed as Exhibit 99.2
hereto.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
99.1 Press release dated July 15, 1997 issued by the Company.
99.2 Letter dated July 14, 1997 addressed to the Company from Stonington
Partners, Inc.
2
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SIGNATURE
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
MERISEL, INC.
Date: July 15, 1997 By: /s/ Karen Tallman
___________________________________
Karen Tallman
Vice President, General Counsel
and Secretary
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EXHIBIT 99.1
FOR IMMEDIATE RELEASE
Contact: James Illson
Senior Vice President, Finance and CFO
(310) 615-1295
Karen Tallman
Vice President, General Counsel
(310) 615-1235
Investor Relations:
Charles Freedman
(310) 615-1376
MERISEL RECEIVES PROPOSAL FOR $152 MILLION EQUITY INVESTMENT
PROPOSAL WOULD REINSTATE 12.5% SENIOR NOTES,
RETIRE OPERATING COMPANY INDEBTEDNESS
El Segundo, Calif., (July 15, 1997)--Merisel, Inc. (NASDAQ:MSEL) announced
today that it has received a proposal from Stonington Partners, Inc., a New
York-based investment firm, to invest $152 million in order to acquire 70% of
the Company's common stock. Current stockholders would retain their shares
which would represent 30% of the then outstanding common stock after the
equity investment. Under the proposal, Merisel's $125 million of 12.5% Senior
Notes would remain outstanding in lieu of the exchange of such indebtedness
for equity as currently proposed under the previously announced restructuring.
The cash investment would be used to eliminate substantially all of the
senior and subordinated debt aggregating approximately $150 million held by
Merisel Americas, Inc., the Merisel subsidiary that operates the company's
North American distribution businesses. As of July 10, the company had $80.7
million in borrowings under its Revolving Credit Agreement, $53.8 million of
11.5% Senior Notes, and $13.2 million of privately placed Subordinated Notes.
Commenting on the proposal, Dwight A. Steffensen, Merisel chairman and chief
executive officer, stated, "Compared with our current debt restructuring plan
and exchange offer, the proceeds of the equity offer would eliminate nearly
all of the approximately $150 million of operating company debt and
shareholders would retain a greater equity interest than they would have
initially in the current restructuring. Moreover, the Stonington proposal
contemplates a significant deleveraging of the operating company and obtaining
a substantial bank line on terms that would provide greater working capital
availability than Merisel has had in the recent past.
"Due to the improved capitalization of the operating company and the
liquidity provided by a largely undrawn credit line, Merisel should be able to
implement improved purchasing arrangements that should translate into more
competitive programs for our value-added resellers and commercial dealer
accounts." Pending the establishment of the bank line, Stonington has agreed
to provide a six-month bridge financing facility of $50 million.
<PAGE>
The Stonington offer, which is made on behalf of the firm's $1.0 billion
equity fund, would be subject to certain conditions, including execution of a
definitive agreement, shareholder approval and termination or modification of
Merisel's existing agreement with the holders of its 12.5% Senior Notes, which
is also subject to shareholder approval. Management confirmed it has already
contacted representatives of the noteholders to discuss the terms of the
Stonington proposal, which is also subject to obtaining the agreement of such
noteholders to extend their interest payment waiver. If such noteholders do
not support the Stonington proposal, the company intends to proceed with a
stockholder vote on its existing restructuring plan.
Stonington has agreed to keep the offer available until September 4, 1997
subject to certain conditions, including the company granting exclusivity with
regard to third-party negotiations, which the Company has agreed to do. Under
that agreement, if a higher offer were to be submitted and accepted,
Stonington would be entitled to a termination fee and reimbursement of
expenses.
The complete terms of the proposal will be filed today with the Securities
and Exchange Commission as part of a Form 8-K.
Merisel, Inc. (NASDAQ:MSEL) is a leading distributor of computer hardware,
software and networking products. Through its subsidiaries, Merisel Americas,
Inc. and Merisel Canada, Inc., Merisel distributes a full line of 25,000
products to more than 45,000 resellers throughout the U.S. and Canada.
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EXHIBIT 99.2
Dwight A. Steffensen
Chairman and Chief Executive Officer
Merisel, Inc.
200 Continental Boulevard
El Segunda
California 90245-0984 July 14, 1997
Dear Dwight:
Stonington Partners, Inc. ("Stonington") is pleased to submit a proposal for
the acquisition, on the terms and conditions contained herein and the attached
summary of terms, by one or more newly formed corporations (the "Buyer") to be
wholly owned by Stonington Capital Appreciation 1994 Fund, L.P., of newly
issued shares of Merisel, Inc. (the "Company") constituting 70% of the issued
and outstanding shares of the Company after giving effect to the five-for-one-
reverse stock split contemplated in the attached term sheet (the "Shares").
1. The aggregate consideration to be paid by the Buyer to the Company for
the Shares would consist of $152 million to be paid in cash at the closing.
This purchase price would be contributed to the Buyer pursuant to a $152
million equity contribution by Stonington on behalf of the Stonington Capital
Appreciation 1994 Fund, L.P. In addition to its equity investment, as we
discussed, the Stonington Fund is prepared to provide to the Company a
revolving credit facility of $50 million to mature in 180 days or less. We
would expect to work with the Company to obtain an alternative revolving
credit facility for the Company before the closing of the purchase of the
Shares, or, in the event such alternative facility is not obtained by such
time, to refinance our facility prior to its maturity.
2. As reflected in the term sheet, our proposal is conditioned, among other
things, upon the Company or its operating subsidiaries entering into a stand-
by credit facility or remarketing agreement, satisfactory to us and the
Company, for the repurchase or remarketing, as applicable, of any of the
Company's 12 1/2% Senior Notes Due 2004 (the "Senior Notes") put to the
Company following the closing. Our proposal is also subject to (a) the
negotiation, execution and delivery of a mutually satisfactory Stock Purchase
Agreement and Registration Rights Agreement, in each case consistent with the
provisions of the term sheet and which we agree to negotiate in good faith,
(b) the absence of any change or effect that is, or would be reasonably likely
to be, materially adverse to the assets, liabilities, business, operations,
properties (including intangible properties), condition (financial or
otherwise) or results of operations of the Company and its subsidiaries, taken
as a whole, and (c) the absence of any pending or threatened litigation that
seeks to enjoin, restrain or prohibit the purchase by us of the Shares or to
impose limitations on our ability to exercise full rights of ownership with
respect to the Shares, that could have, or would be reasonably likely to
result in, a material adverse effect (as described in clause (b)) on the
Company, or that seeks material monetary damages from either the Company or us
in connection with the transactions contemplated by this letter.
3. Subject to the second next succeeding sentence, this letter is being
delivered on the condition that the existence of this letter, as well as its
contents (including the Stonington name and the purchase price), will not be
disclosed to any person without the prior consent of Stonington, and that it
will otherwise be treated as strictly confidential; provided that the Company
may discuss the terms of this letter with holders of the Senior Notes
identified to Stonington in advance of such discussions who agree to be bound
by the terms of this sentence. Our proposal will remain outstanding until 9:00
am, New York City time, on July 15, 1997, unless we receive, before such time,
a copy of this letter executed by the Company evidencing the Company's
agreement to be bound by the terms hereof. If such copy is received by us by
such time, our proposal will remain open until September 4, 1997, and the
Company may disclose the terms of our proposal, including the Stonington name,
by means of a press release satisfactory to us and our counsel.
Notwithstanding the foregoing, Stonington reserves the right to revoke this
letter and its contents or revise its proposal at any time prior to execution
of this letter by the Company.
<PAGE>
4. In consideration of our agreement to allow the public disclosure of our
proposal and to leave our proposal open until September 4, 1997, the Company
hereby agrees (a) to immediately cease discussions or negotiations with all
parties other than Stonington with respect to any alternative proposals and
(b) that it will not, and will not authorize any of its directors, officers,
employees or any investment banker, attorney or other advisor or
representative retained by the Company or any of its subsidiaries to, directly
or indirectly, solicit or initiate or knowingly encourage any inquiries or
proposals for (or that may reasonably be expected to lead to), or, except to
the extent required by the fiduciary duties of the Company's Board of
Directors (as advised by independent counsel), engage in discussions with or
provide any information to any person in connection with (i) the acquisition
of any stock, assets or businesses of the Company or its subsidiaries, (ii)
any merger or consolidation involving the Company or any of its subsidiaries
or (iii) any recapitalization or restructuring of the Company or any of its
subsidiaries regardless of whether any third party is involved; provided that
nothing in this paragraph 4 shall prevent the Company or its representatives
from discussing with the holders of the Senior Notes and the holders of loans
under the Revolving Credit Agreement, the Senior Notes and the Subordinated
Notes of Merisel Americas, Inc. the termination or amendment of the Limited
Waiver and Voting Agreement and the Limited Waiver and Agreement to Amend
between the Company and such holders.
5. As additional consideration for our agreement to allow the public
disclosure of our proposal and to leave our proposal open until September 4,
1997, the Company hereby agrees that if, in the exercise of its fiduciary
duties described above, (a) it provides information to, or enters into
negotiations with, any person in connection with any alternative transaction
(including, without limitation, a recapitalization or restructuring of the
Company or its subsidiaries) and (b) enters into a definitive agreement with
any person with respect to such alternative transaction (including, without
limitation, any transaction with the holders of the Senior Notes that is more
favorable to the Company than that contemplated by the Limited Waiver and
Voting Agreement, but excluding any transaction with the holders of Senior
Notes that is not more favorable to the Company than that contemplated by the
Limited Waiver and Voting Agreement) within six months of the date on which
the Company notifies us pursuant to paragraph 6 that it does not intend to
execute a definitive agreement with respect to the purchase of Shares, we will
be entitled to receive a fee of $2.5 million in cash, plus reimbursement for
all out-of-pocket costs and expenses, up to $500,000, incurred by us in
connection with the transactions contemplated by this letter, together with
the amount of any commitment fees paid by us at the request of the Company,
payable upon the execution of such agreement; provided, however, that if the
Company determines to proceed with an alternative transaction with the holders
of the Senior Notes involving the exchange of the Senior Notes for equity of
the Company that is not more favorable to the Company than that contemplated
by the Limited Waiver and Voting Agreement, the Company will not be obligated
to pay either the fee or expenses (including the amount of any such commitment
fees) referred to in this sentence, unless such determination is made more
than 14 days from the date of this letter, in which case the Company will be
bound to pay only such expenses (including the amount of any such commitment
fees). If the Company receives a proposal with respect to an alternative
transaction, including a transaction with the holders of the Senior Notes that
differs from that contemplated by the Limited Waiver and Voting Agreement, the
Company will promptly inform us of the receipt of such proposal together with
the terms and conditions thereof.
6. The agreements contained in paragraph 4 and 5 will terminate and be of no
further force and effect on the date that Stonington advises the Company in
writing that it is withdrawing its proposal as a result of the occurrence of
any of the events described in clauses (b) or (c) of paragraph 2. The
agreements contained in paragraph 4 will terminate and be of no further force
and effect on the date that the Company advises Stonington in writing, having
complied with the provisions of such paragraph, that it does not intend to
execute a definitive agreement with respect to the purchase of the Shares, and
the agreements contained in clause (b) of paragraph 5 shall survive in such
event in accordance with the terms thereof.
7. For purpose of paragraphs 5 and 6, an alternative transaction will not
include either the bankruptcy of the Company, other than pursuant to a plan of
reorganization for which the requisite acceptances have been obtained before
the commencement of the case, or a transaction after any such bankruptcy or
with a third party subsequent to the consummation of a transaction with the
holders of the Senior Notes. We also understand that we will be entitled to
receive only one fee, and to be reimbursed only once for our expenses,
pursuant to paragraph 5(b).
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8. This letter will be governed by the laws of the State of New York
(without regard to the conflicts of laws provisions thereof). Each of
Stonington and the Company has the requisite power and authority to execute
this letter, and this letter will constitute the binding agreement of each of
them enforceable against each of them in accordance with its terms.
If you have any questions concerning the terms of this proposal, please do
not hesitate to contact the undersigned at (212) 339-8550 or Stephen M. McLean
at (212) 339-8510.
If you are in agreement with the foregoing, please sign the enclosed copy
and return it to the undersigned.
Very truly yours,
/s/ Albert J. Fitzgibbons
-------------------------------------
Albert J. Fitzgibbons
Acknowledged and Agreed
as of the date first above written
MERISEL, INC.
By: /s/ Dwight A. Steffensen
-------------------------------
Name: Dwight A. Steffensen
Title: Chairman of the Board of
Directors and Chief
Executive Officer
3
<PAGE>
July 14, 1997
PROJECT C
SUMMARY OF SIGNIFICANT TERMS
Security: Shares of common stock, par value $0.05 per
share, of M., Inc. (the "Company")
Price: Aggregate price of $152 million, payable in cash
Structure: A wholly owned subsidiary of S will subscribe for
newly issued shares of common stock of the
Company constituting 70% of the issued and
outstanding shares of common stock, after giving
effect to a five-to-one stock split of the shares
of common stock, par value $0.01, of the Company,
pursuant to a Stock Purchase Agreement between
such subsidiary and the Company. S will provide a
funding commitment to such wholly owned
subsidiaries in the amount of the purchase price
as well as with respect to the bridge financing
described below subject to the conditions
contained in the Stock Purchase Agreement
Use of Proceeds: Payment of all amounts outstanding under the
Company's Revolving Credit Agreement, the Senior
Notes of M. Americas, Inc. and, at the option of
S, the Subordinated Notes of M. Americas, Inc.
Conditions to Execution of
Stock Purchase Agreement:
. Termination of the Limited Waiver and Voting
Agreement dated as of April 14, 1997 among the
Company and certain holders of its 12 1/2%
Senior Notes Due 2004, and agreement by such
holders to waive payment of the interest due
on such Notes on June 30, 1997, until the
earlier of (A) the closing of the transactions
contemplated by the Stock Purchase Agreement
and (B) October 31, 1997
. Amendment and restatement of the Limited
Waiver and Agreement to Amend among the
Company and certain of its subsidiaries and
certain holders of its loans pursuant to the
Revolving Credit Agreement, the Senior Notes
of M. Americas, Inc. and the Subordinated
Notes of M. Americas, Inc. so as to permit the
consummation of the transactions contemplated
by the Stock Purchase Agreement and to
continue to waive the defaults caused by the
events set forth in section 1 of such
agreement
Stock Purchase Agreement: This Agreement would contain the following
provisions:
. Customary representations and warranties by
the Company as to legal, financial, tax,
environmental, compensation and benefits and
operational matters
. Customary covenants of the Company with
respect to, among other things (i) the conduct
of the business of the Company and its
subsidiaries during the period between signing
and closing of the Agreement, (ii) the calling
of the special meeting of the stockholders of
the Company to approve the issuance of shares,
the required amendments to the Company's
certificate of incorporation and the adoption
of the 1997 Stock Option Plan, and (iii)
access to information
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. Covenants of S to obtain, within five business
days of the date of the Agreement, executed
commitment letters providing for (i) in the
event S will not itself provide a revolving
credit bridge facility to the operating
subsidiaries of the Company, a revolving
credit facility of $100 million to such
subsidiaries, and (ii) a standby credit
facility or remarketing agreement for the
repurchase or remarketing, as applicable, of
any 12-1/2% Senior Notes put to the Company
following the closing of the transactions
contemplated by the Agreement
. Closing conditions, including (i) truth and
correctness of representations and warranties
and compliance with covenants, (ii) absence of
material adverse effect on the business,
financial condition, results of operations or
assets of the Company and its subsidiaries,
(iii) absence of any litigation that could
have a material adverse effect on the Company
or its subsidiaries, that seeks material
damages against the Company or S in connection
with the transaction or that prevents the
consummation of the transactions contemplated
by the Stock Purchase Agreement, (iv) receipt
of all necessary stockholder approvals, (v) in
the event S will not itself provide a
revolving credit bridge facility to the
operating subsidiaries of the Company,
execution and delivery of a revolving credit
agreement, satisfactory to S and the Company,
between such subsidiaries and one or more
financial institutions for $100 million, (vi)
execution and delivery of a standby credit
facility or remarketing agreement for the
repurchase or remarketing, as applicable, of
any 12-1/2% Notes put to the Company following
the closing of the transactions contemplated
by the Agreement, (vii) receipt of all
required regulatory approvals, including HSR,
and all third party approvals the absence of
which would have a material adverse effect on
the Company and its subsidiaries, and (viii)
approval of inclusion of stock to be issued in
the NASDAQ national market system
. "Deal protection" provisions providing for
(i) no solicitation by the Company of
alternative transactions and no right to
provide information regarding the Company to
third parties or to engage in discussions with
third parties regarding alternative
transactions other than in response to a
proposal regarding an alternative transaction
and in order to comply with the fiduciary
duties of the Board of Directors of the
Company, as advised by counsel, (ii) no right
of the Company to modify its recommendation of
the transaction unless required to do so by
its fiduciary duties, as advised by counsel,
(iii) the ability of the Company to terminate
the Agreement if required to do so by its
fiduciary duties (as advised by counsel) and
after three business days notice to S,
(iv) payment by the Company of a fee of $5.5
million and out-of-pocket expenses of up to $1
millon to S in the event (A) the Agreement is
terminated by the Company in favor of an
alternative proposal or by S, so long as S has
not breached any material term of the
Agreement, after the Company has changed its
recommendation of the transaction in a manner
unfavorable to S or approved an alternative
proposal, (B) the requisite
5
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stockholder approval is not obtained and, at
the time of the stockholders' meeting, a
competing transaction has been publicly
announced, or (C) the requisite stockholder
approval is not obtained and, within one year
of such termination, an alternative transaction
is consummated involving the acquisition of at
least 25% of the assets or stock of the Company
or a merger, consolidation or similar
transaction involving the Company
In addition, in the event the transactions
contemplated by the Agreement are not
consummated as a result of the commencement of
a lawsuit against the Company or S seeking a
material amount of damages against either of
them in connection with the transaction,
provided that S has not breached any material
term of the Agreement, S would be reimbursed by
the Company for all its costs and expenses
incurred by it in connection with the
transaction. The Company will also reimburse S
for all costs and expenses incurred by it in
connection with any such litigation.
. Termination rights, including (i) by mutual
consent, (ii) if the closing has not occurred
within 120 days of the execution of the
Agreement, (iii) following a breach of
representations or warranties, or non
compliance with covenants, that, if capable of
being cured, has not been cured within 30 days
of notice, (iv) following the entry of a non-
appealable order prohibiting the consummation
of the contemplated transactions, or (v)
provided that S has not breached any material
term of the Agreement, following the
modification of the Company's recommendation or
its execution of a definitive agreement with
respect to an alternative transaction as
described above
Commitment Fee: Upon the closing of the Stock Purchase Agreement,
S will receive from the Company a fee of $3
million, payable in cash
Management/Employee
Arrangements:
The Company will propose to its stockholders the
adoption of the 1997 Stock Option Plan, and the
Board of Directors of the Company will determine,
pursuant to Section 7 of such plan, that the
consummation of the transactions contemplated by
the Agreement will not constitute a "change of
control" for purposes of such plan. Following the
effectiveness of the 1997 plan, no additional
options or other awards shall be granted under any
stock option plan other than the 1997 plan.
Options or awards with respect to shares of common
stock constituting 10% of the outstanding common
stock of the Company (after giving effect to the
five-to-one reverse stock split and the sale of
shares to S) will be available for grant under the
plan, but options and awards with respect to no
more than 8% of such shares (including all options
not cancelled under existing plans of the Company)
will be granted before the closing of the
transactions contemplated by the Agreement.
Tag-Along Rights:
So long as S or any of its affiliates beneficially
owns at least 40% of the issued and outstanding
shares of the Company, it will not sell more than
20% of such shares in one transaction or a series
of related transactions to an unaffiliated third
party without causing such third
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party to make available to the public
stockholders the opportunity to sell a
proportionate number of their shares on the same
terms and conditions as those on which S has
agreed to sell its shares. In making any such
offer, such third party will comply with the
relevant provisions of the Securities Exchange
Act and the Securities Act.
Registration Rights Agreement:
S will have the following rights:
. unlimited demand registration rights, except
that (a) S may not exercise such rights more
than twice in any 12 month period (subject to
appropriate black-out provisions), and (b) the
transferees of S will have no more than ten
demand registration rights in the aggregate
. unlimited piggy back registration rights,
subject to underwriter cut-backs
. the Company to pay all expenses associated
with the exercise of such demand rights, and
to provide customary indemnification to the
underwriter and the selling stockholder
. any registration statement to be effective for
up to 4 months
7
