STOCK SUBSCRIPTION AGREEMENT
By and Between
MERISEL, INC.
and
PHOENIX ACQUISITION COMPANY II, L.L.C.
Dated as of June 2, 2000
PAGE>
STOCK SUBSCRIPTION AGREEMENT
STOCK SUBSCRIPTION AGREEMENT (the "Agreement"), dated as of June 2, 2000, by and
between Merisel, Inc. a Delaware corporation (the "Company"), and Phoenix
Acquisition Company II, L.L.C., a Delaware limited liability company (the
"Investor").
W I T N E S S E T H:
WHEREAS, the board of directors of the Company has determined that it is
desirable and in the best interests of the Company (i) to create and authorize
300,000 shares of Convertible Preferred Stock, par value $.01 per share, of the
Company (the "Convertible Preferred Stock") out of the 1,000,000 authorized
shares of preferred stock of the Company (the "Preferred Stock") and (ii) to
issue and sell to the Investor an aggregate of 150,000 shares of the Convertible
Preferred Stock for a purchase price of $15,000,000 (the "Purchase Price") to be
paid by the Investor to the Company;
WHEREAS, capitalized terms used in this Agreement and not otherwise defined
shall have the meanings ascribed to them in Article I hereof;
NOW, THEREFORE, in order to implement the foregoing and in consideration of the
mutual representations, warranties, covenants and agreements contained herein
and for other good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
As used in this Agreement, the following terms shall have the meanings ascribed
to them below:
Affiliate. The term "Affiliate" shall mean, with respect to any specified
Person, any other Person, directly or indirectly, controlling or controlled by
or under direct or indirect common control with such specified Person. For the
purposes of this definition, "control," when used with respect to any Person,
means the power to direct the management and policies of such Person, directly
or indirectly, whether through the ownership of voting securities, by contract
or otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
Closing. The term "Closing" shall have the meaning specified in Section 2.2
hereof.
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Closing Date. The term "Closing Date" shall have the meaning specified in
Section 2.2 hereof.
Common Stock. The term "Common Stock" shall mean any shares
of common stock of the Company, par value $.01 per share.
Conversion Shares. Theterm "Conversion Shares" shall mean the Common Stock or
other securities issuable upon conversion of the Securities.
ERISA. The term "ERISA" shall mean the federal Employee Retirement Income
Security Act of 1974 or any successor statute, and the rules and regulations
thereunder.
Exchange Act. The term "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, or any similar federal statute then in effect, and a reference
to a particular section thereof shall be deemed to include a reference to the
comparable section, if any, of such similar federal statute.
Indenture. The term "Indenture" shall mean the indenture, dated as of October
15, 1994, pursuant to which the Notes were issued.
Notes. The term "Notes" shall mean the $125,000,000 aggregate principal amount
of 12-% Senior Notes due 2004 of the Company.
Person. The term "Person" shall mean any individual, corporation, partnership,
joint venture, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof or any
other entity.
Rule 144. The term "Rule 144" shall have the meaning specified in Section 3.3
hereof.
Securities. The term "Securities" shall mean the Convertible Preferred Stock
with the rights, privileges and preferences substantially as set forth in
Exhibit A to this Agreement.
Securities Act. The term "Securities Act" shall mean the Securities Act of 1933,
as amended, or any similar federal statute then in effect, and a reference to a
particular section thereof shall be deemed to include a reference to the
comparable section, if any, of any such similar federal statute.
Shares. The term "Shares" shall mean any shares of Common Stock, including,
without limitation, all shares of Common Stock issued in connection with any
employee benefit plan of the Company or its subsidiaries.
<PAGE>
ARTICLE 2
SUBSCRIPTION FOR AND ISSUANCE OF SECURITIES
Section 2.1 Subscription for and Issuance of Securities. Pursuant to the terms
and subject to the conditions set forth in this Agreement, the Investor, hereby
subscribes for and agrees to purchase and the Company hereby agrees to issue and
sell to the Investor on the Closing Date, the Securities at the Purchase Price.
Section 2.2 The Closing. The closing (the "Closing") of the transactions
contemplated by this Article II shall take place at the executive offices of the
Company at 200 Continental Boulevard, El Segundo, California, 90245, or at such
other place as shall be agreed to by the Company and the Investor. The date of
such Closing is June 15, 2000 or such other date as the parties agree upon,
hereinafter referred to as the "Closing Date."
(a) At the Closing, the Company shall deliver to the Investor, against delivery
of the Purchase Price, duly issued certificates representing the Securities.
(b) At the Closing, the Investor shall deliver to the Company, against delivery
to the Investor of certificates representing the Securities to be purchased by
the Investor, cash in the amount equal to the Purchase Price by wire transfer of
immediately available funds to the account of the Company designated by it to
the Purchaser at least three days prior to the Closing Date.
Section 2.3 Representations and Warranties of the Investor. The Investor
represents and warrants to the Company as follows:
(a) the Investor has full right, power and authority to execute and deliver this
Agreement, and to perform the Investor's obligations hereunder, and this
Agreement has been duly authorized, executed and delivered by the Investor and,
assuming due authorization, execution and delivery by the Company, is valid,
binding and enforceable against the Investor in accordance with its terms; and
(b) none of the execution, delivery and performance of this Agreement by the
Investor will conflict with or result in any material breach of any terms or
provisions of, or constitute a default under, any material contract, agreement
or instrument to which the Investor is a party or by which the Investor is
bound.
Section2.4 Representations and Warranties of the Company. The Company represents
and warrants to the Investor as follows:
(a) the Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, and the Company has delivered
to the Investor a full an d current copy of its Restated Certificate of
Incorporation and its By-Laws;
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(b) the Company has full corporate power and authority to execute and deliver
this Agreement and to perform its obligations hereunder, and this Agreement has
been duly authorized, executed and delivered by the Company and, assuming due
authorization, execution and delivery by the Purchaser, is valid, binding and
enforceable against the Company in accordance with its terms; and no consent,
approval, authorization or order of, or filing with, any governmental body or
agency is required for the performance by the Company of its obligations under
this Agreement;
(c) the Securities to be issued to the Investor pursuant to this Agreement have
been duly authorized and will be validly issued, fully paid and nonassessable.
The Conversion Shares issuable upon conversion of the Securities have been duly
and validly reserved for issuance, and upon issuance in accordance with the
Company's Restated Certificate of Incorporation, shall be duly authorized and
validly issued, fully paid and nonassessable;
(d) none of the execution, deliverance and performance of this Agreement by the
Company will conflict with the Company's Restated Certificate of Incorporation
or By-Laws or result in any material breach of any terms or provisions of, or
constitute a default under, any material contract, agreement or instrument to
which the Company is a party or by which the Company is bound;
(e) the issuance by the Company of the Securities pursuant to this Agreement,
and, upon the conversion of the Securities, the Conversion Shares, will not
violate any state securities or "blue sky" laws;
(f) after giving effect to the transactions contemplated by this Agreement, the
authorized capital stock of the Company will consist of 150,000,000 authorized
Shares and 1,000,000 shares of Preferred Stock, of which 80,309,046 Shares are
issued and outstanding as of May 31, 2000. All of the outstanding Securities,
and, upon the conversion thereof, the Conversion Shares, will be duly
authorized, and upon the issuance thereof will be validly issued, fully paid and
nonassessable and shall be free and clear of all liens, claims, options, charges
or other security interests or encumbrances.
(g) except for options issued under the Company's stock option plans, (x) the
Company has no outstanding securities convertible into or exchangeable for any
shares of capital stock, (y) the Company has no outstanding rights or options
for the purchase of, or agreements providing for the issue (contingent or
otherwise) of, or calls, commitments or claims of any character relating to, any
capital stock of the Company or any stock or securities convertible into or
exchangeable for such capital stock and (z) the Company is not subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of capital stock or any convertible securities, rights or
options of the type described in the foregoing clause (x) or (y).
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(h) Subject to the accuracy of Investor's representation in Section 3.6, the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby will not involve any prohibited transaction
within the meaning of ERISA; and
(i) the Company is primarily engaged, through a majority owned subsidiary or
subsidiaries, in the production or sale of a product.
Section 2.5 Agreements of the Company. The Company agrees with the Investor as
follows:
(a) the Company shall take all actions necessary to maintain its status as an
Operating Company and not to cause any of its assets or those of its
subsidiaries to be deemed Plan Assets with respect to the Company;
(b) the Company shall furnish to the Investor upon request a copy of the annual
audited financial statements of the Company and quarterly unaudited financial
statements of the Company in each case accompanied by management's discussion
and analysis of financial condition and results of operations prepared in
accordance with Item 303 of Regulation S-K promulgated under the Securities Act
or any comparable successor regulation; provided that, so long as the Company
files reports under the Exchange Act, delivery of such reports of the Company on
Form l0-K and Form l0-Q shall satisfy the provisions of this Section 2.5(b);
(c) the Company shall at all times preserve and keep in full force and effect
its corporate existence.
Section 2.6 Agreements of the Parties. The parties shall amend the Registration
Rights Agreement, made and entered into the 19th day of September, 1997, by and
among the Company, Merisel Americas, Inc., a Delaware corporation and wholly
owned subsidiary of the Company, and the Investor to include the Conversion
Shares in the definition of "Registrable Shares" so as to provide the
registration rights set forth in such Registration Rights Agreement for the
Common Stock and to provide for registration rights for the Convertible
Preferred Stock.
Section 2.7 Survival of Covenants. All covenants, agreements, representations
and warranties made herein or in any other document referred to herein or
delivered to a party pursuant hereto or in connection herewith shall survive the
execution and delivery to such party of this Agreement and the Closing hereunder
<PAGE>
ARTICLE 3
INVESTMENT REPRESENTATIONS OF THE INVESTOR
Section 3.1 Investment Intention; No Resales. The Investor represents and
warrants that it is acquiring the Securities and, upon conversion thereof, the
Conversion Shares, for investment, solely for its own account and not with a
view to, or for resale in connection with, the distribution or other disposition
thereof or with any present intention of distributing or reselling any
Securities and Conversion Shares, except for such distributions and dispositions
effected in compliance with the Securities Act and the rules and regulations
thereunder and all applicable state securities, or "blue sky," laws, The
Investor agrees and acknowledges that it will not, directly or indirectly,
offer, transfer, sell, assign, pledge, hypothecate or otherwise dispose of any
Securities and Conversion Shares, or solicit any offers to purchase or otherwise
acquire or take a pledge of any Securities and Conversion Shares, other than
transfers, sales, assignments, pledges, hypothecations or other dispositions
explicitly effected in compliance with the Securities Act and the rules and
regulations thereunder.
Section 3.2 Legend. (a) Each certificate representing Securities and Conversion
Shares shall bear the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE DISPOSED OF OR TRANSFERRED UNLESS REGISTERED UNDER
SUCH ACT OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. IN THE CASE
OF A TRANSFER OTHER THAN PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE ACT, THE HOLDER SHALL PROVIDE TO THE ISSUER HEREOF AN OPINION OF COUNSEL OR
OTHER EVIDENCE REASONABLY SATISFACTORY TO THE ISSUER AND ITS COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED.
(b) In the event that any Securities or Conversion Shares shall cease to be
restricted, the Company shall, upon the written request of the Investor, issue
to the Investor a new certificate evidencing such securities without the legend
required by Section 3.2(a) endorsed thereon. Before issuing a new certificate
omitting the legend set forth in Section 3.2(a), the Company may request an
opinion of counsel reasonably satisfactory to it to the effect that the
restrictions discussed in the legend to be omitted no longer apply to the
securities represented by such certificate.
Section 3.3 Stock Unregistered. The Investor acknowledges and represents that it
has been advised that (a) the Securities and Conversion Shares have not been
registered under the Securities Act; (b) if and when any of the Securities and
Conversion Shares may be disposed of without registration in reliance on Rule
144 promulgated under the Securities Act ("Rule 144"), such disposition may be
made only in limited amounts in accordance with the terms and conditions of such
Rule; (c) if the Rule 144 exemption is not available, the public offer or sale
of Securities and Conversion Shares without registration will require the
availability of an exemption under the Securities Act;
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(d) the restrictive legend in the form set forth in Section 3.2 hereof shall be
placed on the certificates representing the Securities and Conversion Shares;
and (e) a notation shall be made in the appropriate records of the Company
indicating that the Securities and Conversion Shares are subject to restrictions
on transfer and, if the Company should at some time in the future engage the
services of a securities transfer agent in connection with any of the Securities
and Conversion Shares, appropriate stop-transfer instructions will be issued to
such transfer agent with respect to such Securities and Conversion Shares.
Section 3.4 Rule 144. If any Securities and Conversion Shares are disposed of in
accordance with Rule 144 or any similar or successor rule or regulation, the
Investor shall deliver to the Company at or prior to the time of such
disposition an executed copy of Form 144 (if required by Rule 144) or of such
other form or forms required by any such similar or successor rule or regulation
and such other documentation as the Company may reasonably require in connection
with such disposition. Notwithstanding anything to the contrary contained in
this Section 3.4, the Company may deregister any of its securities under Section
12 of the Exchange Act if it is then permitted to do so pursuant to the Exchange
Act and the rules and regulations in effect thereunder.
Section 3.5 Additional Investment Representations. The Investor represents and
warrants that (a) the Investor is an "Accredited Investor," as such term is
defined in Regulation D of the Securities Act; (b) the Investor's financial
situation is such that it can afford to bear the economic risk of holding the
Securities and Conversion Shares for an indefinite period of time and suffer
complete loss of its investment in the Securities and Conversion Shares; (c) the
Investor's knowledge and experience in financial and business matters are such
that it is capable of evaluating the merits and risks of its investment in the
Securities and Conversion Shares; (d) in making the decision to invest in the
Securities and Conversion Shares hereunder, the Investor has relied upon
independent investigations made by the Investor and, to the extent believed by
the Investor to be appropriate, its representatives, including its own
professional, tax and other advisors; and (e) the Investor and the Investor's
representatives have been given the opportunity to examine all documents and to
ask questions of, and to receive answers from, the Company and its
representatives concerning the terms and conditions of the investment in the
Securities and Conversion Shares, and other than set forth herein no
representations have been made to the Investor or the Investor's representatives
concerning the Securities and Conversion Shares, the Company, its subsidiaries,
their business or prospects or other matters.
Section 3.6 ERISA. Investor represents either that (i) no part of the assets to
be used to purchase the Convertible Preferred Stock to be purchased by Investor
constitutes assets of any employee benefit plan (as defined in Section 3(3) of
ERISA) subject to Title I of ERISA or Section 4975 of the Internal Revenue Code
of 1986, as amended, (the "Code") or (ii) part of the assets to be used to
purchase the Convertible Preferred Stock to be purchased by Investor constitutes
assets of one or more employee benefit plans subject to Title I of ERISA or
Section 4975 of the Code and that use of such assets to purchase the Convertible
Preferred Stock will not constitute, cause or result in the occurrence of a
non-exempt prohibited transaction under ERISA or the Code by reason of the
application of a statutory or administrative exemption.
<PAGE>
ARTICLE 4
MISCELLANEOUS
Section 4.1 Binding Effect. The provisions of this Agreement shall be binding
upon the parties hereto and their respective heirs, legal representatives,
successors and assigns.
Section 4.2 Recapitalizations, Exchanges, Etc. Affecting Securities. The
provisions of this Agreement regarding Securities and Conversion Shares shall
apply to any and all shares of capital stock of the Company or any successor or
assign of the Company (whether by merger, consolidation, sale of assets,
reorganization or otherwise) which may be issued in respect of, in exchange for,
or in substitution of any of the Securities and Conversion Shares by reason of
any stock dividend, stock split, stock issuance, reverse stock split,
combination, recapitalization, reclassification, merger, consolidation or
otherwise. Subject only to the provisions of the preceding sentence, nothing
contained in this Agreement shall prohibit or restrict the Company from taking
any corporate action, including, without limitation, declaring any dividend
(whether in cash or stock) or engaging in any corporate transaction of any kind,
including, without limitation, any merger, consolidation, liquidation or sale of
assets.
Section 4.3 Waiver and Amendment. Any party hereto may waive its rights under
this Agreement at any time. Any agreement on the part of any such party to any
such waiver shall be valid only if set forth in an instrument in writing signed
by such party. This Agreement may be amended only by a written instrument signed
by the Company and the Investor.
Section 4.4 Notices. All notices and other communications provided for herein
shall be dated and in writing and shall be deemed to have been duly given when
delivered, if delivered personally, or when deposited in the mail if sent by
registered or certified mail, return receipt requested, postage prepaid and when
received if delivered otherwise, to the party to whom it is directed:
(a) If to the Company, to it at the following address:
Merisel, Inc.
200 Continental Boulevard
El Segundo, CA 90245
Attention: Dwight A. Steffensen
Telecopier: (310) 615-1234
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue, Suite 3400
Los Angeles, CA 90071
Attention: Joseph J. Giunta
Telecopier: (213) 687-5600
<PAGE>
(b) If to the Investor, to it at the following address:
Stonington Partners, Inc.
767 Fifth Avenue
48th Floor
New York, New York 10153
Attention: Albert J. Fitzgibbons III
Telecopier: (213) 339-8585
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Attention: Clare O'Brien, Esq.
Telecopier: (212) 848-7179
or at such other address as the parties hereto shall have specified by notice in
writing to the other parties.
Section 4.5 Applicable Law. The laws of the State of New York shall govern the
interpretation, validity and performance of the terms of this Agreement,
regardless of the law that might be applied under principles of conflicts of
law.
Section 4.6 Integration. This Agreement and the documents referred to herein or
delivered pursuant hereto which form a part hereof contain the entire
understanding of the parties with respect to its subject matter. There are no
restrictions, agreements, promises, representations, warranties, covenants or
undertakings with respect to the subject matter hereof other than those
expressly set forth herein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to its subject matter.
Section 4.7 The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning of terms contained herein.
Unless the context of this Agreement otherwise requires, (i) words of any gender
shall be deemed to include each other gender; (ii) words using the singular or
plural number shall also include the plural or singular number, respectively;
and (iii) references to "hereof," "herein," "hereby" and similar terms shall
refer to this entire Agreement.
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Section 4.8 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument, and it shall not be necessary in making
proof of this Agreement to produce or account for more than one such
counterpart.
Section 4.9 Expenses. The Company agrees to pay, on demand, the following
expenses: (i) payment by wire transfer of the reasonable fees and expenses of
Shearman & Sterling, special counsel to the Investor, arising in connection with
the preparation, negotiation and execution of this Agreement and the
consummation of the transactions contemplated hereby and (ii) all expenses
(including reasonable attorneys' fees and expenses) in connection with any
amendment or waiver (whether or not the same become effective) of this
Agreement.
Section 4.10 Severability. In the event that any one or more of the provisions,
paragraphs, words, clauses, phrases or sentences contained herein, or the
application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision, paragraph, word, clause, phrase or
sentence in every other respect and of the other remaining provisions,
paragraphs, words, clauses, phrases or sentences hereof shall not be in any way
impaired, it being intended that all rights, powers and privileges of the
parties hereto shall be enforceable to the fullest extent permitted by law.
Section 4.11 Further Assurances. The parties hereto shall from time to time
execute and deliver all such further documents and do all acts and things as the
other party may reasonably require to effectively carry out or better evidence
or perfect the full intent and meaning of this Agreement.
Section 4.12 Waiver of Jury Trial. Each of the Company and the Investor hereby
irrevocably waives all right to a trial by jury in any action, proceeding or
counterclaim, arising out of or relating to this Agreement or the transactions
contemplated hereby.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
MERISEL, INC.
______________________________________________________
By: Name: Dwight A. Steffensen
Title: Chief Executive Officer
PHOENIX ACQUISITION COMPANY II, L.L.C.
______________________________________________________
By: STONINGTON CAPITAL APPRECIATION 1994
FUND, L.P., its sole member
______________________________________________________
By: STONINGTON PARTNERS, L.P., its general partner
______________________________________________________
By: STONINGTON PARTNERS, INC., II, its general partner
______________________________________________________
By: Name: Albert J. Fitgibbons III Title: Partner
