EXHIBIT 4.10
LIMITED WAIVER AND VOTING AGREEMENT
This Limited Waiver and Voting Agreement (the "Agreement"), dated as
of April 11, 1997, by and among Merisel, Inc. ("Merisel") and the undersigned
holders (each, a "Consenting Noteholder") of Merisel's 12 1/2% Senior Notes due
December 31, 2004 (the "Notes"), issued under an indenture dated October 15,
1994 between Merisel and the Bank of New York, as successor to NationsBank of
Texas, N.A., as Trustee (the "Indenture").
WITNESSETH:
WHEREAS, Merisel and the Consenting Noteholders desire to implement a
financial restructuring on the terms set forth on Appendix I hereto (the
"Financial Restructuring");
WHEREAS, in order to implement the Financial Restructuring, Merisel
has agreed to undertake an exchange offer and consent solicitation (the
"Exchange Offer" or "Exchange Offer/Consent Solicitation") of the holders of the
Notes (together with the Consenting Noteholders, the "Noteholders") or to file a
prepackaged Chapter 11 Plan of Reorganization (the "Prepackaged Plan") in
proceedings (the "Chapter 11 Proceedings") under Chapter 11 of Title 11 of the
United States Code (the "Bankruptcy Code"), in each case on terms consistent
with the terms of the Financial Restructuring; and
WHEREAS, in order to facilitate the implementation of the Financial
Restructuring, each of the Consenting Noteholders is prepared, on the terms and
subject to the conditions of this Agreement, to waive its right to receive the
interest payments due on June 30, 1997 and December 31, 1997 in respect of the
Notes held by it and to tender such Notes into the Exchange Offer and/or to vote
its claims in respect of such Notes in support of the Prepackaged Plan.
NOW THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Merisel and each Consenting Noteholder, hereby agree as follows:
1. Waiver. Effective as of the "Effective Date" (as defined in
Section 4 of this Agreement) and so long as no "Agreement Termination Event" (as
defined in Section 5 of this Agreement) shall have occurred, each of the
Consenting Noteholders hereby agrees (a) to waive (i) its right to receive the
interest payments due in respect of its Notes on June 30, 1997 and December 31,
1997 and (ii) any Event of Default (as defined in the Indenture) that may arise
from the non-payment thereof (the "Relevant Defaults"), and (b) not (i) to vote
its Notes in favor of an acceleration of the maturity of the Notes as a result
of the occurrence of the Relevant Defaults or (ii) to direct the Trustee under
the Indenture to accelerate the maturity of the Notes as a result of the
occurrence of the Relevant Defaults.
2. Exchange and Voting Agreement; Restriction on Transfer. Each of
the Consenting Noteholders represents that as of the date hereof it is the
beneficial owner of, and/or the investment adviser or manager for the beneficial
owners of (with the power to vote and dispose of such Notes on behalf of such
beneficial owners) the principal amount of Notes set forth opposite its
signature hereto (for each such Consenting Noteholder, the "Relevant Notes").
Effective as of the Effective Date, each of the Consenting Noteholders hereby
agrees that, subject to the conditions that (i) the disclosure statement in
respect of the Prepackaged Plan or the prospectus or information circular in
respect of the Exchange Offer/Consent Solicitation contains information in
respect of Merisel's business and
operations that is not materially inconsistent with the information heretofore
provided by Merisel to the Consenting Noteholders and (ii) the terms of the
Exchange Offer or the Prepackaged Plan are no less favorable to the Noteholders
than the terms of the Financial Restructuring, it shall (1) timely tender (and,
so long as no Agreement Termination Event shall have occurred, not withdraw) the
Relevant Notes into the Exchange Offer and (2) timely vote its claims in respect
of the Relevant Notes (and, so long as no Agreement Termination Event shall have
occurred, not revoke or withdraw such vote) in favor of the Prepackaged Plan.
In addition, each of the Consenting Noteholders hereby agrees that, so long as
this Agreement has not been terminated, it shall not sell, transfer or assign
any of the Relevant Notes, or any voting interest therein, unless such transfer
is in compliance with applicable securities laws, the transferee thereof agrees
in writing to be bound by all the terms of this Agreement (which writing may
include a trade confirmation issued by a broker or dealer, acting as principal
or as agent for the transferee, stating that such agreement is a term of such
transfer), and the transferor provides Merisel with a copy of such writing, in
which event Merisel shall be deemed to have acknowledged that its obligations to
the Consenting Noteholders hereunder shall be deemed to constitute obligations
in favor of such transferee, and Merisel shall confirm that acknowledgment in
writing. In addition, so long as the relief requested in any first day motions
filed by Merisel in the Chapter 11 Proceedings does not adversely affect the
value of the distributions to the Consenting Noteholders under the Prepackaged
Plan and is not otherwise inconsistent with the terms of the Financial
Restructuring, the Consenting Noteholders shall, from and after the Effective
Date, not object to the entry of orders granting such relief.
3. Merisel Agreements. Merisel hereby agrees (i) promptly after the
Effective Date to prepare a draft prospectus or information circular relating to
the Exchange Offer/Consent Solicitation; (ii) subject to receipt of any
applicable governmental approvals and confirmation from counsel to the
Consenting Noteholders that the Consenting Noteholders do not believe that (a)
the information contained in such circular in respect of Merisel's business and
operations is materially inconsistent with the information provided to such
Noteholders or their representatives prior to the date hereof or (b) the terms
of such Exchange Offer/Consent Solicitation are inconsistent with the terms of
the Financial Restructuring, to commence the Exchange Offer/Consent
Solicitation; and (iii) as promptly thereafter as possible, consistent with its
obligations under applicable law, to close the Exchange Offer/Consent
Solicitation or, in the event that the minimum tender condition stated therein
is not satisfied but holders of at least two thirds in principal amount of the
Notes and a majority in number of the holders of such Notes shall have tendered
their Notes into the Exchange Offer and voted their claims in respect of such
Notes in favor of the Prepackaged Plan, to commence chapter 11 proceedings and
take all such steps as shall be necessary and desirable to confirm the
Prepackaged Plan as promptly as practicable. In addition, as promptly as
practicable after the date hereof, Merisel shall solicit proxies from its
shareholders in favor of appropriate amendments to its Certificate of
Incorporation to provide for a sufficient increase in the number of authorized
shares of its common stock to implement the Financial Restructuring.
4. Conditions to the Effective Date. The agreements of the
Consenting Noteholders set forth in Sections 1 and 2 herein shall not become
effective unless and until the following conditions shall have first been
fulfilled (the date on which all such conditions are first fulfilled, the
"Effective Date"):
(a) Merisel and requisite majorities under each of the Operating
Company Debt Agreements (as hereinafter defined) shall have executed and
delivered an effective waiver of any default or event of default under the
Operating Company Debt Agreements arising out of (i) Merisel's
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execution, delivery and performance of its obligations under this Agreement;
(ii) the commencement of any collection action by any Noteholder that is not a
Consenting Noteholder arising out of the occurrence of the Relevant Defaults;
and (iii) if applicable, Merisel's failure to obtain an unqualified opinion from
its certified public accountants in respect of Merisel's financial statements
for the 1996 fiscal year (such defaults, the "Applicable Senior Defaults"); and
(b) Merisel's representations and warranties in Section 6 shall
be true and correct in all material respects as of the first date on which the
conditions set forth in clauses (a) above shall have been satisfied.
5. Termination of Agreement. The waiver set forth in Section 1 of
this Agreement as well as all other obligations of the Consenting Noteholders
hereunder shall terminate automatically upon the occurrence of any "Agreement
Termination Event" (as hereinafter defined), unless the occurrence of such
Agreement Termination Event is waived in writing by all of the Consenting
Noteholders. If any Agreement Termination Event occurs (and has not been
waived) at the time when court permission shall be required for a Consenting
Noteholder to change or withdraw (or cause to be changed or withdrawn) its votes
in favor of the Prepackaged Plan, Merisel shall not, subject to its fiduciary
duties as a debtor in possession, oppose any attempt by such Consenting
Noteholder to change or withdraw (or cause to be changed or withdrawn) such
votes at such time. Upon the occurrence of an Agreement Termination Event,
payments of accrued interest waived by the Consenting Noteholders under Section
1 of this Agreement shall become immediately due and payable in accordance with
the terms of the Indenture. An "Agreement Termination Event" shall mean any of
the following:
(a) On the earliest to occur of (i) the day immediately
preceding the first date on which the Exchange Offer/Consent Solicitation could
be closed under applicable law and pursuant to its terms and conditions, (ii)
the day immediately preceding the last date on which ballots in respect of the
Prepackaged Plan may be submitted, and (iii) October 31, 1997 (together with (i)
and (ii) above, the "Drop-Dead Date"), (1) Merisel and the other parties to the
Operating Company Debt Agreements (as hereinafter defined) shall have failed to
have executed and delivered an amendment thereto pursuant to which the maturity
of the indebtedness outstanding thereunder shall have been extended to no
earlier than January 31, 1999 on terms no more expensive for Merisel than those
set forth on Appendix II or (2) Merisel shall have failed to consummate a
refinancing of all of the indebtedness outstanding under the Operating Company
Debt Agreements on terms and conditions reasonably acceptable to the Consenting
Noteholders;
(b) The Exchange Offer/Consent Solicitation shall not have been
closed and the Notes tendered thereunder accepted for payment on or prior to
August 31, 1997 unless such failure is a result of the commencement of the
Chapter 11 Proceedings in connection with the filing of the Prepackaged Plan on
or prior to such date;
(c) In the event that the Chapter 11 Proceedings have been
commenced, the Prepackaged Plan shall not have been substantially consummated on
or prior to October 31, 1997;
(d) Merisel shall have made any change in the terms of the
Exchange Offer/Consent Solicitation after the commencement thereof or in the
Prepackaged Plan after the commencement of the Chapter 11 Proceedings such that
the terms thereof are no longer consistent with the Financial Restructuring,
unless such change is previously consented to by all of the
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Consenting Noteholders;
(e) After the Effective Date, there occurs any "Event of
Default" as defined under (i) the Revolving Credit Agreement, dated December 23,
1993, as amended and restated as of April 12, 1996, as subsequently amended,
between Merisel Americas, Inc. and Merisel Europe Inc. as Borrowers, Merisel,
Inc. as Guarantor, the Lenders party thereto and Citicorp USA, Inc. as Agent and
NationsBank of Texas, N.A. as Co-Agent (the "Revolving Credit Agreement"), (ii)
the Amended and Restated Senior Note Purchase Agreement, dated as of December
23, 1993, as subsequently amended, between the noteholders and Merisel Americas,
Inc., relating to $100,000,000 of Amended and Restated 8.58% Senior Notes due
June 30, 1997 (the "Senior Note Purchase Agreement"), (iii) the 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 (the
"Receivables Purchase and Servicing Agreement") or (iv) the Amended and Restated
Subordinated Note Purchase Agreement, dated as of December 23, 1993, as
subsequently amended, between the noteholders and Merisel Americas, Inc.,
relating to $22,000,000 of Amended and Restated 11.28% Subordinated Notes due
March 10, 2000 (the "Subordinated Note Purchase Agreement", and together with
the Revolving Credit Agreement, the Senior Note Purchase Agreement and the
Receivables Purchase and Servicing Agreement, the "Operating Company Debt
Agreements"), and such Event of Default has not been cured or waived by the
earliest of (1) the tenth day after the occurrence thereof, (2) the Drop-Dead
Date, and (3) the date of the acceleration of the maturity of the underlying
indebtedness under any of the Operating Company Debt Agreements;
(f) Merisel's Certificate of Incorporation shall not have been
amended by the requisite affirmative shareholder vote to provide for a
sufficient increase in the number of authorized shares of its common stock to
implement the Financial Restructuring on or prior to August 31, 1997; or
(g) There shall have occurred any material adverse change in the
business, assets, operations, or condition (financial or otherwise) of Merisel
and its subsidiaries, taken as a whole.
Upon the occurrence of any Agreement Termination Event, unless such
Agreement Termination Event is waived by each of the Consenting Noteholders,
this Agreement shall terminate and no party hereto shall have any continuing
liability or obligation to any other party hereunder, except as otherwise
provided in Section 15.6.
Representations and Warranties of Merisel. In order to induce the
Consenting Noteholders to enter into this Agreement, Merisel represents and
warrants to each Consenting Noteholder that the following statements are true,
correct and complete:
(a) Corporate Power and Authority. Merisel 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 this
Agreement;
(b) Authorization. The execution and delivery of this Agreement
and the performance of its obligations hereunder have been duly authorized by
all necessary corporate action by Merisel;
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(c) No Conflicts. The execution, delivery and performance by
Merisel of this Agreement do not and shall not (i) violate any provision of law,
rule or regulation applicable to it or any of its subsidiaries or the
Certificate of Incorporation or bylaws of Merisel or any of its subsidiaries or
(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
Merisel or any of its subsidiaries;
(d) Governmental Consents. The execution, delivery and
performance by Merisel of this Agreement do not and shall not require any
registration or filing 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, except such filings as may be necessary in connection with the
commencement of the Exchange Offer/Consent Solicitation and/or the commencement
of a proxy solicitation of Merisel's shareholders or the filing of the
Prepackaged Plan;
(e) Binding Obligation. This Agreement is the legally valid and
binding obligation of Merisel, enforceable against Merisel in accordance with
its 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; and
(f) Absence of Default. After giving effect to this Agreement,
no event has occurred and is continuing or shall result from the consummation of
the transactions contemplated by this Agreement that would constitute an Event
of Default under the Indenture or the Operating Company Debt Agreements (except
the Applicable Senior Default specified in clause (i) of the definition
thereof), or an event that with the passage of time, the giving or notice or
both would constitute an Event of Default under the Indenture or the Operating
Company Debt Agreements.
7. Further Acquisition of Securities. This Agreement shall in no
way be construed to preclude the Consenting Noteholders from acquiring
additional Notes of Merisel. However, any such additional Notes so acquired
shall automatically be deemed to be Relevant Notes and to be subject to the
terms of this Agreement. This Agreement shall in no way be construed to
preclude the Consenting Noteholders from acquiring any other securities of
Merisel. However, the Consenting Noteholders agree that they will vote (or
cause to be voted) any such additional securities in favor of the Prepackaged
Plan for so long as this Agreement remains in effect.
8. Amendments. This Agreement may not be modified, amended or
supplemented except in writing signed by Merisel and each of the Consenting
Noteholders.
9. Disclosure of Individual Holdings. Unless required by applicable
law or regulation, Merisel shall not disclose any Consenting Noteholder's
holdings of Relevant Notes without the prior written consent of such Consenting
Noteholders; and if such announcement or disclosure is so required by law or
regulation, Merisel shall afford the Consenting Noteholders a reasonable
opportunity to review and comment upon any such announcement or disclosure prior
to Merisel's making such announcement or disclosure. The foregoing shall not
prohibit Merisel from disclosing the approximate aggregate holdings of Notes by
the Consenting Noteholders as a group.
10. Impact of Appointment to Creditors Committee. Notwithstanding
anything herein to the contrary, in the event that any Consenting Noteholder is
appointed to and serves on a committee of creditors in Merisel's Chapter 11
proceedings, the terms of this Agreement shall not be construed so as to limit
such Consenting Noteholder's exercise (in its sole discretion) of its fiduciary
5
duties to any person arising from its service on such committee, and any such
exercise (in the sole discretion of such Consenting Noteholder) of such
fiduciary duties shall not be deemed to constitute a breach of the terms of this
Agreement (but the fact of such service on such committee shall not otherwise
affect the continuing validity or enforceability of this Agreement). The
foregoing shall not modify or limit the obligations of Consenting Noteholders to
vote their Relevant Notes or other Merisel securities or claims beneficially
owned by them and to take the other actions set forth in Section 2 hereof.
11. Indemnification Obligations. Merisel agrees that it shall fully
indemnify each Consenting Noteholder and its directors, officers, employees,
agents, and representatives (including, without limitation, Cleary, Gottlieb,
Xxxxx & Xxxxxxxx and Xxxxxx and Company) (all the foregoing persons, together
with the Consenting Noteholders, the "Indemnitees") against any claims,
liabilities, actions, suits, damages, fines, judgments or expenses (including
reasonable attorneys' fees), brought or asserted by anyone (other than Merisel
or any successor thereto with respect to asserted violations of this Agreement)
arising during the course of, or otherwise in connection with or in any way
related to, the negotiation, preparation, formulation, solicitation,
dissemination, implementation, confirmation and consummation of the Financial
Restructuring, including the Exchange Offer/Consent Solicitation or the
Prepackaged Plan, as the case may be, and the transactions contemplated hereby
and thereby; provided, however, that this indemnity shall not extend to any
claims asserted by a Consenting Noteholder against any other Indemnitee, and
provided, further, that the foregoing indemnification shall not apply to any
liabilities arising from the gross negligence or willful misconduct of any
Indemnitee. If any claim, action or proceeding is brought or asserted against
an Indemnitee in respect of which indemnity may be sought from Merisel, the
Indemnitee shall promptly notify Merisel in writing, and Merisel shall assume
the defense thereof, including the employment of counsel reasonably satisfactory
to the Indemnitee, and the payment of all expenses. The Indemnitee shall have
the right to employ separate counsel in any such claim, action or proceeding and
to participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of the Indemnitee unless (a) Merisel has agreed to pay
the fees and expenses of such counsel, or (b) Merisel shall have failed promptly
to assume the defense of such claim, action or proceeding and employ counsel
reasonably satisfactory to the Indemnitee in any such claim, action or
proceeding, or (c) the named parties to any such claim, action or proceeding
(including any impleaded parties) include both the Indemnitee and Merisel, and
the Indemnitee believes in the exercise of its business judgment and in the
opinion of its legal counsel that the joint representation of Merisel and the
Indemnitee will likely result in a conflict of interest (in which case, if the
Indemnitee notifies Merisel in writing that it elects to employ separate counsel
at the expense of Merisel, Merisel shall not have the right to assume the
defense of such action or proceeding on behalf of the Indemnitee). In addition,
Merisel shall not effect any settlement or release from liability in connection
with any matter for which the Indemnitee would have the right to indemnification
from Merisel, unless such settlement contains a full and unconditional release
of the Indemnitee or a release of the Indemnitee reasonably satisfactory in form
and substance to the Indemnitee.
12. Governing Law; Jurisdiction. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of New York,
without regard to any conflicts of law provision which would require the
application of the law of any other jurisdiction. By its execution and delivery
of this Agreement, each of the parties hereto hereby irrevocably and
unconditionally agrees for itself that any legal action, suit or proceeding
against it with respect to any matter under or arising out of or in connection
with this Agreement or for recognition or enforcement of any judgment rendered
in any such action, suit or proceeding, may be brought in any Federal or
0
Xxxxx xxxxx xx xxx Xxxxxxx xx Xxxxxxxxx, the City of New York. By execution and
delivery of this Agreement, each of the parties hereto hereby irrevocably
accepts and submits itself to the nonexclusive jurisdiction of each such court,
generally and unconditionally, with respect to any such action, suit or
proceeding. Notwithstanding the foregoing consent to New York jurisdiction,
upon the commencement of Merisel's Chapter 11 case, each of the parties hereto
hereby agrees that the bankruptcy court before which such case is pending shall
have exclusive jurisdiction of all matters arising out of or in connection with
this Agreement.
13. Specific Performance. It is understood and agreed by each of the
parties hereto that money damages would not be a sufficient remedy for any
breach of this Agreement by any party (other than a breach by Merisel of Section
14 hereof) and each non-breaching party shall be entitled to specific
performance and injunctive or other equitable relief as a remedy of any such
breach.
14. Fees and Expenses. Until the occurrence of an Agreement
Termination Event, Merisel shall continue to reimburse the Consenting
Noteholders for their out of pocket costs and expenses in respect of the fees
and expenses of Xxxxxx and Company and Cleary, Gottlieb, Xxxxx & Xxxxxxxx in
accordance with Merisel's respective agreements with each such firm. In
addition, in the event any party brings an action against any other party based
upon a breach by such other party of its obligations hereunder, the prevailing
party shall be entitled to all reasonable expenses incurred, including
reasonable attorneys' and financial advisers' fees in connection with such
action.
15. Survival. Notwithstanding the sale of the Relevant Notes in
accordance with Section 2 hereof or the termination of the Consenting
Noteholders' obligations hereunder in accordance with Section 5 hereof, the
agreements and obligations of Merisel in Section 9 and Sections 11 and 14
hereof shall survive such termination and shall continue in full force and
effect for the benefit of the Consenting Noteholders in accordance with the
terms hereof.
16. Headings. The Headings of the Sections, paragraphs and
subsections of this Agreement are inserted for convenience only and shall not
affect the interpretation hereof.
17. Successors and Assigns. This Agreement is intended to bind and
inure to the benefit of the parties and their respective successors, assigns,
heirs, executors, administrators and representatives. The agreements,
representations and obligations of the Consenting Noteholders under this
Agreement are several and not joint in all respects.
18. Prior Negotiations. This Agreement and Appendix 1 supersede all
prior negotiations with respect to the subject matter hereof.
19. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which shall
constitute one and the same Agreement.
20. No Third-Party Beneficiaries. Unless expressly stated herein,
this Agreement shall be solely for the benefit of the parties hereto and the
Consenting Noteholders who have entered into agreements with Merisel
substantially identical to this Agreement and no other person or entity shall be
a third-party beneficiary hereof.
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21. Consideration. It is hereby acknowledged by the parties hereto
that no consideration shall be due or paid to the Consenting Noteholders for
their agreement to vote in favor of the Exchange Offer/Consent Solicitation or
the Prepackaged Plan in accordance with the terms and conditions of this
Agreement other than Merisel's agreement to commence the Exchange Offer/Consent
Solicitation or file the Prepackaged Plan in accordance with the terms and
conditions of this Agreement.
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed and delivered by its duly authorized officer as of the
date first above written.
MERISEL, INC.
9
APPENDIX I
SUMMARY OF TERMS AND CONDITIONS
The following is intended for discussion and settlement purposes only.
MERISEL, INC.
12.5% SENIOR NOTES RESTRUCTURING
--------------------------------
DEBT TO EQUITY EXCHANGE: Subject to the terms and conditions hereinafter
set forth, the principal amount plus accrued
interest to closing date of the Merisel, Inc.
12.5% Senior Notes due 2004 (the "Senior
Notes") shall be exchanged for 80% of the fully
diluted shares of Merisel, Inc. ("Company")
common stock, $0.01 par value (the "Common
Stock").
WARRANTS: On the Exchange Date, the Company shall
distribute to shareholders of record on the
day immediately preceding the Exchange Date
two tranches of warrants having the following
terms and conditions (the "Warrants"):
(i) the Warrants shall be exercisable at any
time within the seven year period, commencing
on the Exchange Date;
(ii) the Warrants shall entitle the holders
thereof to purchase, in the aggregate, common
stock constituting 17.5% of the shares
outstanding after giving effect to the
conversion of Senior Notes into common stock;
and
(iii) the Warrants shall be issued in two
tranches of equal size exercisable at equity
valuations of $215 million and $265 million,
respectively.
CORPORATE GOVERNANCE: On the Exchange Date, the Board of Directors
of the Company shall be composed of members
acceptable to the Ad Hoc Committee of Holders
of Merisel, Inc. 12.5% Senior Notes (the
"Committee"), and the Company. No financial
advisor nor legal advisor will be named to the
Board.
1997 CHANGE OF CONTROL: Through December 31, 1997, any sale or agreement
to sell or change in control of the Company must
be approved by the holders of at least 85% of
the then outstanding common stock unless the
warrants remain outstanding or are convertible
into the acquiror's common stock pursuant to
customary anti-dilution provisions.
EXHIBIT I
PRO FORMA OWNERSHIP
Currently 30.1 Million Shares Outstanding
We anticipate a reverse split to reduce the total number of shares outstanding
after the transaction.
OWNERSHIP AT CLOSING AT $215 MILLION AT $265 MILLION
--------- ---------- --------------- ---------------
12.5% Senior Noteholders 120.3 shares 120.3 shares 120.3 shares
Percent Ownership 80.0% 73.6% 68.1%
Existing Shareholder Shares 30.1 shares 30.1 shares 30.1 shares
Tranche 1 Warrants 0 shares 13.2 shares 13.2 shares
Tranche 2 Warrants 0 shares 0 shares 13.2 shares
------------ --------------- ---------------
Total to Existing Shareholders 30.1 shares 43.2 shares 56.4 shares
Percent Ownership 20.0% 26.4% 31.9%
Total Shares Outstanding 150.4 shares 163.5 shares 176.7 shares
APPENDIX II
RESTRUCTURING PROPOSAL - SENIOR DEBT
TERMS
Issuer: No change.
Instrument: No change.
Principal Amount: No change.
Interest Rate: No change in 1997, increasing 1/2% per quarter
commencing January 31, 1998 and each quarter
thereafter.
Amortization: No change (except that the Issuer will make
reasonable efforts to apply for tax carryback
refunds, and all such tax refunds received will be
applied to amortize senior debt).
Maturity Date: January 31, 1999.
Optional Redemption: Redeemable at any time at par plus accrued
interest.
Modification Fee (in cash):
On Signing and Receipt of 67% Approval:
1.50%
At Closing: 2.00%
On January 31, 1998: 0.25%
On April 30, 1998: 0.50%
On July 31, 1998: 0.75%
RESTRUCTURING PROPOSAL - SUBORDINATED NOTES
TERMS
Issuer: No change.
Security: No change.
Principal Amount: No change.
Interest Rate: No change in 1997, increasing 1/2% per quarter
commencing January 31, 1998 and continuing for the
three quarters thereafter.
Amortization: No change.
Maturity Date: The earlier of (i) no change or (ii) within 90 days
after repayment in full of the senior debt.
Optional Redemption: No change.
Modification Fee: None.
OPERATING COMPANY DEBT COVENANTS
CHANGES IN CONJUNCTION WITH EXTENSION
($ in thousands)
CURRENT PROPOSED
COVENANT TEST TEST
1 Minimum Required Accounts Payable
Q1 1997 $345,000 $300,000
Q2 1997 345,000 300,000
Q3 1997 345,000 330,000
Q4 1997 500,000 350,000
Q1 1998 330,000
Q2 1998 360,000
Q3 1998 410,000
Q4 1998 410,000
2 Accounts Payable to Inventory 0.9x 0.9x Eliminate covenant of 1:1
every two quarters
3 EBITSDA Cumulative
--------
X0 0000 $ 11,000 $ 10,000
Q2 1997 12,400 20,000
Q3 1997 14,560 33,000
Q4 1997 19,280 50,000
Last Twelve Months
------------------
X0 0000 NA $ 56,000
Q2 1998 NA 60,000
Q3 1998 NA 64,000
Q4 1998 NA 68,000
4 EBITSDA/(I+S)
Q1 1997 0.83x NA Until restructuring completed
Q2 1997 0.89 NA
Q3 1997 1.13 1.30x
Q4 1997 1.44 2.00
Q1 1998 NA 1.30x
Q2 1998 NA 1.60
Q3 1998 NA 1.60
Q4 1998 NA 2.00
OPERATING COMPANY DEBT COVENANTS
CHANGES IN CONJUNCTION WITH EXTENSION
($ in thousands)
CURRENT PROPOSED
COVENANT TEST TEST
5 Capital Expenditures Cumulative
----------
Q1 1997 $ 4,000
Q2 1997 7,000
Q3 1997 11,000
Q4 1997 13,000 $ 18,000 Unused amount carried forward
Q1 1998 NA
Q2 1998 NA
Q3 1998 NA
Q4 1998 NA $ 27,000
6 Inventory Turnover 9.0x 8.0x
7 Minimum Unsecured Inventory $315,000
Q1 1997 $250,000
Q2 1997 250,000
Q3 1997 250,000
Q4 1997 300,000
Q1 1998 $250,000
Q2 1998 250,000
Q3 1998 300,000
Q4 1998 350,000
8 Audit Opinion Clean Opinion 1996 -- Waived
1997 -- Clean Opinion
OPERATING COMPANY DEBT COVENANTS
CHANGES IN CONJUNCTION WITH EXTENSION
($ in thousands)
COVENANT
9 Ability to participate in Compaq's Flexpaq program (Requires pledging of
Compaq inventory)
10 Lien covenant modified to permit capital leases up to $5.0 million for
purchases on credit versus cash for systems (e.g. SAP); computer equipment;
copiers, etc.
11 Debt covenant needs to be modified to permit the promissory note or capital
lease associated with the lease financing
12 Requirement to provide standard reports subject to further discussion with
the Noteholders
13 Subject to Noteholder decision the Company will pay for financial advisors
up to $150,000 per year for routine monitoring unless the Company is in
default. The Company will continue to pay reasonable legal fees and
expenses as required by the Revolving Credit Agreement and the Senior Note
Purchase Agreement.
14 Eliminate requirement in Canadian guaranty to maintain $20.0 million in
inter-company loan balance between Merisel Americas and Merisel Canada
15 Remove European and FAB debt covenants and references in the agreements
