AMENDMENT No. 6 TO PURCHASE AGREEMENT AND WAIVER
AMENDMENT No. 6 TO PURCHASE AGREEMENT AND WAIVER, dated as of
August 13, 1999, among MERISEL AMERICAS, INC. ("Merisel Americas"), MERISEL
CAPITAL FUNDING, INC. ("Merisel Capital Funding"), REDWOOD RECEIVABLES
CORPORATION ("Redwood") and GENERAL ELECTRIC CAPITAL CORPORATION ("GE Capital").
WHEREAS, Merisel Americas, as originator (in such capacity,
the "Originator") and Merisel Capital Funding are parties to an Amended and
Restated Receivables Transfer Agreement, dated as of September 27, 1996, as
amended by Amendment No. 1, dated as of November 7, 1996, Amendment No. 2, dated
as of December 19, 1997 and Amendment No. 3, dated as of July 31, 1998 (the
Transfer Agreement").
WHEREAS, Merisel Capital Funding, as seller (in such capacity,
the "Seller"), Redwood as purchaser (in such capacity, the "Purchaser"), GE
Capital, as operating agent (in such capacity, the "Operating Agent") and
collateral agent (in such capacity, the "Collateral Agent") and Merisel
Americas, as servicer (in such capacity, the "Servicer") are parties to an
Amended and Restated Receivables Purchase and Servicing Agreement, dated as of
September 27, 1996, as amended by Amendment No. 1, dated as of November 7, 1996,
Amendment No. 2, dated as of December 19, 1997, Amendment No. 3, dated as of
July 31, 1998, Amendment No. 4, dated as of February 22, 1999 and Amendment No.
5, dated as of May 12, 1999 (the "Purchase Agreement");
WHEREAS, the Seller and the Servicer have requested that the
Purchaser, the Operating Agent and the Collateral Agent waive and amend certain
financial covenants contained in the Purchase Agreement, subject to the terms
and conditions hereof.
WHEREAS, the parties hereto desire to amend the Purchase
Agreement (such amendments collectively referred to herein as these
"Amendments").
FOR GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND ADEQUACY
OF WHICH ARE HEREBY ACKNOWLEDGED, THE PARTIES HERETO, INTENDING TO BE LEGALLY
BOUND HEREBY, AGREE AS
FOLLOWS:
ARTICLE I
DEFINITIONS
All capitalized terms used herein, unless otherwise defined,
are used as defined in the Purchase Agreement.
ARTICLE II
AMENDMENT NO. 6 TO PURCHASE AGREEMENT
(a) Annex X of the Purchase Agreement is hereby amended by (i)
adding the following definition thereto:
"Investment Base Reserve" means an amount equal to
the product of 2.5% and Investment Base; and
(ii) amending and restating the definition of
"Availability" to read as follows:
"Availability" means, as of any date, the lesser of: (a) an
amount equal to: (i) Investment Base times (ii) Purchase Discount Rate minus
(iii) the Yield Discount Amount, the Dilution Reserve, and the Investment Base
Reserve and (b) the Maximum Purchase Limit then in effect.
(b) Section 5.02 of the Purchase Agreement is hereby amended
by moving the word "and" from the end of paragraph (i) to the end of paragraph
(j) and adding a new paragraph (k) to read as follows:
"(k) as soon as available after the end of each fiscal month,
a consolidated balance sheet of the Parent and its consolidated Subsidiaries as
of the end of such fiscal month and including the prior comparable period, and
consolidated statement of net income and retained earnings, and of cash flow, of
the Parent and its consolidated Subsidiaries for such fiscal month and for the
period commencing at the end of the previous fiscal year and ending with the end
of such fiscal month, (it being agreed that information shall be presented in
such form as Parent may utilize in the presentation of its monthly financial
reporting, as in effect from time to time.)
(c) Schedule 3 is hereby amended by:
(i) deleting the definition of "Daily Margin" and substituting therefor the
following definition of "Daily Margin":
"`Daily Margin'" means as of any date, a percentage
per annum (the "Reference Percentage") divided by 360, which
Reference Percentage shall be determined by reference to the
Daily Margin Fixed Charge Coverage Ratio for the four fiscal
quarters of the Parent ended on or most recently prior to such
date as set forth below:
MARGIN LEVEL
Daily Margin Reference
Fixed Charge Coverage Ratio Percentage
Level I 1.50%
Less than or equal to 0.40 x
Level II 1.25%
Greater than 0.40 x, but less than or equal to 0.50 x
Level III 1.00%
Greater than 0.50 x, but less than or equal to 0.75 x
Level IV 0.75%
Greater than 0.75 x, but less than or equal to 1.00 x
Level V 0.60%
Greater than 1.00 x
The Daily Margin shall be (i) calculated for the four
preceding fiscal quarter of the Parent (except for the fiscal
quarter ending on October 2, 1999 with respect to which such
calculation shall be made for the three most recent fiscal
quarters), and (ii) determined by reference to the Daily
Margin Fixed Charge Coverage Ratio in effect from time to
time; provided, that (A) no change in the Daily Margin shall
be effective until one Business Day after the date on which
the Operating Agent and the Purchaser receive financial
statements pursuant to Section 5.02(c) or Section 5.02(e) and
a certificate of the chief financial officer of the Parent
demonstrating the computation of the Daily Margin Fixed Charge
Coverage Ratio, (B) if the Operating Agent and the Purchaser
have not received the information described in clause (A) of
this proviso within ten days of the day required under Section
5.02(c), or Section 5.02(e), as the case may be, or if a
Termination Event or Incipient Event has occurred and is
continuing, the Daily Margin shall be determined by reference
to Level I for so long as such information has not been
received by the Operating Agent and Purchaser or such
Termination Event or Incipient Event continues; and (C) until
December 15, 1999, the Daily Margin shall be determined by
reference to Level I; and
(ii) deleting the definition of Daily Margin
Interest Coverage Ratio and replacing it with the following definition of "Daily
Margin Fixed Charge Coverage Ratio" (all references in the Purchase Agreement to
"Daily Margin Interest Coverage Ratio" shall from and after the date hereof be
deemed to refer to "Daily Fixed Charge Coverage Ratio"):
"Daily Margin Fixed Charge Coverage Ratio" means, with respect
to any Person and its consolidated subsidiaries for the
preceding four fiscal quarters (except for the fiscal quarter
ending October 2, 1999, with respect to which such calculation
shall be made for the three most recent quarters), the ratio
of (i) EBITDA to (ii) Fixed Charges (as defined in Exhibit H)
plus Capital Expenditures.
(d) Exhibit H of the Purchase Agreement is hereby amended and
restated in its entirety to read as follows by deleting the chart as it appears
in such Exhibit and substituting in lieu thereof the following:
FINANCIAL COVENANTS
(a) All covenants (i) shall be calculated on the basis of the
financial ratios and net worth percentages for the most recent four consecutive
fiscal quarters just completed, ending in each case with one of the quarters
specified in the tables below, except as provided in clause (b) below, and (ii)
shall be calculated on a quarterly basis. For purposes of determining the
covenants set forth in this Exhibit H, Funded Debt shall include any notes,
bonds, certificates or other interests issued in securitization of assets of the
Originator or any of its Subsidiaries and principal payments on Funded Debt
shall include any payments in respect of principal of such securities and Cash
Interest Expense shall include any payments or distributions in respect of
interest on such securities. The Fixed Charge Coverage Ratio, Minimum EBITDA and
Tangible Net Worth covenants with respect to any four fiscal quarters ending
before the Second Quarter of 2000 are to be calculated on a pro-forma basis
excluding the reserve of $21 million relating to the loss recorded by the Parent
in connection with the Turnberry Settlement (except to the extent of any net
insurance proceeds, if any, collected in connection with the Turnberry
Settlement).
(b) The Fixed Charge Coverage Ratio shall be calculated on the
basis of the following measurement periods
Period End Date Measurement Period
--------------- ------------------
April 3, 1999 First Quarter of 1999
July 3, 1999 First and Second Quarters of 1999
October 2, 1999 First, Second, and Third Quarters
of 1999
January 1, 2000 Most recent four quarters
and the last day of each fiscal quarter
thereafter
Covenant Covenant Level
I. Parent Fixed Charge Coverage Ratio (minimum)
Fourth Quarter of 1997 1.00 to 1.00
First Quarter of 1998 1.00 to 1.00
Second Quarter of 1998 1.00 to 1.00
Third Quarter of 1998 0.85 to 1.00
Fourth Quarter of 1998 0.70 to 1.00
First Quarter of 1999 0.46 to 1.00
Second Quarter of 1999 0.60 to 1.00
Third Quarter of 1999 0.40 to 1.00
Fourth Quarter of 1999 0.45 to 1.00
First Quarter of 2000 0.45 to 1.00
Second Quarter of 2000 0.55 to 1.00
Third Quarter of 2000 and thereafter 1.00 to 1.00
II. Seller Net Worth Percentage (minimum 15%
III. Parent Tangible Net Worth (minimum) $120,000,000 plus 50% of
(commencing 10/3/1999)1 Net Income for fiscal
quarter then ended
IV. Parent Minimum EBITDA Covenant Level
Measurement Period
Third Quarter of 1999 36,000,000
Fourth Quarter of 1999 35,000,000
First Quarter of 2000 36,000,000
Second Quarter of 2000 45,000,000
Third Quarter of 2000 and each quarter
thereafter 55,000,000
[END OF CHART]
Capitalized terms used above and not otherwise defined below
shall have the meanings specified in Annex X to the Purchase Agreement.
-----------------
1 Commencing with the fiscal quarter ending on October 3, 1999. Tangible Net
Worth on the last day of each fiscal quarter shall be not less than the minimum
Tangible Net Worth of the Parent required pursuant to this Covenant III for the
immediately preceding fiscal quarter, plus 50% of Net Income for the fiscal
quarter ended.
"Capital Expenditures" means all payments for any fixed assets
or improvements or for replacements, substitutions, or additions thereto, which
are required to be capitalized in accordance with GAAP, including, without
limitation, any such expenditures financed by the proceeds received from the
sale of Receivables under the Transfer Agreement, but excluding expenditures
under (i) Capital Leases and (ii) financed by the incurrence of Debt (other than
pursuant to the Inventory Facility).
"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) cash taxes.
"Fixed Charge Coverage Ratio" means with respect to any Person
and its consolidated subsidiaries, the ratio of (i) EBITDA to (ii) Fixed Charges
plus Capital Expenditures.
"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 extendable 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 Income" means, for any Person with respect to any period,
the consolidated net income 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.
"Tangible Net Worth" means, with respect to any Person and its
consolidated subsidiaries, assets minus liabilities.
(e) Exhibit J is amended and restated to read as follows:
(i) As of the last day of any fiscal month, the Net Dilution
Ratio shall not exceed 6.5%, (ii) the Default Ratio shall not exceed 2.5%, (iii)
the Delinquency Ratio shall not exceed 6.5%, and (iv) neither the Receivables
Collection Turnover nor the Gross Dilution Ratio shall exceed the levels set
forth below for the corresponding range of Sales Ratios:
Sales Ratio Receivables Collection Turnover Gross Dilution Ratio
25.0% or less 41 8.50%
25.1%-35.0% 42 8.75%
35.1%-45.0% 44 9.00%
Greater than 45.1% 46 9.50%
"Sales Ratio" shall mean the ratio (expressed as a percentage)
of (x) sales of merchandise in respect of (a) the "Merisel Open Computing
Alliance" plus(b) total retail sales, divided by (y) total sales of merchandise.
ARTICLE III
WAIVER OF DEFAULT UNDER
PURCHASE AGREEMENT
The Operating Agent, the Collateral Agent and the Purchaser
agree to waive any potential Termination Event resulting from the potential
breach of the Fixed Charge Coverage Ratio and the Interest Coverage Ratio
covenants contained in Exhibit H of the Purchase Agreement for the fiscal
quarter ended July 3, 1999.
ARTICLE IV
CONDITIONS PRECEDENT
The effectiveness of these Amendments and waiver is subject
to the conditions precedent that the Collateral Agent, the Operating Agent and
the Purchaser shall have received each of the following, in form and substance
satisfactory to each such party:
(a) A certificate of the Secretary of each of the Seller and
the Servicer, dated the date of these Amendments and certifying (i) that
attached thereto is a true and complete copy of a resolution of the Board of
Directors of the Seller or the Servicer, as the case may be, authorizing the
execution, delivery and performance of these Amendments, and all other documents
required or necessary to be delivered hereunder and that such resolution has not
been modified, rescinded or amended and is in full force and effect and (ii) as
to the incumbency and specimen signature of each Person's officers executing
these Amendments, and all other documents required or necessary to be delivered
hereunder.
(b) A certificate of an officer of each of the Seller and the
Servicer, dated the date of these amendments, certifying that each of the
representations and warranties made by the Seller and the Servicer in these
Amendments is true and correct in all material respects as of the date hereof.
(c) The opinion of counsel to the Seller, in form and
substance reasonably satisfactory to the Purchaser, the Operating Agent and the
Collateral Agent, as to certain matters including, without limitation, (i) the
valid existence and good standing of the Seller and Servicer, (ii) the power and
authority of the Seller and Servicer (or Originator, as the case may be) to
execute the Amendments, (iii) the due authorization, execution and delivery of
the Amendments by the Seller and Servicer (or Originator, as the case may be),
(iv) the enforceability of the Amendments against the Seller and Servicer (or
Originator, as the case may be), and (v) that the execution and delivery of the
Amendments (x) does not conflict with the organizational documents of the Seller
or Servicer and (y) does not violate or constitute a default under any material
financing agreements of the Seller or Servicer.
(d) An Officer's Certificate in form and substance
satisfactory to the Operating Agent to the effect that all of the
representations and warranties in the Transfer Agreement and Purchase Agreement
are true and correct in all material respects as of the date hereof after giving
effect to this Amendment No. 6.
(e) The Seller shall pay the fees and expenses of the
Purchaser incurred in connection with preparing these Amendments (including,
without limitation, reasonable legal fees and expenses).
(f) Confirmation from the Rating Agencies that this Amendment
No. 6 will not result in the qualification, withdrawal or downgrade of the
ratings assigned to the Commercial Paper.
ARTICLE V
SELLER'S AND SERVICER'S REPRESENTATIONS
AND WARRANTIES
Each of the Seller and the Servicer represents and warrants
that:
(a) these Amendments have been duly authorized, executed and
delivered pursuant to its corporation power;
(b) these Amendments constitute its legal, valid and binding
obligation subject to the effect of bankruptcy, insolvency, reorganization or
other similar laws affecting the enforcement of creditors' rights generally; and
(c) after giving effect to the amendments referred to herein,
there does not exist any Termination Event.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1 Confirmation of Purchase Agreement. Each of the
Seller and the Servicer agree that, except for the specific amendments and
waiver set forth herein, nothing herein shall be deemed to be a waiver or
amendment of any covenant or agreement contained in the Purchase Agreement and
each of the other documents executed in connection therewith are ratified and
confirmed in all respects and shall remain in full force and effect in
accordance with its terms. Each reference in the Purchase Agreement to "this
Agreement" and in each of the other documents to be executed in connection
therewith to the "Purchase Agreement," shall mean the Purchase Agreement as
amended by these Amendments and as each such agreement may be hereinafter
amended or restated. Nothing herein shall obligate the Seller, the Servicer, the
Purchaser, the Operating Agent or the Collateral Agent to enter into any future
amendment (whether similar or dissimilar).
SECTION 6.2 Waiver by the Seller and Servicer. Except for
manifest errors on the part of the Operating Agent, each of the Seller and the
Servicer hereby waives any claim, defense, demand, action or suit of any kind or
nature whatsoever against the Purchaser, the Operating Agent and the Collateral
Agent arising on or prior to the date hereof in connection with the Purchase
Agreement or the transactions contemplated thereunder.
SECTION 6.3 Counterparts. Delivery of an executed counterpart
of a signature page to these Amendments by facsimile shall be effective as
delivery of a manually executed counterpart of these Amendments. These
Amendments may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute one
and the same agreement.
SECTION 6.4 Governing Law. These Amendments shall be
governed by, and construed in accordance with, California law.
SECTION 6.5 Effective Date of Amendments. Upon the execution
and delivery of these Amendments by the parties hereto and the satisfaction of
the conditions precedent set forth herein, the Purchase Agreement shall be
amended by these Amendments, effective as of the date hereof.
IN WITNESS WHEREOF, the Seller, the Servicer, the Collateral
Agent, the Operating Agent and the Purchaser have caused these Amendments to be
duly executed by their respective authorized officers as of the date and year
first above written.
MERISEL CAPITAL FUNDING, INC.,
as Seller
By:___________________________
Title:
Name:
MERISEL AMERICAS, INC.,
as Originator and Servicer
By:___________________________
Title:
Name:
GENERAL ELECTRIC CAPITAL CORPORATION,
as Operating Agent and Collateral Agent
By:___________________________
Title:
Name:
REDWOOD RECEIVABLES CORPORATION,
as Purchaser
By:___________________________
Title:
Name:
