Exhibit 10.1

 

NOTE PURCHASE AGREEMENT

 

NOTE PURCHASE AGREEMENT (the “Agreement”), dated as of February 4, 2013, by and
between  MERISEL, INC., a Delaware corporation, with headquarters located at 132
West 31st Street, 5th Floor, NY, NY 10001 (the “Company”), and SAINTS CAPITAL
GRANITE, L.P. ( “Buyer”).

RECITALS

 

A.     A special committee of the board of directors of the Company consisting
of an independent director (the “Special Committee”) has determined that it is
advisable and in the best interests of all stockholders, including the
stockholders that are not affiliates of the Company, for the Company to execute
and deliver this Agreement.

 

B.     The Company and Buyer are executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by Regulation
D (“Regulation D”) as promulgated by the United States Securities and Exchange
Commission (the “SEC”) under the Securities Act of 1933, as amended (the “1933
Act”).

 

C.     The Company has authorized a new series of 10% convertible notes, due
August 31, 2015 of the Company, in the form attached hereto as Exhibit A (the
“Notes”), which Notes shall be convertible into the Company’s common stock, $.01
par value per share (the “Common Stock”) (as converted, the “Conversion Shares”
and together with the Notes, the “Securities”), in accordance with the terms of
the Notes.

 

D.     Buyer wishes to purchase, and the Company wishes to sell, upon the terms
and conditions stated in this Agreement, Seven Hundred Fifty Thousand and 00/100
Dollars ($750,000.00) in principal amount of the Notes.

 

E.     On or about the date hereof, the parties hereto will execute and deliver
Amendment No. 2 to the Registration Rights Agreement, substantially in the form
attached hereto as Exhibit B (the “Registration Rights Amendment”), pursuant to
which (i) the Company, and Buyer will agree to amend that certain Registration
Rights Agreement, dated as of February 4, 2011 (as amended by the Registration
Rights Amendment, Amendment No. 1 to Registration Rights Agreement, dated as of
August 20, 2012, by and among the Company, Buyer and Saints Capital VI, L.P., a
Delaware limited partnership (“Saints VI”), and as the same may otherwise be
amended to the date hereof, the “Registration Rights Agreement”), by and between
the Company and Buyer (as successor to the interests of Saints VI, the successor
to the interests of Phoenix Acquisition Company II, LLC, a Delaware limited
liability company) and (ii) the Company will agree provide certain registration
rights with respect to the Securities under the 1933 Act and the rules and
regulations promulgated thereunder, and applicable state securities laws.

 

NOW, THEREFORE, the Company and Buyer hereby agree as follows:

 

 
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                1.             PURCHASE AND SALE OF NOTES.

 

(a)     Purchase of Notes.  Subject to the satisfaction (or waiver) of the
conditions set forth in Section 5 and Section 6 below, the Company shall issue
and sell to Buyer and Buyer agrees to purchase from the Company on the Closing
Date (as defined below), SEVEN HUNDRED FIFTY THOUSAND AND 00/100 DOLLARS
($750,000.00) in principal amount of Notes (the “Closing”).

 

(b)     Closing.  The date and time of the Closing (the “Closing Date”) shall be
12:00 p.m., New York City time, on the date hereof (or such later date as is
mutually agreed to by the Company and Buyer) after notification of satisfaction
(or waiver) of the conditions to the Closing set forth in Section 5 and Section
6 below at the offices of Herrick, Feinstein LLP, 2 Park Avenue, NY, New York
10016.

 

(c)     Purchase Price.  The aggregate purchase price for the Notes to be
purchased by Buyer at the Closing (the “Purchase Price”) shall be SEVEN HUNDRED
FIFTY THOUSAND AND 00/100 DOLLARS ($750,000.00).

 

(d)     Form of Payment.  On the Closing Date, (i)  Buyer shall pay the Purchase
Price to the Company for the Notes to be issued and sold to Buyer at the Closing
by wire transfer of immediately available funds in accordance with the Company’s
written wire instructions and (ii) the Company shall deliver to Buyer the Notes
(allocated in the principal amounts as Buyer shall request) which Buyer is then
purchasing hereunder duly executed on behalf of the Company and registered in
the name of Buyer or its designee.

 

                2.             BUYER’S REPRESENTATIONS AND WARRANTIES.

 

Buyer represents and warrants, as of the date hereof and as of the Closing Date,
that:

 

(a)     No Public Sale or Distribution.  Buyer is (i) acquiring the Notes with
its own funds and (ii) upon conversion of the Notes will acquire the Conversion
Shares issuable upon conversion of the Notes, in each case, for its own account
and not with a view towards, or for resale in connection with, the public sale
or distribution thereof, except pursuant to sales registered or exempted under
the 1933 Act.  Buyer is acquiring the Securities hereunder in the ordinary
course of its business.  Buyer does not presently have any agreement or
understanding, directly or indirectly, with any Person to distribute any of the
Securities.  Buyer currently intends to hold the Notes until conversion into
Conversion Shares or until the Maturity Date (as defined in the Notes). For
purposes of this Agreement, “Person” means an individual, a limited liability
company, a partnership, a joint venture, a corporation, a trust, an
unincorporated organization and a government or any department or agency
thereof.

 

(b)     Accredited Investor Status.  Buyer is an “accredited investor” as that
term is defined in Rule 501(a) of Regulation D.

 

 
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(c)     Reliance on Exemptions.  Buyer understands that the Securities are being
offered and sold to it in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and that the
Company is relying in part upon the truth and accuracy of, and Buyer’s
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of Buyer to acquire the
Securities.

 

(d)     Information.  Buyer and its advisors, if any, have been furnished with
all materials relating to the business, finances and operations of the Company
and materials relating to the offer and sale of the Securities that have been
requested by Buyer.  Buyer and its advisors, if any, have been afforded the
opportunity to ask questions of the Company.  Neither such inquiries nor any
other due diligence investigations conducted by Buyer or its advisors, if any,
or its representatives shall modify, amend or affect Buyer’s right to rely on
the Company’s representations and warranties contained herein.  Buyer
understands that its investment in the Securities involves a high degree of
risk.  Buyer has sought such accounting, legal and tax advice as it has
considered necessary to make an informed investment decision with respect to its
acquisition of the Securities.

 

(e)     No Governmental Review.  Buyer understands that no United States federal
or state agency or any other government or governmental agency has passed on or
made any recommendation or endorsement of the Securities or the fairness or
suitability of the investment in the Securities nor have such authorities passed
upon or endorsed the merits of the offering of the Securities.

 

(f)     Transfer or Resale.  Buyer understands that except as provided in the
Registration Rights Agreement: (i) the Securities have not been and are not
being registered under the 1933 Act or any state securities laws, and may not be
offered for sale, sold, assigned or transferred unless (A) subsequently
registered thereunder or (B)  Buyer shall have delivered to the Company an
opinion of counsel, in a generally acceptable form, to the effect that such
Securities to be sold, assigned or transferred may be sold, assigned or
transferred pursuant to an exemption from such registration, or (C)  Buyer
provides the Company with reasonable assurance that such Securities can be sold,
assigned or transferred pursuant to Rule 144 or Rule 144A promulgated under the
1933 Act, as amended, (or a successor rule thereto) (collectively, “Rule 144”);
(ii) any sale of the Securities made in reliance on Rule 144 may be made only in
accordance with the terms of Rule 144 and further, if Rule 144 is not
applicable, any resale of the Securities under circumstances in which the seller
(or the Person through whom the sale is made) may be deemed to be an underwriter
(as that term is defined in the 1933 Act) may require compliance with some other
exemption under the 1933 Act or the rules and regulations of the SEC thereunder;
and (iii) except as otherwise contemplated by the Registration Rights Agreement,
neither the Company nor any other Person is under any obligation to register the
Securities under the 1933 Act or any state securities laws or to comply with the
terms and conditions of any exemption thereunder. 

 

(g)     Legends.  Buyer understands that the certificates or other instruments
representing the Notes and, until such time as the Conversion Shares have been
registered under the 1933 Act, the stock certificates representing the
Conversion Shares, except as set forth below, shall bear any legend as required
by the “blue sky” laws of any state and a restrictive legend in substantially
the following form (and a stop-transfer order may be placed against transfer of
such stock certificates):

 

 
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THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR APPLICABLE STATE
SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE 1933 ACT, OR (B) AN OPINION OF COUNSEL, IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT (II) UNLESS
SOLD OR TRANSFERRED TO A “QUALIFIED INSTITUTIONAL BUYER” WITHIN THE MEANING OF
RULE 144A UNDER THE 1933 ACT OR (III) UNLESS SOLD PURSUANT TO RULE 144 OR RULE
144A UNDER SAID ACT. 

 

(h)     Validity; Enforcement.  This Agreement and the Registration Rights
Amendment have been duly and validly authorized, executed and delivered on
behalf of Buyer and shall constitute the legal, valid and binding obligations of
Buyer enforceable against Buyer in accordance with their respective terms,
except as such enforceability may be limited by general principles of equity or
to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
and other similar laws relating to, or affecting generally, the enforcement of
applicable creditors’ rights and remedies.

 

(i)     No Conflicts.  The execution, delivery and performance by Buyer of this
Agreement and the Registration Rights Amendment and the consummation by Buyer of
the transactions contemplated hereby and thereby will not (i) result in a
violation of the organizational documents of Buyer or (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which Buyer is a party or (iii) result in a violation of any law,
rule, regulation, order, judgment  or decree (including federal and state
securities laws) applicable to Buyer.

 

(j)     Transfer Limitations.  Without the prior written consent of the Company
(which will not be unreasonably withheld or delayed) Buyer acknowledges and
agrees that Buyer’s Notes may not be transferred in increments less than the
lesser of (i) $1,000,000 and (ii) the amount then outstanding under such Notes
(the “Minimum Transfer Amount”). Notwithstanding the provisions of this Section
2(j), Buyer may not transfer Notes unless the transferee agrees in writing to be
bound by all of the provisions of the Transaction Documents (defined below), and
it shall be a condition to any such transfer that any such transferee execute
and deliver appropriate documentation, in form and substance reasonably
satisfactory to the Company and the holders of at least 60% of the aggregate
number of Securities issued and issuable hereunder and under the Notes, to such
effect.

 

(k)     Residency.  Buyer is a resident of the State of California.

 

 
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                3.             REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

 

The Company represents and warrants to Buyer that, as of the date hereof and as
of the Closing Date:

 

(a)     Organization and Qualification.  Each of the Company and its
“Subsidiaries” (which for purposes of this Agreement means any joint venture or
any entity in which the Company, directly or indirectly, owns 50% or more of the
capital stock or an equity or similar interest) are entities duly organized and
validly existing in good standing under the laws of the jurisdiction in which
they are formed, and have the requisite power and authorization to own their
properties and to carry on their business as now being conducted.  Each of the
Company and its Subsidiaries is duly qualified as a foreign entity to do
business and is in good standing in every jurisdiction in which its ownership of
property or the nature of the business conducted by it makes such qualification
necessary, except to the extent that the failure to be so qualified or be in
good standing would not reasonably be expected to have a Material Adverse
Effect.  As used in this Agreement, “Material Adverse Effect” means any material
adverse effect on the business, properties, assets, operations, results of
operations, condition (financial or otherwise) or prospects of the Company and
its Subsidiaries, taken as a whole, or on the transactions contemplated hereby
or in the other Transaction Documents or by the agreements and instruments to be
entered into in connection herewith or therewith, or on the authority or ability
of the Company to perform its obligations under the Transaction Documents (as
defined below).  The Company has no Subsidiaries except as described in the SEC
Documents (defined below).

 

(b)     Authorization; Enforcement; Validity.  The Company has the requisite
power and authority to enter into and perform its obligations under this
Agreement, the Irrevocable Transfer Agent Instructions (as defined below), the
Registration Rights Amendment, the Notes and each of the other agreements
entered into by the parties hereto in connection with the transactions
contemplated by this Agreement (collectively, the “Transaction Documents”) and
to issue the Securities in accordance with the terms hereof and thereof.  The
execution and delivery of the Transaction Documents by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby,
including, without limitation, the issuance of the Notes, was recommended to the
Company’s Board of Directors by the Special Committee and duly authorized by the
Company’s Board of Directors (other than the directors that were duly appointed
by Buyer or its affiliates, each of whom abstained from participating in the
consideration of the terms and conditions of the Transaction Documents in their
capacities as directors,) and no further consent or authorization is required by
the Company, its Board of Directors or its stockholders.  This Agreement and the
other Transaction Documents have been duly executed and delivered by the
Company, and constitute the legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms,
except as such enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of applicable
creditors’ rights and remedies.

 

 
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(c)     Issuance of Securities.  The issuance of the Notes is duly authorized
and, upon issuance, shall be free from all taxes, liens and charges with respect
to the issue thereof.  As of the Closing, a number of shares of Common Stock
shall have been duly authorized and reserved for issuance which equals or
exceeds the maximum number of shares of Common Stock issuable upon conversion of
the Notes (without taking into account any limitations on the conversion of the
Notes).  Upon conversion in accordance with the Notes, the Conversion Shares
will be validly issued, fully paid and nonassessable and free from all
preemptive or similar rights, taxes, liens and charges with respect to the issue
thereof, with the holders being entitled to all rights accorded to a holder of
Common Stock. Assuming the accuracy of the representations and warranties of
Buyer contained herein, the offer and issuance by the Company of the Securities
is exempt from registration under the 1933 Act.

 

(d)     No Conflicts.  The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby (including, without limitation, the
issuance of the Notes and the reservation for issuance and issuance of the
Conversion Shares) will not (i) result in a violation of any certificate of
incorporation, certificate of formation, any certificate of designations or
other constituent documents of the Company or any of its Subsidiaries, any
capital stock of the Company or any of its Subsidiaries or bylaws of the Company
or any of its Subsidiaries or (ii) conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any material agreement, indenture or instrument to which the
Company or any of its Subsidiaries is a party, or (iii) result in a violation of
any law, rule, regulation, order, judgment or decree (including federal and
state securities laws and regulations and the rules and regulations of OTC Pink
Markets (commonly known as the “Pink Sheets”) (the “Principal Market”)
applicable to the Company or any of its Subsidiaries or by which any property or
asset of the Company or any of its Subsidiaries is bound or affected.

 

(e)     Consents.  Except for such consents, authorizations or orders that have
been previously received, neither the Company nor any of its Subsidiaries is
required to obtain any consent, authorization or order of, or make any filing or
registration with, any court, governmental agency or any regulatory or
self-regulatory agency or any other Person in order for it to execute, deliver
or perform any of its obligations under or contemplated by the Transaction
Documents, in each case in accordance with the terms hereof or thereof.  All
consents, authorizations, orders, filings and registrations which the Company is
required to obtain pursuant to the preceding sentence have been obtained or
effected on or prior to the Closing Date and the Company and its Subsidiaries
are unaware of any facts or circumstances that could reasonably be expected to
prevent the Company from obtaining or effecting any of the registration,
application or filings pursuant to the preceding sentence, except for (i)  the
filing of a notice of sale of securities on Form D with the SEC under Regulation
D and any related state securities filings, and (ii) the filing of a Current
Report on Form 8-K (or other corresponding disclosure in the items of the
Company’s quarterly report on Form 10-Q) describing the terms of the
transactions contemplated by the Transaction Documents in the form required by
the 1934 Act. 

 

(f)     Brokers, Finders, etc. The Company shall be responsible for the payment
of any financial advisory fees, or brokers’ commissions (other than for persons
engaged by Buyer or its investment advisor) relating to or arising out of the
transactions contemplated hereby. 

 

 
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(g)     No Integrated Offering.  None of the Company, its Subsidiaries, any of
their affiliates, and any Person acting on their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of any of
the Securities under the 1933 Act, whether through integration with prior
offerings or otherwise, or cause this offering of the Securities to require
approval of stockholders of the Company for purposes of the 1933 Act or any
applicable stockholder approval provisions, including, without limitation, under
the rules and regulations of any exchange or automated quotation system on which
any of the securities of the Company are listed or designated. 

(h)     SEC Documents; Financial Statements.  During the two (2) years prior to
the date hereof, the Company has timely filed all reports, schedules, forms,
statements and other documents required to be filed by it with the SEC pursuant
to the reporting requirements of the Securities Exchange Act of 1934, as amended
(the “1934 Act”) (all of the foregoing filed prior to the date hereof or prior
to the date of the Closing, and all exhibits included therein and financial
statements, notes and schedules thereto and documents incorporated by reference
therein being hereinafter referred to as the “SEC Documents”), other than (i)
the Form 10-Q for the quarter ended September 30, 2012 and (ii) the Form 8-K
current report(s) relating to (x) the appointment of Jeb Ball as Executive Vice
President and Chief Operating Officer of the Company on December 17, 2012, (y)
the results of the Company’s 2012 annual meeting of stockholders held on
December 20, 2012 and (z) the execution, on December 21, 2012, of an amendment
to the Revolving Credit and Security Agreement with PNC Bank, National
Association.  As of their respective filing dates, or, if amended or superseded
by a subsequent filing, as of the date of the last such amendment or superseding
filing, the SEC Documents complied in all material respects with the
requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed or, if amended or superseded by a
subsequent filing, as of the date of the last such amendment or superseding
filing, with the SEC, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.  As of their respective filing dates, or,
if amended or superseded by a subsequent filing, as of the date of the last such
amendment or superseding filing, the financial statements of the Company
included in the SEC Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto.  Such financial statements have been prepared in
accordance with generally accepted accounting principles, consistently applied,
during the periods involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto, or (ii) in the case of unaudited
interim statements, to the extent they may exclude footnotes or may be condensed
or summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). 

 

 
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(i)     Conduct of Business; Regulatory Permits.  Neither the Company nor its
Subsidiaries is in violation of any term of or in default under any certificate
of designations of any outstanding series of preferred stock of the Company, its
certificate of incorporation, as amended and as in effect on the date hereof
(the “Certificate of Incorporation”) or Bylaws as amended and as in effect on
the date hereof (“Bylaws”) or their organizational charter or certificate of
incorporation or bylaws, respectively.  Neither the Company nor any of its
Subsidiaries is in violation of any judgment, decree or order or any statute,
ordinance, rule or regulation applicable to the Company or its Subsidiaries, and
neither the Company nor any of its Subsidiaries will conduct its business in
violation of any of the foregoing, except for possible violations which could
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.  Without limiting the generality of the foregoing, the Company
is not in violation of any of the rules, regulations or requirements of the
Principal Market and has no knowledge of any facts or circumstances that would
reasonably lead to delisting or suspension of the Common Stock by the Principal
Market in the foreseeable future.  The Company and its Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses, except where the failure to possess such certificates,
authorizations or permits would not have, individually or in the aggregate, a
Material Adverse Effect, and neither the Company nor any such Subsidiary has
received any notice of proceedings relating to the revocation or modification of
any such certificate, authorization or permit. 

(j)      Equity Capitalization.  As of the date hereof, the authorized capital
stock of the Company consists of 80,000,000 shares of Common Stock, of which as
of the date hereof, 7,214,784 shares of Common Stock are issued and outstanding,
1,000,000 shares of preferred stock, of which as of the date hereof,
171,436.0818 shares are issued and outstanding, 1,300,000 shares of Common Stock
are reserved for issuance pursuant to the Company’s stock option and purchase
plans and zero shares are reserved for issuance pursuant to securities (other
than the aforementioned options and the Notes) exercisable or exchangeable for,
or convertible into, shares of Common Stock.  All of such outstanding shares
have been, or upon issuance will be, validly issued and are fully paid and
nonassessable.  Except as disclosed in the SEC Documents filed prior to the date
hereof or as contemplated by the Registration Rights Agreement, no stockholder
of the Company is entitled to any preemptive or similar rights to subscribe for
shares of the Company and no stockholder of the Company has any rights,
contractual or otherwise, to designate members of the Company’s board of
directors. Except as disclosed in the SEC Documents or as contemplated by the
Transaction Agreements, the Company is not a party to any stockholder, voting or
other agreements relating to the rights and obligations of the Company’s
stockholders. Except as disclosed in the SEC Documents filed prior to the date
hereof or as contemplated by the Transaction Agreements, no Person has the right
to require the Company to register any securities for sale under the 1933 Act.

 (k)     Absence of Litigation.  There is no action, suit, proceeding, inquiry
or investigation before or by the Principal Market, any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company, threatened against or affecting the Company or any of
its Subsidiaries, the Common Stock or any of the Company’s Subsidiaries or any
of the Company’s or its Subsidiaries’ officers or directors, whether of a civil
or criminal nature or otherwise, relating to the issuance of the Securities.

 

 
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(l)     Subsidiary Rights.  Except as disclosed in the SEC Documents, none of
the Company or any of its Subsidiaries (i) has issued or is bound by any
outstanding subscriptions, options, warrants, calls, convertible or exchangeable
securities, rights, commitments or agreements of any character providing for the
issuance or disposition of any shares of capital stock, voting securities or
equity interests of any Subsidiary of the Company, and (ii) there are no
outstanding obligations of the Company or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any shares of capital stock, voting securities or
equity interests (or any options, warrants or other rights to acquire any shares
of capital stock, voting securities or equity interests) of any Subsidiary of
the Company (other than any such obligation to the Company or any Subsidiary of
the Company arising from time to time in connection with any internal
restructuring or reorganizations of the Company’s Subsidiaries). 

 

                4.             COVENANTS.

 

(a)      Best Efforts.  Each party shall use its best efforts timely to satisfy
each of the covenants and the conditions to be satisfied by it as provided in
Section 5 and Section 6 of this Agreement. 

(b)     Securities Laws.  The Company shall timely make all filings and reports
relating to the issuance of the Securities required under applicable securities
laws, including filing a notice of sale of securities on Form D with the SEC
under Regulation D and complying with any applicable “blue sky” laws of the
states of the United States. The Company shall pay all fees and expenses in
connection with satisfying its obligations under this Section 4(b). Neither the
Company nor any of its Subsidiaries shall sell, offer for sale or solicit offers
to buy or otherwise negotiate in respect of any “security” (as defined in the
1933 Act) that could be integrated with the issuance of the Notes in a manner
that could require the registration of the Notes under the 1933 Act.

(c)     [Intentionally omitted].

 

(d)     Use of Proceeds.  The Company will use the proceeds from the sale of the
Securities to fund general corporate and working capital needs.

 

(e)     Register. The Company shall maintain at its principal executive offices
(or such other office or agency of the Company as it may designate by notice to
each holder of Securities), a register for the Notes in which the Company shall
record the name and address of the Person in whose name the Notes have been
issued (including the name and address of each transferee), the principal amount
of Notes held by such Person, the number of Conversion Shares issuable upon
conversion of the Notes held by such Person.  The Company shall keep the
register open and available at all times during business hours for inspection of
any Buyer or its legal representatives.

 

(f)     [Intentionally omitted]. 

 

 
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(g)     Fees.  The Company shall reimburse Buyer or its designee(s) (in addition
to any other expense amounts paid to any Buyer prior to the date of this
Agreement) for all reasonable costs and expenses, incurred in connection with
the transactions contemplated by the Transaction Documents (including all
reasonable legal fees and disbursements in connection therewith, documentation
and implementation of the transactions contemplated by the Transaction Documents
and due diligence in connection therewith), up to a maximum reimbursement of
$50,000.00 which may be withheld by Buyer from its Purchase Price at the
Closing. 

 

(h)     Pledge of Securities.  The Company acknowledges and agrees that the
Securities may be pledged by an Investor in connection with a bona fide margin
agreement or other loan or financing arrangement that is secured by the
Securities.  The pledge of Securities shall not be deemed to be a transfer, sale
or assignment of the Securities hereunder, and no Investor effecting a pledge of
Securities shall be required to provide the Company with any notice thereof or
otherwise make any delivery to the Company pursuant to this Agreement or any
other Transaction Document, including, without limitation, Section 2(f) of this
Agreement; provided that an Investor and its pledgee shall be required to comply
with the provisions of Section 2(f) of this Agreement in order to effect a sale,
transfer or assignment of Securities to such pledgee.  The Company hereby agrees
to execute and deliver such documentation as a pledgee of the Securities may
reasonably request in connection with a pledge of the Securities to such pledgee
by an Investor.

 

(i)     Additional Notes.  So long as Buyer beneficially owns any Notes, the
Company will not issue any Notes (other than to Buyer as contemplated hereby)
and the Company shall not issue any other securities that would cause a breach
or default under the Notes. 

 

(j)     Reservation of Shares.  So long as Buyer owns any Securities, the
Company shall take all action necessary to at all times have authorized, and
reserved for the purpose of issuance, no less than the number of shares of
Common Stock (the “Required Reserved Amount”) issuable upon conversion of the
Notes pursuant to the terms of the Notes (without taking into account any
limitations on the conversion of the Notes). If at any time the number of shares
of Common Stock authorized and reserved for issuance is not sufficient to meet
the Required Reserved Amount, the Company will promptly take all corporate
action necessary to authorize and reserve a sufficient number of shares,
including, without limitation, calling a special meeting of stockholders to
authorize additional shares to meet the Company’s obligations under this Section
4(j).

 

(k)     Conduct of Business.  The business of the Company and its Subsidiaries
shall not be conducted in violation of any law, ordinance or regulation of any
governmental entity, except where such violations would not result, either
individually or in the aggregate, in a Material Adverse Effect.

 

(l)     No Going Private Transaction. Buyer hereby agrees not to initiate,
directly or indirectly, any “going private” or “Rule 13e-3 transaction”, as such
term is defined in Rule 13e-3 promulgated under the 1934 Act at any time prior
to March 31, 2013.

 

 
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                5.             CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL.

 

The obligation of the Company hereunder to issue and sell the Notes to Buyer at
the Closing is subject to the satisfaction, at or before the Closing Date, of
each of the following conditions, provided that these conditions are for the
Company’s sole benefit and may be waived by the Company at any time in its sole
discretion by providing Buyer with prior written notice thereof:

 

(a)     Buyer shall have executed each of the Transaction Documents to which it
is a party and delivered the same to the Company.

 

(b)     Buyer shall have delivered to the Company the Purchase Price (less
amounts withheld pursuant to Section 4(g) above) for the Notes being purchased
by Buyer at the Closing by wire transfer of immediately available funds pursuant
to the wire instructions provided by the Company.

 

(c)     The representations and warranties of Buyer shall be true and correct in
all respects as of the date when made and as of the Closing Date as though made
at that time (except for representations and warranties that speak as of a
specific date, which shall be true and correct as of such specified date), and
Buyer shall have performed, satisfied and complied in all respects with the
covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by Buyer at or prior to the Closing Date. 

 

6.             CONDITIONS TO BUYER'S OBLIGATION TO PURCHASE

 

The obligation of Buyer hereunder to purchase the Notes at the Closing is
subject to the satisfaction, at or before the Closing Date, of each of the
following conditions, provided that these conditions are for Buyer’s sole
benefit and may be waived by Buyer at any time in its sole discretion by
providing the Company with prior written notice thereof:

 

(a)     The Company shall have duly executed and delivered to Buyer (i) each of
the Transaction Documents and (ii) the Notes (allocated in such principal
amounts as Buyer shall request), being purchased by Buyer at the Closing
pursuant to this Agreement (allocated in such amounts as Buyer shall request)
being purchased by Buyer at the Closing pursuant to this Agreement.

 

(b)     The representations and warranties of the Company shall be true and
correct in all material respects (except for those representations and
warranties that are qualified by materiality or Material Adverse Effect, which
shall be true and correct in all respects) as of the as of the Closing Date as
though made at that time (except for representations and warranties that speak
as of a specific date, which shall be true and correct as of such specified
date) and the Company shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with by the Company
at or prior to the Closing Date. 

 

 
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(c)     The Company shall have obtained all governmental, regulatory or third
party consents and approvals, if any, necessary for the sale of the Securities,
which the Company agrees to use its best efforts to secure as soon as
practicable following the Closing. 

 

(d)     Buyer shall have successfully completed any required capital call to
fund the Purchase Price.

 

7.             MISCELLANEOUS.

 

(a)     Governing Law; Jurisdiction; Jury Trial.  All questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by the internal laws of the State of New York, without giving effect
to any choice of law or conflict of law provision or rule (whether of the State
of New York or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the State of New York.  Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in The City of New York, Borough of Manhattan for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper.  Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof.  Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.  EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF
THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

(b)     Counterparts.  This Agreement may be executed in two or more identical
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party; provided that a facsimile signature shall be
considered due execution and shall be binding upon the signatory thereto with
the same force and effect as if the signature were an original, not a facsimile
signature.

 

(c)     Headings.  The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.

 

(d)     Severability.  If any provision of this Agreement is prohibited by law
or otherwise determined to be invalid or unenforceable by a court of competent
jurisdiction, the provision that would otherwise be prohibited, invalid or
unenforceable shall be deemed amended to apply to the broadest extent that it
would be valid and enforceable, and the invalidity or unenforceability of such
provision shall not affect the validity of the remaining provisions of this
Agreement so long as this Agreement as so modified continues to express, without
material change, the original intentions of the parties as to the subject matter
hereof and the prohibited nature, invalidity or unenforceability of the
provision(s) in question does not substantially impair the respective
expectations or reciprocal obligations of the parties or the practical
realization of the benefits that would otherwise be conferred upon the parties. 
The parties will endeavor in good faith negotiations to replace the prohibited,
invalid or unenforceable provision(s) with a valid provision(s), the effect of
which comes as close as possible to that of the prohibited, invalid or
unenforceable provision(s).

 

 
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(e)     Entire Agreement; Amendments.   This Agreement and the other Transaction
Documents supersede all other prior oral or written agreements between Buyer,
the Company, their affiliates and Persons acting on their behalf with respect to
the matters discussed herein, and this Agreement, the other Transaction
Documents and the instruments referenced herein and therein contain the entire
understanding of the parties with respect to the matters covered herein and
therein and, except as specifically set forth herein or therein, neither the
Company nor Buyer makes any representation, warranty, covenant or undertaking
with respect to such matters.  No provision of this Agreement may be amended or
waived other than by an instrument in writing signed by the Company and the
holders of at least 60% of the aggregate number of Securities issued and
issuable hereunder and under the Notes, and any amendment or waiver to this
Agreement made in conformity with the provisions of this Section 7(e) shall be
binding on Buyer and all holders of Securities, as applicable.  No such
amendment shall be effective to the extent that it applies to less than all of
the holders of the applicable Securities then outstanding.  No consideration
shall be offered or paid to any Person to amend or consent to a waiver or
modification of any provision of any of the Transaction Documents unless the
same consideration also is offered to all of the parties to the Transaction
Documents and the holders of Notes.  The Company has not, directly or
indirectly, made any agreements with Buyer relating to the terms or conditions
of the transactions contemplated by the Transaction Documents except as set
forth in the Transaction Documents.  Without limiting the foregoing, the Company
confirms that, except as set forth in this Agreement, Buyer has not made any
commitment or promise or has any other obligation to provide any financing to
the Company or otherwise.

 

(f)     Notices.  Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered:  (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one Business Day after deposit with
an overnight courier service, in each case properly addressed to the party to
receive the same.  The addresses and facsimile numbers for such communications
shall be:

 

 
13

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If to the Company:

 

Merisel, Inc.

132 West 31st Street, 5th Floor 

5th Floor

New York, NY 10001

Telephone:

Facsimile:

Attention: Terry A. Tevis, Chief Executive Officer and President

 

 

With copies to (for information purposes only):

 

Herrick, Feinstein LLP

2 Park Avenue

NY, New York 10016

Telephone:     (212) 592-1480

Facsimile:     (973) 274-6420

Attention:     Edward B. Stevenson, Esq.

 

and

 

Herrick, Feinstein LLP

2 Park Avenue

NY, New York 10016

Telephone:     (212) 592-1481

Facsimile:      (212) 545-5065

Attention:     David A. Pentlow, Esq.

 

 

If to Buyer, to its address and facsimile number set forth on the signature page
hereto, with a copy (for informational purposes only) to:

 

O'Melveny & Myers LLP

2765 Sand Hill Road

Menlo Park, CA 94025

Telephone: (650) 473-2603

Fascimile: (650) 473-2601

 Attention: Steven Tonsfeldt, Esq.

 

or to such other address, facsimile number and/or email address to the attention
of such other Person as the recipient party has specified by written notice
given to each other party five (5) days prior to the effectiveness of such
change.  Written confirmation of receipt (A) given by the recipient of such
notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender’s facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or (C) provided by an overnight courier service shall be rebuttable
evidence of personal service, receipt by facsimile or receipt from an overnight
courier service in accordance with clause (i), (ii) or (iii) above,
respectively.

 

 
14

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(g)     Successors and Assigns.  This Agreement shall be binding upon and inure
to the benefit of the parties and their respective successors and assigns,
including any purchasers of the Notes.  The Company shall not assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the holders of at least 60% of the aggregate number of Securities
issued and issuable hereunder and under the Notes, including by way of a
Fundamental Transaction (unless the Company is in compliance with the applicable
provisions governing Fundamental Transactions set forth in the Notes).  Buyer
may not assign some or all of its rights hereunder without the written consent
of the Company, unless Buyer assigns Notes having an aggregate principal balance
greater than or equal to the applicable Minimum Transfer Amount, in which event
such assignee shall be deemed to be Buyer hereunder with respect to such
assigned rights.

 

(h)     No Third Party Beneficiaries.  This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.

 

(i)     Further Assurances.  Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
any other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.

 

(j)     No Strict Construction.  The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied against any party.

 

(k)     Remedies.  Buyer and each holder of the Securities shall have all rights
and remedies set forth in the Transaction Documents and all rights and remedies
which such holders have been granted at any time under any other agreement or
contract and all of the rights which such holders have under any law.  Any
Person having any rights under any provision of this Agreement shall be entitled
to enforce such rights specifically (without posting a bond or other security),
to recover damages by reason of any breach of any provision of this Agreement
and to exercise all other rights granted by law.  Furthermore, the Company
recognizes that in the event that it fails to perform, observe, or discharge any
or all of its obligations under the Transaction Documents, any remedy at law may
prove to be inadequate relief to Buyer.  The Company therefore agrees that Buyer
shall be entitled to seek temporary and permanent injunctive relief in any such
case without the necessity of proving actual damages and without posting a bond
or other security.

 

(l)     Rescission and Withdrawal Right.  Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever Buyer exercises a right, election, demand or
option under a Transaction Document and the Company does not timely perform its
related obligations within the periods therein provided, then Buyer may rescind
or withdraw, in its sole discretion from time to time upon written notice to the
Company, any relevant notice, demand or election in whole or in part without
prejudice to its future actions and rights.

 

 
15

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(m)     Payment Set Aside.  To the extent that the Company makes a payment or
payments to Buyer hereunder or pursuant to any of the other Transaction
Documents or Buyer enforces or exercises its rights hereunder or thereunder, and
such payment or payments or the proceeds of such enforcement or exercise or any
part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside, recovered from, disgorged by or are required to be
refunded, repaid or otherwise restored to the Company, a trustee, receiver or
any other Person under any law (including, without limitation, any bankruptcy
law, foreign, state or federal law, common law or equitable cause of action),
then to the extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued in full force
and effect as if such payment had not been made or such enforcement or setoff
had not occurred.

 

[Remainder of Page Intentionally Left Blank.

Signature Page Follows.]

 

 
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IN WITNESS WHEREOF, Buyer and the Company have caused their respective signature
page to this Note Purchase Agreement to be duly executed as of the date first
written above.

 

 

 

MERISEL, INC.

          By:  /s/ Donald R. Uzzi      

Name: Donald R. Uzzi

Title: Chairman

   

SAINTS CAPITAL GRANITE, L.P.

 

By: Saints Capital Granite, LLC,

its general partner

  By: /s/ Kenneth B. Sawyer

Name: Kenneth Sawyer

Title: Managing Member

Address: Telephone: Facsimile: Attention:

 

    

[Signature Page to Note Purchase Agreement]

 

 
 

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EXHIBIT A

[FORM OF CONVERTIBLE NOTE]

 

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR
APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE 1933 ACT, OR (B) AN OPINION
OF COUNSEL, IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED
UNDER SAID ACT (II) UNLESS SOLD OR TRANSFERRED TO A “QUALIFIED INSTITUTIONAL
BUYER” WITHIN THE MEANING OF RULE 144A UNDER THE 1933 ACT OR (III) UNLESS SOLD
PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. 

 

THE OBLIGATIONS EVIDENCED HEREBY ARE SUBORDINATE IN THE MANNER AND TO THE EXTENT
SET FORTH IN THAT CERTAIN SUBORDINATION AGREEMENT (THE “SUBORDINATION
AGREEMENT”) DATED AS OF DECEMBER 21, 2012, BETWEEN SAINTS CAPITAL GRANITE, L.P.
AND PNC BANK, NATIONAL ASSOCIATION, TO THE INDEBTEDNESS, OBLIGATIONS AND OTHER
LIABILITIES (INCLUDING INTEREST) OWED BY MERISEL, INC. AND ITS AFFILIATES UNDER
AND PURSUANT TO ANY OF THE “SENIOR INSTRUMENTS” (AS DEFINED THEREIN), AND EACH
HOLDER HEREOF, BY ITS ACCEPTANCE HEREOF, ACKNOWLEDGES AND AGREES TO BE BOUND BY
THE PROVISIONS OF THE SUBORDINATION AGREEMENT.

 

No. 1

Original Issue Date: [•]

                  $750,000.00
 

 

MERISEL, INC.
10% CONVERTIBLE NOTE, DUE AUGUST 31, 2015

THIS NOTE is one of a series of duly authorized and issued notes of Merisel,
Inc., a Delaware corporation (the “Company”), designated as its 10% Convertible
Notes, due August 31, 2015, in the aggregate principal amount of Seven Hundred
Fifty Thousand and 00/100 Dollars ($750,000.00) (collectively, the “Notes” and
each Note comprising the Notes, a “Note”).

FOR VALUE RECEIVED, the Company promises to pay to SAINTS CAPITAL GRANITE, L.P.,
a Delaware limited partnership, or its registered assigns (the “Investor”), the
principal sum of SEVEN HUNDRED FIFTY THOUSAND AND 00/100 DOLLARS ($750,000.00),
on August 31, 2015 or such earlier date as this Note is required to be repaid as
provided hereunder (the “Maturity Date”), and to pay interest to the Investor on
the principal amount of this Note outstanding from time to time in accordance
with the provisions hereof. All holders of Notes are referred to collectively,
as the “Investors.” This Note is subject to the following additional provisions:

 

 
 

--------------------------------------------------------------------------------

 

1.  Definitions.     In addition to the terms defined elsewhere in this Note:
(a) capitalized terms that are used but not otherwise defined herein have the
meanings given to such terms in the Note Purchase Agreement, dated as of
February 4, 2013, by and between the Company and the Investor (the “Purchase
Agreement”) and (b) the following terms have the meanings indicated below:

 

“Bankruptcy Code” means Title 11 of the United States Code (11 U.S.C. 101 et
seq.), as amended from time to time (including any successor statute) and all
rules and regulations promulgated thereunder.

“Bankruptcy Event” means any of the following events: (a) the Company or any
Subsidiary commences a case or other proceeding under any Bankruptcy Law
relating to the Company or any Subsidiary thereof; (b) there is commenced
against the Company or any Subsidiary any such case or proceeding that is not
dismissed within sixty (60) days after commencement; (c) the Company or any
Subsidiary is adjudicated by a court of competent jurisdiction insolvent or
bankrupt or any order of relief or other order approving any such case or
proceeding is entered; (d) the Company or any Subsidiary suffers any appointment
of any custodian or the like for it or any substantial part of its property that
is not discharged or stayed within sixty (60) days; (e) under applicable law the
Company or any Subsidiary makes a general assignment for the benefit of
creditors; (f) the Company or any Subsidiary fails to pay, or states that it is
unable to pay or is unable to pay, its debts generally as they become due; (g)
the Company or any Subsidiary calls a meeting of its creditors with a view to
arranging a composition, adjustment or restructuring of its debts; or (h) the
Company or any Subsidiary, by any act or failure to act, expressly indicates its
consent to, approval of or acquiescence in any of the foregoing or takes any
corporate or other action for the purpose of effecting any of the foregoing.

“Bankruptcy Law” means the Bankruptcy Code of the United States and all other
liquidation, conservatorship, bankruptcy, assignment for the benefit of
creditors, moratorium, rearrangement, receivership, insolvency, fraudulent
conveyance or transfer, reorganization, or similar state or Federal debtor
relief laws, statutes, rules, regulations, orders, or ordinances of the United
States or other applicable jurisdictions from time to time in effect and
affecting the rights of creditors generally.

“Business Day” means any day other than a Saturday, Sunday, any other day on
which commercial banks in the City of New York are authorized or required by law
to remain closed or any other day on which the Principal Market is closed.

“Change of Control” means the occurrence of any of the following in one or a
series of related transactions: (i) an acquisition after the date hereof by an
individual or legal entity or “group” (as described in Rule 13d-5(b)(1) under
the Exchange Act) of more than one-third of the voting rights or equity
interests in the Company other than pursuant to the Transaction Documents; (ii)
a replacement of more than one-half of the members of the Company's board of
directors in a twelve (12) month period in a single election of directors that
is not approved by at least a majority of (x) those individuals who were members
of the board of directors on December 13, 2012, (y) those individuals who were
nominated or appointed to the board of directors by at least a majority of such
members of the board of directors (collectively, the persons referenced in
clauses (x) and (y) shall be referred to herein as the “Incumbent Directors”),
and (z) any member of the board of directors who was nominated or appointed by a
majority of the Incumbent Directors at the time of such nomination or
appointment; (iii) a Fundamental Transaction (as defined in Section 10(c)), a
merger or consolidation of the Company or any Subsidiary in one or a series of
related transactions, unless following such transaction or series of
transactions, the holders of the Company's securities prior to the first such
transaction continue to hold at least two-thirds of the voting rights and equity
interests in the surviving entity; (iv) a sale of all or substantially all of
the assets of the Company and its Subsidiaries on a consolidated basis; (v) a
recapitalization, reorganization or other transaction involving the Company or
any Subsidiary that constitutes or results in a transfer of more than one-third
of the voting rights or equity interests in the Company, unless following such
transaction or series of transactions, the holders of the Company's securities
prior to the first such transaction continue to hold at least two-thirds of the
voting rights and equity interests in the surviving entity or acquirer of such
assets and one-half or more of the board of directors of the Company remain the
same; or (vi) the execution by the Company or its controlling stockholders of an
agreement providing for or reasonably likely to result in any of the foregoing
events.

 

 
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“Common Stock” means the common stock of the Company, $0.01 par value per share,
and any securities into which such common stock may hereafter be reclassified.

“Common Stock Equivalent” means securities, such as stock options, warrants,
convertible notes, convertible bonds and contingent shares, entitling any Person
to acquire shares of Common Stock.

“Conversion Date” means the date a Conversion Notice together with the
Conversion Schedule is delivered to the Company in accordance with Section 5(a).

“Conversion Notice” means a written notice in the form attached hereto as
Exhibit A.

“Conversion Price” at any Conversion Date, means the greater of (a) $0.10,
subject to adjustment from time to time in accordance with the terms of the
Notes; or (b) in the period following March 31, 2013, the EBITDA Conversion
Price, in all cases, subject to adjustment as provided herein.

“Default” means any event or condition which constitutes an Event of Default or
that upon notice, lapse of time or both would, unless cured or waived, become an
Event of Default.

“EBITDA” means the net income of the Company and its Subsidiaries, on a
consolidated basis, from continuing operations before interest expense (income),
income taxes, depreciation and amortization expense, adding back non-cash
charges including, without limitation, compensation charges for equity grants
and charges for unconsolidated losses (gains), determined directly or indirectly
from the consolidated financial statements of the Company and its Subsidiaries
contained in the Quarterly Report on Form 10-Q or Annual Report on Form 10-K of
the Company for the applicable periods.

“EBITDA Conversion Price” for each Conversion Date, is equal to (i) (x) EBITDA
for the twelve months ended March 31, 2013 multiplied (y) by six and one half
(6.5) less amounts outstanding under the Existing Indebtedness or any other
Indebtedness for borrowed money and liabilities relating to the Company’s
outstanding redeemable Series A Preferred Stock and this Note, in each case as
of March 31, 2013, plus the Company’s closing cash balance, as of March 31,
2013, and (ii) divided by the number of Common Stock outstanding as of the
fiscal quarter ended on March 31, 2013.

 

 
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“Eligible Market” means whichever of the New York Stock Exchange, the American
Stock Exchange, the NASDAQ Global Select Market, the NASDAQ Global Market, the
NASDAQ Capital Market, the OTC Bulletin Board or the OTC Pink Market, on which
the Common Stock is listed or quoted for trading on the date in question.

“Event of Default” means any one of the following events (whatever the reason
and whether it shall be voluntary or involuntary or effected by operation of law
or pursuant to any judgment, decree or order of any court, or any order, rule or
regulation of any administrative or governmental body).

(i)     any default in the payment, when the same becomes due and payable
(whether on a Prepayment Date, the Maturity Date or by acceleration or
prepayment or otherwise), of principal under or interest in respect of this Note
or the Company or any Subsidiary fails in any material respect to observe or
perform any other obligation under this Note or under the Purchase Agreement;

(ii)     the Company or any Subsidiary (1) fails to pay when due or there is an
acceleration of any monetary obligation (regardless of amount) under the
Existing Indebtedness or any currently existing or hereafter arising debenture
(other than a Note) or any mortgage, credit agreement or other facility,
indenture agreement, factoring agreement or other instrument under which there
may be issued, or by which there may be secured or evidenced, any Indebtedness
or under any long term leasing or factoring arrangement, if the aggregate amount
of the obligations and liabilities of the Company and the subsidiaries
thereunder exceed $100,000 (each of the foregoing, including the Existing
Indebtedness, a “Material Debt Agreement”), or (2) fails to observe or perform
any other obligation under any Material Debt Agreement, and such failure results
in the obligations thereunder becoming or being declared due and payable prior
to the date on which they would otherwise become due and payable.

(iii)     the occurrence of any Change of Control other than a Change of Control
approved or consented to by Investors holding at least 60% of the aggregate
principal amount of the then outstanding Notes;

(iv)     the occurrence of a Bankruptcy Event;

(v)     the Company fails to have available and reserved for the benefit of the
holders of Notes a number of authorized but unissued and otherwise unreserved
shares of Common Stock sufficient to issue Underlying Shares upon any conversion
in full of all Notes; or

(vi)     the Company fails to make any cash payment required under the
Transaction Documents (other than as set forth in paragraph (i) above).

 

 
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“Existing Indebtedness” means Indebtedness incurred by the Company and its
Subsidiaries pursuant to that certain Revolving Credit and Security Agreement,
dated as of August 13, 2010 among the Company, Merisel Americas, Inc., a
Delaware corporation, Color Edge LLC, a Delaware limited liability company,
Color Edge Visual LLC, a Delaware limited liability company, Comp 24 LLC, a
Delaware limited liability company, Crush Creative LLC, a Delaware limited
liability company, Dennis Curtin Studios, LLC, a Delaware limited liability
company, MADP, LLC, a Delaware limited liability company, Advertising Props,
Inc., a Georgia corporation, and Fuel Digital, LLC, a Delaware limited liability
company, the financial institutions which are now or which thereafter become a
party thereto and PNC BANK, NATIONAL ASSOCIATION, as agent for Lenders, as the
same has been amended, supplemented or otherwise modified.

“Indebtedness” of any Person shall mean, without duplication, (a) all
obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such Person
upon which interest charges are customarily paid, (d) all obligations of such
Person under conditional sale or other title retention agreements relating to
property or assets purchased by such Person, (e) all obligations of such Person
issued or assumed as the deferred purchase price of property or services (other
than unsecured accounts payable incurred in the ordinary course of business and
no more than ninety (90) days past the due date set forth in the invoice
therefor), (f) all Indebtedness of others secured by (or for which the holder of
such Indebtedness has an existing right, contingent or otherwise, to be secured
by) any Lien on property owned or acquired by such Person, whether or not the
obligations secured thereby have been assumed, (g) all obligations of such
Person in respect of interest rate protection agreements, foreign currency
exchange agreements or other interest or exchange rate hedging arrangements that
exceed amounts necessary to hedge the Company’s cross-currency exposure and (h)
all obligations of such Person as an account party in respect of letters of
credit and bankers’ acceptances. The Indebtedness of any Person shall include
the Indebtedness of any partnership in which such Person is a general partner.

“Original Issue Date” has the meaning set forth on the face of this Note.

“Prepayment Date” means any date on which a prepayment is made pursuant to
Section 12.

“Proceeding” means a claim, suit, arbitration, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.

“Trading Day” means (i) a day on which the Common Stock is traded on the
Principal Market, (ii) a day on which the Common Stock is traded on an Eligible
Market, or (iii) if the Common Stock is not reported on the Principal Market or
an Eligible Market (or any similar organization or agency succeeding to its
functions of reporting prices) then Trading Day shall mean a Business Day.

“Transaction Documents” has the meaning set forth in the Purchase Agreement.

“Restricted Period” means from the Original Issue Date until March 31, 2013.

“Underlying Shares” means the shares of Common Stock issuable upon conversion of
the Notes and payment of interest thereunder.

 

 
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2.     Interest.

(a)     Interest on the aggregate unconverted and then outstanding principal
amount of this Note shall be calculated at the rate of 10% per annum, compounded
quarterly, in arrears on the 1st day of each calendar quarter, beginning on
April 1, 2013 (each, an “Interest Payment Date”); provided, that, during the
continuance of an Event of Default, this Note shall bear interest at the rate of
12.0% per annum (the “Default Rate”). Interest shall be calculated on the basis
of a 360-day year for the actual number of days elapsed and shall accrue daily
commencing on the Original Issue Date.

(b)     On each Interest Payment Date, accrued interest on this Note shall be
paid in kind by the Company by capitalizing the interest and increasing the
unpaid principal amount of this Note, and interest on this Note shall thereafter
accrue on the increased principal amount of this Note. Notwithstanding the
foregoing, at least five (5) Trading Days prior to an Interest Payment Date, the
Company may deliver written notice to the Investor indicating that it intends to
pay interest in cash in lieu of capitalizing the interest. The Company may
indicate in any such notice that the election to pay interest in cash contained
therein shall continue for subsequent Interest Payment Dates until rescinded.
Once capitalized, the Company may at its option pay any accrued capitalized
interest in cash at any time prior to the delivery of a Conversion Notice by the
Investor to the Company. All interest payable in respect of the Notes on any
Interest Payment Date must be paid in the same manner.

3.     Registration of Notes. The Company shall maintain a register (the
“Register”) for the recordation of the names and addresses of the holders of
each Note and the principal amount of the Notes held by such holders (the
“Registered Notes”). The entries in the Register shall be conclusive and binding
for all purposes absent manifest error. The Company and the holders of the Notes
shall treat each Person whose name is recorded in the Register as the owner of a
Note for all purposes, including, without limitation, the right to receive
payments of principal and interest hereunder, notwithstanding notice to the
contrary. A Registered Note may be assigned or sold in whole or in part only by
registration of such assignment or sale on the Register. Upon its receipt of a
request to assign or sell all or part of any Registered Note by a holder, the
Company shall record the information contained therein in the Register and issue
one or more new Registered Notes in the same aggregate principal amount as the
principal amount of the surrendered Registered Note to the designated assignee
or transferee pursuant to Section 4 below.

4.     Registration of Transfers and Exchanges. In accordance with Section 4(e)
of the Purchase Agreement, the Company shall register the transfer of any
portion of this Note in the Register upon surrender of this Note to the Company
at its address for notice set forth herein. Upon any such registration or
transfer in accordance with Section 9(g) of the Purchase Agreement, a new Note,
in substantially the form of this Note (any such new debenture, a “New Note”),
evidencing the portion of this Note so transferred shall be issued to the
transferee and a New Note evidencing the remaining portion of this Note not so
transferred, if any, shall be issued to the transferring Investor. The
acceptance of the New Note by the transferee thereof shall be deemed the
acceptance by such transferee of all of the rights and obligations of a holder
of a Note. The Company shall be entitled to reasonable assurance, including an
opinion of counsel reasonably acceptable to the Company that such transfer
complies with applicable federal and state securities laws. This Note is
exchangeable for an equal aggregate principal amount of Notes of different
authorized denominations, as requested by the Investor surrendering the same;
provided that each such New Note shall have an aggregate principal balance
greater than or equal to the applicable Minimum Transfer Amount. No service
charge or other fee will be imposed in connection with any such registration of
transfer or exchange.

 

 
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5.     Conversion.

(a)     Subject to the provisions of Section 5(b) and Section 5(c) below, all or
any portion of the principal amount of this Note then outstanding together with
any accrued and unpaid interest hereunder shall be convertible into shares of
Common Stock at the Conversion Price, at the option of the Investor, at any time
and from time to time from and after the end of the Restricted Period. The
Investor may effect conversions under this Section 5 by delivering to the
Company a Conversion Notice together with a schedule in the form of Schedule 1
attached hereto (the “Conversion Schedule”). If the Investor is converting less
than all of the principal amount represented by this Note, the Company shall
honor such conversion and shall promptly deliver to the Investor a Conversion
Schedule indicating the principal amount which has not been converted.

(b)     Notwithstanding anything else hereunder to the contrary, if at any time
the number of shares of Common Stock authorized and reserved for issuance by the
Company is less than the number of Underlying Shares issuable upon a conversion
hereunder, the Investor may only convert that portion of the principal amount of
this Note or accrued and unpaid interest on this Note that is convertible into
the number of shares of Common Stock authorized and available for issuance by
the Company.

(c)     Notwithstanding the provisions of Section 5(a) above, each conversion of
the principal amount then outstanding or any accrued and unpaid interest of this
Note, shall be in an amount at least equal to the lesser of (i) one million
dollars ($1,000,000) or (ii) the then outstanding principal amount of this Note
and any accrued and unpaid interest hereunder.

6.     Mechanics of Conversion.

(a)     The number of Underlying Shares issuable upon any conversion hereunder
shall equal the outstanding principal amount of this Note to be converted
(including any accrued interest thereon capitalized pursuant to Section 2(b) of
this Note), divided by the Conversion Price on the Conversion Date, plus (if
indicated in the applicable Conversion Notice) the amount of any accrued but
unpaid interest on this Note through the Conversion Date, divided by the
Conversion Price on the Conversion Date.

(b)     The Company shall, by the fifth (5th)Trading Day following each
Conversion Date, issue or cause to be issued and cause to be delivered to or
upon the written order of the Investor and in such name or names as the Investor
may designate a certificate for the Underlying Shares issuable upon such
conversion, bearing any legend as required by the “blue sky” laws of any state
and a restrictive legend in substantially the same form as the legend described
in Section 2(g) of the Purchase Agreement until such time as the Underlying
Shares have been registered under the 1933 Act. The Investor, or any Person so
designated by the Investor to receive Underlying Shares, shall be deemed to have
become holder of record of such Underlying Shares as of such Conversion Date.

 

 
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(c)     The Investor shall not be required to deliver the original Note in order
to effect a conversion hereunder. Execution and delivery of the Conversion
Notice shall have the same effect as cancellation of the Note and issuance of a
New Note representing the remaining outstanding principal amount.

(d)     The Company's obligations to issue and deliver Underlying Shares upon
conversion of this Note in accordance with the terms hereof are absolute and
unconditional, irrespective of any action or inaction by the Investor to enforce
the same, any waiver or consent with respect to any provision hereof, the
recovery of any judgment against any Person or any action to enforce the same,
or any setoff, counterclaim, recoupment, limitation or termination, or any
breach or alleged breach by the Investor or any other Person of any obligation
to the Company or any violation or alleged violation of law by the Investor or
any other Person, and irrespective of any other circumstance which might
otherwise limit such obligation of the Company to the Investor in connection
with the issuance of such Underlying Shares.

7.     Events of Default.

(a)     At any time or times following the occurrence and during the continuance
of an Event of Default (except in the case of clause (iv) within the definition
of Event of Default, in which case Section 7(c) below shall control), the
Investor may elect, by notice to the Company (an “Event Notice”) to inform the
Company that all outstanding principal and accrued but unpaid interest on this
Note and any other amounts then owing under the Transaction Documents is
immediately due and payable in full in Dollars in cash, without any further
action by the Investor, and the Company shall immediately be obligated to
repurchase this Note held by such Investor.

(b)     Following the occurrence and during the continuance of an Event of
Default (except in the case of clause (iv) within the definition of Event of
Default, in which case Section 7(c) below shall control), regardless of whether
or not the Investor elects to deliver an Event Notice to the Company, interest
on this Note shall continue to accrue at the Default Rate and shall be paid in
kind by increasing the unpaid principal amount of this Note on a quarterly
compounded basis in accordance with Section 2 above.

(c)     Upon the occurrence of any Bankruptcy Event with respect to the Company,
all outstanding principal and accrued but unpaid interest on this Note and any
other amounts then owing under the Transaction Documents shall immediately
become due and payable in full in Dollars in cash (free of any claim of
subordination), without any action by the Investor, as if the Investor had
delivered an Event Notice immediately prior to the occurrence of such Bankruptcy
Event.

(d)     Except as described in Section 7(a) above, in connection with any Event
of Default, the Investor need not provide and the Company hereby waives any
presentment, demand, protest or other notice of any kind, and the Investor may
immediately enforce any and all of its rights and remedies hereunder and all
other remedies available to it under applicable law. Any Event Notice may be
rescinded and annulled by the Investor at any time prior to payment hereunder.
No such rescission or annulment shall affect any subsequent Event of Default or
impair any right consequent thereto.

 

 
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8.     Ranking. This Note ranks pari passu with all other Notes now or hereafter
issued pursuant to the Transaction Documents. Except as otherwise contemplated
by the Transaction Documents, the Company shall repay amounts due under this
Note and all other Notes on a pro rata basis, based upon the relative unpaid
principal balances thereof then due.

9.     Reservation of Underlying Shares. The Company covenants that shall use
its best efforts to take all corporate action necessary to amend its Certificate
of Incorporation and to have authorized, reserved and available, no less than
the number of Underlying Shares which are then issuable and deliverable upon the
conversion of (and otherwise in respect of) this entire Note (taking into
account the adjustments of Section 10 below), free from preemptive rights or any
other contingent purchase rights of Persons other than the Investor. Without
limiting the foregoing, the Company shall propose an amendment to its
Certificate of Incorporation to increase the authorized number of shares of its
Common Stock to effectuate the foregoing for consideration by the Company’s
stockholders at the first stockholders’ meeting to be convened following the
issuance of this Note, and the Company’s board of directors shall recommend the
adoption of such proposal by the Company’s stockholders. The Company covenants
that all Underlying Shares so issuable and deliverable shall, upon issuance in
accordance with the terms hereof, be duly and validly authorized, issued and
fully paid and nonassessable.

10.     Certain Adjustments. The Conversion Price is subject to adjustment from
time to time as set forth in this Section 10.

(a)     Stock Dividends and Splits. If the Company, at any time while this Note
is outstanding: (i) pays a stock dividend on its Common Stock or otherwise makes
a distribution on any class of capital stock that is payable in shares of Common
Stock, (ii) subdivides outstanding shares of Common Stock into a larger number
of shares, or (iii) combines outstanding shares of Common Stock into a smaller
number of shares, then in each such case the Conversion Price shall be
multiplied by a fraction of which the numerator shall be the number of shares of
Common Stock outstanding immediately before such event and of which the
denominator shall be the number of shares of Common Stock outstanding
immediately after such event. Any adjustment made pursuant to clause (i) of this
paragraph shall become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or distribution,
and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall
become effective immediately after the effective date of such subdivision or
combination.

(b)     Pro Rata Distributions. If the Company, at any time while this Note is
outstanding, distributes to all holders of Common Stock (i) evidences of its
Indebtedness, (ii) any security (other than a distribution of Common Stock
covered by the preceding paragraph), (iii) rights or warrants to subscribe for
or purchase any security, or (iv) any other asset (in each case, “Distributed
Property”), then, at the request of the Investor delivered before the 90th day
after the record date fixed for determination of stockholders entitled to
receive such distribution, the Company will deliver to the Investor, within five
Trading Days after such request (or, if later, on the effective date of such
distribution), the Distributed Property that the Investor would have been
entitled to receive in respect of the Underlying Shares for which this Note
could have been converted immediately prior to such record date. If such
Distributed Property is not delivered to the Investor pursuant to the preceding
sentence, then upon any conversion of this Note that occurs after such record
date, the Investor shall be entitled to receive, in addition to the Underlying
Shares otherwise issuable upon such conversion, the Distributed Property that
the Investor would have been entitled to receive in respect of such number of
Underlying Shares had the Investor been the record holder of such Underlying
Shares immediately prior to such record date. Notwithstanding the foregoing,
this Section 10(b) shall not apply to any distribution of rights or securities
in respect of adoption by the Company of a stockholder rights plan, which events
shall be covered by Section 10(a).

 

 
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(c)     Fundamental Transactions. If, at any time while this Note is
outstanding, (i) the Company effects any merger or consolidation of the Company
with or into another Person pursuant to which the Common Stock is effectively
converted and exchanged, (ii) the Company effects any sale of all or
substantially all of its assets in one or a series of related transactions
pursuant to which the Common Stock is effectively converted and exchanged, (iii)
any tender offer or exchange offer (whether by the Company or another Person) is
completed pursuant to which at least a majority of the outstanding Common Stock
are tendered and exchanged for other securities, cash or property or (iv) the
Company effects any reclassification of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively converted into or
exchanged for other securities, cash or property (other than as a result of a
subdivision or combination of shares of Common Stock covered by Section 10(a)
above) (in any such case, a “Fundamental Transaction”), then the Investor shall
have the right to: (x) declare an Event of Default pursuant to clause (iii)
thereunder, or (y) upon any subsequent conversion of this Note, receive, for
each Underlying Share that would have been issuable upon such conversion absent
such Fundamental Transaction, the same kind and amount of securities, cash or
property as it would have been entitled to receive upon the occurrence of such
Fundamental Transaction if it had been, immediately prior to such Fundamental
Transaction, the holder of one share of Common Stock (the “Alternate
Consideration”) or (z) require the surviving entity to issue to the Investor an
instrument identical to this Note (with an appropriate adjustment to the
conversion price) such that the Investor may receive shares of the surviving
company’s common stock. For purposes of any such conversion, the Company shall
apportion the Conversion Price among the Alternate Consideration in a reasonable
manner reflecting the relative value of any different components of the
Alternate Consideration. If holders of Common Stock are given any choice as to
the securities, cash or property to be received in a Fundamental Transaction,
then the Investor shall be given the same choice as to the Alternate
Consideration it receives upon any conversion of this Note following such
Fundamental Transaction. To the extent necessary to effectuate the foregoing
provisions, any successor to the Company or surviving entity in such Fundamental
Transaction (or, if different, the ultimate parent of such successor or entity
or the entity issuing the Alternate Consideration) shall issue to the Investor a
new debenture consistent with the foregoing provisions and evidencing the
Investor's right to convert such debenture into Alternate Consideration. The
terms of any agreement pursuant to which a Fundamental Transaction is effected
shall include terms requiring any such successor or surviving entity to comply
with the provisions of this paragraph (c) and insuring that this Note (or any
such replacement security) will be similarly adjusted upon any subsequent
transaction analogous to a Fundamental Transaction.

 

 
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(d)     Subsequent Equity Sales.

(i)     While this Note is outstanding, if the Company or any Subsidiary
thereof, as applicable, at any time after the first (1st) anniversary of the
Original Issue Date, shall issue or enter into any agreement or understanding to
issue shares of Common Stock or Common Stock Equivalents, at a price per share
less than the Conversion Price (if the holder of the Common Stock or Common
Stock Equivalent so issued shall at any time, whether by operation of purchase
price adjustments, reset provisions, floating conversion, exercise or exchange
prices or otherwise, or due to warrants, options or rights issued in connection
with such issuance, be entitled to receive shares of Common Stock at a price
less than the Conversion Price, such issuance shall be deemed to have occurred
for less than the Conversion Price), then, the Conversion Price shall be reduced
to mirror such lower price. Such adjustment shall be made whenever such Common
Stock or Common Stock Equivalent is issued. The Company shall notify the
Investor in writing, no later than the Trading Day following the issuance of any
Common Stock or Common Stock Equivalent subject to this section, indicating
therein the applicable issuance price, or of applicable reset price, exchange
price, conversion price and other pricing terms.

(ii)     For purposes of this Section 10(d), the following subsections
(d)(ii)(l) to (d)(ii)(5) shall also be applicable:

(1)     Issuance of Rights or Options. In case at any time after the first (1st)
anniversary of the Original Issue Date the Company shall in any manner grant
(directly and not by assumption in a merger or otherwise) any warrants or other
rights to subscribe for or to purchase, or any options for the purchase of,
Common Stock or any stock or security convertible into or exchangeable for
Common Stock (such warrants, rights or options being called “Options” and such
convertible or exchangeable stock or securities being called “Convertible
Securities”) whether or not such Options or the right to convert or exchange any
such Convertible Securities are immediately exercisable, and the price per share
for which Common Stock is issuable upon the exercise of such Options or upon the
conversion or exchange of such Convertible Securities (determined by dividing
(i) the sum (which sum shall constitute the applicable consideration) of (x) the
total amount, if any, received or receivable by the Company as consideration for
the granting of such Options, plus (y) the aggregate amount of additional
consideration payable to the Company upon the exercise of all such Options, plus
(z), in the case of such Options which relate to Convertible Securities, the
aggregate amount of additional consideration, if any, payable upon the issue or
sale of such Convertible Securities and upon the conversion or exchange thereof,
by (ii) the total maximum number of shares of Common Stock issuable upon the
exercise of such Options or upon the conversion or exchange of all such
Convertible Securities issuable upon the exercise of such Options) shall be less
than the Conversion Price in effect immediately prior to the time of the
granting of such Options, then the total number of shares of Common Stock
issuable upon the exercise of such Options or upon conversion or exchange of the
total amount of such Convertible Securities issuable upon the exercise of such
Options shall be deemed to have been issued for such price per share as of the
date of granting of such Options or the issuance of such Convertible Securities
and thereafter shall be deemed to be outstanding for purposes of adjusting the
Conversion Price. Except as otherwise provided in subsection 10(d)(ii)(3), no
adjustment of the Conversion Price shall be made upon the actual issue of such
Common Stock or of such Convertible Securities upon exercise of such Options or
upon the actual issue of such Common Stock upon conversion or exchange of such
Convertible Securities.

 

 
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(2)     Issuance of Convertible Securities. In case after the first (1st)
anniversary of the Original Issue Date the Company shall in any manner issue
(directly and not by assumption in a merger or otherwise) or sell any
Convertible Securities, whether or not the rights to exchange or convert any
such Convertible Securities are immediately exercisable, and the price per share
for which Common Stock is issuable upon such conversion or exchange (determined
by dividing (i) the sum (which sum shall constitute the applicable
consideration) of (x) the total amount received or receivable by the Company as
consideration for the issue or sale of such Convertible Securities, plus (y) the
aggregate amount of additional consideration, if any, payable to the Company
upon the conversion or exchange thereof, by (ii) the total number of shares of
Common Stock issuable upon the conversion or exchange of all such Convertible
Securities) shall be less than the Conversion Price in effect immediately prior
to the time of such issue or sale, then the total maximum number of shares of
Common Stock issuable upon conversion or exchange of all such Convertible
Securities shall be deemed to have been issued for such price per share as of
the date of the issue or sale of such Convertible Securities and thereafter
shall be deemed to be outstanding for purposes of adjusting the Conversion
Price, provided that (a) except as otherwise provided in subsection
10(d)(ii)(3), no adjustment of the Conversion Price shall be made upon the
actual issuance of such Common Stock upon conversion or exchange of such
Convertible Securities and (b) no further adjustment of the Conversion Price
shall be made by reason of the issue or sale of Convertible Securities upon
exercise of any Options to purchase any such Convertible Securities for which
adjustments of the Conversion Price have been made pursuant to the other
provisions of subsection 10(d).

(3)     Change in Option Price or Conversion Rate. Upon the happening of any of
the following events, namely, if the purchase price provided for in any Option
referred to in subsection 10(d)(ii)(l) hereof, the additional consideration, if
any, payable upon the conversion or exchange of any Convertible Securities
referred to in subsections 10(d)(ii)(l) or 10(d)(ii)(2), or the rate at which
Convertible Securities referred to in subsections 10(d)(ii)(l) or 10(d)(ii)(2)
are convertible into or exchangeable for Common Stock shall change at any time
(including, but not limited to, changes under or by reason of provisions
designed to protect against dilution), the Conversion Price in effect at the
time of such event shall forthwith be readjusted to the Conversion Price which
would have been in effect at such time had such Options or Convertible
Securities still outstanding provided for such changed purchase price,
additional consideration or conversion rate, as the case may be, at the time
initially granted, issued or sold.

 

 
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(4)     Consideration for Stock. In case any shares of Common Stock, Options or
Convertible Securities shall be issued or sold for cash, the consideration
received therefor shall be deemed to be the net amount received by the Company
therefor, after deduction therefrom of any expenses incurred or any underwriting
commissions or concessions paid or allowed by the Company in connection
therewith. In case any shares of Common Stock, Options or Convertible Securities
shall be issued or sold for a consideration other than cash, the amount of the
consideration other than cash received by the Company shall be deemed to be the
fair value of such consideration as determined in good faith by the board of
directors of the Company, after deduction of any expenses incurred or any
underwriting commissions or concessions paid or allowed by the Company in
connection therewith. In case any Options shall be issued in connection with the
issue and sale of other securities of the Company, together comprising one
integral transaction in which no specific consideration is allocated to such
Options by the parties thereto, such Options shall be deemed to have been issued
for such consideration as determined in good faith by the board of directors of
the Company. If Common Stock, Options or Convertible Securities shall be issued
or sold by the Company and, in connection therewith, other Options or
Convertible Securities (the “Additional Rights”) are issued, then the
consideration received or deemed to be received by the Company shall be reduced
by the fair market value of the Additional Rights (as determined using the
Black-Scholes option pricing model or another method mutually agreed to by the
Company and the Investor). The board of directors of the Company shall respond
promptly, in writing, to an inquiry by any Investor as to the fair market value
of the Additional Rights. In the event that the board of directors of the
Company and the holders of at least 60% of the aggregate principal amount under
the Notes are unable to agree upon the fair market value of the Additional
Rights, the Company and the Investors shall jointly select an appraiser, who is
experienced in such matters. The decision of such appraiser shall be final and
conclusive, and the cost of such appraiser shall be borne evenly by the Company
and the Investor.

(5)     Record Date. In case the Company shall take a record of the holders of
its Common Stock for the purpose of entitling them (i) to receive a dividend or
other distribution payable in Common Stock, Options or Convertible Securities or
(ii) to subscribe for or purchase Common Stock, Options or Convertible
Securities, then such record date shall be deemed to be the date of the issue or
sale of the shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution or the
date of the granting of such right of subscription or purchase, as the case may
be.

(iii)     Notwithstanding the foregoing, no adjustment will be made under this
paragraph (d) in respect of: (1) the issuance of securities upon the exercise,
exchange or conversion of any Common Stock Equivalents, or pursuant to any
penalty, anti-dilution or similar requirements associated with securities that
have been issued or agreements that have been entered into by the Company on or
prior to the first (1st) anniversary of the Original Issue Date of this Note
(but such adjustment shall apply to any amendments, modifications, and
reissuances thereof and as a result of any changes, resets or adjustments to a
conversion or exchange price thereunder whether or not as a result of any
amendment, modification or reissuance) or (2) the grant of options or warrants,
or the issuance of additional securities in connection with the exercise
thereof, under any duly authorized Company stock option, stock incentive plan,
restricted stock plan or stock purchase plan in existence on the Closing Date.

(e)     Calculations. All calculations under this Section 10 shall be made to
the nearest cent or the nearest 1/100th of a share, as applicable. The number of
shares of Common Stock outstanding at any given time shall not include shares
owned or held by or for the account of the Company, and the disposition of any
such shares shall be considered an issue or sale of Common Stock.

 

 
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(f)     Notice of Adjustments. Upon the occurrence of each adjustment pursuant
to this Section 10, the Company at its expense will promptly compute such
adjustment in accordance with the terms hereof and prepare a certificate
describing in reasonable detail such adjustment and the transactions giving rise
thereto, including all facts upon which such adjustment is based. Upon written
request, the Company will promptly deliver a copy of each such certificate to
the Investor.

(g)     Notice of Corporate Events. If the Company (i) declares a dividend or
any other distribution of cash, securities or other property in respect of its
Common Stock, including without limitation any granting of rights or warrants to
subscribe for or purchase any capital stock of the Company or any subsidiary,
(ii) authorizes and publicly approves, or enters into any agreement
contemplating or solicits stockholder approval for any Fundamental Transaction
or (iii) publicly authorizes the voluntary dissolution, liquidation or winding
up of the affairs of the Company, then the Company shall deliver to the Investor
a notice describing the material terms and conditions of such transaction, at
least twenty (20) calendar days prior to the applicable record or effective date
on which a Person would need to hold Common Stock in order to participate in or
vote with respect to such transaction, and the Company will take all steps
reasonably necessary in order to insure that the Investor is given the practical
opportunity to convert this Note prior to such time so as to participate in or
vote with respect to such transaction; provided, however, that the failure to
deliver such notice or any defect therein shall not affect the validity of the
corporate action required to be described in such notice.

11.     Fractional Shares. The Company shall not be required to issue or cause
to be issued fractional Underlying Shares on conversion of this Note. If any
fraction of an Underlying Share would, except for the provisions of this
Section, be issuable upon conversion of this Note or payment of interest hereon,
the number of Underlying Shares to be issued will be rounded up to the nearest
whole share.

12.     Prepayment.

(a)     Except as described in Section 12(b) below or for the payment in cash of
accrued interest previously capitalized pursuant to Section 2(b) of this Note,
this Note may not be prepaid in whole or in part without the Investor’s prior
written consent.

(b)     Provided that the Company has redeemed all of the Company’s outstanding
redeemable Series A Preferred Stock, at any time prior to March 31, 2013, the
Company may, in its sole discretion, elect to prepay this Note, in whole or in
part, by paying to the Investor, in immediately available funds, an amount equal
to two and one-half (2.5) times the then outstanding principal amount or portion
thereof (including any accrued and unpaid interest thereon capitalized pursuant
to Section 2(b) of this Note), as applicable, plus all accrued and unpaid
interest due under this Note, on the date that is the third (3rd) Business Day
after written notice thereof is received by the Investor in accordance with the
notice provisions described in Section 14 below.

13.     Additional Covenants and Negative Covenants. Each of the covenants and
negative covenants of the Company set forth in the Purchase Agreement are hereby
incorporated herein by reference as if set forth in this Note in their entirety,
and the Company hereby agrees in favor of the Investors to comply with each of
the covenants and negative covenants.

 

 
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14.     Notices. Any and all notices or other communications or deliveries
hereunder (including without limitation any Conversion Notice) shall be in
writing and shall be deemed given and effective on the earliest of (i) the date
of transmission, if such notice or communication is delivered via e-mail or via
facsimile at the facsimile number specified in this Section prior to 5:30 p.m.
(New York City time) on a Trading Day, (ii) the next Trading Day after the date
of transmission, if such notice or communication is delivered via facsimile at
the facsimile number specified in this Section on a day that is not a Trading
Day or later than 5:30 p.m. (New York City time) on any Trading Day, (iii) the
Trading Day following the date of mailing, if sent by nationally recognized
overnight courier service, or (iv) upon actual receipt by the party to whom such
notice is required to be given. The addresses for such communications shall be:
(i) if to the Company, to 127 West 30th Street, 5th Floor, New York, NY 10001,
attention: Chief Executive Officer, with a copy (which shall not constitute
notice) to: Herrick, Feinstein LLP, 2 Park Avenue, New York, NY 10016,
facsimiles: (973) 274-6420 and (212) 545-5065, attention: Edward B. Stevenson,
Esq. & David A. Pentlow, Esq. (ii) if to any of the Investors, to the address or
facsimile number appearing on the Company's stockholder records or such other
address or facsimile number as the Investor may provide to the Company in
accordance with this Section.

 

15.     Miscellaneous.

(a)     This Note shall be binding on and inure to the benefit of the parties
hereto and their respective successors and assigns.

(b)     Subject to Section 15(a), above, nothing in this Note shall be construed
to give to any person or corporation other than the Company and the Investor any
legal or equitable right, remedy or cause under this Note. This Note shall inure
to the sole and exclusive benefit of the Company and the Investor.

(c)     All questions concerning the construction, validity, enforcement and
interpretation of this Note shall be governed by and construed and enforced in
accordance with the internal laws of the State of New York, without regard to
the principles of conflicts of law thereof. Each party agrees that all
Proceedings shall be commenced exclusively in the state and federal courts
sitting in the City of New York, Borough of Manhattan (the “New York Courts”).
Each party hereto hereby irrevocably submits to the exclusive jurisdiction of
the New York Courts for any Proceeding, and hereby irrevocably waives, and
agrees not to assert in any Proceeding, any claim that it is not personally
subject to the jurisdiction of any New York Court or that a New York Court is an
inconvenient forum for such Proceeding. Each party hereto hereby irrevocably
waives personal service of process and consents to process being served in any
such Proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address in
effect for notices to it under this Note and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing
contained herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law. Each party hereto hereby irrevocably waives, to
the fullest extent permitted by applicable law, any and all right to trial by
jury in any legal Proceeding. The prevailing party in a Proceeding shall be
reimbursed by the other party for its reasonable attorneys’ fees and other costs
and expenses incurred with the investigation, preparation and prosecution of
such Proceeding.

 

 
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(d)     The headings herein are for convenience only, do not constitute a part
of this Note and shall not be deemed to limit or affect any of the provisions
hereof.

(e)     In case any one or more of the provisions of this Note shall be invalid
or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Note shall not in any way be affected or
impaired thereby and the parties will attempt in good faith to agree upon a
valid and enforceable provision which shall be a commercially reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Note.

(f)     No provision of this Note may be waived or amended except (i) in
accordance with the requirements set forth in the Purchase Agreement, and (ii)
in a written instrument signed, in the case of an amendment, by the Company and
Investors holding at least 60% of the aggregate principal amount of the then
outstanding Notes or, in the case of a waiver, by the party against whom
enforcement of any such waiver is sought. No waiver of any default with respect
to any provision, condition or requirement of this Note shall be deemed to be a
continuing waiver in the future or a waiver of any subsequent default or a
waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of either party to exercise any right hereunder in any manner
impair the exercise of any such right.

(g)     To the extent it may lawfully do so, the Company hereby agrees not to
insist upon or plead or in any manner whatsoever claim, and will resist any and
all efforts to be compelled to take the benefit or advantage of, usury laws
wherever enacted, now or at any time hereafter in force, in connection with any
claim, action or Proceeding that may be brought by any Investor in order to
enforce any right or remedy under the Notes. Notwithstanding any provision to
the contrary contained in the Notes, it is expressly agreed and provided that
the total liability of the Company under the Notes for payments in the nature of
interest shall not exceed the maximum lawful rate authorized under applicable
law (the “Maximum Rate”), and, without limiting the foregoing, in no event shall
any rate of interest or default interest, or both of them, when aggregated with
any other sums in the nature of interest that the Company may be obligated to
pay under the Notes exceed such Maximum Rate. It is agreed that if the maximum
contract rate of interest allowed by law and applicable to the Notes is
increased or decreased by statute or any official governmental action subsequent
to the date hereof, the new maximum contract rate of interest allowed by law
will be the Maximum Rate of interest applicable to the Notes from the effective
date forward, unless such application is precluded by applicable law. If under
any circumstances whatsoever, interest in excess of the Maximum Rate is paid by
the Company to any Investor with respect to indebtedness evidenced by the Notes,
such excess shall be applied by such Investor to the unpaid principal balance of
any such indebtedness or be refunded to the Company, the manner of handling such
excess to be at such Investor’s election.

 

[REMAINDER OF PAGE INTENTIONALLY BLANK.

SIGNATURE PAGE FOLLOWS]

 

 
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      IN WITNESS WHEREOF, the Company has caused this Note to be duly executed
by a duly authorized officer as of the date first above indicated.

 

 

 

MERISEL, INC.

          By: /s/        Name        Title   

 

 

[Signature Page to Convertible Note]

 

 
 

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EXHIBIT A

CONVERSION NOTICE

(To be Executed by the Registered

Investor in order to convert Notes)

 

The undersigned hereby elects to convert the principal amount of Note indicated
below, into shares of Common Stock of Merisel, Inc., as of the date written
below. If shares are to be issued in the name of a Person other than
undersigned, the undersigned will pay all transfer taxes payable with respect
thereto and is delivering herewith such certificates and opinions as reasonably
requested by the Company in accordance therewith. No fee will be charged to the
Investor for any conversion, except for such transfer taxes, if any. All terms
used in this notice shall have the meanings set forth in the Note.

 

Conversion calculations:

 

Date to Effect Conversion

Principal amount of Note owned prior to conversion

Principal amount of Note to be Converted

Principal amount of Note remaining after Conversion

Number of shares of Common Stock to be Issued

Applicable Conversion Price

Name of Investor

By: Name: Title:

 

 
 

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Schedule 1

Merisel, Inc.
10% Convertible Note, due August 31, 2015

CONVERSION SCHEDULE

This Conversion Schedule reflects conversions made under the above referenced
Notes.

Dated:

 

Date of Conversion

Amount of Conversion

Aggregate Principal Amount Remaining Subsequent to Conversion

Applicable Conversion Price