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As filed with the Securities and Exchange Commission on November 22, 1996
Registration No. 333-_____
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-1 REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
INGRAM MICRO INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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Delaware 5045 62-1644402
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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1600 E. St. Andrew Place
Santa Ana, CA 92705
(714) 566-1000
(Address, Including Zip Code, and Telephone Number,
Including Area Code, Of Registrant's Principal Executive Offices)
James E. Anderson, Jr., Esq.
Senior Vice President and General Counsel
Ingram Micro Inc.
1600 E. St. Andrew Place
Santa Ana, CA 92705
(714) 566-1000
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, Of Agent for Service)
Approximate date of commencement of proposed sale of the
securities to the public: As soon as practicable after the Registration
Statement becomes effective.
If any of the securities being registered on this Form are to
be offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. [X]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant
to Rule 434, please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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Proposed Proposed
Maximum Maximum
Number of Shares Offering Price Per Aggregate Amount of
Title of Securities to be Registered to be Registered Share(1) Offering Price(1) Registration Fee
Class A Common Stock,
par value $0.01 per share......... 800,000 $24.375 $19,500,000 $5,909.09
==========================================================================================================================
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) based on a per share price of $24.375, the average
of the high and low price of $25.125 and $23.675 of the Company's Class A
Common Stock on November 19, 1996.
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The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its Effective Date until the Registrant
shall file a further Amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
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PROSPECTUS
(Subject to Completion)
Issued November 22, 1996
INGRAM MICRO INC.
800,000 Shares
CLASS A COMMON STOCK
This prospectus relates to the offer and sale from time to time
by the Ingram Thrift Plan, of a total of 800,000 shares of Class A Common
Stock, $0.01 par value (the "Common Stock"), of Ingram Micro Inc. (the
"Company"). The Ingram Thrift Plan, a defined contribution plan intended to
qualify under section 401(a) of the Internal Revenue Code of 1986, as amended
(the "Code"), currently owns an aggregate of 10,007,000 shares of Class B
Common Stock (which are automatically convertible into shares of Common Stock
upon sale) issued to the Ingram Thrift Plan in November 1996 pursuant to a
reorganization of the Company that included the initial public offering of the
Company's Common Stock, among other elements. The Company will not receive
any of the proceeds from the sale of the shares offered hereby.
The Ingram Thrift Plan directly or through agents, brokers,
dealers or underwriters designated from time to time, may sell shares of the
Common Stock from time to time, on terms to be determined at the time of sale.
To the extent required, the specific number of shares to be sold, the purchase
price and public offering price, the names of any resale agent, dealer or
underwriter, and the terms and amount of any applicable commission or discount
with respect to a particular offer will be set forth in a Prospectus
Supplement and/or post-effective amendment to the registration statement of
which this Prospectus forms a part. See "Plan Of Distribution."
The Ingram Thrift Plan and any such agents, brokers, dealers
or underwriters may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"), and any commissions
received by them and any profit on the resale of the Common Stock purchased by
them may be deemed to be underwriting commissions or discounts under the
Securities Act.
The Company has agreed to bear all expenses of registration of
the Common Stock under federal and state securities laws and to indemnify the
Ingram Thrift Plan and such agents, brokers, dealers, and underwriters against
certain civil liabilities, including certain liabilities under the Securities
Act.
The Common Stock is listed on the New York Stock Exchange
under the symbol "IM." On November 21, 1996, the last reported sale price
of the Common Stock on the New York Stock Exchange Composite Tape was
$24.375 per share.
SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR A DISCUSSION OF CERTAIN RISKS
ASSOCIATED WITH THIS OFFERING.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Information contained herein is subject to completion or
amendment. A registration statement relating to these securities has been
filed with the Securities and Exchange Commission. These securities may
not be sold nor may offers to buy be accepted prior to the time the
registration statement becomes effective. This Prospectus shall not
constitute an offer to sell or the solicitation of an offer to buy no shall
there be any sale of these securities in any state in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such state.
November __, 1996
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE
HEREBY TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN AS
CONTAINED IN THIS PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR THE INGRAM THRIFT PLAN. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY BY ANY PERSON IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MAKE SUCH OFFERING OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCE IMPLY THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
TABLE OF CONTENTS
Page
----
Prospectus Summary....................................................... 4
Risk Factors............................................................. 7
The Company.............................................................. 16
Use of Proceeds.......................................................... 18
Dividend Policy.......................................................... 18
Capitalization........................................................... 19
Selected Consolidated Financial Data..................................... 21
Management's Discussion and Analysis
of Financial Condition and Results of Operations....................... 22
Business................................................................. 33
Management............................................................... 51
Certain Transactions..................................................... 63
The Split-Off and the Reorganization..................................... 64
Selling Stockholder...................................................... 69
Principal Stockholders................................................... 70
Description of Capital Stock............................................. 72
Shares Eligible for Future Sale.......................................... 75
Federal Income Tax Considerations........................................ 77
Plan of Distribution..................................................... 79
Legal Matters............................................................ 80
Experts.................................................................. 80
Additional Information................................................... 80
Index to Consolidated Financial Statements............................... F-1
Ingram Micro and the Ingram Micro logo are registered
trademarks of the Company. Ingram Alliance, IMpulse, "Leading the Way in
Worldwide Distribution," and "Partnership America" are trademarks of the
Company. All other trademarks or tradenames referred to in this Prospectus
are the property of their respective owners.
IN CONNECTION WITH THE COMPANY'S INITIAL PUBLIC OFFERING OF ITS
CLASS A COMMON STOCK, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS
WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF THE
COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN
THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY
BE DISCONTINUED AT ANY TIME.
Unless the context otherwise requires, the "Company" or "Ingram
Micro" refers to Ingram Micro Inc., a Delaware corporation, and its
consolidated subsidiaries. The fiscal year of the Company is a 52- or 53-week
period ending on the Saturday nearest to December 31. Unless the context
otherwise requires, references in this Prospectus to "1991," "1992," "1993,"
"1994," and "1995" represent the fiscal years ended December 28, 1991 (52
weeks), January 2, 1993 (53 weeks), January 1, 1994 (52 weeks), December 31,
1994 (52 weeks), and December 30, 1995 (52 weeks), respectively. The
Company's next 53-week fiscal year will be fiscal year 1997.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements and the notes thereto
appearing elsewhere in this Prospectus.
THE COMPANY
Ingram Micro is the leading wholesale distributor of
microcomputer products worldwide. The Company markets microcomputer hardware,
networking equipment, and software products to more than 100,000 reseller
customers in approximately 120 countries worldwide. Ingram Micro distributes
microcomputer products through warehouses in eight strategic locations in the
continental United States and 22 international warehouses located in Canada,
Mexico, most countries of the European Union, Norway, Malaysia, and Singapore.
The Company believes that it is the market share leader in the United States,
Canada, and Mexico, and the second largest full-line distributor in Europe.
In 1995, approximately 31% of the Company's net sales were derived from
operations outside the United States. Ingram Micro offers one-stop shopping
to its reseller customers by providing a comprehensive inventory of more than
36,000 products from over 1,100 suppliers, including most of the microcomputer
industry's leading hardware manufacturers, networking equipment suppliers, and
software publishers. The Company's suppliers include Apple Computer, Cisco
Systems, Compaq Computer, Creative Labs, Hewlett-Packard, IBM, Intel,
Microsoft, NEC, Novell, Quantum, Seagate, 3Com, Toshiba, and U.S. Robotics.
The Company conducts business with most of the leading
resellers of microcomputer products around the world, including, in the United
States, AmeriData, CDW Computer Centers, CompuCom, CompUSA, Computer City,
Electronic Data Systems, En Pointe Technologies, Entex Information Services,
Micro Warehouse, Sam's Club, Staples, and Vanstar. The Company's
international reseller customers include Complet Data A/S, Consultores en
Diagnostico Organizacional y de Sistemas, DSG Retail Ltd., 06 Software Centre
Europe, B.V., GE Capital Technologies, Jump Ordenadores, Maxima S.A., Norsk
Datasenter, Owell Svenska AB, SNI Siemens Nixdorf Infosys AG, and TC Sistema
S.p.A.
The Company has grown rapidly over the past five years, with
net sales and net income increasing to $8.6 billion and $84.3 million,
respectively, in 1995 from $2.0 billion and $30.2 million, respectively, in
1991, representing compound annual growth rates of 43.8% and 29.3%,
respectively. The Company's growth during this period reflects substantial
expansion of its existing domestic and international operations, resulting
from the addition of new customers, increased sales to the existing customer
base, the addition of new product categories and suppliers, and the
establishment of Ingram Alliance Reseller Company ("Ingram Alliance"), the
Company's master reseller business launched in late 1994, as well as the
successful integration of ten acquisitions worldwide. Because of intense
price competition in the microcomputer products wholesale distribution
industry, the Company's margins have historically been narrow and are expected
in the future to continue to be narrow. In addition, the Company is highly
leveraged and has relied heavily on debt financing for its increasing working
capital needs in connection with the expansion of its business.
Prior to the Split-Off (as defined herein), the Company was a
subsidiary of Ingram Industries Inc. ("Ingram Industries"). Immediately prior
to the closing of the Company's initial public offering (the "IPO"), Ingram
Industries consummated the Split-Off, and all information in this Prospectus
assumes the occurrence of the Split-Off. See "The Company" and "The Split-Off
and the Reorganization."
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THE OFFERING
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Common Stock offered by the Ingram Thrift Plan(1)................................ 800,000 Shares
Common Equity to be outstanding after this offering(2):
Common Stock.................................................................. 24,000,000 Shares
Class B Common Stock(3)....................................................... 109,013,762 Shares
Total....................................................................... 133,013,762 Shares
Voting rights:
Common Stock.................................................................. One vote per share
Class B Common Stock.......................................................... Ten votes per share
NYSE Symbol...................................................................... IM
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SUMMARY CONSOLIDATED FINANCIAL DATA
(in millions, except per share data)
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Fiscal Year Thirty-nine Weeks Ended
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September 30, September 28,
1991 1992 1993 1994 1995 1995 1996
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INCOME STATEMENT
DATA:
Net sales............... $2,016.6 $2,731.3 $4,044.2 $5,830.2 $8,616.9 $6,070.7 $8,474.7
Gross profit............ 185.4 227.6 329.6 439.0 605.7 422.5 574.5
Income from operations.. 67.6 68.9 103.0 140.3 186.9 123.9 175.9(4)
Net income(5)........... 30.2 31.0 50.4 63.3 84.3 56.3 77.6(4)
Earnings per share...... 0.25 0.26 0.41 0.52 0.69 0.46 0.64(4)
Weighted average common
shares outstanding(6).. 121.4 121.4 121.4 121.4 121.4 121.4 121.7
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September 28, 1996
------------------------------
Actual As Adjusted(7)
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BALANCE SHEET DATA:
Working capital............. $ 828.1 $ 654.6
Total assets................ 2,843.7 2,706.3
Total debt(8)............... 625.0 93.8
Stockholders' equity........ 366.0 746.4
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(1) The Ingram Thrift Plan holds 10,007,000 shares of Class B Common Stock
prior to this offering and will hold 9,207,000 shares of Class B Common
Stock assuming all Shares offered hereby are purchased. The Company
has certain obligations with respect to the registration of the
remaining Shares of Class B Common Stock held by the Ingram Thrift
Plan. See "The Split-Off and the Reorganization--The Split-Off."
(2) Assumes all Shares offered in this offering are actually sold. The
800,000 Shares offered in this offering are currently outstanding Class B
Common Stock, which will convert to Class A Common Stock automatically
upon purchase in this offering. See "Selling Stockholder" and
"Principal Stockholders." Excludes approximately 21,000,000 shares of
Common Equity issuable in connection with outstanding stock options.
See "Management--1996 Plan--Options" and "--Rollover Plan; Incentive
Stock Units." Does not include Rollover Stock Options exercised after
October 31, 1996. The Company has filed a registration statement on
Form S-1 (the "Rollover S-1") relating to shares issuable upon exercise
of certain Rollover Stock Options, and expects to file a registration
statement on Form S-8 (the "Rollover S-8") in the near future relating
to shares issuable upon exercise of those Rollover Stock Options held
by employees of the Company. See "Shares Eligible for Future Sale."
(3) Each share of Class B Common Stock is convertible, at any time at the
option of the holder, into one share of Common Stock. In addition, the
Class B Common Stock will be automatically converted into Common Stock
upon the occurrence of certain events. See "Description of Capital
Stock."
(4) Reflects a non-cash compensation charge of $8.9 million ($5.4 million,
or $0.04 per share, net of tax) in connection with the granting of the
Rollover Stock Options. See "Managment's Discussion and Analysis of
Financial Condition and Results of Operations--Overview," "The Split-Off
and the Reorganization--The Split-Off," and Note 11 of Notes to
Consolidated Financial Statements.
(5) The 1992 results reflect the adoption of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("FAS 109").
(6) See Note 2 of Notes to Consolidated Financial Statements.
(7) As adjusted to reflect (i) the assumption by the Company of the
accounts receivable securitization program of Ingram Industries in
partial satisfaction of amounts due to Ingram Industries (resulting in
a $160.0 million decrease in each of working capital, total assets, and
total debt), (ii) approximately $22.6 million of indebtedness to be
incurred by the Company in connection with the acquisition of certain
facilities currently utilized by the Company, (iii) the issuance of the
Common Stock sold by the Company in the IPO, (iv) the repayment of
certain indebtedness with the estimated net proceeds therefrom, and (v)
the additional $13.4 million non-cash compensation charge related to
certain of the Rollover Stock Options, as if such transactions had
occurred on September 28, 1996. Does not reflect the issuance of any
Common Stock upon exercise of Rollover Stock Options. If all 2,867,374
shares being offered by the Company pursuant to the Rollover S-1 were
purchased, the Company would receive net proceeds of approximately $4.1
million and estimated realizable tax benefits not quantifiable at this
time. See "Capitalization," "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Overview," "--Liquidity
and Capital Resources," and "Certain Transactions."
(8) Includes long-term debt, current maturities of long-term debt, and amounts
due to Ingram Industries.
RISK FACTORS
In evaluating the Company's business, prospective investors should carefully
consider the following factors in addition to the other information contained
in this Prospectus.
Intense Competition. The Company operates in a highly
competitive environment, both in the United States and internationally. The
microcomputer products distribution industry is characterized by intense
competition, based primarily on price, product availability, speed and
accuracy of delivery, effectiveness of sales and marketing programs, credit
availability, ability to tailor specific solutions to customer needs, quality
and breadth of product lines and services, and availability of technical and
product information. The Company's competitors include regional, national,
and international wholesale distributors, as well as hardware manufacturers,
networking equipment manufacturers, and software publishers that sell directly
to resellers and large resellers who resell to other resellers. There can be
no assurance that the Company will not lose market share in the United States
or in international markets, or that it will not be forced in the future to
reduce its prices in response to the actions of its competitors and thereby
experience a further reduction in its gross margins. See "--Narrow Margins"
and "Business--Competition."
The Company entered the "aggregator" or "master reseller"
business by launching Ingram Alliance in late 1994. See "Business--Ingram
Alliance." The Company competes with other master resellers, which sell to
groups of affiliated franchisees and third-party dealers. Many of the
Company's competitors in the master reseller business are more experienced and
have more established contacts with affiliated resellers, third-party dealers,
or suppliers, which may provide them with a competitive advantage over the
Company.
The Company is constantly seeking to expand its business into
areas closely related to its core microcomputer products distribution
business. As the Company enters new business areas, it may encounter
increased competition from current competitors and/or from new competitors,
some of which may be current customers of the Company. For example, the
Company intends to distribute media in the new digital video disc format and
may compete with traditional music and printed media distributors. In
addition, certain services the Company provides may directly compete with
those provided by the Company's reseller customers. There can be no assurance
that increased competition and adverse reaction from customers resulting from
the Company's expansion into new business areas will not have a material
adverse effect on the Company's business, financial condition, or results of
operations. See "Business--The Industry" and "--Competition."
Narrow Margins. As a result of intense price competition in
the microcomputer products wholesale distribution industry, the Company's
margins have historically been narrow and are expected in the future to
continue to be narrow. See "--Intense Competition." These narrow margins
magnify the impact on operating results of variations in operating costs. The
Company's gross margins have declined from 8.1% for 1993 to 6.8% for the
thirty-nine weeks ended September 28, 1996. The Company receives purchase
discounts from suppliers based on a number of factors, including sales or
purchase volume and breadth of customers. These purchase discounts directly
affect gross margins. Because many purchase discounts from suppliers are
based on percentage increases in sales of products, it may become more
difficult for the Company to achieve the percentage growth in sales required
for larger discounts due to the current size of the Company's revenue base.
The Company's gross margins have been further reduced by the Company's entry
into the master reseller business through Ingram Alliance, which has lower
gross margins than the Company's traditional wholesale distribution business.
See "--Risks Associated with Ingram Alliance" and "Business--Ingram Alliance."
The Company has taken a number of steps intended to address the challenges of
declining gross margins, particularly by continually improving and enhancing
its information systems and implementing procedures and systems designed to
provide greater warehousing efficiencies and greater accuracy in shipping.
However, there can be no assurance that these steps will prevent gross margins
from continuing to decline. If the Company's gross margins continue to
decline, the Company will be required to reduce operating expenses as a
percentage of net sales further in order to maintain or increase its operating
margins. While the Company will continue to explore ways to improve gross
margins and reduce operating expenses as a percentage of net sales, there can
be no assurance that the Company will be successful in such efforts or that
the Company's margins will not decline in the future. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Fluctuations in Quarterly Results. The Company's quarterly
net sales and operating results have varied significantly in the past and will
likely continue to do so in the future as a result of seasonal variations in
the demand for the products and services offered by the Company, the
introduction of new hardware and software technologies and products offering
improved features and functionality, the introduction of new products and
services by the Company and its competitors, the loss or consolidation of a
significant supplier or customer, changes in the level of operating expenses,
inventory adjustments, product supply constraints, competitive conditions
including pricing, interest rate fluctuations, the impact of acquisitions,
currency fluctuations, and general economic conditions. The Company's narrow
margins may magnify the impact of these factors on the Company's operating
results.
Specific historical seasonal variations in the Company's
operating results have included a reduction of demand in Europe during the
summer months, increased Canadian government purchasing in the first quarter,
and pre-holiday stocking in the retail channel during the September to
November period. In addition, as was the case with the introduction of
Microsoft Windows 95 in August 1995, the product cycle of major products may
materially impact the Company's business, financial condition, or results of
operations. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Quarterly Data; Seasonality." Changes in supplier
supported programs may also have a material impact on the Company's quarterly
net sales and operating results. The Company may be unable to adjust spending
sufficiently in a timely manner to compensate for any unexpected sales
shortfall, which could materially adversely affect quarterly operating
results. Accordingly, the Company believes that period-to-period comparisons
of its operating results should not be relied upon as an indication of future
performance. In addition, the results of any quarterly period are not
indicative of results to be expected for a full fiscal year. In certain
future quarters, the Company's operating results may be below the expectations
of public market analysts or investors. In such event, the market price of
the Common Stock would be materially adversely affected.
Capital Intensive Nature of Business; High Degree of Leverage.
The Company's business requires significant levels of capital to finance
accounts receivable and product inventory that is not financed by trade
creditors. The Company is highly leveraged and has relied heavily on debt
financing for its increasing working capital needs in connection with the
expansion of its business. At December 30, 1995 and September 28, 1996, the
Company's total debt was $850.5 million and $625.0 million, respectively, and
represented 73.6% and 63.0%, respectively, of the Company's total
capitalization. Pro forma for the IPO and the application of the estimated
net proceeds therefrom, and the incurrence of approximately $22.6 million of
indebtedness in connection with the acquisition of certain facilities
currently utilized by the Company, as of September 28, 1996, the Company's
total debt would have been $93.8 million and would have represented 11.1% of
the Company's total capitalization. See "Capitalization," and "Management's
Discussion and Analysis of Financial Condition and Results of Operations." In
order to continue its expansion, the Company will need additional financing,
including debt financing, which may or may not be available on terms
acceptable to the Company, or at all. The Company expects that the ratio of
total debt to total capitalization will likely increase over time. While a
portion of the Company's historical financing needs has been satisfied through
internally generated funds and trade creditors, a substantial amount has come
from intercompany borrowings under debt facilities and an accounts receivable
securitization facility maintained by Ingram Industries. No assurance can be
given that the Company will continue to be able to borrow in adequate amounts
for these or other purposes on terms acceptable to the Company, and the
failure to do so could have a material adverse effect on the Company's
business, financial condition, and results of operations.
The Company has entered into a $1 billion Credit Facility (the
"Credit Facility") with NationsBank of Texas N.A. and The Bank of Nova Scotia,
acting as Agents for a syndicate of lenders. The Credit Facility became
effective immediately prior to the closing of the IPO. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources." Concurrently with the
Split-Off, the Company used borrowings under the Credit Facility to repay (i)
intercompany indebtedness in partial satisfaction of amounts due to Ingram
Industries (the Company assumed Ingram Industries' accounts receivable
securitization program in satisfaction of the remaining amounts due to Ingram
Industries) and (ii) outstanding revolving indebtedness related to amounts
drawn by certain of the Company's subsidiaries, as participants in Ingram
Industries' then existing unsecured credit facility, which terminated
concurrently with the closing of the IPO. The net proceeds from the IPO were
used to repay a portion of the borrowings under the Credit Facility. The
Company's ability in the future to satisfy its debt obligations will be
dependent upon its future performance, which is subject to prevailing economic
conditions and financial, business, and other factors, including factors
beyond the Company's control. See "--Fluctuations in Quarterly Results,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources," "Certain Transactions," and "The
Split-Off and the Reorganization--The Reorganization."
Management of Growth. The rapid growth of the Company's
business has required the Company to make significant recent additions in
personnel and has significantly increased the Company's working capital
requirements. Although the Company has experienced significant sales growth
in recent years, such growth should not be considered indicative of future
sales growth. Such growth has resulted in new and increased responsibilities
for management personnel and has placed and continues to place a significant
strain upon the Company's management, operating and financial systems, and
other resources. There can be no assurance that the strain placed upon the
Company's management, operating and financial systems, and other resources
will not have a material adverse effect on the Company's business, financial
condition, and results of operations, nor can there be any assurance that the
Company will be able to attract or retain sufficient personnel to continue the
expansion of its operations. Also crucial to the Company's success in
managing its growth will be its ability to achieve additional economies of
scale. There can be no assurance that the Company will be able to achieve
such economies of scale, and the failure to do so could have a material
adverse effect on the Company's business, financial condition, and results of
operations.
To manage the expansion of its operations, the Company must
continuously evaluate the adequacy of its management structure and its
existing systems and procedures, including, among others, its data processing,
financial, and internal control systems. When entering new geographic
markets, the Company will be required to implement the Company's centralized
IMpulse information processing system on a timely and cost-effective basis,
hire personnel, establish suitable distribution centers, and adapt the
Company's distribution systems and procedures to these new markets. There can
be no assurance that management will adequately anticipate all of the changing
demands that growth could impose on the Company's systems, procedures, and
structure. In addition, the Company will be required to react to changes in
the microcomputer distribution industry, and there can be no assurance that
it will be able to do so successfully. Any failure to adequately anticipate
and respond to such changing demands may have a material adverse effect on the
Company's business, financial condition, or results of operations. See
"--Dependence on Information Systems" and "Business--Information Systems."
Dependence on Information Systems. The Company depends on a
variety of information systems for its operations, particularly its
centralized IMpulse information processing system which supports more than 40
operational functions including inventory management, order processing,
shipping, receiving, and accounting. At the core of IMpulse is on-line,
real-time distribution software which supports basic order entry and
processing and customers' shipments and returns. The Company's information
systems require the services of over 350 of the Company's associates with
extensive knowledge of the Company's information systems and the business
environment in which the Company operates. Although the Company has not in
the past experienced significant failures or downtime of IMpulse or any of its
other information systems, any such failure or significant downtime could
prevent the Company from taking customer orders, printing product pick-lists,
and/or shipping product and could prevent customers from accessing price and
product availability information from the Company. In such event, the Company
could be at a severe disadvantage in determining appropriate product pricing
or the adequacy of inventory levels or in reacting to rapidly changing market
conditions, such as a currency devaluation. A failure of the Company's
information systems which impacts any of these functions could have a material
adverse effect on the Company's business, financial condition, or results of
operations. In addition, the inability of the Company to attract and retain
the highly skilled personnel required to implement, maintain, and operate
IMpulse and the Company's other information systems could have a material
adverse effect on the Company's business, financial condition, or results of
operations. In order to react to changing market conditions, the Company must
continuously expand and improve IMpulse and its other information systems.
From time to time the Company may acquire other businesses having information
systems and records which must be converted and integrated into IMpulse or
other Company information systems. This can be a lengthy and expensive
process that results in a significant diversion of resources from other
operations. The inability of the Company to convert the information systems
of any acquired businesses to the Company's information systems and to train
its information systems personnel in a timely manner and on a cost-effective
basis could materially adversely affect the Company's business, financial
condition, or results of operations. There can be no assurance that the
Company's information systems will not fail, that the Company will be able to
attract and retain qualified personnel necessary for the operation of such
systems, that the Company will be able to expand and improve its information
systems, or that the information systems of acquired companies will be
successfully converted and integrated into the Company's information systems
on a timely and cost-effective basis. See "Business--Information Systems."
Exposure to Foreign Markets; Currency Risk. The Company,
through its subsidiaries, operates in a number of countries outside the United
States, including Canada, Mexico, most of the countries of the European Union,
Norway, Malaysia, and Singapore. In 1994, 1995, and the first three quarters
of 1996, 29.3%, 30.7%, and 30.0%, respectively, of the Company's net sales
were derived from operations outside of the United States, and the Company
expects its international net sales to increase as a percentage of total net
sales in the future. See "Business--Geographic Tactics." The Company's
international net sales are primarily denominated in currencies other than the
U.S. dollar. Accordingly, the Company's international operations impose risks
upon its business as a result of exchange rate fluctuations. Although the
Company attempts to mitigate the effect of exchange rate fluctuations on its
business, primarily by attempting to match the currencies of sales and costs,
as well as through the use of foreign currency borrowings and derivative
financial instruments such as forward exchange contracts, the Company does not
seek to remove all risk associated with such fluctuations. Accordingly, there
can be no assurance that exchange rate fluctuations will not have a material
adverse effect on the Company's business, financial condition, or results of
operations in the future. In certain countries outside the United States,
operations are accounted for primarily on a U.S. dollar denominated basis. In
the event of an unexpected devaluation of the local currency in those
countries, the Company may experience significant foreign exchange losses. For
example, the devaluation of the Mexican peso, which began in December 1994,
significantly affected the Company's Mexican operations. The primary impact
on the Company's operating results was a foreign exchange pre-tax charge of
approximately $6.9 million and $7.8 million in 1994 and 1995, respectively.
In addition, the Company's net sales in Mexico were adversely affected in 1995
as a result of the general economic impact of the devaluation of the Mexican
peso. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
The Company's international operations are subject to other
risks such as the imposition of governmental controls, export license
requirements, restrictions on the export of certain technology, political
instability, trade restrictions, tariff changes, difficulties in staffing and
managing international operations, difficulties in collecting accounts
receivable and longer collection periods, and the impact of local economic
conditions and practices. As the Company continues to expand its
international business, its success will be dependent, in part, on its ability
to anticipate and effectively manage these and other risks. There can be no
assurance that these and other factors will not have a material adverse effect
on the Company's international operations or its business, financial
condition, and results of operations as a whole.
Dependence on Key Individuals. The Company is dependent in
large part on its ability to retain the services of its executive officers,
especially Messrs. Jerre L. Stead (Chief Executive Officer and Chairman of
the Board of Directors), Jeffrey R. Rodek (Worldwide President and Chief
Operating Officer), and David R. Dukes (Vice Chairman of Ingram Micro and
Chief Executive Officer of Ingram Alliance). The loss of any of the Company's
executive officers could have a material adverse effect on the Company. The
Company does not have employment agreements with most of its executive
officers, although it does have agreements, primarily relating to severance
arrangements, with certain of the Named Executive Officers (as defined
herein). See "Management--Employment Agreements." The Company's continued
success is also dependent upon its ability to retain and attract other
qualified employees to meet the Company's needs. See "Business--Employees."
Effective August 27, 1996, the Company appointed Jerre L.
Stead as its Chief Executive Officer and Chairman of the Board. Linwood A.
(Chip) Lacy, Jr., the Company's Chief Executive Officer since 1985,
resigned effective May 31, 1996. Although the Company believes that one of
its distinguishing characteristics is the strength of its senior and middle
management personnel, there can be no assurance that the Company will not
experience a material adverse effect on its business, financial condition,
or results of operations as a result of the resignation of Mr. Lacy. See
"Management--Employment Agreements."
Product Supply; Dependence on Key Suppliers. The ability of
the Company to obtain particular products or product lines in the required
quantities and to fulfill customer orders on a timely basis is critical to the
Company's success. In most cases, the Company has no guaranteed price or
delivery agreements with its suppliers. As a result, the Company has
experienced, and may in the future continue to experience, short-term
inventory shortages. In addition, manufacturers who currently distribute
their products through the Company may decide to distribute, or to
substantially increase their existing distribution, through other
distributors, their own dealer networks, or directly to resellers. Further,
the personal computer industry experiences significant product supply
shortages and customer order backlogs from time to time due to the inability
of certain manufacturers to supply certain products on a timely basis. There
can be no assurance that suppliers will be able to maintain an adequate supply
of products to fulfill the Company's customer orders on a timely basis or that
the Company will be able to obtain particular products or that a product line
currently offered by suppliers will continue to be available. The failure of
the Company to obtain particular products or product lines in the required
quantities or fulfill customer orders on a timely basis could have a material
adverse effect on its business, financial condition, or results of operations.
Although Ingram Micro regularly stocks products and accessories
supplied by over 1,100 suppliers, approximately 36.5%, 41.4%, 53.2%, and 55.2%
of the Company's net sales in 1993, 1994, 1995, and the first three quarters
of 1996, respectively, were derived from products provided by its ten largest
suppliers. In 1995, 23.4% of the Company's net sales were derived from sales
of products from Microsoft (12.7%), Compaq Computer (10.7%), and
Hewlett-Packard (9.5%). In the first three quarters of 1996, 33.2% of the
Company's net sales were derived from sales of products from Compaq Computer
(13.7%), Microsoft (10.4%), and Hewlett-Packard (9.1%). Certain of the
Company's non-U.S. operations are even more dependent on a limited number of
suppliers. In addition, many services that the Company provides to its
reseller customers, such as financing and technical training, are dependent
on supplier support. The loss of a major supplier, the deterioration of the
Company's relationship with a major supplier, the loss or deterioration of
supplier support for certain Company-provided services, the decline in demand
for a particular supplier's product, or the failure of the Company to
establish good relationships with major new suppliers could have a material
adverse effect on the Company's business, financial condition, or results of
operations. Such a loss, deterioration, decline, or failure could also have a
material adverse effect on the sales by the Company of products provided by
other suppliers.
The Company's ability to achieve increases in net sales or to
sustain current net sales levels depends in part on the ability and
willingness of the Company's suppliers to provide products in the quantities
the Company requires. Although the Company has written distribution
agreements with many of its suppliers, these agreements usually provide for
nonexclusive distribution rights and often include territorial restrictions
that limit the countries in which Ingram Micro is permitted to distribute the
products. The agreements are also generally short term, subject to periodic
renewal, and often contain provisions permitting termination by either party
without cause upon relatively short notice. The termination of an agreement
may have a material adverse impact on the Company's business, financial
condition, or results of operations. See "Business--Products and Suppliers."
Risks Associated with Ingram Alliance. Ingram Micro entered
the master reseller (also known as "aggregation") business in late 1994
through the launch of Ingram Alliance. Ingram Alliance is designed to offer
resellers access to products supplied by certain of the industry's leading
hardware manufacturers at competitive prices by utilizing a low-cost business
model that depends upon a higher average order size, lower product returns
percentage, and supplier-paid financing. The master reseller business is
characterized by gross margins and operating margins that are even narrower
than those of the U.S. microcomputer products wholesale distribution business
and by competition based almost exclusively on price, programs, and execution.
In the master reseller business, the Company has different supply arrangements
and financing terms than in its traditional wholesale distribution business.
There can be no assurance that the Company will be able to compete
successfully in the master reseller business. A failure by Ingram Alliance to
compete successfully could have a material adverse effect on the Company's
business, financial condition, or results of operations.
A substantial portion of Ingram Alliance's net sales
(approximately 89.9% during 1995 and 92.5% during the thirty-nine weeks ended
September 28, 1996) is derived from the sale of products supplied by Compaq
Computer, IBM, Toshiba, NEC, and Apple Computer. As a result, Ingram
Alliance's business is dependent upon price and related terms and availability
of products provided by these key suppliers. Although the Company considers
Ingram Alliance's relationships with these suppliers to be good, there can be
no assurance that these relationships will continue as presently in effect or
that changes by one or more of such key suppliers in their volume discount
schedules or other marketing programs would not adversely affect the Company's
business, financial condition or results of operations. Termination or
nonrenewal of Ingram Alliance's agreements with key suppliers would have a
material adverse effect on the Company's business, financial condition, or
results of operations.
Although the Company's wholesale distribution division sells
Hewlett-Packard products, Ingram Alliance has not historically had
authorization to sell Hewlett-Packard products in the master reseller market.
Because of Hewlett-Packard's position as a major supplier of microcomputer
hardware products, the Company believes that sales of Hewlett-Packard products
likely account for a substantial portion of sales at Ingram Alliance's
competitors in the master reseller business. The inability to offer
Hewlett-Packard's products has placed Ingram Alliance at a competitive
disadvantage to its competitors because it has been unable to provide a full
range of products to its customers. In late October 1996, Ingram Alliance,
along with Tech Data Elect, was authorized to sell Hewlett-Packard products in
the master reseller market. The arrangement with Hewlett-Packard provides that
Ingram Alliance and Tech Data Elect may commence sales of Hewlett-Packard
products in January 1997. There can be no assurance that Ingram Alliance will
be able to compete effectively in the sale of Hewlett-Packard products within
the master reseller market. See "Business--Ingram Alliance."
Acquisitions. As part of its growth strategy, the Company
pursues the acquisition of companies that either complement or expand its
existing business. As a result, the Company is continually evaluating
potential acquisition opportunities, which may be material in size and scope.
Acquisitions involve a number of risks and difficulties, including expansion
into new geographic markets and business areas, the requirement to understand
local business practices, the diversion of management's attention to the
assimilation of the operations and personnel of the acquired companies, the
integration of the acquired companies' management information systems with
those of the Company, potential adverse short-term effects on the Company's
operating results, the amortization of acquired intangible assets, and the
need to present a unified corporate image.
The Company does not currently have any commitments or
agreements with respect to any material acquisitions. The Company is
currently in negotiations regarding potential acquisitions or joint ventures,
none of which, if consummated, would be material to the Company's business.
The Company anticipates that one or more potential acquisition opportunities,
including some that could be material to the Company, may become available in
the future. The Company may issue equity securities to consummate
acquisitions, which may cause dilution to investors purchasing Common Stock in
this offering. In addition, the Company may be required to utilize cash or
increase its borrowings to consummate acquisitions. No assurance can be given
that the Company will have adequate resources to consummate any acquisition,
that any acquisition by the Company will or will not occur, that if any
acquisition does occur it will not have a material adverse effect on the
Company, its business, financial condition, or results of operations or that
any such acquisition will be successful in enhancing the Company's business.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations."
Risk of Declines in Inventory Value. The Company's business,
like that of other wholesale distributors, is subject to the risk that the
value of its inventory will be adversely affected by price reductions by
suppliers or by technological changes affecting the usefulness or desirability
of the products comprising the inventory. It is the policy of most suppliers
of microcomputer products to protect distributors such as the Company, who
purchase directly from such suppliers, from the loss in value of inventory due
to technological change or the supplier's price reductions. Under the terms
of many distribution agreements, suppliers will credit the distributor for
inventory losses resulting from the supplier's price reductions if the
distributor complies with certain conditions. In addition, under many such
agreements, the distributor has the right to return for credit or exchange for
other products a portion of the inventory items purchased, within a designated
period of time. A supplier who elects to terminate a distribution agreement
generally will repurchase from the distributor the supplier's products carried
in the distributor's inventory. The industry practices discussed above are
sometimes not embodied in written agreements and do not protect the Company in
all cases from declines in inventory value. No assurance can be given that
such practices will continue, that unforeseen new product developments will
not materially adversely affect the Company, or that the Company will be able
to successfully manage its existing and future inventories. The Company's
risk of declines in inventory value could be greater outside the United States
where agreements with suppliers are more restrictive with regard to price
protection and the Company's ability to return unsold inventory. The Company
establishes reserves for estimated losses due to obsolete inventory in the
normal course of business. Historically, the Company has not experienced
losses due to obsolete inventory materially in excess of established inventory
reserves. However, significant declines in inventory value in excess of
established inventory reserves could materially adversely affect the Company's
business, financial condition, or results of operations.
The Company sometimes purchases from suppliers, usually at
significant discounts, quantities of products that are nearing the end of
their product life cycle. In addition, the Company's purchasing staff also
seeks opportunities to purchase quantities of products from suppliers at
discounts larger than those usually available. When the Company negotiates
these purchases, it seeks to secure favorable terms for the return to
suppliers of products unwanted by resellers and end-users.
Because some of these purchase agreements contain terms
providing for a 60-day time limit on returns to suppliers, end-user or
reseller delays in returning the product to the Company may make it difficult
for the Company to meet the deadline for returns to suppliers, and the Company
could be left with unwanted product. Additionally, some suppliers may be
unwilling or unable to pay the Company for products returned to them under
purchase agreements, and this trend may accelerate as consolidation in the
industry increases. For products offered by major suppliers, each of these
events, were they to occur, could materially adversely impact the Company's
business, financial condition, or results of operations. See
"Business--Products and Suppliers."
Dependence on Independent Shipping Companies. The Company
relies almost entirely on arrangements with independent shipping companies for
the delivery of its products. Products are shipped from suppliers to the
Company through Skyway Freight Systems, Yellow Freight Systems, APL Land
Transport Services, and ABF Freight Systems. Currently, Federal Express
Corporation ("FedEx"), United Parcel Service ("UPS"), Western Package Service,
General Parcel Services, Roadway Parcel Services, and Purolator Courier
deliver the substantial majority of the Company's products to its reseller
customers in the United States and Canada. In other countries, the Company
typically relies on one or two shipping companies prominent in local markets.
The termination of the Company's arrangements with one or more of these
independent shipping companies, or the failure or inability of one or more of
these independent shipping companies to deliver products from suppliers to the
Company or products from the Company to its reseller customers or their
end-user customers could have a material adverse effect on the Company's
business, financial condition, or results of operations. For instance, an
employee work stoppage or slow-down at one or more of these independent
shipping companies could materially impair that shipping company's ability to
perform the services required by the Company. There can be no assurance that
the services of any of these independent shipping companies will continue to
be available to the Company on terms as favorable as those currently available
or that these companies will choose or be able to perform their required
shipping services for the Company. See "Business--Operations--Shipping."
Rapid Technological Change; Alternate Means of Software
Distribution. The microcomputer products industry is subject to rapid
technological change, new and enhanced product specification requirements, and
evolving industry standards. These changes may cause inventory in stock to
decline substantially in value or to become obsolete. In addition, suppliers
may give the Company limited or no access to new products being introduced.
Although the Company believes that it has adequate price protection and other
arrangements with its suppliers to avoid bearing the costs associated with
these changes, no assurance can be made that future technological or other
changes will not have a material adverse effect on the business, financial
condition, or results of operations of the Company. Outside North America,
the supplier contracts can be more restrictive and place more risks on the
Company.
Net sales of software products have decreased as a percentage
of total net sales in recent years due to a number of factors, including
bundling of software with microcomputers; sales growth in Ingram Alliance,
which is a hardware-only business; declines in software prices; and the
emergence of alternative means of software distribution, such as site licenses
and electronic distribution. The Company expects this trend to continue. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Overview" and "Business--Products and Suppliers."
Relationship with Ingram Industries, Ingram Entertainment, and
the Ingram Family Stockholders. The Company has historically depended on
Ingram Industries and other subsidiaries of Ingram Industries for financing,
cash management, tax and payroll administration, property/casualty insurance,
employee benefits administration, and certain other administrative services.
In conjunction with the Split-Off, the Company, Ingram Industries, and Ingram
Entertainment Inc. ("Ingram Entertainment"), a wholly-owned subsidiary of
Ingram Industries, entered into agreements for the continued provision after
the Split-Off of certain services formerly shared among such entities
(collectively, the "Transitional Service Agreements"), as well as a tax
sharing and tax services agreement. See "The Split-Off and the
Reorganization--The Reorganization." The Company believes that the terms of
the Transitional Service Agreements are on a basis as favorable to the
Company as those that would have been obtained from third parties on an arm's
length basis and that they are adequate to allow the Company to continue its
business as previously conducted on an independent basis. The Company's
historical financial statements reflect an allocation of expenses in
connection with the services covered by the Transitional Service Agreements.
Although the Company expects the costs and fees to be paid by it in connection
with the Transitional Service Agreements to be higher than its historical
allocated costs, it does not believe the increase in costs will be material to
its results of operations. In addition, the Transitional Service Agreements
generally terminate on December 31, 1996, although payroll services under the
Transitional Service Agreements will be provided through December 31, 1997.
After such termination, the Company will be required to provide such services
internally or find a third-party provider of such services. There can be no
assurance that the Company will be able to secure the provision of such
services on acceptable terms. Either the additional costs and fees associated
with the Transitional Service Agreements or the failure to obtain acceptable
provision of services upon termination of the Transitional Service Agreements
could have a material adverse effect on the Company's business, financial
condition, or results of operations. Each of the Company and Ingram
Industries continues to be controlled by the Ingram Family Stockholders (as
defined herein). See "--Control by Ingram Family Stockholders; Certain
Anti-takeover Provisions." After the Split-Off, Ingram Entertainment
continues to be a wholly-owned subsidiary of Ingram Industries. Although
there can be no assurance, it is contemplated that, on or after June 20, 1997,
certain remaining stockholders of Ingram Industries will exchange their
remaining shares of Ingram Industries common stock for shares of Ingram
Entertainment common stock. See "The Split-Off and the Reorganization--The
Reorganization."
Furthermore, the Company has incurred, and anticipates
incurring in the future, higher payroll costs associated with the hiring of
certain additional personnel and the addition of certain officers, previously
paid by Ingram Industries, to the Company's payroll. There can be no
assurance that the Company's results of operations will not be materially
adversely affected by such additional costs. See "--Capital Intensive Nature
of Business; High Degree of Leverage," "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Liquidity and Capital
Resources," "Certain Transactions," and "The Split-Off and the
Reorganization--The Reorganization."
In connection with the Split-Off, the Company made a $20.0
million distribution to Ingram Industries in the second quarter of 1996. The
Company may be obligated to Ingram Industries for certain liabilities, fees or
costs incurred in connection with the Split-Off. However, the Company
believes such obligations will be largely offset by amounts due from Ingram
Industries. See "The Split-Off and the Reorganization."
Control by Ingram Family Stockholders; Certain Anti-takeover
Provisions. Immediately after the Split-Off and the closing of the IPO, 67.9%
of the outstanding Common Equity (and 80.5% of the outstanding voting power)
was held by the Ingram Family Stockholders. Martha R. Ingram, her children,
certain trusts created for their benefit, and two charitable trusts and a
foundation created by the Ingram family (collectively, the "Ingram Family
Stockholders") have entered into a Board Representation Agreement (as defined
herein) with the Company, which provides that certain types of corporate
transactions, including transactions involving the potential sale or merger of
the Company; the issuance of additional equity, warrants, or options; certain
acquisitions; or the incurrence of significant indebtedness, may not be
entered into without the written approval of at least a majority of the voting
power held by certain of the Ingram Family Stockholders acting in their sole
discretion. See "The Split-Off and the Reorganization--The Split-Off,"
"Principal Stockholders," and "Description of Capital Stock." Voting
control by the Ingram Family Stockholders may discourage certain types of
transactions involving an actual or potential change of control of the
Company, including transactions in which the holders of the Company's
Common Stock might receive a premium for their shares over the prevailing
market price of the Common Stock.
Section 203 of the Delaware General Corporation Law (as amended
from time to time, the "DGCL"), which is applicable to the Company, prohibits
certain business combinations with certain stockholders for a period of three
years after they acquire 15% or more of the outstanding voting stock of a
corporation. See "Description of Capital Stock--Section 203 of the DGCL." In
addition, the authorized but unissued capital stock of the Company includes
1,000,000 shares of preferred stock. The Board of Directors is authorized to
provide for the issuance of such preferred stock in one or more series and to
fix the designations, preferences, powers and relative, participating,
optional or other rights and restrictions thereof. Accordingly, the Company
may issue a series of preferred stock in the future that will have preference
over the Common Equity with respect to the payment of dividends and upon
liquidation, dissolution or winding-up or which could otherwise adversely
affect holders of the Common Equity or discourage or make difficult any
attempt to obtain control of the Company. See "Description of Capital
Stock--Preferred Stock."
Shares Eligible for Future Sale. Assuming the sale of all
shares being offered hereby, the Company will have outstanding 24,000,000
shares of Common Stock and 109,013,762 shares of Class B Common Stock, and an
additional approximately 16,200,000 shares of Common Stock and approximately
4,800,000 shares of Class B Common Stock will be reserved for issuance upon
exercise of outstanding stock options held by employees and directors of the
Company, Ingram Industries, and Ingram Entertainment. See "Management."
23,000,000 of the shares of Common Stock sold by the Company in the IPO, and
any shares of Common Stock sold in this offering, will be freely tradable
without restriction. The Company and its directors and executive officers,
and certain stockholders of the Company, have agreed, subject to certain
exceptions, not to offer, sell, contract to sell or otherwise dispose of any
Common Equity for a period of 180 days after October 31, 1996 without the
prior written consent of Morgan Stanley & Co. Incorporated. Morgan Stanley &
Co. Incorporated has informed the Company that it has no present intention to
consent to any such transactions. Despite these limitations, the sale of a
significant number of these shares could have an adverse impact on the price
of the Common Stock or on any trading market that may develop. See "Shares
Eligible for Future Sale."
Absence of Public Market; Possible Volatility of Stock Price.
Prior to the IPO, there was no public market for the Common Stock or the Class
B Common Stock. There can be no assurance that an active trading market for
the Common Stock will be sustained or that the market price of the Common
Stock will not decline below the initial public offering price. The initial
public offering price was determined by negotiations between the Company and
the Representatives of the Underwriters. The market price of the Common Stock
could be subject to wide fluctuations in response to quarterly variations in
the Company's results of operations, changes in earnings estimates by research
analysts, conditions in the personal computer industry, or general market or
economic conditions, among other factors. In addition, in recent years the
stock market has experienced extreme price and volume fluctuations. These
fluctuations have had a substantial effect on the market prices of many
technology companies, often unrelated to the operating performance of the
specific companies. Such market fluctuations could materially adversely
affect the market price for the Common Stock.
Dilution. The initial public offering price of the shares of
Common Stock offered in the IPO and the offering price of the shares being
offered hereby is substantially higher than the net tangible book value per
share of the Common Equity.
THE COMPANY
Ingram Micro is the leading wholesale distributor of
microcomputer products worldwide. The Company markets microcomputer hardware,
networking equipment, and software products to more than 100,000 reseller
customers in approximately 120 countries worldwide in three principal market
sectors: the VAR sector, consisting of value-added resellers, systems
integrators, network integrators, application VARs, and original equipment
manufacturers; the Commercial sector, consisting of corporate resellers,
direct marketers, independent dealers, and owner-operated chains; and the
Consumer sector, consisting of consumer electronics stores, computer
superstores, mass merchants, office product superstores, software-only stores,
and warehouse clubs. As a wholesale distributor, the Company markets its
products to each of these types of resellers as opposed to marketing directly
to end-user customers.
The Company conducts business with most of the leading
resellers of microcomputer products around the world, including, in the United
States, AmeriData, CDW Computer Centers, CompuCom, CompUSA, Computer City,
Electronic Data Systems, En Pointe Technologies, Entex Information Services,
Micro Warehouse, Sam's Club, Staples, and Vanstar. The Company's
international reseller customers include Complet Data A/S, Consultores en
Diagnostico Organizacional y de Sistemas, DSG Retail Ltd., 06 Software Centre
Europe, B.V., GE Capital Technologies, Jump Ordenadores, Maxima S.A., Norsk
Datasenter, Owell Svenska AB, SNI Siemens Nixdorf Infosys AG, and TC Sistema
S.p.A.
Ingram Micro offers one-stop shopping to its reseller customers
by providing a comprehensive inventory of more than 36,000 products from over
1,100 suppliers, including most of the microcomputer industry's leading
hardware manufacturers, networking equipment suppliers, and software
publishers. The Company's broad product offerings include: desktop and
notebook personal computers ("PCs"), servers, and workstations; mass storage
devices; CD-ROM drives; monitors; printers; scanners; modems; networking hubs,
routers, and switches; network interface cards; business application software;
entertainment software; and computer supplies. The Company's suppliers
include Apple Computer, Cisco Systems, Compaq Computer, Creative Labs,
Hewlett-Packard, IBM, Intel, Microsoft, NEC, Novell, Quantum, Seagate,
3Com, Toshiba, and U.S. Robotics.
Ingram Micro distributes microcomputer products worldwide
through warehouses in eight strategic locations in the continental United
States and 22 international warehouses located in Canada, Mexico, most
countries of the European Union, Norway, Malaysia, and Singapore. The Company
believes that it is the market share leader in the United States, Canada, and
Mexico, and the second largest full-line distributor in Europe. In 1995,
approximately 31% of the Company's net sales were derived from operations
outside the United States. The Export Division fulfills orders from U.S.
exporters and from foreign customers in countries where the Company does not
operate a distribution subsidiary, including much of Latin America, the Middle
East, Africa, Australia, and parts of Europe and Asia. The Company
participates in the master reseller business in the United States through
Ingram Alliance.
The Company's principal objective is to enhance its position as
the preeminent wholesale distributor of microcomputer products worldwide. The
Company is focused on providing a broad range of products and services, quick
and efficient order fulfillment, and consistent on-time and accurate delivery
to its reseller customers around the world. The Company believes that
IMpulse, the Company's on-line information system, provides a competitive
advantage through real-time worldwide information access and processing
capabilities. This information system, coupled with the Company's exacting
operating procedures in telesales, credit support, customer service,
purchasing, technical support, and warehouse operations, enables the Company
to provide its reseller customers with superior service in an efficient and
low cost manner. In addition, to enhance sales and support its suppliers and
reseller customers, the Company provides a wide range of value-added services,
such as technical training, order fulfillment, tailored financing programs,
systems configuration, and marketing programs.
The Company has grown rapidly over the past five years, with
net sales and net income increasing to $8.6 billion and $84.3 million,
respectively, in 1995 from $2.0 billion and $30.2 million, respectively, in
1991, representing compound annual growth rates of 43.8% and 29.3%,
respectively. The Company's growth during this period reflects substantial
expansion of its existing domestic and international operations, resulting
from the addition of new customers, increased sales to the existing customer
base, the addition of new product categories and suppliers, and the
establishment of Ingram Alliance, as well as the successful integration of ten
acquisitions worldwide. Because of intense price competition in the
microcomputer products wholesale distribution industry, the Company's margins
have historically been narrow and are expected in the future to continue to be
narrow. In addition, the Company is highly leveraged and has relied heavily
on debt financing for its increasing working capital needs in connection with
the expansion of its business. See "Risk Factors--Narrow Margins" and
"--Capital Intensive Nature of Business; High Degree of Leverage."
Prior to the Split-Off, the Company was a subsidiary of Ingram
Industries, a company controlled by the Ingram Family Stockholders. The
Company, Ingram Industries, and Ingram Entertainment have entered into certain
agreements, pursuant to which the operations of the three companies are being
reorganized (the "Reorganization"). In the Reorganization, the Company,
Ingram Industries, and Ingram Entertainment allocated certain liabilities and
obligations among themselves. Immediately prior to the closing of the IPO,
Ingram Industries consummated an exchange, pursuant to which certain existing
stockholders of Ingram Industries (including the Ingram Thrift Plan) exchanged
all or a portion of their shares of Ingram Industries common stock for shares
of Class B Common Stock of the Company in specified ratios. Immediately after
the Split-Off and the closing of the IPO, none of the Common Equity was held
by Ingram Industries, other than the 246,000 shares purchased by Ingram
Industries in the IPO (including 15,000 shares purchased by Ingram Industries'
subsidiary Ingram Entertainment). At such time, 67.9% of the outstanding
Common Equity (and 80.5% of the outstanding voting power) was held by the
Ingram Family Stockholders. See "Risk Factors--Control by Ingram Family
Stockholders; Certain Anti-takeover Provisions." Such exchange of shares of
Ingram Industries common stock for shares of Class B Common Stock of the
Company, together with those elements of the Reorganization that occurred
prior to the closing of the IPO, are referred to herein as the "Split-Off."
See "Principal Stockholders" and "The Split-Off and the Reorganization."
After the Split-Off, Ingram Entertainment continues to be a wholly-owned
subsidiary of Ingram Industries. Although there can be no assurance, it is
contemplated that, on or after June 20, 1997, certain remaining stockholders
of Ingram Industries will exchange their remaining shares of Ingram Industries
common stock for shares of Ingram Entertainment common stock. See "The
Split-Off and the Reorganization."
The Company's earliest predecessor began business in 1979 as a
California corporation named Micro D, Inc. This company and its parent,
Ingram Micro Holdings Inc. ("Holdings"), grew through a series of
acquisitions, mergers, and internal growth to encompass the Company's
current operations. Ingram Micro Inc. was incorporated in Delaware on
April 29, 1996, in order to effect the reincorporation of the Company in
Delaware. The successor to Micro D, Inc. and Holdings were merged into
Ingram Micro Inc. in October 1996. The Company's principal executive
office is located at 1600 East St. Andrew Place, Santa Ana, California
92705, and its telephone number is (714) 566-1000.
USE OF PROCEEDS
Shares of Common Stock are being offered hereby solely for the account
of the Ingram Thrift Plan. The Company will not receive any proceeds from
sales of the Common Stock being offered hereby.
DIVIDEND POLICY
The Company has never declared or paid any dividends on the Common
Equity other than the distribution made to Ingram Industries in connection
with the Split-Off. See "Risk Factors--Relationship with Ingram
Industries, Ingram Entertainment, and the Ingram Family Stockholders." The
Company currently intends to retain its future earnings to finance the
growth and development of its business and therefore does not anticipate
declaring or paying cash dividends on the Common Equity for the foreseeable
future. Any future determination to declare or pay dividends will be at
the discretion of the Board of Directors and will be dependent upon the
Company's financial condition, results of operations, capital requirements,
and such other factors as the Board of Directors deems relevant. In
addition, the Credit Facility and the Company's other debt facilities
contain restrictions on the declaration and payment of dividends.
CAPITALIZATION
The following table sets forth, as of September 28, 1996, (i) the
actual short-term debt and capitalization of the Company and (ii) such
short-term debt and capitalization as adjusted to give effect to the Split-
Off, the sale of the shares of Common Stock offered by the Company in the
IPO at $18.00 per share (after deducting underwriting discounts and
commissions and estimated offering expenses), the application of the
estimated net proceeds therefrom, and the sale of the 800,000 shares of
Common Stock offered hereby.
<TABLE>
<CAPTION>
September 28, 1996
---------------------------------
Actual As Adjusted (1)
------ ---------------
<S> <C> <C>
Short-term debt:
Current maturities of long-term debt.................................... $ 16,458 $ 16,458
======== ========
Long-term debt:
Long-term debt.......................................................... $128,855 $ 77,298
Due to Ingram Industries................................................ 479,703 0
-------- -------
Total long-term debt.................................................. 608,558 77,298
Redeemable Class B Common Stock.......................................... 17,223 17,223
-------- --------
Stockholders' equity(2)(3):
Preferred Stock, $0.01 par value; 1,000,000 shares authorized; 0
shares issued and outstanding......................................... 0 0
Class A Common Stock, $0.01 par value; 265,000,000 shares
authorized; 0 and 24,000,000 shares issued and outstanding,
respectively.......................................................... 0 240
Class B Common Stock, $0.01 par value; 135,000,000 shares
authorized; 109,813,762 and 109,013,762 shares issued and
outstanding, respectively (including 2,460,400 redeemable shares)..... 1,074 1,066
Additional paid in capital............................................. 23,140 416,752
Retained earnings...................................................... 339,689 326,254
Cumulative translation adjustment...................................... 2,680 2,680
Unearned compensation.................................................. (594) (594)
-------- --------
Total stockholders' equity............................................ 365,989 746,398
-------- --------
Total capitalization.................................................. $991,770 $840,919
======== ========
- ---------------
<FN>
(1) As adjusted to reflect (i) the assumption by the Company of the
accounts receivable program of Ingram Industries in satisfaction of
amounts due to Ingram Industries (resulting in an increase of $319.7
million in long-term debt, a decrease of $479.7 million in amounts due
to Ingram Industries, and a decrease of $160.0 million in trade accounts
receivable, not reflected in this table), (ii) approximately $22.6
million of indebtedness to be incurred by the Company in connection with
the acquisition of certain facilities currently utilized by the Company
(resulting in an increase of $22.6 million in long-term debt, which is
reflected in this table, and a similar increase in property and
equipment, which is not reflected in this table), (iii) the issuance of
the Common Stock sold by the Company in the IPO (after deducting
underwriting discounts and commissions and estimated offering expenses
in connection with the IPO), (iv) the repayment of certain revolving
indebtedness with the estimated net proceeds therefrom, (v) the
additional $13.4 million non-cash compensation charge related to certain
of the Rollover Stock Options, and (vi) the sale of all of the shares
being offered hereby, as if such transactions had occurred on September
28, 1996. See "Dilution," "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Overview," "--Liquidity
and Capital Resources," and "Certain Transactions."
(2) Each share of Class B Common Stock is convertible, at any time at the
option of the holder, into one share of Common Stock. In addition, the
Class B Common Stock will be automatically converted into Common Stock
upon the occurrence of certain events. See "Description of Capital
Stock."
(3) Excludes approximately 21,000,000 shares of Common Equity issuable in
connection with outstanding stock options. See "Management--1996 Plan--
Options" and "--Rollover Plan; Incentive Stock Units." The Company has
filed the Rollover S-1 and expects to file the Rollover S-8 in the near
future. See "Shares Eligible for Future Sale."
</TABLE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table presents selected consolidated financial
data of the Company. The information set forth below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the historical consolidated financial
statements and notes thereto included elsewhere in this Prospectus. The
consolidated statement of income data set forth below for each of the three
years in the period ended December 30, 1995 and the consolidated balance sheet
data at December 31, 1994 and December 30, 1995 are derived from, and are
qualified by reference to, the audited consolidated financial statements
included elsewhere in this Prospectus, and should be read in conjunction with
those financial statements and the notes thereto. The consolidated balance
sheet data as of January 1, 1994 are derived from the audited consolidated
balance sheet of the Company as of January 1, 1994, which is not included in
this Prospectus. The consolidated statement of income data for each of the
two years in the period ended January 2, 1993 and the consolidated balance
sheet data as of December 28, 1991 and January 2, 1993 are derived from
unaudited consolidated financial statements not included in this Prospectus.
The consolidated financial data as of and for the thirty-nine weeks ended
September 30, 1995, and as of and for the thirty-nine weeks ended September
28, 1996, have been derived from unaudited consolidated financial statements
of the Company which are included in this Prospectus and which, in the opinion
of the Company, reflect all adjustments, consisting only of adjustments of a
normal and recurring nature, necessary for a fair presentation. Results for
the thirty-nine weeks ended September 28, 1996 are not necessarily indicative
of results for the full year. The historical consolidated financial data may
not be indicative of the Company's future performance and do not necessarily
reflect what the financial position and results of operations of the Company
would have been had the Company operated as a separate, stand-alone entity
during the periods covered. See "Consolidated Financial Statements."
<TABLE>
<CAPTION>
Thirty-nine Weeks Ended
Fiscal Year ------------------------------
-------------------------------------------------------- September 30, September 28,
1991 1992 1993 1994 1995 1995 1996
---- ---- ---- ---- ---- ---- ----
(in thousands except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales.................... $2,016,586 $2,731,272 $4,044,169 $5,830,199 $8,616,867 $6,070,722 $8,474,710
Cost of sales................ 1,831,140 2,503,702 3,714,527 5,391,224 8,011,181 5,648,210 7,900,223
---------- --------- ---------- ---------- ---------- ---------- ----------
Gross profit................. 185,446 227,570 329,642 438,975 605,686 422,512 574,487
Expenses:
Selling, general and
administrative............... 116,793 157,306 225,047 296,330 415,344 296,079 386,492
Charges allocated from
Ingram Industries........ 1,030 1,330 1,567 2,355 3,461 2,561 3,259
Non-cash compensation
charge................... 0 0 0 0 0 0 8,859(2)
---------- --------- ---------- ---------- ---------- ---------- ----------
117,823 158,636 226,614 298,685 418,805 298,640 398,610(2)
---------- --------- ---------- ---------- ---------- ---------- ----------
Income from operations....... 67,623 68,934 103,028 140,290 186,881 123,872 175,877(2)
Other (income) expense:
Interest income............ (256) (103) (407) (937) (3,479) (3,049) (1,188)
Interest expense........... 3,233 5,556 5,003 8,744 13,451 8,918 10,608
Interest expense charged
by Ingram Industries.... 11,859 12,405 16,089 24,189 32,606 22,977 30,912
Net foreign currency
exchange Loss........... 0 0 111 6,873 7,751 6,572 447
Other.................... 324 2,574 (623) 716 1,936 405 1,689
---------- --------- ---------- ---------- ---------- ---------- ----------
15,160 20,432 20,173 39,585 52,265 35,823 42,468
---------- --------- ---------- ---------- ---------- ---------- ----------
Income before income taxes
and minority interest.... 52,463 48,502 82,855 100,705 134,616 88,049 133,409(2)
Provision for income taxes... 22,286 17,529 31,660 39,604 53,143 34,755 55,459
---------- --------- ---------- ---------- ---------- ---------- ----------
Income before minority
interest.................... 30,177 30,973 51,195 61,101 81,473 53,294 77,950(2)
Minority interest............ 0 0 840 (2,243) (2,834) (2,986) 383
---------- --------- ---------- ---------- ---------- ---------- ----------
Net income(1)................ $ 30,177 $ 30,973 $ 50,355 $ 63,344 $ 84,307 $ 56,280 $ 77,567(2)
========== ========== ========== ========== ========== ========== ==========
Earnings per share........... $ 0.25 $ 0.26 $ 0.41 $ 0.52 $ 0.69 $ 0.46 $ 0.64(2)
========== ========== ========== ========== ========== ========== ==========
Weighted average common
shares outstanding....... 121,407 121,407 121,407 121,407 121,407 121,407 121,687
</TABLE>
<TABLE>
<CAPTION>
December 28, January 2, January 1, December 31, December 30, September 28,
1991 1993 1994 1994 1995 1996
------------ ---------- ---------- ------------ ------------ -------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Cash.................. $ 15,510 $ 25,276 $ 44,391 $ 58,369 $ 56,916 $ 43,196
Working capital....... 288,462 334,913 471,616 663,049 1,019,639 828,084
Total assets.......... 670,649 915,590 1,296,363 1,974,289 2,940,898 2,843,712
Total debt(3)......... 244,785 295,389 398,929 552,283 850,548 625,016
Stockholder's equity.. 78,972 109,418 155,459 221,344 310,795 365,989
<FN>
- -----------------
(1) The 1992 results reflect the adoption of FAS 109.
(2) Reflects a non-cash compensation charge of $8.9 million ($5.4 million, or
$0.04 per share, net of tax) in connection with the granting of the
Rollover Stock Options. See Note 11 of Notes to Consolidated Financial
Statements.
(3) Includes long-term debt, current maturities of long-term debt, and amounts
due to Ingram Industries.
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Overview
Ingram Micro is the leading wholesale distributor of
microcomputer products worldwide. The Company's net sales have grown to $8.6
billion in 1995 from $2.0 billion in 1991. This sales growth reflects
substantial expansion of its existing domestic and international operations,
resulting from the addition of new customers, increased sales to the existing
customer base, the addition of new product categories and suppliers, and the
establishment of Ingram Alliance, as well as the successful integration of ten
acquisitions worldwide. Net income has grown to $84.3 million in 1995 from
$30.2 million in 1991.
The microcomputer wholesale distribution industry in which the
Company operates is characterized by narrow gross and operating margins, which
have declined industry-wide in recent years, primarily due to intense price
competition. The Company's gross margins declined to 7.0% in 1995 from 9.2%
in 1991. To partially offset the decline in gross margins, the Company has
continually instituted operational and expense controls which have reduced
selling, general, and administrative ("SG&A") expenses (including charges
allocated from Ingram Industries) as a percentage of net sales to 4.8% in 1995
from 5.8% in 1991. As a result, the Company's operating margins and net
margins have declined less than gross margins. Operating margins declined to
2.2% in 1995 from 3.4% in 1991, and net margins declined to 1.0% in 1995 from
1.5% in 1991. There can be no assurance that the Company will be able to
continue to reduce operating expenses as a percentage of net sales to mitigate
further reductions in gross margins. Although the Company's international
operations have historically had similar gross margins to the Company's U.S.
traditional wholesale operations, the Company's international operations have
historically had lower operating margins due in part to greater economies of
scale in the U.S. operations. See "Risk Factors--Narrow Margins."
Ingram Micro entered the master reseller (also known as
"aggregation") business in late 1994 through the launch of Ingram Alliance.
Ingram Alliance is designed to offer resellers access to certain of the
industry's leading hardware manufacturers at competitive prices by utilizing a
lower cost business model that depends upon a higher average order size, lower
product returns percentage, and supplier-paid financing. In 1995, Ingram
Alliance contributed over $700 million of net sales to the Company. Since its
inception in late 1994, Ingram Alliance has operated with lower gross margins,
lower SG&A expenses as a percentage of net sales, and lower financing costs
than the Company's traditional wholesale distribution business. Accordingly,
if Ingram Alliance's sales continue to grow as a percentage of the Company's
total net sales, the Company expects such increase to cause its overall gross
margins to decline.
The Company sells microcomputer hardware, networking equipment,
and software products. Sales of hardware products (including networking
equipment) represent a majority of total net sales and have historically
generated a higher operating margin than sales of software products, although
operating margins on both hardware products and software products have
historically declined. Hardware products and networking equipment have
comprised an increasing percentage, and software products a decreasing
percentage, of the Company's net sales in recent years, and the Company
expects this trend to continue. Net sales of software products have decreased
as a percentage of total net sales in recent years due to a number of factors,
including bundling of software with microcomputers; sales growth in Ingram
Alliance, which is a hardware-only business; declines in software prices; and
the emergence of alternative means of software distribution, such as site
licenses and electronic distribution. See "Risk Factors--Rapid Technological
Change; Alternate Means of Software Distribution" and "Business--Products and
Suppliers."
Historically, the Company's sources of capital have primarily
been borrowings from Ingram Industries through debt facilities maintained by
Ingram Industries and guaranteed by the Company. The Company has entered into
the $1 billion Credit Facility, which became effective immediately prior to
the closing of the IPO. See "Liquidity and Capital Resources." Concurrently
with the Split-Off, the Company used borrowings under the Credit Facility to
repay (i) intercompany indebtedness in partial satisfaction of amounts due to
Ingram Industries (the Company assumed Ingram Industries' accounts receivable
securitization program in satisfaction of the remaining amounts due to Ingram
Industries) and (ii) outstanding revolving indebtedness related to amounts
drawn by certain of the Company's subsidiaries, as participants in Ingram
Industries' then existing unsecured credit facility, which terminated
concurrently with the closing of the IPO. The net proceeds from the IPO were
used to repay a portion of the borrowings under the Credit Facility. The
Company has historically depended on Ingram Industries and other subsidiaries
of Ingram Industries for financing, management, tax and payroll
administration, property/casualty insurance, employee benefits administration,
and certain other administrative services. In conjunction with the
Reorganization, the Company, Ingram Industries, and Ingram Entertainment
entered into the Transitional Service Agreements, as well as a tax sharing and
tax services agreement. See "The Split-Off and the Reorganization--The
Reorganization." The Company believes that the terms of the Transitional
Service Agreements are on a basis as favorable to the Company as those that
would have been obtained from third parties on an arm's length basis. The
Company's historical financial statements reflect an allocation of expenses in
connection with the services covered by the Transitional Service Agreements.
Although the Company expects the costs and fees to be paid by it in connection
with the Transitional Service Agreements to be higher than its historical
allocated costs, it does not believe the increase in costs will be material to
its results of operations. On a long-term basis, the Company will be required
to hire personnel to perform such services or contract with one or more
independent third parties to provide such services. See "Risk
Factors--Relationship with Ingram Industries, Ingram Entertainment, and the
Ingram Family Stockholders."
The microcomputer wholesale distribution business is capital
intensive. The Company's business requires significant levels of capital to
finance accounts receivable and product inventory that is not financed by
trade creditors. The Company is highly leveraged and has relied heavily on
debt financing for its increasing working capital needs in connection with
the expansion of its business. The Company will need additional capital to
finance its product inventory and accounts receivable as it expands its
business. The Company's interest expense for any current or future
indebtedness will be subject to fluctuations in interest rates and may
cause fluctuations in the Company's net income. In connection with the
Split-Off, the Company assumed Ingram Industries' accounts receivable
securitization program, and financing costs associated with this program
will be classified as other expense. Prior to the Split-Off, such expenses
were reflected as interest expense charged by Ingram Industries. While
this structure will not increase the Company's cost of financing, this
change in the classification of financing costs will result in an increase
in the Company's other expenses of approximately $10.5 million per year and
a corresponding decrease in its interest expense.
In connection with the Split-Off, certain outstanding Ingram
Industries options, incentive stock units ("ISUs"), and stock appreciation
rights ("SARs") held by certain employees of Ingram Industries, Ingram
Entertainment, and Ingram Micro were exchanged or converted to the Rollover
Stock Options. See "Management--Rollover Plan; Incentive Stock Units." The
Company has recorded a pre-tax non-cash compensation charge of approximately
$8.9 million ($5.4 million net of tax) in the first three quarters of 1996
related to the vested portion of certain of the Rollover Stock Options as the
terms and grants of the Rollover Stock Options were established in the first
quarter of 1996. This charge was based on the difference between the
estimated fair value of such options in the first quarter of 1996 and the
exercise price of such options or SARs. In addition, at the time of the IPO,
the Company was required by applicable accounting rules to record a non-cash
compensation charge with respect to the vested portion of approximately
1,300,000 formula plan Rollover Stock Options included in the 11,000,000
shares. This non-cash charge was approximately $13.4 million based on the
difference between the average exercise price of $2.63 per share and $18.00
per share, the initial public offering price of the Common Stock. The Company
will be required by applicable accounting rules to record additional non-cash
compensation charges over the remaining vesting periods of the Rollover Stock
Options. These additional charges will be approximately $1.0 million ($0.6
million net of tax) in the aggregate for the fourth quarter of 1996, $7.1
million ($5.7 million net of tax) for 1997, and $4.6 million ($3.6 million net
of tax) for 1998.
Results of Operations
The following table sets forth the Company's net sales by
geographic region (excluding intercompany sales), and the percentage of total
net sales represented thereby, for each of the periods indicated.
<TABLE>
Fiscal Year Thirty-nine Weeks Ended
---------------------------------------------------- --------------------------------------
September 30, September 28,
1993 1994 1995 1995 1996
--------------- --------------- --------------- --------------- ------------
(dollars in millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales by Geographic Region(1):
United States...................... $3,118 77.1% $4,122 70.7% $5,970 69.3% $4,287 70.6% $5,930 70.0%
Europe............................. 485 12.0 1,078 18.5 1,849 21.4 1,239 20.4 1,745 20.6
------ ----- ------ ----- ------ ----- ------ ----- ------ -----
Other international................ 441 10.9 630 10.8 798 9.3 545 9.0 800 9.4
Total........................... $4,044 100.0% $5,830 100.0% $8,617 100.0% $6,071 100.0% $8,475 100.0%
====== ===== ======= ===== ======= ===== ====== ===== ====== =====
<FN>
- -------------------
(1) Net sales are classified by location of the Company entity. For example,
products sold through Ingram Alliance or the U.S. Export Division are
classified as United States sales.
</TABLE>
The following table sets forth certain items from the Company's
Consolidated Statement of Income as a percentage of net sales, for each of the
periods indicated.
<TABLE>
<CAPTION>
Percentage of Net Sales
----------------------------------------------------------------------------------
Fiscal Year Thirty-nine Weeks Ended
----------------------------------- ----------------------------------------
September 30, September 28,
1993 1994 1995 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales............................. 100.0% 100.0% 100.0% 100.0% 100.0%
----- ----- ----- ----- -----
91.9 92.5 93.0 93.0 93.2
Cost of sales.........................
Gross profit.......................... 8.1 7.5 7.0 7.0 6.8
Expenses:
SG&A expenses and charges
allocated from Ingram Industries 5.6 5.1 4.8 5.0 4.6
Non-cash compensation charge...... 0.0 0.0 0.0 0.0 0.1
----- ----- ----- ----- -----
Income from operations................ 2.5 2.4 2.2 2.0 2.1
Other expense, net.................... 0.5 0.7 0.6 0.5 0.5
----- ----- ----- ----- -----
Income before income taxes and
minority interest.................... 2.0 1.7 1.6 1.5 1.6
Provision for income taxes............ 0.8 0.6 0.6 0.6 0.7
Minority interest..................... 0.0 0.0 0.0 0.0 0.0
----- ----- ----- ----- -----
Net income............................ 1.2% 1.1% 1.0% 0.9% 0.9%
===== ===== ===== ===== =====
</TABLE>
First Three Quarters 1996 Compared to First Three Quarters 1995
Consolidated net sales increased 39.6% to $8.5 billion in the
first three quarters of 1996 from $6.1 billion in the first three quarters of
1995. Microsoft Windows 95 was launched in the third quarter of 1995, and
sales of Microsoft Windows 95 accounted for $289.1 million of consolidated net
sales in the first three quarters of 1995. The increase in worldwide net
sales was attributable to growth in the microcomputer products industry in
general, the addition of new customers, increased sales to the existing
customer base, and expansion of the Company's product offerings.
Net sales from U.S. operations increased 38.3% to $5.9 billion
in the first three quarters of 1996 from $4.3 billion in the first three
quarters of 1995. In addition to the factors above that impacted net sales
worldwide, U.S. net sales were positively impacted by the strong growth in
Ingram Alliance sales. Net sales from European operations increased 40.8% to
$1.7 billion in the first three quarters of 1996 from $1.2 billion in the
first three quarters of 1995. Other international net sales increased 46.9%
to $799.8 million in the first three quarters of 1996 from $544.5 million in
the first three quarters of 1995, principally due to the growth in net sales
from the Company's Canadian operations. In the first three quarters of 1996,
net sales from U.S. operations accounted for 70.0% of consolidated net sales,
net sales from European operations accounted for 20.6% of consolidated net
sales, and other international net sales accounted for 9.4% of consolidated
net sales. In the first three quarters of 1995, net sales from U.S.
operations accounted for 70.6% of consolidated net sales, net sales from
European operations accounted for 20.4% of consolidated net sales, and other
international net sales accounted for 9.0% of consolidated net sales.
Cost of sales as a percentage of net sales increased to 93.2%
in the first three quarters of 1996 from 93.0% in the first three quarters of
1995. This increase was largely attributable to competitive pricing
pressures, especially in Europe, and the increase as a percentage of net sales
of the lower gross margin Ingram Alliance business, which more than offset an
increase in worldwide purchase discounts and rebates from the Company's
suppliers.
Total SG&A expenses and charges allocated from Ingram
Industries increased 30.5% to $389.8 million in the first three quarters of
1996 from $298.6 million in the first three quarters of 1995, but decreased as
a percentage of net sales to 4.6% in the first three quarters of 1996 from
5.0% in the first three quarters of 1995. The increased level of spending was
attributable to expenses required to support expansion of the Company's
business, consisting primarily of incremental personnel and support costs,
lease payments relating to new operating facilities, and expenses associated
with the development and maintenance of information systems. The decrease in
operating expenses as a percentage of net sales was primarily attributable to
the growth of Ingram Alliance, which utilizes a lower cost business model, and
economies of scale from higher sales volumes.
During the first three quarters of 1996, the Company recorded a
non-cash compensation charge of $8.9 million or 0.1% of net sales in
connection with the Rollover Stock Options. The Company did not record any
such charge during the first three quarters of 1995.
Excluding the $8.9 million non-cash compensation charge in the
first three quarters of 1996, total income from operations increased as a
percentage of net sales to 2.2% in the first three quarters of 1996 from 2.0%
in the first three quarters of 1995. Income from operations in the United
States increased as a percentage of net sales to 2.7% in the first three
quarters of 1996 from 2.6% in the first three quarters of 1995. Income from
operations in Europe decreased as a percentage of net sales to 0.5% in the
first three quarters of 1996 from 0.7% in the first three quarters of 1995.
This decrease was offset by an increase in income from operations as a
percentage of net sales for geographic regions outside the United States and
Europe to 2.0% in the first three quarters of 1996 from 0.7% in the first
three quarters of 1995. The first three quarters of 1995 included the
negative impact of an inventory valuation loss of $3.8 million related to the
decline in value of the Mexican peso and the associated impact on the Mexican
economy.
For the reasons set forth above, income from operations,
including the $8.9 million non-cash compensation charge, increased 42.0% to
$175.9 million in the first three quarters of 1996 from $123.9 million in the
first three quarters of 1995, and, as a percentage of net sales, increased to
2.1% in the first three quarters of 1996 from 2.0% in the first three quarters
of 1995.
Other expense, net, which consists primarily of net interest
expense (including interest expense charged by Ingram Industries), foreign
currency exchange losses, and miscellaneous non-operating expenses, increased
18.5% to $42.5 million in the first three quarters of 1996 from $35.8 million
in the first three quarters of 1995, but remained constant as a percentage of
net sales at 0.5%. The increase in other expense was largely attributable to
a higher level of borrowings to finance the Company's worldwide business
expansion, partially offset by a period-over-period decrease in the amount of
foreign currency losses which were primarily related to the 1995 Mexican peso
devaluation.
The provision for income taxes increased 59.6% to $55.5 million
in the first three quarters of 1996 from $34.8 million in the first three
quarters of 1995, reflecting the 51.5% increase in the Company's income before
income taxes and minority interest. The Company's effective tax rate was
41.6% in the first three quarters of 1996 compared to 39.5% in the first three
quarters of 1995. The increase in the effective tax rate was primarily due to
the effect of certain international taxes in 1996.
Excluding the $5.4 million (net of tax) non-cash compensation
charge, net income increased 47.4% to $83.0 million in the first three
quarters of 1996 from $56.3 million in the first three quarters of 1995 and,
as a percentage of net sales, increased to 1.0% in the first three quarters of
1996 from 0.9% in the first three quarters of 1995. Net income, including the
$5.4 million (net of tax) non-cash compensation charge, increased 37.8% to
$77.6 million in the first three quarters of 1996 from $56.3 million in the
first three quarters of 1995, but remained constant as a percentage of net
sales at 0.9%.
1995 Compared to 1994
Consolidated net sales increased 47.8% to $8.6 billion in 1995
from $5.8 billion in 1994. The increase in worldwide net sales was
attributable to growth in the microcomputer products industry in general, the
addition of new customers, increased sales to the existing customer base, and
expansion of the Company's product offerings, as well as to the release of
significant new products, including the Microsoft Windows 95 operating system
in August 1995.
Net sales from U.S. operations increased 44.8% to $6.0 billion
in 1995 from $4.1 billion in 1994. The increase in U.S. net sales was largely
attributable to the growth of Ingram Alliance in 1995, its first full year of
operations, as well as an increase in the Company's customer base and product
lines. Net sales from European operations increased 71.5% to $1.8 billion in
1995 from $1.1 billion in 1994. In addition to factors affecting sales
worldwide, European net sales were positively impacted by the full year
contribution in 1995 of the Company's Scandinavian operations, which were
acquired in September 1994. Other international net sales increased 26.7% to
$798.0 million in 1995 from $629.6 million in 1994. The increase in net sales
from other international operations was entirely attributable to an increase
in Canadian sales, partially offset by a decrease in Mexican net sales
resulting from the distressed Mexican economy and the related peso
devaluation. In 1995, net sales from U.S. operations accounted for 69.3% of
consolidated net sales, net sales from European operations accounted for 21.4%
of consolidated net sales, and other international net sales accounted for
9.3% of consolidated net sales. In 1994, net sales from U.S. operations
accounted for 70.7% of consolidated net sales, net sales from European
operations accounted for 18.5% of consolidated net sales, and other
international net sales accounted for 10.8% of consolidated net sales.
Cost of sales as a percentage of net sales increased to 93.0%
in 1995 from 92.5% in 1994. This increase was largely attributable to
competitive pricing pressures worldwide and the growth of Ingram Alliance,
which is characterized by lower gross margins than the Company's traditional
wholesale distribution business. Gross margin was favorably impacted by
effective operational controls and an increase in worldwide purchase discounts
and rebates from the Company's suppliers.
Total SG&A expenses and charges allocated from Ingram
Industries increased 40.2% to $418.8 million in 1995 from $298.7 million in
1994, but decreased as a percentage of net sales to 4.8% in 1995 from 5.1% in
1994. The increased level of spending was attributable to expenses required
to support expansion of the Company's business, consisting primarily of
incremental personnel and support costs, lease payments relating to new
facilities, and expenses associated with the development and maintenance of
information systems. The decreased level of spending as a percentage of net
sales was primarily attributable to economies of scale resulting from higher
sales volumes, increased operating efficiencies, and the growth of Ingram
Alliance, which is characterized by lower SG&A expenses as a percentage of net
sales than the Company's traditional wholesale distribution business.
For the reasons set forth above, income from operations
increased 33.2% to $186.9 million in 1995 from $140.3 million in 1994, but
decreased as a percentage of net sales to 2.2% in 1995 from 2.4% in 1994.
Income from U.S. operations decreased as a percentage of net sales to 2.6% in
1995 from 3.0% in 1994. This decrease was partially offset by an increase in
income from European operations as a percentage of net sales to 1.1% in 1995
from 0.7% in 1994.
Other expense, net increased 32.0% to $52.3 million in 1995
from $39.6 million in 1994, but decreased as a percentage of net sales to 0.6%
in 1995 from 0.7% in 1994. The increase in other expense was largely
attributable to a higher level of borrowings to finance the Company's
worldwide business expansion. The Company was also negatively impacted by the
continued effect of the distressed Mexican economy and the related peso
devaluation. Primarily due to events in Mexico, the Company sustained a net
foreign currency exchange loss of $7.8 million in 1995 as compared to a $6.9
million loss in 1994.
The provision for income taxes increased 34.2% to $53.1 million
in 1995 from $39.6 million in 1994, reflecting the 33.7% increase in the
Company's income before income taxes and minority interest. The Company's
effective tax rate was 39.5% in 1995 as compared to 39.3% in 1994.
Net income increased 33.1% to $84.3 million in 1995 from $63.3
million in 1994, but decreased as a percentage of net sales to 1.0% in 1995
from 1.1% in 1994.
1994 Compared to 1993
Consolidated net sales increased 44.2% to $5.8 billion in 1994
from $4.0 billion in 1993. The increase in worldwide net sales was
attributable to growth in the microcomputer products industry in general, the
acquisition of four international distributors, the addition of new customers,
increased sales to the existing customer base, and expansion of the Company's
product offerings.
Net sales from U.S. operations increased 32.2% to $4.1 billion
in 1994 from $3.1 billion in 1993. The increase in U.S. net sales was
primarily attributable to the same factors favorably impacting worldwide
consolidated net sales. Net sales from European operations increased 122.3%
to $1.1 billion in 1994 from $485.1 million in 1993. The increase in European
net sales was due to improved operating performance by several of the European
subsidiaries (including the addition of some of the Company's suppliers to the
German operation), as well as the Company's entry through acquisitions into
the Spanish market in April 1994 and the Scandinavian market in September
1994. Net sales from other international operations increased 42.9% to $629.6
million in 1994 from $440.7 million in 1993. The increase in net sales from
other international operations was largely attributable to the continued
development of the Company's operations in Canada and Mexico. In 1994, net
sales from U.S. operations accounted for 70.7% of consolidated net sales, net
sales from European operations accounted for 18.5% of consolidated net sales,
and net sales from other international operations accounted for 10.8% of
consolidated net sales. In 1993, net sales from U.S. operations accounted for
77.1% of consolidated net sales, net sales from European operations accounted
for 12.0% of consolidated net sales, and other international net sales
accounted for 10.9% of consolidated net sales.
Cost of sales as a percentage of net sales increased to 92.5%
in 1994 from 91.9% in 1993. This increase was primarily attributable to
competitive pricing pressures worldwide.
Total SG&A expenses and charges allocated from Ingram
Industries increased 31.8% to $298.7 million in 1994 from $226.6 million in
1993 but decreased as a percentage of net sales to 5.1% in 1994 from 5.6% in
1993. The increased level of spending was attributable to expenses required
to support expansion of the Company's business, consisting primarily of
incremental personnel and support costs, lease payments relating to new
facilities, and expenses associated with the development and maintenance of
information systems. The decreased level of spending as a percentage of net
sales was primarily attributable to economies of scale resulting from higher
sales volumes, as well as increased operating efficiencies.
For the reasons set forth above, income from operations
increased 36.2% to $140.3 million in 1994 from $103.0 million in 1993, but
decreased as a percentage of net sales to 2.4% in 1994 from 2.5% in 1993.
Contributing to the increase in income from operations was income from the
European operations of $8.1 million, compared to a $3.2 million loss from such
operations in 1993.
Other expense, net increased 96.2% to $39.6 million in 1994
from $20.2 million in 1993, and increased as a percentage of net sales to 0.7%
in 1994 from 0.5% in 1993. The increase in other expense was largely
attributable to a higher level of borrowings to finance the Company's
worldwide business expansion, including acquisitions, and foreign currency
exchange losses of $6.9 million primarily related to Mexico in 1994.
The provision for income taxes increased 25.1% to $39.6 million
in 1994 from $31.7 million in 1993, reflecting the 21.5% increase in the
Company's income before income taxes and minority interest. The Company's
effective tax rate was 39.3% in 1994 as compared to 38.2% in 1993.
Net income increased 25.8% to $63.3 million in 1994 from $50.4
million in 1993, but decreased as a percentage of net sales to 1.1% in 1994
from 1.2% in 1993.
Quarterly Data; Seasonality
The Company's quarterly net sales and operating results have
varied significantly in the past and will likely continue to do so in the
future as a result of seasonal variations in the demand for the products and
services offered by the Company, the introduction of new hardware and software
technologies and products offering improved features and functionality, the
introduction of new products and services by the Company and its competitors,
the loss or consolidation of a significant supplier or customer, changes in
the level of operating expenses, inventory adjustments, product supply
constraints, competitive conditions including pricing, interest rate
fluctuations, the impact of acquisitions, currency fluctuations, and general
economic conditions. The Company's narrow operating margins may magnify any
such fluctuations. Specific historical seasonal variations in the Company's
operating results have included a reduction of demand in Europe during the
summer months, increased Canadian government purchasing in the first quarter,
and pre-holiday stocking in the retail channel during the September to
November period. In addition, as was the case with the introduction of
Microsoft Windows 95 in August 1995, the product cycle of major products may
materially impact the Company's business, financial condition, or results of
operations.
The following table sets forth certain unaudited quarterly
historical consolidated financial data for each of the eleven quarters up to
the period ended September 28, 1996. This unaudited quarterly information has
been prepared on the same basis as the annual information presented elsewhere
herein and, in the Company's opinion, includes all adjustments (consisting
only of normal recurring adjustments) necessary for a fair presentation of the
selected quarterly information. This information should be read in
conjunction with the consolidated financial statements and notes thereto
included elsewhere in this Prospectus. The operating results for any quarter
shown are not necessarily indicative of results for any future period.
<TABLE>
<CAPTION>
Income Income Before
Net Gross From Income Taxes and Net Earnings
Sales Profit Operations Minority Interest Income Per Share
----- ------ ---------- ------------------ ------ ----------
(in millions, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Fiscal Year Ended
December 31, 1994
Thirteen Weeks
Ended:
April 2, 1994..... $1,266.6 $92.4 $26.1 $19.4 $11.6 $0.10
July 2, 1994...... 1,298.9 96.8 28.3 19.5 12.1 0.10
October 1, 1994... 1,387.0 105.1 32.9 24.3 14.6 0.12
December 31, 1994. 1,877.7 144.7 53.0 37.5 25.0 0.21
Fiscal Year Ended
December 30, 1995
Thirteen Weeks
Ended:
April 1, 1995..... $1,879.5 $132.4 $38.5 $24.3 $17.1 $0.14
July 1, 1995...... 1,859.6 138.9 40.2 30.0 18.4 0.15
September 30, 1995 2,331.6 151.2 45.2 33.8 20.8 0.17
December 30, 1995. 2,546.2 183.2 63.0 46.5 28.0 0.23
Fiscal Year Ended
December 30, 1995
Thirteen Weeks
Ended:
March 30, 1996.... $2,752.7 $186.6 $54.9(1) $39.6(1) $23.8(1) $0.20(1)
June 29, 1996..... 2,790.4 190.5 59.5(2) 44.9(2) 26.8(2) 0.22(2)
September 28, 1996 2,931.5 197.5 61.4(3) 48.9(3) 26.9(3) 0.22(3)
<FN>
- ---------------
(1) Reflects a non-cash compensation charge of $6.7 million ($4.1 million, or
$0.03 per share, net of tax) in connection with the granting of the
Rollover Stock Options.
(2) Reflects a non-cash compensation charge of $1.1 million ($0.7 million, or
less than $0.01 per share, net of tax) in connection with the granting of
the Rollover Stock Options.
(3) Reflects a non-cash compensation charge of $1.1 million ($0.6 million, or
less than $0.01 per share, net of tax) in connection with the granting of
the Rollover Stock Options.
</TABLE>
As indicated in the table above, the increases in the Company's
net sales in the fourth quarter of each fiscal year have generally been higher
than those in the other three quarters in the same fiscal year. The trend of
higher fourth quarter net sales is attributable to calendar year-end business
purchases and holiday period purchases made by customers. Additionally, gross
profit in the fourth quarter of each year has historically been favorably
impacted by attractive year-end product buying opportunities which have often
resulted in higher purchase discounts. Net sales in the third quarter of 1995
were positively impacted by the release of Microsoft Windows 95. However,
gross and operating margins were lower in the third quarter of 1995 due to the
significant volume of Microsoft Windows 95 sales, which had lower than average
gross margins.
Liquidity and Capital Resources
The Company has financed its growth and cash needs largely
through income from operations and borrowings (primarily from Ingram
Industries), as well as from trade and supplier credit.
Cash provided by operating activities increased to $273.3
million in the first three quarters of 1996 from $32.5 million in the first
three quarters of 1995. The significant increase in cash provided by
operating activities was partially due to higher net income and the difference
between accounts receivable, inventory levels, and accounts payable in the
first three quarters of 1996 as compared to the first three quarters of 1995
due to the launch of Microsoft Windows 95 in the third quarter of 1995. Net
cash used by investing activities was $64.5 million and $36.1 million in the
first three quarters of 1996 and 1995, respectively. This increase was due to
the Company's expansion of warehouse and other facilities. Net cash used for
financing activities increased to $221.6 million from $17.1 million in the
first three quarters of 1996 and 1995, respectively, as a result of higher
repayments on borrowings from Ingram Industries and the $20.0 million
distribution to Ingram Industries, both in the first three quarters of 1996.
Net cash used by operating activities was $251.3 million, $87.1
million, and $41.7 million in 1995, 1994, and 1993, respectively. The
significant increase in cash used by operating activities in 1995 over 1994
was due to the increased levels of inventory which accounted for a use of
$580.1 million in 1995 as compared to $345.5 million in 1994 and an increase
in accounts receivable which accounted for a use of $320.2 million in 1995 as
compared to $232.3 million in 1994. Cash provided by accounts payable of
$543.8 million in 1995 and $411.0 million in 1994 partially offset the use
related to inventory and accounts receivable. The increase in the difference
between inventory levels and accounts payable in 1995 as compared to 1994 was
primarily due to the launch of Microsoft Windows 95.
Net cash used by investing activities of $48.8 million, $42.6
million, and $40.7 million in 1995, 1994, and 1993, respectively, was due to
the Company's expansion of warehouse and other facilities in each year and the
acquisitions of operations in four European countries in 1994 and the
acquisition of operations in three countries in Europe and in Mexico in 1993.
Net cash provided by financing activities was $298.3 million,
$143.3 million, and $101.4 million in 1995, 1994, and 1993, respectively. The
increase in each period was primarily provided by an increase in borrowings
from Ingram Industries.
The Company's sources of capital have primarily been borrowings
from Ingram Industries. As of September 28, 1996, the Company had total debt
outstanding of $625.0 million, including $479.7 million due to Ingram
Industries. The Company has entered into the $1 billion Credit Facility with
NationsBank of Texas N.A. and The Bank of Nova Scotia, acting as Agents for a
syndicate of lenders. The Credit Facility, which became effective immediately
prior to the closing of the IPO, contains standard provisions for agreements
of its type. Under the Credit Facility, the Company can borrow up to $750
million in foreign currencies through negotiated arrangements with individual
lenders in the syndicate. The Company can use up to $250 million of the
Credit Facility for letters of credit. The Company will be required to comply
with certain financial covenants, including minimum net worth, restrictions on
funded debt, current ratio and interest coverage, which will be tested as of
the end of each fiscal quarter. The Credit Facility also restricts the
Company's ability to pay dividends. Borrowings will be subject to the
satisfaction of customary conditions, including the absence of any material
adverse change in the Company's business or financial condition. Concurrently
with the Split-Off, the Company assumed Ingram Industries' accounts receivable
securitization program in partial satisfaction of amounts due to Ingram
Industries. The Company used borrowings under the Credit Facility to repay
(i) the remaining intercompany indebtedness and (ii) outstanding revolving
indebtedness related to amounts drawn by certain of the Company's
subsidiaries, as participants in Ingram Industries' then existing unsecured
credit facility, which terminated concurrently with the closing of the IPO.
The net proceeds from the IPO were used to repay a portion of
the borrowings under the Credit Facility. After giving effect to the
foregoing transactions, including the application of the net proceeds from the
IPO, borrowings under the Credit Facility would have been approximately $17.9
million on a pro forma basis at September 28, 1996. After giving effect to the
foregoing transactions and the application of the net proceeds from the IPO,
the Company would have had available approximately $982.1 million under the
Credit Facility. The aggregate amount of long-term debt outstanding after the
Split-Off, and before application of the proceeds from the IPO, was
substantially similar to the long-term debt and debt due to Ingram Industries
immediately prior to the Split-Off, except as adjusted for the accounts
receivable securitization program assumed by the Company and the incurrence of
an additional $22.6 million of indebtedness including capital lease
obligations in connection with the acquisition of lease agreements related to
certain facilities currently utilized by the Company. See "Certain
Transactions."
Effective February 1993, the Company entered into an agreement
with Ingram Industries whereby the Company sold all of its domestic trade
accounts receivable to Ingram Industries on an ongoing basis. Ingram
Industries transferred certain trade accounts receivable from the Company and
other Ingram Industries affiliates to a trust which sold certificates
representing undivided interests in the total pool of trade receivables
without recourse. As of September 28, 1996, Ingram Industries had sold $160
million of fixed rate certificates and a variable rate certificate, under
which $13.0 million was outstanding. Ingram Industries' arrangement with the
trust extended to December 31, 1997, renewable biannually under an evergreen
provision up to a maximum term of 20 years. In connection with the Split-Off,
in partial satisfaction of amounts due to Ingram Industries, the Ingram
Industries accounts receivable securitization program was assumed by the
Company, which will be the sole seller of receivables. Under the amended
program, certain of the Company's domestic receivables will no longer be
transferred to the trust. The Company believes the amended program will
contain sufficient trade accounts receivable to support the outstanding fixed
rate certificates and an unspecified amount of the variable rate certificates.
Assumption of the securitization program results in a $160 million reduction
of trade accounts receivable and due to Ingram Industries. See Note 4 of
Notes to Consolidated Financial Statements.
The Company and its foreign subsidiaries have uncommitted lines
of credit and short-term overdraft facilities in various currencies which
aggregated $114.1 million as of September 28, 1996. These facilities are used
principally for working capital and bear interest at market rates. See Note 6
of Notes to Consolidated Financial Statements.
The Company believes that the net proceeds from the sale of the
Common Stock offered in the IPO, together with net cash provided by operating
activities, supplemented as necessary with funds available under credit
arrangements (including the Credit Facility), will provide sufficient
resources to meet its present and future working capital requirements and
other cash needs for at least the next 12 months, or earlier if the Company
were to engage in any corporate transactions not currently anticipated, in
which event the Company anticipates that additional debt or equity financing
would be required.
The Company presently expects to spend approximately $90
million in each of 1996 and 1997 for capital expenditures due to the continued
expansion of its business.
Asset Management
The Company maintains sufficient quantities of product
inventories to achieve high order fill rates. The Company believes that the
risks associated with slow moving and obsolete inventory are substantially
mitigated by protection and stock return privileges provided by suppliers. In
the event of a supplier price reduction, the Company generally receives a
credit for products in its inventory. In addition, the Company has the right
to return a certain percentage of purchases, subject to certain limitations.
Historically, price protection, stock return privileges, and inventory
management procedures have helped to reduce the risk of decline in the value
of inventory. The Company's risk of decline in the value of inventory could
be greater outside the United States, where agreements with suppliers are more
restrictive with regard to price protection and the Company's ability to
return unsold inventory. The Company establishes reserves for estimated
losses due to obsolete inventory in the normal course of business.
Historically, the Company has not experienced losses due to obsolete inventory
materially in excess of established inventory reserves. Inventory levels may
vary from period to period, due in part to the addition of new suppliers or
new lines with current suppliers and large cash purchases of inventory due to
advantageous terms offered by suppliers. See "Risk Factors--Risk of Inventory
Losses."
The Company offers various credit terms to qualifying customers
as well as prepay, credit card, and COD terms. The Company closely monitors
customers' creditworthiness through its on-line computer system which contains
detailed information on each customer's payment history and other relevant
information. In addition, the Company participates in a national credit
association which exchanges credit rating information on customers of
association members. In most markets, the Company utilizes various levels of
credit insurance to allow sales expansion and control credit risks. The
Company establishes reserves for estimated credit losses in the normal course
of business. Historically, the Company has not experienced credit losses
materially in excess of established credit loss reserves.
Changes in Accounting Standards
The Company will adopt Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed of" ("FAS 121") in 1996. The Company
does not expect the adoption of FAS 121 to have a material effect on its
financial condition or results of operations.
The Company will adopt Statement of Financial Accounting
Standards No. 123, "Accounting for Stock Based Compensation" ("FAS 123") in
1996. As permitted by FAS 123, the Company will continue to measure
compensation cost in accordance with Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees." Therefore, the adoption of FAS
123 will have no impact on the Company's financial condition or results of
operations.
BUSINESS
Overview
Ingram Micro is the leading wholesale distributor of
microcomputer products worldwide. The Company markets microcomputer hardware,
networking equipment, and software products to more than 100,000 reseller
customers in approximately 120 countries in three principal market sectors:
the VAR sector, consisting of value-added resellers, systems integrators,
network integrators, application VARs, and original equipment manufacturers;
the Commercial sector, consisting of corporate resellers, direct marketers,
independent dealers, and owner-operated chains; and the Consumer sector,
consisting of consumer electronics stores, computer superstores, mass
merchants, office product superstores, software-only stores, and warehouse
clubs. As a wholesale distributor, the Company markets its products to each
of these types of resellers as opposed to marketing directly to end-user
customers.
The Company conducts business with most of the leading
resellers of microcomputer products around the world, including, in the United
States, AmeriData, CDW Computer Centers, CompuCom, CompUSA, Computer City,
Electronic Data Systems, En Pointe Technologies, Entex Information Services,
Micro Warehouse, Sam's Club, Staples, and Vanstar. The Company's
international reseller customers include Complet Data A/S, Consultores en
Diagnostico Organizacional y de Sistemas, DSG Retail Ltd., 06 Software Centre
Europe, B.V., GE Capital Technologies, Jump Ordenadores, Maxima S.A., Norsk
Datasenter, Owell Svenska AB, SNI Siemens Nixdorf Infosys AG, and TC Sistema
S.p.A.
Ingram Micro offers one-stop shopping to its reseller customers
by providing a comprehensive inventory of more than 36,000 products from over
1,100 suppliers, including most of the microcomputer industry's leading
hardware manufacturers, networking equipment suppliers, and software
publishers. The Company's broad product offerings include: desktop and
notebook PCs, servers, and workstations; mass storage devices; CD-ROM drives;
monitors; printers; scanners; modems; networking hubs, routers, and switches;
network interface cards; business application software; entertainment
software; and computer supplies. The Company's suppliers include Apple
Computer, Cisco Systems, Compaq Computer, Creative Labs, Hewlett-Packard, IBM,
Intel, Microsoft, NEC, Novell, Quantum, Seagate, 3Com, Toshiba, and U.S.
Robotics.
Ingram Micro distributes microcomputer products through
warehouses in eight strategic locations in the continental United States and
22 international warehouses located in Canada, Mexico, most countries of the
European Union, Norway, Malaysia and Singapore. The Company believes that it
is the market share leader in the United States, Canada, and Mexico, and the
second largest full-line distributor in Europe, based on publicly available
data and management's knowledge of the industry. In 1995, approximately 31%
of the Company's net sales were derived from operations outside the United
States. The Export Division fulfills orders from U.S. exporters and from
foreign customers in countries where the Company does not operate a
distribution subsidiary, including much of Latin America, the Middle East,
Africa, Australia, and parts of Europe and Asia. The Company participates in
the master reseller business in the United States through Ingram Alliance.
The Company's principal objective is to enhance its position as
the preeminent wholesale distributor of microcomputer products worldwide. The
Company's belief that it is the preeminent wholesale distributor of
microcomputer products is based on publicly available data and management's
knowledge of the industry. The Company is focused on providing a broad range
of products and services, quick and efficient order fulfillment, and
consistent on-time and accurate delivery to its reseller customers around the
world. The Company believes that IMpulse provides a competitive advantage
through real-time worldwide information access and processing capabilities.
This on-line information system, coupled with the Company's exacting operating
procedures in telesales, credit support, customer service, purchasing,
technical support, and warehouse operations, enables the Company to provide
its reseller customers with superior service in an efficient and low cost
manner. In addition, to enhance sales and to support its suppliers and
reseller customers, the Company provides a wide range of value-added services,
such as technical training, order fulfillment, tailored financing programs,
systems configuration, and marketing programs.
The Company has grown rapidly over the past five years, with
net sales and net income increasing to $8.6 billion and $84.3 million,
respectively, in 1995 from $2.0 billion and $30.2 million, respectively, in
1991, representing compound annual growth rates of 43.8% and 29.3%,
respectively. For the thirty-nine weeks ended September 28, 1996, the
Company's net sales and net income increased 39.6% and 37.8%, respectively, as
compared to the net sales and net income levels achieved in the thirty-nine
weeks ended September 30, 1995. The Company's growth during these periods
reflects substantial expansion in its existing domestic and international
operations, resulting from the addition of new customers, increased sales to
the existing customer base, the addition of new product categories and
suppliers, the establishment of Ingram Alliance, and the successful
integration of ten acquisitions worldwide. Because of intense price
competition in the microcomputer products wholesale distribution industry, the
Company's margins have historically been narrow and are expected in the future
to continue to be narrow. In addition, the Company is highly leveraged and
has relied heavily on debt financing for its increasing working capital needs
in connection with the expansion of its business. See "Risk Factors--Narrow
Margins" and "--Capital Intensive Nature of Business; High Degree of
Leverage."
The Industry
The worldwide microcomputer products distribution industry
generally consists of suppliers, which sell directly to wholesalers,
resellers, and end-users; wholesale distributors, which sell to resellers; and
resellers, which sell to other resellers and directly to end-users. A variety
of reseller categories exists, including corporate resellers, VARs, systems
integrators, original equipment manufacturers, direct marketers, independent
dealers, owner-operated chains, franchise chains, and computer retailers.
Different types of resellers are defined and distinguished by the end-user
market they serve, such as large corporate accounts, small and medium-sized
businesses, or home users, and by the level of value they add to the basic
products they sell. Wholesale distributors generally sell only to resellers
and purchase a wide range of products in bulk directly from manufacturers.
Different wholesale distribution models have evolved in particular countries
and geographies depending on the characteristics of the local reseller
environment, as well as other factors specific to a particular country or
region. The United States, for example, is distinguished by the presence of
master resellers, or aggregators, which are functionally similar to wholesale
distributors, but which focus on selling relatively few product
lines--typically high volume, brand name hardware systems--to a network of
franchised dealers and affiliates.
The growth of the microcomputer products wholesale distribution
industry continues to exceed that of the microcomputer industry as a whole.
Faced with the pressures of declining product prices and the increasing costs
of selling direct to a large and diverse group of resellers, suppliers are
increasingly relying upon wholesale distribution channels for a greater
proportion of their sales. To minimize costs and focus on their core
capabilities in manufacturing, product development, and marketing, many
suppliers are also outsourcing an increasing portion of certain functions such
as distribution, service, technical support, and final assembly to the
wholesale distribution channel. Growing product complexity, shorter product
life cycles, and an increasing number of microcomputer products due to the
emergence of open systems architectures and the recognition of certain
industry standards have led resellers to depend on wholesale distributors for
more of their product, marketing, and technical support needs. In addition,
resellers are relying to an increasing extent on wholesale distributors for
inventory management and credit to avoid stocking large inventories and
maintaining credit lines to finance their working capital needs. The Company
believes that new opportunities for growth in the microcomputer products
wholesale distribution industry will emerge as new product categories, such as
computer telephone integration ("CTI") and the digital video disc format,
arise from the ongoing convergence of computing, communications, and consumer
electronics.
International markets, which represent over half of the
microcomputer industry's sales, are characterized by a more fragmented
wholesale distribution channel than in the United States. Increasingly,
suppliers and resellers pursuing global growth are seeking wholesale
distributors with international sales and support capabilities. In addition,
the microcomputer products industry in international markets is less mature
and growing more rapidly than in the United States, and as such, international
growth opportunities for microcomputer wholesaler distributors are
significant.
The evolution of open sourcing during the past several years is
a phenomenon specific to the U.S. microcomputer products wholesale
distribution market. Historically, branded computer systems from large
suppliers such as Apple Computer, Compaq Computer, Hewlett-Packard, and IBM
were sold in the United States only through authorized master resellers.
Under this single sourcing model, resellers were required to purchase these
products exclusively from one master reseller. Over the past few years,
competitive pressures have led some of the major computer suppliers to
authorize second sourcing, in which resellers may purchase a supplier's
product from a source other than their primary master reseller, subject to
certain restrictive terms and conditions (such as higher prices or the
elimination of floor planning subsidies). More recently, certain computer
manufacturers have authorized open sourcing, a model under which resellers can
purchase the supplier's product from any source on equal terms and conditions.
The trend toward open sourcing has blurred the distinction between wholesale
distributors and master resellers, which are increasingly able to serve the
same reseller customers, whereas previously master resellers had a captive
reseller customer base. The Company believes that continued movement towards
second sourcing and open sourcing puts the largest and most efficient
distributors of microcomputer products, which provide the highest value
through superior service and pricing, in the best position to compete for
reseller customers.
The dynamics of the microcomputer products wholesale
distribution business favor the largest distributors which have access to
financing and are able to achieve economies of scale, breadth of geographic
coverage, and the strongest vendor relationships. Consequently, the
distributors with these characteristics are tending to take share from smaller
distributors as the industry undergoes a process of consolidation. The need
for wholesale distributors to implement high volume/low cost operations on a
worldwide basis is continuing to grow due to ongoing price competition, the
increasing demand for value-added services, the trend toward open sourcing,
and the increasing globalization of the microcomputer products industry. In
summary, the microcomputer wholesale distribution industry is growing rapidly
while simultaneously consolidating, creating an industry environment in which
market share leadership and cost efficiency are of paramount importance.
Business Strategy
The Company is the preeminent worldwide wholesale distributor
of microcomputer products and services and believes that it has developed the
capabilities and scale of operations critical for long-term success in the
microcomputer products distribution industry.
The Company's strategy of offering a full line of products and
services provides reseller customers with one-stop shopping. The Company
generally is able to purchase products in large quantities and to avail itself
of special purchase opportunities from a broad range of suppliers. This
allows the Company to take advantage of various discounts from its suppliers,
which in turn enables the Company to provide competitive pricing to its
reseller customers. The Company's international market presence provides
suppliers with access to a broad base of geographically dispersed resellers,
serviced by the Company's extensive network of distribution centers and support
offices. The Company's size has permitted it to attract highly qualified
associates and increase investment in personnel development and training.
Also, the Company benefits from being able to make large investments in
information systems, warehousing systems, and infrastructure. Further, the
Company is able to spread the costs of these investments across its worldwide
operations.
The Company is pursuing a number of strategies to further
enhance its leadership position within the microcomputer marketplace. These
include:
Expand Worldwide Market Coverage. Ingram Micro is committed to
extending its already extensive worldwide market coverage through internal
growth in all domestic and international markets in which it currently
participates. In addition, the Company intends to pursue acquisitions, joint
ventures, and strategic relationships outside the United States in order to
take advantage of growth opportunities and to leverage its strong systems,
infrastructure, and international management skills.
The Company believes that its skills in warehouse operations,
purchasing, sales, credit management, marketing, and technical support enable
it to expand effectively and quickly into new markets. The Company integrates
acquired operations by incorporating its management philosophies and exacting
operating procedures, implementing its IMpulse information system, applying
its functional expertise, and training personnel on the Ingram Micro business
model. Based upon these capabilities, the Company believes it is in the best
position to serve global resellers, which are increasingly seeking a single
source for microcomputer products and services.
By providing greater worldwide market coverage, Ingram Micro
also increases the scale of its business, which results in more cost
economies. In addition, as it increases its global reach, the Company
diversifies its business across different markets, reducing its exposure to
individual market downturns. The Company has grown its international
operations principally through acquisitions and currently has fully integrated
operations in 18 countries outside the United States: Canada, Mexico, most
countries of the European Union, Norway, Malaysia, Singapore, Japan, Argentina
and Ecuador. The Company believes that it is the market share leader in the
United States, Canada, and Mexico, and the second largest full-line
distributor in Europe, based on publicly available data and management's
knowledge of the industry. The Company's objective is to achieve the number
one market share in each of the markets in which it operates.
Ingram Micro will continue to focus on expansion of its
operations through acquisitions, joint ventures, and strategic relationships
in order to take advantage of significant growth opportunities around the
world, both in established and developing markets.
Exploit Information Systems Leadership. Ingram Micro
continually invests in its information systems which are crucial in supporting
the Company's growth and its ability to maintain high service and performance
levels. The Company has developed a scalable, full-featured information
system, IMpulse, which the Company believes is critical to its ability to
deliver worldwide, real-time information to both suppliers and reseller
customers. IMpulse is a single, standardized information system, used across
all markets worldwide, that has been customized to suit local market
requirements. The Company believes that it is the only full-line wholesale
distributor of microcomputer products in the world with such a centralized
global system.
IMpulse allows the Company's telesales representatives to
deliver real-time information on product pricing, inventory, availability, and
order status to reseller customers. Telesales representatives utilize the
Company's Sales Adjusted Gross Profit ("SAGP") pricing system to make informed
pricing decisions for each order through access to specific product and order
related costs. Considering the industry's narrow margins, the Company's
ability to make thousands of informed pricing decisions daily represents a
competitive advantage. In addition, the Company has a number of supporting
systems, including its Decision Support System ("DSS"), a multidimensional
sales and profitability analysis application. The Company continuously seeks
to make system modifications to provide greater capability and flexibility to
the Company's individual business units and markets.
The Company intends to continue to develop and expand the use
of its Customer Information Systems ("CIS"), which packages the full range of
Ingram Micro's electronic services into a single solution. CIS is designed to
improve the information flow from supplier to distributor to reseller to
end-user in order to conduct business in a cost-effective manner. It
addresses the dynamic requirements of various customer markets by offering a
core group of services through a number of different electronic media. By
using CIS, resellers can place orders directly, without the assistance of a
telesales representative. The Company plans further expansion in electronic
links with reseller customers and suppliers to provide better access to the
Company's extensive database for pricing, product availability, and technical
information.
The Company will continue to invest in the enhancement and
expansion of its systems to create additional applications and functionality.
Provide Superior Execution for Reseller Customers. Ingram
Micro continually refines its systems and processes to provide superior
execution and service to reseller customers. The Company believes that the
level of service achieved with its systems and processes is a competitive
advantage and has been a principal contributor to its success to date.
Providing superior execution involves, among other factors,
rapid response to customer calls, quick access to relevant product
information, high order fill rates, and on-time, accurate shipments. The
Company's information systems enable telesales representatives to provide
reseller customers with real-time inventory and pricing information. Ingram
Micro strives to maintain high order fill rates by keeping extensive supplies
of product in its 30 distribution centers worldwide. In the United States and
Canada, the Company has implemented control systems and processes referred to
as Bulletproof Shipping, which include stock-keeping unit ("SKU") bar coding
for all products and on-line quality assurance methods. As a result of this
program, substantially all orders in the United States received by 5:00 p.m.
are shipped on the same day, with highly accurate shipping performance.
Ingram Micro will continue to invest in the development of
systems and processes to improve execution. In the United States, the Company
is currently implementing CTI technology, which will provide automatic caller
identification, onscreen call waiting, and abandoned call management
capabilities to telesales and customer service associates. Also in the United
States, the recently installed POWER system will improve response time to
reseller customers' product returns and other customer service requests. To
support future customer requirements, the Company continues to expand and
upgrade its distribution network. For example, a new warehouse is under
construction in Millington, Tennessee. In Canada, a new returns center will
be added near Toronto, Ontario. The Company is implementing formal systems
for evaluating and tracking key performance metrics such as responsiveness to
customers, process accuracy, order processing cycle time, and order
fulfillment efficiency. Ingram Micro will use this customer satisfaction
monitoring system to identify potential areas of improvement as part of the
Company's focus on providing superior service.
Deliver World-Class Value-Added Services to Suppliers and
Resellers. Ingram Micro is committed to providing a diverse range of
value-added wholesaling and "for fee" services to its supplier and reseller
customers. Together, these services are intended to link reseller customers
and suppliers to Ingram Micro as a one-stop provider of microcomputer products
and related services, while meeting demand by suppliers and resellers to
outsource non-core business activities and thereby lower their operating
costs.
The Company's value-added wholesaling services include final
assembly and configuration of products, technical education programs, pre- and
post-sale technical support, order fulfillment, and product demo evaluation.
In addition to these value-added wholesaling services, the
Company offers a variety of "for fee" services for its reseller customers and
suppliers. These services include: contract configuration, contract
fulfillment, contract warehousing, contract telesales, contract
credit/accounts receivable management, contract inventory management, and
contract technical support for customers. The Company is focused on
identifying and developing services that directly meet reseller customer and
supplier needs.
Maintain Low Cost Leadership Through Continuous Improvements in
Systems and Processes. The microcomputer products industry is characterized
by intense competition and narrow margins, and as a result, achieving
economies of scale and controlling operating expenses are critical to
achieving and maintaining profitable growth.
Over the last five years, the Company has been successful in
reducing SG&A expenses (including expenses allocated from Ingram Industries)
as a percentage of net sales, from 5.8% in 1991 to 4.8% in 1995. The Company
has embarked on a number of programs that are designed to continue to reduce
operating expenses as a percentage of net sales.
Many U.S. developed programs continue to be adapted for
implementation in the Company's international operations. These programs
include: (i) the use of advanced inventory processes and techniques to reduce
the number of shipments from multiple warehouses to fulfill a single order;
(ii) the use of proprietary warehouse productivity programs, such as
Bulletproof Shipping and Pick Assignment; (iii) the enhancement of associates'
productivity through the use of technology such as CTI, and the expanded use
of multimedia workstations for functions such as Telesales and Customer
Service; and (iv) the electronic automation of the ordering and information
delivery process through CIS to decrease the number of non-order telesales
calls. See "--Information Systems."
The Company believes that the continued development of the
IMpulse system and related distribution processes represents an opportunity
for the Company to leverage operating costs across additional areas of the
Company's operations.
Develop Human Resources for Excellence and to Support Future
Growth. Ingram Micro's growth to date is a result of the talent, dedication,
and teamwork of its associates. Future growth and success will be
substantially dependent upon the retention and development of existing
associates, as well as the recruitment of superior talent.
The Company has invested in a number of programs and systems
designed to assist in the development and retention of its associates. The
Company recently formed its Leadership Institute to provide training on a
global basis in areas such as personal leadership and basic business
fundamentals. In addition, the Company provides specific functional training
for associates through Company programs such as the Sales, Purchasing, and
Marketing Academies. Transferring functional skills and implementing
cross-training programs across all Ingram Micro locations have proven to be
important factors in the Company's growth and international expansion. In
conjunction with these programs, the Company intends to expand its human
resource systems to provide enhanced career planning, training support,
applicant tracking, and benefits administration. Also, the Company continues
to seek top quality associates worldwide through local, professional, and
college recruiting programs.
Customers
Ingram Micro sells to more than 100,000 reseller customers in
approximately 120 countries worldwide. No single customer accounted for more
than 3% of Ingram Micro's net sales in 1993, 1994, 1995, or the first three
quarters of 1996.
The Company conducts business with most of the leading
resellers of microcomputer products around the world, including, in the United
States, AmeriData, CDW Computer Centers, CompuCom, CompUSA, Computer City,
Electronic Data Systems, En Pointe Technologies, Entex Information Services,
Micro Warehouse, Sam's Club, Staples, and Vanstar. The Company's
international reseller customers include Complet Data A/S, Consultores en
Diagnostico Organizacional y de Sistemas, DSG Retail Ltd., 06 Software Centre
Europe, B.V., GE Capital Technologies, Jump Ordenadores, Maxima S.A., Norsk
Datasenter, Owell Svenska AB, SNI Siemens Nixdorf Infosys AG, and TC Sistema
S.p.A. The Company has certain limited contracts with its reseller customers,
although most such contracts have a short term, or are terminable at will, and
have no minimum purchase requirements. The Company's business is not
substantially dependent on any such contracts.
Ingram Micro is firmly committed to maintaining a strong
customer focus in all of the markets it serves. To best meet this key
business objective, the Company is organized along the lines of the three
market sectors it serves: VAR, Commercial, and Consumer. This organization
permits the Company to identify and address the varying and often unique
requirements of each customer group, as opposed to applying a uniform approach
to distinctly different reseller channels. This organization model is most
fully developed in the United States and Canada, and is described as follows:
bullet VAR sector. VARs develop computer solutions for their
customers by adding tangible value to a microcomputer product. These
computer solutions range from tailored software development to systems
integration that meet specific customer needs. Systems integrators,
network integrators, application VARs, and original equipment
manufacturers ("OEMs") are classified in this sector. In 1995, this
sector contributed over 27% of Ingram Micro's U.S. net sales (inclusive
of Ingram Alliance and the Export Division).
bullet Commercial sector. The Commercial sector includes
chain/independent dealers, corporate resellers, and direct marketers
that sell a variety of computer products. This sector continues to be
Ingram Micro's largest channel and contributed over 53% of the Company's
1995 U.S. net sales.
bullet Consumer sector. The Consumer sector includes computer
superstores, office product superstores, mass merchants, consumer
electronics stores, and warehouse clubs. In 1995, over 17% of the
Company's U.S. net sales came from this sector.
In addition to focusing on the VAR, Commercial, and Consumer
market sectors, the Company also has specialized strategic business units
("SBUs") designed to provide additional focused marketing and support for
specific product categories or within specific markets. These product-focused
SBUs address the needs of resellers and suppliers for in-depth support of
particular product categories. These SBUs include the Technical Products
Division, the Macintosh and Apple Computer Division, the Enterprise Computing
Division, and the Mass Storage Division. The Company's market-focused SBUs,
which include the Consumer Markets Division, the Education Division, and the
Government Division, are designed to meet the needs of resellers and VARs who
have chosen to concentrate on a particular customer market.
Customer organization along the VAR, Commercial, and Consumer
market sectors has been implemented to varying degrees throughout the
Company's worldwide operations and may not be as well defined as in the United
States and Canada. Specific market circumstances vary from country to
country. In some markets, a few large resellers dominate; in others, the
customer base is more diversified.
Sales and Marketing
Ingram Micro's telesales department is comprised of
approximately 1,400 telesales representatives worldwide, of whom more than 800
representatives are located in the United States. These telesales
representatives assist resellers with product specifications, system
configuration, new product/service introductions, pricing, and availability.
The two main United States telesales centers are located in Santa Ana,
California and Buffalo, New York and are supported by an extensive national
field sales organization. Currently, Ingram Micro has more than 130 field
sales representatives worldwide, including more than 50 in the United States.
In addition to customer organization along the VAR, Commercial,
and Consumer market sectors, the Company utilizes a variety of product-focused
groups specializing in specific product types. Specialists in processors, mass
storage, networks, and other product categories promote sales growth and
facilitate customer contacts for their particular product group. Ingram Micro
also offers a variety of marketing programs tailored to meet specific supplier
and reseller customer needs. Services provided by the Company's in-house
marketing services group include advertising, direct mail campaigns, market
research, retail programs, sales promotions, training, and assistance with
trade shows and other events.
In Canada, Ingram Micro has been organized along customer
sector lines to render more specialized service to each customer sector.
Additionally, a Montreal telesales center was opened in 1995 specifically to
cover the French-speaking market. The Corporate Reseller Division has 13
dedicated field sales representatives to focus efforts on increasing
penetration and protecting market share. The VAR accounts have received
increasing coverage from field sales representatives, now one for each
geographic region, along with dedicated telesales operations in Vancouver and
Montreal. Retail customers served by the Consumer Markets Division benefit
from usage of the electronic ordering systems and manufacturer/customer
symposiums tailored specifically to the Consumer sector. The Company offers a
myriad of marketing programs targeted at the respective customer markets and
are similar to the United States programs that offer a graduated level of
services based on monthly purchase volume.
In Europe, Ingram Micro relies more heavily on telesales to
cover its customer base than in the United States and Canada. In addition,
the Company maintains a relatively small field sales organization to serve
larger customers in each country. Many of the country operations have
Technical Products Divisions that employ dedicated technical sales
representatives. The European operation is expanding the presence of other
product-specific divisions such as the Mass Storage Division and the Macintosh
Division. Ingram Micro employs many of the same marketing tools in Europe as
in the United States and Canada, including product guides, catalogues, and
showcases used to promote selected manufacturers' product lines.
In Mexico, the sales team is comprised of both field sales
representatives and telesales representatives serving Mexico City, Merida,
Guadalajara, Puebla, Monterrey, Leon, and Hermosillo. Complementing this
sales group are marketing associates assigned to key supplier product lines.
To best meet the individualized needs of its increasingly diverse customer
group, the Company is in the process of realigning its sales and marketing
workforce along VAR, Commercial, and Consumer sectors throughout the branch
network. This is anticipated to be a strategic advantage as the trend toward
greater customer focus on particular markets continues to evolve in Mexico.
Ingram Micro's Asia Pacific sales force is responsible for
growing the Company's sales in Singapore, Malaysia, Indonesia, The
Philippines, Thailand, India, and Hong Kong. Marketing support for this sales
effort is based on product line, but will eventually be aligned along VAR,
Commercial, and Consumer sectors. To provide greater focus on the Japanese
market, the Company opened a sales office in Tokyo during the third quarter of
1995.
The Company's Export Division is supported by a team of sales
representatives located in Miami, Florida and Santa Ana, California. The
Miami office covers the Caribbean, Puerto Rico, Ecuador, Colombia, Venezuela,
Peru, Chile, Argentina, Uruguay, and Brazil, while the Santa Ana Export
representatives sell and market Ingram Micro products and services to Japan,
the Middle East, and Australia. A satellite export sales office was opened in
Tokyo during the third quarter of 1995 to provide greater focus on the
Japanese market. The Belgian Export office, which is part of the Company's
European operations, serves Africa and areas of Europe where Ingram Micro does
not have an in-country sales and distribution operation. In addition, the
Export Division has field sales representatives based in Buenos Aires,
Argentina and Quito, Ecuador.
Products and Suppliers
Ingram Micro believes that it has the largest inventory of
products in the industry, based on a review of publicly available data with
respect to its major competitors. The Company distributes and markets more
than 36,000 products from the industry's premier microcomputer hardware
manufacturers, networking equipment suppliers, and software publishers
worldwide. Product assortments vary by market, and the relative importance of
manufacturers to Ingram Micro varies from country to country. On a worldwide
basis, the Company's sales mix is more heavily weighted toward hardware
products and networking equipment than software products. Net sales of
software products have decreased as a percentage of total net sales in recent
years due to a number of factors, including bundling of software with
microcomputers; sales growth in Ingram Alliance, which is a hardware-only
business; declines in software prices; and the emergence of alternative means
of software distribution, such as site licenses and electronic distribution.
The Company believes that this is a trend that applies to the microcomputer
products distribution industry as a whole, and the Company expects it to
continue. See "Risk Factors--Rapid Technological Change; Alternate Means of
Software Distribution" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Overview."
In the United States, Ingram Micro's suppliers include almost
all of the leading microcomputer hardware manufacturers, networking equipment
manufacturers, and software publishers such as Apple Computer, Cisco Systems,
Compaq Computer, Creative Labs, Hewlett-Packard, IBM, Intel, Microsoft, NEC,
Novell, Quantum, Seagate, 3Com, Toshiba, and U.S. Robotics. Internationally,
Ingram Micro has secured distribution agreements with most of the leading
suppliers, and products are added to the Company's mix in response to local
market demands.
New products are continually evaluated and added to the
Company's product mix upon meeting Ingram Micro's business and technical
standards. The Company evaluates on average 160 products monthly. Each
Ingram Micro entity has its own procedure for assessing new products based on
local market characteristics, but all follow general guidelines utilizing
certain business and technical criteria including market size, demand,
perceived value, industry positioning, support required, ease of set-up,
packaging quality, and error handling procedures. The Company proactively
pursues products representing the leading edge of technology.
The Company's suppliers generally warrant the products
distributed by the Company and allow the Company to return defective products,
including those that have been returned to the Company by its customers. The
Company does not independently warrant the products it distributes.
The Company's business, like that of other wholesale
distributors, is subject to the risk that the value of its inventory will be
affected adversely by suppliers' price reductions or by technological changes
affecting the usefulness or desirability of the products comprising the
inventory. It is the policy of most suppliers of microcomputer products to
protect distributors, such as the Company, who purchase directly from such
suppliers, from the loss in value of inventory due to technological change or
the supplier's price reductions. Although the Company has written
distribution agreements with many of its suppliers, these agreements usually
provide for nonexclusive distribution rights and often include territorial
restrictions that limit the countries in which Ingram Micro is permitted to
distribute the products. The agreements are also generally short term,
subject to periodic renewal, and often contain provisions permitting
termination by either party without cause upon relatively short notice. The
Company does not believe that its business is substantially dependent on the
terms of any such agreements. Under the terms of many distribution
agreements, suppliers will credit the distributor for declines in inventory
value resulting from the supplier's price reductions if the distributor
complies with certain conditions. In addition, under many such agreements,
the distributor has the right to return for credit or exchange for other
products a portion of those inventory items purchased, within a designated
period of time. A supplier who elects to terminate a distribution agreement
generally will repurchase from the distributor the supplier's products carried
in the distributor's inventory. While the industry practices discussed
above are sometimes not embodied in written agreements and do not protect
the Company in all cases from declines in inventory value, management
believes that these practices provide a significant level of protection
from such declines. No assurance can be given, however, that such
practices will continue or that they will adequately protect the Company
against declines in inventory value. The Company's risk of inventory loss
could be greater outside the United States, where agreements with suppliers
are more restrictive with regard to price protection and the Company's
ability to return unsold inventory. The Company establishes reserves for
estimated losses due to obsolete inventory in the normal course of
business. Historically, the Company has not experienced losses due to
obsolete inventory materially in excess of established inventory reserves.
See "Risk Factors--Product Supply; Dependence on Key Suppliers."
Value-added Services
The Company believes that there is a trend among wholesale
distributors of microcomputer products to increase available services for
suppliers and customers, and the Company is committed to being in the
forefront of this trend. Ingram Micro offers a myriad of programs and
services to its supplier and reseller customers as an integral part of its
wholesaling efforts. The Company categorizes these services into value-added
wholesale distribution and "for fee" services. Together, these services are
intended to link reseller customers and suppliers to Ingram Micro as a
one-stop provider of microcomputer products and related services, while
meeting demand by suppliers and resellers to outsource non-core business
activities and thereby lower their operating costs.
The Company's value-added wholesaling services are an important
complement to its distribution activities and include final assembly and
configuration of products, technical education programs, pre- and post-sale
technical support, order fulfillment, and product demo evaluation.
Ingram Micro offers a selection of "for fee" services which
reseller customers and suppliers may avail themselves of, independent of
product purchase transactions. Many of the value-added wholesaling services
are also included in this set of "for fee" services, which include: contract
configuration, contract fulfillment, contract warehousing, contract telesales,
contract inventory management, and contract technical support for reseller
customers and end-users. Management remains focused on adding more
value-added "for fee" services to meet reseller customer and supplier needs.
Ingram Micro's value-added services for its reseller customers
and suppliers include:
bullet System Configuration. Final assembly and configuration of
microcomputer products for suppliers and reseller customers.
bullet Order Fulfillment. Fulfillment of end-user orders on behalf
of suppliers and reseller customers. This may include order-taking,
configuration, shipping, and collection.
bullet Electronic Services. Various electronic ordering and
information delivery media integrated under the Company's CIS program
which enable suppliers and reseller customers to interface directly with
the Company's database.
bullet Technical Support. Pre- and post-sale technical support for
reseller customers.
bullet Tailored Marketing Services. A range of offerings including
trade show and symposium development, promotional advertising, end-user
briefings, and joint sales calls performed by Ingram Micro Sales and
Marketing staff for the benefit of reseller customers and suppliers.
bullet Financial Services. Includes accounts receivable financing,
a purchase order program, and credit insurance provided or arranged by
Ingram Financial Services Company for reseller customers.
bullet Inventory Management. A variety of services conducted for
reseller customers that includes contract warehousing, inventory
tracking by serial number, and other services.
bullet Telesales. Telesales performed by the Company for suppliers
and reseller customers.
bullet Warehousing. Leasing of warehouse space to suppliers and
reseller customers.
bullet Technical Education. Various computer-based and self-study
training programs, some leading to certification from suppliers.
bullet Warranty and Repair. Comprehensive warranty coverage on
end-user systems. This service is sub-contracted by Ingram Micro to
third-party repair businesses for reseller customers.
All of these services are currently available in the Company's
U.S. operations. The degree of implementation of these value-added services
in Ingram Micro's international operations varies depending on particular
market circumstances. Although the Company believes that value-added services
are important as a complement to its core business, such services do not, and
are not in the future expected to, generate a material percentage of the
Company's net sales. In addition, such value-added services do not, and are
not in the future expected to, require a material portion of the Company's
resources.
Ingram Alliance
Ingram Micro entered the master reseller (also known as
"aggregation") business in late 1994 with the launch of Ingram Alliance.
Ingram Alliance is designed to offer resellers access to the industry's
leading hardware manufacturers at competitive prices by utilizing a lower cost
business model that depends upon a higher average order size, lower product
returns percentage, and supplier-paid financing. See "Risk Factors--Narrow
Margins" and "--Risks Associated with Ingram Alliance."
The Company believes that it has been able to leverage its
leading traditional wholesale distribution business in the United States to
establish its master reseller business. Over 95% of Ingram Alliance's sales
are funded by floor plan financing companies. The Company typically receives
payment from these financing institutions within three business days from the
date of the sale, allowing Ingram Alliance to operate at much lower relative
working capital levels than the Company's wholesale distribution business.
Such floor plan financing is typically subsidized for Ingram Alliance's
reseller customers by its suppliers.
Since its inception, Ingram Alliance has experienced rapid
growth. In 1995, Ingram Alliance achieved net sales in excess of $700
million, and it currently has 12 suppliers and more than 800 reseller
customers. Ingram Alliance's success has, to a large degree, been
attributable to its ability to leverage Ingram Micro's distribution
infrastructure and capitalize on strong supplier relationships.
To support additional growth, Ingram Alliance remains committed
to further developing relations with key suppliers. These efforts are largely
driven by joint supplier/distributor sales calls, proposal and bid development
programs, and tailored marketing campaigns carried out by Ingram Alliance
supplier program teams.
Ingram Alliance pursues an integrated sales and marketing
strategy to gain new customers and grow its business. A fully-dedicated
telesales team is in place, which in conjunction with the Company's field
sales representatives aims to cultivate important relationships with reseller
customers. Further, Ingram Alliance provides a wide range of high quality
"for fee" value-added services for its customers including technical training
and certification, warranty and repair, fulfillment, technical support,
contract warehousing, and configuration services. Special promotional
activities and creative financing packages are additional incentives for
resellers to do business with Ingram Alliance.
Information Systems
The Company's information system, IMpulse, is central to its
ability to provide superior execution to its customers, and as such, the
Company believes that it represents an important competitive advantage. See
"Risk Factors--Dependence on Information Systems."
Ingram Micro's systems are primarily mainframe-based in order
to provide the high level of scalability and performance required to manage
such a large and complex business operation. IMpulse is a single,
standardized, real-time information system and operating environment, used
across all of the Company's worldwide operations. It has been customized as
necessary for use in every country in which the Company operates and has the
capability to handle multiple languages and currencies. On a daily basis, the
Company's systems typically handle 12 million on-line transactions, 26,000
orders, and 37,000 shipments. The Company has designed IMpulse as a scalable
system that has the capability to support increased transaction volume. The
overall on-line response time for the Company's network of over 8,000 user
stations (terminals, printers, personal computers, and radio frequency hand
held terminals) is less than one-half second.
Worldwide, Ingram Micro's centralized processing system
supports more than 40 operational functions including receiving, order
processing, shipping, inventory management, and accounting. At the core of
the IMpulse system is on-line, real-time distribution software to which
considerable enhancements and modifications have been made to support the
Company's growth and its low cost business model. The Company makes extensive
use of advanced telecommunications technologies with customer
service-enhancing features, such as Automatic Call Distribution to route
customer calls to the telesales representatives. The Telesales Department
relies on its Sales Wizard system for on-line, real-time tracking of all
customer calls and for status reports on sales statistics such as number of
customer calls, customer call intentions, and total sales generated. IMpulse
allows the Company's telesales representatives to deliver real-time
information on product pricing, inventory, availability, and order status to
reseller customers. The SAGP pricing system enables telesales representatives
to make informed pricing decisions through access to specific product and
order related costs for each order. Considering the industry's narrow
margins, these pricing decisions are particularly important, and the Company
believes that its ability to make thousands of informed pricing decisions
daily represents a competitive advantage.
In the United States, the Company is in the process of
implementing CTI technology, which will provide the telesales and customer
service representatives with Automatic Number Identification capability and
advanced telecommunications features such as on-screen call waiting and
automatic call return, thereby reducing the time required to process customer
orders and customer service requests.
To complement Ingram Micro's telesales, customer service, and
technical support capabilities, IMpulse supports CIS, which integrates all of
the Company's electronic services into a single solution. CIS offers a number
of different electronic media through which customers can conduct business
with the Company, such as the Customer Automated Purchasing System ("CAPS"),
Electronic Data Interchange ("EDI"), the Bulletin Board Service, and the
Ingram Micro Web site. The Company's latest additions to CIS are its
Internet-based Electronic Catalog and Manufacturer Information Library. The
Electronic Catalog provides reseller customers with real-time access to
product pricing and availability, with the capability to search by product
category, name, or manufacturer. The Manufacturer Information Library is a
comprehensive multi-manufacturer database of timely and accurate product,
sales, marketing, and technical information, which is updated nightly for new
information. Ingram Micro believes it is the first microcomputer wholesale
distributor to offer electronic access to real-time product pricing,
availability, and information on the World Wide Web. All of Ingram Micro's
CIS offerings are constantly being reviewed for enhancement. For instance, a
faster local network intranet solution to access the Manufacturer Information
Library is currently being tested, and ordering and configuration capabilities
through the Internet are under consideration.
The Company's warehouse operations use extensive bar-coding
technology and radio frequency technology for receiving and shipping, and
real-time links to UPS and FedEx for freight processing and shipment tracking.
The Customer Service Department uses the POWER System for on-line
documentation and faster processing of customer product returns. To ensure
that adequate inventory levels are maintained, the Company's buyers depend on
the Purchasing system to track inventory on a continual basis. Many other
features of IMpulse help to expedite the order processing cycle and reduce
operating costs for the Company as well as its reseller customers and
suppliers.
To support and augment the Company's mainframe-based systems,
the Company utilizes a number of client-server applications. Examples are the
Marketing On-line Management System, a software application that provides
management, accountability, and financial controls for over 6,000 marketing
projects; APImage, an application that facilitates imaging of invoices and
related documents in the Accounts Payable department, substantially reducing
paper processing and improving document work flow; and DSS, a data warehousing
application that enables multidimensional sales and profitability analysis.
In the United States, over 330 associates across all functions have access to
75 million lines of data through DSS. DSS is used for, among other tasks,
pricing decisions and analysis of profitability by customer market and product
category. DSS is currently being implemented in Canada and the U.K., with
plans to add other international locations thereafter. The Company has also
begun to deploy other PC-based tools for both the United States and
international locations, including workstations in Telesales and Purchasing
to assist with product acquisition and pricing decisions.
The Company employs various security measures and backup
systems designed to protect against unauthorized use or failure of its
information systems. Access to the Company's information systems is
controlled through the use of passwords and additional security measures are
taken with respect to especially sensitive information. The Company has a
five year contract with Sungard Recovery Services for disaster recovery and
twice per year performs a complete systems test, including applications and
database integrity. In addition, the Company has backup power sources for
emergency power and also has the capability to automatically reroute incoming
calls, such as from its Santa Ana (West Coast sales) facility to its Buffalo
(East Coast sales) facility. The Company has not in the past experienced
significant failures or downtime of IMpulse or any of its other information
systems, but any such failure or significant downtime could prevent the
Company from taking customer orders, printing product pick-lists, and/or
shipping product and could prevent customers from accessing price and product
availability information from the Company. See "Risk Factors--Dependence on
Information Systems."
Over 350 experienced information technology professionals
support the daily maintenance and continuous development of the Company's
systems.
Operations
Order Entry
The order entry process begins with the entry of a customer
account number by a telesales representative. With this input, IMpulse
automatically displays the customer's name, address, credit terms, financing
arrangements, and preferred shipping method. The telesales representative
assists the customer on-line with product lookups, real-time inventory
availability, price inquiries, and status of previous orders. As an order is
entered, key information is filled in by the system, such as product
description, price, availability, and adjusted gross margin. The closest
warehouse to the customer with available product is automatically determined,
and the corresponding product quantity is reserved. The system totals the
order and automatically checks the customer's credit status. The order is
released for processing, unless credit limits are exceeded or the order falls
outside acceptable profit levels. In the latter case, the order is put on
hold and immediately elevated for review by credit or sales management.
Reseller customers can also conduct business electronically
through the Company's CIS offerings such as CAPS, EDI, and IM On Line. By
using CIS, resellers can access the Company's database and place orders
directly without the assistance of a telesales representative. See
"--Information Systems."
Shipping
In most of Ingram Micro's operations, the Company's objective
is to ship substantially all orders received by 5:00 p.m. on the same day. In
Canada, France, Belgium, the U.K. and the Netherlands, the cut-off time for
same day shipment is 6:00 p.m. When an order is released, it is immediately
available for processing in the designated warehouse. IMpulse ensures cost
efficient order processing through a system called Pick Assignment which
determines pick lists based on the warehouse location of items ordered. In
the distribution centers, Ingram Micro relies on a sophisticated bar code
reading system and a flexible automated package handling system for picking,
packing, and shipping products accurately and cost effectively. In addition,
IMpulse provides on-line shipping, manifesting, freight costing, invoicing and
package tracking information.
The Company's warehouse inventories are maintained
automatically by IMpulse which updates stock levels and feeds this information
to the purchasing system for restocking as soon as an order is received.
On-line quality assurance done during receipt of inbound product and prior to
the shipment of orders ensures the integrity of warehouse stock inventory and
the accuracy of shipments to customers. See "Risk Factors--Dependence on
Independent Shipping Companies."
Purchasing
To monitor product inventory, the purchasing staff, numbering
over 260 worldwide, uses the IMpulse system inventory reports, which provide
product inventory levels, six months' sales history, month-to-date, and
year-to-date sales statistics by SKU and by warehouse location. Buyers
carefully analyze current and future inventory positions and profitability
potential. Several factors, such as inventory carrying cost, payment terms,
purchase rebates, volume discounts, and marketing funds are considered in
negotiating deals with suppliers. Buyers enter purchase orders into the
IMpulse system, indicating the SKU number, the quantity to be ordered, and the
warehouse locations to which the order should be shipped. Cost information
and supplier terms and conditions are automatically entered on the purchase
order; and can be modified if different terms have been negotiated. The
IMpulse system automatically generates purchase orders for each inventory
warehouse location and transmits these orders directly to the suppliers via
EDI or facsimile. See "Risk Factors--Risk of Declines in Inventory Value."
A number of purchasing programs have been developed to exploit
opportunities unique to certain of the Company's operations. In Europe, the
country managers work together as a group to obtain the best available
supplier terms. The European "Inventory Sharing" program, when fully
implemented, will allow sales personnel in one market to order products that
are out of stock or otherwise unavailable in the local country from another
European Ingram Micro business unit. Benefits of this program include lower
inventory costs, better inventory turnover, and improved margins. In Canada,
the U.S. Direct Fulfillment Program allows the fulfillment of individual
Canadian orders from the United States as necessary. See "--Geographic
Tactics--Canada" and "--Europe."
Geographic Tactics
Ingram Micro operates worldwide with a set of common, global
strategies. Recognizing the varying requirements of the Company's different
geographic markets, the Company has developed specific tactics to address
local market conditions. However, the Company's non-U.S. operations are
subject to certain additional risks. See "Risk Factors--Exposure to Foreign
Markets; Currency Risk."
United States
In the United States, the Company has undertaken a number of
key initiatives to enhance its position in the wholesale microcomputer
marketplace:
bullet In an effort to capture an increased share of the VAR sector,
the Company will seek to convey to the market its superior ability to
supply basic wholesaling services to VARs, as well as its breadth of
product offerings to support vertical VAR customer sets. The Premier
VAR Plus program has been developed as the prime marketing vehicle for
all VAR programs and services. This program provides VARs with
graduated levels of business services based on monthly purchase volume.
Such services include a dedicated technical sales force, end-user leads,
technology seminars, and marketing symposiums.
bullet As a cornerstone of the Company's VAR efforts, the Enterprise
Computing Division continues to expand its penetration in markets for
high-end technical products such as UNIX, Windows NT, document imaging,
and networking equipment. This will be accomplished by developing
programs which institute a Company-wide commitment to the UNIX VAR
market, providing a sophisticated sales force experienced in complex
networking technology solutions, partnering with key suppliers of
high-end technical products, and leveraging the Company's core
competencies in electronic ordering and configuration.
bullet In order to increase its share of the Consumer sector, the
Company maintains a team of sales account managers and business
development specialists dedicated to the Consumer account base. The aim
of the Consumer Markets Division is to provide a variety of value-added
services including inventory mix management, store personnel training,
marketing programs, and administration of supplier programs.
Canada
While the Company's Canadian operation closely mirrors the U.S.
operation, initiatives unique to the Canadian operating environment have been
developed and are described below:
bullet The U.S. Direct Fulfillment Program has been instituted in
Canada to take advantage of its proximity to the United States. Through
this program, Canadian customers are currently able to receive products
directly from the Chicago distribution center. The expanded use of the
U.S. Direct Fulfillment Program will allow for greater breadth of SKUs
and manufacturers represented in the Canadian marketplace.
bullet As part of its overall strategy to grow share in the retail
market, the Canadian operation periodically employs Dealer Development
Representatives who provide product education, display set-up assistance,
and other on-site assistance as a special service to retail customers.
Europe
One of the Company's key objectives is to become the market
share leader in Europe. The Company entered Europe in 1989 with an
acquisition in Belgium. See "Risk Factors--Acquisitions." Through a series of
small acquisitions, it has rapidly grown to a pan-European presence with
aggregate net sales of $1.8 billion in 1995, covering 11 countries: Austria,
Belgium, Denmark, France, Germany, Italy, the Netherlands, Norway, Sweden,
Spain, and the United Kingdom. The Company believes that it has the second
largest market share position in Europe and that it has a strong base for
future growth and increased profitability. Particular areas of focus in
Europe include:
bullet The Company will seek to enhance gross margin in the European
operation through increased emphasis on high-end and higher margin
technical product sales and the implementation of the SAGP system.
bullet A program unique to Ingram Micro is Inventory Sharing. This
program allows sales personnel in one European market to order products
that are out of stock or otherwise unavailable in the local country from
another Ingram Micro business unit. The billing is done in the local
currency with all value-added taxes, tax reporting, and similar
functions managed automatically by the IMpulse system. Inventory sharing
allows the Company to expand its sales base without an expansion of
inventory investment or individual country expansion of stock product
assortment. Benefits of the program include lower inventory costs,
better inventory turnover, and improved gross margin. An important
initiative is to add more country operations to the inventory sharing
program and to enhance the program through coordinated purchasing among
several countries.
bullet Continued cost reduction, as a percentage of net sales, and
cost control are important for boosting profitability in the European
operation. The Company aims to further reduce expense ratios of the
individual business units through increased sales volume, the continued
development and refinement of operations and management processes, and
the increasing use of selected U.S. and Canadian business programs.
Mexico/Asia Pacific
Mexico. Ingram Dicom, a 70%-owned subsidiary of Ingram Micro,
is the leading wholesale distributor of microcomputer products in Mexico.
Ingram Dicom offers over 6,000 products to more than 5,900 reseller customers
in Mexico. In 1995, over 85% of Ingram Dicom's net sales came from 1,100
resellers who primarily service the country's major banks and businesses.
Additionally, Ingram Dicom also sells to a small but growing VAR client base
and to mass merchant retailers (e.g., Sam's Club, Sanborn's, Price Club).
As the local high technology market becomes more sophisticated,
Ingram Dicom intends to add higher volume, more specialized technical (e.g.,
UNIX, networking) products to its inventory. Other important initiatives
include adding a wider selection of technical education courses, extending
CAPS electronic ordering throughout the entire Ingram Dicom operation, and
offering a broader range of financing options for reseller customers. The
Company will also continue to negotiate supplier terms and conditions aimed at
limiting the Company's exposure to foreign currency fluctuations.
Asia Pacific. Ingram Micro's Asia Pacific operations,
supported by its Singapore office and warehouse, focus on serving the
Singapore, Malaysia, Indonesia, Philippines, Thailand, India, and Hong Kong
markets. Over 800 customers are currently served from the Singapore base,
with approximately 64% of these customers concentrated in the local Singapore
market. The Company operates a sales office in Tokyo serving the Japanese
market. In addition, the Company has recently acquired a distributor in
Malaysia.
In building a solid regional Asia Pacific business, the Company
intends to leverage its systems capability, financial strength, management
experience, and excellent relationships with key suppliers. The initial aim
of the Asia Pacific strategy is to recruit new suppliers and reseller
customers while further adding experienced managers in key functional areas of
the business. The Company is currently exploring the possibility of
establishing additional operations through joint ventures or acquisitions.
See "Risk Factors--Acquisitions."
Export Markets
Ingram Micro's Export Division continues to expand in
international markets where the Company does not have a stand-alone,
in-country presence. The Miami, Santa Ana, and Belgium offices serve more
than 2,500 resellers in over 100 countries. In addition, the Export Division
has field sales representatives based in Buenos Aires, Argentina and Quito,
Ecuador.
Key strategic objectives for the Export Division include
increasing sales and market share in each of the regions it serves primarily
by providing a broad product assortment, further cultivating key supplier
relationships, and expanding reseller service offerings. The Company will
continue to position itself as a global distributor of microcomputer products
providing resellers in all markets access to the Company's vast selection of
products via its extensive network of international and U.S. warehouses.
Competition
The Company operates in a highly competitive environment, both
in the United States and internationally. The microcomputer products
distribution industry is characterized by intense competition, based primarily
on price, product availability, speed and accuracy of delivery, effectiveness
of sales and marketing programs, credit availability, ability to tailor
specific solutions to customer needs, quality and breadth of product lines and
service, and availability of technical and product information. The Company
believes it competes favorably with respect to each of these factors. As
price points have declined, the Company believes that value-added services
capabilities (such as configuration, innovative financing programs, order
fulfillment, contract telesales, and contract warehousing) will become more
important competitive factors.
The Company entered the master reseller business through Ingram
Alliance in late 1994. See "--Ingram Alliance." The Company competes with
other master resellers, which sell to groups of affiliated franchisees and
third-party dealers. Many of the Company's competitors in the master reseller
business are more experienced and have more established contacts with
affiliated resellers, third-party dealers, or suppliers, which may provide
them with a competitive advantage over the Company.
The Company is constantly seeking to expand its business into
areas closely related to its core microcomputer products distribution
business. As the Company enters new business areas, it may encounter
increased competition from current competitors and/or from new competitors,
some of which may be current customers of the Company. For example, the
Company intends to distribute media in the new digital video disc format and
may compete with traditional music and printed media distributors. In
addition, certain services the Company provides may directly compete with
those provided by the Company's reseller customers. There can be no assurance
that increased competition and adverse reaction from customers resulting from
the Company's expansion into new business areas will not have a material
adverse effect on the Company's business, financial condition, or results of
operations. See "Risk Factors--Intense Competition."
Ingram Micro's primary competitors include large U.S.-based
international distributors such as Merisel, Tech Data, and Arrow Electronics
(a worldwide industrial electronics distributor), as well as national
distributors such as AmeriQuest Technologies (majority owned by Computer
2000), Handleman, Navarre, and Avnet. Ingram Alliance's principal competitors
include such master resellers as Intelligent Electronics, MicroAge, Datago,
InaCom, and recent entrant Tech Data Elect, a division of Tech Data. Ingram
Micro competes internationally with a variety of national and regional
distributors. European competitors include international distributors such as
Computer 2000 (owned by German conglomerate Viag AG), CHS Electronics, and
Softmart/Tech Data, and several local and regional distributors, including
Actebis, Scribona, and Microtech. In Canada, Ingram Micro competes with
Merisel, Globelle, Beamscope, and Tech Data. Ingram Dicom is the leading
distributor in Mexico, competing with such companies as MPS, CHS Electronics,
Intertec, and Dataflux. In the Asia Pacific market, Ingram Micro faces both
regional and local competitors, of whom the largest is Tech Pacific, a
division of First Pacific Holdings, which operates in more than five Asia
Pacific markets.
Ingram Micro also competes with hardware manufacturers and
software publishers that sell directly to reseller customers and end-users.
Facilities
Ingram Micro's worldwide executive headquarters, as well as its
West Coast sales and support offices, are located in Santa Ana, California.
The Company also maintains an East Coast operations center in Buffalo, New
York. A new United States distribution center in Millington, Tennessee is
expected to be completed in April 1997, adding 600,000 square feet to the
Company's warehouse capacity. This distribution center will be strategically
located near several major transportation hubs and is expected to benefit from
lower regional labor costs. The U.S. network of distribution centers permits
Ingram Micro to keep an extensive supply of product close to its reseller
customers, which enables the Company to provide substantially all of its U.S.
reseller customers with one- or two-day ground delivery.
The principal properties of the Company consist of the following:
<TABLE>
<CAPTION>
Approximate
Location Principal Use Floor Area in Sq. Ft
- -------- ------------- ---------------------
<S> <C> <C>
United States
- -------------
Santa Ana, CA Executive offices 398,245
Buffalo, NY Offices 188,341
Nashville, TN Data Processing Center 11,782
Millington, TN Distribution Center (under construction) 600,000
Chicago/Carol Stream, IL Distribution Centers 456,139
Fullerton, CA Distribution Center 401,394
Harrisburg, PA Distribution Center 230,000
Memphis, TN Distribution Center 160,000
Fremont, CA Distribution Center 141,540
Carrollton, TX Distribution Center 121,654
Atlanta, GA Distribution Center 83,049
Miami, FL Distribution Center, Offices 52,080
Santa Ana, CA Returns Center, Offices 219,500
Fremont, CA Freight Consolidation Center 58,435
Europe
- ------
Brussels, Belgium Offices 33,600
Horsholm, Denmark Offices 39,682
Ballerup, Denmark Distribution Center 58,104
Lesquin, France Offices 37,088
Paris, France Offices 4,250
Roncq, France Distribution Center 96,000
Ottobrunn, Germany Offices 32,221
Kirchheim, Germany Distribution Center 75,904
Milan, Italy Offices 17,114
Milan, Italy Distribution Center 44,669
Rome, Italy Offices, Distribution Center 10,225
Utrecht, Netherlands Offices 30,999
Vianen, Netherlands Distribution Center 61,149
Oslo, Norway Offices, Distribution Center 53,595
Madrid, Spain Offices, Distribution Center 17,689
Barcelona, Spain Offices, Distribution Center 74,508
Kista, Sweden Offices 26,371
Sollentuna, Sweden Distribution Center 43,126
Milton Keynes, U.K Offices, Distribution Center 211,992
Canada
- ------
Toronto, Ontario Offices, Distribution Center 274,376
Vancouver, B.C Offices, Distribution Center 87,148
Montreal, Quebec Offices 12,000
Mexico
- ------
Mexico City, D.F Offices, Distribution Center 65,695
Puebla, Puebla Offices, Distribution Center 11,679
Leon, Guanajuato Offices, Distribution Center 11,206
Guadalajara, Jalisco Offices, Distribution Center 9,967
Merida, Yucatan Offices, Distribution Center 6,437
Monterrey, Nuevo Leon Offices, Distribution Center 6,039
Hermosillo, Sonora Offices, Distribution Center 5,156
Asia
- ----
Singapore Offices, Distribution Center 20,989
Kuala Lumpur, Malaysia Offices, Distribution Center 6,000
Tokyo, Japan Offices 720
</TABLE>
All of the Company's facilities, with the exception of the
Brussels office and the distribution centers in Chicago and Roncq, France are
leased. The Company does not anticipate any material difficulty in renewing
any of its leases as they expire or securing replacement facilities, in each
case on commercially reasonable terms. The Company has recently purchased
three undeveloped properties in Santa Ana, California totaling approximately
23.27 acres.
Trademarks and Service Marks
The Company holds various trademarks and service marks,
including, among others, "Ingram Micro," "IMpulse," the Ingram Micro logo,
"Partnership America," and "Leading the Way in Worldwide Distribution."
Certain of these marks are registered, or are in the process of being
registered, in the United States and various foreign countries. Even though
the Company's marks may not be registered in every country where the Company
conducts business, in many cases the Company has acquired rights in those
marks because of its continued use of them. Management believes that the
value of the Company's marks is increasing with the development of its
business but that the business of the Company as a whole is not materially
dependent on such marks.
Employees
As of September 28, 1996, the Company had approximately 8,434
associates located as follows: United States--5,322, Europe--1,840,
Canada--797, Mexico--405, and Asia-Pacific--70. Ingram Micro believes that
its success depends on the skill and dedication of its associates. The
Company strives to attract, develop, and retain outstanding personnel.
None of the Company's associates in the United States, Europe, Canada,
Malaysia, and Singapore are represented by unions. In Mexico, Ingram Dicom
has collective bargaining agreements with one of the national unions. The
Company considers its employee relations to be good.
Legal Proceedings
There are no material pending legal proceedings to which the
Company is a party or to which any of its property is subject.
MANAGEMENT
Executive Officers and Directors
The following table sets forth certain information with respect
to each person who is an executive officer or director of the Company:
<TABLE>
<CAPTION>
Name Age Present and Prior Positions Held(1) Years Positions Held
- ---- --- ------------------------------------------- ---------------------
<S> <C> <C> <C>
Jerre L. Stead(2) 53 Chief Executive Officer and Chairman of the Aug. 1996 - Present
Board
Chief Executive Officer and Chairman of the Jan. 1995 - Aug. 1995
Board, Legent Corporation, a software
development company
Executive Vice President, Chairman and Chief May 1993 - Dec. 1994
Executive Officer, AT&T Corp. Global
Information Solutions (NCR Corp.), a
computer manufacturer
President and Chief Executive Officer, AT&T Sept. 1991 - Apr. 1993
Corp. Global Business Communication
Systems, a communications company
Chairman, President and Chief Executive Sept. 1988 - Aug. 1991
Officer, Square D Co., an electronics
manufacturer
Jeffrey R. Rodek 43 Worldwide President; Chief Operating Officer Dec. 1994 - Present
Senior Vice President, Americas and Caribbean,
Federal Express, an overnight courier firm July 1991 - Sept. 1994
Senior Vice President, Central Support
Services, Federal Express
Dec. 1989 - July 1991
David R. Dukes 52 Vice Chairman Apr. 1996 - Present
Chief Executive Officer, Ingram Alliance Jan. 1994 - Present
Co-Chairman Jan. 1992 - Apr. 1996
Chief Operating Officer Sept. 1989 - Dec. 1993
President Sept. 1989 - Dec. 1991
Sanat K. Dutta 47 Executive Vice President; President, Ingram Oct. 1996 - Present
Micro U.S.
Executive Vice President Aug. 1994 - Oct. 1996
Senior Vice President, Operations May 1988 - Aug. 1994
Michael J. Grainger 44 Executive Vice President; Worldwide Chief Oct. 1996 - Present
Financial Officer
Chief Financial Officer May 1996 - Oct. 1996
Vice President and Controller, Ingram July 1990 - Nov. 1996
Industries
John Wm. Winkelhaus, II 46 Executive Vice President; President, Ingram Jan. 1996 - Oct. 1996
Micro Europe
Senior Vice President, Ingram Micro Europe Feb. 1992 - Dec. 1995
Senior Vice President, Sales Apr. 1989 - Jan. 1992
James E. Anderson, Jr. 49 Senior Vice President, Secretary, and General Jan. 1996 - Present
Counsel
Vice President, Secretary, and General Counsel, Sept. 1991 - Nov. 1996
Ingram Industries
Partner, Dearborn & Ewing, a Nashville law Jan. 1986 - Sept. 1991
firm
Douglas R. Antone 43 Senior Vice President; President, Ingram July 1994 - Present
Alliance
Senior Vice President, Worldwide Sales and Nov. 1993 - May 1994
Marketing, Borland International
Senior Vice President, Worldwide Sales, July 1990 - Nov. 1993
Borland International
Larry Elchesen 46 Senior Vice President June 1994 - Present
President, Ingram Micro Canada May 1989 - Present
Philip Ellett 42 Senior Vice President; Chief Operating Officer, Oct. 1996 - Present
Ingram Micro Europe
Senior Vice President; General Manager, U.S. Jan. 1996 - Oct. 1996
Consumer Markets Division
President, Gates/Arrow, an electronics Aug. 1994 - Dec. 1995
distributor
President and Chief Executive Officer, Oct. 1991 - Aug. 1994
Gates/F.A. Distributing, Inc.
President and Chief Operating Officer, Oct. 1990 - Oct. 1991
Gates/F.A. Distributing, Inc.
David M. Finley 56 Senior Vice President, Human Resources July 1996 - Present
Senior Vice President, Human Resources, May 1995 - July 1996
Budget Rent a Car, a car rental company
Vice President, Human Resources, Jan. 1977 - May 1995
The Southland Corporation, a convenience
retail company
Robert Furtado 40 Senior Vice President, Operations Aug. 1994 - Present
Vice President, Operations July 1989 - Aug. 1994
Robert Grambo 32 Senior Vice President, Telesales Oct. 1995 - Present
Vice President, Sales Apr. 1994 - Sept. 1995
Vice President, Product Marketing Apr. 1993 - Mar. 1994
President, Bloc Publishing Corp., a software Apr. 1992 - Apr. 1993
publishing firm
Senior Director, Purchasing, Ingram Micro Jan. 1990 - Apr. 1992
Ronald K. Hardaway 52 Senior Vice President; Chief Financial Officer, Jan. 1992 - Present
Ingram Micro U.S.
Senior Vice President and Controller June 1990 - Jan. 1992
Gregory J. Hawkins 42 Senior Vice President, Sales Oct. 1995 - Present
Vice President, Sales Jan. 1993 - Oct. 1995
Vice President, Major Accounts Aug. 1992 - Jan. 1993
Director, Major Accounts, Consumer Markets June 1992 - Aug. 1992
Director, Marketing Jan. 1991 - June 1992
James M. Kelly 60 Senior Vice President, Management Information Feb. 1991 - Present
Systems
David W. Rutledge 43 Senior Vice President, Asia Pacific, Latin Jan. 1996 - Present
America and Export Markets
Senior Vice President, Administration Sept. 1991 - Dec. 1995
Vice President, Secretary, and General Counsel, Jan. 1986 - Sept. 1991
Ingram Industries
Martha R. Ingram(3)(4) 61 Director May 1996 - Present
Chairman of the Board of Directors May 1996 - Aug. 1996
Chairman of the Board of Directors, Ingram June 1995 - Present
Industries
Director, Ingram Industries 1981 - Present
Chief Executive Officer, Ingram Industries Apr. 1996 - Present
Director of Public Affairs, Ingram Industries 1979 - June 1995
John R. Ingram(3) 35 Director Dec. 1994 - Present
Acting Chief Executive Officer May 1996 - Aug. 1996
Co-President, Ingram Industries Jan. 1996 - Present
President, Ingram Book Company Jan. 1995 - Oct. 1996
Vice President, Purchasing, Ingram Micro Jan. 1994 - Dec. 1994
Europe
Vice President, Management Services, Ingram July 1993 - Dec. 1993
Micro Europe
Director of Management Services, Ingram Jan. 1993 - June 1993
Micro Europe
Director of Purchasing Apr. 1991 - Dec. 1992
David B. Ingram(3) 33 Director May 1996 - Present
Chairman and President, Ingram Entertainment Mar. 1996 - Present
President and Chief Operating Officer, Ingram
Entertainment Aug. 1994 - Mar. 1996
Vice President, Major Accounts, Ingram
Entertainment Nov. 1993 - Aug. 1994
Assistant Vice President, Sales, Ingram
Entertainment June 1992 - Nov. 1993
Director, Sales, Ingram Entertainment
July 1991 - June 1992
Don H. Davis, Jr. (5) 56 Director Oct. 1996 - Present
President and Chief Operating Officer, July 1995 - Oct. 1996
Rockwell International Corporation, a
diversified high-technology company
Executive Vice President and Chief Operating Jan. 1994 - July 1995
Officer, Rockwell International Corporation
Senior Vice President; President, Automation
Group, Rockwell International Corporation June 1993 - Jan. 1994
President, Allen-Bradley Company, a wholly-owned
subsidiary of Rockwell International
Corporation July 1989 - Jan. 1994
Philip M. Pfeffer 51 Director 1986 - Present
President and Chief Operating Officer, Random May 1996 - Present
House Inc., a publishing company
Executive Vice President, Ingram Industries Dec. 1981 - Mar. 1996
Chairman and Chief Executive Officer, Ingram Dec. 1981 - Dec. 1995
Distribution Group Inc.
Chairman, Ingram Micro Holdings Inc. Apr. 1989 - Oct. 1995
J. Phillip Samper (6) 62 Director Oct. 1996 - Present
Chairman and Chief Executive Officer, Cray May 1995 - Mar. 1996
Research, Inc., a computer products company
President and Chief Executive Officer, Sun
Microsystems Computer Company, a division Jan. 1994 - Mar. 1995
of Sun Microsystems, Inc., a computer
products company
Managing Partner, FRN Group, a private
investment and consulting firm Feb. 1991 - Jan. 1994
President and Chief Executive Officer,
Kindercare Learning Centers, Inc., a child May 1990 - Feb. 1991
care and educational company
Joe B. Wyatt (7) 61 Director Oct. 1996 - Present
Chancellor, Vanderbilt University July 1982 - Present
<FN>
- -------------------
(1) The first position and any other positions not given a separate corporate
identification are with the Company.
(2) Jerre L. Stead is a director of Armstrong World Industries, Inc.,
Autodesk, Inc., and TJ International, Inc.
(3) Martha R. Ingram is the mother of David B. Ingram and John R. Ingram.
There are no other family relationships among the above individuals.
(4) Martha R. Ingram is a director of Baxter International Inc., First
American Corporation, and Weyerhaeuser Co.
(5) Don H. Davis, Jr. is a director of Sybron International Corporation.
(6) J. Phillip Samper is a director of Armstrong World Industries, Inc., The
Interpublic Group of Companies, Inc., Sylvan Learning Systems, Inc.,
Network Storage Corp., and Scitex Corporation, Ltd.
(7) Joe B. Wyatt is a director of Sonat, Inc. and Reynolds Metals Company.
</TABLE>
Board of Directors
The Board of Directors currently consists of Mr. Stead, Mrs.
Ingram, and Messrs. John R. Ingram, David B. Ingram, Davis, Pfeffer, Samper,
and Wyatt. So long as the Ingram Family Stockholders and their permitted
transferees (as defined in the Board Representation Agreement) own in excess
of 25,000,000 shares of the outstanding Common Equity, the Board
Representation Agreement will provide for the designation of (i) not more than
three directors designated by the Ingram Family Stockholders, (ii) one
director designated by the Chief Executive Officer of the Company, and (iii)
four or five additional directors ("Independent Directors") who are not
members of the Ingram family or executive officers or employees of the
Company. Directors designated by the Ingram Family Stockholders may include
Martha R. Ingram, any of her legal descendants, or any of their respective
spouses. See "The Split-Off and the Reorganization--The Reorganization."
Messrs. Davis, Pfeffer, Samper, and Wyatt are Independent Directors.
One additional Independent Director may be designated after the closing of
the IPO.
Committees. The Board Representation Agreement provides for
the formation of certain committees of the Board of Directors. The Bylaws of
the Company specifically provide for four committees: an Executive Committee,
a Nominating Committee, an Audit Committee, and a Compensation Committee.
The Executive Committee consists of three directors, one of
whom is a director designated by the Ingram Family Stockholders, one of
whom is the director designated by the Chief Executive Officer of the
Company, and one of whom is an Independent Director. The Executive
Committee currently consists of Messrs. Stead, John R. Ingram, and Samper.
The Executive Committee may approve management decisions requiring the
immediate attention of the Board of Directors during the period of time
between each regularly scheduled meeting of the Board. The Executive
Committee does not have authority to approve any of the following items,
all of which require the approval of the Board: (i) any action that would
require the approval of the holders of a majority of the stock held by
certain of the Ingram Family Stockholders or that would require approval of
the holders of a majority of the Common Equity under applicable law or
under the Certificate of Incorporation or Bylaws of the Company; (ii) any
acquisition with a total aggregate consideration in excess of 2% of the
Company's stockholders' equity; (iii) any action outside the ordinary
course of business of the Company; or (iv) any other action involving a
material shift in policy or business strategy for the Board.
The Nominating Committee consists of three directors, two
of whom are directors designated by the Ingram Family Stockholders, and
one of whom is the director designated by the Chief Executive Officer of
the Company. The Nominating Committee currently consists of Messrs.
David B. Ingram and Stead and Mrs. Ingram. The function of the
Nominating Committee is to recommend to the full Board of Directors
nominees for election as directors of the Company and to elect members of
committees of the Board of Directors. The Nominating Committee names
the respective members of an Audit Committee and a Compensation Committee.
The Audit Committee consists of at least three directors,
and a majority of the members of the Audit Committee are Independent
Directors. The Audit Committee currently consists of Messrs. John R.
Ingram, Pfeffer, and Wyatt. The functions of the Audit Committee are
to recommend annually to the Board of Directors the appointment of the
independent auditors of the Company, discuss and review in advance the
scope and the fees of the annual audit and review the results thereof with
the independent auditors, review and approve non-audit services of the
independent auditors, review compliance with existing major accounting and
financial reporting policies of the Company, review the adequacy of the
financial organization of the Company, and review management's procedures
and policies relating to the adequacy of the Company's internal accounting
controls and compliance with applicable laws relating to accounting
practices.
The Compensation Committee consists of three directors, one
of whom is a director designated by the Ingram Family Stockholders and
two of whom are Independent Directors. The Compensation Committee
currently consists of Messrs. Davis and Samper and Mrs. Ingram.
The functions of the Compensation Committee are to review and approve
annual salaries, bonuses, and grants of stock options pursuant to the 1996
Plan for all executive officers and key members of the Company's management
staff and to review and approve the terms and conditions of all employee
benefit plans or changes thereto.
Compensation of Directors. Directors who are not Independent
Directors do not receive any additional compensation for serving on the
Board of Directors, but will be reimbursed for expenses incurred in attending
meetings of the Board of Directors and Committees thereof. Each current
Independent Director has been, and each new Independent Director will be,
granted, at the later of (i) the date his or her service begins and (ii)
October 31, 1996, options to purchase 45,000 shares of Common Stock. These
options have an exercise price per share equal to the market price of the
Common Stock on the date of grant and will vest in equal installments on the
first, second, and third anniversaries of the date of grant. Independent
Directors do not receive any other compensation for their service, but are
reimbursed for expenses incurred in attending meetings of the Board of
Directors and committees thereof.
Executive Compensation
Summary Compensation Table. The following table provides
information relating to compensation for the year ended December 30, 1995 for
the Company's former Chief Executive Officer and the other four most highly
compensated executive officers of the Company (collectively, the "Named
Executive Officers") for services rendered by each Named Executive Officer
during the year ended December 30, 1995. A portion of this compensation was
paid by Ingram Industries and was included as a factor in the determination of
intercompany charges paid by the Company to Ingram Industries.
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards
Annual Compensation ------------
-------------------------------------- Securities All Other
Underlying Compensation
Name and Principal Position(s) Year(1) Salary($)(2) Bonus($)(3) Options/SARs(#) ($)(4)
- ------------------------------ ------- ------------ ----------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Linwood A. (Chip) Lacy, Jr.(5) 1995 558,000 $414,057 -- $ 28,617
Former Chief Executive Officer and
Former Chairman of the Board of
Directors
Jeffrey R. Rodek 1995 392,820 267,089 240,258(6) 163,649
Worldwide President and Chief
Operating Officer
David R. Dukes 1995 260,130 205,611 -- 10,607
Vice Chairman of the Company and
Chief Executive Officer of Ingram
Alliance
Sanat K. Dutta 1995 263,500 213,593 -- 12,365
Executive Vice President and President,
Ingram Micro U.S.
John Wm. Winkelhaus, II 1995 250,000 130,441 -- 124,287
Executive Vice President and President,
Ingram Micro Europe
<FN>
- ------------------
(1) Under rules promulgated by the Securities and Exchange Commission (the
"Commission"), since the Company was not a reporting company during the
three immediately preceding fiscal years, only the information with respect
to the most recent completed fiscal year is reported in the Summary
Compensation Table.
(2) Includes amounts deferred under qualified and nonqualified defined
contribution compensation plans and pretax insurance premium amounts.
(3) Reflects amounts paid in 1996 in respect of the fiscal year ended December
30, 1995.
(4) Includes the following amounts: Mr. Lacy (group term life insurance,
$3,600; employer thrift plan contributions, $20,625; relocation, $4,392);
Mr. Rodek (group term life insurance, $1,632; employer thrift plan
contributions, $11,631; relocation, $150,386); Mr. Dukes (group term life
insurance, $1,152; employer thrift plan contributions, $9,455); Mr. Dutta
(group term life insurance, $2,784; employer thrift plan contributions,
$9,581); and Mr. Winkelhaus (group term life insurance, $1,006; employer
thrift plan contributions, $6,211; and expatriate compensatory payments,
$117,070).
(5) Mr. Lacy was an employee of Ingram Industries at all times during 1995.
All amounts shown for Mr. Lacy were paid by Ingram Industries, and a
portion of such amounts is reflected in the Company's consolidated
statement of income under charges allocated from Ingram Industries.
(6) Represents options exercisable for 175,000 shares of Ingram Industries
common stock, which were converted into options exercisable for 240,258
shares of Common Stock in connection with the Split-Off.
</TABLE>
Stock Option/SAR Grants in Last Fiscal Year. The following
table provides information relating to stock options granted to the Named
Executive Officers for the year ended December 30, 1995.
<TABLE>
<CAPTION>
Individual Grants(1)
------------------------------------------------------------
% of Total Potential Realizable Value at
Number of Options/SARs Assumed Annual Rates of
Securities Granted to Stock price appreciation for
Underlying Employees of Exercise or Option Term
Options/SARs the Company Base Price Expiration ------------------------------
Granted in Fiscal Year ($/sh) Date 5%($) 10%($)
------------ -------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Linwood A. (Chip) Lacy, Jr. -- -- -- -- -- --
Jeffrey R. Rodek(2) 240,258 22.95% $2.85 1/1/03 $326,532 $782,100
David R. Dukes -- -- -- -- -- --
Sanat K. Dutta -- -- -- -- -- --
John Wm. Winkelhaus, II -- -- -- -- -- --
<FN>
- --------------
(1) The Company has, since December 30, 1995, granted certain options to
purchase Class B Common Stock, including options to purchase 150,000,
35,000, 40,000, and 40,000 shares, respectively, to Messrs. Rodek, Dukes,
Dutta, and Winkelhaus. Additionally, options to purchase Common Stock were
granted to certain officers of the Company, including options to purchase
200,000, 150,000, 125,000, and 75,000 shares, respectively, to Messrs,
Rodek, Dukes, Dutta, and Winkelhaus, concurrently with the IPO at the
initial public offering price. See "--1996 Plan--Options."
(2) Represents options exercisable for 175,000 shares of Ingram Industries
common stock, which were converted into options exercisable for 240,258
shares of Common Stock in connection with the Split-Off. Mr. Rodek's
options vest according to the following schedule: 34,324 shares on January
1, 1997, 60,064 shares on January 1, 1998, 60,064 shares on January 1,
1999, 60,064 shares on January 1, 2000, and 25,742 shares on January 1,
2001.
</TABLE>
Stock Options/SAR Exercises in Last Fiscal Year and Fiscal
Year-End Options/SAR Values. The following table provides information
relating to stock options and ISUs exercised by the Named Executive
Officers during the year ended December 30, 1995, as well as the number and
value of securities underlying unexercised stock options held by the Named
Executive Officers as of December 30, 1995.
<TABLE>
<CAPTION> Number of
Securities Value of
Underlying Unexercised
Shares Unexercised In-the-Money
Acquired Options/SARs Options/SARs
on at Year End at Year End
Exercise Value -------------- ---------------
During Realized Exercisable/ Exercisable/
Name 1995(1)(2) ($)(3) Unexercisable(2) Unexercisable
- ---- ---------- -------- ----------------- ---------------
<S> <C> <C> <C> <C>
Linwood A. (Chip) Lacy, Jr 1,613,158(4) $2,917,808 46,875/372,315(5) $119,844/$810,153(5)
Jeffrey R. Rodek -- -- 0/274,580 0/ 214,400
David R. Dukes -- 518,063 30,032/243,861 71,921/ 540,609
Sanat K. Dutta -- -- 0/258,105 0/ 455,656
John Wm. Winkelhaus, II -- 278,600 0/244,376 0/ 450,216
<FN>
- -----------------
(1) Excludes Ingram Industries ISUs held by Messrs. Lacy, Dukes, and
Winkelhaus that matured in 1995 and were settled in cash.
(2) Reflects the conversion of shares of Ingram Industries common stock, or
options exercisable for shares of Ingram Industries common stock, into
shares of Class B Common Stock, or options exercisable for shares of Common
Stock, in connection with the Split-Off.
(3) Includes $830,408, $518,063, and $278,600 paid to Messrs. Lacy, Dukes, and
Winkelhaus, respectively, in connection with the settlement of ISUs.
(4) 1,544,513 of such shares were acquired from the E. Bronson Ingram
Charitable 8% Remainder Unitrust and were deemed to be acquired from the
Company.
(5) Excludes options exercisable for 12,731/101,121 shares of Ingram
Industries common stock with a value of $44,687/$302,084.
Pension Plan
None of the Named Executive Officers other than Mr. Lacy
participates in the tax-qualified Ingram Retirement Plan and the non-
qualified Ingram Supplemental Executive Retirement Plan (the "Retirement
Plans") sponsored by Ingram Industries. At the time he left the Company,
Mr. Lacy had earned one year of credited service under the Retirement
Plans.
</TABLE>
Mr. Lacy's benefit from the Retirement Plans will be in the
form of a deferred annuity. At age 65, his life only annuities would be
$178.70 per month from the Ingram Retirement Plan and $539.70 per month from
the Ingram Supplemental Executive Retirement Plan. It is anticipated that the
Company will establish a qualified plan similar to the Ingram Industries
qualified plan. None of the Named Executive Officers will participate in the
Company's qualified retirement plan.
Employment Agreements
In August 1996, the Company entered into an agreement with Mr.
Stead pursuant to which he agreed to serve as Chief Executive Officer and
Chairman of the Board of the Company. The agreement provides for the grant to
Mr. Stead of options at the initial public offering price exercisable for
3,600,000 shares of Common Stock. Such options will vest over an extended
period, as described below. In lieu of receipt of 200,000 of such options, Mr.
Stead has purchased 200,000 shares of Common Stock directly from the Company
at the initial public offering price. See "--1996 Plan--Options." Mr. Stead
will not receive any salary, bonus, or other cash compensation during the
vesting period of such options; however, the Company has agreed to compensate
Mr. Stead in a mutually agreeable manner in the event that the initial public
offering price exceeds $14.00. The Company has also agreed to provide Mr.
Stead and his spouse with lifetime healthcare coverage, with a lifetime cap of
$2.0 million, as well as certain other perquisites.
In December 1994, the Company entered into an agreement with
Mr. Rodek pursuant to which he agreed to serve as President and Chief
Operating Officer of the Company and as a member of the Company's Board of
Directors. The agreement provides for a base salary, participation in the
Company's Executive Incentive Bonus Plan, and participation in the Company's
health and benefit programs. Mr. Rodek will receive a severance benefit equal
to his annual base salary if the Company terminates his employment without
cause prior to January 1, 1998. Mr. Rodek currently serves as Worldwide
President and Chief Operating Officer.
In April 1988, the Company entered into an agreement with Mr.
Dutta pursuant to which he agreed to serve as Senior Vice President,
Operations. The agreement provides for a base salary, participation in the
Company's Executive Incentive Bonus Plan, and participation in the Company's
health and benefit programs. Mr. Dutta will receive a severance benefit of
nine months' base salary if he is terminated without cause or 12 months' base
salary if he is involuntarily terminated or has a substantial change in title
or reduction of salary within 12 months of a change in control (as defined in
the agreement). Mr. Dutta currently serves as Executive Vice President and
President, Ingram Micro U.S.
In June 1991, the Company entered into an agreement with Mr.
Winkelhaus pursuant to which he agreed to serve as Senior Vice President,
Ingram Micro Europe. The agreement provides for a base salary, a housing cost
and goods and services differential, participation in the Company's Executive
Incentive Bonus Plan, and participation in the Company's health and benefit
programs. Mr. Winkelhaus currently serves as Executive Vice President and
President, Ingram Micro Europe.
Mr. Lacy resigned as Chairman and Chief Executive Officer of
the Company effective May 31, 1996. Pursuant to an agreement (the "Severance
Agreement"), Mr. Lacy resigned from all positions with the Company, and
resigned from all positions with Ingram Industries and its other subsidiaries,
except that Mr. Lacy will remain a director of Ingram Industries until
December 31, 1997, unless earlier removed in accordance with the bylaws of
Ingram Industries. In addition, Mr. Lacy has agreed to serve as a director of
the Company, if so requested by Ingram Industries, until December 31, 1997.
Pursuant to the Severance Agreement, Mr. Lacy agreed to
cooperate with the Company and Ingram Industries in connection with the
consummation of the Split-Off and the IPO. Mr. Lacy has also agreed not to
use or disclose confidential information relating to the Company.
Furthermore, Mr. Lacy has agreed that until November 30, 1998, he will not
compete with the Company or solicit for hire any person who was or becomes an
employee of the Company between December 1, 1995 and June 1, 1998. Mr. Lacy
has also agreed to similar restrictions with respect to the businesses of
Ingram Industries and its other subsidiaries.
The Company agreed to pay Mr. Lacy one year's salary at the
level in effect as of the date of his resignation, and has paid Mr. Lacy
$272,000, his earned bonus for the first five months of 1996. In addition,
the Severance Agreement provides for the continuation of certain health and
life insurance benefits for a period of 12 months from the date thereof. Mr.
Lacy will also receive certain payments from Ingram Industries.
The shares of Ingram Industries common stock owned by Mr. Lacy
were converted into shares of Class B Common Stock in connection with the
Split-Off. These shares have been placed in an escrow account, although Mr.
Lacy will be permitted to sell such shares, subject to applicable tax and
securities laws, provided that the after-tax proceeds of such sales remain in
the escrow account. If at any time prior to December 1, 1998, Mr. Lacy
breaches the terms and conditions of the Severance Agreement, the Company
shall have the right to be reimbursed for its damages from this escrow
account. Furthermore, Ingram Industries and the Company may suspend any
payments or obligations otherwise owed to Mr. Lacy. If not earlier released
due to the death of Mr. Lacy or a Change of Control (as defined therein),
fifty percent of the escrow account will be released on June 1, 1998 and the
remainder on December 1, 1998.
Key Employee Stock Purchase Plan
As of April 30, 1996, the Board of Directors of the Company
adopted, and Ingram Industries, as the sole stockholder of the Company,
approved, the Key Employee Stock Purchase Plan (the "Stock Purchase Plan").
The Company has reserved 4,000,000 shares of Class B Common Stock to cover
awards under the Stock Purchase Plan.
Employee Offering. In the second quarter of 1996, the Company
offered (the "Employee Offering") 2,775,000 shares of its Class B Common
Stock, of which 2,510,400 shares were purchased, in reliance upon Regulation D
and Regulation S under the Securities Act of 1933, as amended (the "Securities
Act"), for $17,572,800, to certain of its officers. Such shares are subject
to vesting, certain restrictions on transfer, and repurchase by the Company
upon termination of the holder's employment. As of October 31, 1996, 50,000
of such shares have been repurchased by the Company. In order to allow loan
financing from a bank of the shares purchased in the Employee Offering, the
Company entered into repurchase agreements with such bank, pursuant to which
it agreed to repurchase (i) unvested shares at the lower of fair market value
and $7.00 and (ii) vested shares at fair market value, in the event of an
employee's default on his or her loan.
Restricted Stock Grants. The Company also made grants
pursuant to the Stock Purchase Plan of an aggregate of 107,000 restricted
shares of Class B Common Stock to certain officers and employees of the
Company, which shares will vest 25% on April 1, 1998 and each year thereafter
through 2001. Prior to vesting, such shares are subject to forfeiture to the
Company, with no consideration paid to the holder thereof, upon termination of
the holder's employment. As of October 31, 1996, 5,000 of such shares have
been forfeited to the Company.
1996 Plan
As of April 30, 1996, the Board of Directors of the Company
adopted, and Ingram Industries, as the sole stockholder of the Company,
approved, the 1996 Equity Incentive Plan (the "1996 Plan"). The Company has
amended the 1996 Plan, effective as of October 31, 1996, primarily to increase
the number of shares available for grant from 10,000,000 shares to 12,000,000
shares, as well as to change the allowable vesting schedule for options
granted under the 1996 Plan and to permit options to be granted to purchase
shares of Common Stock in addition to Class B Common Stock. Options granted
prior to October 31, 1996 will continue to be governed by the 1996 Plan as in
effect prior to the amendment of the 1996 Plan.
The purpose of the 1996 Plan is to attract and retain key
personnel and to enhance their interest in the Company's continued success.
The 1996 Plan is administered by the Board of Directors of the
Company or a committee appointed thereby (the "Committee"). The Committee has
broad discretion, subject to contractual restrictions affecting the Company, as
to the specific terms and conditions of each award and any rules applicable
thereto, including but not limited to the effect thereon of the death,
retirement, or other termination of employment of the participant.
The 1996 Plan permits the granting of (i) stock options that
qualify as "Incentive Stock Options" under the Code, (ii) options other than
Incentive Stock Options ("Nonqualified Stock Options"), (iii) SARs granted
either alone or in tandem with other awards under the 1996 Plan, (iv)
restricted stock and restricted stock units, (v) performance awards, and (vi)
other stock-based awards. The Company has reserved 12,000,000 shares of
Common Equity (which may be either Common Stock or Class B Common Stock) to
cover awards under the 1996 Plan.
The Board of Directors may amend, alter, or terminate the 1996
Plan at any time, provided that stockholder approval generally must be
obtained for any change that would require stockholder approval under Rule
16b-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or any other regulatory or tax requirement that the Board deems
desirable to comply with or obtain relief under and subject to the requirement
that no rights under an outstanding award may be impaired by such action
without the consent of the holder thereof. The Committee may amend or modify
the terms of any outstanding award but only with the consent of the participant
if such amendment would impair his rights. In the event of certain corporate
transactions or events affecting the shares or the structure of the Company,
the Committee may make certain adjustments as set forth in the 1996 Plan.
The 1996 Plan is not subject to any provision of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and is not
qualified under Section 401(a) of the Code.
Options. On June 25, 1996, the Company granted options to
purchase approximately 4,800,000 shares of Class B Common Stock under the 1996
Plan to all full-time employees of the Company who had at such time been
continuously employed by the Company since January 1, 1996, as well as to
certain employees of the Company, at the director level and above, who began
employment with the Company at a later date. The exercise price of these
options is $7.00 per share. These options, which are Incentive Stock Options
to the extent permitted under the terms of the 1996 Plan and the Code, will
vest as follows: (i) for officers of the Company, in four equal annual
installments commencing on April 1, 1998, and (ii) for non-officers, in five
equal annual installments commencing on April 1, 1997, in each case subject to
continued employment with the Company.
Concurrently with the IPO, the Board of Directors granted
options under the 1996 Plan to purchase approximately 5,200,000 shares of
Common Stock to certain executive officers, employees, and Independent
Directors of the Company. The exercise price of these options is equal to the
initial public offering price. Of such options, options to purchase 3,400,000
shares were granted to Mr. Stead pursuant to the employment agreement
described above. See "--Employment Agreements." Of the total options granted
to Mr. Stead, options to purchase 200,000 shares vested immediately, and
options to purchase an additional 1,600,000 shares will vest in four equal
installments beginning April 1, 1998. The remaining options to purchase an
additional 1,600,000 shares granted to Mr. Stead, as well as the options to
purchase approximately 1,000,000 shares granted to other executive officers and
employees of the Company, will vest over a fixed term, subject to continued
employment with the Company; however, such options will vest earlier if the
Company achieves certain performance criteria. The Company also has granted
to the Independent Directors, concurrently with the IPO, options to purchase
an aggregate of 180,000 shares of Common Stock at the initial public offering
price. See "--Board of Directors --Compensation of Directors." The Company
has also granted options to purchase an aggregate of approximately 635,000
shares of Common Stock to certain officers of the Company, in connection with
the hiring or promotion of such officers. All of such options have an
exercise price equal to the initial public offering price and otherwise have
terms similar to those of the options granted in June 1996.
1996 Employee Stock Purchase Plan
The Company intends to make available to its employees the
opportunity to purchase shares of Common Stock under its 1996 Employee Stock
Purchase Plan (the "ESPP"). The ESPP was adopted by the Board of Directors and
stockholders in October 1996. The ESPP is intended to qualify under Section
423 of the Code and permits eligible employees of the Company to purchase
Common Stock through payroll deductions, provided that no employee may accrue
the right to purchase more than $25,000 worth of stock under all employee
stock purchase plans of the Company in any calendar year. Up to 1,000,000
shares of Common Stock will be initially available for sale under the ESPP.
The amount of additional shares of Common Stock that will be made available
for sale under the ESPP, if any, has not been determined. The initial
offering period will commence on or about November 1, 1996 and will end on the
last market trading day on or before December 31, 1998, and the right to
purchase shares of Common Stock will accrue in an amount not to exceed $13,000
per employee during the offering period. The price of Common Stock offered
under the initial offer under the ESPP will be 100% of the lower of the fair
market value of the Common Stock on the first or last day of the offering
period. The price of Common Stock offered under subsequent ESPP offerings,
the duration of which will be determined by the Committee, will be from 85% to
100% of the lower of the fair market value of the Common Stock on the first or
last day of each offering period, as determined by the Committee. Employees
may end their participation in the ESPP at any time during an offering period,
and they will be paid their payroll deductions accumulated to date.
Participation ends automatically on termination of employment with the Company.
Rights granted under the ESPP are not transferable by a
participant other than by will, the laws of descent and distribution, or as
otherwise provided under the ESPP.
The Board may amend or terminate the ESPP at any time. The
ESPP will terminate in all events on the last business day in October 2006.
Executive Incentive Bonus Plan
All officers of the Company are eligible to participate in the
Company's Executive Incentive Bonus Plan (the "Bonus Plan"). Pursuant to the
Bonus Plan, officers receive bonus payments based on the Company's meeting or
exceeding budgeted results, as well as individual achievement of previously
agreed upon goals.
Rollover Plan; Incentive Stock Units
In connection with the Split-Off, Ingram Industries options
held by the Company's employees and certain other Ingram Industries options
and SARs were converted to the Rollover Stock Options. In addition, holders of
approximately 300,000 Ingram Industries ISUs had the option to exchange a
portion of their ISUs for the Rollover Stock Options. See "The Split-Off and
the Reorganization--The Split-Off." Approximately 11,000,000 Rollover Stock
Options are outstanding, with exercise prices ranging from $0.66 to $3.32 per
share. See "The Split-Off and the Reorganization--The Split-Off." The
majority of these options will be fully vested by the year 2000 and expire no
later than ten years from the date of grant. These vested options generally
become exercisable, if otherwise vested, upon the earlier of (i) nine months
after the Split-Off or (ii) a public offering of the shares, in each case
subject to the optionee's continued employment with any of the Company, Ingram
Industries, or Ingram Entertainment.
Compensation Committee Interlocks and Insider Participation
The Board of Directors of the Company does not currently
maintain a separate compensation committee. Historically, base compensation
of officers of the Company, and Mr. Lacy's compensation under the Bonus Plan,
has been determined by the Executive Compensation Committee of the Ingram
Industries board of directors, which in 1995 consisted of E. Bronson Ingram,
until his resignation from the Board in May, and Messrs. Lacy and Pfeffer.
Mr. Lacy did not participate in the determination of his compensation.
Compensation under the Bonus Plan for all officers of the Company other than
Mr. Lacy was determined by the entire Board of Directors of the Company.
CERTAIN TRANSACTIONS
Historically, Ingram Industries has provided certain
administrative services to the Company. The Company is allocated a portion of
the costs of these administrative services. This allocation totaled $1.6
million, $2.4 million, $3.5 million, and $3.3 million in 1993, 1994, 1995, and
the first three quarters of 1996, respectively. In connection with the
Split-Off, the Company entered into the Transitional Service Agreements with
Ingram Industries relating to the continued provision of certain
administrative services. The Company believes that the terms of the
Transitional Service Agreements are on a basis as favorable as those that
would be obtained from third parties on an arm's length basis. The
Transitional Service Agreements generally terminate on December 31, 1996,
although payroll services under the Transitional Service Agreements will be
provided through December 31, 1997. After such termination, the Company will
be required to provide such services internally or find a third-party provider
of such services.
Additionally, Ingram Industries has provided a large portion of
the debt financing required by the Company in connection with its expansion.
As of December 31, 1994, December 30, 1995, and September 28, 1996, $449.4
million, $673.8 million, and $479.7 million, respectively, was outstanding to
Ingram Industries. Interest on such debt has been charged based on Ingram
Industries' domestic weighted average cost of funds. See Note 6 of Notes to
Consolidated Financial Statements. In connection with the Split-Off, the
Company assumed Ingram Industries' accounts receivable securitization program
in partial satisfaction of amounts due to Ingram Industries. The Company used
borrowings under the Credit Facility to repay the remaining intercompany
indebtedness to Ingram Industries, which was incurred for general corporate
purposes, primarily working capital needs in connection with the expansion of
the Company's business. The Company also used borrowings under the Credit
Facility to repay outstanding revolving indebtedness related to amounts drawn
by certain of the Company's subsidiaries, as participants in Ingram
Industries' then existing $380 million credit facility, which terminated
concurrently with the closing of the IPO. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."
The Company leases certain office space near Buffalo, New York
from a partnership owned by certain members of the Ingram family. The lease
agreement expires January 31, 2013 and requires annual rental payments of
approximately $1.6 million. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources." The Company currently subleases its facilities in Santa Ana,
California and Harrisburg, Pennsylvania from Ingram Industries pursuant to a
sublease which expires March 1, 2007. The sublease agreement requires annual
rental payments of approximately $2.1 million. In connection with the
Reorganization, the Company intends to acquire ownership of these facilities
for an aggregate amount of approximately $22.6 million. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources." The Company's lease for its
distribution center in Millington, Tennessee was previously guaranteed by
Ingram Industries. Certain of the Company's other leases were also guaranteed
by Ingram Industries. Such guarantees were released in connection with the
Split-Off.
The Company extended a loan during 1995 to one of its senior
executive officers. This loan has been repaid in full. The largest aggregate
amount outstanding at any time during 1995 was $450,000. This loan bore
interest at the intercompany rate of interest paid by the Company to Ingram
Industries.
In connection with the Split-Off, agreements relating to board
representation and registration rights with respect to Common Stock held by
the Ingram Family Stockholders (including shares of Common Stock issued upon
conversion of Class B Common Stock) were entered into by the Company and the
Ingram Family Stockholders. See "The Split-Off and the Reorganization."
THE SPLIT-OFF AND THE REORGANIZATION
Immediately prior to the closing of the IPO, Ingram Industries
consummated the Split-Off. The Company, Ingram Industries, and Ingram
Entertainment have also entered into certain agreements to effect the
Reorganization. The following is a summary of certain of the material terms
of the Split-Off.
The Split-Off
Immediately prior to the closing of the IPO, Ingram Industries
consummated an exchange, under an Exchange Agreement (the "Exchange
Agreement"), pursuant to which certain existing stockholders of Ingram
Industries exchanged a specified number of their shares of Ingram Industries
common stock for shares of Class B Common Stock of the Company of equivalent
value to the shares of Ingram Industries so exchanged. The exchange of shares
of Ingram Industries common stock for shares of Class B Common Stock of the
Company, together with those elements of the Reorganization contemplated to
occur prior to the closing of the IPO, are referred to herein as the
"Split-Off." See "Principal Stockholders." Eligible stockholders who
exchanged shares of Ingram Industries common stock eligible to be exchanged
received 107,251,362 shares of Class B Common Stock. The exchange values were
determined by the board of directors of Ingram Industries, which relied in
part on an opinion of a financial advisor to the effect that the Split-Off was
fair to all involved parties. In the Exchange Agreement, the Company
covenants that, during the two-year period following the Split-Off, it will
not (i) liquidate, merge, or consolidate with any other person, or sell,
exchange, distribute, or dispose of any material asset other than in the
ordinary course of business, (ii) with certain limited exceptions, redeem or
reacquire any of its capital stock transferred in the Split-Off, (iii) cease
to conduct the principal active trade or business conducted by it during the
five years immediately preceding the Split-Off, or (iv) otherwise take any
actions inconsistent with the facts and representations set forth in the
private letter ruling from the U.S. Internal Revenue Service (the "IRS")
regarding certain federal income tax consequences of the Reorganization and
the Split-Off, in each case unless it first obtains an opinion from recognized
tax counsel or a ruling from the IRS that such action will not affect the
qualification of the transactions contemplated by the Exchange Agreement for
tax-free treatment. All such covenants were necessary to obtain the private
letter ruling from the IRS. After the Split-Off, Ingram Entertainment
continues to be a wholly-owned subsidiary of Ingram Industries. Although
there can be no assurance, it is contemplated that, pursuant to the Exchange
Agreement, on or after June 20, 1997, certain remaining stockholders of Ingram
Industries will exchange their remaining shares of Ingram Industries common
stock for shares of Ingram Entertainment common stock.
Certain outstanding Ingram Industries options and SARs were
converted to, and certain Ingram Industries ISUs were exchanged for, the
Rollover Stock Options. The exchange values for these options, SARs, and ISUs
are primarily based on the exchange value for the underlying common stock.
The option, SAR, and ISU exchange values were determined by the board of
directors of Ingram Industries in accordance with the respective plans under
which they were issued. The total number of Rollover Stock Options
outstanding are exercisable for approximately 11,000,000 shares of Common
Stock. See "Management--Rollover Plan; Incentive Stock Units."
The Company and the Ingram Family Stockholders entered into the
Board Representation Agreement. So long as the Ingram Family Stockholders and
their permitted transferees (as defined in the Board Representation Agreement)
own in excess of 25,000,000 shares of the outstanding Common Equity, the Board
Representation Agreement will provide for the designation of (i) not more than
three directors designated by the Ingram Family Stockholders, (ii) one
director designated by the Chief Executive Officer of the Company, and (iii)
four or five additional Independent Directors (collectively, the "Designated
Nominees").
The Ingram Family Stockholders will be required to vote their
shares of Common Equity for the election of the Designated Nominees. In
addition, certain types of corporate transactions, including transactions
involving the potential sale or merger of the Company; the issuance of
additional equity, warrants, or options; acquisitions involving aggregate
consideration in excess of 10% of the Company's stockholders' equity; any
guarantee of indebtedness of an entity other than a subsidiary of the Company
exceeding 5% of the Company's stockholders' equity; and the incurrence of
indebtedness in a transaction which could reasonably be expected to reduce the
Company's investment rating (i) lower than one grade below the rating in
effect immediately following the IPO or (ii) below investment grade, may not
be entered into without the written approval of at least a majority of the
voting power deemed to be held (for purposes of the Board Representation
Agreement) by certain of the Ingram Family Stockholders, acting in their sole
discretion.
The Board Representation Agreement will terminate on the date
on which the Ingram Family Stockholders and their permitted transferees
collectively cease to beneficially own at least 25,000,000 shares of the
Common Equity of the Company (as such number may be equitably adjusted to
reflect stock splits, stock dividends, recapitalization, and other
transactions in the capital stock of the Company). All decisions for the
Ingram Family Stockholders that are trusts or foundations will be made by the
trustees thereof, who in some cases are members of the Ingram family.
The Ingram Family Stockholders and the other stockholders of
Ingram Industries who received shares of Class B Common Stock in the Split-Off
entered into a registration rights agreement (the "Registration Rights
Agreement") which grants the E. Bronson Ingram QTIP Marital Trust (the "QTIP
Trust") demand registration rights following the closing of the IPO. Such
demand registration rights may be exercised with respect to all or any portion
(subject to certain minimum thresholds) of the shares of Class B Common Stock
owned by the QTIP Trust, one or more of the other Ingram Family Stockholders
and certain of their permitted transferees on up to three occasions during the
84-month period following the closing of the IPO; provided that the Company
shall not be obligated to effect (i) any registration requested by the QTIP
Trust unless the QTIP Trust has furnished the Company with an opinion of
counsel to the effect that such registration and any subsequent sale will not
affect the tax-free nature of the Split-Off or (ii) more than one demand
registration during any 12-month period.
The Registration Rights Agreement also grants one demand
registration right (subject to certain minimum thresholds) to members of the
Ingram family (which may only be exercised during the 84-month period following
the closing of the IPO) and one demand registration right to certain minority
stockholders of the Company if a change of control of the Company occurs
following the closing of the IPO but prior to the second anniversary of the
Split-Off Date. The minority stockholders will not be entitled to this
registration right if they were offered the opportunity to participate in the
change of control transaction.
The Registration Rights Agreement restricts the exercise by any
party thereto of a demand registration right, and provides that the Company
will not grant any registration rights to any other person that are more
favorable than those granted pursuant to the Registration Rights Agreement or
that provide for the exercise of demand registration rights sooner than three
months following a public offering in which such person was entitled to
include its shares, unless the number of shares requested to be included in
such public offering exceeded 125% of the number of shares actually included.
In addition, the Registration Rights Agreement provides that
the parties thereto shall be entitled to unlimited "piggyback" registration
rights in connection with any proposed registration of equity securities by
the Company (with certain specified exceptions) during the 84-month period
following the completion of the IPO. Employees who received shares in the
Employee Offering, and persons who have exercised Rollover Stock Options, are
bound by the provisions of the Registration Rights Agreement as if such
employees were parties thereto, and are entitled to the "piggyback"
registration rights provided therein, with respect to the portion of their
shares of Class B Common Stock that is no longer subject to restrictions.
The Registration Rights Agreement contains provisions regarding
reduction of the size of an offering that has been determined by the
underwriters to have exceeded its maximum potential size and contains certain
customary provisions, including those relating to holdback arrangements,
registration procedures, indemnification, contribution and payment of fees and
expenses.
Pursuant to an agreement (the "Thrift Plan Liquidity
Agreement") with the Ingram Thrift Plan, which received 10,007,000 shares of
Class B Common Stock in the Split-Off, during the 90-day period following each
of (i) the closing of the IPO and (ii) the first anniversary of the closing of
the IPO the Company may elect to file a registration statement under the
Securities Act covering such number of shares as are required to be sold by
the Ingram Thrift Plan in order to comply with the requirements of ERISA or
are necessary to fund distributions to Ingram Thrift Plan participants
("Registrable Securities"). If a registration statement covering the
Registrable Securities has not become effective during either such 90-day
period, the Ingram Thrift Plan may elect to sell any of such Registrable
Securities to the Company during the 90-day period thereafter at the
then-current fair market value of the Common Stock; provided that the
Company's obligation in any fiscal year to purchase shares not required to
fund distributions by the Ingram Thrift Plan will be limited to the lesser of
$10,000,000 or 3% of the Company's stockholders' equity as of the beginning of
such fiscal year. In addition, the Ingram Thrift Plan may elect to sell to
the Company one time each calendar month, such number of shares as are
necessary to fund distributions to Ingram Thrift Plan participants, except
during such periods when the Company has notified the Ingram Thrift Plan of
the filing of a registration statement covering Registrable Securities or when
such a registration statement is effective. The Company will not be obligated
to make any repurchase pursuant to the Thrift Plan Liquidity Agreement if it
determines that to do so would adversely affect the tax-free nature of the
Split-Off or if such repurchase would be prohibited by a credit facility of
the Company. Of the 10,007,000 shares of Class B Common Stock to be received
by the Ingram Thrift Plan, 9,207,000 shares are subject to a lock-up agreement
in connection with the IPO. See "Shares Eligible for Future Sale." The
registration statement of which this Prospectus forms a part is intended to
fulfill the Company's obligation pursuant to clause (i) above.
The Reorganization
Prior to the Split-Off, the Company was a subsidiary of Ingram
Industries, a company controlled by the Ingram Family Stockholders. Ingram
Industries is engaged in various businesses, including inland marine
transportation; the production and transport of specification commercial sand;
insurance; and the distribution of books, prerecorded video cassettes, laser
discs, video games, and spoken-word audio cassettes. The businesses of the
Company, Ingram Industries, and Ingram Entertainment (each, an "Ingram
Company") and their respective subsidiaries are being reorganized as described
below. In conjunction with the Split-Off, the Company assumed Ingram
Industries' accounts receivable securitization program in partial satisfaction
of amounts due to Ingram Industries. The Company repaid the remaining
intercompany indebtedness with borrowings under the Credit Facility. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
Pursuant to a reorganization agreement (the "Reorganization
Agreement"), each Ingram Company has agreed to retain or assume, at the time
of the Reorganization, certain liabilities and obligations, including the
following: (i) liabilities and obligations incurred by such Ingram Company
(other than certain general corporate level liabilities of Ingram Industries)
with respect to periods ending on or prior to the closing of the Split-Off,
other than liabilities or obligations arising as a result of any intentional
act which is tortious or as a result of any illegal act (each, a "Designated
Action") committed by (x) a corporate officer of Ingram Industries (except for
actions that are believed by such person to be in furtherance of his duties as
an officer or employee of the Company, Ingram Entertainment, or their
respective subsidiaries, or the other subsidiaries or business operating units
of Ingram Industries), (y) any other employee of Ingram Industries whose
responsibilities are not primarily associated with the Company, Ingram
Entertainment, or their respective subsidiaries, or the other subsidiaries or
business operating units of Ingram Industries or (z) an employee (other than
general corporate level employees of Ingram Industries) of any other Ingram
Company; (ii) liabilities and obligations (other than general corporate level
liabilities of Ingram Industries) incurred by any other Ingram Company with
respect to periods ending on or prior to the closing of the Split-Off as a
result of any Designated Action committed by an employee of any such Ingram
Company or certain subsidiaries or business operating units of such Ingram
Company; (iii) in the case of Ingram Industries, certain general corporate
level liabilities and obligations up to an aggregate of $100,000 incurred by
Ingram Industries with respect to certain periods ending on or prior to the
closing of the Split-Off and recorded under Ingram Industries' internal
accounting system as "home office" liabilities, to the extent that such
liabilities and obligations are extraordinary in nature and arise out of the
ordinary course of business and were not accrued on Ingram Industries' year
end 1995 balance sheet; (iv) specified liabilities and obligations related to
certain asset dispositions and the settlement of certain claims; and (v)
liabilities and obligations incurred by such Ingram Company with respect to
periods beginning after the closing of the Split-Off. In addition, certain
contingent assets or liabilities, as well as fees and costs incurred in
connection with the Split-Off, will be shared 23.01% by Ingram Industries,
72.84% by the Company, and 4.15% by Ingram Entertainment. These contingent
liabilities include (i) liabilities and obligations arising as a result of any
Designated Action committed by a corporate officer of Ingram Industries
(except for actions that are believed by such person to be in furtherance of
his duties as an officer or employee of the Company, Ingram Entertainment, or
their respective subsidiaries or other designated affiliates, or the other
subsidiaries or designated affiliates of Ingram Industries), or any other
employee of Ingram Industries whose responsibilities are not primarily
associated with the Company, Ingram Entertainment, or their respective
subsidiaries, or the other subsidiaries or business operating units of Ingram
Industries; (ii) certain general corporate level liabilities and obligations,
if the aggregate of such liabilities and obligations incurred by Ingram
Industries exceeds $100,000, incurred by Ingram Industries with respect to
periods ending on or prior to the closing of the Split-Off and recorded under
Ingram Industries' internal accounting system as "home office" liabilities, to
the extent that such liabilities and obligations are extraordinary and
non-recurring in nature and arise out of the ordinary course of business and
were not accrued on Ingram Industries' 1995 balance sheet; (iii) certain
liabilities and obligations incurred by Ingram Industries in respect of
specified individuals pursuant to certain deferred compensation plans of
Ingram Industries; and (iv) assets, liabilities, and obligations arising in
connection with certain specified asset dispositions. The Company will not be
responsible for any liabilities except to the extent that the Company's share
of such liabilities, fees or costs and certain other amounts (net of any
contingent assets) exceeds, in the aggregate, $20,778,000. The Company
currently believes that any such liabilities, fees, or costs will be largely
offset by other amounts due from Ingram Industries. However, there can be no
assurance that further payments, which could be material, will not be required
in the future.
Pursuant to the Reorganization Agreement, each Ingram Company
agreed to conduct its business, from the date of the Reorganization Agreement
until the closing of the Split-Off, in the ordinary course of business
consistent with past practice. The Reorganization Agreement required the
Company, at or prior to the closing of the Split-Off, to enter into bank
repurchase agreements with respect to securities of the Company received in
connection with the Exchange Agreement in exchange for shares of Ingram
Industries common stock previously held as collateral for certain loans made
to stockholders of Ingram Industries. If securities of Ingram Industries are
exchanged for securities of Ingram Entertainment, as contemplated in "-- The
Split-Off" above, Ingram Entertainment has agreed to enter into similar
agreements with respect to such securities.
Pursuant to the Reorganization Agreement, each Ingram Company
has agreed to indemnify each other Ingram Company from any and all damage,
loss, liability, and expense incurred as a result of any breach by such party
of any covenant or agreement pursuant to the Reorganization Agreement or the
failure by such party to perform its obligations with respect to any liability
retained or assumed by such party pursuant to the Reorganization Agreement.
The Ingram Companies have also entered into an employee
benefits transfer and assumption agreement (the "Employee Benefits
Agreement"). The Employee Benefits Agreement provides for the allocation of
employee benefit assets and liabilities generally on a pro rata basis in
respect of each Ingram Company's current and former employees. Each Ingram
Company will indemnify the other parties with respect to such party's
benefit-related assumed or retained assets and liabilities.
In connection with the Reorganization, the Ingram Companies
entered into a tax sharing and tax services agreement (the "Tax Sharing
Agreement"). Under the Tax Sharing Agreement, the Company agreed that it will
be liable for (i) its allocable share of the consolidated federal income tax
liability and any consolidated state income tax liability for the year that
includes the Split-Off and (ii) generally, 72.84% of any adjustment in excess
of reserves already established by Ingram Industries for federal or state
income tax liabilities of Ingram Industries, Ingram Entertainment, or the
Company (x) relating to tax periods ending on or prior to the Split-Off or (y)
resulting from a failure (other than due to a breach of certain
representations or covenants) of either the Split-Off or the subsequent
exchange of securities of Ingram Industries for securities of Ingram
Entertainment to qualify for tax-free treatment. However, no liability with
respect to the subsequent exchange involving Ingram Entertainment will be
allocated to the Company if such exchange is not completed in accordance with
the provisions of the Exchange Agreement or if the facts and circumstances of
such exchange are materially different from those on which the private letter
ruling received by Ingram Industries (see "The Split-Off and the
Reorganization -- Conditions to the Split-Off") is based, unless a
supplemental private letter ruling reasonably satisfactory to the Company
addressing such differences is obtained prior to such exchange. Subject to
certain consultation rights and certain limited rights on the part of the
Company to consent to a settlement, Ingram Industries will have the right to
control any audit or proceeding relating to the Company for periods ending
prior to the Split-Off. The Company will share in any refunds received in
respect of the carryback of any future tax losses or credits it may suffer or
receive. In addition, Ingram Industries and Ingram Entertainment have each
agreed that, upon the exercise by one of its employees of an option granted in
connection with the Split-Off, it will pay the Company an amount equal to the
tax benefit, if any, received from any compensation deduction in respect of
such exercise. Furthermore, if the Split-Off or the contemplated exchange of
Ingram Entertainment common stock fails to qualify for tax-free treatment as a
result of a breach by one of the Ingram Companies of specified representations
or covenants contained in the Exchange Agreement, any resulting deficiency
will be borne by such breaching Ingram Company.
In addition, until 1999, the Company will provide data
processing services to Ingram Industries and Ingram Entertainment for a fee to
be determined. The Ingram Companies have also entered into the Transitional
Service Agreements relating to the continued provision of certain
administrative services (including cash management, insurance, employee
benefits, and payroll administration). The Transitional Service Agreements
are believed to be on terms as favorable as those that would be obtained from
third parties on an arm's length basis.
Conditions to the Split-Off
The Split-Off was subject to the satisfaction or waiver of
certain conditions including, without limitation, (i) receipt of a private
letter ruling from the IRS satisfactory to Ingram Industries and certain of
the Ingram Family Stockholders as to the tax-free nature of the Split-Off and
a determination by the board of directors of Ingram Industries and each of the
Ingram Family Stockholders that nothing has come to their attention that
causes them to conclude that significant questions exist as to the validity of
the ruling as applied to the Reorganization or the Split-Off; (ii) the absence
of any law, judgment, injunction, order or decree which prohibits consummation
of the Split-Off; (iii) the effectiveness of certain ancillary agreements;
(iv) receipt of required regulatory approvals and third-party consents; (v)
consummation of the scheduled refinancing and assumption of debt; and (vi)
settlement of intercompany receivables and payables. On October 16, 1996,
Ingram Industries received from the IRS a private letter ruling as to the
tax-free nature of the Split-Off. The Exchange Agreement was terminable by
the board of directors of Ingram Industries or the holders of a majority of
the outstanding shares of Ingram Industries common stock at any time prior to
the closing of the Split-Off.
SELLING STOCKHOLDER
The Ingram Thrift Plan is the beneficial owner of 10,007,000
shares of Class B Common Stock, representing approximately 9.1% of the
outstanding Class B Common Stock of the Company (and 8.9% of the
outstanding voting power). Pursuant to the Thrift Plan Liquidity
Agreement, the Company has agreed to register the sale of certain of the
shares held by the Ingram Thrift Plan, or alternatively to purchase such
shares from the Ingram Thrift Plan. The registration statement of which
this Prospectus forms a part relates to 800,000 of the shares held by the
Ingram Thrift Plan (that portion not subject to a lock-up agreement in
connection with the IPO). See "The Split-Off and the Reorganization--The
Split-Off" and "Shares Eligible for Future Sale."
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information, as of
September 28, 1996, as adjusted for (i) the Split-Off and (ii) the issuance of
the Common Stock offered in the IPO as if such transactions had occurred on
September 28, 1996, with respect to the beneficial ownership of each class of
the Common Equity by (a) each person known by the Company to own beneficially
more than five percent of the outstanding shares of either class of the Common
Equity; (b) each director; (c) each of the Named Executive Officers; and (d)
all executive officers and directors of the Company as a group. This table
does not reflect the sale by the Ingram Thrift Plan of any of the 800,000
shares of Common Stock offered hereby. Any such sales would decrease the
number of shares of Class B Common Stock outstanding and increase the number
of shares of Class A Common Stock outstanding held by the public. See
"Management," "Certain Transactions," "The Split-Off and the Reorganization,"
and "Selling Stockholder."
<TABLE>
<CAPTION>
Common
Class B Common Stock Common Stock(1) Equity
------------------------------- ----------------------------- -----------
Shares Shares Percentage
Beneficially Percentage Beneficially Percentage of Total
Name Owned of Class Owned of Class Voting Power
- ---- ------------ ----------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
E. Bronson Ingram QTIP
Marital Trust(2)(3) 69,099,259 62.9% -- -- 61.6%
Ingram Thrift Plan(2) 10,007,000 9.1 -- -- 8.9
David B. Ingram(2)(3) 72,377,210(4)(5) 65.9 8,580(6)(7) * 64.5
Robin Ingram Patton(2)(3) 71,646,916(4)(5) 65.2 --(7) -- 63.9
Orrin H. Ingram(2)(3) 73,157,670(4)(5) 66.6 68,644(6)(7) * 65.2
Roy E. Claverie(2) 10,859,083(4)(8) 9.9 150,000(6)(7) * 9.7
SunTrust Bank, Atlanta(9) 12,115,391 11.0 -- -- 10.8
Jerre L. Stead -- -- 400,000(10) 1.7% *
Jeffrey R. Rodek 285,000 * -- -- *
David R. Dukes 65,000 * 73,277(6) * *
Sanat K. Dutta 85,000 * 37,410(6) * *
John Wm. Winkelhaus, II 85,000 * 42,559(6) * *
Martha R. Ingram(3) 83,740,788(4)(5) 76.3 --(7) -- 74.7
John R. Ingram(3) 71,875,978(4)(5) 65.5 33,633(6)(7) * 64.1
Philip M. Pfeffer 1,972,476(5) 1.8 21,250(6) * 1.8
J. Phillip Samper -- -- -- -- --
Joe B. Wyatt -- -- 193,065(6) * *
Don H. Davis, Jr. -- -- -- -- --
All executive officers and
directors as a group (24
persons)(3)(11) 91,067,943(4)(5) 82.9 1,148,537(6)(7) 4.8 81.2
Linwood A. (Chip) Lacy, Jr. 1,390,062 1.3 110,500(6) * 1.2
<FN>
- ---------------
* Less than one percent.
(1) Excludes each stockholder's beneficial ownership of Class B Common Stock,
which may be converted into Class A Common Stock at any time, at the option
of the holder. See "Description of Capital Stock."
(2) The address for the indicated parties is: c/o Ingram Industries Inc., One
Belle Meade Place, 4400 Harding Road, Nashville, Tennessee 37205.
(3) David B. Ingram, Robin Ingram Patton, Orrin H. Ingram, John R. Ingram, and
Martha R. Ingram are trustees of the QTIP Trust, and accordingly could each
be deemed to be the beneficial owner of the shares held by the QTIP Trust.
(4) Includes 71,286,290; 71,266,588; 71,286,290; 10,387,004; 71,286,290;
81,702,786; and 83,870,115 shares, for David B. Ingram, Robin Ingram
Patton, Orrin H. Ingram, Roy E. Claverie, John R. Ingram, Martha R. Ingram,
and all executive officers and directors as a group, respectively, which
shares are held by various trusts or foundations of which these individuals
are trustees. Such individuals could each be deemed to be the beneficial
owner of the shares held by such trusts of which he or she is a trustee.
(5) Excludes for David B. Ingram 5,132,080 shares held by one or more trusts
of which he and/or his children are beneficiaries; for Robin Ingram Patton
2,932,917 shares held by one or more trusts of which she is a beneficiary;
for Orrin H. Ingram 1,441,856 shares held by one or more trusts of which he
and/or his children are beneficiaries; for John R. Ingram 2,732,815 shares
held by one or more trusts of which he and/or his children are
beneficiaries; for Mr. Lacy 223,097 shares held by a trust of which his
children are beneficiaries; for Mr. Pfeffer 234,348 shares held by his
children or one or more trusts of which his children are beneficiaries; and
for Mr. Claverie 244,912 shares held by his children or one or more trusts
of which he and/or his children are beneficiaries. Each such individual
disclaims beneficial ownership as to such shares.
(6) Represents Rollover Stock Options exercisable within 60 days of the date
of the table for shares of Common Stock.
(7) Excludes 246,000 shares of Common Stock purchased by Ingram Industries in
the IPO (including 15,000 shares purchased by Ingram Industries' subsidiary
Ingram Entertainment). As principal stockholders of Ingram Industries, the
indicated stockholders may be deemed to be beneficial owners of the shares
held by Ingram Industries.
(8) Includes 10,007,000 shares held by the Ingram Thrift Plan. Mr. Claverie
may be deemed to be the beneficial owner of such shares, because he is a
trustee of the Ingram Thrift Plan.
(9) The address for SunTrust Bank, Atlanta ("SunTrust") is 25 Park Place, NE,
Atlanta, Georgia 30303. All shares are held by SunTrust as trustee for
certain individuals. SunTrust and certain of its affiliates may be deemed
beneficial owners of such shares; however, SunTrust and such affiliates
disclaim any beneficial interest in such shares.
(10) Includes options to purchase 200,000 shares of Common Stock, which
represent the immediately exercisable portion of the options granted to
Mr. Stead effective upon the closing of the IPO. See "Management--1996
Plan--Options."
(11) Excludes shares beneficially owned by Mr. Lacy, the Company's former
Chief Executive Officer and former Chairman of the Board of Directors.
</TABLE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of
265,000,000 shares of Class A Common Stock, par value $0.01 per share, of
which 23,200,000 shares were issued and outstanding upon the closing of
the IPO, and 135,000,000 shares of Class B Common Stock, par value $0.01
per share, of which 109,813,762 shares were issued and outstanding upon
the closing of the Split-Off. In addition, the Company's Certificate of
Incorporation (the "Certificate of Incorporation") authorizes the issuance
by the Company of up to 1,000,000 shares of preferred stock, par value
$0.01 per share (the "Preferred Stock"), on terms determined by the
Company's Board of Directors. Additionally, any shares of Common Stock (a
maximum of 800,000 shares) sold in this offering will increase the number
of shares of Common stock outstanding and reduce the number of shares of
Class B Common Stock outstanding. The following description is a summary
of the capital stock of the Company and is subject to and qualified in its
entirety by reference to the provisions of the Certificate of
Incorporation and the Amended and Restated Bylaws (the "Bylaws") of the
Company, which are included as exhibits to the Registration Statement of
which this Prospectus forms a part.
Common Equity
The shares of Common Stock and Class B Common Stock are
identical in all respects, except for voting rights and certain conversion
rights, as described below.
Voting Rights. Each share of Common Stock entitles the holder
to one vote on each matter submitted to a vote of the Company's stockholders,
including the election of directors, and each share of Class B Common Stock
entitles the holder to ten votes on each such matter. Except as required by
applicable law, holders of the Common Stock and Class B Common Stock vote
together as a single class on all matters submitted to a vote of the
stockholders of the Company. There is no cumulative voting. See "Risk
Factors--Control by Ingram Family Stockholders."
Subject to New York Stock Exchange requirements, for so long as
there are any shares of Class B Common Stock outstanding, any action that may
be taken at a meeting of the stockholders may be taken by written consent in
lieu of a meeting if the Company receives consents signed by stockholders
having the minimum number of votes that would be necessary to approve the
action at a meeting at which all shares entitled to vote on the matter were
present and voted. This could permit certain holders of Class B Common Stock
to take action regarding certain matters without providing other stockholders
the opportunity to voice dissenting views or raise other matters. The right
to take such action by written consent of stockholders will expire at such
time as all outstanding shares of Class B Common Stock cease to be
outstanding.
Dividends, Distributions and Stock Splits. Holders of Common
Stock and Class B Common Stock are entitled to receive dividends at the same
rate if, as, and when such dividends are declared by the Board of Directors
out of assets legally available therefor after payment of dividends required
to be paid on shares of Preferred Stock, if any.
In the case of dividends or distributions payable in Common
Stock or Class B Common Stock, only shares of Common Stock will be distributed
with respect to the Common Stock and only shares of Class B Common Stock will
be distributed with respect to the Class B Common Stock. In the case of
dividends or other distributions consisting of other voting shares of the
Company, the Company will declare and pay such dividends in two separate
classes of such voting securities, identical in all respects, except that the
voting rights of each such security paid to the holders of the Common Stock
shall be one-tenth of the voting rights of each such security paid to the
holders of Class B Common Stock, and such security paid to the holders of
Class B Common Stock shall convert into the security paid to the holders of
the Common Stock upon the same terms and conditions applicable to the Class B
Common Stock. In the case of dividends or other distributions consisting of
securities convertible into, or exchangeable for, voting securities of the
Company, the Company will provide that such convertible or exchangeable
securities and the underlying securities be identical in all respects, except
that the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of the Common Stock shall be
one-tenth of the voting rights of each security underlying the convertible or
exchangeable security paid to the holders of Class B Common Stock, and such
underlying securities paid to the holders of Class B Common Stock shall
convert into the security paid to the holders of the Common Stock upon the
same terms and conditions applicable to the Class B Common Stock.
Neither the Common Stock nor the Class B Common Stock may be
subdivided or combined in any manner unless the other class is subdivided or
combined in the same proportion.
Conversion. The Common Stock has no conversion rights.
The Class B Common Stock is convertible into Common Stock, in
whole or in part, at any time and from time to time at the option of the
holder, on the basis of one share of Common Stock for each share of Class B
Common Stock converted. Each share of Class B Common Stock will also
automatically convert into one share of Common Stock upon the earliest to
occur of (i) the fifth anniversary of the closing of the Split-Off; (ii) the
sale or transfer of such share of Class B Common Stock (a) by a holder that is
a party to the Board Representation Agreement to any person that is not an
affiliate, spouse or descendant of such holder, their estates or trusts for
their benefit or any other party to the Exchange Agreement or (b) by any other
holder, to a holder that is not the spouse or descendant of such holder or
their estates or trusts for the benefit thereof; and (iii) the date on which
the number of shares of Class B Common Stock then outstanding is less than 25%
of the aggregate number of shares of Common Equity then outstanding.
Liquidation. In the event of any dissolution, liquidation, or
winding up of the affairs of the Company, whether voluntary or involuntary,
after payment of the debts and other liabilities of the Company and making
provision for the holders of Preferred Stock, if any, the remaining assets of
the Company will be distributed ratably among the holders of the Common Stock
and the Class B Common Stock, treated as a single class.
Mergers and Other Business Combinations. Upon a merger,
combination, or other similar transaction of the Company in which shares of
Common Equity are exchanged for or changed into other stock or securities,
cash and/or any other property, holders of each class of Common Equity will be
entitled to receive an equal per share amount of stock, securities, cash,
and/or any other property, as the case may be, into which or for which each
share of any other class of Common Equity is exchanged or changed; provided
that in any transaction in which shares of capital stock are distributed, such
shares so exchanged for or changed into may differ as to voting rights and
certain conversion rights to the extent and only to the extent that the voting
rights and certain conversion rights of Common Stock and Class B Common Stock
differ at that time.
Other Provisions. The holders of the Common Stock and Class B
Common Stock are not entitled to preemptive rights. There are no redemption
provisions or sinking fund provisions applicable to the Common Stock or the
Class B Common Stock.
Preferred Stock
The Board of Directors is authorized, subject to any
limitations prescribed by the DGCL, or the rules of any quotation system or
national securities exchange on which stock of the Company may be quoted or
listed, to provide for the issuance of shares of Preferred Stock in one or
more series; to establish from time to time the number of shares to be
included in each such series; to fix the rights, powers, preferences, and
privileges of the shares of each series and any qualifications and
restrictions thereon; and, to the extent permitted by the DGCL, to increase or
decrease the number of shares of such series, without any further vote or
action by the stockholders. Depending upon the terms of the Preferred Stock
established by the Board of Directors, any or all series of Preferred Stock
could have preference over the Common Stock with respect to dividends and
other distributions and upon liquidation of the Company or could have voting
or conversion rights that could adversely affect the holders of the outstanding
Common Stock. The Company has no present plans to issue any shares of
Preferred Stock.
Limitation of Liability; Indemnification
As permitted by the DGCL, the Certificate of Incorporation
provides that directors of the Company shall not be personally liable to the
Company or its stockholders for monetary damages for breach of fiduciary duty
as a director to the fullest extent permitted by the DGCL (which currently
provides that such liability may be so limited, except for liability (i) for
any breach of the director's duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of the law, (iii) under Section
174 of the DGCL, relating to prohibited dividends or distributions or the
repurchase or redemption of stock, or (iv) for any transaction from which the
director derives an improper personal benefit).
Each person who is or was a party to any action by reason of
the fact that such person is or was a director or officer of the Company shall
be indemnified and held harmless by the Company to the fullest extent
permitted by the DGCL. This right to indemnification also includes the right
to have paid by the Company the expenses incurred in connection with any such
proceeding in advance of its final disposition, to the fullest extent
permitted by the DGCL. In addition, the Company may, by action of the Board
of Directors, provide indemnification to such other employees and agents of
the Company to such extent as the Board of Directors determines to be
appropriate under the DGCL.
As a result of this provision, the Company and its stockholders
may be unable to obtain monetary damages from a director for breach of his
duty of care. Although stockholders may continue to seek injunctive or other
equitable relief for an alleged breach of fiduciary duty by a director,
stockholders may not have any effective remedy against the challenged conduct
if equitable remedies are unavailable. The Company also reserves the right to
purchase and maintain directors' and officers' liability insurance.
Other Certificate of Incorporation and Bylaw Provisions
The Bylaws provide that a majority of the total number of
directors shall constitute a quorum for the transaction of business. The
Board of Directors may act by unanimous written consent. The Board
Representation Agreement contains additional provisions relating to corporate
governance. See "The Split-Off and the Reorganization -- The Split-Off."
Annual meetings of stockholders shall be held to elect the
Board of Directors and transact such other business as may be properly brought
before the meeting. Special meetings of stockholders may be called by the
chairman and shall be called by the secretary on the written request of
stockholders having 10% of the voting power of the Company. The stockholders
may act by written consent in lieu of a meeting of stockholders until such
time as all shares of Class B Common Stock cease to be outstanding.
The Certificate of Incorporation may be amended with the
approval of the Board of Directors (by the vote required as described above),
and for so long as any shares of Class B Common Stock remain outstanding, in
addition to any vote required by law, any such amendment also requires the
approval of the holders of a majority of the Company's outstanding voting
power and a majority of the members of the Board of Directors. However, any
amendment to the provisions of the Certificate of Incorporation relating to
the Common Equity also requires the consent of a majority of the outstanding
voting power held by the Ingram Family Stockholders. The Bylaws may be
amended with the approval of three-quarters of the entire Board of Directors
or by the holders of 75% of the Company's voting power present and entitled to
vote at any annual or special meeting of stockholders at which a quorum is
present.
The number of directors which shall constitute the whole Board
of Directors shall be fixed by resolution of the Board of Directors. The
number of directors shall be eight or nine. The size of the initial Board is
fixed at eight members, but may be increased to nine in accordance with the
Board Representation Agreement. The vote of a majority of the entire Board is
required for all actions of the Board. The directors shall be elected at the
annual meeting of the stockholders, except for filling vacancies. Directors
may be removed with the approval of the holders of a majority of the Company's
voting power present and entitled to vote at a meeting of stockholders.
Vacancies and newly created directorships on the Board of Directors resulting
from any increase in the number of directors may be filled by a majority of
the directors then in office, although less than a quorum, a sole remaining
director, or the holders of a majority of the voting power present and
entitled to vote at a meeting of stockholders. So long as the Ingram Family
Stockholders and their permitted transferees own at least 25,000,000 shares of
the Common Equity, the Bylaws will provide for the appointment of the
Designated Nominees.
The presence, in person or by proxy, of the holders of a
majority of the votes entitled to be cast by the stockholders entitled to vote
generally, shall constitute a quorum for stockholder action at any meeting.
Section 203 of the DGCL
The Company is subject to Section 203 of the DGCL which,
subject to certain exceptions, prohibits a Delaware corporation from engaging
in a business combination (as defined therein) with an "interested
stockholder" (defined generally as any person who beneficially owns 15% or
more of the outstanding voting stock of the Company or any person affiliated
with such person) for a period of three years following the date that such
stockholder became an interested stockholder, unless (i) prior to such date
the board of directors of the corporation approved either the business
combination or the transaction that resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction that
resulted in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation at the
time the transaction commenced (excluding for purposes of determining the
number of shares outstanding those shares owned (a) by directors who are also
officers of the corporation and (b) by employee stock plans in which employee
participants do not have the right to determine confidentially whether shares
held subject to the plan will be tendered in a tender or exchange offer); or
(iii) on or subsequent to such date the business combination is approved by
the board of directors of the corporation and authorized at a meeting of
stockholders by the affirmative vote of at least 66 2/3% of the outstanding
voting stock of the corporation not owned by the interested stockholder.
Transfer Agent
The transfer agent and registrar for the Common Stock is First
Chicago Trust Company of New York.
SHARES ELIGIBLE FOR FUTURE SALE
Assuming the sale of all of the shares of Common Stock being
offered hereby, upon the closing of this offering, the Company will have
outstanding an aggregate of 24,000,000 shares of Common Stock and 109,013,762
shares of Class B Common Stock. Additionally, any shares of Common Stock sold
pursuant to the Rollover S-1 will be outstanding (a maximum of 2,867,374
shares). Of the total outstanding shares of Common Equity, only the shares
of Common Stock will be freely tradable without restriction or further
registration under the Securities Act, unless purchased by "affiliates" of the
Company, as that term is defined in Rule 144 under the Securities Act (which
sales would be subject to certain volume limitations and other restrictions
described below).
The remaining shares of Common Equity held by existing
stockholders upon completion of the IPO are "restricted securities" as that
term is defined in Rule 144 under the Securities Act. In general, under Rule
144 as currently in effect, a person (or persons whose shares are aggregated),
including an affiliate, who has beneficially owned shares for at least two
years (including, if the shares are transferred, the holding period of any
prior owner except an affiliate) is entitled to sell in "broker's
transactions" or to market makers, within any three-month period commencing 90
days after the date of the IPO, a number of shares that does not exceed the
greater of (i) 1% of the then outstanding shares of such class of the Common
Equity (approximately 1,090,138 shares immediately after this offering) or
(ii) generally, the average weekly trading volume in such class of the Common
Stock during the four calendar weeks preceding the filing of a Form 144 with
respect to such sale, and subject to certain other limitations and
restrictions. In addition, a person who is not deemed to have been an
affiliate of the Company at any time during the three months preceding a sale,
and who has beneficially owned the shares proposed to be sold for at least
three years, would be entitled to sell such shares under Rule 144(k) without
regard to the volume and other requirements described above. Shares of Common
Equity that would otherwise be deemed "restricted securities" could be sold at
any time through an effective registration statement relating to such shares
of Common Equity.
Of the 109,013,762 shares of Class B Common Stock outstanding
as of the closing of this offering, 2,562,400 shares were acquired in July
1996 pursuant to the Employee Offering and the concurrent grant of restricted
stock awards, and 106,451,362 shares were acquired pursuant to the Split-Off.
Under current law, absent registration or an exemption from registration other
than Rule 144, (a) no shares of Class B Common Stock will be eligible for sale
as of October 31, 1996; (b)106,451,362 shares of Class B Common Stock will be
eligible for sale two years from the effective date of the Split-Off, and (c)
the 2,562,400 shares of Class B Common Stock sold in the Employee Offering in
July 1996 (or granted concurrently therewith) and not repurchased or forfeited
will be eligible for sale upon the later of (i) July 1998 and (ii) for those
shares pledged to secure purchase money loans for such shares, two years after
the release of such pledge. In addition, the 2,562,400 shares of Class B
Common Stock issued in July 1996 are subject to contractual vesting
restrictions, which restrictions begin to lapse in April 1998.
Pursuant to the Registration Rights Agreement, the QTIP Trust,
which after the Split-Off holds 69,099,259 shares of Class B Common Stock,
has certain demand registration rights with respect to all or any portion
(subject to certain minimum thresholds) of the shares of Class B Common Stock
owned by the QTIP Trust, one or more of the other Ingram Family Stockholders
and certain of their permitted transferees on up to three occasions during the
84-month period following the closing of the IPO; provided that the Company
shall not be obligated to effect (i) any registration requested by the QTIP
Trust unless the QTIP Trust has furnished the Company with an opinion of
counsel to the effect that such registration and any subsequent sale will not
affect the tax-free nature of the Split-Off or (ii) more than one demand
registration during any 12-month period. The Registration Rights Agreement
also grants one demand registration right (subject to certain minimum
thresholds) to members of the Ingram family holding, at the time of the
Split-Off, approximately 18,210,000 shares of Class B Common Stock (which may
only be exercised within the 84-month period following the closing of the
IPO). All holders of such demand registration rights are subject to the
lock-up agreements described below, and therefore are restricted from selling
any shares during the 180-day period following October 31, 1996. In addition,
the Registration Rights Agreement grants one demand registration right to
certain minority stockholders of the Company, if a change of control of the
Company occurs following the closing of the IPO but prior to the second
anniversary of the Split-Off Date. The minority stockholders will not be
entitled to this registration right if they were offered the opportunity to
participate in the change of control transaction.
In addition, the Registration Rights Agreement provides that
the recipients of Class B Common Stock received in the Split-Off will be
entitled to unlimited "piggyback" registration rights in connection with any
proposed registration of equity securities by the Company (with certain
specified exceptions) during the 84-month period following the closing of the
IPO. Employees who received shares in the Employee Offering, holders of
restricted stock granted at the time of the Employee Offering, and persons who
have exercised Rollover Stock Options are bound by the provisions of the
Registration Rights Agreement as if such employees were parties thereto, and
are entitled to the "piggyback" registration rights provided therein, with
respect to the portion of their shares of Common Equity that is no longer
subject to restrictions.
Pursuant to the Thrift Plan Liquidity Agreement, the Ingram
Thrift Plan has certain rights to require the Company to purchase such shares
of Class B Common Stock as are required to be sold by the Ingram Thrift Plan
in order to comply with the requirements of ERISA or are necessary to fund
distributions to Ingram Thrift Plan participants, if the Company does not
arrange for the registration of such shares. Of the 10,007,000 shares of Class
B Common Stock held by the Ingram Thrift Plan, 9,207,000 shares will be
subject to the lock-up agreements described below. The registration statement
of which this Prospectus forms a part is intended to comply with a portion of
the Company's obligations under the Thrift Plan Liquidity Agreement. See "The
Split-Off and the Reorganization--The Split-Off."
In addition to the Rollover S-1, the Company expects to file
the Rollover S-8 in the near future. The Company also intends to file a
registration statement on Form S-8 relating to options granted under the 1996
Plan. Shares registered under such registration statements will, subject to
Rule 144 volume limitations applicable to affiliates, be available for sale in
the open market, unless such shares are subject to vesting restrictions with
the Company or the lock-up agreements described below. Immediately following
the closing of the IPO there were outstanding options exercisable for
approximately 21,000,000 shares of Common Equity. Of such options,
approximately 2,600,000 Rollover Stock Options and 200,000 options granted to
Mr. Stead were exercisable immediately after the closing of the IPO for shares
of Common Stock, although shares issuable upon exercise of approximately
1,000,000 of such options will be subject to the lock-up agreements described
below. In addition, approximately 1,350,000 Rollover Stock Options will
become exercisable on or prior to May 1, 1997, although the shares issuable
upon exercise of approximately 600,000 of such Rollover Stock Options will be
subject to the lock-up agreements described below. In addition, on April 1,
1997, options granted to non-officers of the Company pursuant to the 1996 Plan
will become exercisable for approximately 700,000 shares of Class B Common
Stock, none of which will be subject to the lock-up agreements described
below. See "Management--1996 Plan" and "--Rollover Plan; Incentive Stock
Units."
The Company and its directors and executive officers, and
certain stockholders of the Company, have agreed, subject to certain
exceptions, not to offer, sell, contract to sell or otherwise dispose of any
Common Stock for a period of 180 days after the date of the Prospectus
relating to the IPO without the prior written consent of Morgan Stanley & Co.
Incorporated. Morgan Stanley & Co. Incorporated has informed the Company
that it has no present intention to consent to any such transactions. Of the
107,251,362 shares of Class B Common Stock received in the Split-Off, all but
3,855,892 shares are subject to such lock-up agreements. Each holder of
shares received in the Split-Off, in order to obtain the private letter ruling
from the IRS, has represented in the Exchange Agreement that there is no plan
or intention by such holder to sell, exchange, transfer by gift or otherwise
dispose of any of such holder's Class B Common Stock subsequent to the
Split-Off. As described above, all such shares are subject to restrictions on
resale under Rule 144, including a two-year holding period. However, 800,000
of such 3,855,892 shares are held by the Ingram Thrift Plan, which has the
registration rights described above, and therefore such shares may be
registered and be eligible for immediate resale under certain limited
circumstances. The registration statement of which this Prospectus forms a
part relates to such shares. In addition, certain minority stockholders may
have demand registration rights under the Registration Rights Agreement upon a
change of control, as described above.
Prior to the IPO, there has not been any public market for
either class of the Common Equity. No prediction can be made as to the
effect, if any, that market sales of shares or the availability of shares for
sale will have on the market price prevailing from time to time. Sales of
substantial additional amounts of Common Equity in the public market, or the
perception that such sales could occur, could adversely affect the prevailing
market price of the Common Stock.
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following is a discussion of the material U.S. federal
income and estate tax consequences of the ownership and disposition of Common
Stock by a "Non-U.S. Holder." A "Non-U.S. Holder" is a person or entity that,
for U.S. federal income tax purposes, is a non-resident alien individual, a
foreign corporation, a foreign partnership, or a non-resident fiduciary of a
foreign estate or trust.
This discussion is based on the Code, and administrative
interpretations as of the date hereof, all of which are subject to change,
including changes with retroactive effect. This discussion does not address
all aspects of U.S. federal income and estate taxation that may be relevant to
Non-U.S. Holders in light of their particular circumstances and does not
address any tax consequences arising under the laws of any state, local, or
foreign jurisdiction.
Proposed United States Treasury Regulations were issued on
April 15, 1996 (the "Proposed Regulations") which, if adopted, would affect
the United States taxation of dividends paid to a Non-U.S. Holder on Common
Stock. The Proposed Regulations are generally proposed to be effective with
respect to dividends paid after December 31, 1997, subject to certain
transition rules. The discussion below is not intended to be a complete
discussion of the provisions of the Proposed Regulations, and prospective
investors are urged to consult their tax advisors with respect to the effect
the Proposed Regulations would have if adopted.
Prospective holders should consult their tax advisors with
respect to the particular tax consequences to them of owning and disposing of
Common Stock, including the consequences under U.S. federal law as well as
under the laws of any state, local, or foreign jurisdiction.
Dividends
Subject to the discussion below, dividends paid to a Non-U.S.
Holder of Common Stock generally will be subject to withholding tax at a 30%
rate or such lower rate as may be specified by an applicable income tax treaty.
For purposes of determining whether tax is to be withheld at a 30% rate or at
a reduced rate as specified by an income tax treaty, the Company ordinarily
will presume that dividends paid to an address in a foreign country are paid
to a resident of such country absent knowledge that such presumption is not
warranted.
Under the Proposed Regulations, to obtain a reduced rate of
withholding under a treaty, a Non-U.S. Holder would generally be required to
provide a Form W-8 certifying such Non-U.S. Holder's entitlement to benefits
under a treaty. The Proposed Regulations would also provide special rules to
determine whether for purposes of determining the applicability of a tax
treaty, dividends paid to a Non-U.S. Holder that is an entity should be treated
as paid to the entity or those holding an interest in that entity.
There will be no withholding tax on dividends paid to a
Non-U.S. Holder that are effectively connected with the Non-U.S. Holder's
conduct of a trade or business within the United States if the Non-U.S. Holder
files a valid Form 4224 (or, if and when the Proposed Regulations become
effective, a Form W-8) stating that the dividends are so connected. Instead,
the effectively connected dividends will be subject to regular U.S. income tax
in the same manner as if the Non-U.S. Holder were a U.S. resident. A non-U.S.
corporation receiving effectively connected dividends may also be subject to
an additional "branch profits tax" which is imposed, under certain
circumstances, at a rate of 30% (or such lower rate as may be specified by an
applicable treaty) of the non-U.S. corporation's effectively connected
earnings and profits, subject to certain adjustments.
Generally, the Company must report to the IRS the amount of
dividends paid, the name and address of the recipient, and the amount, if any,
of tax withheld. A similar report is sent to the holder. Pursuant to tax
treaties or certain other agreements, the IRS may make its reports available
to tax authorities in the recipient's country of residence.
Dividends paid to a Non-U.S. Holder at an address within the
United States may be subject to backup withholding imposed at a rate of 31% if
the Non-U.S. Holder fails to establish that it is entitled to an exemption or
to provide a correct taxpayer identification number and certain other
information. The Proposed Regulations would, if adopted, alter the foregoing
rules in certain respects, including by providing certain presumptions under
which a Non-U.S. Holder would be subject to backup withholding in the absence
of the certification from the holder as to non-U.S. status, regardless of
whether dividends are paid to a U.S. or non-U.S. address.
Gain on Disposition of Common Stock
A Non-U.S. Holder generally will not be subject to U.S. federal
income tax with respect to gain realized on a sale or other disposition of
Common Stock unless (i) the gain is effectively connected with a trade or
business of such holder in the United States, (ii) in the case of certain
Non-U.S. Holders who are nonresident alien individuals and hold the Common
Stock as a capital asset, such individual is present in the United States for
183 or more days in the taxable year of the disposition, (iii) the Non-U.S.
Holder is subject to tax pursuant to the provisions of the Code regarding the
taxation of U.S. expatriates, or (iv) the Company is or has been a "U.S. real
property holding corporation" within the meaning of Section 897(c)(2) of the
Code at any time within the shorter of the five-year period preceding such
disposition or such holder's holding period. The Company is not, and does not
anticipate becoming, a U.S. real property holding corporation.
Information Reporting Requirements and Backup Withholding on Disposition of
Common Stock
Under current United States federal income tax law, information
reporting and backup withholding imposed at a rate of 31% will apply to the
proceeds of a disposition of Common Stock paid to or through a U.S. office of a
broker unless the disposing holder certifies as to its non-U.S. status or
otherwise establishes an exemption. Generally, U.S. information reporting and
backup withholding will not apply to a payment of disposition proceeds if the
payment is made outside the United States through a non-U.S. office of a
non-U.S. broker. However, U.S. information reporting requirements (but not
backup withholding) will apply to a payment of disposition proceeds outside
the United States if (A) the payment is made through an office outside the
United States of a broker that is either (i) a U.S. person, (ii) a foreign
person which derives 50% or more of its gross income for certain periods from
the conduct of a trade or business in the United States, or (iii) a
"controlled foreign corporation" for U.S. federal income tax purposes and (B)
the broker fails to maintain documentary evidence that the holder is a
Non-U.S. Holder and that certain conditions are met, or that the holder
otherwise is entitled to an exemption.
The Proposed Regulations would, if adopted, alter the foregoing
rules in certain respects. Among other things. the Proposed Regulations would
provide certain presumptions under which a Non-U.S. Holder would be subject to
backup withholding in the absence of certification from the holder as to
non-U.S. status.
Backup withholding is not an additional tax. Rather, the tax
liability of persons subject to backup withholding will be reduced by the
amount of tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained, provided that the required information is furnished to
the IRS.
Federal Estate Tax
An individual Non-U.S. Holder who is treated as the owner of,
or has made certain lifetime transfers of, an interest in the Common Stock
will be required to include the value thereof in his gross estate for U.S.
federal estate tax purposes, and may be subject to U.S. federal estate tax
unless an applicable estate tax treaty provides otherwise.
PLAN OF DISTRIBUTION
The Company will not receive any proceeds from any sales of
Common Stock pursuant to this Prospectus. Shares of Common Stock may be sold
from time to time to purchasers directly by the Ingram Thrift Plan.
Alternatively, from time to time the Ingram Thrift Plan may offer shares of
Common Stock through underwriters, brokers, dealers or agents, who may receive
compensation in the form of underwriting discounts, concessions or commissions
from the seller and/or the purchasers for whom they may act as agent. The
Ingram Thrift Plan and any such underwriters, dealers or agents that
participate in the distribution of the Common Stock may be deemed to be
underwriters, and any profits on the sale of Common Stock by them and any
associated discounts, commissions or concessions that are received may be
deemed to be underwriting compensation under the Securities Act. To the
extent the Ingram Thrift Plan may be deemed to be an underwriter, it may be
subject to certain statutory liabilities under the Securities Act including
but not limited to Sections 11 and 12 of the Securities Act. If required at
the time a particular offering is made, a Prospectus Supplement will be
distributed that will set forth the aggregate number of shares of Common Stock
being offered and the terms of the offering, including the name or names of any
underwriters, any discounts, commissions and other items constituting
compensation from the Ingram Thrift Plan and any discounts, commissions or
concessions allowed or reallowed or paid to dealers. Such Prospectus
Supplement, and, if necessary, a post-effective amendment to the registration
statement of which this Prospectus forms a part, will be filed with the
Commission to reflect the disclosure of additional information with respect to
the distribution of the Common Stock.
Shares of the Common Stock may be sold from time to time in one
or more transactions at a fixed offering price, which may be changed, or at
varying prices determined at the time of sale or at negotiated prices. Such
prices will be determined by the Ingram Thrift Plan or by agreement between
the Ingram Thrift Plan and underwriters or dealers. The Ingram Thrift Plan
also may, from time to time, authorize dealers, acting as the Ingram Thrift
Plan's agents, to solicit offers to purchase the Common Stock upon the terms
and conditions set forth in any Prospectus Supplement.
The Ingram Thrift Plan and any other person participating in a
sale or distribution of the Common Stock will be subject to applicable
provisions of the Exchange Act and the rules and regulations thereunder,
including without limitation Rules 10b-5, 10b-6 and 10b-7, which provisions
may limit the timing of purchases and sales of any of the Common Stock by the
Ingram Thrift Plan and any other such person.
The Common Stock is listed on the New York Stock Exchange under
the symbol: "IM."
The Company has agreed to pay all expenses incident to the
registration statement of which this Prospectus forms a part and the sale of
Common Stock hereunder to the public, other than commissions, fees and
discounts of underwriters, dealers or agents. In addition, the Ingram Thrift
Plan and any underwriters, agents dealers and brokers participating in the
distribution of the Common Stock, will be indemnified by the Company against
certain civil liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
Certain legal matters with respect to the Common Stock offered
in this offering will be passed upon by Davis Polk & Wardwell, New York, New
York.
EXPERTS
The consolidated financial statements as of December 31, 1994
and December 30, 1995 and for each of the three fiscal years in the period
ended December 30, 1995 included in this Prospectus have been so included in
reliance on the report of Price Waterhouse LLP, independent accountants, given
on the authority of said firm as experts in auditing and accounting.
ADDITIONAL INFORMATION
Prior to the IPO, the Company has not been subject to the
reporting requirements of the Exchange Act. The Company has filed with the
Commission a registration statement on Form S-1 (together with any amendments
thereto, the "Registration Statement") under the Securities Act, with respect
to the shares of Common Stock being offered hereby. This Prospectus does not
contain all of the information set forth in the Registration Statement and the
exhibits and schedules thereto, certain items of which are omitted as
permitted by the Rules and Regulations of the Commission. Statements
contained in this Prospectus as to the contents of any contract or other
document referred to herein are not necessarily complete, and in each instance
in which a copy of such contract or other document has been filed as an
exhibit to the Registration Statement, reference is made to such copy and each
such statement is qualified in all respects by such reference.
The Company is subject to the informational requirements of the
Exchange Act, and, in accordance therewith, will file reports and other
information with the Commission. A copy of the Registration Statement, the
exhibits and schedules forming a part thereof and the reports and other
information filed by the Company in accordance with the Exchange Act may be
inspected without charge at the offices of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549 and at certain regional offices of the Commission
located at Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661 and 7 World Trade Center, 13th Floor, New York, New
York 10048. Copies of such material may also be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, upon payment of the fees prescribed by the Commission. Such
material may also be accessed electronically by means of the Commission's home
page on the Internet at http://www.sec.gov.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
INGRAM MICRO INC.
(A WHOLLY-OWNED SUBSIDIARY OF INGRAM INDUSTRIES INC.)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants..................................................... F-2
Consolidated Balance Sheet as of December 31, 1994, December 30, 1995 and September
28, 1996 (unaudited)................................................................ F-3
Consolidated Statement of Income for the years ended January 1, 1994, December 31,
1994 and December 30, 1995 and the thirty-nine weeks ended September 30, 1995 and
September 28,
1996 (unaudited).................................................................... F-4
Consolidated Statement of Stockholder's Equity for the years ended January 1, 1994,
December 31, 1994 and December 30, 1995 and the thirty-nine weeks ended September
28, 1996 (unaudited)................................................................ F-5
Consolidated Statement of Cash Flows for the years ended January 1, 1994, December 31,
1994 and December 30, 1995 and the thirty-nine weeks ended September 30, 1995 and
September 28, 1996 (unaudited)...................................................... F-6
Notes to Consolidated Financial Statements............................................ F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholder of Ingram Micro Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, of stockholder's equity and of cash flows
present fairly, in all material respects, the financial position of Ingram Micro
Inc. (a wholly-owned subsidiary of Ingram Industries Inc.) and its subsidiaries
at December 31, 1994 and December 30, 1995, and the results of their operations
and their cash flows for each of the three years in the period ended December
30, 1995, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
Nashville, Tennessee
February 29, 1996, except
Note 12 as to which the date is September 9, 1996
and Note 2 as to which the date is October 29, 1996
F-2
<PAGE>
INGRAM MICRO INC.
(A WHOLLY-OWNED SUBSIDIARY OF INGRAM INDUSTRIES INC.)
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL PERIOD END
------------------------- SEPTEMBER 28,
1994 1995 1996
---------- ---------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash............................................. $ 58,369 $ 56,916 $ 43,196
Trade accounts receivable (less allowances of
$25,668 in 1994, $30,791 in 1995 and $38,069 in
1996).......................................... 745,910 1,071,275 1,127,937
Inventories...................................... 995,880 1,582,922 1,382,122
Other current assets............................. 68,717 88,503 115,243
---------- ---------- ----------
Total current assets........................ 1,868,876 2,799,616 2,668,498
Property and equipment, net......................... 58,285 89,126 127,984
Goodwill, net....................................... 33,481 29,871 27,785
Other............................................... 13,647 22,285 19,445
---------- ---------- ----------
Total assets................................ $1,974,289 $2,940,898 $ 2,843,712
========== ========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable................................. $1,100,598 $1,652,073 $ 1,670,358
Accrued expenses................................. 94,505 121,572 153,598
Current maturities of long-term debt............. 10,724 6,332 16,458
---------- ---------- ----------
Total current liabilities................... 1,205,827 1,779,977 1,840,414
Long-term debt................................... 92,204 170,424 128,855
Due to Ingram Industries......................... 449,355 673,792 479,703
Other............................................ 3,434 5,697 8,572
---------- ---------- ----------
Total liabilities........................... 1,750,820 2,629,890 2,457,544
Minority interest................................... 2,125 213 2,956
Commitments and contingencies (Note 8)
Redeemable Class B Common Stock..................... -- -- 17,223
Stockholder's equity:
Preferred Stock, $0.01 par value, 1,000,000
shares authorized; no shares issued and
outstanding.................................... -- -- --
Class A Common Stock, $0.01 par value,
265,000,000 shares authorized; no shares issued
and outstanding................................ -- -- --
Class B Common Stock, $0.01 par value,
135,000,000 shares authorized; 109,813,762
shares issued and outstanding (including
2,460,400 redeemable shares)................... 1,073 1,073 1,074
Additional paid in capital....................... 22,427 22,427 23,140
Retained earnings................................ 197,815 282,122 339,689
Cumulative translation adjustment................ 29 5,173 2,680
Unearned compensation............................ -- -- (594)
---------- ---------- ----------
Total stockholder's equity.................. 221,344 310,795 365,989
---------- ---------- ----------
Total liabilities and stockholder's
equity.................................... $1,974,289 $2,940,898 $ 2,843,712
========== ========== ==========
</TABLE>
See accompanying notes to these consolidated financial statements.
F-3
<PAGE>
INGRAM MICRO INC.
(A WHOLLY-OWNED SUBSIDIARY OF INGRAM INDUSTRIES INC.)
CONSOLIDATED STATEMENT OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS ENDED
FISCAL YEAR ---------------------------------
---------------------------------------- SEPTEMBER 30, SEPTEMBER 28,
1993 1994 1995 1995 1996
---------- ---------- ---------- -------------- --------------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
Net sales................. $4,044,169 $5,830,199 $8,616,867 $6,070,722 $8,474,710
Cost of sales............. 3,714,527 5,391,224 8,011,181 5,648,210 7,900,223
---------- ---------- ---------- -------------- --------------
Gross profit.............. 329,642 438,975 605,686 422,512 574,487
Expenses:
Selling, general and
administrative....... 225,047 296,330 415,344 296,079 386,492
Charges allocated from
Ingram Industries.... 1,567 2,355 3,461 2,561 3,259
Non-cash compensation
charge............... 8,859
---------- ---------- ---------- -------------- --------------
226,614 298,685 418,805 298,640 398,610
---------- ---------- ---------- -------------- --------------
Income from operations.... 103,028 140,290 186,881 123,872 175,877
Other (income) expense:
Interest income......... (407) (937) (3,479) (3,049) (1,188)
Interest expense........ 5,003 8,744 13,451 8,918 10,608
Interest expense charged
by Ingram
Industries........... 16,089 24,189 32,606 22,977 30,912
Net foreign currency
exchange loss........ 111 6,873 7,751 6,572 447
Other................... (623) 716 1,936 405 1,689
---------- ---------- ---------- -------------- --------------
20,173 39,585 52,265 35,823 42,468
---------- ---------- ---------- -------------- --------------
Income before income taxes
and minority interest... 82,855 100,705 134,616 88,049 133,409
Provision for income
taxes................... 31,660 39,604 53,143 34,755 55,459
---------- ---------- ---------- -------------- --------------
Income before minority
interest................ 51,195 61,101 81,473 53,294 77,950
Minority interest......... 840 (2,243) (2,834) (2,986) 383
---------- ---------- ---------- -------------- --------------
Net income................ $ 50,355 $ 63,344 $ 84,307 $ 56,280 $ 77,567
========= ========= ========= ========== ==========
Earnings per share........ $ 0.41 $ 0.52 $ 0.69 $ 0.46 $ 0.64
========= ========= ========= ========== ==========
</TABLE>
See accompanying notes to these consolidated financial statements.
F-4
<PAGE>
INGRAM MICRO INC.
(A WHOLLY-OWNED SUBSIDIARY OF INGRAM INDUSTRIES INC.)
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
CLASS A CLASS B
COMMON STOCK COMMON STOCK ADDITIONAL CUMULATIVE
------------------- -------------------- PAID IN RETAINED TRANSLATION UNEARNED
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENT COMPENSATION TOTAL
---------- ------ ----------- ------ ---------- -------- ----------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
JANUARY 2, 1993...... 107,251,362 $1,073 $ 22,427 $84,116 $ 1,802 $109,418
Translation
adjustment......... (4,314) (4,314)
Net income........... 50,355 50,355
---------- ------ ----------- ------ ------- -------- ------ --------
JANUARY 1, 1994...... 107,251,362 1,073 22,427 134,471 (2,512) 155,459
Translation
adjustment......... 2,541 2,541
Net income........... 63,344 63,344
---------- ------ ----------- ------ ------- -------- ------ --------
DECEMBER 31, 1994.... 107,251,362 1,073 22,427 197,815 29 221,344
Translation
adjustment......... 5,144 5,144
Net income........... 84,307 84,307
---------- ------ ----------- ------ ------- -------- ------ --------
DECEMBER 30, 1995.... 107,251,362 1,073 22,427 282,122 5,173 310,795
Distribution to
Ingram Industries
(unaudited)........ (20,000 ) (20,000)
Grant of restricted
Class B Common
Stock
(unaudited)........ 102,000 1 713 (714)
Amortization of
unearned
compensation
(unaudited)........ 120 120
Translation
adjustment
(unaudited)........ (2,493) (2,493)
Net income
(unaudited)........ 77,567 77,567
---------- ------ ----------- ------ ------- -------- ------ --------
SEPTEMBER 28, 1996
(UNAUDITED)........ 107,353,362 $1,074 $ 23,140 $339,689 $ 2,680 $ (594) $365,989
========== ====== =========== ====== ======= ======== ====== ========
</TABLE>
See accompanying notes to these consolidated financial statements.
F-5
<PAGE>
INGRAM MICRO INC.
(A WHOLLY-OWNED SUBSIDIARY OF INGRAM INDUSTRIES INC.)
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS ENDED
FISCAL YEAR -------------------------------
------------------------------ SEPTEMBER 30, SEPTEMBER 28,
1993 1994 1995 1995 1996
-------- -------- -------- -------------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH PROVIDED (USED) BY OPERATING
ACTIVITIES:
Net income........................... $ 50,355 $ 63,344 $ 84,307 $ 56,280 $ 77,567
Adjustments to reconcile net income
to cash provided by operating
activities:
Depreciation and amortization..... 12,918 18,675 25,394 17,829 25,253
Deferred income taxes............. (5,719) (4,668) (8,632) (8,475) (3,144)
Minority interest................. 840 (2,243) (2,834) (2,986) 383
Non-cash compensation charge...... 8,859
Changes in operating assets and
liabilities, net of effects of
acquisitions:
Trade accounts receivable......... (161,097) (232,268) (320,177) (151,854) (63,799)
Inventories....................... (143,738) (345,511) (580,116) (481,072) 194,288
Other current assets.............. (2,881) (12,846) (15,877) (20,929) (16,280)
Accounts payable.................. 184,787 411,012 543,822 612,038 25,890
Accrued expenses.................. 22,830 17,452 22,828 11,651 24,235
-------- -------- -------- -------------- --------------
Cash provided (used) by operating
activities...................... (41,705) (87,053) (251,285) 32,482 273,252
CASH PROVIDED (USED) BY INVESTING
ACTIVITIES:
Purchase of property and equipment... (21,311) (31,286) (52,985) (37,219) (62,503)
Acquisitions, net of cash acquired... (21,447) (15,088)
Other................................ 2,062 3,765 4,188 1,124 (2,034)
-------- -------- -------- -------------- --------------
Cash used by investing
activities...................... (40,696) (42,609) (48,797) (36,095) (64,537)
CASH PROVIDED (USED) BY FINANCING
ACTIVITIES:
Proceeds from sale of Class B Common
Stock............................. 17,223
Increase (decrease) in borrowings
from Ingram Industries............ 83,635 103,580 224,437 (36,196) (194,090)
Proceeds (repayment) of debt......... 1,410 (4,930) (838) 97 2,481
Net borrowings under revolving credit
facility.......................... 16,388 44,636 74,666 19,039 (29,612)
Distribution to Ingram Industries.... (20,000)
Minority interest investment......... 2,400
-------- -------- -------- -------------- --------------
Cash provided (used) by financing
activities...................... 101,433 143,286 298,265 (17,060) (221,598)
Effect of exchange rate changes on
cash................................. 84 354 364 399 (837)
-------- -------- -------- -------------- --------------
Increase (decrease) in cash............ 19,116 13,978 (1,453) (20,274) (13,720)
Cash, beginning of year................ 25,275 44,391 58,369 58,369 56,916
-------- -------- -------- -------------- --------------
Cash, end of period or year............ $ 44,391 $ 58,369 $ 56,916 $ 38,095 $ 43,196
======== ======== ======== ========== ==========
Supplementary disclosure of cash flow
information:
CASH PAYMENTS DURING THE PERIOD:
Interest............................. $ 20,738 $ 32,528 $ 45,164 $ 31,066 $ 41,814
Income taxes......................... 34,906 47,152 54,506 38,843 60,090
Cash payments include payments made to Ingram Industries for interest and U.S. income taxes
</TABLE>
See accompanying notes to these consolidated financial statements.
F-6
<PAGE>
INGRAM MICRO INC.
(A WHOLLY-OWNED SUBSIDIARY OF INGRAM INDUSTRIES INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 1 -- ORGANIZATION AND BASIS OF PRESENTATION
Ingram Micro Inc. (the "Company" or "Ingram Micro"), formerly Ingram Micro
Holdings Inc. (refer to Note 12), is primarily engaged in wholesale distribution
and marketing of microcomputer hardware and software products. The Company
conducts the majority of its operations in North America and Europe. The Company
is a wholly-owned subsidiary of Ingram Industries Inc. ("Ingram Industries"). In
September 1995, Ingram Industries announced its intention to reorganize into
three separate companies in a tax-free reorganization. As part of the
reorganization (the "Reorganization"), Ingram Industries will split-off the
Company. The plan of reorganization is subject to, among other things, receipt
of a satisfactory tax ruling from the Internal Revenue Service. The plan
contemplates that certain of the Ingram Industries stockholders will exchange
(the "Exchange") all or some of their shares of Ingram Industries for the
outstanding shares of the Company held by Ingram Industries. The Exchange and
those elements of the Reorganization contemplated to occur prior to the closing
of the Company's initial public offering are referred to herein as the
"Split-Off."
The accompanying consolidated financial statements have been prepared as if
the Company had operated as an independent stand alone entity for all periods
presented except the Company generally has not had significant borrowings in
North America other than amounts due Ingram Industries. Refer to Notes 6 and 10
regarding related party transactions.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The Company's significant accounting policies which conform to generally
accepted accounting principles applied on a consistent basis between years, are
described below:
Basis of Consolidation
The consolidated financial statements include the accounts of the Company,
its wholly-owned and majority-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation.
Fiscal Year
The fiscal year of the Company is a 52 or 53 week period ending on the
Saturday nearest to December 31. All references herein to "1993," "1994" and
"1995" represent the 52 week fiscal years ended January 1, 1994, December 31,
1994 and December 30, 1995, respectively.
Accounting Estimates
Preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements, disclosure of contingent liabilities at financial
statement date and reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
Cash
Outstanding checks of $119,627 in 1994 and $72,868 in 1995 are included in
accounts payable.
F-7
<PAGE>
INGRAM MICRO INC.
(A WHOLLY-OWNED SUBSIDIARY OF INGRAM INDUSTRIES INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Revenue Recognition
Revenue is recognized at the time of product shipment. The Company, under
specified conditions, permits its customers to return or exchange products. The
provision for estimated sales returns is recorded concurrently with the
recognition of revenue.
Vendor Programs
Funds received from vendors for price protection, product rebates,
marketing or training programs are recorded net of direct costs as adjustments
to product costs, reduction of selling, general and administrative expenses or
revenue according to the nature of the program.
The Company does not provide warranty coverage of its product sales.
However, to maintain customer relations, the Company facilitates domestic vendor
warranty policies by accepting for exchange, with the Company's prior approval,
most defective products within 90 days of invoicing. Defective products received
by the Company are subsequently returned to the vendor for credit or
replacement.
The Company generated approximately 17% of its sales in fiscal 1993, 18% in
1994 and 23% in 1995 from products purchased from two vendors.
Inventories
Inventories are stated at the lower of average cost or market.
Property and Equipment
Property and equipment are recorded at cost and depreciated using the
straight-line method over the following estimated useful lives. Leasehold
improvements are amortized over the shorter of the lease term or the estimated
useful life:
<TABLE>
<S> <C>
Leasehold improvements....................................... 3-12 years
Distribution equipment....................................... 5-7 years
Computer equipment........................................... 2-5 years
</TABLE>
Maintenance, repairs and minor renewals are charged to expense as incurred.
Additions, major renewals and betterments to property and equipment are
capitalized. Realization of carrying value is assessed periodically.
Goodwill
Goodwill is amortized on a straight-line basis over periods ranging from
five to twenty years. Accumulated amortization was $9,846 at December 31, 1994
and $13,576 at December 30, 1995. The Company evaluates the recoverability of
goodwill and reviews the amortization periods on an annual basis. Recoverability
is measured on the basis of anticipated undiscounted cash flows from operations.
At December 31, 1994 and December 30, 1995, no impairment was indicated.
Income Taxes
The temporary differences between the financial reporting basis and the
income tax basis of the Company's assets and liabilities are provided in
accordance with Statement of Financial Accounting Standards No. 109.
F-8
<PAGE>
INGRAM MICRO INC.
(A WHOLLY-OWNED SUBSIDIARY OF INGRAM INDUSTRIES INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Foreign Currency Translation
Financial statements of foreign subsidiaries are translated into U.S.
dollars using the exchange rate at each balance sheet date for assets and
liabilities and a weighted average exchange rate for each period for results of
foreign operations. Translation adjustments are recorded as a separate component
of stockholder's equity when the local currency is the functional currency.
Translation adjustments are recorded in income when the U.S. dollar is the
functional currency. The U.S. dollar is the functional currency for the
Company's subsidiaries in Mexico and Singapore.
Financial Instruments
The carrying amounts of cash, accounts receivable, accounts payable and
other accrued expenses approximate fair value because of the short maturity of
these items.
The carrying amounts of intercompany payables and debt issued pursuant to
bank credit agreements approximate fair value because interest rates on these
instruments approximate current market interest rates.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of trade accounts receivable
and derivative financial instruments. Credit risk with respect to trade accounts
receivable is limited due to the large number of customers and their dispersion
across geographic areas. The Company sells its products primarily in the United
States, Europe, Canada and Mexico. The Company performs ongoing credit
evaluations of its customers' financial condition, utilizes flooring
arrangements with third party financing companies, obtains credit insurance in
certain locations and requires collateral in certain circumstances. The Company
maintains an allowance for potential credit losses.
Derivative Financial Instruments
The Company operates internationally with distribution facilities in
various locations around the world. The Company uses derivative financial
instruments to reduce its exposure to fluctuations in interest rates and foreign
exchange rates by creating offsetting positions through the use of derivative
financial instruments. The market risk related to the foreign exchange
agreements is offset by changes in the valuation of the underlying items being
hedged. The majority of the Company's derivative financial instruments have
terms of 90 days or less. The Company currently does not use derivative
financial instruments for trading or speculative purposes, nor is the Company a
party to leveraged derivatives.
Derivative financial instruments are accounted for on an accrual basis.
Income and expense are recorded in the same category as that arising from the
related asset or liability being hedged. Gains and losses resulting from
effective hedges of existing assets, liabilities or firm commitments are
deferred and recognized when the offsetting gain and losses are recognized on
the related hedged items. Written foreign currency options are used to mitigate
currency risk in conjunction with purchased options. Gains or losses on written
foreign currency options are adjusted to market value at the end of each
accounting period and have not been material to date.
The notional amount of forward exchange contracts and options is the amount
of foreign currency bought or sold at maturity. The notional amount of currency
interest rate swaps is the underlying principal and currency amounts used in
determining the interest payments exchanged over the life of the swap. Notional
amounts are indicative of the extent of the Company's involvement in the various
types and uses of derivative financial instruments and are not a measure of the
Company's exposure to credit or market risks through its
F-9
<PAGE>
INGRAM MICRO INC.
(A WHOLLY-OWNED SUBSIDIARY OF INGRAM INDUSTRIES INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
use of derivatives. The estimated fair value of derivative financial instruments
represents the amount required to enter into like off-setting contracts with
similar remaining maturities based on quoted market prices.
Credit exposure is limited to the amounts, if any, by which the
counterparties' obligations under the contracts exceed the obligations of the
Company to the counterparties. Potential credit losses are minimized through
careful evaluation of counterparty credit standing, selection of counterparties
from a limited group of high quality institutions and other contract provisions.
Derivative financial instruments comprise the following:
<TABLE>
<CAPTION>
1994 1995
----------------------- -----------------------
NOTIONAL ESTIMATED NOTIONAL ESTIMATED
AMOUNTS FAIR VALUE AMOUNTS FAIR VALUE
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Foreign exchange forward contracts....... $ 44,586 $ (384) $109,218 $ (1,971)
Purchased foreign currency options....... 55,979 699 75,928 485
Written foreign currency options ........ 77,298 (25) 121,183 (615)
Currency interest rate swaps............. 9,823 (543) 25,655 (1,056)
</TABLE>
Employee Benefits
The Company participates in Ingram Industries' defined contribution plan
covering substantially all U.S. employees. The plan permits eligible employees
to make contributions up to certain limits and receive employer matching at
stipulated percentages. The Company's contributions charged to expense were $716
in fiscal 1993, $764 in 1994 and $1,399 in 1995.
As a result of the Split-Off described in Note 1, the Company will
establish its own employee benefit plans.
Earnings Per Share
Historical earnings per share data reflects the Company's capital structure
as a result of the formation of the Delaware corporation in preparation for the
Split-Off described in Notes 1 and 12. Earnings per share is determined based on
the number of shares the Company is expected to have after the Split-Off
(107,251,362) in addition to all dilutive common stock and common stock
equivalent shares issued within 12 months of the public offering. Pursuant to
the Securities and Exchange Commission Staff Accounting Bulletins and Staff
policy, such shares are treated as if they were outstanding for all periods
presented using the treasury stock method (14,155,229). The number of common
shares used to compute the earnings per share amounts for each of the three
fiscal years in the period ended December 30, 1995 and the thirty-nine weeks
ended September 30, 1995 and September 28, 1996 was 121,406,591, 121,406,591,
and 121,687,287, respectively.
Supplementary Earnings Per Share
Supplementary per share data (unaudited) is presented to give effect to the
repayment of certain indebtedness assumed by the Company in satisfaction of
amounts due to Ingram Industries. Net income is adjusted by $16,094 and $11,214
for 1995 and the thirty-nine weeks ended September 28, 1996, respectively, to
reflect the reduction in interest expense (net of tax) related to the
indebtedness assumed by the Company.
The weighted average shares outstanding used to calculate supplementary pro
forma earnings per share are based on weighted average shares outstanding at
December 30, 1995 and September 28, 1996, respectively, as adjusted for
20,200,000 shares of Class A Common Stock being sold in the Company's initial
public offering to repay certain indebtedness of the Company.
F-10
<PAGE>
INGRAM MICRO INC.
(A WHOLLY-OWNED SUBSIDIARY OF INGRAM INDUSTRIES INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Unaudited supplementary pro forma earnings per share for the fiscal periods
ended December 30, 1995 and September 28, 1996 is $0.70 and $0.62, respectively.
Interim Financial Information
The accompanying interim financial statements have been prepared without
audit, and certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted, although the Company believes that
the disclosures herein are adequate to make information presented not
misleading. These statements should be read in conjunction with the Company's
financial statements for the year ended December 30, 1995. The results of
operations for the thirty-nine week period is not necessarily indicative of
results for the full year.
In the opinion of management, the accompanying interim financial statements
contain all adjustments of a normal and recurring nature necessary for a fair
presentation of the Company's financial position as of September 28, 1996, its
results of operations for the thirty-nine weeks ended September 30, 1995 and
September 28, 1996, and its cash flows for the thirty-nine weeks ended September
30, 1995 and September 28, 1996.
NOTE 3 -- ACQUISITIONS
The Company acquired 70% of the stock of Distribuidora de Computo, S.A. de
C.V. ("Dicom"), in January 1993, for $9,327 cash and amounts payable to the
sellers of $2,475. Dicom is located in Mexico and is engaged in wholesale
distribution. The assets acquired were $32,383 and liabilities assumed were
$21,468.
The Company also acquired four separate wholesale distributors in Germany,
the United Kingdom, Belgium and the Netherlands in 1993. The combined
consideration for the assets or common stock purchased was $12,120 cash and
$2,364 of notes payable to sellers. The acquired companies had assets of $10,810
and liabilities of $80.
In April and August 1994, the Company acquired two separate wholesale
distributors (Keylan S.A. and Datateam Sverige AB) with operations in Spain,
Sweden, Denmark and Norway. The combined consideration paid was $15,088 cash and
$5,279 of notes payable to the sellers. The acquired companies had assets of
$48,748 and liabilities of $35,034.
The acquisitions described above have been accounted for using the purchase
method of accounting. The purchase price has been allocated to the assets
purchased and liabilities assumed based on fair values at the date of
acquisition. The excess of the purchase price over fair value of net assets
acquired in 1993 was $7,916 and in 1994 was $6,653 and was recorded as goodwill.
The operating results of these acquired businesses have been included in
the consolidated statement of income from the date of acquisition. Pro forma
results of operations have not been presented because the effects of these
acquisitions were not significant.
NOTE 4 -- ACCOUNTS RECEIVABLE
Effective February 1993, the Company entered into an arrangement with
Ingram Industries whereby the Company sells all of its domestic trade accounts
receivable to Ingram Industries on an ongoing basis ($665,325 at December 30,
1995). Ingram Industries transfers certain trade accounts receivable from the
Company and other Ingram Industries affiliates to a trust which sells
certificates representing undivided interests in the total pool of trade
receivables without recourse. Ingram Industries' arrangement with the trust
extends to December 31, 1997 and renews biannually under an evergreen provision
up to a maximum term of
F-11
<PAGE>
INGRAM MICRO INC.
(A WHOLLY-OWNED SUBSIDIARY OF INGRAM INDUSTRIES INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
twenty years. At December 31, 1994 and December 30, 1995, the accounts
receivable and due to Ingram Industries amounts in the Company's consolidated
balance sheet have not been reduced to reflect the sale of such receivables. As
a result of the Split-Off described in Note 1, it is anticipated that Ingram
Industries' accounts receivable securitization agreement will be assumed by the
Company.
NOTE 5 -- PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
FISCAL PERIOD END
--------------------- SEPTEMBER 28,
1994 1995 1996
-------- -------- --------------
(UNAUDITED)
<S> <C> <C> <C>
Land............................................. $ 2,274 $ 2,359 $ 11,431
Leasehold improvements........................... 17,448 26,381 47,588
Distribution equipment........................... 39,814 62,462 76,173
Computer equipment............................... 40,579 59,161 76,922
------- ------- -------
100,115 150,363 212,114
Accumulated depreciation......................... (41,830) (61,237) (84,130)
------- ------- -------
$ 58,285 $ 89,126 $127,984
======= ======= =======
</TABLE>
Depreciation expense was $10,927 in fiscal 1993, $15,756 in 1994 and
$21,785 in 1995.
NOTE 6 -- LONG-TERM DEBT AND DUE TO INGRAM INDUSTRIES
Ingram Industries manages most treasury activities, including the
arrangement of short-term and long-term financing on a centralized, consolidated
basis. Using a centralized cash management system, the Company's domestic cash
receipts are remitted to Ingram Industries and domestic cash disbursements are
funded by Ingram Industries on a daily basis. The Company's historical financial
statements reflect funding provided by Ingram Industries to the Company, and net
cash used by the Company, as amounts due to Ingram Industries. At December 31,
1994 and December 30, 1995, amounts due to Ingram Industries are classified as
long-term due to the terms of the underlying debt at Ingram Industries.
Ingram Industries charges the Company interest expense on the outstanding
intercompany balance based on Ingram Industries' domestic weighted average cost
of funds. The average rate was 6.93% in fiscal 1993, 6.99% in 1994 and 7.38% in
1995.
The Company and other Ingram Industries affiliates participate in Ingram
Industries' unsecured revolving credit agreement with a syndicate of banks.
Under this agreement, Ingram Industries and its affiliates may borrow in various
currencies up to $380,000 at various money market and bid rates. The weighted
average borrowing rate was 6.84% at December 31, 1994 and 7.00% at December 30,
1995. The agreement extends to December 31, 1999, and is renewable for an
additional two year period during the year prior to expiration. The agreement is
guaranteed by certain subsidiaries of the Company and other Ingram Industries
affiliates. At December 30, 1995, outstanding aggregate borrowings were
$229,716, of which $167,176 is specifically related to amounts drawn by the
Company's subsidiaries.
The Company's subsidiaries outside the United States have lines of credit
and short-term overdraft facilities aggregating $93,527 various banks worldwide.
Most of these arrangements are reviewed periodically for renewal. At December
30, 1995, the Company had $5,782 outstanding under these facilities.
F-12
<PAGE>
INGRAM MICRO INC.
(A WHOLLY-OWNED SUBSIDIARY OF INGRAM INDUSTRIES INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
In addition to the guarantee described above, the Company has guaranteed
certain other borrowings of Ingram Industries totaling $328,572. Included within
this amount are (i) amounts outstanding on an unsecured temporary revolving
credit facility that provides for borrowings up to $200,000 at specified
variable rates and expires on the earlier of December 31, 1996 or five days
after the successful completion of an initial public offering and (ii) $192,900
of fixed maturity, privately placed debt with maturities from November 1, 1996
to November 1, 2002. As a result of the Split-Off described in Notes 1 and 12,
it is anticipated that certain of the debt facilities guaranteed will be assumed
by the Company in satisfaction of the amounts payable to Ingram Industries.
Under the most restrictive provisions of the loan agreements, Ingram
Industries is required to maintain certain levels of stockholders' equity, a
certain current ratio and a certain debt to capital ratio and is subject to
certain dividend restrictions. During 1994 and 1995, Ingram Industries was in
compliance with the provisions of these agreements.
Long-term debt consists of the following:
<TABLE>
<CAPTION>
FISCAL PERIOD END
--------------------- SEPTEMBER 28,
1994 1995 1996
-------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Revolving credit facility........................ $ 61,913 $141,521 $ 100,195
Overdraft facilities............................. 10,724 5,782 13,184
Other............................................ 30,291 29,453 31,934
-------- -------- --------
102,928 176,756 145,313
Less current maturities of long-term debt........ (10,724) (6,332) (16,458)
-------- -------- --------
$ 92,204 $170,424 $ 128,855
======== ======== ========
</TABLE>
Annual maturities of long-term debt as of December 30, 1995 are as follows:
<TABLE>
<S> <C>
1996.............................................................. $ 6,332
1997.............................................................. 10,187
1998.............................................................. 388
1999.............................................................. 157,743
2000 and thereafter............................................... 2,106
--------
$176,756
========
</TABLE>
NOTE 7 -- INCOME TAXES
The components of income before taxes and minority interest consist of the
following:
<TABLE>
<CAPTION>
FISCAL YEAR
---------------------------------
1993 1994 1995
------- -------- --------
<S> <C> <C> <C>
United States....................................... $85,044 $ 99,701 $124,277
Foreign............................................. (2,189) 1,004 10,339
------- -------- --------
Total..................................... $82,855 $100,705 $134,616
======= ======== ========
</TABLE>
F-13
<PAGE>
INGRAM MICRO INC.
(A WHOLLY-OWNED SUBSIDIARY OF INGRAM INDUSTRIES INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
FISCAL YEAR
-------------------------------
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Current:
Federal............................................. $30,268 $35,989 $44,615
State............................................... 4,721 4,060 9,544
Foreign............................................. 2,390 4,223 7,616
------- ------- -------
37,379 44,272 61,775
Deferred:
Federal............................................. (1,929) (2,472) (4,082)
State............................................... (198) 136 (949)
Foreign............................................. (3,592) (2,332) (3,601)
------- ------- -------
(5,719) (4,668) (8,632)
------- ------- -------
Total income tax provision............................ $31,660 $39,604 $53,143
======= ======= =======
</TABLE>
Deferred income taxes reflect the tax effect of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
FISCAL PERIOD END
-------------------------------
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Deferred tax assets:
Tax in excess of book basis of foreign operations... $ 9,837 $13,816 $19,511
Accruals not currently deductible................... 7,840 9,275 12,734
Inventories......................................... 2,724 3,538 5,876
Other............................................... 293 263 492
------- ------- -------
Total....................................... $20,694 $26,892 $38,613
======= ======= =======
Deferred tax liabilities:
Depreciation........................................ $ 1,324 $ 958 $ 1,564
======= ======= =======
</TABLE>
Current deferred tax assets of $15,130 and $19,307 are included in other
current assets at December 31, 1994 and December 30, 1995, respectively.
Non-current deferred tax assets of $11,762 and $19,306 are included in other
assets at December 31, 1994 and December 30, 1995, respectively.
Reconciliation of the statutory U.S. federal income tax rate to the
Company's effective rate is as follows:
<TABLE>
<CAPTION>
FISCAL YEAR
----------------------
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
U.S. statutory rate............................................ 35.0% 35.0% 35.0%
State income taxes, net of federal income tax benefit.......... 3.3 2.8 3.9
Other.......................................................... (.1) 1.5 .6
---- ---- ----
Effective tax rate............................................. 38.2% 39.3% 39.5%
===== ===== =====
</TABLE>
F-14
<PAGE>
INGRAM MICRO INC.
(A WHOLLY-OWNED SUBSIDIARY OF INGRAM INDUSTRIES INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The Company is included in the consolidated federal income tax return filed
by Ingram Industries. Taxes related to the Company are determined on a separate
entity basis and taxes payable are remitted to Ingram Industries every two
months. Taxes payable to Ingram Industries of $4,089 at December 31, 1994 and
$14,303 at December 30, 1995 are included in accrued expenses in the
consolidated balance sheet.
At December 30, 1995, the Company had foreign net operating tax loss
carryforwards of $49,264 of which approximately one third have no expiration
date.
The Company does not provide for U.S. federal income taxes on undistributed
earnings of foreign subsidiaries as such earnings are intended to be permanently
reinvested in those operations.
NOTE 8 -- COMMITMENTS AND CONTINGENCIES
There are various claims, lawsuits and pending actions against the Company
incident to the Company's operations. It is the opinion of management that the
ultimate resolution of these matters will not have a material effect on the
Company's financial position or results of operations.
The Company has arrangements with certain finance companies which provide
accounts receivable and inventory financing facilities for its customers. The
Company assesses the financial stability of the finance companies and payment
terms are within 3 to 30 days of product shipment. In conjunction with certain
of these arrangements, the Company has inventory repurchase agreements with the
finance companies that would require it to repurchase certain inventory which
might be repossessed from the customers by the finance companies. Such
repurchases have been insignificant to date.
The Company leases the majority of its facilities and certain equipment
under noncancelable operating leases. Renewal and purchase options at fair
values exist for a substantial portion of the leases. Rental expense for the
years ended January 1, 1994, December 31, 1994 and December 30, 1995 was
$11,939, $16,574 and $28,367, respectively. Future minimum rental commitments on
operating leases that have remaining noncancelable lease terms in excess of one
year as of December 30, 1995 are as follows:
<TABLE>
<S> <C>
1996............................................................... $21,507
1997............................................................... 18,614
1998............................................................... 16,693
1999............................................................... 14,912
2000............................................................... 9,912
Later years........................................................ 54,104
</TABLE>
F-15
<PAGE>
INGRAM MICRO INC.
(A WHOLLY-OWNED SUBSIDIARY OF INGRAM INDUSTRIES INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 9 -- SEGMENT INFORMATION
The Company operates predominantly in a single industry segment as a
wholesale distributor of microcomputer hardware and software. Geographic areas
in which the Company operates include the United States (United States and the
majority of the Company's exports), Europe (Belgium, Denmark, France, Germany,
Italy, the Netherlands, Norway, Spain, Sweden and the United Kingdom) and Other
(Canada, Mexico and Singapore). Transfers between geographic areas primarily
represent intercompany sales and are accounted for based on established sales
prices between the related companies. Net sales, income (loss) from operations
and identifiable assets by geographic area are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR
------------------------------------
1993 1994 1995
---------- ---------- ----------
<S> <C> <C> <C>
NET SALES:
United States:
Sales to unaffiliated customers............... $3,118,316 $4,122,338 $5,969,749
Transfers between geographic areas............ 60,358 76,696 86,961
Europe........................................... 485,126 1,078,250 1,849,129
Other............................................ 440,727 629,611 797,989
Eliminations..................................... (60,358) (76,696) (86,961)
---------- ---------- ----------
Total.................................... $4,044,169 $5,830,199 $8,616,867
========== ========== ==========
INCOME (LOSS) FROM OPERATIONS:
United States.................................... $ 98,669 $ 123,796 $ 156,749
Europe........................................... (3,246) 8,079 19,576
Other............................................ 7,605 8,415 10,556
---------- ---------- ----------
Total.................................... $ 103,028 $ 140,290 $ 186,881
========== ========== ==========
IDENTIFIABLE ASSETS:
United States.................................... $ 945,699 $1,381,798 $1,996,642
Europe........................................... 190,892 393,346 669,309
Other............................................ 159,772 199,145 274,947
---------- ---------- ----------
Total.................................... $1,296,363 $1,974,289 $2,940,898
========== ========== ==========
</TABLE>
No single customer accounts for 10% or more of the Company's net sales.
NOTE 10 -- TRANSACTIONS WITH RELATED PARTIES
Ingram Industries provides certain corporate, general and administrative
services to the Company in addition to treasury activities described in Note 6
(including, but not limited to, legal, tax, employee benefits and electronic
data processing services). Charges for these services are based upon utilization
and at amounts which management believes are less than the amounts which the
Company would incur as a stand-alone entity. Such amounts are reflected as
charges allocated from Ingram Industries on the consolidated statement of
income.
Ingram Industries also provides guarantees to certain of the Company's
vendors and for certain of the Company's leases; no charges from Ingram
Industries have been reflected in the Company's financial statements for such
guarantees.
F-16
<PAGE>
INGRAM MICRO INC.
(A WHOLLY-OWNED SUBSIDIARY OF INGRAM INDUSTRIES INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The Company leases warehouse and office space from certain stockholders of
Ingram Industries. Total rental payments were $729 in fiscal 1993, $784 in 1994
and $1,645 in 1995.
Other transactions with Ingram Industries affiliates includes sales of
$1,664 in fiscal 1993, $3,056 in 1994 and $5,281 in 1995.
NOTE 11 -- STOCK OPTIONS AND INCENTIVE PLANS
Certain of the Company's employees participate in Ingram Industries'
qualified and non-qualified stock option and SAR plans. Ingram Industries' plans
provide for the grant of options and SARs at fair value. In conjunction with the
Split-Off, Ingram Industries options held by the Company's employees and certain
other Ingram Industries options and SARs will be converted to Ingram Micro
options ("Rollover Stock Options") to purchase Class A Common Stock. Upon
conversion, approximately 11,000,000 Rollover Stock Options will be outstanding.
The Rollover Stock Options have exercise prices ranging from $0.66 to $3.32 per
share, the majority will be fully vested by the year 2000 and no such options
expire later than 10 years from the date of grant. The Company recorded a
non-cash compensation charge of approximately $8,859 or $5,404 net of tax, in
the first three quarters of 1996 related to the vested portion of certain
Rollover Stock Options. This charge was based on the difference between the
estimated fair value of such options in the first quarter of 1996 and the
exercise price of such options.
The Company will adopt Statement of Financial Accounting Standards No. 123,
"Accounting for Stock Based Compensation" ("FAS 123") in 1996. As permitted by
FAS 123, the Company will continue to measure compensation cost in accordance
with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees." Therefore, the adoption of FAS 123 will have no impact on the
Company's financial condition or results of operations.
The Company has two Incentive Stock Unit ("ISU") plans available to grant
up to 1,575,000 ISUs to certain key employees. Subject to continued employment,
these stock appreciation awards vest over five years and actual cash payout is
based on the increase in book value from date of award grant. Outstanding ISUs
at January 1, 1994, December 31, 1994 and December 30, 1995 were 748,200,
221,000 and 25,100, respectively. The amounts charged to expense related to
these incentive stock unit plans totaled $3,354 in fiscal 1993, $2,163 in 1994
and $695 in 1995. There were no grants made under the ISU plans in 1995.
The Company will establish its separate stock option and incentive plans in
conjunction with the Split-Off. Refer to Note 12.
NOTE 12 -- SUBSEQUENT EVENTS
Formation of Ingram Micro Inc.
On April 29, 1996, a Delaware corporation, Ingram Micro Inc., was formed to
hold all of the outstanding stock of Ingram Micro Holdings Inc. ("Holdings"). It
is the Company's plan to merge with and into such Delaware corporation prior to
the effective date of a registration statement on Form S-1 filed with the
Securities and Exchange Commission. The proposed merger will not impact the
Company's financial statements, as the Company's historical financial statements
reflect the capital structure described herein.
Ingram Micro Inc., a Delaware corporation, has two classes of common stock,
consisting of 265,000,000 shares of $0.01 par value Class A Common Stock and
135,000,000 shares of $0.01 par value Class B Common Stock, and 1,000,000 shares
of $0.01 par value Preferred Stock. Class A stockholders are entitled to one
vote on each matter to be voted on by the stockholders whereas the Class B
stockholders are entitled to ten votes on each matter to be voted on by the
stockholders. The two classes of stock have similar
F-17
<PAGE>
INGRAM MICRO INC.
(A WHOLLY-OWNED SUBSIDIARY OF INGRAM INDUSTRIES INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
rights in all other respects. Each share of Class B Common Stock may at any time
be converted to a share of Class A Common Stock; however, conversion will occur
automatically on the earliest to occur of (i) the fifth anniversary of the
consummation of the Split-Off pursuant to the Exchange Agreement; (ii) the sale
of such share of Class B Common Stock to any person not provided for under the
provisions of the Board Representation Agreement; or (iii) the date on which the
number of shares of Class B Common Stock then outstanding represents less than
25% of the aggregate number of shares of Class A Common Stock and Class B Common
Stock then outstanding. The capital structure resulting from the formation of
the Delaware corporation was finalized on September 9, 1996 and the Company has
107,251,362 shares of Class B Common Stock outstanding.
Key Employee Stock Purchase Plan
As of April 30, 1996, the Company adopted the Key Employee Stock Purchase
Plan (the "Plan") which provides for the issuance of up to 4,000,000 shares of
Class B Common Stock to certain employees. In June 1996, the Company offered
2,775,000 shares of its Class B Common Stock to certain employees pursuant to
the Plan, and subsequently sold 2,510,400 shares with proceeds of approximately
$17,573. The shares sold thereby are subject to vesting and certain restrictions
on transfer, may be redeemable prior to vesting and are subject to repurchase by
the Company upon termination of employment. The Company has repurchased 50,000
of such shares. In addition, the Company granted, pursuant to this Plan, 107,000
restricted shares of Class B Common Stock to certain officers and employees of
the Company. These shares are subject to vesting. Prior to vesting, these
restricted grant shares are subject to forfeiture to the Company without
consideration, upon termination of employment. 5,000 of such shares have been
forfeited to the Company.
1996 Equity Incentive Plan
As of April 30, 1996, the Company adopted the 1996 Equity Incentive Plan
and Ingram Industries approved the grant of options under this plan. In June
1996, the Company issued options at $7.00 per share to purchase an aggregate of
approximately 4,800,000 shares of Class B Common Stock under its Equity
Incentive Plan to all eligible employees of the Company. These options vest and
generally become exercisable over five years from the issue date and expire
eight years after the issue date.
Split-Off, Reorganization and Exchange
The Company plans to engage in a Split-Off, consisting of a Reorganization
and an Exchange, from Ingram Industries and Ingram Entertainment. Pursuant to
the Reorganization Agreement it is contemplated that the Company will retain all
of the assets and liabilities associated with the Company's business and will
indemnify Ingram Industries and Ingram Entertainment for all liabilities related
to the Company's business and operations or otherwise assigned to the Company.
In addition, the Reorganization Agreement provides for the sharing by the
Company of approximately 73% of certain contingent assets and liabilities not
allocated to one of the parties. The Company will assume a portion of Ingram
Industries' debt in return for the extinguishment of intercompany indebtedness.
The debt to be assumed by the Company includes an accounts receivable
securitization program which will be transferred to the Company subsequent to
the Split-Off. The Company will also enter into a $1 billion Credit Facility.
In connection with the Reorganization Agreement, the Company is expected to
enter into an employee benefits transfer and assumption agreement with Ingram
Industries and Ingram Entertainment which will provide for the allocation of
employee benefit assets and liabilities on a pro rata basis to each of the
parties of the Split-Off. It is also contemplated that the Company will enter
into a Tax Sharing Agreement. This Agreement will hold the Company liable for
its allocable share of the consolidated federal and state income
F-18
<PAGE>
INGRAM MICRO INC.
(A WHOLLY-OWNED SUBSIDIARY OF INGRAM INDUSTRIES INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
tax liability for the year that includes the Split-Off and approximately 73% of
any adjustment in excess of reserves already established by Ingram Industries
for past federal or state tax liabilities of the Company, Ingram Industries or
Ingram Entertainment. In addition, the Company will share in any refunds
received. The Company will also enter into Transitional Service Agreements
related to certain administration services including data processing.
In conjunction with the Reorganization, the Company will consummate an
exchange pursuant to which certain existing stockholders of Ingram Industries
may exchange all or a portion of their shares of Ingram Industries common stock
for shares of Class B Common Stock of the Company of equivalent value. If all
stockholders were to exchange all eligible shares, they would receive
107,251,362 shares of Class B Common Stock. Pursuant to a Transfer Restrictions
Agreement, the shares of Class B Common Stock received by employees of the
Company, Ingram Industries or Ingram Entertainment in the Exchange are expected
to be subject to repurchase by the Company upon termination of employment. The
repurchase feature lapses upon consummation of an initial public offering.
Although there can be no assurance, it is also contemplated that, on or after
June 20, 1997, certain remaining stockholders of Ingram Industries will exchange
their remaining shares of Ingram Industries common stock for shares of Ingram
Entertainment common stock.
F-19
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
An itemized statement of the estimated amount of the expenses,
other than underwriting discounts and commissions, incurred and to be incurred
in connection with the issuance and distribution of the securities registered
pursuant to this Registration Statement is as follows:
Securities and Exchange Commission registration fee......... $ 5,910
NYSE listing fee............................................ 830
Printing and engraving expenses............................. 2,000
Accounting fees and expenses................................ 10,000
Legal fees and expenses..................................... 10,000
Transfer Agent fees and expenses............................ 1,000
Miscellaneous............................................... 10,260
------
Total...................................................... $40,000
======
Item 14. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law (the
"DGCL") provides, in effect, that any person made a party to any action by
reason of the fact that he is or was a director, officer, employee or agent of
the Company may and, in certain cases, must be indemnified by the Company
against, in the case of a non-derivative action, judgments, fines, amounts
paid in settlement and reasonable expenses (including attorneys' fees)
incurred by him as a result of such action, and in the case of a derivative
action, against expenses (including attorneys' fees), if in either type of
action he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Company. This indemnification does
not apply, in a derivative action, to matters as to which it is adjudged that
the director, officer, employee or agent is liable to the Company, unless upon
court order it is determined that, despite such adjudication of liability, but
in view of all the circumstances of the case, he is fairly and reasonably
entitled to indemnity for expenses, and, in a non-derivative action, to any
criminal proceeding in which such person had reasonable cause to believe his
conduct was unlawful.
Section 102 of the DGCL allows the Company to eliminate or
limit the personal liability of a director to the Company or to any of its
stockholders for monetary damage for a breach of fiduciary duty as a director,
except in the case where the director (i) breaches such person's duty of
loyalty to the Company or its stockholders, (ii) fails to act in good faith,
engages in intentional misconduct or knowingly violates a law, (iii)
authorizes the payment of a dividend or approves a stock purchase or
redemption in violation of Section 174 of the DGCL or (iv) obtains an improper
personal benefit. Article Tenth of the Company's Certificate of Incorporation
includes a provision which eliminates directors' personal liability to the
fullest extent permitted under the Delaware General Corporation Law.
Article Tenth of the Company's Certificate of Incorporation
provides that the Company shall indemnify any person (and the heirs, executors
or administrators of such person) who was or is a party or is threatened to be
made a party to, or is involved in any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that such person is or was a director or
officer of the Company or is or was serving at the request of the Company as a
director or officer of another corporation, partnership, joint venture, trust
or other enterprise, to the fullest extent permitted by Delaware Law. Each
such indemnified party shall have the right to be paid by the Company for any
expenses incurred in connection with any such proceeding in advance of its
final disposition to the fullest extent authorized by Delaware Law. Article
Tenth of the Company's Certificate of Incorporation also provides that the
Company may, by action of its Board of Directors, provide indemnification to
such of the employees and agents of the Company to such extent and to such
effect as the Board of Directors shall determine to be appropriate and
authorized by Delaware Law.
As permitted by Delaware Law and the Company's Certificate of
Incorporation, the Company maintains insurance covering its directors and
officers against certain liabilities incurred by them in their capacities as
such, including among other things, certain liabilities under the Securities
Act of 1933, as amended.
Item 15. Recent Sales of Unregistered Securities
In the second quarter of 1996, the Company offered 2,775,000
shares of its Class B Common Stock to certain of its employees, of which
2,510,400 shares were purchased for $17.6 million. The shares were issued
without registration under the Securities Act in reliance upon the exemptions
from registration afforded by Section 4(2) of the Securities Act, and
Regulation D and Regulation S promulgated under the Securities Act. All such
shares were issued pursuant to the Company's Key Employee Stock Purchase Plan
and are subject to certain restrictions.
Reference is made to "Management--Rollover Plan; Incentive
Stock Units" and "The Split-Off and the Reorganization--The Split-Off"
regarding shares, and options exercisable for shares, of the Company's Common
Equity, issued in connection with the Split-Off, the purchasers thereof and
the consideration therefor. Such issuances will occur without registration
under the Securities Act in reliance upon the exemptions from registration
afforded by Section 4(2) of the Securities Act and Regulation D promulgated
under the Securities Act.
Item 16. Exhibits and Financial Statement Schedules.
(a) List of Exhibits.
<TABLE>
<CAPTION>
<S> <C> <C>
3.01 -- Form of Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit
3.01 to the Company's Registration Statement on Form S-1 (File No. 333-08453) (the "IPO
S-1"))
3.02 -- Form of Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit
3.03 to the IPO S-1)
4.01 -- Specimen Certificate for the Class A Common Stock, par value $0.01 per share, of the
Registrant (incorporated by reference to Exhibit 4.01 to the IPO S-1)
5.01 -- Opinion of Davis Polk & Wardwell
10.01 -- Ingram Micro Inc. Executive Incentive Bonus Plan (incorporated by reference to Exhibit 10.01
to the IPO S-1)
10.02 -- Ingram Micro Inc. Management Incentive Bonus Plan (incorporated by reference to Exhibit
10.02 to the IPO S-1)
10.03 -- Ingram Micro Inc. General Employee Incentive Bonus Plan (incorporated by reference to
Exhibit 10.03 to the IPO S-1)
10.04 -- Agreement dated as of December 21, 1994 between the Company and Jeffrey R. Rodek
(incorporated by reference to Exhibit 10.04 to the IPO S-1)
10.05 -- Agreement dated as of April 25, 1988 between the Company and Sanat K. Dutta (incorporated
by reference to Exhibit 10.05 to the IPO S-1)
10.06 -- Agreement dated as of June 21, 1991 between the Company and John Wm. Winkelhaus, II
(incorporated by reference to Exhibit 10.06 to the IPO S-1)
10.07 -- Ingram Micro Inc. Rollover Stock Option Plan (incorporated by reference to Exhibit 10.07 to
the IPO S-1)
10.08 -- Ingram Micro Inc. Key Employee Stock Purchase Plan (incorporated by reference to Exhibit
10.08 to the IPO S-1)
10.09 -- Ingram Micro Inc. 1996 Equity Incentive Plan (incorporated by reference to Exhibit 10.09 to
the IPO S-1)
10.10 -- Ingram Micro Inc. Amended and Restated 1996 Equity Incentive Plan (incorporated by
reference to Exhibit 10.10 to the IPO S-1)
10.11 -- Severance Agreement dated as of June 1, 1996 among the Company, Ingram Industries,
Linwood A. Lacy, Jr., and NationsBank, N.A., as trustee of the Linwood A. Lacy, Jr. 1996
Irrevocable Trust dated February 1996 (incorporated by reference to Exhibit 10.11 to the IPO
S-1)
10.12 -- Credit Agreement dated as of October 30, 1996 among the Company and Ingram European
Coordination Center N.V., Ingram Micro Singapore Pte Ltd., and Ingram Micro Inc., as
Borrowers and Guarantors, certain financial institutions, as the Lenders, NationsBank of Texas,
N.A., as Administrative Agent for the Lenders and The Bank of Nova Scotia as Documentation
Agent for the Lenders
10.13 -- Amended and Restated Reorganization Agreement dated as of October 17, 1996 among the
Company, Ingram Industries, and Ingram Entertainment
10.14 -- Registration Rights Agreement dated as of November 6, 1996 among the Company and the
persons listed on the signature pages thereof
10.15 -- Board Representation Agreement dated as of November 6, 1996
10.16 -- Thrift Plan Liquidity Agreement dated as of November 6, 1996 among the Company and the
Ingram Thrift Plan
10.17 -- Tax Sharing and Tax Services Agreement dated as November 6, 1996 among the Company,
Ingram Industries, and Ingram Entertainment
10.18 -- Master Services Agreement dated as of November 6, 1996 among the Company, Ingram
Industries, and Ingram Entertainment
10.19 -- Employee Benefits Transfer and Assumption Agreement dated as of November 6, 1996 among
the Company, Ingram Industries, and Ingram Entertainment
10.20 -- Data Center Services Agreement dated as of November 6, 1996 among the Company, Ingram
Book Company, and Ingram Entertainment Inc.
10.21 -- Amended and Restated Exchange Agreement dated as of November 6, 1996 among the
Company, Ingram Industries, Ingram Entertainment and the other parties thereto
10.22 -- Agreement dated as of August 26, 1996 between the Company and Jerre L. Stead (incorporated
by reference to Exhibit 10.22 to the IPO S-1)
10.23 -- Definitions for Ingram Funding Master Trust Agreements (incorporated by reference to Exhibit
10.23 to the IPO S-1)
10.24 -- Asset Purchase and Sale Agreement dated as of February 10, 1993 between Ingram Industries
and Ingram Funding (incorporated by reference to Exhibit 10.24 to the IPO S-1)
10.25 -- Pooling and Servicing Agreement dated as of February 10, 1993 among Ingram Funding,
Ingram Industries and Chemical Bank (incorporated by reference to Exhibit 10.25 to the IPO
S-1)
10.26 -- Amendment No. 1 to the Pooling and Servicing Agreement dated as of February 12, 1993, the
Asset Purchase and Sale Agreement dated as of February 12, 1993, and the Liquidity
Agreement dated as of February 12, 1993 (incorporated by reference to Exhibit 10.26 to the
IPO S-1)
10.27 -- Certificate Purchase Agreement dated as of July 23, 1993 (incorporated by reference to Exhibit
10.27 to the IPO S-1)
10.28 -- Schedule of Certificate Purchase Agreements (incorporated by reference to Exhibit 10.28 to the
IPO S-1)
10.29 -- Series 1993-1 Supplement to Ingram Funding Master Trust Pooling and Servicing Agreement
dated as of July 23, 1993 (incorporated by reference to Exhibit 10.29 to the IPO S-1)
10.30 -- Schedule of Supplements to Ingram Funding Master Trust Pooling and Servicing Agreement
dated as of July 23, 1993 (incorporated by reference to Exhibit 10.30 to the IPO S-1)
10.31 -- Letter of Credit Reimbursement Agreement dated as of February 10, 1993 (incorporated by
reference to Exhibit 10.31 to the IPO S-1)
10.32 -- Liquidity Agreement dated as of February 10, 1993 (incorporated by reference to Exhibit 10.32
to the IPO S-1)
10.33 -- Amendment No. 2 to the Pooling and Servicing Agreement dated as of February 12, 1993, the
Asset Purchase and Sale Agreement dated as of February 12, 1993, and the Liquidity
Agreement dated as of February 12, 1993 (incorporated by reference to Exhibit 10.33 to the
IPO S-1)
10.34 -- Agreement dated as of October 10, 1996 between the Company and Michael J. Grainger
(incorporated by reference to Exhibit 10.34 to the IPO S-1)
10.35 -- Form of Repurchase Agreement (incorporated by reference to Exhibit 10.35 to the IPO S-1)
21.01 -- Subsidiaries of the Registrant (incorporated by reference to Exhibit 21.01 to the IPO S-1)
23.01 -- Consent of Price Waterhouse LLP
23.02 -- Consent of Davis Polk & Wardwell (included in their opinion filed as Exhibit 5.01)
24.01 -- Powers of Attorney of certain officers and directors of the Registrant (see page II-5 and II-6)
</TABLE>
(b) Financial Statement Schedules
See Schedule II on page S-1. All other schedules for which
provision is made in the applicable accounting regulations of the Securities
and Exchange Commission are not required under the related instructions or are
inapplicable or the information is contained in the Consolidated Financial
Statements and related notes and therefore have been omitted.
Item 17. Undertakings.
The undersigned registrant hereby undertakes that:
(1) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Company pursuant to the foregoing provisions, or otherwise,
the Company has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Company of expenses incurred or paid by a director,
officer or controlling person of the Company in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
(2) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(3) For the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
Ingram Micro Inc. has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Santa
Ana, State of California, on this 18th day of November, 1996.
Ingram Micro Inc.
By: /s/ Michael J. Grainger
---------------------------
Name: Michael J. Grainger
Title: Executive Vice President and
Worldwide Chief Financial
Officer
POWER OF ATTORNEY
The Registrant and each person whose signature appears below
constitutes and appoints Jerre L. Stead, James E. Anderson, Jr. and Michael J.
Grainger, and any agent for service named in this Registration Statement and
each of them, his, her, or its true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for him, her, or it and in
his, her, or its name, place and stead, in any and all capacities, to sign and
file (i) any and all amendments (including post-effective amendments) to this
Registration Statement, with all exhibits thereto, and other documents in
connection therewith, and (ii) a registration statement, and any and all
amendments thereto, relating to the offering covered hereby filed pursuant to
Rule 462(b) under the Securities Act of 1933, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and things
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he, she, or it might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or any of
them, or their or his substitute or substitutes, may lawfully do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ------ ----
<S> <C> <C>
/s/ Jerre L. Stead Chief Executive Officer (Principal November 18, 1996
- --------------------------------- Executive Officer); Chairman of the
Jerre L. Stead Board
/s/ Michael J. Grainger Executive Vice President and November 18, 1996
- --------------------------------- Worldwide Chief Financial Officer
Michael J. Grainger (Principal Financial Officer and
Principal Accounting Officer)
/s/ Martha R. Ingram Director November 18, 1996
- ---------------------------------
Martha R. Ingram
/s/ John R. Ingram Director November 18, 1996
- ---------------------------------
John R. Ingram
/s/ David B. Ingram Director November 18, 1996
- ---------------------------------
David B. Ingram
/s/ Philip M. Pfeffer Director November 18, 1996
- ---------------------------------
Philip M. Pfeffer
/s/ Don H. Davis, Jr. Director November 18, 1996
- ---------------------------------
Don H. Davis, Jr.
/s/ J. Phillip Samper Director November 18, 1996
- ---------------------------------
J. Phillip Samper
/s/ Joe B. Wyatt Director November 18, 1996
- ---------------------------------
Joe B. Wyatt
</TABLE>
INGRAM MICRO INC.
SCHEDULE II --VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
<TABLE>
<CAPTION>
Balance at Charged to Balance
beginning costs and at end of
Description of year expenses Other(*) Deductions year
----------- ----------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts
receivable and sales returns:
1995................................ $25,668 $24,168 $673 $(19,718) $30,791
1994................................ 18,594 20,931 (4) (13,853) 25,668
1993................................ 12,928 17,492 2,343 (14,169) 18,594
Inventory Obsolescence:
1995................................ $10,706 $13,199 $207 $(11,867) $12,245
1994................................ 9,431 9,410 257 (8,392) 10,706
1993................................ 6,076 6,587 121 (3,353) 9,431
<FN>
- ---------------
* Other includes recoveries, acquisitions and the effect of fluctuations in
foreign currency.
</TABLE>
Exhibit 5.01
DAVIS POLK & WARDWELL
450 LEXINGTON AVENUE
NEW YORK, NY 10017
writer's direct number
212-450-4000
November 18, 1996
Ingram Micro Inc.
1600 E. St. Andrew Place
Santa Ana, CA 92705
Re: Ingram Micro Inc. Registration Statement on Form S-1
Relating to the sale by the Ingram Thrift Plan from time to time
of up to 800,000 shares of Class A Common Stock of Ingram Micro Inc.
Ladies and Gentlemen:
We have acted as counsel to Ingram Micro Inc. (the "Company") in
connection with the Company's Registration Statement on Form S-1 (the
"Registration Statement") filed with the Securities and Exchange Commission
pursuant to the Securities Act of 1933, as amended (the "Securities Act"), for
the registration for sale by the Ingram Thrift Plan from time to time of up to
800,000 shares (the "Shares") of the Company's Class A Common Stock, par value
$0.01 per share (the "Common Stock"), issuable pursuant to the Company's
Rollover Stock Option Plan (the "Plan").
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate records,
certificates of public officials and other instruments as we have deemed
necessary for the purposes of rendering this opinion.
On the basis of the foregoing and assuming the due execution
and delivery of certificates representing the Shares, we are of the opinion
that the Shares have been duly authorized and, when and to the extent issued
upon conversion of a like number of shares of the Company's Class B Common
Stock, par value $0.01per share, pursuant to the Company's Certificate of
Incorporation, will be validly issued, fully paid and non-assessable.
If the Company files an abbreviated registration statement (the
"Rule 462(b) Registration Statement"), which incorporates the Registration
Statement, to register additional shares of Common Stock (the "Additional
Shares") pursuant to Rule 462(b) under the Securities Act, for purposes of the
preceding opinion, any reference therein to the "Shares" shall be deemed to
include the Additional Shares.
We are members of the Bar of the State of New York and the
foregoing opinion is limited to the laws of the State of New York, the federal
laws of the United States of America and the General Corporation Law of the
State of Delaware.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement, and if filed, the Rule 462(b) Registration
Statement. We also consent to the reference to our name under the caption
"Legal Matters" in the Prospectus contained in the Registration Statement, and
if filed, the Rule 462(b) Registration Statement.
Very truly yours,
/S/ DAVIS POLK & WARDWELL
EXHIBIT 10.12
US $1,000,000,000
CREDIT AGREEMENT
dated as of October 30, 1996
among
INGRAM MICRO INC.,
INGRAM EUROPEAN COORDINATION CENTER N.V.,
INGRAM MICRO SINGAPORE PTE LTD.
and
INGRAM MICRO INC. (Canada),
as Borrowers and Guarantors,
CERTAIN FINANCIAL INSTITUTIONS,
as the Lenders,
NATIONSBANK OF TEXAS, N.A.,
as Administrative Agent
for the Lenders,
and
THE BANK OF NOVA SCOTIA,
as Documentation Agent for the Lenders,
and
THE CHASE MANHATTAN BANK,
DG BANK DEUTSCHE GENOSSENSCHAFTSBANK,
CAYMAN ISLANDS BRANCH
THE FIRST NATIONAL BANK OF CHICAGO,
THE INDUSTRIAL BANK OF JAPAN,
LIMITED, ATLANTA AGENCY
and
ROYAL BANK OF CANADA,
as Co-Agents
TABLE OF CONTENTS
Section Page
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.1. Defined Terms.......................................................3
1.2. Use of Defined Terms...............................................30
1.3. Cross-References...................................................30
1.4. Accounting and Financial Determinations............................30
1.5. Calculations.......................................................30
ARTICLE II
COMMITMENTS, ETC.
2.1. Commitments........................................................31
2.2. Extensions of the Commitment Termination Date......................32
2.3. Reductions of the Commitment Amounts...............................34
ARTICLE III
BORROWING PROCEDURES,
LETTERS OF CREDIT AND REGISTERS
3.1. Borrowing Procedure for Pro-Rata Revolving Loans...................35
3.2. Pro-Rata Letter of Credit Issuance Procedures......................36
3.2.1. Other Lenders' Participation.......................................36
3.2.2. Disbursements......................................................36
3.2.3. Reimbursement......................................................37
3.2.4. Deemed Disbursements...............................................38
3.2.5. Nature of Reimbursement Obligations................................38
3.3. Non-Rata Revolving Loan Facility...................................39
3.3.1. Non-Rata Revolving Loans...........................................39
3.3.2. Ineligible Currencies..............................................40
3.3.3. Limitations on Making Non-Rata Revolving Loans.....................40
3.3.4. Procedure for Making Non-Rata Revolving Loans......................40
3.3.5. Maturity of Non-Rata Revolving Loans...............................41
3.3.6. Non-Rata Revolving Loan Records....................................41
3.3.7. Quarterly Report...................................................41
3.4. Non-Rata Letter of Credit Facility.................................41
3.4.1. Non-Rata Letters of Credit.........................................41
3.4.2. Ineligible Currencies..............................................42
3.4.3. Limitations on Issuing Non-Rata Letters of Credit..................42
3.4.4. Procedures for Issuing Non-Rata Letters of Credit..................42
3.4.5. Disbursements......................................................42
3.4.6. Reimbursement......................................................42
3.5. Bid Rate Facility..................................................43
3.5.1. Bid Rate Loans.....................................................43
3.5.2. Quote Request......................................................43
3.5.3. Submission of Quotes...............................................43
3.5.4. Acceptance of Quotes...............................................44
3.5.5. Bid Rate Loan......................................................44
3.5.6. Maturity of Bid Rate Loans.........................................45
3.5.7. Bid Rate Loan Records..............................................45
3.5.8. Limitations on Making Bid Rate Loans...............................45
ARTICLE IV
PRINCIPAL, INTEREST AND FEE PAYMENTS
4.1. Repayments and Prepayments of Pro-Rata Revolving Loans.............45
4.2. Interest Provisions................................................46
4.2.1. Rates..............................................................47
4.2.2. Post-Maturity Rates................................................47
4.2.3. Continuation and Conversion Elections..............................47
4.2.4. Payment Dates......................................................48
4.2.5. Interest Rate Determination........................................49
4.2.6. Additional Interest on LIBO Rate Loans.............................49
4.3. Fees...............................................................49
4.3.1. Administration and Documentation Fees..............................50
4.3.2. Facility Fees......................................................50
4.3.3. Letter of Credit Fees..............................................51
4.4. Rate and Fee Determinations........................................52
4.5. Obligations in Respect of Non-Rata Credit Extensions...............52
ARTICLE V
CERTAIN PAYMENT PROVISIONS
5.1. Illegality; Currency Restrictions..................................52
5.2. Deposits Unavailable...............................................53
5.3. Increased Credit Extension Costs, etc..............................54
5.4. Funding Losses.....................................................54
5.5. Increased Capital Costs............................................55
5.6. Discretion of Lenders as to Manner of Funding......................55
5.7. Taxes..............................................................55
5.8. Payments...........................................................57
5.8.1. Pro-Rata Credit Extensions.........................................57
5.8.2. Non-Rata Obligations...............................................58
5.9. Sharing of Payments................................................59
5.10. Right of Set-off...................................................60
5.11. Judgments, Currencies, etc.........................................60
5.12. Replacement of Lenders.............................................61
5.13. Change of Lending Office...........................................61
ARTICLE VI
CONDITIONS TO MAKING CREDIT EXTENSIONS
AND ACCESSION OF ACCEDING BORROWERS
6.1. Initial Credit Extension...........................................62
6.1.1. Resolutions, etc...................................................62
6.1.2. Effective Date Certificate.........................................62
6.1.3. Delivery of Notes..................................................62
6.1.4. Guaranties, etc....................................................63
6.1.5. Financial Information, etc.........................................63
6.1.6. Compliance Certificate.............................................63
6.1.7. Payment of Outstanding Indebtedness................................63
6.1.8. Consents, etc......................................................63
6.1.9. Closing Fees, Expenses, etc........................................63
6.1.10. Opinions of Counsel................................................63
6.1.11. Investment Prospectus..............................................64
6.1.12. Senior Executive Officer's Certificate.............................64
6.1.13. Satisfactory Legal Form............................................64
6.2. All Credit Extensions..............................................65
6.2.1. Compliance with Warranties, No Default, etc........................65
6.2.2. Credit Extension Request...........................................66
6.2.3. Non-Rata Revolving Loans...........................................66
6.2.4. Non-Rata Letters of Credit.........................................66
6.2.5. Bid Rate Loans.....................................................66
6.3. Acceding Borrowers.................................................66
6.3.1. Resolutions, etc...................................................67
6.3.2. Delivery of Accession Request and Acknowledgment and Notes.........67
6.3.3. Guaranties, etc....................................................68
6.3.4. Compliance Certificate.............................................68
6.3.5. Consents, etc......................................................68
6.3.6. Opinions of Counsel................................................68
6.4. Waiver of Notice under Existing Industries Credit Agreement........68
6.5. Waiver of Notice under Existing Micro Credit Agreement.............68
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
7.1. Organization, etc..................................................69
7.2. Due Authorization, Non-Contravention, etc..........................69
7.3. No Default.........................................................69
7.4. Government Approval, Regulation, etc...............................70
7.5. Validity, etc......................................................70
7.6. Financial Information..............................................70
7.7. No Material Adverse Effect.........................................70
7.8. Litigation, Labor Controversies, etc...............................70
7.9. Subsidiaries.......................................................71
7.10. Ownership of Properties............................................71
7.11. Taxes..............................................................71
7.12. Pension and Welfare Plans..........................................71
7.13. Environmental Warranties...........................................72
7.14. Outstanding Indebtedness...........................................72
7.15. Accuracy of Information............................................72
7.16. Patents, Trademarks, etc...........................................73
7.17. Margin Stock.......................................................73
ARTICLE VIII
COVENANTS
8.1. Affirmative Covenants..............................................74
8.1.1. Financial Information, Reports, Notices, etc.......................74
8.1.2. Compliance with Laws, etc..........................................76
8.1.3. Maintenance of Properties..........................................76
8.1.4. Insurance..........................................................76
8.1.5. Books and Records..................................................77
8.1.6. Environmental Covenant.............................................77
8.1.7. Use of Proceeds....................................................78
8.1.8. Pari Passu.........................................................78
8.1.9. Guarantee or Suretyship............................................78
8.1.10. Additional Guaranty................................................78
8.1.11. Intra-Group Agreement, etc.........................................79
8.2. Negative Covenants.................................................79
8.2.1. Restriction on Incurrence of Indebtedness..........................79
8.2.2. Restriction on Incurrence of Liens.................................80
8.2.3. Financial Condition................................................81
8.2.4. Dividends..........................................................82
8.2.5. Consolidation, Merger, Asset Acquisitions, etc.....................82
8.2.6. Transactions with Affiliates.......................................84
8.2.7. Limitations on Margin Stock Acquisitions...........................85
8.2.8. Limitation on Sale of Trade Accounts Receivable....................85
8.2.9. Sale of Assets.....................................................85
8.2.10. Limitation on Businesses...........................................87
ARTICLE IX
EVENTS OF DEFAULT
9.1. Listing of Events of Default.......................................87
9.1.1. Non-Payment of Obligations.........................................87
9.1.2. Breach of Warranty.................................................87
9.1.3. Non-Performance of Certain Covenants and Obligations...............87
9.1.4. Non-Performance of Other Covenants and Obligations.................87
9.1.5. Default on Indebtedness............................................87
9.1.6. Judgments..........................................................88
9.1.7. Pension Plans......................................................88
9.1.8. Ownership; Board of Directors......................................88
9.1.9. Bankruptcy, Insolvency, etc........................................89
9.1.10. Guaranties.........................................................89
9.2. Action if Bankruptcy...............................................90
9.3. Action if Other Event of Default...................................90
9.4. Action by Terminating Lender.......................................90
9.5. Cash Collateral....................................................90
ARTICLE X
THE ADMINISTRATIVE AGENT AND
DOCUMENTATION AGENT
10.1. Authorization and Actions..........................................91
10.2. Funding Reliance, etc..............................................91
10.3. Exculpation........................................................92
10.4. Successor..........................................................92
10.5. Credit Extensions by NationsBank and Scotiabank....................93
10.6. Credit Decisions...................................................93
10.7. Copies, etc........................................................93
10.8. Reporting of Non-Rata Credit Extensions............................93
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1. Waivers, Amendments, etc...........................................94
11.2. Notices............................................................95
11.3. Payment of Costs and Expenses......................................95
11.4. Indemnification....................................................96
11.5. Survival...........................................................97
11.6. Severability.......................................................97
11.7. Headings...........................................................97
11.8. Execution in Counterparts, Effectiveness; Entire Agreement.........97
11.9. Governing Law; Submission to Jurisdiction..........................97
11.10. Successors and Assigns.............................................99
11.11. Assignments and Transfers of Interests.............................99
11.11.1. Assignments........................................................99
11.11.2. Participations....................................................100
11.12. Other Transactions................................................101
11.13. Further Assurances................................................101
11.14. Waiver of Jury Trial..............................................101
11.15. Confidentiality...................................................101
11.16. Release of Subsidiary Guarantors and Supplemental Borrowers.......102
11.17. Collateral........................................................103
Schedule I - Disclosure Schedule
- Item 7.8
- Item 7.9
- Item 7.11
- Item 7.12
- Item 7.14
- Item 8.2.1(a)(ii)
- Item 8.2.2(a)
- Annex A
Schedule II - Lending Offices
Exhibit A-1 - Form of Revolving Note
Exhibit A-2 - Form of Bid Rate Note
Exhibit A-3 - Form of Non-Rata Revolving Note
Exhibit B - Form of Borrowing Request
Exhibit C - Form of Issuance Request
Exhibit D - Form of Continuation/Conversion Notice
Exhibit E - Form of Compliance Certificate
Exhibit F - Form of Effective Date Certificate
Exhibit G-1 - Form of Coordination Center Guaranty
Exhibit G-2 - Form of Intra-Group Agreement
Exhibit H - Form of Micro Guaranty
Exhibit I-1 - Form of Micro Canada Guaranty (Coordination Center/Micro
Singapore)
Exhibit I-2 - Form of Micro Canada Guaranty (Micro)
Exhibit I-3 - Form of Micro Singapore Guaranty
Exhibit J - Form of Additional Guaranty
Exhibit K - Form of Lender Assignment Agreement
Exhibit L - Form of Quarterly Report
Exhibit M - Form of Opinion of the General Counsel of Micro
Exhibit N - Form of Opinion of Davis Polk & Wardwell, Special counsel to
Micro
Exhibit O - Form of Opinion of Special Belgian counsel to Coordination
Center
Exhibit P - Form of Opinion of Special Canadian counsel to Micro Canada
Exhibit Q - Form of Opinion of Special Singapore counsel to Micro
Singapore
Exhibit R - Form of Opinion of counsel to the Agents
Exhibit S - Form of Commitment Extension Request
Exhibit T - Form of Accession Request and Acknowledgment
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of October 30, 1996, among INGRAM MICRO
INC., a Delaware corporation ("Micro"), INGRAM EUROPEAN COORDINATION CENTER
N.V., a company organized and existing under the laws of The Kingdom of
Belgium ("Coordination Center"), INGRAM MICRO SINGAPORE PTE LTD., a
corporation organized and existing under the laws of Singapore ("Micro
Singapore"), INGRAM MICRO INC., a corporation organized and existing under
the laws of Ontario, Canada ("Micro Canada", and, collectively with
Coordination Center and Micro Singapore, the "Supplemental Borrowers"), the
financial institutions parties hereto (together with their respective
successors and permitted assigns and any branch or affiliate of a financial
institution funding a Loan as permitted by Section 5.6, collectively, the
"Lenders"), NATIONSBANK OF TEXAS, N.A. ("NationsBank"), as administrative
agent for the Lenders (in such capacity, the "Administrative Agent"), THE
BANK OF NOVA SCOTIA ("Scotiabank"), as documentation agent for the Lenders
(in such capacity, the "Documentation Agent" and, collectively with the
Administrative Agent, the "Agents"), and THE CHASE MANHATTAN BANK, DG BANK
DEUTSCHE GENOSSENSCHAFTSBANK, CAYMAN ISLANDS BRANCH, THE FIRST NATIONAL BANK
OF CHICAGO, THE INDUSTRIAL BANK OF JAPAN, LIMITED, ATLANTA AGENCY, and
ROYAL BANK OF CANADA, as co-agents (collectively in such capacity, the
"Co-Agents").
WHEREAS, Micro and its Subsidiaries (such capitalized term and all other
capitalized terms used herein having the meanings provided in Section 1.1) are
engaged primarily in the business of the wholesale distribution of
microcomputer software and hardware products, multimedia products, customer
financing, assembly and configuration and other related wholesaling,
distribution and service activities; and
WHEREAS, Micro wishes to obtain:
(a) for itself Commitments from all the Lenders for Pro-Rata
Credit Extensions to be made prior to the Commitment Termination Date in
an aggregate amount in Dollars not to exceed the Total Credit Commitment
Amount at any one time outstanding, such Credit Extensions being
available on a committed basis as
(i) Pro-Rata Revolving Loans, and
(ii) Pro-Rata Letters of Credit in an aggregate amount at
any time issued and outstanding not to exceed $250,000,000;
(b) for itself and each other Borrower a protocol whereby each
such Borrower may, prior to the Commitment Termination Date and to the
extent the aggregate Commitments shall be unused and available from time
to time, request that any Lender make Non-Rata Revolving Loans and issue
Non-Rata Letters of Credit in any Available Currency, subject to a limit
on all Outstanding Credit Extensions consisting of Non-Rata Credit
Extensions of $750,000,000 in the aggregate; and
(c) for itself and each other Borrower a protocol whereby each
such Borrower may, prior to the Commitment Termination Date and to the
extent the aggregate Commitments shall be unused and available from time
to time, request that the Lenders make Bid Rate Loans, subject to a
limit on all Outstanding Credit Extensions consisting of Non-Rata Credit
Extensions of $750,000,000 in the aggregate; and
WHEREAS, each Borrower is willing to guarantee all Obligations of each
other Borrower on a joint and several basis; and
WHEREAS, the Lenders are willing, pursuant to and in accordance with the
terms of this Agreement:
(a) to extend severally Commitments to make, from time to time
prior to the Commitment Termination Date, Pro-Rata Credit Extensions in
an aggregate amount at any time outstanding not to exceed the excess of
the Total Credit Commitment Amount over the then Outstanding Credit
Extensions;
(b) to consider from time to time prior to the Commitment
Termination Date, in each Lender's sole and absolute discretion and
without commitment, making Non-Rata Revolving Loans and issuing Non-Rata
Letters of Credit in an aggregate principal amount not to exceed the
excess of the Total Credit Commitment Amount over the then Outstanding
Credit Extensions, subject to a limit on all Outstanding Credit
Extensions consisting of Non-Rata Credit Extensions of $750,000,000 in
the aggregate; and
(c) to consider quoting bids to make from time to time prior to
the Commitment Termination Date, in each Lender's sole and absolute
discretion and without commitment, Bid Rate Loans in an aggregate
principal amount not to exceed the excess of the Total Credit Commitment
Amount over the then Outstanding Credit Extensions, subject to a limit
on all Outstanding Credit Extensions consisting of Non-Rata Credit
Extensions of $750,000,000 in the aggregate; and
WHEREAS, the proceeds of the initial Credit Extensions will be used
through repayment of intercompany advances to refinance all amounts
outstanding under the Existing Industries Credit Agreement, and to repay other
Indebtedness required to be repaid and to make other payments required to be
made, in each case in connection with the consummation of the transactions
referred to in Section 6.1.12, and the proceeds of all subsequent Credit
Extensions will be used for general corporate purposes (including, working
capital, Acquisitions (so long as such Borrower has complied with Section
8.1.7), and liquidity support for commercial paper borrowings) of each
Borrower and its Subsidiaries;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1. Defined Terms. The following terms (whether or not in
bold type) when used in this Agreement, including its preamble and
recitals, shall, except where the context otherwise requires, have the
following meanings (such meanings to be equally applicable to the singular
and plural forms thereof):
"Absolute Interest Rate" is defined in Section 3.5.3.
"Absolute Interest Rate Auction" means a solicitation of Quotes setting
forth Absolute Interest Rates pursuant to Section 3.5.3.
"Absolute Interest Rate Loans" means Bid Rate Loans, the interest rate
on which is determined on the basis of Absolute Interest Rates pursuant to an
Absolute Interest Rate Auction.
"Acceding Borrower" is defined in Section 6.3.
"Accession Request and Acknowledgment" means a request for accession
duly completed and executed by an Authorized Person of the applicable Acceding
Borrower and acknowledged by an Authorized Person of each Guarantor,
substantially in the form of Exhibit T hereto.
"Acquisition" shall mean any transaction, or any series of related
transactions, by which Micro and/or any of its Subsidiaries directly or
indirectly (a) acquires any ongoing business or all or substantially all of
the assets of any Person or division thereof, whether through purchase of
assets, merger or otherwise, (b) acquires (in one transaction or as the most
recent transaction in a series of transactions) control of at least a majority
in ordinary voting power of the securities of a Person which have ordinary
voting power for the election of directors or (c) otherwise acquires control
of a more than 50% ownership interest in any such Person.
"Additional Guarantor" means each other Subsidiary of Micro as shall
from time to time become a Guarantor in accordance with Section 8.1.10.
"Additional Guaranty" is defined in Section 8.1.10. and means a
guaranty, in the form of Exhibit J attached hereto, duly executed and
delivered by an Authorized Person of each Additional Guarantor, as amended,
supplemented, restated or otherwise modified from time to time.
"Additional Permitted Liens" means, as of any date, Liens securing
Indebtedness and not described in clauses (a) through (l) of Section 8.2.2,
but only to the extent that the sum (without duplication) of (a) the Amount of
Additional Liens on such date plus (b) the Total Indebtedness of Subsidiaries
(other than any Subsidiary that is a Guarantor) on such date does not exceed
fifteen percent (15%) of Consolidated Tangible Net Worth on such date.
"Administrative Agent" is defined in the preamble and includes each
other Person as shall have subsequently been appointed as the successor
Administrative Agent pursuant to Section 10.4.
"Affiliate" of any Person means any other Person which, directly or
indirectly, controls, is controlled by or is under common control with such
Person (excluding any trustee under, or any committee with responsibility for
administering, any Plan). A Person shall be deemed to be "controlled by" any
other Person if such other Person possesses, directly or indirectly, power:
(a) to vote, in the case of any Lender Party, ten percent (10%)
or more or, in the case of any other Person, thirty-five percent (35%)
or more, of the securities (on a fully diluted basis) having ordinary
voting power, for the election of directors or managing general
partners; or
(b) in the case of any Lender Party or any other Person, to
direct or cause the direction of the management and policies of such
Person whether by contract or otherwise.
"Affiliate Transaction" is defined in Section 8.2.6.
"Agents" is defined in the preamble.
"Agreement" means this Credit Agreement, as amended, supplemented,
restated or otherwise modified from time to time in accordance with its terms.
"Amount of Additional Liens" means, at any date, the aggregate principal
amount of Indebtedness secured by Additional Permitted Liens on such date.
"Applicable Margin" means, for any LIBO Rate Loan or Pro-Rata Letter of
Credit (i) for any day during the period from and including the Effective
Date, through and including the date the Administrative Agent shall receive
the reports and financial statements of Micro and its Consolidated
Subsidiaries required to be delivered pursuant to Section 8.1.1(a) hereof
(together with the Compliance Certificate required to be delivered
contemporaneously therewith pursuant to Section 8.1.1(d) hereof) for the
Fiscal Year ending on the Saturday nearest December 31, 1996, .250 of 1% per
annum and (ii) for any day subsequent to the date the Administrative Agent
shall receive the reports, financial statements and Compliance Certificate
described in the preceding clause (i), the corresponding rate per annum set
forth in the table below, determined by reference to: (a) the lower of the
two highest ratings from time to time assigned to Micro's long-term senior
unsecured debt by S&P, Moody's and Fitch and either published or otherwise
evidenced in writing by the applicable rating agency and made available to the
Administrative Agent (including both "express" and "indicative" or "implied"
(or equivalent) ratings) or (b) the ratio (calculated pursuant to clause (c)
of Section 8.2.3) of Consolidated Funded Debt to Consolidated EBITDA for the
Fiscal Period most recently ended prior to such day, for which financial
statements and reports have been received by the Administrative Agent pursuant
to Section 8.1.1(a) or (b), whichever results in the lower Applicable Margin:
<TABLE>
<CAPTION>
Micro's Long-Term Senior
Unsecured Debt Ratings Ratio of Consolidated LIBO Rate
by S&P, Moody's and Funded Debt to Loan Applicable
Fitch, respectively Consolidated EBITDA Margin
_________________________ _____________________ _______________
<S> <C> <C>
A-, A3 or A- (or higher) Less than 1.5 .160%
BBB+, Baa1 or BBB+ Greater than or equal to 1.5, but less than 2.0. .215%
BBB, Baa2 or BBB Greater than or equal to 2.0, but less than 2.5. .250%
BBB-, Baa3 or BBB- Greater than or equal to 2.5, but less than 3.0. .275%
BB+, Ba1 or BB+ Greater than or equal to 3.0, but less than 3.25. .400%
Lower than BB+, Ba1 or BB+ Greater than or equal to 3.25. .625%
</TABLE>
Any change in the Applicable Margin pursuant to clause (ii)(a) above, will be
effective as of the day subsequent to the date on which S&P, Moody's or Fitch,
as the case may be, releases the applicable change in its rating of Micro's
long-term senior unsecured debt.
"Authorized Person" means those officers or employees of each Obligor
whose signatures and incumbency shall have been certified to the
Administrative Agent pursuant to Section 6.1.1.
"Available Credit Commitment" means, relative to any Lender at any time,
the excess of such Lender's Percentage multiplied by the then Total Credit
Commitment Amount over such Lender's then Outstanding Credit Extensions (it
being understood that no reduction shall be made for any Non-Rata Credit
Extension).
"Available Currency" means for the purposes of any Non-Rata Revolving
Loans and Non-Rata Letters of Credit, Dollars, Canadian Dollars, Singapore
Dollars, Hong Kong Dollars, Swiss Francs, Belgian Francs, French Francs,
Guilders, Sterling, Marks, Lira, Mexican Pesos, Pesetas, Yen, Krona, Danish
Krone, Norwegian Krone, Schillings, Ringgit, Won, European Currency Units and
other mutually agreed currencies.
"Belgian Francs" means the lawful currency of The Kingdom of Belgium.
"Bid Rate Borrowing" has the meaning set forth in Section 3.5.2.
"Bid Rate Loan" means a loan made to a Borrower under Section 3.5.
"Bid Rate Note" means a promissory note of a Borrower payable to a
Lender, in the Form of Exhibit A-2 hereto (as such promissory note may be
amended, endorsed or otherwise modified from time to time), evidencing the
aggregate Indebtedness of such Borrower to such Lender resulting from Bid Rate
Loans, and also means all other promissory notes accepted from time to time in
substitution therefor or as a renewal thereof.
"Board Representation Agreement" means the Board Representation
Agreement delivered to the Administrative Agent pursuant to Section 6.1.1(c),
among Micro and the "Family Stockholders" (as defined therein) listed on the
signature pages thereof, as in effect on the date so delivered without giving
effect to any amendment, waiver, supplement or modification thereafter, except
for any such amendment, waiver, supplement or modification that does not
materially alter the terms thereof (excluding from such exception however, any
such amendment, waiver, supplement or modification that in any way expands the
scope of or materially affects the definition of "Family Stockholders" set
forth therein).
"Borrowers" means, collectively, Micro and the Supplemental Borrowers
party to this Agreement from time to time, together with their respective
successors and assigns.
"Borrower's Account" means such account maintained by a Borrower for
purposes of Section 3.5.5, as such Borrower may notify the Lenders from time
to time.
"Borrowing" means the Pro-Rata Revolving Loans of the same Type and, in
the case of any LIBO Rate Loan, having the same Interest Period, made by all
Lenders on the same Business Day and pursuant to the same Borrowing Request in
accordance with Section 2.1.
"Borrowing Request" means a loan request and certificate for Pro-Rata
Revolving Loans duly completed and executed by an Authorized Person of Micro,
substantially in the form of Exhibit B hereto.
"Business Day" means:
(a) any day which is neither a Saturday or Sunday nor a legal
holiday on which banks are authorized or required to be closed in New
York City or Dallas, Texas;
(b) relative to the making of any payment in respect of any
Credit Extension denominated in an Available Currency other than
Dollars, any day on which dealings in such Available Currency are
carried on in the relevant local money market;
(c) relative to the making, continuing, prepaying or repaying of
any LIBO Rate Loans, any day which is a Business Day described in clause
(a) above and which is also a day on which dealings in Dollars are
carried on in the London interbank eurodollar market; and
(d) with respect to any payment, notice or other event relating
to any Non-Rata Credit Extension, any day on which banks are open for
business in the location of the lending office of the Lender making such
Non-Rata Credit Extension available.
"Canadian Dollars" means lawful currency of Canada.
"Capitalized Lease Liabilities" of any Person means, at any time, any
obligation of such Person at such time to pay rent or other amounts under a
lease of (or other agreement conveying the right to use) real and/or personal
property, which obligation is, or in accordance with GAAP (including FASB
Statement 13) is required to be, classified and accounted for as a capital
lease on a balance sheet of such Person at the time incurred; and for purposes
of this Agreement the amount of such obligation shall be the capitalized
amount thereof determined in accordance with such FASB Statement 13.
"Co-Agents" is defined in the preamble.
"Code" means the Internal Revenue Code of 1986, as amended and as in
effect from time to time, and any rules and regulations promulgated thereunder.
"Commitment" means, relative to each Lender, its obligation under
clause (a) of Section 2.1 to make Pro-Rata Revolving Loans and under clause
(b) of Section 2.1 to participate in Pro-Rata Letters of Credit and
drawings thereunder.
"Commitment Extension Request" means a request for the extension of the
Commitment Termination Date duly executed by an Authorized Person of Micro,
substantially in the form of Exhibit S attached hereto.
"Commitment Termination Date" means the fifth anniversary of the date
hereof, or the earlier date of termination in whole of the Commitments
pursuant to Section 2.3, 9.2 or 9.3.
"Compliance Certificate" means a report duly completed, with
substantially the same information as set forth in Exhibit E attached hereto,
as such Exhibit E may be amended, supplemented, restated or otherwise modified
from time to time.
"consolidated", "consolidating" and any derivative thereof each means,
with reference to the accounts or financial reports of any Person, the
consolidated accounts or financial reports of such Person and each Subsidiary
of such Person determined in accordance with GAAP, including principles of
consolidation, consistent with those applied in the preparation of the
consolidated financial statements of Micro referred to in Section 7.6.
"Consolidated Assets" means, at any date, the total assets of Micro and
its Consolidated Subsidiaries as at such date in accordance with GAAP.
"Consolidated Current Assets" means, at any date, all amounts which
would be included as current assets on a consolidated balance sheet of Micro
and its Consolidated Subsidiaries as at such date in accordance with GAAP.
"Consolidated Current Liabilities" means, at any date, all amounts which
would be included as current liabilities on a consolidated balance sheet of
Micro and its Consolidated Subsidiaries as at such date in accordance with
GAAP, excluding any such current liabilities constituting Current Maturities
of Funded Debt at such date.
"Consolidated Current Ratio" means, at any date, the ratio of:
(a) Consolidated Current Assets as at such date, to
(b) Consolidated Current Liabilities as at such date.
"Consolidated EBITDA" means, for any period, Consolidated Net Income
adjusted by adding thereto the amount of Consolidated Interest Charges that
were deducted in arriving at Consolidated Net Income for such period and all
amortization of intangibles, taxes, depreciation and any other non-cash
charges that were deducted in arriving at Consolidated Net Income for such
period.
"Consolidated Funded Debt" means, as of any date of determination, the
total of all Funded Debt of Micro and its Consolidated Subsidiaries
outstanding on such date, after eliminating all offsetting debits and credits
between Micro and its Subsidiaries and all other items required to be
eliminated in the course of the preparation of consolidated financial
statements of Micro and its Subsidiaries in accordance with GAAP.
"Consolidated Interest Charges" means, with respect to any period, the
sum (without duplication) of the following (in each case, eliminating all
offsetting debits and credits between Micro and its Subsidiaries and all other
items required to be eliminated in the course of the preparation of
consolidated financial statements of Micro and its Subsidiaries in accordance
with GAAP):
(a) aggregate net interest expense in respect of Indebtedness of
Micro and its Subsidiaries (including imputed interest on Capitalized
Lease Liabilities) deducted in determining Consolidated Net Income for
such period plus, to the extent not deducted in determining Consolidated
Net Income for such period, the amount of all interest previously
capitalized or deferred that was amortized during such period, and
(b) all debt discount and expense amortized or required to be
amortized in the determination of Consolidated Net Income for such
period, and
(c) all attributable interest and fees in lieu of interest
associated with any securitizations by Micro or any of its Subsidiaries.
"Consolidated Liabilities" means, at any date, the sum of all
obligations of Micro and its Consolidated Subsidiaries as at such date in
accordance with GAAP.
"Consolidated Net Income" means, for any period, the consolidated net
income of Micro and its Consolidated Subsidiaries as reflected on a statement
of income of Micro and its Consolidated Subsidiaries for such period in
accordance with GAAP.
"Consolidated Retained Receivables" means, at any date, the face amount
(calculated in Dollars but net of any amount allocated to the relevant Trade
Account Receivable with respect to any reserve or similar allowance for
doubtful payment) of all Trade Accounts Receivable of Micro and its
Consolidated Subsidiaries outstanding as at such date (including, in the case
of any receivables that have been sold, assigned or otherwise transferred to a
trust, the amount of such receivables net of any amount of Consolidated
Transferred Receivables determined with respect thereto, it being agreed for
the avoidance of doubt that Consolidated Retained Receivables shall not
include any Consolidated Transferred Receivables).
"Consolidated Stockholders' Equity" means, at any date:
(a) Consolidated Assets as at such date, less
(b) Consolidated Liabilities as at such date.
"Consolidated Subsidiary" means any Subsidiary whose financial
statements are required in accordance with GAAP to be consolidated with the
consolidated financial statements delivered by Micro from time to time in
accordance with Section 8.1.1.
"Consolidated Tangible Net Worth" means, at any date:
(a) Consolidated Stockholders' Equity as at such date plus the
accumulated after-tax amount of non-cash charges and adjustments to
income and Consolidated Stockholders' Equity attributable to employee
stock options and stock purchases through such date, less
(b) goodwill and other Intangible Assets of Micro and its
Consolidated Subsidiaries.
"Consolidated Transferred Receivables" means, at any date, the face
amount (calculated in Dollars but net of any amount allocated by Micro or any
of its Consolidated Subsidiaries to the relevant Trade Account Receivable with
respect to any reserve or similar allowance for doubtful payment) of all Trade
Accounts Receivable originally payable to the account of Micro or any of its
Consolidated Subsidiaries, which have not been discharged at such date and in
respect of which Micro's or any such Consolidated Subsidiary's rights and
interests, have, on or prior to such date, been sold, assigned or otherwise
transferred, in whole or in part, to any Person other than Micro or any of its
Consolidated Subsidiaries (either directly or by way of such Person holding an
undivided interest in a specified amount of Trade Accounts Receivable sold,
assigned or otherwise transferred to a trust).
"Contingent Liability" means any agreement, undertaking or arrangement
by which any Person guarantees, endorses or otherwise becomes or is
contingently liable (by direct or indirect agreement, contingent or otherwise)
to provide funds for payment, to supply funds to, or otherwise to invest in, a
debtor, or obligation or any other liability of any other Person (other than
by endorsements of instruments in the course of collection), or guarantees the
payment of dividends or other distributions upon the shares of any other
person, if the primary purpose or intent thereof by the Person incurring the
Contingent Liability is to provide assurance to the obligee of such obligation
of another Person that such obligation of such other Person will be paid or
discharged, or that any agreements relating thereto will be complied with, or
that the holders of such obligation will be protected (in whole or in part)
against loss in respect thereof. The amount of any Person's obligation under
any Contingent Liability shall (subject to any limitation set forth therein)
be deemed to be the outstanding principal amount of the debt, obligation or
other liability guaranteed thereby.
"Continuation/Conversion Notice" means a notice of continuation or
conversion and certificate for Pro-Rata Revolving Loans duly completed and
executed by an Authorized Person of Micro, substantially in the form of
Exhibit D attached hereto.
"Controlled Group" means all members of a controlled group of
corporations and all members of a controlled group of trades or businesses
(whether or not incorporated) under common control which, together with Micro,
are treated as a single employer under Section 414(b) or 414(c) of the Code or
Section 4001 of ERISA.
"Coordination Center" is defined in the preamble.
"Coordination Center Guaranty" means a guaranty, in the form of Exhibit
G-1 attached hereto, duly executed and delivered by an Authorized Person of
Coordination Center, as amended, supplemented, restated or otherwise modified
from time to time.
"Credit Commitment Amount" means, relative to any Lender at any time,
such Lender's Percentage multiplied by the then Total Credit Commitment Amount
as in effect at such time.
"Credit Extension" means, as the context may require,
(a) any Pro-Rata Credit Extension; or
(b) the making of a Non-Rata Credit Extension by the relevant
Lender.
"Credit Extension Request" means, as the context may require, a
Borrowing Request, a Continuation/Conversion Notice or an Issuance Request.
"Current Maturities of Funded Debt" means, at any time and with respect
to any item of Funded Debt, the portion of such Funded Debt outstanding at
such time which by the terms of such Funded Debt or the terms of any
instrument or agreement relating thereto is due on demand or within one year
from such time (whether by sinking fund, other required prepayment or final
payment at maturity) and is not directly or indirectly renewable, extendible
or refundable at the option of the obligor under an agreement or firm
commitment in effect at such time to a date one year or more from such time.
"Danish Krone" means the lawful currency of Denmark.
"Default" means any Event of Default or any condition, occurrence or
event which, after notice or lapse of time or both, would constitute an Event
of Default.
"Disbursement Date" is defined in Section 3.2.2.
"Disclosure Schedule" means the Disclosure Schedule attached hereto as
Schedule I, as the same may be amended, supplemented or otherwise modified
from time to time by Micro with the consent of the Administrative Agent and
the Required Lenders.
"Documentation Agent" is defined in the preamble and includes each other
Person as shall have subsequently been appointed as the successor
Documentation Agent pursuant to Section 10.4.
"Dollar" and the sign "$" each mean the lawful currency of the United
States.
"Dollar Amount" means, at any date:
(a) with respect to an amount denominated in Dollars, such
amount as at such date; and
(b) with respect to an amount denominated in any other Available
Currency, the amount of Dollars into which such Available Currency is
convertible into Dollars, as at such date and on the terms herein
provided.
"Effective Date" is defined in Section 11.8.
"Effective Date Certificate" means a certificate duly completed and
executed by an Authorized Person of Micro, substantially in the form of
Exhibit F hereto.
"Eligible Assignee" means (i) a commercial bank organized under the laws
of the United States, or any State thereof; (ii) a commercial bank organized
under the laws of any other country that is a member of the Organization for
Economic Cooperation and Development or has concluded special lending
arrangements with the International Monetary Fund associated with its General
Arrangements to Borrow, or a political subdivision of any such country,
provided that such bank is acting through a branch or agency located in the
United States; (iii) the central bank of any country that is a member of the
Organization for Economic Cooperation and Development; (iv) any Lender; or (v)
solely during the occurrence and continuance of a Default, a finance company,
insurance company or other financial institution or fund (whether a
corporation, partnership or other entity) engaged generally in making,
purchasing and otherwise investing in commercial loans in the ordinary course
of its business; provided, however, that (A) any Person described in clause
(i), (ii) or (iii) above shall also (x) have outstanding unsecured
indebtedness that is rated A- or better by S&P, A3 or better by Moody's or
A- or better by Fitch (or an equivalent rating by another nationally
recognized credit rating agency of similar standing if such corporations
are no longer in the business of rating unsecured indebtedness of entities
engaged in such businesses), (y) have combined capital and surplus (as
established in its most recent report of condition to its primary
regulator) of not less than $250,000,000 (or its equivalent in foreign
currency) and (z) be reasonably acceptable to the Administrative Agent and,
so long as no Default shall have occurred and be continuing, Micro, (B) any
Person described in clause (v) above shall (x) have combined capital and
surplus (as established in its most recent report of condition to its
primary regulator) of not less than $250,000,000 (or its equivalent in
foreign currency) and (y) be reasonably acceptable to the Administrative
Agent and Micro and (C) any Person described in clause (ii), (iii) or (v)
above shall, on the date on which it is to become a Lender hereunder, be
entitled to receive payments hereunder without deduction or withholding of
any United States Federal income taxes.
"Entertainment" means Ingram Entertainment Inc., a Tennessee
corporation.
"Environmental Laws" means any and all applicable statutes, laws,
ordinances, codes, rules, regulations and binding and enforceable guidelines
(including consent decrees and administrative orders binding on any Obligor or
any of their respective Subsidiaries), in each case as now or hereafter in
effect, relating to human health and safety, or the regulation or protection
of the environment, or to emissions, discharges, releases or threatened
releases of pollutants, contaminants, chemicals or toxic or hazardous
substances or wastes into the indoor or outdoor environment, or otherwise
relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of pollutants, contaminants,
chemicals or toxic or hazardous substances or wastes issued (presently or in
the future) by any Federal, state, or local authority in the United States or
any foreign jurisdiction in which any Obligor or any of their respective
Subsidiaries is conducting its business.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import, together with the rules
and regulations promulgated thereunder, in each case as in effect from time to
time. References to sections of ERISA also refer to any successor sections.
"Eurocurrency Liabilities" has the meaning assigned to that term in
Regulation D of the F.R.S. Board, as in effect from time to time.
"European Currency Units" means the composite currency unit designated
as such by the European Community.
"Event of Default" is defined in Section 9.1.
"Excess Amount" is defined in clause (d) of Section 5.9.
"Existing Industries Credit Agreement" means the Amended and Restated
Credit Agreement, dated as of May 5, 1995, among the Borrowers (other than
Micro Singapore), Industries, Entertainment, Ingram Ohio Barge Co., Ingram
Micro Singapore Inc., the various financial institutions parties thereto, and
the co-agents, lead managers and European agent named therein, as amended.
"FASB" means the Financial Accounting Standards Board.
"Federal Funds Rate" means, for any period, a fluctuating interest rate
per annum equal for each day during such period to:
(a) the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System arranged by
federal funds brokers, as published for such day (or, if such day is not
a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York; or
(b) if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day on such
transactions received by the Administrative Agent from three federal
funds brokers of recognized standing selected by it.
In the case of a day which is not a Business Day, the Federal Funds Rate for
such day shall be the Federal Funds Rate for the next preceding Business Day.
For purposes of this Agreement, any change in the Reference Rate due to a
change in the Federal Funds Rate shall be effective on the effective date of
such change in the Federal Funds Rate.
"Fee Letter" means that certain confidential letter, dated as of the
date hereof, among Scotiabank and NationsBank and Micro, relating to certain
fees to be paid in connection with this Agreement.
"Fiscal Period" means a fiscal period of Micro or any of its
Subsidiaries, which shall be either a calendar quarter or an aggregate period
comprised of three (3) consecutive periods of four (4) weeks and five (5)
weeks (or, on occasion, six (6) weeks instead of five), currently commencing
on or about each January 1, April 1, July 1 or October 1.
"Fiscal Year" means, with respect to any Person, the fiscal year of such
Person. The term Fiscal Year, when used without reference to any Person,
shall mean a Fiscal Year of Micro, which currently ends on the Saturday
nearest December 31.
"Fitch" means Fitch Investors Service, L.P.
"French Francs" means the lawful currency of France.
"F.R.S. Board" is defined in Section 7.17.
"Funded Debt" means, with respect to any Person, all Indebtedness of
such Person which by its terms or by the terms of any instrument or agreement
relating thereto matures, or which is otherwise payable or unpaid, one year or
more from, or is directly or indirectly renewable or extendible at the option
of the obligor in respect thereto to a date one year or more (including,
without limitation, an option of such obligor under a revolving credit or
similar agreement obligating the lender or lenders to extend credit over a
period of one year or more) from, the date of the creation thereof, provided
that Funded Debt shall include, as at any date of determination, Current
Maturities of Funded Debt.
"GAAP" is defined in Section 1.4.
"Guarantee Letter of Credit Obligations" means any contingent legal
obligations of any Person to reimburse any financial institution for draws on
letters of credit (including those issued pursuant to this Agreement) issued
for the account of such Person to support or ensure payment or performance of
Indebtedness or obligations of some other Person provided no such draws have
been made and such obligation to reimburse is not then due and payable; it
being understood that no obligation with respect to any letter of credit
(including those issued pursuant to this Agreement) may be treated as both a
Reimbursement Obligation and a Guarantee Letter of Credit Obligation.
"Guaranties" means, collectively,
(a) the Micro Guaranty;
(b) the Coordination Center Guaranty;
(c) the Micro Canada Guaranty (Micro);
(d) the Micro Canada Guaranty (Coordination Center/Micro
Singapore);
(e) the Micro Singapore Guaranty; and
(f) each Additional Guaranty.
"Guarantors" means, collectively, the Borrowers and each Additional
Guarantor.
"Guilders" means the lawful currency of the Kingdom of the Netherlands.
"Hazardous Material" means:
(a) any pollutant or contaminant or hazardous, dangerous or
toxic chemical, material or substance that presently or hereafter
becomes defined as or included in the definition of "hazardous
substances", "hazardous wastes", "hazardous materials", "extremely
hazardous wastes", "restricted hazardous wastes", "toxic substances",
"toxic pollutants", "contaminants", "pollutants", or terms of similar
import within the meaning of any Environmental Law; or
(b) any other chemical or other material or substance, exposure
to which is presently or hereafter prohibited, limited or regulated
under any Environmental Law.
"herein", "hereof", "hereto", "hereunder" and similar terms contained in
this Agreement or any other Loan Document refer to this Agreement or such
other Loan Document, as the case may be, as a whole and not to any particular
Article, Section, clause, paragraph or provision of this Agreement or such
other Loan Document.
"Hong Kong Dollars" means the lawful currency of Hong Kong.
"Impermissible Qualifications" means, relative to the opinion of
certification of any independent public accountant engaged by Micro as to any
financial statement of Micro and its Consolidated Subsidiaries, any
qualification or exception to such opinion or certification:
(a) which is of a "going concern" or similar nature;
(b) which relates to the limited scope of examination of matters
relevant to such financial statement; or
(c) which relates to the treatment or classification of any
item in such financial statement and which, as a condition to its
removal, would require an adjustment to such item the effect of which
would be to cause Micro to be in default of any of its obligations under
Section 8.2.3 or 8.2.8.
"including" and "include" mean including without limiting the generality
of any description preceding such term.
"Indebtedness" of any Person means and includes the sum of the following
(without duplication):
(a) all obligations of such Person for borrowed money, all
obligations evidenced by bonds, debentures, notes, investment repurchase
agreements or other similar instruments, and all securities issued by
such Person providing for mandatory payments of money, whether or not
contingent;
(b) all obligations of such Person pursuant to revolving credit
agreements or similar arrangements to the extent then outstanding;
(c) all obligations of such Person to pay the deferred purchase
price of property or services, except (i) trade accounts payable arising
in the ordinary course of business, (ii) other accounts payable arising
in the ordinary course of business in respect of such obligations the
payment of which has been deferred for a period of 270 days or less,
(iii) other accounts payable arising in the ordinary course of business
none of which shall be, individually, in excess of $200,000 and (iv)
leases of personal property not required to be capitalized under FASB
Statement 13;
(d) all obligations of such Person as lessee under Capitalized
Lease Liabilities;
(e) all obligations of such Person to purchase securities (or
other property) which arise out of or in connection with the sale of the
same or substantially similar securities or property excluding any such
sales or exchanges for a period of less than 45 days;
(f) all obligations with respect to letters of credit (other
than trade letters of credit) and bankers' acceptances issued for the
account of such Person;
(g) all Indebtedness of others secured by a Lien of any kind on
any asset of such Person, whether or not such Indebtedness is assumed by
such Person; provided, that the amount of any Indebtedness attributed
to any Person pursuant to this clause (g) shall be limited, in each
case, to the lesser of (i) the fair market value of the assets of such
Person subject to such Lien and (ii) the amount of the other Person's
Indebtedness secured by such Lien; and
(h) all guarantees, endorsements and other Contingent
Liabilities of or in respect of, or obligations to purchase or otherwise
acquire, the Indebtedness of another Person;
provided, however, that it is understood and agreed that the following are not
"Indebtedness":
(i) obligations to pay the deferred purchase price for the
acquisition of any business (whether by way of merger, sale of
stock or assets or otherwise) to the extent that such obligations
are contingent upon attaining performance criteria such as
earnings and such criteria shall not have been achieved;
(ii) obligations to repurchase securities (A) issued to
employees pursuant to any Plan or other contract or arrangement
relating to employment upon the termination of their employment or
other events, or (B) that may arise out of the transactions
contemplated by the Transition Agreements;
(iii) obligations to match contributions of employees under
any Plan; and
(iv) guarantees of any Obligor or any of their respective
Subsidiaries that are guarantees of performance, reclamation or
similar bonds or, in lieu of such bonds, letters of credit used
for such purposes issued in the ordinary course of business for
the benefit of any Subsidiary of Micro, which would not be included
on the consolidated financial statements of any Obligor.
"Indemnified Liabilities" is defined in Section 11.4.
"Indemnified Parties" is defined in Section 11.4.
"Industries" means Ingram Industries Inc., a Tennessee corporation.
"Ineligible Currency" means, with respect to any Non-Rata Revolving Loan
denominated in an Available Currency (other than Dollars), a determination by
the relevant Lender that the currency in which such Loan is denominated has
ceased to be (a) freely convertible into Dollars or (b) a currency for which
there is an active foreign exchange and deposit market in New York City.
"Intangible Assets" means, with respect to any Person, that portion of
the book value of the assets of such Person which would be treated as
intangibles under GAAP, including all items such as goodwill, trademarks,
trade names, brands, trade secrets, customer lists, copyrights, patents,
licenses, franchise conversion rights and rights with respect to any of the
foregoing and all unamortized debt or equity discount and expenses.
"Interest Period" means, for any LIBO Rate Loan, the period beginning on
(and including) the date on which such LIBO Rate Loan is made, continued or
converted and ending on (but excluding) the last day of the period selected by
Micro pursuant to the provisions below. The duration of each such Interest
Period shall be one, three or six months from (and including) the date of such
LIBO Rate Loan, ending on (but excluding) the day which numerically
corresponds to such date (or, if such month has no numerically corresponding
day, on the last Business Day of such month), as Micro may select in its
relevant notice pursuant to Section 3.1 or 4.2.3; provided, however, that
(a) Micro shall not be permitted to select Interest Periods for
LIBO Rate Loans to be in effect at any one time which have expiration
dates occurring on more than 20 different dates;
(b) Interest Periods commencing on the same date for Loans
comprising part of the same Borrowing shall be of the same duration;
(c) if such Interest Period would otherwise end on a day which
is not a Business Day, such Interest Period shall end on the next
following Business Day (unless, if such Interest Period applies to a
LIBO Rate Loan, such next following Business Day is the first Business
Day of a calendar month, in which case such Interest Period shall end on
the Business Day next preceding such numerically corresponding day); and
(d) no Interest Period for any LIBO Rate Loan may end, with
respect to each Lender making a part of such Loan, later than the
Commitment Termination Date.
"Intra-Group Agreement" means the Intra-Group Agreement, in the form of
Exhibit G-2 hereto, duly executed and delivered by Authorized Persons of each
Borrower that is a Guarantor, as amended, supplemented, restated or otherwise
modified from time to time.
"Investment" means an increase since January 1, 1996 in Consolidated
Tangible Net Worth by at least $220,000,000 from (i) an initial public
offering by Micro; (ii) other equity offerings or issuances of capital stock;
(iii) the exercise of stock options on Micro stock held by present or former
employees of Micro, Industries or Entertainment (or any of their respective
Subsidiaries); (iv) an irrevocable contribution of cash to the capital of
Micro; or (v) a combination of the events described in clauses (i) through
(iv) above.
"Investment Prospectus" is defined in Section 6.1.11.
"Issuance Request" means an issuance request for Pro-Rata Letters of
Credit duly completed and executed by an Authorized Person of Micro,
substantially in the form of Exhibit C hereto.
"Issuer" means either NationsBank or Scotiabank, in its capacity as
issuer of the Pro-Rata Letters of Credit, or any Lender in its capacity as
issuer of a Non-Rata Letter of Credit. At the request of the Agents, another
Lender or an Affiliate of NationsBank or Scotiabank may issue one or more
Pro-Rata Letters of Credit hereunder.
"Krona" means the lawful currency of Sweden.
"Lenders" is defined in the preamble.
"Lender Assignment Agreement" means a Lender Assignment Agreement
substantially in the form of Exhibit K attached hereto.
"Lender Party" means any of the Lenders, Agents, Co-Agents or Issuers.
"Lending Office" means, relative to any LIBO Rate Loan of a Lender, the
LIBOR Office of such Lender designated as such below its signature hereto or
in a Lender Assignment Agreement or by notice to the Administrative Agent and
Micro from time to time and relative to any Non-Rata Credit Extension, the
office that such Lender shall designate.
"Letter of Credit Commitment Amount" means, on any date, a maximum
amount of $250,000,000, as such amount may be reduced from time to time
pursuant to Section 2.3.
"Letter of Credit Outstandings" means, on any date, the sum (without
duplication) of the Dollar Amounts of
(a) the then aggregate amount which is undrawn and available
under all Pro-Rata Letters of Credit issued and outstanding (assuming
that all conditions for drawing have been satisfied);
plus
(b) the then aggregate amount of all unpaid and outstanding
Pro-Rata Reimbursement Obligations.
"Letters of Credit" shall mean, collectively, all Pro-Rata Letters of
Credit issued and outstanding and Non-Rata Letters of Credit issued and
outstanding.
"LIBO Auction" means a solicitation of Quotes setting forth LIBO Margins
based on the LIBO Rate pursuant to Section 3.5.3.
"LIBO Margin" is defined in Section 3.5.3.
"LIBO Market Loan" means a Bid Rate Loan the interest rate on which is
determined on the basis of a LIBO Rate pursuant to a LIBO Auction.
"LIBO Rate" means, relative to any Interest Period for LIBO Rate Loans,
the rate of interest equal to the average (rounded upwards, if necessary, to
the nearest 1/16 of 1% per annum) of the rates per annum at which Dollar
deposits in immediately available funds are offered to each Reference Lender's
LIBOR Office in the London interbank market at or about 11:00 a.m., London
time, two Business Days prior to the beginning of such Interest Period for
delivery on the first day of such Interest Period, and in an amount
approximately equal to the amount of each such Reference Lender's LIBO Rate
Loan and for a period approximately equal to such Interest Period.
"LIBO Rate Loan" means a Pro-Rata Revolving Loan bearing interest, at
all times during the Interest Period applicable thereto, at a fixed rate of
interest determined by reference to the LIBO Rate.
"LIBOR Reserve Percentage" means, for any Lender, relative to any
Interest Period for LIBO Rate Loans, the reserve percentage (expressed as a
decimal) equal to the maximum aggregate reserve requirements (including all
basic, emergency, supplemental, marginal and other reserves and taking into
account any transitional adjustments or other scheduled changes in reserve
requirements) specified under regulations issued from time to time by the
F.R.S. Board and then applicable to assets or liabilities consisting of and
including Eurocurrency Liabilities having a term approximately equal or
comparable to such Interest Period.
"Lien" means any security interest, mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or otherwise),
charge against, valid claim on or interest in property to secure payment of a
debt or performance of an obligation or other priority or preferential
arrangement of any kind or nature whatsoever (including, without limitation,
(a) the lien or retained security title of a conditional vendor, and (b) under
any agreement for the sale of Trade Accounts Receivable, the interest of the
purchaser (or any assignee of such purchaser which has financed the relevant
purchase) in a percentage of receivables of the seller not so sold, held by
the purchaser (or such assignee) as a reserve for (i) interest rate protection
in the event of a liquidation of the receivables sold, (ii) expenses that
would be incurred upon a liquidation of the receivables sold, (iii) losses
that might be incurred in the event the amount actually collected from the
receivables sold is less than the amount represented in the relevant
receivables purchase agreement as collectible, or (iv) any similar purpose
(but excluding the interest of a trust in such receivables to the extent that
the beneficiary of such trust is Micro or a Subsidiary of Micro).
"Lira" means the lawful currency of the Republic of Italy.
"Loan" means a Pro-Rata Revolving Loan or a Non-Rata Revolving Loan or
a Bid Rate Loan.
"Loan Document" means this Agreement, each Note, each Credit Extension
Request, each Letter of Credit, the Intra-Group Agreement, each Guaranty, the
most recently delivered Compliance Certificate (specifically excluding any
other Compliance Certificate previously delivered), any Accession Request and
Acknowledgment and any other agreement, document or instrument (excluding any
documents delivered solely for the purpose of satisfying disclosure
requirements or requests for information) required in connection with this
Agreement or the making or maintaining of any Credit Extension and delivered
by an Authorized Person.
"Margin Stock" means "margin stock", as such term is defined and used in
Regulation U.
"Marks" means the lawful currency of the Federal Republic of Germany.
"Material Adverse Effect" means an event, act, occurrence or other
circumstance which results in a material adverse effect on the business,
results of operations or financial condition of Micro and its Consolidated
Subsidiaries, taken as a whole.
"Material Asset Acquisition" is defined in Section 8.2.5(b).
"Material Subsidiary" means: (a) with respect to any Subsidiary of Micro
as of the date hereof, a Subsidiary of Micro that (as of any date of
determination), (i) on an average over the three (3) most recently preceding
Fiscal Years contributed at least five percent (5%) to Consolidated Net
Income, or (ii) on an average at the end of the three (3) most recently
preceding Fiscal Years owned assets constituting at least five percent (5%) of
Consolidated Assets; and (b) with respect to any Subsidiary of Micro organized
or acquired subsequent to the date hereof, a Subsidiary of Micro that as of
(i) the date it becomes a Subsidiary of Micro, would have owned (on a pro
forma basis if such Subsidiary had been a Subsidiary of Micro at the end of
the preceding Fiscal Year) assets constituting at least five percent (5%) of
Consolidated Assets at the end of the Fiscal Year immediately prior to the
Fiscal Year in which it is organized or acquired, or (ii) any date of
determination thereafter, (A) on an average over the three (3) most recently
preceding Fiscal Years (or, if less, since the date such Person became a
Subsidiary of Micro) contributed at least five percent (5%) to Consolidated
Net Income, or (B) on an average at the end of the three (3) (or, if less,
such number of Fiscal Year-ends as have occurred since such Person became a
Subsidiary of Micro) most recently preceding Fiscal Years owned assets
constituting at least five percent (5%) of Consolidated Assets; provided that
Ingram Funding Inc., Distribution Funding Corporation and any other special
purpose financing vehicle shall not be Material Subsidiaries.
"Maturity" of any Obligation means the earliest to occur of
(a) the date on which such Obligation expressly becomes due and
payable pursuant hereto or any other Loan Document or, in the case of
any Obligation incurred in respect of any Non-Rata Revolving Loan or Bid
Rate Loan, pursuant to the arrangements entered into by the relevant
Borrower and the relevant Lender in connection therewith but in no event
beyond the then Commitment Termination Date with respect to such Lender,
(b) the Stated Maturity Date (in the case of Pro-Rata Revolving
Loans) where no such due date is specified, and
(c) the date on which such Obligation becomes due and payable
pursuant to Section 9.2 or 9.3 or 9.4.
"Mexican Pesos" means the lawful currency of the United States of
Mexico.
"Micro" is defined in the preamble.
"Micro Canada" is defined in the preamble.
"Micro Canada Guaranty (Coordination Center/Micro Singapore)" means a
guaranty, in the form of Exhibit I-1 attached hereto, duly executed and
delivered by an Authorized Person of Micro Canada, as amended, supplemented,
restated or otherwise modified from time to time.
"Micro Canada Guaranty (Micro)" means a guaranty, in the form of Exhibit
I-2 attached hereto, duly executed and delivered by an Authorized Person of
Micro Canada, as amended, supplemented, restated or otherwise modified from
time to time.
"Micro Guaranty" means the Guaranty, in the form of Exhibit H attached
hereto, duly executed and delivered by an Authorized Person of Micro, as
amended, supplemented, restated or otherwise modified from time to time.
"Micro Singapore" is defined in the preamble.
"Micro Singapore Guaranty" means the Guaranty, in the form of Exhibit
I-3 attached hereto, duly executed and delivered by an Authorized Person of
Micro Singapore, as amended, supplemented, restated or otherwise modified from
time to time.
"Moody's" means Moody's Investors Service, Inc.
"NationsBank" is defined in the preamble.
"Non-Rata Credit Extension" means, collectively,
(a) the making of a Non-Rata Revolving Loan by any Lender;
(b) the issuance by any Lender of a Non-Rata Letter of Credit;
and
(c) the making of a Bid Rate Loan by any Lender.
"Non-Rata Disbursement Date" is defined in Section 3.4.5.
"Non-Rata Letter of Credit" is defined in Section 3.4.1.
"Non-Rata Reimbursement Obligations" is defined in Section 3.4.6.
"Non-Rata Revolving Loans" is defined in Section 3.3.1.
"Non-Rata Revolving Note" means a promissory note of a Borrower payable
to a Lender, in the form of Exhibit A-3 hereto (as such promissory note may be
amended, endorsed or otherwise modified from time to time), evidencing the
aggregate Indebtedness of such Borrower to such Lender resulting from
outstanding Non-Rata Revolving Loans, and also means all other promissory
notes accepted from time to time in substitution therefor or renewal thereof.
"Norwegian Krone" means the lawful currency of Norway.
"Note" means, as the context may require, a Revolving Note, a Non-Rata
Revolving Note, a Bid Rate Note, or any promissory note of Coordination
Center that may be issued from time to time to evidence Non-Rata Revolving
Loans made by any Lender to Coordination Center.
"Obligations" means, individually and collectively: (a) the Loans; (b)
all Letter of Credit Outstandings and (c) all other indebtedness, liabilities,
obligations, covenants and duties of any Borrower owing to the Agents and/or
the Lenders of every kind, nature and description, under or in respect of this
Agreement or any of the other Loan Documents including, without limitation,
any fees, whether direct or indirect, absolute or contingent, due or not due,
contractual or tortious, liquidated or unliquidated, and whether or not
evidenced by any note.
"Obligors" means, collectively, the Borrowers and Guarantors.
"Organic Documents" means, relative to any Obligor, any governmental
filing or proclamation pursuant to which such Person shall have been created
and shall continue in existence (including a charter or certificate or
articles of incorporation or organization, and, with respect to Coordination
Center, the Royal Decree) and its by-laws (or, if applicable, partnership or
operating agreement) and all material shareholder agreements, voting trusts
and similar arrangements to which such Obligor is a party that are applicable
to the voting of any of its authorized shares of capital stock (or, if
applicable, other ownership interests therein).
"Outstanding Credit Extensions" means, relative to any Lender at any
date and without duplication, the sum of the Dollar Amounts of
(a) the aggregate principal amount of all outstanding Loans of
such Lender at such date,
plus
(b) such Lender's Percentage of the aggregate Stated Amount of
all Pro-Rata Letters of Credit which are outstanding and undrawn (or
drawn and unreimbursed) at such date,
plus
(c) the aggregate Stated Amount of all Non-Rata Letters of
Credit issued by such Lender which are outstanding and undrawn (or drawn
and unreimbursed) at such date.
"Participant" is defined in Section 11.11.2.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Pension Plan" means a "pension plan", as such term is defined in
section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a
multiemployer plan as defined in section 4001(3) of ERISA), and to which any
Obligor or any corporation, trade or business that is, along with Obligor, a
member of a Controlled Group, may have liability, including any liability by
reason of having been a substantial employer within the meaning of section
4063 of ERISA at any time during the preceding five years, or by reason of
being deemed to be a contributing sponsor within the meaning of section 4069
of ERISA.
"Percentage" of any Lender means in the case of (a) each Lender which
is a signatory to this Agreement, the percentage set forth opposite such
Lender's signature hereto under the caption "Percentage", subject to any
modification necessary to give effect to any sale, assignment or transfer made
pursuant to Section 11.11.1, or (b) any Transferee Lender, effective upon the
occurrence of the relevant purchase by, or assignment to, such Transferee
Lender, the portion of the Percentage of the selling, assigning or
transferring Lender allocated to such Transferee Lender. With respect to any
Lender at any time, "Percentage" shall express the ratio of such Lender's then
Available Credit Commitments to the then aggregate Available Credit
Commitments of all the Lenders.
"Person" means any natural person, company, partnership, firm, limited
liability company or partnership, association, trust, government, governmental
agency or any other entity, whether acting in an individual, fiduciary or
other capacity.
"Pesetas" means the lawful currency of Spain.
"Plan" means any Pension Plan or Welfare Plan.
"Pro-Rata Credit Extension" means, collectively,
(a) the making of Pro-Rata Revolving Loans by the Lenders; and
(b) the issuance by any Issuer of a Pro-Rata Letter of Credit.
"Pro-Rata Distribution Event" is defined in clause (c) of Section 5.9.
"Pro-Rata Letter of Credit" means an irrevocable letter of credit issued
pursuant to Section 3.2.
"Pro-Rata Letter of Credit Commitment" means, with respect to any Issuer
of Pro-Rata Letters of Credit, such Issuer's obligations to issue Pro-Rata
Letters of Credit pursuant to Section 3.2 and, with respect to each of the
other Lenders, the obligations of each such Lender to participate in Pro-Rata
Letters of Credit pursuant to such Section.
"Pro-Rata Revolving Loans" is defined in clause (a) of Section 2.1.
"Pro-Rata Reimbursement Obligation" is defined in Section 3.2.3.
"Quarterly Payment Date" means the last day of March, June, September
and December of each calendar year or, if any such day is not a Business Day,
the next succeeding Business Day.
"Quarterly Report" means a report duly completed, substantially in the
form of Exhibit L attached hereto (including, in addition to the information
expressly described in Exhibit L hereto, information (including calculations
in accordance with the provisions of the last sentence of Section 2.1)
regarding the values of the Available Currencies (other than the Dollar) of
all Outstanding Credit Extensions consisting of Non-Rata Credit Extensions as
of the end of the applicable Fiscal Period), as such Exhibit L may be amended,
supplemented, restated or otherwise modified from time to time.
"Quote" means an offer in accordance with Section 3.5.3 by a Lender to
make a Bid Rate Loan with one single specified interest rate.
"Quote Request" has the meaning set forth in Section 3.5.2.
"Receiving Lender Party" is defined in clause (d) of Section 5.9.
"Reference Lenders" means Scotiabank, NationsBank, The First National
Bank of Chicago and The Chase Manhattan Bank.
"Reference Rate" means, on any date and with respect to all Reference
Rate Loans, a fluctuating rate of interest per annum equal to
(a) at all times other than the last five Business Days of each
calendar quarter, the rate of interest most recently announced or
established by NationsBank as its reference rate for Dollar loans; and
(b) during the last five Business Days of each calendar quarter,
the higher of (i) the rate set forth in the preceding clause (a) and
(ii) the Federal Funds Rate plus 1/2 of 1%.
The Reference Rate is not necessarily intended to be the lowest rate of
interest determined by NationsBank in connection with extensions of credit.
Changes in the rate of interest on that portion of any Pro-Rata Revolving
Loans maintained as Reference Rate Loans will take effect simultaneously with
each change in the Reference Rate. The Administrative Agent will give notice
promptly to Micro and the Lenders of changes in the Reference Rate.
"Reference Rate Loan" means a Pro-Rata Revolving Loan bearing interest
at a fluctuating rate of interest determined by reference to the Reference
Rate.
"Regulation U" is defined in Section 7.17.
"Regulatory Change" means any change after the date hereof in any (or
the promulgation after the date hereof of any new):
(a) law applicable to any class of banks (of which any Lender
Party is a member) issued by (i) any competent authority in any country
or jurisdiction, or (ii) any competent international or supra-national
authority; or
(b) regulation, interpretation, directive or request (whether or
not having the force of law) applicable to any class of banks (of which
any Lender Party is a member) of any court, central bank or governmental
authority or agency charged with the interpretation or administration of
any law referred to in clause (a) of this definition or of any fiscal,
monetary or other authority having jurisdiction over any Lender Party.
"Reimbursement Obligations" shall mean, collectively, all Pro-Rata
Reimbursement Obligations and Non-Rata Reimbursement Obligations.
"Release" means a "release", as such term is defined in the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as amended and as in effect from time to time (42 United States Code Section
9601 et seq.), and any rules and regulations promulgated thereunder.
"Relevant Issuer" is defined in Section 8.2.7.
"Remaining Lender" is defined in clause (a) of Section 2.2.
"Replacement Notice" is defined in Section 5.12.
"Required Currency" is defined in Section 5.8.2.
"Required Lenders" means, at any time, Lenders having an aggregate
Percentage of at least 65%.
"Revolving Note" means a promissory note of Micro payable to a Lender,
in the form of Exhibit A-1 hereto (as such promissory note may be amended,
endorsed or otherwise modified from time to time), evidencing the aggregate
Indebtedness of Micro to such Lender resulting from outstanding Pro-Rata
Revolving Loans, and also means all other promissory notes accepted from time
to time in substitution therefor or renewal thereof.
"Ringgit" means the lawful currency of Malaysia.
"Royal Decree" means the Royal Decree of The Kingdom of Belgium
recognizing Coordination Center as a coordination center under Belgian law, as
the same may from time to time be amended, supplemented or otherwise modified
by any new Royal Decree relating to the recognition of the Coordination Center
as a coordination center under Belgium law.
"S&P" means Standard & Poor's Rating Services, a division of The
McGraw-Hill Companies, Inc.
"Schillings" means the lawful currency of the Republic of Austria.
"Scotiabank" is defined in the preamble.
"Singapore Dollars" means the lawful currency of Singapore.
"Stated Amount" for any Letter of Credit on any day means the amount
which is undrawn and available under such Letter of Credit on such day (after
giving effect to any drawings thereon on such day).
"Stated Expiry Date" is defined in Section 3.2.
"Stated Maturity Date" means, for each Lender, in the case of any
Pro-Rata Revolving Loan, the then-effective Commitment Termination Date.
"Sterling" means the lawful currency of the United Kingdom of England
and Wales.
"Subject Lender" is defined in Section 5.12.
"Subsidiary" means, with respect to any Person, any corporation, company,
partnership or other entity of which more than fifty percent (50%) of the
outstanding shares or other ownership interests having by the terms thereof
ordinary voting power to elect a majority of the board of directors of, or
other persons performing similar functions for, such corporation, company,
partnership or other entity (irrespective of whether at the time shares or
other ownership interests of any other class or classes of such corporation,
company, partnership or other entity shall or might have voting power upon the
occurrence of any contingency) is at the time directly or indirectly owned by
such Person, by such Person and one or more other Subsidiaries of such Person,
or by one or more other Subsidiaries of such Person.
"Supplemental Borrowers" is defined in the preamble, and such term shall
include any Acceding Borrowers party to this Agreement from time to time,
together with their respective successors and assigns.
"Swiss Francs" means the lawful currency of Switzerland.
"Tax Credit" is defined in Section 5.7.
"Tax Payment" is defined in Section 5.7.
"Taxes" is defined in Section 5.7.
"Total Credit Commitment Amount" means, at any time, $1,000,000,000, as
such amount may be reduced from time to time pursuant to Section 2.3.
"Total Indebtedness" means, at any date, the aggregate of all
Indebtedness on such date of Micro and its Subsidiaries, without duplication
and after eliminating all offsetting debits and credits between Micro and its
Subsidiaries and all other items required to be eliminated in accordance with
GAAP.
"Total Indebtedness of Subsidiaries" means, at any date, the aggregate
of all Indebtedness on such date of all the Subsidiaries of Micro, without
duplication and after eliminating all offsetting debits and credits between
each of such Subsidiaries or between such a Subsidiary and Micro and all other
items required to be eliminated in accordance with GAAP, excluding (a) all
Indebtedness of any Subsidiary of Micro outstanding on the date hereof or
incurred pursuant to any commitment or line of credit in its favor in effect
on the date hereof, and any renewals or replacements thereof, so long as such
renewals or replacements do not increase the amount of such Indebtedness or
such commitments or lines of credit and (b) any Indebtedness of Ingram Funding
Inc., Distribution Funding Corporation or any other special purpose financing
vehicle incurred in connection with their purchase, directly or indirectly,
from Micro or any of Micro's other Subsidiaries, of Trade Accounts Receivable
or interests therein.
"Trade Accounts Receivable" means, with respect to any Person, all
rights of such Person to the payment of money arising out of any sale, lease
or other disposition of goods or rendition of services by such Person.
"Transferee Lender" is defined in Section 11.11.1.
"Transition Agreements" means those agreements and other instruments
entered into by Micro, Industries, Entertainment and certain other Persons on
or before the date hereof in connection with a series of related transactions
through which Micro and Entertainment cease to be Subsidiaries of Industries,
in each case as summarized in the annexes attached to the certificate referred
to in Section 6.1.12, each as in effect on the date hereof (or, if later, the
date the Investment is consummated), without giving effect to any amendment,
modification or supplement thereafter except for such amendments,
modifications or supplements after the date hereof, which, individually or
taken as whole, do not materially alter the terms of such Transition Agreement
or adversely affect Micro or any of its Subsidiaries.
"Type" means, relative to any Loan, the portion thereof, if any, being
maintained as a Reference Rate Loan or a LIBO Rate Loan.
"United States" or "U.S." means the United States of America, its fifty
States and the District of Columbia.
"Voting Stock" means, (a) with respect to a corporation, the stock of
such corporation the holders of which are ordinarily, in the absence of
contingencies, entitled to elect members of the board of directors (or other
governing body) of such corporation, (b) with respect to any partnership, the
partnership interests in such partnership the owners of which are entitled to
manage the affairs of the partnership or vote in connection with the
management of the affairs of the partnership or the designation of another
Person as the Person entitled to manage the affairs of the partnership, and
(c) with respect to any limited liability company, the membership interests
in such limited liability company the owners of which are entitled to manage
the affairs of such limited liability company or entitled to elect managers of
such limited liability company (it being understood that, in the case of any
partnership or limited liability company, "shares" of Voting Stock shall refer
to the partnership interests or membership interests therein, as the case may
be).
"Welfare Plan" means a "welfare plan", as such term is defined in
section 3(1) of ERISA.
"Withdrawing Lender" is defined in clause (a) of Section 2.2.
"Won" means the lawful currency of the Republic of Korea.
"Yen" means the lawful currency of Japan.
SECTION 1.2. Use of Defined Terms. Unless otherwise defined or the
context otherwise requires, terms for which meanings are provided in this
Agreement shall have such meanings when used in the Disclosure Schedule and
in each Credit Extension Request, each other Loan Document, and each notice
and other communication delivered from time to time in connection with this
Agreement or any other Loan Document.
SECTION 1.3. Cross-References. Unless otherwise specified, references
in this Agreement and in each other Loan Document to any Article, Section,
clause or definition are references to such clause or definition of this
Agreement or such other Loan Document, as the case may be, and, unless
otherwise specified, references in any Article, Section, clause or
definition to any section are references to such section of such Article,
Section, clause or definition.
SECTION 1.4. Accounting and Financial Determinations.
(a) Unless otherwise specified, all accounting terms used herein
or in any other Loan Document shall be interpreted, and all accounting
determinations and computations hereunder or thereunder (including under
Section 8.2.3) shall be made, in accordance with those U.S. generally
accepted accounting principles ("GAAP") as applied in the preparation of
the financial statements of Micro and its Consolidated Subsidiaries
delivered pursuant to clause (a) of Section 6.1.5; provided, however,
that the financial statements required to be delivered pursuant to
clauses (a) and (b) of Section 8.1.1 shall be prepared in accordance
with GAAP as in effect from time to time and the quarterly financial
statements required to be delivered pursuant to clause (b) of Section
8.1.1 are not required to contain footnote disclosures required by GAAP
and shall be subject to ordinary year-end adjustments.
(b) If, after the date hereof, there shall be any change to the
Borrower's Fiscal Year, or any modification in GAAP used in the
preparation of the financial statements delivered pursuant to clause (a)
of Section 6.1.5 (whether such modification is adopted or imposed by
FASB, the American Institute of Certified Public Accountants or any other
professional body) which changes result in a change in the method of
calculation of financial covenants, standards or terms found in this
Agreement, the parties hereto agree promptly to enter into negotiations
in order to amend such financial covenants, standards or terms so as to
reflect equitably such changes, with the desired result that the
evaluations of the Borrower's financial condition shall be the same
after such changes as if such changes had not been made; provided,
however, that until the parties hereto have reached a definitive
agreement on such amendments, the Borrower's financial condition shall
continue to be evaluated on the same principles as those used in the
preparation of the financial statements delivered pursuant to clause (a)
of Section 6.1.5.
SECTION 1.5. Calculations. Unless otherwise expressly stated to the
contrary in this Agreement or in any other Loan Document, all calculations
made for purposes of this Agreement, each other Loan Document and the
transactions contemplated hereby and thereby shall be made to two decimal
places.
ARTICLE II
COMMITMENTS, ETC.
SECTION 2.1. Commitments. On the terms and subject to the conditions
of this Agreement (including ARTICLE VI), each Lender severally agrees that it
will, from time to time on any Business Day occurring prior to the Commitment
Termination Date,
(a) make loans in Dollars ("Pro-Rata Revolving Loans") to Micro
equal to such Lender's Percentage of the aggregate amount of the
Borrowing to be made on such Business Day, all in accordance with
Section 3.1; provided, however, that no Lender shall be permitted or
required to make any Pro-Rata Revolving Loan if, after giving effect
thereto,
(i) such Lender's Outstanding Credit Extensions (excluding
for this calculation Non-Rata Credit Extensions) would exceed an
amount equal to such Lender's Percentage multiplied by the then
Total Credit Commitment Amount, or
(ii) the aggregate Outstanding Credit Extensions of all the
Lenders would exceed the then Total Credit Commitment Amount; and
(b) purchase participation interests in Dollars equal to its
Percentage in each Pro-Rata Letter of Credit issued upon the application
of Micro pursuant to Section 3.2; provided, however, that no Issuer
(with respect to Pro-Rata Letters of Credit) shall issue a Pro-Rata
Letter of Credit if, after giving effect thereto,
(i) the aggregate Letter of Credit Outstandings would
exceed the then Letter of Credit Commitment Amount, or
(ii) the aggregate Outstanding Credit Extensions of all the
Lenders would exceed the then Total Credit Commitment Amount.
All Pro-Rata Revolving Loans and Pro-Rata Letters of Credit (and drawings
thereunder) shall be denominated solely in, and repaid in, Dollars. On and
subject to the conditions hereof, Micro may from time to time borrow, prepay
and reborrow Pro-Rata Revolving Loans and may apply for, extinguish or
reimburse drawings made under and re-apply for Pro-Rata Letters of Credit.
For purposes of this Section 2.1 and Section 3.3.3, the Dollar Amount on any
date of Non-Rata Revolving Loans denominated in an Available Currency (other
than Dollars) shall be calculated based upon the spot rate at which Dollars
are offered on such day for such Available Currency which appears on Telerate
Page 3740 at approximately 11:00 a.m. (London time) (and if such spot rate is
not available on Telerate Page 3740 as of such time, such spot rate as quoted
by NationsBank, in London at approximately 11:00 a.m. (London time)).
SECTION 2.2. Extensions of the Commitment Termination Date.
(a) If the Commitment Termination Date has not occurred, Micro
may, on any Business Day occurring not earlier than May 1st, nor later
than June 30th of the year immediately preceding the year in which the
then-effective Commitment Termination Date occurs, deliver by registered
or certified mail, return receipt requested, or by overnight courier
service in the case of domestic deliveries (or the equivalent courier
service in the case of deliveries outside of the United States) in which
an acknowledgment of receipt of delivery is required from the recipient
thereof, to each Lender (with a copy thereof to the Administrative
Agent) three counterparts of a Commitment Extension Request
appropriately completed. Not later than July 31st of the year
immediately preceding the year in which the then-effective Commitment
Termination Date occurs, each Lender shall, by appropriately completing,
executing and delivering to Micro and the Administrative Agent the
Commitment Extension Request delivered to it, indicate whether or not it
intends to extend its Commitment pursuant to this Section 2.2. Any
Lender failing to return its Commitment Extension Request to Micro as
provided in the preceding sentence shall be deemed to have declined the
extension of its Commitments as contemplated by this Section 2.2. Not
later than August 15th of the year immediately preceding the year in
which the then-effective Commitment Termination Date occurs, the
Administrative Agent shall notify all of the Lenders as to the identity
of those Lenders that have indicated their intention not to extend their
respective Commitments (each a "Withdrawing Lender") and those Lenders
that have extended their Commitments (each a "Remaining Lender").
(b) In the event that, as of the date the Administrative Agent
delivers the notice provided for in the last sentence of paragraph (a)
above, (i) neither NationsBank nor Scotiabank shall be a Remaining
Lender and (ii) the Remaining Lenders shall hold, in the aggregate, less
than 75% of the Commitments, then from such date until a date not later
than August 31st of the year immediately preceding the year in which the
then-effective Commitment Termination Date occurs, each Remaining Lender
shall have the right to revoke (by delivering written notice thereof to
Micro and the Administrative Agent) its consent to such extension of its
Commitment provided pursuant to paragraph (a) of this Section (thereby
becoming a Withdrawing Lender hereunder as of the day of such
revocation). From and after the date the Administrative Agent delivers
the notice provided for in the last sentence of paragraph (a) of this
Section until a date not later than September 15th of the year
immediately preceding the year in which the then-effective Commitment
Termination Date occurs, the Remaining Lenders shall have the right to
assume the Commitments of any Withdrawing Lenders in proportion to their
respective share of the Commitments of such Remaining Lenders. If, as
of September 30th of the year immediately preceding the year in which
the then-effective Commitment Termination Date occurs, the Remaining
Lenders hold, in the aggregate, less than 75% of the Commitments (after
giving effect to any assumptions of the Commitments of Withdrawing
Lenders completed in accordance with the preceding sentence on or prior
to such date), the Commitments of all Lenders shall terminate and any
Outstanding Credit Extensions will mature and be payable in full on the
then-effective Commitment Termination Date.
(c) If, as of September 30th of the year immediately preceding
the year in which the then-effective Commitment Termination Date occurs,
the Remaining Lenders hold, in the aggregate, 75% or more of the
Commitments (after giving effect to any assumptions of the Commitments
of Withdrawing Lenders completed in accordance with the penultimate
sentence of paragraph (b) above on or prior to such date), the
Commitments of each Remaining Lender (including any Commitments assumed
by any Remaining Lender in accordance with the penultimate sentence of
paragraph (b) above) shall be extended for a period of one year (365
days or, if appropriate, 366 days) from the then-effective Commitment
Termination Date, subject to the satisfaction of the conditions
precedent to extension of the Commitments set forth in paragraph (f) of
this Section. In the event the requirements for extension of the
Commitments set forth in the preceding sentence shall be satisfied, from
and after October 1st of the year immediately preceding the year in
which the then-effective Commitment Termination Date occurs until a date
not later than 30 days prior to the then-effective Commitment
Termination Date, Micro may enter into an agreement with one or more new
financial institutions reasonably acceptable to the Agents or with any
Remaining Lender to assume the Commitments of the Withdrawing Lenders
which have not been assumed in accordance with the penultimate sentence
of paragraph (b) above. Any Commitments assumed by Remaining Lenders or
new financial institutions in accordance with the preceding sentence
shall be extended for a period of one year (365 days or, if appropriate,
366 days) from the then-effective Commitment Termination Date, subject
to the satisfaction of the conditions precedent to extension of the
Commitments set forth in paragraph (f) of this Section.
(d) In the event the Commitments are extended in accordance with
this Section, the Outstanding Credit Extensions made by any Withdrawing
Lender that are not assumed or purchased pursuant to paragraph (b) or
(c) of this Section will mature and be payable in full on the
then-effective Commitment Termination Date, and the Commitments of each
such Withdrawing Lender shall thereupon terminate. On the
then-effective Commitment Termination Date, the Total Credit Commitment
Amount will be automatically reduced by an amount equal to the product of
(i) the sum of the Percentages of all the Withdrawing
Lenders that were not assumed or purchased pursuant to paragraph
(b) or (c) of this Section, and
(ii) the Total Credit Commitment Amount on such Commitment
Termination Date immediately prior to such calculation.
The Percentages of the Remaining Lenders shall be adjusted by the
Administrative Agent based upon each such Remaining Lender's pro rata
share of the remaining Total Credit Commitment Amount.
(e) The decision of each Lender to extend its Commitments or
assume or purchase the Commitments of any Withdrawing Lender pursuant to
this Section 2.2 shall be exercised by it in its sole and absolute
discretion, including without reference to any or all of the stated
desires of any other Lender Party or Micro. All assignments made
pursuant to this Section 2.2 shall be made in accordance with Section
11.11.1, except that any such assignment may be in any minimum amount or
multiple thereof which results from the operation of this Section 2.2
and shall not require the consent of Micro or the Administrative Agent.
(f) Any extension of the Commitments in accordance with this
Section shall become effective only upon (i) the satisfaction of the
requirements for extension set forth herein and (ii) the delivery by
Micro to the Administrative Agent and each Lender, on or prior to the
then-effective Commitment Termination Date, of (A) executed replacement
Notes reflecting, without limitation, any changes in the identity or
Percentages of the Lender Parties and the Total Credit Commitment
Amount, and (B) copies of such other legal opinions, approvals,
instruments or documents as the Administrative Agent or any Remaining
Lender may reasonably request. Upon their receipt of the replacement
Notes required to be delivered pursuant to clause (A) above, the
Remaining Lenders shall mark the relevant predecessor Notes "exchanged"
and deliver the same to Micro.
SECTION 2.3. Reductions of the Commitment Amounts. Micro may, from
time to time on any Business Day, voluntarily reduce the Total Credit
Commitment Amount or the Letter of Credit Commitment Amount; provided,
however, that
(a) all such reductions shall require at least three and not
more than five Business Days' prior notice to the Administrative Agent
and shall be permanent, and any partial reduction thereof shall be in a
minimum amount of $10,000,000 and in an integral multiple of $1,000,000
(or, if less, in an amount equal to the Total Credit Commitment Amount
at such time); and
(b) Micro shall not voluntarily reduce the Total Credit
Commitment Amount or the Letter of Credit Commitment Amount pursuant to
this Section to an amount which, on the date of proposed reduction,
is less than the aggregate Outstanding Credit Extensions of all the
Lenders.
ARTICLE III
BORROWING PROCEDURES,
LETTERS OF CREDIT AND REGISTERS
SECTION 3.1. Borrowing Procedure for Pro-Rata Revolving Loans.
(a) On any Business Day occurring on or prior to the Commitment
Termination Date, Micro may from time to time irrevocably request, by
delivering on or prior to 1:00 p.m., Eastern time, on such Business Day
a Borrowing Request to the Administrative Agent, (i) in the case of LIBO
Rate Loans, not less than three nor more than five Business Days before
the date of the proposed Borrowing, or (ii) in the case of Reference
Rate Loans, on or before the Business Day of but not more than three
Business Days before the date of the proposed Borrowing, that a
Borrowing be made in a minimum amount of $25,000,000 and an integral
multiple of $1,000,000, or if less, in the unused amount of the Total
Credit Commitment Amount. Upon the receipt of each Borrowing
Request, the Administrative Agent shall give prompt notice thereof to
each Lender on the same day such Borrowing Request is received. On
the terms and subject to the conditions of this Agreement, each
Borrowing shall be comprised of the Type of Loans, and shall be made
on the Business Day, specified in such Borrowing Request. On or
before 2:30 p.m., Eastern time, on such Business Day, each Lender
shall deposit with the Administrative Agent (to an account specified
by the Administrative Agent to each Lender from time to time) same
day funds in an amount equal to such Lender's Percentage of the
requested Borrowing.
To the extent funds are received from the Lenders, the
Administrative Agent shall make such funds available to Micro by wire
transfer to the accounts Micro shall have specified in its Borrowing
Request. No Lender's obligation to make any Pro-Rata Revolving Loan
shall be affected by any other Lender's failure to make any Pro-Rata
Revolving Loan.
(b) Each Lender's Pro-Rata Revolving Loans shall be evidenced by
a single Revolving Note payable to such Lender. Micro hereby
irrevocably authorizes each Lender to make (or cause to be made)
appropriate entries and endorsements on Schedule I to the Revolving Note
payable to such Lender, which entries, if made, shall evidence, inter
alia, the date of, the Type of, the advance period (if applicable) of,
the Maturity of, the outstanding principal of, interest payable on and
any repayments of Pro-Rata Revolving Loans made by such Lender to Micro
pursuant hereto. Any such entries indicating the outstanding principal
amount of such Lender's Pro-Rata Revolving Loans and interest payable
thereon shall be prima facie evidence of the principal amount thereof
owing and unpaid and interest payable thereon, but the failure to make
any such entry shall not limit or otherwise affect the obligations of
Micro hereunder to make payments of principal of or interest on such
Pro-Rata Revolving Loans when due.
SECTION 3.2. Pro-Rata Letter of Credit Issuance Procedures. By
delivering to the Administrative Agent an Issuance Request on or before
1:00 p.m., Eastern time, on any Business Day occurring prior to the
Commitment Termination Date, Micro may from time to time request that an
Issuer (with respect to Pro-Rata Letters of Credit) issue a Pro-Rata Letter
of Credit. Each such request shall be made on not less than two Business
Days' notice (or such shorter period as may be agreed to by the
Administrative Agent), and not less than 30 days prior to the Commitment
Termination Date. Upon receipt of an Issuance Request, the Administrative
Agent shall promptly on the same day notify the applicable Issuer (if other
than NationsBank or Scotiabank) and each Lender thereof. Each Pro-Rata
Letter of Credit shall by its terms be denominated in Dollars and be stated
to expire (whether originally or after giving effect to any extension) on a
date (its "Stated Expiry Date") no later than three days prior to the
Commitment Termination Date. Micro and the relevant Issuer may amend or
modify any issued Pro-Rata Letter of Credit upon written notice to the
Administrative Agent only; provided, however, that (A) any amendment
constituting an extension of such Pro-Rata Letter of Credit's Stated Expiry
Date shall comply with the provisions of the immediately preceding sentence
and may be made only if the Commitment Termination Date has not occurred
and (B) any amendment constituting an increase in the Stated Amount of such
Pro-Rata Letter of Credit shall be deemed a request for the issuance of a
new Pro-Rata Letter of Credit and shall comply with the foregoing
provisions of this paragraph.
Upon satisfaction of the terms and conditions hereunder, the relevant
Issuer will issue each Pro-Rata Letter of Credit to be issued by it and will
make available to the beneficiary thereof the original of such Pro-Rata Letter
of Credit.
SECTION 3.2.1. Other Lenders' Participation. Automatically, and
without further action, upon the issuance of each Pro-Rata Letter of
Credit, each Lender (other than the Issuer of such Pro-Rata Letter of
Credit) shall be deemed to have irrevocably purchased from the relevant
Issuer, to the extent of such Lender's Percentage (and without giving
effect to the outstanding Non-Rata Credit Extensions, if any, of any
Lender), a participation interest in such Pro-Rata Letter of Credit
(including any Pro-Rata Reimbursement Obligation and any other Contingent
Liability with respect thereto), and such Lender shall, to the extent of
its Percentage, be responsible for reimbursing promptly (and in any event
within one Business Day after receipt of demand for payment from the
Issuer, together with accrued interest from the day of such demand) the
relevant Issuer for any Pro-Rata Reimbursement Obligation which has not
been reimbursed in accordance with Section 3.2.3. In addition, such Lender
shall, to the extent of its Percentage, be entitled to receive a ratable
portion of the Pro-Rata Letter of Credit participation fee payable pursuant
to clause (a) of Section 4.3.3 with respect to each Pro-Rata Letter of
Credit and a ratable portion of any interest payable pursuant to Sections
3.2.2. and 4.2.
SECTION 3.2.2. Disbursements. Subject to the terms and provisions of
each Pro-Rata Letter of Credit and this Agreement, upon presentment under any
Pro-Rata Letter of Credit to the Issuer thereof for payment, such Issuer shall
make such payment to the beneficiary (or its designee) of such Pro-Rata Letter
of Credit on the date designated for such payment (the "Disbursement Date").
Such Issuer will promptly notify Micro and each of the Lenders of the
presentment for payment of any such Pro-Rata Letter of Credit, together with
notice of the Disbursement Date thereof. Prior to 12:00 noon, Eastern time,
on the next Business Day following the Disbursement Date, Micro will reimburse
the Administrative Agent, for the account of such Issuer, for all amounts
disbursed under such Pro-Rata Letter of Credit, together with all interest
accrued thereon since the Disbursement Date. To the extent the Administrative
Agent does not receive payment in full, on behalf of the relevant Issuer on
the Disbursement Date, Micro's Pro-Rata Reimbursement Obligation shall accrue
interest at a fluctuating rate equal to the Reference Rate plus 1/2 of 1% per
annum, payable on demand. In the event Micro fails to notify the
Administrative Agent and the relevant Issuer prior to 1:00 p.m., Eastern time,
on the Disbursement Date that Micro intends to pay the Administrative Agent,
for the account of such Issuer, for the amount of such drawing with funds
other than proceeds of Pro-Rata Revolving Loans, or the Administrative Agent
does not receive such reimbursement payment from Micro prior to 1:00 p.m.,
Eastern time on the Disbursement Date (or if the relevant Issuer must for any
reason return or disgorge such reimbursement), the Administrative Agent shall
promptly notify the Lenders, and Micro shall be deemed to have given a timely
Borrowing Request as of the Disbursement Date for Pro-Rata Revolving Loans in
an aggregate principal amount equal to such Pro-Rata Reimbursement Obligation
and the Lenders (including the relevant Issuer) shall, on the terms and
subject to the conditions of this Agreement (including, without limitation,
Sections 6.1 and 6.2 hereof), make Pro-Rata Revolving Loans in the amount of
such Pro-Rata Reimbursement Obligation which shall be Reference Rate Loans as
provided in Section 3.1; provided, however, that for the purpose of
determining the availability of any unused Total Credit Commitment Amount
immediately prior to giving effect to the application of the proceeds of such
Pro-Rata Revolving Loans, such Pro-Rata Reimbursement Obligation shall be
deemed not to be outstanding at such time. In the event that the conditions
precedent to any Pro-Rata Revolving Loans deemed requested by Micro as
provided in the preceding sentence shall not be satisfied at the time of such
deemed request, the Lenders (including the relevant Issuer) shall make demand
loans on such date for the benefit of Micro, ratably, in accordance with their
respective Percentages, which loans shall: (a) aggregate in principal amount
an amount equal to the applicable Pro-Rata Reimbursement Obligations; (b) be
applied solely to the prompt satisfaction of such Pro-Rata Reimbursement
Obligations; (c) be payable by Micro upon demand; and (d) accrue interest on
the unpaid principal amount thereof from (and including) the date on which
such demand loan is made until the date such loan is paid by Micro in full, at
a rate per annum equal to the Reference Rate plus 2% per annum.
SECTION 3.2.3. Reimbursement. The obligation (the "Pro-Rata
Reimbursement Obligation") of Micro under Section 3.2.2. to reimburse the
relevant Issuer with respect to each disbursement under a Pro-Rata Letter
of Credit (including interest thereon), and, upon the failure of Micro to
reimburse such Issuer, the obligation of each Lender to reimburse such
Issuer, shall be absolute and unconditional under any and all circumstances
and irrespective of any set-off, counterclaim or defense to payment which
Micro or such Lender, as the case may be, may have or have had against the
relevant Issuer or any Lender, including any defense based upon the failure
of any disbursement under a Pro-Rata Letter of Credit to conform to the
terms of the applicable Pro-Rata Letter of Credit (if, in the relevant
Issuer's good faith opinion, such disbursement is determined to be
appropriate) or any non-application or misapplication by the beneficiary of
the proceeds of such Pro-Rata Letter of Credit; provided, however, that
nothing herein shall require Micro or such Lender, as the case may be, to
reimburse an Issuer for any wrongful disbursement made by such Issuer under
a Pro-Rata Letter of Credit as a result of acts or omissions finally
determined by a court of competent jurisdiction to constitute gross
negligence or willful misconduct on the part of such Issuer.
SECTION 3.2.4. Deemed Disbursements. Upon the occurrence and during
the continuation of any Event of Default of the type described in Section
9.1.9 or, with notice from the Administrative Agent given at the direction
of the Required Lenders, upon the occurrence and during the continuation of
any other Event of Default, an amount equal to the then aggregate amount of
all Letters of Credit (including Non-Rata Letters of Credit) which are
undrawn and available under all issued and outstanding Letters of Credit
shall, without demand upon or notice to Micro, be deemed to have been paid
or disbursed by the Issuer under such Letters of Credit (notwithstanding
that such amount may not in fact have been so paid or disbursed) and Micro
shall be immediately obligated to pay to the Issuer of each Letter of
Credit an amount equal to such amount. Any amounts so payable by Micro
pursuant to this Section shall be deposited in cash with the Administrative
Agent and held in trust (for the sole benefit of the relevant Issuer and
the Lenders) for payment of the Obligations arising in connection with such
Letters of Credit. If such Event of Default shall have been cured or
waived (and provided no other Default has occurred and is continuing and
the Obligations have not been accelerated pursuant to Section 9.2 or 9.3),
the Administrative Agent shall promptly return to Micro all amounts
deposited by it with the Administrative Agent pursuant to this clause
(together with accrued interest thereon at the Federal Funds Rate or such
other interest rate based upon a cash equivalent investment (in the form of
obligations issued by or guaranteed by the U.S. government, commercial
paper of a domestic corporation rated A-1 by S&P or a comparable rating
from another nationally recognized rating agency or certificates of deposit
of a U.S. or Canadian bank with (x) a credit rating of Aa or better by S&P
or a comparable rating from another nationally recognized rating agency and
(y) a combined capital and surplus greater than $250,000,000) which is
agreed to between the relevant Issuer and Micro), net of any amount (which
may include accrued interest) applied to the payment of any Obligations
with respect to the Pro-Rata Letters of Credit.
SECTION 3.2.5. Nature of Reimbursement Obligations. Micro and, to the
extent set forth in Section 3.2.1, each Lender shall assume all risks of
the acts, omission or misuse of any Letter of Credit by the beneficiary
thereof. No Issuer (with respect to Pro-Rata Letters of Credit and Non-Rata
Letters of Credit) or any Lender (except to the extent of its own
gross negligence or willful misconduct) shall be responsible for:
(a) the form, validity, sufficiency, accuracy, genuineness or
legal effect of any document submitted by any party in connection with
the application for an issuance of a Letter of Credit, even if it should
in fact prove to be in any or all respects invalid, insufficient,
inaccurate, fraudulent or forged;
(b) the form, validity, sufficiency, accuracy, genuineness or
legal effect of any instrument transferring or assigning or purporting
to transfer or assign a Letter of Credit or the rights or benefits
thereunder or the proceeds thereof in whole or in part, which may prove
to be invalid or ineffective for any reason;
(c) failure of the beneficiary to comply fully with conditions
required in order to demand payment under a Letter of Credit; provided,
however, if a payment is made pursuant to such Letter of Credit when a
beneficiary has failed to comply with the conditions therefor and such
failure to comply is manifest on the face of such Letter of Credit or
the documents submitted by the beneficiary in connection therewith,
Micro shall be required to indemnify the Issuer in connection therewith
only if, and to the extent, Micro or any of its Subsidiaries has
received the benefit of such payment on such Letter of Credit by one or
more of their obligations being satisfied, either in whole or in part;
(d) errors, omissions, interruptions or delays in transmission
or delivery of any messages, by mail, telecopy or otherwise; or
(e) any loss or delay in the transmission or otherwise of any
document or draft required in order to make a disbursement under a
Letter of Credit.
None of the foregoing shall affect, impair or prevent the vesting of any of
the rights or powers granted to any Issuer or any Lender hereunder. In
furtherance and extension and not in limitation or derogation of any of the
foregoing (but subject to the limitations set forth in clause (c) above), any
action taken or omitted to be taken by an Issuer in good faith (and not
constituting gross negligence or willful misconduct as finally determined by a
court of competent jurisdiction) shall be binding upon Micro and, with respect
to Pro-Rata Letters of Credit, each Lender, and shall not put such Issuer
under any resulting liability to Micro or, with respect to Pro-Rata Letters of
Credit, any Lender.
SECTION 3.3. Non-Rata Revolving Loan Facility.
SECTION 3.3.1. Non-Rata Revolving Loans. Any Borrower may from time
to time, on any Business Day prior to the Commitment Termination Date,
request that any Lender make a Loan (relative to such Lender, a "Non-Rata
Revolving Loan") denominated in any Available Currency. The Borrower shall
make such request to the applicable office of such Lender set forth on
Schedule II or to such other office as a Lender may notify the Borrowers
pursuant to Section 11.2. Such Lender may in its sole and absolute
discretion agree to make or not make such Non-Rata Revolving Loan, it being
understood and agreed that the Lenders' Commitments only require the making
by them of Pro-Rata Revolving Loans and participation in or issuance of
Pro-Rata Letters of Credit (subject to the terms and conditions contained
herein). Except as otherwise provided herein and subject in each case to
the satisfaction of the applicable conditions precedent set forth in
Sections 6.1 and 6.2 hereof, each Non-Rata Revolving Loan shall be made on
the terms and conditions agreed to between the relevant Borrower and the
relevant Lender; provided, however, that the Obligations of Micro with
respect to each Pro-Rata Credit Extension shall rank pari passu with the
Obligations of each Borrower with respect to each Non-Rata Revolving Loan.
SECTION 3.3.2. Ineligible Currencies. Notwithstanding any other
provision contained in this Agreement, if, at any time prior to the Commitment
Termination Date, the relevant Lender of a Non-Rata Revolving Loan determines
that the Available Currency in which such Non-Rata Revolving Loan has been
made is an Ineligible Currency, then such Lender may (in its sole discretion)
at any time notify the relevant Borrower of the same. Promptly after
receiving such notice and, in any event, within five Business Days of
receiving the same, such Borrower will notify such Lender as to what Available
Currency it desires such Non-Rata Revolving Loan to be converted into and
promptly thereafter such Lender shall so convert such Loans. If the relevant
Borrower fails to select another Available Currency as provided in the
preceding sentence, such other Available Currency shall be selected by the
relevant Lender. Such conversion shall be effected at the relevant spot rate
at which such Ineligible Currency is offered on such day for the selected
Available Currency which appears on Telerate Page 3740 at approximately 11:00
a.m. (London time) (and if such spot rate is not available on Telerate Page
3740 as of such time, such spot rate as quoted by NationsBank, in London at
approximately 11:00 a.m. (London time)), or, if no such spot rate shall exist,
such other rate of exchange as the relevant Lender shall reasonably determine.
SECTION 3.3.3. Limitations on Making Non-Rata Revolving Loans.
Subject to the last sentence of Section 2.1, no Lender shall be permitted
to make any Non-Rata Revolving Loan if, after giving effect thereto, either
the aggregate Outstanding Credit Extensions of all the Lenders would exceed
the then Total Credit Commitment Amount or the aggregate Outstanding Credit
Extensions consisting of Non-Rata Credit Extensions would exceed
$750,000,000.
SECTION 3.3.4. Procedure for Making Non-Rata Revolving Loans. Subject
to the terms and conditions of this Agreement, including Section 3.3.1, the
terms of each Non-Rata Revolving Loan shall be mutually agreed upon between
the relevant Borrower and the relevant Lender. If the relevant Borrower
and the relevant Lender agree to an interest rate for a Non-Rata Revolving
Loan by reference to a fixed rate of interest (such as, for example, the
LIBO Rate) to be subsequently determined and such Lender subsequently
determines (which determination shall be conclusive and binding on the
relevant Borrower and such Lender) on or prior to the scheduled date of
making such Non-Rata Revolving Loan and promptly notifies the relevant
Borrower that such interest rate is unascertainable or that deposits in the
relevant interbank market are not available to such Lender in the relevant
Available Currency, then such Lender (except to the extent otherwise agreed
between such Lender and the relevant Borrower) shall not be obligated to
make such Non-Rata Revolving Loan. In connection with each Lender agreeing
to make a Non-Rata Revolving Loan calculated based upon a fixed rate of
interest, such Lender shall, in accordance with its customary practices,
attempt to determine the relevant interest rate or obtain the relevant
deposits in the relevant Available Currency necessary to make such Non-Rata
Revolving Loan.
SECTION 3.3.5. Maturity of Non-Rata Revolving Loans. Subject to
Section 3.3.2, each Non-Rata Revolving Loan shall be repaid in the
Available Currency in which such Loan was made on the Maturity thereof or
on any earlier date agreed upon by the relevant Borrower and the relevant
Lender or required by the other terms and conditions of this Agreement.
Each Borrower may prepay any Non-Rata Revolving Loan on such terms and
conditions as such Borrower and the relevant Lender may agree.
SECTION 3.3.6. Non-Rata Revolving Loan Records. Subject to Section
3.3.7, each Lender's Non-Rata Revolving Loans shall be evidenced by a loan
account maintained by such Lender. Each Borrower hereby irrevocably
authorizes the relevant Lender to make (or cause to be made) appropriate
account entries, which account entries, if made, shall evidence, inter
alia, the date of, the Type of, the currency of, the advance period (if
applicable) of, the Maturity of, the outstanding principal of, interest
payable on and any repayments of Non-Rata Revolving Loans made by such
Lender to such Borrower pursuant hereto. Any such account entries
indicating the outstanding principal amount of such Lender's Non-Rata
Revolving Loans and interest payable thereon shall be prima facie evidence
of the principal amount thereof owing and unpaid and interest payable
thereon, but the failure to make any such entry shall not limit or
otherwise affect the obligations of any Borrower hereunder to make payments
of principal of or interest on such Non-Rata Revolving Loans when due.
SECTION 3.3.7. Quarterly Report. During the period commencing on the
date hereof and ending on the Commitment Termination Date, Micro shall submit
(together with each set of reports and financial statements of Micro and its
Consolidated Subsidiaries delivered pursuant to Section 8.1.1 (a) and (b)) a
Quarterly Report to the Administrative Agent in respect of the most recently
ended Fiscal Period. In addition, Micro agrees to provide to the
Administrative Agent updates with respect to the information provided in the
Quarterly Reports at such other times as the Administrative Agent may
reasonably request from time to time.
SECTION 3.4. Non-Rata Letter of Credit Facility.
SECTION 3.4.1. Non-Rata Letters of Credit. Any Borrower may from
time to time, on any Business Day prior to the Commitment Termination Date,
request that any Lender issue a letter of credit (relative to such Lender,
a "Non-Rata Letter of Credit") denominated in any Available Currency. Such
Lender may in its sole and absolute discretion agree to issue or not issue
such Non-Rata Letter of Credit, it being understood and agreed that the
Lenders' Commitments only require the making by them of Pro-Rata Revolving
Loans and participation in or issuance of Pro-Rata Letters of Credit
(subject to the terms and conditions contained herein). Except as
otherwise provided herein and subject in each case to the satisfaction of
the applicable conditions precedent set forth in Sections 6.1 and 6.2
hereof, each Non-Rata Letter of Credit shall be issued on the terms and
conditions agreed to between the relevant Borrower and the relevant Lender;
provided, however, that the Obligations of Micro with respect to each
Pro-Rata Credit Extension shall rank pari passu with the Obligations of each
Borrower with respect to each Non-Rata Letter of Credit.
SECTION 3.4.2. Ineligible Currencies. Notwithstanding any other
provision contained in this Agreement, if, at any time prior to the Commitment
Termination Date, the relevant Issuer of a Non-Rata Letter of Credit
determines that the Available Currency in which such Non-Rata Letter of Credit
has been issued is an Ineligible Currency, then such Issuer may (in its sole
discretion) at any time notify the relevant Borrower of the same. Such
Borrower shall use reasonable efforts to cause the beneficiary of such
Non-Rata Letter of Credit to accept a substitution for such Non-Rata Letter of
Credit with another Non-Rata Letter of Credit in an Available Currency
acceptable to such Borrower and such Issuer.
SECTION 3.4.3. Limitations on Issuing Non-Rata Letters of Credit.
Subject to the last sentence of Section 2.1, no Lender shall be permitted
to issue any Non-Rata Letters of Credit if, after giving effect thereto,
either the aggregate Outstanding Credit Extensions of all the Lenders would
exceed the then Total Credit Commitment Amount or the aggregate Outstanding
Credit Extensions consisting of Non-Rata Credit Extensions would exceed
$750,000,000.
SECTION 3.4.4. Procedures for Issuing Non-Rata Letters of Credit.
Subject to the terms and conditions of this Agreement, including Section
3.4.1, the terms of each Non-Rata Letter of Credit shall be mutually agreed
upon between the relevant Borrower and the relevant Issuer.
SECTION 3.4.5. Disbursements. Subject to the terms and provisions of
each Non-Rata Letter of Credit and this Agreement, upon presentment of any
Non-Rata Letter of Credit to the relevant Issuer thereof for payment, such
Issuer shall make such payment to the beneficiary (or its designee) of such
Non-Rata Letter of Credit on the date designated for such payment (the
"Non-Rata Disbursement Date"). Such Issuer will promptly notify the
relevant Borrower of the presentment for payment of any such Non-Rata
Letter of Credit, together with notice of the Non-Rata Disbursement Date
thereof. Prior to 12:00 noon, Eastern time, on the next Business Day
following the Non-Rata Disbursement Date, the relevant Borrower will
reimburse such Issuer for all amounts disbursed under such Non-Rata Letter
of Credit, together with all interest, if any, that such Borrower shall
have agreed to pay that shall have accrued thereon since the Non-Rata
Disbursement Date.
SECTION 3.4.6. Reimbursement. The obligation (the "Non-Rata
Reimbursement Obligation") of the relevant Borrower under Section 3.4.5. to
reimburse an Issuer with respect to each disbursement under a Non-Rata
Letter of Credit (including interest thereon) issued by such Issuer, shall
be absolute and unconditional under any and all circumstances and
irrespective of any set-off, counterclaim or defense to payment which such
Borrower or any other Borrower may have or have had against such Issuer,
including any defense based upon the failure of any disbursement under a
Non-Rata Letter of Credit to conform to the terms of the applicable
Non-Rata Letter of Credit (if, in the applicable Issuer's good faith
opinion, such disbursement is determined to be appropriate) or any
non-application or misapplication by the beneficiary of the proceeds of
such Non-Rata Letter of Credit; provided, however, that nothing herein
shall require such Borrower to reimburse the applicable Issuer for any
wrongful disbursement made by such Issuer under a Non-Rata Letter of Credit
as a result of acts or omissions finally determined by a court of competent
jurisdiction to constitute gross negligence or willful misconduct on the
part of such Issuer. Subject to Section 3.4.2, each Non-Rata Letter of
Credit shall be reimbursed in the Available Currency in which such Non-Rata
Letter of Credit was issued.
SECTION 3.5. Bid Rate Facility.
SECTION 3.5.1. Bid Rate Loans. Any Borrower may, on the terms and
conditions of this Agreement, request the Lenders to make offers to make
Bid Rate Loans to such Borrower. The Lenders may, but shall have no
obligation to, make such offers and the relevant Borrower may, but shall
have no obligation to, accept any such offers in the manner set forth in
this Section 3.5. Except as otherwise provided herein and subject in each
case to the satisfaction of the applicable conditions precedent set forth
in Sections 6.1 and 6.2 hereof, each Bid Rate Loan shall be made on the
terms and conditions agreed to between the relevant Borrower and the
relevant Lender; provided, however, that the Obligations of Micro with
respect to each Pro-Rata Credit Extension shall rank pari passu with the
Obligations of each Borrower with respect to each Bid Rate Loan.
SECTION 3.5.2. Quote Request. When a Borrower wishes to request
offers to make Bid Rate Loans, it shall give each of the Lenders (excluding
any Lender that has previously notified the Borrowers that it will not
participate in any LIBO Auctions or Absolute Interest Rate Auctions) notice
by telephone or telecopy (a "Quote Request") so as to be received at the
applicable office of each such Lender set forth on Schedule II or to such
other office as a Lender may notify the Borrowers pursuant to Section 11.2
no later than (a) 3:00 p.m., Eastern time, on the fourth Business Day prior
to the date of borrowing proposed therein, in the case of a LIBO Auction or
(b) 11:00 a.m., Eastern time, on the date of borrowing proposed therein, in
the case of an Absolute Interest Rate Auction. The relevant Borrower may
request offers to make Bid Rate Loans for up to five different Interest
Periods in a single notice; provided, however, that the request for each
separate Interest Period shall be deemed to be a separate Quote Request for
a separate borrowing (a "Bid Rate Borrowing"). Each Bid Rate Borrowing
shall be at least $10,000,000 (or an integral multiple of $1,000,000 in
excess thereof).
SECTION 3.5.3. Submission of Quotes. Each Lender may submit one or
more Quotes, each containing an offer to make a Bid Rate Loan in response
to any Quote Request; provided, however, that, if the relevant Borrower's
request under Section 3.5.2 specified more than one Interest Period, such
Lender may make a single submission containing one or more Quotes for each
such Interest Period. Each Quote must be submitted to the relevant
Borrower not later than (a) 11:00 a.m., Eastern time, on the third Business
Day immediately prior to the proposed date of borrowing, in the case of a
LIBO Auction or (b) 12:00 noon, Eastern time, on the proposed date of
borrowing, in the case of an Absolute Interest Rate Auction. Subject to
Sections 5.1 through 5.5 and 6.2 and Article IX, any Quote so made shall be
irrevocable. Each Quote shall specify: (i) the proposed date of borrowing
and the Interest Period therefor; (ii) the principal amount of the Bid
Rate Loan for which each such offer is being made, which principal amount
shall be at least $10,000,000 (or an integral multiple of $1,000,000 in
excess thereof); provided, however, that the aggregate principal amount of
all Bid Rate Loans for which a Lender submits Quotes may not exceed the
principal amount of the Bid Rate Borrowing for a particular Interest Period
for which offers were requested; (iii) in the case of a LIBO Auction, the
margin above or below the applicable LIBO Rate (the "LIBO Margin") offered
for each such Bid Rate Loan, ex pressed as a percentage (rounded upwards,
if necessary, to the nearest 1/100th of 1%) to be added to or subtracted
from the applicable LIBO Rate; (iv) in the case of an Absolute Interest
Rate Auction, the rate of interest per annum offered for each such Bid Rate
Loan (the "Absolute Interest Rate"); and (v) the identity of the quoting
Lender. No Quote shall contain qualifying, conditional or similar language
or propose terms other than or in addition to those of the Quote Request
and, in particular, no Quote may be conditioned upon acceptance by the
relevant Borrower of all (or some specified minimum) of the principal
amount of the Bid Rate Loan for which such Quote is being made.
SECTION 3.5.4. Acceptance of Quotes. Not later than (a) 11:00 a.m.,
Eastern time, on the second Business Day immediately prior to the proposed
date of borrowing, in the case of a LIBO Auction or (b) 2:00 p.m., Eastern
time, on the proposed date of borrowing, in the case of an Absolute
Interest Rate Auction, the relevant Borrower shall notify each Lender by
telephone or telecopy of such Borrower's acceptance or nonacceptance of the
Quotes submitted to such Borrower by such Lender. The failure of the
relevant Borrower to give such notice by such time shall constitute
nonacceptance of any such Quote. Such Borrower may accept any Quote in
whole or in part (provided that any Quote accepted in part shall be at
least $10,000,000 or an integral multiple of $1,000,000 in excess thereof);
provided, however, that: (i) subject to the limitations set forth in
clause (ii), (iii) or (iv) of this proviso, if two or more Lenders submit
Quotes for any Interest Period at identical pricing and the relevant
Borrower accepts any of such offers but does not wish to (or by reason of
the limitations set forth in clause (ii), (iii) or (iv) of this proviso,
cannot) accept the aggregate principal amount of the Bid Rate Loans offered
by such Lenders, such Borrower shall accept Bid Rate Loans from all of such
Lenders in amounts allocated among them pro rata according to the
respective principal amounts of the respective Bid Rate Loans originally
offered by such Lenders (or as nearly pro rata as shall be practicable in
light of the limitations set forth in clauses (ii), (iii) and (iv) of this
proviso), (ii) the aggregate principal amount of each Bid Rate Borrowing
may not exceed the applicable amount set forth in the related Quote
Request; (iii) the aggregate principal amount of each Bid Rate Borrowing
shall be at least $10,000,000 (or an integral multiple of $1,000,000 in
excess thereof) but shall not cause the limits specified in Section 3.5.8
to be violated; and (iv) the relevant Borrower may not accept any offer
that fails to comply with Section 3.5.3 or otherwise fails to comply with
the requirements of this Agreement.
SECTION 3.5.5. Bid Rate Loan. Any Lender whose offer to make any Bid
Rate Loan has been accepted shall, not later than 3:00 p.m., Eastern time,
on the date specified for the making of such Loan and subject to the other
terms and conditions of this Agreement, make the amount of such Bid Rate
Loan available to the relevant Borrower at such Borrower's Account in
immediately available funds.
SECTION 3.5.6. Maturity of Bid Rate Loans. Each Bid Rate Loan shall be
repaid on the Maturity thereof or on any earlier date agreed upon by the
relevant Borrower and the relevant Lender or required by the other terms and
conditions of this Agreement. The relevant Borrower may prepay any Bid Rate
Loan on such terms and conditions as such Borrower and the relevant Lender may
agree.
SECTION 3.5.7. Bid Rate Loan Records. Each Lender's Bid Rate Loans,
if any, shall be evidenced by a loan account maintained by such Lender.
Each Borrower hereby irrevocably authorizes the relevant Lender to make (or
cause to be made) appropriate account entries, which account entries, if
made, shall evidence, inter alia, the date of, the Type of, the currency
of, the advance period (if applicable) of, the Maturity of, the outstanding
principal of, interest payable on and any repayments of Bid Rate Loans made
by such Lender to such Borrower pursuant hereto. Any such account entries
indicating the outstanding principal amount of such Lender's Bid Rate Loans
and interest payable thereon shall be prima facie evidence of the principal
amount thereof owing and unpaid and interest payable thereon, but the
failure to make any such entry shall not limit or otherwise affect the
obligations of any Borrower hereunder to make payments of principal of or
interest on such Bid Rate Loans when due.
SECTION 3.5.8 Limitations on Making Bid Rate Loans. Subject to the
last sentence of Section 2.1, no Lender shall be permitted to make any Bid
Rate Loan if, after giving effect thereto, either the aggregate Outstanding
Credit Extensions of all the Lenders would exceed the then Total Credit
Commitment Amount or the aggregate Outstanding Credit Extensions consisting
of Non-Rata Credit Extensions would exceed $750,000,000.
ARTICLE IV
PRINCIPAL, INTEREST AND FEE PAYMENTS
SECTION 4.1. Repayments and Prepayments of Pro-Rata Revolving Loans.
Micro shall repay in full the unpaid principal amount of each Pro-Rata
Revolving Loan outstanding to it at the Maturity thereof. Prior thereto,
Micro:
(a) may, from time to time on any Business Day, make a voluntary
prepayment, in whole or in part, of the outstanding principal amount of
any Pro-Rata Revolving Loan; provided, however, that:
(i) any such prepayment of any Pro-Rata Revolving Loan
shall be allocated to each Lender pro rata according to such
Lender's Percentage (calculated on the date such Pro-Rata
Revolving Loans were made) of the Pro-Rata Revolving Loans so
prepaid (and, for the avoidance of doubt, no such prepayment shall
be allocated to any Lender which did not participate in the making
of the Pro-Rata Revolving Loans to be prepaid);
(ii) no such prepayment of any Pro-Rata Revolving Loan that
is a LIBO Rate Loan may be made on any day other than the last day
of the Interest Period then applicable to such LIBO Rate Loan
unless all the losses or expenses incurred by the Lenders in
connection therewith pursuant to Section 5.4 are paid in full
contemporaneously with such prepayments;
(iii) all such voluntary prepayments shall require prior
notice to the Administrative Agent of (x) at least three but no
more than five Business Days in the case of LIBO Rate Loans and
(y) not more than three Business Days but no later than the date
of such voluntary prepayment in the case of Reference Rate Loans;
and
(iv) all such voluntary prepayments shall, if other than a
prepayment in whole, be in an aggregate minimum amount of
$10,000,000 and an integral multiple of $1,000,000;
(b) shall determine if the aggregate Outstanding Credit
Extensions of all the Lenders exceed the Total Credit Commitment Amount
(i) at the end of each Fiscal Period and (ii) on the date of each
request for a Credit Extension (excluding any request submitted in
respect of any continuation or conversion of any Borrowing previously
made hereunder), and promptly thereafter (and in any event (A) in
respect of any determination made pursuant to clause (i) above, no later
than the next date on which Micro shall be required to submit a
Quarterly Report in accordance with Section 3.3.7 or (B) in respect of
any determination made pursuant to clause (ii) above, prior to the
proposed date of such requested Credit Extension), Micro shall make a
mandatory prepayment of the outstanding principal amount of such Loans
as Micro may select in an amount equal to such excess, such prepayment
to be allocated to the Lenders in such manner as Micro may elect
(provided; that a prepayment of a Pro-Rata Revolving Loan shall be
allocated to the Lenders in the manner set forth in clause (a)(i)
above); and
(c) shall, on each date when any reduction or termination in the
Total Credit Commitment Amount shall become effective, including
pursuant to Section 2.3, make a mandatory prepayment of all Pro-Rata
Revolving Loans equal to the excess, if any, of the then aggregate
Outstanding Credit Extensions of all the Lenders over the Total Credit
Commitment Amount as so reduced, such prepayment to be allocated to the
Lenders in the manner set forth in clause (a)(i).
SECTION 4.2. Interest Provisions. Each Pro-Rata Revolving Loan shall
bear interest from and including the day when made until (but not
including) the day such Pro-Rata Revolving Loan shall be paid in full, and
such interest shall accrue and be payable in accordance with this Section
4.2.
SECTION 4.2.1. Rates.
(a) Pro-Rata Revolving Loans. Subject to Section 4.2.2 and
pursuant to an appropriately completed and delivered Borrowing Request
or Continuation/Conversion Notice, Micro may elect that Pro-Rata
Revolving Loans comprising a Borrowing accrue interest at the following
rates per annum:
(i) Reference Rate Loans. On that portion of such
Borrowing maintained from time to time as a Reference Rate Loan,
equal to the Reference Rate from time to time in effect.
(ii) LIBO Rate Loans. On that portion of such Borrowing
maintained from time to time as a LIBO Rate Loan, during each
Interest Period applicable thereto, the sum of the LIBO Rate for
such Interest Period plus the Applicable Margin.
(b) Non-Rata Revolving Loans. Pursuant to the terms agreed to
between the relevant Borrower and the relevant Lender, each Borrower
shall pay interest on the aggregate principal amount of any Non-Rata
Revolving Loan outstanding to any Lender from time to time prior to and
at Maturity at a rate agreed between each such Borrower and such Lender
pursuant to Section 3.3 in connection with the making of such Non-Rata
Revolving Loan. Such interest rate shall include any compensation for
reserves or similar costs incurred in connection with such Non-Rata
Revolving Loan.
SECTION 4.2.2 Post-Maturity Rates. After the date any principal amount
of any Loan is due and payable (whether at Maturity, upon acceleration or
otherwise), or after any other monetary Obligation of Micro or any other
Borrower shall have become due and payable, Micro or each such other Borrower
shall pay, but only to the extent permitted by law, interest (after as well as
before judgment) on such amounts at a rate per annum equal to the Reference
Rate plus 2%.
SECTION 4.2.3. Continuation and Conversion Elections. Micro may from
time to time by delivering a Continuation/Conversion Notice to the
Administrative Agent on or before 1:00 p.m., Eastern time, on a Business
Day, irrevocably elect, in the case of LIBO Rate Loans, on not less than
three nor more than five Business Days' notice, and in the case of
Reference Rate Loans, on such Business Day, that all, or any portion in an
aggregate minimum amount of $25,000,000 and an integral multiple of
$1,000,000 of the Loans, be, in the case of Reference Rate Loans, converted
into LIBO Rate Loans or be, in the case of LIBO Rate Loans, converted into
Reference Rate Loans or continued as LIBO Rate Loans (in the absence of
delivery of a Continuation/Conversion Notice with respect to any LIBO Rate
Loan, at least three Business Days (but not more than five Business Days)
before the last day of the then current Interest Period with respect
thereto, each such LIBO Rate Loan shall, on such last day, automatically
convert to a Reference Rate Loan); provided, however, that (1) each such
conversion or continuation shall be pro rated among the applicable
outstanding Pro-Rata Revolving Loans of all Lenders, and (2) no portion of
the outstanding principal amount of any Pro-Rata Revolving Loans may be
continued as, or be converted into, a LIBO Rate Loan with an Interest
Period longer than one month while any Default has occurred and is
continuing.
SECTION 4.2.4. Payment Dates.
(a) Pro-Rata Revolving Loans. Interest accrued on each Pro-Rata
Revolving Loan shall be payable, without duplication:
(i) on the Stated Maturity Date therefor;
(ii) on the date of any payment or prepayment, in whole or
in part, of principal outstanding on such Pro-Rata Revolving Loan
(but only on the principal amount so paid or prepaid);
(iii) with respect to each Reference Rate Loan, on each
Quarterly Payment Date;
(iv) with respect to each Reference Rate Loan that is
converted into a LIBO Rate Loan on a day when interest would not
otherwise have been payable pursuant to clause (iii), on the date
of such conversion;
(v) with respect to each LIBO Rate Loan, on the last day
of each applicable Interest Period (and, if such Interest Period
shall exceed three months, on each three month anniversary of the
date of the commencement of such Interest Period); and
(vi) on that portion of any Loans the Stated Maturity Date
of which is accelerated pursuant to Section 9.2 or 9.3,
immediately upon such acceleration.
Interest accrued on Pro-Rata Revolving Loans or other monetary
Obligations arising under this Agreement or any other Loan Document
after the date such Pro-Rata Revolving Loans or other Obligations are
due and payable (whether on the Stated Maturity Date, upon acceleration
or otherwise) shall be payable upon demand.
(b) Non-Rata Revolving Loans. Subject to Section 3.3.2, each
Borrower shall pay interest on the aggregate principal amount of any
Non-Rata Revolving Loan outstanding in the Available Currency in which
such Loan was made to the relevant Lender from time to time prior to and
at Maturity on such dates agreed between such Borrower and such Lender
pursuant to Section 3.3 in connection with the making of such Non-Rata
Revolving Loan.
(c) Bid Rate Loans. Each Borrower shall pay interest on the
aggregate principal amount of any Bid Rate Loan outstanding to the
relevant Lender from time to time prior to and at Maturity on such dates
agreed between such Borrower and such Lender pursuant to Section 3.5 in
connection with the making of such Bid Rate Loan.
SECTION 4.2.5. Interest Rate Determination. The Administrative Agent
and the Reference Lenders shall, in accordance with each of their customary
practices, attempt to determine the relevant interest rates applicable to
each LIBO Rate Loan requested to be made pursuant to each Borrowing Request
duly completed and delivered by Micro and each LIBO Market Loan from time
to time in accordance with the terms hereof, and each Reference Lender
agrees to furnish the Administrative Agent timely information for the
purpose of determining the LIBO Rate. If any Reference Lender fails to
timely furnish such information to the Administrative Agent for any such
interest rate, the Administrative Agent shall determine such interest rate
on the basis of the information furnished by the other Reference Lenders.
SECTION 4.2.6. Additional Interest on LIBO Rate Loans. For so long as
the cost to a Lender of making or maintaining its LIBO Rate Loans is
increased as a result of any imposition or modification of any reserve
required to be maintained by such Lender against Eurocurrency Liabilities
(or any other category of liabilities which includes deposits by reference
to which the interest rate on LIBO Rate Loans is determined or any category
of extensions of credit or other assets which includes loans by a non-United
States office of such Lender to United States residents), then such
Lender may require Micro to pay, contemporaneously with each payment of
interest on the LIBO Rate Loans, additional interest on the related LIBO
Rate Loan of such Lender at a rate per annum up to but not exceeding the
excess of (i) (A) the applicable LIBO Rate divided by (B) one minus the
LIBOR Reserve Percentage over (ii) the applicable LIBO Rate. Any Lender
wishing to require payment of such additional interest shall so notify
Micro and the Administrative Agent (which notice shall set forth the amount
(as determined by such Lender) to which such Lender is then entitled under
this Section 4.2.6 (which amount shall be consistent with such Lender's
good faith estimate of the level at which the related reserves are
maintained by it and which determination shall be conclusive and binding
for all purposes, absent demonstrable error) and shall be accompanied by
such information as to the computation set forth therein as Micro may
reasonably request), in which case such additional interest on the LIBO
Rate Loans of such Lender shall be payable on the last day of each Interest
Period thereafter (commencing with the Interest Period beginning at least
three Business Days after the giving of such notice) to such Lender at the
place indicated in such notice. Each Lender that receives any payment in
respect of increased costs pursuant to this Section shall promptly notify
Micro of any change with respect to such costs which affects the amount of
additional interest payable pursuant to this Section in respect thereof.
SECTION 4.3. Fees. Micro (and, in the case of Section 4.3.3(d), each
relevant Borrower) agrees to pay the fees set forth in this Section 4.3.
All such fees shall be non-refundable and shall be paid to each such Lender
or the relevant Issuer at its office specified for such purpose on the
signature pages hereof.
SECTION 4.3.1. Administration and Documentation Fees. Micro agrees to
pay directly to the Administrative Agent and the Documentation Agent, for
their own accounts, an annual administration and documentation fee,
respectively, in the amounts and on the dates set forth in the Fee Letter.
SECTION 4.3.2. Facility Fees. Micro agrees to pay directly to each
Lender (including any portion thereof when the Lenders may not extend any
Credit Extensions by reason of the inability of Micro to satisfy any
condition of Section 6.1 or 6.2): (a) for each day during the period
commencing on the date hereof and continuing through and including the date
the Administrative Agent shall receive the reports and financial statements
of Micro and its Consolidated Subsidiaries required to be delivered
pursuant to Section 8.1.1(a) hereof (together with the Compliance
Certificate required to be delivered contemporaneously therewith pursuant
to Section 8.1.1(d) hereof) for the Fiscal Year ending on the Saturday
nearest December 31, 1996, a fee to each Lender on its Credit Commitment
Amount on such day (without taking into account usage) at a rate of .125 of
1% per annum and (b) for each day during the period commencing on the date
immediately following the date the Administrative Agent shall receive the
reports, financial statements and Compliance Certificate referred to in
clause (a) above, until but excluding the Commitment Termination Date, a
fee to each Lender on its Credit Commitment Amount on such day (without
taking into account usage) at the corresponding rate per annum set forth
below, determined by reference to: (i) the lower of the two highest
ratings from time to time assigned to Micro's long-term senior unsecured
debt by S&P, Moody's and Fitch and either published or otherwise evidenced
in writing by the applicable rating agency and made available to the
Administrative Agent (including both "express" and "indicative" or
"implied" (or equivalent) ratings) or (ii) the ratio (calculated pursuant
to clause (c) of Section 8.2.3) of Consolidated Funded Debt to Consolidated
EBITDA for the Fiscal Period most recently ended prior to, such day, for
which financial statements and reports have been received by the
Administrative Agent pursuant to Section 8.1(a) or (b), whichever results
in the lower rate:
<TABLE>
<CAPTION>
Micro's Long-Term Senior Unsecured
Debt Ratings by S&P, Moody's or Fitch, Ratio of Consolidated Funded Debt to
respectively Consolidated EBITDA Facility Fee
______________________________________ _______________________________________________ ____________
<S> <C> <C>
A-, A3 or A- (or higher) Less than 1.5 .090%
BBB+, Baa1 or BBB+ Greater than or equal to 1.5, but less than 2.0. .110%
BBB, Baa2 or BBB Greater than or equal to 2.0, but less than 2.5. .125%
BBB-, Baa3 or BBB- Greater than or equal to 2.5, but less than 3.0. .150%
BB+, Ba1 or BB+ Greater than or equal to 3.0, but less than 3.25. .200%
Lower than BB+, Ba1 or BB+ Greater than or equal to 3.25. .250%
</TABLE>
Such fee shall be calculated by Micro as at each Quarterly Payment Date,
commencing on the first Quarterly Payment Date to occur after the date hereof,
and on the Commitment Termination Date and shall be payable by Micro in
arrears on each Quarterly Payment Date and on the Commitment Termination Date.
Each Lender agrees to promptly notify the Administrative Agent of the failure
of Micro to pay any fee as provided in this Section.
SECTION 4.3.3. Letter of Credit Fees.
(a) Micro agrees to pay directly to each Lender (including the
relevant Issuer) a Pro-Rata Letter of Credit participation fee equal to
each Lender's Percentage of the average daily Stated Amount of each
Pro-Rata Letter of Credit during the applicable period multiplied by the
Applicable Margin then in effect for any LIBO Rate Loan. Such
participation fee shall accrue from the date of issuance of any Pro-Rata
Letter of Credit until the date such Pro-Rata Letter of Credit is drawn
in full or terminated, and shall be payable in arrears on each Quarterly
Payment Date and on the date that the Commitments terminate in their
entirety.
(b) Micro agrees to pay directly to the Issuer of each Pro-Rata
Letter of Credit a Pro-Rata Letter of Credit issuance fee of .125 of 1%
per annum of the average daily Stated Amount of such Pro-Rata Letter of
Credit during the applicable period, such fee to be payable to the
relevant Issuer in quarterly installments in arrears on each Quarterly
Payment Date and on the date that the Commitments terminate in their
entirety. Micro agrees to reimburse each Issuer, on demand, for all
usual out-of-pocket costs and expenses incurred in connection with the
issuance or maintenance of any Pro-Rata Letter of Credit issued by such
Issuer.
(c) Each Lender and Issuer agrees to promptly notify the
Administrative Agent of the failure of Micro to pay any letter of credit
fees pursuant to this Section.
(d) Each Borrower agrees to pay directly to the relevant Issuer
of each Non-Rata Letter of Credit requested by such Borrower an
issuance fee equal to such amount and at such times as such Borrower
and the applicable Issuer shall agree in connection with the issuance
of such Non-Rata Letter of Credit.
SECTION 4.4. Rate and Fee Determinations. Interest on each LIBO Rate
Loan shall be computed on the basis of a year consisting of 360 days and
interest on each Reference Rate Loan and fees shall be computed on the
basis of a year consisting of 365 or 366 days, as the case may be, in each
case paid for the actual number of days elapsed, calculated as to each
period from and including the first day thereof to but excluding the last
day thereof. All determinations by the Administrative Agent of the rate of
interest payable with respect to any Pro-Rata Revolving Loan shall be
conclusive and binding in the absence of demonstrable error.
SECTION 4.5. Obligations in Respect of Non-Rata Credit Extensions.
Micro hereby acknowledges and agrees that notwithstanding any provision
hereof or of any other Loan Document to the contrary, all Obligations of
the Obligors in respect of any Non-Rata Credit Extensions shall be the
joint and several liabilities of Micro.
ARTICLE V
CERTAIN PAYMENT PROVISIONS
SECTION 5.1. Illegality; Currency Restrictions.
(a) If, as the result of any Regulatory Change, any Lender shall
determine (which determination shall, in the absence of demonstrable
error, be conclusive and binding on each Borrower), that it is unlawful
for such Lender to make any LIBO Rate Loan, issue any Non-Rata Letter of
Credit or continue any LIBO Rate Loan previously made by it hereunder,
as the case may be, the obligations of such Lender to make any such LIBO
Rate Loan, issue any such Non-Rata Letter of Credit or continue any such
LIBO Rate Loan, as the case may be, shall, upon the giving of notice
thereof to the Administrative Agent, Micro and any other applicable
Borrower, forthwith be suspended and each applicable Borrower shall, if
requested by such Lender and if required by such Regulatory Change, on
such date as shall be specified in such notice, prepay to such Lender in
full all of such LIBO Rate Loans or convert all of such LIBO Rate Loans
into a Loan of another Type that is not unlawful, in each case on the
last day of the Interest Period applicable thereto (unless otherwise
required by applicable law) and without any penalty whatsoever (but
subject to Section 5.4); provided, however, such Lender shall make as
Reference Rate Loans all Loans that such Lender would otherwise be
obligated to make as LIBO Rate Loans and convert into or continue as
Reference Rate Loans all Loans that such Lender would otherwise be
required to convert into or continue as LIBO Rate Loans, in each case
during the period any such suspension is effective. Such suspension
shall continue to be effective until such Lender shall notify the
Administrative Agent and Micro that the circumstances causing such
suspension no longer exist, at which time the obligations of such Lender
to make any such LIBO Rate Loan, issue any Non-Rata Letter of Credit
or continue any LIBO Rate Loan, as the case may be, shall be
reinstated.
(b) If any central bank or other governmental authorization in
the country of the proposed Available Currency of any proposed Non-Rata
Revolving Loan is required to permit the use of such Available Currency
by a Lender (through its Lending Office) for such Non-Rata Revolving
Loan and such authorization has not been obtained (provided that such
Lender has used reasonable endeavors to obtain such authorization) or is
not in full force and effect, the obligation of such Lender to provide
such Non-Rata Revolving Loans shall be suspended so long as such
authorization is required and has not been obtained by such Lender.
SECTION 5.2. Deposits Unavailable.
(a) If prior to the date on which all or any portion of any LIBO
Rate Loan is to be made, maintained or continued the Administrative
Agent shall have determined (which determination shall be conclusive and
binding), with respect to such LIBO Rate Loan that:
(i) Dollar deposits in the relevant amount and for the
relevant Interest Period are available to none of the Reference
Lenders in the relevant market; or
(ii) by reason of circumstances affecting the London
interbank market, adequate means do not exist for ascertaining the
interest rate applicable hereunder to such LIBO Rate Loan,
then, upon notice from the Administrative Agent to Micro and the
Lenders, the obligations of the Lenders to make or continue any Pro-Rata
Revolving Loan as a LIBO Rate Loan under Sections 3.1 and 4.2.3 shall
forthwith be suspended until the Administrative Agent shall notify Micro
and the Lenders that the circumstances causing such suspension no longer
exist; provided, however, that, for so long as any such suspension shall
be effective, unless the Borrower shall notify the Administrative Agent
prior to 1:00 p.m., Eastern Time, on the date of any proposed Borrowing
that was to be comprised of LIBO Rate Loans that it does not wish to
obtain such Loans as Reference Rate Loans, any proposed Borrowing that
would have been comprised of LIBO Rate Loans but for the terms of this
Section shall be made on the date of such proposed Borrowing as
Reference Rate Loans.
(b) The obligation of any Lender to make a Non-Rata Revolving
Loan shall be suspended under the circumstances provided for pursuant to
Section 3.3.4.
SECTION 5.3. Increased Credit Extension Costs, etc. Each Borrower
agrees to reimburse each Lender upon demand for any increase in the cost to
such Lender of, or any reduction in the amount of any sum receivable by
such Lender in respect of, making, maintaining, participating, issuing or
extending (or of its obligation to make, maintain, participate, issue or
extend) any Credit Extension to the extent such increased cost or reduced
amount is due to a Regulatory Change. Such Lender shall provide to the
Administrative Agent and the relevant Borrower a certificate stating, in
reasonable detail, the reasons for such increased cost or reduced amount
and the additional amount required fully to compensate such Lender for such
increased cost or reduced amount. Such additional amounts shall be payable
by the relevant Borrower directly to such Lender upon its receipt of such
notice, and such notice shall be rebuttable presumptive evidence of the
additional amounts so owing. In determining such amount, such Lender shall
act reasonably and in good faith and may use any method of averaging and
attribution that it customarily uses for its other borrowers with a similar
credit rating as Micro. Such Lender may demand reimbursement for such
increased cost or reduced amount only for the 360-day period immediately
preceding the date of such written notice, and Micro shall have liability
only for such period.
SECTION 5.4. Funding Losses. In the event any Lender shall incur
any loss or expense (including any loss or expense incurred by reason of
the liquidation or reemployment of deposits or other funds acquired by such
Lender to make, continue or extend any portion of the principal amount of
any Loan) as a result of:
(a) any repayment or prepayment of the principal amount of any
Loan on a date other than the scheduled last day of the Interest Period
or, in the case of any Non-Rata Revolving Loan, other relevant funding
period applicable thereto, whether pursuant to Section 4.1 or otherwise;
(b) any conversion of a LIBO Rate Loan into a Reference Rate
Loan on a date other than the scheduled last day of the Interest Period
applicable thereto; or
(c) any Loan not being made, continued or converted in
accordance with the Credit Extension Request therefor in the case of any
Pro-Rata Credit Extension Request or the instructions of the relevant
Borrower to the relevant Lender in the case of any Non-Rata Credit
Extension as a consequence of any action taken, or failed to be
taken, by any Obligor,
then, upon the written notice of such Lender to the relevant Borrower (with a
copy to the Administrative Agent), such Borrower shall, within five days of
its receipt thereof, pay directly to such Lender such amount as will (in the
reasonable determination of such Lender) reimburse such Lender for such loss
or expense. Such written notice (which shall include calculations in
reasonable detail) shall be rebuttable presumptive evidence of the amount of
any such loss or expense that has been so incurred.
SECTION 5.5. Increased Capital Costs. If any Regulatory Change
affects or would affect the amount of capital required or expected to be
maintained by any Lender or any Person controlling such Lender, and such
Lender determines (in its sole and absolute discretion) that the rate of
return on its or such controlling Person's capital as a consequence of its
participation in this Agreement or the making, continuing, participating in
or extending of any Credit Extension is reduced to a level below that which
such Lender or such controlling Person could have achieved but for the
occurrence of any such circumstance, then, in any such case, upon the
relevant Borrower's receipt of written notice thereof from such Lender
(with a copy to the Administrative Agent), such Borrower shall pay directly
to such Lender additional amounts sufficient to compensate such Lender or
such controlling Person for such reduction in rate of return. A statement
of such Lender as to any such additional amounts (including calculations
thereof in reasonable detail) shall be rebuttable presumptive evidence of
the additional amounts so owing. In determining such amount, such Lender
may use any method of averaging and attribution that it shall deem
applicable. Such Lender may demand payment for such additional amounts
that have accrued only during the 360-day period immediately preceding the
date of such written notice and Micro shall have liability only for such
period.
SECTION 5.6. Discretion of Lenders as to Manner of Funding.
Notwithstanding any provision of this Agreement to the contrary, the Lenders
shall be entitled to fund and maintain their funding of all or any part of
their Loans and other Credit Extensions in any manner they elect, it being
understood, however, that for the purposes of this Agreement all
determinations hereunder with respect to a Pro-Rata Revolving Loan shall be
made as if each Lender had actually funded and maintained each Loan through
its Lending Office and through the purchase of deposits having a maturity
corresponding to the maturity of such Pro-Rata Revolving Loan. Any Lender
may, if it so elects, fulfill any commitment or obligation to make or
maintain Loans or other Credit Extensions by causing a branch or affiliate
to make or maintain such Loans or other Credit Extensions; provided,
however, that in such event such Loans or other Credit Extensions shall be
deemed for the purposes of this Agreement to have been made by such Lender
through its applicable Lending Office, and the obligation of Micro to repay
such Loans shall nevertheless be to such Lender at its Lending Office and
shall be deemed held by such Lender through its applicable Lending Office,
to the extent of such Loan, for the account of such branch or affiliate.
SECTION 5.7. Taxes. All payments by any Obligor of principal of, and
interest and fees on, any Credit Extension and all other amounts payable
hereunder or under any other Loan Document shall be made free and clear of and
without deduction for any present or future income, excise, stamp or franchise
taxes and other taxes, fees, duties, withholdings or other charges of any
nature whatsoever imposed by any taxing authority with respect to such
payments, but excluding first, franchise taxes and taxes imposed on or
measured by any Lender Party's gross or net income, profits or receipts and,
second, taxes or other charges of any nature imposed by any taxing authority
on any Lender Party which do not result from any Regulatory Change and which
are not imposed on any class of bank having the same general characteristics
as such Lender Party (such non-excluded items being called "Taxes"). In the
event that any withholding or deduction from any payment to be made by any
Obligor hereunder is required in respect of any Taxes pursuant to any
applicable law, rule or regulation, then such Obligor will:
(a) pay directly to the relevant authority the full amount
required to be so withheld or deducted;
(b) promptly forward to the relevant Lender Party an official
receipt or other documentation satisfactory to such Lender Party
evidencing such payment to such authority; and
(c) pay directly to the relevant Lender Party for its own
account such additional amount or amounts as is or are necessary to
ensure that the net amount actually received by such Lender Party will
equal the full amount such Lender Party would have received had no such
withholding or deduction been required.
Moreover, if any Taxes are directly asserted against any Lender Party with
respect to any payment received by such Lender Party hereunder, such Lender
Party may pay such Taxes and the relevant Obligor will promptly pay such
additional amounts (including any penalties, interest or expenses) as is
necessary in order that the net amount received by such Lender Party after the
payment of such Taxes (including any Taxes on such additional amount) shall
equal the amount such Lender Party would have received had not such Taxes been
asserted.
If the relevant Obligor fails to pay any Taxes when due to the
appropriate taxing authority or fails to remit to the relevant Lender Parties
entitled thereto the required receipts or other required documentary evidence,
such Obligor shall indemnify such Lender Parties for any incremental Taxes,
interest or penalties that may become payable by any Lender Party as a result
of any such failure.
Each Lender Party organized under the laws of a jurisdiction outside the
United States: (a) either on or prior to (i) the date of its execution and
delivery of this Agreement in the case of each such Lender Party listed on the
signature pages hereof, or (ii) the date on which it becomes a Lender Party in
the case of each such other Lender Party; (b) on or prior to the date of any
change in any such Lender Party's Lending Office; and (c) from time to time
thereafter if requested in writing by Micro (but only so long as such Lender
Party remains lawfully able to do so), shall provide Micro and the
Administrative Agent with Internal Revenue Service Form 1001 or 4224, as
appropriate, or any successor form prescribed by the Internal Revenue Service,
certifying that such Lender Party is entitled to benefits under an income tax
treaty to which the United States is a party which exempts the Lender Party
from United States withholding tax or, except in the case of the initial such
form so delivered hereunder by such Lender Party, reduces the rate of
withholding tax on payments of interest for the account of such Lender Party or
certifying that the income receivable by such Lender Party pursuant to this
Agreement is effectively connected with the conduct of a trade or business in
the United States. For any period with respect to which a Lender Party
organized under the laws of a jurisdiction outside the United States has
failed to provide Micro and the Administrative Agent with the applicable
Internal Revenue Service form required to be so provided in accordance with
this Section 5.7 (unless such failure is due to a change in treaty, law or
regulation occurring subsequent to the date on which such form originally was
required to be provided), such Lender Party shall not be entitled to
indemnification under this Section 5.7 with respect to United States
withholding tax; provided that if a Lender Party which is otherwise exempt
from or subject to a reduced rate of withholding tax becomes subject to United
States withholding tax because of its failure to deliver an Internal Revenue
Service form required hereunder, Micro shall take such steps as such Lender
Party shall reasonably request to assist such Lender Party to recover such
United States withholding tax.
If any Obligor pays any additional amount under this Section 5.7 (a "Tax
Payment") and any Lender Party or Affiliate thereof effectively obtains a
refund of tax or credit against tax by reason of the Tax Payment (a "Tax
Credit") and such Tax Credit is, in the reasonable judgment of such Lender
Party or Affiliate, attributable to the Tax Payment, then such Lender Party,
after actual receipt of such Tax Credit or actual receipt of the benefits
thereof, shall promptly reimburse such Obligor for such amount as such Lender
Party shall reasonably determine to be the proportion of the Tax Credit as
will leave such Lender Party (after that reimbursement) in no better or worse
position than it would have been in if the Tax Payment had not been required;
provided, however, that no Lender Party shall be required to make any such
reimbursement if it reasonably believes the making of such reimbursement would
cause it to lose the benefit of the Tax Credit or would adversely affect in
any other respect its tax position. Subject to the other terms hereof, any
claim by a Lender Party for a Tax Credit shall be made in a manner, order and
amount as such Lender Party determines in its sole and absolute discretion.
Except to the extent necessary for Micro to evaluate any Tax Credit, no Lender
Party shall be obligated to disclose information regarding its tax affairs or
computations to any Obligor, it being understood and agreed that in no event
shall any Lender Party be required to disclose information regarding its tax
position that it deems to be confidential (other than with respect to the Tax
Credit).
SECTION 5.8. Payments. All payments by an Obligor pursuant to this
Agreement or any other Loan Document, whether in respect of principal,
interest, fees or otherwise, shall be made as set forth in this Section 5.8.
SECTION 5.8.1. Pro-Rata Credit Extensions.
(a) All payments (whether in respect of principal, interest or
otherwise) pursuant to this Agreement or any other Loan Document with
respect to Pro-Rata Credit Extensions or any other amount payable
hereunder (other than amounts payable with respect to Non-Rata Revolving
Loans, Bid Rate Loans, Non-Rata Reimbursement Obligations, fees payable
pursuant to Section 4.3 (which fees shall be paid directly by Micro or
the relevant Borrower to the relevant payee), 11.3 or 11.4 and payments
made to a Terminating Lender pursuant to Section 9.4), shall be made by
Micro to the Administrative Agent for the account of each Lender based
upon its Percentage in the case of Pro-Rata Letters of Credit and its
Percentage in the case of any Pro-Rata Revolving Loan (such Percentage
to be calculated on the date each such Pro-Rata Revolving Loan was
made). All such payments required to be made to the Administrative
Agent shall be made, without set-off, deduction or counterclaim, not
later than 1:00 p.m., Eastern time, on the date when due, in same day or
immediately available funds, to such account as the Administrative Agent
shall specify from time to time by notice to Micro. Funds received
after that time shall be deemed to have been received by the
Administrative Agent on the next succeeding Business Day. The
Administrative Agent shall promptly remit in same day funds to each
Lender its share, if any, of such payments received by the
Administrative Agent for the account of such Lender. Whenever any
payment hereunder shall be stated to be due on a day other than a
Business Day, such payment shall, except as otherwise required pursuant
to clause (d) of the definition of Interest Period, be made on the next
succeeding Business Day, and such extension of time shall in such case
be included in the computation of payment of interest or fees, as the
case may be.
(b) In the case of any payment made pursuant to the preceding
clause (a) by Micro to the Administrative Agent, unless the
Administrative Agent shall have received notice from Micro prior to the
date on which any such payment is due hereunder that Micro will not make
such payment in full, the Administrative Agent may assume that Micro has
made such payment in full to the Administrative Agent on such date and
the Administrative Agent may, in reliance upon such assumption, cause to
be distributed to each Lender on such due date an amount equal to the
amount then due to such Lender. If Micro shall not have so made such
payment in full to the Administrative Agent, each Lender shall repay to
the Administrative Agent forthwith on demand any such amount distributed
to the Lender to the extent that such amount was not paid by Micro to the
Administrative Agent together with interest thereon, for each day from
the date such amount is distributed to such Lender until the date such
Lender repays such amount to the Administrative Agent, at the Federal
Funds Rate.
SECTION 5.8.2. Non-Rata Obligations. All payments (whether in respect
of principal, interest, fees or otherwise) by any Borrower pursuant to this
Agreement or any other Loan Document with respect to the Non-Rata Credit
Extensions shall be made by such Borrower, in the currency in which the
Obligation was denominated (the "Required Currency") and in same day or
immediately available funds, to the relevant Lender or Issuer, as the case may
be (for its own account), at an account specified by such Lender or Issuer, as
the case may be, from time to time by notice to the relevant Borrower. All
such payments on account of Non-Rata Revolving Loans or Non-Rata Reimbursement
Obligations shall be made on the date due, without set-off, deduction or
counterclaim and at the times agreed to between the relevant Borrower and the
relevant Lender or Issuer, as the case may be. Each Lender that has made a
Non-Rata Revolving Loan or Bid Rate Loan agrees to give the Administrative
Agent prompt notice of any payment or failure to pay when due of any amounts
owing with respect to each such Non-Rata Revolving Loan or Bid Rate Loan.
Each Issuer that has issued a Non-Rata Letter of Credit agrees to give the
Administrative Agent prompt notice of any payment or failure to pay when due
any Non-Rata Reimbursement Obligations or any other amounts owing with respect
to such Non-Rata Letter of Credit.
SECTION 5.9. Sharing of Payments.
(a) Prior to the occurrence of a Pro-Rata Distribution Event,
the Administrative Agent shall remit payments made by Micro to it
pursuant to Section 5.8.1, and each Lender shall retain for its own
account all payments received by it pursuant to Section 5.8.2.
(b) Upon the occurrence and continuation of a Pro-Rata
Distribution Event,
(i) the Lenders shall share all collections and recoveries
in respect of the Credit Extensions and Obligations hereunder on a
pro rata basis, based on the respective Outstanding Credit
Extensions of each Lender, including unpaid principal, interest,
indemnities and fees payable with respect thereto; and
(ii) Micro, each other Borrower and each other Obligor
shall make payment of all amounts owing hereunder (whether in
respect of principal, interest, fees or otherwise or on account of
any Pro-Rata Credit Extension or Non-Rata Credit Extension) to the
Administrative Agent for the account of the Lenders as provided in
the preceding clause (i). The Administrative Agent shall promptly
remit in same day funds to each Lender its share, if any, of all
payments received by the Administrative Agent for the account of
such Lender.
(c) For purposes of the foregoing, a "Pro-Rata Distribution
Event" shall mean the first to occur of (i) an Event of Default
pursuant to Section 9.1.1 or 9.1.9 or (ii) any Default if, in
connection therewith, the Required Lenders shall have notified the
Administrative Agent (and, upon receipt of any such notice, the
Administrative Agent shall promptly notify Micro and the Lenders of
the same) of the occurrence of such Default and shall have instructed
the Administrative Agent that payments hereunder shall be allocated
as provided in the preceding clause (b).
(d) If at any time the proportion which any Lender Party (the
"Receiving Lender Party") has received or recovered (whether by set-off
or otherwise) in respect of its portion of any sum due from any Borrower
hereunder or under any other Loan Document is in excess of (the amount
of such excess being herein referred to as the "Excess Amount") the
proportion of such sum thereof which the Receiving Lender Party is
entitled to receive pursuant to clause (b)(i), then the Receiving Lender
Party shall promptly notify the Administrative Agent thereof and:
(i) the Receiving Lender Party shall promptly and in any
event within ten days of receipt or recovery of the Excess Amount
pay to the Administrative Agent an amount equal to the Excess
Amount;
(ii) the Administrative Agent shall treat such payment as
if it were a payment by the relevant Borrower on account of a sum
owed to the Receiving Lender Party and shall pay the same to the
relevant Lender Parties entitled to share in such payment
(including the Receiving Lender Party) as provided in clause
(b)(i); and
(iii) as between the relevant Borrower and the Receiving
Lender Party the Excess Amount shall be treated as not having been
paid, while as between such Borrower and each Lender Party
referred to in the preceding clause (d)(ii), it shall be treated
as having been paid by such Borrower to the extent received by
such Lender Party;
provided, however, that where a Receiving Lender Party is subsequently
required to repay to any Obligor any amount received or recovered by it
and paid to the other Lender Parties pursuant to this clause (d), each
relevant Lender Party shall promptly repay to the Administrative Agent
for the account of the Receiving Lender Party the portion of such amount
distributed to it pursuant to this clause (d), together with interest
thereon at a rate sufficient to reimburse the Receiving Lender Party for
any interest which it has been required to pay to such Obligor in
respect of such portion of such amount.
SECTION 5.10. Right of Set-off. Upon the occurrence and during the
continuance of any Default, after providing notice to Micro with respect
thereto (which notice shall not be required during any period when an Event of
Default shall have occurred and be continuing), each Lender Party is hereby
authorized at any time and from time to time, to the fullest extent permitted
by law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final but excluding, for the avoidance of doubt, any
payment received pursuant to this Agreement by the Administrative Agent in its
capacity qua Administrative Agent on behalf of the Lenders) at any time held
and other indebtedness at any time due and owing by such Lender Party (in any
currency and at any branch or office) to or for the credit or the account of
any Obligor against any and all of the Obligations of such Obligor now or
hereafter existing under this Agreement or any other Loan Document that are at
such time due and owing, irrespective of whether or not such Lender Party
shall have made any demand under this Agreement or such other Loan Document
(other than any notice expressly required hereby). The rights of each Lender
Party under this Section 5.10 are in addition to other rights and remedies
(including other rights of set-off) which such Lender Party may have.
SECTION 5.11. Judgments, Currencies, etc. The obligation of each
Obligor to make payment of all Obligations in the Required Currency shall
not be discharged or satisfied by any tender, or any recovery pursuant to
any judgment, which is expressed in or converted into any currency other
than the Required Currency, except to the extent such tender or recovery
shall result in the actual receipt by the recipient at the office required
hereunder of the full amount of the Required Currency expressed to be
payable under this Agreement or any other Loan Document. Without limiting
the generality of the foregoing, each Obligor authorizes the Administrative
Agent (or in the case of a Non-Rata Revolving Loan or any other amount
required to be paid to any Lender directly, the relevant Lender) on any
tender or recovery in a currency other than the Required Currency to
purchase in accordance with normal banking procedures the Required Currency
with the amount of such other currency so tendered or recovered. The
obligation of each Obligor to make payments in the Required Currency shall
be enforceable as an alternative or additional cause of action for the
purpose of recovery in the Required Currency of the amount (if any) by
which such actual receipt shall fall short of the full amount of the
Required Currency expressed to be payable under this Agreement or any other
Loan Document, and shall not be affected by judgment being obtained for any
other sums due under this Agreement or such other Loan Document.
SECTION 5.12. Replacement of Lenders. Each Lender hereby severally
agrees that if such Lender (a "Subject Lender") makes demand upon any
Borrower for (or if any Borrower is otherwise required to pay) amounts
pursuant to Section 4.2.6, 5.3, 5.5 or 5.7, or if the obligation of such
Lender to make LIBO Rate Loans is suspended pursuant to Section 5.1(a),
such Borrower may, so long as no Event of Default shall have occurred and
be continuing, replace such Subject Lender with another financial
institution pursuant to an assignment in accordance with Section 11.11.1;
provided that (i) unless such financial institution is a Lender or an
Affiliate of a Lender, such financial institution shall become a Lender
only with the prior written consent of the Administrative Agent, which
consent shall not be unreasonably withheld, and (ii) the purchase price
paid by such designated financial institution shall be in the amount of
such Subject Lender's Loans and its Percentage of outstanding Reimbursement
Obligations, together with all accrued and unpaid interest and fees in
respect thereof, plus all other amounts (including the amounts demanded and
unreimbursed under Sections 4.2.6, 5.3, 5.5 and 5.7), owing to such Subject
Lender hereunder. Upon the effective date of such assignment, (a) the
relevant Borrower shall issue a replacement Note to such designated financial
institution and such institution shall become a Lender for all purposes
under this Agreement and the other Loan Documents and (b) the relevant Subject
Lender shall deliver to Micro all of its Notes, such Notes to be canceled
by Micro.
SECTION 5.13. Change of Lending Office. If Micro or any other Obligor
is required to pay additional amounts to or for the account of any Lender
Party pursuant to Section 4.2.6, 5.3, 5.5 or 5.7, or if the obligation of
any Lender to make or continue LIBO Rate Loans is suspended pursuant to
Section 5.1(a), then such Lender Party will change the jurisdiction of its
Lending Office if, in the judgment of such Lender Party, such change (i)
will eliminate or reduce any such additional payment which may thereafter
accrue or will avoid such suspension and (ii) is not otherwise
disadvantageous to such Lender Party.
ARTICLE VI
CONDITIONS TO MAKING CREDIT EXTENSIONS
AND ACCESSION OF ACCEDING BORROWERS
SECTION 6.1. Initial Credit Extension. The obligation of each Lender
and, if applicable, any Issuer to make the initial Credit Extension shall be
subject to the prior or concurrent satisfaction of each of the conditions
precedent set forth in this Section 6.1.
SECTION 6.1.1. Resolutions, etc. The Administrative Agent shall have
received from each Obligor a certificate, dated the Effective Date and with
counterparts for each Lender, duly executed and delivered by the Secretary,
Assistant Secretary or other authorized representative of such Obligor as to:
(a) resolutions of its Board of Directors or its Executive
Committee, as the case may be, then in full force and effect authorizing
the execution, delivery and performance of this Agreement and the
Guaranty and each other Loan Document to be executed by it;
(b) the incumbency and signatures of those of its officers
authorized to act with respect to this Agreement and the Guaranty and
each other Loan Document to be executed by it; and
(c) the Organic Documents of such Obligor (including, without
limitation, with respect to Micro, a copy of the executed Board
Representation Agreement),
upon which certificate each Lender may conclusively rely until the
Administrative Agent shall have received a further certificate of the
Secretary of the relevant Obligor canceling or amending such prior
certificate. In addition, each Obligor shall have delivered to the
Administrative Agent a good standing certificate from the relevant
governmental regulatory institution of its jurisdiction of incorporation, each
such certificate to be dated a date reasonably near (but prior to) the date
of the initial Credit Extension.
SECTION 6.1.2. Effective Date Certificate. The Administrative Agent
shall have received, with counterparts for each Lender, the Effective Date
Certificate, dated the Effective Date and duly executed and delivered by the
chief executive officer, an Authorized Person or the Treasurer of Micro. All
documents and agreements required to be appended to the Effective Date
Certificate shall be in form and substance satisfactory to the Lenders.
SECTION 6.1.3. Delivery of Notes. The Administrative Agent shall have
received, for the account of each Lender, such Lender's Revolving Note, Bid
Rate Note and Non-Rata Revolving Note, duly executed and delivered by the
Obligor party thereto, as the case may be.
SECTION 6.1.4. Guaranties, etc. The Administrative Agent shall have
received, with counterparts for each Lender, (a) each of the Guaranties in
effect as of the Effective Date, dated the date hereof, duly executed and
delivered by an Authorized Person of the relevant Guarantor and (b) the
Intra-Group Agreement, dated the date hereof and duly executed by each
Borrower that is a Guarantor.
SECTION 6.1.5. Financial Information, etc. The Administrative Agent
shall have received true and correct copies for each Lender, of
(a) audited consolidated financial statements of Micro and its
Consolidated Subsidiaries for its last Fiscal Year, prepared in
accordance with GAAP free of any Impermissible Qualifications; and
(b) unaudited consolidated financial statements for Micro and
its Consolidated Subsidiaries for the first two Fiscal Periods of the
1996 Fiscal Year, prepared in accordance with GAAP.
SECTION 6.1.6. Compliance Certificate. The Administrative Agent shall
have received, with counterparts for each Lender, an initial Compliance
Certificate, dated as of the Effective Date.
SECTION 6.1.7. Payment of Outstanding Indebtedness. The Administrative
Agent shall have received evidence satisfactory to it that
contemporaneously with the making of the initial Credit Extension (a) all
"Obligations" (including those in respect of Indebtedness thereunder and
accrued interest with respect thereto) under the Existing Industries Credit
Agreement shall be satisfied in full, whether through the application,
directly or indirectly, of any portion of the proceeds of such initial
Credit Extension or through the application of other moneys, and (b) all
"Commitments" under the Existing Industries Credit Agreement shall be
terminated.
SECTION 6.1.8. Consents, etc. The Administrative Agent shall have
received evidence satisfactory to it as to the receipt by each Obligor of
any necessary consents or waivers under any agreement applicable to such
Obligor in order to enable such Obligor to enter into this Agreement and
any other Loan Document, to perform its obligations hereunder and
thereunder and, in the case of each Borrower, to obtain Credit Extensions
hereunder.
SECTION 6.1.9. Closing Fees, Expenses, etc. The Administrative Agent
and each Lender shall have received payment in full of all fees, costs and
expenses due and payable pursuant to Sections 4.3 and 11.3 (to the extent
then invoiced).
SECTION 6.1.10. Opinions of Counsel. The Administrative Agent shall
have received opinions of counsel, dated the Effective Date and addressed
to the Documentation Agent, the Administrative Agent and all the Lenders,
from:
(a) James E. Anderson, General Counsel of Micro, covering the
matters set forth in Exhibit M hereto;
(b) Davis Polk & Wardwell, special counsel to Micro, covering
the matters set forth in Exhibit N hereto;
(c) Baker & McKenzie, special Belgian counsel to Coordination
Center, substantially in the form of Exhibit O hereto;
(d) Fogler, Rubinoff, special Canadian counsel to Micro Canada,
substantially in the form of Exhibit P hereto;
(e) Yeo Wee Kiong and Partners, special Singapore counsel to
Micro Singapore, substantially in the form of Exhibit Q hereto; and
(f) King & Spalding, counsel to the Agents, substantially in the
form of Exhibit R hereto.
SECTION 6.1.11. Investment Prospectus. The Administrative Agent shall
have received a true and correct copy of the final Prospectus (filed or to
be filed with the Securities and Exchange Commission pursuant to Rule
424(b) under the Securities Act of 1933, as amended) (the "Investment
Prospectus") and comprising a part of the registration statement on Form
S-1 (Registration No. 333-08453) filed with the Securities and Exchange
Commission in connection with the Investment.
SECTION 6.1.12. Senior Executive Officer's Certificate. The
Administrative Agent shall have received, with counterparts for each
Lender, a certificate, dated the Effective Date and duly executed and
delivered by a senior executive officer of Micro stating that (i) the First
Closing (as defined in the Amended and Restated Exchange Agreement referred
to below) has occurred of the share exchanges contemplated by that certain
Amended and Restated Exchange Agreement to be entered into among
Industries, Entertainment, Micro and certain shareholders of Industries,
(ii) each of Ingram Micro Holdings Inc., a California corporation, and
Ingram Micro Inc., a California corporation, has merged into Micro, (iii)
the Investment has been successfully completed or will be successfully
completed concurrently with the initial Credit Extension hereunder; (iv)
since December 31, 1995, there has occurred no event or events which,
singly or in the aggregate, has resulted in a Material Adverse Effect; and
(v) the descriptions of the Transition Agreements and the transactions
contemplated thereby set forth in the annexes attached thereto, when taken
as a whole, do not include any untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
SECTION 6.1.13. Satisfactory Legal Form. All documents executed or
submitted pursuant to this ARTICLE VI by or on behalf of each Obligor shall
be satisfactory in form and substance to the Administrative Agent (who may
rely upon the advice of its legal counsel with respect to legal matters in
making such determination) and the Administrative Agent shall have received
such additional information, approvals, opinions, documents or instruments
as the Administrative Agent or the Required Lenders may reasonably request.
SECTION 6.2. All Credit Extensions. The obligation of each Lender to
make any Credit Extension (including the initial Credit Extension) shall be
subject to the satisfaction of each of the additional conditions precedent
set forth in this Section 6.2.
SECTION 6.2.1. Compliance with Warranties, No Default, etc. Both
before and after giving effect to such Credit Extension other than any
continuation or conversion (except as otherwise set forth in the final
proviso to this Section) of a Borrowing (but, if any Default of the nature
referred to in Section 9.1.5 shall have occurred with respect to any other
Indebtedness, without giving effect to the application, directly or
indirectly, of the proceeds of such Credit Extension to such other
Indebtedness), the following statements shall be true and correct:
(a) the representations and warranties of each Obligor set forth
in ARTICLE VII (excluding, however, those contained in Section 7.8) and
in any other Loan Document shall be true and correct with the same
effect as if then made (unless stated to relate solely to an earlier
date, in which case such representations and warranties shall be true
and correct as of such earlier date); provided, however, that if any of
the financial statements delivered pursuant to clause (b) of Section
8.1.1 do not present fairly the consolidated financial condition of the
Persons covered thereby as of the dates thereof and the results of their
operations for the periods then ended and Micro subsequently delivers
one or more financial statements pursuant to clause (a) or (b) of
Section 8.1.1 which, in the opinion of the Required Lenders, effectively
cures any omission or misstatement contained in such prior delivered
financial statement, the representation and warranty contained in
Section 7.6 as it relates to such prior delivered financial statement
shall be deemed satisfied for purposes hereof (it being understood and
agreed that such subsequent delivered financial statements shall be
deemed to have cured such earlier delivered inaccurate financial
statements unless the Required Lenders raise an objection with respect
thereto);
(b) except as disclosed in Item 7.8 (Litigation) of the
Disclosure Schedule:
(i) no labor controversy, litigation, arbitration or
governmental investigation or proceeding shall be pending or, to
the knowledge of any Obligor, threatened against any Obligor, or
any of their respective Consolidated Subsidiaries in respect of
which there exists a reasonable possibility of an outcome that
would result in a Material Adverse Effect or that would affect the
legality, validity or enforceability of this Agreement or any
other Loan Document; and
(ii) no development shall have occurred in any labor
controversy, litigation, arbitration or governmental investigation
or proceeding so disclosed in respect of which there exists a
reasonable possibility of an outcome that would result in a
Material Adverse Effect;
(c) no Default shall have occurred and be continuing, and no
Obligor, nor any of their respective Subsidiaries, shall be in violation
of any law or governmental regulation or court order or decree which,
singly or in the aggregate, results in, or would reasonably be expected
to result in, a Material Adverse Effect; and
(d) the Outstanding Credit Extensions of all the Lenders do not
exceed the Total Credit Commitment Amount (as such amount may be reduced
from time to time pursuant to Section 2.3);
provided however, that, in the case of any continuation or conversion of a
Borrowing, no Event of Default shall have occurred and be continuing.
SECTION 6.2.2. Credit Extension Request. In the case of any Pro-Rata
Credit Extension the Administrative Agent shall have received the relevant
Credit Extension Request in a timely manner as herein provided for such
Pro-Rata Credit Extension. Delivery of a Credit Extension Request and the
acceptance by Micro or any other Borrower of the proceeds of any Pro-Rata
Credit Extension shall constitute a representation and warranty by each
Obligor that, on the date of making such Pro-Rata Credit Extension (both
immediately before and after giving effect to the making of such Pro-Rata
Credit Extension and the application of the proceeds thereof), the
statements made in Section 6.2.1 are true and correct.
SECTION 6.2.3. Non-Rata Revolving Loans. In the case of any requested
Non-Rata Revolving Loan, each of the applicable conditions set forth in
Sections 3.3 and 6.2 or otherwise specified by the relevant Lender in
connection with such Non-Rata Revolving Loan shall have been satisfied.
SECTION 6.2.4. Non-Rata Letters of Credit. In the case of any
requested Non-Rata Letter of Credit, each of the applicable conditions set
forth in Sections 3.4 and 6.2 or otherwise specified by the relevant Issuer
(with respect to Non-Rata Letters of Credit) in connection with such
Non-Rata Letter of Credit shall have been satisfied.
SECTION 6.2.5. Bid Rate Loans. In the case of any requested Bid Rate
Loan, each of the applicable conditions set forth in Sections 3.5 and 6.2 or
otherwise specified by the relevant Lender in connection with such Bid Rate
Loan shall have been satisfied.
SECTION 6.3. Acceding Borrowers. Subject to the prior or concurrent
satisfaction of the conditions precedent set forth in this Section 6.3, any
Subsidiary of Micro may become a party hereto and a Supplemental Borrower and
an Obligor hereunder subsequent to the Effective Date (each such Subsidiary of
Micro, an "Acceding Borrower"), entitled to all the rights and subject to all
the obligations incident thereto and each Acceding Borrower may request the
Lenders to make Non-Rata Credit Extensions on the terms and subject to the
conditions of this Agreement.
SECTION 6.3.1. Resolutions, etc. The Administrative Agent shall have
received from such Acceding Borrower a certificate, dated the date such
Acceding Borrower is accepted by the Administrative Agent as a Supplemental
Borrower hereunder and with counterparts for each Lender, duly executed and
delivered by the Secretary, Assistant Secretary or other authorized
representative of such Acceding Borrower as to:
(a) resolutions of its Board of Directors or its Executive
Committee, as the case may be, then in full force and effect authorizing
the execution, delivery and performance of this Agreement and the
Guaranty and each other Loan Document to be executed by it;
(b) the incumbency and signatures of those of its officers
authorized to act with respect to this Agreement and the Guaranty and
each other Loan Document to be executed by it; and
(c) the Organic Documents of such Acceding Borrower,
upon which certificate each Lender may conclusively rely until the
Administrative Agent shall have received a further certificate of the
Secretary of such Acceding Borrower canceling or amending such prior
certificate. In addition, each Acceding Borrower shall have delivered to the
Administrative Agent a good standing certificate from the relevant
governmental regulatory institution of its jurisdiction of organization, each
such certificate to be dated a date reasonably near (but prior to) the date
such Acceding Borrower becomes a Supplemental Borrower hereunder.
SECTION 6.3.2. Delivery of Accession Request and Acknowledgment and
Notes. The Administrative Agent shall have received (a) an original
Accession Request and Acknowledgment duly completed and executed and
delivered by such Acceding Borrower and originals of any other instruments
evidencing accession of such Acceding Borrower hereunder as the
Administrative Agent may reasonably request, in each case effective as of
the date such Acceding Borrower becomes a Supplemental Borrower hereunder
and (b) for the account of each Lender (unless illegal (or otherwise likely
to result in consequences materially adverse to such Acceding Borrower)
under any local law, rule or regulation applicable to such Acceding
Borrower, in which case such Acceding Borrower shall provide prior notice
thereof to the Lenders and shall provide (prior to the date such Acceding
Borrower becomes a Supplemental Borrower hereunder) other evidence of such
Indebtedness or other documentation acceptable to the Required Lenders)
such Lender's Bid Rate Note and Non-Rata Revolving Note, duly executed and
delivered by such Acceding Borrower and in effect on the date such Acceding
Borrower becomes a Supplemental Borrower hereunder.
SECTION 6.3.3. Guaranties, etc. The Administrative Agent shall have
received, with counterparts for each Lender, (a) an Additional Guaranty
executed by such Acceding Borrower, in effect as of the date such Acceding
Borrower becomes a Supplemental Borrower hereunder, duly executed and
delivered by an Authorized Person of such Acceding Borrower and (b) such
instruments and documents evidencing accession of such Acceding Borrower under
the Intra-Group Agreement as the Administrative Agent may reasonably
request, in each case effective with respect to such Acceding Borrower as
of the date such Acceding Borrower becomes a Supplemental Borrower
hereunder.
SECTION 6.3.4. Compliance Certificate. The Administrative Agent shall
have received, with counterparts for each Lender, a Compliance Certificate
from Micro, dated the date such Acceding Borrower becomes a Supplemental
Borrower hereunder.
SECTION 6.3.5. Consents, etc. The Administrative Agent shall have
received evidence satisfactory to it as to the receipt by such Acceding
Borrower of any necessary consents or waivers under any agreement
applicable to such Acceding Borrower in order to enable such Acceding
Borrower to enter into this Agreement and any other Loan Document, to
perform its obligations hereunder and thereunder and to obtain Credit
Extensions hereunder.
SECTION 6.3.6. Opinions of Counsel. The Administrative Agent shall
have received an opinion of counsel, dated the date such Acceding Borrower
becomes a Supplemental Borrower hereunder and addressed to the
Documentation Agent, the Administrative Agent and all the Lenders, from the
General Counsel of Micro, or such other counsel as shall be reasonably
satisfactory to the Administrative Agent, covering the matters set forth in
Exhibit M hereto as to such Acceding Borrower.
SECTION 6.4. Waiver of Notice under Existing Industries Credit
Agreement. By its execution of this Agreement, each Lender that is a party
to the Existing Industries Credit Agreement (if in effect on the date of
the initial Credit Extension) agrees to waive the requirements set forth in
Sections 2.3 and 4.1 of the Existing Industries Credit Agreement for the
provision of advance notice by Industries and any other borrower thereunder
to the administrative agent thereunder in respect of the consummation of
the transactions contemplated by Section 6.1.7 hereof.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
In order to induce the Lender Parties to enter into this Agreement and
to make Credit Extensions hereunder, each Borrower represents and warrants
unto the Administrative Agent and each Lender with respect to itself and the
other Obligors as set forth in this ARTICLE VII.
SECTION 7.1. Organization, etc. Each of the Obligors and each of their
respective Subsidiaries is a company or corporation, as the case may be,
validly organized and existing and in good standing under the laws of the
jurisdiction of its incorporation or organization, is duly qualified to do
business and is in good standing as a foreign corporation in each jurisdiction
where the nature of its business requires such qualification and where the
failure to so qualify and to maintain such good standing, singularly or in the
aggregate, has resulted in, or would reasonably be expected to result in, a
Material Adverse Effect, and has full power and authority and holds all
requisite governmental licenses, permits, authorizations and other approvals
to enter into and perform its Obligations under this Agreement and each other
Loan Document to which it is a party and to own and hold under lease its
property and to conduct its business substantially as currently conducted by
it, excluding any such governmental licenses, permits or other approvals in
respect of which the failure to so obtain, hold or maintain has not caused,
and would not reasonably be expected to result in, a Material Adverse Effect.
SECTION 7.2. Due Authorization, Non-Contravention, etc. The execution,
delivery and performance by each Obligor of this Agreement and each other Loan
Document executed or to be executed by it are within such Obligor's corporate
powers, have been duly authorized by all necessary corporate action,
and do not
(a) contravene such Obligor's Organic Documents;
(b) contravene any law or governmental regulation or court
decree or order binding or affecting such Obligor; or
(c) result in, or require the creation or imposition of, any
Lien on any of such Obligor's properties.
SECTION 7.3. No Default. None of the Obligors, nor any of their
respective Subsidiaries, is in default in the performance of any
obligation, agreement or condition contained in any bond, debenture, note,
or in any indenture, loan agreement, or other agreement, in connection with
or as a result of which default there exists a reasonable possibility that
a Material Adverse Effect could arise. The execution, delivery and
performance by each Obligor of this Agreement and each other Loan Document
executed or to be executed by such Obligor will not conflict with, or
constitute a breach of, or a default under, any such bond, debenture, note,
indenture, loan agreement or other agreement to which any Obligor or any of
their respective Subsidiaries is a party or by which it is bound, in
connection with, or as a result of which, conflict, breach or default,
there exists a reasonable possibility that a Material Adverse Effect could
arise.
SECTION 7.4. Government Approval, Regulation, etc. No action by, and
no notice to or filing with, any governmental authority or regulatory body or
other Person and no payment of any stamp or similar tax, is required for the
due execution, delivery or performance by any Obligor of this Agreement or any
other Loan Document to which it is a party. No Obligor, nor any of their
respective Subsidiaries is an "investment company" within the meaning of the
Investment Company Act of 1940, as amended (the "Investment Company Act"), or
a "holding company", or a "subsidiary company" of a "holding company", or an
"affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company", within the meaning of the Public Utility Holding Company Act of
1935, as amended.
SECTION 7.5. Validity, etc. This Agreement constitutes, and each other
Loan Document executed by any Obligor will, on the due execution and delivery
thereof, constitute, the legal, valid and binding obligations of each Obligor
party thereto, enforceable against such Obligor in accordance with their
respective terms, except as such enforcement may be limited by applicable
bankruptcy, insolvency, reorganization or other similar laws relating to or
limiting creditors' rights generally or by general principles of equity.
SECTION 7.6. Financial Information. The financial statements of Micro
and its Consolidated Subsidiaries to be delivered pursuant to Section 6.1.5
will have been prepared in accordance with GAAP and present fairly
(subject, in the case of such financial statements delivered pursuant to
clause (b) thereof (which financial statements, in accordance with Section
1.4(a) hereof, are not required to contain certain footnote disclosures
required by GAAP), to ordinary year-end adjustments) the consolidated
financial condition of the Persons covered thereby as at the dates thereof
and the results of their operations for the periods then ended. All the
financial statements delivered pursuant to clauses (a) and (b) of Section
8.1.1 have been and will be prepared in accordance with GAAP consistently
applied, and do or will present fairly (subject, in the case of such
financial statements delivered pursuant to clause (b) thereof (which
financial statements, in accordance with Section 1.4(a) hereof, are not
required to contain certain footnote disclosures required by GAAP), to
ordinary year-end adjustments) the consolidated financial condition of the
Persons covered thereby as of the dates thereof and the results of their
operations for the periods then ended.
SECTION 7.7. No Material Adverse Effect. Since December 31, 1995, there
has been no event or events which, singly or in the aggregate, have resulted
in a Material Adverse Effect.
SECTION 7.8. Litigation, Labor Controversies, etc. Except as
disclosed in Item 7.8 (Litigation) of the Disclosure Schedule, there is no
pending or, to the knowledge of any Obligor, threatened litigation, action,
proceeding or labor controversy affecting any Obligor, or any of their
respective Subsidiaries, or any of their respective properties, businesses,
assets or revenues, in respect of which there exists a reasonable
possibility of an outcome that would result in a Material Adverse Effect or
that would affect the legality, validity or enforceability of this
Agreement or any other Loan Document.
SECTION 7.9. Subsidiaries. As of the date hereof, Micro has no
Subsidiaries, except those Subsidiaries which are identified in Item 7.9
(Existing Subsidiaries) of the Disclosure Schedule and certain other
Subsidiaries that are shell corporations that do not conduct any business and
do not in the aggregate have a net worth exceeding $1,000,000.
SECTION 7.10. Ownership of Properties. Each Obligor and each of their
respective Subsidiaries owns good and marketable title (or their respective
equivalents in any applicable jurisdiction) to all of its properties and
assets, real and personal, tangible and intangible, of any nature whatsoever,
free and clear of all Liens, charges or claims except as permitted pursuant to
Section 8.2.2, except where such failure or failures to own, singly or in the
aggregate, has not resulted in, or would not reasonably be expected to result
in, a Material Adverse Effect.
SECTION 7.11. Taxes. Each Obligor and each of their respective
Subsidiaries has filed all material tax returns and reports it reasonably
believes are required by law to have been filed by it and has paid all taxes
and governmental charges thereby shown to be owing, except as disclosed in
Item 7.11 (Taxes) of the Disclosure Schedule and except for any such taxes or
charges which are being diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP shall have
been set aside on its books; provided, however, that with respect to any
Subsidiary that is not a Material Subsidiary this representation and warranty
shall be satisfied if the tax returns or reports not so filed or the taxes or
governmental charges owing by each such Subsidiary are not with respect to any
income, sales or use tax and the amount so owing (or which would be so owing
if such tax returns or reports were duly filed) with respect to all such
Subsidiaries, does not exceed in the aggregate $1,000,000 at any time.
SECTION 7.12. Pension and Welfare Plans. Except to the extent that
any such termination, liability, penalty or fine would not (either
individually or in the aggregate) reasonably be expected to have a Material
Adverse Effect, (a) during the twelve-consecutive-month period prior to the
date hereof and prior to the date of any Credit Extension hereunder, except
as disclosed in Item 7.12 (Employee Benefit Plans) of the Disclosure
Schedule, no steps have been taken to terminate any Pension Plan, and no
contribution failure has occurred with respect to any Pension Plan
sufficient to give rise to a Lien under section 302(f) of ERISA, (b) no
condition exists or event or transaction has occurred with respect to any
Pension Plan which might result in the incurrence by any Obligor or any
member of the related Controlled Group of any material liability with
respect to any contribution thereto, fine or penalty, and (c) except as
disclosed in Item 7.12 (Employee Benefit Plans) of the Disclosure Schedule,
neither any Obligor nor any member of the related Controlled Group has any
material contingent liability with respect to any post-retirement benefit
under a Welfare Plan, other than liability for continuation coverage
described in Part 6 of Title I of ERISA.
SECTION 7.13. Environmental Warranties.
(a) Each Obligor and each of their respective Subsidiaries has
obtained all environmental, health and safety permits, licenses and
other authorizations required under all Environmental Laws to carry on
its business as now being or as proposed to be conducted, except to the
extent failure to have any such permit, license or authorization would
not (either individually or in the aggregate) reasonably be expected to
have a Material Adverse Effect. Each of such permits, licenses and
authorizations is in full force and effect and each Obligor and each of
their respective Subsidiaries is in compliance with the terms and
conditions thereof, and is also in compliance with all other
limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in any
applicable Environmental Law or in any plan, judgment, injunction,
notice or demand letter issued, entered or approved thereunder,
except to the extent failure to comply therewith would not (either
individually or in the aggregate) reasonably be expected to have a
Material Adverse Effect.
(b) No notice, notification, demand, request for information,
citation, summons or order has been issued, no complaint has been filed,
no penalty has been assessed and no investigation or review is pending
or, to the knowledge of any Obligor, threatened by any governmental or
other entity with respect to any alleged failure by any Obligor or any
of their respective Subsidiaries to have any environmental, health or
safety permit, license or other authorization required under any
Environmental Law in connection with the conduct of the business of any
Obligor or any of their respective Subsidiaries or with respect to any
generation, treatment, storage, recycling, transportation, discharge or
disposal, or any Release of any Hazardous Materials generated by any
Obligor or any of their respective Subsidiaries, except to the extent
failure to have any such permit, license or authorization would not
(either individually or in the aggregate) reasonably be expected to have
a Material Adverse Effect.
SECTION 7.14. Outstanding Indebtedness. As of the date hereof neither
Micro nor any of its Subsidiaries has any outstanding Indebtedness other than
Indebtedness disclosed in Item 7.14 (Outstanding Indebtedness) of the
Disclosure Schedule and Indebtedness that could be incurred pursuant to clause
(ii) of Section 8.2.1 (a).
SECTION 7.15. Accuracy of Information.
(a) Except as otherwise set forth in paragraph (b) of this
Section, all factual information furnished by or on behalf of any
Obligor to any Lender Party for purposes of or in connection with this
Agreement or any transaction contemplated hereby is, when taken as a
whole, to the best of the knowledge of each Borrower, and all other
factual information hereafter furnished by or on behalf of any Obligor
to any Lender Party will be, when taken as a whole, to the best of the
knowledge of each Borrower, true and accurate in all material respects
on the date as of which such information is dated or certified and (in
the case of any such information furnished prior to the date hereof) as
of the date hereof (unless such information relates to an earlier date,
in which case such information, when taken as a whole, shall be true and
accurate in all material respects as of such earlier date), and is not,
or shall not be, as the case may be, when taken as a whole, incomplete
by omitting to state any material fact necessary to make such
information not misleading.
(b) The information (i) describing the Transition Agreements and
the transactions contemplated thereby set forth in the annexes to the
certificate delivered to the Administrative Agent pursuant to Section
6.1.12, when considered as a whole, does not and will not include any
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, (ii) contained in any
financial projections furnished hereunder is and will be based upon
assumptions and information believed by Micro to be reasonable, and
(iii) furnished with express written disclaimers with regard to the
accuracy thereof, is and shall be subject to such disclaimers.
SECTION 7.16. Patents, Trademarks, etc. Each Obligor and each of their
respective Subsidiaries owns and possesses, or has a valid and existing
license of, or other sufficient interest in, all such patents, patent rights,
trademarks, trademark rights, trade names, trade name rights, service marks,
service mark rights and copyrights as is necessary for the conduct of the
business of each such Obligor or its Subsidiaries as now conducted, without,
to the best of the knowledge of each such Obligor, any infringement upon
rights of other Persons, which infringement results in or would reasonably be
expected to result in a Material Adverse Effect, and there is no license or
other interest or right, the loss of which results in, or would reasonably be
expected to result in, a Material Adverse Effect.
SECTION 7.17. Margin Stock. No part of the proceeds of any Credit
Extension shall be used at any time by any Obligor or any of their
respective Subsidiaries for the purpose, whether immediate, incidental or
ultimate, of buying or carrying Margin Stock (within the meaning of
Regulation U (as amended, modified, supplemented or replaced and in effect
from time to time, "Regulation U") promulgated by the F.R.S. Board of
Governors of the Federal Reserve System (together with any successor
thereto, the "F.R.S. Board")) or to extend credit to others for the
purpose of purchasing or carrying any Margin Stock if any such use or
extension of credit described in this Section 7.17 would cause any of the
Lender Parties to violate the provisions of Regulation U. Neither any
Obligor nor any of their respective Subsidiaries is engaged principally, or
as one of its important activities, in the business of extending credit for
the purposes of purchasing or carrying any such Margin Stock within the
meaning of Regulation U. Not more than 25% of the value of the assets of
any Obligor or any Subsidiary of any Obligor is, as of the date hereof,
represented by Margin Stock. No part of the proceeds of any Credit
Extension will be used by any Obligor or any of their respective
Subsidiaries for any purpose which violates, or which is inconsistent with,
any regulations promulgated by the F.R.S. Board, including Regulation U.
ARTICLE VIII
COVENANTS
SECTION 8.1. Affirmative Covenants. Each Borrower agrees with the
Agents and each Lender that, until all the Commitments have terminated and all
Obligations have been paid and performed in full, each Borrower will perform
its respective obligations set forth in this Section 8.1.
SECTION 8.1.1. Financial Information, Reports, Notices, etc. Micro will
furnish, or will cause to be furnished, to each Lender Party copies of the
following financial statements, reports, notices and information:
(a) as soon as available and in any event within 120 days after
the end of each Fiscal Year of Micro, a copy of the annual audit report
for such Fiscal Year for Micro and its Consolidated Subsidiaries,
including therein consolidated balance sheets of Micro and its
Consolidated Subsidiaries as of the end of such Fiscal Year and
consolidated statements of earnings, stockholders' equity and cash flow
of Micro and its Consolidated Subsidiaries for such Fiscal Year, setting
forth in each case, in comparative form, the figures for the preceding
Fiscal Year, in each case certified (without any Impermissible
Qualification, except that (i) qualifications relating to
pre-acquisition balance sheet accounts of Person(s) acquired by Micro or
any of its Subsidiaries and (ii) statements of reliance in the auditor's
opinion on another accounting firm shall not be deemed an Impermissible
Qualification) in a manner satisfactory to the Securities and Exchange
Commission (under applicable United States securities law) by Price
Waterhouse or its successors or other independent public accountants of
national reputation;
(b) as soon as available and in any event within 60 days after
the end of each of the first three Fiscal Periods occurring during any
Fiscal Year of Micro, a copy of the unaudited consolidated and
consolidating financial statements of Micro and its Consolidated
Subsidiaries, consisting of (i) a balance sheet as of the close of such
Fiscal Period and (ii) related statements of earnings and cash flows for
such Fiscal Period and from the beginning of such Fiscal Year to the end
of such Fiscal Period, in each case certified by an officer who is an
Authorized Person of Micro as to (A) being a complete and correct copy
of such financial statements which have been prepared in accordance with
GAAP consistently applied as provided in Section 1.4, and (B)
presenting fairly the financial position of Micro and its
Consolidated Subsidiaries;
(c) at the time of delivery of each financial statement required
by clause (a) or (b), a certificate signed by an Authorized Person of
Micro stating that no Default has occurred and is continuing (or if a
Default has occurred and is continuing, and without prejudice to any
rights or remedies of any Lender Party hereunder in connection therewith,
a statement of the nature thereof and the action which Micro has taken
or proposes to take with respect thereto);
(d) at the time of delivery of each financial statement required
by clause (a) or (b), a Compliance Certificate showing compliance with
the financial covenants set forth in Section 8.2;
(e) to the extent not otherwise disclosed in a report on Form
10-K, Form 10-Q or Form 8-K filed with the Securities and Exchange
Commission and previously furnished pursuant to clause (f) below, as
soon as possible after (i) the occurrence of any material adverse
development with respect to any litigation, action, proceeding, or labor
controversy disclosed in Item 7.8 (Litigation) of the Disclosure
Schedule, or (ii) the commencement of any labor controversy, litigation,
action, proceeding of the type described in Section 7.8, notice thereof;
(f) promptly after the filing thereof, copies of (i) any
registration statements (other than the exhibits thereto and excluding
any registration statement on Form S-8 and any other registration
statement relating exclusively to stock, bonus, option, 401(k) and other
similar plans for officers, directors and employees of Micro,
Industries, Entertainment or any of their respective Subsidiaries),
(ii) any amendments or supplements to the Investment Prospectus and
(iii) all reports on Form 10-K, Form 10-Q or Form 8-K (or any
respective successor forms thereto) which Micro or any Subsidiary of
Micro is required to file with the Securities and Exchange Commission
(or any successor authority) or any national securities exchange
(including, in each case, any exhibits thereto requested by any
Lender Party);
(g) to the extent not otherwise disclosed in a report on Form
10-K, Form 10-Q or Form 8-K filed with the Securities and Exchange
Commission and previously furnished pursuant to clause (f) above,
immediately upon becoming aware of the institution of any steps by any
Obligor or any other Person to terminate any Pension Plan other than
pursuant to Section 4041(b) of ERISA, or the failure to make a required
contribution to any Pension Plan if such failure is sufficient to give
rise to a Lien under Section 302(f) of ERISA, or the taking of any
action with respect to a Pension Plan which could result in the
requirement that any Obligor furnish a bond or other security to the
PBGC or such Pension Plan, or the occurrence of any other event with
respect to any Pension Plan which, in any such case, results in, or
would reasonably be expected to result in, a Material Adverse Effect,
notice thereof and copies of all documentation relating thereto;
(h) as soon as possible and in any event within three Business
Days after becoming aware of the occurrence of a Default or any
inaccuracy in the financial statements delivered pursuant to clause (a)
or (b) of Section 8.1.1 if the result thereof is not to present fairly
the consolidated financial condition of the Persons covered thereby as
of the dates thereof and the results of their operations for the periods
then ended, a statement of an Authorized Person of Micro setting forth
the details of such Default or inaccuracy and the action which Micro has
taken or proposes to take with respect thereto;
(i) in the case of each Borrower, promptly following the
consummation of any transaction described in Section 8.2.5, a
description in reasonable detail regarding the same; and
(j) such other information respecting the condition or
operations, financial or otherwise, of each Borrower, or any of their
respective Subsidiaries as any Lender through the Administrative Agent
may from time to time reasonably request.
SECTION 8.1.2. Compliance with Laws, etc. Each Borrower will (and each
Borrower will cause each of its Subsidiaries to) comply in all respects with
all applicable laws, rules, regulations and orders the noncompliance with
which results in, or would reasonably be expected to result in, a Material
Adverse Effect, such compliance to include (without limitation):
(a) except as may be otherwise permitted pursuant to Section
8.2.5, the maintenance and preservation of its corporate existence (and
in the case of Coordination Center, its status as a coordination center)
in accordance with the laws of the jurisdiction of its incorporation and
qualification as a foreign corporation (subject to the materiality
standard referred to above); and
(b) the payment, before the same become delinquent, of all
taxes, assessments and governmental charges imposed upon it or upon its
property except to the extent being diligently contested in good faith
by appropriate proceedings and for which adequate reserves in accordance
with GAAP shall have been set aside on its books; provided, however,
that with respect to any Subsidiary that is not a Material Subsidiary
this covenant shall be satisfied if the taxes, assessments or other
governmental charges owing by each such Subsidiary (i) is not with
respect to any income, sales or use tax and (ii) the amount so owing
with respect to all such Subsidiaries does not exceed in the
aggregate $1,000,000 at any time.
SECTION 8.1.3. Maintenance of Properties. Each Borrower will (and each
Borrower will cause each of its Subsidiaries to) maintain, preserve, protect
and keep its material properties in good repair, working order and condition,
and make necessary and proper repairs, renewals and replacements so that its
business carried on in connection therewith may be properly conducted at all
times, unless such Borrower or such Subsidiary determines in good faith that
the continued maintenance of any of its properties is no longer economically
desirable.
SECTION 8.1.4. Insurance. Each Borrower will (and each Borrower will
cause each of its Subsidiaries to) maintain, or cause to be maintained with
responsible insurance companies or through such Borrower's own program of
self-insurance, insurance with respect to its properties and business against
such casualties and contingencies and of such types and in such amounts as is
customary in the case of similar businesses and will, upon request of the
Administrative Agent, furnish to each Lender at reasonable intervals a
certificate of an Authorized Person of such Borrower setting forth the nature
and extent of all insurance maintained by such Borrower and each of its
Subsidiaries in accordance with this Section 8.1.4.
SECTION 8.1.5. Books and Records. Each Borrower will (and each
Borrower will cause each of its Subsidiaries to) keep books and records
which accurately reflect all of its business affairs and transactions and
permit the Administrative Agent and each Lender, or any of their respective
representatives, at reasonable times and intervals, to visit all of its
offices, to discuss its financial matters with its officers and independent
public accountants (and each Borrower hereby authorizes such independent
public accountants to discuss the financial matters of such Borrower and its
Subsidiaries with the Administrative Agent and each Lender or its
representatives whether or not any representative of such Borrower is present
but provided that an officer of such Borrower is afforded a reasonable
opportunity to be present at any such discussion) and to examine any of its
relevant books or other corporate records. Micro will pay all expenses
associated with the exercise of any Lender Party's rights pursuant to this
Section 8.1.5 at any time during the occurrence and continuance of any Event
of Default.
SECTION 8.1.6. Environmental Covenant. Each Borrower will (and each
Borrower will cause each of its Subsidiaries to):
(a) use and operate all of its facilities and properties in
compliance with all Environmental Laws which, by their terms, apply to
such use and operation, keep all necessary permits, approvals,
certificates, licenses and other authorizations relating to
environmental matters in effect and remain in compliance therewith, and
handle all Hazardous Materials in compliance with all Environmental Laws
which, by their terms, apply to such Hazardous Materials, in each case
so that the non-compliance with any of the foregoing does not result in,
or would not reasonably be expected to result in, either singly or in
the aggregate, a Material Adverse Effect;
(b) immediately notify the Administrative Agent and provide
copies upon receipt of all written claims, complaints, notices or
inquiries relating to the condition of its facilities and properties or
compliance with Environmental Laws which, singly or in the aggregate,
result in, or would reasonably be expected to result in, a Material
Adverse Effect, and shall promptly cure and have dismissed with
prejudice any actions and proceedings relating to compliance with
Environmental Laws where the failure to so cure or have dismissed,
singularly or in the aggregate, results in, or would reasonably be
expected to result in, a Material Adverse Effect (it being understood
that this clause (b) shall not be construed to restrict any Borrower or
any of its Subsidiaries from challenging or defending any such action or
proceeding which it, in its sole discretion, deems advisable or
necessary); and
(c) provide such information and certifications which the
Administrative Agent may reasonably request from time to time to
evidence compliance with this Section 8.1.6.
SECTION 8.1.7. Use of Proceeds. Each Borrower shall apply the
proceeds of each Credit Extension in accordance with the last recital of
this Agreement and shall not use directly and immediately, any proceeds to
acquire, or finance the acquisition of, any equity interest in Coordination
Center.
SECTION 8.1.8. Pari Passu. Each Borrower shall ensure that such
Borrower's Obligations rank at least pari passu with all other unsecured
Indebtedness of such Borrower.
SECTION 8.1.9. Guarantee or Suretyship. If any Borrower or any of its
Subsidiaries becomes a party to any contract of guarantee or suretyship which
would constitute Indebtedness, or if any of its assets becomes subject to such
a contract, that contract will be disclosed in the next financial information
to be provided by Micro pursuant to clause (c) of Section 8.1.1; provided,
however, that any failure to comply with the disclosure obligations of this
Section 8.1.9 shall not constitute a Default unless the existence of the
contract or contracts of guarantee or suretyship which Micro fails to disclose
would result in a Default under clause (c) of Section 8.2.3.
SECTION 8.1.10. Additional Guaranty. Micro (a) may cause any of its
Subsidiaries to execute and deliver from time to time in favor of the
Lender Parties additional guaranties (each an "Additional Guaranty") for
the repayment of the Obligations and (b) shall, concurrently or promptly after
any of its Subsidiaries (i) guarantees any Indebtedness of Micro or any
other Obligor or (ii) satisfies (at any time) the requirements hereunder
which describe a Material Subsidiary, cause such Subsidiary to execute and
deliver in favor of the Lender Parties an Additional Guaranty for the
repayment of the Obligations. Each Additional Guaranty (including, without
limitation, any Additional Guaranty executed and delivered by an Acceding
Borrower pursuant to Section 6.3.3) shall be in substantially the form of
Exhibit J attached hereto, shall be governed by the laws of a State of the
United States and shall contain such other terms and provisions as the
Administrative Agent determines to be necessary or appropriate (after
consulting with legal counsel) in order that such Additional Guaranty
complies with local laws, rules and regulations and is fully enforceable
(at least to the extent of such Additional Guaranty) against such
Additional Guarantor; provided, that, in the event it shall be illegal
under any local law, rule or regulation for any Additional Guaranty to be
governed by the law of any State of the United States, and the
Administrative Agent shall have received evidence of such illegality
(including, if the Administrative Agent shall so request, an opinion of
local counsel as to such matters, which counsel and the form and substance
of such opinion shall be reasonably satisfactory to the Administrative
Agent) reasonably satisfactory to it, the Administrative Agent shall
consent to such Additional Guaranty being governed by the laws of a
jurisdiction outside of the United States, which jurisdiction shall be
subject to the prior approval of the Administrative Agent.
In connection with the delivery of any such Additional Guaranty by an
Additional Guarantor there shall be delivered an opinion of counsel (which
counsel and the form and substance of such opinion shall be reasonably
satisfactory to the Administrative Agent and the Required Lenders, it being
agreed that if the Additional Guaranty is governed by the laws of any State of
the United States, the General Counsel of Micro shall be satisfactory counsel
for purposes hereof) addressed to the Documentation Agent, the Administrative
Agent and the Lenders addressing the matters set forth in Exhibit M, as it
relates to such Additional Guarantor and Additional Guaranty.
SECTION 8.1.11. Intra-Group Agreement, etc. Except to add additional
Subsidiaries of Micro as parties thereto, the terms of the Intra-Group
Agreement shall not be amended or otherwise modified without the prior consent
of the Administrative Agent on behalf of and as directed by the requisite
Lenders, such consent not to be unreasonably withheld. In addition, no Person
a party to the Intra-Group Agreement shall assign any of its rights or
obligations thereunder without the prior consent of the Administrative Agent,
such consent not to be unreasonably withheld.
SECTION 8.2. Negative Covenants. Each Borrower agrees with the
Administrative Agent and each Lender that, until all the Commitments have
terminated and all Obligations have been paid and performed in full, each
Borrower will perform its respective obligations set forth in this
Section 8.2.
SECTION 8.2.1. Restriction on Incurrence of Indebtedness.
(a) No Borrower will (and no Borrower will permit any of its
Subsidiaries to) create, incur, assume or suffer to exist or otherwise
become or be liable in respect of any Indebtedness, other than the
following:
(i) Indebtedness in respect of the Credit Extensions;
(ii) Indebtedness existing as of the date hereof or
incurred pursuant to commitments or lines of credit in effect on
the date hereof (or any renewal or replacement thereof, so long as
such renewals or replacements do not increase the amount of such
Indebtedness or such commitments or lines of credit), in any case
identified in Item 8.2.1(a)(ii) (Ongoing Indebtedness) of the
Disclosure Schedule; and
(iii) additional Indebtedness if after giving effect to the
incurrence thereof the Borrowers are in compliance with Section
8.2.3, calculated as of the date of the incurrence of such
additional Indebtedness, on a pro forma basis.
(b) Micro will not at the end of any Fiscal Period permit the
sum of (i) Total Indebtedness of Subsidiaries (other than any Guarantor)
and (ii) the Amount of Additional Liens to exceed fifteen percent (15%)
of Consolidated Tangible Net Worth.
SECTION 8.2.2 Restriction on Incurrence of Liens. No Borrower will
(and no Borrower will permit any of its Subsidiaries to) create, incur,
assume or suffer to exist any Lien upon any of its property, revenues or
assets, whether now owned or hereafter acquired, except:
(a) Liens existing as of the date hereof and identified in Item
8.2.2(a) (Existing Liens) of the Disclosure Schedule and Liens resulting
from the extension, renewal or replacement of any such Liens in respect
of the same property theretofore subject to such Lien; provided,
however, that (i) no property shall become subject to such extended,
renewed or replacement Lien that was not subject to the Lien extended,
renewed or replaced, (ii) the aggregate principal amount of Indebtedness
secured by any such extended, renewed or replacement Lien shall not be
increased by such extension, renewal or replacement, (iii) the
Indebtedness secured by such Lien shall be incurred in compliance
with the applicable terms hereof, including Section 8.2.3, and (iv)
both immediately before and after giving effect thereto, no Default
shall exist;
(b) Liens for taxes, assessments or other governmental charges
or levies not at the time delinquent or thereafter payable without
penalty or being diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP
shall have been set aside on its books;
(c) Liens of carriers, warehousemen, mechanics, materialmen and
landlords incurred in the ordinary course of business for sums not
overdue or being diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP
shall have been set aside on its books;
(d) Liens incurred in the ordinary course of business in
connection with worker's compensation, unemployment insurance or other
forms of governmental insurance or benefits, or to secure performance of
statutory obligations, leases and contracts (other than for borrowed
money) entered into in the ordinary course of business or to secure
obligations on surety or appeal bonds;
(e) judgment Liens of less than $60,000,000 in the aggregate, or
with respect to which execution has been stayed or the payment of which
is covered in full (subject to a customary deductible) by insurance
maintained with responsible insurance companies and for which, within 30
days of such judgment, the insurance carrier has acknowledged coverage
in writing;
(f) Liens on property purchased or constructed after the date
hereof securing Indebtedness used to purchase or construct such
property; provided, however, that (i) no such Lien shall be created in
or attach to any other asset at the time owned by Micro or any of its
Subsidiaries if the aggregate principal amount of the Indebtedness
secured by such property would exceed the fair market value of such
property and assets, taken as a whole, (ii) the aggregate outstanding
principal amount of Indebtedness secured by all such Liens shall not at
any time exceed one hundred percent (100%) of the fair market value of
such property at the time of the purchase or construction thereof, and
(iii) each such Lien shall have been incurred within two hundred
seventy (270) days of the purchase or completion of construction of
such property;
(g) Liens resulting from utility easements, building
restrictions and such other encumbrances or charges against real
property as are of a nature generally existing with respect to
properties of a similar character and which do not in any material way
affect the marketability of the same or interfere with the use thereof
in the business of any Borrower or any of its Subsidiaries;
(h) Liens incurred in the normal course of business in
connection with bankers' acceptance financing or used in the ordinary
course of trade practices, statutory lessor and vendor privilege liens
and liens in connection with ad valorem taxes not yet due, good faith
bids, tenders and deposits;
(i) Liens on all goods held for sale on consignment;
(j) Liens granted by any Subsidiary of Micro in favor of Micro
or in favor of another Subsidiary of Micro that is the parent of such
Subsidiary granting the Lien, other than Liens granted by a Guarantor to
a Subsidiary of Micro that is not a Guarantor; provided, however, that
no Person that is not a Subsidiary of Micro shall be secured by or
benefit from any such Lien;
(k) Liens of the nature referred to in clause (b) of the
definition of the term "Lien" and granted to a purchaser or any assignee
of such purchaser which has financed the relevant purchase of Trade
Accounts Receivable of any Borrower or any of their respective
subsidiaries;
(l) Liens on accounts receivable of Micro Canada with respect to
any accounts receivable securitization program; and
(m) Additional Permitted Liens.
SECTION 8.2.3. Financial Condition. Micro will not permit any of the
following:
(a) the Consolidated Current Ratio as at the end of any Fiscal
Period to be less than 1.0 to 1.0; or
(b) the ratio of (i) Consolidated EBITDA for any period of four
consecutive Fiscal Periods to (ii) Consolidated Interest Charges for
such period to be less than 3.5 to 1.0; or
(c) the ratio of (i) the average daily balances of Consolidated
Funded Debt during any Fiscal Period to (ii) Consolidated EBITDA for the
period of four Fiscal Periods ending on the last day of such Fiscal
Period to exceed 3.5 to 1.0; provided that, for purposes of calculating
this ratio, Consolidated Funded Debt on any day shall be the amount
otherwise determined pursuant to the definition thereof plus the amount
of Consolidated Transferred Receivables on such day.
(d) the Consolidated Tangible Net Worth as at the end of any
Fiscal Period to be less than the sum of (i) the greater of (A)
$500,000,000 and (B) an amount equal to 90% of Consolidated Tangible Net
Worth as at the end of the Fiscal Year ending nearest to December 31,
1996, plus (ii) as at the end of each Fiscal Year commencing with the
Fiscal Year ending closest to December 31, 1997, 67% of Consolidated Net
Income (without taking into account any losses incurred in any Fiscal
Year) since the beginning of the Fiscal Year which began closest to
December 31, 1996.
SECTION 8.2.4. Dividends. Except for dividends paid, or redemptions
made, in any Fiscal Year that do not exceed fifty percent (50%) of
Consolidated Net Income for the immediately preceding Fiscal Year, Micro
will not declare or pay any dividends (in cash, property or obligations) or
any other payments or distributions on account of, or set apart money for a
sinking or analogous fund for, or purchase, redeem, retire or otherwise
acquire for value, any shares of its capital stock now or hereafter
outstanding or any warrants, options or other rights to acquire the same;
return any capital to its stockholders as such; or make any distribution of
assets to its stockholders as such; provided, however, that Micro may
redeem, purchase or acquire any of its capital stock (i) issued to
employees pursuant to any Plan or other contract or arrangement relating to
employment upon the termination of employment or other events or (ii) in a
transaction contemplated by the Transition Agreements.
SECTION 8.2.5. Consolidation, Merger, Asset Acquisitions, etc.
(a) No Borrower will liquidate or dissolve, consolidate with, or
merge into or with, or exchange shares with, any other Person, or sell,
transfer, lease or otherwise dispose of all or substantially all of its
assets to any Person, except, if no Default has occurred and is
continuing or would occur after giving effect thereto:
(i) any Obligor (except Micro) may liquidate or dissolve
voluntarily into any other Obligor and may merge into or with or
exchange shares with any other Person or sell, transfer, lease or
otherwise dispose of all or substantially all of its assets to any
other Person, so long as the surviving entity or such transferee of
such assets shall continue to be an Obligor;
(ii) Micro may merge into or with any other Person;
provided, that: (A) either (1) Micro is the surviving entity or
(2) the surviving entity formed by such consolidation or into
which Micro shall be merged (which entity shall be a Person
organized, existing and in good standing under the laws of a State
of the United States) shall expressly assume Micro's Obligations
in a written agreement or undertaking satisfactory in form and
substance to Lenders holding, in the aggregate, 85% of the
Commitments and (B) Micro can demonstrate (in a manner and in such
scope and detail as are acceptable to either (1) if such merger
satisfies the requirements of subclause (1) of clause (A) above,
the Required Lenders, or (2) if such merger satisfies the
requirements of subclause (2) of clause (A) above, Lenders
holding, in the aggregate, 85% of the Commitments) that the
surviving entity (x) will be, immediately upon and following the
consummation of such proposed transaction, in compliance with each
of the covenants set forth in Sections 8.2.1 and 8.2.2 and (y) on
a pro forma basis, assuming such proposed transaction had been
consummated on the first day of the most recently ended period of
four Fiscal Periods for which financial statements have been or
are required to have been delivered pursuant to Section 8.1.1,
would have been in compliance with each of the covenants set forth
in Section 8.2.3 as of the last day of such period; and
(iii) Micro may exchange shares with any Person; provided,
that (A) either (1) Micro is the surviving entity of the
transaction in which such shares were exchanged, or (2) if Micro
shall not continue to exist following such transaction, the
surviving entity of such transaction (which entity shall be a
Person organized, existing and in good standing under the laws of
a State of the United States) shall expressly assume Micro's
Obligations in a written agreement or undertaking satisfactory in
form and substance to Lenders holding, in the aggregate, 85% of the
Commitments or (B) the entity resulting from such transaction or
the entity with whose shareholders Micro's shares were exchanged
in such transaction shall, following such transaction, be a
Subsidiary of Micro or shall be a Person in which Micro shall, as
a result of such transaction, have acquired a direct or indirect
interest permitted to be held by Micro hereunder.
(b) No Borrower will purchase or otherwise acquire (in one
transaction or a series of related transactions) from any other Person
property or assets the aggregate purchase price of which (calculated in
Dollars) paid in cash or property (other than property consisting of
equity shares or interests or other equivalents of corporate stock of, or
partnership or other ownership interests in, any Obligor), equals or
exceeds twenty-five percent (25%) of the sum (calculated without giving
effect to such purchase or acquisition) of (i) Consolidated Funded Debt
determined as at the end of the then most recently ended Fiscal Period
plus (ii) Consolidated Stockholders' Equity determined as at the end of
the then most recently ended Fiscal Period, plus any increase thereof
attributable to any equity offerings or issuances of capital stock
occurring subsequent to the end of such Fiscal Period and prior to any
such purchase or acquisition (any such purchase or acquisition, a
"Material Asset Acquisition"), except, if no Default has occurred and
is continuing or would occur after giving effect thereto, Micro may make
a Material Asset Acquisition; provided that, prior to the consummation
of any proposed Material Asset Acquisition, Micro shall (x) notify the
Administrative Agent that it intends to make such proposed Material
Asset Acquisition and that it reasonably believes that it will be able
to certify as required by clause (y) below and (y) deliver to the
Administrative Agent a certificate duly executed and delivered by an
Authorized Person of Micro, certifying that (1) immediately upon and
following the consummation of such proposed Material Asset Acquisition,
Micro will be in compliance with each of the covenants set forth in
Sections 8.2.1 and 8.2.2 and (2) on a pro forma basis, assuming such
proposed Material Asset Acquisition had been consummated on the first
day of the most recently ended period of four Fiscal Periods for which
financial statements have been or are required to have been delivered
pursuant to Section 8.1.1, Micro would have been in compliance with each
of the covenants set forth in Section 8.2.3 as of the last day of such
period; provided further, that no purchase or acquisition of property
or assets of the character described in and permitted pursuant to clause
(c) of Section 8.2.9 shall constitute a Material Asset Acquisition.
SECTION 8.2.6. Transactions with Affiliates. No Borrower will (and no
Borrower will permit any of its Subsidiaries to), except in the ordinary
course of business, directly or indirectly, pay any funds to or for the
account of, make any investment (whether by acquisition of stock or
indebtedness, by loan, advance, transfer of property, guarantee or other
agreement to pay, purchase or service, directly or indirectly, any
Indebtedness, or otherwise) in, lease, sell, transfer or otherwise dispose of
any assets, tangible or intangible, to, or participate in, or effect, any
transaction with, any Affiliate (any such payment, investment, lease, sale,
transfer, other disposition or transaction, an "Affiliate Transaction") except
on an arms-length basis on terms at least as favorable to such Borrower (or
such Subsidiary) as terms that could have been obtained from a third party who
was not an Affiliate; provided that the foregoing provisions of this Section
shall not prohibit (i) agreements with or for the benefit of employees of such
Borrower or any of its Subsidiaries regarding bridge home loans and other
loans necessitated by the relocation of such Borrower's or such Subsidiary's
business or employees, or regarding short-term hardship advances, (ii) loans
to officers or employees of such Borrower or any of its Subsidiaries in
connection with the exercise of rights under such Borrower's stock option or
stock purchase plan, (iii) any such Person from declaring or paying any lawful
dividend or other payment ratably in respect of all of its capital stock of
the relevant class so long as, in the case of Micro, after giving effect
thereto, no Default shall have occurred and be continuing, (iv) any Affiliate
Transaction pursuant to a Transition Agreement or disclosed in the Investment
Prospectus, (v) any Affiliate Transaction between Micro and any of its
Subsidiaries or between any Subsidiaries of Micro or (vi) any Affiliate
Transaction (other than any Affiliate Transaction described in clauses (i)
through (v)) in which the amount involved does not exceed $50,000; provided,
further, however, the Borrowers shall not, nor shall they permit any of their
respective Subsidiaries to, participate in or effect any Affiliate
Transactions otherwise permitted pursuant to this Section which either
individually or in the aggregate may involve obligations that are reasonably
likely to have a Material Adverse Effect. The approval by the independent
directors of the Board of Directors of the relevant Borrower (or the relevant
Subsidiary thereof) of any Affiliate Transaction to which such or such
Borrower (or the relevant Subsidiary thereof) is a party shall create a
rebuttable presumption that such Affiliate Transaction is on an arms-length
basis on terms at least as favorable to such Borrower (or the relevant
Subsidiary thereof) as terms that could have been obtained from a third party
who was not an Affiliate.
SECTION 8.2.7. Limitations on Margin Stock Acquisitions. Without first
providing the notice to the Administrative Agent and the Lenders required by
this Section 8.2.7, the Borrowers shall not (and shall not permit their
respective Subsidiaries to) acquire any outstanding stock of any U.S. or
non-U.S. corporation, limited company or similar entity of which the shares
constitute Margin Stock if after giving effect to such acquisition, Micro and
its Affiliates shall hold, in the aggregate, more than five percent (5%) of
the total outstanding stock of the issuer of such Margin Stock (the "Relevant
Issuer"). Such notice shall include the name and jurisdiction of organization
of the Relevant Issuer, the market on which such stock is traded, the total
percentage of the Relevant Issuer's stock currently held, and the purpose for
which the acquisition is being made. If any Lender Party notifies Micro,
within five Business Days of its receipt of any notice described in this
Section 8.2.7, that it elects not to fund any further Credit Extension for the
reason that such Lender Party has a substantial relationship with the Relevant
Issuer or any of its Subsidiaries or Affiliates, where, in each case, such
Credit Extension would be used to acquire or carry Margin Stock of the
Relevant Issuer, then, and notwithstanding anything to the contrary contained
in this Agreement, and subject to the consent of Micro (which consent shall
not be unreasonably withheld), such Lender Party shall have no further
obligation with respect to any Credit Extension requested after the date of
such notice from such Lender Party, the proceeds of which would be used
directly or indirectly for the purchase or carrying of such Margin Stock (it
being understood and agreed, however, that in no event shall any Lender be
required to fund more than its Percentage of any proposed Borrowing). The
acceptance by each Borrower of the proceeds of any Credit Extension shall
constitute a representation and warranty by each Borrower that no part of any
such Credit Extension will be used directly or indirectly to make any further
acquisition of the stock of any Relevant Issuer.
SECTION 8.2.8. Limitation on Sale of Trade Accounts Receivable.
Notwithstanding anything to the contrary in this Agreement, no Borrower will
(and no Borrower will permit any of its Subsidiaries to) sell, assign, grant a
Lien in, or otherwise transfer any interest in its Trade Accounts Receivable
to any Person if, after giving effect thereto, the ratio (expressed as a
percentage) of (i) Consolidated Transferred Receivables, to (ii) the sum of
Consolidated Retained Receivables plus Consolidated Transferred Receivables
shall exceed 40%.
SECTION 8.2.9. Sale of Assets. No Obligor will (and no Obligor will
permit any of its Subsidiaries to) Dispose of any property or assets other
than in the ordinary course of business, except that:
(a) Micro or any Subsidiary of Micro may Dispose of any of its
assets so long as the proceeds thereof are either (i) utilized to repay
or prepay (in accordance with the provisions of ARTICLE IV hereof)
Pro-Rata Revolving Loans (provided, that in the event the amount of such
proceeds shall exceed the aggregate principal amount of all Pro-Rata
Revolving Loans outstanding hereunder at such time, such excess proceeds
may be utilized to repay or prepay (in accordance with the provisions
hereof) other loans outstanding at such time) or (ii) so long as no
Default has occurred and is continuing or would occur after giving
effect thereto, reinvested in one or more of the businesses in which
Micro or any of its Subsidiaries is principally engaged in accordance
with Section 8.2.10 hereof;
(b) Micro or any Subsidiary of Micro may Dispose of assets which
are worn out, obsolete or surplus or otherwise have no further useful
life to Micro or any of its Subsidiaries; and
(c) so long as no Default has occurred and is continuing or
would occur after giving effect thereto, Micro and any Subsidiary of
Micro may Dispose of assets in transactions exclusively among Micro and
any of its Subsidiaries or among Subsidiaries of Micro that satisfy the
requirements of Section 8.2.6; provided, that, notwithstanding any
provision hereof to the contrary, in the event that, immediately after
giving effect to any Disposition described in this clause (c) to a
Subsidiary of Micro, such Subsidiary shall own assets constituting at
least ten percent (10%) of Consolidated Assets determined as of the last
day of the most recently completed Fiscal Period, such Subsidiary of
Micro shall be deemed a Material Subsidiary for all purposes hereunder
as of the date of such Disposition and Micro shall cause any such
Material Subsidiary promptly to execute and deliver an Additional
Guaranty in favor of the Lender Parties in accordance with Section
8.1.10; provided further, that, notwithstanding the foregoing, so long
as no Event of Default has occurred and is continuing or would occur
after giving effect thereto, (i) any Subsidiary of Micro which is not at
the time of such Disposition an Obligor may Dispose of assets in
transactions exclusively with (A) Micro, (B) any Subsidiary of Micro
which, at the time of such Disposition, is an Obligor and (C) any other
Subsidiary of Micro which is not at the time of such Disposition an
Obligor, unless, immediately after giving effect to such Disposition,
such other Subsidiary of Micro would become a Material Subsidiary and
such other Subsidiary does not, promptly after such Disposition, execute
an Additional Guaranty in accordance with Section 8.1.10 and (ii) Micro
or any Subsidiary of Micro which is at the time of such Disposition also
an Obligor may Dispose of assets in transactions exclusively with (A)
Micro and (B) any other Subsidiary of Micro which, at the time of such
Disposition, is also an Obligor.
For purposes of this Section 8.2.9 "Dispose" means sell, lease, transfer or
otherwise dispose of property but shall not include any public taking or
condemnation, and "Disposition" and "Disposed of" have corresponding meanings
to Dispose. Such terms shall not include an exchange of assets, provided that
the assets involved in such exchange are similar in function in that after
giving effect to such exchange there has not been (i) a Material Adverse
Effect, (ii) any material deterioration of cash flow generation from or in
connection with such assets, or (iii) any material deterioration in the
overall quality of plant, property and equipment of any Obligor. An
"exchange" shall be deemed to have occurred for purposes hereof if each of the
transactions involved shall have been consummated within a six month period.
SECTION 8.2.10. Limitation on Businesses. Micro and its Subsidiaries,
considered as a whole, will not engage principally in businesses other than
those conducted by Micro and its Subsidiaries on the date hereof, as described
in the Preamble of this Agreement.
ARTICLE IX
EVENTS OF DEFAULT
SECTION 9.1. Listing of Events of Default. Any of the following events
or occurrences described in this Section 9.1 shall constitute an "Event of
Default".
SECTION 9.1.1. Non-Payment of Obligations. A default shall occur in
the payment or prepayment when due (a) by any Borrower of any principal of any
Loan, (b) by any Borrower of any interest on any Loan, (c) by any Borrower of
any Reimbursement Obligation or any deposit of cash for collateral purposes
pursuant to Section 3.2.2 or 3.2.4 or (d) by any Guarantor of any Guaranteed
Obligation (as defined in such Guarantor's Guaranty), and in the case of
clause (b), (c) or (d), such default shall continue unremedied for a period of
five Business Days.
SECTION 9.1.2. Breach of Warranty. Any representation or warranty of
any Obligor made or deemed to be made hereunder or in any other Loan Document
executed by it or in any other writing or certificate furnished by or on
behalf of any Obligor to the Administrative Agent or any Lender for the
purposes of or in connection with this Agreement or any such other Loan
Document (including any certificates delivered pursuant to ARTICLE VI) is or
shall be incorrect when made in any material respect.
SECTION 9.1.3. Non-Performance of Certain Covenants and Obligations.
Any Obligor shall default in the due performance and observance of any of its
obligations under Section 8.2.2, 8.2.3, 8.2.4 or 8.2.5 (excluding any default
by Micro in the performance of its obligation to deliver, prior to the
consummation of any Material Asset Acquisition, the certificate required to
be so delivered in connection therewith pursuant to clause (y) of paragraph
(b) of Section 8.2.5).
SECTION 9.1.4. Non-Performance of Other Covenants and Obligations. Any
Obligor shall default in the payment when due of any fee or any other
Obligation not subject to Section 9.1.1, or the due performance and observance
of any other covenant, agreement or obligation contained herein or in any
other Loan Document, and such default shall continue unremedied for a period
of 30 days after Micro obtains actual knowledge thereof or notice thereof
shall have been given to Micro by the Administrative Agent or any Lender.
SECTION 9.1.5. Default on Indebtedness. A default shall occur in the
payment when due (subject to any applicable grace period), whether by
acceleration or otherwise, of any Indebtedness of any Obligor or any of its
Subsidiaries (other than Indebtedness described in Section 9.1.1 or
Indebtedness which is non-recourse to any Obligor, or any Subsidiary of any
Obligor) having an outstanding aggregate principal amount in excess of the
lesser of (a) (i) 5% of Consolidated Tangible Net Worth for the then most
recently ended Fiscal Period, individually, or (ii) 10% of Consolidated
Tangible Net Worth for the then most recently ended Fiscal Period, in the
aggregate and (b) $75,000,000 (or the equivalent thereof in any other
currency), or a default shall occur in the performance or observance of any
obligation or condition with respect to such Indebtedness if the effect of
such default is to cause, or (with the giving of any notice or lapse of
time or both) to permit the holder or holders of such Indebtedness, or any
trustee or agent for such holders to cause, the maturity of any such
Indebtedness to be accelerated or such Indebtedness to be prepaid,
redeemed, purchased, defeased or otherwise to become due and payable prior
to its expressed maturity.
SECTION 9.1.6. Judgments. Any judgment or order for the payment of
money in excess of (individually or in the aggregate) $60,000,000 (or the
equivalent thereof in any other currency), shall be rendered against any
Obligor or any of their respective Subsidiaries and either:
(a) enforcement proceedings shall have been commenced and be
continuing by any creditor upon such judgment or order for any period of
10 consecutive days; or
(b) there shall be any period during which a stay of enforcement
of such judgment or order, by reason of a pending appeal or otherwise,
shall not be in effect.
SECTION 9.1.7. Pension Plans. Any of the following events shall occur
with respect to any Pension Plan:
(a) the institution of any steps by any Obligor, any member of
its Controlled Group or any other Person to terminate a Pension Plan if,
as a result of such termination, any such Obligor or any such member
could be required to make a contribution in excess of $60,000,000 (or
the equivalent thereof in any other currency), to such Pension Plan, or
could reasonably expect to incur a liability or obligation in excess of
$60,000,000 (or the equivalent thereof in any other currency), to such
Pension Plan; or
(b) a contribution failure occurs with respect to any Pension
Plan sufficient to give rise to a Lien under section 302(f) of ERISA.
SECTION 9.1.8. Ownership; Board of Directors. Any Person or two or more
Persons (excluding the Family Stockholders (as defined in the Board
Representation Agreement)) acting in concert shall have acquired beneficial
ownership (within the meaning of Rule 13d-3 of the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended (or any
successor regulation)) of capital stock of Micro having more than 25% of the
ordinary voting power of all capital stock of Micro then outstanding; and at
any time during any period of 25 consecutive calendar months commencing on or
after the date of this Agreement, a majority of the Board of Directors of
Micro shall no longer be composed of individuals (i) who were members of such
Board of Directors on the first day of such period, (ii) whose election or
nomination to such Board of Directors was approved by individuals referred to
in clause (i) above constituting at the time of such election or nomination at
least a majority of such Board of Directors or (iii) whose election or
nomination to such Board of Directors was approved by individuals referred to
in clauses (i) and (ii) above constituting at the time of such election or
nomination at least a majority of such Board of Directors.
SECTION 9.1.9. Bankruptcy, Insolvency, etc. Any Obligor or any Material
Subsidiary shall:
(a) become insolvent or generally fail to pay, or admit in
writing its inability to pay, debts as they become due;
(b) apply for, consent to, or acquiesce in, the appointment of a
trustee, receiver, administrative receiver, sequestrator, liquidator or
other custodian for it, its property, or make a general assignment for
the benefit of creditors;
(c) in the absence of such application, consent or acquiescence,
permit or suffer to exist the appointment of a trustee, administrative
receiver, receiver, sequestrator, liquidator or other custodian for it
or for a substantial part of its property, and such trustee, receiver,
sequestrator, liquidator or other custodian shall not be discharged
within 60 days, provided that each Obligor and each Material Subsidiary
hereby expressly authorizes each Lender Party to appear in any court
conducting any relevant proceedings during such 60-day period to
preserve, protect and defend its rights under this Agreement and the
other Loan Documents;
(d) permit or suffer to exist the commencement of any
bankruptcy, reorganization, debt arrangement or other case or
proceeding under any bankruptcy or insolvency law, or any
dissolution, winding up or liquidation proceeding, in respect of any
Obligor or any Subsidiary thereof, as the case may be, and, if any
such case or proceeding is not commenced by such Person, such case or
proceeding shall be consented to or acquiesced in by such Obligor or
Material Subsidiary, as the case may be, or shall result in the entry
of an order for relief or shall remain for 60 days unstayed or
undismissed, provided that each Obligor and each Material Subsidiary
hereby expressly authorizes each Lender Party to appear in any court
conducting any such case or proceeding during such 60-day period to
preserve, protect and defend its rights under this Agreement and the
other Loan Documents; or
(e) take any action authorizing, or in furtherance of, any of
the foregoing.
SECTION 9.1.10. Guaranties. Any of the Guaranties or any provisions
thereof shall be found or held invalid or unenforceable by a court of
competent jurisdiction or shall have ceased to be effective because of the
merger, dissolution or liquidation of a Guarantor (other than as may result
from a transaction permitted pursuant to Section 8.2.5 hereof or by reason
of a merger of a Guarantor under one Guaranty into the Guarantor under
another Guaranty) or any Guarantor shall have repudiated its obligations
under a Guaranty.
SECTION 9.2. Action if Bankruptcy. If any Event of Default described in
Section 9.1.9 shall occur, the Commitments (if not theretofore terminated)
shall automatically terminate and the outstanding principal amount of all
outstanding Loans and all other Obligations shall automatically be and become
immediately due and payable, without notice or demand.
SECTION 9.3. Action if Other Event of Default. If any Event of Default
(other than any Event of Default described in Section 9.1.9) shall occur for
any reason, whether voluntary or involuntary, and be continuing, the
Administrative Agent, upon the direction of the Required Lenders, shall by
notice to Micro declare all or any portion of the outstanding principal amount
of the Loans and all other Obligations to be due and payable and/or the
Commitments to be terminated, whereupon the full unpaid amount of the Loans
and all other Obligations which shall be so declared due and payable shall be
and become immediately due and payable, without further notice, demand or
presentment, and/or, as the case may be, the Commitments shall terminate.
SECTION 9.4. Action by Terminating Lender. If an Event of Default
shall occur because the Borrowers have failed to pay in full a Terminating
Lender, for any reason, voluntary or involuntary, the Terminating Lender
may by notice to Micro declare all or any portion of the outstanding
principal amount of the Loans made by such Terminating Lender and all other
Obligations owed to such Terminating Lender to be due and payable and/or
its commitment to be terminated, whereupon the full unpaid amount of such
Loans and all such other Obligations which shall be so declared due and
payable shall be and become immediately due and payable, without further
notice, demand or presentment, and/or, as the case may be, its Commitment
shall terminate.
SECTION 9.5. Cash Collateral. If any Event of Default shall occur for
any reason, whether voluntary or involuntary, and shall not have been cured
or waived and shall be continuing and the Obligations are or have been
declared due and payable under Section 9.2 or 9.3, the Administrative Agent
may apply any cash collateral held by the Administrative Agent pursuant to
Section 3.2.4 to the payment of the Obligations in any order in which the
Majority Lenders may elect.
ARTICLE X
THE ADMINISTRATIVE AGENT AND
DOCUMENTATION AGENT
SECTION 10.1. Authorization and Actions. Each Lender hereby appoints
NationsBank as the Administrative Agent and Scotiabank as the Documentation
Agent under, and for the purposes set forth in, this Agreement and each other
Loan Document. Each Lender authorizes each Agent to act on behalf of such
Lender under this Agreement and each other Loan Document and, in the absence
of other written instructions from the Required Lenders received from time to
time by the Agents (with respect to which each Agent agrees that it will
comply, except as otherwise provided in this Section 10.1 or as otherwise
advised by counsel), to exercise such powers hereunder and thereunder as are
specifically delegated to or required of the Agents by the terms hereof and
thereof, together with such powers as may be reasonably incidental thereto.
Each Lender hereby indemnifies (which indemnity shall survive any termination
of this Agreement) each Agent from and against such Lender's Percentage of any
and all liabilities, obligations, losses, damages, claims, costs or expenses
of any kind or nature whatsoever which may at any time be imposed on, incurred
by, or asserted against, each such Agent in any way relating to or arising out
of this Agreement or any other Loan Document (including any such liability,
etc. incurred as a result of each Agent's reliance on any information
contained in any Quarterly Report or update with respect thereto), including
reasonable attorneys' fees, and as to which either Agent is not reimbursed by
Micro or the other Obligors; provided, however, that no Lender shall be liable
for the payment of any portion of such liabilities, obligations, losses,
damages, claims, costs or expenses which are determined by a court of
competent jurisdiction in a final proceeding to have resulted solely from
either Agent's gross negligence or willful misconduct. No Agent shall be
required to take any action hereunder or under any other Loan Document, or to
prosecute or defend any suit in respect of this Agreement or any other Loan
Document, unless it is indemnified hereunder to its satisfaction. If any
indemnity in favor of either Agent shall be or become, in either Agent's
determination, inadequate, such Agent may call for additional indemnification
from the Lenders and cease to do the acts indemnified against hereunder until
such additional indemnity is given.
SECTION 10.2. Funding Reliance, etc. Unless the Administrative Agent
shall have been notified by telephone, confirmed in writing, by any Lender
by 5:00 p.m., Eastern time, on the day prior to the making of a Pro-Rata
Revolving Loan that such Lender will not make available the amount which
would constitute its Percentage of such requested Pro-Rata Revolving Loan
on the date specified therefor, the Administrative Agent may assume that
such Lender has made such amount available to the Administrative Agent and,
in reliance upon such assumption, make available to Micro a corresponding
amount. If and to the extent that such Lender shall not have made such
amount available to the Administrative Agent, such Lender and Micro
severally agree to repay the Administrative Agent forthwith on demand such
corresponding amount together with interest thereon, for each day from the
date the Administrative Agent made such amount available to Micro to the
date such amount is repaid to the Administrative Agent at an interest rate
equal to the Federal Funds Rate for the first day that the Administrative
Agent made such amounts available and thereafter at a rate of interest
equal to the interest rate applicable at the time to the requested Pro-Rata
Revolving Loan.
SECTION 10.3. Exculpation. Neither Agent nor any of their respective
directors, officers, employees or agents shall be liable to any Lender for any
action taken or omitted to be taken by it under this Agreement or any other
Loan Document, or in connection herewith or therewith, except for its own
willful misconduct or gross negligence, nor be responsible for any recitals or
warranties herein or therein, nor for the effectiveness, enforceability,
validity or due execution of this Agreement or any other Loan Document, nor to
make any inquiry respecting the performance by any Obligor of its obligations
hereunder or under any other Loan Document. Any such inquiry which may be
made by either Agent shall not obligate it to make any further inquiry or to
take any action. Each Agent shall be entitled to rely upon advice of counsel
concerning legal matters and upon any notice, consent, certificate, statement
or writing which each such Agent believes to be genuine and to have been
presented by a proper Person.
SECTION 10.4. Successor. Either Agent may resign as such at any time
upon at least 30 days' prior notice to Micro and all the Lenders. If
either Agent shall at any time resign, the Required Lenders, after
consultations with Micro, may appoint another Lender as a successor
Administrative Agent or Documentation Agent, as the case may be, whereupon
such Lender shall become an Administrative Agent or Documentation Agent
hereunder, as the case may be. If no successor Administrative Agent or
Documentation Agent shall have been so appointed by the Required Lenders,
and shall have accepted such appointment, within 30 days after the retiring
Administrative Agent's or Documentation Agent's giving notice of
resignation, then the retiring Administrative Agent or Documentation Agent
may, on behalf of the Lenders, after consultations with Micro, appoint a
successor Administrative Agent or Documentation Agent, as the case may be,
which shall be one of the Lenders or a commercial banking institution
organized under the laws of the United States (or any State thereof) or a
U.S. branch or agency of a commercial banking institution, and having a
combined capital and surplus of at least $500,000,000. Upon the acceptance
of any appointment as Administrative Agent or Documentation Agent
hereunder, as the case may be, by a successor Administrative Agent or
Documentation Agent, as the case may be, such successor Administrative
Agent or Documentation Agent shall be entitled to receive from the retiring
Administrative Agent or Documentation Agent such documents of transfer and
assignment as such successor Administrative Agent or Documentation Agent
may reasonably request, and shall thereupon succeed to and become vested
with all rights, powers, privileges and duties of the retiring
Administrative Agent or Documentation Agent, as the case may be, and the
retiring Administrative Agent or Documentation Agent shall be discharged
from its duties and obligations under this Agreement. No resignation or
removal of either the Administrative Agent or Documentation Agent pursuant
to this Section 10.4 shall be effective until the appointment of a
successor Administrative Agent or Documentation Agent, as the case may be,
has become effective. After any retiring Administrative Agent's or
Documentation Agent's resignation hereunder as an Administrative Agent or
Documentation Agent, as the case may be, the provisions of:
(a) this ARTICLE X shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was the Administrative Agent
or Documentation Agent under this Agreement; and
(b) Sections 11.3 and 11.4 shall continue to inure to its
benefit.
SECTION 10.5. Credit Extensions by NationsBank and Scotiabank.
NationsBank and Scotiabank shall each have the same rights and powers with
respect to the Credit Extensions made by it or any of its Affiliates in its
capacity as a Lender and may exercise the same as if it were not an Agent
hereunder. Each of NationsBank, Scotiabank and their respective Affiliates
may accept deposits from, lend money to, and generally engage in any kind
of business with any Obligor or any Subsidiary of any thereof as if it were
not an Agent hereunder.
SECTION 10.6. Credit Decisions. Each Lender acknowledges that it has,
independently of the Agents and each other Lender, and based on such Lender's
review of the financial information of each Obligor, this Agreement, the other
Loan Documents (the terms and provisions of which being satisfactory to such
Lender) and such other documents, information and investigations as such
Lender has deemed appropriate, made its own credit decision to make available
its Commitment and to make available any Non-Rata Credit Extensions. Each
Lender also acknowledges that it will, independently of the Agents and each
other Lender, and based on such other documents, information and
investigations as it shall deem appropriate at any time, continue to make its
own credit decisions as to exercising or not exercising from time to time any
rights and privileges available to it under this Agreement or any other Loan
Document.
SECTION 10.7. Copies, etc. The Administrative Agent shall give prompt
notice to each Lender of each notice or request required or permitted to be
given to the Administrative Agent by any Obligor pursuant to the terms of this
Agreement or any other Loan Document (unless concurrently delivered to the
Lenders by such Obligor). The Administrative Agent will distribute to each
Lender each document or instrument received for its account, and copies of all
other communications received by the Administrative Agent from any Obligor,
for distribution to the Lenders by the Administrative Agent in accordance with
the terms of this Agreement or any other Loan Document.
SECTION 10.8. Reporting of Non-Rata Credit Extensions. Each Borrower
agrees to provide the Administrative Agent with written notice of each
Non-Rata Credit Extension concurrently with or promptly after the making of
such Non-Rata Credit Extension, which notice shall set forth, among other
things: (a) the date thereof; (b) the principal amount thereof stated in
the relevant Available Currency (and, with respect to all Available
Currencies other than the Dollar, the corresponding Dollar Amount thereof);
(c) the Interest Period applicable thereto; (d) the aggregate Dollar
Amount of such Lender's outstanding or undrawn Non-Rata Credit Extensions
as of such date; and (e) the identity of the relevant Lender. Each Lender
agrees to provide the Administrative Agent with written confirmation within
five calendar days following the last day of each calendar month (from the
date hereof until the Commitment Termination Date) of the Outstanding
Credit Extensions comprised of Non-Rata Credit Extensions made by such
Lender as of the end of such calendar month, which confirmation shall set
forth, among other things: (a) the date of each such Non-Rata Credit
Extension; (b) the principal amount or Stated Amount, as the case may be,
of each such Non-Rata Credit Extension stated in the relevant Available
Currency (and the corresponding Dollar Amount thereof), and the aggregate
Dollar Amount of all such Non-Rata Credit Extensions; (c) the respective
Interest Periods applicable thereto; and (d) the Identity of such Lender.
ARTICLE XI
MISCELLANEOUS PROVISIONS
SECTION 11.1. Waivers, Amendments, etc. The provisions of this
Agreement and of each other Loan Document may from time to time be amended,
modified or waived, if such amendment, modification or waiver is in writing
and consented to by each Borrower and the Required Lenders; provided,
however, that no such amendment, modification or waiver which would:
(a) modify any requirement hereunder that any particular action
be taken by all the Lenders or by the Required Lenders shall be
effective unless consented to by each Lender;
(b) modify this Section 11.1, change the definitions of
Percentage or Required Lenders, increase the Total Credit Commitment
Amount or the Credit Commitment Amount or Percentage of any Lender,
extend the Commitment Termination Date, or, subject to Section 8.2.5,
release any Guarantor from any of its payment obligations under the
Guaranty entered into by it, shall be made without the consent of each
Lender;
(c) extend the due date for, or reduce the amount of, any
scheduled repayment or prepayment of principal of or interest on any
Pro-Rata Credit Extension or the amount of any fee payable under Section
4.3 shall be made without the consent of each Lender;
(d) affect adversely the interests, rights or obligations of the
Administrative Agent in its capacity as Administrative Agent shall be
made without the consent of the Administrative Agent; or
(e) affect adversely the interests, rights or obligations of the
Documentation Agent in its capacity as the Documentation Agent shall be
made without the consent of the Documentation Agent.
No failure or delay on the part of any Lender Party in exercising any power or
right under this Agreement or any other Loan Document shall operate as a
waiver thereof, nor shall any single or partial exercise of any such power or
right preclude any other or further exercise thereof or the exercise of any
other power or right. No notice to or demand on any Obligor in any case shall
entitle it to any notice or demand in similar or other circumstances. No
waiver or approval by any Lender Party under this Agreement or any other Loan
Document shall, except as may be otherwise stated in such waiver or approval,
be applicable to subsequent transactions. No waiver or approval hereunder
shall require any similar or dissimilar waiver or approval thereafter to be
granted hereunder.
SECTION 11.2. Notices. Unless otherwise specified to the contrary, all
notices and other communications provided to any party hereto under this
Agreement or any other Loan Document shall be in writing or by facsimile and
addressed, delivered or transmitted to such party at its address or facsimile
number set forth below its signature hereto or at such other address or
facsimile number as may be designated by such party in a notice to the other
parties. All notices, if mailed and properly addressed with postage prepaid
or if properly addressed and sent by prepaid courier service, shall be deemed
given when received; all notices if transmitted by facsimile shall be deemed
given when transmitted and the appropriate receipt for transmission received
by the sender thereof.
SECTION 11.3. Payment of Costs and Expenses. Micro agrees to pay on
demand all reasonable expenses (inclusive of value added tax or any other
similar tax imposed thereon) of the Agents (including the reasonable fees and
out-of-pocket expenses of the single counsel to the Agents and of local
counsel, if any, who may be retained by such counsel to the Agents) in
connection with the negotiation, preparation, execution and delivery of this
Agreement and of each other Loan Document (including schedules, exhibits, and
forms of any document or instrument relevant to this Agreement or any other
Loan Document), and any amendments, waivers, consents, supplements or other
modifications to this Agreement or any other Loan Document as may from time to
time hereafter be required, whether or not the transactions contemplated hereby
are consummated.
Micro further agrees to pay, and to save the Lender Parties harmless
from all liability for, any stamp or other taxes (including, without
limitation, any registration duty imposed by Belgian law) which may be payable
in connection with the execution, delivery or enforcement of this Agreement or
any other Loan Document, and in connection with the making of any Credit
Extensions and the issuing of any Letters of Credit hereunder. Micro also
agrees to reimburse each Lender Party upon demand for all out-of-pocket
expenses (inclusive of value added tax or any other similar tax imposed
thereon and including attorneys' fees and legal expenses (including the actual
cost to such Lender Party of its in-house counsel) on a full indemnity basis)
incurred by each such Lender Party in connection with (x) the negotiation of
any restructuring or "work-out", whether or not consummated, of any
Obligations and (y) the enforcement of any Obligations; provided, however,
that Micro shall reimburse each Lender Party for the fees and legal
expenses of only one counsel for such Lender Party.
SECTION 11.4. Indemnification. In consideration of the execution and
delivery of this Agreement by each Lender Party and the extension of the
Commitments, the Obligors hereby jointly and severally indemnify, exonerate
and hold each Lender Party and each of their respective officers, directors,
employees and agents (collectively, the "Indemnified Parties") free and
harmless from and against any and all actions, causes of action, suits,
losses, costs, liabilities and damages, and expenses incurred in connection
therewith (irrespective of whether any such Indemnified Party is a party to
the action for which indemnification hereunder is sought), including
reasonable attorneys' fees and disbursements, which shall include the actual
cost to such Indemnified Party of its in-house counsel but shall not include
the fees and expenses of more than one counsel to such Indemnified Party
(collectively, the "Indemnified Liabilities"), incurred by the Indemnified
Parties or any of them as a result of, or arising out of, or relating to:
(a) any transaction financed or to be financed in whole or in
part, directly or indirectly, with the proceeds of any Credit Extension;
(b) the entering into and performance of this Agreement and any
other Loan Document by any of the Indemnified Parties (excluding,
however, any action successfully brought by or on behalf of Micro or any
other Borrower with respect to any determination by any Lender not to
fund any Credit Extension or not to comply with Section 11.15 of this
Agreement or any action by the Required Lenders to terminate or reduce
the Commitments or accelerate the Loans in violation of the terms of
this Agreement);
(c) any investigation, litigation or proceeding related to any
acquisition or proposed acquisition by any Obligor, or any of their
respective Subsidiaries of all or any portion of the stock or assets of
any Person, whether or not any Indemnified Party is party thereto;
(d) any investigation, litigation or proceeding related to any
environmental cleanup, audit, compliance or other matter relating to the
protection of the environment or the Release by any Obligor, or any of
their respective Subsidiaries of any Hazardous Material; or
(e) the presence on or under, or the escape, seepage, leakage,
spillage, discharge, emission, discharging or releases from, any real
property owned or operated by any Obligor, or any of their respective
Subsidiaries of any Hazardous Material (including any losses,
liabilities, damages, injuries, costs, expenses or claims asserted or
arising under any Environmental Law), regardless of whether caused by,
or within the control of such Person;
except for any such Indemnified Liabilities arising for the account of a
particular Indemnified Party by reason of the relevant Indemnified Party's
gross negligence or willful misconduct. If and to the extent that the
foregoing undertaking may be unenforceable for any reason, the Obligors
hereby jointly and severally agree to make the maximum contribution to the
payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law.
SECTION 11.5. Survival. The obligations of Micro and each other Obligor
under Sections 5.3, 5.4, 5.5, 5.7, 11.3 and 11.4, and the obligations of the
Lenders under Sections 10.1 and 11.15, shall in each case survive any
termination of this Agreement, the payment in full of all Obligations and the
termination of the Commitments. The representations and warranties made by
Micro and each other Obligor in this Agreement and in each other Loan Document
shall survive the execution and delivery of this Agreement and each such other
Loan Document.
SECTION 11.6. Severability. Any provision of this Agreement or any
other Loan Document which is prohibited or unenforceable in any
jurisdiction shall, as to such provision and such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement or such Loan
Document or affecting the validity or enforceability of such provision in
any other jurisdictions.
SECTION 11.7. Headings. The various headings of this Agreement and of
each other Loan Document are inserted for convenience only and shall not
affect the meaning or interpretation of this Agreement or such other Loan
Document or any provisions hereof or thereof.
SECTION 11.8. Execution in Counterparts, Effectiveness; Entire
Agreement. This Agreement may be executed by the parties hereto in several
counterparts, each of which shall be deemed to be an original and all of
which shall constitute together but one and the same agreement. This
Agreement shall become effective on the date when (a) counterparts hereof
executed on behalf of Micro, each Supplemental Borrower, the Agents and
each Lender (or notice thereof satisfactory to the Administrative Agent)
shall have been received by the Administrative Agent and notice thereof
shall have been given by the Administrative Agent to each Borrower and each
Lender and (b) the Administrative Agent shall have received evidence
reasonably satisfactory to it that the mergers described in clause (ii) of
Section 6.1.12 have been consummated; provided, however, that no Lender
shall have any obligation to make the initial Credit Extension until the
date (the "Effective Date") that the applicable conditions set forth in
Sections 6.1 and 6.2 have been satisfied as provided herein. This
Agreement and the other Loan Documents constitute the entire understanding
among the parties hereto with respect to the subject matter hereof and
supersede any prior agreements, written or oral, with respect thereto.
SECTION 11.9. Governing Law; Submission to Jurisdiction. THIS
AGREEMENT AND EACH OTHER LOAN DOCUMENT (OTHER THAN THE COORDINATION CENTER
GUARANTY, MICRO CANADA GUARANTY (MICRO) AND MICRO CANADA GUARANTY
(COORDINATION CENTER/MICRO SINGAPORE)) SHALL EACH BE DEEMED TO BE A
CONTRACT MADE UNDER AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH,
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT (OTHER THAN THE COORDINATION
CENTER GUARANTY, MICRO CANADA GUARANTY (MICRO) AND MICRO CANADA GUARANTY
(COORDINATION CENTER/MICRO SINGAPORE)), OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS (OTHER THAN WITH
RESPECT TO THE COORDINATION CENTER GUARANTY, MICRO CANADA GUARANTY (MICRO)
OR MICRO CANADA GUARANTY (COORDINATION CENTER/MICRO SINGAPORE)) OF THE
AGENTS, THE LENDERS, MICRO OR ANY OTHER OBLIGOR SHALL BE BROUGHT AND
MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW YORK OR IN THE
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK. MICRO
AND EACH OTHER OBLIGOR HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND OF THE UNITED
STATED DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, FOR THE PURPOSE OF ANY SUCH LITIGATION
AS SET FORTH ABOVE, AND IRREVOCABLY CONSENTS TO THE SERVICE OF ANY AND ALL
PROCESS IN SUCH LITIGATION BY THE MAILING OF COPIES OF SUCH PROCESS TO SUCH
OBLIGOR AT ITS ADDRESS FOR NOTICES SPECIFIED PURSUANT TO SECTION 11.2
HEREOF, IN EACH SUCH CASE MARKED FOR THE ATTENTION OF GENERAL COUNSEL,
INGRAM MICRO INC., OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF
NEW YORK IN A MANNER PERMITTED BY THE LAWS OF EACH SUCH STATE. MICRO AND
EACH OTHER OBLIGOR HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION WHICH IT MAY HAVE OR
HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN
ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT MICRO OR ANY
OTHER OBLIGOR HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION
OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE,
ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE)
WITH RESPECT TO ITSELF OR ITS PROPERTY, EACH SUCH OBLIGOR HEREBY
IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS (OTHER THAN THE COORDINATION CENTER
GUARANTY, MICRO CANADA GUARANTY (MICRO) AND MICRO CANADA GUARANTY
(COORDINATION CENTER/MICRO SINGAPORE)).
SECTION 11.10. Successors and Assigns. This Agreement and each other
Loan Document shall be binding upon and shall inure to the benefit of the
parties hereto and thereto and their respective successors and assigns;
provided, however, that:
(a) no Obligor may assign or transfer its rights or obligations
hereunder or under any other Loan Document without the prior written
consent of all the Lender Parties;
(b) the rights of sale, assignment and transfer of the Lenders
are subject to Section 11.11; and
(c) the rights of the Administrative Agent and the Documentation
Agent with respect to resignation or removal are subject to Section
10.4.
SECTION 11.11. Assignments and Transfers of Interests. No Lender may
assign or sell participation interests in its Commitment or any of its Credit
Extensions or any portion thereof to any Persons except in accordance with
this Section 11.11.
SECTION 11.11.1. Assignments. Any Lender may at any time assign or
transfer to one or more Eligible Assignees, to any of its Affiliates, to
any other Lender or to any Federal Reserve Bank (each Person described in
either of the foregoing clauses as being the Person to whom such assignment
or transfer is available to be made, being hereinafter referred to as a
"Transferee Lender") all or any part of such Lender's total Credit
Extensions and Commitment (which assignment and delegation shall be of a
constant, and not a varying, percentage of all the assigning Lender's
Credit Extensions and Commitment) in a minimum aggregate amount of
$10,000,000 (or if less, the entire amount of such Lender's total Credit
Extensions and Commitment); provided, however, that, each Obligor and the
Agents shall be entitled to continue to deal solely and directly with such
Lender in connection with the interests so assigned and delegated to a
Transferee Lender until:
(a) notice of such assignment or transfer, together with payment
instructions, addresses and related information with respect to such
Transferee Lender, shall have been given to Micro and each Agent by such
Lender and such Transferee Lender;
(b) the Transferee Lender shall have executed and delivered to
Micro and each Agent, a Lender Assignment Agreement; and
(c) the processing fee described below shall have been paid.
From and after the effective date of such Lender Assignment Agreement, (x) the
Transferee Lender thereunder shall be deemed automatically to have become a
party hereto and to the extent that rights and obligations hereunder have been
assigned and delegated to such Transferee Lender in connection with such
Lender Assignment Agreement, shall have the rights and obligations of a Lender
hereunder and under the other Loan Documents, and (y) the assignor Lender, to
the extent that rights and obligations hereunder have been assigned and
delegated by it in connection with such Lender Assignment Agreement, shall be
released from its obligations hereunder and under the other Loan Documents.
Within five Business Days after its receipt pursuant to clauses (a) and (b)
above of notice of such assignment and transfer and an executed Lender
Assignment Agreement, Micro shall execute and deliver to the Administrative
Agent (for delivery to the relevant Transferee Lender) new Notes evidencing
such Transferee Lender's assigned Credit Extensions and Commitments and, if
the assignor Lender has retained Credit Extensions and Commitments hereunder,
replacement Notes in the principal amount of the Credit Extensions and
Commitments retained by the assignor Lender hereunder (such Notes to be in
exchange for, but not in payment of, the Notes then held by such assignor
Lender). Each such Note shall be dated the date of the respective predecessor
Note. The assignor Lender shall mark each predecessor Note "exchanged" and
deliver each of them to Micro. Accrued interest and accrued fees shall be
paid at the same time or times provided in each predecessor Note and in this
Agreement. The Transferee Lender shall pay a processing fee in the amount of
$3,500 to the Administrative Agent upon delivery of its Lender Assignment
Agreement to the Administrative Agent. Any attempted assignment and
delegation not made in accordance with this Section 11.11.1 shall be null and
void.
SECTION 11.11.2. Participations. Any Lender may at any time sell to
one or more commercial banks or other Persons (each of such commercial
banks and other Persons being herein called a "Participant") participating
interests in any of its Credit Extensions and Commitments hereunder;
provided, however, that
(a) no participation contemplated in this Section 11.11.2 shall
relieve such Lender from its Commitments or its other obligations
hereunder or under any other Loan Document;
(b) such Lender shall remain solely responsible for the
performance of its Commitments and such other obligations;
(c) each Borrower and each other Obligor and the Agents shall
continue to deal solely and directly with such Lender in connection with
such Lender's rights and obligations under this Agreement and each other
Loan Document;
(d) no Participant, unless such Participant is an Affiliate of
such Lender or is itself a Lender, shall be entitled to require such
Lender to take or refrain from taking any action hereunder or under any
other Loan Document, except that such Lender may agree with any
Participant that such Lender will not, without such Participant's
consent, take any actions of the type described in clause (a), (b) or
clause (c) of Section 11.1;
(e) no Borrower shall be required to pay any amount under this
Agreement that is greater than the amount which it would have been
required to pay had no participating interest been sold; and
(f) the aggregate amount of participating interests sold by any
Lender in its Credit Extensions comprised of Bid Rate Loans shall not
exceed, at any time, an amount equal to such Lender's Commitment at such
time multiplied by three.
The Borrower acknowledges and agrees that each Participant, for purposes of
Sections 5.3, 5.4, 5.5, 5.7, 5.9, 5.10, 11.3 and 11.4, shall be considered a
Lender.
SECTION 11.12. Other Transactions. Nothing contained herein shall
preclude any Lender Party from engaging in any transaction, in addition to
those contemplated by this Agreement or any other Loan Document, with any
Obligor or any of its Affiliates in which such Obligor or such Affiliate is
not restricted hereby from engaging with any other Person.
SECTION 11.13. Further Assurances. Each Obligor agrees to do such
further acts and things and to execute and deliver to each Lender Party
such additional assignments, agreements, powers and instruments, as such
Lender Party may reasonably require or deem advisable to carry into effect
the purposes of this Agreement or any other Loan Document or to better
assure and confirm unto such Lender Party its rights, powers and remedies
hereunder and thereunder.
SECTION 11.14. Waiver of Jury Trial. THE AGENTS, THE LENDERS, MICRO
AND EACH OTHER OBLIGOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH,
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE
OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE
LENDER PARTIES OR MICRO OR ANY OTHER OBLIGOR. MICRO AND EACH OTHER OBLIGOR
ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT
CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF THIS
AGREEMENT AND EACH OTHER LOAN DOCUMENT TO WHICH IT IS A PARTY) AND THAT
THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER PARTIES ENTERING
INTO THIS AGREEMENT AND EACH SUCH OTHER LOAN DOCUMENT TO WHICH IT IS A
PARTY.
SECTION 11.15. Confidentiality. Each of the Lender Parties hereby
severally agrees with each Borrower that it will keep confidential all
information delivered to such Lender Party by or on behalf of each Borrower
or any of their respective Subsidiaries which information is known by such
Lender Party to be proprietary in nature, concerns the terms and conditions
of this Agreement or any other Loan Document, or is clearly marked or
labeled or otherwise adequately identified when received by such Lender
Party as being confidential information (all such information, collectively
for purposes of this Section, "confidential information"); provided, that,
each Lender Party shall be permitted to deliver or disclose "confidential
information": (a) to its directors, officers, employees and affiliates;
(b) to authorized agents, attorneys, auditors and other professional advisors
retained by such Lender Party that have been apprised of such Lender
Party's obligation under this Section 11.15 and have agreed to hold
confidential the foregoing information substantially in accordance with the
terms of this Section; (c) in connection with the prospective assignment or
transfer of all or any part of, or the sale of a participating interest in,
such Lender Party's Credit Extensions and Commitment, to any prospective
Transferee Lender or Participant that has been apprised of such Lender
Party's obligation under this Section 11.15 and has agreed to hold
confidential the foregoing information in accordance with the terms of this
Section; (d) to any federal or state regulatory authority having jurisdiction
over such Lender Party; (e) or to any other Person to which such delivery or
disclosure may be necessary or appropriate (i) to effect compliance with
any law, rule, regulation or order applicable to such Lender Party, (ii) in
response to any subpoena or other legal process (provided, that the
relevant Borrower shall be given notice of any such subpoena or other legal
process as soon as possible and in any event prior to production (unless
provision of any such notice would result in a violation of any such
subpoena or other legal process), and the Lender Party receiving such
subpoena or other legal process shall cooperate with such Borrower, at such
Borrower's expense, in seeking a protective order to prevent or limit such
disclosure), or (iii) in connection with any litigation to which such
Lender Party is a party.
For purposes hereof, the term "confidential information" does not
include any information that: (A) was publicly known or otherwise known by any
Lender Party on a non-confidential basis from a source other than the relevant
Borrower prior to the time such information is delivered or disclosed to such
Lender Party by the relevant Borrower; (B) subsequently becomes publicly known
through no act or omission by any Lender Party or any Person acting on behalf
of any Lender Party; (C) otherwise becomes known to a Lender Party other than
through disclosure by the relevant Borrower (or any Subsidiary thereof) or
through someone subject, to such Lender Party's knowledge, to a duty of
confidentiality to the relevant Borrower; or (D) constitutes financial
statements that are otherwise publicly available.
SECTION 11.16. Release of Subsidiary Guarantors and Supplemental
Borrowers.
(a) Upon receipt by the Agents of (i) a certificate from a
senior officer of Micro certifying as of the date thereof that, after
the consummation of the transaction or series of transactions described
in such certificate (which transactions, individually and in the
aggregate, shall be certified to be in compliance with the terms and
conditions of this Agreement, including the covenants contained in
Sections 8.2.5, 8.2.6 and 8.2.9), the Guarantor identified in such
certificate is no longer a Subsidiary of Micro, and (ii) such additional
information, approvals, opinions, documents or instruments relating to
the matters addressed in such certificate as the Agents shall reasonably
request, such Guarantor's Guaranty shall automatically terminate so long
as there shall exist no Default immediately prior to, as a result of, or
after giving effect to, such termination. In all events, all other
Guaranties shall remain in full force and effect. Each Lender Party
shall, at Micro's expense, execute such documents as Micro shall
reasonably request to evidence such termination.
(b) Upon receipt by the Agents of (i) a certificate from a
senior officer of Micro certifying as of the date thereof that, after
the consummation of the transaction or series of transactions described
in such certificate (which transactions, individually and in the
aggregate, shall be certified to be in compliance with the terms and
conditions of this Agreement, including the covenants contained in
Sections 8.2.5, 8.2.6 and 8.2.9), the Supplemental Borrower identified
in such certificate is no longer a Subsidiary of Micro, (ii) such
additional information, approvals, opinions, documents or instruments
relating to the matters addressed in such certificate as the Agents
shall reasonably request, and (iii) payment in full of any Outstanding
Credit Extensions made by any Lender in favor of such Supplemental
Borrower and satisfaction of any Obligations of such Supplemental
Borrower under the Loan Documents, such Supplemental Borrower shall
automatically cease to be a party to this Agreement so long as there
shall exist no Default immediately prior to, as a result of, or after
giving effect to, such cessation. In all events, this Agreement shall
remain in full force and effect as among the remaining parties hereto.
Each Lender Party shall, at Micro's expense, execute such documents as
Micro shall reasonably request to evidence such cessation.
SECTION 11.17. Collateral. Each of the Lenders represents to the
Administrative Agent and each of the other Lenders that it in good faith is
not relying upon any Margin Stock as collateral in the extension or
maintenance of the credit provided for in this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective officers thereunto duly authorized as of
the day and year first above written.
BORROWERS AND GUARANTORS:
INGRAM MICRO INC.
By /s/ James F. Ricketts
---------------------------------------
Name: James F. Ricketts
Title: Vice President & Treasurer
Address: 1600 E. St. Andrew Place
Santa Ana, CA 92705
Facsimile No: 714-566-9447
Attention: James F. Ricketts
INGRAM EUROPEAN COORDINATION
CENTER N.V.
By /s/ M. J. Grainger
---------------------------------------
Name: M. J. Grainger
Title: Authorized Representative
Address: Leuvensesteenweg 11
1932 Sint Stevens Woluwe
Belgium
Facsimile No: 011-32-2-725-1511
Attention: Thierry Denaisse
INGRAM MICRO SINGAPORE PTE LTD.
By /s/ M. J. Grainger
---------------------------------------
Name: M. J. Grainger
Title: Attorney
Address: 143 Cecil Street, #07-03/04
GB Building
Singapore 069542
Facsimile No: 011-65-226-5337
Attention: Ng Peng Tea
INGRAM MICRO INC.,
an Ontario, Canada corporation
By /s/ M. J. Grainger
---------------------------------------
Name: M. J. Grainger
Title: Authorized Representative
Address: 230 Barmac Drive
Weston, Ontario
Canada M9L 2Z3
Facsimile No: 416-740-8623
Attention: Robert E. Carbrey
Initial
Commitment
Percentage Amount
8.250% $82,500,000 THE LENDER PARTIES:
NATIONSBANK OF TEXAS, N.A.,
as Administrative Agent and as a Lender
By /s/ Stan W. Reynolds
---------------------------------------
Name: Stan W. Reynolds
Title: Vice President
LIBOR
Office: 901 Main Street
13th Floor
Dallas, Texas 75202
Facsimile No: 214-508-2515
Attention: Agency Services
Domestic
Office: 901 Main Street
13th Floor
Dallas, Texas 75202
Facsimile No: 214-508-2515
Attention: Agency Services
Address for
Notices: 901 Main Street
13th Floor
Dallas, Texas 75202
Facsimile No: 214-508-2515
Attention: Agency Services
Address for Payment of Fees:
901 Main Street
13th Floor
Dallas, Texas 75202
Facsimile No: 214-508-2515
Attention: Agency Services
Initial
Commitment
Percentage Amount
8.250% $82,500,000 THE BANK OF NOVA SCOTIA,
as Documentation Agent and as a Lender
By /s/ P. M. Brown
---------------------------------------
Name: P. M. Brown
Title: Relationship Manager
LIBOR
Office: 600 Peachtree Street, N.E.
Suite 2700
Atlanta, Georgia 30308
Facsimile No: 404-888-8998
Attention: Amanda Norsworthy
Domestic
Office: 600 Peachtree Street, N.E.
Suite 2700
Atlanta, Georgia 30308
Facsimile No: 404-888-8998
Attention: Amanda Norsworthy
Address for
Notices: 600 Peachtree Street, N.E.
Suite 2700
Atlanta, Georgia 30308
Facsimile No: 404-888-8998
Attention: Amanda Norsworthy
Address for Payment of Fees:
600 Peachtree Street, N.E.
Suite 2700
Atlanta, Georgia 30308
Facsimile No: 404-888-8998
Attention: Amanda Norsworthy
Initial
Commitment
Percentage Amount
6.500% $65,000,000 THE CHASE MANHATTAN BANK,
as a Co-Agent and as a Lender
By /s/ Peter C. Eckstein
---------------------------------------
Name: Peter C. Eckstein
Title: Vice President
LIBOR
Office: The Chase Manhattan Bank
Grand Central Towers
29th Floor
New York, New York 10017
Facsimile No: 212-622-0854
Attention: Andrew Stasiw
Domestic
Office: The Chase Manhattan Bank
Grand Central Towers
29th Floor
New York, New York 10017
Facsimile No: 212-622-0854
Attention: Andrew Stasiw
Address for
Notices: The Chase Manhattan Bank
Grand Central Towers
29th Floor
New York, New York 10017
Facsimile No: 212-622-0854
Attention: Andrew Stasiw
Address for Payment of Fees:
Loan Services
52 Broadway
New York, NY 10004
Facsimile No: 212-701-5090
Attention: John Knapp
Initial
Commitment
Percentage Amount
6.500% $65,000,000 DG BANK DEUTSCHE
GENOSSENSCHAFTSBANK, CAYMAN
ISLANDS BRANCH,
as a Co-Agent and as a Lender
By /s/ J. W. Somers
---------------------------------------
Name: J. W. Somers
Title: S.V.P. and Manager
By /s/ William S. Bartlett
---------------------------------------
Name: William S. Bartlett
Title: AVP
LIBOR
Office: DG BANK New York
DG BANK Building
609 Fifth Avenue
New York, NY 10017-1021
Facsimile No: 212-745-1556
Attention: Karen Brinkman
Domestic
Office: DG BANK New York
DG BANK Building
609 Fifth Avenue
New York, NY 10017-1021
Facsimile No: 212-745-1556
Attention: Karen Brinkman
Address for
Notices: DG BANK Atlanta Agency
303 Peachtree Street, N.E.
Suite 2900
Atlanta, GA 30308
Facsimile No: 404-524-4006
Attention: John Somers
Address for Payment of Fees:
DG Bank New York
DG Bank Building
609 Fifth Avenue
New York, NY 10017-1021
Facsimile No: 212-745-1556
Attention: Beverly Magee
Initial
Commitment
Percentage Amount
6.500% $65,000,000 THE FIRST NATIONAL BANK OF CHICAGO,
as a Co-Agent and as a Lender
By /s/ Kathleen Comella
---------------------------------------
Name: Kathleen Comella
Title: Vice President
LIBOR
Office: One First National Plaza
Suite 0167, 1-10
Chicago, Illinois 60670
Facsimile No: 312-732-5435
Attention: Kathy Comella
Domestic
Office: One First National Plaza
Suite 0167, 1-10
Chicago, Illinois 60670
Facsimile No: 312-732-5435
Attention: Kathy Comella
Address for
Notices: One First National Plaza
Suite 0167, 1-10
Chicago, Illinois 60670
Facsimile No: 312-732-5435
Attention: Kathy Comella
Address for Payment of Fees:
One First National Plaza
Suite 0634, 1-10
Chicago, Illinois 60670
Facsimile No: 312-732-4840
Attention: Mattie Reed
Initial
Commitment
Percentage Amount
6.500% $65,000,000 THE INDUSTRIAL BANK OF JAPAN,
LIMITED, ATLANTA AGENCY,
as a Co-Agent and as a Lender
By /s/ Kazuo Iida
---------------------------------------
Name: Kazuo Iida
Title: General Manager
LIBOR
Office: One Ninety One Peachtree Tower
191 Peachtree Street, N.E.
Suite 3600
Atlanta, GA 30303-1757
Facsimile No: 404-524-8509
Attention: James Masters
Domestic
Office: One Ninety One Peachtree Tower
191 Peachtree Street, N.E.
Suite 3600
Atlanta, GA 30303-1757
Facsimile No: 404-524-8509
Attention: James Masters
Address for
Notices: One Ninety One Peachtree Tower
191 Peachtree Street, N.E.
Suite 3600
Atlanta,GA 30303-1757
Facsimile No: 404-524-8509
Attention: James Masters
Address for Payment of Fees:
One Ninety One Peachtree Tower
191 Peachtree Street, N.E.
Suite 3600
Atlanta, GA 30303-1757
Facsimile No: 404-524-8509
Attention: James Masters
Initial
Commitment
Percentage Amount
6.500% $65,000,000 ROYAL BANK OF CANADA,
as a Co-Agent and as a Lender
By /s/ Michael Cole
---------------------------------------
Name: Michael Cole
Title: Manager
LIBOR
Office: 600 Wilshire Boulevard
Suite 800
Los Angeles, CA 90017
Facsimile No: 213-955-5350
Attention: Michael Cole
Domestic
Office: 600 Wilshire Boulevard
Suite 800
Los Angeles, CA 90017
Facsimile No: 213-955-5350
Attention: Michael Cole
Address for
Notices: 1 Financial Square
23rd Floor
New York, NY 10005-3531
Facsimile No: 212-428-2372
Attention: Linda Smith
Loan Administrator
Address for Payment of Fees:
1 Financial Square
23rd Floor
New York, NY 10005-3531
Facsimile No: 212-428-2372
Attention: Linda Smith
Loan Administrator
Initial
Commitment
Percentage Amount
5.000% $50,000,000 THE FUJI BANK, LIMITED,
LOS ANGELES AGENCY
By /s/ Nobuhiro Umemura
---------------------------------------
Name: Nobuhiro Umemura
Title: Joint General Manager
LIBOR
Office: 333 S. Hope Street
39th Floor
Los Angeles, CA 90071
Facsimile No: 213-253-4198
Attention: Corporate Finance Group
Domestic
Office: 333 S. Hope Street
39th Floor
Los Angeles, CA 90071
Facsimile No: 213-253-4198
Attention: Corporate Finance Group
Address for
Notices: 333 S. Hope Street
39th Floor
Los Angeles, CA 90071
Facsimile No: 213-253-4198
Attention: Tami Kita
Address for Payment of Fees:
333 S. Hope Street
39th Floor
Los Angeles, CA 90071
Facsimile No: 213-253-4198
Attention: Corporate Finance Group
Initial
Commitment
Percentage Amount
4.000% $40,000,000 ABN-AMRO BANK, N.V.
By /s/ Steven L. Hipsman
---------------------------------------
Name: Steven Hipsman
Title: Vice President
By /s/ Larry Kelley
---------------------------------------
Name: Larry Kelley
Title: Group Vice President
LIBOR
Office: One Ravinia Drive
Suite 1200
Atlanta, GA 30346
Facsimile No: 770-395-9188
Attention: Reenie Williamson
Domestic
Office: One Ravinia Drive
Suite 1200
Atlanta, GA 30346
Facsimile No: 770-395-9188
Attention: Reenie Williamson
Address for
Notices: One Ravinia Drive
Suite 1200
Atlanta, GA 30346
Facsimile No: 770-399-0066
Attention: Patrick A. Thom
Address for Payment of Fees:
One Ravinia Drive
Suite 1200
Atlanta, GA 30346
Facsimile No: 770-395-9188
Attention: Reenie Williamson
Initial
Commitment
Percentage Amount
4.000% $40,000,000 BANK OF AMERICA NATIONAL
TRUST & SAVINGS ASSOCIATION
By /s/ Kevin McMahon
---------------------------------------
Name: Kevin McMahon
Title: Managing Director
LIBOR
Office: 1850 Gateway Boulevard
Concord, CA 94521
Facsimile No: 510-675-7531
Attention: Daryl Hurst
Domestic
Office: 1850 Gateway Boulevard
Concord, CA 94521
Facsimile No: 510-675-7531
Attention: Daryl Hurst
Address for Notices other than Notice of
Borrowing or Notices of Conversion or
Continuation:
High Technology #3697
555 California Street
41st Floor
San Francisco, CA 94104
Facsimile No: 415-622-2514
Attention: Kevin McMahon
Address for Payment of Fees:
1850 Gateway Boulevard
Concord, CA 94521
Facsimile No: 510-675-7531
Attention: Daryl Hurst
Initial
Commitment
Percentage Amount
4.000% $40,000,000 CREDIT LYONNAIS NEW YORK BRANCH
By /s/ Robert Ivosevich
---------------------------------------
Name: Robert Ivosevich
Title: Senior Vice President
LIBOR
Office: 1301 Avenue of the Americas
New York, NY 10019
Facsimile No: 404-584-5249
Attention: David Cawrse
Domestic
Office: 1301 Avenue of the Americas
New York, NY 10019
Facsimile No: 404-584-5249
Attention: David Cawrse
Address for
Notices: Credit Lyonnais Atlanta Agency
303 Peachtree Street, N.E.
Suite 4400
Atlanta, GA 30308
Facsimile No: 404-584-5249
Attention: David Cawrse
Address for Payment of Fees:
Credit Lyonnais Atlanta Agency
303 Peachtree Street, N.E.
Suite 4400
Atlanta, GA 30308
Facsimile No: 404-584-5249
Attention: Lisa Cline
Initial
Commitment
Percentage Amount
4.000% $40,000,000 THE DAI-ICHI KANGYO BANK, LTD.,
LOS ANGELES AGENCY
By /s/ Masatsugu Morishita
---------------------------------------
Name: Masatsugu Morishita
Title: Sr. Vice President &
Joint General Manager
LIBOR
Office: 555 West Fifth Street
5th Floor
Los Angeles, CA 90013
Facsimile No: 213-243-4848
Attention: Hollie Luong
Domestic
Office: 555 West Fifth Street
5th Floor
Los Angeles, CA 90013
Facsimile No: 213-243-4848
Attention: Hollie Luong
Address for
Notices: 555 West Fifth Street
5th Floor
Los Angeles, CA 90013
Facsimile No: 213-243-4848
Attention: Hollie Luong
Address for Payment of Fees:
555 West Fifth Street
5th Floor
Los Angeles, CA 90013
Facsimile No: 213-243-4848
Attention: Hollie Luong
Initial
Commitment
Percentage Amount
4.000% $40,000,000 THE SAKURA BANK, LIMITED
By /s/ Fernando Buesa
---------------------------------------
Name: Fernando Buesa
Title: Vice President
By /s/ Ofusa Sato
---------------------------------------
Name: Ofusa Sato
Title: Senior Vice President
General Manager
LIBOR
Office: 515 South Figueroa Street
Suite 400
Los Angeles, CA 90071
Facsimile No: 213-623-8692
Attention: Fernando Buesa
Domestic
Office: 515 South Figueroa Street
Suite 400
Los Angeles, CA 90071
Facsimile No: 213-623-8692
Attention: Fernando Buesa
Address for
Notices: 515 South Figueroa Street
Suite 400
Los Angeles, CA 90071
Facsimile No: 213-623-8692
Attention: Emiko Nagai
Loan Administrator
Address for Payment of Fees:
515 South Figueroa Street
Suite 400
Los Angeles, CA 90071
Facsimile No: 213-623-8692
Attention: Emiko Nagai
Loan Administrator
Initial
Commitment
Percentage Amount
2.500% $25,000,000 COMMERZBANK AKTIENGESELLSCHAFT,
LOS ANGELES BRANCH
By /s/ Christian Jagenburg
---------------------------------------
Name: Christian Jagenburg
Title: Senior Vice President & Manager
By /s/ Steven F. Larsen
---------------------------------------
Name: Steven F. Larsen
Title: Vice President
LIBOR
Office: Commerzbank AG, Los Angeles Branch
660 S. Figueroa, Suite 1450
Los Angeles, CA 90017
Facsimile No: 213-623-0039
Attention: Steven F. Larsen
Domestic
Office: Commerzbank AG, Los Angeles Branch
660 S. Figueroa, Suite 1450
Los Angeles, CA 90017
Facsimile No: 213-623-0039
Attention: Steven F. Larsen
Address for
Notices: Commerzbank AG, Los Angeles Branch
660 S. Figueroa, Suite 1450
Los Angeles, CA 90017
Facsimile No: 213-623-0039
Attention: Steven F. Larsen
Address for Payment of Fees:
Commerzbank AG, New York Branch
2 World Financial Center
New York, New York 10281-1050
Facsimile No: 212-266-7593
Attention: Christina Humphrey
Initial
Commitment
Percentage Amount
2.500% $25,000,000 THE MITSUBISHI TRUST AND BANKING
CORPORATION, LOS ANGELES AGENCY
By /s/ Yasushi Satomi
---------------------------------------
Name: Yasushi Satomi
Title: Senior Vice President
LIBOR
Office: 801 South Figueroa Street
Suite 500
Los Angeles, CA 90017
Facsimile No: 213-687-4631
Attention: Jill Kato
Domestic Office: 801 South Figueroa Street
Suite 500
Los Angeles, CA 90017
Facsimile No: 213-687-4631
Attention: Jill Kato
Address for
Notices: 801 South Figueroa Street
Suite 500
Los Angeles, CA 90017
Facsimile No: 213-687-4631
Attention: Jill Kato
Address for Payment of Fees:
801 South Figueroa Street
Suite 500
Los Angeles, CA 90017
Facsimile No: 213-629-2571
Attention: Yvonne Yoon
Initial
Commitment
Percentage Amount
2.000% $20,000,000 BANCA COMMERCIALE ITALIANA,
LOS ANGELES FOREIGN BRANCH
By /s/ Richard R. Iwanicki
---------------------------------------
Name: Richard R. Iwanicki
Title: V.P.
By /s/ E. Bombieri
---------------------------------------
Name: E. Bombieri
Title: V.P. & Manager
LIBOR
Office: Banca Commerciale Italiana
Los Angeles Foreign Branch
555 S. Flower Street, #4300
Los Angeles, CA 90071
Facsimile No: 213-624-0457
Attention: Richard E. Iwanicki
Domestic
Office: Banca Commerciale Italiana
Los Angeles Foreign Branch
555 S. Flower Street, #4300
Los Angeles, CA 90071
Facsimile No: 213-624-0457
Attention: Richard E. Iwanicki
Address for
Notices: Banca Commerciale Italiana
Los Angeles Foreign Branch
555 S. Flower Street, #4300
Los Angeles, CA 90071
Facsimile No: 213-624-0457
Attention: Richard E. Iwanicki
Address for Payment of Fees:
Banca Commerciale Italiana
Los Angeles Foreign Branch
555 S. Flower Street, #4300
Los Angeles, CA 90071
Facsimile No: 213-624-0457
Attention: Richard E. Iwanicki
Initial
Commitment
Percentage Amount
2.000% $20,000,000 BANQUE NATIONALE DE PARIS
By /s/ Clive Bettles
---------------------------------------
Name: Clive Bettles
Title: Senior Vice President
and Manager
By /s/ Tjalling Terpstra
---------------------------------------
Name: Tjalling Terpstra
Title: Vice President
LIBOR
Office: 725 South Figueroa Street
Suite #2090
Los Angeles, CA 90017
Facsimile No: 213-488-9602
Attention: Tjalling Terpstra
Domestic
Office: 725 South Figueroa Street
Suite #2090
Los Angeles, CA 90017
Facsimile No: 213-488-9602
Attention: Tjalling Terpstra
Address for
Notices: Banque Nationale de Paris
Treasury Department
180 Montgomery Street
San Francisco, CA 94104
Facsimile No: 415-989-9041
Attention: Don Hart
with a copy to:
Tjalling Terpstra
Banque Nationale de Paris
725 South Figueroa Street
Suite #2090
Los Angeles, CA 90017
Address for Payment of Fees:
The Federal Reserve Bank of San Francisco
c/o Banque Nationale de Paris
725 South Figueroa Street
Suite #2090
Los Angeles, CA 90017
Attention: Paggie Wong
Initial
Commitment
Percentage Amount
2.000% $20,000,000 COMERICA BANK
By /s/ Dirk Price
---------------------------------------
Name: Dirk Price
Title: Vice President
LIBOR
Office: 1920 Main Street
Suite 1150
Irvine, CA 92714
Facsimile No: 714-476-1222
Attention: Dirk A. Price
Domestic
Office: 1920 Main Street
Suite 1150
Irvine, CA 92714
Facsimile No: 714-476-1222
Attention: Dirk A. Price
Address for
Notices: 1920 Main Street
Suite 1150
Irvine, CA 92714
Facsimile No: 714-476-1222
Attention: Dirk A. Price
Address for Payment of Fees:
500 Woodward Avenue
9th Floor
Detroit, MI 48226
Facsimile No: 313-222-9434
Attention: Debra J. Clark
Customer Assistant
Initial
Commitment
Percentage Amount
2.000% $20,000,000 DEN DANSKE BANK AKTIESELSKAB
CAYMAN ISLANDS BRANCH
By /s/ Peter L. Hargraves
---------------------------------------
Name: Peter L. Hargraves
Title: Vice President
By /s/ John A. O'Neill
---------------------------------------
Name: John A. O'Neill
Title: Vice President
LIBOR
Office: Den Danske Bank Aktieselskab
Cayman Islands Branch
c/o Den Danske Bank, New York Branch
4th Floor East Building
280 Park Avenue
New York, New York 10017
Facsimile No: 212-599-2493
Attention: Maria Webb
Domestic
Office: Den Danske Bank Aktieselskab
Cayman Islands Branch
c/o Den Danske Bank, New York Branch
4th Floor East Building
280 Park Avenue
New York, New York 10017
Facsimile No: 212-599-2493
Attention: Maria Webb
Address for
Notices:
Den Danske Bank Aktieselskab
Cayman Islands Branch
c/o Den Danske Bank, New York Branch
4th Floor East Building
280 Park Avenue
New York, New York 10017
Facsimile No: 212-599-2493
Attention: Maria Webb
Address for Payment of Fees:
Den Danske Bank Aktieselskab
Cayman Islands Branch
c/o Den Danske Bank, New York Branch
4th Floor East Building
280 Park Avenue
New York, New York 10017
Facsimile No: 212-599-2493
Attention: Maria Webb
Initial
Commitment
Percentage Amount
2.000% $20,000,000 FIRST AMERICAN NATIONAL BANK
By /s/ Corey Napier
---------------------------------------
Name: Corey Napier
Title: Vice President
LIBOR
Office: First American National Bank
First American Center
Nashville, TN 37238-0310
Facsimile No: 615-748-6072
Attention: Corey Napier
Domestic
Office: First American National Bank
First American Center
Nashville, TN 37238-0310
Facsimile No: 615-748-6072
Attention: Corey Napier
Address for
Notices: First American National Bank
First American Center
3rd Floor
Nashville, TN 37238-0310
Facsimile No: 615-748-6098
Attention: Frensia Joy
Address for Payment of Fees:
First American National Bank
First American Center
Commercial Loan Operations
Nashville, TN 37238-0310
Facsimile No: 615-748-6098
Attention: Frensia Joy
Initial
Commitment
Percentage Amount
2.000% $20,000,000 GENERALE BANK, S.A./N.V.
By /s/ E. Matthews
---------------------------------------
Name: E. Matthews
Title: SVP
By /s/ P. Pollaera
---------------------------------------
Name: P. Pollaera
Title: SVP
LIBOR
Office: Generale Bank, S.A./N.V.
520 Madison Avenue
41st Floor
New York, New York 10022
Facsimile No: 212-750-9503
Attention: Douglas Riahi
Domestic
Office: Generale Bank, S.A./N.V.
520 Madison Avenue
41st Floor
New York, New York 10022
Facsimile No: 212-750-9503
Attention: Douglas Riahi
Address for
Notices: Generale Bank, S.A./N.V.
520 Madison Avenue
41st Floor
New York, New York 10022
Facsimile No: 212-750-9503
Attention: Douglas Riahi
Address for Payment of Fees:
Generale Bank, S.A./N.V.
520 Madison Avenue
41st Floor
New York, New York 10022
Facsimile No: 212-750-9503
Attention: Douglas Riahi
Initial
Commitment
Percentage Amount
2.000% $20,000,000 KREDIETBANK N.V., GRAND CAYMAN
BRANCH
By /s/ Robert Snauffer
---------------------------------------
Name: Robert Snauffer
Title: Vice President
By /s/ Raymond F. Murray
---------------------------------------
Name: Raymond F. Murray
Title: Vice President
LIBOR
Office: Kredietbank N.V.
New York Branch
125 West 55th Street
10th Floor
New York, NY 10019
Facsimile No: 212-956-5580
Attention: Robert Snauffer
Domestic
Office: Kredietbank N.V.
New York Branch
125 West 55th Street
10th Floor
New York, NY 10019
Facsimile No: 212-956-5580
Attention: Robert Snauffer
Address for
Notices: Kredietbank
Los Angeles Representative Office
550 South Hope Street
Suite 1775
Los Angeles, CA 90071
Facsimile No: 213-629-5801
Attention: Roxanne Cheng
Vice President
Address for Payment of Fees:
Kredietbank N.V.
New York Branch
125 West 55th Street
10th Floor
New York, NY 10019
Facsimile No: 212-956-5580
Attention: Lynda Resuman
Loan Operator
Initial
Commitment
Percentage Amount
2.000% $20,000,000 THE SANWA BANK, LIMITED
LOS ANGELES BRANCH
By /s/ Virginia Hart
---------------------------------------
Name: Virginia Hart
Title: Vice President
LIBOR
Office: 601 S. Figueroa Street
Los Angeles, CA 90017
Facsimile No: 213-623-4912
Attention: Virginia Hart
Domestic
Office: 601 S. Figueroa Street
Los Angeles, CA 90017
Facsimile No: 213-623-4912
Attention: Virginia Hart
Address for
Notices: 601 S. Figueroa Street
Los Angeles, CA 90017
Facsimile No: 213-623-4912
Attention: Virginia Hart
Address for Payment of Fees:
601 S. Figueroa Street
Los Angeles, CA 90017
Facsimile No: 213-623-4912
Attention: Washington Boza
Loan Operations
Initial
Commitment
Percentage Amount
2.000% $20,000,000 SUNTRUST BANK, ATLANTA
By /s/ Kristina L. Anderson
---------------------------------------
Name: Kristina L. Anderson
Title: Asst. Vice President
By /s/ Charles J. Johnson
---------------------------------------
Name: Charles J. Johnson
Title: Vice President
LIBOR
Office: 25 Park Place, N.E.
Atlanta, GA 30303
Facsimile No: 404-588-8505
Attention: Kathy Perkerson
Domestic
Office: 25 Park Place, N.E.
Atlanta, GA 30303
Facsimile No: 404-588-8505
Attention: Kathy Perkerson
Address for
Notices: 25 Park Place, N.E.
Atlanta, GA 30303
Facsimile No: 404-588-8505
Attention: Kris Anderson
Address for Payment of Fees:
25 Park Place, N.E.
Atlanta, GA 30303
Facsimile No: 404-588-8505
Attention: Kathy Perkerson
Initial
Commitment
Percentage Amount
2.000% $20,000,000 UNITED STATES NATIONAL BANK OF
OREGON
By /s/ Derek Ridgley
---------------------------------------
Name: Derek Ridgley
Title: Assistant Vice President
LIBOR
Office: 555 S.W. Oak Street
PL-4
Portland, OR 97204
Facsimile No: 503-275-5428
Attention: Derek W. Ridgley
Domestic
Office: 555 S.W. Oak Street
PL-4
Portland, OR 97204
Facsimile No: 503-275-5428
Attention: Derek W. Ridgley
Address for
Notices: 555 S.W. Oak Street
PL-4
Portland, OR 97204
Facsimile No: 503-275-5428
Attention: Derek W. Ridgley
Address for Payment of Fees:
555 S.W. Oak Street
PL-7 Note Department
Portland, OR 97204
Attention: Participation Specialist
Initial
Commitment
Percentage Amount
1.000% $10,000,000 ISTITUTO BANCARIO SAN PAOLO DI
TORINO S.P.A.
By /s/ Robert S. Wurster
---------------------------------------
Name: Robert S. Wurster
Title: First Vice President
By /s/ William J. De Angelo
---------------------------------------
Name: William J. De Angelo
Title: First Vice President
LIBOR
Office: 245 Park Avenue
35th Floor
New York, NY 10167
Facsimile No: 212-599-5303
Attention: Carmela Romanello-Schaden
Domestic
Office: 245 Park Avenue
35th Floor
New York, NY 10167
Facsimile No: 212-599-5303
Attention: Carmela Romanello-Schaden
Address for Notices other than Notice of
Borrowing or Notice of Conversion:
444 S. Flower Street
Suite 4550
Los Angeles, CA 90071
Facsimile No: 213-622-2514
Attention: Annette Bergsten
Address for Payment of Fees:
245 Park Avenue
35th Floor
New York, NY 10167
Facsimile No: 212-599-5303
Attention: Carmela Romanello-Schaden
EXHIBIT 10.13
AMENDED AND RESTATED REORGANIZATION AGREEMENT
among
INGRAM INDUSTRIES INC.,
INGRAM MICRO INC.,
and
INGRAM ENTERTAINMENT INC.
TABLE OF CONTENTS(1)
Page
ARTICLE 1
DEFINITIONS
SECTION 1.1. Definitions...................................... 1
_________________
(1) The Table of Contents is not a part of this Agreement.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE PARTIES
SECTION 2.1. Corporate Existence and Power.................... 3
SECTION 2.2. Corporate Authorization.......................... 3
SECTION 2.3. Governmental Authorization....................... 3
SECTION 2.4. Non-Contravention................................ 4
ARTICLE 3
CERTAIN LIABILITIES; CERTAIN ASSETS
SECTION 3.1. Assumed Liabilities.............................. 4
SECTION 3.2. Certain Contingent Assets........................ 8
SECTION 3.3. Certain Adjustments.............................. 9
ARTICLE 4
GENERAL COVENANTS
SECTION 4.1. Conduct of the Business.......................... 10
SECTION 4.2. Access; Confidentiality.......................... 11
SECTION 4.3. Best Efforts; Further Assurances................. 12
SECTION 4.4. Loans; Repurchase Agreements..................... 12
SECTION 4.5. Cross-Guarantees................................. 13
SECTION 4.6. Public Announcements............................. 14
SECTION 4.7. Notices of Certain Events........................ 14
ARTICLE 5
SURVIVAL; INDEMNIFICATION
SECTION 5.1. Survival......................................... 15
SECTION 5.2. Indemnification.................................. 15
SECTION 5.3. Procedures....................................... 15
ARTICLE 6
TERMINATION
SECTION 6.1. Grounds for Termination.......................... 17
SECTION 6.2. Effect of Termination............................ 17
ARTICLE 7
MISCELLANEOUS
SECTION 7.1. Headings......................................... 17
SECTION 7.2. Entire Agreement................................. 17
SECTION 7.3. Notices.......................................... 18
SECTION 7.4. Applicable Law................................... 18
SECTION 7.5. Severability..................................... 18
SECTION 7.6. Successors, Assigns, Transferees................. 18
SECTION 7.7. Counterparts..................................... 19
SECTION 7.8. Amendments and Waivers........................... 19
SECTION 7.9. Consent to Jurisdiction.......................... 19
EXHIBITS
Exhibit I - Form of Master Services Agreement
Exhibit II - Form of Risk Management Agreement
Exhibit III - Form of Data Center Services Agreement
Exhibit IV - Form of Tax Sharing and Tax Services Agreement
Exhibit V - Form of Employee Benefits Transfer and Assumption
Agreement
AMENDED AND RESTATED REORGANIZATION AGREEMENT
AGREEMENT dated as of September 4, 1996, as amended and
restated as of October 17, 1996, among Ingram Industries Inc., a Tennessee
corporation ("Industries"), Ingram Micro Inc., a Delaware corporation
("Micro"), and Ingram Entertainment Inc., a Tennessee corporation
("Entertainment" and, together with Industries and Micro, the "Ingram
Companies").
The parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1. Definitions. (a) The following terms, as
used herein, have the following meanings:
"Affiliate" means, with respect to any Person, any other
Person directly or indirectly controlling, controlled by, or under common
control with such other Person; provided that for purposes of this
Agreement no Ingram Company shall be deemed an Affiliate of any other
Ingram Company. For purposes of this definition, the term "control", when
used with respect to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management
and policies of such Person, whether through ownership of voting
securities, by contract or otherwise, and the terms "controlling",
"controlled by" and "under common control with" have meanings correlative
to the foregoing.
"Ancillary Agreements" means (i) the Master Services Agreement
substantially in the form attached as Exhibit I hereto, (ii) the Risk
Management Agreement substantially in the form attached as Exhibit II
hereto, (iii) the Data Center Services Agreement substantially in the form
attached as Exhibit III hereto, (iv) the Tax Sharing and Tax Services
Agreement substantially in the form attached as Exhibit IV hereto and (v)
the Employee Benefits Transfer and Assumption Agreement substantially in
the form attached as Exhibit V hereto. [Names of these Agreements will be
changed to reflect amendments and restatements thereof, if necessary.]
"Carrying Cost" means, with respect to any investment, the
carrying cost of such investment from the date specified in Article 3 with
respect to such investment to the date of disposition of such investment,
calculated by Industries on the basis of the average borrowing rate of
Industries during such period as published from time to time by the
Industries treasury department as applied to the amount of Industries'
invested capital from time to time with respect to such investment.
"Covered Person" means (i) with respect to Micro, each
Subsidiary of Micro, (ii) with respect to Entertainment, each Subsidiary of
Entertainment and (iii) with respect to Industries, each business operating
unit of Industries and each Subsidiary of Industries (other than Micro,
Entertainment and their respective Subsidiaries); provided that "Covered
Person" shall in no event include Cactus, Magnolia or IMS.
"Effective Time" means the effective time of the First
Closing as defined in the Exchange Agreement.
"Exchange Agreement" means the Amended and Restated Exchange
Agreement dated as of September 4, 1996, as amended and restated as of
October 17, 1996, among each Ingram Company and the Persons listed on the
signature pages thereof.
"Material Adverse Effect" means, with respect to any Ingram
Company, a material adverse effect on the business, assets, condition
(financial or otherwise) or result of operations of the business of such
Ingram Company and its Subsidiaries taken as a whole.
"Person" means an individual, corporation, partnership,
association, trust, limited liability company or other entity or
organization, including a government or political subdivision or an agency
or instrumentality thereof.
"Second Closing" shall have the meaning set forth in the
Exchange Agreement.
"Subsidiary" means, with respect to Industries, Entertainment
or Micro, any entity of which securities or other ownership interests
having ordinary voting power to elect a majority of the board of directors
or other persons performing similar functions are directly or indirectly
owned by such Person immediately after the Closing.
(b) Each of the following terms is defined in the Section
set forth opposite such term:
Term Section
----- -------
Cactus 3.2
Cooper Agreement 3.2
Currently Pledged Stock 4.4
IMS 3.1
Indemnified Party 5.3
Indemnifying Party 5.3
IOBC 3.1
IPSI 3.2
Loss 5.2
Magnolia 3.1
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE PARTIES
Each party represents and warrants to each other party as of
September 4, 1996, as of October 17, 1996 and as of the Effective Time that:
SECTION 2.1. Corporate Existence and Power. Such party is
a corporation duly incorporated, validly existing and in good standing
under the laws of the jurisdiction of its incorporation, and has all
corporate powers and all governmental licenses, authorizations, permits,
consents and approvals required to carry on its business as now conducted,
except where the failure to have such governmental licenses,
authorizations, permits, consents and approvals does not have a Material
Adverse Effect or would not prevent such party from performing any of its
obligations hereunder or under the Ancillary Agreements.
SECTION 2.2. Corporate Authorization. The execution,
delivery and performance by such party of this Agreement and each of the
Ancillary Agreements to which such party is a party are within its
corporate powers and have been duly authorized by all necessary corporate
and stockholder action on its part. This Agreement constitutes, and when
executed and delivered, each of the Ancillary Agreements to which such
party is a party will constitute, a valid and binding agreement of such
party.
SECTION 2.3. Governmental Authorization. The execution,
delivery and performance by such party of this Agreement and each of the
Ancillary Agreements to which such party is a party require no action by or
in respect of, or filing with, any governmental body, agency or official
other than (i) compliance with any applicable requirements of the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
and regulations promulgated thereunder and (ii) such other matters where
the failure to take such action or make such filing would not have a
Material Adverse Effect or prevent such party from performing any of its
obligations hereunder or the Ancillary Agreements.
SECTION 2.4. Non-Contravention. The execution, delivery
and performance by such party of this Agreement and each of the Ancillary
Agreements to which such party is a party do not (i) violate the
certificate of incorporation or bylaws of such party, (ii) assuming
compliance with the matters referred to in Section 2.3, violate any
applicable law, rule, regulation, judgment, injunction, order or decree,
(iii) constitute a default under or give rise to any right of termination,
cancellation or acceleration of any right or obligation of any party or to
a loss of any benefit relating to the business of such party to which any
party is entitled under any permit or license or any provision of any
agreement, contract or other instrument binding upon any party or by which
any of the assets of such party is or may be bound or (iv) result in the
creation or imposition of any lien on any asset of such party, except, in
the case of clauses (ii) through (iv), as would not, individually or in the
aggregate, have a Material Adverse Effect or prevent such party from
performing in any material respect any of its obligations hereunder or
under the Ancillary Agreements.
ARTICLE 3
CERTAIN LIABILITIES; CERTAIN ASSETS
SECTION 3.1. Assumed Liabilities. (a) Upon the terms and
subject to the conditions of this Agreement and except as otherwise
provided in the Ancillary Agreements, each party agrees, at the Effective
Time, to assume, or remain liable for, as the case may be, and shall
thereafter pay, perform and discharge, the following liabilities and
obligations:
(i) liabilities and obligations incurred by such party (in
the case of Micro and Entertainment) and its Covered Persons, or by
any Covered Person of such party (in the case of Industries), with
respect to periods ending on or prior to the Effective Time, other
than liabilities and obligations arising directly or indirectly as a
result of (1) any intentional act which is tortious or (2) any
illegal act, in either case committed by (x) a corporate officer of
Industries (except for actions that are believed by such person to
be in furtherance of his duties as an officer or employee of Micro,
Entertainment, any of their respective Covered Persons or a Covered
Person of Industries), (y) any other employee of Industries whose
responsibilities are not primarily associated with Micro,
Entertainment, any of their respective Covered Persons or a Covered
Person of Industries, or (z) any other employee or agent of another
party;
(ii) liabilities and obligations incurred by any other party
(if such other party is Micro or Entertainment) and its Covered
Persons, or by any Covered Person of any other party (if such other
party is Industries), with respect to periods ending on or prior to
the Effective Time arising directly or indirectly as a result of (x)
any intentional act which is tortious or (y) any illegal act, in
either case committed by an employee or agent of such party or its
Covered Persons (in the case of Micro or Entertainment) or by a
Covered Person of such party (in the case of Industries);
(iii) in the case of Industries and subject to Section
3.1(b)(ii), general corporate level liabilities and obligations
recorded under Industries' internal accounting system as "home
office" liabilities up to an aggregate amount of $100,000 incurred by
Industries with respect to periods ending on or prior to the
Effective Time, to the extent that such liabilities and obligations
(x) are not attributable to Micro, Entertainment, any of their
respective Covered Persons or any Covered Person of Industries, (y)
have not been reserved for on the December 31, 1995 balance sheet of
any Ingram Company and (z) are extraordinary and non-recurring in
nature and arise other than in the ordinary course of business;
(iv) in the case of Micro, in the event that the net proceeds
from a disposition by Industries of its investment in common stock
of Stream, Inc. are less than $500,580, liabilities and
obligations in an amount equal to the sum of (x) such shortfall
and (y) the Carrying Cost of such investment from and after
December 31, 1995.
(v) in the case of Industries, (x) the first $4,500,000 of
liabilities and obligations payable in connection with the
settlement following December 31, 1995 of Bluewater Insurance,
Ltd. claims arising under the treaties listed on Schedule
3.1(a)(v) and (y) liabilities and obligations payable in
connection with the settlement following December 31, 1995 of such
Bluewater Insurance, Ltd. claims in excess of the second
$4,500,000 of such liabilities and obligations; and
(vi) liabilities and obligations incurred by such party and
its Covered Persons with respect to periods beginning after the
Effective Time.
(b) Upon the terms and subject to the conditions of this
Agreement, each of Industries, Micro and Entertainment agrees, at the
Effective Time, to assume (or retain, as the case may be) 23.01%, 72.84%
and 4.15%, respectively, of the following liabilities and obligations:
(i) liabilities and obligations incurred by any party or any
of its Covered Persons with respect to periods ending on or prior
to the Effective Time arising directly or indirectly as a result
of (x) any intentional act which is tortious or (y) any illegal
act, in either case committed by a corporate officer of Industries
(except for actions that are believed by such person to be in
furtherance of his duties as an officer or employee of Micro,
Entertainment, any of their respective Covered Persons or a
Covered Person of Industries), or any other employee of Industries
whose responsibilities are not primarily associated with Micro,
Entertainment, any of their respective Covered Persons or a
Covered Person of Industries;
(ii) general corporate level liabilities and obligations
recorded under Industries' internal accounting system as "home
office" liabilities in excess of an aggregate amount of $100,000
incurred by Industries with respect to periods ending on or prior
to the Effective Time to the extent that such liabilities and
obligations (x) are not attributable to Micro, Entertainment, any
of their respective Covered Persons or any Covered Person of
Industries, (y) have not been reserved for on the December 31,
1995 balance sheet of any Ingram Company and (z) are extraordinary
and non-recurring in nature and arise other than in the ordinary
course of business (in which case, all of such liabilities and
obligations in excess of $1.00 shall be assumed or retained
pursuant to this Section 3.1(b)(ii) and Industries shall be
reimbursed for any excess amounts paid in respect of such
liabilities and obligations pursuant to Section 3.1(a)(iii));
(iii) (x) liabilities and obligations, to the extent
accrued on December 31, 1995 (and not otherwise included in
amounts to be allocated to the parties hereto pursuant to the
provisions of Section 6.5 or Section 7.12 of the Exchange
Agreement), incurred by Industries under the Ingram Industries
Inc. Supplemental Executive Retirement Plan and the Ingram
Supplemental Thrift Plan in respect of E. Bronson Ingram, Neil N.
Diehl, Linwood A. Lacy, Jr., John M. Donnelly, David F.
Sampsell and Philip M. Pfeffer and (y) liabilities and
obligations incurred by Industries in an amount equal to (A) the
aggregate purchase price paid by Industries for up to 135,000
shares of common stock of Micro purchased by Industries in the
initial public offering of Micro common stock, plus (B) if
Industries does not purchase 135,000 shares of Micro common stock
in such initial public offering, the product of (1) 135,000, less
the number of shares actually purchased in such initial public
offering, and (2) the price of one share of Micro common stock
sold in such initial public offering;
(iv) liabilities and obligations incurred by Industries in
an amount equal to the loss recognized in connection with the
disposition and winding up of the business by Industries of Ingram
Merchandising Services Inc. ("IMS") to the extent that such loss
causes the equity of IMS as reported on a stand alone basis to be
less than $8,956,000;
(v) liabilities and obligations incurred by Industries in
an amount equal to the sum of (x) the loss recognized in
connection with the disposition by Industries of its partnership
interest in Magnolia Coal Terminal ("Magnolia") or a disposition
by Magnolia of all or substantially all of its assets (which loss
shall be calculated after taking into account (A) expenses
incurred, and indemnification payments received, after December
31, 1995 in connection with environmental matters relating to such
investment, (B) distributions received after December 31, 1995 in
respect of such investment and (C) contributions made after
December 31, 1995 with respect to such investment) and (y) the
Carrying Cost of such investment from and after December 31, 1995;
(vi) liabilities and obligations up to an aggregate amount
of $4,500,000 payable in connection with the settlement following
December 31, 1995 of Bluewater Insurance, Ltd. claims arising
under the treaties set forth on Schedule 3.1(a)(v), in excess of
the first $4,500,000 of such liabilities and obligations; and
(vii) liabilities and obligations up to an aggregate amount
of $2,500,000 incurred by Industries or Ingram Ohio Barge Co.
("IOBC") pursuant to the guarantees by Industries and IOBC of the
obligations of IOBC under the 1974 charter agreement with Mellon
Bank, as Owner Trustee, and the 1975 charter agreement with Fleet
National Bank of Connecticut (formerly U.S. Trust), as such
guarantees may be amended, modified or supplemented from time to
time.
(c) Notwithstanding anything herein to the contrary, each
party hereto agrees that, following the Effective Time and prior to the
Second Closing, Industries and Entertainment will be liable on a joint and
several basis for the obligations of Industries and Entertainment under
Section 3.1(a) and 3.1(b).
(d) Without limiting the generality of the last sentence of
Section 7.6, nothing in this Agreement shall be deemed to give rise to, or
accelerate the performance of, any obligation of any party owing to a Person
other than a party to this Agreement.
SECTION 3.2. Certain Contingent Assets.
Upon the terms and subject to the conditions of this Agreement, the parties
hereto agree that each of the following assets shall be allocated 23.01% to
Industries, 72.84% to Micro and 4.15% to Entertainment:
(i) the amount by which the gain recognized in connection
with the disposition by Industries of its partnership interest in
Magnolia or a disposition by Magnolia of all or substantially all of
its assets (which gain shall be calculated after taking into account
(x) expenses incurred, and indemnification payments received, after
December 31, 1995 in connection with environmental matters relating
to such investment, (y) distributions received after December 31,
1995 in connection with such investment and (z) contributions made
after December 31, 1995 with respect to its investment in Magnolia)
exceeds the Carrying Cost of such investment from and after December
31, 1995;
(ii) the amount by which the proceeds recognized by
Industries in connection with the disposition by Industries of its
investment in common stock of Stream, Inc. as of December 31, 1995
exceed the sum of (x) $500,580 plus (y) the Carrying Cost of such
investment from and after December 31, 1995; and
(iii) the amount of net cash flow distributed to Industries
resulting from the sale and liquidation of the ownership interest
of Ingram Petroleum Service Inc. ("IPSI") in Ingram Cactus
Company ("Cactus") (net of applicable income taxes and after
liquidation of assets and liabilities of IPSI inclusive of the
cost of liquidating the Cactus subsidiaries), minus the book value
(net equity of IPSI calculated in accordance with generally
accepted accounting principles at December 31, 1995), minus the
Carrying Cost of Industries' equity investment in IPSI from and
after December 31, 1995. It is understood and agreed by the
parties that (1) an initial allocation of the net amount referred
to in this clause (iii) shall be made among the parties 30 days
after final determination of the working capital adjustment as
provided for in Section 1.11 (a) of the Purchase Agreement (the
"Cooper Agreement") with Cooper Cameron dated March 28, 1996,
which shall provide for Cactus' remaining unliquidated liabilities
and (2) a final allocation among the parties shall be made at such
time thereafter as all significant liabilities have been resolved
or the parties have mutually agreed on final provisions for all
significant unresolved liabilities; provided that the parties
shall use all reasonable efforts to cause such liabilities to be
resolved no later than 24 months after consummation of the
transactions contemplated by the Cooper Agreement.
SECTION 3.3. Certain Adjustments.
(a) Notwithstanding anything herein to the contrary, the
parties agree that, in consideration of distributions to Industries
previously made by Micro and Entertainment, no amounts shall be allocated
to, and no liabilities or obligations shall be assumed or borne by, Micro
or Entertainment pursuant to Section 6.5(a) or Section 7.12 of the Exchange
Agreement or pursuant to Article 3 of this Agreement, until the aggregate
of such amounts, costs, expenses, liabilities and obligations shall exceed
$20,778,000, in the case of Micro, or $1,160,000, in the case of
Entertainment, in which event such allocation or assumption shall be made
only to the extent of such excess. To the extent that the aggregate of
such costs, expenses, liabilities and obligations is less than $20,778,000
in the case of Micro, or $1,160,000 in the case of Entertainment,
Industries shall make a payment in the amount of such difference to Micro
or Entertainment, as the case may be.
(b) Notwithstanding anything herein to the contrary, the
amount of any gain or loss to be allocated among the Ingram Companies
pursuant to this Article 3 shall be determined after taking into account
the actual tax consequences of the recognition of such gain or loss to the
party recognizing such gain or loss (which consequences shall include, in
the case of any such gain, the amount of any tax imposed thereon and, in
the case of any such loss, any deduction to which such party becomes
entitled as a result thereof).
ARTICLE 4
GENERAL COVENANTS
Each party hereto agrees that:
SECTION 4.1. Conduct of the Business. From September 4,
1996 until the Second Closing (or, with respect to Micro, until the
Effective Time), such party shall conduct its business in the ordinary
course consistent with past practice and the published policies and
procedures of the Ingram Companies and use its best efforts to preserve
intact the business organizations and relationships with third parties and
keep available the services of the present employees of its business.
Without limiting the generality of the foregoing, from September 4, 1996
until the Second Closing (or, with respect to Micro, until the Effective
Time) and except in connection with the transactions contemplated hereby or
by the Ancillary Agreements (or, with respect to actions taken prior to the
Effective Time, as otherwise approved by the board of directors of
Industries), such party will not:
(a) enter into any lease, contract, agreement, commitment,
arrangement or transaction, other than in the ordinary course of business
consistent with past practice;
(b) sell, lease, license or otherwise dispose of any assets
except (i) pursuant to existing contracts or commitments or (ii) in the
ordinary course of business consistent with past practice;
(c) modify, amend, cancel, terminate, forfeit, assign or
encumber in any material manner, other than in the ordinary course of
business consistent with past practice, any existing material franchise,
license, permit, consent, authority, operating right, lease, contract,
agreement, commitment or arrangement;
(d) incur, assume or guarantee any indebtedness for borrowed
money other than in the ordinary course of business consistent with past
practice;
(e) declare, set aside or pay any dividend or other
distribution with respect to any shares of capital stock, or issue,
repurchase, redeem or otherwise acquire any outstanding shares of capital
stock or other ownership interests, other than in the ordinary course of
business consistent with past practice;
(f) amend any material term of any outstanding security;
(g) create or assume any lien on any material asset other
than in the ordinary course of business consistent with past practice;
(h) make any loan, advance or capital contribution to or
investment in any Person other than loans, advances or capital contributions
to or investments in wholly-owned subsidiaries or employees or as otherwise
made in the ordinary course of business consistent with past practice;
(i) (A) grant any severance or termination pay to any
director or officer, (B) enter into any individual employment, deferred
compensation or other similar agreement (or any amendment to any such
existing agreement) with any director, officer or employee, (C) change
benefits payable under existing severance or termination pay policies or
employment agreements or (D) change compensation, bonus or other benefits
payable to directors, officers or employees, other than, in the case of
each of clauses (A) through (D) above, in the ordinary course of business
consistent with past practice; or
(j) agree or commit to do any of the foregoing.
SECTION 4.2. Access; Confidentiality. (a) Each party
will, at and after the Effective Time, afford to each other party and its
agents reasonable access to its properties, books, records, employees and
auditors to the extent necessary to permit such other party to determine
any matter relating to its rights and obligations hereunder or to any
period ending at or before the Effective Time. Each of Industries and
Entertainment will, at and after the Second Closing, afford to the other
and its agents reasonable access to its properties, books, records,
employees and auditors to the extent necessary to permit such other party
to determine any matter relating to its rights and obligations hereunder or
to any period ending at or before the Second Closing.
(b) After the Effective Time, each party will hold, and will
use its best efforts to cause its respective officers, directors,
employees, accountants, counsel, consultants, advisors, agents and
Affiliates to hold, in confidence, unless compelled to disclose by judicial
or administrative process or by other requirements of law, all confidential
documents and information concerning the business of the other parties,
except (i) to the extent that such information can be shown to have been
(A) in the public domain through no fault of such party or (B) later
lawfully acquired by such party on a non-confidential basis or (ii) to the
extent that such documents and information are required to be furnished to
the lenders of such party in connection with guarantees of indebtedness
owing to such lenders that are furnished by such other parties. The
obligation of such party and its Affiliates to hold any such information in
confidence shall be satisfied if they exercise the same care with respect
to such information as they would take to preserve the confidentiality of
their own similar information.
SECTION 4.3. Best Efforts; Further Assurances. Subject to
the terms and conditions of this Agreement, the parties hereto will use their
best efforts (but without the payment of money) to take, or cause to be taken,
all actions and to do, or cause to be done, all things necessary or desirable
under applicable laws and regulations to consummate the transactions
contemplated by this Agreement and the Ancillary Agreements. Each party
agrees to execute and deliver such other documents, certificates, agreements
and other writings and to take such other actions as may be reasonably
necessary or desirable in order to consummate or implement expeditiously the
transactions contemplated by this Agreement and the Ancillary Agreements.
SECTION 4.4. Loans; Repurchase Agreements. (a) Loans
that have been made by Industries to certain employees of Micro and
Entertainment shall be transferred by Industries as of the Effective Time to
Micro (with respect to employees of Micro) and to Entertainment (with respect
to employees of Entertainment), in each case in consideration for the
principal balance (plus accrued interest) of each such loan. Loans that have
been made after the Effective Time by Industries to certain employees of
Entertainment shall be transferred by Industries as of the Second Closing to
Entertainment, in consideration for the principal balance (plus accrued
interest) of each such loan.
(b) At or prior to the Effective Time, Micro shall enter into
bank repurchase agreements effective as of the Effective Time with respect to
the Micro securities to be received pursuant to the Exchange Agreement in
exchange for shares of Industries Common Stock (the "Currently Pledged Stock")
currently pledged as collateral for loans made by First American National
Bank, NationsBank, N.A. or NationsBank of Tennessee, N.A. to certain
stockholders of Industries. At or prior to the Second Closing, Entertainment
shall enter into bank repurchase agreements effective as of the Second Closing
with respect to the Entertainment securities to be received pursuant to the
Exchange Agreement in exchange for shares of Currently Pledged Stock. Such
repurchase agreements shall be in form and substance satisfactory to Micro or
Entertainment, as the case may be, it being understood that such repurchase
agreements shall be similar to Industries' current bank repurchase agreements.
Industries shall be released from its obligations under Industries' current
bank repurchase agreements with respect to the Currently Pledged Stock
exchanged in the Exchange. Such release shall be effective at the Effective
Time (with respect to shares of Currently Pledged Stock exchanged pursuant to
the Exchange Agreement at the Effective Time) and at the Second Closing (with
respect to shares of Currently Pledged Stock exchanged pursuant to the
Exchange Agreement at the Second Closing).
SECTION 4.5. Cross-Guarantees. Each of Industries and
Entertainment hereby agrees, upon the request of Micro, to guarantee, for
the fees and on the other terms and conditions set forth on Schedule 4.5,
(i) indebtedness incurred by Micro pursuant to credit facilities of Micro
entered into at or prior to the Effective Time or pursuant to any
replacements, refinancings or renewals thereof which do not increase the
aggregate amount of the indebtedness guaranteed and are on terms
substantially the same as the prior facilities or otherwise reasonably
acceptable to Industries and Entertainment, (ii) indebtedness incurred by
Micro the proceeds of which are used by Micro to repay indebtedness owing
to Industries, Entertainment or their respective Subsidiaries and (iii)
amounts payable by Micro under the Master Lease dated as of December 20,
1995 by and between Lease Plan North America, Inc. and Ingram Micro L.P.
Commencing at the Effective Time, Micro shall reimburse Entertainment or
Industries, as the case may be, for the difference between (x) the actual
cost of indebtedness incurred by Entertainment or Industries in connection
with any type of financing transaction (up to an amount of such financing
equal to the amount of indebtedness guaranteed by Entertainment or
Industries, as the case may be), and the amount which such portion of such
financing would have cost had all such guarantees been released at such
time and (y) any increased cost of existing indebtedness of Industries or
Entertainment arising as a result of the failure to have all guarantees
released at such time. Each of Entertainment and Industries agrees to give
Micro 75 days prior written notice of the incurrence by it of any
indebtedness (other than indebtedness incurred pursuant to facilities
entered into as of the Effective Time) subject to reimbursement as
described above. Such written notice shall set forth the proposed amount
of such indebtedness and shall specify the material terms and conditions of
such indebtedness being proposed at such time, to the extent known by
Entertainment or Industries at the time of such notice. Fees payable to
Industries and Entertainment pursuant to Schedule 4.5 for any month shall
be allocated between them in accordance with their relative book values as
of the end of the prior month.
SECTION 4.6. Public Announcements. The parties agree to
consult with each other before issuing any press release or making any public
statement with respect to this Agreement, the Ancillary Agreements or the
consummation of the transactions contemplated hereby and thereby and, except
as may be required by applicable law or any listing agreement with any
national securities exchange, will not issue any such press release or make
any such public statement without the prior written consent of all of the
parties hereto, which will not unreasonably be withheld.
SECTION 4.7. Notices of Certain Events. Each party hereto
shall promptly notify each other party of:
(i) any notice or other communication from any Person
alleging that the consent of such Person is or may be required in
connection with the transactions contemplated by this Agreement;
(ii) any notice or other communication from any governmental
or regulatory agency or authority in connection with the transactions
contemplated by this Agreement;
(iii) any actions, suits, claims, investigations or proceedings
commenced or, to its knowledge threatened, against, relating to or
involving or otherwise affecting such party challenging this
Agreement or any Ancillary Agreement or the transactions contemplated
hereby or thereby or seeking to prohibit, alter, prevent or
materially delay the Effective Time; and
(iv) any materially adverse developments affecting the
business and operations of such party which become known to it,
including without limitation any change which has had or is
reasonably likely to have a Material Adverse Effect on such party.
ARTICLE 5
SURVIVAL; INDEMNIFICATION
SECTION 5.1. Survival. The representations and warranties
of the parties hereto contained in this Agreement or in any certificate or
other writing delivered pursuant hereto or in connection herewith shall not
survive the Effective Time. The covenants and agreements to be performed
hereunder shall remain in full force and effect in accordance with their
terms (or, if no survival period is specified, indefinitely).
Notwithstanding the preceding sentence, any covenant or agreement in
respect of which indemnity may be sought under this Agreement shall survive
the time at which it would otherwise terminate pursuant to the preceding
sentence, if notice of the breach thereof giving rise to such right to
indemnity shall have been given to the party against whom such indemnity
may be sought prior to such time.
SECTION 5.2. Indemnification. Each party hereby
indemnifies each other party and its Affiliates against and agrees to hold
each of them harmless from any and all damage, loss, liability and expense
(including without limitation reasonable expenses of investigation and
reasonable attorneys' fees and expenses in connection with any action, suit
or proceeding, including any expenses incurred in connection with the
enforcement of rights of any party pursuant to this Agreement)
(collectively, "Loss") incurred or suffered by such other party or any of
its Affiliates arising out of:
(i) any breach of any covenant or agreement to be performed
by such party pursuant to this Agreement; and
(ii) the failure of such party to perform its obligations with
respect to any liability assumed (or retained) by such party pursuant
to Section 3.1.
SECTION 5.3. Procedures. (a) The party seeking
indemnification under Section 5.2 (the "Indemnified Party") shall give prompt
written notice to the party against whom indemnity is sought (the
"Indemnifying Party") of any claim, assertion, event or proceeding of which
such Indemnified Party has knowledge concerning any Loss as to which such
Indemnified Party may request indemnification under such Section; provided
that the failure to give such notice shall not relieve the Indemnifying Party
from any liability under Section 5.2, except to the extent that the
Indemnifying Party has been prejudiced by such failure.
(b) With respect to any such claim or proceeding by or in
respect of a third party, the Indemnifying Party shall have the right to
direct, through counsel of its own choosing, reasonably satisfactory to the
Indemnified Party, the defense or settlement thereof at its own expense. If
the Indemnifying Party elects to assume the defense of any such claim or
proceeding, the Indemnifying Party thereby waives its right to contest its
obligation to indemnify the Indemnified Party pursuant to this Section with
respect to such claim or proceeding and the Indemnified Party may participate
in such defense, but in such case the expenses of the Indemnified Party shall
be paid by the Indemnified Party. The Indemnified Party shall provide the
Indemnifying Party with reasonable access to its records and personnel
relating to any such claim, assertion, event or proceeding during normal
business hours and shall otherwise cooperate with the Indemnifying Party in
the defense or settlement thereof, and the Indemnifying Party shall reimburse
the Indemnified Party for all of its reasonable out-of-pocket expenses in
connection therewith. Upon assumption of the defense of any such claim or
proceeding by the Indemnifying Party, the Indemnified Party shall not pay, or
permit to be paid, any part of any claim or demand arising from such asserted
liability for so long as the Indemnifying Party is diligently defending such
claim or demand, unless the Indemnifying Party consents in writing to such
payment or unless a final judgment from which no appeal may be taken is
entered against the Indemnified Party for such liability. If the Indemnifying
Party shall fail to assume and pursue the defense, the Indemnified Party shall
have the right to undertake the defense or settlement thereof at the
Indemnifying Party's expense (subject to the liability of the Indemnifying
Party pursuant to Section 5.2). No third party claim may be settled by the
Indemnified Party without the written consent of the Indemnifying Party, which
consent shall not be unreasonably withheld. Any such settlement shall include
as an unconditional term thereof the giving by the claimant or the plaintiff
to the Indemnified Party of a release of the Indemnified Party from all
liability in respect of such claim; provided that if the Indemnifying Party
submits to the Indemnified Party a bona fide settlement offer from the third
party claimant of any claim (which settlement offer shall include as an
unconditional term of it the release by the claimant or the plaintiff to the
Indemnified Party from all liability in respect of such claim) and the
Indemnified Party refuses to consent to such settlement, then thereafter the
Indemnifying Party's liability to the Indemnified Party for indemnification
with respect to such claim shall not exceed the settlement amount included in
said bona fide settlement offer, and the Indemnified Party shall either assume
the defense of such claim or pay the Indemnifying Party's attorney's fees and
other out-of-pocket costs incurred thereafter in continuing the defense of
such claim.
(c) Each payment made pursuant to Section 5.2 of an amount
equal to $1,000,000 or more shall be made promptly following final
determination of such claim and each such payment of an amount of less than
$1,000,000 shall be made no later than the end of the calendar quarter next
following the date on which the amount of such claim was finally determined.
Any such payment shall be limited to the amount of any liability or damage
that remains after deducting therefrom any indemnity, contribution or other
similar payment recoverable by the Indemnified Party from any third party with
respect thereto.
ARTICLE 6
TERMINATION
SECTION 6.1. Grounds for Termination. This Agreement shall
terminate in its entirety upon the termination of the Exchange Agreement
pursuant to Section 7.6(a) of the Exchange Agreement. Section 4.1 of this
Agreement shall terminate upon the termination of the Exchange Agreement
pursuant to Section 7.6(b) of the Exchange Agreement.
SECTION 6.2. Effect of Termination. If this Agreement is
terminated as permitted by Section 6.1, such termination shall be without
liability of any party (or any stockholder, director, officer, employee,
agent, member, consultant or representative of such party) to the other
parties to this Agreement.
ARTICLE 7
MISCELLANEOUS
SECTION 7.1. Headings. The headings in this Agreement are
for convenience of reference only and shall not control or affect the
meaning or construction of any provision hereof.
SECTION 7.2. Entire Agreement. This Agreement, the
Ancillary Agreements, the Exchange Agreement, the Related Agreements (as
defined in the Exchange Agreement) and the Board Representation Agreement
(as defined in the Exchange Agreement) constitute the entire agreement and
understanding of the parties hereto in respect of the subject matter
contained herein and therein. This Agreement and such other agreements
supersede all prior agreements and understandings between the parties
hereto with respect to the subject matter hereof and thereof.
SECTION 7.3. Notices. Any notice, request, instruction or
other document to be given hereunder by any party hereto to another party
hereto shall be in writing (including telecopier or similar writing) and
shall be given to such party at its address set forth on the signature
pages hereof, or to such other address as the party to whom notice is to be
given may provide in a written notice to the party giving such notice, a
copy of which written notice shall be on file with the Secretary of
Industries. If notice is given pursuant to this Section of a permitted
successor or assign of a party to this Agreement, then notice shall
thereafter be given as set forth above to such successor or assign of such
party to this Agreement. Each such notice, request or other communication
shall be effective (i) if given by telecopy, when such telecopy is
transmitted to the telecopy number specified on the signature pages hereof
and electronic or oral confirmation of receipt is received, (ii) if given
by mail, at the close of business on the third business day hours after
such communication is deposited in the mails with first class postage
prepaid addressed as aforesaid or (iii) if given by any other means, when
delivered at the address specified in this Section 7.3.
SECTION 7.4. Applicable Law. This Agreement shall be
governed by and construed in accordance with the laws of the State of
Tennessee without regard to the conflicts of law rules of such state.
SECTION 7.5. Severability. The invalidity or
unenforceability of any provision of this Agreement in any jurisdiction
shall not affect the validity, legality or enforceability of the remainder
of this Agreement in such jurisdiction or the validity, legality or
enforceability of this Agreement, including any such provision, in any
other jurisdiction, it being intended that all rights and obligations of
the parties hereunder shall be enforceable to the fullest extent permitted
by law.
SECTION 7.6. Successors, Assigns, Transferees. No party
may assign or otherwise transfer any of its rights under this Agreement
without the consent of each other party. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and
their respective heirs, successors and permitted assigns. Neither this
Agreement nor any provision hereof shall be construed so as to confer any
right or benefit upon any Person other than the parties to this Agreement,
those who agree to be bound hereby and their respective successors and
permitted assigns.
SECTION 7.7. Counterparts. This Agreement may be executed
in any number of counterparts, each of which shall be an original with the
same effect as if the signatures thereto and hereto were upon the same
instrument.
SECTION 7.8. Amendments and Waivers. (a) Any provision of
this Agreement may be amended or waived if, but only if, such amendment or
waiver is in writing and is signed, in the case of an amendment, by each
party to this Agreement, or in the case of a waiver, by the party against
whom the waiver is to be effective.
(b) No failure or delay by any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege.
SECTION 7.9. Consent to Jurisdiction. Each party hereto
irrevocably submits to the non-exclusive jurisdiction of any Tennessee
State Court or United States Federal Court sitting in the Middle District
of Tennessee over any suit, action or proceeding arising out of or relating
to this Agreement. Each party hereto waives any right it may have to
assert the doctrine of forum non conveniens or to object to venue to the
extent any proceeding is brought in accordance with this Section 7.9.
Nothing in this paragraph shall affect or limit any right to serve process
in any manner permitted by law, to bring proceedings in the courts of any
jurisdiction or to enforce in any lawful manner a judgment obtained in one
jurisdiction in any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of
the day and year first above written.
INGRAM INDUSTRIES INC.
By: /s/ John R. Ingram
----------------------------
Name: John R. Ingram
Title: Co-President
One Belle Meade Place
4400 Harding Road
Nashville, TN 37205
Telecopy: (615) 298-8242
INGRAM MICRO INC.
By: /s/ Jeffrey R. Rodek
----------------------------
Name: Jeffrey R. Rodek
Title: President
1600 East Saint Andrew Place
Santa Ana, CA 92705
Telecopy: 714-566-7900
INGRAM ENTERTAINMENT INC.
By: /s/ David B. Ingram
----------------------------
Name: David B. Ingram
Title: Chairman & President
Two Ingram Blvd.
La Vergne, TN 37086
Telecopy: 615-287-4985
EXHIBIT 10.14
REGISTRATION RIGHTS AGREEMENT
AGREEMENT dated as of November 6, 1996 among Ingram Micro Inc.,
a Delaware corporation ("MICRO"), and the Persons listed on the signature
pages hereof.
In connection with the closing of the transactions contemplated by
the Restated Exchange Agreement (the "EXCHANGE AGREEMENT") dated as of
September 4, 1996 as amended and restated as of October 17, 1996, among
Ingram Industries Inc. ("INDUSTRIES"), Ingram Entertainment Inc.
("ENTERTAINMENT"), Micro and the Persons listed on the signature pages
thereof, the parties hereto (other than Micro) acquired shares of common
stock of Micro; and
WHEREAS, Micro has agreed to grant the other parties hereto
certain rights to register such shares of common stock as provided herein;
NOW, THEREFORE, in consideration of the mutual promises set forth
below (the mutuality, adequacy and sufficiency of which are hereby
acknowledged), the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. (a) The following terms, as used herein,
have the following meanings:
"AFFILIATE" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control with,
such Person. For the purposes of this definition, "control" when used with
respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"BUSINESS DAY" means any day except a Saturday, Sunday or any other day
on which commercial banks in the City of New York are authorized by law to
close.
"COMMISSION" means the Securities and Exchange Commission.
<PAGE>
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FAMILY STOCKHOLDER" means each of the Family Stockholders set forth on
Annex I hereto.
"GRANTEE" means each Person (other than a Holder) to whom Micro has
granted registration rights.
"HOLDERS" means each of the parties to this Agreement (other than
Micro) and any other Person, who, pursuant to the terms hereof, shall become a
party to or agree to be bound by the terms of this Agreement after the date
hereof.
"INGRAM STOCKHOLDER" means each Family Stockholder, the Qtip Trust, the
E. Bronson Ingram 1995 Charitable Remainder 5% Unitrust, the Martha and Bronson
Ingram Foundation, the E. Bronson Ingram 1994 Charitable Lead Annuity Trust and
the Permitted Transferees of each of such Persons.
"MICRO CLASS A COMMON STOCK" means the Class A Common Stock, par value
$0.01 per share, of Micro.
"PERMITTED TRANSFEREE" means, (A) with respect to any Ingram
Stockholder, (i) any Affiliate of such Ingram Stockholder, (ii) the spouse or
descendants (including adopted Persons and their descendants) of such Ingram
Stockholder, their estates, or trusts for the benefit of such Ingram
Stockholder, Affiliate, spouse or descendants or (iii) any other Holder, (B)
with respect to the Ingram Thrift Plan, (i) any Participant (as defined in the
Employee Benefits Transfer, Assumption and Services Agreement of even date
herewith among Industries, Micro and Entertainment (the "BENEFITS TRANSFER
AGREEMENT")) or (ii) the Micro Thrift Plan or the Entertainment Thrift Plan
(each as defined in the Benefits Transfer Agreement) in connection with any
Transfer of Micro common stock to the Micro Thrift Plan or Entertainment Thrift
Plan, respectively, pursuant to Section 3.01 of the Benefits Transfer Agreement
and (C) with respect to any other Holder, the spouse or descendants (including
adopted Persons and their descendants) of such Holder, their estates, or trusts
or other entities solely for the benefit of such Holder, spouse or descendants;
provided that each such transferee shall have executed and delivered to Micro an
instrument substantially in the form of Exhibit A hereto pursuant to which the
transferee shall have agreed to be bound by the terms of this Agreement.
"PERSON" means an individual, corporation, partnership, limited
liability company, trust, association or any other entity or organization.
"PUBLIC OFFERING" means any public offering of equity securities of
Micro pursuant to an effective registration statement under the Securities Act
other than
B-2
<PAGE>
pursuant to a registration statement on Form S-4 or Form S-8 or any successor or
similar form.
"QTIP TRUST" means the E. Bronson Ingram Qtip Marital Trust.
"REGISTRABLE SECURITIES" means any shares of Micro Class A Common Stock
now or hereafter acquired by the Holders or by any Permitted Transferee of any
such Holder and any shares of Micro Class A Common Stock issued with respect to
any Registrable Securities including, without limitation, by way of a stock
split or stock dividend, in connection with a recapitalization or a merger,
consolidation or other reorganization, or pursuant to a distribution; provided
that (A) such securities shall cease to be Registrable Securities if and when
(i) a registration statement with respect to the disposition of such securities
shall have become effective under the Securities Act and such securities shall
have been disposed of pursuant to such effective registration statement, (ii)
such securities shall have been sold under circumstances in which all of the
applicable conditions of Rule 144 (or any similar provisions then in force) are
met or (iii) such shares shall have ceased to be outstanding securities and (B)
in addition to clause (A) above, securities requested to be registered by
Holders (other than the Ingram Stockholders) pursuant to Section 2.02 shall
cease to be Registrable Securities if and when such securities may be sold
pursuant to Rule 144(k) or otherwise in the public market without being
registered pursuant to the Securities Act; provided further that any such shares
that have ceased to be Registrable Securities cannot thereafter become
Registrable Securities, and securities that are issued or distributed by way of
dividends in respect of such shares of Micro Class A Common Stock that have
ceased to be Registrable Securities shall not be Registrable Securities.
"REGISTRATION EXPENSES" means all (i) registration and filing fees,
(ii) fees and expenses of compliance with securities or blue sky laws (including
reasonable fees and disbursements of a qualified independent underwriter, if
any, counsel in connection therewith and the reasonable fees and disbursements
of counsel in connection with blue sky qualifications of the Registrable
Securities), (iii) printing expenses, (iv) internal expenses of Micro
(including, without limitation, all salaries and expenses of officers and
employees performing legal or accounting duties), (v) fees and disbursements of
counsel for Micro, (vi) customary fees and expenses for independent certified
public accountants retained by Micro (including the expenses of any comfort
letters or costs associated with the delivery by independent certified public
accountants of a comfort letter or comfort letters), (vii) fees and expenses of
any special experts retained by Micro in connection with such registration,
(viii) fees and expenses of listing the Registrable Securities on a securities
exchange and (ix) customary fees and disbursements (in light of the time and
effort required and the complexity of the matters addressed) of one separate
firm of attorneys (in addition to any local counsel) for the Holders (which
counsel shall be selected by the Qtip Trust, the Initiating Family Stockholders,
or Demanding Holders owning a majority of the Registrable Securities requested
to be included in such
B-3
<PAGE>
registration by all Demanding Holders (in the case of any registration requested
by the Qtip Trust, the Initiating Family Stockholders or the Demanding Holders,
respectively, pursuant to Section 2.01)), or the Holder selling securities
constituting the largest number of securities included in such registration by
any Holder (in the case of any registration pursuant to Section 2.02) and shall
be reasonably acceptable to Micro; but shall not include any underwriting fees
or discounts or commissions attributable to the sale of Registrable Securities.
"RULE 144" means Rule 144 under the Securities Act.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
<TABLE>
<CAPTION>
TERM SECTION
---- -------
<S> <C> <C>
Change of Control Date 2.01
Demanding Holders 2.01
Disadvantageous Condition 2.01
Indemnified Party 2.07
Indemnifying Party 2.07
Initiating Family Stockholders 2.01
Inspectors 2.04
Maximum Offering Size 2.01
Priority Holder 2.02
Priority Securities 2.02
Records 2.04
Section 2.01 Holders 2.01
</TABLE>
ARTICLE 2
REGISTRATION RIGHTS
SECTION 2.01. Demand Registration.
(a) Registration on Request. If following the initial Public
Offering, the Qtip Trust desires to effect the registration under the
Securities Act of outstanding Registrable Securities, the Qtip Trust may
make a written request that Micro effect the registration under the
Securities Act of all or any portion of the outstanding Registrable
Securities of the Qtip Trust and any or all of the other Ingram
Stockholders. If following the initial Public Offering, the Family
Stockholders desire to effect the registration under the Securities Act of
outstanding Registrable Securities, Family Stockholders (the "INITIATING
FAMILY STOCKHOLDERS") holding at least a majority of the outstanding
Registrable Securities held by all Family Stockholders may make a written
request that Micro effect
B-4
<PAGE>
the registration under the Securities Act of all or any portion of the
outstanding Registrable Securities of such Family Stockholders. If
following the initial Public Offering and on any date (the "CHANGE OF
CONTROL DATE") prior to the second anniversary of the date hereof, the
Ingram Stockholders transfer, in one transaction or a series of related
transactions, shares of Micro common stock and if, after giving effect to
such transfer, the Ingram Stockholders cease to own shares of Micro common
stock representing a majority of the number of votes for the election of
directors represented by all of the shares of Micro common stock
outstanding on such date, the Holders (other than the Ingram Stockholders)
of at least a majority of the outstanding Registrable Securities held by
all Holders (other than the Ingram Stockholders) prior to the Change of
Control Date (the "DEMANDING HOLDERS") may, prior to the second anniversary
of the date hereof, make a written request that Micro effect the
registration under the Securities Act of all or any portion of the
outstanding Registrable Securities of such Holders; provided that the
Demanding Holders shall not be entitled to request any such registration if
such Demanding Holders were offered the opportunity to participate in such
transfer by the Ingram Stockholders generally on the same terms and
conditions as the Ingram Stockholders. The Qtip Trust, the Initiating
Family Stockholders and the Demanding Holders are sometimes hereinafter
referred to together as the "SECTION 2.01 HOLDER". Any request for
registration made pursuant to this Section 2.01 will specify the number of
shares of Registrable Securities proposed to be sold and will also specify
the intended method of disposition thereof; provided that Micro shall not
be obligated to (x) effect any shelf registration of Registrable Securities
pursuant to Rule 415 under the Securities Act, (y) register Registrable
Securities (i) representing less than 10% of the outstanding Registrable
Securities or (ii) if the Ingram Stockholders (in the case of any
registration requested by the Qtip Trust), the Initiating Family
Stockholders (in the case of any registration requested by the Initiating
Family Stockholders) or the Demanding Holders (in the case of any
registration requested by the Demanding Holders) hold less than 10% of the
outstanding Registrable Securities, unless the underwriter determines that
the net proceeds of any registration of such Registrable Securities are
expected to be at least $25,000,000 or (z) effect any such registration
requested by the Qtip Trust or the Initiating Family Stockholders, unless
the Qtip Trust or the Initiating Family Stockholders have furnished Micro
with an opinion of counsel in form and substance reasonably satisfactory to
Micro to the effect that the requested registration and sale of Registrable
Securities will not adversely affect the tax-free nature of the
transactions contemplated by the Exchange Agreement or the Amended and
Restated Reorganization Agreement dated as of September 4, 1996 as amended
and restated as of October 17, 1996 among Industries, Entertainment and
Micro. In any such opinion counsel may rely, to the extent they may do so
in good faith, upon representations that the trustees of the Qtip Trust and
other Holders had no plan or intention of selling the Micro common stock
received in the transactions at the time the transactions were effected and
that the decision to sell such stock pursuant to exercise of the demand
registration right was based upon considerations which arose subsequent to
the transactions. Micro will promptly give written notice of such
requested registration to all other Holders and each Grantee, and,
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subject to Section 2.01(f) hereof, thereupon will use its best efforts to
effect, as promptly as practicable, the registration under the Securities Act
of:
(i) the Registrable Securities which Micro has been so
requested to register by the Section 2.01 Holder; and
(ii) all other Registrable Securities which Micro has been
requested to register by any other Holder pursuant to Section 2.02, by
written request received by Micro within ten Business Days after the
giving of such written notice by Micro, and all other securities which
Micro has been requested to register pursuant to an agreement entered
into with a Grantee;
all to the extent necessary to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registrable Securities so to be
registered; provided that:
(X) Micro shall not be obligated to file a registration
statement relating to a registration request made by the Qtip Trust
pursuant to this Section 2.01 more than once during any 12-month period
or sooner than three months following the effective date of a Public
Offering in which the Qtip Trust and the other Ingram Stockholders were
entitled to include Registrable Securities, unless the number of
Registrable Securities requested to be included in such Public Offering
by the Qtip Trust and the other Ingram Stockholders was in excess of
125% of the number of such Registrable Securities actually included;
(Y) Except as otherwise specifically provided herein, Micro
shall in no event be obligated to effect more than three registrations
requested by the Qtip Trust pursuant to this Section 2.01, more than
one registration requested by the Initiating Family Stockholders
pursuant to this Section 2.01, or more than one registration requested
by the Demanding Holders pursuant to this Section 2.01. Except as
otherwise specifically provided herein, none of such regististrations
may be requested after the expiration of 84 months following the
initial Public Offering;
(Z) with respect to any registration statement filed or to be
filed pursuant to this Section 2.01, if the Board of Directors of Micro
shall determine, in its good faith judgment, that to maintain the
effectiveness of such registration statement or to permit such
registration statement to become effective (or, if no registration
statement has yet been filed, to file such a registration statement)
would be significantly disadvantageous to Micro (a "DISADVANTAGEOUS
CONDITION"), Micro may, for the shortest period possible but not more
than a period of 120 days from the date of the Board's determination,
cause such registration statement to be withdrawn and the effectiveness
of such registration
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statement to be temporarily suspended or, if no registration
statement has yet been filed, delay the filing of such
registration statement.
Promptly after the expiration of the ten Business Day period referred to in
clause (ii) above, Micro shall notify each holder of Registrable Securities
to be included in the registration of the other Holders and Grantees
requesting securities to be included therein and the number of shares
requested to be included therein. The Qtip Trust, or the Initiating Family
Stockholders or Demanding Holders owning a majority of the Registrable
Securities requested to be included in such registration by all Initiating
Family Stockholders or Demanding Holders, respectively, may, at any time
prior to the effective date of the registration statement relating to such
registration, revoke such request, without liability (except as set forth
below) to any other Holder holding Registrable Securities requested to be
registered pursuant to clause (ii) above or any Grantee, by providing a
written notice to Micro revoking such request; provided that, if as a
result thereof such registration is abandoned, all Registration Expenses
and all other fees and expenses reasonably incurred by other Holders and
Grantees including securities in such registration shall be borne by the
Section 2.01 Holder, on a pro rata basis (in the case of any such
registration requested by the Initiating Family Stockholders or Demanding
Holders) according to the relative number of shares requested to be
included in such registration by each such Initiating Family Stockholder or
Demanding Holder, respectively. If Micro determines to take any action
pursuant to clause (Z) above, Micro shall deliver a notice to the Section
2.01 Holder and to any holder of securities being sold pursuant to an
effective registration statement to such effect. Upon the receipt of any
notice delivered as a result of a determination by Micro to take action
pursuant to clause (Z) above, such Persons shall forthwith discontinue use
of the prospectus contained in such registration statement and, if so
directed by Micro, shall deliver to Micro all copies of the prospectus
delivered to such Persons then covering such securities current at the time
of receipt of such notice (or, if no registration statement has yet been
filed, all drafts of the prospectus delivered to such Persons covering such
securities). If any Disadvantageous Condition shall cease to exist, Micro
shall promptly notify the Section 2.01 Holder (and any other holder whose
securities shall have ceased to be sold pursuant to an effective
registration statement as a result of such Disadvantageous Condition) to
such effect. If so requested by the Section 2.01 Holder, Micro shall, if
any registration statement shall have been withdrawn, at such time as it is
possible or, if earlier, at the end of the 120-day period following such
withdrawal, file a new registration statement covering the securities that
were covered by such withdrawn registration statement, and the
effectiveness of such registration statement shall be maintained for such
time as may be necessary so that the period of effectiveness of such new
registration statement, when aggregated with the period during which such
withdrawn registration statement was effective, if any, shall be such time
as may be otherwise required by this Agreement.
(b) Registration Statement Form. If, pursuant to a registration
request under this Section 2.01, Micro proposes to effect registration by
filing of a registration statement
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on Form S-3 (or any successor or similar short-form registration statement) and
any managing underwriter shall advise Micro in writing that, in its opinion, the
use of another form of registration statement is of material importance to the
success of such proposed offering, then such registration shall be effected on
such other form.
(c) Expenses. Except as specifically provided herein, Micro shall pay
all Registration Expenses in connection with the registrations which are
requested pursuant to this Section 2.01 and all Registration Expenses incurred
by Holders of Registrable Securities as a result of Micro's withdrawal or delay
of any registration pursuant to Section 2.01(a)(ii)(Z). Each Holder shall pay
all underwriting discounts and commissions and transfer taxes, if any, relating
to the sale or disposition of such Holder's Registrable Securities pursuant to a
registration statement requested pursuant to this Section 2.01.
(d) Effective Registration Statement. A registration requested
pursuant to this Section 2.01 shall not be deemed to have been effected until
such registration has been effective (and not subject to any stop order,
injunction or other order or requirement of the Commission or other governmental
agency or court for any reason) for a period of 120 days following the date on
which such registration was declared effective, or, if earlier, the date on
which all Registrable Securities requested to be registered thereunder have been
sold or withdrawn from sale by notice to Micro.
(e) Selection of Underwriters. If any registration pursuant to this
Section 2.01 is in the form of an underwritten Public Offering, Micro shall have
the right to select the managing underwriter or co-managing underwriters for
such Public Offering, which underwriter or underwriters shall be reasonably
acceptable to the Qtip Trust, or the Initiating Family Stockholders or Demanding
Holders owning a majority of Registrable Securities requested to be included in
such registration by all Initiating Family Stockholders or Demanding Holders,
respectively.
(f) Maximum Offering Size. If a registration pursuant to this Section
2.1 involves an underwritten Public Offering and the managing underwriter shall
advise Micro that, in its view, the number or proposed mix of equity securities
requested to be included in such registration (including securities which Micro
requests to be included which are not Registrable Securities) exceeds the
largest number or appropriate mix of securities (which mix shall in any event
give priority to the securities requested to be registered by the Qtip Trust,
the Initiating Family Stockholders or the Demanding Holders, as the case may be,
in the manner set forth below) which can be sold without having a material
adverse effect on such offering (the "MAXIMUM OFFERING SIZE"), including the
price at which such securities can be sold, Micro will reduce the number of
securities requested to be registered until such registration no longer exceeds
the Maximum Offering Size as follows:
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(i) first, until such time as the Registrable Securities
requested to be included in such registration by all Persons other than
the Section 2.01 Holder have been reduced to 50% of the number of
Registrable Securities requested to be registered by the Section 2.01
Holder, the Registrable Securities requested to be registered by such
Persons shall be reduced on a pro rata basis among them (excluding the
Section 2.01 Holder) according to the relative number of shares each
such Person has requested to be included in such registration;
(ii) second, until such time as the Registrable Securities
requested to be included in such registration by the Section 2.01
Holder have been reduced by 50%, the Registrable Securities requested
to be included in such registration by the Section 2.01 Holder pursuant
to Section 2.01(a)(i), the Registrable Securities requested to be
included in such registration by any other Holders pursuant to Section
2.01(a)(ii) and the securities requested to be included in such
registration by Grantees pursuant to the terms of their agreements with
Micro shall be reduced on a pro rata basis among them according to the
relative number of shares that each such Person has requested to be
included in such registration;
(iii) third, any remaining securities requested to be
included in such registration by all other Holders pursuant to Section
2.01(a)(ii) and by all Grantees pursuant to the terms of their
agreements with Micro shall be reduced on a pro rata basis among them
according to the relative number of shares each such Person has
requested to be included in such registration; and
(iv) fourth, any remaining Registrable Securities
requested to be included in such registration pursuant to Section
2.01(a)(i) by the Section 2.01 Holder shall be reduced.
Any reduction of shares of Registrable Securities made among the shares of
Registrable Securities requested to be included in any registration pursuant to
Section 2.01(a)(i) by the Qtip Trust shall be made on a basis to be mutually
agreed among the Holders of such Registrable Securities. Any such reduction of
shares of Registrable Securities requested to be included by the Initiating
Family Stockholders or Demanding Holders, respectively, shall be made on a pro
rata basis among such Holders according to the relative number of shares each
such Holder has requested to be included in such registration.
(g) Subsequent Grants. Micro hereby agrees that it will not (i) at any
time after the date hereof, grant to any Person any registration rights that
conflict with, or have priority over, the registration rights granted hereby or
(ii) grant any registration rights with respect to securities held by any Person
which permit such Person to exercise a demand registration right sooner than
three months following the effective date of a Public Offering in which such
Person was entitled to include securities, unless the number of
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securities requested to be included in such Public Offering by such Person was
in excess of 125% of the number of such securities actually included.
SECTION 2.02. Incidental ("Piggy-Back") Registration. (a) If, following
the initial Public Offering, Micro at any time proposes to register any of its
equity securities (the "PRIORITY SECURITIES") under the Securities Act (other
than a registration (i) on Form S-8 or S-4 or any successor or similar forms,
(ii) relating to shares of common stock issuable upon exercise of stock options
or in connection with any employee benefit or similar plan of Micro, (iii) in
connection with a direct or indirect acquisition by Micro of another Person or
(iv) pursuant to a shelf registration of securities pursuant to Rule 415 under
the Securities Act), whether for sale for its own account or for the account of
any other Person, in a manner which would permit registration of Registrable
Securities for sale to the public under the Securities Act, it will each such
time, subject to the provisions of Section 2.02(b), give prompt written notice
to the Holders of record holding Registrable Securities of its intention to do
so and of such Holders' rights under this Section 2.02, at least 30 days prior
to the anticipated filing date of the registration statement relating to such
registration. Any such notice shall offer all such Holders the opportunity to
include in such registration such number of Registrable Securities as each such
Holder may request. Upon the written request of any such Holder made within 20
days after the receipt of notice from Micro (which request shall specify the
number of Registrable Securities intended to be disposed of by such Holder and
the intended method of disposition thereof), Micro will use its best efforts to
effect the registration under the Securities Act and any related qualification
or other compliance of all Registrable Securities which Micro has been so
requested to register by the Holders thereof, to the extent required to permit
the disposition (in accordance with such intended methods thereof) of the
Registrable Securities so to be registered; provided that (i) if such
registration involves an underwritten Public Offering, all Holders holding
Registrable Securities requesting to be included in Micro's registration must
sell their Registrable Securities to the underwriters selected by Micro on the
same terms and conditions as apply to the Person for whose account the Priority
Securities are being sold, (ii) if, at any time after giving written notice
pursuant to this Section 2.02 of its intention to register any securities and
prior to the effective date of the registration statement filed in connection
with such registration, Micro shall determine for any reason not to proceed with
such registration (with respect to all of such securities requested to be
registered), Micro shall give written notice to the Holders holding Registrable
Securities and shall be relieved of its obligation to register any Registrable
Securities in connection with such registration but shall not be relieved from
its obligation to pay the Registration Expenses in connection therewith as
provided in this Section 2.02, without prejudice, however, to the rights of the
Section 2.01 Holder to request that such registration be effected as a
registration under Section 2.01 to the extent so entitled and (iii) no Holder
may request the registration of any Registrable Securities pursuant to this
Section 2.02 after the expiration of 84 months following the initial Public
Offering. If a registration pursuant to this Section 2.02 involves an
underwritten Public Offering, each Holder of Registrable Securities requesting
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to be included in such registration may elect, in writing not less than five
Business Days prior to the effective date of the registration statement filed in
connection with such registration, not to register such securities in connection
with such registration. No registration effected under this Section 2.02 shall
relieve Micro of its obligations to effect registrations upon request under
Section 2.01. Micro will pay all Registration Expenses in connection with each
registration of Registrable Securities requested pursuant to this Section 2.02,
and each such Holder shall pay underwriting discounts and commissions and
transfer taxes, if any, relating to the sale or disposition of such Holder's
Registrable Securities pursuant to a registration statement effected pursuant to
this Section 2.02.
(b) Maximum Offering Size. If a registration pursuant to this Section
2.02 involves an underwritten Public Offering and the managing underwriter shall
advise Micro that, in its view, the number or mix of securities of Micro
(including all Registrable Securities) which Micro, the Holders and any other
Persons intend to include in such registration exceeds the Maximum Offering
Size, Micro will reduce the number of securities requested to be registered
until such registration no longer exceeds the Maximum Offering Size as follows:
(i) If the registration was initiated by Micro for the
sale of Priority Securities for its own account:
(1) first, Priority Securities to be sold for the account
of holders of Priority Securities other than Micro,
Registrable Securities requested to be included in such
registration pursuant to Section 2.02(a) by Holders holding
Registrable Securities and securities requested to be included
in such registration by Grantees pursuant to the terms of
their agreements with Micro shall be reduced on a pro rata
basis among them according to the relative number of shares
each such Person has requested to be included in such
registration; and
(2) second, Priority Securities to be sold for Micro's
own account shall be reduced.
(ii) If the registration was initiated at the request of a
holder (a "PRIORITY HOLDER") of Priority Securities to be sold for the
account of such Priority Holder:
(1) first, until such time as the Registrable Securities
requested to be included in such registration by the Priority
Holder have been reduced by 50%, the Priority Securities
requested to be included in such registration by the Priority
Holder and the securities requested to be included in such
registration by the Holders pursuant to Section 2.02 and by
the Grantees pursuant to the terms of their agreements with
Micro shall be reduced on a
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pro rata basis among them according to the relative number of
shares each such Person has requested to be included in such
registration;
(2) second, any remaining securities requested to be
included in such registration by the Holders pursuant to
Section 2.02 and by all Grantees pursuant to the terms of
their agreements with Micro shall be reduced on a pro rata
basis among them according to the relative number of shares
each such Person has requested to be included in such
registration; and
(3) third, any remaining Priority Securities requested to
be included in such registration by the Priority Holder shall
be reduced.
SECTION 2.03. Holdback Agreements. Each Holder holding Registrable
Securities agrees not to effect any public sale or distribution, including any
sale pursuant to Rule 144 or any successor provision under the Securities Act,
of any Registrable Securities, and not to effect any such public sale or
distribution of any other equity security of Micro or of any security
convertible into or exchangeable or exercisable for any equity security of Micro
(in each case, other than (x) as part of any registration pursuant to the terms
hereof of Registrable Securities in connection with a Public Offering or (y) any
sale or distribution of Registrable Securities received upon the exercise of
stock options) during the 14 days prior to, and during (i) the 180-day period
(in the case of an initial Public Offering), (ii) the 60-day period (in the case
of a shelf registered offering) or (iii) otherwise the 120-day period beginning
on, the effective date (or the commencement of a take-down in the case of a
shelf registered offering) of such registration statement (except as part of
such registration or take-down); provided that each such Holder has received
written notice of such registration or take-down at least two Business Days
prior to the anticipated beginning of the 14-day period referred to above.
SECTION 2.04. Registration Procedures. Whenever a Holder requests that
any Registrable Securities be registered pursuant to Section 2.01 or 2.02, Micro
shall, subject to the provisions of such Sections, use its best efforts to
effect the registration and the sale of such Registrable Securities in
accordance with the intended method of disposition thereof as quickly as
practicable, and in connection with any such request:
(a) Micro will as expeditiously as possible prepare and file with the
Commission a registration statement on any form for which Micro then qualifies
or which counsel for Micro shall deem appropriate and which form shall be
available for the sale of the Registrable Securities to be registered thereunder
in accordance with the intended method of distribution thereof, and use its best
efforts to cause such filed registration statement to become and remain
effective for a period of not less than 120 days.
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(b) Micro will, if requested, at least three Business Days prior to
filing a registration statement or prospectus or any amendment or supplement
thereto, furnish to each Holder and each underwriter, if any, of the Registrable
Securities covered by such registration statement copies of such registration
statement as proposed to be filed (including documents to be incorporated by
reference therein) which documents will be subject to the reasonable review and
comments of such Holders (and their respective attorneys) during such three
Business Day period and Micro will not file any registration statement, any
prospectus or any amendment or supplement thereto (or any such documents
incorporated by reference) containing any statements with respect to such
Holders to which the holders of a majority of the Registrable Securities to be
included in such registration shall reasonably object in writing. Thereafter
Micro will furnish to such Holder and underwriter, if any, such number of copies
of such registration statement, each amendment and supplement thereto (and, if
requested, all exhibits thereto and documents incorporated by reference
therein), the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such Holder or underwriter
may reasonably request in order to facilitate the disposition of the Registrable
Securities owned by such Holder.
(c) After the filing of the registration statement, Micro will
promptly notify each Holder of Registrable Securities covered by such
registration statement of the effectiveness thereof and of any stop order issued
or threatened by the Commission and take all reasonable actions required to
prevent the entry of such stop order or to remove it if entered and promptly
notify such Holder of such lifting or withdrawal of such order.
(d) Micro will use its best efforts (i) to register or qualify the
Registrable Securities under such other securities or blue sky laws of such
jurisdictions in the United States as any Holder of Registrable Securities
covered by such registration statement reasonably (in light of such Holder's
intended plan of distribution) requests and (ii) to cause such Registrable
Securities to be registered with or approved by such other governmental agencies
or authorities as may be necessary by virtue of the business and operations of
Micro and do any and all other acts and things that may be reasonably necessary
or advisable to enable such Holder to consummate the disposition of the
Registrable Securities owned by such Holder; provided that Micro will not be
required (x) to qualify generally to do business in any jurisdiction where it
would not otherwise be required to qualify but for this paragraph (d), (y) to
subject itself to any material risk of taxation in any such jurisdiction or (z)
to consent to general service of process in any such jurisdiction.
(e) Micro will immediately notify each Holder of Registrable
Securities covered by such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, of the
occurrence of an event requiring the preparation of a supplement or amendment to
such prospectus so that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus will not contain
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an untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading and promptly make available to each such Holder any such supplement
or amendment, and Micro will promptly prepare and furnish to each such Holder a
supplement to or an amendment of such prospectus so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus will
not contain any untrue statement of material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances in which they were made, not misleading.
(f) Micro will enter into customary agreements (including an
underwriting agreement in customary form) and take such other actions as are
reasonably required in order to expedite or facilitate the disposition of such
Registrable Securities.
(g) Micro will make available for inspection by any Holder of
Registrable Securities covered by such registration statement, any underwriter
participating in any disposition pursuant to such registration statement and any
attorney, accountant or other professional retained by any such Holder or
underwriter (collectively, the "INSPECTORS"), all financial and other records,
pertinent corporate documents and properties of Micro (collectively, the
"RECORDS") as shall be reasonably necessary to enable them to exercise their due
diligence responsibility, and cause Micro's officers, directors and employees to
make themselves available to, and supply all information reasonably requested
by, any Inspectors in connection with such registration statement. Records which
Micro determines, in good faith, to be confidential and which it notifies the
Inspectors are confidential shall not be disclosed by the Inspectors unless (i)
the disclosure of such Records is necessary to avoid or correct a misstatement
or omission in such registration statement or (ii) the release of such Records
is ordered pursuant to a subpoena or other order from a court of competent
jurisdiction. Each such Holder agrees that information obtained by it as a
result of such inspections shall be deemed confidential and shall not be used by
it as the basis for any market transactions in the securities of Micro or its
Affiliates unless and until such is made generally available to the public. Each
such Holder further agrees that it will, upon learning that disclosure of such
Records is sought in a court of competent jurisdiction, give notice to Micro and
allow Micro, at its expense, to undertake appropriate action to prevent
disclosure of the Records deemed confidential.
(h) Micro will furnish to each Holder of Registrable Securities
covered by such registration statement and to each underwriter, if any, a signed
counterpart of (i) an opinion or opinions of counsel to Micro addressed to such
Holder and underwriter on which opinion both such Holder and such underwriter
are entitled to rely and (ii) a comfort letter or comfort letters from Micro's
independent public accountants, each in then customary form and covering such
matters of the type then customarily covered by opinions or comfort letters, as
the case may be, as the holders of a majority of the Registrable Securities
included in such registration statement or the managing underwriter therefor
reasonably requests.
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(i) Micro will otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering a period of 12 months, beginning within three months after the
effective date of the registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act.
(j) Micro will use its best efforts to cause all such Registrable
Securities to be listed on each securities exchange, if any, on which similar
securities issued by Micro are then listed.
(k) Micro will use its best efforts to prepare and file with the
Commission promptly upon the request of any such Holder, any amendments or
supplements to such registration statement or prospectus which, in the
reasonable opinion of counsel for such Holders, is required under the Securities
Act or the rules and regulations thereunder in connection with the distribution
of the Registrable Securities by such Holders.
Micro may require each Holder of Registrable Securities included in
such registration statement promptly to furnish in writing to Micro such
information regarding the distribution of the Registrable Securities as Micro
may from time to time reasonably request and such other information with respect
to such Holder as may be legally required in connection with such registration.
Each Holder agrees that, upon receipt of any notice from Micro of the
happening of any event of the kind described in Section 2.04(e), such Holder
will forthwith discontinue disposition of Registrable Securities pursuant to the
registration statement covering such Registrable Securities until such Holder's
receipt of the copies of the supplemented or amended prospectus contemplated by
Section 2.04(e), and, if so directed by Micro, such Holder will deliver to Micro
all copies in its possession of the most recent prospectus covering such
Registrable Securities at the time of receipt of such notice. In the event Micro
shall give such notice, Micro shall extend the period during which the
effectiveness of such registration statement shall be maintained (including the
period referred to in Section 2.04(a) hereof) by the number of days during the
period from and including the date of the giving of notice pursuant to Section
2.04(e) to the date when Micro shall make available to such Holder a prospectus
supplemented or amended to conform with the requirements of Section 2.04(e).
Micro shall not be liable for the failure of any such registration to
become effective provided that Micro complies with its obligations hereunder.
SECTION 2.05. Indemnification by Micro. Micro agrees to indemnify and
hold harmless to the fullest extent permitted by law each Holder of Registrable
Securities covered by a registration statement, its officers, directors and
agents, and each Person, if
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any, who controls such Holder within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act from and against any and all losses,
claims, damages, liabilities and expenses caused by any untrue statement or
alleged untrue statement of a material fact contained in any registration
statement or prospectus relating to the Registrable Securities (as amended or
supplemented if Micro shall have furnished any amendments or supplements
thereto) or any preliminary, summary or final prospectus or any amendments or
supplements thereto, or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading and Micro will reimburse such Holders for any
legal or any other expenses reasonably incurred by them in connection with
investigating or defending such loss, claim, damage, liability or expense except
insofar as such losses, claims, damages, liabilities or expenses are caused by
any such untrue statement or omission or alleged untrue statement or omission
based upon information furnished in writing to Micro by such Holder or on such
Holder's behalf in either such case expressly for use therein; provided, that
with respect to any untrue statement or omission or alleged untrue statement or
omission made in any preliminary prospectus, or in any prospectus, as the case
may be, the indemnity agreement contained in this paragraph shall not apply to
the extent that any such loss, claim, damage, liability or expense results from
the fact that a current copy of the prospectus (or, in the case of a prospectus,
the prospectus as amended or supplemented) was not sent or given to the Person
asserting any such loss, claim, damage, liability or expense at or prior to the
written confirmation of the sale of the Registrable Securities concerned to such
Person if it is determined that Micro has provided such prospectus and it was
the responsibility of such Holder to provide such Person with a current copy of
the prospectus (or such amended or supplemented prospectus, as the case may be)
and such current copy of the prospectus (or such amended or supplemented
prospectus, as the case may be) would have cured the defect giving rise to such
loss, claim, damage, liability or expense. Micro also agrees to indemnify any
underwriters of the Registrable Securities, their officers and directors and
each Person who controls such underwriters on substantially the same basis as
that of the indemnification of the Holders provided in this Section 2.05.
SECTION 2.06. Indemnification by Holders of Registrable Securities.
Each Holder of Registrable Securities included in any registration statement
agrees to indemnify and hold harmless to the fullest extent permitted by law
(including without limitation reimbursement of Micro for any legal or any other
expenses reasonably incurred by it in investigating or defending such loss,
claim, damage, liability or expense) Micro, its officers, directors and agents
and each Person, if any, who controls Micro within the meaning of either Section
15 of the Securities Act or Section 20 of the Exchange Act to the same extent as
the foregoing indemnity from Micro to such Holder, but only (i) with respect to
information furnished in writing by such Holder or on such Holder's behalf in
either case expressly for use in any registration statement or prospectus
relating to the Registrable Securities, or any amendment or supplement thereto,
or any preliminary, summary or final prospectus or any amendments or supplements
thereto or (ii) to the
B-16
<PAGE>
extent that any loss, claim, damage, liability or expense described in Section
2.05 results from the fact that a current copy of the prospectus (or, in the
case of a prospectus, the prospectus as amended or supplemented) was not sent or
given to the Person asserting any such loss, claim, damage, liability or expense
at or prior to the written confirmation of the sale of the Registrable
Securities concerned to such Person if it is determined that it was the
responsibility of such Holder to provide such Person with a current copy of the
prospectus (or such amended or supplemented prospectus, as the case may be) and
such current copy of the prospectus (or such amended or supplemented prospectus,
as the case may be) would have cured the defect giving rise to such loss, claim,
damage, liability or expense. Each such Holder also agrees to indemnify and hold
harmless underwriters of the Registrable Securities, their officers and
directors and each Person who controls such underwriters on substantially the
same basis as that of the indemnification of Micro provided in this Section
2.06.
SECTION 2.07. Conduct of Indemnification Proceedings. In case any
proceeding (including any governmental investigation) shall be instituted
involving any Person in respect of which indemnity may be sought pursuant to
Section 2.05 or 2.06, such Person (an "INDEMNIFIED PARTY") shall promptly notify
the Person against whom such indemnity may be sought (the "INDEMNIFYING PARTY")
in writing and the Indemnifying Party shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to such Indemnified
Party, and shall assume the payment of all fees and expenses. In any such
proceeding, any Indemnified Party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Party unless (i) the Indemnifying Party and the Indemnified
Party shall have mutually agreed to the retention of such counsel or (ii) the
Indemnified Party has been advised in writing by its counsel that representation
of both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. It is understood that the
Indemnifying Party shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys (in addition to any local
counsel) at any time for all such Indemnified Parties. In the case of any such
separate firm for the Indemnified Parties, such firm shall be designated in
writing by the Indemnified Party who had the largest number of Registrable
Securities included in such registration. The Indemnifying Party shall not be
liable for any settlement of any proceeding effected without its written consent
which consent shall not be unreasonably withheld, but if settled with such
consent, or if there be a final judgment for the plaintiff, the Indemnifying
Party shall indemnify and hold harmless such Indemnified Parties from and
against any loss or liability (to the extent stated above) by reason of such
settlement or judgment. No Indemnifying Party shall, without the prior written
consent of the Indemnified Party, effect any settlement of any pending or
threatened proceeding in respect of which any Indemnified Party is or could have
been a party and indemnity could have been sought hereunder by such Indemnified
Party, unless such settlement includes an unconditional release of such
Indemnified Party from all liability arising out of such proceeding.
B-17
<PAGE>
SECTION 2.08. Contribution. If the indemnification provided for
hereunder is unavailable to the Indemnified Parties in respect of any losses,
claims, damages or liabilities referred to herein, then each such Indemnifying
Party, in lieu of indemnifying such Indemnified Party shall contribute to the
amount paid or payable by such Indemnified Party as a result of such losses,
claims, damages or liabilities (i) as between Micro and the Holders on the one
hand and the underwriters on the other, in such proportion as is appropriate to
reflect the relative benefits received by Micro and the Holders on the one hand
and the underwriters on the other from the offering of the securities, or if
such allocation is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits but also the relative
fault of Micro and the Holders on the one hand and of the underwriters on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities, as well as any other relevant equitable
considerations and (ii) as between Micro on the one hand and each Holder of
Registrable Securities covered by a registration statement on the other, in such
proportion as is appropriate to reflect the relative fault of Micro and of each
such Holder in connection with such statements or omissions, as well as any
other relevant equitable considerations. The relative benefits received by Micro
and the Holders on the one hand and the underwriters on the other shall be
deemed to be in the same proportion as the total proceeds from the offering (net
of underwriting discounts and commissions but before deducting expenses)
received by Micro and the Holders bear to the total underwriting discounts and
commissions received by the underwriters, in each case as set forth in the table
on the cover page of the prospectus. The relative fault of Micro and the Holders
on the one hand and of the underwriters on the other shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by Micro and the Holders or by the underwriters.
The relative fault of Micro on the one hand and of each such Holder on the other
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by such party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
Micro and the Holders of Registrable Securities agree that it would not
be just and equitable if contribution pursuant to this Section 2.08 were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to in the
immediately preceding paragraph. The amount paid or payable by an Indemnified
Party as a result of the losses, claims, damages or liabilities referred to in
the immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such Indemnified Party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 2.08, no
underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Registrable Securities underwritten by it
and distributed to the public were
B-18
<PAGE>
offered to the public exceeds the amount of any damages which such underwriter
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. Notwithstanding the provisions of
this Section, no Holder shall be required to contribute any amount in excess of
the amount by which the total price at which the securities of such Holder were
offered to the public exceeds the amount of any damages which such Holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation. Each Holder's obligation to contribute pursuant to
this Section 2.08 is several in the proportion that the proceeds of the offering
received by such Holder bears to the total proceeds of the offering received by
all of the Holders and not joint.
SECTION 2.09. Participation in Public Offering. No Person may
participate in any underwritten Public Offering hereunder unless such Person (i)
agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Persons entitled hereunder to approve
such arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreement, custody agreements and other
documents reasonably required under the terms of such underwriting arrangements
and these Registration Rights.
SECTION 2.10. Rule 144 Reporting. With a view to making available to
the Holders the benefits of certain rules and regulations of the Commission
which may permit the sale of securities to the public without registration,
Micro agrees to:
(a) make and keep public information available as those terms are
understood and defined in Rule 144 (including paragraph (c)(2) of such Rule);
(b) use its best efforts to file with the Commission in a timely
manner reports and other documents, if any, required of Micro under the
Securities Act and the Exchange Act; and
(c) furnish to the Holders forthwith upon request a written statement
by Micro as to its compliance with the reporting requirements of Rule 144, and
of the Securities Act and the Exchange Act (if applicable), a copy of the most
recent annual or quarterly report of Micro filed with the Commission, if any,
and such other reports and documents of Micro and other information in the
possession of or reasonably obtainable by Micro as the Holders may reasonably
request in availing themselves of any rule or regulation of the Commission
allowing the Holders to sell securities without registration.
B-19
<PAGE>
ARTICLE 3
MISCELLANEOUS
SECTION 3.01. Entire Agreement. This Agreement constitutes the entire
agreement and understanding of the parties hereto in respect of the subject
matter contained herein. This Agreement supersedes all prior agreements and
understandings between the parties hereto with respect to the subject matter
hereof.
SECTION 3.02. Notices. Any notice, request, instruction or other
document to be given hereunder by any party hereto to another party hereto shall
be in writing (including telecopier or similar writing) and shall be given to
such party at its address set forth on the signature pages hereof, or to such
other address as the party to whom notice is to be given may provide in a
written notice to the party giving such notice, a copy of which written notice
shall be on file with the Secretary of Micro. If notice is given pursuant to
this Section of a permitted successor or assign of a party to this Agreement,
then notice shall thereafter be given as set forth above to such successor or
assign of such party to this Agreement. Each such notice, request or other
communication shall be effective (i) if given by telecopy, when such telecopy is
transmitted to the telecopy number specified on the signature pages hereof and
electronic or oral confirmation of receipt is received, (ii) if given by mail,
at the close of business on the third Business Day after such communication is
deposited in the mails with first class postage prepaid addressed as aforesaid
or (iii) if given by any other means, when delivered at the address specified in
this Section 3.02.
SECTION 3.03. Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without regard to
the conflicts of law rules of such state.
SECTION 3.04. Successors, Assigns, Transferees. Neither this Agreement
nor any right, remedy, obligation or liability arising hereunder or by reason
hereof shall be assignable by Micro or any Holder, except to a Permitted
Transferee of any such Holder as provided pursuant to the terms hereof. This
Agreement is binding upon the parties to this Agreement and their respective
legal representatives, heirs, devisees, legatees, beneficiaries and successors
and permitted assigns and inures to the benefit of the parties to this Agreement
and their respective permitted legal representatives, heirs, devisees, legatees,
beneficiaries and other permitted successors and assigns, if any. Neither this
Agreement nor any provision hereof shall be construed so as to confer any right
or benefit upon any Person other than the parties to this Agreement, those who
agree to be bound hereby and their respective permitted legal representatives,
heirs, devisees, legatees, beneficiaries and other permitted successors and
assigns. References to a party to this Agreement are also references to any
permitted successor or assign of such party and, when appropriate to effect the
binding nature of this Agreement for the benefit of another party, any other
successor or assign of a party.
B-20
<PAGE>
SECTION 3.05. Amendments; Waivers. (a) No failure or delay on the part
of any party in exercising any right, power or privilege hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise thereof preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege. The rights and remedies herein provided shall be cumulative and
not exclusive of any rights or remedies provided by law.
(b) Neither this Agreement nor any term or provision hereof may be
waived except by an instrument in writing signed by (i) each Ingram Stockholder,
(ii) Micro, (iii) the Ingram Thrift Plan; provided that the Ingram Thrift Plan
is materially adversely affected by such waiver, and (iv) Holders of a majority
of the Registrable Securities which are materially adversely affected by such
waiver.
(c) Neither this Agreement nor any term or provision hereof may be
amended except by an instrument in writing signed by (i) each Ingram
Stockholder, (ii) Micro, (iii) the Ingram Thrift Plan; provided that the Ingram
Thrift Plan is materially adversely affected by such amendment, and (iv) Holders
of a majority of the Registrable Securities (excluding those held by the Ingram
Stockholders and the Ingram Thrift Plan) which are materially adversely affected
by such amendment.
(d) Micro shall deliver prompt written notice to each other party
hereto of any amendment or waiver to this Agreement approved pursuant to this
Section.
SECTION 3.06. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be an original with the same effect
as if the signatures thereto and hereto were upon the same instrument.
SECTION 3.07. Consent to Jurisdiction. Each party hereto irrevocably
submits to the non-exclusive jurisdiction of any Tennessee State Court or
United States Federal Court sitting in the Middle District of Tennessee
over any suit, action or proceeding arising out of or relating to this
Agreement. Each party hereto (other than Micro) hereby irrevocably
appoints CT Corporation System Company as its authorized agent to accept
and acknowledge on its behalf service of any and all process which may be
served in any such suit, action or proceeding in any such court and
represents and warrants that such agent has accepted such appointment.
Each party hereto consents to process being served in any such suit, action
or proceeding by serving a copy thereof upon the agent for service of
process, provided that to the extent lawful and possible, written notice of
such service shall also be mailed to such party. Each party hereto waives
any right it may have to assert the doctrine of forum non conveniens or to
object to venue to the extent any proceeding is brought in accordance with
this Section 3.07. Nothing in this paragraph shall affect or limit any
right to serve process in any manner permitted by law, to bring proceedings
in the courts of any jurisdiction or to enforce in any lawful manner a
judgment obtained in one jurisdiction in any other jurisdiction.
B-21
<PAGE>
SECTION 3.08. Community Property. If such Holder's Registrable
Securities constitute community property, this Agreement has been executed and
delivered by such Holder's spouse, who shall be bound hereby.
B-22
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
INGRAM MICRO INC.
By: /s/ Jeffrey R. Rodek
---------------------------------
Name: Jeffrey R. Rodek
Title: President
1600 Saint Andrew Place
Santa Ana, CA 92705
Telecopy: 714-566-7900
B-23
HOLDERS E. BRONSON INGRAM
Q-TIP MARITAL TRUST
By MARTHA R. INGRAM, ORRIN H. INGRAM,
JOHN R. INGRAM, DAVID B. INGRAM AND
ROBIN I. PATTON, as Co-Trustees
By: /s/ Martha R. Ingram
---------------------------------
Name: Martha R. Ingram
Title: Co-Trustee
Address: 120 Hillwood Drive
Nashville, TN 37215
By: /s/ Orrin H. Ingram
---------------------------------
Name: Orrin H. Ingram
Title: Co-Trustee
Address: 1475 Moran Road
Franklin, TN 37069
By: /s/ John R. Ingram
---------------------------------
Name: John R. Ingram
Title: Co-Trustee
Address: 311 Jackson Boulevard
Nashville, TN 37205
By: /s/ David B. Ingram
---------------------------------
Name: David B. Ingram
Title: Co-Trustee
Address: 4417 Tyne Boulevard
Nashville, TN 37215
By: /s/ Robin I. Patton
---------------------------------
Name: Robin I. Patton
Title: Co-Trustee
Address: 1600 Chickering Road
Nashville, TN 37215
B-24
<PAGE>
E. BRONSON INGRAM 1995 CHARITABLE
REMAINDER 5% UNITRUST
By MARTHA R. INGRAM, as Trustee
By: /s/ Martha R. Ingram
---------------------------------
Name: Martha R. Ingram
Title: Trustee
Address: 120 Hillwood Drive
Nashville, TN 37215
MARTHA AND BRONSON INGRAM
FOUNDATION
By: /s/ John R. Ingram
---------------------------------
Name: John R. Ingram
Title: President
Address: c/o Ingram Industries Inc.
4440 Harding Road
Nashville, TN 37205
(615) 298-8200
E. BRONSON INGRAM 1994
CHARITABLE LEAD ANNUITY TRUST
By ORRIN H. INGRAM, JOHN R. INGRAM,
DAVID B. INGRAM, AND ROBIN B.
INGRAM PATTON, as Co-Trustees
By: /s/ Orrin H. Ingram
---------------------------------
Name: Orrin H. Ingram
Title: Co-Trustee
Address: 1475 Moran Road
Franklin, TN 37069
B-25
<PAGE>
By: /s/ John R. Ingram
---------------------------------
Name: John R. Ingram
Title: Co-Trustee
Address: 311 Jackson Boulevard
Nashville, TN 37205
By: /s/ David B. Ingram
---------------------------------
Name: David B. Ingram
Title: Co-Trustee
Address: 4417 Tyne Boulevard
Nashville, TN 37215
By: /s/ Robin B. Ingram Patton
---------------------------------
Name: Robin B. Ingram Patton
Title: Co-Trustee
Address: 1600 Chickering Road
Nashville, TN 37215
INGRAM THRIFT PLAN
By W.M. HEAD, R.E. CLAVERIE AND
T.H. LUNN, as Co-Trustees
By: /s/ William M. Head
---------------------------------
Name: William M. Head
Title: Co-Trustee
Address: 1229 Nichol Lane
Nashville, TN 37205
By: /s/ R.E. Claverie
---------------------------------
Name: R.E. Claverie
Title: Co-Trustee
Address: 6107 Hickory Valley Road
Nashville, TN 37205
B-26
<PAGE>
By: /s/ T.H. Lunn
---------------------------------
Name: T.H. Lunn
Title: Co-Trustee
Address: 509 Sugartree Lane
Franklin, TN 37064
/s/ Linwood A. Lacy, Jr.
---------------------------------
Linwood A. Lacy, Jr.
2304 Cranborne Road
Midlothian, VA 23113
LINWOOD A. LACY, JR.
1996 IRREVOCABLE TRUST DATED
MARCH 24, 1996
By NATIONSBANK, N.A, as Trustee
By: /s/ Philip L. Rudder
---------------------------------
Name: Philip L. Rudder
Title: Vice President
Address: NationsBank, N.A.
Attention: Phil Rudder,
Vice President
12th and Main, 12th Floor
Richmond, VA 23261
/s/ Dana N. Rutledge /s/ David W. Rutledge
_____________________________ _____________________________________
Spouse David W. Rutledge
34 Deerwood East
Irvine, CA 92714
/s/ Deborah S. Hardaway /s/ Ronald K. Hardaway
_____________________________ _____________________________________
Spouse Ronald K. Hardaway
2 Moss Glen
Irvine, CA 92715
B-27
<PAGE>
/s/ Victoria L. Cotten
_____________________________________
Victoria L. Cotten
8 Medici
Aliso Viejo, CA 92656
/s/ David B. Ingram
_____________________________________
David B. Ingram
4417 Tyne Boulevard
Nashville, TN 37215
DAVID AND SARAH INGRAM FAMILY 1996
GENERATION SKIPPING TRUST
By THOMAS H. LUNN, as Trustee
By: /s/ Thomas H. Lunn
---------------------------------
Name: Thomas H. Lunn
Title: 509 Sugartree Lane
Address: Franklin, TN 37064
TRUST FOR THE BENEFIT OF DAVID BRONSON
INGRAM, DATED OCTOBER 27, 1967
By SUNTRUST BANK, ATLANTA,
successor trustee
By: /s/ Thomas A. Shanks, Jr.
---------------------------------
Name: Thomas A. Shanks, Jr.
Title: First Vice President
Address: Trust Company Bank
Trust Company of Georgia
Attn: Thomas A. Shanks, Jr.
Trust Company Tower
25 Park Place, 2nd Floor
Atlanta, GA 30303
B-28
<PAGE>
TRUST FOR THE BENEFIT OF DAVID BRONSON
INGRAM, DATED JUNE 14, 1968
By SUNTRUST BANK, ATLANTA
as Successor Trustee
By: /s/ M. Steven Carroll
---------------------------------
Name: M. Steven Carroll
Title: Group Vice President
Address: Trust Company Bank
Trust Company of Georgia
Attn: Thomas A. Shanks, Jr.
Trust Company Tower
25 Park Place, 2nd Floor
Atlanta, GA 30303
TRUST FOR THE BENEFIT OF DAVID B.
INGRAM, DATED DECEMBER 22, 1975
By SUNTRUST BANK, ATLANTA,
as Successor Trustee
By: /s/ Thomas A. Shanks, Jr.
---------------------------------
Name: Thomas A. Shanks, Jr.
Title: First Vice President
Address: Trust Company Bank
Trust Company of Georgia
Attn: Thomas A. Shanks, Jr.
Trust Company Tower
25 Park Place, 2nd Floor
Atlanta, GA 30303
B-29
<PAGE>
DAVID B. INGRAM IRREVOCABLE TRUST
DATED AUGUST 16, 1988
By ROY E. CLAVERIE, as Trustee
By: /s/ Roy E. Claverie
---------------------------------
Name: Roy E. Claverie
Title: Trustee
Address: 6107 Hickory Valley Road
Nashville, TN 37205
1994 DAVID BRONSON INGRAM TRUST
By ROY E. CLAVERIE, as Trustee
By: /s/ Roy E. Claverie
---------------------------------
Name: Roy E. Claverie
Title: Trustee
Address: 6107 Hickory Valley Road
Nashville, TN 37205
/s/ Thomas H. Lunn
______________________________________
Thomas H. Lunn
509 Sugartree Lane
Franklin, TN 37064
LUNN FAMILY PARTNERS, L.P.
By: /s/ Thomas H. Lunn
---------------------------------
as General Partner
By: /s/ Thomas H. Lunn
---------------------------------
Name: Thomas H. Lunn
Title:
Address: 509 Sugartree Lane
Franklin, TN 37064
B-30
<PAGE>
/s/ Philip Maurice Pfeffer
______________________________________
Philip M. Pfeffer
836 Treemont Court
Nashville, TN 37220
PFEFFER FAMILY PARTNERS, L.P.
By: /s/ Pfeffer Enterprises, Inc.
---------------------------------
as General Partner
By: /s/ Philip Maurice Pfeffer
---------------------------------
Name: Philip Maurice Pfeffer
Title: President
Address: 836 Treemont Court
Nashville, TN 37220
TRUST AGREEMENT OF JUNE 11, 1987
BETWEEN BRONSON AND MARTHA INGRAM,
GRANTORS, AND EDWARD G. NELSON,
TRUSTEE FOR THE BENEFIT OF JOHN-LINDELL
PHILIP PFEFFER
By EDWARD G. NELSON, as Trustee
By: /s/ Edward G. Nelson
---------------------------------
Name: Edward G. Nelson
Title: Trustee
Address: Nelson Capital Corp.
3401 West End Avenue
Nashville, TN 37203
/s/ John-Lindell Philip Pfeffer
_____________________________________
John-Lindell Philip Pfeffer
Rue General Patton, Sq.
1050 Brussels Belgium
B-31
<PAGE>
TRUST AGREEMENT OF JUNE 11, 1987
BETWEEN BRONSON AND MARTHA INGRAM,
GRANTORS, AND EDWARD G. NELSON,
TRUSTEE FOR THE BENEFIT OF DAVID
MAURICE PFEFFER
By EDWARD G. NELSON, as Trustee
By: /s/ Edward G. Nelson
---------------------------------
Name: Edward G. Nelson
Title: Trustee
Address: Nelson Capital Corp.
3401 West End Avenue
Nashville, TN 37203
TRUST AGREEMENT OF JUNE 11, 1987
BETWEEN BRONSON AND MARTHA INGRAM,
GRANTORS, AND EDWARD G. NELSON,
TRUSTEE FOR THE BENEFIT OF JAMES
HOWARD PFEFFER
By EDWARD G. NELSON, as Trustee
By: /s/ Edward G. Nelson
---------------------------------
Name: Edward G. Nelson
Title: Trustee
Address: Nelson Capital Corp.
3401 West End Avenue
Nashville, TN 37203
/s/ Roy E. Claverie
_____________________________________
Roy E. Claverie
6107 Hickory Valley Road
Nashville, TN 37205
B-32
<PAGE>
ROY E. CLAVERIE, JR.
1996 VESTED TRUST
By WILLIAM S. JONES, as Trustee
By: /s/ William S. Jones
---------------------------------
Name: William S. Jones
Title: Trustee
Address: 6015 Wellesley Way
Brentwood, TN 37027
ROY E. CLAVERIE, JR. 1996
GENERATION SKIPPING TRUST
By WILLIAM S. JONES, as Trustee
By: /s/ William S. Jones
---------------------------------
Name: William S. Jones
Title: Trustee
Address: 6015 Wellesley Way
Brentwood, TN 37027
KEITH J. CLAVERIE, JR.
1996 VESTED TRUST
By WILLIAM S. JONES, as Trustee
By: /s/ William S. Jones
---------------------------------
Name: William S. Jones
Title: Trustee
Address: 6015 Wellesley Way
Brentwood, TN 37027
B-33
<PAGE>
KEITH J. CLAVERIE, JR.
1996 GENERATION SKIPPING TRUST
By WILLIAM S. JONES, as Trustee
By: /s/ William S. Jones
---------------------------------
Name: William S. Jones
Title: Trustee
Address: 6015 Wellesley Way
Brentwood, TN 37027
TRUST AGREEMENT OF JUNE 11, 1987
BETWEEN BRONSON AND MARTHA
INGRAM, GRANTORS, AND EDWARD G.
NELSON TRUSTEE FOR THE BENEFIT OF
KEITH JOSEPH CLAVERIE
By EDWARD G. NELSON, as Trustee
By /s/ Edward G. Nelson
----------------------------------
Name: Edward G. Nelson
Title: Trustee
Address: Nelson Capital Corp.
3401 West End Avenue
Nashville, TN 37203
B-34
<PAGE>
TRUST AGREEMENT OF JUNE 11, 1987
BETWEEN BRONSON AND MARTHA
INGRAM, GRANTORS, AND EDWARD G.
NELSON, TRUSTEE FOR THE BENEFIT OF
ROY EDWARD CLAVERIE, JR.
By EDWARD G. NELSON, as Trustee
By: /s/ Edward G. Nelson
---------------------------------
Name: Edward G. Nelson
Title: Trustee
Address: Nelson Capital Corp.
3401 West End Avenue
Nashville, TN 37203
/s/ Roy E. Claverie, Jr.
____________________________________
Roy E. Claverie, Jr.
6107 Hickory Valley Road
Nashville, TN 37205
/s/ David F. Sampsell
____________________________________
David F. Sampsell
420 Welshwood #47
Nashville, TN 37211
/s/ Steven J. Mason
____________________________________
Steven J. Mason
1318 Chickering Road
Nashville, TN 37215
B-35
<PAGE>
THE DAVID C. MASON
1996 GENERATION SKIPPING TRUST
By LINDA L. MASON AND MICHAEL G.
MASON, as Co-Trustees
By: /s/ Linda L. Mason
---------------------------------
Name: Linda L. Mason
Title: Co-Trustee
Address: 1318 Chickering Road
Nashville, TN 37215
By: /s/ Michael Mason
---------------------------------
Name: Michael Mason
Title: Co-Trustee
Address: 1318 Chickering Road
Nashville, TN 37215
THE MICHAEL G. MASON
1996 GENERATION SKIPPING TRUST
By LINDA L. MASON AND STEVEN J.
MASON, JR., as Co-Trustees
By: /s/ Linda L. Mason
---------------------------------
Name: Linda L. Mason
Title: Co-Trustee
Address: 1318 Chickering Road
Nashville, TN 37215
By: /s/ Steven J. Mason, Jr.
---------------------------------
Name: Steven J. Mason, Jr.
Title: Co-Trustee
Address: 1318 Chickering Road
Nashville, TN 37215
B-36
<PAGE>
THE STEVEN J. MASON, JR.
1996 GENERATION SKIPPING TRUST
By LINDA L. MASON AND DAVID C.
MASON, as Co-Trustees
By: /s/ Linda L. Mason
---------------------------------
Name: Linda L. Mason
Title: Co-Trustee
Address: 1318 Chickering Road
Nashville, TN 37215
By: /s/ David C. Mason
---------------------------------
Name: David C. Mason
Title: Co-Trustee
Address: 1318 Chickering Road
Nashville, TN 37215
/s/ Neil N. Diehl
_________________________________
Neil N. Diehl
6 Castle Rising
Nashville, TN 37215
/s/ W. Michael Head
_________________________________
W. Michael Head
1229 Nichol Lane
Nashville, TN 37205
/s/ David L. Hettinger
_________________________________
David L. Hettinger
5108 Woodland Hills Drive
Brentwood, TN 37027
/s/ Lavona G. Russell
_________________________________
Lavona G. Russell
9549 Butler Drive
Brentwood, TN 37027
B-37
<PAGE>
/s/ Michael F. Lovett
_________________________________
Michael F. Lovett
1013 Beech Grove Road
Brentwood, TN 37027
/s/ William S. Jones
_________________________________
William S. Jones
6015 Wellesley Way
Brentwood, TN 37027
/s/ James F. Neal
_________________________________
James F. Neal
c/o Neal & Harwell
2000 One Nashville Place
150 Fourth Avenue, North
Nashville, TN 37219
/s/ Martha R. Ingram
_________________________________
Martha R. Ingram
120 Hillwood Drive
Nashville, TN 37215
/s/ Orrin H. Ingram, II
_________________________________
Orrin H. Ingram, II
1475 Moran Road
Franklin, TN 37069
B-38
<PAGE>
TRUST FOR THE BENEFIT OF ORRIN HENRY
INGRAM, II, DATED OCTOBER 27, 1967
By SUNTRUST BANK, ATLANTA
as Successor Trustee
By: /s/ Thomas A. Shanks, Jr.
---------------------------------
Name: Thomas A. Shanks, Jr.
Title: First Vice President
Address: Trust Company Bank
Trust Company of Georgia
Attn: Thomas A. Shanks, Jr.
Trust Company Tower
25 Park Place, 2nd Floor
Atlanta, GA 30303
TRUST FOR THE BENEFIT OF ORRIN HENRY
INGRAM, II, DATED JUNE 14, 1968
By SUNTRUST BANK, ATLANTA
as Successor Trustee
By: /s/ Thomas A. Shanks, Jr.
---------------------------------
Name: Thomas A. Shanks, Jr.
Title: First Vice President
Address: Trust Company Bank
Trust Company of Georgia
Attn: Thomas A. Shanks, Jr.
Trust Company Tower
25 Park Place, 2nd Floor
Atlanta, GA 30303
B-39
<PAGE>
TRUST FOR THE BENEFIT OF ORRIN H.
INGRAM, II, DATED DECEMBER 22, 1975
By SUNTRUST BANK, ATLANTA
as Successor Trustee
By: /s/ M. Steven Carroll
---------------------------------
Name: M. Steven Carroll
Title: Group Vice President
Address: Trust Company Bank
Trust Company of Georgia
Attn: Thomas A. Shanks, Jr.
Trust Company Tower
25 Park Place, 2nd Floor
Atlanta, GA 30303
ORRIN H. INGRAM IRREVOCABLE
TRUST DATED AUGUST 16, 1988
By ROY E. CLAVERIE, as Trustee
By: /s/ Roy E. Claverie
---------------------------------
Name: Roy E. Claverie
Title: Trustee
Address: 6107 Hickory Valley Road
Nashville, TN 37205
1994 ORRIN HENRY INGRAM TRUST
By ROY E. CLAVERIE, as Trustee
By: /s/ Roy E. Claverie
---------------------------------
Name: Roy E. Claverie
Title: Trustee
Address: 6107 Hickory Valley Road
Nashville, TN 37205
B-40
<PAGE>
/s/ John R. Ingram
________________________________________
John R. Ingram
311 Jackson Boulevard
Nashville, TN 37205
THE JOHN AND STEPHANIE INGRAM
FAMILY 1996 GENERATION SKIPPING TRUST
By WILLIAM S. JONES, as Trustee
By: /s/ William S. Jones
---------------------------------
Name: William S. Jones
Title: Trustee
Address: 6015 Wellesley Way
Brentwood, TN 37027
TRUST FOR THE BENEFIT OF JOHN
RIVERS INGRAM, DATED OCTOBER 27, 1967
By SUNTRUST BANK, ATLANTA
as Successor Trustee
By: /s/ M. Steven Carroll
---------------------------------
Name: M. Steven Carroll
Title: Group Vice President
Address: Trust Company Bank
Trust Company of Georgia
Attn: Thomas A. Shanks, Jr.
Trust Company Tower
25 Park Place, 2nd Floor
Atlanta, GA 30303
B-41
<PAGE>
TRUST FOR THE BENEFIT OF JOHN RIVERS INGRAM,
DATED JUNE 14, 1968
By SUNTRUST BANK, ATLANTA
as Successor Trustee
By: /s/ M. Steven Carroll
---------------------------------
Name: M. Steven Carroll
Title: Group Vice President
Address: Trust Company Bank
Trust Company of Georgia
Attn: Thomas A. Shanks, Jr.
Trust Company Tower
25 Park Place, 2nd Floor
Atlanta, GA 30303
TRUST FOR THE BENEFIT OF JOHN R.
INGRAM, DATED DECEMBER 22, 1975
By SUNTRUST BANK, ATLANTA
as Successor Trustee
By: /s/ M. Steven Carroll
---------------------------------
Name: M. Steven Carroll
Title: Group Vice President
Address: Trust Company Bank
Trust Company of Georgia
Attn: Thomas A. Shanks, Jr.
Trust Company Tower
25 Park Place, 2nd Floor
Atlanta, GA 30303
B-42
<PAGE>
JOHN R. INGRAM IRREVOCABLE TRUST
DATED AUGUST 16, 1988
By ROY E. CLAVERIE, as Trustee
By: /s/ Roy E. Claverie
---------------------------------
Name: Roy E. Claverie
Title: Trustee
Address: 6107 Hickory Valley Road
Nashville, TN 37205
1994 JOHN RIVERS INGRAM TRUST
By ROY E. CLAVERIE, as Trustee
By: /s/ Roy E. Claverie
---------------------------------
Name: Roy E. Claverie
Title: Trustee
Address: 6107 Hickory Valley Road
Nashville, TN 37205
/s/ Robin B. Ingram Patton
________________________________________
Robin B. Ingram Patton
1600 Chickering Road
Nashville, TN 37215
B-43
<PAGE>
TRUST FOR THE BENEFIT OF ROBIN
INGRAM, DATED OCTOBER 27, 1967
By SUNTRUST BANK, ATLANTA
as Successor Trustee
By: /s/ M. Steven Carroll
---------------------------------
Name: M. Steven Carroll
Title: Group Vice President
Address: Trust Company Bank
Trust Company of Georgia
Attn: Thomas A. Shanks, Jr.
Trust Company Tower
25 Park Place, 2nd Floor
Atlanta, GA 30303
TRUST FOR THE BENEFIT OF ROBIN
BIGELOW INGRAM, DATED JUNE 14, 1968
By SUNTRUST BANK, ATLANTA
as Successor Trustee
By: /s/ M. Steven Carroll
---------------------------------
Name: M. Steven Carroll
Title: Group Vice President
Address: Trust Company Bank
Trust Company of Georgia
Attn: Thomas A. Shanks, Jr.
Trust Company Tower
25 Park Place, 2nd Floor
Atlanta, GA 30303
B-44
<PAGE>
TRUST FOR THE BENEFIT OF ROBIN B.
INGRAM, DATED DECEMBER 22, 1975
By SUNTRUST BANK, ATLANTA
as Successor Trustee
By: /s/ M. Steven Carroll
---------------------------------
Name: M. Steven Carroll
Title: Group Vice President
Address: Trust Company Bank
Trust Company of Georgia
Attn: Thomas A. Shanks, Jr.
Trust Company Tower
25 Park Place, 2nd Floor
Atlanta, GA 30303
ROBIN B. INGRAM IRREVOCABLE
TRUST DATED AUGUST 16, 1988
By ROY E. CLAVERIE, as Trustee
By: /s/ Roy E. Claverie
---------------------------------
Name: Roy E. Claverie
Title: Trustee
Address: 6107 Hickory Valley Road
Nashville, TN 37205
1994 ROBIN INGRAM PATTON TRUST
By ROY E. CLAVERIE, as Trustee
By: /s/ Roy E. Claverie
---------------------------------
Name: Roy E. Claverie
Title: Trustee
Address: 6107 Hickory Valley Road
Nashville, TN 37205
B-45
<PAGE>
/s/ Panjah P. Shah
________________________________________
Panjah P. Shah
1201 Parker Place
Brentwood, TN 37027-7002
/s/ S. Ray Taylor
________________________________________
S. Ray Taylor
3280 Central Valley Road
Murfreesboro, TN 37219
/s/ Jacob S. Sherman
________________________________________
Jacob S. Sherman
215 Lauderdale Road
Nashville, TN 37205
/s/ Susan R. Flaster
________________________________________
Susan R. Flaster
144 September Drive
La Vergne, TN 37086
B-46
EXHIBIT A
FORM OF AGREEMENT TO BE BOUND
To the Parties to the Registration
Rights Agreement dated as of
November 6, 1996
Dear Sirs:
Reference is made to the Registration Rights Agreement (the
"AGREEMENT") dated as of November 6, 1996 among Ingram Micro Inc. and the
Persons listed on the signature pages thereof.
In consideration of the transfer of Registrable Securities (as
defined in the Agreement) to the undersigned, the undersigned hereby
confirms and agrees to be bound by all of the provisions of the Agreement.
This letter shall be construed and enforced in accordance with the
laws of the State of Delaware without regard to the conflicts of law rules
of such state.
Very truly yours,
Permitted Transferee
<PAGE>
ANNEX I
FAMILY STOCKHOLDERS
David B. Ingram
David and Sarah Ingram Family
1996 Generation Skipping Trust
Trust for the Benefit of David Bronson Ingram,
Dated October 27,1967
Trust for the Benefit of David Bronson Ingram,
Dated June 14, 1968
Trust for the Benefit of David B. Ingram,
Dated December 22, 1975
David B. Ingram Irrevocable Trust
Dated August 16, 1988
1994 David Bronson Ingram Trust
Martha R. Ingram
Orrin H. Ingram, II
Trust for the Benefit of Orrin Henry Ingram, II,
Dated October 27, 1967
Trust for the Benefit of Orrin Henry Ingram, II,
Dated June 14, 1968
Trust for the Benefit of Orrin H. Ingram, II,
Dated December 22, 1975
Orrin H. Ingram Irrevocable Trust
Dated August 16, 1988
1994 Orrin Henry Ingram Trust
<PAGE>
John R. Ingram
John and Stephanie Ingram Family
1996 Generation Skipping Trust
Trust for the Benefit of John Rivers Ingram,
Dated October 27, 1967
Trust for the Benefit of John Rivers Ingram,
Dated June 14, 1968
Trust for the Benefit of John R. Ingram,
Dated December 22, 1975
John R. Ingram Irrevocable Trust
Dated August 16, 1988
1994 John Rivers Ingram Trust
Robin B. Ingram Patton
Trust for the Benefit of Robin Ingram,
Dated October 27, 1967
Trust for the Benefit of Robin Bigelow Ingram,
Dated June 14, 1968
Trust for the Benefit of Robin B. Ingram,
Dated December 22, 1975
Robin B. Ingram Irrevocable Trust
Dated August 16, 1988
1994 Robin Ingram Patton Trust
B-2
EXHIBIT 10.15
BOARD REPRESENTATION AGREEMENT
AGREEMENT dated as of November 6th, 1996 among Ingram Micro Inc., a
Delaware corporation ("Micro"), and each Person listed on the signature
pages hereof.
WHEREAS, Micro believes it is in the best interest of Micro and its
stockholders to become a free standing corporation rather than a subsidiary of
Ingram Industries Inc. ("Industries"); and
WHEREAS, Micro believes that the proposed Split-Off (as defined herein)
from Industries will facilitate its ability to raise capital, including its
initial public offering, and will allow Micro to more effectively design
incentives for its employees, all to the benefit of Micro and its
stockholders; and
WHEREAS, the Family Stockholders (as defined herein) are willing to
relinquish certain rights in exchange for the bargained for provisions of this
Agreement (all of which are, and are intended to be, an inducement for the
Family Stockholders to effect the Split-Off); and
WHEREAS, the parties hereto desire to provide for certain rights and
obligations relating to the composition and qualifications of the board of
directors of Micro following the date hereof;
Accordingly, in consideration of the mutual promises herein contained
and other good and valuable consideration, the receipt, sufficiency and
mutuality of which are hereby acknowledged by each of the parties hereto, the
parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1 Definitions.
(a) The following terms, as used herein, have the following meanings:
"Approving Family Stockholders" means the QTIP Marital Trust created
under the E. Bronson Ingram Revocable Trust Agreement dated January 4, 1995,
Martha R. Ingram, Orrin H. Ingram, II, John R. Ingram, David B. Ingram, Robin
B. Ingram Patton, E. Bronson Ingram 1995 Charitable Remainder 5% Unitrust,
Martha and Bronson Ingram Foundation, Trust for Orrin Henry Ingram, II, under
Agreement with E. Bronson Ingram dated October 27, 1967, Trust for the Benefit
of Orrin Henry Ingram, II, under Agreement with E. Bronson Ingram dated June
14, 1968, Trust for Orrin Henry Ingram, II, under Agreement with Hortense B.
Ingram dated December 22, 1975, The Orrin H. Ingram Irrevocable Trust dated
July 9, 1992, the Trust for the Benefit of Orrin H. Ingram established by
Martha R. Rivers under Agreement of Trust originally dated April 30, 1982,
as amended, the Trust for John Rivers Ingram, under Agreement with E.
Bronson Ingram dated October 27, 1967, the Trust for John Rivers Ingram,
under Agreement with Hortense B. Ingram dated December 22, 1975, The John
R. Ingram Irrevocable Trust dated July 9, 1992, the Trust for the Benefit
of John R. Ingram established by Martha R. Rivers under Agreement of
Trust originally dated April 30, 1982, The John and Stephanie Ingram Family
1996 Generation Skipping Trust, the Trust for David B. Ingram, under
Agreement with Hortense B. Ingram dated December 22, 1975, The David B.
Ingram Irrevocable Trust dated July 9, 1992, the Trust for the Benefit of
David B. Ingram established by Martha R. Rivers under Agreement of Trust
originally dated April 30, 1982, the David and Sarah Ingram Family 1996
Generation Skipping Trust, the Trust for Robin Bigelow Ingram, under
Agreement with E. Bronson Ingram dated October 27, 1967, Trust for Robin
Bigelow Ingram, under Agreement with Hortense B. Ingram dated December 22,
1975, The Robin Ingram Patton Irrevocable Trust, dated July 9, 1992 and
Trust for the Benefit of Robin B. Ingram established by Martha R. Rivers
under Agreement of Trust originally dated April 30, 1982, and all Permitted
Transferees of each such Person.
"Approving Voting Power" means, as of any date, the number of votes able
to be cast pursuant to Section 2.5(d) by the Approving Family Stockholders
consistent with Exhibit A hereto.
"Board" means the board of directors of Micro.
"Fair Market Value" means with respect to the Micro Common Shares, as of
any given date or dates, the reported closing price of a share of such class
of common stock on such exchange or market as is the principal trading market
for such class of common stock. If such class of common stock is not traded
on an exchange or principal trading market on such date, the fair market value
of a Micro Common Share shall be determined by the Board in good faith taking
into account as appropriate recent sales of the Micro Common Shares, recent
valuations of the Micro Common Shares, the lack of liquidity of the Micro
Common Shares, the fact that the Micro Common Shares may represent a minority
interest and such other factors as the Committee shall in its discretion deem
relevant or appropriate.
"Family Agent" means a Person appointed by a majority of the Approving
Voting Power of the Approving Family Stockholders from time to time as
provided in Section 3.13 of this Agreement.
"Family Stockholders" means the Persons listed on the signature pages
hereof (other than Micro) and all Permitted Transferees of each such Person.
"Independent" means, with respect to any Person, a Person who shall (i)
not be an executive officer or other employee of Micro and (ii) not be a
member of the Ingram Family.
"Ingram Family" means Martha R. Ingram, her descendants (including
adopted persons and their descendants) and their respective spouses.
"Micro Common Shares" means the shares of common stock of Micro,
including the Class B common stock and the Class A common stock, par value
$0.01 per share, of Micro.
"Outstanding Voting Power" means, as of any date, the number of votes
able to be cast for the election of directors represented by all Micro Common
Shares outstanding on such date.
"Permitted Transferee" means, with respect to any Family Stockholder,
any of the other Family Stockholders or any of their respective spouses,
descendants (including adopted persons and their descendants), estates,
affiliates or any trust or other entities for the benefit of any of the
foregoing Persons and beneficiaries of the E. Bronson Ingram QTIP Marital Trust
upon the death of Martha R. Ingram, whether the transfer occurs voluntarily
during life or at death, whether by appointment, will or intestate descent or
distribution. Without limiting the generality of the foregoing, transfers
from the QTIP Marital Trust created under the E. Bronson Ingram Revocable
Trust Agreement dated January 4, 1995 to the Martha and Bronson Ingram
Foundation, the Ingram Charitable Fund or any of the other beneficiaries
thereof shall be deemed to be transfers to Permitted Transferees.
"Person" means an individual, corporation, partnership, limited
liability company, trust, association or any other entity or organization,
including a government or political subdivision or an agency or
instrumentality thereof.
"Split-Off" means the contemplated distribution by Industries of all the
stock of Micro and Ingram Entertainment Inc. to certain stockholders of
Industries effected in accordance with Section 355 of the Internal Revenue
Code of 1986, as amended.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
<TABLE>
<S> <C> <C>
Term Section
---- -------
Approving Family Stockholder Notice.... 2.5
Date of Confirmation................... 2.5
Family Directors....................... 2.2
Independent Directors.................. 2.2
Management Director.................... 2.2
Significant Actions.................... 2.5
</TABLE>
ARTICLE 2
BOARD COMPOSITION AND CORPORATE GOVERNANCE
SECTION 2.1 Number of Directors; Term; Quorum; Vote. The bylaws of
Micro shall provide for a Board consisting of at least seven and no more than
nine members. The term of each director will be one year, commencing
immediately following the annual meeting of stockholders at which such
director is to be elected and ending at such time after the next annual
meeting of stockholders as his or her successor is elected and qualified or
upon such director's death, or earlier resignation or removal in accordance
with this Agreement or applicable law. Except as otherwise provided herein,
the bylaws of Micro shall provide that the vote of a majority of the entire
Board of directors shall be required for all actions of the Board.
SECTION 2.2 Qualifications of Directors; Subsequent Nominations of
Directors.
(a) Composition and Qualifications of the Board. The Family
Stockholders agree to vote their shares of Micro Common Shares to cause the
Board, from and after the date of this Agreement and until their successors
are duly elected and qualified in accordance with law and the terms of this
Agreement, to consist of the chief executive officer of Micro, four
individuals named by the Family Stockholders and who may be Family
Stockholders, and the individuals who shall be Independent and who shall have
been approved by the Family Stockholders. All subsequent nominations of
persons for election to the Board contained in proxy soliciting material
distributed on behalf of Micro during the term of this Agreement will be
made by the Nominating Committee, and all persons proposed to fill
vacancies on the Board, shall in each case be consistent with the
provisions of Micro's bylaws which shall provide the following
qualifications for directors:
(i) Three individuals who are designated by the Family Stockholders
and who need not be Independent and may be Family Stockholders
(the "Family Directors");
(ii) One individual who is designated by the chief executive officer of
Micro, who need not be Independent and who may be the chief
executive officer of Micro (the "Management Director"); and
(iii) Four (in the case of a board consisting of eight directors) or
five (in the case of a board consisting of nine directors)
individuals, as the case may be from time to time, who shall be
Independent (the "Independent Directors").
(b) Addition of Ninth Director. After the election and
qualification of the eight directors as set forth in this Section 2.2
above, the Board may be expanded to nine directors by the affirmative vote
of a majority of such eight directors. Such ninth director shall have the
qualifications of being nominated by a majority of the Nominating Committee
and shall be Independent. After the initial qualification and election of
such ninth director as set forth in this Section 2.2(b), any vacancy
created by the death, resignation or removal of such director shall be
filled pursuant to Section 2.3 below.
SECTION 2.3 Filling of Vacancies. The bylaws of Micro shall provide
that if, as a result of the death, resignation or removal of a director, a
vacancy is created on the Board, the vacancy shall be filled in the following
manner with individuals with the following qualifications: (a) if the vacancy
resulted from the death, resignation or removal of a Family Director, the
vacancy shall be filled by vote of a majority of the remaining Family
Directors; (b) if the vacancy resulted from the death, resignation or removal
of the Management Director, the vacancy shall be filled by a person qualifying
to be a Management Director as designated by the chief executive officer of
Micro; and (c) if the vacancy resulted from the death, resignation or removal
of an Independent Director, the vacancy shall be filled by a person qualifying
to be an Independent Director nominated by the Nominating Committee and
approved by a majority of the entire Board then in office. The bylaws of Micro
shall provide that if such vacancy on the Board also creates a vacancy on any
committee thereof, the Board will appoint such replacement director elected in
accordance with this Section 2.3 to fill the committee position or positions
held by his or her predecessor.
SECTION 2.4 Committees.
(a) General. The bylaws of Micro shall provide for the designation,
qualification and composition of the Board committees as set forth below and
shall provide that all committees shall act by vote of the majority of the
entire number of directors which constitute the committee.
i. Nominating Committee. The Nominating Committee will consist
of three (3) directors, two of whom will be Family
Directors, and one of whom will be the Management Director.
ii. Executive Committee. The Executive Committee will consist
of three (3) directors, one of whom will be a Family
Director, one of whom will be the Management Director and
one of whom will be an Independent Director.
iii. Compensation Committee. The Compensation Committee will
consist of three (3) directors, one of whom will be a Family
Director, and two of whom will be Independent Directors.
The Compensation Committee shall establish the
compensation of all executive officers of Micro and shall
administer all stock option, purchase and equity
incentive plans.
iv. Audit Committee. The Audit Committee will consist of at
least three (3) directors. At least a majority of the
members of the Audit Committee will be Independent
Directors.
(b) Selection and Removal of Committee Members. The bylaws shall
provide that the Nominating Committee shall name the directors to serve on the
Board committees and shall direct the Nominating Committee to follow the
qualification requirements set forth in Sections 2.2 and 2.4(a). A Committee
member shall be subject to removal from his or her position as a Committee
member by the vote of a majority of the members of the Nominating Committee.
SECTION 2.5 Actions Requiring Consent of Approving Family Stockholders.
(a) Significant Actions. In addition to any vote required by
applicable law, the bylaws shall provide that so long as this Agreement
remains effective, the following actions ("Significant Actions") will not be
taken by or on behalf of Micro without the written approval of Approving
Family Stockholders, acting in their sole discretion, holding at least a
majority of the Approving Voting Power held by all of the Approving Family
Stockholders:
(i) any sale or other disposition or transfer of all or
substantially all of the assets of Micro (considered together with its
subsidiaries);
(ii) any merger, consolidation or share exchange involving Micro,
other than mergers effected for administrative reasons of subsidiaries
owned at least 90% by Micro which under applicable law can be effected
without stockholder approval;
(iii) any issuance (or transfer from treasury) of additional
equity, convertible securities, warrants or options with respect to the
capital stock of Micro, or any of its subsidiaries, or the adoption of
any additional equity plans by or on behalf of Micro or any of its
subsidiaries except for (A) options granted or stock sold in the
ordinary course of business pursuant to plans approved by the Family
Stockholders, and (B) the issuance of Micro Common Shares valued at
Fair Market Value in acquisitions as to which no approval is required
under subsection (iv) of this Section or as to which approval has been
obtained under subsection (iv) of this Section;
(iv) any acquisition by or on behalf of Micro or one of its
subsidiaries involving a total aggregate consideration in excess of 10%
of Micro's stockholders' equity calculated in accordance with generally
accepted accounting principles for the most recent quarter for which
financial information is available (after taking into account the amount
of any indebtedness for borrowed money to be assumed or discharged by
Micro or any of its subsidiaries and any amounts required to be
contributed, invested or borrowed by Micro or any of its subsidiaries if
such contribution, investment or borrowing is reasonably contemplated by
Micro to be necessary within 12 months after the date of the
acquisition);
(v) guaranteeing indebtedness of an entity other than a
subsidiary of Micro exceeding 5% of Micro's stockholders' equity
calculated in accordance with generally accepted accounting principles
for the most recent quarter for which financial information is available;
(vi) incurrence of indebtedness by Micro after the consummation
of the initial public offering of Micro Common Shares (other than
indebtedness incurred after the initial public offering of Micro which
renews or replaces a previously existing facility so long as the
aggregate amount of indebtedness is not increased) in a transaction which
could be reasonably expected to reduce Micro's investment rating lower
than one grade below the ratings of Micro by Moody's Investors Service
("Moody's"), Fitch Investors Service, L.P. ("Fitch") or Standard &
Poor's Rating Group ("Standard & Poor's") immediately following the
initial public offering, but in any event incurrence of indebtedness by
Micro after the consummation of the initial public offering which could
be reasonably expected to reduce such investment rating lower than Baa
by Moody's; BBB- by Fitch; or BBB- by Standard & Poor's; and
(vii) any other transaction having substantially the same effect
as a transaction described in clauses (i) through (vi) of this Section
2.5.
(b) Notices and Information Required To Be Given. Micro shall give
notice to each of the Approving Family Stockholders of any potential, proposed
or contemplated Significant Action, along with all information that Micro
believes in good faith that an Approving Family Stockholder might reasonably
consider to be material in deciding whether or not to approve such Significant
Action (an "Approving Family Stockholder Notice"). An Approving Family
Stockholder Notice will be given by Micro to each of the Approving Family
Stockholders as soon as is practicable under the circumstances, but in no
event later than five (5) days prior to the date on which the Significant
Action is expected to occur. Micro shall be deemed to have given the required
Approving Family Stockholder Notice to each Approving Family Stockholder when
the Family Agent receives such Approving Family Stockholder Notice consistent
with the requirements of Sections 2.5 and 3.3 and a copy of such Approving
Family Stockholder Notice is delivered to Bass, Berry & Sims PLC, Attention:
Leigh Walton, by telecopy to (615) 742-6298 or by physical delivery to 2700
First American Center, Nashville, TN 37238-2700.
(c) Consent Deemed to be Given. The approval of each Significant
Action required to be given by the Approving Family Stockholders consistent
with Section 2.5(a) will be deemed to have been given by the Approving Family
Stockholders if Micro does not receive communications from the Family Agent
withholding such approval within five (5) business days from the Date of
Confirmation. For purposes of this Section 2.5(c) "Date of Confirmation"
means the day Micro confirms the actual receipt of such Approving Family
Stockholder Notice by the Family Agent and Bass, Berry & Sims PLC consistent
with the requirements of Sections 2.5 and 3.3.
(d) Approving Family Stockholder Voting Power. With respect to any
vote pursuant to Section 2.5, and as of any given date, each Approving Family
Stockholder shall be entitled to cast a number of votes equal to (i) the
Outstanding Voting Power of all Micro Common Shares owned of record by such
Approving Family Stockholder, plus (ii) any voting power attributed to such
Approving Family Stockholder under Exhibit A hereto.
SECTION 2.6 Other Corporate Governance Provisions; Liability Insurance.
(a) Governance by Board. Micro will be managed by or under the
direction of its Board. The bylaws of Micro shall provide that each member of
the Board, and all committees of the Board, shall have at all times full
access to the books and records of Micro and all minutes of stockholder, Board
and committee meetings, proceedings and actions and that each member of the
Board shall have the right to add items to any agenda for a meeting of the
Board. The bylaws of Micro shall also provide that during the period of time
between each regularly scheduled meeting of the Board, management decisions
requiring the immediate attention of the Board may be made with the approval
of a majority of the members of the Executive Committee; provided, however,
that the Executive Committee will not have the authority to approve any of the
following items, all of which require the approval of the Board: (i) any
action that would require the approval of the holders of a majority of the
Outstanding Voting Power held by the Family Stockholders under Section 2.5
above or that would require approval of the holders of a majority of the
Micro Common Shares under applicable law or under the certificate of
incorporation or bylaws of Micro (provided, however, that subject to
applicable law, the Board shall be entitled to delegate to the Executive
Committee the authority to negotiate and finalize actions, the general
terms of which have been approved by the Board); (ii) any acquisition with
a total aggregate consideration in excess of 2% of Micro's stockholders'
equity calculated in accordance with generally accepted accounting
principles for the most recent quarter for which financial information is
available (after taking into account the amount of any indebtedness to be
assumed or discharged by Micro or any of its subsidiaries and any amounts
required to be contributed, invested or borrowed by Micro or any of its
subsidiaries); (iii) any action outside of the ordinary course of business
of Micro; or (iv) any other action involving a material shift in policy or
business strategy for the Board.
(b) Directors' Liability Insurance. Unless otherwise agreed by the
written consent of the Family Stockholders, Micro shall maintain, to the
extent commercially available at reasonable rates, for the benefit of the
directors adequate directors' liability insurance to cover the reasonably
anticipated risks associated with their positions. Micro shall enter into
contracts with directors which assure them of indemnification to the full
extent allowable by law both while they serve as directors and thereafter and
the Micro certificate of incorporation will include all applicable provisions
necessary to effect the maximum protection provided by Section 102(b)(7) of
the Delaware General Corporation Law.
SECTION 2.7 Agreement to Vote; Best Efforts.
(a) Generally. Each party to this Agreement agrees (i) to use its
best efforts to take all actions necessary to cause the Family Directors, the
Management Director and the Independent Directors to be elected or appointed
to the Board, (ii) to act in a manner consistent with the intent of this
Agreement in nominating and electing persons to be directors and in filling
any vacancy in the membership of the Board, and (iii) to take such other
necessary or appropriate actions as may be required to give effect to the
provisions of this Agreement.
(b) Amendment of Class A and B Shares. The provisions of the
certificate of incorporation of Micro relating to the Micro Common Shares will
not be altered without the consent of a majority of the Outstanding Voting
Power held by the Family Stockholders.
(c) Amendment of Bylaws. The bylaws of Micro shall provide that,
during the term of this Agreement, (i) the stockholders may alter, amend,
restate or repeal such bylaws or any of them, or make new bylaws, only by the
affirmative vote of the holders of 75 % of the voting power of the then
outstanding Micro Common Shares and (ii) the Board may alter, amend, restate
or repeal such bylaws or any of them, or make new bylaws, only by the
affirmative vote of three-quarters (3/4) of the members of the entire Board.
(d) No Conflicting Provisions of Certificate of Incorporation or
Bylaws. Except as may be required by applicable law, during the term of this
Agreement, the parties hereto agree to use their best efforts to prevent any
provision of Micro's certificate of incorporation or bylaws from containing
any terms inconsistent with the provisions of this Agreement, and from being
amended, modified, supplemented, restated or repealed in a manner inconsistent
with the provisions of this Agreement.
SECTION 2.8 Termination. This Agreement will terminate and be of no
further force or effect on the first date on which the Family Stockholders and
their Permitted Transferees together hold beneficially less than 25,000,000
Micro Common Shares (as such number is equitably adjusted to reflect stock
splits, stock dividends, recapitalizations or other transactions in the
capital stock of Micro).
ARTICLE 3
MISCELLANEOUS
SECTION 3.1 Headings. The headings in this Agreement are for
convenience of reference only and shall not control or affect the meaning or
construction of any provisions hereof.
SECTION 3.2 Entire Agreement. This Agreement constitutes the entire
agreement and understanding of the parties hereto in respect of the subject
matter contained herein. This Agreement supersedes all prior agreements and
understandings between the parties hereto with respect to the subject matter
hereof.
SECTION 3.3 Notices. Any notice, request, instruction or other
document to be given hereunder by any party hereto to another party hereto
shall be in writing (including telecopier or similar writing) and shall be
given to such party at its address set forth on the signature pages hereof, or
to such other address as the party to whom notice is to be given may provide
in a written notice to the party giving such notice, a copy of which written
notice shall be on file with the Secretary of Micro. Except as otherwise
provided herein, each such notice, request or other communication shall be
effective (i) if given by telecopy, when such telecopy is transmitted to the
telecopy number specified on the signature pages hereof and the appropriate
confirmation is received, (ii) if given by mail, 72 hours after such
communication is deposited in the mails with first class postage prepaid
addressed as aforesaid or (iii) if given by any other means, when delivered at
the address specified in this Section 3.3.
SECTION 3.4 Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without regard
to the conflicts of law rules of such state.
SECTION 3.5 Severability. The invalidity or unenforceability of any
provisions of this Agreement in any jurisdiction shall not affect the
validity, legality or enforceability of the remainder of this Agreement in
such jurisdiction or the validity, legality or enforceability of this
Agreement, including any such provision, in any other jurisdiction, it being
intended that all rights and obligations of the parties hereunder shall be
enforceable to the fullest extent permitted by law.
SECTION 3.6 Successors, Assigns, Transferees. The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, successors and permitted assigns. Notwithstanding
the foregoing, neither this Agreement nor any right, remedy, obligation or
liability arising hereunder or by reason hereof shall be assignable by any
party hereto; provided that each Family Stockholder agrees that, in connection
with any transfer by such Family Stockholder of Micro Common Shares after the
Split-Off to a Permitted Transferee (as defined herein), such Family
Stockholder shall assign its rights hereunder with respect to the shares so
transferred to the transferee of such Micro Common Shares. In such event, such
transferee shall execute and deliver to Micro an instrument or instruments
substantially in the form of Exhibit B hereto confirming that the transferee
has agreed to be bound, to the same extent and in the same manner as the
transferor, by the terms of this Agreement, a copy of which instrument shall
be maintained on file with the Secretary of Micro and shall include the
address of such transferee to which notices hereunder shall be sent. Neither
this Agreement nor any provision hereof shall be construed so as to confer any
right or benefit upon any Person other than the parties to this Agreement,
those who agree to be bound hereby and their respective successors and
permitted assigns.
SECTION 3.7 Amendments; Waivers.
(a) No failure or delay on the part of any party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. The
rights and remedies herein provided shall be cumulative and not exclusive of
any rights or remedies provided by law.
(b) Neither this Agreement nor any term or provision hereof may be
amended or waived except by an instrument in writing signed, in the case of an
amendment, by each of the parties hereto and, in the case of waiver, by the
party against whom the enforcement of such waiver is sought.
SECTION 3.8 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be an original with the same effect as if
the signatures thereto and hereto were upon the same instrument.
SECTION 3.9 Remedies. The parties hereby acknowledge and agree that in
the event of any breach of this Agreement, the parties would be irreparably
harmed and could not be made whole by monetary damages. Each party hereto
accordingly agrees (i) not to assert by way of defense or otherwise that a
remedy at law would be adequate, and (ii) in addition to any other remedy to
which the parties may be entitled, that the remedy of specific performance of
this Agreement is appropriate in any action in court.
SECTION 3.10 Consent to Jurisdiction. Each party hereto irrevocably
submits to the non-exclusive jurisdiction of any court of the State of
Delaware or any United States Federal Court sitting in the State of Delaware
over any suit, action or proceeding arising out of or relating to this
Agreement. Each party hereto waives any right it may have to assert the
doctrine of forum non conveniens or to object to venue to the extent any
proceeding is brought in accordance with this Section 3.10. Nothing in this
paragraph shall affect or limit any right to serve process in any manner
permitted by law, to bring proceedings in the courts of any jurisdiction or to
enforce in any lawful manner a judgment obtained in one jurisdiction in any
other jurisdiction.
SECTION 3.11 Reliance on Corporate Records of Micro. For purposes of
this Agreement, Micro shall be entitled to determine the identity or existence
of one or more Family Stockholders, Approving Family Stockholders and their
Permitted Transferees by relying on the shareholder and other records of Micro.
SECTION 3.12 Actions by Family Stockholders. Except as otherwise
provided herein, all actions required to be taken hereunder by the Family
Stockholders shall be taken by the holders of a majority of the Outstanding
Voting Power held by the Family Stockholders.
SECTION 3.13 Actions by the Approving Family Stockholders; Family Agent.
(a) All actions required to be taken hereunder by the Approving Family
Stockholders shall be taken by the holders of a majority of the Approving
Voting Power held by the Approving Family Stockholders.
(b) The Approving Family Stockholders agree to appoint a Person to serve
as Family Agent on or before the date of the Split-Off, and to maintain a
Family Agent for the duration of this Agreement. The appointment of a Person
to serve as Family Agent shall become effective upon the receipt by Micro of a
written notice pursuant to Section 3.3 of such appointment by the holders of
a majority of the Approving Voting Power held by the Approving Family
Stockholders. The Family Agent is authorized to report the decisions of the
Approving Family Stockholders, and Micro shall be entitled to rely on a
written statement from the Family Agent as to actions taken by the Approving
Family Stockholders.
(c) A Family Agent shall serve in the agency capacity set forth in this
Agreement until (i) this Agreement terminates pursuant to Section 2.8 or (ii)
Micro receives notice from the holders of a majority of the Approving Voting
Power held by the Approving Family Stockholders that another Person has been
appointed as the Family Agent.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
INGRAM MICRO INC.
By: /s/ Jeffrey R. Rodek
---------------------------------
Name: Jeffrey R. Rodek
Title: President
1600 East Saint Andrew Place
Santa Ana, California 92705
Telecopy: 714-566-7900
/s/ Martha R. Ingram
---------------------------------------
Martha R. Ingram
120 Hillwood Drive
Nashville, TN 37215
/s/ Orrin H. Ingram, II
---------------------------------------
Orrin H. Ingram, II
1475 Moran Road
Franklin, TN 37069
/s/ John R. Ingram
---------------------------------------
John R. Ingram
311 Jackson Boulevard
Nashville, TN 37205
/s/ David B. Ingram
---------------------------------------
David B. Ingram
4417 Tyne Boulevard
Nashville, TN 37215
/s/ Robin B. Ingram Patton
---------------------------------------
Robin B. Ingram Patton
1600 Chickering Road
Nashville, TN 37215
QTIP MARITAL TRUST CREATED UNDER
THE E. BRONSON INGRAM REVOCABLE
TRUST AGREEMENT DATED JANUARY 4, 1995
By: MARTHA R. INGRAM, ORRIN H.
INGRAM, JOHN R. INGRAM,
DAVID B. INGRAM AND ROBIN B. INGRAM
PATTON, as Co-Trustees
By: /s/ Martha R. Ingram
----------------------------------
Name: Martha R. Ingram
Title: Co-Trustee
Address: 120 Hillwood Drive
Nashville, TN 37215
By: /s/ Orrin H. Ingram
----------------------------------
Name: Orrin H. Ingram
Title: Co-Trustee
Address: 1475 Moran Road
Franklin, TN 37069
By: /s/ John R. Ingram
----------------------------------
Name: John R. Ingram
Title: Co-Trustee
Address: 311 Jackson Boulevard
Nashville, TN 37205
By: /s/ David B. Ingram
----------------------------------
Name: David B. Ingram
Title: Co-Trustee
Address: 4417 Tyne Boulevard
Nashville, TN 37215
By: /s/ Robin B. Ingram Patton
----------------------------------
Name: Robin B. Ingram Patton
Title: Co-Trustee
Address: 1600 Chickering Road
Nashville, TN 37215
E. BRONSON INGRAM 1995 CHARITABLE
REMAINDER 5% UNITRUST
By: MARTHA R. INGRAM, as Trustee
By: /s/ Martha R. Ingram
----------------------------------
Name: Martha R. Ingram
Title: Trustee
Address: 120 Hillwood Drive
Nashville, TN 37215
MARTHA AND BRONSON INGRAM
FOUNDATION
By: ORRIN H. INGRAM, JOHN R. INGRAM,
DAVID B. INGRAM, AND ROBIN BIGELOW
INGRAM PATTON, as Co-Trustees
By: /s/ Orrin H. Ingram
----------------------------------
Name: Orrin H. Ingram
Title: Co-Trustee
Address: 1475 Moran Road
Franklin, TN 37069
By: /s/ John R. Ingram
----------------------------------
Name: John R. Ingram
Title: Co-Trustee
Address: 311 Jackson Boulevard
Nashville, TN 37205
By: /s/ David B. Ingram
----------------------------------
Name: David B. Ingram
Title: Co-Trustee
Address: 4417 Tyne Boulevard
Nashville, TN 37215
By: /s/ Robin Bigelow Ingram Patton
----------------------------------
Name: Robin Bigelow Ingram Patton
Title: Co-Trustee
Address: 1600 Chickering Road
Nashville, TN 37215
E. BRONSON INGRAM 1994
CHARITABLE LEAD ANNUITY TRUST
By: ORRIN H. INGRAM, JOHN R. INGRAM,
DAVID B. INGRAM, AND ROBIN B.
INGRAM PATTON, as Co-Trustees
By: /s/ Orrin H. Ingram
----------------------------------
Name: Orrin H. Ingram
Title: Co-Trustee
Address: 1475 Moran Road
Franklin, TN 37069
By: /s/ John R. Ingram
----------------------------------
Name: John R. Ingram
Title: Co-Trustee
Address: 311 Jackson Boulevard
Nashville, TN 37205
By: /s/ David B. Ingram
----------------------------------
Name: David B. Ingram
Title: Co-Trustee
Address: 4417 Tyne Boulevard
Nashville, TN 37215
By: /s/ Robin B. Ingram Patton
----------------------------------
Name: Robin B. Ingram Patton
Title: Co-Trustee
Address: 1600 Chickering Road
Nashville, TN 37215
TRUST FOR ORRIN HENRY INGRAM, II,
UNDER AGREEMENT WITH E. BRONSON
INGRAM DATED OCTOBER 27, 1967
By: SUNTRUST BANK, ATLANTA,
MARTHA R. INGRAM AND FREDERIC
B. INGRAM, AS CO-TRUSTEES
By: /s/ M. Steven Carroll
----------------------------------
Name: M. Steven Carroll
Title: Group Vice President
Address: SunTrust Bank, Atlanta
Attn: Thomas A. Shanks, Jr.
Trust Company Tower
25 Park Place, 2nd Floor
Atlanta, GA 30303
By: /s/ Martha R. Ingram
----------------------------------
Name: Martha R. Ingram
Title: Co-Trustee
Address: 120 Hillwood Drive
Nashville, TN 37215
By: /s/ Frederic B. Ingram
----------------------------------
Name: Frederic B. Ingram
Title: Co-Trustee
Address: 813 Greenway Dr.
Beverly Hills, CA 90210
TRUST FOR ORRIN HENRY INGRAM, II, UNDER
AGREEMENT WITH E. BRONSON INGRAM DATED
JUNE 14, 1968
By: SUNTRUST BANK, ATLANTA, AND
MARTHA R. INGRAM, AS CO-TRUSTEES
By: /s/ M. Steven Carroll
----------------------------------
Name: M. Steven Carroll
Title: Group Vice President
Address: SunTrust Bank, Atlanta
Attn: Thomas A. Shanks, Jr.
Trust Company Tower
25 Park Place, 2nd Floor
Atlanta, GA 30303
By: /s/ Martha R. Ingram
----------------------------------
Name: Martha R. Ingram
Title: Co-Trustee
Address: 120 Hillwood Drive
Nashville, TN 37215
TRUST FOR ORRIN HENRY INGRAM, II, UNDER
AGREEMENT WITH HORTENSE B. INGRAM DATED
DECEMBER 22, 1975
By: SUNTRUST BANK, ATLANTA,
Trustee
By: /s/ M. Steven Carroll
----------------------------------
Name: M. Steven Carroll
Title: Group Vice President
Address: SunTrust Bank, Atlanta
Attn: Thomas A. Shanks, Jr.
Trust Company Tower
25 Park Place, 2nd Floor
Atlanta, GA 30303
THE ORRIN H. INGRAM IRREVOCABLE TRUST
DATED JULY 9, 1992
By: ROY E. CLAVERIE, as Trustee
By: /s/ Roy E. Claverie
----------------------------------
Name: Roy E. Claverie
Title: Trustee
Address: 6107 Hickory Valley Road
Nashville, TN 37205
TRUST FOR THE BENEFIT OF ORRIN H. INGRAM
ESTABLISHED BY MARTHA R. RIVERS UNDER
AGREEMENT OF TRUST ORIGINALLY
DATED APRIL 30, 1982, AS AMENDED
By: ROY E. CLAVERIE, as Trustee
By: /s/ Roy E. Claverie
----------------------------------
Name: Roy E. Claverie
Title: Trustee
Address: 6107 Hickory Valley Road
Nashville, TN 37205
TRUST FOR JOHN RIVERS INGRAM, UNDER
AGREEMENT WITH E. BRONSON INGRAM DATED
OCTOBER 27, 1967
By: SUNTRUST BANK, ATLANTA, MARTHA R.
INGRAM AND FREDERIC B. INGRAM, AS
CO-TRUSTEES
By: /s/ M. Steven Carroll
----------------------------------
Name: M. Steven Carroll
Title: Group Vice President
Address: SunTrust Bank, Atlanta
Attn: Thomas A. Shanks, Jr.
Trust Company Tower
25 Park Place, 2nd Floor
Atlanta, GA 30303
By: /s/ Martha R. Ingram
----------------------------------
Name: Martha R. Ingram
Title: Co-Trustee
Address: 120 Hillwood Drive
Nashville, TN 37215
By: /s/ Frederic B. Ingram
----------------------------------
Name: Frederic B. Ingram
Title: Co-Trustee
Address: 813 Greenway Dr.
Beverly Hills, CA 90210
TRUST FOR JOHN RIVERS INGRAM, UNDER
AGREEMENT WITH E. BRONSON INGRAM DATED
JUNE 14, 1968
By: SUNTRUST BANK, ATLANTA AND MARTHA R.
INGRAM, AS CO-TRUSTEES
By: /s/ M. Steven Carroll
----------------------------------
Name: M. Steven Carroll
Title: Group Vice President
Address: SunTrust Bank, Atlanta
Attn: Thomas A. Shanks, Jr.
Trust Company Tower
25 Park Place, 2nd Floor
Atlanta, GA 30303
By: /s/ Martha R. Ingram
----------------------------------
Name: Martha R. Ingram
Title: Co-Trustee
Address: 120 Hillwood Drive
Nashville, TN 37215
TRUST FOR JOHN RIVERS INGRAM, UNDER
AGREEMENT WITH HORTENSE B. INGRAM DATED
DECEMBER 22, 1975
By: SUNTRUST BANK, ATLANTA, Trustee
By: /s/ M. Steven Carroll
----------------------------------
Name: M. Steven Carroll
Title: Group Vice President
Address: SunTrust Bank, Atlanta
Attn: Thomas A. Shanks, Jr.
Trust Company Tower
25 Park Place, 2nd Floor
Atlanta, GA 30303
THE JOHN R. INGRAM IRREVOCABLE TRUST DATED
JULY 9, 1992
By: ROY E. CLAVERIE, as Trustee
By: /s/ Roy E. Claverie
----------------------------------
Name: Roy E. Claverie
Title: Trustee
Address: 6107 Hickory Valley Road
Nashville, TN 37205
TRUST FOR THE BENEFIT OF JOHN R. INGRAM
ESTABLISHED BY MARTHA R. RIVERS UNDER
AGREEMENT OF TRUST ORIGINALLY DATED APRIL
30, 1982, AS AMENDED
By: ROY E. CLAVERIE, as Trustee
By: /s/ Roy E. Claverie
----------------------------------
Name: Roy E. Claverie
Title: Trustee
Address: 6107 Hickory Valley Road
Nashville, TN 37205
THE JOHN AND STEPHANIE INGRAM FAMILY 1996
GENERATION SKIPPING TRUST
By: WILLIAM S. JONES, as Trustee
By: /s/ William S. Jones
----------------------------------
Name: William S. Jones
Title: Trustee
Address:
TRUST FOR DAVID B. INGRAM, UNDER AGREEMENT
WITH E. BRONSON INGRAM DATED OCTOBER 27,
1967
By: SUNTRUST BANK, ATLANTA, MARTHA R.
INGRAM AND FREDERIC B. INGRAM, AS
CO-TRUSTEES
By: /s/ M. Steven Carroll
----------------------------------
Name: M. Steven Carroll
Title: Group Vice President
Address: SunTrust Bank, Atlanta
Attn: Thomas A. Shanks, Jr.
Trust Company Tower
25 Park Place, 2nd Floor
Atlanta, GA 30303
By: /s/ Martha R. Ingram
----------------------------------
Name: Martha R. Ingram
Title: Co-Trustee
Address: 120 Hillwood Drive
Nashville, TN 37215
By: /s/ Frederic B. Ingram
----------------------------------
Name: Frederic B. Ingram
Title: Co-Trustee
Address: 813 Greenway Dr.
Beverly Hills, CA 90210
TRUST FOR DAVID B. INGRAM, UNDER AGREEMENT
WITH E. BRONSON INGRAM DATED JUNE 14, 1968
By: SUNTRUST BANK, ATLANTA AND MARTHA R.
INGRAM, AS CO-TRUSTEES
By: /s/ M. Steven Carroll
----------------------------------
Name: M. Steven Carroll
Title: Group Vice President
Address: SunTrust Bank, Atlanta
Attn: Thomas A. Shanks, Jr.
Trust Company Tower
25 Park Place, 2nd Floor
Atlanta, GA 30303
By: /s/ Martha R. Ingram
----------------------------------
Name: Martha R. Ingram
Title: Co-Trustee
Address: 120 Hillwood Drive
Nashville, TN 37215
TRUST FOR DAVID B. INGRAM, UNDER AGREEMENT
WITH HORTENSE B. INGRAM DATED DECEMBER
22, 1975
By: SUNTRUST BANK, ATLANTA, Trustee
By: /s/ M. Steven Carroll
----------------------------------
Name: M. Steven Carroll
Title: Group Vice President
Address: SunTrust Bank, Atlanta
Attn: Thomas A. Shanks, Jr.
Trust Company Tower
25 Park Place, 2nd Floor
Atlanta, GA 30303
THE DAVID B. INGRAM IRREVOCABLE
TRUST DATED JULY 9, 1992
By: ROY E. CLAVERIE, as Trustee
By: /s/ Roy E. Claverie
----------------------------------
Name: ROY E. CLAVERIE
Title: Trustee
Address: 6107 Hickory Valley Road
Nashville, TN 37205
TRUST FOR THE BENEFIT OF DAVID B. INGRAM
ESTABLISHED BY MARTHA R. RIVERS UNDER
AGREEMENT OF TRUST ORIGINALLY DATED APRIL
30, 1982, AS AMENDED
By: ROY E. CLAVERIE, as Trustee
By: /s/ Roy E. Claverie
----------------------------------
Name: Roy E. Claverie
Title: Trustee
Address: 6107 Hickory Valley Road
Nashville, TN 37205
DAVID AND SARAH INGRAM FAMILY 1996
GENERATION SKIPPING TRUST
By: THOMAS H. LUNN, AS TRUSTEE
By: /s/ Thomas H. Lunn
-----------------------------------
Name: Thomas H. Lunn
Title: Trustee
Address: 509 Sugartree Lane
Franklin, TN 37064
TRUST FOR ROBIN BIGELOW INGRAM, UNDER
AGREEMENT WITH E. BRONSON INGRAM DATED
OCTOBER 27, 1967
By: SUNTRUST BANK, ATLANTA MARTHA R.
INGRAM AND FREDERIC B. INGRAM, AS
CO-TRUSTEES
By: /s/ M. Steven Carroll
----------------------------------
Name: M. Steven Carroll
Title: Group Vice President
Address: SunTrust Bank, Atlanta
Attn: Thomas A. Shanks, Jr.
Trust Company Tower
25 Park Place, 2nd Floor
Atlanta, GA 30303
By: /s/ Martha R. Ingram
----------------------------------
Name: Martha R. Ingram
Title: Co-Trustee
Address: 120 Hillwood Drive
Nashville, TN 37215
By: /s/ Frederic B. Ingram
----------------------------------
Name: Frederic B. Ingram
Title: Co-Trustee
Address: 813 Greenway Drive
Beverly Hills CA 90210
TRUST FOR ROBIN BIGELOW INGRAM, UNDER
AGREEMENT WITH E. BRONSON INGRAM DATED
JUNE 14, 1968
By: SUNTRUST BANK, ATLANTA AND MARTHA R.
INGRAM, AS CO-TRUSTEES
By: /s/ M. Steven Carroll
----------------------------------
Name: M. Steven Carroll
Title: Group Vice President
Address: SunTrust Bank, Atlanta
Attn: Thomas A. Shanks, Jr.
Trust Company Tower
25 Park Place, 2nd Floor
Atlanta, GA 30303
By: /s/ Martha R. Ingram
----------------------------------
Name: Martha R. Ingram
Title: Co-Trustee
Address: 120 Hillwood Drive
Nashville, TN 37215
By: /s/ Frederic B. Ingram
----------------------------------
Name: Frederic B. Ingram
Title: Co-Trustee
Address: 813 Greenway Drive
Beverly Hills CA 90210
TRUST FOR ROBIN BIGELOW INGRAM, UNDER
AGREEMENT WITH HORTENSE B. INGRAM DATED
DECEMBER 22, 1975
By: SUNTRUST BANK, ATLANTA, Trustee
By: /s/ M. Steven Carroll
----------------------------------
Name: M. Steven Carroll
Title: Group Vice President
Address: SunTrust Bank, Atlanta
Attn: Thomas A. Shanks, Jr.
Trust Company Tower
25 Park Place, 2nd Floor
Atlanta, GA 30303
THE ROBIN INGRAM PATTON IRREVOCABLE
TRUST DATED JULY 9, 1992
By: ROY E. CLAVERIE, as Trustee
By: /s/ Roy E. Claverie
----------------------------------
Name: Roy E. Claverie
Title: Trustee
Address: 6107 Hickory Valley Road
Nashville, TN 37205
TRUST FOR THE BENEFIT OF ROBIN B. INGRAM
ESTABLISHED BY MARTHA R. RIVERS UNDER
AGREEMENT OF TRUST ORIGINALLY DATED APRIL
30, 1982, AS AMENDED
By: ROY E. CLAVERIE, as Trustee
By: /s/ Roy E. Claverie
----------------------------------
Name: Roy E. Claverie
Title: Trustee
Address: 6107 Hickory Valley Road
Nashville, TN 37205
EXHIBIT A
Attribution of Approving Voting Power
1. With respect to any vote pursuant to Section 2.5, and as of any
given date, Martha R. Ingram shall be attributed and entitled to cast a
number of votes equal to the Outstanding Voting Power of all Micro Common
Shares owned by Trust for John Rivers Ingram, under an Agreement with E.
Bronson Ingram dated June 14, 1968, plus the Outstanding Voting Power of
all Micro Common Shares owned by the Trust for David B. Ingram, under an
Agreement with E. Bronson Ingram dated October 27, 1967, plus the
Outstanding Voting Power of all Micro Common Shares owned by the Trust for the
Benefit of David Bronson Ingram, dated June 14, 1968, plus the Outstanding
Voting Power of all Micro Common Shares owned by the Trust for Robin Bigelow
Ingram, under an Agreement with E. Bronson Ingram dated June 14, 1968.
2. With respect to any vote pursuant to Section 2.5, and as of any
given date, Orrin H. Ingram, II shall be attributed and entitled to cast a
number of votes equal to twenty-five percent (25%) of the Outstanding Voting
Power of all Micro Common Shares owned by E. Bronson Ingram 1994 Charitable
Lead Annuity Trust.
3. With respect to any vote pursuant to Section 2.5, and as of any
given date, John R. Ingram shall be attributed and entitled to cast a number
of votes equal to twenty-five percent (25%) of the Outstanding Voting Power of
all Micro Common Shares owned by E. Bronson Ingram 1994 Charitable Lead
Annuity Trust.
4. With respect to any vote pursuant to Section 2.5, and as of any
given date, David B. Ingram shall be attributed and entitled to cast a number
of votes equal to twenty-five percent (25%) of the Outstanding Voting Power of
all Micro Common Shares owned by E. Bronson Ingram 1994 Charitable Lead
Annuity Trust.
5. With respect to any vote pursuant to Section 2.5, and as of any
given date, Robin B. Ingram Patton shall be attributed and entitled to cast a
number of votes equal to twenty-five percent (25%) of the Outstanding Voting
Power of all Micro Common Shares owned by E. Bronson Ingram 1994 Charitable
Lead Annuity Trust.
EXHIBIT B
FORM OF AGREEMENT TO BE BOUND
[DATE]
To the Parties to the Board Representation Agreement
Dated as of _______, ____
Ladies and Gentlemen:
Reference is made to the Board Representation Agreement (the
"Agreement") dated as of __________ among Ingram Micro Inc. and the Persons
listed on the signature pages thereof.
In consideration of the transfer to the undersigned of Micro Common
Shares (as defined in the Agreement), the undersigned hereby confirms and
agrees to be bound by all of the provisions of the Agreement applicable to the
transferor.
This letter shall be construed and enforced in accordance with the laws
of the State of Delaware without regard to the conflicts of law rules of such
state.
Very truly yours,
Permitted Transferee
EXHIBIT 10.16
THRIFT PLAN LIQUIDITY AGREEMENT
THRIFT PLAN LIQUIDITY AGREEMENT dated as of November 6, 1996
between Ingram Micro Inc., a Delaware corporation ("MICRO"), and the Ingram
Thrift Plan (together with its successors and permitted assigns, the "THRIFT
PLAN").
In consideration of the mutual promises set forth below (the
mutuality, adequacy and sufficiency of which are hereby acknowledged), the
parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1. DEFINITIONS. The following terms, as used herein, have
the following meanings:
"BENEFITS TRANSFER AGREEMENT" means the Employee Benefits Transfer
and Assumption Agreement of even date herewith among Micro, Ingram Industries
Inc. and Ingram Entertainment Inc.
"COMMISSION" means the Securities and Exchange Commission.
"ELIGIBLE REPURCHASE PERIOD" means the period commencing on the
effective date of the initial Public Offering and ending on the effective date
of any registration statement filed pursuant to Section 2.1(b); provided that
the "Eligible Repurchase Period" shall not include any period (i) commencing on
the date of delivery of a written notice by Micro pursuant to Section 2.1(a),
2.1(b) or 2.1(c) and (ii) ending on the day following the earliest to occur of
(a) the last day of effectiveness of the registration statement in respect of
which such notice was delivered, (b) the day after the date on which such
registration statement is withdrawn pursuant to Section 2.3 or (c) the 90th day
after the date of such written notice,
<PAGE>
if such registration statement shall not have been declared effective by such
time.
"FAIR MARKET VALUE" means, with respect to one share of Micro Common
Stock as of any date, the reported closing price on such date of a share of
Micro Common Stock on such exchange or market as is the principal trading market
for the Micro Common Stock (regardless of whether such listed or traded share of
Micro Common Stock is of the same class as the share of Micro Common Stock in
respect of which the determination of Fair Market Value is being made).
"LIQUIDITY EVENT" means any event that requires that shares of Micro
Common Stock held by the Thrift Plan be sold in order to fund a distribution to
a participant required pursuant to the terms of the Thrift Plan consistent with
past practice.
"MICRO COMMON STOCK" means the common stock of Micro, including
without limitation the Class A common stock and the Class B common stock, par
value $0.01 per share, of Micro.
"PUBLIC OFFERING" means a public offering of Micro Common Stock
pursuant to an effective registration statement under the Securities Act, other
than pursuant to a registration statement on Form S-4 or Form S-8 or any
successor or similar form.
"REGISTRABLE SECURITIES" means, as of any date, (i) shares of Micro
Common Stock held by the Thrift Plan that the trustees of the Thrift Plan
determine, in their good faith opinion, should be sold as of such date in order
to comply with the provisions of Section 404(a) of The Employee Retirement
Income Security Act of 1974, as amended and (ii) shares of Micro Common Stock in
respect of which a Liquidity Event has occurred as of such date. Registrable
Securities shall cease to be Registrable Securities when (x) a registration
statement with respect to the disposition of such securities shall have become
effective under the Securities Act and such securities shall have been disposed
of pursuant to such effective registration statement, (y) such securities shall
have been sold under circumstances in which all of the applicable conditions of
Rule 144 under the Securities Act are met or (z) such securities may be sold
pursuant to Rule 144(k) under the Securities Act or otherwise in the public
market without being registered under the Securities Act.
"REGISTRATION EXPENSES" means all (i) registration and filing fees,
(ii) fees and expenses of compliance with
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securities or blue sky laws and the reasonable fees and disbursements of counsel
in connection with blue sky qualifications of the Registrable Securities, (iii)
printing expenses, (iv) internal expenses of Micro (including, without
limitation, all salaries and expenses of officers and employees performing legal
or accounting duties), (v) fees and disbursements of counsel for Micro, (vi)
customary fees and expenses for independent certified public accountants
retained by Micro (including the expenses of any comfort letters or costs
associated with the delivery by independent certified public accountants of a
comfort letter or comfort letters), (vii) fees and expenses of any special
experts retained by Micro in connection with such registration and (viii) fees
and expenses of listing the Registrable Securities to be registered pursuant to
this Agreement on a securities exchange.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
ARTICLE 2
REGISTRATION PROVISIONS; SHARE REPURCHASES
SECTION 2.1. SECURITIES ACT REGISTRATION. (a) Micro may elect, by
delivery of written notice to the Thrift Plan, to effect the registration, as
soon as practicable following the initial Public Offering, of Registrable
Securities on Form S-1 under the Securities Act; provided that if such
registration shall not have been effected within 90 days following such initial
Public Offering, Micro shall be obligated to repurchase such Registrable
Securities on the terms and conditions set forth in Section 2.4(a). The Thrift
Plan shall deliver written notice to Micro, within ten days after receipt by the
Thrift Plan of such written notice from Micro, of the number of Registrable
Securities to be included in such registration. Whether to make any election to
effect the registration of such Registrable Securities shall be in the sole and
absolute discretion of Micro.
(b) Micro may elect, by delivery of written notice to the Thrift
Plan, to effect the registration, as soon as practicable following the first
anniversary of the effective date of the initial Public Offering, of the
Registrable Securities on Form S-3 under the Securities Act; provided that if
such registration shall not have been effected within 90 days following such
anniversary, Micro
3
<PAGE>
shall be obligated to repurchase such Registrable Securities on the terms and
conditions set forth in Section 2.4(a). The Thrift Plan shall deliver written
notice to Micro, within ten days after receipt by the Thrift Plan of such
written notice from Micro, of the number of Registrable Securities to be
included in such registration. Whether to make any election to effect the
registration of such Registrable Securities shall be in the sole and absolute
discretion of Micro.
(c) Micro shall deliver written notice to the Thrift Plan in the
event that Micro is required to use its best efforts to effect a registration
pursuant to Section 7.01(b) of the Stock Option, SAR and ISU Conversion and
Exchange Agreement dated as of September 4, 1996 among Micro and the other
parties thereto. The Thrift Plan shall then deliver written notice to Micro,
within ten days after receipt by the Thrift Plan of such written notice from
Micro, of the number of Registrable Securities to be included in any such
registration, and Micro shall use its best efforts to include such Registrable
Securities in such registration.
SECTION 2.2. EFFECTIVENESS OF REGISTRATIONS. (a) Micro shall use its
best efforts to cause any registration pursuant to Section 2.1(a) to remain
effective (and not be subject to any stop order, injunction or other order or
requirement of the Commission or other governmental agency or court for any
reason) for a period of not less than 30 days following the date on which such
registration was declared effective, or, if earlier, the date on which all
Registrable Securities registered thereunder have been sold.
(b) Subject to Section 2.3(b), Micro shall use its best efforts to
cause any registration pursuant to Section 2.1(b) to remain effective (and not
be subject to any stop order, injunction or other order or requirement of the
Commission or other governmental agency or court for any reason) for the period
beginning on the date on which such registration was declared effective and
ending on the date on which all Registrable Securities registered thereunder
have been sold or, if earlier, the date on which no Registrable Securities
remain outstanding.
SECTION 2.3. EXPENSES; MICRO DISCRETION. (a) Micro shall pay all
Registration Expenses in connection with any registration effected pursuant to
the terms of this Agreement.
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(b) With respect to any registration statement filed or to be filed
pursuant to this Agreement, if the Board of Directors of Micro shall determine,
in its good faith judgment, that to maintain the effectiveness of such
registration statement or to permit such registration statement to become
effective (or, if no registration statement has yet been filed, to file such a
registration statement) would be significantly disadvantageous to Micro, Micro
may cause such registration statement to be withdrawn and the effectiveness of
such registration statement to be temporarily suspended or, if no registration
statement has yet been filed, delay the filing of such registration statement.
Micro shall not be liable for the failure of any such registration statement to
become effective provided that Micro complies with its obligations under this
Agreement; provided that, if any registration effected pursuant to Section
2.1(a) or 2.1(b) is so withdrawn or delayed for a period of more than 120
consecutive days, Micro shall be obligated to repurchase the Registrable
Securities to have been included in such registration on the terms and
conditions set forth in Section 2.4(a).
SECTION 2.4 SHARE REPURCHASES. (a) Subject to Section 2.4(d), if a
registration of Registrable Securities shall not have been effected during the
applicable time period specified in Section 2.1(a) or 2.1(b), or if required
pursuant to Section 2.3(b), the Thrift Plan may elect, by written notice
delivered to Micro within 90 days following the expiration of the time period
specified in Section 2.1(a) or Section 2.1(b), respectively, or the expiration
of the 120-day period referred to in Section 2.3(b), to sell to Micro the
Registrable Securities otherwise to have been included in such registration at a
purchase price, payable in cash, equal to the Fair Market Value of such
Registrable Securities as of the date such purchase is effected pursuant to
Section 2.4(c) and otherwise in the manner set forth herein.
(b) Subject to Section 2.4(d), at any time during the Eligible
Repurchase Period, the Thrift Plan may elect, by written notice delivered to
Micro, to sell to Micro, and Micro shall be required to purchase from the Thrift
Plan, the shares of Micro Common Stock with respect to which a Liquidity Event
has occurred, at a purchase price, payable in cash, equal to the Fair Market
Value of such shares as of the date such purchase is effected pursuant to
Section 2.3(c) and otherwise in the manner set forth herein; provided that Micro
shall not be obligated to make a repurchase pursuant to this Section 2.4(b) on
more than one occasion during any calendar month.
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(c) The closing of any repurchase made pursuant to this Section 2.4
shall be effected in one lump sum and, subject to Section 2.4(b), shall be
consummated as promptly as practicable following receipt of the written notice
from the Thrift Plan referred to in Section 2.4(a) or 2.4(b) upon at least five
days' prior notice by Micro of the date, time and place of the closing of such
repurchase.
(d) Notwithstanding anything herein to the contrary, (i) Micro shall
not be obligated to make any such purchase if Micro determines in good faith
that such purchase would adversely affect the qualification of the transactions
contemplated by the Exchange Agreement or Reorganization Agreement (as defined
in the Benefits Transfer Agreement) for tax-free treatment under Section 355 of
the Internal Revenue Code, as amended, or if such purchase would be prohibited
by the terms of any credit facility or financing agreement of Micro then in
effect, and (ii) Micro shall not be obligated to repurchase pursuant to Section
2.4(a), during any fiscal year, Registrable Securities of the type described in
clause (i) of the definition of "Registrable Securities" having an aggregate
purchase price in excess of the greater of $10 million or 3% of the stockholders
equity of Micro as of the beginning of such fiscal year (it being understood
that shares of Micro Common Stock shall be repurchased on a first-come,
first-served basis until the limit for such fiscal year has been reached).
(e) Micro hereby agrees to use commercially reasonable efforts to
negotiate the terms of each credit facility and financing agreement of Micro so
as to minimize any restrictions on the ability of Micro to make repurchases
hereunder.
ARTICLE 3
MISCELLANEOUS
SECTION 3.1. HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not control or affect the meaning or
construction of any provisions hereof.
SECTION 3.2. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement and understanding of the parties hereto in respect of the subject
matter contained herein. This Agreement supersedes all prior agreements and
understandings between the parties hereto with respect to the subject matter
hereof.
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SECTION 3.3. NOTICES. Any notice, request, instruction or other
document to be given hereunder by either party hereto to the other party hereto
shall be in writing (including telecopier or similar writing) and shall be given
to such party at its address set forth on the signature pages hereof, or to such
other address as the party to whom notice is to be given may provide in a
written notice to the party giving such notice. If notice is given pursuant to
this Section of a successor or permitted assign of a party to this Agreement,
then notice shall thereafter be given as set forth above to such successor or
assign. Each such notice, request or other communication shall be effective (i)
if given by telecopy, when such telecopy is transmitted to the telecopy number
specified on the signature pages hereof and electronic or oral confirmation of
receipt is received, (ii) if given by mail, at the close of business on the
third business day after such communication is deposited in the mails with first
class postage prepaid addressed as aforesaid or (iii) if given by any other
means, when delivered at the address specified in this Section 3.3.
SECTION 3.4. APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without regard to
the conflicts of law rules of such state.
SECTION 3.5. SEVERABILITY. The invalidity or unenforceability of any
provision of this Agreement in any jurisdiction shall not affect the validity,
legality or enforceability of the remainder of this Agreement in such
jurisdiction or the validity, legality or enforceability of this Agreement,
including any such provision, in any other jurisdiction, it being intended that
all rights and obligations of the parties hereunder shall be enforceable to the
fullest extent permitted by law.
SECTION 3.6. SUCCESSORS, ASSIGNS. Neither this Agreement nor any
right, remedy, obligation or liability arising hereunder or by reason hereof
shall be assignable by Micro or by the Thrift Plan; provided that the Thrift
Plan may assign its rights hereunder to the Micro Thrift Plan or the
Entertainment Thrift Plan (each as defined in the Benefits Transfer Agreement)
in connection with any transfer of Micro Common Stock to the Micro Thrift Plan
or Entertainment Thrift Plan, respectively, pursuant to Section 3.1 of the
Benefits Transfer Agreement; provided that each such assignee shall have
executed and delivered to Micro an instrument in form and substance satisfactory
to Micro pursuant to which such assignee shall have agreed to be bound by the
terms of this Agreement. This Agreement is
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<PAGE>
binding upon the parties to this Agreement and their respective successors and
permitted assigns and inures to the benefit of the parties to this Agreement and
their respective successors and assigns. Neither this Agreement nor any
provision hereof shall be construed so as to confer any right or benefit upon
any entity other than the parties to this Agreement, those who agree to be bound
hereby and their respective successors and assigns. References to a party to
this Agreement are also references to any successor or permitted assign of such
party and, when appropriate to effect the binding nature of this Agreement for
the benefit of another party, any other successor or assign of a party.
SECTION 3.7. AMENDMENTS; WAIVERS. (a) No failure or delay on the
part of either party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege.
(b) Neither this Agreement nor any term or provision hereof may be
amended or waived except by an instrument in writing signed by the parties
hereto.
SECTION 3.8. COUNTERPARTS. This Agreement may be executed in two
counterparts, both of which shall be an original with the same effect as if the
signatures thereto and hereto were upon the same instrument.
SECTION 3.9. REMEDIES. The parties hereby acknowledge and agree that
in the event of any breach of this Agreement, the parties would be irreparably
harmed and could not be made whole by monetary damages. Each party hereto
accordingly agrees (i) not to assert by way of defense or otherwise that a
remedy at law would be adequate, and (ii) in addition to any other remedy to
which the parties may be entitled, that the remedy of specific performance of
this Agreement is appropriate in any action in court. The rights and remedies
herein provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 3.10. EFFECTIVENESS. This Agreement shall become effective
commencing on the effective date of the initial Public Offering.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
INGRAM MICRO INC.
By: /s/ Jeffrey R. Rodek
---------------------------------
Name: Jeffrey R. Rodek
Title: President
1600 Saint Andrew Place
Santa Ana, CA 92705
Telecopy: (714) 566-7900
INGRAM THRIFT PLAN
By W.M. HEAD, R.E. CLAVERIE
AND T.H. LUNN,
as Co-Trustees
By: /s/ William M. Head
---------------------------------
Name: William M. Head
Title: Co-Trustee
Address: 1229 Nichol Lane
Nashville, TN 37205
By: /s/ R.E. Claverie
---------------------------------
Name: R.E. Claverie
Title: Co-Trustee
Address: 6107 Hickory Valley Road
Nashville, TN 37205
By: /s/ T.H. Lunn
---------------------------------
Name: T.H. Lunn
Title: Co-Trustee
Address: 509 Sugartree Lane
Franklin, TN 37064
9
EXHIBIT 10.17
Tax Sharing and Tax Services
Agreement
This Agreement is entered into the 6th day of November, 1996,
by and among Ingram Industries Inc. ("Industries"), Ingram Entertainment
Inc. ("Entertainment") and Ingram Micro Inc. ("Micro") (Entertainment
and Micro are sometimes hereinafter referred to collectively as the
"Subsidiaries" and individually as a "Subsidiary").
WHEREAS, Industries is the common parent corporation of an
affiliated group of corporations (the "Affiliated Group") within the
meaning of section 1504(a) of the Internal Revenue Code of 1986, as amended
(the "Code"), which files consolidated federal income tax returns
("Consolidated Federal Returns");
WHEREAS, the Subsidiaries are currently wholly-owned subsidiaries of
Industries and members of the Affiliated Group;
WHEREAS, Industries files consolidated, combined or unitary state
income tax returns (collectively, "Consolidated State Returns") in certain
states for groups of corporations which include the Subsidiaries;
WHEREAS, Industries is distributing all of its stock in each of the
Subsidiaries to certain of the shareholders of Industries in split-off
transactions (each, a "Split-off" and together, the "Split-offs");
WHEREAS, the parties hereto desire to set forth their agreement
concerning the manner in which various matters relating to federal state
and foreign taxes based upon income (collectively, "Income Taxes") will be
handled after the dates of the Split-offs;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, the parties agree as follows:
1. Termination of Other Income Tax Sharing Agreements. Any existing
Income Tax sharing agreements or arrangements, whether written or
unwritten, between Industries and a Subsidiary shall terminate on the date
of the Split-off of such Subsidiary, (the "Subsidiary's Split-off Date"),
and this Agreement shall thereafter constitute the sole Income Tax sharing
agreement between Industries and such Subsidiary.
2. Filing of Income Tax Returns and Payment of Tax Liability.
(a) Federal Income Tax Returns.
(i) Return for Affiliated Group. Industries will prepare and file
the Consolidated Federal Return for the Affiliated Group for the taxable year
which includes a Subsidiary's Split-off Date.
(ii) Separate Federal Income Tax Returns. Industries shall prepare
on behalf of each Subsidiary, in consideration of a fee to be negotiated by
the parties, a separate federal income tax return for the short taxable year
of such Subsidiary which begins immediately after such Subsidiary's Split-off
Date.
(b) State Income Tax Returns.
(i) Consolidated State Income Tax Returns. Industries shall
prepare and file state income tax returns for the taxable year which includes
a Subsidiary's Split-off Date for those states in which Consolidated State
Returns are filed.
(ii) Separate State Income Tax Returns. With respect to those
states in which a Subsidiary files a separate income tax return, Industries
shall prepare on behalf of such Subsidiary, in consideration of a fee to be
negotiated by the parties, an income tax return for the taxable year of the
Subsidiary which includes such Subsidiary's Split-off Date. With respect to
those states in which Consolidated State Returns are filed in accordance with
Section 2(b)(i) above, Industries shall prepare on behalf of each Subsidiary,
in consideration of a fee to be negotiated by the parties, a separate income
tax return for the short taxable year of the Subsidiary which begins
immediately after such Subsidiary's Split-off Date.
(c) In preparing the Consolidated Federal Return and any Consolidated
State Returns for the taxable period which includes a Subsidiary's Split-off
Date, the items attributable to such Subsidiary for the portion of such
taxable period ending on the Subsidiary's Split-off Date shall be determined
by closing the books of the Subsidiary as of the Subsidiary's Split-off Date.
All such returns shall be prepared using the same procedures and on the same
basis as returns for prior periods, except as the parties hereto may otherwise
agree.
(d) Payment of Tax.
(i) Consolidated Federal and State Returns. Within thirty (30)
days after the Consolidated Federal Return and each Consolidated State
Return for the taxable year which includes a Subsidiary's Split-off Date is
filed, Industries shall notify such Subsidiary of the amount of the tax
liability reflected on such return which is allocable to such Subsidiary.
Such Subsidiary shall pay to Industries, within ten (10) days after the
date of such notice, the excess of the amount of tax liability reflected on
such tax return which is allocable to the Subsidiary over the amount
previously paid by such Subsidiary to Industries with respect to the
Subsidiary's tax liability for such taxable year, together with interest,
at the intercompany rate of interest determined by Industries' Treasury
Department (the "Inter-Company Rate") for such period, on such excess
amount for the period from the date the tax return is filed until the date
of payment by the Subsidiary. In the event that the amount of tax
liability reflected on such tax return which is allocable to the Subsidiary
is less than the amount previously paid by such Subsidiary to Industries
with respect to the Subsidiary's tax liability for such taxable year,
Industries shall pay such Subsidiary the difference, together with interest
at the Inter-Company Rate on such amount for the period from the date the
tax return is filed until the date of payment to the Subsidiary; provided,
however, that interest shall only be paid to the extent such Subsidiary's
overpayment was used to fund an underpayment by Industries or another
Subsidiary or interest on such overpayment was actually received from the
relevant taxing authority. Industries shall allocate the tax liability
reflected on the Consolidated Federal Return and each Consolidated State
Return in accordance with the method prescribed in Treas. Reg. Section
1.1552-1(a)(3).
(ii) Separate Federal and State Returns. Each Subsidiary
shall be responsible for the payment of any Income Tax liability reflected
on the Separate Income Tax returns prepared by Industries on behalf of such
Subsidiary pursuant to Sections 2(a)(ii) and 2(b)(ii) of this Agreement.
3. Subsequent Adjustments.
(a) In the event that adjustments are made to a Consolidated Federal
Return, a Consolidated State Return or a foreign or separate state Income
Tax return of Industries or a Subsidiary for any taxable year or portion
thereof ending on or before the date of the Split-off of Micro (the "Micro
Split-off Date"), whether by reason of an audit, amended return or
otherwise, and such adjustments result in an increase in the Income Tax
liability for such taxable period, the responsibility for the payment of
such increase in Income Tax liability and any interest, penalties, or
additions to tax imposed with respect to such increase (collectively, a
"Deficiency") shall, except as provided Section 3(c) and Section 4(b)
below, be determined in the following manner:
(i) The amount of a Deficiency shall first be offset against and
reduce the amount reflected in the reserve for taxes recorded on the books of
Industries as of the Micro Split-off Date (the "Reserve"). Industries shall be
responsible for payment of the amount of such Deficiency which is offset
against the Reserve in accordance with this Section 3(a)(i).
(ii) To the extent that the amount of a Deficiency exceeds the
balance in the Reserve (after giving effect to any prior reduction in the
Reserve made pursuant to this Agreement), the parties hereto shall be
responsible for the payment of the amount of such excess in the following
proportions:
Industries 23.01 percent
Micro 72.84 percent
Entertainment 4.15 percent;
(iii) Provided, however, that in the event that a Deficiency
involves a timing issue and results in a decrease in income or an increase
in a deduction, credit or other tax attribute (an "Offsetting Adjustment")
for a taxable period or portion thereof beginning after the Micro Split-off
Date, the amount of the Deficiency to be taken into account for purposes of
applying Sections 3(a)(i) and 3(a)(ii) above shall be reduced by the
present value (using a discount rate equal to 10 percent) of the tax
benefit (based on the applicable maximum corporate tax rate in effect on
the date of such adjustment) which will result from the Offsetting
Adjustment and the Subsidiary benefiting from such Offsetting Adjustment
shall pay 100 percent of the foregoing reduction in the Deficiency.
(b) In the event that a Deficiency is imposed with respect to a
Consolidated Federal Return or Consolidated State Return, or a foreign or a
separate state Income Tax Return of Entertainment, and any portion of such
Deficiency is attributable to items of Entertainment for the period beginning
immediately after the Micro Split-off Date and ending on the date of the
Split-off of Entertainment (the "Interim Period"), such portion of the
Deficiency (the "Interim Period Deficiency") shall first be offset against and
reduce the amount reflected in the reserve for taxes recorded on the books of
Industries for the Interim Period (the "Interim Period Reserve"), which shall
be established using the same procedures and on the same basis as in prior
periods. Industries shall be responsible for payment of the amount of any
Interim Period Deficiency which is offset against the Interim Reserve pursuant
to this Section 3(b). To the extent that the Interim Period Deficiency exceeds
the balance in the Interim Period Reserve (after giving effect to any prior
reduction in the Interim Period Reserve made under this Agreement),
Entertainment shall be solely responsible for the payment of the amount of
such excess.
(c) Notwithstanding the provisions of Section 3(a) or 3(b), (i) if
either the Split-off of Micro or the Split-off of Entertainment fails to
qualify for tax-free treatment under Section 355 of the Code as the result
of the breach by one of Industries, Micro or Entertainment of a
representation or covenant contained in Section 6.2 or Section 6.3 of the
Amended and Restated Exchange Agreement dated September 4, 1996, as amended
and restated on October 17, 1996 (the "Exchange Agreement"), to which
Industries and the Subsidiaries are parties, the responsibility for the
payment of any resulting Deficiency shall be borne solely by the
corporation which committed such breach; and in the event the Deficiency
results from the breach by more than one of the corporations of such
representations or covenants, the responsibility for the payment of the
Deficiency shall be shared by each of the corporations which committed such
breach in the proportion which the percentage specified for such
corporation in Section 3(a)(ii) bears to the sum of the percentages
specified therein for each of the corporations which committed such breach;
and (ii) if a Deficiency is attributable to a transaction, other than the
Split-offs, which was consummated pursuant to the Amended and Restated
Reorganization Agreement dated September 4, 1996, as amended and restated
on October 17, 1996 (the "Reorganization Agreement"), among Industries,
Micro and Entertainment, the responsibility for the payment of such
Deficiency shall be borne 23.01 percent by Industries, 72.84 percent by
Micro and 4.15 percent by Entertainment, as determined after the
application of the procedures set forth in Section 3(a)(iii), if
appropriate.
(d) In the event that the Split-off of Entertainment fails to
qualify for tax-free treatment under Section 355 of the Code and Section
3(c)(i) of this Agreement is not applicable, the amount of the resulting
Deficiency shall first be offset against and reduce the amount reflected in
the Interim Reserve and, to the extent that such Deficiency exceeds the
balance in the Interim Reserve (after giving effect to any prior reduction
in the Interim Reserve made under this Agreement), shall then be offset
against and reduce the balance reflected in the Reserve (after giving
effect to any prior reduction in the Reserve made under this Agreement);
provided, however, that no such offset against and reduction of the Reserve
shall be permitted if (i) the Split-off of Entertainment was not completed
in accordance with the provisions of the Exchange Agreement and the
Reorganization Agreement, or (ii) the facts and circumstances of the Split-
off of Entertainment differed in any material respect from the description
thereof (including the representations relating thereto) set forth in the
private letter ruling dated October 16, 1996 from the Internal Revenue
Service regarding the Split-offs unless a supplemental private letter
ruling reasonably satisfactory to Micro addressing any such differences is
obtained prior to such Split-off. Industries shall be responsible for the
payment of the amounts of such resulting Deficiency which are offset
against the Interim Reserve and the Reserve in accordance with this Section
3(d). To the extent that the amount of the resulting Deficiency exceeds
the amount offset against the Interim Reserve and the Reserve under this
Section 3(d), the responsibility for the payment of such excess amount
shall be borne 23.01 percent by Industries, 72.84 percent by Micro and 4.15
percent by Entertainment. In all other instances, the Deficiency shall be
borne 84.72 percent by Industries and 15.28 percent by Entertainment.
4. Refunds.
(a) In the event that a refund of Income Tax (other than a
refund attributable to a carryback of a loss or tax credit) is received by
Industries with respect to a Federal Consolidated Return or a State
Consolidated Return for any taxable year or portion thereof ending on or
before a Subsidiary's Split-off Date, the portion of such refund which is
attributable to items of a Subsidiary shall be promptly paid by Industries
to such Subsidiary, together with any interest received on such portion;
provided, however, that in the event that a refund is received with respect
to an amount of a Deficiency which was paid by Industries or a Subsidiary
in accordance with Section 3 above, Industries and each Subsidiary shall be
entitled to the portion of such refund, together with interest thereon,
which is the same as the proportion of the Deficiency which was paid by
such party.
(b) In the event that a Subsidiary has a net operating loss, net
capital loss or credits against tax for a taxable year beginning after such
Subsidiary's Split-off Date which, under applicable federal or state law,
may be carried back to a Consolidated Federal Return or State Consolidated
Return for a taxable period or portion thereof of the Subsidiary which ends
on or before such Subsidiary's Split-off Date, Industries shall pay to such
Subsidiary, within ten (10) days of the receipt of such refund, the amount
of the Income Tax benefit actually received by the Affiliated Group or the
applicable state consolidated, combined or unitary group, as the case may
be, as a result of such carryback. The tax benefit received as a result of
a carryback shall be considered to be equal to the excess of (i)
the Income Taxes which would have been payable for the taxable period to which
the loss or credit is carried in the absence of such carryback over (ii) the
Income Taxes actually payable for such period after taking such carryback into
effect. In the event that any portion of a carryback is disallowed following
payment to a Subsidiary of the tax benefit received from such carryback, the
Subsidiary shall repay to Industries the amount which would not have been
payable to the Subsidiary hereunder if only the portion of the carryback
actually allowed had been taken into account.
5. Allocation of Items. In the case of an assessment or refund
which is imposed or received with respect to an Income Tax Refund filed for
a taxable period that includes but does not end on a Subsidiary's Split-off
Date, the amount of the assessment or refund which relates to the portion
of the taxable period ending on such Subsidiary's Split-off Date shall be
determined by allocating the items to which the assessment or refund
relates to the date on which such items are properly taken into account for
Income Tax purposes, and in the case of any item which cannot be allocated
to a specific date, by ratably allocating such item between the portion of
the taxable period ending on such Subsidiary's Split-off Date and the
portion of the taxable period beginning immediately after such Subsidiary's
Split-off Date based on the number of days in such respective portions.
6. Certain Changes. Following a Subsidiary's Split-off Date, neither
Industries nor such Subsidiary shall, without the prior written consent of the
other parties to this Agreement, make or change any Income Tax election, adopt
or change any accounting method, file any amended Income Tax Return or agree
to or settle any claim, proposed adjustment or assessment if such action would
result in an increase in Income Tax liability or a reduction in any deduction,
credit, loss or other Income Tax attribute for any taxable period or portion
thereof of Industries or such Subsidiary which ends on or before such
Subsidiary's Split-off Date.
7. Deductions Related to Options. It is agreed by the parties that
where an option to purchase stock of Industries which is held by an
employee of Industries or Entertainment is converted in connection with the
Micro Split-off into an option to purchase stock of Micro, and Micro issues
its stock to such employee pursuant to the exercise of the converted
option, then, to the extent that Industries or Entertainment is entitled to
an Income Tax deduction for the amount of compensation which results to the
employee from exercise of the converted option, Industries or Entertainment
shall pay to Micro the amount of the tax benefit received by such
corporation from the compensation deduction.
8. Contests. Industries shall have the right to control any audit,
administrative or judicial proceeding involving a claim, proposed
adjustment, assessment or other contest with respect to a Consolidated
Federal Return, Consolidated State Return, or a separate Income Tax return
filed by Industries or a Subsidiary for any taxable period or portion
thereof ending on or prior to such Subsidiary's Split-off Date, and
Industries shall have the right to determine when to settle such claim,
adjustment, assessment or contest; provided, however, that Industries shall
consult with a Subsidiary regarding any such proceeding to the extent that
such proceeding may affect the tax liability of such Subsidiary for a
taxable period or portion thereof beginning after such Subsidiary's Split-
off Date and shall obtain the consent of a Subsidiary, which consent shall
not be unreasonably withheld, to any proposed settlement if such settlement
would increase the tax liability of such Subsidiary for a taxable period or
portion thereof beginning after such Subsidiary's Split-off Date. The
legal fees and other expenses incurred by Industries in connection with any
such proceeding shall be borne 23.01 percent by Industries, 72.84 percent
by Micro and 4.15 percent by Entertainment for proceedings related to
periods ending on or before the Micro Split-off Date. For proceedings
relating to the Interim Period, any such fees and expenses shall be borne
84.72 percent by Industries and 15.28 percent by Entertainment. Industries
shall allow a Subsidiary and its counsel to participate in any such
proceeding to the extent that the proceeding relates to such Subsidiary,
and the legal fees and other expenses incurred by a Subsidiary in this
regard shall be borne by the parties in the same proportions set forth in
the immediately preceding sentence.
9. Cooperation and Assistance. Industries and each Subsidiary agree
to provide each other with such cooperation and information as either of
them may reasonably request in connection with the preparation of Income
Tax returns, amended returns, claims for refunds or other income tax
filings or the conduct of any audit, administrative or judicial proceeding
relating to Income Taxes. Industries and each Subsidiary further agree to
retain all books, records, documents, accounting data or other information
which relate to Income Tax returns for taxable periods ending on or prior
to or which include such Subsidiary's Split-off Date, until the expiration
of the applicable statute of limitations (giving effect to any extension,
waiver or mitigation thereof).
10. Governing Law. This Agreement shall be construed under and governed
by the laws of the State of Tennessee.
11. Headings. The headings contained in this Agreement are for
reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
12. Entire Agreement; Amendment; Waiver. This Agreement
constitutes the entire agreement between the parties with respect to the
subject matter hereof and may not be altered or amended except in writing
signed by the parties. The failure of a party hereto at any time to
require the performance of any provision hereunder shall in no manner
affect the right to enforce the same. No waiver by any party hereto of any
condition, or of the breach of any provision of this Agreement shall be
deemed or construed as a further or continuing waiver of any such condition
or of the breach of any other provision herein contained.
13. Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns. This Agreement shall not be construed so as
to benefit any person other than the parties hereto and such successors and
assigns.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement on the date first written above.
INGRAM INDUSTRIES INC.
By: /s/ John R. Ingram
---------------------------
Title: Co-President
INGRAM ENTERTAINMENT INC.
By: /s/ David B. Ingram
---------------------------
Title: Chairman and President
INGRAM MICRO HOLDINGS INC.
By: /s/ Jeffrey R. Rodek
---------------------------
Title: President
EXHIBIT 10.18
MASTER SERVICES AGREEMENT
AGREEMENT dated as of November 6, 1996, between Ingram
Industries Inc., a Tennessee corporation ("Industries") and Ingram Micro Inc.,
a Delaware corporation ("Micro").
In consideration of the mutual agreements contained herein, and
other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, and intending to be legally bound, the parties hereto
agree as follows:
ARTICLE 1
PERFORMANCE OF SERVICES
SECTION 1.1. Provision of Services. (a) On the terms and
subject to the conditions of this Agreement, during the term of this Agreement
Industries agrees to provide to Micro and its Subsidiaries, or procure the
provision to Micro and its Subsidiaries of, and Micro (on behalf of itself and
its Subsidiaries) agrees to purchase from Industries, the services described
on the Schedules attached hereto (the "Services"), including without
limitation Services in connection with the administration of certain employee
benefit plans and arrangements set forth on such Schedules (the "Plans").
Notwithstanding anything herein to the contrary, Industries shall only perform
Services involving the administration of the Micro Thrift Plan (as defined in
the Employee Benefits Transfer and Assumption Agreement dated as of
November 6, 1996 among the parties hereto) upon the written request of
Micro (or an appropriate committee designated thereby) and on the condition
that the terms of the Micro Thrift Plan are acceptable to Industries.
Unless otherwise specifically agreed by the parties, the Services to be
provided or procured by Industries hereunder shall be substantially similar
in scope, quality and nature to those provided to, or procured on behalf
of, Micro and its Subsidiaries prior to the date hereof.
(b) Any administration of the Plans by Industries pursuant to
the terms hereof shall be subject to applicable regulatory requirements and
the terms of the governing plan documents as interpreted by the appropriate
plan fiduciaries. The parties shall cooperate fully with each other in the
administration and coordination of regulatory and administrative
requirements associated with the Plans. Such coordination, upon request,
will include (but not be limited to) the following: sharing payroll data
for determination of highly compensated associates, providing census
information (including accrued benefits) for purposes of running
discrimination tests, providing actuarial reports for purposes of
determining the funded status of any plan, review and coordination of
insurance and other independent third party contracts, and providing for
review of all summary plan descriptions, requests for determination
letters, insurance contracts, Forms 5500, financial statement disclosures
and plan documents.
SECTION 1.2. Service Fees; Expenses. (a) The Schedules
hereto indicate, with respect to each Service listed thereon, the method by
which fees (the "Service Fees") to be charged to Micro for such Service
will be determined. Micro agrees to pay to Industries in the manner set
forth in Section 1.3 the Service Fees applicable to each of the Services
provided by Industries to Micro (and its Subsidiaries) pursuant to the
terms hereof.
(b) In addition to any other amounts payable to Industries
hereunder, Micro shall reimburse Industries in the manner set forth in
Section 1.3 for (i) all out-of-pocket expenses (including without
limitation travel expenses, professional fees, printing and postage)
incurred by Industries in connection with the performance of Services
pursuant to this Agreement, to the extent that such expenses have not
already been taken into account in determining the Service Fees applicable
to such Services and (ii) without duplication, all costs and expenses
(including without limitation any contributions, premium costs and third-
party expenses), incurred by Industries in connection with its
administration of the Plans.
(c) In addition to any other amounts payable to Industries
hereunder, Micro shall reimburse Industries in the manner set forth in
Section 1.3 for any taxes, excises, imposts, duties, levies, withholdings
or other similar charges (excepting any charges for taxes due on
Industries' income) that Industries and its Subsidiaries may be required to
pay on account of Micro (and its Subsidiaries) in connection with the
performance of Services or with respect to payments made by Micro for such
Services pursuant to this Agreement.
SECTION 1.3. Invoicing and Settlement of Costs. (a)
Industries will deliver an invoice to Micro on a monthly basis (not later
than the fifth day of each accounting month) for (i) Service Fees in
respect of Services provided during the prior accounting month to Micro
(and its Subsidiaries) and (ii) other amounts owing to Industries pursuant
to Section 1.2. Except as otherwise provided in this Agreement, each such
invoice will be prepared and delivered in a manner substantially consistent
with the billing practices used in connection with services provided to
Micro prior to the date hereof; provided that each such invoice shall (A)
provide sufficient detail to identify each Service, the fee therefor and
the method of calculating such fee, (B) identify all third party costs
included in the invoice to the extent specifically billed and (C) include
such other data as may be reasonably requested by Micro. In addition,
Micro shall have the right to examine any and all books and records as it
reasonably requests in order to confirm and verify the calculation of the
amount of any payment pursuant to this Section and Industries shall
cooperate in any reasonable manner in such examination as Micro shall
request.
(b) Payment (including payment of any amounts disputed
pursuant to Section 1.3(c)) of each invoice shall be due from Micro on the
day (or the next business day, if such day is not a business day) that is
the later of (i) the third day prior to the end of the accounting month in
which such invoice was received and (ii) the tenth day after the receipt of
such invoice (each, a "Payment Date"), by wire transfer of immediately
available funds payable to the order of Industries. If Micro fails to make
any payment within 30 days of the relevant Payment Date, the party that has
failed to make such payment shall be obligated to pay, in addition to the
amount due on such Payment Date, interest on such amount at the prime, or
best rate announced by Nationsbank of Texas, N.A. per annum compounded
annually from the relevant Payment Date through the date of payment.
(c) In the event that Micro disputes any charges invoiced by
Industries pursuant to this Agreement, Micro shall deliver a written
statement describing the dispute to Industries within 15 days following
receipt of the disputed invoice. The statement shall provide a
sufficiently detailed description of the disputed items. The parties
hereto shall use their best efforts to resolve any such disputes. Amounts
not so disputed shall be deemed accepted. Disputed amounts resolved in
favor of Micro (together with interest on such amounts at the prime, or
best rate announced by Nationsbank of Texas, N.A. per annum compounded
annually from the date such disputed amounts were paid to Industries to the
next relevant Payment Date) shall be credited against payments owing by
Micro to Industries on the next relevant Payment Date.
(d) Unless otherwise specified on the Schedules hereto, in
the event that the actual utilization of a Service is less than the period
specified on such Schedules with respect to such Service, then the Service
Fees for such Service shall be prorated on the basis of actual utilization
of such Service; provided that the monthly charges shall not be prorated on
any period of time less than one day, the per diem charge shall not be
prorated on any period of time less than one-half day, and the hourly
charges shall not be prorated on any period of time less than one hour.
SECTION 1.4. Term. (a) The term of this Agreement shall
commence on the date hereof and shall end on December 31, 1996 (or, with
respect to payroll services provided to Micro, on December 31, 1997), unless
earlier terminated pursuant to the terms hereof. The provisions of Section
1.2 (with respect to amounts accrued prior to such termination) shall survive
any termination of this Agreement.
(b) At any time, Micro may request Industries to discontinue
performing all or any portion of the Services upon 45 days' prior written
notice.
SECTION 1.5. Limited Warranty. Industries will provide
the Services hereunder in good faith, with the care and diligence that it
exercises in the performance of such services for its divisions and
Subsidiaries. Micro hereby acknowledges that Industries does not regularly
provide to third parties services such as the Services as part of its
business and that, except as set forth in Section 1.1 or in this Section
1.5, Industries does not otherwise warrant or assume any responsibility for
its Services. The warranty stated above is in lieu of and exclusive of all
other representations and warranties of any kind whatsoever. EXCEPT AS
STATED ABOVE, THERE ARE NO WARRANTIES RELATING TO THE SERVICES OF ANY KIND,
EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTIES
OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
SECTION 1.6. Performance Remedy. In the event that
Industries fails to provide a Service hereunder, or the quality of a
Service is not in accordance with Section 1.1 or Section 1.5, Micro may
give Industries prompt written notice thereof. Industries will then have
thirty days to cure the defective Service. If after such period Industries
has failed to cure the defective Service, Micro may seek an alternative
provider for such Service and Industries shall discontinue performing such
Service at the written request of Micro. Micro shall be liable to
Industries for any Service performed by Industries after Industries has
been given written notice of termination of such Service pursuant to this
Section 1.6, except for any out-of-pocket costs incurred by Industries in
connection with the cessation of such Services or the transfer of such
Services back to Micro or its designees. Except as otherwise expressly
provided in Article 2, the provisions of this Section 1.6 will provide the
exclusive remedy for any misrepresentation, breach of warranty, covenant or
other agreement or other claim arising out of this Agreement or the
Services to be performed hereunder.
ARTICLE 2
INDEMNIFICATION
SECTION 2.1. Limitation of Liability. Micro agrees that
none of Industries, any of its Subsidiaries or any of their respective
directors, officers, agents and employees (each, an "Industries Indemnified
Person") shall have any liability, whether direct or indirect, in contract,
tort or otherwise, to Micro arising out of or attributable to the performance
or nonperformance of Services pursuant to this Agreement.
SECTION 2.2. Indemnification. (a) Micro agrees to and
does hereby indemnify and hold each Industries Indemnified Person harmless
from and against any and all damage, loss, liability and expense (including
without limitation reasonable expenses of investigation and reasonable
attorneys' fees and expenses in connection with any action, claim, suit or
proceeding, including any expenses incurred in connection with the
enforcement of the rights of such Industries Indemnified Person pursuant to
this Agreement) to which such Industries Indemnified Person may be
subjected as a result of a claim made by a third party arising out of or
attributable, directly or indirectly, (i) to the performance or
nonperformance for Micro of any Services or (ii) otherwise in connection
with this Agreement.
(b) The parties agree to follow the procedures set forth in
Section 5.3(a) and 5.3(b) of the Amended and Restated Reorganization
Agreement dated as of September 4, 1996, as amended and restated as of
October 17, 1996, among the parties hereto and Ingram Entertainment Inc.
with respect to any claim for indemnification made pursuant to this Section
2.2.
SECTION 2.3. Ownership of Work Product. (a) Except for
the data provided by Micro to Industries and the reports produced by
Industries for Micro pursuant to this Agreement, all proprietary tools and
methodologies and all written material including programs, tapes, listing
and other programming documentation which were preexisting or originated
and prepared by Industries pursuant to this Agreement shall belong to
Industries except as otherwise agreed by the parties in a separate written
agreement signed by each party.
(b) No license under any trade secrets, copyrights, or other
rights is granted by this Agreement or any disclosure hereunder.
(c) Micro shall have reasonable access to all data, records,
files, statements, records, invoices, billings, and other information
generated by or in custody of Industries relating to the Services provided
pursuant to this Agreement. Unless otherwise specified by Micro or
required by law, Industries shall maintain all such business records
pertaining to the Services and will retain the records pertaining to each
Service for a period of twelve months after the cessation of such Service.
At the request of Micro, Industries shall provide copies of records
pertaining to the Services.
ARTICLE 3
GENERAL PROVISIONS
SECTION 3.1. Parties. Nothing in this Agreement, express
or implied, is intended to confer upon any person not a party any rights and
remedies hereunder.
SECTION 3.2. Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the State of
Tennessee, without regard to its conflict of laws provisions.
SECTION 3.3. Headings. The Section and other headings
contained in this Agreement are for reference purposes only and shall not in
any way affect the meaning or interpretation of this Agreement.
SECTION 3.4. Entire Agreement. This Agreement constitutes
the entire agreement between the parties in respect of the subject matter
contained herein and neither this Agreement nor any term or provision
hereof may be amended or waived except by an instrument in writing signed,
in the case of an amendment, by each party and, in the case of a waiver, by
the party against whom the waiver is to be effective.
SECTION 3.5. Assignments. This Agreement shall not be
assignable by either party without the written consent of the other parties
hereto. No assignment of any right or benefit hereunder shall relieve any
obligation of the assignor hereunder without the written consent of the other
parties.
SECTION 3.6. Notices. Any notice, request, instruction or
other document to be given hereunder by either party hereto to the other
party hereto shall be in writing (including telecopier or similar writing)
and shall be given to such party at its address set forth on the signature
pages hereof, or to such other address as the party to whom notice is to be
given may provide in a written notice to the party giving such notice, a
copy of which written notice shall be on file with the Secretary of
Industries. Each such notice, request or other communication shall be
effective (i) if given by telecopy, when such telecopy is transmitted to
the telecopy number specified on the signature pages hereof and the
appropriate confirmation is received, (ii) if given by mail, 72 hours after
such communication is deposited in the mails with first class postage
prepaid addressed as aforesaid or (iii) if given by any other means, when
delivered at the address specified in this Section 3.6.
SECTION 3.7. Definitions. Terms used but not defined
herein shall have the meanings set forth in the Amended and Restated
Reorganization Agreement dated as of September 4, 1996, as amended and
restated as of October 17, 1996 among the parties hereto and Ingram
Entertainment Inc.
SECTION 3.8. Severability. The invalidity or
unenforceability of any provisions of this Agreement in any jurisdiction
shall not affect the validity, legality or enforceability of the remainder
of this Agreement in such jurisdiction or the validity, legality or
enforceability of this Agreement, including any such provision, in any
other jurisdiction, it being intended that all rights and obligations of
the parties hereunder shall be enforceable to the fullest extent permitted
by law.
SECTION 3.9. Independent Contractors. The parties hereto
are independent contractors. Nothing in this Agreement is intended or
shall be deemed to constitute a partnership, agency, franchise or joint
venture relationship between the parties. No party shall incur any debts
or make any commitments for the others, except to the extent, if at all,
specifically provided herein.
SECTION 3.10. Remedies. The parties hereby acknowledge and
agree that in the event of any breach of this Agreement, the parties would
be irreparably harmed and could not be made whole by monetary damages.
Each party hereto agrees (i) not to assert by way of defense or otherwise
that a remedy at law would be adequate, and (ii) in addition to any other
remedy to which the parties may be entitled, that the remedy of specific
performance of this Agreement is appropriate in any action in court.
SECTION 3.11. Consent to Jurisdiction. Each party hereto
irrevocably submits to the non-exclusive jurisdiction of any Tennessee
State Court or United States Federal Court sitting in the Middle District
of Tennessee over any suit, action or proceeding arising out of or relating
to this Agreement. Each party hereto waives any right it may have to
assert the doctrine of forum non conveniens or to object to venue to the
extent any proceeding is brought in accordance with this Section 3.11.
Nothing in this paragraph shall affect or limit any right to serve process
in any manner permitted by law, to bring proceedings in the courts of any
jurisdiction or to enforce in any lawful manner a judgment obtained in one
jurisdiction in any other jurisdiction.
SECTION 3.12. Counterparts. This Agreement may be executed
in any number of counterparts, each of which shall be an original with the
same effect as if the signatures thereto and hereto were upon the same
instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
INGRAM INDUSTRIES INC.
By: /s/ John R. Ingram
----------------------------
Name: John R. Ingram
Title: Co-President
One Belle Meade Place
4400 Harding Road
Nashville, TN 32705
Telecopy: (615) 298-8242
INGRAM MICRO INC.
By: /s/ Jeffrey R. Rodek
----------------------------
Name: Jeffrey R. Rodek
Title: President
1600 East Saint Andrew Place
Santa Ana, CA 92705
Telecopy: (714) 566-7900
EXHIBIT 10.19
EMPLOYEE BENEFITS TRANSFER and ASSUMPTION
AGREEMENT
AGREEMENT dated as of November 6, 1996, among Ingram
Industries Inc., a Tennessee corporation ("Industries"), Ingram Micro Inc., a
Delaware corporation ("Micro"), and Ingram Entertainment Inc., a Tennessee
corporation ("Entertainment" and, together with Industries and Micro, the
"Ingram Companies").
NOW, THEREFORE, it is agreed as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. (a) The following terms, as used
herein, shall have the following meanings:
"Code" means the Internal Revenue Code of 1986, as amended, and
the rules and regulations thereunder.
"Employee Benefit Plan" means any "employee benefit plan" (as
defined in Section 3(3) of ERISA) maintained at any time by any of the Ingram
Companies or their Subsidiaries.
"Entertainment Employees" means those individuals listed on the
payroll records of Entertainment or any Subsidiary thereof immediately after
the Second Closing.
"Entertainment Group" means all Entertainment Employees and
Entertainment Retirees, including their respective beneficiaries.
"Entertainment Retiree" means each individual who was employed
by Entertainment or any Subsidiary thereof immediately prior to such
individual's retirement or other termination of employment from all Ingram
Companies and their Subsidiaries or is otherwise listed on Schedule 3 as an
Entertainment Retiree.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations thereunder.
"Exchange Agreement" means the Amended and Restated Exchange
Agreement dated as of September 4, 1996, as amended and restated as of October
17, 1996, among the Ingram Companies and the other persons listed on the
signature pages thereof.
"First Closing" and "First Closing Date" shall have the
meanings ascribed thereto in the Exchange Agreement.
"Industries Employees" means those individuals listed on the
payroll records of Industries or any Subsidiary thereof immediately after the
First Closing.
"Industries Equity-Based Plans" means the plans identified as
such on Schedule 6 hereto.
"Industries Group" means all Industries Employees and
Industries Retirees, including their respective beneficiaries.
"Industries Retiree" means each individual who was employed by
Industries or any Subsidiary thereof immediately prior to such individual's
retirement or other termination of employment from all Ingram Companies and
their Subsidiaries and who is not otherwise a member of the Micro Group or
Entertainment Group.
"Micro Common Stock" means shares of Class B common stock, par
value $.01 per share, of Micro.
"Micro Employees" means those individuals listed on the payroll
records of Micro or any Subsidiary thereof immediately after the First
Closing.
"Micro Group" means all Micro Employees and Micro Retirees,
including their respective beneficiaries.
"Micro Retiree" means each individual who was employed by Micro
or any Subsidiary thereof immediately prior to such individual's retirement or
other termination of employment from all Ingram Companies and their
Subsidiaries or is otherwise listed on Schedule 3 as a Micro Retiree.
"Person" means an individual, corporation, limited liability
company, partnership, association, trust, or other entity or organization,
including a government or political subdivision or an agency or
instrumentality thereof.
"Reorganization Agreement" shall have the meaning set forth in
the Exchange Agreement.
"Second Closing" and "Second Closing Date" shall have the
meanings ascribed thereto in the Exchange Agreement.
"Subsidiary" means, (i) with respect to Entertainment or Micro,
any entity of which securities or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other persons
performing similar functions are directly or indirectly owned by such Person
immediately after the First Closing and (ii) with respect to Industries, any
entity (other than Entertainment or its Subsidiaries) of which securities or
other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions are
directly or indirectly owned by Industries immediately after the First Closing.
(b) Each of the following terms is defined in the Section set
forth opposite such term:
Terms Sections
- ----- --------
Actuarial Valuation 3.03
Entertainment Assumed Liabilities 3.04
Entertainment Indemnified Person 5.01
Entertainment Plan Participants 3.03
Entertainment Retirement Plan 3.03
Entertainment Supplemental Retirement
Assets and Liabilities 3.02
Entertainment Supplemental Thrift
Assets and Liabilities 3.02
Entertainment Thrift Plan 3.01
ERP Amount 3.03
ERP Transition Period 3.03
Industries Indemnified Person 5.01
Industries Retained Liabilities 3.04
Industries Retirement Plan 3.03
Industries Supplemental Executive Retirement Plan 3.02
Industries Supplemental Thrift Plan 3.02
Industries Thrift Plan 3.01
IRS 3.01
Loss 5.02
Micro Assumed Liabilities 3.04
Micro Indemnified Person 5.02
Micro Plan Participants 3.03
Micro Retirement Plan 3.03
Micro Supplemental Retirement
Assets and Liabilities 3.02
Micro Supplemental Thrift Assets
and Liabilities 3.02
Micro Thrift Plan 3.01
MRP Amount 3.03
MRP Transition Period 3.03
PBGC 3.03
Retained Retirement Assets and Liabilities 3.03
Retained Supplemental Assets
and Liabilities 3.02
Retained Thrift Assets and Liabilities 3.01
ARTICLE II
EMPLOYEES;
CERTAIN AGREEMENTS
SECTION 2.01. Employees. Subject to the terms and conditions
of this Agreement, effective at the time of the First Closing, Industries,
Micro and Entertainment or their respective Subsidiaries shall employ each
Industries Employee, Micro Employee or Entertainment Employee,
respectively. No provision of this Agreement, however, shall require any
Ingram Company or any of their respective Subsidiaries to continue the
employment of any of their respective employees following the First
Closing.
SECTION 2.02. Certain Agreements. (a) Except as provided
in Section 2.02(b), this Agreement shall not apply or be deemed to apply to
the Industries Equity-Based Plans and any options, awards, grants or sales
made or to be made thereunder shall not be deemed to be Micro Assumed
Agreements or Entertainment Assumed Agreements.
(b) Micro shall assume all liability relating to, and be
responsible for, all incentive stock units granted to Mr. Lawrence
Elcheson, under the Industries Equity-Based Plans. Industries shall inform
Micro on a quarterly basis of the status of such liability, including any
changes thereto.
ARTICLE III
ALLOCATION OF ASSETS AND LIABILITIES
SECTION 3.01. Industries Thrift Plan. (a) (i) As soon as
practicable after and effective as of the First Closing, Micro shall adopt
or designate a profit-sharing plan with a salary reduction arrangement that
covers the Micro Group and meets the requirements of Sections 401(a) and
401(k) of the Code ("Micro Thrift Plan"). Micro agrees that all service
credited under the Ingram Thrift Plan ("Industries Thrift Plan") as of the
First Closing with respect to the Micro Group shall be credited under the
Micro Thrift Plan for all plan purposes, including eligibility and vesting.
(ii) Within 30 days after the adoption or designation of
the Micro Thrift Plan by Micro or as soon as practicable thereafter,
Industries shall cause an amount, in cash or in kind as Industries and
Micro shall agree, equivalent to the account balances of all members of the
Micro Group under the Industries Thrift Plan as of the date of the
transfer, to be transferred from the trust maintained under the Industries
Thrift Plan to the trust maintained under the Micro Thrift Plan. Such
transfer shall include the number of shares of Micro Common Stock allocable
or attributable to the account balances of all members of the Micro Group.
Such transfer of assets shall be made only after Micro has supplied to
Industries either (A) a copy of an Internal Revenue Service ("IRS")
determination letter finding the Micro Thrift Plan to be a qualified plan
meeting the requirements of Sections 401(a) and 401(k) of the Code or (B)
an opinion of counsel or written representation from Micro (with
appropriate indemnities), in either case, to the effect that the Micro
Thrift Plan has been established in accordance with the Code and ERISA, and
an agreement that Micro will request a determination letter from the IRS
and make any and all changes to the Micro Thrift Plan necessary to receive
a favorable determination letter. Micro and Industries shall cooperate
with each other during the period beginning on the date hereof and ending
on the date the assets are transferred to the trust maintained under the
Micro Thrift Plan to ensure the ongoing operation and administration of the
Micro Thrift Plan and the Industries Thrift Plan with respect to the Micro
Group.
(iii) Notwithstanding anything herein to the contrary, each
transfer to the Micro Thrift Plan of shares of Micro Common Stock pursuant
to this Section shall be made in compliance with the provisions of the
Transfer Restrictions Agreement, if any, of even date herewith among Micro
and each of the other parties thereto, including Sections 2.1 and 3.7
thereof.
(b) (i) Not later than the Second Closing, Entertainment
shall adopt or designate a profit-sharing plan with a salary reduction
arrangement that covers the Entertainment Group and meets the requirements
of Sections 401(a) and 401(k) of the Code ("Entertainment Thrift Plan").
Entertainment agrees that all service credited under the Industries Thrift
Plan as of such adoption or designation with respect to the Entertainment
Group shall be credited under the Entertainment Thrift Plan for all plan
purposes, including eligibility and vesting.
(ii) Within 30 days after the adoption or designation of
the Entertainment Thrift Plan by Entertainment or as soon as practicable
thereafter, Industries shall cause an amount, in cash or in kind as
Industries and Entertainment shall agree, equivalent to the account
balances of all members of the Entertainment Group under the Industries
Thrift Plan as of the date of transfer to be transferred from the trust
maintained under the Industries Thrift Plan to the trust maintained under
the Entertainment Thrift Plan. Such transfer shall include the number of
shares of Micro Common Stock allocable or attributable to the account
balances of all members of the Entertainment Group. Such transfer of
assets shall be made only after Entertainment has supplied to Industries
either (A) a copy of an IRS determination letter finding the Entertainment
Thrift Plan to be a qualified plan meeting the requirements of Sections
401(a) and 401(k) of the Code or (B) an opinion of counsel or written
representation from Entertainment (with appropriate indemnities), in either
case, to the effect that the Entertainment Thrift Plan has been established
in accordance with the Code and ERISA, and an agreement that Entertainment
will request a determination letter from the IRS and make any and all
changes to the Entertainment Thrift Plan necessary to receive a favorable
determination letter. Entertainment and Industries shall cooperate with
each other during the period beginning on the date hereof and ending on the
date the assets are transferred to the trust maintained under the
Entertainment Thrift Plan to ensure the ongoing operation and
administration of the Entertainment Thrift Plan and the Industries Thrift
Plan with respect to the Entertainment Group.
(iii) Notwithstanding anything herein to the contrary, each
transfer to the Entertainment Thrift Plan of shares of Micro Common Stock
pursuant to this Section shall be made in compliance with the provisions of
the Transfer Restrictions Agreement, if any, of even date herewith among
Entertainment and each of the other parties thereto, including Sections 2.1
and 3.7 thereof.
(c) Industries shall retain all assets and liabilities
under the Industries Thrift Plan except as otherwise provided in Section
3.01(a) and (b) ("Retained Thrift Assets and Liabilities").
SECTION 3.02. Industries Supplemental Plans. (a) All
liabilities under the Ingram Supplemental Thrift Plan ("Industries
Supplemental Thrift Plan") and the Ingram Industries Inc. Supplemental
Executive Retirement Plan ("Industries Supplemental Retirement Plan") to
the extent applicable to any member of the Micro Group and any assets
allocable to such liabilities shall be transferred to and assumed by Micro
as of the First Closing ("Micro Supplemental Assets and Liabilities").
(b) All liabilities under the Industries Supplemental
Thrift Plan and the Industries Supplemental Retirement Plan to the extent
applicable to any member of the Entertainment Group and any assets
allocable to such liabilities shall be transferred to and assumed by
Entertainment not later than the Second Closing ("Entertainment
Supplemental Assets and Liabilities").
(c) Industries shall retain all assets and liabilities
under the Industries Supplemental Thrift Plan and the Industries
Supplemental Retirement Plan except as otherwise provided in Section
3.02(a) and (b) hereof and Article 3 of the Reorganization Agreement
("Retained Supplemental Assets and Liabilities").
SECTION 3.03. Industries Retirement Plan. (a) (i) As
soon as practicable after and effective as of the First Closing, Micro
shall adopt or designate a defined benefit plan ("Micro Retirement Plan")
that covers the members of the Micro Group listed as participants therein
on Schedule 2 and Schedule 3 ("Micro Plan Participants") and meets the
requirements of Section 401(a) of the Code. Micro agrees that all service
credited under the Ingram Retirement Plan (as amended effective January 1,
1989 and restated December 31, 1994) ("Industries Retirement Plan") as of
the First Closing with respect to the Micro Plan Participants shall be
credited under the Micro Retirement Plan for all plan purposes, including
eligibility, vesting and benefit accrual; provided, however, that those
individuals determined to be highly compensated employees under Section
414(q) of the Code shall accrue their benefits on and after the First
Closing under an unfunded defined benefit plan that is not qualified under
Section 401(a) of the Code.
(ii) Within 30 days after the adoption or designation of
the Micro Retirement Plan by Micro or as soon as practicable thereafter,
Industries shall cause an amount in cash or in kind determined as of the
First Closing pursuant to subparagraph (iii) below (the "MRP Amount"),
adjusted as set forth therein, to be transferred from the trust maintained
under the Industries Retirement Plan to the trust maintained under the
Micro Retirement Plan. Such transfer of assets shall be made only after
Micro has supplied to Industries (x) either (A) a copy of an IRS
determination letter finding the Micro Retirement Plan to be a qualified
plan meeting the requirements of Section 401(a) of the Code or (B) an
opinion of counsel or a written representation from Micro (with appropriate
indemnities), in either case, to the effect that the Micro Retirement Plan
has been established in accordance with the Code and ERISA, and an
agreement that Micro will request a determination letter from the IRS and
make any and all changes to the Micro Retirement Plan necessary to receive
a favorable determination letter and (y) information enabling the enrolled
actuary for the Industries Retirement Plan to issue the certification
required by Section 414(l) of the Code (Form 5310-A). Micro and Industries
shall cooperate with each other during the period beginning on the date
hereof and ending on the date the assets are transferred to the trust
maintained under the Micro Retirement Plan ("MRP Transition Period") to
ensure the ongoing operation and administration of the Micro Retirement
Plan and the Industries Retirement Plan with respect to the Micro Plan
Participants.
(iii) The MRP Amount shall be equal to that portion of the
total value of the assets held in the Industries Retirement Plan, valued as
of the First Closing Date or as soon as practicable thereafter, that bears
the same relation to such total as the aggregate present value of benefits
(vested and non-vested, including special early retirement benefits and
death benefit coverage both before and after the expected retirement ages
of Micro Plan Participants) accrued under the Industries Retirement Plan
for Micro Plan Participants, as determined in the Industries Retirement
Plan actuarial valuation as of January 1, 1996 (the "Actuarial Valuation"),
shall bear to the aggregate present value of such benefits accrued under
the Industries Retirement Plan for all participants therein, in each case
determined by Industries' enrolled actuary, using the projected unit credit
funding method and based on the actuarial assumptions used for funding
purposes as set forth in the Actuarial Valuation. The MRP Amount shall be
adjusted as may be required by the Pension Benefit Guaranty Corporation
("PBGC") and the IRS to maintain the status of the Industries Retirement
Plan or the Micro Retirement Plan as an employee pension plan meeting the
requirements of Section 401(a) of the Code. Within at least 30 days prior
to the First Closing or as soon as practicable thereafter, Industries and
Micro shall make any required governmental filings necessary to effect the
asset transfers described herein, including the filing of IRS Form 5310-A.
(iv) The assets to be transferred to the trust maintained
under the Micro Retirement Plan shall be held, invested and distributed as
required under the Industries Retirement Plan and the related trust
thereunder for the benefit of Micro Plan Participants during the MRP
Transition Period, pending the transfer to the trust maintained under the
Micro Retirement Plan pursuant to this Section 3.03(a). Industries and
Micro shall use their best efforts to effectuate the above transfer as
promptly as possible following the First Closing.
(b) (i) Not later than the Second Closing, Entertainment
shall adopt or designate a defined benefit plan that covers the
Entertainment Employees and members of the Entertainment Group listed on
Schedule 3 ("Entertainment Plan Participants") and meets the requirements
of Section 401(a) of the Code ("Entertainment Retirement Plan").
Entertainment agrees that all service credited under the Industries
Retirement Plan as of such adoption or designation with respect to the
Entertainment Plan Participants shall be credited under the Entertainment
Retirement Plan for all plan purposes, including eligibility, vesting and
benefit accrual.
(ii) Within 30 days after the adoption or designation of
the Entertainment Retirement Plan by Entertainment or as soon as
practicable thereafter, Industries shall cause an amount in cash or in kind
determined as of the Second Closing pursuant to subparagraph (iii) below
(the "ERP Amount"), adjusted as set forth therein, to be transferred from
the trust maintained under the Industries Retirement Plan to the trust
maintained under the Entertainment Retirement Plan. Such transfer of
assets shall be made only after Entertainment has supplied to Industries
(x) either (A) a copy of an IRS determination letter finding the
Entertainment Retirement Plan to be a qualified plan meeting the
requirements of Section 401(a) of the Code or (B) an opinion of counsel or
a written representation from Entertainment (with appropriate indemnities),
in either case, to the effect that the Entertainment Retirement Plan has
been established in accordance with the Code and ERISA, and an agreement
that Entertainment will request a determination letter from the IRS and
make any and all changes to the Entertainment Retirement Plan necessary to
receive a favorable determination letter and (y) information enabling the
enrolled actuary for the Industries Retirement Plan to issue the
certification required by Section 414(l) of the Code (Form 5310-A).
Entertainment and Industries shall cooperate with each other during the
period beginning on the date hereof and ending on the date the assets are
transferred to the trust maintained under the Entertainment Retirement Plan
(the "ERP Transition Period") to ensure the ongoing operation and
administration of the Entertainment Retirement Plan and the Industries
Retirement Plan with respect to the Entertainment Plan Participants.
(iii) The ERP Amount shall be equal to that portion of the
total value of the assets held in the Industries Retirement Plan, valued as
of the adoption or designation referred to in (i) above or as soon as
practicable thereafter, that bears the same relation to such total as the
aggregate present value of benefits (vested and non-vested, including
special early retirement benefits and death benefit coverage both before
and after the expected retirement ages of Entertainment Plan Participants)
accrued under the Industries Retirement Plan for Entertainment Plan
Participants, as determined in the Actuarial Valuation or such later
valuation to the extent one is available, shall bear to the aggregate
present value of such benefits accrued under the Industries Retirement Plan
for all participants therein, in each case determined by Industries'
enrolled actuary using the projected unit credit funding method and based
on the actuarial assumptions used for funding purposes as set forth in the
Actuarial Valuation. The ERP Amount shall be adjusted as may be required
by the PBGC and the IRS to maintain the status of the Industries Retirement
Plan or the Entertainment Retirement Plan as an employee pension plan
meeting the requirements of Section 401(a) of the Code. Within at least 30
days prior to the Second Closing or as soon as practicable thereafter,
Industries and Entertainment shall make any required governmental filings
necessary to effect the asset transfers described herein, including the
filing of IRS Form 5310-A.
(iv) The assets to be transferred to the trust maintained
under the Entertainment Retirement Plan shall be held, invested and
distributed as required under the Industries Retirement Plan and the
related trust thereunder for the benefit of Entertainment Plan Participants
during the ERP Transition Period, pending the transfer to the trust
maintained under the Entertainment Retirement Plan pursuant to this Section
3.03(b). Industries and Entertainment shall effectuate the above transfer
on such date as Industries and Entertainment shall agree but not later than
the Second Closing.
(c) Industries shall retain all assets and liabilities
under the Industries Retirement Plan except as otherwise provided in
Section 3.03(a) and (b) ("Retained Retirement Assets and Liabilities").
SECTION 3.04. Assumption of Liabilities Generally. (a)
Subject to the terms and conditions of this Agreement, effective as of the
First Closing, Micro shall assume and agree to pay when due, honor and
discharge, the following ("Micro Assumed Liabilities"):
(i) all obligations and liabilities arising under any
employment, separation or retirement agreement or arrangement to
the extent applicable to any member of the Micro Group which has
been established or entered into by any of the Ingram Companies or
any of their Subsidiaries, whether or not listed on any Schedule
attached hereto;
(ii) all obligations and liabilities arising under the Micro
Thrift Plan, the Micro Supplemental Assets and Liabilities and the
Micro Retirement Plan;
(iii) all obligations and liabilities arising under the welfare
benefit plans and other arrangements listed on or otherwise
described in Schedule 4 hereto to the extent applicable to any
member of the Micro Group;
(iv) all obligations and liabilities arising under any other
employee benefit plan or arrangement maintained at any time by any
of the Ingram Companies or any of their Subsidiaries to the extent
applicable to any member of the Micro Group;
(v) all obligations and liabilities to any member of the
Micro Group in respect of the continuation of coverage rules under
Sections 601 through 608 of ERISA and Section 4980B of the Code,
including all liabilities and obligations relating to qualifying
events that have occurred on or prior to the First Closing;
(vi) all obligations and liabilities arising under any
federal, state, local or foreign law, order or regulation
(including, without limitation, ERISA and the Code) to the extent
they relate to participation by any member of the Micro Group in
any Employee Benefit Plan, whether relating to events occurring on
or prior to the First Closing or arising by reason of the
transactions contemplated by this Agreement or otherwise; and
(vii) all statutory obligations and liabilities to any member
of the Micro Group, which arise, directly or indirectly, by reason
of the transactions contemplated by this Agreement.
(b) Subject to the terms and conditions of this Agreement,
effective as of such date as Industries and Entertainment shall agree but
not later than the Second Closing, Entertainment shall assume and agree to
pay when due, honor and discharge, the following ("Entertainment Assumed
Liabilities"):
(i) all obligations and liabilities arising under any
employment, separation or retirement agreement or arrangement to
the extent applicable to any member of the Entertainment Group
which has been established or entered into by any Ingram Company
or any of their Subsidiaries, whether or not listed on any
Schedule attached hereto;
(ii) all obligations and liabilities arising under the
Entertainment Thrift Plan, the Entertainment Supplemental Assets
and Liabilities and the Entertainment Retirement Plan;
(iii) all obligations and liabilities arising under the welfare
benefit plans and other arrangements listed on or otherwise
described in Schedule 4 hereto to the extent applicable to any
member of the Entertainment Group;
(iv) all obligations and liabilities arising under any other
employee benefit plan or arrangement maintained at any time by any
of the Ingram Companies or any of their Subsidiaries to the extent
applicable to any member of the Entertainment Group;
(v) all obligations and liabilities to any member of the
Entertainment Group in respect of the continuation of coverage
rules under Sections 601 through 608 of ERISA and Section 4980B of
the Code, including all liabilities and obligations relating to
qualifying events that have occurred on or prior to the Second
Closing;
(vi) all obligations and liabilities arising under any
federal, state, local or foreign law, order or regulation
(including, without limitation, ERISA and the Code) to the extent
they relate to participation by any member of the Entertainment
Group in any Employee Benefit Plan, whether relating to events
occurring on or prior to the Second Closing or arising by reason
of the transactions contemplated by this Agreement or otherwise;
and
(vii) all statutory obligations and liabilities to any member
of the Entertainment Group which arises, directly or indirectly,
by reason of the transactions contemplated by this Agreement.
(c) Subject to the terms and conditions of this Agreement,
effective as of the First Closing, Industries shall retain and agree to pay
when due, honor and discharge, the following ("Industries Retained
Liabilities"):
(i) all obligations and liabilities arising under any
employment, separation or retirement agreement or arrangement to
the extent applicable to any member of the Industries Group which
has been established or entered into by any of the Ingram
Companies or any of their Subsidiaries, whether or not listed on
any Schedule attached hereto;
(ii) obligations and liabilities arising under the Retained
Thrift Assets and Liabilities, the Retained Supplemental Assets
and Liabilities, and the Retained Retirement Assets and
Liabilities;
(iii) all obligations and liabilities arising under the welfare
benefit plans and other arrangements listed on or otherwise
described in Schedule 4 hereto to the extent applicable to any
member of the Industries Group;
(iv) all obligations and liabilities arising under any other
employee benefit plan or arrangement maintained at any time by any
Ingram Company or any of their Subsidiaries to the extent
applicable to any member of the Industries Group;
(v) all obligations and liabilities to any member of the
Industries Group in respect of the continuation of coverage rules
under Sections 601 through 608 of ERISA and Section 4980B of the
Code, including all liabilities and obligations relating to
qualifying events that have occurred on or prior to the First
Closing;
(vi) all obligations and liabilities arising under any
federal, state, local or foreign law, order or regulation
(including, without limitation, ERISA and the Code) to the extent
they relate to participation by any member of the Industries Group
in any Employee Benefit Plan, whether relating to events occurring
on or prior to the First Closing or arising by reason of the
transactions contemplated by this Agreement or otherwise; and
(vii) all statutory obligations and liabilities to any member
of the Industries Group, which arise, directly or indirectly, by
reason of the transactions contemplated by this Agreement.
(d) Subject to the terms and conditions of this Agreement,
effective as of the Second Closing Industries shall confirm to Entertainment
the retention by and agreement of Industries to pay when due, honor and
discharge the Industries Retained Liabilities.
(e) All obligations, liabilities and responsibilities arising
out of or relating to workers' compensation shall be transferred among and
assumed by the parties pursuant to the terms of the Risk Management Agreement
dated as of the First Closing among Industries, Micro and Entertainment.
SECTION 3.05. Method of Settlement. Notwithstanding anything
herein to the contrary, any transfer or assumption of liabilities pursuant to
this Article III shall be effected through a corresponding adjustment in the
relevant intercompany account balances of the parties hereto.
SECTION 3.06. Further Assurances. (a) On and after the date
hereof, Industries will, at the reasonable request of Micro, execute,
acknowledge and deliver all such endorsements, assurances, consents,
assignments, transfers, conveyances, powers of attorney and other instruments
and documents, and take such other actions necessary (i) to assign, transfer,
convey and deliver to Micro, acting in its fiduciary capacity, all the assets
to be transferred to Micro pursuant to Article III hereof and (ii) to assist
Micro in obtaining the consent and approval of all governmental bodies and
other Persons required to be obtained by Micro to effect the transfer thereof
and the assumption of the Micro Assumed Liabilities by Micro or otherwise
appropriate to carry out the transactions contemplated hereby.
(b) On and after the date hereof, Industries will, at the
reasonable request of Entertainment, execute, acknowledge and deliver all
such endorsements, assurances, consents, assignments, transfers,
conveyances, powers of attorney and other instruments and documents, and
take such other actions necessary (i) to assign, transfer, convey and
deliver to Entertainment, acting in its fiduciary capacity, all the assets
to be transferred to Entertainment pursuant to Article III hereof, and (ii)
to assist Entertainment in obtaining the consent and approval of all
governmental bodies and other Persons required to be obtained by
Entertainment to effect the transfer thereof and the assumption of the
Entertainment Assumed Liabilities by Entertainment or otherwise appropriate
to carry out the transactions contemplated hereby.
(c) On and after the date hereof, each of Micro and
Entertainment will, at the reasonable request of Industries, execute,
acknowledge and deliver all such assumptions, endorsements and other
instruments and documents, and take such other actions necessary (i) to
assume, pay, honor and discharge the Micro Assumed Liabilities and
Entertainment Assumed Liabilities, respectively, and (ii) to assist
Industries in obtaining the consent and approval of all governmental bodies
and other Persons required to be obtained by Industries to effect the
transfer of the assets to be transferred to Micro or Entertainment pursuant
to Article III hereof, respectively, and the assumption of the Micro
Assumed Liabilities and Entertainment Assumed Liabilities by Micro and
Entertainment, respectively, or otherwise appropriate to carry out the
transactions contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Certain Industries Representations.
Industries hereby represents and warrants to Micro and Entertainment on the
date hereof, and to Entertainment on the date of the adoption or
designation of the Entertainment Thrift Plan and the Entertainment
Retirement Plan, that the Industries Thrift Plan and the Industries
Retirement Plan have been established in accordance with the Code and
ERISA, are qualified under Section 401(a) of the Code, have been so
qualified during the period from their adoption to the date hereof and each
will be so qualified as of the date of the transfers referred to in Section
3.01 and 3.03 respectively, and that each trust forming a part thereof is
exempt from tax pursuant to Section 501(a) of the Code.
ARTICLE V
INDEMNIFICATION
SECTION 5.01. Indemnification by Micro. Micro agrees to
indemnify and hold harmless Entertainment and its Subsidiaries and their
respective directors, officers, agents and employees (each, an
"Entertainment Indemnified Person") and Industries, its Subsidiaries and
their respective directors, officers, agents and employees (each, an
"Industries Indemnified Person") from any and all damage, loss, liability
and expense (including, without limitation, reasonable expenses of
investigation and reasonable attorneys' fees and expenses in connection
with any action, suit or proceeding) (collectively, "Loss") incurred or
suffered by such Entertainment Indemnified Person or Industries Indemnified
Person, as the case may be, arising out of or related to the Micro Assumed
Liabilities.
SECTION 5.02. Indemnification by Entertainment.
Entertainment agrees to indemnify and hold harmless Micro and its
Subsidiaries and their respective directors, officers, agents and employees
(each, a "Micro Indemnified Person") and each Industries Indemnified Person
from any and all Losses, incurred or suffered by such Micro Indemnified
Person or Industries Indemnified Person, as the case may be, arising out of
or related to the Entertainment Assumed Liabilities.
SECTION 5.03. Indemnification by Industries. Industries
agrees to indemnify and hold harmless each Entertainment Indemnified Person
and each Micro Indemnified Person from any and all Losses, incurred or
suffered by such Micro Indemnified Person or Industries Indemnified Person,
as the case may be, arising out of or related to the Industries Retained
Liabilities.
ARTICLE VI
GENERAL PROVISIONS
SECTION 6.01. Parties. Nothing in this Agreement, express
or implied, is intended to confer upon any person not a party any rights
and remedies hereunder.
SECTION 6.02. Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the State of
Tennessee, without regard to its conflict of laws provisions.
SECTION 6.03. Headings. The Section and other headings
contained in this Agreement are for reference purposes only and shall not
in any way affect the meaning or interpretation of this Agreement.
SECTION 6.04. Entire Agreement. This Agreement constitutes
the entire agreement between the parties in respect of the subject matter
contained herein and neither this Agreement nor any term or provision
hereof may be amended or changed except by an instrument in writing signed
by Industries, Micro and Entertainment. Industries shall deliver prompt
written notice to each other party hereto of any amendment to this
Agreement approved pursuant to this Section.
SECTION 6.05. Assignments. This Agreement shall not be
assignable by any party, without the written consent of the other parties
hereto. No assignment of any right or benefit hereunder shall relieve any
obligation of the assignor hereunder without the written consent of the
other party.
SECTION 6.06. Notices. Any notice, request, instruction or
other document to be given hereunder by any party hereto to another party
hereto shall be in writing (including telecopier or similar writing) and
shall be given to such party at its address set forth on the signature
pages hereof, or to such other address as the party to whom notice is to be
given may provide in a written notice to the party giving such notice, a
copy of which written notice shall be on file with the Secretary of
Industries. Each such notice, request or other communication shall be
effective (i) if given by telecopy, when such telecopy is transmitted to
the telecopy number specified on the signature pages hereof and the
appropriate confirmation is received, (ii) if given by mail, 72 hours after
such communication is deposited in the mails with first class postage
prepaid addressed as aforesaid or (iii) if given by any other means, when
delivered at the address specified in this Section 6.06.
SECTION 6.07. Severability. The invalidity or
unenforceability of any provisions of this Agreement in any jurisdiction
shall not affect the validity, legality or enforceability of the remainder
of this Agreement in such jurisdiction or the validity, legality or
enforceability of this Agreement, including any such provision, in any
other jurisdiction, it being intended that all rights and obligations of
the parties hereunder shall be enforceable to the fullest extent permitted
by law.
SECTION 6.08. Counterparts. This Agreement may be executed
in any number of counterparts, each of which shall be an original with the
same effect as if the signatures thereto and hereto were upon the same
instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
INGRAM INDUSTRIES INC.
By: /s/ John R. Ingram
----------------------------
Name: John R. Ingram
Title: Co-President
One Belle Meade Place
4400 Harding Road
Nashville, TN 32705
Telecopy: (615) 298-8242
INGRAM MICRO INC.
By: /s/ Jeffrey R. Rodek
----------------------------
Name: Jeffrey R. Rodek
Title:
1600 East Saint Andrew Place
Santa Ana, CA 92705
Telecopy: (714) 566-7900
INGRAM ENTERTAINMENT INC.
By: /s/ David B. Ingram
----------------------------
Name: David B. Ingram
Title: Chairman and President
Two Ingram Boulevard
La Vergne, TN 37086
Telecopy: (615) 287-4985
EXHIBIT 10.20
DATA CENTER SERVICES AGREEMENT
AGREEMENT dated as of November 6, 1996, among Ingram Micro
Inc., a Delaware corporation ("MICRO"), Ingram Book Company ("BOOK"), a
division of Ingram Industries Inc., a Tennessee corporation, and Ingram
Entertainment Inc., a Tennessee corporation ("ENTERTAINMENT").
In consideration of the mutual agreements contained herein, and
other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, and intending to be legally bound, the parties
hereto agree as follows:
ARTICLE 1
PERFORMANCE OF SERVICES
SECTION 1.1. PROVISION OF SERVICES. On the terms and subject
to the conditions of this Agreement, during the term of this Agreement
Micro agrees to provide to Book, Entertainment and their respective
Subsidiaries, or procure the provision to each of Book, Entertainment and
their respective Subsidiaries of, and each of Book and Entertainment (on
behalf of itself and its Subsidiaries) agrees to purchase from Micro, the
services performed at the Ingram Micro Data Center in La Vergne, Tennessee
and described on the Schedules attached hereto (the "SERVICES"). Unless
otherwise specifically agreed by the parties, the Services to be provided
or procured by Micro hereunder shall be substantially similar in scope,
quality and nature to those provided to, or procured on behalf of, Book,
Entertainment and their respective Subsidiaries prior to the date hereof.
SECTION 1.2. SERVICE FEES; EXPENSES. (a) The Schedules
hereto indicate, with respect to each Service listed thereon, the method by
which fees (the "SERVICE FEES") to be charged to Book or Entertainment, as
the case
<PAGE>
may be, for such Service will be determined. Each of Book and Entertainment
agrees to pay to Micro in the manner set forth in Section 1.3 the Service Fees
applicable to each of the Services provided by Micro to Book (and its
Subsidiaries) and Entertainment (and its Subsidiaries), respectively, pursuant
to the terms hereof.
(b) In addition to any other amounts payable to Micro
hereunder, each of Book and Entertainment shall reimburse Micro in the
manner set forth in
(c) In addition to any other amounts payable to Micro
hereunder, each of Book and Entertainment shall reimburse Micro in the
manner set forth in Section 1.3 for all out-of-pocket expenses (including
without limitation travel expenses, professional fees, printing and
postage) incurred by Micro in connection with the performance of Services
pursuant to this Agreement, to the extent that such expenses have not
already been taken into account in determining the Service Fees applicable
to such Services.
(c) In addition to any other amounts payable to Micro
hereunder, each of Book and Entertainment shall reimburse Micro in the
manner set forth in Section 1.3 for any taxes, excises, imposts, duties,
levies, withholdings or other similar charges (excepting any charges for
taxes due on Micro's income) that Micro and its Subsidiaries may be
required to pay on account of Book (and its Subsidiaries) and Entertainment
(and its Subsidiaries), respectively, in connection with the performance of
Services or with respect to payments made by Book or Entertainment for such
Services pursuant to this Agreement.
SECTION 1.3. INVOICING AND SETTLEMENT OF COSTS. (a) Micro
will deliver an invoice to each of Book and Entertainment on a monthly
basis (not later than the fifth day of each accounting month) for (i)
Service Fees in respect of Services provided during the prior accounting
month to Book (and its Subsidiaries) and Entertainment (and its
Subsidiaries), respectively, and (ii) other amounts owing to Micro pursuant
to Section 1.2. Each such invoice shall (A) provide sufficient detail to
identify each Service, the fee therefor and the method of calculating such
fee, (B) identify all third party costs included in the invoice to the
extent specifically billed and (C) include such other data as may be
reasonably requested by Book or Entertainment. In addition, Book and
Entertainment shall have the right to examine any and all books and records
as they reasonably request in order to confirm and verify the calculation
of the amount of any payment pursuant to this Section and Micro shall
cooperate in any reasonable manner in such examination as Book or
Entertainment shall request.
(b) Payment (including payment of any amounts disputed pursuant to
Section 1.3(c)) of each invoice shall
III-2
<PAGE>
be due from Book and Entertainment on the day (or the next business day, if
such day is not a business day) that is the later of (i) the third day
prior to the end of the accounting month in which such invoice was received
and (ii) the tenth day after the receipt of such invoice (each, a "PAYMENT
DATE"), by wire transfer of immediately available funds payable to the
order of Micro. If either Book or Entertainment fails to make any payment
within 30 days of the relevant Payment Date, the party that has failed to
make such payment shall be obligated to pay, in addition to the amount due
on such Payment Date, interest on such amount at the prime, or best rate
announced by Nationsbank of Texas, N.A. per annum compounded annually from
the relevant Payment Date through the date of payment.
(c) In the event that Book or Entertainment disputes any
charges invoiced by Micro pursuant to this Agreement, Book or Entertainment
shall deliver a written statement describing the dispute to Micro within 15
days following receipt of the disputed invoice. The statement shall
provide a sufficiently detailed description of the disputed items. The
parties hereto shall use their best efforts to resolve any such disputes.
Amounts not so disputed shall be deemed accepted. Disputed amounts
resolved in favor of Book or Entertainment (together with interest on such
amounts at the prime, or best rate announced by Nationsbank of Texas, N.A.
per annum compounded annually from the date such disputed amounts were paid
to Micro to the next relevant Payment Date) shall be credited against
payments owing by Book and Entertainment, respectively, to Micro on the
next relevant Payment Date.
(d) Unless otherwise specified on the Schedules hereto, in the
event that the actual utilization of a Service is less than the period
specified on such Schedules with respect to such Service, then the Service
Fees for such Service shall be prorated on the basis of actual utilization
of such Service; provided that the monthly charges shall not be prorated on
any period of time less than one day, the per diem charge shall not be
prorated on any period of time less than one-half day, and the hourly
charges shall not be prorated on any period of time less than one hour.
SECTION 1.4. TERM. The term of this Agreement shall
commence on the date hereof and shall end on July 31, 1999, unless earlier
terminated pursuant to the terms hereof. The provisions of Section 1.2
(with respect to amounts accrued prior to such termination) shall survive
any termination of this Agreement.
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<PAGE>
SECTION 1.5. LIMITED WARRANTY. Micro will provide the
Services hereunder in good faith, with the care and diligence that it
exercises in the performance of such services for its divisions and
Subsidiaries. Each of Book and Entertainment hereby acknowledges that
Micro does not regularly provide to third parties services such as the
Services as part of its business and that, except as set forth in Section
1.1 or in this Section 1.5, Micro does not otherwise warrant or assume any
responsibility for its Services. The warranty stated above is in lieu of
and exclusive of all other representations and warranties of any kind
whatsoever. EXCEPT AS STATED ABOVE, THERE ARE NO WARRANTIES RELATING TO
THE SERVICES OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED
TO, ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE.
SECTION 1.6. PERFORMANCE REMEDY. In the event that Micro
fails to provide a Service hereunder, or the quality of a Service is not in
accordance with Section 1.1 or Section 1.5, Book or Entertainment may give
Micro prompt written notice thereof. Micro will then have thirty days to
cure the defective Service. If after such period Micro has failed to cure
the defective Service, Book or Entertainment, as the case may be, may seek
an alternative provider for such Service and Micro shall discontinue
performing such Service at the written request of Book or Entertainment,
respectively. Neither Book nor Entertainment shall be liable to Micro for
any Service performed by Micro after Micro has been given written notice of
termination of such Service pursuant to this Section 1.6, except for any
out-of-pocket costs incurred by Micro in connection with the cessation of
such Services or the transfer of such Services back to Book, Entertainment
or their respective designees. Except as otherwise expressly provided in
Article 2, the provisions of this Section 1.6 will provide the exclusive
remedy for any misrepresentation, breach of warranty, covenant or other
agreement or other claim arising out of this Agreement or the Services to
be performed hereunder.
III-4
<PAGE>
ARTICLE 2
INDEMNIFICATION
SECTION 2.1. LIMITATION OF LIABILITY. Book and Entertainment
agree that none of Micro, any of its Subsidiaries or any of their
respective directors, officers, agents and employees (each, an "MICRO
INDEMNIFIED PERSON") shall have any liability, whether direct or indirect,
in contract, tort or otherwise, to Book or Entertainment arising out of or
attributable to the performance or nonperformance of Services pursuant to
this Agreement.
SECTION 2.2. INDEMNIFICATION. (a) Book agrees to and does
hereby indemnify and hold each Micro Indemnified Person harmless from and
against any and all damage, loss, liability and expense (including without
limitation reasonable expenses of investigation and reasonable attorneys'
fees and expenses in connection with any action, claim, suit or proceeding,
including any expenses incurred in connection with the enforcement of the
rights of such Micro Indemnified Person pursuant to this Agreement) to
which such Micro Indemnified Person may be subjected as a result of a claim
made by a third party arising out of or attributable, directly or
indirectly, (i) to the performance or nonperformance for Book of any
Services or (ii) otherwise in connection with this Agreement.
(b) Entertainment agrees to and does hereby indemnify and hold
each Micro Indemnified Person harmless from and against any and all damage,
loss, liability and expense (including without limitation reasonable
expenses of investigation and reasonable attorneys' fees and expenses in
connection with any action, claim, suit or proceeding, including any
expenses incurred in connection with the enforcement of the rights of such
Micro Indemnified Person pursuant to this Agreement) to which such Micro
Indemnified Person may be subjected as a result of a claim made by a third
party arising out of or attributable, directly or indirectly, (i) to the
performance or nonperformance for Entertainment of any Services or (ii)
otherwise in connection with this Agreement.
(c) The parties agree to follow the procedures set forth in
Section 5.3(a) and 5.3(b) of the Reorganization Agreement dated as of
September 4, 1996 among the parties hereto with respect to any claim for
indemnification made pursuant to this Section 2.2.
SECTION 2.3. OWNERSHIP OF WORK PRODUCT. (a) Except for the
data provided by Book or Entertainment to
III-5
<PAGE>
Micro and the reports produced by Micro for Book or Entertainment pursuant
to this Agreement, all proprietary tools and methodologies and all written
material including programs, tapes, listing and other programming
documentation which were preexisting or originated and prepared by Micro
pursuant to this Agreement shall belong to Micro except as otherwise agreed
by the parties in a separate written agreement signed by each party.
(b) No license under any trade secrets, copyrights, or other
rights is granted by this Agreement or any disclosure hereunder.
(c) Book and Entertainment shall have reasonable access to all
data, records, files, statements, records, invoices, billings, and other
information generated by or in custody of Micro relating to the Services
provided pursuant to this Agreement. Unless otherwise specified by Book or
Entertainment or required by law, Micro shall maintain all such business
records pertaining to the Services and will retain the records pertaining
to each Service for a period of twelve months after the cessation of such
Service. At the request of Book or Entertainment, Micro shall provide
copies of records pertaining to the Services.
ARTICLE 3
GENERAL PROVISIONS
SECTION 3.1. PARTIES. Nothing in this Agreement, express or
implied, is intended to confer upon any person not a party any rights and
remedies hereunder.
SECTION 3.2. GOVERNING LAW. This Agreement shall be governed
by and construed in accordance with the laws of the State of Tennessee,
without regard to its conflict of laws provisions.
SECTION 3.3. HEADINGS. The Section and other headings
contained in this Agreement are for reference purposes only and shall not
in any way affect the meaning or interpretation of this Agreement.
SECTION 3.4. ENTIRE AGREEMENT. This Agreement constitutes the
entire agreement among the parties in respect of the subject matter
contained herein and neither this Agreement nor any term or provision
hereof may be amended or waived except by an instrument in writing signed,
in the case of an amendment, by each party and, in the case
III-6
<PAGE>
of a waiver, by the party against whom the waiver is to be effective.
SECTION 3.5. ASSIGNMENTS. This Agreement shall not be
assignable by any party without the written consent of the other parties
hereto. No assignment of any right or benefit hereunder shall relieve any
obligation of the assignor hereunder without the written consent of the
other parties.
SECTION 3.6. NOTICES. Any notice, request, instruction or
other document to be given hereunder by any party hereto to another party
hereto shall be in writing (including telecopier or similar writing) and
shall be given to such party at its address set forth on the signature
pages hereof, or to such other address as the party to whom notice is to be
given may provide in a written notice to the party giving such notice, a
copy of which written notice shall be on file with the Secretary of Micro.
Each such notice, request or other communication shall be effective (i) if
given by telecopy, when such telecopy is transmitted to the telecopy number
specified on the signature pages hereof and the appropriate confirmation is
received, (ii) if given by mail, 72 hours after such communication is
deposited in the mails with first class postage prepaid addressed as
aforesaid or (iii) if given by any other means, when delivered at the
address specified in this Section 3.6.
SECTION 3.7. DEFINITIONS. Terms used but not defined herein
shall have the meanings set forth in the Reorganization Agreement dated as
of September 4, 1996 among the parties hereto.
SECTION 3.8. SEVERABILITY. The invalidity or unenforceability
of any provisions of this Agreement in any jurisdiction shall not affect
the validity, legality or enforceability of the remainder of this Agreement
in such jurisdiction or the validity, legality or enforceability of this
Agreement, including any such provision, in any other jurisdiction, it
being intended that all rights and obligations of the parties hereunder
shall be enforceable to the fullest extent permitted by law.
SECTION 3.9. INDEPENDENT CONTRACTORS. The parties hereto are
independent contractors. Nothing in this Agreement is intended or shall be
deemed to constitute a partnership, agency, franchise or joint venture
relationship among the parties. No party shall incur any debts or make any
commitments for the others, except to the extent, if at all, specifically
provided herein.
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<PAGE>
SECTION 3.10. REMEDIES. The parties hereby acknowledge and
agree that in the event of any breach of this Agreement, the parties would
be irreparably harmed and could not be made whole by monetary damages.
Each party hereto agrees (i) not to assert by way of defense or otherwise
that a remedy at law would be adequate, and (ii) in addition to any other
remedy to which the parties may be entitled, that the remedy of specific
performance of this Agreement is appropriate in any action in court.
SECTION 3.11. CONSENT TO JURISDICTION. Each party hereto
irrevocably submits to the non-exclusive jurisdiction of any Tennessee
State Court or United States Federal Court sitting in the Middle District
of Tennessee over any suit, action or proceeding arising out of or relating
to this Agreement. Each party hereto waives any right it may have to
assert the doctrine of forum non conveniens or to object to venue to the
extent any proceeding is brought in accordance with this Section 3.11.
Nothing in this paragraph shall affect or limit any right to serve process
in any manner permitted by law, to bring proceedings in the courts of any
jurisdiction or to enforce in any lawful manner a judgment obtained in one
jurisdiction in any other jurisdiction.
SECTION 3.12. COUNTERPARTS. This Agreement may be executed in
any number of counterparts, each of which shall be an original with the
same effect as if the signatures thereto and hereto were upon the same
instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
INGRAM MICRO INC.
By: /s/ Jeffrey R. Rodek
---------------------------------------
Name: Jeffrey R. Rodek
Title: President
1600 East Saint Andrew Place
Santa Ana, CA 92705
Telecopy: (714) 566-7900
INGRAM BOOK COMPANY, A
DIVISION OF INGRAM INDUSTRIES
INC.
By: /s/ John R. Ingram
---------------------------------------
Name: John R. Ingram
Title: Co-President
One Belle Meade Place
4400 Harding Road
Nashville, TN 32705
Telecopy: (615) 298-8242
INGRAM ENTERTAINMENT INC.
By: /s/ David B. Ingram
---------------------------------------
Name: David B. Ingram
Title: Chairman & President
Two Ingram Boulevard
La Vergne, TN 37086
Telecopy: (615) 287-4985
III-9
EXHIBIT 10.21
AMENDED AND RESTATED EXCHANGE AGREEMENT
among
INGRAM INDUSTRIES INC.,
INGRAM MICRO INC.,
INGRAM ENTERTAINMENT INC.,
AND
THE PERSONS IDENTIFIED
ON THE SIGNATURE PAGES HEREOF
TABLE OF CONTENTS
Page
ARTICLE 1
DEFINITIONS
SECTION 1.1. Definitions.................................. 1
ARTICLE 2
EXCHANGE
SECTION 2.1. Exchange by Holders.......................... 3
SECTION 2.2. The First Closing............................ 4
SECTION 2.3. The Second Closing........................... 6
SECTION 2.4. Other Holders................................ 6
SECTION 2.5. Exercising Optionholders..................... 6
SECTION 2.6. Acknowledgement and Release.................. 7
SECTION 2.7. Surrender of Existing Certificates........... 8
SECTION 2.8. Certain Representations and
Warranties.................................. 8
SECTION 2.9. Legend....................................... 9
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF EACH HOLDER
SECTION 3.1. Private Placement............................ 9
SECTION 3.2. Ownership.................................... 10
SECTION 3.3. Tax Matters.................................. 10
SECTION 3.4. Community Property........................... 11
SECTION 3.5. Representation of the Thrift Plan............ 11
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF EACH PARTY
SECTION 4.1. Authority; No Other Action................... 11
SECTION 4.2. Binding Effect............................... 12
ARTICLE 5A
CONDITIONS TO FIRST CLOSING
SECTION 5A.1. Conditions to Obligations of the
Parties.................................... 12
SECTION 5A.2. Conditions to Obligation of the Ingram
Companies.................................. 13
SECTION 5A.3. Conditions to Obligation of the
Holders.................................... 14
SECTION 5A.4. Conditions to Obligation of Certain
Stockholders............................... 15
SECTION 5A.5. Conditions to Obligation of the Thrift
Plan....................................... 15
ARTICLE 5B
CONDITIONS TO SECOND CLOSING
SECTION 5B.1. Conditions to Obligations of the
Parties.................................... 16
SECTION 5B.2. Conditions to Obligation of Industries and
Entertainment.............................. 16
SECTION 5B.3. Conditions to Obligation of Certain
Holders.................................... 17
SECTION 5B.4. Conditions to Obligation of David B.
Ingram..................................... 18
ARTICLE 6
CERTAIN AGREEMENTS; TAX MATTERS
SECTION 6.1. Tax Representation of the Holders............ 18
SECTION 6.2. Tax Representation of the Ingram
Companies.................................. 18
SECTION 6.3. Tax Covenant................................. 19
SECTION 6.4. Agreements of Investment Manager............. 19
SECTION 6.5. True-Up...................................... 20
SECTION 6.6. Termination of Stock Purchase Agreement
Obligations................................ 22
SECTION 6.7. Cooperation.................................. 22
SECTION 6.8. Issuance of Entertainment Common
Stock...................................... 22
ARTICLE 7
MISCELLANEOUS
SECTION 7.1. Headings..................................... 22
SECTION 7.2. Entire Agreement............................. 23
SECTION 7.3. Notices...................................... 23
SECTION 7.4. Applicable Law............................... 23
SECTION 7.5. Severability................................. 23
SECTION 7.6. Termination.................................. 24
SECTION 7.7. Successors, Assigns, Transferees............. 24
SECTION 7.8. Amendments; Waivers.......................... 24
SECTION 7.9. Counterparts................................. 26
SECTION 7.10. Remedies..................................... 26
SECTION 7.11. Consent to Jurisdiction...................... 26
SECTION 7.12. Expenses..................................... 26
Exhibit A - Form of Transfer Restrictions Agreement
Exhibit B - Form of Registration Rights Agreement
Exhibit C - Form of Board Representation Agreement
Exhibit D - Form of Amended and Restated Stock Option, SAR/ISU
Conversion and Exchange Agreement
Exhibit E - Form of Certificate of Incorporation of Micro
Exhibit F - Form of Bylaws of Micro
Exhibit G - Form of Thrift Plan Liquidity Agreement
Annex I - Industries stockholders and optionholders as of
12/31/95
Annex II - Family Stockholders
AMENDED AND RESTATED EXCHANGE AGREEMENT
AGREEMENT dated as of September 4, 1996, as amended and
restated as of October 17, 1996, among Ingram Industries Inc., a Tennessee
corporation ("Industries"), Ingram Micro Inc., a Delaware corporation
("Micro"), Ingram Entertainment Inc., a Tennessee corporation ("Entertainment"
and, together with Industries and Micro, the "Ingram Companies"), and each
Person listed on the signature pages hereof.
The parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1. Definitions. (a) The following terms, as
used herein, have the following meanings:
"Board Representation Agreement" means the Board Representation
Agreement substantially in the form attached as Exhibit C hereto.
"Entertainment Common Stock" means shares of common stock,
without par value, of Entertainment.
"Exchange" means the exchange of Industries Common Stock
pursuant to Article 2.
"Exchange Securities" means the shares of Industries Common
Stock to be exchanged pursuant to Article 2.
"Family Stockholders" means the Family Stockholders set forth
on Annex II hereto.
"First Closing" means the closing of the transactions
contemplated by Section 2.2.
"Group" means any Stockholder Group, which includes the Micro
Group, the Entertainment Group, the Industries Group, the Family Group, and
the Industries Optionholder Group, in each case as indicated on Annex I
hereto.
"Holder" means each Person listed on the signature pages hereof
(other than any Ingram Company), each Person who becomes a party to this
Agreement pursuant to Section 2.4 or 2.5, or all of them, as the context
requires; provided that any Person who withdraws from this Agreement pursuant
to Section 7.8(d) shall cease to be a Holder effective on the date of such
withdrawal.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and the rules and regulations promulgated thereunder.
"Industries Common Stock" means shares of Class A common stock
and Class B common stock, without par value, of Industries.
"Investment Manager" means State Street Bank and Trust Company,
in its capacity as investment manager with respect to the Thrift Plan.
"Micro Common Stock" means shares of Class B common stock, par
value $0.01 per share, of Micro.
"Person" means an individual, corporation, partnership, limited
liability company, trust, association or any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"QTIP" means the E. Bronson Ingram Qtip Marital Trust.
"Related Agreements" means the Transfer Restrictions Agreement
substantially in the form attached as Exhibit A hereto, the Registration
Rights Agreement substantially in the form attached as Exhibit B hereto, the
Amended and Restated Stock Option, SAR and ISU Conversion and Exchange
Agreement substantially in the form attached as Exhibit D hereto and the
Thrift Plan Liquidity Agreement.
"Reorganization Agreement" means the Amended and Restated
Reorganization Agreement dated as of September 4, 1996, as amended and
restated as of October 17, 1996, among Industries, Micro and Entertainment.
"Second Closing" means the closing of the transactions
contemplated by Section 2.3.
"Securities Act" means the Securities Act of 1933, as amended.
"Subsidiary" means, (i) with respect to Entertainment or Micro,
any entity of which securities or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other persons
performing similar functions are directly or indirectly owned by such Person
immediately after the First Closing and (ii) with respect to Industries, any
entity (other than Entertainment or its Subsidiaries) of which securities or
other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions are
directly or indirectly owned by Industries immediately after the First Closing.
"Thrift Plan" means the Ingram Thrift Plan.
"Thrift Plan Liquidity Agreement" means the Thrift Plan
Liquidity Agreement substantially in the form attached as Exhibit G hereto.
(b) Each of the following terms is defined in the Section set
forth opposite such term:
Term Section
---- -------
Adjustment Amount 6.5
Affected Group 7.8
Charitable Trusts and
Foundation 7.8
Claims 2.6
Entertainment Tax Ruling 5B.2
Exercising Optionholder 2.5
First Closing Date 2.2
HLH&Z 5.5
Holder's Fraction 2.1
Initial Adjustment Period 6.5
Micro Tax Ruling 5A.2
Offer Period 2.4
Option Record Date 2.5
Other Holder 2.4
Required Holders 7.8
Second Closing Date 2.3
Unexchanged Shares 2.1
ARTICLE 2
EXCHANGE
SECTION 2.1. Exchange by Holders. On the terms and
subject to the conditions set forth herein, each Holder who is a member of the
Stockholder Groups hereby agrees to exchange the number of shares of
Industries Common Stock set forth opposite the name of such Holder under the
heading "III Common Stock To Be Exchanged" on Annex I; provided that the
number of shares of Industries Common Stock to be exchanged for shares of
Micro Common Stock by each Holder that is a member of the Family Group shall
be increased by an amount equal to the product of
(a) the sum (the "Unexchanged Shares") of (x) the product of
of .7599 and the aggregate number of shares of Industries Common Stock set
forth under the heading "III Common Stock Owned" on Annex I opposite the
name of each Holder that is a member of the Industries Group identified
under such heading who does not elect to participate in the Exchange
pursuant to Section 2.4; and (y) the product of .7284 and the aggregate
number of shares of Industries Common Stock acquired upon exercise after
December 31, 1995 of options held as of December 31, 1995 as set forth
under the heading "III Common Stock Owned" on Annex I opposite the name of
each Holder that is a member of the Industries Optionholder Group who does
not elect to participate in the Exchange pursuant to Section 2.4; and
(b) a fraction (the "Holder's Fraction"), the numerator of
which shall equal the number of shares of Industries Common Stock set forth
opposite the name of such Holder that is a member of the Family Group under the
heading "III Common Stock Owned" on Annex I and the denominator of which shall
equal the total number of shares of Industries Common Stock set forth opposite
the name of all Holders that are members of the Family Group under the heading
"III Common Stock Owned" on Annex I.
Except as otherwise determined by the Board of Directors of
Industries, if the Exchange Securities of any Holder constitute less than 100%
of such Holder's Industries Common Stock, the Exchange Securities of such
Holder shall, to the extent practicable, consist of 90% of Class B common
stock of Industries and 10% of Class A common stock of Industries.
SECTION 2.2. The First Closing. (a) The First Closing
shall take place at the executive offices of Industries in Nashville,
Tennessee or at such other place, and at such time, as the Ingram Companies
may agree following satisfaction or waiver of the conditions set forth in
Article 5A. The date and time of such closing are referred to herein as the
"First Closing Date". The First Closing shall take place in two phases as
specified below.
(b) In the first phase, the following actions shall take
place simultaneously:
(i) the Thrift Plan, pursuant to the written instructions of
the Investment Manager, shall deliver to Industries (x) certificates
representing the Exchange Securities of the Thrift Plan, duly endorsed
in blank or accompanied by a duly executed stock power and (y)
executed counterpart signature pages to each Related Agreement; and
(ii) Industries shall deliver to the Thrift Plan certificates
representing the number of shares of Micro Common Stock, rounded up
to the nearest whole share, which the Thrift Plan is entitled to
receive as set forth opposite the name of the Thrift Plan on Annex I
thereto.
(c) Immediately following the first phase, the following
actions shall take place simultaneously in the second phase:
(i) The Exchange Securities to be exchanged pursuant to
Section 2.2(c)(ii) and the other related documents tendered pursuant
to Section 2.7 shall be released from escrow to Industries;
(ii) Industries shall deliver to each Holder (other than the
Thrift Plan), certificates representing the number of shares of Micro
Common Stock which such Holder is entitled to receive as set forth
opposite the name of such Holder on Annex I, rounded up to the
nearest whole share, plus with respect to each Holder that is a
member of the Family Group, the number of shares of Micro Common
Stock, rounded up to the nearest whole share, represented by the
product of (A) such Holder's Fraction and (B) the product of 1.3729
and the Unexchanged Shares; and
(iii) Industries shall deliver to Micro for cancellation all of
the shares of Micro Common Stock that have not been delivered to the
Thrift Plan pursuant to Section 2.2(b) or to the Holders pursuant to
Section 2.2(c).
(d) If pursuant to Section 2.7 any Holder (other than a
Holder that is a member of the Entertainment Group) has delivered to
Industries certificates representing a greater number of shares of Industries
Common Stock than the number of Exchange Securities of such Holder, at the
First Closing, Industries shall deliver to such Holder a new certificate
representing the number of shares (if any) of the class of Industries Common
Stock, rounded up to the nearest whole share, to be retained by such Holder
immediately following the Exchange.
SECTION 2.3. The Second Closing. The Second Closing shall
take place at the executive offices of Industries in Nashville, Tennessee or
at such other place, and at such time, as Industries and Entertainment may
agree following satisfaction or waiver of the conditions set forth in Article
5B. The date and time of closing are referred to herein as the "Second
Closing Date". At the Second Closing:
(i) The Exchange Securities to be exchanged pursuant to
Section 2.3(ii) and the other related documents tendered pursuant to
Section 2.7 shall be released from escrow to Industries;
(ii) Industries shall deliver to each Holder identified on
Annex I hereto as being a member of the Entertainment Group,
certificates representing the number of shares of Entertainment
Common Stock, rounded up to the nearest whole share, which such
Holder is entitled to receive as set forth opposite the name of such
Holder on Annex I hereto; and
(iii) Industries shall deliver to Entertainment for
cancellation all of the shares of Entertainment Common Stock that
have not been delivered to the Holders pursuant to Section 2.3(ii).
SECTION 2.4. Other Holders. Within 15 days following
September 4, 1996, Industries shall offer each stockholder of Industries set
forth on Annex I that has not signed this Agreement on September 4, 1996
(each, an "Other Holder") the opportunity to participate in the Exchange by
exchanging the Exchange Securities of such Person on the terms and conditions
set forth on Annex I. Each Other Holder may elect to participate in the
Exchange by delivering to Industries no later than 20 business days following
the date on which the offer is made or such later date as Industries may
specify in its sole discretion following September 4, 1996 (the "Offer
Period"), an executed counterpart signature page to this Agreement and the
documents referred to in Section 2.7. Upon execution and delivery thereof to
Industries, such Other Holder shall become a party to this Agreement effective
as of September 4, 1996 and shall be bound by all of the provisions hereof.
SECTION 2.5. Exercising Optionholders. Industries shall
offer each Person listed on Annex I as being a member of the Entertainment
Group who acquires shares of Industries Common Stock upon exercise of stock
options after the First Closing Date and prior to a date (the "Option Record
Date") fixed by the board of directors of Industries, which date shall not be
more than 30 business days prior to the Second Closing Date (an "Exercising
Optionholder"), the opportunity to exchange such shares of Industries Common
Stock on the terms and conditions set forth in Sections 2.1 and 2.3 for shares
of Entertainment Common Stock. Industries shall deliver notice of the Option
Record Date promptly following determination thereof to each such Person
holding stock options that will be exercisable prior to such Option Record
Date. Each Exercising Optionholder may elect to participate in the Exchange by
delivering to Industries, no later than 20 business days following the Option
Record Date, an executed counterpart signature page to this Agreement and the
documents referred to in Section 2.7. Upon execution and delivery thereof to
Industries, such Exercising Optionholder shall become a party to this
Agreement effective as of September 4, 1996 and shall be bound by all of the
provisions hereof.
SECTION 2.6. Acknowledgement and Release. (a) Each
Holder hereby agrees that, as of September 4, 1996, the fair value of the
securities to be received by such Holder in the Exchange is equal to the fair
value of such Holder's Exchange Securities. Each Holder hereby acknowledges
that an initial public offering of Micro Common Stock is contemplated, but no
assurance can be given as to whether such public offering will be consummated
or as to the market value of the Micro securities to be sold in such public
offering or whether a market for such securities will develop or be maintained.
(b) In consideration of the Exchange and effective at the
First Closing (in the case of each Holder, with respect to Exchange Securities
of such Holder that are exchanged at the First Closing) and at the Second
Closing (in the case of each Holder that is a member of the Entertainment
Group, with respect to Exchange Securities of such Holder that are exchanged
at the Second Closing), each Holder hereby unconditionally and irrevocably
releases and discharges each Ingram Company and each other Person directly or
indirectly controlling, controlled by, or under common control with, such
Ingram Company and any and all directors, officers and shareholders of any of
the foregoing, of any claim, obligation or liability, in law or in equity,
that such Holder had in the past, now has or hereafter shall or may have for,
upon or by reason of any event, matter or thing which has occurred from the
beginning of the world to the First Closing Date or the Second Closing Date,
respectively (the "Claims"), arising out of or relating to such Holder's
ownership of Industries Common Stock, including without limitation (i) Claims
alleging that such Holder has a right to receive additional or different
consideration in the Exchange and (ii) Claims against directors of any Ingram
Company alleging a breach of fiduciary duty of such directors arising in
connection with the transactions contemplated hereby or by the Board
Representation Agreement, the Related Agreements, the Reorganization Agreement
or the Ancillary Agreements (as defined in the Reorganization Agreement) or
any other agreement referred to herein or therein, except that no Holder shall
agree hereby to waive any such Claim to the extent that any such director was
not acting in good faith.
SECTION 2.7. Surrender of Existing Certificates. (a)
Except as otherwise provided in Section 2.7(b), concurrently with the
execution by each Holder (other than the Thrift Plan) of this Agreement, such
Holder will deliver to Industries in escrow pending the consummation of the
First Closing or the Second Closing, as applicable, executed counterpart
signature pages to each Related Agreement and all certificates representing
the Exchange Securities owned by such Holder. Each certificate representing
such Exchange Securities shall be duly endorsed in blank or accompanied by a
duly executed stock power. Each Holder that is an Exercising Optionholder
also will deliver to Industries in escrow pending the consummation of the
Second Closing executed counterpart signature pages to an agreement pursuant
to which such Holder would be subject to certain restrictions on the ability
of such Holder to transfer shares of Entertainment Common Stock to be received
by such Holder in the Exchange (which restrictions will be similar to the
restrictions applicable to the Exchange Securities of Holder immediately prior
to the Second Closing).
(b) Notwithstanding anything to the contrary in Section
2.7(a), (i) no later than two days prior to the First Closing Date, each of
the Family Stockholders, the QTIP and the Charitable Trusts and Foundation
will deliver to Industries in escrow pending consummation of the First Closing
all certificates representing the Exchange Securities owned by such Holder,
duly endorsed in blank or accompanied by a duly executed stock power, and (ii)
all certificates representing Exchange Securities which are currently pledged
to Nationsbank, N.A., Nationsbank of Tennessee, N.A. or First American
National Bank shall be delivered by the pledgee to Industries at the First
Closing (or, in the case of Exchange Securities to be exchanged at the Second
Closing pursuant to Section 2.3, at the Second Closing), duly endorsed as
described above.
(c) Certificates representing Exchange Securities held in
escrow pursuant to this Section 2.7 shall promptly be returned to the Holder
thereof upon any termination of this Agreement pursuant to Section 7.6.
SECTION 2.8. Certain Representations and Warranties.
Micro represents and warrants to each Holder as of September 4, 1996 and as of
the First Closing Date that the shares of Micro Common Stock to be delivered
pursuant to Section 2.2 are validly issued, fully paid and non-assessable.
Entertainment represents and warrants to each Holder as of September 4, 1996
and as of the Second Closing Date that the shares of Entertainment Common
Stock to be delivered pursuant to Section 2.3 are validly issued, fully paid
and non-assessable.
SECTION 2.9. Legend. Each certificate representing a
share of Micro Common Stock or Entertainment Common Stock to be acquired
pursuant to this Agreement shall (except as provided below) include any
legends required pursuant to applicable securities laws and a legend in
substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE OR FOREIGN SECURITIES LAWS
AND MAY NOT BE OFFERED OR SOLD EXCEPT IN COMPLIANCE THEREWITH.
Any Holder or transferee of a share of Micro Common Stock or Entertainment
Common Stock may, upon providing evidence (including without limitation an
opinion of counsel) reasonably satisfactory to Micro or Entertainment,
respectively, that such share either is not a "restricted security" (as
defined in Rule 144 promulgated under the Securities Act) or may be sold
pursuant to Rule 144(k) promulgated under the Securities Act, exchange the
certificate representing such share for a new certificate that does not bear
such legend.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF EACH HOLDER
Each Holder hereby represents and warrants to each Ingram
Company as of September 4, 1996, as of October 17, 1996, as of the First
Closing Date and, in the case of any Holder that is a member of the
Entertainment Group, as of the Second Closing Date, as follows:
SECTION 3.1. Private Placement. (a) Such Holder
understands that (i) the Exchange and the delivery of securities in the
Exchange as contemplated hereby is intended to be exempt from registration
under the Securities Act pursuant to Section 4(2) of the Securities Act and
(ii) there is no existing public or other market for such securities and,
except as otherwise provided in the Related Agreements, there can be no
assurance that such Holder will be able to sell or dispose of the securities
delivered to such Holder pursuant to the terms hereof.
(b) The securities to be acquired by such Holder pursuant to
this Agreement are being acquired for its own account for investment and
without a view to the public distribution of such securities or any interest
therein.
(c) Unless Industries has been notified in writing to the
contrary prior to September 4, 1996, such Holder is an "Accredited Investor"
as such term is defined in Regulation D promulgated under the Securities Act.
(d) Such Holder has sufficient knowledge and experience in
financial and business matters so as to be capable of evaluating the merits
and risks of its investment in the securities to be acquired by such Holder
pursuant to this Agreement and such Holder is capable of bearing the economic
risks of such investment, including a complete loss of its investment in such
securities, since such securities may not be transferred except as provided in
the Related Agreements.
(e) Such Holder has been given the opportunity to ask
questions of, and receive answers from the Ingram Companies concerning the
Ingram Companies, the securities to be acquired by such Holder pursuant to
this Agreement, the transactions contemplated hereby and by the Reorganization
Agreement and other related matters. Such Holder further represents and
warrants to each Ingram Company that such Ingram Company has made available to
such Holder or its agents all documents and information relating to an
investment in such securities requested by or on behalf of such Holder. In
evaluating the suitability of an investment in such securities, such Holder
has not relied upon any other representations or other information (whether
oral or written) made by or on behalf of any Ingram Company.
(f) Such Holder understands that (i) the securities to be
acquired by such Holder pursuant to this Agreement may not be transferred
except in compliance with the provisions of the Related Agreements and (ii)
such securities will bear a legend to such effect.
SECTION 3.2. Ownership. Except as set forth on Schedule
3.2, such Holder is the record and beneficial owner of the Exchange Securities
of such Holder. Except as set forth on Schedule 3.2, such Exchange Securities
are and, as of the First Closing (and, if such Holder is a member of the
Entertainment Group, as of the Second Closing) will be, free and clear of any
lien, pledge, charge, security interest or encumbrance of any kind and any
other limitation or restriction (including without limitation any restriction
on the right to vote, sell or otherwise dispose of such Exchange Securities).
SECTION 3.3. Tax Matters. There is no plan or intention
by such Holder to sell, exchange, transfer by gift or otherwise dispose of any
of such Holder's stock in any of the Ingram Companies subsequent to the
Exchange.
SECTION 3.4. Community Property. If such Holder's
Exchange Securities constitute community property, this Agreement has been
executed and delivered by such Holder's spouse, who shall be bound hereby, and
the representations and warranties contained in Article 3 (other than the
first sentence of Section 3.2), Article 4 and Section 6.2 are true and correct
as to such spouse.
SECTION 3.5. Representation of the Thrift Plan. If such
Holder is the Thrift Plan, the Investment Manager has made the determination
as of September 4, 1996 that the exchange of the Thrift Plan's shares of
Industries Common Stock for Micro Common Stock is prudent and in the best
interest of the Thrift Plan participants and beneficiaries.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF EACH PARTY
Each party hereto hereby represents and warrants to each other
party hereto as of September 4, 1996, as of October 17, 1996, as of the First
Closing Date and, in the case of Entertainment, Industries and each Holder
that is a member of the Entertainment Group, as of the Second Closing Date, as
follows:
SECTION 4.1. Authority; No Other Action. (a) Such
Person, if an individual, has the legal capacity to enter into this Agreement
and each Related Agreement. If such Person is not an individual, the
execution, delivery and performance by such Person of this Agreement and each
Related Agreement are within such Person's powers and have been duly
authorized on its part by all requisite action.
(b) No action by or in respect of, or filing with, any
governmental authority, agency or official is required for the execution,
delivery and performance by such Person of this Agreement and each Related
Agreement, other than compliance with any applicable requirements of the HSR
Act. The execution, delivery and performance by such Person of this Agreement
and each Related Agreement do not (i) contravene or conflict with or
constitute a violation of any provision of any existing law, regulation,
judgment, injunction, order or decree binding upon or applicable to such
Person or (ii) after giving effect to the actions to be taken in connection
with the First Closing and, if applicable, the Second Closing, require any
further consent, approval or other action by any other Person or constitute a
default under any provision of any material agreement, contract, indenture,
lease or other instrument binding upon such Person or any material license,
franchise, permit or other similar authorization held by such Person which
would have a material adverse effect on the business, financial condition or
prospects of any such Person.
SECTION 4.2. Binding Effect. This Agreement has been duly
executed by such Person and constitutes, and, when executed and delivered,
each Related Agreement shall constitute, a valid and binding agreement of such
Person.
ARTICLE 5A
CONDITIONS TO FIRST CLOSING
SECTION 5A.1. Conditions to Obligations of the Parties.
The obligations of each party to consummate the First Closing are subject to
the satisfaction of the following conditions:
(i) any applicable waiting period under the HSR Act
relating to the consummation of the First Closing and the
transactions contemplated by the Reorganization Agreement and the
other agreements referred to herein or therein shall have expired or
been terminated;
(ii) no provision of any applicable law or regulation and
no judgment, injunction, order or decree shall prohibit the
consummation of the First Closing or the transactions contemplated by
the Reorganization Agreement and the other agreements referred to
herein or therein;
(iii) all actions by or in respect of or filings with any
governmental body, agency, official or authority required to permit
the consummation of the First Closing and the transactions
contemplated by the Reorganization Agreement and the other agreements
referred to herein or therein shall have been taken, made or obtained;
(iv) the Related Agreements, the Board Representation
Agreement, the Reorganization Agreement and the Ancillary Agreements
(as defined in the Reorganization Agreement) shall have been executed
and delivered by each of the parties thereto and shall be in full
force and effect; and
(v) the certificate of incorporation and bylaws of Micro
shall be substantially in the forms attached as Exhibits E and F,
respectively.
SECTION 5A.2. Conditions to Obligation of the Ingram
Companies. The obligation of each Ingram Company to consummate the First
Closing is subject to the satisfaction of the following further conditions:
(i) (A) each Holder shall have performed in all material
respects all of its obligations under this Agreement and any other
agreement, certificate or other writing delivered in connection
herewith required to be performed by it on or prior to the First
Closing Date and (B) the representations and warranties of each
Holder contained in this Agreement and in any other agreement,
certificate or other writing delivered in connection herewith shall
be true at and as of the First Closing Date, as if made at and as of
such date;
(ii) (A) a ruling (the "Micro Tax Ruling") with respect to the
federal income tax consequences of the transactions contemplated by
Section 2.2 and by the Reorganization Agreement and the other
agreements referred to herein and therein in form and substance
reasonably satisfactory to Industries (and which may be in the same
ruling as the Entertainment Tax Ruling) shall have been received and
shall not have been revoked and (B) nothing shall have come to the
attention of the Board of Directors of Industries that causes them to
conclude, after consideration of advice of tax counsel and all other
facts and circumstances that they deem appropriate, that significant
questions exist as to the validity of the Micro Tax Ruling as applied
to the transactions contemplated hereby and by the Reorganization
Agreement and the other agreements referred to herein and therein;
(iii) each Ingram Company shall have received an opinion of
McDermott, Will & Emery, counsel to the Investment Manager, dated the
date of the First Closing, to the effect that the transactions
contemplated to be entered into by the Thrift Plan at the First
Closing and the consummation thereof will not constitute prohibited
transactions under Section 406 of the Employee Retirement Income
Security Act of 1974, as amended, or Section 4975 of the Internal
Revenue Code of 1986, as amended;
(iv) all third party non-governmental consents, authorizations
and approvals required in connection with the consummation of the
First Closing and the transactions contemplated by the Reorganization
Agreement and the other agreements referred to herein or therein
shall have been received, in each case in form and substance
reasonably satisfactory to Industries, and no such consent,
authorization or approval shall have been revoked;
(v) all receivables, payables and other liabilities (other
than loans made to or by any stockholder of Industries and other than
purchases and sales of goods in the ordinary course of business)
owing between Industries, Entertainment or any of their respective
Subsidiaries, on the one hand, and Micro or any of its Subsidiaries,
on the other hand, shall have been settled and repaid;
(vi) agreements relating to the transactions referred to on
Schedule 5A.2(vi) shall have been executed and delivered by the
parties thereto and shall be in full force and effect, and the
conditions to closing of each such agreement shall have been
satisfied;
(vii) the Offer Period referred to in Section 2.4 shall have
expired; and
(viii) the exchanges and conversions contemplated to occur on
or prior to the First Closing by the Amended and Restated Stock
Option, SAR and ISU Conversion and Exchange Agreement substantially
in the form attached as Exhibit D hereto shall have occurred (or
shall occur concurrently with the First Closing).
SECTION 5A.3. Conditions to Obligation of the Holders. The
obligation of each Holder to consummate the First Closing is subject to the
satisfaction of the following further conditions that (i) each Ingram Company
shall have performed in all material respects all of its obligations under
this Agreement and any other agreement, certificate or other writing delivered
in connection herewith required to be performed by it at or prior to the First
Closing Date and (ii) the representations and warranties of each Ingram
Company contained in this Agreement and in any other agreement, certificate or
other writing delivered in connection herewith shall be true at and as of the
First Closing Date, as if made at and as of such date.
SECTION 5A.4. Conditions to Obligation of Certain
Stockholders. The obligation of each of the Family Stockholders and the QTIP
to consummate the First Closing is subject to the satisfaction of the further
conditions that (i) the Micro Tax Ruling, in form and substance reasonably
satisfactory to each of the Family Stockholders and the QTIP, shall have been
received and shall not have been revoked and (ii) nothing shall have come to
the attention of any Family Stockholder or the QTIP that causes them to
conclude, after consideration of advice of tax counsel and all other facts and
circumstances that they deem appropriate, that significant questions exist as
to the validity of the Micro Tax Ruling as applied to the transactions
contemplated hereby and by the Reorganization Agreement and the other
agreements referred to herein and therein.
SECTION 5A.5. Conditions to Obligation of the Thrift Plan.
The obligation of the Thrift Plan to consummate the First Closing is subject
to the satisfaction of the following further conditions:
(i) the Thrift Plan shall have received an opinion dated the
date of the First Closing of McDermott, Will & Emery, counsel to the
Investment Manager, in form and substance satisfactory to the
trustees of the Thrift Plan, to the effect that the transactions to
be entered into by the Thrift Plan, at the First Closing and the
consummation thereof will not constitute prohibited transactions
under Section 406 of the Employee Retirement Income Security Act of
1974, as amended, or Section 4975 of the Internal Revenue Code of
1986, as amended;
(ii) the Investment Manager of the Thrift Plan shall have
received a written opinion from Houlihan, Lokey, Howard & Zukin
("HLH&Z") to the effect that (A) the fair market value of the shares
of Micro Common Stock to be received by the Thrift Plan pursuant to
Section 2.2 is at least equal to the fair market value of the
Exchange Securities of the Thrift Plan and (B) the terms and
conditions of the Exchange are fair and reasonable to the Thrift Plan
from a financial point of view;
(iii) the Investment Manager shall have provided the written
direction to the trustees of the Thrift Plan contemplated under
Section 2.2(b)(i); and
(iv) Nothing shall have come to the attention of the
Investment Manager that causes it to conclude that its decision to
exchange the Thrift Plan's shares of Industries Common Stock for
Micro Common Stock was not prudent or in the best interest of the
Thrift Plan participants and beneficiaries.
ARTICLE 5B
CONDITIONS TO SECOND CLOSING
SECTION 5B.1. Conditions to Obligations of the Parties.
The obligations of Industries, Entertainment and each Holder that is a member
of the Entertainment Group to consummate the Second Closing are subject to the
satisfaction of the following conditions:
(i) any applicable waiting period under the HSR Act
relating to the consummation of the Second Closing and the
transactions contemplated by the Reorganization Agreement and the
other agreements referred to herein or therein shall have expired or
been terminated;
(ii) no provision of any applicable law or regulation and
no judgment, injunction, order or decree shall prohibit the
consummation of the Second Closing or the transactions contemplated
by the Reorganization Agreement and the other agreements referred to
herein or therein; and
(iii) all actions by or in respect of or filings with any
governmental body, agency, official or authority required to permit
the consummation of the Second Closing and the transactions
contemplated by the Reorganization Agreement and the other agreements
referred to herein or therein shall have been taken, made or obtained.
SECTION 5B.2. Conditions to Obligation of Industries and
Entertainment. The obligation of Industries and Entertainment to consummate
the Second Closing is subject to the satisfaction of the following further
conditions:
(i) (A) each Holder that is a member of the Entertainment
Group shall have performed in all material respects all of its
obligations under this Agreement and any other agreement, certificate
or other writing delivered in connection herewith required to be
performed by it on or prior to the Second Closing Date and (B) the
representations and warranties of each Holder that is a member of the
Entertainment Group contained in this Agreement and in any other
agreement, certificate or other writing delivered in connection
herewith shall be true at and as of the Second Closing Date, as if
made at and as of such date;
(ii) (A) a ruling (the "Entertainment Tax Ruling") with
respect to the federal income tax consequences of the transactions
contemplated by Section 2.3 and the other agreements referred to
herein in form and substance reasonably satisfactory to Industries
(and which may be in the same ruling as the Micro Tax Ruling) shall
have been received and shall not have been revoked and (B) nothing
shall have come to the attention of the Board of Directors of
Industries that causes them to conclude, after consideration of
advice of tax counsel and all other facts and circumstances that they
deem appropriate, that significant questions exist as to the validity
of the Entertainment Tax Ruling as applied to the transactions
contemplated hereby and the other agreements referred to herein;
(iii) all third party non-governmental consents,
authorizations and approvals required in connection with the
consummation of the Second Closing and the transactions contemplated
by the Reorganization Agreement and the other agreements referred to
herein or therein shall have been received, in each case in form and
substance reasonably satisfactory to Industries, and no such consent,
authorization or approval shall have been revoked;
(iv) all receivables, payables and other liabilities (other
than loans made to or by any stockholder of Industries and other than
purchases and sales of goods in the ordinary course of business)
owing between Industries or any of its Subsidiaries, on the one hand,
and Entertainment or any of its Subsidiaries, on the other hand,
shall have been settled and repaid; and
(v) the exchanges and conversions contemplated to occur on
or prior to the Second Closing by the Amended and Restated Stock
Option, SAR and ISU Conversion and Exchange Agreement substantially
in the form attached as Exhibit D hereto shall have occurred (or
shall occur concurrently with the Second Closing).
SECTION 5B.3. Conditions to Obligation of Certain Holders.
The obligation of each Holder that is a member of the Entertainment Group to
consummate the Second Closing is subject to the satisfaction of the following
further conditions that (i) each of Industries and Entertainment shall have
performed in all material respects all of its obligations under this Agreement
and any other agreement, certificate or other writing delivered in connection
herewith required to be performed by it at or prior to the Second Closing Date
and (ii) the representations and warranties of Industries and Entertainment
contained in this Agreement and in any other agreement, certificate or other
writing delivered in connection herewith shall be true at and as of the Second
Closing Date, as if made at and as of such date.
SECTION 5B.4. Conditions to Obligation of David B. Ingram.
The obligation of David B. Ingram to consummate the Second Closing is subject
to the satisfaction of the further conditions that (i) the Entertainment Tax
Ruling, in form and substance reasonably satisfactory to David B. Ingram,
shall have been received and shall not have been revoked and (ii) nothing
shall have come to the attention of David B. Ingram that causes him to
conclude, after consideration of all other facts and circumstances that he
deems appropriate, that significant questions exist as to the validity of the
Entertainment Tax Ruling as applied to the transactions contemplated hereby
and the other agreements referred to herein.
ARTICLE 6
CERTAIN AGREEMENTS; TAX MATTERS
SECTION 6.1. Tax Representation and Covenant of the
Holders. Each Holder hereby represents and warrants to each Ingram Company as
of September 4, 1996, as of the First Closing Date and, if such Holder is a
member of the Entertainment Group, as of the Second Closing Date, that there
is no plan or intention by such Holder to sell, exchange, transfer by gift or
otherwise dispose of any of such Holder's stock in any of the Ingram Companies
subsequent to the Exchange. Each Holder that is a member of the Entertainment
Group hereby agrees not to sell, exchange, or otherwise transfer any of such
Holder's shares of Entertainment Common Stock subsequent to the Second Closing
to any entity formed for the purpose of holding all of the outstanding shares
of Entertainment Common Stock unless such Holder first obtains an opinion from
recognized tax counsel acceptable to the Ingram Companies, or a ruling from the
Internal Revenue Service, that such sale, exchange, transfer or other
disposition will not affect the qualification of the transactions contemplated
by this Agreement for tax-free treatment under Section 355 of the Internal
Revenue Code of 1986, as amended.
SECTION 6.2. Tax Representation of the Ingram Companies.
Each Ingram Company represents and warrants to each Holder as of September 4,
1996 and as of the First Closing Date that such Ingram Company has no plan or
intention to liquidate, merge or consolidate with any other Person, or to sell
or otherwise dispose of its assets other than in the ordinary course of
business following the First Closing. Each of Industries and Entertainment
further represents and warrants to each Holder as of September 4, 1996 and as
of the Second Closing Date that it has no plan or intention to liquidate,
merge or consolidate with any other Person, or to sell or otherwise dispose of
its assets other than in the ordinary course of business following the Second
Closing.
SECTION 6.3. Tax Covenant. Each Ingram Company covenants
that, during the two-year period following the First Closing (and, with
respect to Industries and Entertainment, during the two-year period following
the Second Closing), it will not, and will not enter into any agreement to,
(i) liquidate, merge or consolidate with any other Person, or sell, exchange,
distribute or otherwise dispose of any material asset other than in the
ordinary course of business; (ii) redeem or reacquire any of its capital stock
transferred pursuant to this Agreement (except for the redemption of the stock
held by an employee or by the Thrift Plan on behalf of an employee upon the
employee's termination or death in accordance with the terms of (x) an
applicable stock purchase agreement or a repurchase agreement referred to in
Section 4.4 of the Reorganization Agreement, (y) Section 2.6 or Section
2.7(a)(ii) of the Transfer Restrictions Agreement or (z) the Thrift Plan
Liquidity Agreement) or, in the case of Industries, any of the Industries
common stock outstanding as of the First Closing or the Second Closing, as the
case may be, that is not transferred pursuant to this Agreement (except for the
redemption of the stock held by an employee upon such employee's termination
or death in accordance with the terms of an applicable stock purchase
agreement or a repurchase agreement referred to in Section 4.4 of the
Reorganization Agreement); (iii) cease to conduct the principal active trade
or business conducted by it during the five years immediately preceding the
First Closing or the Second Closing, as the case may be; or (iv) otherwise
take any actions inconsistent with the facts and representations set forth in
the Tax Ruling; provided that such Ingram Company may take an action
inconsistent with any of the foregoing covenants if it first obtains an
opinion from recognized tax counsel acceptable to the other Ingram Companies,
or a ruling from the Internal Revenue Service, that such action will not
affect the qualification of the transactions contemplated by this Agreement
for tax-free treatment under Section 355 of the Internal Revenue Code of 1986,
as amended.
SECTION 6.4. Agreements of Investment Manager. (a) The
Investment Manager represents and warrants to each Holder as of September 4,
1996 that it has received written confirmation, attached hereto as Schedule
6.4, from HLH&Z that HLH&Z will deliver the opinion contemplated pursuant to
Section 5A.5(ii), provided that, immediately after the First Closing (and
without giving effect to any shares of Micro Common Stock to be issued in the
initial public offering of Micro), the Thrift Plan will own shares of Micro
Common Stock representing not less than 9.1% (as adjusted to reflect rounding
and any sale of Micro Common Stock to the Chief Executive Officer of Micro) of
all shares of Micro Common Stock outstanding at such time.
(b) The Investment Manager hereby agrees to cooperate with
the Ingram Companies and HLH&Z in connection with obtaining the opinion from
HLH&Z referred to in Section 5A.5(ii). The Investment Manager hereby further
agrees to deliver the written direction to the trustees of the Thrift Plan
referred to in Section 2.2(b)(i) and 5A.5(iii) promptly following receipt of
such HLH&Z opinion.
(c) The Investment Manager hereby agrees (i) to deliver to
the trustees of the Thrift Plan the written direction contemplated pursuant to
Section 2.2(b)(i), provided that the applicable conditions to the obligation of
the Thrift Plan set forth in Article 5A are satisfied or waived and (ii) to
direct the trustees of the Thrift Plan to enter into the Exchange Agreement on
behalf of the Thrift Plan.
SECTION 6.5. True-Up. (a) (i) Subject to Section 6.5(b),
each Ingram Company hereby agrees that, at or immediately prior to the First
Closing, the Adjustment Amount (as defined below) shall be allocated 23.01% to
Industries, 72.84% to Micro and 4.15% to Entertainment. Such allocation shall
be made through appropriate adjustments effected by way of dividends or capital
contributions to balance (A) the actual amount which each of Industries, Micro
and Entertainment and their respective Subsidiaries have contributed to the
Adjustment Amount with (B) the respective share of the Adjustment Amount to be
allocated to each of them pursuant to the foregoing sentence. As used herein,
"Adjustment Amount" shall mean the sum of (i) consolidated net income as
reported in Industries' unaudited interim financial statements for the period
(the "Initial Adjustment Period") commencing January 1, 1996 and ending (x) on
the last day of the full accounting month ended immediately prior to the First
Closing Date (if the First Closing Date occurs later than the 15th day of the
month) or (y) the last day of the second full accounting month ended prior to
the First Closing Date (if the First Closing Date occurs on or prior to the
15th day of the month) and (ii) the consolidated net income of Industries, as
projected by Industries, for the period commencing on the first day following
the end of the Initial Adjustment Period and ending on the last day of the
fiscal year, assuming for purposes of this clause (ii) that the First Closing
does not occur during such fiscal year; provided that the Adjustment Amount
shall be determined without giving effect to (a) any net income or losses
related to IMS or IPSI (each, as defined in the Reorganization Agreement), (b)
the after-tax effect of the Industries LIFO provision for such period, (c) any
accrual for expenses related to the transactions contemplated hereby, by the
Related Agreements, by the Reorganization Agreement or by the Ancillary
Agreements (as defined in the Reorganization Agreement), (d) any non-cash
charges related to Micro's stock option plans or (e) any expenses referred to
in Section 7.12 of this Agreement; provided further that the Adjustment Amount
shall be increased or decreased by such other amounts as the Ingram Companies
may agree.
(ii) Subject to Section 6.5(b), each of Industries and
Entertainment hereby agree that, at or prior to the Second Closing, the
Adjustment Amount shall be recalculated; provided that for purposes of such
recalculation, the consolidated net income of Industries for the period
commencing on the first day following the end of the Initial Adjustment Period
and ending on the last day of the fiscal year during which the First Closing
occurred shall be based on the actual net income of Industries and its
Subsidiaries and Entertainment and its Subsidiaries during such period (with
the net income of Micro and its Subsidiaries continuing to be as projected in
Section 6.5(a)). Such recalculation shall continue to assume that the First
Closing did not occur during such fiscal year. Following such recalculation,
appropriate adjustments shall be made between Industries and Entertainment in
the manner described in Section 6.5(a)(i) such that, after taking into account
any adjustments made at or immediately prior to the First Closing pursuant to
Section 6.5(a)(i), the recalculated Adjustment Amount shall (to the extent
possible) be allocated 23.01% to Industries and 4.15% to Entertainment.
(b) Notwithstanding anything herein to the contrary, the
parties agree that, in consideration of distributions to Industries previously
made by Micro and Entertainment, no costs and expenses shall be allocated to,
and no liabilities or obligations shall be assumed or borne by, Micro or
Entertainment pursuant to Section 6.5(a) or Section 7.12 of this Agreement or
pursuant to Article 3 of the Reorganization Agreement, until the aggregate of
such costs, expenses, liabilities and obligations shall exceed $20,778,000, in
the case of Micro, or $1,160,000, in the case of Entertainment, in which event
such allocation or assumption shall be made only to the extent of such excess.
To the extent that the aggregate of such costs, expenses, liabilities and
obligations is less than $20,778,000 in the case of Micro, or $1,160,000 in
the case of Entertainment, Industries shall make a payment in the amount of
such difference to Micro or Entertainment, as the case may be.
SECTION 6.6. Termination of Stock Purchase Agreement
Obligations. Industries and each Holder who is a party to a stock purchase
agreement with Industries hereby acknowledges that all obligations of the
other party to such stock purchase agreement will cease with respect to all
shares of Industries common stock of such Holder that are exchanged for shares
of Micro Common Stock or Entertainment Common Stock pursuant to this
Agreement. Such cessation shall be effective at the First Closing with
respect to shares of Industries common stock exchanged for Micro Common Stock
and at the Second Closing with respect to shares of Industries common stock
exchanged for Entertainment Common Stock.
SECTION 6.7. Cooperation. Each Holder agrees to cooperate
with Micro in connection with the initial registered public offering of shares
of Micro Common Stock. Without limiting the generality of the foregoing, each
Holder agrees to execute and deliver such documents, certificates, agreements
and other writings (including without limitation any lock-up agreement
requested by the underwriters) and to take such other actions requested by
Micro in connection with the consummation of such initial public offering.
SECTION 6.8. Issuance of Entertainment Common Stock. The
parties hereto agree that if a stock option of Industries is exercised by a
Person listed on Annex I as being a member of the Entertainment Group after
the First Closing Date and prior to the Option Record Date, Industries shall
subscribe for, and shall cause Entertainment to issue, 3.68 shares of
Entertainment Common Stock for each option to purchase one share of Industries
Common Stock that is so exercised (which aggregate number of shares of
Entertainment Common Stock issued in respect of the exercise of stock options
by any such member of the Entertainment Group shall be rounded up to the
nearest whole share). In consideration for such issuance, Industries shall
make a capital contribution to Entertainment in an amount equal to the sum of
(i) the aggregate exercise price received by Industries in connection with any
such exercise and (ii) the estimated tax benefit to be realized by Industries
as a result of any such exercise of nonqualified options.
ARTICLE 7
MISCELLANEOUS
SECTION 7.1. Headings. The headings in this Agreement are
for convenience of reference only and shall not control or affect the meaning
or construction of any provision hereof.
SECTION 7.2. Entire Agreement. This Agreement, the Board
Representation Agreement, the Related Agreements, the Reorganization Agreement
and the Ancillary Agreements (as defined in the Reorganization Agreement)
constitute the entire agreement and understanding of the parties hereto in
respect of the subject matter contained herein and therein. This Agreement
and such other agreements supersede all prior agreements and understandings
between the parties hereto and thereto with respect to the subject matter
hereof and thereof.
SECTION 7.3. Notices. Any notice, request, instruction or
other document to be given hereunder by any party hereto to another party
hereto shall be in writing (including telecopier or similar writing) and shall
be given to such party at its address set forth on the signature pages hereof,
or to such other address as the party to whom notice is to be given may
provide in a written notice to the party giving such notice, a copy of which
written notice shall be on file with the Secretary of Industries. If notice
is given pursuant to this Section of a permitted successor or assign of a
party to this Agreement, then notice shall thereafter be given as set forth
above to such successor or assign of such party to this Agreement. Each such
notice, request or other communication shall be effective (i) if given by
telecopy, when such telecopy is transmitted to the telecopy number specified
on the signature pages hereof and electronic or oral confirmation of receipt
is received, (ii) if given by mail, at the close of business on the third
business day after such communication is deposited in the mails with first
class postage prepaid addressed as aforesaid or (iii) if given by any other
means, when delivered at the address specified in this Section 7.3.
SECTION 7.4. Applicable Law. This Agreement shall be
governed by and construed in accordance with the laws of the State of
Tennessee without regard to the conflicts of law rules of such state.
SECTION 7.5. Severability. The invalidity or
unenforceability of any provisions of this Agreement in any jurisdiction shall
not affect the validity, legality or enforceability of the remainder of this
Agreement in such jurisdiction or the validity, legality or enforceability of
this Agreement, including any such provision, in any other jurisdiction, it
being intended that all rights and obligations of the parties hereunder shall
be enforceable to the fullest extent permitted by law.
SECTION 7.6. Termination. (a) This Agreement may be
terminated in its entirety at any time prior to the First Closing at the
election of Industries or the holders of a majority of the outstanding shares
of Industries Common Stock for any reason or for no reason without any
liability to any Person.
(b) This Agreement may be terminated with respect to the
transactions contemplated to take place at the Second Closing at any time
prior to the Second Closing at the election of Industries or the holders of a
majority of the outstanding shares of Industries Common Stock or David B.
Ingram for any reason or for no reason without any liability to any Person.
This Agreement shall terminate with respect to the transactions contemplated
to take place at the Second Closing if the Second Closing does not occur prior
to December 31, 1997.
SECTION 7.7. Successors, Assigns, Transferees. No Holder
or Ingram Company may assign or otherwise transfer any of its rights under
this Agreement without the consent of each Ingram Company. This Agreement is
binding upon the parties to this Agreement and their respective legal
representatives, heirs, devisees, legatees, beneficiaries and successors and
permitted assigns and inures to the benefit of the parties to this Agreement
and their respective permitted legal representatives, heirs, devisees,
legatees, beneficiaries and other permitted successors and assigns, if any.
Neither this Agreement nor any provision hereof shall be construed so as to
confer any right or benefit upon any Person other than the parties to this
Agreement, those who agree to be bound hereby and their respective permitted
legal representatives, heirs, devisees, legatees, beneficiaries and other
permitted successors and assigns. References to a party to this Agreement are
also references to any permitted successor or assign of such party and, when
appropriate to effect the binding nature of this Agreement for the benefit of
another party, any other successor or assign of a party.
SECTION 7.8. Amendments; Waivers. (a) No failure or
delay on the part of any party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies
herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
(b) Neither this Agreement nor any term or provision hereof
may be amended or waived except by an instrument in writing:
(i) signed by (x) each of the Family Stockholders, (y) each
Ingram Company, following approval of such amendment or waiver by the
Board of Directors of such Ingram Company and (z) the Thrift Plan;
provided that the Thrift Plan is materially adversely affected by
such amendment or waiver; and
(ii) approved by the Holders that are members of each Group
which is materially adversely affected by such amendment or waiver
(an "Affected Group"); provided that the approval referred to in this
clause (ii) shall be deemed to have been received with respect to any
Affected Group (A) if Industries has not received written notice of
disapproval within ten business days after effective delivery of the
proposed amendment or waiver signed by (x) the Holders of at least
66% of the shares of Industries Common Stock (other than shares held
by the Family Stockholders and the Thrift Plan) held by all members
of such Affected Group (other than the Family Stockholders and the
Thrift Plan) and (y) at least 66% of the members (other than the
Family Stockholders and the Thrift Plan) of each such Affected Group
(the Persons referred to in clause (x) and (y) above are hereinafter
referred to as the "Required Holders"), or (B) if the amendment or
waiver is signed by the Holders of more than 33% of the shares of
Industries Common Stock (other than shares held by the Family
Stockholders and the Thrift Plan) held by the members of such
Affected Group or by more than 33% of the members (other than the
Family Stockholders or the Thrift Plan) of such Affected Group;
provided further that for purposes of this clause (ii), the Micro
Group shall be divided into two Groups, the first of which shall
include the E. Bronson Ingram 1995 Charitable Remainder 5% Unitrust,
the Martha and Bronson Ingram Foundation, the E. Bronson Ingram 1994
Charitable Lead Annuity Trust (collectively, the "Charitable Trusts
and Foundation") and the QTIP, and the second of which shall include
all other members of the Micro Group (other than the Family
Stockholders and the Thrift Plan).
(c) Industries shall deliver prompt written notice to each
other party hereto of any amendment or waiver to this Agreement approved
pursuant to this Section.
(d) Any Holder (other than an Ingram Stockholder, the QTIP,
the Charitable Trusts and Foundation or the Thrift Plan) who is materially
adversely affected by an amendment approved pursuant to this Section and who
did not execute such amendment pursuant to clause (b) above shall have the
right to withdraw as a party to this Agreement by written notice to Industries
delivered within 10 days following receipt of the notice described in clause
(c) above, in which event such Holder shall not participate in the Exchange
and shall retain its shares of Industries Common Stock.
SECTION 7.9. Counterparts. This Agreement may be executed
in any number of counterparts, each of which shall be an original with the
same effect as if the signatures thereto and hereto were upon the same
instrument.
SECTION 7.10. Remedies. The parties hereby acknowledge and
agree that in the event of any breach of this Agreement, the parties would be
irreparably harmed and could not be made whole by monetary damages. Each party
hereto accordingly agrees (i) not to assert by way of defense or otherwise
that a remedy at law would be adequate, and (ii) in addition to any other
remedy to which the parties may be entitled, that the remedy of specific
performance of this Agreement is appropriate in any action in court.
SECTION 7.11. Consent to Jurisdiction. Each party hereto
irrevocably submits to the non-exclusive jurisdiction of any Tennessee State
Court or United States Federal Court sitting in the Middle District of
Tennessee over any suit, action or proceeding arising out of or relating to
this Agreement. Each party hereto (other than any Ingram Company) hereby
irrevocably appoints CT Corporation System as its authorized agent to accept
and acknowledge on its behalf service of any and all process which may be
served in any such suit, action or proceeding in any such court and represents
and warrants that such agent has accepted such appointment. Each party hereto
consents to process being served in any such suit, action or proceeding by
serving a copy thereof upon the agent for service of process, provided that to
the extent lawful and possible, written notice of such service shall also be
mailed to such party. Each party hereto waives any right it may have to
assert the doctrine of forum non conveniens or to object to venue to the
extent any proceeding is brought in accordance with this Section 7.11.
Nothing in this paragraph shall affect or limit any right to serve process in
any manner permitted by law, to bring proceedings in the courts of any
jurisdiction or to enforce in any lawful manner a judgment obtained in one
jurisdiction in any other jurisdiction.
SECTION 7.12. Expenses. (a) Subject to Section 6.5(b), all
costs and expenses of the Ingram Companies (i) incurred as a result of
services provided by third parties in connection with the preparation of this
Agreement, the Reorganization Agreement, the Ancillary Agreements (as defined
in the Reorganization Agreement) and the Related Agreements and the
consummation of the transactions contemplated hereby and thereby (including
without limitation (x) rating agency fees incurred in connection with the
refinancings referred to in Section 5.2(vi), (y) expenses incurred in
connection with the Tax Ruling and (z) fees charged by software vendors in
connection with the transfer or replacement (but not enhancement), directly as
a result of the consummation of the transactions contemplated hereby, of
software packages currently used by the Ingram Companies and related equipment
costs) and (ii) incurred by the party providing services pursuant to the
Ancillary Agreements as a result of the cessation of such services, shall be
borne 23.01% by Industries, 72.84% by Micro and 4.15% by Entertainment, except
as otherwise specifically provided in this Agreement, the Reorganization
Agreement, any Ancillary Agreement or any Related Agreement; provided that (A)
to the extent that any of the costs and expenses referred to in clause (i) or
(ii) above are incurred as a result of arrangements pertaining solely to the
transactions contemplated by the Second Closing, and to the extent that Micro
did not participate in the negotiation of such arrangements, such costs and
expenses shall be borne 84.72% by Industries and 15.28% by Entertainment, (B)
all costs and expenses incurred in connection with the initial public offering
of Micro and the adoption and grant of awards under the 1996 Equity Incentive
Plan and 1996 Key Employee Stock Purchase Plan of Micro shall be borne by
Micro and (C) rating agency fees incurred in connection with all financings
(other than those referred to in Section 5.2(vi)) shall be borne by the party
undertaking such financing.
(b) All costs and expenses incurred by the parties to this
Agreement (other than the Ingram Companies) in connection with the preparation
of this Agreement, the Reorganization Agreement, the Ancillary Agreements and
the Related Agreements and the consummation of the transactions contemplated
hereby and thereby shall be borne by the party incurring such costs and
expenses, except as otherwise specifically provided herein or therein.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
INGRAM INDUSTRIES INC.
By: /s/ John B. Ingram
----------------------------------------
Name: John B. Ingram
Title: Co-President
Address: One Belle Meade Place
4400 Harding Road
Nashville, TN 37205
Telecopy: (615) 298-8242
INGRAM MICRO INC.
By: /s/ Jeffrey R. Rodek
----------------------------------------
Name: Jeffrey R. Rodek
Title: President
Address: 1600 East Saint Andrew Place
Santa Ana, CA 92705
Telecopy: 714-566-7900
INGRAM ENTERTAINMENT INC.
By: /s/ David B. Ingram
----------------------------------------
Name: David B. Ingram
Title: Chairman and President
Address: Two Ingram Blvd.
La Vergne, TN 37086
Telecopy: 615-287-4985
STATE STREET BANK & TRUST COMPANY
By:________________________________________
Name: Kelly Q. Driscoll
Title: Vice President
Address: Batterymarch Park III
3 Pinehill Drive
Quincy, MA 02169
Telecopy: 617-376-7313
HOLDERS E. BRONSON INGRAM
Q-TIP MARITAL TRUST
By: MARTHA R. INGRAM, ORRIN H. INGRAM,
JOHN R. INGRAM, DAVID B. INGRAM AND
ROBIN I. PATTON, as Co-Trustees
By:________________________________________
Name: Martha R. Ingram
Title: Co-Trustee
Address: 120 Hillwood Drive
Nashville, TN 37215
By:________________________________________
Name: Orrin H. Ingram
Title: Co-Trustee
Address: 1475 Moran Road
Franklin, TN 37069
By:________________________________________
Name: John R. Ingram
Title: Co-Trustee
Address: 311 Jackson Boulevard
Nashville, TN 37205
By:________________________________________
Name: David B. Ingram
Title: Co-Trustee
Address: 4417 Tyne Boulevard
Nashville, TN 37215
By:________________________________________
Name: Robin I. Patton
Title: Co-Trustee
Address: 1600 Chickering Road
Nashville, TN 37215
E. BRONSON INGRAM 1995 CHARITABLE
REMAINDER 5% UNITRUST
By: MARTHA R. INGRAM, as Trustee
By:________________________________________
Name: Martha R. Ingram
Title: Trustee
Address: 120 Hillwood Drive
Nashville, TN 37215
MARTHA AND BRONSON INGRAM FOUNDATION
By:________________________________________
Name: John R. Ingram
Title: President
Address: c/o Ingram Industries Inc.
4440 Harding Road
Nashville, TN 37205
(615) 298-8200
E. BRONSON INGRAM 1994
CHARITABLE LEAD ANNUITY TRUST
By: ORRIN H. INGRAM, JOHN R. INGRAM,
DAVID B. INGRAM, AND ROBIN B.
INGRAM PATTON, as Co-Trustees
By:________________________________________
Name: Orrin H. Ingram
Title: Co-Trustee
Address: 1475 Moran Road
Franklin, TN 37069
By:________________________________________
Name: John R. Ingram
Title: Co-Trustee
Address: 311 Jackson Boulevard
Nashville, TN 37205
By:________________________________________
Name: David B. Ingram
Title: Co-Trustee
Address: 4417 Tyne Boulevard
Nashville, TN 37215
By:________________________________________
Name: Robin B. Ingram Patton
Title: Co-Trustee
Address: 1600 Chickering Road
Nashville, TN 37215
INGRAM THRIFT PLAN
By: W.M. HEAD, R.E. CLAVERIE
AND T.H. LUNN, as Co-Trustees
By:________________________________________
Name: William M. Head
Title: Co-Trustee
Address: 1229 Nichol Lane
Nashville, TN 37205
By:________________________________________
Name: R.E. Claverie
Title: Co-Trustee
Address: 6107 Hickory Valley Road
Nashville, TN 37205
By:________________________________________
Name: T.H. Lunn
Title: Co-Trustee
Address: 509 Sugartree Lane
Franklin, TN 37064
___________________________________________
Linwood A. Lacy, Jr.
2304 Cranborne Road
Midlothian, VA 23113
LINWOOD A. LACY, JR.
1996 IRREVOCABLE TRUST DATED
MARCH 24, 1996
By: NATIONSBANK, N.A, as Trustee
By:________________________________________
Name:
Title:
Address: NationsBank, N.A.
Attention: Phil Rudder,
Vice President
12th and Main, 12th Floor
Richmond, VA 23261
____________________________ ___________________________________________
Spouse David W. Rutledge
34 Deerwood East
Irvine, CA 92714
____________________________ ___________________________________________
Spouse Ronald K. Hardaway
2 Moss Glen
Irvine, CA 92715
___________________________________________
Victoria L. Cotten
8 Medici
Aliso Viejo, CA 92656
___________________________________________
David B. Ingram
4417 Tyne Boulevard
Nashville, TN 37215
DAVID AND SARAH INGRAM
FAMILY 1996 GENERATION SKIPPING TRUST
By: THOMAS H. LUNN, as Trustee
By:________________________________________
Name: Thomas H. Lunn
Title: 509 Sugartree Lane
Address: Franklin, TN 37064
TRUST FOR THE BENEFIT OF
DAVID BRONSON INGRAM,
DATED OCTOBER 27, 1967
By: TRUST COMPANY BANK,
as Successor Trustee
By:________________________________________
Name: Thomas A. Shanks, Jr.
Title: First Vice President
Address: Trust Company Bank
Trust Company of Georgia
Attn: Thomas A. Shanks, Jr.
Trust Company Tower
25 Park Place, 2nd Floor
Atlanta, GA 30303
TRUST FOR THE BENEFIT OF
DAVID BRONSON INGRAM,
DATED JUNE 14, 1968
By: TRUST COMPANY BANK,
as Successor Trustee
By:________________________________________
Name: Thomas A. Shanks, Jr.
Title: First Vice President
Address: Trust Company Bank
Trust Company of Georgia
Attn: Thomas A. Shanks, Jr.
Trust Company Tower
25 Park Place, 2nd Floor
Atlanta, GA 30303
TRUST FOR THE BENEFIT OF
DAVID B. INGRAM, DATED DECEMBER 22, 1975
By: TRUST COMPANY BANK,
as Successor Trustee
By:____________________________
Name: Thomas A. Shanks, Jr.
Title: First Vice President
Address: Trust Company Bank
Trust Company of Georgia
Attn: Thomas A. Shanks, Jr.
Trust Company Tower
25 Park Place, 2nd Floor
Atlanta, GA 30303
DAVID B. INGRAM IRREVOCABLE TRUST
DATED AUGUST 16, 1988
By: ROY E. CLAVERIE, as Trustee
By:________________________________________
Name: Roy E. Claverie
Title: Trustee
Address: 6107 Hickory Valley Road
Nashville, TN 37205
1994 DAVID BRONSON INGRAM TRUST
By: ROY E. CLAVERIE, as Trustee
By:________________________________________
Name: Roy E. Claverie
Title: Trustee
Address: 6107 Hickory Valley Road
Nashville, TN 37205
___________________________________________
Thomas H. Lunn
509 Sugartree Lane
Franklin, TN 37064
LUNN FAMILY PARTNERS, L.P.
By: LUNN INVESTMENT COMPANY,
as General Partner
By:________________________________________
Name: Thomas H. Lunn
Title: President
Address: 509 Sugartree Lane
Franklin, TN 37064
___________________________________________
Philip M. Pfeffer
836 Treemont Court
Nashville, TN 37220
PFEFFER FAMILY PARTNERS, L.P.
By:
as General Partner
By:________________________________________
Name:
Title:
Address: 836 Treemont Court
Nashville, TN 37220
TRUST AGREEMENT OF JUNE 11, 1987
BETWEEN BRONSON AND MARTHA INGRAM,
GRANTORS, AND EDWARD G. NELSON,
TRUSTEE FOR THE BENEFIT OF
JOHN-LINDELL PHILIP PFEFFER
By: EDWARD G. NELSON, as Trustee
By:________________________________________
Name: Edward G. Nelson
Title: Trustee
Address: Nelson Capital Corp.
3401 West End Avenue
Nashville, TN 37203
___________________________________________
John-Lindell Philip Pfeffer
Rue General Potton, 29
1050 Brussels
Belgium
TRUST AGREEMENT OF JUNE 11, 1987
BETWEEN BRONSON AND MARTHA INGRAM,
GRANTORS, AND EDWARD G. NELSON, TRUSTEE
FOR THE BENEFIT OF DAVID MAURICE PFEFFER
By: EDWARD G. NELSON, as Trustee
By:________________________________________
Name: Edward G. Nelson
Title: Trustee
Address: Nelson Capital Corp.
3401 West End Avenue
Nashville, TN 37203
TRUST AGREEMENT OF JUNE 11, 1987
BETWEEN BRONSON AND MARTHA INGRAM,
GRANTORS, AND EDWARD G. NELSON,
TRUSTEE FOR THE BENEFIT OF
JAMES HOWARD PFEFFER
By: EDWARD G. NELSON, as Trustee
By:________________________________________
Name: Edward G. Nelson
Title: Trustee
Address: Nelson Capital Corp.
3401 West End Avenue
Nashville, TN 37203
___________________________________________
Roy E. Claverie
6107 Hickory Valley Road
Nashville, TN 37205
ROY E. CLAVERIE, JR.
1996 VESTED TRUST
By: WILLIAM S. JONES, as Trustee
By:________________________________________
Name: William S. Jones
Title: Trustee
Address: 6015 Wellesley Way
Brentwood, TN 37027
ROY E. CLAVERIE, JR.
1996 GENERATION SKIPPING TRUST
By: WILLIAM S. JONES, as Trustee
By:________________________________________
Name: William S. Jones
Title: Trustee
Address: 6015 Wellesley Way
Brentwood, TN 37027
KEITH J. CLAVERIE, JR.
1996 VESTED TRUST
By: WILLIAM S. JONES, as Trustee
By:________________________________________
Name: William S. Jones
Title: Trustee
Address: 6015 Wellesley Way
Brentwood, TN 37027
KEITH J. CLAVERIE, JR.
1996 GENERATION SKIPPING TRUST
By: WILLIAM S. JONES, as Trustee
By:________________________________________
Name: William S. Jones
Title: Trustee
Address: 6015 Wellesley Way
Brentwood, TN 37027
TRUST AGREEMENT OF JUNE 11, 1987
BETWEEN BRONSON AND MARTHA INGRAM,
GRANTORS, AND EDWARD G. NELSON,
TRUSTEE FOR THE BENEFIT OF
KEITH JOSEPH CLAVERIE
By: EDWARD G. NELSON, as Trustee
By:________________________________________
Name: Edward G. Nelson
Title: Trustee
Address: Nelson Capital Corp.
3401 West End Avenue
Nashville, TN 37203
TRUST AGREEMENT OF JUNE 11, 1987
BETWEEN BRONSON AND MARTHA INGRAM,
GRANTORS, AND EDWARD G. NELSON,
TRUSTEE FOR THE BENEFIT OF
ROY EDWARD CLAVERIE, JR.
By: EDWARD G. NELSON, as Trustee
By:________________________________________
Name: Edward G. Nelson
Title: Trustee
Address: Nelson Capital Corp.
3401 West End Avenue
Nashville, TN 37203
___________________________________________
Roy E. Claverie, Jr.
6107 Hickory Valley Road
Nashville, TN 37205
___________________________________________
David F. Sampsell
420 Welshwood #47
Nashville, TN 37211
___________________________________________
Steven J. Mason
1318 Chickering Road
Nashville, TN 37215
THE DAVID C. MASON
1996 GENERATION SKIPPING TRUST
By: LINDA L. MASON AND
MICHAEL G. MASON, as Co-Trustees
By:________________________________________
Name: Linda L. Mason
Title: Co-Trustee
Address: 1318 Chickering Road
Nashville, TN 37215
By:________________________________________
Name: Michael G. Mason
Title: Co-Trustee
Address: 1318 Chickering Road
Nashville, TN 37215
THE MICHAEL G. MASON
1996 GENERATION SKIPPING TRUST
By: LINDA L. MASON AND
STEVEN J. MASON, JR., as Co-Trustees
By:________________________________________
Name: Linda L. Mason
Title: Co-Trustee
Address: 1318 Chickering Road
Nashville, TN 37215
By:________________________________________
Name: Steven J. Mason, Jr.
Title: Co-Trustee
Address: 1318 Chickering Road
Nashville, TN 37215
THE STEVEN J. MASON, JR.
1996 GENERATION SKIPPING TRUST
By: LINDA L. MASON AND DAVID C. MASON,
as Co-Trustees
By:________________________________________
Name: Linda L. Mason
Title: Co-Trustee
Address: 1318 Chickering Road
Nashville, TN 37215
By:________________________________________
Name: David C. Mason
Title: Co-Trustee
Address: 1318 Chickering Road
Nashville, TN 37215
___________________________________________
Neil N. Diehl
6 Castle Rising
Nashville, TN 37215
___________________________________________
W. Michael Head
1229 Nichol Lane
Nashville, TN 37205
___________________________________________
David L. Hettinger
5010 Woodland Hills Drive
Nashville, TN 37211
___________________________________________
Lavona G. Russell
9549 Butler Drive
Brentwood, TN 37027
___________________________________________
Michael F. Lovett
1013 Beech Grove Road
Brentwood, TN 37027
___________________________________________
William S. Jones
6015 Wellesley Way
Brentwood, TN 37027
___________________________________________
James F. Neal
c/o Neal & Harwell
2000 One Nashville Place
150 Fourth Avenue, North
Nashville, TN 37219
___________________________________________
Martha R. Ingram
120 Hillwood Drive
Nashville, TN 37215
___________________________________________
Orrin H. Ingram, II
1475 Moran Road
Franklin, TN 37069
TRUST FOR THE BENEFIT OF ORRIN HENRY
INGRAM, II, DATED
OCTOBER 27, 1967
By: TRUST COMPANY BANK,
as Successor Trustee
By:________________________________________
Name: Thomas A. Shanks, Jr.
Title: First Vice President
Address: Trust Company Bank
Trust Company of Georgia
Attn: Thomas A. Shanks, Jr.
Trust Company Tower
25 Park Place, 2nd Floor
Atlanta, GA 30303
TRUST FOR THE BENEFIT OF ORRIN HENRY
INGRAM, II, DATED JUNE 14, 1968
By: TRUST COMPANY BANK,
as Successor Trustee
By:________________________________________
Name: Thomas A. Shanks, Jr.
Title: First Vice President
Address: Trust Company Bank
Trust Company of Georgia
Attn: Thomas A. Shanks, Jr.
Trust Company Tower
25 Park Place, 2nd Floor
Atlanta, GA 30303
TRUST FOR THE BENEFIT OF ORRIN H.
INGRAM, II, DATED DECEMBER 22, 1975
By: TRUST COMPANY BANK,
as Successor Trustee
By:________________________________________
Name: Thomas A. Shanks, Jr.
Title: First Vice President
Address: Trust Company Bank
Trust Company of Georgia
Attn: Thomas A. Shanks, Jr.
Trust Company Tower
25 Park Place, 2nd Floor
Atlanta, GA 30303
ORRIN H. INGRAM IRREVOCABLE
TRUST DATED AUGUST 16, 1988
By: ROY E. CLAVERIE, as
Trustee
By:________________________________________
Name: Roy E. Claverie
Title: Trustee
Address: 6107 Hickory Valley Road
Nashville, TN 37205
1994 ORRIN HENRY INGRAM TRUST
By: ROY E. CLAVERIE, as Trustee
By:________________________________________
Name: Roy E. Claverie
Title: Trustee
Address: 6107 Hickory Valley Road
Nashville, TN 37205
________________________________________
John R. Ingram
311 Jackson Boulevard
Nashville, TN 37205
THE JOHN AND STEPHANIE INGRAM
FAMILY 1996 GENERATION SKIPPING TRUST
By: WILLIAM S. JONES, as Trustee
By:________________________________________
Name: William S. Jones
Title: Trustee
Address: 6015 Wellesley Way
Brentwood, TN 37027
TRUST FOR THE BENEFIT OF JOHN
RIVERS INGRAM, DATED OCTOBER 27, 1967
By: TRUST COMPANY BANK,
as Successor Trustee
By:________________________________________
Name: Thomas A. Shanks, Jr.
Title: First Vice President
Address: Trust Company Bank
Trust Company of Georgia
Attn: Thomas A. Shanks, Jr.
Trust Company Tower
25 Park Place, 2nd Floor
Atlanta, GA 30303
TRUST FOR THE BENEFIT OF JOHN RIVERS
INGRAM, DATED JUNE 14, 1968
By: TRUST COMPANY BANK,
as Successor Trustee
By:________________________________________
Name: Thomas A. Shanks, Jr.
Title: First Vice President
Address: Trust Company Bank
Trust Company of Georgia
Attn: Thomas A. Shanks, Jr.
Trust Company Tower
25 Park Place, 2nd Floor
Atlanta, GA 30303
TRUST FOR THE BENEFIT OF JOHN R.
INGRAM, DATED DECEMBER 22, 1975
By: TRUST COMPANY BANK,
as Successor Trustee
By:________________________________________
Name: Thomas A. Shanks, Jr.
Title: First Vice President
Address: Trust Company Bank
Trust Company of Georgia
Attn: Thomas A. Shanks, Jr.
Trust Company Tower
25 Park Place, 2nd Floor
Atlanta, GA 30303
JOHN R. INGRAM IRREVOCABLE TRUST
DATED AUGUST 16, 1988
By: ROY E. CLAVERIE, as Trustee
By:________________________________________
Name: Roy E. Claverie
Title: Trustee
Address: 6107 Hickory Valley Road
Nashville, TN 37205
1994 JOHN RIVERS INGRAM TRUST
By: ROY E. CLAVERIE, as Trustee
By:________________________________________
Name: Roy E. Claverie
Title: Trustee
Address: 6107 Hickory Valley Road
Nashville, TN 37205
___________________________________________
Robin B. Ingram Patton
1600 Chickering Road
Nashville, TN 37215
TRUST FOR THE BENEFIT OF ROBIN
INGRAM, DATED OCTOBER 27, 1967
By: TRUST COMPANY BANK,
as Successor Trustee
By:________________________________________
Name: Thomas A. Shanks, Jr.
Title: First Vice President
Address: Trust Company Bank
Trust Company of Georgia
Attn: Thomas A. Shanks, Jr.
Trust Company Tower
25 Park Place, 2nd Floor
Atlanta, GA 30303
TRUST FOR THE BENEFIT OF ROBIN
BIGELOW INGRAM, DATED JUNE 14, 1968
By: TRUST COMPANY BANK,
as Successor Trustee
By:________________________________________
Name: Thomas A. Shanks, Jr.
Title: First Vice President
Address: Trust Company Bank
Trust Company of Georgia
Attn: Thomas A. Shanks, Jr.
Trust Company Tower
25 Park Place, 2nd Floor
Atlanta, GA 30303
TRUST FOR THE BENEFIT OF
ROBIN B. INGRAM, DATED DECEMBER 22, 1975
By: TRUST COMPANY BANK,
as Successor Trustee
By:________________________________________
Name: Thomas A. Shanks, Jr.
Title: First Vice President
Address: Trust Company Bank
Trust Company of Georgia
Attn: Thomas A. Shanks, Jr.
Trust Company Tower
25 Park Place, 2nd Floor
Atlanta, GA 30303
ROBIN B. INGRAM IRREVOCABLE
TRUST DATED AUGUST 16, 1988
By: ROY E. CLAVERIE, as Trustee
By:________________________________________
Name: Roy E. Claverie
Title: Trustee
Address: 6107 Hickory Valley Road
Nashville, TN 37205
1994 ROBIN INGRAM PATTON TRUST
By ROY E. CLAVERIE, as Trustee
By:________________________________________
Name: Roy E. Claverie
Title: Trustee
Address: 6107 Hickory Valley Road
Nashville, TN 37205
___________________________________________
Pankaj B. Shah
1201 Parker Place
Brentwood, TN 37027-7002
___________________________________________
S. Ray Taylor
3280 Central Valley Road
Murfreesboro, TN 37219
___________________________________________
Jacob S. Sherman
215 Lauderdale Road
Nashville, TN 37205
___________________________________________
Susan R. Flaster
144 September Drive
La Vergne, TN 37086
Exhibit 23.01
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Prospectus constituting part of this
Registration Statement on Form S-1 (333-_____) of our report dated February
29, 1996, except as to Note 12 which is dated as of September 9, 1996 and Note
2 which is dated as of October 29, 1996, relating to the financial statements
of Ingram Micro Inc., which appears in such Prospectus. We also consent to
the application of such report to the Financial Statement Schedules for the
three years ended December 30, 1995 listed under Item 16(b) of this
Registration Statement when such schedules are read in conjunction with the
financial statements referred to in our report. The audits referred to in
such report also included these schedules. We also consent to the reference
to us under the heading "Experts" in such Prospectus.
PRICE WATERHOUSE LLP
Nashville, Tennessee
November 20, 1996
