<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE YEAR ENDED DECEMBER 31, 1995
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ___________________ to __________________
Commission file number 1-5374
[LOGO OF WYLE ELECTRONICS]
WYLE ELECTRONICS
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CALIFORNIA 95-1779998
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
15370 BARRANCA PARKWAY, IRVINE, CALIFORNIA 92718
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(714) 753-9953
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
Common Stock New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
(TITLE OF CLASS)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO
SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO
----- -----
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN AND WILL NOT BE CONTAINED, TO
THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION
STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY
AMENDMENT TO THIS FORM 10-K. [_]
THE AGGREGATE MARKET VALUE OF THE VOTING STOCK OF THE REGISTRANT HELD BY
NON-AFFILIATES OF THE REGISTRANT, BASED ON THE CLOSING PRICE AT WHICH SUCH
STOCK WAS SOLD ON THE NEW YORK STOCK EXCHANGE ON FEBRUARY 29, 1996, WAS
$397,754,743.
AT FEBRUARY 29, 1996, THE REGISTRANT HAD 12,538,169 SHARES OF COMMON STOCK
OUTSTANDING.
PARTS I AND III INCORPORATE INFORMATION BY REFERENCE FROM THE REGISTRANT'S
DEFINITIVE PROXY STATEMENT FILED IN CONNECTION WITH THE REGISTRANT'S 1996
ANNUAL MEETING OF SHAREHOLDERS. PARTS I AND II INCORPORATE INFORMATION BY
REFERENCE FROM THE REGISTRANT'S ANNUAL REPORT TO SHAREHOLDERS FOR THE YEAR
ENDED DECEMBER 31, 1995.
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WYLE ELECTRONICS
PART I
ITEM 1. BUSINESS
Wyle Electronics (the "Company") is a leading international electronics
distributor marketing semiconductors and computer products, as well as providing
value-added services. These services include complex materials management
systems and engineering design services for application-specific integrated
circuits, including field and programmable logic devices. Wyle Electronics,
formerly Wyle Laboratories, was founded in 1949 and incorporated in California
in 1953.
On January 2, 1996, the company purchased all the outstanding capital stock
of Sylvan Ginsbury, Ltd., a New Jersey corporation, and certain affiliated
entities ("Ginsbury"), an international distributor of active, passive and
interconnect electronic products with operations in the United States and six
European countries.
On December 23, 1994, the Company completed the sale of its Scientific
Services & Systems ("SS&S") business to a buy-out group led by William E. Simon
& Sons and certain members of the SS&S management along with two former and one
current member of the Company's Board of Directors.
In January 1995, the Company changed its name from Wyle Laboratories to
Wyle Electronics to more accurately reflect the Company's business activities
following the sale of discontinued operations.
CUSTOMERS AND MARKETS SERVED
----------------------------
The Company serves a broad base of customers in the computer,
telecommunications, military and industrial markets. The Company believes it
offers its products and services in all major electronic products markets within
the United States, through a network of 33 sales facilities. The Company's sales
facilities are located in Huntsville, Alabama; Phoenix, Arizona; Garden Grove,
Irvine, Los Angeles, Sacramento, San Diego and Santa Clara, California; Denver,
Colorado; Wallingford, Connecticut; Fort Lauderdale, Orlando and Tampa, Florida;
Atlanta, Georgia; Chicago, Illinois; Boston Massachusetts; Baltimore, Maryland;
Minneapolis, Minnesota; Pine Brook, New Jersey; Long Island and Rochester, New
York; Raleigh, North Carolina; Cleveland and Dayton, Ohio; Portland, Oregon;
Philadelphia, Pennsylvania; Austin, Dallas and Houston, Texas; Provo and Salt
Lake City, Utah; Seattle, Washington; and Milwaukee, Wisconsin.
With the acquisition of Ginsbury, the Company also provides products and
services to European markets from sales locations in Denmark, Finland, France,
Germany, Sweden and the United Kingdom.
1
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PRODUCTS SOLD AND SERVICES RENDERED
The Company stocks approximately 35,000 items from over 50 electronic
component and computer product suppliers. Principal products distributed
include semiconductors and computer products (e.g., microcomputer systems, board
level subsystems and peripherals). For the year ended December 31, 1995,
semiconductor and computer product sales represented approximately 75% and 25%,
respectively, of total sales.
Most manufacturers of electronic components and computer products rely on
industrial distributors to augment their own sales and marketing operations.
Distributors provide stocking, marketing, technical, design and financing
services, reducing a manufacturer's operating costs associated with stocking and
selling its products. These services also reduce the manufacturer's investment
in finished goods inventories and accounts receivable, while providing
geographically dispersed sales and delivery capabilities.
During the year ended December 31, 1995, the Company's ten largest
suppliers, which in aggregate represented 80% of its sales, were Intel, Digital
Equipment Corporation, Texas Instruments, Motorola, Advanced Micro Devices,
Altera, Quantum, Micron Technology, LSI Logic and Philips. For the year ended
December 31, 1995, Intel and Digital Equipment Corporation, the Company's two
largest suppliers, accounted for approximately 17% and 12%, respectively, of its
sales.
The Company focuses on providing higher complexity semiconductor products
such as user-configurable and fixed ASIC (application-specific integrated
circuit) devices. The Company distributes a full range of semiconductor
technologies, from discrete transistors through field programmable logic and
gate arrays.
The principal computer products offered by the Company include medium and
small scale multi-user systems, workstations, personal computers, motherboards
and related peripheral equipment products. The Company's peripheral equipment
products include mass storage products, terminals, controllers, and printers.
The Company provides specialized value-added services such as kitting,
turnkey manufacturing, autoreplenishment, design engineering, programming and
testing of semiconductor products, computer systems integration and technical
support. These value-added services are designed to enhance the competitiveness
of the Company's customers by providing cost efficiencies and the ability to
introduce products into the marketplace more quickly and efficiently.
The Company's Liberty Contract Services operation provides management
services for materials and complex inventory processes for customers in areas
such as kitting, turnkey manufacturing, autoreplenishment, final assembly and
test, and systems integration. This operation offers customers value-added
services of varying levels of complexity from the traditional distributor
function, through fully-integrated just-in-time inventory management systems.
2
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Under its kitting program, Liberty Contract Services provides the complete
bill-of-materials of components for a customer's product which is inspected and
packaged in production-ready kit form to customer specifications. Completed kits
are typically shipped directly to the customer's production line on a just-in-
time (JIT) basis. Turnkey manufacturing solutions are offered through alliances
with independent contract manufacturers as an extension of the Company's
JIT/kitting business. Under such arrangements, the Company supplies components
directly to contract manufacturers who perform assembly and test to produce a
completed product, such as a printed circuit board, to customer specifications .
The Company's design engineers, located in the field, provide capabilities
to develop customized semiconductor products for unique customer applications.
The Company operates seven IDEAL(R) (Integrated Design Engineering And Logic)
centers that provide customers with services such as programming, testing and
symbolization in a controlled environment for programmable logic devices.
Products from suppliers such as Actel, Advanced Micro Devices, Altera, Intel,
Motorola, Philips and Texas Instruments can be programmed and tested at these
centers as required by individual customers.
The Company's System Enhancement Center, located in Phoenix, Arizona,
provides a full range of value-added services for integration of system and
peripheral products to a particular customer requirement. System Enhancement
Center personnel perform design engineering and all aspects of systems
integration, including systems configuration, networking and software
verification, as well as assembly and testing.
In September 1995, the Company completed the construction of its 200,000
square foot Value-Added Distribution Center. This high-technology facility will
support the further growth of the Company's value-added services and allow for
the consolidation of existing warehouse activities into one location. The
Company has begun relocating its existing warehouses and a portion of its value-
added services. The transition is expected to be completed by mid-1996.
RELATIONSHIP WITH SUPPLIERS
The Company has distribution agreements with its component and computer
products manufacturers. Distribution agreements are nonexclusive and are subject
to cancellation at will or upon 30 days' notice. Although the loss of a major
supplier could significantly impact operating results, the Company does not
regard any one supplier of products to be essential to its operations. In
addition, the Company believes that most products currently sold are available
from other suppliers at competitive prices.
3
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The Company's distribution agreements generally provide, among other
things, that the Company can return inventory declared obsolete by the
manufacturer or inventory in excess of current requirements, up to a specified
percentage of the dollar amount purchased from the manufacturer. Most
manufacturers protect the Company against subsequent manufacturer price
reductions by issuing credits to the Company with respect to the affected
product in the Company's inventory. As part of its value-added services, the
Company purchases certain products from suppliers that have not entered into
distribution agreements with the Company. Consequently, the Company may not
receive the same level of inventory protection as that available under its
distribution agreements, particularly the ability to return obsolete or excess
inventory.
RISK FACTORS
The Company intends to take advantage of the "safe harbor" provisions of
the Private Securities Litigation Reform Act of 1995. The Company's business is
subject to intense competition from international, national, regional and local
independent distributors along with direct sales by manufacturers. The principal
factors of competition are quality of service, price, variety and availability
of products carried and value-added services capability.
The Company's business is affected by the cyclical nature of the
electronics industry and the effect of general economic and market conditions.
The electronics distribution industry is highly sensitive to fluctuating market
conditions, primarily caused by changes in the supply and demand for
semiconductors and computer products, which can dramatically effect market
prices and product availability. Accordingly, the Company's financial results
may reflect significant variations from period-to-period due to these factors.
In addition to the potential adverse impact of the above factors, the
Company cautions that its future financial results also could be negatively
affected by various other circumstances which include, but are not limited to:
loss of significant supplier franchises or material changes in supplier
distribution agreements affecting pricing, inventory obsolescence protection or
other terms; loss of significant customers; uncollectible customer accounts
receivable; inventory obsolescence and other charges related to non-franchised
product; losses due to substantial damage or destruction of major facilities and
contents; technological obsolescence of machinery, equipment and software;
increased selling and administrative expense due to changes in business
strategies, asset valuations and organizational structures; inability to
successfully access capital markets; and the affect of governmental regulations
including those relative to environmental matters.
BACKLOG
Most orders received by the Company are for short-term delivery.
Consequently, the dollar amount of unfilled orders is subject to rapid change
and represents customer orders for products for which the Company is awaiting
delivery from the manufacturer, or customer orders for products with delivery
dates scheduled as much as twelve months in advance. However, since these
orders are for products normally stocked, cancellation of an order would not
have a significant effect on the operations of the Company.
4
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EMPLOYEES
As of December 31, 1995, the Company employed a total of 1,452 persons.
FINANCIAL INFORMATION RELATING TO INDUSTRY SEGMENTS
There is hereby incorporated by reference the information appearing in Note
11 of Notes to Consolidated Financial Statements in the Company's Annual Report
to Shareholders for the year ended December 31, 1995.
ITEM 2. PROPERTIES
At December 31, 1995, the Company had facility leases for its marketing,
inventory and distribution activities, with terms expiring from 1996 through
2003, aggregating 381,566 square feet located in Arizona, California, Colorado,
Florida, Georgia, Illinois, Maryland, Massachusetts, Minnesota, New Jersey, New
York, North Carolina, Ohio, Oregon, Texas, Utah, Washington and Wisconsin. The
Company has a lease for 512,180 square feet of land in Arizona, on which its new
Value-Added Distribution Center is located, that expires in 2014.
The Company also occupies owned facilities in Alabama, Arizona and
California totaling 314,757 square feet. The Company believes that its
facilities are in good operating condition, well-maintained and adequate for its
present needs.
ITEM 3. LEGAL PROCEEDINGS
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In May 1993, Avnet, Inc. ("Avnet") and Hall-Mark Electronics Corporation
("Hall-Mark") filed a civil action against the Company and a former employee of
Hall-Mark in the Superior Court of Fulton County, Georgia, seeking injunctive
and unspecified monetary damages, alleging inter alia, that the Company
tortiously interfered with the employment relations of Hall-Mark and its
employees and that the Company tortiously interfered with a proposed business
combination between the plaintiffs, which combination was consummated
subsequently. Plaintiffs' motion for a preliminary injunction was denied in
part by the trial court and affirmed by the Georgia Supreme Court in December
1993. The Company filed a counterclaim against plaintiffs, alleging, inter
alia, that plaintiffs had tortiously interfered with the Company's business and
employment relations. On October 31, 1995, plaintiffs dismissed their claims
without prejudice in Georgia, and the Georgia court then entered summary
judgment against the Company on the counterclaim and dismissed same.
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In September 1995, the plaintiffs had refiled the same action against the
Company and certain Company employees in the Circuit Court of Hillsborough
County, Florida, which the Company has now moved to dismiss. The Florida
litigation is still pending. While this litigation is in the pretrial stage, the
Company believes that plaintiffs' complaint is without merit and will contest it
vigorously. The Company recorded a special charge of $1,900,000 during the
third quarter of 1994, primarily for anticipated legal expenses associated with
the defense of this litigation. Although management cannot predict the ultimate
outcome with any certainty, management believes that a result adverse to the
Company in this matter is unlikely.
The Company also has other contingent liabilities arising in the ordinary
course of business. In the opinion of management, the ultimate disposition of
such matters will not materially affect the Company's results of operations or
financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
fourth quarter of the year ended December 31, 1995.
EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION> Year in which
they became
Officer Position Age an officer
- --------------------------- ------------------------- --- -------------
<S> <C> <C> <C>
Ralph L. Ozorkiewicz(1) President and Chief
Executive Officer 49 1985
Joseph A. Adamczyk Executive Vice President
and Chief Operating
Officer 52 1992
R. Van Ness Holland, Jr. Executive Vice President-
Finance and Treasurer,
Chief Financial Officer 42 1985
James N. Smith Executive Vice President
and President of Liberty
Contract Services 50 1995
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</TABLE>
(1) Also a director of the Company.
6
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There are no family relationships between the officers listed above.
The term of office of each executive officer is until his respective successor
is elected and has qualified, or until his death, resignation or removal.
Officers generally are elected by the Board of Directors annually at its first
meeting following the Annual Meeting of Shareholders; however, for a discussion
of employment agreements with certain executive officers of the Company, there
is hereby incorporated by reference the information appearing under the caption
"Employment Agreements" in the Company's definitive Proxy Statement for the 1996
Annual Meeting of Shareholders.
For a discussion of the background and business experience of Ralph L.
Ozorkiewicz there is hereby incorporated by reference the information appearing
under the caption "Election of Directors" in the Company's definitive Proxy
Statement for the 1996 Annual Meeting of Shareholders.
Mr. Adamczyk was elected Executive Vice President and Chief Operating
Officer in January 1995. He served as Executive Vice President of the
Corporation and President of Electronics Marketing Group from May 1994 to
January 1995. From September 1992 to May 1994 he served as Vice President of the
Corporation and President of Electronics Marketing Group. Prior to that, he
served at the Electronics Marketing Group as Executive Vice President-Sales from
February 1990 to September 1992, and as Regional Vice President from June 1982
to February 1990.
Mr. Holland was elected Executive Vice President - Finance and
Treasurer, Chief Financial Officer of the Company in January 1992. He served as
Senior Vice President and Corporate Controller from June 1990 to January 1992
and was Vice President and Corporate Controller from June 1987 to June 1990.
Mr. Smith was elected Executive Vice President and President of
Liberty Contract Services in January 1996. He served as Senior Vice President of
the Corporation and President of Liberty Contract Services from January 1995 to
January 1996 and at the Electronics Marketing Group as Executive Vice President
Operations and President of Liberty Contract Services from September 1992 to
January 1995. Prior to that, he served as Vice President, Operations and Quality
Assurance from May 1987 to September 1992.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
There is hereby incorporated by reference the information appearing
under the caption "Results by Quarter and Capital Stock Information" in the
Company's Annual Report to Shareholders for the year ended December 31, 1995.
The Company's shareholders of record on February 29, 1996 totaled 1,920.
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ITEM 6. SELECTED FINANCIAL DATA
There is hereby incorporated by reference the information appearing
under the caption "Selected Financial Data" in the Company's Annual Report to
Shareholders for the year ended December 31, 1995.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
There is hereby incorporated by reference the information appearing
under the caption "Management's Discussion and Analysis of Financial Condition
and Results of Operations" in the Company's Annual Report to Shareholders for
the year ended December 31, 1995.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ----------------------------------------------------
There is hereby incorporated by reference the information appearing in
the "Consolidated Financial Statements," "Notes to Consolidated Financial
Statements" and "Results by Quarter and Capital Stock Information" in the
Company's Annual Report to Shareholders for the year ended December 31, 1995.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
There is hereby incorporated by reference the information appearing
under the captions "Election of Directors" and "Compliance with Section 16 (a)
of the Securities Exchange Act of 1934" in the Company's definitive Proxy
Statement for the 1996 Annual Meeting of Shareholders and the information
appearing under the caption "Executive Officers of the Registrant" in Part I of
this Annual Report on Form 10-K for the year ended December 31, 1995.
ITEM 11. EXECUTIVE COMPENSATION
There is hereby incorporated by reference the information appearing
under the captions "Director Compensation" and "Executive Officers' Compensation
and Other Information" in the Company's definitive Proxy Statement for the 1996
Annual Meeting of Shareholders.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
There is hereby incorporated by reference the information appearing
under the caption "Security Ownership" in the Company's definitive Proxy
Statement for the 1996 Annual Meeting of Shareholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There is hereby incorporated by reference the information appearing
under the captions "Compensation Committee Interlocks and Insider Participation
in Compensation Decisions" and "Certain Transactions" in the Company's
definitive Proxy Statement for the 1996 Annual Meeting of Shareholders.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
a. Financial Statements
l. The following financial statements are included in the Company's Annual
Report to Shareholders for the year ended December 3l, 1995 and are hereby
incorporated by reference.
<TABLE>
<CAPTION>
Page Reference
--------------
Annual Report
---------------
<S> <C>
Consolidated Statements of Income for the years ended
December 31, 1995 and 1994, and the eleven months
ended December 31, 1993.................................... 18
Consolidated Balance Sheets at December 31, 1995
and 1994................................................... 19
Consolidated Statements of Cash Flows for the years ended
December 31, 1995 and 1994, and the eleven months
ended December 31, 1993.................................... 20
Consolidated Statements of Shareholders' Equity for the
years ended December 31, 1995 and 1994, and the eleven
months ended December 31, 1993............................. 21
Notes to Consolidated Financial Statements.................. 22-30
Report of Independent Public Accountants.................... 31
</TABLE>
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2. Financial Statement Schedules
<TABLE>
<CAPTION>
Page Reference
--------------
Form 10-K
--------------
<S> <C>
Report of Independent Public Accountants.................... 14
Schedule II Valuation and Qualifying Accounts.............. 15
</TABLE>
All other schedules have been omitted since they are either not applicable
or required or the information is included in the Company's consolidated
financial statements or notes thereto.
3. Exhibits
3(a) Restated Articles of Incorporation of the Company dated June
16, 1986, as amended to date. Incorporated herein by reference
to Exhibit 3(a) filed with the Company's Quarterly Report on
Form 10-Q for the second quarter ended June 30, 1995
3(b) Bylaws of the Company, as amended to date. Incorporated herein
by reference to Exhibit 3(b) filed with the Company's Quarterly
Report on Form 10-Q for the third quarter ended September 30,
1995
4(a) Article Three of Restated Articles of Incorporation of the
Company defines the rights of holders of the Company's common
stock. Incorporated herein by reference to Exhibit 3(a)
4(b) The Company agrees to provide the Commission, upon request,
copies of instruments defining the rights of holders of its
long-term notes payable
4(c) Amended And Restated Rights Agreement between Wyle Electronics
and Chemical Bank as Rights Agent, dated February 23, 1995.
Incorporated herein by reference to Exhibit 4(c) filed with the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994
10(a) 1978 Non-Qualified Stock Option Plan, as amended, dated June
14, 1988. Incorporated herein by reference to Exhibit 10(a)
filed with the Company's Annual Report on Form 10-K for the
fiscal year ended January 31, 1989
10(b) 1982 Stock Option Plan, as amended, dated June 14, 1988.
Incorporated herein by reference to Exhibit 10(b) filed with
the Company's Annual Report on Form 10-K for the fiscal year
ended January 31, 1989
10(c) 1985 Stock Option Plan, as amended, dated June 14, 1988.
Incorporated herein by reference to Exhibit 10(c) filed with
the Company's Annual Report on Form 10-K for the fiscal year
ended January 31, 1989
10(d) 1988 Stock Option Plan. Incorporated herein by reference to
Exhibit 10(d) filed with the Company's Annual Report on Form
10-K for the fiscal year ended January 31, 1989
10(e) 1992 Stock Incentive Plan. Incorporated herein by reference to
Exhibit A to the Company's definitive Proxy Statement dated
April 28, 1992 in connection with the 1992 Annual Meeting of
Shareholders
10(f) 1995 Stock Incentive Plan. Incorporated herein by reference to
Annex C to the Company's definitive Proxy Statement dated March
28, 1995 in connection with the 1995 Annual Meeting of
Shareholders
10
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10(g) 1993 Eligible Directors' Stock Option Plan. Incorporated herein
by reference to Exhibit A to the Company's definitive Proxy
Statement dated March 28, 1994 in connection with the 1994
Annual Meeting of Shareholders
10(h) Compensation Agreement between Frank S. Wyle and the Company
dated February 10, 1981. Incorporated herein by reference to
Exhibit 10(c) filed with the Company's Annual Report on Form
10-K for the fiscal year ended January 31, 1981
10(i) Amendment to Compensation Agreement between Frank S. Wyle and
the Company dated November 16, 1989. Incorporated herein by
reference to Exhibit 10(g) filed with the Company's Annual
Report on Form 10-K for the fiscal year ended January 31, 1991
10(j) Second Amendment to Compensation Agreement between Frank S.
Wyle and the Company dated December 23, 1991. Incorporated
herein by reference to Exhibit 10(h) filed with the Company's
Annual Report on Form 10-K for the fiscal year ended January
31, 1992
10(k) Agreement between Charles M. Clough and the Company dated
January 1, 1995
10(l) Employment Agreement between Ralph L. Ozorkiewicz and the
Company dated January 1, 1995. Incorporated herein by reference
to Exhibit 10(k) filed with the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1994
10(m) Employment Agreement between Joseph A. Adamczyk and the Company
dated January 1, 1995. Incorporated herein by reference to
Exhibit 10(l) filed with the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1994
10(n) Employment Agreement between R. Van Ness Holland, Jr. and the
Company dated January 1, 1995. Incorporated herein by reference
to Exhibit 10(m) filed with the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1994
10(o) Employment Agreement between James N. Smith and the Company
dated January 1, 1995. Incorporated herein by reference to
Exhibit 10(n) filed with the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1994
10(p) Supplemental Executive Retirement Plan, as amended to date.
Incorporated herein by reference to Exhibit 10(o) filed with
the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993
10(q) Supplemental Executive Retirement Trust Agreement between the
Company and Bank of America NT & SA (successor by merger to
Security Pacific National Bank), as trustee, dated March 11,
1992. Incorporated herein by reference to Exhibit 10(o) filed
with the Company's Annual Report on Form 10-K for the fiscal
year ended January 31, 1992
10(r) Supplemental Executive Retirement Agreement between Theodore M.
Freedman and the Company dated February 1, 1985, as amended to
date. Incorporated herein by reference to Exhibit 10(q) filed
with the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1993
11
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10(s) Supplemental Executive Retirement Agreement between Charles M.
Clough and the Company dated February 1, 1985, as amended to
date. Incorporated herein by reference to Exhibit 10(r) filed
with the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1993
10(t) Supplemental Executive Retirement Agreement between Charles M.
Clough and the Company dated January 28, 1988, as amended to
date. Incorporated herein by reference to Exhibit 10(s) filed
with the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1993
10(u) Deferred Compensation Plan for Directors of Wyle Electronics
(formerly Wyle Laboratories). Incorporated herein by reference
to Exhibit 10(m) filed with the Company's Annual Report on Form
10-K for the fiscal year ended January 31, 1986
10(v) Directors Deferred Compensation Trust Agreement between the
Company and Bank of America NT & SA (successor by merger to
Security Pacific National Bank), as trustee, dated March 11,
1992. Incorporated herein by reference to Exhibit 10(y) filed
with the Company's Annual Report on Form 10-K for the fiscal
year ended January 31, 1992
10(w) Retirement Plan for Outside Directors of Wyle Electronics, as
amended, dated August 31, 1995
10(x) Form of Indemnity Agreement entered into between the Company
and each of its directors and executive officers and each of
the directors and officers of its subsidiaries. Incorporated
herein by reference to Exhibit 10(e) filed with the Company's
Annual Report on Form 10-K for the fiscal year ended January
31, 1988
10(y) Form of Indemnification Agreement entered into between the
Company and each of its executive officers and directors and
each of the officers and directors of its subsidiaries.
Incorporated herein by reference to Exhibit 10(r) filed with
the Company's Annual Report on Form 10-K for the fiscal year
ended January 31, 1989
10(z) Incentive Compensation Plan for Corporate Officers of Wyle
Electronics (formerly Wyle Laboratories) (excerpt from March
22, 1990 Board of Directors meeting minutes), as amended to
date
10(aa) Agreements between the Company and Hewitt Associates for Hewitt
Associates to act as consultant under the Supplemental
Executive Retirement Trust Agreement and Directors Deferred
Compensation Trust Agreement dated March 26, 1992. Incorporated
herein by reference to Exhibit 10(ah) filed with the Company's
Annual Report on Form 10-K for the fiscal year ended January
31, 1992
10(ab) Form of Restricted Stock Award Agreements, as amended
10(ac) Form of Restricted Stock Award for Officers (Related to
Deferral of 1996 Incentive Compensation Award). Incorporated
herein by reference to Exhibit 4.4 to the Company's
Registration Statement on Form S-8 dated November 8, 1995 in
connection with the 1995 Stock Incentive Plan
12
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10(ad) Trust Agreement between the Company and The Bank of New York
dated December 8, 1992 relating to the establishment of a
master trust for the Wyle Electronics (formerly Wyle
Laboratories) retirement plan. Incorporated herein by reference
to Exhibit 10(ak) filed with the Company's Annual Report on
Form 10-K for the fiscal year ended January 31, 1993
10(ae) First Amended and Restated Credit Agreement Dated as of
December 29, 1995, among Wyle Electronics, various Financial
Institutions and Bank of America NT & SA, individually and as
agent
11 Calculation of Income (Loss) Per Share
13 Annual Report to Shareholders for the year ended December 31,
1995. (Except for those portions which are expressly
incorporated by reference in this filing, the Annual Report to
Shareholders for the year ended December 31, 1995 is furnished
for the information of the Commission and is not to be deemed
filed as part of this report)
21 Subsidiaries of the Company
23 Consent of Independent Public Accountants
27 Financial Data Schedule
b. Reports on Form 8-K
Completion of the acquisition of the outstanding stock of Sylvan
Ginsbury Ltd., a New Jersey corporation (Item 7.), filed January 17, 1996.
13
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Wyle Electronics:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements included in Wyle Electronics' Annual
Report to Shareholders incorporated by reference in this Form 10-K, and have
issued our report thereon dated February 16, 1996. Our audits were made for the
purpose of forming an opinion on those statements taken as a whole. The
schedule listed in the accompanying index is the responsibility of the Company's
management and is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic consolidated financial
statements. This schedule has been subjected to the auditing procedures applied
in the audits of the basic consolidated financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic consolidated financial statements
taken as a whole.
ARTHUR ANDERSEN LLP
Los Angeles, California
February 16, 1996
14
<PAGE>
SCHEDULE II
WYLE ELECTRONICS
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE ELEVEN MONTHS ENDED DECEMBER 31, 1993
AND THE YEARS ENDED DECEMBER 31, 1994 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
Amounts
Balance at Charged to Amounts Balance at
Beginning Costs & Written End of
of Period Expenses off Other (1) Period
--------- ---------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C>
December 31, 1993:
Allowance for
doubtful accounts $4,957 $1,389 $(2,213) $ 50 $4,183
======== ======== ======== ======== ========
December 31, 1994:
Allowance for
doubtful accounts $4,183 $2,143 $ (884) $ (109)(2) $5,333
======== ======== ======== ======== ========
December 31, 1995
Allowance for
doubtful accounts $5,333 $2,794 $(2,013) $ 309 $6,423
========= ======== ======== ======== ========
</TABLE>
- ------------
NOTES:
(1) Primarily represents changes in the amount of credit memo reserve.
(2) Includes a reduction in the allowance for doubtful accounts of $138,000
associated with trade receivables sold as part of the divestiture of the
Scientific Services & Systems business.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on the 29th day of March,
1996.
WYLE ELECTRONICS
By: R. VAN NESS HOLLAND, JR.
----------------------------
R. Van Ness Holland, Jr.
Executive Vice President-
Finance and Treasurer,
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
CHARLES M. CLOUGH Chairman of the Board March 29, 1996
--------------------------
(Charles M. Clough)
President and Chief
RALPH L. OZORKIEWICZ Executive Officer March 29, 1996
---------------------------
(Ralph L. Ozorkiewicz)
Executive Vice President-
Finance and Treasurer,
R. VAN NESS HOLLAND, JR. Chief Financial Officer March 29, 1996
----------------------------
(R. Van Ness Holland, Jr.)
16
<PAGE>
Signature Title Date
--------- ----- ----
MICHAEL R. CORBOY Director March 29, 1996
----------------------------
(Michael R. Corboy)
THEODORE M. FREEDMAN Director March 29, 1996
----------------------------
(Theodore M. Freedman)
JACK S. KILBY Director March 29, 1996
----------------------------
(Jack S. Kilby)
EDWARD SANDERS Director March 29, 1996
---------------------------
(Edward Sanders)
STANLEY A. WAINER Director March 29, 1996
---------------------------
(Stanley A. Wainer)
KIRK WEST Director March 29, 1996
---------------------------
(Kirk West)
FRANK S. WYLE Director March 29, 1996
---------------------------
(Frank S. Wyle)
17
<PAGE>
WYLE ELECTRONICS
INDEX TO EXHIBITS FILED WITH FORM 10-K
For the Year Ended December 31, 1995
Exhibits:
- ---------
10(k) Agreement between Charles M. Clough and the Company dated January 1,
1995
10(w) Retirement Plan for Outside Directors of Wyle Electronics, as amended,
dated August 31, 1995
10(ab) Form of Restricted Stock Award Agreements, as amended
10(ae) First Amended and Restated Credit Agreement Dated as of December 29,
1995, among Wyle Electronics, various Financial Institutions and Bank of
America NT & SA, individually and as agent
10(z) Incentive Compensation Plan for Corporate Officers of Wyle Electronics
(formerly Wyle Laboratories) (excerpt from March 22, 1990 Board of
Directors meeting minutes), as amended to date
11 Calculation of Income (Loss) Per Share
13 Annual Report to Shareholders for the year ended December 31, 1995.
(Except for those portions which are expressly incorporated by reference
in this filing, the Annual Report to Shareholders for the year ended
December 31, 1995 is furnished for the information of the Commission and
is not to be deemed filed as part of this report)
21 Subsidiaries of the Company
23 Consent of Independent Public Accountants
27 Financial Data Schedule
<PAGE>
AGREEMENT
This Agreement (the "Agreement") is made and entered into as of January 1,
1995, by and between Charles M. Clough ("Clough") and Wyle Laboratories, a
California corporation (the "Company") with reference to the following facts.
Clough is currently serving as Chairman of the Board and Chief Executive
Officer of the Company under that certain Employment Agreement dated February 1,
1989, as amended (the "Prior Agreement"). Clough has been an essential,
instrumental ingredient in the growth and success of the Company's Electronics
Marketing Group business and the Company overall during a twelve-year period.
The Company and Clough have had extensive discussions regarding Clough's
desire to retire as an employee at the close of business on March 31, 1995, and
Clough's role with the Company in future years following such retirement. In
order to induce Clough to continue his relationship with, and to devote his
singular efforts to, the Company, during and following his employment, the
parties hereto propose to enter into this Agreement and to replace and supersede
the Prior Agreement effective January 1, 1995.
The parties therefore agree as follows:
1. Scope of Services.
-----------------
1.1 Title & Duties. Clough shall continue to serve as Chairman of the
--------------
Board and Chief Executive Officer of the Company through March 31, 1995. As of
the close of business on March 31, 1995, Clough will relinquish his position and
the title of Chief Executive Officer and shall retire as an employee from the
Company. From April 1, 1995 until the 1998 Annual Meeting of Shareholders,
currently scheduled for May 12, 1998, Mr. Clough shall retain the title of
Chairman of the Board and serve as an outside director of the Company, subject
to the approval of the shareholders, thereby allowing another individual to
assume the position and title of Chief Executive Officer.
1.2 Place. Clough shall not be required to perform any duties as
-----
described in section 1.1 at any place other than in the County of Orange, State
of California, except insofar as his duties shall require reasonable business
trips and/or visits to suppliers or customers or Company facilities.
-1-
<PAGE>
2. Extent of Services; Noncompetition.
----------------------------------
2.1 General. It is recognized that the services to be rendered by Clough
-------
are of such a nature as to be peculiarly rendered by Clough, encompass the
individual ability of Clough and cannot be measured exclusively in terms of
hours or services rendered in any particular period. Clough agrees to devote
his best efforts to the performance of his duties and exclusively to advance the
interests of the Company, which interests shall include the allocation of a
reasonable amount of Clough's time to the Company's Electronics Marketing Group.
2.2 Vacation. From January 1, 1995 through March 31, 1995, Clough shall
--------
be entitled to such vacations and other absences from work as shall be
reasonably consistent with the performance of his duties as provided in this
Agreement.
2.3 Noncompetition. Clough agrees that during the term of this Agreement
--------------
and for a period of two years thereafter, he will neither directly nor
indirectly engage in a business competing with any of the businesses conducted
by the Company or any of its subsidiaries or affiliates in any county in the
state of California and each state of the United States, nor without the prior
written consent of the Board of Directors of the Company, directly or indirectly
have any interest in, own, manage, operate, control, be connected with as a
stockholder, joint venturer, officer, employee, partner or consultant, or
otherwise engage, invest or participate in any business which is competitive
with any of the businesses conducted by the Company or by any subsidiary or
affiliate of the Company; provided, however, that nothing contained in this
section 2.3 shall prevent Clough from investing or trading in stocks, bonds,
commodities, securities, real estate or other forms of investment for his own
account and benefit (directly or indirectly), so long as such investment
activities do not significantly interfere with Clough's services to be rendered
hereunder and are consistent with the conflict of interest provisions contained
in the Company's Business Ethics Policy as it exists from time to time.
3. Term. Subject to the provisions for earlier termination provided
----
herein, the term of this Agreement shall continue through the 1998 Annual
Meeting of Shareholders, currently scheduled for May 12, 1998, and will then
terminate, or on June 30, 1998, whichever date shall first occur (the
"Termination Date").
4. Compensation.
------------
4.1 Cash Compensation. The Company shall compensate Clough for services
-----------------
rendered under this Agreement as set forth below, it being is understood by the
parties that Clough will remain eligible to participate in the Company's
executive bonus plan for calendar year 1994.
-2-
<PAGE>
(a) Effective January 1, 1995 through March 31, 1995, Clough will be
compensated at a salary of $75,000 per month, and shall have no incentive
compensation participation for calendar year 1995.
(b) Effective April 1, 1995 through the Termination Date, Clough will
receive for services as Chairman of the Board an annual fee of $250,000, payable
monthly, such fee to be inclusive of any and all director and committee fees.
4.2 Benefits.
--------
(a) Employee Benefits. Until Clough's scheduled retirement as a full time
-----------------
employee at the close of business on March 31, 1995, Clough shall be entitled to
receive fringe benefits consistent with his duties and position, which benefits
shall be no less than those to which he is entitled as of the date hereof,
including, but not limited to all plans of life, accident, health, salary
continuation and other insurance which is or becomes generally available to
other employees, officers or executives of the Company and participation in the
Company's Retirement Plan. Clough shall be provided with a full time use of an
automobile consistent with the Company's corporate executive policy on
automobiles as in effect from time to time. The Company reserves the right to
modify, suspend or discontinue any and all of its fringe benefits referred to in
this section 4.2 at any time without recourse by Clough so long as such action
is taken generally with respect to other similarly situated peer executives and
does not single out Clough.
(b) Post-Employment Benefits. Effective April 1, 1995, Clough shall be
------------------------
entitled to appropriate office space and secretarial services at the Company's
corporate office, Irvine, California. He shall also be entitled to participate
in outside director benefit plans as may be in effect from time to time,
including the Outside Directors' Retirement Plan, the Deferred Directors'
Compensation Plan and the 1993 Eligible Directors' Stock Option Plan.
4.3 Expenses. During the term of this Agreement, Clough shall be
--------
reimbursed for all expenses reasonably incurred in the furtherance of the
business of the Company. Clough shall keep complete and accurate records of all
expenditures such that Clough may fully account to the Board of Directors, if
requested, or as may then be required by the Internal Revenue Service.
4.4 Automobile Transfer Bonus. Upon Clough's retirement as a full time
-------------------------
employee, the Company shall transfer to Clough without charge the automobile he
is then using under section 4.2 hereof.
-3-
<PAGE>
5. Confidential Information.
------------------------
5.1 General. Clough acknowledges that during his employment by, and as a
-------
result of his relationship with, the Company he has obtained knowledge of and
has gained access to information regarding the Company's business, operations,
products, proposed products, production methods, processes, customer lists,
advertising, marketing and promotional plans and materials, price lists, price
policies, financial information and other trade secrets, confidential
information and material proprietary to the Company or designated as being
confidential by the Company which is not generally known to non-Company
personnel, including information and material originated, discovered or
developed in whole or in part by Clough (collectively referred to herein as
"Confidential Information"). Clough agrees that during the term of this
Agreement and, to the fullest extent permitted by law, thereafter, he will, in a
fiduciary capacity for the benefit of the Company, hold all Confidential
Information strictly in confidence and will not directly or indirectly reveal,
report, disclose, publish or transfer any of such Confidential Information to
any person, firm or other entity, or utilize any of the Confidential Information
for any purpose, except in furtherance of his services under this Agreement.
5.2 Return of Materials. Clough agrees that upon the expiration or
-------------------
earlier termination of this Agreement, he will, at the Company's request,
surrender and return to the Company all lists, books, records and other
Confidential Information of the Company, or obtained in connection with the
Company's business, it being expressly acknowledged by Clough that all such
items are the exclusive property of the Company, and all other property
belonging to the Company then in the possession of Clough, and Clough shall not
make or retain any copies thereof.
6. Termination Prior to Termination Date. Clough's rights under this
-------------------------------------
Agreement may be terminated prior to the expiration of the term of this
Agreement (as provided in section 3 hereof) only as provided in this section 6.
6.1 Discharge or Resignation.
------------------------
(a) Clough may be discharged prior to the Termination Date (1) for "Just
Cause"; or (2) upon 60 days written notice, even if "Just Cause" does not exist.
(b) For a discharge which occurs prior to a "Change in Control," as defined
herein, "Just Cause" shall mean that the Company, acting in good faith based
upon the information then known to the Company, determines that Clough has: (1)
committed a material breach of his duties and responsibilities to the Company
(other than as a result of incapacity due to Clough's disability); or (2) been
convicted of a crime involving moral turpitude; or (3) refused to perform his
required
-4-
<PAGE>
duties and responsibilities or performed them incompetently; or (4)
violated any fiduciary duty to the Company; or (5) taken actions which are
injurious to the Company and which involve moral turpitude or actual malice
towards the Company. For a discharge which occurs coincident with or after a
"Change in Control," "Just Cause" shall mean (x) Clough's conviction of a crime
involving moral turpitude; or (y) actions of Clough which are injurious to the
Company and involve moral turpitude or actual malice toward the Company.
(c) Clough may resign prior to the term of this Agreement (1) for "Good
Reason"; or (2) upon 60 days written notice, even if "Good Reason" does not
exist. Regardless of whether a resignation occurs prior to, coincident with or
after a "Change in Control," "Good Reason" shall mean the material failure by
the Company to fulfill its obligations under this Agreement, to the extent not
remedied in a reasonable period of time after receipt of written notice by
Clough specifying the material failure by the Company. Any reduction or
attempted reduction of compensation or benefits below that required by section 4
or services to be rendered in section 1.1 is deemed material. For a resignation
which occurs coincident with or following a Change in Control, "Good Reason"
shall also mean the failure by the Company or its successors to assume expressly
and agree to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if a Change in Control had not
occurred.
(d) (1) If Clough is discharged for "Just Cause" or resigns without "Good
Reason," the Company shall not be obligated to pay Clough any sums of money
other than all compensation and benefits due Clough as of the date of his
discharge or resignation.
(2) If Clough is discharged without "Just Cause" or resigns for "Good
Reason," Clough shall be entitled to the following:
(i) all compensation and benefits due Clough as of the date of
discharge or resignation; plus
(ii) A lump sum payment equal to the present value of the compensation
which would be received by Clough through the term of this
Agreement had the resignation or discharge not occurred. The
present value shall be determined by using the applicable federal
mid-term rate, compounded monthly, as determined under Section
127(d) of the Internal Revenue Code of 1986, as amended (the
"Code"), or its successor, as of the date of discharge or
resignation. The entire lump-sum amount shall be paid within 30
days of the date of resignation or discharge. Clough shall have
no duty to mitigate or attempt to mitigate his
-5-
<PAGE>
damages.
(e) (1) Notwithstanding anything to the contrary in this Agreement,
payments to Clough which constitute "parachute payments," as defined in Section
280G of the Code, shall be limited, if necessary, so that the maximum amount of
such payments to the Clough shall be one dollar ($1.00) less than the amount
which would cause the payments to Clough (including payments to Clough which are
not included in this Agreement) to be subject to the excise tax imposed by
Section 4999 of the Code.
(2) Any determination that payments to Clough must be limited and the
assumptions to be utilized in arriving at such determination, shall be made by
Arthur Andersen LLP (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and Clough within 15 business days
of the time such calculation is requested by the Company or Clough. In the
event that the Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting the Change of Control, Clough shall
appoint another nationally recognized accounting firm to make the determinations
required hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall
be borne solely by the Company. If the Accounting Firm determines that payments
to Clough shall be limited, it shall furnish Clough with written opinion that
failure to limit the payments would result in the imposition of a tax under
Section 4999 of the Code. Any determination by the Accounting Firm shall be
binding upon the Company and Clough. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible that payments to Clough which
will not have been made by the Company should have been made ("Underpayment").
The Accounting Firm shall determine the amount of the Underpayment that has
occurred and any such Underpayment shall be promptly paid by the Company to or
for the benefit of Clough. In the event that any payment made to Clough shall
be determined by the Accounting Firm to result in the imposition of any tax
under Section 4999 of the Code, Clough shall promptly reimburse the Company for
the amount of such excess together with interest on such amount (at the same
rate as is applied to determine the present value of payments under Section 280G
(or any successor thereto), from the date the reimbursable payment was received
by Clough to the date the same is repaid to the Company. The parties hereto
acknowledge and agree that the amount of any such reimbursement shall be deemed
never paid to Clough.
(f) For purposes of this Agreement; a "Change of Control" shall be deemed
to have occurred if (1) any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934) is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Securities Exchange Act of
-6-
<PAGE>
1934), directly or indirectly, of securities of the Company representing 35% or
more of the combined voting power of the Company's then outstanding securities;
or (2) during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board of Directors of the Company (the
"Board") cease for any reason to constitute at least a majority thereof, unless
the election, or the nomination for election by the Company's shareholders, of
each new Board member was approved by a vote of at least three-fourths of the
Board members then still in office who were Board members at the beginning of
such period.
6.2 Disability. If the Company in good faith determines that Clough has
----------
become ill or injured and such illness or injury will prevent Clough from
performing the services required under this Agreement for a period of more than
12 consecutive months on substantially a full time basis, the Company may give
Clough written notice that it intends to terminate this Agreement. Such
termination shall become effective 30 days after receipt of such notice by
Clough, provided that, within 30 days after such receipt, Clough shall not have
returned to full time performance of his duties. If Clough is so terminated,
Clough shall be entitled to receive his full compensation and benefits until the
expiration of 12 months from the date on which he was first unable to
substantially perform his duties hereunder.
6.3 Death. The death of Clough shall result in automatic termination of
-----
this Agreement, and the Company shall not be obligated to pay the estate or
personal representative of Clough any sums of money other than any and all
compensation and benefits due Clough at the date of his death and bonus for the
period prior to death.
7. Arbitration.
-----------
7.1 General. Any dispute, controversy or claim arising out of or relating
-------
to this Agreement, the breach hereof or the coverage or enforceability of this
arbitration provision shall be settled by arbitration in Orange County,
California, conducted in accordance with the Commercial Arbitration Rules of the
American Arbitration Association, as such rules are in effect in Orange County
on the date of delivery of demand for arbitration. The arbitration of any such
issue, including the determination of the amount of any damages suffered by
either party hereto by reason of the acts or omissions of the other, shall be to
the exclusion of any court of law. Notwithstanding the foregoing, either party
hereto may seek any provisional remedy in a court, including but not limited to
an action for injunctive relief or attachment, without waiving the right to
arbitration.
7.2 Procedure. There shall be three arbitrators, one to be chosen by each
---------
party at will within 10 days from the date of delivery of demand for arbitration
and the third arbitrator to be selected by the two arbitrators so chosen. If
the two
-7-
<PAGE>
arbitrators are unable to select a third arbitrator within 10 days after
the last of the two arbitrators is chosen by the parties, the third arbitrator
will be designated, on application by either party, by the American Arbitration
Association. The decision of a majority of the arbitrators shall be final and
binding on both parties and their respective heirs, executors, administrators,
personal representatives, successors and assigns. The Company shall have the
burden of proving Just Cause for any discharge of Clough under section 6.1
hereof; for a resignation which occurs prior to a Change in Control, Clough
shall have the burden of proving Good Reason, and for a resignation which occur
after a Change in Control, the Company shall have the burden of proving that
Good Reason did not exist. Judgment upon any award of the arbitrators may be
entered in any court having jurisdiction, or application may be made to any such
court for the judicial acceptance of the award and for an order of enforcement.
7.3 Costs and Expenses. The Company shall pay the fees of all
------------------
arbitrators, witnesses and such other expenses as may be generated by the
arbitration, except Clough's attorneys fees, unless a majority of the
arbitrators concludes that such arbitration procedure was not instituted in good
faith by Clough. In such event the arbitrators shall be empowered to allocate
fees and assess costs and other expenses of the arbitration, except attorneys
fees, as they may deem appropriate, bearing in mind the relative financial
abilities of the parties and the respective merits of their positions.
8. Non-Assignment. This Agreement shall not be assignable nor the duties
--------------
hereunder delegable by Clough. None of the payments hereunder may be
encumbered, transferred or in any way anticipated. The Company shall not assign
this Agreement nor shall it transfer all or any substantial part of its assets
without first obtaining in conjunction with such transfer the express assumption
of the obligations hereof by the assignee or transferee.
9. Remedies. Clough acknowledges that the services he is to render under
--------
this Agreement are of a unique and special nature, the loss of which cannot
reasonably or adequately be compensated for in monetary damages, and that
irreparable injury and damage will result to the Company in the event of any
default or breach of this Agreement by Clough. Because of the unique nature of
the Confidential Information, Clough further acknowledges and agrees that the
Company will suffer irreparable harm if Clough fails to comply with his
obligations in section 5 hereof and that monetary damages would be inadequate to
compensate the Company for such breach. Accordingly, Clough agrees that the
Company will, in addition to any other remedies available to it at law, in
equity or, without limitation, otherwise, be entitled to injunctive relief
and/or specific performance to enforce the terms, or prevent or remedy the
violation, of any provisions of this Agreement. This provision shall not
constitute a waiver by the Company of any rights to damages or other remedies
which it may have
-8-
<PAGE>
pursuant to this Agreement or otherwise.
10. Survival. The provisions of sections 5, 7 and 9 shall survive the
--------
expiration or earlier termination of this Agreement.
11. Notices. Any notices or other communications relating to this
-------
Agreement shall be in writing and delivered personally or mailed by certified
mail, return receipt requested, to the party concerned at the address set forth
below:
If to Company: Wyle Laboratories
15370 Barranca Parkway
Irvine, California 92718
Attn: Vice President - Administration,
General Counsel & Secretary
If to Clough: At his residence address as maintained by the Company in
the regular course of its business.
Either party may change the address for the giving of notices at any time by
notice given to the other party under the provisions of this section 11.
12. Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties and supersedes the Prior Agreement. This Agreement may not
be changed orally, but only by an agreement in writing signed by both parties.
13. Construction. This Agreement shall be governed under
------------
and construed in accordance with the laws of the State of California. The
paragraph headings and captions contained herein are for reference purposes and
convenience only and shall not in any way affect the meaning or interpretation
of this Agreement. It is intended by the parties that this Agreement be
interpreted in accordance with its fair and simple meaning, not for or against
either party, and neither party shall be deemed to be the drafter of this
Agreement.
14. Severability. If any portion or provision of this Agreement is
------------
determined by arbitration or by a court of competent jurisdiction to be invalid,
illegal or unenforceable, the remaining portions or provisions hereof shall not
be affected.
15. Binding Effect. The rights and obligations of the parties under this
--------------
Agreement shall be binding upon and inure to the benefit of the permitted
successors, assigns, heirs, administrators, executors and personal
representatives of the parties.
16. Following the close of business on March 31, 1995 Clough will no
longer be an employee of the Company and shall become an independent contractor.
-9-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement effective on
the day and in the year first written above.
WYLE LABORATORIES
By: /s/ Stephen D. Natcher
------------------------
Stephen D. Natcher
Its: Vice President - Administration,
General Counsel and Secretary
/s/ Charles M. Clough
------------------------
Charles M. Clough
-10-
<PAGE>
RETIREMENT PLAN
FOR OUTSIDE DIRECTORS OF WYLE ELECTRONICS
(AS AMENDED EFFECTIVE AUGUST 31, 1995)
1. Establishment of Plan.
---------------------
There is hereby established for the benefit of the directors of Wyle
Electronics (the "Company") who are not employees of the Company (the "Outside
Directors") an unfunded plan of deferred compensation to be known as the
"Outside Directors Retirement Plan" (the "Plan").
2. Effective Date.
--------------
This plan shall be effective as of January 1, 1995 (the "Effective Date").
3. Eligibility and Participation.
-----------------------------
(a) All Outside Directors presently serving on the Board of Directors
of the Company (the "Board") shall be eligible and become participants in this
Plan ("Participants") upon the Effective Date. Each Outside Director hereafter
elected to the Board shall be eligible and become a Participant upon his or her
acceptance of election to the Board.
(b) A copy of this Plan shall be given to all Participants.
(c) A Participant shall cease to be a Participant upon the earlier of
(i) the payment of the total amount of the Participant's vested Accrued Benefit
under Section 5; (ii) the payment of the total amount payable to the Participant
under Section 11; (iii) the Participant's death; or (iv) the date the
Participant ceases to be director of the Company if on such date the Participant
is not 100% vested in his or her Accrued Benefit.
1
<PAGE>
4. Accrued Benefit and Vesting.
---------------------------
(a) The "Accrued Benefit" of a Participant as of any date is the
Participant's Normal Retirement Benefit.
(b) The Accrued Benefit of a Participant shall vest only in accordance
with the following schedule:
Consecutive 12-Month
Periods of Service as Vested Percentage
an Outside Director of Accrued Benefit
---------------------- -------------------
Less than five None
Five or more 100%
5. Benefits.
--------
(a) Normal Retirement Benefit. Commencing upon a Participant's Normal
-------------------------
Retirement Date (as defined in Paragraph (b) of this Section 5), and except as
provided in Paragraph (d) of this Section 5, the Company shall pay a Participant
while living an annual benefit (the "Normal Retirement Benefit") in the amount
equal to 100% of the Outside Director retainer in effect at the time of the
Participant's Normal Retirement Date, for the lesser of 10 years or the number
of years equal to the number of consecutive 12-month periods (including periods
prior to the effective date of this Plan) the Participant served as an Outside
Director of the Company.
(b) Normal Retirement Date. A Participant shall have reached the
----------------------
"Normal Retirement Date" upon the later of (1) the date the Participant attains
age 65 or (ii) the date the Participant actually retires from the Board, i.e.,
the date the Participant ceases to be a director (other than a "Director
Emeritus") of the Company.
2
<PAGE>
(c) Payment of Normal Retirement Benefit. The Normal Retirement Benefit
------------------------------------
payable in the year a Participant reaches the Normal Retirement Date shall be
pro rated for that portion of the Company's current fiscal year after the
Participant reaches the Normal Retirement Date. Such pro rated benefit shall be
due within 30 days after the Participant reaches the Normal Retirement Date.
Thereafter, the Normal Retirement Benefit shall be due on February 1 of each
succeeding year.
(d) Cessation Upon Death. Upon the death of a Participant, all Normal
--------------------
Retirement Benefits payable hereunder after the date of death shall cease;
provided, however, that the estate of the deceased Outside Director shall remain
entitled to any Normal Retirement Benefits paid (or due but not yet paid) prior
to the date of death.
(e) Increase in Normal Retirement Benefit. In the event that the Plan
-------------------------------------
is amended to increase the amount of the Normal Retirement Benefit, such
increase for Participants currently receiving payments under the Plan shall be
prospective only.
6. Accounting.
----------
No fund or escrow deposit shall be established for any benefits payable
pursuant to this Plan, and the obligation to pay benefits hereunder shall be a
general unsecured obligation of the Company. The Secretary of the Company shall
keep a record of the vested amount of the Accrued Benefit of each Participant.
Within sixty (60) days after the close of each fiscal year, the Secretary shall
furnish each Participant with a statement of the vested amount of the
Participant's then Accrued Benefit as of the last day of the preceding fiscal
year.
3
<PAGE>
7. Nonalienation of Benefits.
-------------------------
No right or benefit under this Plan shall be subject to anticipation,
alienation, sale, assignment, pledge, encumbrance or charge, and any attempt to
alienate, sell, assign, pledge, encumber of charge the same shall be void. No
right or benefit hereunder shall in any manner be liable for or subject to the
debts, contracts, liabilities or torts of the person entitled to such right or
benefit, nor shall any right or benefit be subject to attachment for legal
process.
8. Amendment or Termination of Plan.
--------------------------------
The Board may amend or terminate this Plan at any time; provided, however,
that any amendment or termination of this Plan shall not affect the rights of ny
Participant to continued payments or payments upon retirement in accordance with
Section 5 of the Participant's vested Accrued Benefit as of the time of such
amendment or termination. Thus, for example, if at the time of amendment or
termination of this Plan, a Participant has served as an Outside Director for 10
years, then regardless of the Participant's age, no amendment or termination of
this Plan may affect the Participant's right to the payment of a Normal
Retirement Benefit for 10 years following the Normal Retirement Date as provided
in Section 5.
9. Administration.
--------------
This Plan shall be administered by the Board, which shall interpret the
Plan, adopt and revise rules and regulations relating to the Plan and make any
other determinations which it believes necessary or advisable for the proper
administration
4
<PAGE>
of the Plan. The interpretation and construction of the Plan or any of its
provisions by the Board shall be final.
10. Merger or Consolidation.
-----------------------
In the event of a merger or consolidation to which the Company is a party
but of which it is not the surviving corporation, the Board will make provision
in connection with such transaction for the continuance of this Plan and the
assumption of all liabilities for Accrued Benefits to which Participants are
entitled.
11. Effect of Change of Control.
---------------------------
Notwithstanding the foregoing, in the event of a Change of Control, unless
prior to the date of such Change of Control a Participant has elected in writing
by notice delivered to the Secretary of the Company that this Section 11 shall
not apply with respect to such Change of Control, the rights of each Participant
in his or her Accrued Benefit shall thereupon become fully vested and
nonforfeitable notwithstanding any other provision of this Plan, and the Company
shall pay each Participant, within 10 days after the date of such Change of
Control, a lump sum cash payment in an amount equal to the present value, as of
the date of such lump sum payment, of either:
(a) If benefits are not then being paid to such Participant pursuant to
this Plan, the benefits which would but for the provisions of this Section 11
otherwise have thereafter been payable to him or her pursuant to the Plan upon
the Participant's reaching his or her Normal Retirement Date; provided, however,
that in calculating the amount of such benefits, the Participant shall be 100%
vested in his or her Accrued
5
<PAGE>
Benefit; and further provided, however, that in calculating the amount of such
benefits, the Participant shall be credited for, and the amount of benefits
shall be based on, the number of consecutive 12-month periods (including periods
prior to the effective date of this Plan) that the Participant served as an
Outside Director of the Company through the date of such Change of Control; or
(b) if benefits are then being paid to such Participant pursuant to this
Plan, the benefits which would but for the provisions of this Section 22
otherwise thereafter be payable to him or her or them pursuant to this Plan.
When such payment has been made, the Participant shall have no further
rights under this Plan. For purposes hereof (i) in determining the amount of
benefits which would have been payable or are thereafter payable pursuant to
this Plan, the 1983 Group Annuity Mortality Table shall be employed; (ii) the
present value of the benefits which would have been payable or are thereafter
payable pursuant to this Plan shall be determined by using a discount rate equal
to 100 percent of the applicable Federal Rate (determined under Section 1274(d)
of the Internal Revenue Code of 1986, as amended) for the month during which the
lump sum payment is required to be made pursuant to this Section 11, compounded
semiannually; (iii) if benefits are not then being paid to a Participant as of
the date of such Change of Control, then in employing the mortality table to
determine the amount of such Participant benefits pursuant to clause (i) above,
and in determining the present value of such amount pursuant to clause (ii)
above, it shall be assumed that the Company would have commenced the payment of
such benefits to such Participant upon the later of (x) the
6
<PAGE>
Participant's 65th birthday, or (y) the date of such Change of Control; and (iv)
a "Change of Control" shall be deemed to have occurred if any "person" (as such
term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934)
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934), directly or indirectly, of securities of the
Company representing 35% or more of the combined voting power of the Company's
then outstanding securities; or during any period of two consecutive years,
individuals who at the beginning of such period constitute the Board of
Directors of the Company (the "Board") cease for any reason to constitute at
least a majority thereof, unless the election, or the nomination for election by
the Company's shareholders, of each new Board member was approved by a vote of
at least three-fourths of the Board members then still in office who were Board
members at the beginning of such period.
7
<PAGE>
WYLE ELECTRONICS
RESTRICTED STOCK AWARD AGREEMENT
THIS AGREEMENT is dated as of the 27th day of November, 1995, between WYLE
ELECTRONICS, a California corporation (the "Corporation"), and 1___ (the
"Employee").
W I T N E S S E T H
WHEREAS, the Corporation has adopted and the shareholders of the
Corporation have approved the Wyle Electronics 1995 Stock Incentive Plan (the
"Plan").
WHEREAS, pursuant to Article 4 of the Plan, the Committee has granted to
the Employee a restricted stock award upon the terms and conditions evidenced
hereby, as required by the Plan.
NOW, THEREFORE, in consideration of the services rendered and to be
rendered by the Employee, the Corporation and the Employee agree to the terms
and conditions set forth herein (including the terms and conditions incorporated
by reference from the Plan).
1. DEFINED TERMS. Capitalized terms not otherwise defined herein shall
-------------
have the meaning assigned to such terms in the Plan.
2. AWARD AND PURCHASE OF RESTRICTED STOCK. The Corporation hereby awards
--------------------------------------
to the Employee, effective as of November 27, 1995 (the "Award Date"), the right
to purchase from the Corporation and the Employee hereby agrees to purchase 3___
shares of Common Stock of the Corporation. The purchase price for the shares of
Common Stock being purchased shall be $1.00 per share (the "Price").
3. RESTRICTIONS ON TRANSFER. The shares of Common Stock purchased by the
------------------------
Employee pursuant to Section 2 hereof and any additional shares attributable
thereto received by the Employee as a result of any stock dividend,
recapitalization, merger, reorganization or similar event described in Section
6.2 of the Plan (collectively, the "Restricted Stock") shall be subject to the
restrictions set forth herein and may not be sold, assigned, transferred,
pledged or otherwise disposed of, or encumbered, during the Restricted Period
(as defined below), except as permitted hereby. The Restricted Period shall
commence as the Award Date and shall terminate as follows:
Non-Cliff Vesting Restricted Stock Award Agreement
<PAGE>
Date Shares Become Percentage of Shares
Free From Restrictions Free From Restrictions
---------------------- ----------------------
November 27, 1996 33-1/3%
November 27, 1997 33-1/3%
November 27, 1998 33-1/3%
4. TERMINATION OF EMPLOYMENT. If the employment of the Employee
-------------------------
terminates by reason of death, Total Disability or Retirement, all shares of
Restricted Stock which are then subject to any restrictions set forth above
shall be forfeited and returned to the Corporation except to the extent such
shares shall be made free from restrictions by the Committee. The Corporation
shall pay to the Employee the Price with respect to each share of Restricted
Stock so surrendered. A leave of absence approved in writing by the Committee
shall not be deemed a termination of employment for purposes of this section.
5. STOCK CERTIFICATE. Upon the purchase of the Restricted Stock by the
-----------------
Employee, a stock certificate issued in respect of such shares of Restricted
Stock shall be registered in the name of the Employee and shall be deposited by
the Employee with the Corporation together with a stock power endorsed in blank.
The Corporation shall provide the Employee with a receipt for such stock
certificate acknowledging that the Corporation is holding such certificate
pursuant to the terms of this Agreement.
All stock certificates for shares of Restricted Stock during the
Restricted Period shall bear the following legend:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions contained
in an Agreement entered into between the registered owner and Wyle
Electronics. A copy of such Agreement is on file in the office of the
Secretary of Wyle Electronics, 15370 Barranca Parkway, Irvine,
California 92718."
With regard to any shares of Restricted Stock which cease to be
subject to restrictions pursuant to Section 3, the Corporation shall, within 60
days of the date such shares cease to be subject to restrictions, transfer such
shares free of all restrictions set forth in the Plan and this Agreement to the
Employee or, in the event of such the Employee's death, to the Employee's legal
representative, heir or legatee.
Non-Cliff Vesting Restricted Stock Award Agreement
<PAGE>
6. SHAREHOLDER'S RIGHTS. Subject to the terms of this Agreement, during
--------------------
the Restricted Period, the Employee shall have, with respect to the Restricted
Stock, all rights of a shareholder of the Corporation, including the right to
vote such shares and the right to receive all regular cash dividends paid with
respect to the shares of Restricted Stock; provided, that the right to receive
regular cash dividends shall terminate immediately with respect to any shares of
Restricted Stock upon forfeiture of those shares pursuant to Section 4 of this
Agreement.
7. REGULATORY COMPLIANCE. The issue and sale of shares of Restricted
---------------------
Stock shall be subject to full compliance with all then applicable requirements
of law and the requirements of any stock exchange upon which the Common Stock of
the Corporation may be listed.
8. WITHHOLDING TAX. The Employee agrees that, in the event the purchase
---------------
of the Restricted Stock or the expiration of restrictions thereon results in the
Employee's realization of income which for federal, state or local income tax
purposes is, in the opinion of counsel for the Corporation, subject to
withholding of tax at source by the Corporation, the Employee will pay to the
Corporation an amount equal to such withholding tax (or the Corporation may
withhold such amount from the Employee's salary or from dividends deposited with
the Corporation with respect to the Restricted Stock).
9. INVESTMENT REPRESENTATION. The Employee represents and agrees that if
-------------------------
the Employee purchases the Restricted Stock at a time when there is not in
effect under the Securities Act of 1933 (the "Securities Act") a registration
statement relating to the shares and there is not available for delivery a
prospectus meeting the requirements of Section 10(a)(3) of the Securities Act,
(i) the Employee will acquire the shares upon such purchase for the purpose of
investment and not with a view to their resale or distribution, (ii) that upon
such purchase, the Employee will furnish to the Corporation an investment letter
in form and substance satisfactory to the Corporation, (iii) prior to selling or
offering for sale any such shares, the Employee will furnish the Corporation
with an opinion of counsel satisfactory to it to the effect that such sale may
lawfully be made and will furnish it with such certificates as to factual
matters as it may reasonably request, and (iv) that certificates representing
such shares may be marked with an appropriate legend describing such conditions
precedent to sale or transfer.
10. FEDERAL INCOME TAX ELECTION. The Employee hereby acknowledges receipt
---------------------------
of advice that pursuant to current federal income tax laws, (i) the Employee has
30 days in which to elect to be taxed in the current taxable year on the
difference between the amount paid, if any, for the Restricted Stock and the
Fair Market Value thereof in accordance with the provisions of Internal Revenue
Code Section 83(b) and, (ii) if no such election is made, the taxable event will
occur when the shares of Restricted Stock cease to be subject to restriction,
and the tax will be measured by the difference between the amount paid, if any,
for the Restricted Stock and the Fair Market Value of the Restricted Stock on
the date of the taxable event.
Non-Cliff Vesting Restricted Stock Award Agreement
<PAGE>
11. NOTICES. Any notice to be given to the Corporation under the terms of
-------
this Agreement shall be in writing and addressed to the Corporation at its
principal office located at 15370 Barranca Parkway, Irvine, California 92718,
Attention: Corporate Secretary, and any notice to be given to the Employee shall
be addressed to him or her at the address given beneath the Employee's signature
hereto, or at such other address as either party may hereafter designate in
writing to the other party.
12. AMENDMENT, TERMINATION AND SUSPENSION. The amendment, termination and
-------------------------------------
suspension of the Plan shall be governed by Section 6.6 of the Plan. The
Committee with the consent of the Employee may make such modifications of the
terms and conditions of the award under this Agreement as the Committee shall
deem advisable, including, without limitation, those adjustments described in
Section 6.6(e) of the Plan.
13. GENERAL TERMS. The award of Restricted Stock and this Agreement are
-------------
subject to, and the Corporation and the Employee agree to be bound by, the
provisions of the Plan that apply to the Restricted Stock, including but not
limited to Articles 1, 4, 6 and 7. Such provisions are incorporated herein by
this reference. The Employee acknowledges receiving a copy of the Plan and
reading its applicable provisions. Provisions of the Plan that grant
discretionary authority to the Committee shall not create any rights in the
Employee, unless such rights are expressly set forth herein.
[TEXT CONTINUED ON NEXT PAGE]
Non-Cliff Vesting Restricted Stock Award Agreement
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first written above.
WYLE ELECTRONICS
By: ________________________________
Stephen D. Natcher
Senior Vice President - Administration,
General Counsel and Secretary
1___
2___
______________________________
(Signature)
______________________________
(Social Security Number)
================================================================================
CONSENT OF SPOUSE
-----------------
In consideration of the execution of the foregoing Restricted Stock
Award Agreement by the Corporation, I, ______________________________, the
spouse of the Employee herein named, do hereby join with my spouse in executing
the foregoing Restricted Stock Award Agreement and do hereby agree to be bound
by all of the terms and provisions thereof and of the Plan.
DATED: _______________ ______________________________
Signature of Spouse
Non-Cliff Vesting Restricted Stock Award Agreement
<PAGE>
WYLE ELECTRONICS
RESTRICTED STOCK AWARD AGREEMENT
THIS AGREEMENT is dated as of the 27th day of November, 1995, between WYLE
ELECTRONICS, a California corporation (the "Corporation"), and 1___ (the
"Employee").
W I T N E S S E T H
WHEREAS, the Corporation has adopted and the shareholders of the
Corporation have approved the Wyle Electronics 1995 Stock Incentive Plan (the
"Plan").
WHEREAS, pursuant to Article 4 of the Plan, the Committee has granted to
the Employee a restricted stock award upon the terms and conditions evidenced
hereby, as required by the Plan.
NOW, THEREFORE, in consideration of the services rendered and to be
rendered by the Employee, the Corporation and the Employee agree to the terms
and conditions set forth herein (including the terms and conditions incorporated
by reference from the Plan).
1. DEFINED TERMS. Capitalized terms not otherwise defined herein shall
-------------
have the meaning assigned to such terms in the Plan.
2. AWARD AND PURCHASE OF RESTRICTED STOCK. The Corporation hereby awards
--------------------------------------
to the Employee, effective as of November 27, 1995 (the "Award Date"), the right
to purchase from the Corporation and the Employee hereby agrees to purchase 3___
shares of Common Stock of the Corporation. The purchase price for the shares of
Common Stock being purchased shall be $1.00 per share (the "Price").
3. RESTRICTIONS ON TRANSFER. The shares of Common Stock purchased by the
------------------------
Employee pursuant to Section 2 hereof and any additional shares attributable
thereto received by the Employee as a result of any stock dividend,
recapitalization, merger, reorganization or similar event described in Section
6.2 of the Plan (collectively, the "Restricted Stock") shall be subject to the
restrictions set forth herein and may not be sold, assigned, transferred,
pledged or otherwise disposed of, or encumbered, during the Restricted Period
(as defined below), except as permitted hereby. The Restricted Period shall
commence as the Award Date and shall terminate as follows:
Cliff Vesting Restricted Stock Award Agreement
<PAGE>
Date Shares Become Percentage of Shares
Free From Restrictions Free From Restrictions
---------------------- ----------------------
November 27, 1998 100%
4. TERMINATION OF EMPLOYMENT. If the employment of the Employee
-------------------------
terminates by reason of death, Total Disability or Retirement, all shares of
Restricted Stock which are then subject to any restrictions set forth above
shall be forfeited and returned to the Corporation except to the extent such
shares shall be made free from restrictions by the Committee. The Corporation
shall pay to the Employee the Price with respect to each share of Restricted
Stock so surrendered. A leave of absence approved in writing by the Committee
shall not be deemed a termination of employment for purposes of this section.
5. STOCK CERTIFICATE. Upon the purchase of the Restricted Stock by the
-----------------
Employee, a stock certificate issued in respect of such shares of Restricted
Stock shall be registered in the name of the Employee and shall be deposited by
the Employee with the Corporation together with a stock power endorsed in blank.
The Corporation shall provide the Employee with a receipt for such stock
certificate acknowledging that the Corporation is holding such certificate
pursuant to the terms of this Agreement.
All stock certificates for shares of Restricted Stock during the Restricted
Period shall bear the following legend:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions contained
in an Agreement entered into between the registered owner and Wyle
Electronics. A copy of such Agreement is on file in the office of the
Secretary of Wyle Electronics, 15370 Barranca Parkway, Irvine,
California 92718."
With regard to any shares of Restricted Stock which cease to be subject to
restrictions pursuant to Section 3, the Corporation shall, within 60 days of the
date such shares cease to be subject to restrictions, transfer such shares free
of all restrictions set forth in the Plan and this Agreement to the Employee or,
in the event of such the Employee's death, to the Employee's legal
representative, heir or legatee.
Cliff Vesting Restricted Stock Award Agreement
<PAGE>
6. SHAREHOLDER'S RIGHTS. Subject to the terms of this Agreement, during
--------------------
the Restricted Period, the Employee shall have, with respect to the Restricted
Stock, all rights of a shareholder of the Corporation, including the right to
vote such shares and the right to receive all regular cash dividends paid with
respect to the shares of Restricted Stock; provided, that the right to receive
regular cash dividends shall terminate immediately with respect to any shares of
Restricted Stock upon forfeiture of those shares pursuant to Section 4 of this
Agreement.
7. REGULATORY COMPLIANCE. The issue and sale of shares of Restricted
---------------------
Stock shall be subject to full compliance with all then applicable requirements
of law and the requirements of any stock exchange upon which the Common Stock of
the Corporation may be listed.
8. WITHHOLDING TAX. The Employee agrees that, in the event the purchase
---------------
of the Restricted Stock or the expiration of restrictions thereon results in the
Employee's realization of income which for federal, state or local income tax
purposes is, in the opinion of counsel for the Corporation, subject to
withholding of tax at source by the Corporation, the Employee will pay to the
Corporation an amount equal to such withholding tax (or the Corporation may
withhold such amount from the Employee's salary or from dividends deposited with
the Corporation with respect to the Restricted Stock).
9. INVESTMENT REPRESENTATION. The Employee represents and agrees that if
-------------------------
the Employee purchases the Restricted Stock at a time when there is not in
effect under the Securities Act of 1933 (the "Securities Act") a registration
statement relating to the shares and there is not available for delivery a
prospectus meeting the requirements of Section 10(a)(3) of the Securities Act,
(i) the Employee will acquire the shares upon such purchase for the purpose of
investment and not with a view to their resale or distribution, (ii) that upon
such purchase, the Employee will furnish to the Corporation an investment letter
in form and substance satisfactory to the Corporation, (iii) prior to selling or
offering for sale any such shares, the Employee will furnish the Corporation
with an opinion of counsel satisfactory to it to the effect that such sale may
lawfully be made and will furnish it with such certificates as to factual
matters as it may reasonably request, and (iv) that certificates representing
such shares may be marked with an appropriate legend describing such conditions
precedent to sale or transfer.
10. FEDERAL INCOME TAX ELECTION. The Employee hereby acknowledges receipt
---------------------------
of advice that pursuant to current federal income tax laws, (i) the Employee has
30 days in which to elect to be taxed in the current taxable year on the
difference between the amount paid, if any, for the Restricted Stock and the
Fair Market Value thereof in accordance with the provisions of Internal Revenue
Code Section 83(b) and, (ii) if no such election is made, the taxable event will
occur when the shares of Restricted Stock cease to be subject to restriction,
and the tax will be measured by the difference between the amount paid, if any,
for the Restricted Stock and the Fair Market Value of the Restricted Stock on
the date of the taxable event.
Cliff Vesting Restricted Stock Award Agreement
<PAGE>
11. NOTICES. Any notice to be given to the Corporation under the terms of
-------
this Agreement shall be in writing and addressed to the Corporation at its
principal office located at 15370 Barranca Parkway, Irvine, California 92718,
Attention: Corporate Secretary, and any notice to be given to the Employee shall
be addressed to him or her at the address given beneath the Employee's signature
hereto, or at such other address as either party may hereafter designate in
writing to the other party.
12. AMENDMENT, TERMINATION AND SUSPENSION. The amendment, termination and
-------------------------------------
suspension of the Plan shall be governed by Section 6.6 of the Plan. The
Committee with the consent of the Employee may make such modifications of the
terms and conditions of the award under this Agreement as the Committee shall
deem advisable, including, without limitation, those adjustments described in
Section 6.6(e) of the Plan.
13. GENERAL TERMS. The award of Restricted Stock and this Agreement are
-------------
subject to, and the Corporation and the Employee agree to be bound by, the
provisions of the Plan that apply to the Restricted Stock, including but not
limited to Articles 1, 4, 6 and 7. Such provisions are incorporated herein by
this reference. The Employee acknowledges receiving a copy of the Plan and
reading its applicable provisions. Provisions of the Plan that grant
discretionary authority to the Committee shall not create any rights in the
Employee, unless such rights are expressly set forth herein.
[TEXT CONTINUED ON NEXT PAGE]
Cliff Vesting Restricted Stock Award Agreement
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
and year first written above.
WYLE ELECTRONICS
By: __________________________
Stephen D. Natcher
Senior Vice President - Administration,
General Counsel and Secretary
1___
2___
______________________________
(Signature)
______________________________
(Social Security Number)
================================================================================
CONSENT OF SPOUSE
-----------------
In consideration of the execution of the foregoing Restricted Stock Award
Agreement by the Corporation, I, ______________________________, the spouse of
the Employee herein named, do hereby join with my spouse in executing the
foregoing Restricted Stock Award Agreement and do hereby agree to be bound by
all of the terms and provisions thereof and of the Plan.
DATED: _______________ ______________________________
Signature of Spouse
Cliff Vesting Restricted Stock Award Agreement
<PAGE>
Restricted Stock Award Agreement
WYLE ELECTRONICS
RESTRICTED STOCK AWARD AGREEMENT
REPLACEMENT AWARDS FOR CASH COMPENSATION
----------------------------------------
THIS AGREEMENT is dated as of the 17th day of January, 1996, between WYLE
ELECTRONICS, a California corporation (the "Corporation"), and 1___ (the
"Employee").
W I T N E S S E T H
WHEREAS, the Corporation has adopted and the shareholders of the
Corporation have approved the Wyle Electronics 1995 Stock Incentive Plan (the
"Plan").
WHEREAS, pursuant to Article 4 of the Plan, the Committee has granted to
the Employee a restricted stock award upon the terms and conditions evidenced
hereby, as required by the Plan.
NOW, THEREFORE, in consideration of the services rendered and to be
rendered by the Employee, the Corporation and the Employee agree to the terms
and conditions set forth herein (including the terms and conditions incorporated
by reference from the Plan).
1. DEFINED TERMS. Capitalized terms not otherwise defined herein shall
-------------
have the meaning assigned to such terms in the Plan.
2. AWARD AND PURCHASE OF RESTRICTED STOCK. The Corporation hereby awards
--------------------------------------
to the Employee, effective as of January 17, 1996 (the "Award Date"), the right
to purchase from the Corporation and the Employee hereby agrees to purchase 3___
shares of Common Stock of the Corporation. The purchase price for the shares of
Common Stock being purchased shall be $1.00 per share (the "Price").
3. RESTRICTIONS ON TRANSFER. The shares of Common Stock purchased by the
------------------------
Employee pursuant to Section 2 hereof and any additional shares attributable
thereto received by the Employee as a result of any stock dividend,
recapitalization, merger, reorganization or similar event described in Section
6.2 of the Plan (collectively, the "Restricted Stock") shall be subject to the
restrictions set forth herein and may not be sold, assigned, transferred,
pledged or otherwise disposed of, or encumbered, during the Restricted Period
(as defined below), except as permitted hereby. The Restricted Period shall
commence as the Award Date and shall terminate as follows:
Non-Cliff Restricted Stock Award Agreement -
Replacement Comp. (1994 and 1995 Incentives)
<PAGE>
Date Shares Become Percentage of Shares
Free From Restrictions Free From Restrictions
---------------------- ----------------------
January 17, 1997 33-1/3%
January 17, 1998 33-1/3%
January 17, 1999 33-1/3%
4. TERMINATION OF EMPLOYMENT. If the Employee ceases to be employed by
-------------------------
the Corporation for any reason other than death, Total Disability or Retirement
(as defined below), all shares of Restricted Stock which are then subject to any
restrictions set forth above, shall upon such termination of employment be
forfeited and returned to the Corporation. If the employment of the Employee
terminates by reason of death, Total Disability or Retirement (as defined
below), all shares of Restricted Stock which are then subject to any
restrictions set forth above shall automatically be made free from such
restrictions. The Corporation shall pay to the Employee the Price with respect
to each share of Restricted Stock so surrendered. A leave of absence approved
in writing by the Committee shall not be deemed a termination of employment for
purposes of this section. For purposes of this Agreement, Employee will be
considered to have terminated by reason of Retirement if the Employee retires
under the provisions of any retirement plan of the Corporation then in effect
and immediately commences to receive benefits thereunder.
5. STOCK CERTIFICATE. Upon the purchase of the Restricted Stock by the
-----------------
Employee, a stock certificate issued in respect of such shares of Restricted
Stock shall be registered in the name of the Employee and shall be deposited by
the Employee with the Corporation together with a stock power endorsed in blank.
The Corporation shall provide the Employee with a receipt for such stock
certificate acknowledging that the Corporation is holding such certificate
pursuant to the terms of this Agreement.
All stock certificates for shares of Restricted Stock during the Restricted
Period shall bear the following legend:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions contained in an
Agreement entered into between the registered owner and Wyle Electronics.
A copy of such Agreement is on file in the office of the Secretary of Wyle
Electronics, 15370 Barranca Parkway, Irvine, CA 92718."
Non-Cliff Restricted Stock Award Agreement -
Replacement Comp. (1994 and 1995 Incentives)
<PAGE>
With regard to any shares of Restricted Stock which cease to be subject to
restrictions pursuant to Section 3, the Corporation shall, within 60 days of the
date such shares cease to be subject to restrictions, transfer such shares free
of all restrictions set forth in the Plan and this Agreement to the Employee or,
in the event of such the Employee's death, to the Employee's legal
representative, heir or legatee.
6. SHAREHOLDER'S RIGHTS. Subject to the terms of this Agreement, during
--------------------
the Restricted Period, the Employee shall have, with respect to the Restricted
Stock, all rights of a shareholder of the Corporation, including the right to
vote such shares and the right to receive all regular cash dividends paid with
respect to the shares of Restricted Stock; provided, that the right to receive
regular cash dividends shall terminate immediately with respect to any shares of
Restricted Stock upon forfeiture of those shares pursuant to Section 4 of this
Agreement.
7. REGULATORY COMPLIANCE. The issue and sale of shares of Restricted
---------------------
Stock shall be subject to full compliance with all then applicable requirements
of law and the requirements of any stock exchange upon which the Common Stock of
the Corporation may be listed.
8. WITHHOLDING TAX. The Employee agrees that, in the event the purchase
---------------
of the Restricted Stock or the expiration of restrictions thereon results in the
Employee's realization of income which for federal, state or local income tax
purposes is, in the opinion of counsel for the Corporation, subject to
withholding of tax at source by the Corporation, the Employee will pay to the
Corporation an amount equal to such withholding tax (or the Corporation may
withhold such amount from the Employee's salary or from dividends deposited with
the Corporation with respect to the Restricted Stock).
9. INVESTMENT REPRESENTATION. The Employee represents and agrees that if
-------------------------
the Employee purchases the Restricted Stock at a time when there is not in
effect under the Securities Act of 1933 (the "Securities Act") a registration
statement relating to the shares and there is not available for delivery a
prospectus meeting the requirements of Section 10(a)(3) of the Securities Act,
(i) the Employee will acquire the shares upon such purchase for the purpose of
investment and not with a view to their resale or distribution, (ii) that upon
such purchase, the Employee will furnish to the Corporation an investment letter
in form and substance satisfactory to the Corporation, (iii) prior to selling or
offering for sale any such shares, the Employee will furnish the Corporation
with an opinion of counsel satisfactory to it to the effect that such sale may
lawfully be made and will furnish it with such certificates as to factual
matters as it may reasonably request, and (iv) that certificates representing
such shares may be marked with an appropriate legend describing such conditions
precedent to sale or transfer.
Non-Cliff Restricted Stock Award Agreement -
Replacement Comp. (1994 and 1995 Incentives)
<PAGE>
10. FEDERAL INCOME TAX ELECTION. The Employee hereby acknowledges receipt
---------------------------
of advice that pursuant to current federal income tax laws, (i) the Employee has
30 days in which to elect to be taxed in the current taxable year on the
difference between the amount paid, if any, for the Restricted Stock and the
Fair Market Value thereof in accordance with the provisions of Internal Revenue
Code Section 83(b) and, (ii) if no such election is made, the taxable event will
occur when the shares of Restricted Stock cease to be subject to restriction,
and the tax will be measured by the difference between the amount paid, if any,
for the Restricted Stock and the Fair Market Value of the Restricted Stock on
the date of the taxable event.
11. NOTICES. Any notice to be given to the Corporation under the terms of
-------
this Agreement shall be in writing and addressed to the Corporation at its
principal office located at 15370 Barranca Parkway, Irvine, California 92718-
2215, Attention: Corporate Secretary, and any notice to be given to the Employee
shall be addressed to him or her at the address given beneath the Employee's
signature hereto, or at such other address as either party may hereafter
designate in writing to the other party.
12. AMENDMENT, TERMINATION AND SUSPENSION. The amendment, termination and
-------------------------------------
suspension of the Plan shall be governed by Section 6.6 of the Plan. The
Committee with the consent of the Employee may make such modifications of the
terms and conditions of the award under this Agreement as the Committee shall
deem advisable, including, without limitation, those adjustments described in
Section 6.6(e) of the Plan.
13. GENERAL TERMS. The award of Restricted Stock and this Agreement are
-------------
subject to, and the Corporation and the Employee agree to be bound by, the
provisions of the Plan that apply to the Restricted Stock, including but not
limited to Articles 1, 4, 6 and 7. Such provisions are incorporated herein by
this reference. The Employee acknowledges receiving a copy of the Plan and
reading its applicable provisions. Provisions of the Plan that grant
discretionary authority to the Committee shall not create any rights in the
Employee, unless such rights are expressly set forth herein.
Non-Cliff Restricted Stock Award Agreement -
Replacement Comp. (1994 and 1995 Incentives)
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
and year first written above.
WYLE ELECTRONICS
By: _____________________________
Title: ____________________________
1___
2___
_________________________________
(Signature)
_________________________________
(Social Security Number)
Non-Cliff Restricted Stock Award Agreement -
Replacement Comp. (1994 and 1995 Incentives)
<PAGE>
CONSENT OF SPOUSE
-----------------
In consideration of the execution of the foregoing Restricted Stock Award
Agreement by the Corporation, I, _______________________, the spouse of the
Employee herein named, do hereby join with my spouse in executing the foregoing
Restricted Stock Award Agreement and do hereby agree to be bound by all of the
terms and provisions thereof and of the Plan.
DATED: ___________________ ________________________________
Signature of Spouse
Non-Cliff Restricted Stock Award Agreement -
Replacement Comp. (1994 and 1995 Incentives)
<PAGE>
EXHIBIT 10(ae)
================================================================================
First Amended and Restated Credit Agreement
Dated as of December 29, 1995
among
Wyle Electronics
Bank of America National Trust
and Savings Association,
as Agent
and
The Other Financial Institutions Party Hereto
[LOGO APPEARS HERE]
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE #
------
<S> <C> <C>
SECTION 1 DEFINITIONS...................................................... 1
1.1 Definitions...................................................... 1
1.2 Use of Defined Terms............................................. 15
1.3 Accounting Terms................................................. 15
1.4 Exhibits and Schedules........................................... 15
SECTION 2 COMMITMENTS OF THE BANKS; TYPES OF LOANS; LETTER
OF CREDIT, BORROWING AND CONVERSION PROCEDURES................... 15
2.1 Commitments...................................................... 15
2.1.1 Letters of Credit......................................... 16
2.1.2 Loans..................................................... 16
2.1.3 Commitment Limits......................................... 16
2.2 Various Types of Loans........................................... 17
2.3 Borrowing Procedures............................................. 17
2.4 Conversion and Continuation Procedures........................... 18
2.5 Pro Rata Treatment............................................... 19
2.6 Letter of Credit Procedures...................................... 19
2.7 Determination of Issuing Bank: Replacement of
Credit........................................................... 20
2.8 Participations in Letters of Credit.............................. 20
2.9 Reimbursement Obligations........................................ 21
2.10 Limitation on the Issuing Bank's Obligations.................... 22
2.11 Reimbursement Obligations Deemed to be Loans;
Funding by Banks to an Issuing Bank............................. 23
2.12 Warranty........................................................ 24
2.13 Conditions...................................................... 24
2.14 Commitments Several............................................. 24
2.15 Transfer Instructions........................................... 24
2.16 Extension of Termination Date................................... 24
SECTION 3 EVIDENCE OF INDEBTEDNESS......................................... 25
3.1 Loan Accounts.................................................... 25
3.2 Notes............................................................ 25
3.3 Recordkeeping.................................................... 25
SECTION 4 INTEREST......................................................... 26
4.1 Interest Rates................................................... 26
4.2 Interest Payment Dates........................................... 26
4.3 Interest Periods................................................. 26
4.4 Setting and Notice of Eurodollar Rates........................... 27
4.5 Computation of Interest.......................................... 27
SECTION 5 FEES............................................................. 27
5.1 Participation Fee................................................ 27
5.2 Facility Fee..................................................... 28
5.3 Letter of Credit Fees............................................ 28
5.4 Agent's and Arranger's Fees...................................... 28
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C>
5.5 Interest......................................................... 29
SECTION 6 REDUCTION OR TERMINATION OF THE COMMITMENTS;
PREPAYMENTS...................................................... 29
6.1 Reduction or Termination......................................... 29
6.2 Voluntary Prepayments............................................ 29
SECTION 7 MAKING AND PRORATION OF PAYMENTS; SETOFF; TAXES.................. 30
7.1 Making of Payments............................................... 30
7.2 Application of Certain Payments.................................. 30
7.3 Due Date Extension: Payments Due on Business Days................ 31
7.4 Setoff........................................................... 31
7.5 Proration of Payments............................................ 31
7.6 Taxes............................................................ 32
SECTION 8 INCREASED COSTS; SPECIAL PROVISIONS FOR EURODOLLAR
LOANS............................................................ 33
8.1 Increased Costs.................................................. 33
8.2 Basis for Determining Interest Rate Inadequate or
Unfair........................................................... 35
8.3 Changes in Law Rendering Eurodollar Loans
Unlawful......................................................... 35
8.4 Funding Losses................................................... 36
8.5 Right of Banks to Fund through Other Offices..................... 36
8.6 Discretion of Banks as to Manner of Funding...................... 36
8.7 Conclusiveness of Statements; Survival of
Provisions....................................................... 37
8.8 Banks' Obligation to Mitigate.................................... 37
SECTION 9 WARRANTIES....................................................... 37
9.1 Organization, Etc................................................ 38
9.2 Authorization: No Conflict....................................... 38
9.3 Validity and Binding Nature...................................... 39
9.4 Financial Information............................................ 40
9.5 No Material Adverse Change; Conduct of Business.................. 40
9.6 Litigation....................................................... 40
9.7 Ownership of Properties; Liens................................... 40
9.8 Subsidiaries..................................................... 40
9.9 Compliance with ERISA............................................ 40
9.10 Investment Company Act.......................................... 41
9.11 Public Utility Holding Company Act.............................. 41
9.12 Regulation U; Other Governmental Regulation..................... 42
9.13 Taxes........................................................... 42
9.14 Solvency, etc................................................... 42
9.15 Hazardous Materials............................................. 42
9.15.1 Release and Disposal..................................... 42
9.15.2 Treatment and Storage.................................... 43
9.16 Ownership....................................................... 43
9.17 Information..................................................... 43
SECTION 10 COVENANTS...................................................... 44
10.1 Reports, Certificates and Other Information..................... 44
</TABLE>
- ii -
<PAGE>
<TABLE>
<S> <C> <C>
10.1.1 Audit Report............................................. 44
10.1.2 Monthly Reports; Quarterly Cash Flow
Statement................................................ 45
10.1.3 Compliance Certificates.................................. 45
10.1.4 Reports to SEC, to the Public and to
Stockholders: Press Releases............................. 45
10.1.5 Notice of Default, Litigation, Material
Adverse Change........................................... 46
10.1.6 Subsidiaries............................................. 46
10.1.7 Management Reports....................................... 46
10.1.8 Projections.............................................. 46
10.1.9 ERISA.................................................... 46
10.1.10 Other Information....................................... 47
10.2 Books, Records and Inspections.................................. 47
10.3 Insurance....................................................... 48
10.4 Compliance with Laws: Payment of Taxes and
Liabilities..................................................... 48
10.5 Maintenance of Existence, Etc................................... 49
10.6 Financial Covenants............................................. 49
10.6.1 Minimum Tangible Net Worth............................... 49
10.6.2 Maximum Leverage......................................... 49
10.6.3 Minimum Fixed Charge Coverage............................ 50
10.6.4 Current Ratio............................................ 50
10.7 Liens........................................................... 50
10.8 Restricted Payments............................................. 51
10.9 Mergers, Consolidations, Sales.................................. 52
10.10 Modification of Nature of Business; Modification
of Organizational Documents.................................... 52
10.11 Use of Proceeds................................................ 53
10.12 Employee Benefit Plans.................................... 53
10.13 Environmental Covenants........................................ 53
10.13.1 Environmental Response Obligation....................... 53
10.13.2 Environmental Liabilities............................... 53
10.14 Material Agreements............................................ 54
10.15 Maintenance of Properties...................................... 54
10.16 Investments.................................................... 54
10.17 No Negative Pledge............................................. 55
10.18 Funded Debt of Subsidiaries.................................... 55
10.19 Capital Expenditures........................................... 55
10.20 Subsidiary Guaranties.......................................... 55
SECTION 11 CONDITIONS OF LENDING........................................... 55
11.1 Initial Letter of Credit or Loan................................ 56
11.1.1 Loan Documents........................................... 56
11.1.2 Consents, etc............................................ 56
11.1.3 Secretary's Certificate.................................. 56
11.1.4 Officer's Certificate.................................... 57
11.1.5 Opinion of Counsel for the Company....................... 57
11.1.6 Notice of Borrowing or Notice of
Conversion/Continuation.................................. 57
11.1.7 Compliance Certificate................................... 57
11.1.8 Other.................................................... 57
</TABLE>
- iii -
<PAGE>
<TABLE>
<S> <C> <C>
11.2 All Loans and Letters of Credit................................. 57
11.2.1 No Default............................................... 58
11.2.2 Confirmatory Certificate................................. 58
SECTION 12 EVENTS OF DEFAULT AND THEIR EFFECT............................. 58
12.1 Events of Default............................................... 58
12.1.1 Non-Payment of the Loans, etc............................ 58
12.1.2 Non-Payment of Other Debt................................ 58
12.1.3 Bankruptcy, Insolvency, etc.............................. 59
12.1.4 Non-Compliance with Provisions of This
Agreement or Any Other Loan Document..................... 59
12.1.5 Warranties............................................... 59
12.1.6 ERISA.................................................... 60
12.1.7 Judgments................................................ 60
12.1.8 Guaranties............................................... 60
12.1.9 Change of Control........................................ 61
12.2 Effect of Event of Default...................................... 61
SECTION 13 THE AGENT...................................................... 62
13.1 Appointment and Authorization; "Agent".......................... 62
13.2 Delegation of Duties............................................ 62
13.3 Liability of Agent.............................................. 62
13.4 Reliance by Agent............................................... 63
13.5 Notice of Default............................................... 63
13.6 Credit Decision................................................. 64
13.7 Indemnification of Agent........................................ 64
13.8 Agent in Individual Capacity.................................... 65
13.9 Successor Agent................................................. 65
13.10 Withholding Tax................................................ 66
SECTION 14 GENERAL......................................................... 67
14.1 Waiver: Amendments.............................................. 67
14.2 Confirmations................................................... 68
14.3 Notices......................................................... 68
14.4 Computations.................................................... 68
14.5 Regulation U.................................................... 69
14.6 Costs, Expenses and Taxes....................................... 69
14.7 Captions........................................................ 70
14.8 Assignments; Participations..................................... 70
14.8.1 Assignments.............................................. 70
14.8.2 Participations........................................... 72
14.9 Governing Law................................................... 73
14.10 Counterparts................................................... 73
14.11 Successors and Assigns......................................... 73
14.12 Indemnification by the Company................................. 73
14.13 Forum Selection and Consent to Jurisdiction.................... 74
14.14 Waiver of Jury Trial........................................... 74
14.15 Further Assurances............................................. 75
14.16 Reinstatement.................................................. 75
14.17 Waivers........................................................ 75
14.18 Confidentiality................................................ 75
14.19 Amendment and Restatement...................................... 76
</TABLE>
- iv -
<PAGE>
<TABLE>
EXHIBITS
- --------
<S> <C>
A Form of Note
B-1 Notice Of Borrowing
B-2 Notice of Conversion/Continuation
C Compliance Certificate
D Subsidiary Guaranty
E Assignment Agreement
F Opinion of Counsel
<CAPTION>
SCHEDULES
- ---------
<S> <C>
1 Commitments and Percentages
1.1 Certain Indebtedness
9.6 Litigation
9.8 Subsidiaries
9.9 ERISA Plans
9.15 Hazardous Materials
10.7 Permitted Liens
10.16 Investments
14.3 Addresses for Notices
</TABLE>
- v -
<PAGE>
FIRST AMENDED AND RESTATED CREDIT AGREEMENT
-------------------------------------------
This FIRST AMENDED AND RESTATED CREDIT AGREEMENT, dated as of December
29, 1995 (as amended or otherwise modified from time to time, this "Agreement"),
is entered into among WYLE ELECTRONICS (formerly named Wyle Laboratories), a
California corporation (the "Company"), the undersigned financial institutions
(together with their respective successors and assigns, collectively the "Banks"
and individually each a "Bank") and BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION (in its individual capacity and as agent ("Agent") for the Banks),
and amends and restates that certain Credit Agreement dated as of December 9,
1993 among the Company, the Banks and the Agent (the "Existing Credit
---------------
Agreement").
- ---------
In consideration of the premises and the mutual agreements herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1 DEFINITIONS.
1.1 Definitions. When used herein the following terms shall have the
-----------
following meaning (such definitions to be applicable to both the singular and
plural forms of such terms):
"Accounting Changes" - see Section 14.4.
------------------ ------------
"Affected Loan" - see Section 8.3.
------------- -----------
"Affiliate" of any Person means any other Person which, directly or
---------
indirectly, controls or is controlled by or is under common control with such
Person.
"Agent" means BofA in its capacity as agent for the Banks hereunder,
-----
and any successor agent arising under Section 13.9.
"Agent-Related Persons" means BofA and any successor agent arising
---------------------
under Section 13.9, together with their respective Affiliates, and the officers,
directors, employees, agents and attorneys-in-fact of such Persons and
Affiliates.
"Agent's Payment Office" means the address for payments set forth on
----------------------
Schedule 14.3 or such other address as the Agent may from time to time specify.
- -------------
"Agreement" - see the Preamble.
--------- --------
- 1 -
<PAGE>
"Applicable Margin" means, (a) for the Pricing Period from the
-----------------
Effective Date through February 24, 1996, the per annum rate, expressed in basis
points, indicated by the Compliance Certificate delivered on the Effective Date,
and (b) for each Pricing Period thereafter, the applicable per annum rate in
basis points set forth below opposite the indicated ratios as of the last day of
the Fiscal Quarter most recently ended prior to the commencement of that Pricing
Period, as set forth in the most recently delivered Compliance Certificate:
<TABLE>
<CAPTION>
=====================================================================================
Applicable Margin
(in basis points per annum)
=====================================================================================
Facility Eurodollar
Leverage Ratio Fee Loans
----------
Letter of
Credit Fee
=====================================================================================
<S> <C> <C>
less than 1.00:1 12.50 25.00
-------------------------------------------------------------------------------------
more than or equal to 1.00:1 but less than 1.50:1 15.00 30.00
-------------------------------------------------------------------------------------
more than or equal to 1.50:1 but less than 2.00:1 17.50 37.50
-------------------------------------------------------------------------------------
more than or equal to 2.00:1 20.00 55.00
=====================================================================================
</TABLE>
The Applicable Margin shall be based on the Leverage Ratio as set forth in the
most recent Compliance Certificate; provided, however, that if Agent does not
-------- -------
receive a Compliance Certificate by the date required by Section 10.1.3 the
--------------
Applicable Margin shall, effective as of such date, increase to the highest
level to but excluding the date the Agent receives such Compliance Certificate.
"Arranger" means BA Securities, Inc.
--------
"Bank" - see the Preamble.
---- --------
"Bank Party" - see Section 14.12.
---------- -------------
"Base Rate" means at any time the higher of (a) the Federal Funds Rate
---------
plus 1/2 of 1% and (b) the rate of interest in effect for such day as publicly
announced from time to time by BofA in San Francisco, California, as its
"reference rate." (The "reference rate" is a rate set by BofA based upon
various factors including BofA's costs and desired return, general economic
conditions and other factors, and is used as a reference point for pricing some
loans, which may be priced at, above, or below such announced rate.) Any change
in the reference rate announced by BofA shall take effect at the opening of
business on the day specified in the public announcement of such change. The
Agent
- 2 -
<PAGE>
will give notice promptly to the Company and the Banks of changes in the Base
Rate.
"Base Rate Loan" means any Loan which bears interest at or by
--------------
reference to the Base Rate.
"BofA" - Bank of America National Trust and Savings Association, in
----
its individual capacity.
"BofA Illinois" means Bank of America Illinois, an Illinois banking
-------------
corporation.
"Business Day" means any day other than a Saturday, Sunday or other
------------
day on which commercial banks in New York City or San Francisco are authorized
or required by law to close and, if the applicable Business Day relates to any
Eurodollar Loan, means such a day on which dealings are carried on in the
applicable offshore dollar interbank market.
"Capital Expenditures" means, for any period and with respect to any
--------------------
Person, the aggregate of all expenditures and commitments for expenditures by
such Person and its Subsidiaries, including the capitalized portion of
obligations under Capital Leases, which, in conformity with Generally Accepted
Accounting Principles, is or should be accounted for as property, plant or
equipment on the consolidated balance sheet of such Person.
"Capital Lease" means, with respect to any Person, any lease of (or
-------------
other agreement conveying the right to use) any real or personal property which,
in conformity with Generally Accepted Accounting Principles, is or should be
accounted for as a capital lease an the balance sheet of such Person.
"Cash Equivalent Investment" means, at any time:
--------------------------
(a) any evidence of debt, maturing not more than one year after such
time, issued or guaranteed by the United States Government (provided that
the full faith and credit of the United States is pledged in support
thereof), or by any of the following United States federal agencies:
Federal National Mortgage Association, Federal Home Loan Bank Board, or
Federal Home Loan Mortgage Corporation;
(b) marketable direct obligations issued by any state of the United
States of America or the District of Columbia or any political subdivision
thereof or any public instrumentality thereof (including without limitation
tax-exempt and tax-advantaged municipal bond investments) maturing not more
than one year after such time and rated at least A or better by both S&P
and Moody's;
- 3 -
<PAGE>
(c) commercial paper, variable rate demand notes or other short-term
obligations issued by
(i) a corporation (except an Affiliate of the Company) organized
under the laws of any state of the United States of America or of the
District of Columbia and rated at least A-2 by S&P and P-2 by Moody's,
or
(ii) any Bank (or its holding company) as of the date hereof;
(d) any certificate of deposit or bankers' acceptance or eurodollar
time deposit, maturing not more than one year after the date of issue,
which is issued by either
(i) a financial institution that is a member of the Federal
Reserve System and has a combined capital and surplus and undivided
profits of not less than $500,000,000 or an international bank that
has a combined capital and surplus and undivided profits of not less
than $1,000,000,000 (or the equivalent), or
(ii) any Bank as of the date hereof;
(e) shares of money market funds that invest substantially in
instruments described in clauses (a) through (d) above;
----------- ---
(f) participations in loans made to a borrower (other than an
Affiliate of the Company) which borrower has a debt rating of at least A-2
from S&P and P-2 from Moody's; provided, however, that such loans must
-------- -------
mature within six months from the date such participation is purchased;
(g) short-term asset management accounts offered by any Bank,
brokerage house or other investment manager for the purpose of investing in
notes issued by a corporation (other than an Affiliate of the Company)
organized under the laws of any state of the United States or of the
District of Columbia and rated at least A-2 by S&P and P-2 by Moody's; and
(h) auction preferred securities which are either (x) issued by a
corporation (other than an Affiliate of the Company) organized under the
laws of any state of the United States or of the District of Columbia and
rated at least A by S&P and Moody's or (y) issued by a corporation (other
than an Affiliate of the Company) not organized under the laws of any state
of the United States or of the District of Columbia and rated at least AA
by S&P and Moody's;
provided that all Cash Equivalent Investments must be denominated solely for
- --------
payment in Dollars, and provided, further, that if any
-------- -------
- 4 -
<PAGE>
Investment which is required to carry at least a specified rating by both S&P
and Moody's in order to constitute a Cash Equivalent Investment hereunder is
only rated by one but not both of S&P and Moody's, such Investment shall
nonetheless qualify as a Cash Equivalent Investment if such Investment carries
the required rating from either S&P or Moody's.
"Code" means the Internal Revenue Code of 1986, as amended, and any
----
successor statute of similar import, together with the regulations thereunder,
in each case as in effect from time to time. References to sections of the Code
also refer to any successor sections.
"Commitment" means each commitment of any Issuing Bank to issue, and
----------
of each Bank to participate in, Letters of Credit pursuant to Section 2.1.1 and
-------------
the commitment of the Banks to make Loans pursuant to Section 2.1.2. The initial
-----------------
amount of each Commitment is set forth on Schedule 1 hereto.
----------
"Company" - see the Preamble.
------- --------
"Compliance Certificate" - see Section 10.1.3.
---------------------- --------------
"Computation Period" means any period of four consecutive Fiscal
------------------
Quarters ending on the last day of a Fiscal Quarter.
"Consolidated EBITDA" means, for any period for the Company and its
-------------------
consolidated Subsidiaries, an amount equal to the (a) Consolidated Net Income
plus (b) Interest Expense plus (c) the amount of taxes, based on or measured by
- ---- ----
income, used or included in the determination of Consolidated Net Income plus
----
(d) the amount of depreciation and amortization expense deducted in determining
Consolidated Net Income plus (e) up to $2,000,000 for the Integration Charge on
----
a pre-tax basis less (f) interest income, all determined in conformity with
----
Generally Accepted Accounting Principles; provided, however, that Consolidated
-------- -------
Net Income shall be computed for these purposes without giving effect to
extraordinary losses or extraordinary gains.
"Consolidated Net Income" means, with respect to the Company and its
-----------------------
consolidated Subsidiaries for any period, the net income (or loss) of the
Company and its consolidated Subsidiaries for such period; provided that there
--------
shall be excluded therefrom the income of any Subsidiary to the extent that the
declaration or payment of dividends or similar distributions by such Subsidiary
of such income is not at the time permitted by operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to such Subsidiary.
- 5 -
<PAGE>
"Contingent Liability" means any agreement, undertaking or arrangement
--------------------
by which any Person guarantees, endorses or otherwise becomes or is contingently
liable upon (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 otherwise to assure a creditor against loss) any indebtedness, lease
payment or other obligation of any other Person (other than by endorsements of
negotiable instruments for collection in the course of business), or guarantees
the payment of dividends or other distributions upon the shares of any other
Person, including without limitation contingent reimbursement obligations with
respect to undrawn letters of credit issued for the account of such Person. The
amount of any Person's obligation in respect of any Contingent Liability shall
be deemed to be the stated or determinable amount of the primary obligation in
respect of which such Contingent Liability arises (subject to any stated or
determinable limitation set forth therein), or if such amount is not stated or
determinable, the maximum liability in respect thereof.
"Debt" of any Person means, without duplication, (a) all indebtedness
----
of such Person for borrowed money, whether or not evidenced by bonds,
debentures, notes or similar instruments, (b) all obligations of such Person as
lessee under Capital Leases, (c) all indebtedness created or arising under any
conditional sale, deferred purchase price or other title retention agreement
with respect to property or services owned or acquired by such Person other than
trade accounts payable in the ordinary course of business (whether or not the
rights and remedies of the seller or lender under such agreement in the event of
default are limited to repossession or sale of such property), (d) all
indebtedness secured by a Lien on the property of such Person, whether or not
such indebtedness shall have been assumed by such Person, (e) all unpaid
reimbursement obligations under letters of credit issued for the account of such
Person and (f) all Contingent Liabilities of such Person.
"Designated Employee" means any of the (i) Executive Vice
-------------------
President-Finance and Treasurer, Chief Financial Officer, (ii) Vice President
and Controller or (iii) Vice President-Administration, General Counsel and
Secretary.
"Dollar" and the sign "$" mean lawful money of the United States of
------ -
America.
"Effective Date" - see Section 11.1.
-------------- ------------
"Eligible Assignee" means (a) a commercial bank organized under the
-----------------
laws of the United States, or any state thereof, and having a combined capital
and surplus of at least $100,000,000; (b) a commercial bank organized under the
laws of any other country which is a member of the Organization for
- 6 -
<PAGE>
Economic Cooperation and Development (the "OECD"), or a political subdivision of
any such country, and having a combined capital and surplus of at least
$100,000,000, provided that such bank is acting through a branch or agency
located in the country in which it is organized or another country which is also
a member of the OECD; and (c) a Person that is primarily engaged in the business
of commercial banking and that is (i) a Subsidiary of a Bank, (ii) a Subsidiary
of a Person of which a Bank is a Subsidiary, or (iii) a Person of which a Bank
is a Subsidiary.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to sections of ERISA also refer to any successor sections.
"ERISA Controlled Group" means, when used with respect to a Plan,
----------------------
ERISA, the PBGC or a provision of the Code. pertaining to employee benefit
plans, a group consisting of any Person and all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control with such Person that, together with such Person, are treated as
a single employer under regulations of the PBGC, which are consistent and
coextensive with regulations prescribed for similar purposes by the Secretary of
the Treasury under subsections (b) and (c) of Section 414 of the Code.
"ERISA Plan" means (A) any Plan which is subject to Title IV of ERISA
----------
(i) that is not a Multiemployer Plan and (ii) the fair market value of the
assets of which is less than the present value of all benefits under such Plan,
including all benefit liabilities as defined in Section 4001(a)(16) of ERISA,
all determined as of the then most recent valuation date for such Plan (on the
basis of assumptions prescribed by the PBGC for the purpose of Section 4044 of
ERISA), and (B) any Plan that is a Multiemployer Plan.
"Eurocurrency Reserve Percentage" means, with respect to any
-------------------------------
Eurodollar Loan for any interest Period, a percentage (expressed as a decimal)
equal to the daily average during such Interest Period of the percentage in
effect on each day of such Interest Period, as prescribed by the Board of
Governors of the Federal Reserve System (or any successor), for determining the
aggregate maximum reserve requirements applicable to "Eurocurrency Liabilities"
pursuant to Regulation D or any other then applicable regulation of such Board
of Governors which prescribes reserve requirements applicable to "Eurocurrency
Liabilities" as presently defined in Regulation D.
"Eurodollar Loan" means any Loan which bears interest at a rate
---------------
determined by reference to the Eurodollar Rate (Reserve Adjusted).
- 7 -
<PAGE>
"Eurodollar Office" means with respect to any Bank the office or
-----------------
offices of such Bank which shall be making or maintaining the Eurodollar Loans
of such Bank hereunder or such other office or offices through which such Bank
determines its Eurodollar Rate. A Eurodollar Office of any Bank may be, at the
option of such Bank, either a domestic or foreign office.
"Eurodollar Rate" means, with respect to any Eurodollar Loan for any
---------------
Interest Period, the rate per annum at which Dollar deposits in immediately
available funds are offered to BofA two Business Days prior to the beginning of
such Interest Period by major banks in the London eurodollar market at
approximately 11:00 a.m., London time, for delivery on the first day of such
Interest Period, for the number of days comprised therein and in an amount equal
or comparable to the amount of the Eurodollar Loan of BofA Illinois for such
Interest Period.
"Eurodollar Rate (Reserve Adjusted)" means, with respect to any
----------------------------------
Eurodollar Loan for any Interest Period, a rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of one percent) determined pursuant to the
following formula:
Eurodollar Rate = Eurodollar Rate
---------------
(Reserve Adjusted) 1-Eurocurrency
Reserve Percentage
"Event of Default" means any of the events described in Section 12.1.
---------------- ------------
"Existing Credit Agreement" - see the Preamble.
------------------------- --------
"Extension Date" means the date two years prior to the Termination
--------------
Date.
"Federal Funds Rate" means, for any day, the rate set forth in the
------------------
weekly statistical release designated as H.15(519), or any successor
publication, published by the Federal Reserve Bank of New York (including any
such successor, "H.15(519)") on the preceding Business Day opposite the caption
"Federal Funds (Effective)"; or, if for any relevant day such rate is not so
published on any such preceding Business Day, the rate for such day will be the
arithmetic mean as determined by the Agent of the rates for the last transaction
in overnight Federal funds arranged prior to 9:00 a.m. (New York City time) on
that day by each of three leading brokers of Federal funds transactions in New
York City selected by the Agent.
"Fiscal Quarter" means a fiscal quarter of a Fiscal Year.
--------------
"Fiscal Year" means the fiscal year of the Company and its
-----------
Subsidiaries, which period shall be the year ended December
- 8 -
<PAGE>
31 of each year. References to a Fiscal Year with a number corresponding to any
calendar year (e.g., "Fiscal Year 1996") refer to the Fiscal Year ending on
December 31 of such calendar year.
"Generally Accepted Accounting Principles" means, as of any date of
----------------------------------------
determination, and subject to Section 14.4, accounting principles referenced as
"generally accepted" in then currently effective Statements of the Auditing
Standards Board of the American Institute of Certified Public Accountants, or if
such statements are not then in effect, accounting principles that are then
approved by a significant segment of the accounting profession in the United
States of America, including in each case, the materiality standards as
generally accepted. The term "consistently applied," as used in connection
therewith, means that the accounting principles are applied on a basis
consistent with the audited financial statements certified by Arthur Andersen &
Co. for Fiscal Year 1994.
"Ginsbury Acquisition" means the acquisition of the assets or stock of
--------------------
certain companies comprising The Ginsbury Group.
"Group" - see Section 2.2.
----- -----------
"Hazardous Material" means any hazardous, toxic or dangerous substance
------------------
or material defined as such in (or for purposes of) the Comprehensive
Environmental Response, Compensation and Liability Act, any so-called
"Superfund" or "Superliens" law or any other Federal, state or local statute,
law, ordinance, code, regulation or order, or any other requirement of any
governmental authority regulating, relating to, or imposing liability for, or
standards of conduct concerning, any hazardous, toxic or dangerous waste,
substance or material as now or any time hereafter in effect.
"Inactive Subsidiary" means any Subsidiary of the Company which, on a
-------------------
consolidated basis with its Subsidiaries, has total assets of less than $50,000,
total liabilities of less than $50,000, and conducts no business or operations
of any kind.
"Indemnified Liabilities" - see Section 14.12.
----------------------- -------------
"Integration Charge" means a one-time charge for integration expenses
------------------
related to the Ginsbury Acquisition, calculated in conformity with Generally
Accepted Accounting Principles.
"Interest Expense" means for any period the consolidated interest
----------------
expense of the Company and its Subsidiaries for such period (including, without
limitation, all imputed interest on Capital Leases).
- 9 -
<PAGE>
"Interest Period" - see Section 4.3.
--------------- -----------
"Investment" means, with respect to any Person, any direct or indirect
----------
loan, advance or other extension of credit or capital contribution made by such
Person to any other Person and any ownership or similar interest held by such
Person in any other Person.
"Issuing Bank" means BofA Illinois or with respect to any Letter of
------------
Credit issued by any other Bank designated by BofA Illinois, such other Bank.
"Letter of Credit" - see Section 2.1.1.
---------------- -------------
"Letter of Credit Application" means a letter of credit application in
----------------------------
the form then used by the Issuing Bank for the type of letter of credit
requested (with appropriate adjustments to indicate that any letter of credit
issued thereunder is to be issued pursuant to, and subject to the terms and
conditions of, this Agreement).
"Letter of Credit Commitment" means $30,000,000.
---------------------------
"Leverage Ratio" means, at any time, the ratio of (i) consolidated
--------------
Debt at the end of the Computation Period to (ii) Consolidated EBITDA for the
Computation Period.
"Lien" means, when used with respect to any Person, any interest
----
granted by such Person or otherwise created in any real or personal property,
asset or other right owned or being purchased or acquired by such Person which
secures payment or performance of any obligation and shall include any,
mortgage, lien, encumbrance, charge or other security interest of any kind, and
shall include the interest of a vendor or lessor under any conditional sale
agreement, Capital Lease or other title retention document, whether such Lien is
arising by contract, as a matter of law, by judicial process or otherwise.
"Loan Documents" means this Agreement, the Notes, the Letter of Credit
--------------
Applications, the Subsidiary Guaranties and all other documents, instruments,
certificates, and agreements entered into in connection herewith and therewith
by the Loan Parties, as amended or otherwise modified from time to time.
"Loan Parties" means the Company and each of its Subsidiaries party to
------------
a Subsidiary Guaranty (individually, a "Loan Party").
"Loans" - see Section 2.1.2.
----- -------------
- 10 -
<PAGE>
"Margin Stock" means any "margin stock" as defined in Regulation U of
------------
the Board of Governors of the Federal Reserve System.
"Material Subsidiary" means a Subsidiary of the Company, including its
-------------------
Subsidiaries, which either (x) is irrevocably designated by the Company by
notice to the Agent and each Bank as a "Material Subsidiary" or (y) at any time
on or after the Effective Date meets any of the following conditions:
(1) The Company's and its other Subsidiaries' investments in and
advances to the Subsidiary exceed five percent of the total assets of the
Company and its Subsidiaries consolidated as of the end of the most recently
completed Fiscal Year (for a proposed business combination to be accounted for
as a pooling of interests, this condition is also met when the number of common
shares exchanged or to be exchanged by the Company exceeds five percent of its
total common shares outstanding at the date the combination is initiated);
(2) The Company's and its other Subsidiaries' proportionate share of
the total assets (after intercompany eliminations) of the Subsidiary exceeds
five percent of the total assets of the Company and its Subsidiaries
consolidated as of the end of the most recently completed Fiscal Year;
(3) The Company's and its other Subsidiaries' equity in the income
from continuing operations before income taxes, extraordinary items and
cumulative effect of a change in accounting principles of the Subsidiary exceeds
five percent of such income of the Company and its Subsidiaries consolidated for
the most recently completed Fiscal Year; or
(4) The Company's and its other Subsidiaries' equity in the revenue
from continuing operations of the Subsidiary exceeds five percent of such
revenue of the Company and its Subsidiaries consolidated for the most recently
completed Fiscal Year;
provided, however, that for purposes of calculating the income or revenue test
- -------- -------
above, the following shall be applied:
(a) When a loss has been incurred by either the Company and its
consolidated Subsidiaries or the tested Subsidiary, but not both, the
equity in the income or revenue, as applicable, or loss of the tested
Subsidiary should be excluded from the income or revenue, as applicable, of
the Company and its consolidated Subsidiaries for purposes of the
computation.
(b) If income or revenue of the Company and its Subsidiaries
consolidated for the most recent Fiscal Year is
- 11 -
<PAGE>
at least five percent lower than the average of the income or revenue, as
applicable, for the last five Fiscal Years, such average income or revenue,
as applicable, should be substituted for purposes of the computation. Any
loss years should be omitted for purposes of computing average income or
revenue, as applicable.
"Moody's" means Moody's Investors Services, Inc.
-------
"Multiemployer Plan" shall have the meaning set forth in Section
------------------
4001(a)(3) of ERISA.
"Net Worth" means the Company's consolidated shareholders' equity.
---------
"Note" - see Section 3.2.
---- -----------
"Notice of Borrowing" means a Notice of Borrowing, substantially in
-------------------
the form attached hereto as Exhibit B-1.
-----------
"Notice of Conversion/Continuation" means a Notice of
---------------------------------
Conversion/Continuation, substantially in the form attached hereto as
Exhibit B-2.
- -----------
"Operating Lease" means any lease of (or other agreement conveying the
---------------
right to use) any real or personal property by the Company or any Subsidiary, as
lessee, other than a Capital Lease.
"PBGC" means the Pension Benefit Guaranty corporation and any entity
----
succeeding to any or all of its functions under ERISA.
"Percentage" means as to any Bank the percentage which the aggregate
----------
amount of such Bank's Commitment is of the aggregate amount of all Commitments.
The Percentage for each Bank is set forth on Schedule 1 hereto.
----------
"Person" means any natural person, corporation, partnership, trust,
------
association, firm, governmental authority or unit, or any other entity, whether
acting in an individual, fiduciary or other capacity.
"Plan" means (i) any employee benefit plan as defined in Section 3(3)
----
of ERISA which is maintained by or contributed to by the Company or a member of
its ERISA Controlled Group on or after the Effective Date and (ii) any employee
pension benefit plan which is subject to the minimum funding standards under
Section 412 of the Code and any multi-employer or single-employer plan covered
by Title IV of ERISA, the funding requirements of which: (x) were the
responsibility of the Company or a member of its ERISA Controlled Group at any
time within the five calendar years immediately preceding the date hereof, (y)
are currently the
- 12 -
<PAGE>
responsibility of the Company or a member of its ERISA Controlled Group, or (z)
hereafter become the responsibility of the Company or a member of its ERISA
Controlled Group, including any such plans as may have been, or may hereafter
be, terminated for any reason. Notwithstanding the foregoing, any plan described
in clause (ii) of the foregoing definition shall not be considered to be a Plan
after it ceases to be maintained by the Company or any member of its ERISA
Controlled Group, except with respect to any representation or covenant, the
breach of which with respect to such plan would result in any liability of the
Company or any member of its ERISA Controlled Group.
"Pricing Period" means (a) the period commencing on the Effective Date
--------------
and ending on February 24, 1996, and (b) the period commencing on each February
25 and ending on the next following May 24, (c) the period commencing on each
May 25 and ending on the next following August 24, (d) the period commencing on
each August 25 and ending on the next following November 24 and (e) the period
commencing on each November 25 and ending on the next following February 24.
"Replaced Bank" - see Section 14.8.1.
------------- --------------
"Reportable Event" has the meaning set forth in Section 4043(b) of
----------------
ERISA (other than a Reportable Event as to which the provision of 30 days'
notice to the PBGC is waived under applicable regulations), or is the occurrence
of the events described in Section 4063(a) of ERISA.
"Reportable Quantity" has the meaning given such term in 40 C.F.R. (S)
-------------------
302.3.
"Required Banks" means Banks having an aggregate Percentage of sixty
--------------
six and two-thirds percent (66 2/3%) or more.
"S&P" means Standard & Poor's Ratings Group.
---
"SEC" means the Securities and Exchange Commission.
---
"Stated Amount" means with respect to any Letter of Credit at any date
-------------
of determination, the maximum aggregate amount available thereunder at any time
during the then ensuing term of such Letter of Credit under any and all
circumstances, plus the aggregate amount of all unreimbursed payments and
disbursements under such Letter of Credit.
"Subsidiary" means, with respect to any Person, any corporation,
----------
association or other business entity of which more than fifty percent (50%) of
the total voting power of shares of stock (or equivalent ownership or
controlling interest) entitled (without regard to the occurrence of any
contingency) to vote in
- 13 -
<PAGE>
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof. Unless the context
otherwise requires, each reference to Subsidiaries herein shall be a reference
to Subsidiaries of the Company.
"Subsidiary Guaranty" means a Subsidiary Guaranty, substantially in
-------------------
the form attached hereto as Exhibit D, to be executed and delivered by each
---------
Subsidiary which is not an Inactive Subsidiary, as such Subsidiary Guaranty may
be amended, supplemented or modified from time to time.
"Tangible Net Worth" means the Net Worth of the Company after
------------------
subtracting all intangible assets of the Company and its consolidated
Subsidiaries. For purposes of the foregoing, "intangible assets" means goodwill,
patents, trade names, trademarks, copyrights, franchises, organization expenses
and any other assets that are properly classified as intangible assets in
accordance with Generally Accepted Accounting Principles.
"Taxes" - see Section 7.6.
----- -----------
"Termination Date" means December 9, 1998, as such date may be
----------------
extended from time to time pursuant to Section 2.16, or such other date on which
------------
the Commitments shall terminate pursuant to Section 6 or 12.2.
--------- ----
"Termination Event" means (i) a Reportable Event, (ii) the withdrawal
-----------------
by the Company or by any member of its ERISA Controlled Group from an ERISA Plan
during a plan year in which it was a "substantial employer" as defined in
Section 4001(a)(2) of ERISA, (iii) the initiation of an action by the Company,
any member of its ERISA Controlled Group or any ERISA Plan fiduciary to
terminate an ERISA Plan or the treatment of an amendment to an ERISA Plan as a
termination under ERISA or (iv) the institution of proceedings by the PBGC under
Section 4042 of ERISA to terminate an ERISA Plan or to appoint a trustee to
administer any ERISA Plan.
"Total Liabilities" means all liabilities, including all Debt and
-----------------
Contingent Liabilities, of the Company and its consolidated Subsidiaries
(excluding any intercompany Debt).
"Type of Loan or Borrowing" - see Section 2.2. The types of Loans or
------------------------- -----------
borrowings under this Agreement are as follows: Base Rate Loans or borrowings
and Eurodollar Loans or borrowings.
"Unfunded Benefits" means with respect to any Plan which is subject to
-----------------
Title IV of ERISA, other than a Multiemployer Plan, at any time, the amount (if
any) by which (i) the present value of all benefits under such Plan, including
all benefit
- 14 -
<PAGE>
liabilities as defined in Section 4001(a) (16) of ERISA, exceeds (ii) the fair
market value of all Plan assets allocable to such benefits, all determined as of
the then most recent valuation date for such Plan (on the basis of assumptions
prescribed by the PBGC for the purpose of Section 4044 of ERISA)
"Unmatured Event of Default" means any event which if it continues
--------------------------
uncured will, with lapse of time or notice or lapse of time and notice,
constitute an Event of Default.
1.2 Use of Defined Terms. Any defined term used in the plural shall
--------------------
refer to all members of the relevant class, and any defined term used in the
singular shall refer to any one or more of the members of the relevant class.
1.3 Accounting Terms. All accounting terms not specifically defined
----------------
in this Agreement shall be construed in conformity with, and all financial data
required to be submitted by this Agreement shall be prepared in conformity with
Generally Accepted Accounting Principles consistently applied.
1.4 Exhibits and Schedules. All Exhibits and Schedules to this
----------------------
Agreement, either as originally existing or as the same may from time to time be
supplemented, modified, or amended, are incorporated herein by reference. A
matter disclosed on any Schedule shall be deemed disclosed on all Schedules.
SECTION 2 COMMITMENTS OF THE BANKS; TYPES OF LOANS;
LETTER OF CREDIT, BORROWING AND CONVERSION
PROCEDURES.
2.1 Commitments. On and subject to the terms and conditions of this
-----------
Agreement, each of the Banks, severally and for itself alone, agrees to issue or
participate in the issuance of Letters of Credit for the account of the Company,
and to make Loans to the Company, as follows:
2.1.1 Letters of Credit. (a) The Issuing Bank will issue non-
-----------------
financial (as determined by the Issuing Bank consistent with Federal Reserve
Regulation Y, Appendix A), standby letters of credit, including without
limitation standby letters of credit to support the Company's performance
obligations under operating contracts and to support bids by the Company for
operating contracts, in each case containing such terms and conditions as are
permitted by this Agreement and are reasonably satisfactory to the Issuing Bank
(collectively the "Letters of Credit" and individually each a "Letter of
Credit"), at the request of and for the account of the Company from time to time
before the Termination Date and (b) as more fully set forth in Section 2.8, each
-----------
Bank agrees to purchase a participation in each such Letter of Credit; provided,
--------
further, however, that no
- ------- -------
- 15 -
<PAGE>
Bank shall be obligated to issue any Letter of Credit or purchase a
participation, as applicable, if (w) such issuance or purchase would cause such
Bank's portion of the aggregate Stated Amount outstanding plus the aggregate
amount of such Bank's Loans outstanding to exceed such Bank's Commitment; (x)
such issuance or purchase would cause such Bank's portion of the aggregate
Stated Amount outstanding to exceed such Bank's Percentage times the Letter of
Credit Commitment; (y) such issuance or purchase would cause the aggregate
Stated Amount outstanding plus the aggregate amount of all Loans outstanding to
exceed the aggregate Commitments; or (z) such issuance or purchase would cause
the aggregate Stated Amount outstanding to exceed the Letter of Credit
Commitment.
2.1.2 Loans. Each Bank will make loans to the Company on a
-----
revolving basis ("Loans") from time to-time before the Termination Date in such
Bank's Percentage of such aggregate amounts as the Company may from time to time
request from al l Banks; provided, however, that no Bank shall be obligated to
-------- -------
make any Loan if such Loan would cause the aggregate principal amount of such
Bank's Loans outstanding plus such Bank's portion of the Aggregate Stated Amount
outstanding to exceed such Bank's Commitment, or the aggregate principal amount
of all Loans outstanding plus the aggregate Stated Amount outstanding to exceed
the aggregate Commitments. Any bid loans made from time to time to the Company
outside this Agreement shall not count as usage under the Commitments.
2.1.3 Commitment Limits. Notwithstanding any other provision of
-----------------
this Agreement, the sum of (i) the aggregate outstanding principal amount of all
Loans plus (ii) the aggregate Stated Amount shall not at any time exceed the
aggregate Commitments. In the event the aggregate amount of all outstanding
Loans plus the aggregate Stated Amount exceeds the aggregate Commitments at any
time, the Company shall immediately repay any Loans, or provide cash
collateralization with respect to any outstanding Letters of Credit pursuant to
documentation in form and substance satisfactory to the Issuing Bank and the
Required Banks, in an amount necessary to eliminate any such overadvance.
2.2 Various Types of Loans. Each Loan shall be either a Base Rate
----------------------
Loan or a Eurodollar Loan (each a "type" of Loan), as the Company shall specify
in the related Notice of Borrowing or Notice of Conversion/Continuation pursuant
to Section 2.3 or 2.4. Eurodollar Loans having the same Interest Period are
----------- ---
sometimes called a "Group" or collectively "Groups." Base Rate Loans and
Eurodollar Loans may be outstanding at the same time; provided that (i) not more
--------
than five different Groups of Eurodollar Loans shall be outstanding at any one
time and (ii) the aggregate principal amount of each Group of Eurodollar Loams
shall at all
- 16 -
<PAGE>
times be at least $3,000,000 and an integral multiple of $1,000,000 in excess
thereof.
2.3 Borrowing Procedures.
--------------------
2.3.1 The Company shall give written, facsimile or telephonic notice
(which shall, in the case of telephonic notice, be immediately confirmed by
facsimile in the form of Notice of Borrowing) to the Agent of each proposed
borrowing not later than (a) in the case of a Base Rate borrowing, 10:00 a.m.,
San Francisco time, on the proposed date of such borrowing, and (b) in the case
of a Eurodollar borrowing, 10:00 a.m., San Francisco time, at least three
Business Days prior to the proposed date of such borrowing. Each such Notice of
Borrowing shall be substantially in the form of Exhibit B-1 (with appropriate
-----------
insertions), shall be effective upon receipt by the Agent and shall specify the
date, amount and type of borrowing and, in the case of a Eurodollar borrowing,
the initial Interest Period therefor. Promptly upon receipt of such notice, the
Agent shall advise each Bank thereof. Not later than Noon San Francisco time,
on the date of a proposed borrowing, each Bank shall provide the Agent at the
principal office of the Agent in San Francisco with immediately available funds
covering such Bank's Percentage of such borrowing and, subject to the
satisfaction of the conditions precedent set forth in Section 11 with respect to
----------
such borrowing, the Agent shall pay over the requested amount to the Company on
the requested borrowing date, subject to the obligation of the Company to repay
all or a portion of the requested amount to the Agent pursuant to Section 13.7.
------------
Each borrowing shall be on a Business Day and shall be in an aggregate amount of
at least $3,000,000 and an integral multiple of $1,000,000 in excess thereof (in
the case of borrowings of Eurodollar Loans) or in an aggregate amount of at
least $1,000,000 and an integral multiple of $500,000 in excess thereof (in the
case of borrowings of Base Rate Loans); provided, however, that the Company may
-------- -------
borrow the total amount available for borrowings under this Agreement as Base
Rate Loans if, at the time of such borrowing, such amount was less than
$1,000,000.
2.3.2 Funding Reliance. (a) Unless the Agent receives notice from a
----------------
Bank by 11:00 a.m., San Francisco time, on the day of a proposed borrowing that
such Bank will not make available to the Agent the amount which would constitute
its Percentage of such borrowing in accordance with Section 2.3, the Agent may
-----------
assume that such Bank has made such amount available to the Agent and, in
reliance upon such assumption, make a corresponding amount available to the
Company. If and to the extent any Bank shall not have made its full amount
available to the Agent in immediately available funds and the Agent in such
circumstances has made available to the Company such amount, that Bank shall on
the Business Day following such borrowing date make such amount available to the
Agent, together with interest at the
- 17 -
<PAGE>
Federal Funds Rate for each day during such period. A notice of the Agent
submitted to any Bank with respect to amounts owing under this clause (a) shall
----------
be conclusive, absent manifest error. If such amount is so made available, such
payment to the Agent shall constitute such Bank's Loan on the date of borrowing
for all purposes of this Agreement. If such amount is not made available to the
Agent on the Business Day following the borrowing date, the Agent will notify
the Company of such failure to fund and, upon demand by the Agent, the Company
shall pay such amount to the Agent for the Agent's account, together with
interest thereon for each day elapsed since the date of such borrowing, at a
rate per annum equal to the interest rate applicable at the time to the Loans
comprising such borrowing. Nothing set forth in this clause (a) shall relieve
----------
any Bank of any obligation it may have to make any Loan hereunder.
(b) Unless the Agent receives notice from the Company prior to the
due date for any payment hereunder that the Company does not intend to make such
payment, the Agent may assume that the Company has made such payment and, in
reliance upon such assumption, make available to each Bank its share of such
payment. If and to the extent that the Company has not made any such payment to
the Agent, each Bank which received a share of such payment shall repay such
share (or the relevant portion thereof) to the Agent forthwith on demand,
together with interest thereon at the Federal Funds Rate for each day from the
date such amount is distributed to such Bank until the date repaid by such Bank.
Nothing set forth in this clause (b) shall relieve the Company of any obligation
----------
it may have to make any payment hereunder.
2.4 Conversion and Continuation Procedures. Subject to the
--------------------------------------
provisions of Section 2.2 and Section 2.13, the Company may convert all or any
----------- ------------
part of any outstanding Loan into a Loan of a different type or continue any
Eurodollar Loan as a Eurodollar Loan by giving written, facsimile or telephonic
notice (which shall, in the case of telephonic notice, be immediately confirmed
by facsimile in the form of Notice of Conversion/Continuation) to the Agent not
later than (a) in the case of a conversion into a Base Rate Loan, 10:00 a.m.,
San Francisco time, on the proposed date of such conversion, and (b) in the case
of a conversion into or continuation of a Eurodollar Loan, 10:00 a.m., San
Francisco time, at least three Business Days prior to the proposed date of such
conversion or continuation. Each such Notice of Conversion/Continuation shall be
effective upon receipt by the Agent and shall specify the date and amount of
such conversion or continuation, the Loan to be so converted or continued, the
type of Loan to be converted or continued into and, in the case of a conversion
into or continuation of a Eurodollar Loan, the initial Interest Period therefor.
Promptly upon receipt of such Notice of Conversion/Continuation, the Agent shall
advise each Bank thereof. Subject to Sections 2.2 and 2.13, such Loan shall be
------------ ----
so
- 18 -
<PAGE>
converted or continued on the requested date of conversion or continuation.
Each conversion or continuation shall be on a Business Day and, after giving
effect to any conversion or continuation, the aggregate principal amount of each
Group of Eurodollar Loans shall be at least $3,000,000 and an integral multiple
of $1,000,000.
2.5 Pro Rata Treatment. All borrowings, conversions and repayments
------------------
shall be effected so that after giving effect thereto each Bank will have a pro
rata share (according to its Percentage) of all types (subject to Section 8.3)
and Groups of Loans and Stated Amounts.
2.6 Letter of Credit Procedures. The Company shall give notice to
---------------------------
the Issuing Bank, with a copy to the Agent, of the proposed issuance of each
Letter of Credit on a Business Day which is at least five Business Days (or
fewer Business Days if agreed to by the Issuing Bank) prior to the proposed date
of issuance of such Letter of Credit. Each such notice shall be accompanied by a
Letter of Credit Application, duly executed by the Company and in all respects
satisfactory to the Issuing Bank, together with such other documentation as the
Issuing Bank may reasonably request in support thereof, it being understood that
each Letter of Credit Application shall specify, among other things, the date on
which the proposed Letter of Credit is to be issued and the expiration date of
such Letter of Credit (which shall not extend beyond the earlier of (i) one year
from the date of issuance or (ii) thirty days prior to the Termination Date).
Such notice and Letter of Credit Application may be delivered to the Issuing
Bank and the Agent by facsimile; provided, however, that the original notice and
-------- -------
Letter of Credit Application are promptly delivered to the Issuing Bank
thereafter, but in any event prior to the issuance of such Letter of Credit.
Subject to the satisfaction of the conditions precedent set forth in Section 11
----------
with respect to the issuance or extension of such Letter of Credit, the Issuing
Bank shall issue such Letter of Credit on the requested issuance date. In the
event the Company requests that the expiration date of any Letter of Credit be
extended, the Company shall notify the Issuing Bank, with a copy to the Agent,
in accordance with the applicable notice provision set forth in the Letter of
Credit with respect to extensions, or, in the event the Letter of Credit
contains no such notice provision, on a Business Day which is at least five
Business Days (or fewer Business Days if agreed to by the Issuing Bank) prior to
the existing expiration date under the Letter of Credit. Such notice shall be
duly executed by the Company and in all respects satisfactory to the Issuing
Bank, together with such other documentation as the Issuing Bank may reasonably
request in support thereof, and shall state the proposed extended expiration
date (which date shall not extend beyond the earlier of (i) one year from the
date of such extension or (ii) thirty days prior to the Termination Date). Such
notice may be delivered to the
- 19 -
<PAGE>
Issuing Bank and the Agent by facsimile; provided, however, that the original
-------- -------
notice is promptly delivered to the Issuing Bank thereafter, but in any event
prior to the expiration of the applicable Letter of Credit. Subject to the
satisfaction of the conditions precedent set forth in Section 11 with respect to
----------
the issuance of Letters of Credit, the issuing Bank shall extend the expiration
date of such Letter of Credit to the requested expiration date.
2.7 Determination of Issuing Bank: Replacement of Credit. BofA
----------------------------------------------------
Illinois shall be the Issuing Bank with respect to each Letter of Credit, unless
each of the Company, BofA Illinois, the Agent and another Bank designate such
other Bank to be the Issuing Bank with respect to any Letter of Credit, in which
case such other Bank shall be the Issuing Bank with respect to such Letter of
Credit. A Letter of Credit may be replaced by a Letter of Credit issued by
another Issuing Bank selected pursuant to the terms of this Section 2.7, upon
-----------
receipt of the existing Letter of Credit for cancellation by the issuer thereof.
2.8 Participations in Letters of Credit. Concurrently with the
-----------------------------------
issuance of each Letter of Credit, the Issuing Bank shall be deemed to have sold
and transferred to each other Bank, and each other Bank shall be deemed
irrevocably and unconditionally to have purchased and received from the Issuing
Bank, without recourse or warranty, an undivided interest and participation, to
the extent of such other Bank's Percentage, in such Letter of Credit and the
Company's reimbursement obligations with respect thereto. For the purposes of
this Agreement, the unparticipated portion of each Letter of Credit shall be
deemed to be the Issuing Bank's "participation" therein. The Issuing Bank
hereby agrees, upon request of the Agent or any Bank, to deliver to such Bank
and the Agent a list of all outstanding Letters of Credit issued by such Issuing
Bank, together with such information related thereto as such other Bank may
reasonably request.
2.9 Reimbursement Obligations. The Company hereby unconditionally
-------------------------
and irrevocably agrees to reimburse the Issuing Bank for each payment or
disbursement made by the Issuing Bank under any Letter of Credit honoring any
demand for payment made by the beneficiary thereunder, in each case on the date
that such payment or disbursement is made, including, without limitation, under
the following circumstances:
(i) any lack of validity or enforceability of any Letter of Credit;
(ii) the existence of any claim, set-off, defense or other right
which the Company or any other account party may have at any time against a
beneficiary or any transferee of any Letter of Credit (or any persons or
entities for whom any
- 20 -
<PAGE>
such transferee may be acting), the Issuing Bank, any Bank or any other
Person, whether in connection with this Agreement, the transactions
contemplated herein or any unrelated transaction (including any underlying
transaction between the account party or one of the other Loan Parties and
the beneficiary for which the Letter of Credit was procured);
(iii) any draft, demand, certificate or any other document presented
under any Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(iv) payment by the Issuing Bank under any Letter of Credit against
presentation of a demand, draft or certificate or other document which does
not comply with the terms of such Letter of Credit;
(v) any other circumstances or happening whatsoever, which is
similar to any of the foregoing; or
(vi) the fact that an Event of Default or Unmatured Event of Default
shall have occurred and be continuing;
provided that the obligation of the Company to so reimburse the Issuing Bank
- --------
shall be reduced to the extent of any direct losses suffered by the Company as
the result of any event set forth in clauses (iii), (iv) or (v) above which is
------------- ---- ---
finally judicially determined to constitute gross negligence or wilful
misconduct of the Issuing Bank. To the extent that any obligation of the
Company to reimburse the issuing Bank is reduced pursuant to the immediately
preceding sentence, the Issuing Bank shall reimburse the Banks for any such
amounts which the Banks have paid on account of such unreimbursed obligations.
Any amount not reimbursed on the date of such payment or disbursement (by the
making or deemed making of Base Rate Loans pursuant to Section 2.11 (i) or
---------------
otherwise, notwithstanding if any such Loans would cause a default under Section
-------
2.1.3 or any other provision hereunder) shall bear interest from and including
- -----
the date of such payment or disbursement to but not including the date that the
issuing Bank is reimbursed by the Company therefor, payable on demand, at a rate
per annum equal to the Base Rate from time to time in effect plus two percent
----
(2%) per annum. The Issuing Bank shall notify the Company and the Agent
whenever any demand for payment is made under any Letter of Credit by the
beneficiary thereunder within five Business Days of receiving such demand;
provided, however, that the failure of the Issuing Bank to so notify the Company
- -------- -------
or the Agent shall not affect the rights of the Issuing Bank or the Banks in any
manner whatsoever.
- 21 -
<PAGE>
2.10 Limitation on the Issuing Bank's Obligations. As between the
--------------------------------------------
Company, any Issuing Bank and the Banks, the Company assumes all risks of the
acts and omissions of, or misuse of the Letters of Credit issued by such Issuing
Bank by, the respective beneficiaries of such Letters of Credit, except to the
extent of the gross negligence or wilful misconduct of such Issuing Bank. In
furtherance and not in limitation of the foregoing, neither any Issuing Bank nor
any Bank shall be responsible, except to the extent of its own gross negligence
or wilful misconduct: (i) for the form, validity, sufficiency, accuracy,
genuineness or legal effect of any document submitted by any party in connection
with the application for and issuance of such Letters of Credit, even if it
should in fact prove to be in any or all respects invalid, insufficient,
inaccurate, fraudulent or forged; (ii) for the validity or insufficiency of any
instrument transferring or assigning or purporting to transfer or assign any
such Letter of Credit or the rights or benefits thereunder or proceeds thereof,
in whole or in part, which may prove to be invalid or ineffective for any
reason; (iii) for failure of the beneficiary of any such Letter of Credit to
comply fully with conditions required in order to draw upon such Letter of
Credit; (iv) for errors, omissions, interruptions or delays in transmission or
delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether
or not they be in cipher; (v) for errors in interpretation of technical terms;
(vi) for any loss or delay in the transmission or otherwise of any document
required in order to make a drawing under any such Letter of Credit or of the
proceeds thereof; and (vii) for the misapplication by the beneficiary of any
such Letter of Credit of the proceeds of any drawing under such Letter of
Credit. None of the above shall affect, impair, or prevent the vesting of any
of the Issuing Bank's or any Banks' rights or powers hereunder. In furtherance
and extension and not in limitation of the specific provisions hereinabove set
forth, any action taken or omitted by any Issuing Bank under or in connection
with the Letters of Credit issued by it, if taken or omitted in good faith,
shall not put such Issuing Bank under any resulting liability to the Company or
the Banks, except to the extent of the gross negligence or wilful misconduct of
such Issuing Bank.
2.11 Reimbursement Obligations Deemed to be Loans; Funding by Banks
--------------------------------------------------------------
to an Issuing Bank. An Issuing Bank shall immediately notify the Agent upon
- ------------------
making any payment or disbursement under any Letter of Credit and upon receipt
of any reimbursements with respect thereto. If an Issuing Bank makes any payment
or disbursement under any Letter of Credit and the Company has not reimbursed
such Issuing Bank in full in cash for such payment or disbursement by 11:00
a.m., San Francisco time, such Issuing Bank shall notify the Agent accordingly,
and on the date of such payment or disbursement (i) if such payment or
disbursement is made prior to the Termination Date, the Banks shall be deemed to
have made Base Rate Loans (pro rata according
- 22 -
<PAGE>
to their respective Percentages) (notwithstanding if any such Loans would cause
a default under Section 2.1.3 or any other provision hereunder) to the Company
-------------
in an aggregate amount equal to the amount of such payment or disbursement or
(ii) if such payment or disbursement is made on or after the Termination Date,
or if any reimbursement received by such Issuing Bank from the Company is or
must be returned or rescinded upon or during any bankruptcy or reorganization of
the Company or otherwise, each other Bank shall be obligated to pay to such
Issuing Bank, in full or partial payment of the purchase price of its
participation in such Letter of Credit, its pro rata share (according to its
Percentage) of such payment or disbursement (but no such payment shall diminish
the obligations of the Company under Section 2.9), and in either of the cases
------------
described in clauses (i) or (ii) above, the Agent shall promptly notify each
----------- ----
other Bank thereof. Each other Bank irrevocably and unconditionally agrees to
so pay to the Agent in immediately available funds for such Issuing Bank's
account the amount of such other Bank's Percentage of such payment or
disbursement. If and to the extent any Bank shall not have made such amount
available to the Agent by 2:00 p.m., San Francisco time, on the Business Day on
which such Bank receives notice from the Agent of such payment or disbursement,
such Bank agrees to pay interest on such amount to the Agent for such Issuing
Bank's account forthwith on demand for each day from and including the date such
amount was to have been delivered to the Agent to but excluding the date such
amount is paid, at a rate per annum equal to (a) for the first three days after
demand, the Federal Funds Rate from time to time in effect and (b) thereafter,
the Base Rate from time to time in effect. Any Bank's failure to make available
to the Agent its Percentage of any such payment or disbursement shall not
relieve any other Bank of its obligation hereunder to make available to the
Agent such other Bank's Percentage of such payment, but no Bank shall be
responsible for the failure of any other Bank to make available to the Agent
such other Bank's Percentage of any such payment or disbursement.
2.12 Warranty. Each Notice of Borrowing pursuant to Section 2.3 and
-------- -----------
the delivery of each Letter of Credit Application pursuant to Section 2.6 shall
-----------
automatically constitute a warranty by the Company to the Agent and each Bank to
the effect that on the date of such requested borrowing or the issuance of the
requested Letter of Credit, as the case may be, (a) the warranties of the
Company contained in Section 9 of this Agreement shall be true and correct as of
---------
such requested date as though made on the date thereof and (b) no Event of
Default or Unmatured Event of Default shall have then occurred and be continuing
or will result therefrom.
2.13 Conditions. Notwithstanding any other provision of this
----------
Agreement, (a) no Bank shall be obligated to make any Loan, (b) no Bank shall be
obligated to convert into or permit
- 23 -
<PAGE>
the continuation at the end of the applicable Interest Period of any Eurodollar
Loan and (c) an Issuing Bank shall not be obligated to issue any Letter of
Credit if, in any such case, an Event of Default or Unmatured Event of Default
exists or would result therefrom.
2.14 Commitments Several. The failure of any Bank to make a
-------------------
requested Loan or to purchase a participation in any Letter of Credit on any
date shall not relieve any other Bank of its obligation to make a Loan or
purchase a participation in any Letter of Credit on such date, but no Bank shall
be responsible for the failure of any other Bank to make any Loan or purchase
any participation in any Letter of Credit to be made by such other Bank.
2.15 Transfer Instructions. All funds to be transferred to Agent
---------------------
shall be wire transferred in immediately available funds to the Agent's Payment
Office re: Wyle Electronics, Attention: Agency Management Services #5596,
maintained at BofA, ABA no. 1210-00358, with the purpose of the payment
indicated, or shall be transferred as the Agent may otherwise request from time
to time.
2.16 Extension of Termination Date. The Termination Date shall be
-----------------------------
extended for an additional year on each Extension Date upon satisfaction of each
of the conditions set forth in this Section 2.16:
------------
(a) The Company and each other Loan Party shall have delivered a
written request of such extension to the Agent (who shall promptly
notify the Banks) not less than 45 nor more than 90 days prior to the
applicable Extension Date; and
(b) The Agent and each Bank, each in its sole and absolute
discretion, shall have agreed to such extension by written notice to
the Agent (which in turn shall notify the Company and the Banks), no
later than 45 after delivery of the extension request described in
subparagraph (a) above (it being understood that if the Agent or any
Bank does not agree to such extension (any failure by the Agent or any
Bank to respond within the required time period shall be deemed to be
a decision by such non-responding party not to agree to such
extension), then such extension shall not be granted);
provided, that nothing in this Section 2.16 shall limit the right of the Company
- -------- ------------
to request any extension of the Termination Date at any time or the right of the
Agent and the Banks, each in their sole and absolute discretion, to grant or to
not grant any such extension.
- 24 -
<PAGE>
SECTION 3 EVIDENCE OF INDEBTEDNESS.
3.1 Loan Accounts. The Loans made by each Bank shall be evidenced by
-------------
one or more accounts or records maintained by such Bank in the ordinary course
of business. The accounts or records maintained by each Bank shall be
conclusive evidence, absent demonstrable error, of the amount of the Loans made
by the Banks to the Company, and the interest and payments thereon. The failure
to so record any such amount or any error in so recording any such amount shall
not, however, limit or otherwise affect the obligations of the Company hereunder
to repay the principal amount of the Loans made by such Bank together with all
interest accruing thereon.
3.2 Notes. Upon the request of any Bank made through the Agent, the
-----
Loans of each Bank shall be evidenced by a promissory note (as amended,
supplemented, replaced or otherwise modified from time to time, individually
each a "Note" and collectively for all Banks the "Notes") substantially in the
form set forth in Exhibit A, with appropriate insertions, dated the Effective
---------
Date (or such earlier date as shall be satisfactory to the Agent and the
Company), payable to the order of such Bank in an amount equal to such Bank' s
Percentage of the Commitments (or, if less, in the aggregate unpaid principal
amount of such Bank's Loans).
3.3 Recordkeeping. Each Bank shall record in its records, or at its
-------------
option on the schedule attached to its Note, the date and amount of each Loan
made by such Bank, each repayment or conversion thereof and, in the case of each
Eurodollar Loan, the dates on which each Interest Period for such Loan shall
begin and end. The aggregate unpaid principal amount so recorded shall be
conclusive evidence, absent demonstrable error, of the principal amount owing
and unpaid on such Note. The failure to so record any such amount or any error
in so recording any such amount shall not, however, limit or otherwise affect
the obligations of the Company hereunder or under any Note to repay the
principal amount of the Loans evidenced by such Note together with all interest
accruing thereon.
SECTION 4 INTEREST.
4.1 Interest Rates. The Company agrees to pay to the Agent for the
--------------
account of each Bank interest on the unpaid principal amount of each Loan for
the period commencing on and including the date of such Loan to but excluding
the date such Loan is paid in full in cash, which in no event shall be less than
one day, as follows:
- 25 -
<PAGE>
(a) at all times while such Loan is a Base Rate Loan, at a rate
per annum equal to the Base Rate from time to time in effect; and
(b) at all times while such Loan is a Eurodollar Loan, at a rate
per annum equal to the sum of the Eurodollar Rate (Reserve Adjusted)
applicable to each Interest Period for such Eurodollar Loan plus the
Applicable Margin for Eurodollar Loans;
provided, however, that at any time an Event of Default exists, the interest
- -------- -------
rate otherwise applicable to each Loan shall be increased by two percent (2%)
per annum.
4.2 Interest Payment Dates. Accrued interest on each Base Rate Loan
----------------------
shall be payable on the last day of each calendar quarter and on the Termination
Date, commencing with the first of such dates to occur after the date of such
Loan. Accrued interest on each Eurodollar Loan shall be payable on the last day
of each Interest Period relating to such Loan (and, in the case of each
Eurodollar Loan with an Interest Period in excess of three months, the date
which falls three months after the beginning of such Interest Period) and on the
Termination Date. After the Termination Date, accrued interest on all Loans
shall be payable on demand.
4.3 Interest Periods. Each interest period for a Eurodollar Loan
----------------
(each an "Interest Period") shall commence on the date such Eurodollar Loan is
made or converted from a Base Rate Loan, or on the date of expiration of the
immediately preceding Interest Period for such Eurodollar Loan, and shall end on
the date which is one, two, three or six months thereafter, as the Company may
specify:
(a) in the case of an Interest Period which commences on the
date a Eurodollar Loan is made or converted from a Base Rate Loan, in
the related Notice of Borrowing or Notice of Conversion/Continuation
pursuant to Section 2.3 or 2.4, or
----------- ---
(b) in the case of a succeeding interest Period with respect to
any Eurodollar Loan, by written or telephonic notice to the Agent not
later than 10:00 a.m., San Francisco time, at least three Business
Days prior to the first day of such succeeding Interest Period, it
being understood that (i) each such notice shall be effective upon
receipt by the Agent and (ii) if the Company fails to give such
notice, such Loan shall automatically become a Base Rate Loan at the
end of the then-current Interest Period.
- 26 -
<PAGE>
Each Interest Period for a Eurodollar Loan which would otherwise end on a day
which is not a Business Day shall end on the immediately succeeding Business Day
(unless such immediately succeeding Business Day is the first Business Day of a
calendar month, in which case such Interest Period shall end on the immediately
preceding Business Day). The Company may not select any Interest Period which
would end after the Termination Date.
4.4 Setting and Notice of Eurodollar Rates. The applicable
--------------------------------------
Eurodollar Rate for each Interest Period shall be determined by the Agent, and
notice thereof shall be given by the Agent promptly to the Company and each
Bank. Each determination of the applicable Eurodollar Rate by the Agent shall be
conclusive and binding upon the parties hereto, in the absence of demonstrable
error.
4.5 Computation of Interest. Interest shall be computed for the
-----------------------
actual number of days elapsed on the basis of a year of 360 days, which results
in more interest than if a 365/366-day year were used. The applicable interest
rate for each Base Rate Loan shall change simultaneously with each change in the
Base Rate.
SECTION 5 FEES.
5.1 Participation Fee. The Company agrees to pay to the Agent for
-----------------
the account of each Bank on the Effective Date a participation fee equal to
eight basis points on the net increase in each Bank's final allocated Commitment
hereunder from its commitment under the Existing Credit Agreement.
5.2 Facility Fee. The Company agrees to pay to the Agent for the
------------
account of each Bank a facility fee for the period from and including the
Effective Date, to but excluding the Termination Date, equal to the Applicable
Margin for the facility fee on the average daily portion of each Bank's
Commitment. Such facility fee shall be payable in arrears on the last day of
each calendar quarter, commencing in March 1996 and on the Termination Date for
any period then ending for which such facility fee shall not have been
theretofore paid. The facility fee shall be computed for the actual number of
days elapsed on the basis of a year of 360 days, which results in a higher fee
than if a 365/366-day year were used.
5.3 Letter of Credit Fees. (a) The Company agrees to pay to the
---------------------
Agent for the account of the Banks pro rata according to their respective
Percentages a letter of credit fee for each Letter of Credit in an amount equal
to the Applicable Margin for Letter of Credit fees per annum (computed for the
actual number of days elapsed on the basis of a year of 360 days, which results
in a higher fee than if a 365/366-day year were used) of the face
- 27 -
<PAGE>
amount of such Letter of Credit, payable in arrears on the last day of each
calendar quarter and on the Termination Date for the period from and including
the date of the issuance of such Letter of Credit to but excluding the date such
payment is due or, if earlier, the date on which such Letter of Credit expired
or was terminated.
(b) In addition, with respect to each Letter of Credit, the Company
agrees to pay to the Issuing Bank (i) such fees and expenses as and when such
Issuing Bank customarily requires in connection with the issuance, negotiation,
processing, extension and/or administration of letters of credit in similar
situations and (ii) a letter of credit fee for each Letter of Credit issued by
such Issuing Bank in an amount equal to 0.125% per annum (computed for the
actual number of days elapsed on the basis of a year of 360 days) of the face
amount of such Letter of Credit, payable in arrears on the last day of each
calendar quarter and on the Termination Date for the period from and including
the date of the issuance of such Letter of Credit to but excluding the date such
payment is due or, if earlier, the date on which such Letter of Credit expired
or was terminated.
5.4 Agent's and Arranger's Fees. (a) The Company agrees to pay to
---------------------------
the Agent, individually, an agent's fee in the amount agreed upon in writing by
the Company and the Agent pursuant to a fee letter dated on or about December
29, 1995.
(b) The Company agrees to pay to the Arranger, individually, an
arrangement fee in the amount agreed upon in writing by the Company and the
Arranger pursuant to a fee letter dated on or about December 29, 1995.
5.5 Interest. All fees provided for in this Section 5 shall bear
-------- ---------
interest from and including the date such fees become payable to but not
including the date that such payments are made, payable on demand, at a rate per
annum equal to the then applicable rate charged on Base Rate Loans.
SECTION 6 REDUCTION OR TERMINATION OF THE COMMITMENTS; PREPAYMENTS.
6.1 Reduction or Termination. The Company may from time to time on
------------------------
at least five Business Days' prior written notice received by the Agent (which
shall promptly advise each Bank thereof) permanently reduce the amount of the
Commitments to an amount not less than the sum of (i) the aggregate unpaid
principal amount of the Loans plus (ii) the aggregate Stated Amount of all
outstanding Letters of Credit. Any such reduction shall be in an amount not less
than $5,000,000 and an integral multiple of $1,000,000. The Company may at any
time on like notice terminate the Commitments upon payment in full in cash of
- 28 -
<PAGE>
all Loans and all other obligations of the Company hereunder, and, with respect
to each outstanding Letter of Credit, (i) cash collateralization in full,
pursuant to documentation in form and substance satisfactory to the Agent, the
Issuing Bank and the Required Banks, of all obligations arising with respect to
any applicable Letter of Credit, (ii) delivery to the applicable Issuing Bank,
with a copy to the Agent, of any applicable Letter of Credit for cancellation,
or (iii) delivery to the applicable Issuing Bank, with a copy to each Bank and
the Agent, of evidence satisfactory to the Banks that a replacement letter of
credit has been issued to replace any applicable Letter of Credit and that such
applicable Letter of Credit is to be returned promptly for cancellation. All
reductions of the Commitments shall be pro rata among the Banks according to
their respective Percentages.
6.2 Voluntary Prepayments. The Company may from time to time prepay
---------------------
the Loans in whole or in part; provided that (a) the Company shall give the
--------
Agent (which shall promptly advise each Bank) written notice thereof (i) on or
before 10:00 a.m., San Francisco time, not less than three Business Days prior
thereto in the case of Eurodollar Loans and (ii) on or before 10:00 a.m., San
Francisco time, on the date of such prepayment in the case of Base Rate Loans,
specifying the Loans to be prepaid and the date and amount of prepayment, (b)
any prepayment of a Eurodollar Loan prior to the end of an Interest Period
therefor shall be subject to Section 8.4, (c) each partial prepayment of a
-----------
Eurodollar Loan shall be in a principal amount of at least $3,000,000 and an
integral multiple of $1,000,000, (d) each partial prepayment of a Base Rate Loan
shall be in a principal amount of at least $1,000,000 and an integral multiple
of $500,000 and (e) any prepayment of a Eurodollar Loan shall include accrued
interest to the date of prepayment on the principal amount being repaid.
SECTION 7 MAKING AND PRORATION OF PAYMENTS; SETOFF; TAXES.
7.1 Making of Payments. All payments of principal or interest on the
------------------
Notes, of all fees, and of all other amounts payable hereunder by the Company,
shall be made by the Company to the Agent in immediately available funds without
offset or counterclaim at its office in San Francisco not later than noon, San
Francisco time, on the date due; and funds received after that hour shall be
deemed to have been received by the Agent on the next following Business Day.
The Agent shall promptly remit to each Bank or other holder of a Note its share
of all such payments received in collected funds by the Agent for the account of
such Bank or holder.
7.2 Application of Certain Payments. Each payment shall be applied
-------------------------------
to such Loans or other obligations of the
- 29 -
<PAGE>
Company hereunder as the Company shall direct by notice to be received by the
Agent on or before the date of such payment or, in the absence of such notice or
during any Event of Default or Unmatured Event of Default under Section 12.1.3,
--------------
as follows:
(a) first, to pay all obligations hereunder or under any Loan
-----
Document in respect of any fees, expense reimbursements or indemnities then
due to the Agent (solely in its capacity as the Agent and not as a Bank);
(b) second, to pay ratably interest due in respect of (i) all Loans
------
and (ii) (without duplication) reimbursement obligations in connection with
Letters of Credit;
(c) third, to pay or prepay ratably the principal amount of all Loans
-----
and (without duplication) reimbursement obligations in connection with
Letters of Credit (or to provide collateral in respect of Letters of Credit
to the extent such reimbursement obligations are contingent);
(d) fourth, to pay ratably all obligations hereunder or under any
------
Loan Document in respect of any fees and expenses and indemnities then due
to the Banks (including any issuing Bank); and
(e) fifth, to pay ratably all other obligations hereunder or under
-----
any Loan Document.
The order of priority set forth in this Section and the related provisions of
this Agreement are set forth solely to determine the rights and priorities of
the Agent and the Banks as among themselves and may at any time or from time to
time be changed, and any application of funds hereunder may be reversed and
reapplied, by the Agent and the Banks in writing as they may elect, without
necessity of notice to or consent of or approval by the Company or any other
Person, provided that such change shall not have the result of causing amounts
not otherwise due under this Agreement to become due. The Agent shall advise
the Banks as to the application of any payment upon request.
7.3 Due Date Extension: Payments Due on Business Days. If any
-------------------------------------------------
payment of principal or interest with respect to any of the Notes, facility
fees, Letter of Credit fees, or other obligations of the Company hereunder falls
due on a day which is not a Business Day, then such due date shall be extended
to the next following Business Day (unless, in the case of a Eurodollar Loan,
such next following Business Day is the first Business Day of a calendar month,
in which case such due date shall be the immediately preceding Business Day)
and, in the case of principal and any other amounts on which interest is payable
hereunder, additional interest shall accrue and be payable for the period of any
such extension.
- 30 -
<PAGE>
7.4 Setoff. The Company agrees that the Agent, each Bank and each
------
other holder of a Note have all rights of set-off and bankers' lien provided by
applicable law, and in addition thereto, the Company agrees that at any time any
Unmatured Event of Default under Section 12.1.3 or any Event of Default exists,
--------------
the Agent, each Bank and each such holder may apply to the payment of such
payment or other amount (or, in the case of clause (ii), to any obligations of
-----------
the Company hereunder, whether or not then due) any and all balances, credits,
deposits, accounts or moneys of the Company then or thereafter with the Agent,
such Bank or such holder.
7.5 Proration of Payments. If any Bank shall obtain any payment or
---------------------
other recovery (whether voluntary, involuntary, by application of set-off or
banker's lien or otherwise) on account of principal of or interest on any Note
(or on account of its participation in any Letter of Credit) or any other
obligation under any of the Loan Documents, whether from any Loan Party or any
other Person, in excess of its pro rata share of payments and other recoveries
obtained by all Banks on account of principal of and interest on Notes and on
such participations then held by them (other than in respect of an Affected Loan
to the extent contemplated by Section 8.3 or indemnities or other obligations
-----------
owed solely to such Bank and not owed to the Banks generally based upon their
respective Percentages), such Bank shall purchase from the other Banks such
participations in the Notes (or sub-participations in Letters of Credit) held by
them as shall be necessary to cause such purchasing Bank to share the excess
payment or other recovery ratably with each of them; provided, however, that if
-------- -------
all or any portion of the excess payment or other recovery is thereafter
recovered from such purchasing Bank, the purchase shall be rescinded and the
purchase price restored to the extent of such recovery.
7.6 Taxes. All payments of principal of, and interest on, the Loans
-----
and all other amounts payable hereunder shall be made free and clear of and
(except to the extent required by law) 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, but excluding franchise taxes and taxes imposed on or measured by any
Bank's net income or receipts (all non-excluded items being called "Taxes"). If
any withholding or deduction from any payment to be made by the company
hereunder is required in respect of any Taxes pursuant to any applicable law,
rule or regulation, then the Company will
(a) pay directly to the relevant authority the full amount required
to be so withheld or deducted;
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<PAGE>
(b) promptly forward to the Agent an official receipt or other
documentation satisfactory to the Agent evidencing such payment to such
authority; and
(c) pay to the Agent for the account of the Banks such additional
amount or amounts as is necessary to ensure that the net amount actually
received by each Bank will equal the full amount such Bank would have
received had no such withholding or deduction been required.
Moreover, if any Taxes are directly asserted against the Agent or any Bank with
respect to any payment received by the Agent or such Bank hereunder, the Agent
or such Bank may pay such Taxes and the Company will promptly pay such
additional amounts (including any penalty, interest and expense) as is necessary
in order that the net amount received by such Person after the payment of such
Taxes (including any Taxes on such additional amount) shall equal the amount
such Person would have received had such Taxes not been asserted.
If the Company fails to pay any Taxes when due to the appropriate
taxing authority or fails to remit to the Agent, for the account of the
respective Banks, the required receipts or other required documentary evidence,
the Company shall indemnify the Banks for any incremental Taxes, interest or
penalties that may become payable by any Bank as a result of any such failure.
Upon its execution of this Agreement, and thereafter on each
anniversary thereof, and in addition upon the request from time to time of the
Company or the Agent, each Bank that is organized under the laws of a
jurisdiction other than the United States of America shall, pursuant to Section
13.10, execute and deliver to the Company and the Agent one or more (as the
Company or the Agent may reasonably request) United States Internal Revenue
Service Forms 4224 or Forms 1001 or such other forms or documents, appropriately
completed, as may be applicable to establish that any payment to such Bank is
exempt from withholding or deduction of Taxes. The Company shall not be
required to pay any additional amount to any Bank under this Section 7.6 if such
-----------
Bank shall have failed to satisfy the requirements of the immediately preceding
sentence; provided that if a Bank shall have satisfied such requirements on or
--------
about the date that it became a party to this Agreement, nothing in this
paragraph shall relieve the Company of its obligation to pay any amounts
pursuant to this Section 7.6 in the event that such Bank is no longer properly
-----------
entitled to deliver certificates, documents or other evidence at a subsequent
date establishing the fact that such Bank is not subject to withholding as
described in the immediately preceding sentence.
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<PAGE>
SECTION 8 INCREASED COSTS; SPECIAL PROVISIONS FOR EURODOLLAR LOANS.
8.1 Increased Costs. (a) If, after the date hereof, (i) Regulation D
---------------
of the Board of Governors of the Federal Reserve System, or (ii) any applicable
law, rule or regulation, or any change therein, or the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Bank (or any Eurodollar Office of such Bank) with any request or
directive (whether or not having the force of law) of any such authority,
central bank or comparable agency
(A) shall subject any Bank (or any Eurodollar Office of such Bank) to
any tax, duty or other charge with respect to its Eurodollar Loans, its
Note or its obligation to make Eurodollar Loans, or shall change the basis
of taxation of payments to any Bank of the principal of or interest on its
Eurodollar Loans or any other amounts due under this Agreement in respect
of its Eurodollar Loans or its obligation to make Eurodollar Loans (except
for changes in the rate of tax on the overall net income of such Bank or
its Eurodollar Office imposed by the jurisdiction in which such Bank's
principal executive office or Eurodollar Office is located); or
(B) shall impose, modify or deem applicable any reserve (including,
without limitation, any reserve imposed by the Board of Governors of the
Federal Reserve System, but excluding any Eurocurrency Reserve Percentage),
special deposit or similar requirement against assets of, deposits with or
for the account of, or credit extended by any Bank (or any Eurodollar
Office of such Bank); or
(C) shall impose on any Bank (or its Eurodollar Office) any other
condition affecting its Eurodollar Loans, its Note or its obligation to
make Eurodollar Loans;
and the result of any of the foregoing is to increase the cost to (or in the
case of Regulation D referred to above, to impose a cost on) such Bank (or any
Eurodollar Office of such Bank) of making or maintaining any Eurodollar Loan, or
to reduce the amount of any sum received or receivable by such Bank (or its
Eurodollar Office) under this Agreement or under its Note with respect thereto,
then within 10 days after written demand by such Bank (a copy of which shall be
furnished to the Agent), the Company shall pay to such Bank, such additional
amount or amounts as will compensate such Bank for such increased cost or such
reduction.
(b) If any Bank shall reasonably determine that, after the date
hereof, the adoption or phase-in of any applicable law,
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<PAGE>
rule or regulation regarding capital adequacy, or any change therein, or any
change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank (or its Eurodollar Office) or
any Person controlling such Bank with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority, central
bank or comparable agency, has or would have the effect of reducing the rate of
return on such Bank's or such controlling Person's capital as a consequence of
such Bank's obligations hereunder (including, without limitation, such Bank's
obligations under the Commitment) to a level below that which such Bank or such
controlling Person could have achieved but for such adoption, change or
compliance (taking into consideration such Bank's or such controlling Person's
policies with respect to capital adequacy), then from time to time, within 10
days after written demand by such Bank (a copy of which shall be furnished to
the Agent), the Company shall pay to such Bank, such additional amount or
amounts as will compensate such Bank or such controlling Person for such
reduction.
(c) Any demand under this Section 8.1 shall be accompanied by a
-----------
certificate setting forth the calculation of any additional amount payable under
this Section 8.1, which certificate shall be conclusive for all purposes absent
-----------
manifest error.
8.2 Basis for Determining Interest Rate Inadequate or Unfair. If
--------------------------------------------------------
with respect to any Interest Period:
(a) deposits in Dollars (in the applicable amounts) are not being
offered to one or more Banks in the relevant market for such Interest Period, or
the Agent otherwise reasonably determines (which determination shall be binding
and conclusive on the Company) that by reason of circumstances affecting the
interbank eurodollar market adequate and reasonable means do not exist for
ascertaining the applicable Eurodollar Rate; or
(b) Banks having an aggregate Percentage of thirty three and one-
third percent (33 1/3%) or more advise the Agent that the Eurodollar Rate
(Reserve Adjusted) as determined by the Agent will not adequately and fairly
reflect the cost to such Banks of maintaining or funding such Loans for such
Interest Period, or that the making or funding of Eurodollar Loans has become
impracticable in the opinion of such Banks,
then the Agent shall promptly notify the other parties thereof and, so long as
such circumstances shall continue, (i) no Bank shall be under any obligation to
make, or convert Loans into, Eurodollar Loans and (ii) on the last day of the
current Interest Period for each Eurodollar Loan, such Loan shall, unless then
repaid in full, automatically convert to a Base Rate Loan.
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<PAGE>
8.3 Changes in Law Rendering Eurodollar Loans Unlawful. In the event
--------------------------------------------------
that any change in (including the adoption of any new) applicable laws or
regulations, or any change in the interpretation of applicable laws or
regulations by any governmental or other regulatory body charged with the
administration thereof, should make it unlawful for any Bank (or in the good
faith judgment of any Bank cause a substantial question as to whether it is
unlawful for such Bank) to make, maintain or fund Eurodollar Loans, then such
Bank shall promptly notify each of the other parties hereto and, so long as such
circumstances shall continue, (a) such Bank shall have no obligation to make or
convert into Eurodollar Loans (but shall make Base Rate Loans concurrently with
the making of or conversion into Eurodollar Loans by the Banks which are not so
affected in each case in an amount equal to such Bank's Percentage of all
Eurodollar Loans which would be made or converted into at such time in the
absence of such circumstances) and (b) on the last day of the current Interest
Period for each Eurodollar Loan of such Bank (or, in any event, if such Bank so
requests, on such earlier date as such Bank determines may be required by the
relevant law, regulation or interpretation), such Eurodollar Loan shall, unless
then repaid in full, automatically convert to a Base Rate Loan. Each Base Rate
Loan made by a Bank which, but for the circumstances described in the foregoing
sentence, would be a Eurodollar Loan (an "Affected Loan") shall, notwithstanding
any other provision of this Agreement, remain outstanding for the same period as
the Group of Eurodollar Loans of which such Affected Loan would be a part absent
such circumstances.
8.4 Funding Losses. The Company hereby agrees that upon demand by
--------------
any Bank (a copy of which shall be furnished to the Agent) the Company will
indemnify such Bank against any net loss or expense which such Bank may sustain
or incur (including, without limitation, any net loss or expense incurred by
reason of the liquidation or reemployment of deposits or other funds acquired by
such Bank to fund or maintain any Eurodollar Loan and any amounts which such
Bank would have received had such Eurodollar Loan remained outstanding to the
last day of the applicable Interest Period, net of any amounts actually received
by such Bank in connection with the redeployment of such funds for such period
as such Bank elects consistent with its business practices), as reasonably
determined by such Bank, as a result of (a) any payment or, prepayment or
conversion of any Eurodollar Loan of such Bank on a date other than the last day
of an Interest Period for such Loan (including, without limitation, any
conversion pursuant to Section 8.3) or (b) any failure of the Company to borrow
-----------
or convert or continue any Loans on a date specified therefor in a Notice of
Borrowing or Notice of Conversion/Continuation pursuant to this Agreement. For
this purpose, all notices to the Agent pursuant to this Agreement shall be
deemed to be irrevocable.
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<PAGE>
8.5 Right of Banks to Fund through Other Offices. Each Bank may, if
--------------------------------------------
it so elects, fulfill its commitment as to any Eurodollar Loan by causing a
foreign branch or affiliate of such Bank to make such Loan; provided that in
--------
such event for the purposes of this Agreement such Loan shall be deemed to have
been made by such Bank and the obligation of the Company to repay such Loan
shall nevertheless be to such Bank and shall be deemed held by it, to the extent
of such Loan, for the account of such branch or affiliate.
8.6 Discretion of Banks as to Manner of Funding. Notwithstanding any
-------------------------------------------
provision of this Agreement to the contrary, each Bank shall be entitled to fund
and maintain its funding of all or any part of its Loans in any manner it sees
fit, it being understood, however, that for the purposes of this Agreement all
determinations hereunder shall be made as if such Bank had actually funded and
maintained each Eurodollar Loan during each Interest Period for such Loan
through the purchase of deposits having a maturity corresponding to such
Interest Period and bearing an interest rate equal to the Eurodollar Rate for
such Interest Period.
8.7 Conclusiveness of Statements; Survival of Provisions.
----------------------------------------------------
Determinations and statements of any Bank pursuant to Section 8.1, 8.2, 8.3 or
----------- --- ---
8.4 shall be conclusive absent manifest error. The provisions of such Sections
- ---
shall survive repayment of the Loans, cancellation of the Notes, cancellation or
expiration of the Letters of Credit and any termination of this Agreement, with
respect to all Loans and other obligations made or incurred hereunder or under
the other Loan Documents, and the Notes, Letters of Credit and the other Loan
Documents entered into in connection herewith.
8.8 Banks' Obligation to Mitigate. Each Bank agrees that, as
-----------------------------
promptly as practicable after the officer of such Bank responsible for
administering Loans under this Agreement becomes aware of the occurrence of an
event or the existence of a condition that would cause such Bank to have
Affected Loans or that would entitle such Bank to receive payments (other than
insubstantial amounts) under Section 8.1, it will, to the extent not
-----------
inconsistent with such Bank's internal policies and practices, use reasonable
efforts (i) to make, fund or maintain the Commitments of such Bank or the
Affected Loans of such Bank through another lending office of such Bank, or (ii)
take such other measures as such Bank may deem reasonable, if as a result
thereof the circumstances which would cause such Bank to have Affected Loans
would cease to exist or the additional amounts which would otherwise be required
to be paid to such Bank pursuant to Section 8.1 would not be required to be paid
-----------
to such Bank or would be substantially reduced and if, as determined by such
Bank in its reasonable discretion, the making, funding,or maintaining of such
Commitments or Loans through such other
- 36 -
<PAGE>
lending office or in accordance with such other measures, as the case may be,
would not adversely affect such Commitments or Loans or the interests of such
Bank. The Company hereby agrees to pay all reasonable costs and expenses
incurred by any Bank to the extent allocable to such Bank's Commitments
(including reasonable fees and expenses of outside counsel and allocated costs
of in-house counsel) incurred in connection with this Section 8.8.
-----------
SECTION 9 WARRANTIES.
To induce each Issuing Bank to issue Letters of Credit and to induce
the Agent and the Banks to enter into this Agreement and to induce the Banks to
make Loans and purchase participations in Letters of Credit hereunder, the
Company warrants to the Agent and the Banks that:
9.1 Organization, Etc. (a) The Company is a corporation duly
-----------------
organized, validly existing and in good standing under the laws of the State of
California; each Loan Party other than the Company is a corporation duly
organized, validly existing and in good standing in the jurisdiction of its
incorporation; the Company and each other Loan Party is duly qualified to do
business in each jurisdiction where the nature of its business makes such
qualification necessary (except in those instances in which the failure to be
qualified would not be reasonably expected to materially adversely affect either
(i) the financial condition, operations, assets, business, properties or, to the
knowledge of the Company, prospects of the Company and its Subsidiaries taken as
a whole or (ii) the ability of the Loan Parties to perform their obligations
under the Loan Documents) and the Company and each other Loan Party has full
power and authority, and has all material licenses, permits and authorizations
required, to own its property and conduct its business as presently conducted
and as proposed to be conducted by it.
(b) The Company and the other Loan Parties are in compliance with
their respective Articles or Certificates of Incorporation, By-Laws and other
organizational documents, all material agreements, indentures, instruments and
other documents which are binding on the Company or the other Loan Parties,
respectively, and all laws, rules, regulations and orders, decrees and judgments
of any court or other government authority or agency which are binding on the
Company or any of the other Loan Parties and the Company and the other Loan
Parties have and are in compliance with all permits, licenses and other
authorizations required by law, rule or regulation (except in those instances in
which the failure to be in compliance would not be reasonably expected to
materially adversely affect either (i) the financial condition, operations,
assets, business, properties or, to the knowledge of the Company, prospects of
the
- 37 -
<PAGE>
Company and its Subsidiaries taken as a whole or (ii) the ability of the Loan
Parties to perform their obligations under the Loan Documents).
9.2 Authorization: No Conflict. (a) The execution and delivery by
--------------------------
the Company of this Agreement and each other Loan Document to which it is a
party, the borrowings hereunder, and the performance by the Company of its
obligations under each Loan Document to which it is a party are within the
corporate powers of the Company, have been duly authorized by all necessary
corporate action on the part of the Company (including any necessary stockholder
action), have received all necessary governmental approval (if any shall be
required), and do not and will not (i) violate any provision of law or any
order, decree or judgment of any court or other government authority or agency
which is binding on the Company, (ii) contravene or conflict with, or result in
a breach of, any provision of the Articles of Incorporation, By-Laws or other
organizational documents of the Company or of any material agreement, indenture,
instrument or other document which is binding on the Company or any other Loan
Party (copies of which, including any amendments, supplements or modifications
thereof, have been delivered to the Agent) or (iii) result in, or require, the
creation or imposition of any Lien on any property of the Company or any other
Loan Party (except Liens in favor of the Agent and the Banks as provided in this
Agreement), except in those instances in which such violation or breach would
not be reasonably expected to materially adversely affect either (i) the
financial condition, operations, assets, business, properties or, to the
knowledge of the Company, prospects of the Company and its Subsidiaries taken as
a whole or (ii) the ability of the Loan Parties to perform their obligations
under the Loan Documents.
(b) The execution and delivery by each Loan Party other than the
Company of each Loan Document to which it is a party and the performance by such
Loan Party of its obligations under each Loan Document to which it is a party
are within the corporate powers of such Loan Party, have been duly authorized by
all necessary corporate action on the part of such Loan Party (including any
necessary stockholder action), have received all necessary governmental approval
(if any shall be required), and do not and will not (a) violate any provision of
law or any order, decree or judgment of any court or other government authority
or agency which is binding on such Loan Party, (b) contravene or conflict with,
or result in a breach of, any provision of the Articles or Certificate of
Incorporation, By-Laws or other organizational documents of such Loan Party or
of any material agreement, indenture, instrument or other document which is
binding on the Company or any other Loan Party (copies of which, including any
amendments, supplements or modifications thereof, have been delivered to the
Agent) or (c) result in, or require, the creation or imposition of any Lien on
any property
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<PAGE>
of the Company or any other Loan Party (except Liens in favor of the Agent and
the Banks as provided in this Agreement), except in those instances in which
such violation or breach would not be reasonably expected to materially
adversely affect either (i) the financial condition, operations, assets,
business, properties or, to the knowledge of the Company, prospects of the
Company and its Subsidiaries taken as a whole or (ii) the ability of the Loan
Parties to perform their obligations under the Loan Documents.
9.3 Validity and Binding Nature. This Agreement is, and upon the
---------------------------
execution and delivery thereof each other Loan Document to which the Company or
any other Loan Party is a party will be, the legal, valid and binding obligation
of the Company or any such Loan Party, respectively, enforceable against the
Company or such Loan Party in accordance with its terms, except as such
enforceability may be limited by the effect of bankruptcy, insolvency,
reorganization, moratorium or other similar laws limiting creditors' rights
generally or by equitable principles.
9.4 Financial Information. The audited consolidated financial
---------------------
statements of the Company and its Subsidiaries as of and for the Fiscal Year
ended December 31, 1994, copies of which have been delivered to each Bank, have
been prepared in accordance with Generally Accepted Accounting Principles and
present fairly the consolidated financial condition of the Company and its
Subsidiaries taken as a whole as at such date and the results of their
operations for the period then ended.
9.5 No Material Adverse Change; Conduct of Business. Since December
-----------------------------------------------
31, 1994, there has been no material adverse change in either (i) the financial
condition, operations, assets, business, properties or, to the knowledge of the
Company, prospects of the Company and its Subsidiaries taken as a whole or (ii)
the ability of the Loan Parties to perform their obligations under the Loan
Documents.
9.6 Litigation. Except for matters listed in Schedule 9.6, no
---------- -------- ---
litigation (including, without limitation, derivative actions), arbitration
proceeding or governmental proceeding is pending or, to the Company's knowledge,
threatened against the Company or any other Loan Party which could reasonably be
expected to materially and adversely affect either (i) the financial condition,
operations, assets, business, properties or, to the knowledge of the Company,
prospects of the Company and its Subsidiaries taken as a whole or (ii) the
ability of the Loan Parties to perform their obligations under the Loan
Documents.
9.7 Ownership of Properties; Liens. Each of the Company and each
------------------------------
other Loan Party owns good and marketable title to all of its properties and
assets, real and personal, tangible and intangible, of any nature whatsoever
(including patents,
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<PAGE>
trademarks, trade names, service marks and copyrights), free and clear of all
Liens, charges and claims (including infringement claims with respect to
patents, trademarks, copyrights and the like) except as permitted pursuant to
Section 10.7.
- ------------
9.8 Subsidiaries. The Company has no Subsidiaries, except those
------------
listed in Schedule 9.8, as such schedule may be updated from time to time.
------------
9.9 Compliance with ERISA. Schedule 9.9 contains a list of all Plans
--------------------- ------------
as of the Effective Date. Each Plan (other than a Multiemployer Plan) is in
compliance with ERISA and the applicable provisions of the Code in all material
respects with respect to each Plan other than a Multiemployer Plan, all reports
required under ERISA or any other applicable law or regulation to be filed by
the Company or a member of its ERISA Controlled Group with the relevant
governmental authority the failure of which to file could reasonably result in a
material liability of the Company or a member of its ERISA Controlled Group have
been duly filed and all such reports are true and correct in all material
respects as of the date given. Neither the Company nor a member of its ERISA
Controlled Group has engaged in a "prohibited transaction," as such term is
defined in Section 4975 of the Code or in a transaction subject to the
prohibitions of Section 406 of ERISA, in connection with any Plan which would
subject the Company or a member of its ERISA Controlled Group (after giving
effect to any exemption) to the tax or penalty on prohibited transactions
imposed by Section 4975 of the Code, Section 502 of ERISA or any other liability
under ERISA which tax, penalty or other liability would involve more than
$100,000. There are no claims (other than claims for benefits in the normal
course), actions or lawsuits asserted or instituted against, and neither the
Company nor a member of its ERISA Controlled Group has knowledge of any
threatened litigation or claims against, the assets of any Plan (other than a
Multiemployer Plan) or against any fiduciary of such Plan (other than a
Multiemployer Plan) with respect to the operation of such Plan (other than a
Multiemployer Plan). The aggregate present value of all Unfunded Benefits under
the ERISA Plans, excluding any Multiemployer Plan, does not exceed $20,000,000.
The Company and the members of its ERISA Controlled Group are currently
obligated to make contributions only to the Multiemployer Plans set forth in
Schedule 9.9. With respect to all Multiemployer Plans to which the Company and
- ------------
the members of its ERISA Controlled Group now contribute, have ever contributed
or have ever had an obligation to contribute, all obligations of the Company and
the members of its ERISA Controlled Group have been satisfied in full. The
aggregate potential withdrawal liability of the Company and the members of its
ERISA Controlled Group with respect to all Multiemployer Plans to which the
Company and the members of its ERISA Controlled Group currently contribute does
not exceed $1,000,000. The obligation of the Company and its ERISA
- 40 -
<PAGE>
Controlled Group to provide post-retirement welfare benefits (other than as
required by Sections 601 through 608 of ERISA and Section 4980B of the Code) is
fairly presented according to applicable financial reporting standards in the
financial statements of the Company and its Subsidiaries.
9.10 Investment Company Act. Neither the Company nor any other Loan
----------------------
Party is an "investment company" or a company "Controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940, as amended.
9.11 Public Utility Holding Company Act. Neither the Company nor
----------------------------------
any other Loan Party is 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.
9.12 Regulation U; Other Governmental Regulation. Neither the
-------------------------------------------
Company nor any other Loan Party is (i) engaged principally, or as one of its
important activities, in the business of extending credit for the purpose of
purchasing or carrying Margin Stock, or (ii) subject to other laws, regulations
or orders which would have a material adverse effect on the Company's ability to
borrow money or the ability of the Company or any other Loan Party to perform
its respective obligations under any Loan Document.
9.13 Taxes. Each of the Company and each other Loan Party has filed
-----
all tax returns and reports required by law to have been filed by it and has
paid all taxes and governmental charges thereby shown to be owing, except any
such taxes or charges which are being diligently contested in good faith by
appropriate proceedings and for which adequate reserves in accordance with
Generally Accepted Accounting Principles shall have been set aside on its books.
9.14 Solvency, etc. (a) On the Effective Date, and immediately
-------------
prior to and after giving effect to the issuance of each Letter of Credit and
each borrowing hereunder and the use of the proceeds thereof, (1) the Company's
assets will exceed its liabilities and (2) the Company will be solvent, will be
able to pay its debts as they mature, will own property with fair saleable value
greater than the amount required to pay its debts and will have capital
sufficient to carry on its business as then constituted.
(b) On the Effective Date and for ninety (90) days prior thereto, and
immediately prior to and after giving effect to the issuance of each Letter of
Credit and each borrowing hereunder and the use of the proceeds thereof, (a) the
assets of each Loan Party (other than the Company and any Subsidiary which
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<PAGE>
is not a Material Subsidiary) will exceed its respective liabilities and (b)
each Loan Party (other than the Company and any Subsidiary which is not a
Material Subsidiary) will be solvent, will be able to pay its debts as they
mature, will own property with fair saleable value greater than the amount
required to pay its debts and will have capital sufficient to carry on its
business as then constituted.
9.15 Hazardous Materials.
-------------------
9.15.1 Release and Disposal. To the best knowledge of the
--------------------
Company, except as set forth on Schedule 9.15, (a) none of the Company, any
-------------
other Loan Party or any other Person has ever caused or permitted any Reportable
Quantity of any Hazardous Material to be released on, under or at any real
property owned, leased or operated by the Company or any other Loan Party, (b)
such real property has not been used (by the Company, any other Loan Party or by
any other Person) as a disposal or long-term storage facility for any Hazardous
Material and (c) none of the Company, any other Loan Party or any of their
respective predecessors, except in compliance with applicable law, has ever
caused or permitted any Hazardous Material to be disposed of at any locations
other than those identified pursuant to clause (a), except where such release,
---
use or disposal could not reasonably be expected to materially and adversely
affect either (i) the financial condition, operations, assets, business,
properties or, to the knowledge of the Company, prospects of the Company and its
Subsidiaries taken as a whole or (ii) the ability of the Loan Parties to perform
their obligations under the Loan Documents.
9.15.2 Treatment and Storage. To the best knowledge of the
---------------------
Company, except in compliance with applicable law, or except as set forth on
Schedule 9.15, (a) none of the Company, any other Loan Party or any other Person
- -------------
has ever caused or permitted any Hazardous Material to be treated or stored on,
under or at any real property owned, leased or operated by the Company or any
other Loan Party, (b) such real property has never been used (by the Company,
any other Loan Party or by any other Person) as a temporary storage site for any
Hazardous Material, and (c) none of the Company, any other Loan Party or any of
their respective predecessors has ever caused or permitted any Hazardous
Material (except for any which may have been present in raw materials or any
products) to be transported to, treated, or stored at any locations other than
those identified pursuant to clause (a), except where such treatment, storage or
----------
transport could not reasonably be expected to materially and adversely affect
either (i) the financial condition, operations, assets, business, properties or,
to the knowledge of the Company, prospects of the Company and its Subsidiaries
taken as a whole or (ii) the ability of the Loan Parties to perform their
obligations under the Loan Documents.
- 42 -
<PAGE>
9.16 Ownership. The Company is the legal and beneficial owner of one
---------
hundred percent (100%) of the capital stock of each of its Subsidiaries. All of
the outstanding shares of capital stock of the Company and each of its
Subsidiaries have been duly authorized and validly issued and are fully paid and
non-assessable.
9.17 Information. All information heretofore or contemporaneously
-----------
herewith furnished by or on behalf of the Company or any other Loan Party to any
Bank for purposes of or in connection with this Agreement and the transactions
contemplated hereby is, and all information hereafter furnished by or on behalf
of the Company or any other Loan Party pursuant hereto or in connection herewith
will be, true and accurate in every material respect on the date as of which
such information is dated or certified, and none of such information is or will
be incomplete by omitting to state any material fact necessary to make such
information not misleading (it being recognized by the Agent and each Bank that
projections and forecasts provided by the Company or any other Loan Party are
not to be viewed as facts and that actual results during the period or periods
covered by any such projections and forecasts may differ from projected or
forecasted results).
SECTION 10 COVENANTS.
Until the expiration or termination of the Commitments and thereafter
until all obligations of the Company hereunder and under the other Loan
Documents are paid in full in cash and all Letters of Credit have been
terminated, the Company agrees that, unless at any time the Required Banks shall
otherwise expressly consent in writing, it will:
10.1 Reports, Certificates and Other Information. Furnish to the
-------------------------------------------
Agent and each Bank:
10.1.1 Audit Report. Promptly when available and in any event
------------
within 100 days after the close of each Fiscal Year, (a) a copy of the annual
audit report of the Company and its Subsidiaries for such Fiscal Year, including
therein consolidated balance sheets of the Company and its Subsidiaries as of
the end of such Fiscal Year and consolidated statements of earnings and cash
flow of the Company and its Subsidiaries for such Fiscal Year certified without
qualification as to going concern or scope by Arthur Andersen & Co. or other
independent auditors of nationally recognized standing selected by the Company,
together with a written statement from such accountants to the effect that in
making the examination necessary for the signing of such annual audit report by
such accountants, they have not become aware of any Event of Default or
Unmatured Event of Default that has occurred and is continuing or, if they have
become aware of
- 43 -
<PAGE>
any such event, describing it in reasonable detail; and (b) consolidating
balance sheets of the Company and its Subsidiaries as of the end of such Fiscal
Year and a consolidating statement of earnings for the Company and its
Subsidiaries for such Fiscal Year, certified by the Executive Vice President--
Finance and Treasurer, CFO or Vice President and Controller of the Company. The
Company may satisfy a portion of its obligations under this Section 10.1.1 by
--------------
delivery of copies of the Annual Report on Form 10-K of the Company for such
Fiscal Year filed with the Securities and Exchange Commission.
10.1.2 Monthly Reports; Quarterly Cash Flow Statement. Promptly
----------------------------------------------
when available and in any event within 30 days after the end of each month,
consolidated and consolidating balance sheets of the Company and its
Subsidiaries as of the end of such month and consolidated and consolidating
statements of earnings for such month and for the period beginning with the
first day of such Fiscal Year and ending on the last day of such month, and for
each month-end which is also the end of a Fiscal Quarter, promptly when
available and in any event within 55 days after the end of such Fiscal Quarter,
a consolidated statement of cash flow for such Fiscal Quarter and for the period
beginning with the first day of such Fiscal Year and ending on the last day of
such Fiscal Quarter, in each case certified by the Executive Vice President-
Finance and Treasurer, CFO or Vice President and Controller of the Company. The
Company may satisfy a portion of its obligations under this Section 10.1.2 by
--------------
delivery of copies of the Quarterly Report on Form 10-Q of the Company for any
applicable period filed with the Securities and Exchange Commission.
10.1.3 Compliance Certificates. Contemporaneously with the
-----------------------
furnishing of a copy of each annual audit report pursuant to Section 10.1.1 and
--------------
of each set of monthly statements pursuant to Section 10.1.2 for any month which
--------------
is the last month of a Fiscal Quarter, a duly completed certificate in the form
of Exhibit C (herein called a "Compliance Certificate"), with appropriate
---------
insertions, dated the date of such annual report or such monthly statements and
signed by the Executive Vice President-Finance and Treasurer, CFO or Vice
President and Controller of the Company, containing a computation of each of the
financial ratios and restrictions set forth in this Section 10 and stating that
----------
such officer has not become aware of any Event of Default or Unmatured Event of
Default that has occurred and is continuing after undertaking due inquiry in
respect thereof or, if there is any such event, describing it and the steps, if
any, being taken to cure it.
10.1.4 Reports to SEC, to the Public and to Stockholders: Press
--------------------------------------------------------
Releases. Promptly upon the filing or distribution thereof, a copy of any
- --------
annual, periodic or special report or registration statement (inclusive of
exhibits thereto)
- 44 -
<PAGE>
filed with the SEC or any securities exchange by the Company, or otherwise
publicly available; any report, proxy statement or other communication to the
stockholders of the Company or any other Loan Party in their capacity as
stockholders; and any press releases of the Company or any other Loan Party.
10.1.5 Notice of Default, Litigation, Material Adverse Change.
------------------------------------------------------
Immediately upon becoming aware of any of the following, written notice
describing the same and the steps being taken by the Company or any other Loan
Party affected thereby with respect thereto: (a) the occurrence of an Event of
Default or an Unmatured Event of Default; (b) any litigation (including, without
limitation, derivative actions), arbitration or governmental investigation or
proceeding not previously disclosed by the Company to the Banks which has been
instituted or, to the knowledge of the Company, is threatened against the
Company or any other Loan Party or to which any of the properties of any thereof
is subject which, if adversely determined, could reasonably be expected to
materially adversely affect either (i) the financial condition, operations,
assets, business, properties or, to the knowledge of the Company, prospects of
the Company and its Subsidiaries, taken as a whole or (ii) the ability of the
Loan Parties to perform their obligations under the Loan Documents; (c) any
material adverse change in the financial condition, operations, assets,
business, properties or, to the knowledge of the Company, prospects of the
Company and its Subsidiaries taken as a whole or (d) termination of any material
franchise agreement with any supplier.
10.1.6 Subsidiaries. Promptly upon any Person becoming a
------------
Subsidiary of the Company, notification thereof together with a certificate from
a Designated Employee stating whether such Subsidiary is a Material Subsidiary
or an Inactive Subsidiary.
10.1.7 Management Reports. Promptly upon receipt thereof,
------------------
copies of all detailed financial and management reports submitted to the Board
of Directors of the Company by independent auditors in connection with each
annual or interim audit made by such auditors of the financial statements of the
Company.
10.1.8 Projections. As soon as available, and in accordance
-----------
with the Company's customary planning procedures, copies of all forecasted
statements of income, statements of financial position and statements of cash
flows for the Company and its Subsidiaries for the forthcoming three Fiscal
Years, quarter-by-quarter for the first Fiscal Year therein forecasted and
annually thereafter, together with any changes thereto deemed by the Company, in
its reasonable discretion, to be significant or substantial.
- 45 -
<PAGE>
10.1.9 ERISA. As soon as possible and in any event within ten
-----
days after the Company or a member of its ERISA-Controlled Group knows, or has
reason to know, that: (i) any Termination Event with respect to a Plan has
occurred or is likely to occur, (ii) any condition exists with respect to a Plan
which presents or is likely to present a material risk of termination of the
Plan or imposition of a material excise tax or other liability on the Company or
a member of its ERISA Controlled Group or the imposition of a Lien on any assets
of the Company or a member of its ERISA Controlled Group in favor of the PBGC or
a Plan, (iii) the Company or a member of its ERISA Controlled Group has applied
for a waiver of the minimum funding standard (including any required installment
payments) or an extension of any amortization period under Section 412 of the
Code and Section 302 of ERISA, or has committed a failure sufficient to give
rise to a Lien under Section 302(f) of ERISA, (iv) the Company or a member of
its ERISA Controlled Group has engaged in a "prohibited transaction," as defined
in Section 4975 of the Code or in a transaction subject to the prohibitions of
Section 406 of ERISA, that is not exempt under Section 4975 of the Code and
Section 408 of ERISA or under an applicable individual or class exemption and
which presents or is likely to present the possibility of the imposition of a
material liability or material excise tax on the Company or a member of its
ERISA Controlled Group, (v) the aggregate present value of the Unfunded Benefits
under all ERISA Plans has increased to an amount in excess of $20,000,000, (vi)
any Reportable Event with respect to a Plan has occurred; a certificate of a
Designated Employee setting forth the details of such event described in clause
(i) through (vi) above, as applicable, and the action which the Company or such
member of its ERISA Controlled Group proposes to take with respect thereto,
together with a copy of any notice of filing from the PBGC or which may be
required by the PBGC or other agency of the United States government with
respect thereto. As soon as possible, and in any event within three Business
Days after the receipt by either the Company or a member of its ERISA Controlled
Group, of (i) a demand letter from the PBGC notifying the Company or member of
its ERISA Controlled Group of the final decision finding liability under
Sections 4062, 4063 or 4064 of ERISA with respect to a Plan and the date by
which such liability must be paid or (ii) a notice from the PBGC that a Lien has
been or is to be imposed on any assets of the Company or a member of its ERISA
Controlled Group in favor of the PBGC or a Plan, a copy of such letter or
notice, together with a certificate of a Designated Employee setting forth the
action which the Company or such member of its ERISA Controlled Group proposes
to take with respect thereto.
10.1.10 Other Information. From time to time such other
-----------------
information concerning the Company and the other Loan Parties as any Bank or the
Agent may reasonably request.
- 46 -
<PAGE>
10.2 Books, Records and Inspections. Keep, and cause each other
------------------------------
Loan Party to keep, its books and records in accordance with sound business
practices sufficient to allow the preparation of financial statements in
accordance with Generally Accepted Accounting Principles; permit, and cause each
other Loan Party to permit, on reasonable notice and at reasonable times (or
without notice and at any time during the existence of an Event of Default or an
Unmatured Event of Default) any Bank or the Agent or any representative thereof
to inspect the properties and operations of the Company and of such other Loan
Party; and permit, and cause each other Loan Party to permit, on reasonable
notice and at reasonable times (or without notice and at any time during the
existence of an Event of Default or an Unmatured Event of Default) any Bank or
the Agent or any representative thereof to visit any or all of its offices to
discuss its financial matters with its officers and its independent auditors,
and to examine (and, at the expense of the Company or the applicable other Loan
Party, photocopy extracts from) any of its books or other corporate records. The
Company shall authorize its auditors to discuss the financial matters of the
Company and its Subsidiaries with any Bank or the Agent, or any representative
thereof, and acknowledges the Agent's and the Banks' reliance on past, present
and future financial statements, which authorization and acknowledgement shall
be delivered in writing by the Company to its auditors upon request by the Agent
or the Required Banks. The Company agrees to pay the fees of the Company's
auditors incurred in connection with any reasonable exercise of the rights of
the Agent and the Banks pursuant to this Section. So long as no Event of Default
or Unmatured Event of Default shall have occurred and be continuing, the Company
may, in its sole discretion, elect to have one or more of its executive officers
present at and participate in any discussions conducted pursuant to this Section
-------
10.2.
- ----
10.3 Insurance. Maintain, and cause each other Loan Party to
---------
maintain, with financially responsible insurance companies, such insurance as
may be required by any law or governmental regulation or court decree or order
applicable to it and such other insurance, to such extent and against such
hazards and liabilities, as is customarily maintained by companies similarly
situated; and, upon request of the Agent or any Bank, furnish to the Agent or
such Bank a certificate of the Company setting forth in reasonable detail the
nature and extent of all insurance maintained by the Company and the other Loan
Parties.
10.4 Compliance with Laws: Payment of Taxes and Liabilities. (a)
------------------------------------------------------
Comply, and cause each other Loan Party to comply, with all applicable laws,
rules, regulations, judgments, decrees and orders and maintain and comply with
all permits, licenses and other authorizations required by law, rule or
regulation, except where the failure to do so would not be reasonably expected
to materially adversely affect either (i) the
- 47 -
<PAGE>
financial condition, operations, assets, business, properties or, to the
knowledge of the Company, prospects of the Company and its Subsidiaries, taken
as a whole or (ii) the ability of the Loan Parties to perform their obligations
under the Loan Documents; and (b) pay, and cause each other Loan Party to pay,
prior to delinquency, all taxes and other governmental charges against it or any
of its property, as well as claims of any kind which, if unpaid, might become a
material Lien on any of its property; provided, however, that the foregoing
-----------------
shall not require the Company or any other Loan Party to pay any such tax or
charge so long as it shall contest the validity thereof in good faith by
appropriate proceedings and shall set aside on its books adequate reserves with
respect thereto in accordance with Generally Accepted Accounting Principles and
such Lien, if any, is effectively stayed.
10.5 Maintenance of Existence, Etc. Maintain and preserve, and
------------------------------
(subject to Section 10.9) cause each other Loan Party to maintain and preserve,
-------------
(a) its existence and good standing in the jurisdiction of its incorporation and
(b) its qualification and good standing as a foreign corporation in each
jurisdiction where the nature of its business makes such qualification necessary
(except in those instances in which the failure to be qualified or in good
standing does not materially adversely affect either (i) the financial
condition, operations, assets, business, properties or, to the knowledge of the
Company, prospects of the Company and its Subsidiaries taken as a whole or (ii)
the ability of the Loan Parties to perform their obligations under the Loan
Documents).
10.6 Financial Covenants.
-------------------
10.6.1 Minimum Tangible Net Worth. Not permit Tangible Net
--------------------------
Worth at any time to be less than an amount equal to (a) (i) prior to completion
of the Ginsbury Acquisition, 90% of the actual Tangible Net Worth as of the end
of the Fiscal Quarter immediately preceding the Effective Date, and (ii),
thereafter, 90% of the actual Tangible Net Worth, after taking into account the
Ginsbury Acquisition, as of the end of the Fiscal Quarter within which the
Ginsbury Acquisition is completed plus (b) 75% of Consolidated Net Income (with
----
no deduction for losses) for each Fiscal Quarter ending after the Effective Date
in which such Consolidated Net Income is greater than zero plus (c) 100% of the
----
net proceeds of any equity securities issued by the Company or any Subsidiary
after the Effective Date less (d) up to $1,200,000 for the Integration Charge on
----
an after-tax basis less (e) up to $5,000,000 in the aggregate paid by the
----
Company under any "earn-out" provisions related to the Ginsbury Acquisition less
----
(f) up to $5,000,000 in the aggregate paid by the Company for the purchase or
redemption of its common stock on or after the Effective Date.
- 48 -
<PAGE>
10.6.2 Maximum Leverage. Not permit the Leverage Ratio for any
----------------
Computation Period ending on the last day of any Fiscal Quarter in the fiscal
periods indicated below to exceed the maximum ratio indicated:
<TABLE>
<CAPTION>
Fiscal Quarters
ending in Fiscal Years Maximum Ratio
---------------------- -------------
<S> <C>
Effective Date - 12/30/96 2.25 to 1.00
12/31/96 - 12/30/97 2.00 to 1.00
12/31/97 and thereafter 1.75 to 1.00
</TABLE>
10.6.3 Minimum Fixed Charge Coverage. Not permit the ratio of
-----------------------------
(a) (i) Consolidated Net Income before deducting Interest Expense, income taxes
and lease payments for any Computation Period plus (ii) up to $2,000,000 for the
----
Integration Charge on a pre-tax basis less (iii) all interest income included in
----
Consolidated Net Income for such Computation Period, to (b) (i) all Interest
Expense for such Computation Period plus (ii) all lease payments for such
----
Computation Period, to be less than 2.25 to 1, for any Computation Period.
10.6.4 Current Ratio. Not permit the ratio of consolidated
-------------
current assets to current liabilities for the Company and its consolidated
Subsidiaries at any time to be less than 2.0 to 1.
10.7 Liens. Not, and not permit any other Loan Party to, create or
-----
permit to exist any Lien on any of its real or personal properties, assets or
rights of whatsoever nature (whether now owned or hereafter acquired), except
(a) Liens for taxes or other governmental charges the payment of which is not at
the time required pursuant to Section 10.4, (b) (i) Liens of carriers,
warehousemen, mechanics and materialmen and other similar Liens imposed by law
and (ii) Liens incurred in connection with worker's compensation, unemployment
compensation and other types of social security (excluding Liens arising under
ERISA), in each case for sums not overdue or being contested in good faith by
appropriate proceedings and such Lien is effectively stayed and not involving
any deposits or advances or borrowed money or the deferred purchase price of
property or services, and, in each case, for which it maintains adequate
reserves, (c) Liens identified on Schedule 10.7, (d) Liens in connection with
-------------
Capital Leases (to the extent permitted hereunder), (e) easements, rights of
way, restrictions, minor defects or irregularities in title and other similar
Liens not interfering in any material respect with the ordinary conduct of the
business of the Company or any other Loan Party, (f) Liens to secure the
performance of statutory obligations, surety and appeal bonds, government
contracts and trade contracts; (g) any interest or title of a lessor or lessee
under any lease permitted by this Agreement; (h) Liens granted in the ordinary
course of
- 49 -
<PAGE>
business in favor of Intel Corporation, a Delaware corporation, to secure
accounts payable owed to Intel Corporation with respect to, and covering only,
inventory purchased from Intel Corporation, pursuant to agreements between the
Company and Intel Corporation as in effect on the Effective Date and as
subsequently amended, restated or modified; (i) Liens granted in the ordinary
course of business in favor of suppliers of inventory other than Intel
Corporation, a Delaware corporation, to secure trade payables owed to such
suppliers with respect to, and covering only, inventory purchased from such
suppliers, pursuant to such suppliers' standard terms and conditions for sale of
such inventory and securing trade payables owed to such suppliers not to exceed
$5,000,000 at any one time outstanding; (j) Liens applicable to the property,
plant and equipment comprising the new warehouse facility described in Section
-------
10.19 securing indebtedness for borrowed money incurred to finance the cost of
- -----
acquisition and/or construction of such facility; (k) Liens securing purchase
money indebtedness incurred in the ordinary course of business (excluding
purchase money indebtedness incurred in connection with the purchase of
inventory) and/or Industrial Revenue Bond financings, provided that the
--------
aggregate amount of indebtedness secured by such Liens does not exceed
$7,500,000 at any one time outstanding and, in the case of purchase money
indebtedness, at least 75% of the purchase price of such assets is provided by
the proceeds of such purchase money indebtedness and the Lien is applicable only
to the assets acquired with such purchase money indebtedness; or (1) Liens not
otherwise permitted by this Section 10.7 applicable to assets with a fair market
------------
value not to exceed $5,000,000 (measured at the time each such Lien attaches)
securing obligations not to exceed $2,500,000 at any one time outstanding.
10.8 Restricted Payments. Not (a) declare or pay any dividends on
-------------------
any of its capital stock (other than stock dividends), (b) purchase or redeem
any of its capital stock or any warrants, options or other rights in respect of
its capital stock, (c) make any other distribution to stockholders, (d) prepay,
purchase or redeem any subordinated debt, (e) pay any management fees or similar
payments of any kind or description to any holder of common stock of the Company
or any Affiliate of such holder, (f) make any payments under any "earn-out"
provisions in connection with any acquisition or otherwise in excess of
$5,000,000 for the Ginsbury Acquisition, or (g) set aside funds for any of the
foregoing; provided that the Company may purchase or redeem its capital stock
--------
for not more than fair market value and may pay dividends on its common stock so
long as the aggregate amount paid by the Company for such purchases, redemptions
and dividends on or after July 31, 1993 shall not exceed the sum of (i)
$15,000,000 plus (ii) 50% of Consolidated Net Income for each Fiscal Quarter
(beginning with the Fiscal Quarter ended October 31, 1993) in which such
Consolidated Net Income is greater than zero minus (iii) 100% of Consolidated
Net
- 50 -
<PAGE>
Income for each Fiscal Quarter (beginning with the Fiscal Quarter ended October
31, 1993) in which such Consolidated Net Income is less than zero (exclusive of
$14,610,934 of losses recorded by the Company in the Fiscal Quarter ended
September 30, 1994), in each case so long as no Event of Default or Unmatured
Event of Default has occurred and is continuing or would occur as a result
thereof.
10.9 Mergers, Consolidations, Sales. Not, and not permit any other
------------------------------
Loan Party to, be a party to any merger or consolidation, or purchase or
otherwise acquire all or substantially all of the assets or stock of any class
of, or any partnership or joint venture interest in, any other Person or sell,
transfer, convey or lease all or any substantial part of its assets, or sell or
assign with or without recourse any receivables, except for (i) any such merger
or consolidation, sale, transfer, conveyance, lease or assignment of or by any
wholly owned Subsidiary of the Company into, with or to the Company or any other
wholly owned Subsidiary of the Company, (ii) any such purchase or other
acquisition by the Company or any wholly owned Subsidiary of the assets or stock
of any wholly owned Subsidiary of the Company, (iii) (a) the sale (for not less
than fair market value) of the Company's presently-owned facility located in
Santa Clara, California in connection with the relocation of all or a portion of
the operations taking place at that location or the sale and leaseback of all or
a portion of such facility, and (b) the sale (for not less than fair market
value) and lease-back of the new warehouse facility to be acquired by the
Company as set forth in the proviso to Section 10.19; (iv) any sale by the
-------------
Company or any other Loan Party in the ordinary course of business of assets
which are obsolete or are no longer used or useful in the business of the
Company or such Loan Party; (v) the purchase or other acquisition of all or
substantially all of the assets or stock of any other Person in the same line of
business as the Company (or one related thereto) provided that the purchase
--------
price of such assets or stock, including therein the amount of any liabilities
assumed in connection therewith, shall not exceed $10,000,000 in the aggregate
in any Fiscal Year; and (vi) sales, transfers, conveyances or leases of assets,
or contributions of assets to joint ventures or partnerships, provided that the
--------
fair market value of the assets sold, transferred, conveyed, leased or
contributed pursuant to this clause (vi) in any Fiscal Year shall not exceed
five percent (5%) of Tangible Net Worth as of the last day of the immediately
preceding Fiscal Year.
10.10 Modification of Nature of Business; Modification of
---------------------------------------------------
Organizational Documents. Not make or permit any material change in the nature
- ------------------------
of its business; provided that this clause shall not prevent the Company from
--------
engaging in businesses engaged in as of the Effective Date and similar or
related businesses; and not permit the Articles of Incorporation, By-Laws or
other
- 51 -
<PAGE>
organizational documents of the Company or any other Loan Party to be amended or
modified in any way that would adversely affect the interests of the Agent or
the Banks hereunder or under any of the other Loan Documents.
10.11 Use of Proceeds. Use the proceeds of the Loans solely for
---------------
general corporate purposes; and not use or permit any proceeds of any Loan to be
used, either directly or indirectly, for the purpose, whether immediate,
incidental or ultimate, of "purchasing or carrying" any Margin Stock.
10.12 Employee Benefit Plans. Maintain, and cause each other Loan
----------------------
Party to maintain, each Plan in material compliance with all applicable
requirements of law and regulations.
10.13 Environmental Covenants.
-----------------------
10.13.1 Environmental Response Obligation. (a) Comply, and
---------------------------------
cause each other Loan Party to comply, with any valid Federal or state judicial
or administrative order requiring the performance at any real property owned,
operated, or leased by the Company or any other Loan Party of activities in
response to the release or threatened release of a Hazardous Material, except
where such failure to comply could not reasonably be expected to materially and
adversely affect either (i) the financial condition, operations, assets,
business, properties or, to the knowledge of the Company, prospects of the
Company and its Subsidiaries taken as a whole or (ii) the ability of the Loan
Parties to perform their obligations under the Loan Documents; (b) notify the
Agent within ten days of the receipt of any written claim, demand, proceeding,
action, or notice of liability by any Person arising out of or relating to the
release or threatened release of a Hazardous Material on, under or from any
property owned, operated or leased by the Company or any other Loan Party; and
(c) notify the Agent within ten days of any release, threat of release, or
disposal of Hazardous Material reported to any governmental regulatory authority
at any real property owned, operated, or leased by the Company or any other Loan
Party.
10.13.2 Environmental Liabilities. Not, and not permit any
-------------------------
other Loan Party to, violate any requirement of law regarding Hazardous
Materials; and, without limiting the foregoing, not commence disposal of any
Hazardous Material into or onto any real property owned, operated, or leased by
the Company or any other Loan Party nor allow any lien imposed pursuant to any
law, regulation or order relating to Hazardous Materials or the disposal thereof
to remain on such real property, except as could not reasonably be expected to
materially and adversely affect either (i) the financial condition, operations,
assets, business, properties or, to the knowledge of the Company, prospects of
the Company and its
- 52 -
<PAGE>
Subsidiaries taken as a whole or (ii) the ability of the Loan Parties to perform
their obligations under the Loan Documents.
10.14 Material Agreements. Comply with and perform, and cause each
-------------------
of the other Loan Parties to comply with and perform, every covenant, term,
condition and other provision of every agreement, indenture, instrument and
other document which is binding on the Company or any other Loan Party (except
in those instances in which the failure to so comply and perform could not
reasonably be expected to materially adversely affect either (i) the financial
condition, operations, assets, business, properties or, to the knowledge of the
Company, prospects of the Company and its Subsidiaries taken as a whole or (ii)
the ability of the Loan Parties to perform their obligations under the Loan
Documents).
10.15 Maintenance of Properties. Maintain, and cause each other Loan
-------------------------
Party to maintain, its material equipment, improvements and other property in
good repair, working order and condition, ordinary wear and tear excepted, and
will make, and cause each other Loan Party to make, such repairs, replacements
and additions as may be necessary to maintain such condition.
10.16 Investments. Not, and not permit any other Loan Party to,
-----------
make, incur, assume or suffer to exist any Investment in any other Person,
except:
(a) Investments existing on the Effective Date and identified in
Schedule 10.16 and Investments made after the Effective Date expressly
--------------
included in Schedule 10.16;
---------------
(b) Cash Equivalent Investments;
(c) Investments by the Company in its wholly owned Subsidiaries which
are Material Subsidiaries;
(d) Investments by the Company in its wholly owned Subsidiaries which
are not Material Subsidiaries, provided that such Investments (excluding
--------
the Ginsbury Acquisition) do not exceed $10,000,000 (without giving effect
to any increase or decrease in the value of any such Investment after the
date made);
(e) loans or advances made by any Subsidiary of the Company to the
Company;
(f) reasonable loans or advances to officers and employees for travel
and relocation expenses in the ordinary course of business;
(g) other Investments, provided that the net aggregate amount
--------
invested by the Company and the other Loan Parties
- 53 -
<PAGE>
pursuant to this subparagraph (g) (without giving effect to any increase or
decrease in the value of any such Investment after the date made) shall not
exceed $2,000,000; and
(h) the Ginsbury Acquisition for a total aggregate consideration
(including debt assumed) not exceeding $40,000,000.
10.17 No Negative Pledge. Not, and not permit any other Loan Party
------------------
to, enter into or become bound by any agreement containing any provision which
would restrict the ability of the Company or any other Loan Party to grant a
Lien on any of its assets or which would be violated or breached by any
borrowing by the Company hereunder or issuance or payment of reimbursement
obligations under any Loan or by the performance by the Company or any other
Loan Party of any of its obligations hereunder or under any other Loan Document,
other than the restrictions set forth in that certain Note Agreement dated as of
January 2, 1990 pertaining to the Company's 8.95% Senior Notes due December 2,
1996.
10.18 Funded Debt of Subsidiaries. Not permit any Subsidiary to
---------------------------
incur any Debt for borrowed money.
10.19 Capital Expenditures. Not, and not permit its Subsidiaries to,
--------------------
make or commit to make Capital Expenditures in any Fiscal Year in excess of 225%
of the amount expensed as depreciation in determining Consolidated Net Income
from continuing operations for the immediately preceding Fiscal Year; provided
--------
that Capital Expenditures by the Company of up to $18,000,000 to acquire and
equip a new warehouse facility for the purpose of centralizing its warehouse
operations shall not be included in determining compliance with this covenant;
provided, further, that Capital Expenditures may exceed the foregoing limit in
- -------- -------
the Fiscal Year ending December 31, 1995.
10.20 Subsidiary Guaranties. Immediately upon the formation of any
---------------------
Subsidiary of the Company (other than an Inactive Subsidiary) or upon any Person
becoming a Subsidiary of the Company (other than an Inactive Subsidiary), the
Company shall cause such Subsidiary to execute and deliver to the Agent a
Subsidiary Guaranty substantially in the form of Exhibit D.
---------
SECTION 11 CONDITIONS OF LENDING.
The obligation of each Bank to make or continue its Loans (other than
any Loans deemed to have been made pursuant to Section 2.9 and 2.11) and of each
--------------------
Issuing Bank to issue Letters of Credit is subject to the following conditions
precedent:
- 54 -
<PAGE>
11.1 Initial Letter of Credit or Loan. The obligation of each Bank
--------------------------------
to continue and make Loans and of each Issuing Bank to issue any Letter of
Credit, whichever first occurs, is, in addition to the conditions precedent
specified in Section 11.2, subject to the conditions precedent (and the date on
------------
which all such conditions precedent have been satisfied or waived in writing by
the Banks is called the "Effective Date") that (a) since December 31, 1994, (i)
no material adverse change has occurred in, or development reasonably likely to
have a material adverse effect on, the financial condition, operations, assets,
business, properties or, to the knowledge of the Company, prospects of the
Company and its Subsidiaries taken as a whole, (ii) no occurrence or event which
is reasonably likely to have a material adverse effect on the rights and
remedies of the Agent or the Banks or on the ability of any party to any Loan
Document to perform its obligations to the Agent or the Banks shall have
occurred, and (iii) there shall not have occurred a substantial impairment of
the financial markets generally which, in the opinion of the Required Banks, has
materially and adversely affected the transactions contemplated hereby, and (b)
the Agent shall have received (i) all fees which are then due and payable
pursuant to Section 5, and (ii) all of the following, each duly executed and
---------
dated the Effective Date (or such earlier date as shall be satisfactory to the
Agent), in form and substance satisfactory to the Agent, and each (except for
the Notes, of which only the originals shall be signed) in sufficient number of
signed counterparts to provide one for each Bank:
11.1.1 Loan Documents. This Agreement, the Notes, any Letter of
--------------
Credit Applications, the Subsidiary Guaranties and any other Loan Documents
required to be delivered on or before the Effective Date (other than the letters
referred to in Section 5.4, which have been delivered to the Agent and the
-----------
Arranger).
11.1.2 Consents, etc. Certified copies of all documents
--------------
evidencing any necessary corporate action, consents and governmental approvals
(if any) required for the execution, delivery and performance of the Loan
Documents by the Company or any other Loan Party.
11.1.3 Secretary's Certificate. To the extent not received in
-----------------------
connection with the Existing Credit Agreement, a certificate of the Secretary or
an Assistant Secretary of each Loan Party, certifying (i) a copy (attached
thereto) of such Loan Party's Articles or Certificate of Incorporation
(certified by the Secretary of State of the state of such Loan Party's
incorporation) and By-Laws, as amended and in effect on the other matters
reasonably requested by any Bank dated as of the Effective Date, (ii) copies
(attached thereto) of resolutions of the Board of Directors of each Loan Party,
authorizing or ratifying the execution, delivery and performance by such Loan
Party of the Loan Documents to which such Loan Party is a party,
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<PAGE>
and (iii) the names of the officer or officers of such Loan Party authorized to
sign the Loan Documents to which such Loan Party is a party, together with a
sample of the true signature of each such officer (it being understood that the
Agent and each Bank may conclusively rely on each such certificate until
formally advised by a like certificate of any changes therein).
11.1.4 Officer's Certificate. A certificate of a Designated
---------------------
Employee of each Loan Party, certifying (i) that all of the representations and
warranties made by such Loan Party in any Loan Document are true, correct and
complete in all material respects as of the Effective Date, (ii) that no Events
of Default or Unmatured Events of Default exist or will exist after giving
effect to any Loans to be made and Letters of Credit to be issued on the
Effective Date, (iii) that all conditions to make Loans or to issue Letters of
Credit have been satisfied, and (iv) to all other matters reasonably requested
by any Bank.
11.1.5 Opinion of Counsel for the Company. The opinion of
----------------------------------
Stephen Natcher, Vice President-Administration, General Counsel and Secretary of
the Company substantially in the form attached hereto as Exhibit F.
---------
11.1.6 Notice of Borrowing or Notice of Conversion/Continuation.
--------------------------------------------------------
A Notice of Borrowing or a Notice of Conversion/Continuation duly completed for
any borrowing on the Effective Date.
11.1.7 Compliance Certificate. A Compliance Certificate dated
----------------------
as of September 30, 1995 for purposes of calculating the Applicable Margin.
11.1.8 Other. Such other documents as the Agent or any Bank may
-----
reasonably request.
Upon satisfaction or written waiver of each of the conditions set forth in this
Section 11.1 and in Section 11.2 on the Effective Date, the Company shall have
- ------------ ------------
satisfied the requirements for the initial Loan or the initial Letter of Credit,
whichever first occurs, and if no such Loan is made or Letter of Credit issued
on the Effective Date, the conditions applicable to the initial Loan and the
initial Letter of Credit when made or issued after the Effective Date shall be
as set forth in Section 11.2 hereof.
------------
11.2 All Loans and Letters of Credit. The obligation of each Bank
-------------------------------
to make each Loan (other than any Loans deemed to have been made pursuant to
Section 2.9 and 2.11) and of each Issuing Bank to issue or extend any Letter of
- ---------------------
Credit is subject to the following further conditions precedent that:
11.2.1 No Default. (a) No Event of Default or Unmatured Event
----------
of Default has occurred and is continuing or will
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<PAGE>
result from the making of such Loan or the issuance or extension of such Letter
of Credit and (b) the warranties of the Company contained in Section 9 are true
---------
and correct as of the date of such requested Loan or issuance or extension of
such Letter of Credit, with the same effect as though made on such date.
11.2.2 Confirmatory Certificate. If requested by the Agent or
------------------------
by any Bank through the Agent, the Agent shall have received (in sufficient
counterparts to provide one to each Bank) a certificate dated the date of such
requested Loan or issuance or extension of such Letter of Credit and signed by a
duly authorized representative of the Company as to the matters set out in
Section 11.2.1 (it being understood that each request by the Company for the
- --------------
making of a Loan or the issuance of a Letter of Credit shall be deemed to
constitute a warranty by the Company that the conditions precedent set forth in
Section 11.2.1 will be satisfied at the time of the making of such Loan or the
- --------------
issuance of such Letter of Credit).
SECTION 12 EVENTS OF DEFAULT AND THEIR EFFECT.
12.1 Events of Default. Each of the following shall constitute an
-----------------
Event of Default under this Agreement:
12.1.1 Non-Payment of the Loans, etc. (i) Default in the
------------------------------
payment when due of the principal of any Loan, including without limitation any
amount payable pursuant to Section 2.1.3, or (ii) default in the payment when
-------------
due of the interest on any Loan, fees, reimbursement obligations with respect to
any Letter of Credit or any other amounts payable or deliverable by the Company
hereunder or under any other Loan Document, and in the case of this clause (ii),
continuance of such failure for five (5) days.
12.1.2 Non-Payment of Other Debt. Any default shall occur
-------------------------
under the terms applicable to any Debt of the Company or any other Loan Party in
an aggregate amount (for all Debt so affected) exceeding $2,500,000 and such
default shall (a) consist of the failure to pay such Debt when due (subject to
any applicable grace period), whether by acceleration or otherwise, or (b)
accelerate the maturity of such Debt or permit the holder or holders thereof, or
any trustee or agent for such holder or holders, to cause such Debt to become
due and payable prior to its expressed maturity.
12.1.3 Bankruptcy, Insolvency, etc. Any Loan Party (other than
----------------------------
a Subsidiary which is not a Material Subsidiary) becomes insolvent or generally
fails to pay, or admits in writing its inability or refusal to pay, its debts as
they become due; or applies for, consents to, or acquiesces in the appointment
of a trustee, receiver or other custodian for
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<PAGE>
such Person or any property thereof, or makes a general assignment for the
benefit of creditors; or, in the absence of such application, consent or
acquiescence, a trustee, receiver or other custodian is appointed for any Loan
Party or for a substantial part of the property of any thereof and is not
discharged within sixty (60) days; or any bankruptcy, reorganization, debt
arrangement, or other case or proceeding under any bankruptcy or insolvency law,
or any dissolution or liquidation proceeding is commenced in respect of any Loan
Party (other than a Subsidiary which is not a Material Subsidiary), and if such
case or proceeding is not commenced by such Loan Party, it is consented to or
acquiesced in by such Loan Party or any order for relief is entered in
connection therewith, or such case or proceeding remains for sixty (60) days
undismissed; or any Loan Party (other than a Subsidiary which is not a Material
Subsidiary) takes any corporate action to authorize, or in furtherance of, any
of the foregoing.
12.1.4 Non-Compliance with Provisions of This Agreement or Any
-------------------------------------------------------
Other Loan Document. Failure by the Company to comply with or to perform any
- -------------------
covenant set forth in Sections 10.1.5(a), 10.1.9, 10.5, 10.6, 10.7, 10.8, 10.9,
---------------------------------------------------------
10.10, 10.16, 10.17, 10.18, 10.19 or 10.20; or failure by the Company to comply
- --------------------------------- ------
with or perform any covenant set forth in Section 10.1.5 (other than clause (a)
-------------- ---
thereof) and continuance of such failure for 5 days, or failure by the Company
or any other Loan Party to comply with or to perform any other provision of this
Agreement or any provision of any other Loan Document (and not constituting an
Event of Default under any of the other provisions of this Section 12) and
-----------
continuance of such failure for 30 days; provided that in the event of any
--------
failure to comply with Section 10.13 or Section 10.4 (to the extent such failure
------------- ------------
relates to Hazardous Materials), such failure shall not be deemed to be an Event
of Default so long as the Company commences to cure such non-compliance within
such 30-day period and thereafter diligently proceeds to cure in accordance with
the rules, regulations and procedures of the applicable federal, state and local
agencies regulating Hazardous Materials and completes such cure within 180 days
of the date of such failure.
12.1.5 Warranties. Any warranty made herein or in any other
----------
Loan Document by the Company or any other Loan Party is breached or is false or
misleading in any material respect, any schedule, certificate, financial
statement, report, notice or other writing furnished by or on behalf of the
Company or any Subsidiary of the Company to the Agent or any Bank is false or
misleading in any material respect, in each case on the date as of which the
facts therein set forth are stated or certified or deemed stated or certified
(it being recognized by the Agent and each Bank that projections and forecasts
provided by the Company are not to be viewed as facts and that actual results
during the
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<PAGE>
period or periods covered by any such projections and forecasts may differ from
projected or forecasted results).
12.1.6 ERISA. (a) Any Termination Event with respect to an
-----
ERISA Plan shall occur which could reasonably be expected to result in the
imposition of liability on the Company or any member of its ERISA Controlled
Group in excess of $2,500,000 in the aggregate; (b) any Plan (other than a
Multiemployer Plan) shall incur an "accumulated funding deficiency" (as defined
in Section 412 of the Code or Section 302 of ERISA) for which a waiver shall not
have been obtained in accordance with the applicable provisions of the Code or
ERISA or for which a waiver shall have been obtained on the condition that
security be provided by the Company or any member of its ERISA Controlled Group;
(c) the Company or a member of its ERISA Controlled Group shall have engaged in
a transaction which is prohibited under Section 4975 of the Code or Section 406
of ERISA which could reasonably be expected to result in the imposition of
liability on the Company or any member of its ERISA Controlled Group in excess
of $2,500,000 in the aggregate; (d) the Company or any member of its ERISA
Controlled Group shall fail to pay when due an amount in excess of $2,500,000
which it shall have become liable to pay to the PBGC, a Plan or a trust
established under Title IV of ERISA; (e) a condition shall exist by reason of
which the PBGC would be entitled to obtain a decree adjudicating that an ERISA
Plan (other than a Multiemployer Plan) must be terminated or have a trustee
appointed to administer such Plan (other than a Multiemployer Plan); or (f) a
Lien shall be imposed on any assets of the Company or a member of its ERISA
Controlled Group in favor of the PBGC or a Plan.
12.1.7 Judgments. Final judgments which exceed an aggregate of
---------
$2,500,000 (or the equivalent at the time in question in any other currency) or
any judgment which otherwise could reasonably be expected to have a material
adverse effect on either (i) the financial condition, operations, assets,
business, properties or, to the knowledge of the Company, prospects of the
Company and its Subsidiaries taken as a whole or (ii) the ability of the Loan
Parties to perform their obligations under the Loan Documents shall be rendered
against the Company or any Subsidiary and shall not have been satisfied, paid,
discharged or vacated or had execution thereof stayed pending appeal within 60
days after entry or filing of such judgments.
12.1.8 Guaranties. Any of the Subsidiary Guaranties shall,
----------
after the execution and delivery thereof, cease to be in full force and effect
or is declared to be null and void, or the validity or enforceability thereof is
contested in a judicial proceeding, or any guarantor under any of the Subsidiary
Guaranties denies that it has any further liability thereunder.
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<PAGE>
12.1.9 Change of Control. Any Person or group of Persons shall
-----------------
become the beneficial owner, directly or indirectly, of capital stock of the
Company representing 30% or more of the voting power of the Company or otherwise
enabling such Person or group of Persons to exercise effective control over the
management of the Company.
12.2 Effect of Event of Default. If any Event of Default described
--------------------------
in Section 12.1.3 with respect to the Company shall occur, the Commitments (if
--------------
they have not theretofore terminated) shall immediately terminate and the Notes
and all other obligations hereunder shall become immediately due and payable and
the Company shall become immediately obligated to deliver to the Agent cash
collateral in an amount equal to the outstanding Stated Amount of all Letters of
Credit, all without presentment, demand, protest or notice of any kind; and, in
the case of any other Event of Default, the Agent may (and upon written request
of the Required Banks shall) declare the Commitments (if they have not
theretofore terminated) to be terminated and/or declare all Notes and all other
obligations hereunder to be due and payable and/or demand that the Company
immediately deliver to the Agent cash collateral in an amount equal to the
outstanding Stated Amount of all Letters of Credit, whereupon the Commitments
(if they have not theretofore terminated) shall immediately terminate and/or all
Notes and all other obligations hereunder shall become immediately due and
payable and/or the Company shall immediately become obligated to deliver to the
Agent cash collateral in an amount equal to the Stated Amount of all Letters of
Credit, all without presentment, demand, protest or notice of any kind.
Notwithstanding the foregoing, the effect of an Event of Default of any event
described in Section 12.1.1 or Section 12.1.3 with respect to the Company may be
-------------- --------------
waived by the written concurrence of all of the Banks, and the effect of an
Event of Default of any other event described in this Section 12 may be waived
----------
by the written concurrence of the Required Banks. Any cash collateral hereunder
shall be delivered to the Agent (without liability for interest thereon), and
the Agent may apply the Cash Collateral to obligations arising in connection
with any drawing under a Letter of Credit. Upon the expiration or termination
of any Letters of Credit, such cash collateral in excess of the Stated Amount of
the remaining Letters of Credit may be applied by the Agent to any remaining
obligations hereunder and any excess (as determined by the Agent or by a court
of competent jurisdiction) shall be delivered to the Company or as a court of
competent jurisdiction may direct.
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<PAGE>
SECTION 13 THE AGENT.
13.1 Appointment and Authorization; "Agent". Each Bank hereby
--------------------------------------
irrevocably (subject to Section 13.9) appoints, designates and authorizes the
Agent to take such action on its behalf under the provisions of this Agreement
and each other Loan Document and to exercise such powers and perform such duties
as are expressly delegated to it by the terms of this Agreement or any other
Loan Document, together with such powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary contained elsewhere in this
Agreement or in any other Loan Document, the Agent shall not have any duties or
responsibilities, except those expressly set forth herein, nor shall the Agent
have or be deemed to have any fiduciary relationship with any Bank, and no
implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against the Agent. Without limiting the generality of the
foregoing sentence, the use of the term "agent" in this Agreement with reference
to the Agent is not intended to connote any fiduciary or other implied (or
express) obligations arising under agency doctrine of any applicable law.
Instead, such term is used merely as a matter of market custom, and is intended
to create or reflect only an administrative relationship between independent
contracting parties.
13.2 Delegation of Duties. The Agent may execute any of its duties
--------------------
under this Agreement or any other Loan Document by or through agents, employees
or attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agent or attorney-in-fact that it selects with
reasonable care.
13.3 Liability of Agent. None of the Agent-Related Persons shall (i)
------------------
be liable for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Loan Document or the transactions
contemplated hereby (except for its own gross negligence or willful misconduct),
or (ii) be responsible in any manner to any of the Banks for any recital,
statement, representation or warranty made by the Company or any Subsidiary or
Affiliate of the Company, or any officer thereof, contained in this Agreement or
in any other Loan Document, or in any certificate, report, statement or other
document referred to or provided for in, or received by the Agent under or in
connection with, this Agreement or any other Loan Document, or the validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other Loan Document, or for any failure of the Company or any other party to
any Loan Document to perform its obligations hereunder or thereunder. No Agent-
Related Person shall be under any obligation to any Bank to ascertain or to
inquire as to the observance or performance of any of the agreements contained
in,
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<PAGE>
or conditions of, this Agreement or any other Loan Document, or to inspect the
properties, books or records of the Company or any of the Company's Subsidiaries
or Affiliates.
13.4 Reliance by Agent. (a) The Agent shall be entitled to rely,
-----------------
and shall be fully protected in relying, upon any writing, resolution, notice,
consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone
message, statement or other document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons, and upon advice and statements of legal counsel (including counsel
to the Company), independent accountants and other experts selected by the
Agent. The Agent shall be fully justified in failing or refusing to take any
action under this Agreement or any other Loan Document unless it shall first
receive such advice or concurrence of the Required Banks as it deems appropriate
and, if it so requests, it shall first be indemnified to its satisfaction by the
Banks against any and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action. The Agent shall in all
cases be fully protected in acting, or in refraining from acting, under this
Agreement or any other Loan Document in accordance with a request or consent of
the Required Banks and such request and any action taken or failure to act
pursuant thereto shall be binding upon all of the Banks.
(b) For purposes of determining compliance with the conditions
specified in Section 11, each Bank that has executed this Agreement shall be
deemed to have consented to, approved or accepted or to be satisfied with, each
document or other matter either sent by the Agent to such Bank for consent,
approval, acceptance or satisfaction, or required thereunder to be consented to
or approved by or acceptable or satisfactory to the Bank.
13.5 Notice of Default. The Agent shall not be deemed to have
-----------------
knowledge or notice of the occurrence of any Default or Event of Default, except
with respect to defaults in the payment of principal, interest and fees required
to be paid to the Agent for the account of the Banks, unless the Agent shall
have received written notice from a Bank or the Company referring to this
Agreement, describing such Default or Event of Default and stating that such
notice is a "notice of default". The Agent will notify the Banks of its receipt
of any such notice. The Agent shall take such action with respect to such
Default or Event of Default as may be requested by the Required Banks in
accordance with Section 14.1; provided, however, that unless and until the Agent
-------- -------
has received any such request, the Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such
Default or Event of Default as it shall deem advisable or in the best interest
of the Banks.
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<PAGE>
13.6 Credit Decision. Each Bank acknowledges that none of the
---------------
Agent-Related Persons has made any representation or warranty to it, and that no
act by the Agent hereinafter taken, including any review of the affairs of the
Company and its Subsidiaries, shall be deemed to constitute any representation
or warranty by any Agent-Related Person to any Bank. Each Bank represents to the
Agent that it has, independently and without reliance upon any Agent-Related
Person and based on such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the business, prospects,
operations, property, financial and other condition and credit worthiness of the
Company and its Subsidiaries, and all applicable bank regulatory laws relating
to the transactions contemplated hereby, and made its own decision to enter into
this Agreement and to extend credit to the Company hereunder. Each Bank also
represents that it will, independently and without reliance upon any Agent-
Related Person and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit analysis, appraisals
and decisions in taking or not taking action under this Agreement and the other
Loan Documents, and to make such investigations as it deems necessary to inform
itself as to the business, prospects, operations, property, financial and other
condition and credit worthiness of the Company. Except for notices, reports and
other documents expressly herein required to be furnished to the Banks by the
Agent, the Agent shall not have any duty or responsibility to provide any Bank
with any credit or other information concerning the business, prospects,
operations, property, financial and other condition or credit worthiness of the
Company which may come into the possession of any of the Agent-Related Persons.
13.7 Indemnification of Agent. Whether or not the transactions
------------------------
contemplated hereby are consummated, the Banks shall indemnify upon demand the
Agent-Related Persons (to the extent not reimbursed by or on behalf of the
Company and without limiting the obligation of the Company to do so), pro rata,
from and against any and all Indemnified Liabilities; provided, however, that no
-------- -------
Bank shall be liable for the payment to the Agent-Related Persons of any portion
of such Indemnified Liabilities resulting solely from such Person's gross
negligence or willful misconduct. Without limitation of the foregoing, each
Bank shall reimburse the Agent upon demand for its ratable share of any costs or
out-of-pocket expenses (including the fees and charges of counsel for the Agent,
including, without limitation, all allocated costs of the Agent's internal
counsel, and of local counsel, if any, who may be retained) incurred by the
Agent in connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, any other Loan Document, or any document
contemplated
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<PAGE>
by or referred to herein, to the extent that the Agent is not reimbursed for
such expenses by or on behalf of the Company. The undertaking in this Section
shall survive the payment of all Obligations hereunder and the resignation or
replacement of the Agent.
13.8 Agent in Individual Capacity. BofA and its Affiliates may make
----------------------------
loans to, issue letters of credit for the account of, accept deposits from,
acquire equity interests in and generally engage in any kind of banking, trust,
financial advisory, underwriting or other business with the Company and its
Subsidiaries and Affiliates as though BofA were not the Agent hereunder and
without notice to or consent of the Banks. The Banks acknowledge that, pursuant
to such activities, BofA or its Affiliates may receive information regarding the
Company or its Affiliates (including information that may be subject to
confidentiality obligations in favor of the Company or such Subsidiary) and
acknowledge that the Agent shall be under no obligation to provide such
information to them. With respect to its Loans, BofA shall have the same rights
and powers under this Agreement as any other Bank and may exercise the same as
though it were not the Agent, and the terms "Bank" and "Banks" include BofA in
its individual capacity.
13.9 Successor Agent. The Agent may, and at the request of the
---------------
Required Banks shall, resign as Agent upon 30 days' notice to the Banks. If the
Agent resigns under this Agreement, the Required Banks shall appoint from among
the Banks a successor agent for the Banks which successor agent shall be
approved by the Company. If no successor agent is appointed prior to the
effective date of the resignation of the Agent, the Agent may appoint, after
consulting with the Banks and the Company, a successor agent from among the
Banks. Upon the acceptance of its appointment as successor agent hereunder,
such successor agent shall succeed to all the rights, powers and duties of the
retiring Agent and the term "Agent" shall mean such successor agent and the
retiring Agent's appointment, powers and duties as Agent shall be terminated.
After any retiring Agent's resignation hereunder as Agent, the provisions of
this Section 13 and Sections 14.6 and 14.12 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent under this
Agreement. If no successor agent has accepted appointment as Agent by the date
which is 30 days following a retiring Agent's notice of resignation, the
retiring Agent's resignation shall nevertheless thereupon become effective and
the Banks shall perform all of the duties of the Agent hereunder until such
time, if any, as the Required Banks appoint a successor agent as provided for
above.
13.10 Withholding Tax. (a) If any Bank is a "foreign corporation,
---------------
partnership or trust" within the meaning of the Code and such Bank claims
exemption from, or a reduction of, U.S.
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<PAGE>
withholding tax under Sections 1441 or 1442 of the Code, such Bank agrees with
and in favor of the Agent, to deliver to the Agent:
(i) if such Bank claims an exemption from, or a reduction of,
withholding tax under a United States tax treaty, two properly completed
and executed copies of IRS Form 1001 before the payment of any interest in
the first calendar year and before the payment of any interest in each
third succeeding calendar year during which interest may be paid under this
Agreement;
(ii) if such Bank claims that interest paid under this Agreement
is exempt from United States withholding tax because it is effectively
connected with a United States trade or business of such Bank, two properly
completed and executed copies of IRS Form 4224 before the payment of any
interest is due in the first taxable year of such Bank and in each
succeeding taxable year of such Bank during which interest may be paid
under this Agreement; and
(iii) such other form or forms as may be required under the Code
or other laws of the United States as a condition to exemption from, or
reduction of, United States withholding tax.
Such Bank agrees to promptly notify the Agent of any change in circumstances
which would modify or render invalid any claimed exemption or reduction.
(b) If any Bank claims exemption from, or reduction of, withholding
tax under a United States tax treaty by providing IRS Form 1001 and such Bank
sells, assigns, grants a participation in, or otherwise transfers all or part of
the Obligations of the Company to such Bank, such Bank agrees to notify the
Agent of the percentage amount in which it is no longer the beneficial owner of
Obligations of the Company to such Bank. To the extent of such percentage
amount, the Agent will treat such Bank's IRS Form 1001 as no longer valid.
(c) If any Bank claiming exemption from United States withholding tax
by filing IRS Form 4224 with the Agent sells, assigns, grants a participation
in, or otherwise transfers all or part of the Obligations of the Company to such
Bank, such Bank agrees to undertake sole responsibility for complying with the
withholding tax requirements imposed by Sections 1441 and 1442 of the Code.
(d) If any Bank is entitled to a reduction in the applicable
withholding tax, the Agent may withhold from any interest payment to such Bank
an amount equivalent to the applicable withholding tax after taking into account
such
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<PAGE>
reduction. However, if the forms or other documentation required by subsection
(a) of this Section are not delivered to the Agent, then the Agent may withhold
from any interest payment to such Bank not providing such forms or other
documentation an amount equivalent to the applicable withholding tax imposed by
Sections 1441 and 1442 of the Code, without reduction.
(e) If the IRS or any other Governmental Authority of the United
States or other jurisdiction asserts a claim that the Agent did not properly
withhold tax from amounts paid to or for the account of any Bank (because the
appropriate form was not delivered or was not properly executed, or because such
Bank failed to notify the Agent of a change in circumstances which rendered the
exemption from, or reduction of, withholding tax ineffective, or for any other
reason) such Bank shall indemnify the Agent fully for all amounts paid, directly
or indirectly, by the Agent as tax or otherwise, including penalties and
interest, and including any taxes imposed by any jurisdiction on the amounts
payable to the Agent under this Section, together with all costs and expenses
(including the fees and charges of counsel for the Agent, including, without
limitation, all allocated costs of the Agent's internal counsel, and of local
counsel, if any, who may be retained). The obligation of the Banks under this
subsection shall survive the payment of all Obligations and the resignation or
replacement of the Agent.
SECTION 14 GENERAL.
14.1 Waiver: Amendments. No delay on the part of the Agent, any
------------------
Bank or any other holder of a Note in the exercise of any right, power or remedy
shall operate as a waiver thereof, nor shall any single or partial exercise by
any of them of any right, power or remedy preclude other or further exercise
thereof, or the exercise of any other right, power or remedy. No amendment,
modification or waiver of, or consent with respect to, any provision of this
Agreement, the Notes or the other Loan Documents shall in any event be effective
unless the same shall be in writing and signed and delivered by the Agent and
signed and delivered by Banks having an aggregate Percentage of not less than
the aggregate Percentage expressly designated herein with respect thereto or, in
the absence of such designation as to any provision of this Agreement, the Notes
or the other Loan Documents, by the Required Banks, and then any such amendment,
modification, waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given. No amendment, modification,
waiver or consent shall (i) extend or increase the amount of the Commitments,
(ii) extend the date for payment of any principal of or interest on the Loans,
any reimbursement obligation under any Letter of Credit or any interest or any
fees payable hereunder, (iii) reduce the principal amount of any Loan or any
reimbursement obligation
- 66 -
<PAGE>
under any Letter of Credit, the rate of interest thereon or any fees payable
hereunder, (iv) reduce the aggregate Percentage required to effect an amendment;
modification, waiver or consent, or (v) release any Subsidiary party to a
Subsidiary Guaranty from its obligations thereunder without, in each case, the
consent of all Banks. No provisions of Section 13 shall be amended, modified or
----------
waived without the consent of the Agent.
14.2 Confirmations. The Company and each holder of a Note agree
-------------
from time to time, upon written request received by it from the other, to
confirm to the other in writing (with a copy of each such confirmation to the
Agent) the aggregate unpaid principal amount of the Loans then outstanding under
such Note.
14.3 Notices. Except as otherwise provided in Sections 2.3, 2.4,
------- ------------ ---
and 4.3, all notices hereunder shall be in writing (including, without
---
limitation, facsimile transmission) and shall be sent to the applicable party at
its address shown on Schedule 14.3 hereto or at such other address as such party
-------------
may, by written notice received by the other party, have designated as its
address for such purpose. Notices sent by facsimile transmission shall be deemed
to have been given when sent; notices sent by mail shall be deemed to have been
given three Business Days after the date when sent by registered or certified
mail, postage prepaid; notices sent by overnight courier shall be deemed to have
been given one Business Day after the date when sent; and notices sent by hand
delivery shall be deemed to have been given when received. For purposes of
Sections 2.3, 2.4 and 4.3, the Agent shall be entitled to rely on instructions
- ------------ --- ---
from any person that the Agent in good faith believes is a Designated Employee
of the Company. The Company shall be bound by such instructions in the same
manner as if such person were a Designated Employee and shall indemnify and hold
the Agent and each Bank harmless from any loss, cost or expense resulting from
any such reliance.
14.4 Computations. Where the character or amount of any asset or
------------
liability or item of income or expense is required to be determined, or any
consolidation or other accounting computation is required to be made, for the
purpose of this Agreement, such determination or calculation shall, to the
extent applicable and except as otherwise specified in this Agreement, be made
in accordance with Generally Accepted Accounting Principles applicable at the
time of such computation (or, if "Accounting Changes" (as defined below) shall
have occurred and the affected provisions of this Agreement shall not have been
amended as contemplated by the next sentence, in accordance with generally
accepted accounting principles applicable immediately prior to such Accounting
Changes) and applied on a basis consistent with the audited financial statements
certified by Arthur Andersen & Co. for Fiscal Year 1994. In the event that any
"Accounting Changes" (as defined below) occur and such
- 67 -
<PAGE>
changes result in a change in the method of calculation of financial covenants,
standards or terms in this Agreement, then the Company and the Banks agree to
enter into negotiations in order to amend such provisions of this Agreement so
as to equitably reflect such Accounting Changes with the desired result that the
criteria for evaluating the Company's financial condition shall be the same
after such Accounting Changes as if such Accounting Changes had not been made.
"Accounting Changes" means: (a) changes in accounting principles required by the
promulgation of any rule, regulation, pronouncement or opinion by the Financial
Accounting Standards Board of the American Institute of Certified Public
Accountants (or successors thereto or agencies with similar functions); and (b)
changes in accounting principles recommended and implemented by the Company's
certified public accountants.
14.5 Regulation U. Each Bank represents that it in good faith is
------------
not relying, either directly or indirectly, upon any Margin Stock as collateral
security for the extension or maintenance by it of any credit provided for in
this Agreement.
14.6 Costs, Expenses and Taxes. The Company agrees to pay on demand
-------------------------
all reasonable out-of-pocket costs and expenses of the Agent (including the fees
and charges of counsel for the Agent, including, without limitation, all
allocated costs of the Agent's internal counsel, and of local counsel, if any,
who may be retained) in connection with the preparation, execution, delivery and
administration of this Agreement, the other Loan Documents and all other
documents provided for herein or delivered or to be delivered hereunder or in
connection herewith (including, without limitation, any amendments, supplements
or waivers to any Loan Documents), and all out-of-pocket costs and expenses
(including reasonable attorneys' fees, court costs and other legal expenses and
allocated costs of staff counsel) incurred by the Agent and each Bank after an
Event of Default in connection with the enforcement of this Agreement, the other
Loan Documents or any such other documents. Each Bank agrees to reimburse the
Agent for such Bank's pro rata share (based on its respective Percentage) of any
such costs and expenses of the Agent not paid by the Company. In addition, the
Company agrees to pay, and to save the Agent and the Banks harmless from all
liability for, any stamp or other taxes which may be payable in connection with
the execution and delivery of this Agreement, the borrowings hereunder, the
issuance of the Notes or the execution and delivery of any other Loan Document
or any other document provided for herein or delivered or to be delivered
hereunder or in connection herewith. All obligations provided for in this
Section 14.6 shall bear interest from and including the date such obligations or
- ------------
fees become payable to but not including the date that such payments are made,
payable on demand, at a rate per annum equal to the then applicable rate charged
on Base Rate Loans. All obligations provided for in this Section 14.6 shall
------------
- 68 -
<PAGE>
survive repayment of the Loans and all reimbursement obligations under Letters
of Credit, cancellation of the Notes and any termination of the Commitments and
this Agreement.
14.7 Captions. Section captions used in this Agreement are for
--------
convenience only and shall not affect the construction of this Agreement.
14.8 Assignments; Participations.
---------------------------
14.8.1 Assignments. Any Bank may, with the prior consent of
-----------
each Issuing Bank (provided that such Issuing Bank has any Letters of Credit
--------
then outstanding at the time of such proposed assignment), the Agent and the
Company (which consents shall not be unreasonably delayed or withheld), at any
time assign and delegate to one or more Eligible Assignees (any Person to whom
such an assignment and delegation is to be made being herein called an
"Assignee"), all or any fraction of such Bank's Loans, Note, direct or
participation interest in any Letter of Credit, Commitment or any other interest
of such Bank hereunder (which assignment and delegation shall be of a constant,
and not a varying, percentage of all the assigning Bank's Loans, direct or
participation interest in Letters of Credit and Commitment), subject to a
minimum aggregate amount if the Assignee is not a Bank equal to the lesser of
(i) the assigning Bank's remaining Commitment and (ii) $5,000,000; provided,
--------
however, that the Company and the Agent shall be entitled to continue to deal
- -------
solely and directly with such Bank in connection with the interests so assigned
and delegated to an Assignee until five Business Days (or such lesser period of
time as the Agent and the assigning Bank shall agree) after the date when all of
the following conditions shall have been met:
(x) written notice of such assignment and delegation, together with
payment instructions, addresses and related information with respect to
such Assignee, shall have been given to the Company and the Agent by such
assigning Bank and the Assignee,
(y) the assigning Bank and the Assignee shall have executed and
delivered to the Company and the Agent an assignment agreement
substantially in the form of Exhibit E (an "Assignment Agreement"),
---------
together with any documents required to be delivered thereunder, including,
without limitation, United States Internal Revenue Service Form 4224 or
Form 1001, which Assignment Agreement shall have been accepted by the
Agent, the Company and each such Issuing Bank, and
(z) the assigning Bank or the Assignee shall have paid the Agent a
processing fee of $2,500.
- 69 -
<PAGE>
From and after the date on which the conditions described above have been met,
(x) such Assignee 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 Assignee pursuant to such Assignment Agreement, shall have the
rights and obligations of a Bank hereunder, and (y) the assigning Bank, to the
extent that rights and obligations hereunder have been assigned and delegated by
it pursuant to such Assignment Agreement, shall be released from its obligations
hereunder. Within ten Business Days after effectiveness of any assignment and
delegation, the Company shall execute and deliver to the Agent (for delivery to
the Assignee and the Assignor, as applicable) a new Note in the principal amount
of the Assignee's Percentage of the total amount of the Commitments and, if the
assigning Bank has retained a Percentage of the total amount of the Commitments
hereunder, a replacement Note in the principal amount of the Percentage of the
Loan retained by the assigning Bank (such Note to be in exchange for, but not in
payment of, the predecessor Note held by such assigning Bank). Each such Note
shall be dated the date of the Note so assigned. The assigning Bank shall mark
the predecessor Note "exchanged" and deliver it to the Company. Accrued
interest on that part of the predecessor Note being assigned shall be paid as
provided in the Assignment Agreement. Accrued interest and fees on that part of
the predecessor Note not being assigned shall be paid to the assigning Bank.
Accrued interest and accrued fees shall be paid at the same time or times
provided in the predecessor Note and in this Agreement. Any attempted
assignment and delegation not made in accordance with this Section 14.8.1 shall
--------------
be null and void.
In addition to the foregoing, at the request of the Company, any Bank
designated by the Company for replacement (a "Replaced Bank") shall, upon five
(5) Business Days' (or such lesser period of time as the Company, the Agent and
the Replaced Bank shall agree) prior notice, assign all (but not less than all)
of such Bank's Loans, Note, direct or participation interest in any Letter of
Credit, Commitment and all other interests of such Bank hereunder and under the
other Loan Documents (other than contingent rights which survive such transfer)
to an Assignee designated by the Company and approved by the Agent and each
other Bank (each in their sole discretion) at par value. Such assignment shall
be effected as set forth in this Section 14.8.1.
--------------
Notwithstanding the foregoing provisions of this Section 14.8.1 or any
--------------
other provision of this Agreement, any Bank may at any time assign all or any
portion of its Loans and its Note to a Federal Reserve Bank (but no such
assignment shall release any Bank from any of its obligations hereunder).
14.8.2 Participations. Any Bank may at any time sell to one
--------------
or more commercial banks or other Persons
- 70 -
<PAGE>
participating interests in any Loan owing to such Bank, the Note held by such
Bank, the Commitment of such Bank, the direct or participation interest of such
Bank in any Letter of Credit or any other interest of such Bank hereunder (any
Person purchasing any such participating interest being herein called a
"Participant"). In the event of a sale by a Bank of a participating interest to
a Participant, (x) such Bank shall remain the holder of its Note for all
purposes of this Agreement, (y) the Company and the Agent shall continue to deal
solely and directly with such Bank in connection with such Bank's rights and
obligations hereunder and (z) all amounts payable by the Company shall be
determined as if such Bank had not sold such participation and shall be paid
directly to such Bank. No Bank shall grant any Participant any voting rights
with respect to amendments or modifications of this Agreement or any of the
other Loan Documents, except with respect to any of the events described in the
penultimate sentence of Section 14.1. Each Bank agrees to incorporate the
------------
requirements of the preceding sentence into each participation agreement which
such Bank enters into with any Participant. The Company agrees that if amounts
outstanding under this Agreement and the Notes are due and payable (as a result
of acceleration or otherwise), each Participant shall be deemed to have the
right of setoff in respect of its participating interest in amounts owing under
this Agreement, any Note and with respect to any Letter of Credit to the same
extent as if the amount of its participating interest were owing directly to it
as a Bank under this Agreement or such Note; provided that such right of setoff
--------
shall be subject to the obligation of each Participant to share with the Banks,
and the Banks agree to share with each Participant, as provided in Section 7.5.
-----------
The Company also agrees that each Participant shall be entitled to the benefits
of Section 7.6 and Section 8 as if it were a Bank (provided that no Participant
----------- ---------
shall receive any greater compensation pursuant to Section 7.6 or Section 8 than
----------- ---------
would have been paid to the participating Bank if no participation had been
sold).
14.9 Governing Law. This Agreement and each Note shall be a
-------------
contract made under and governed by the internal laws of the State of
California. Whenever possible each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement. All obligations of the Company
and rights of the Agent, the Banks and any other holder of a Note expressed
herein or in any other Loan Document shall be in addition to and not in
limitation of those provided by applicable law.
- 71 -
<PAGE>
14.10 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the different parties hereto on separate counterparts and
each such counterpart shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same Agreement. When
counterparts executed by all of the parties hereto shall have been lodged with
the Agent (or, in the case of any Bank as to which an executed counterpart shall
not have been so lodged, the Agent shall have received confirmation from such
Bank of execution of a counterpart hereof by such Bank), this Agreement shall
become effective as of the date hereof, and at such time the Agent shall notify
the Company and each Bank.
14.11 Successors and Assigns. This Agreement shall be binding upon
----------------------
the Company, the Banks and the Agent and their respective successors and
assigns, and shall inure to the benefit of the Company, the Banks and the Agent
and the successors and assigns of the Banks and the Agent. The Company may not
assign its rights or obligations hereunder or under any other Loan Document
without the consent of each of the Banks.
14.12 Indemnification by the Company. In consideration of the
------------------------------
execution and delivery of this Agreement by the Agent and the Banks and the
agreement to extend the Commitments provided hereunder, the Company hereby
agrees to indemnify and hold the Agent, each Bank and each of the officers,
directors, employees and agents of the Agent and each Bank (collectively the
"Bank Parties" and individually each a "Bank Party") harmless from and against
any and all actions, causes of action, suits, losses, liabilities, damages and
expenses, including, without limitation, reasonable attorneys' fees and charges
and allocated costs of staff counsel (collectively therein called the
"Indemnified Liabilities"), incurred by the Bank Parties or any of them as a
-----------------------
result of, or arising out of, or relating to the execution, delivery,
performance or enforcement of this Agreement or any other Loan Document by any
of the Bank Parties, or the exercise of rights or remedies with respect hereto
or thereto, except that no Bank Party shall be entitled to such indemnification
to the extent of any such Indemnified Liabilities arising on account of such
Bank Party's gross negligence or willful misconduct. If and to the extent that
the foregoing undertaking may be unenforceable for any reason, the Company
hereby agrees to make the maximum contribution to the payment and satisfaction
of each of the Indemnified Liabilities which is permissible under applicable
law. Nothing set forth above shall be construed to relieve any Bank Party from
any obligation it may have under this Agreement. All obligations provided for
in this Section 14.12 shall survive repayment of the Loans and reimbursement
-------------
obligations under Letters of Credit, cancellation of the Notes, termination of
the Letters of Credit, termination of the Commitments and any termination of
this Agreement. Nothing in this Section 14.12 shall obligate the Company to
-------------
reimburse any Bank for any costs or
- 72 -
<PAGE>
expenses incurred by such Bank prior to the Effective Date in connection with
the preparation of this Agreement or the other Loan Documents.
14.13 Forum Selection and Consent to Jurisdiction. ANY LITIGATION
-------------------------------------------
BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT, SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE
COURTS OF THE STATE OF CALIFORNIA OR IN THE UNITED STATES DISTRICT COURT FOR THE
CENTRAL DISTRICT OF CALIFORNIA; PROVIDED, HOWEVER, THAT ANY SUIT SEEKING
-------- -------
ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE
AGENT'S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH COLLATERAL OR OTHER
PROPERTY MAY BE FOUND. THE COMPANY HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO
THE JURISDICTION OF THE COURTS OF THE STATE OF CALIFORNIA AND OF THE UNITED
STATES DISTRICT COURT FOR THE CENTRAL DISTRICT OF CALIFORNIA FOR THE PURPOSE OF
ANY SUCH LITIGATION AS SET FORTH ABOVE. THE COMPANY FURTHER IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY
PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF CALIFORNIA. THE COMPANY HEREBY
EXPRESSLY AND IRREVOCABLY SUBMITS TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH
LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY THAT ANY SUCH
LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT THIS
COMPANY HAS OR 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, THE COMPANY HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF
ITS OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
14.14 Waiver of Jury Trial. EACH OF THE COMPANY, THE AGENT AND EACH
--------------------
BANK HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO
ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT, ANY NOTE, ANY OTHER LOAN
DOCUMENT AND ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH
MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING
FROM ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH ANY OF THE FOREGOING,
AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND
NOT BEFORE A JURY.
14.15 Further Assurances. The Company shall, and shall cause each of
------------------
the other Loan Parties to, take all further actions and execute all further
documents and instruments as the Agent or any Bank may at any time reasonably
determine in its sole discretion to be necessary or advisable to carry out and
consummate the transactions contemplated by the Loan Documents.
- 73 -
<PAGE>
14.16 Reinstatement. This Agreement shall remain in full force and
-------------
effect until payment in full in cash of all obligations under, and Performance
of all provisions of, the Loan Documents. If, at any time, all or part of any
payment of such obligations made by the Company or any other Person is rescinded
or otherwise returned by the Agent or any Bank for any reason whatsoever
(including, without limitation, the insolvency, bankruptcy or reorganization of
the Company or any other Person), this Agreement shall continue to be effective
or shall be reinstated, as the case may be, as to such obligations which were
satisfied by the payment to be rescinded or returned, all as though such payment
had not been made.
14.17 Waivers. The Company waives diligence, presentment, demand of
-------
payment, protest, notice of dishonor or nonpayment of any liability, suit or
taking of other action by the Agent or any of the Banks against, and any other
notice to, any Loan Party (other than the Company) liable with respect to any
Letter of Credit Application or any other Loan Document. The Company further
waives any requirement on the part of the Agent or any of the Banks to mitigate
damages resulting from any default under any Letter of Credit Application or any
other Loan Document.
14.18 Confidentiality. The Agent and each Bank hereby agrees to hold
---------------
all non-public information about the Company and its Subsidiaries obtained from
the Company or its Subsidiaries or their respective officers, auditors or
counsel pursuant to the requirements of this Agreement confidential and not to
disclose any such information, except for disclosure of such information (a) to
another Bank or to the Agent, (b) to any prospective Assignee or Participant
(provided that such prospective Assignee or Participant agrees to maintain the
- ---------
confidentiality of such information as if such Person were bound by this Section
-------
14.18, (c) to its legal counsel, accountants, appraisers and other professional
- -----
advisers, (d) to regulatory officials having jurisdiction over Agent or such
Bank, (e) as Agent or Bank determines, in its sole discretion, is required by
law or regulation or to honor subpoenas or other legal process, or (f) with the
consent of the Company.
14.19 Amendment and Restatement. (a) This Agreement amends and
-------------------------
restates the Existing Credit Agreement effective as of the Effective Date.
Loans and letters of credit outstanding under the Existing Credit Agreement
shall be deemed continued as the Loans and Letters of Credit hereunder as of the
Effective Date. From and after the Effective Date, such Loans and Letters of
Credit shall bear interest and fees as set forth herein.
(b) The parties hereto agree that all references in the Loan
Documents to the Existing Credit Agreement shall be deemed a
- 74 -
<PAGE>
reference to this Agreement, as it may be amended, restated or otherwise
modified from time to time.
- 75 -
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
WYLE ELECTRONICS
(Formerly named Wyle Laboratories)
By /s/ R. Van Ness Holland, Jr.
-----------------------------------
Title: Executive Vice President-
Finance and Treasurer,
Chief Financial Officer
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent
By /s/ Charles Graber
-----------------------------------
Charles Graber
Vice President
BANK OF AMERICA ILLINOIS
By /s/ Gina West
-----------------------------------
Gina West
Vice President
NBD BANK
By /s/ James R. Frye
-----------------------------------
Title: James R. Frye
First Vice President
THE BANK OF NEW YORK
By /s/ Rebecca K. Levine
-----------------------------------
Title: Rebecca K. Levine
Assistant Vice President
NATIONSBANK OF TEXAS, N.A.
By /s/ William C. Collins
-----------------------------------
Title: William C. Collins
Senior Vice President
S-1
<PAGE>
EXHIBIT 10(z)
EXCERPT FROM MARCH 22, 1990
BOARD OF DIRECTORS MEETING MINUTES
Mr. Clough then introduced a proposal for incentive compensation for the
corporate officers of Wyle, based on corporate performance against established
goals. In particular, non-operating corporate officers would have part of their
bonus based on the return on equity ("ROE") of Wyle for fiscal 1991, i.e.,
actual ROE performance for fiscal 1991 would result in a predetermined factor
that would be multiplied by half of the prior year's bonus to determine the ROE
part of the fiscal 1991 bonus; the remaining bonus amount would be
discretionary.
For Messrs. Herring and Ozorkiewicz, the operating officers, their respective
operating group's RONA performance would each result in a predetermined factor
that would each be multiplied by 1/3 of the prior year's bonus to determine the
RONA and ROE portions of their fiscal 1991 bonus; the remaining bonus amounts
would be discretionary.
Mr. Irell indicated that a copy of the proposed plan had been sent to members of
the Executive Compensation Committee and, after consideration, the Committee
recommended the plan for adoption to the Board of Directors. Mr. Sanders also
spoke in favor of the motion and added a few comments concerning the plan. A
copy of the performance goals and recommended plan is attached to these minutes.
After further discussion among the directors, upon motion duly made, seconded
and unanimously carried, with Messrs. Clough, Freedman and Herring abstaining,
the incentive compensation plan for corporate officers of Wyle Laboratories was
adopted.
<PAGE>
DESCRIPTION OF INCENTIVE COMPENSATION PLAN
FOR EXECUTIVE OFFICERS OF WYLE ELECTRONICS
The Company's Board of Directors has extended the plan, originally effective for
its fiscal year ended January 31, 1991, substantially on the same terms for the
fiscal year ending December 31, 1995, except that the performance targets are
based upon RONA and earnings per share, the multipliers are applied to each
officer's incentive target amount and the plan ratios have been modified. The
current RONA and EPS multipliers range from 0.1 to 2.0.
<PAGE>
EXHIBIT 11
PAGE 1 OF 2
WYLE ELECTRONICS
CALCULATION OF INCOME PER SHARE
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994,
AND THE ELEVEN MONTHS ENDED DECEMBER 31, 1993
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Years
Ended Eleven
December 31, Months Ended
-------------------- December 31,
1995 1994 1993
-------- --------- -------------
<S> <C> <C> <C>
Income (loss) applicable to common shares:
Income from continuing operations........... $36,210 $ 13,980 $ 8,336
Discontinued operations
Income from operations, net of taxes....... - 1,418 2,993
Loss on sale, net of taxes................. - (15,779) -
Cumulative effect of accounting
change for postretirement
benefits other than pensions............... - - (3,193)
------- -------- -------
Net income (loss)........................... $36,210 $ (381) $ 8,136
======= ======== =======
PRIMARY:
Common and common equivalent shares -
Weighted average number of
common shares outstanding.................. 12,322 12,252 12,183
Stock options included under
the treasury stock method (1).............. 342 173 172
------- -------- -------
12,664 12,425 12,355
======= ======== =======
Income (loss) per share -
Income from continuing operations........... $ 2.86 $ 1.13 $ .67
======= ======== =======
Discontinued operations
Income from operations, net of taxes....... $ - $ .11 $ .24
======= ======== =======
Loss on sale, net of taxes................. $ - $ (1.27) $ -
======= ======== =======
Cumulative effect of accounting
change for postretirement
benefits other than pensions............... $ - $ - $ (.26)
======= ======== =======
Net income (loss) per common share.......... $ 2.86 $ (.03) $ .66
======= ======== =======
</TABLE>
<PAGE>
EXHIBIT 11
PAGE 2 OF 2
WYLE ELECTRONICS
CALCULATION OF INCOME PER SHARE
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994,
AND THE ELEVEN MONTHS ENDED DECEMBER 31, 1993
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Years
Ended Eleven
December 31, Months Ended
------------------ December 31,
1995 1994 1993
------- -------- -------------
<S> <C> <C> <C>
FULLY DILUTED:
Common and common equivalent shares -
Weighted average number of
common shares outstanding.............. 12,322 12,252 12,183
Stock options included under
the treasury stock method (1).......... 360 184 201
------- ------- -------
12,682 12,436 12,384
======= ======= =======
Income (loss) per share -
Income from continuing operations....... $ 2.86 $ 1.12 $ .67
======= ======= =======
Discontinued operations
Income from operations, net of taxes... $ - $ .11 $ .24
======= ======= =======
Loss on sale, net of taxes............. $ - $ (1.27) $ -
======= ======= =======
Cumulative effect of accounting
change for postretirement
benefits other than pensions........... $ - $ - $ (.26)
======= ======= =======
Net income (loss) per common share...... $ 2.86 $ (.03) $ .66
======= ======= =======
</TABLE>
(1) Under the primary computation the assumed repurchase price of option shares
is based on the average market price for the period. Under the fully diluted
computation the repurchase price is based on the higher of the average
market price or the month-end closing price, whichever provides greater
dilution.
<PAGE>
Wyle Electronics
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Sales and income from continuing operations for the year ended December 31, 1995
totaled $1.077 billion and $36.2 million, respectively. In comparison to the
prior year, sales rose by 36% and income from continuing operations increased
159%. The growth in sales for 1995, compared to 1994, resulted mainly from
increased shipments of semiconductor products, particularly those offered
through the company's value-added activities such as design of application-
specific integrated circuits (ASICs), and other semiconductor design/programming
services, along with kitting, turnkey manufacturing and autoreplenishment.
Shipments of lower-margin PC microprocessors in 1995 were down from the previous
year. The company also registered significantly higher shipments of computer
systems and mass storage devices in 1995 versus 1994.
The increase in income from continuing operations for the year ended December
31, 1995, over the year ended December 31, 1994, primarily reflects the
company's growth in sales. Additionally, the company's aggregate gross margin
percentage increased in comparison to the prior year, due mainly to a change in
the mix of products sold. Earnings for 1995 also benefited from lower selling
and administrative expense as a percentage of sales, due in part to an increase
in sales for the company's new expansion branches, which began operations in
mid-1993. Operating results for 1995 reflected a higher level of interest
expense due to an increased level of credit line borrowings.
For the year ended December 31, 1994, the company reported sales of $792.3
million and income from continuing operations of $14.0 million. In 1994, the
company recorded a special charge to continuing operations of $1.9 million ($1.2
million after tax) primarily for anticipated legal expenses associated with a
certain litigation matter (see Note 10 of Notes to Consolidated Financial
Statements herein). Additionally, on December 23, 1994, the company completed
the sale of its Scientific Services & Systems Group, which it accounted for as a
discontinued operation (see Note 9 of Notes to Consolidated Financial Statements
herein), and recorded a loss on the sale of $15.8 million, after income taxes.
After recording the loss on sale and income from discontinued operations, the
company reported a net loss of $381,000 for the year ended December 31, 1994.
During 1993, the company changed its fiscal year-end from January 31 to December
31, resulting in an eleven-month fiscal year for the period ended December 31,
1993. Therefore, operating results for the year ended December 31, 1994, which
reflect a full twelve-month reporting period, are not directly comparable with
those of the period ended December 31, 1993.
For the eleven months ended December 31, 1993, the company posted sales of
$473.4 million and income from continuing operations of $8.3 million. Net
income, including income from discontinued operations, totaled $11.3 million,
before the effect of an accounting change.
During the first quarter ended April 30, 1993, the company recorded a one-time,
non-cash charge of $3.2 million, after income taxes, for the cumulative effect
of an accounting change to adopt Financial Accounting Standards Board ("FASB")
Statement No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions" (see Note 1 of Notes to Consolidated Financial Statements herein).
In May 1993, the company initiated a major geographic expansion program to open
ten new facilities in key eastern and midwestern markets within the United
States. The company's earnings for the eleven months ended December 31, 1993
were negatively impacted by initial expansion-related start-up expenses
aggregating approximately $8 million. As anticipated, the expansion operations
incurred quarterly operating losses through June 30, 1994 during this initial
investment period. Sales for the new expansion divisions have increased steadily
since inception and aggregate operating losses for these divisions continued to
decline through the quarter ended June 30, 1994. During the second half of 1994,
the expansion divisions, as a whole, began providing a positive income
contribution.
15
<PAGE>
Wyle Electronics
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
The growth in sales for the year ended December 31, 1994, in comparison to the
eleven months ended December 31, 1993, resulted mainly from increased demand for
semiconductor products, especially those offered through the company's value-
added services. The company also registered higher shipments of lower margin
commodity products, primarily microprocessors, and increased computer product
revenues. The continued ramp-up in shipments from the company's new expansion
divisions also contributed to the sales gain in 1994. In addition, revenues for
1994 included twelve months of operations versus the eleven-month period of
1993.
The increase in income from continuing operations for the year ended December
31, 1994, compared to the eleven months ended December 31, 1993, primarily
reflects the reduction in operating losses associated with the company's major
expansion program, coupled with higher profits generated by the non-expansion
divisions. During 1994, the company experienced a decline in the aggregate gross
margin percentage compared to the prior year due mainly to a change in product
mix, as a larger percentage of revenues was generated from lower margin
commodity products and high-volume customer engagements. Earnings for 1994 also
reflected increased interest expense due to higher levels of credit line
borrowings. In addition, income from continuing operations for 1994 included
twelve months of operations versus the eleven-month period for 1993.
The electronics distribution industry is highly sensitive to fluctuating market
conditions primarily caused by changes in the supply and demand for
semiconductors and computer products. Accordingly, the company's financial
results may reflect significant variations from period-to-period due to these
factors.
DISCONTINUED OPERATIONS
Operating results for the Scientific Services & Systems Group are classified as
discontinued operations on the company's consolidated statements of income.
Therefore, the company's sales and income from continuing operations for all
periods reflect only the operating results of its electronics distribution
business.
The Scientific Services & Systems Group reported income of $1.4 million, after
tax, for the nine months ended September 30, 1994. Sales and income from
discontinued operations for the nine months ended September 30, 1994 were
substantially below the prior year, primarily due to the continuing decline in
the aerospace and defense markets served by the group. In addition, operating
results in 1994 reflected costs and expenses totaling $1.1 million associated
with resolving a certain contract dispute.
OTHER
Net interest expense for the year ended December 31, 1995 of $3.3 million
increased, in comparison to the year ended December 31, 1994, due to higher
credit line borrowing levels that were incurred primarily to fund the company's
working capital requirements associated with its sales growth and to finance the
construction of a new warehouse/value-added distribution center.
Net interest expense for the year ended December 31, 1994 of $1.3 million was
above that for the eleven months ended December 31, 1993 mainly as a result of
increased credit line borrowings, which were incurred to fund the company's
continuing start-up costs and working capital requirements associated with its
expansion program. An interest rate swap agreement previously entered into by
the company had an immaterial effect on overall interest expense for the periods
presented.
16
<PAGE>
The company's effective income tax rate for continuing operations was 39.7%,
38.5% and 34.5% for the periods ended December 31, 1995, 1994 and 1993,
respectively. The rise in the effective tax rate for 1994 versus 1993 can be
attributed mainly to the reduced effect of certain credits to the income tax
provision and an increase in the aggregate effective state income tax rate, as a
larger proportion of sales are being derived from states with higher income tax
rates due, in part, to the company's national expansion.
On January 1, 1994, the company adopted FASB Statement No. 112, "Employers'
Accounting for Postemployment Benefits." The adoption of this statement did not
have a material effect on the company's net income (loss) or financial position.
LIQUIDITY AND CAPITAL RESOURCES
The company's working capital at December 31, 1995 of $255.5 million rose by
$84.7 million from December 31, 1994. Working capital growth resulted primarily
from an increase in inventories and trade receivables due to higher sales
levels, offset partially by higher accounts payable. The current ratio was 3.0
to 1 at December 31, 1995 compared with 2.7 to 1 at December 31, 1994. The ratio
of long-term debt to total capital was 31% and 10% at December 31, 1995 and
1994, respectively. The increased debt to capital ratio resulted primarily from
higher long-term credit line borrowings, offset partly by an increase in
shareholders' equity due mainly to additional net income for the year.
Capital expenditures for the year ended December 31, 1995 aggregated $23.6
million, which are higher than the year ended December 31, 1994 due mainly to
the construction of a new value-added distribution center. Capital outlays for
this new facility, which is on schedule to become fully operational in 1996,
aggregated approximately $13.9 million during 1995. The company expects its
total capital expenditures for 1996 to be approximately $10 million.
Many factors affect the company's cash requirements such as changes in its sales
level and inventory turnover rate. During electronics industry growth periods,
as was the case in 1995, increases in receivable and inventory balances have
typically been financed through cash on hand and cash flow from operations as
well as bank borrowings. During electronics industry recessionary periods, cash
has been generated through receivable and inventory reductions.
In December 1995, the company amended its $80 million three-year revolving
credit agreement with four banks by increasing the committed credit line to $140
million and extending its maturity through December 1998. In addition, the
company has arrangements with a number of other banks to provide short-term
financing on a non-committed basis.
On January 2, 1996, the company purchased all the outstanding capital stock (the
"Stock") of Sylvan Ginsbury, Ltd., a New Jersey corporation, and certain
affiliated entities ("Ginsbury"), an international distributor of active,
passive and interconnect electronic products with operations in the United
States and six European countries (see Note 12 of Notes to Consolidated
Financial Statements herein). The negotiated purchase price of the Ginsbury
stock was approximately $38.8 million, of which $30.8 million was paid in cash.
The acquisition was financed mainly through borrowings under the company's
revolving credit agreement.
The company's cash requirements for 1996 will include funds required to finance
the $30.8 million cash portion of the acquisition of Ginsbury. The company's
near-term cash requirements are expected to be financed through a combination of
internally generated cash flow, bank borrowings and other sources of available
capital.
17
<PAGE>
Wyle Electronics
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Eleven months
Years ended December 31, ended
------------------------ December 31,
In thousands, except per share amounts 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES $1,077,467 $792,309 $473,443
----------------------------------
COSTS AND EXPENSES
Cost of sales 890,693 663,741 382,513
Selling and administrative expenses 124,603 103,253 78,833
Special charge - 1,900 -
Interest expense, net 3,315 1,289 174
Miscellaneous, net (1,193) (604) (811)
----------------------------------
1,017,418 769,579 460,709
----------------------------------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 60,049 22,730 12,734
Income taxes 23,839 8,750 4,398
----------------------------------
INCOME FROM CONTINUING OPERATIONS 36,210 13,980 8,336
DISCONTINUED OPERATIONS
Income from operations, net of taxes - 1,418 2,993
Loss on sale, net of taxes - (15,779) -
CUMULATIVE EFFECT OF ACCOUNTING CHANGE FOR POSTRETIREMENT BENEFITS
OTHER THAN PENSIONS - - (3,193)
----------------------------------
NET INCOME (LOSS) $ 36,210 $ (381) $ 8,136
==================================
INCOME (LOSS) PER SHARE
Income from continuing operations $ 2.86 $ 1.13 $ .67
==================================
Discontinued operations
Income from operations, net of taxes $ - $ .11 $ .24
==================================
Loss on sale, net of taxes $ - $ (1.27) $ -
==================================
Cumulative effect of accounting change for postretirement benefits
other than pensions $ - $ - $ (.26)
==================================
Net income (loss) $ 2.86 $ (.03) $ .66
==================================
Average common and common equivalent shares 12,664 12,425 12,355
==================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
Wyle Electronics
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION> December 31,
---------------------
In thousands, except shares 1995 1994
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 15,694 $ 9,319
Receivables (less allowances of $6,423 and $5,333,
respectively) 159,829 115,082
Inventories 203,413 140,332
Prepaid expenses and deferred tax assets 7,295 9,301
--------------------
TOTAL CURRENT ASSETS 386,231 274,034
--------------------
PROPERTY, PLANT & EQUIPMENT
Land 862 862
Buildings and improvements 22,394 12,236
Machinery and equipment 29,581 19,568
--------------------
52,837 32,666
Less accumulated depreciation and amortization 18,508 17,169
--------------------
34,329 15,497
--------------------
OTHER ASSETS INCLUDING DEFERRED TAX ASSETS 18,784 16,382
--------------------
TOTAL ASSETS $439,344 $305,913
====================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 3,000 $ 3,000
Accounts payable 97,697 70,444
Accrued expenses 30,032 29,817
--------------------
TOTAL CURRENT LIABILITIES 130,729 103,261
--------------------
LONG-TERM DEBT, LESS CURRENT MATURITIES 87,600 17,802
--------------------
OTHER LIABILITIES 25,345 25,104
--------------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock, 25,000,000 shares authorized
(shares outstanding: December 31, 1995 - 12,447,946
and December 31, 1994 - 12,193,041) 90,482 86,647
Retained earnings 105,188 73,099
--------------------
195,670 159,746
--------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $439,344 $305,913
====================
</TABLE>
The accompanying notes are an integral part of these financial statements.
19
<PAGE>
Wyle Electronics
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Eleven months
Years ended December 31, ended
------------------------ December 31,
In thousands 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 36,210 $ (381) $ 8,136
Adjustments to reconcile net income (loss) to net cash
provided by (used for) operating activities:
Depreciation and amortization 5,007 6,761 5,422
Provision for losses on receivables 2,794 2,143 1,389
Provision for deferred income taxes (943) (161) (1,071)
Loss on sale of discontinued operations - 15,779 -
Cumulative effect of accounting change for
postretirement benefits other than pensions - - 3,193
(Increase) in receivables (47,541) (44,529) (6,731)
(Increase) in inventories (63,081) (39,636) (21,901)
(Increase) decrease in prepaid expenses 1,157 1,354 (1,355)
Increase in accounts payable 27,253 12,232 21,506
Increase (decrease) in accrued expenses 215 4,790 (2,819)
Other, net 770 (1,003) (460)
----------------------------------
NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES (38,159) (42,651) 5,309
----------------------------------
FINANCING ACTIVITIES
Additions to long-term debt 72,798 14,802 -
Payments of long-term debt (3,000) (4,120) (3,422)
Exercise of stock options 3,686 684 689
Dividends on common stock (3,457) (3,431) (3,412)
Purchase of common stock (847) (1,634) (28)
----------------------------------
NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES 69,180 6,301 (6,173)
----------------------------------
INVESTING ACTIVITIES
Additions to property, plant and equipment (23,612) (8,434) (6,008)
Proceeds from sale of discontinued operations - 30,000 -
Proceeds from disposition of property, plant and equipment - - 1,704
Other non-current assets and liabilities, net (1,034) 355 (551)
----------------------------------
NET CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES (24,646) 21,921 (4,855)
----------------------------------
Increase (decrease) in cash and cash equivalents 6,375 (14,429) (5,719)
Cash and cash equivalents at beginning of period 9,319 23,748 29,467
----------------------------------
Cash and cash equivalents at end of period $ 15,694 $ 9,319 $ 23,748
==================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 3,710 $ 1,542 $ 1,162
Income taxes 21,708 10,168 8,364
----------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
20
<PAGE>
Wyle Electronics
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock
For the years ended December 31, 1995 and 1994, and the ---------------------- Retained
eleven months ended December 31, 1993 (in thousands, except shares) Shares Amount Earnings
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BALANCE, JANUARY 31, 1993 12,141,342 $ 85,459 $ 73,438
Net income 8,136
Dividends on common stock (3,412)
Exercise of stock options 64,281 829 (140)
Issuance of restricted stock 13,300 232
Unamortized value of restricted stock, net (158)
Purchase of common stock (2,000) (14) (14)
----------------------------------
BALANCE, DECEMBER 31, 1993 12,216,923 86,348 78,008
Net loss (381)
Dividends on common stock (3,431)
Exercise of stock options 61,368 780 (96)
Issuance of restricted stock 3,950 72
Amortization of restricted stock, net 80
Purchase of common stock (89,200) (633) (1,001)
----------------------------------
BALANCE, DECEMBER 31, 1994 12,193,041 86,647 73,099
Net income 36,210
Dividends on common stock (3,457)
Exercise of stock options 215,341 3,800 (114)
Issuance of restricted stock 80,997 2,909
Cancellation of restricted stock (533) (11)
Unamortized value of restricted stock, net (2,572) 6
Purchase of common stock (40,900) (291) (556)
----------------------------------
BALANCE, DECEMBER 31, 1995 12,447,946 $ 90,482 $105,188
==================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
21
<PAGE>
Wyle Electronics
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies
Nature of Operations
The company is an international electronics distributor, specializing in
marketing semiconductors and computer products, as well as providing value-added
services, which include complex materials management systems and engineering
design services for semiconductor products (see Note 12).
Principles of Consolidation
The consolidated financial statements include the accounts of Wyle Electronics
and its subsidiaries. All significant intercompany accounts and transactions
have been eliminated.
Discontinued Operations
On December 23, 1994, the company completed the sale of its Scientific Services
& Systems ("SS&S") business (see Note 9). Operating results for SS&S are
classified as discontinued operations in the company's consolidated statements
of income and prior periods have been restated accordingly.
Change in Fiscal Year-end
During the fiscal year ended December 31, 1993, the company changed its fiscal
year-end from January 31 to December 31, resulting in an eleven-month reporting
period.
Change in Accounting Principles
As of February 1, 1993, the company adopted Financial Accounting Standards Board
("FASB") Statement No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions," and Statement No. 109, "Accounting for Income Taxes." As
of January 1, 1994, the company adopted FASB Statement No. 112, "Employers'
Accounting for Postemployment Benefits." The effects of adopting these
accounting standards are described in Notes 4 and 8. Financial statements for
the previous years have not been restated as a result of the adoption of these
standards.
Use of Estimates
The 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 and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Revenue Recognition
Sales are generally recognized at the time of shipment of the product.
Interest Income
Interest income earned on short-term investments is classified in the
consolidated statements of income as a reduction of interest expense. Interest
income was $209,000 and $254,000 for the years ended December 31, 1995 and 1994,
respectively, and $897,000 for the eleven months ended December 31, 1993.
Receivables
Receivables include amounts billed to customers for products shipped or services
performed which are anticipated to be collected within one year. Concentrations
of credit risk with respect to trade receivables are limited by the large number
of customers comprising the company's customer base and their dispersion across
different industries.
Inventories
Inventories are stated at the lower of cost (first-in first-out or average cost)
or market.
Property, Plant & Equipment
Property, plant & equipment are stated at cost. Major improvements and
betterments are capitalized. Maintenance, repairs and minor refurbishments are
expensed as incurred. Depreciation is provided using the straight-line method
based on estimated useful lives. Useful lives range from 2 to 40 years for
buildings and improvements and from 2 to 10 years for machinery and equipment.
Leasehold improvements are amortized over the lesser of the lease term or
estimated useful life.
22
<PAGE>
Consolidated Statements of Cash Flows
For the purpose of reporting cash flows, cash and cash equivalents include cash
on hand and cash invested in short-term securities with original maturities of
three months or less. The company places its temporary cash investments in high-
quality securities and, by policy, limits the amount that can be invested in any
one particular instrument.
Note 2. Detail of Certain Balance Sheet Amounts
A detail of certain balance sheet amounts at December 31 follows:
<TABLE>
<CAPTION>
-----------------
In thousands 1995 1994
- ------------------------------------------------------------------------
<S> <C> <C>
Accrued expenses:
Payroll and employee benefits $12,144 $ 7,316
Reserves related to the sale of
discontinued operations 77 11,908
Other 17,811 10,593
-----------------
Total $30,032 $29,817
=================
Accounts payable:
Trade and other $67,320 $53,471
Checks outstanding 30,377 16,973
-----------------
Total $97,697 $70,444
=================
</TABLE>
Note 3. Bank Loans and Long-Term Debt
Long-term debt at December 31 consists of the following:
<TABLE>
<CAPTION>
-----------------
In thousands 1995 1994
- ------------------------------------------------------------------------
<S> <C> <C>
Non-committed credit line borrowings $57,600 $14,802
Revolving credit agreement 30,000 -
Senior unsecured loan:
At 8.95% due through 1996 in
equal annual installments 3,000 6,000
-----------------
90,600 20,802
Less current maturities 3,000 3,000
-----------------
$87,600 $17,802
=================
</TABLE>
The non-committed credit line borrowings at December 31, 1995 bear interest at
rates ranging from 6.09% - 6.34%, and were due on various dates through January
16, 1996. Such unsecured amounts are classified as long-term debt on the balance
sheet, since they may be refinanced at any time with borrowings under the
company's three-year revolving credit agreement. The revolving credit agreement
borrowing at December 31, 1995 bears interest at 6.05%.
In December 1995, the company amended its $80,000,000 three-year revolving
credit agreement with four banks by increasing the committed credit line to
$140,000,000 and extending its maturity through December 1998. The credit
agreement provides for borrowings at either the agent bank's reference rate or
the Eurodollar rate plus .25% to .55%, depending on the company's leverage
ratio. An annual facility fee of .125% to .20%, also based on the company's
leverage ratio, is payable on the amount of the commitment. The company has
additional credit line arrangements with a number of banks that provide for
short-term borrowings on a non-committed basis.
Terms of certain borrowing agreements of the company provide, among other
things, for the maintenance of certain amounts or ratios relating to working
capital, debt, tangible net worth and fixed charge coverage. The agreements also
provide for restrictions on additional debt, payment of dividends, purchase of
company stock and capital expenditures. Pursuant to the most restrictive
covenants of these agreements, retained earnings of $31,111,000 were available
at December 31, 1995 for the payment of cash dividends on common stock. The
company is in full compliance with the restrictive covenants contained in the
borrowing agreements.
Aggregate maturities of long-term debt are $3,000,000 for 1996 and $87,600,000
for 1998.
23
<PAGE>
Wyle Electronics
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 4. Income Taxes
On February 1, 1993, the company adopted FASB Statement No. 109, "Accounting
for Income Taxes," under which deferred tax assets and liabilities are provided
on differences between financial reporting and taxable income using the enacted
tax rates. The adoption of this new statement did not have a material effect on
the company's net income or financial position.
The provision for income taxes from continuing operations was computed using
effective tax rates calculated as follows:
<TABLE>
<CAPTION>
Years ended Eleven months
---------------- ended
December 31, December 31,
1995 1994 1993
- ----------------------------------------------------------------
<S> <C> <C> <C>
Federal statutory tax rate 35.0% 35.0% 35.0%
State income taxes, net
of federal tax benefit 5.2 5.3 4.8
Other, net (0.5) (1.8) (5.3)
-------------------------
Effective tax rate 39.7% 38.5% 34.5%
=========================
</TABLE>
The provision for income taxes from continuing operations consists
of:
<TABLE>
<CAPTION>
Years ended Eleven months
December 31, ended
---------------- December 31,
In thousands 1995 1994 1993
- ----------------------------------------------------------------
<S> <C> <C> <C>
Current
Federal $20,069 $ 7,074 $ 4,603
State 4,713 1,837 866
-----------------------------
24,782 8,911 5,469
Deferred taxes arising
from timing differences:
State income taxes (755) (112) (72)
Receivables allowance (273) (440) 289
Inventory valuation (767) (487) (133)
Depreciation and
amortization (122) (87) (147)
Differences arising
from changes in
accruals and other 974 965 (1,008)
-----------------------------
(943) (161) (1,071)
-----------------------------
$23,839 $ 8,750 $ 4,398
=============================
</TABLE>
Net deferred tax assets (liabilities) at December 31 were composed
of the following:
<TABLE>
<CAPTION>
In thousands 1995 1994
- ----------------------------------------------------------------
<S> <C> <C>
Employee benefit programs $ 2,799 $ 1,904
Inventory valuation 2,616 1,944
Postretirement benefits 2,206 2,032
Receivables allowance 1,974 1,749
Depreciation and amortization 152 (1,391)
Discontinued operations 4,741 9,878
Operating accruals and other (594) (2,760)
--------------------
$13,894 $13,356
====================
</TABLE>
Net deferred tax assets at December 31, 1995 of $13,894,000 consisted of
deferred tax assets of $19,540,000 and deferred tax liabilities of $5,646,000.
Net deferred tax assets at December 31, 1994 of $13,356,000 consisted of
deferred tax assets of $19,583,000 and deferred tax liabilities of $6,227,000.
Deferred taxes are classified in the consolidated balance sheets as current or
noncurrent based on the classification of the related asset or liability. Net
current deferred tax assets of $5,675,000 and $6,524,000 are included in prepaid
expenses at December 31, 1995 and 1994, respectively. No valuation allowance was
required for the deferred tax assets.
Note 5. Capital Stock and Dividends
Common stock authorized is 25,000,000 shares. The company declared and paid
dividends on common stock of $.28 per share during the years ended December 31,
1995 and 1994. Preference stock authorized is 500,000 shares. No preference
stock was outstanding at December 31, 1995 or 1994.
The company has a Shareholder Rights Plan (the "Plan") which provides for one
stock purchase right (the "Rights") to be traded initially in tandem with each
share of its common stock. The Plan provides that if any person becomes the
beneficial owner of 15% or more of the outstanding shares of common stock of the
company, each Right (other than Rights held by the 15% shareholder) will be
exercisable, on or after the close of business on the tenth business day
following such event, to purchase common stock having
24
<PAGE>
a market value equal to two times the then current exercise price of the Rights
(currently $85.00), or may be exchangeable for one share of common stock.
The Plan further provides that if, on or after the occurrence of such event, the
company is merged into any other corporation or if 50% or more of the company's
assets or earning power are sold, appropriate provision shall be made so that
each Right (other than Rights held by the 15% shareholder) will be exercisable
to purchase common stock of the acquiring corporation having a market value
equal to two times the exercise price of the Rights. The Rights expire on
February 23, 2005, and are subject to redemption by the Board of Directors at
$.01 per Right at any time prior to the first date upon which they become
exercisable.
In 1994, the company reactivated a plan to purchase from time to time up to
1,500,000 shares of the corporation's common stock in the open market or through
negotiated purchases. The company's Board of Directors has authorized the
implementation of this stock repurchase plan in phases, with the initial phase
approved at $10 million of aggregate stock purchases. Through December 31, 1995,
132,100 shares had been purchased under this program, of which 40,900 shares
were acquired during 1995. The shares purchased, which remain authorized but
unissued, were financed primarily through internally generated cash and bank
borrowings.
Note 6. Stock Options and Awards
Under the company's stock option and stock incentive plans, non-qualified and
incentive stock options, restricted stock, performance awards and stock
appreciation rights may be granted to selected key employees. Non-qualified
stock options may be granted at prices less than 100% of the fair market value
of the company's common stock on the date of grant. Through December 31, 1995,
no stock options have been granted at less than fair market value under any of
the plans. Options generally become exercisable beginning one year from the date
of grant in equal annual installments over a five-year period. Options are
exercisable on a cumulative basis and expire ten years from the date of grant.
A summary of changes in the shares under option follows:
<TABLE>
<CAPTION>
Shares Price Range
- -----------------------------------------------------
<S> <C> <C>
JANUARY 31, 1993 608,847 $ 8.250 - $19.750
Granted 378,500 17.000 - 18.500
Canceled (11,500) 9.250 - 11.500
Exercised (75,750) 8.700 - 14.300
-----------------------------
DECEMBER 31, 1993 900,097 8.250 - 19.750
Granted 156,000 17.750 - 20.000
Canceled (23,800) 9.000 - 19.750
Exercised (68,497) 8.700 - 17.000
-----------------------------
DECEMBER 31, 1994 963,800 8.250 - 20.000
Granted 141,500 37.875 - 44.375
Canceled (12,000) 9.250 - 20.000
Exercised (223,444) 8.700 - 19.750
-----------------------------
DECEMBER 31, 1995 869,856 $ 8.250 - $44.375
=============================
</TABLE>
At December 31, 1995, expiration dates for options outstanding ranged from 1996
to 2005, with a weighted average purchase price of $19.57; options for 394,168
shares were exercisable and 335,387 shares were reserved for the granting of
additional options or awards. No amounts have been reflected in the company's
consolidated statements of income with respect to these stock options.
Restricted share awards of the company's common stock are subject to certain
restriction periods from the date of grant, during which they may not be sold,
assigned, pledged or otherwise encumbered. Restricted stock awards of 80,997,
3,950 and 13,300 shares were granted during the periods ended December 31, 1995,
1994 and 1993, respectively. The unvested portion of restricted stock is
included as an offset to common stock on the consolidated statements of
shareholders' equity, and is amortized as vesting occurs.
Under the company's stock option plan for its outside directors, non-employee
members of its Board of Directors may receive a grant of up to 5,000 non-
qualified stock options annually up to a maximum of 10,000 that are exercisable
in equal annual installments over a three-year period. Stock options under this
program cannot be granted at less than fair market value on the date of grant.
Stock options granted under this plan, included in the table above, totaled
15,000, 50,000 and 40,000 for the periods ended December 31, 1995, 1994 and
1993, respectively.
25
<PAGE>
Wyle Electronics
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
In October 1995, the FASB issued Statement No. 123 "Accounting for Stock-Based
Compensation." The company plans to adopt this required statement for 1996 under
the disclosure method. Accordingly, there will be no impact on the reported
results of operations or financial position.
Note 7. Income (Loss) per Share
Income (loss) per share is computed based on the average number of shares of
common stock and common equivalent shares (stock options) outstanding, after
giving effect to the assumed exercise of dilutive stock options. Dual
presentation of primary and fully diluted earnings per share has not been made
on the consolidated statements of income because the differences are
insignificant.
Note 8. Retirement and Other Employee Benefits Plans
The company has a defined benefit pension plan covering substantially all of its
employees. Plan benefits are generally based on employees' years of service and
average compensation during the final years of employment. Funding of retirement
costs for the plan complies with the funding requirements specified by the
Employee Retirement Income Security Act. At December 31, 1995, plan assets were
invested in diversified equity portfolios (62%), pooled funds or fixed income
securities (32%) or in guaranteed income contracts (6%).
Pension expense, including discontinued operations for the year ended December
31, 1994 and for the eleven months ended December 31, 1993, consists of the
following components:
<TABLE>
<CAPTION>
Years ended Eleven months
December 31, ended
--------------- December 31,
In thousands 1995 1994 1993
- -----------------------------------------------------------------
<S> <C> <C> <C>
Service cost-benefits earned
during the period $ 1,355 $ 2,504 $ 1,989
Interest cost on projected
benefit obligation 4,133 4,134 3,371
Actual return on plan assets (9,387) (626) (4,129)
Net amortization and
deferral 4,419 (3,833) 215
-----------------------------
Net periodic pension cost 520 2,179 1,446
Curtailment gain - (1,880) -
-----------------------------
Net pension expense $ 520 $ 299 $ 1,446
=============================
</TABLE>
The company's pension expense for the year ended December 31, 1994 included a
curtailment gain, which was included in the loss on sale of discontinued
operations (see Note 9).
The pension plan's funded status and amounts recognized in the company's
consolidated balance sheets at December 31 were as follows:
<TABLE>
<CAPTION>
In thousands 1995 1994
- ------------------------------------------------------------
<S> <C> <C>
Actuarial present value of
benefit obligations:
Vested benefits $(53,645) $(46,441)
Nonvested benefits (994) (701)
--------------------
Accumulated benefit obligation (54,639) (47,142)
Effect of projected future
compensation increases (4,706) (4,159)
--------------------
Projected benefit obligation (59,345) (51,301)
Market value of plan assets 56,352 49,093
====================
Plan assets (less than) projected
benefit obligation (2,993) (2,208)
Unrecognized actuarial net loss 5,388 4,792
Unrecognized prior service cost (415) (839)
Unrecognized net asset at
February 1, 1987 (1,169) (1,286)
--------------------
Prepaid pension liability $ 811 $ 459
====================
</TABLE>
In determining the actuarial present value of the projected benefit obligation
under the pension plan, the discount rate used was 7.5% as of December 31, 1995
and 8.25% as of December 31, 1994, and the rate of increase in future
compensation levels was 5.0% for both periods. The expected long-term rate of
return on pension plan assets was 9.5% for the years ended December 31, 1995 and
1994.
The company's pension plan provides that, in the event the plan is terminated
following an involuntary change of control, any excess plan assets over plan
liabilities would be used to provide increased benefits under the pension plan
or other employee benefit plans.
26
<PAGE>
The company has a supplemental executive retirement plan ("SERP") which provides
benefits to certain employees whose benefits under the defined benefit pension
plan are reduced as a result of limitations imposed by the Internal Revenue
Code. The present value of the accumulated benefit obligation related to this
plan totaled $3,437,000 at December 31, 1995 and $2,405,000 at December 31,
1994. Expense under the SERP was $641,000, $393,000 and $473,000 for the years
ended December 31, 1995, 1994 and the eleven months ended December 31, 1993,
respectively.
The company maintains a capital accumulation plan, which qualifies under Section
401(k) of the Internal Revenue Code, for employees meeting certain service
requirements. Eligible employees can contribute up to 15% of their annual
compensation, subject to certain Internal Revenue Code restrictions. In 1994,
the company began matching employee contributions at a rate of 25% on the first
$1,200 contributed. Company matching contributions for the years ended December
31, 1995 and 1994 aggregated $182,000 and $316,000, respectively.
The company has Rabbi trusts to fund benefit payments under its SERP and other
executive and director deferred compensation plans. Trust assets are irrevocable
to the company but are subject to creditor claims under certain conditions.
Assets held in the trusts at December 31, 1995 and 1994 totaled $3,724,000 and
$3,531,000, respectively.
The company also has an unfunded retirement plan for its outside directors under
which benefits are accrued over the estimated service period for each covered
director. Amounts expensed related to this plan were not significant for the
periods presented.
The company has a Voluntary Employees' Beneficiary Association ("VEBA") trust
to fund certain employee benefit payments. Trust assets, which are irrevocable
to the company, totaled $734,000 and $530,000 at December 31, 1995 and 1994,
respectively.
The company provides postretirement medical coverage to qualifying employees.
The company's employees upon retirement may become eligible for benefits if they
meet certain age and length of service requirements as specified in the plan.
In December 1990, the FASB issued Statement No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions." Statement No. 106 required the
company to change its method of accounting for postretirement benefits, to
accrue for the cost of these benefits during an employee's years of service. On
February 1, 1993, the company adopted the new statement by recording a one-time
charge of $3,193,000 (which was net of income taxes of $1,796,000), representing
the accumulated postretirement benefit obligation (the "APBO") as of February 1,
1993. The new statement had no effect on the company's cash outlays for retiree
benefits.
The provision for postretirement benefits, including discontinued operations for
the year ended December 31, 1994 and for the eleven months ended December 31,
1993, consists of the following components:
<TABLE>
<CAPTION>
Years ended Eleven months
December 31, ended
------------- December 31,
In thousands 1995 1994 1993
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost-benefits earned
during the period $ 199 $ 292 $ 218
Interest cost on APBO 473 449 352
Net amortization and deferral 19 15 -
--------------------------
Net periodic postretirement
benefit cost 691 756 570
Curtailment gain - (827) -
--------------------------
Net postretirement medical
expense (income) $ 691 $ (71) $ 570
==========================
</TABLE>
27
<PAGE>
Wyle Electronics
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The company's postretirement benefits provision for the year ended December 31,
1994 included a curtailment gain, which was included in the loss on sale of
discontinued operations (see Note 9). The company will continue to be
responsible for certain postretirement benefit obligations relating to the
discontinued operations.
Components of the APBO recognized in the company's consolidated balance sheets
at December 31 were as follows:
<TABLE>
<CAPTION>
In thousands 1995 1994
- -----------------------------------------------------------------
<S> <C> <C>
Actuarial present value of
benefit obligations:
Retirees and beneficiaries $(3,558) $(3,587)
Fully eligible active plan participants (674) (579)
Other active plan participants (2,286) (1,752)
------------------
Total APBO (6,518) (5,918)
Unrecognized actuarial net loss 1,160 985
------------------
Accrued postretirement benefit liability $(5,358) $(4,933)
==================
</TABLE>
In determining the actuarial present value of the APBO as of December 31, 1995,
the assumed health care cost trend rate was 10%, reducing gradually to an
ultimate rate of 5.5% in 2001, and the discount rate was 7.5%. As of December
31,1994, the assumed health care cost trend rate was 11%, reducing gradually to
an ultimate rate of 6.25% in 2000, and the discount rate was 8.25%. If the
health care cost trend rate were increased by 1% in each year, the APBO as of
December 31, 1995 would be increased by $972,000, and the service cost and
interest cost components of the net periodic postretirement benefit expense for
the current year would be increased by $135,000.
In November 1992, the FASB issued Statement No. 112, "Employers' Accounting for
Postemployment Benefits." This statement required the company to change its
method of accounting for postemployment benefits provided to qualifying former
or inactive employees and their dependents before retirement, to accrue for the
cost of these benefits during an employee's years of service. The company's
adoption of the new statement at the beginning of 1994 had an immaterial effect
on its net income and financial position.
Note 9. Discontinued Operations
On December 23, 1994, the company completed the sale of its Scientific Services
& Systems ("SS&S") business to WESS Investment Corporation ("WESS"), a buyout
group led by William E. Simon & Sons and certain members of the SS&S management
along with a current and two former members of the company's Board of Directors.
Under the terms of the agreement, WESS acquired certain assets and liabilities
of SS&S, including receivables, inventory, property, equipment, accounts payable
and accrued expenses for a negotiated purchase price of $30 million in cash,
subject to adjustment, plus additional amounts that may be paid to the company
under a five-year earnout provision. Certain excess real properties of SS&S were
excluded from the sale to WESS. Such assets are stated at their estimated net
realizable value of $3,433,000 at December 31, 1995 and $3,695,000 at December
31, 1994, and are classified in other assets. The company intends to sell these
assets in the future.
During 1994, the company recorded a loss on sale of discontinued operations of
$15.8 million, after income tax benefits of $9.9 million. The loss on sale
included certain transaction costs and reserves associated with the disposition
such as reserves for insurance and employee related matters, various contractual
arrangements and certain contingent liabilities. The loss on sale was reduced by
certain curtailment gains as discussed in Note 8. Accrued expenses related to
28
<PAGE>
discontinued operations totaled $77,000 at December 31, 1995 and $11,908,000 at
December 31, 1994. Long-term liabilities related to discontinued operations
totaled $14,574,000 and $16,258,000 at December 31, 1995 and 1994, respectively.
Operating results for SS&S are classified as discontinued operations on the
company's consolidated statements of income for the year ended December 31, 1994
and the eleven months ended December 31, 1993. Sales applicable to discontinued
operations for the nine months ended September 30, 1994 and the eleven months
ended December 31, 1993 aggregated $61,076,000 and $84,498,000, respectively.
Income from discontinued operations is net of income taxes of $1,036,000 and
$2,030,000 for the nine months ended September 30, 1994 and the eleven months
ended December 31, 1993, respectively. Operating results for SS&S from October
1, 1994 through the closing date of the sale were netted in balance sheet
reserves established as part of the loss on sale.
Note 10. Commitments and Contingencies
Commitments
The minimum aggregate rentals payable on long-term operating leases subsequent
to December 31, 1995 approximate $18,645,000. The amounts are payable as
follows: 1996 - $4,912,000; 1997 - $3,506,000; 1998 - $3,009,000; 1999 -
$2,167,000; 2000 - $1,658,000 and thereafter - $3,393,000. Rental expense
(including month to month rentals) approximated $7,300,000, $8,096,000 and
$6,477,000 for the years ended December 31, 1995, 1994 and the eleven months
ended December 31, 1993, respectively.
Contingencies
In May 1993, Avnet, Inc. ("Avnet") and Hall-Mark Electronics Corporation
("Hall-Mark") filed a civil action against the company and a former employee of
Hall-Mark in the Superior Court of Fulton County, Georgia, seeking injunctive
and unspecified monetary damages, alleging, inter alia, that the company
tortiously interfered with the employment relations of Hall-Mark and its
employees and that the company tortiously interfered with a proposed business
combination between the plaintiffs, which combination was consummated
subsequently. Plaintiffs' motion for a preliminary injunction was denied in part
by the trial court and affirmed by the Georgia Supreme Court in December 1993.
The company filed a counterclaim against plaintiffs, alleging, inter alia, that
plaintiffs had tortiously interfered with the company's business and employment
relations. On October 31, 1995, plaintiffs voluntarily dismissed their claims in
Georgia without prejudice, and the Georgia court then entered summary judgment
against the company on the counterclaim and dismissed same.
In September 1995, the plaintiffs refiled the same action against the company
and certain company employees in the Circuit Court of Hillsborough County,
Florida, which the company has now moved to dismiss. The Florida litigation is
still pending. While this litigation is in the pretrial stage, the company
believes that plaintiffs' complaint is without merit and will contest it
vigorously. The company recorded a special charge of $1,900,000 during the third
quarter of 1994, primarily for anticipated legal expenses associated with the
defense of this litigation. Although management cannot predict the ultimate
outcome with any certainty, management believes that a result adverse to the
company in this matter is unlikely.
The company also has other contingent liabilities arising in the ordinary course
of business. In the opinion of management, the ultimate disposition of such
matters will not materially affect the company's results of operations or
financial position.
29
<PAGE>
Wyke Electronics
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 11. Business Segments
The company is now exclusively in the electronics marketing business, after the
sale of its SS&S operations in December 1994 (see Note 9). Financial information
for SS&S is shown below as discontinued operations.
Identifiable assets, capital expenditures and depreciation and amortization by
segment follows:
<TABLE>
<CAPTION>
Years ended Eleven months
December 31, ended
------------------ December 31,
In thousands 1995 1994 1993
- -----------------------------------------------------------------
<S> <C> <C> <C>
Identifiable assets:
Continuing
operations $435,911 $302,218 $221,658
Discontinued
operations 3,433 3,695 38,913
--------------------------------
Total $439,344 $305,913 $260,571
================================
Capital expenditures:
Continuing
operations $ 23,612 $ 7,644 $ 4,990
Discontinued
operations - 790 1,018
--------------------------------
Total $ 23,612 $ 8,434 $ 6,008
================================
Depreciation and
amortization:
Continuing
operations $ 5,007 $ 4,120 $ 3,062
Discontinued
operations - 2,641 2,360
--------------------------------
Total $ 5,007 $ 6,761 $ 5,422
================================
</TABLE>
Note 12. Subsequent Event
On January 2, 1996, the company purchased all the outstanding capital stock (the
"Stock") of Sylvan Ginsbury, Ltd., a New Jersey corporation, and certain
affiliated entities ("Ginsbury"), an international distributor of active,
passive and interconnect electronic products with operations in the United
States and six European countries. The assets represented by the Stock generally
include personal property, inventory, accounts receivable, intellectual
property, assigned contracts, permits and other identifiable intangible assets.
The negotiated purchase price of the Ginsbury stock was approximately $38.8
million consisting of $30.8 million in cash paid on the closing date, $3.0
million of restricted stock issued at closing and up to $5.0 million in cash for
an earnout provision, which is potentially payable based on the future financial
performance of Ginsbury over a five-year period. The acquisition was financed
mainly through borrowings under the company's revolving credit agreement.
30
<PAGE>
Wyle Electronics
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of Wyle Electronics:
We have audited the accompanying consolidated balance sheets of Wyle Electronics
(a California corporation) and subsidiaries as of December 31, 1995 and 1994,
and the related consolidated statements of income, shareholders' equity and cash
flows for the years ended December 31, 1995 and 1994 and the eleven-month period
ended December 31, 1993. 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 in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Wyle Electronics and
subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for the years ended December 31, 1995 and 1994
and the eleven-month period ended December 31, 1993 in conformity with generally
accepted accounting principles.
As explained in Note 1 to the consolidated financial statements, effective
February 1, 1993, the company changed its method of accounting for
postretirement benefits other than pensions.
/s/ Arthur Andersen LLP
Los Angeles, California Arthur Andersen LLP
February 16, 1996
31
<PAGE>
Wyle Electronics
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Eleven
months
In thousands, except per Years ended December 31, ended
share amounts and ------------------------ December 31,
percentages 1995 1994 1993(a)
- -------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING RESULTS
Net sales $1,077,467 $792,309 $473,443
Cost of sales 890,693 663,741 382,513
Interest expense, net 3,315 1,289 174
Income (loss) from
continuing operations
before income taxes 60,049 22,730 12,734
Income (loss) from
continuing operations 36,210 13,980 8,336
Net income (loss) 36,210 (381)(b) 8,136(c)
Income (loss) per share
Primary
Continuing operations 2.86 1.13 .67
Net income (loss) 2.86 (.03)(b) .66(c)
Fully diluted(d)
Continuing operations - - -
Net income (loss) - - -
Dividends per common share .28 .28 .28
Dividends paid 3,457 3,431 3,412
=====================================
YEAR-END FINANCIAL DATA
Working capital $ 255,502 $170,773 $143,432
Net investment in property,
plant and equipment 34,329 15,497 30,606
Total assets 439,344 305,913 260,571
Long-term debt, including
subordinated debentures 87,600 17,802 6,000
Shareholders' equity 195,670 159,746 164,356
Book value per common share 15.72 13.10 13.45
Income (loss) from
continuing operations as a
% of sales 3.4% 1.8% 1.8%
Annualized return from
continuing operations on
average shareholders'
equity 20.4% 8.6% 5.6%
=====================================
</TABLE>
(a) The company changed its fiscal year-end from January 31 to December 31,
resulting in an eleven-month fiscal year.
(b) Includes a net loss on sale of discontinued operations of $15.8 million, or
$1.27 per share (see Note 9).
(c) Includes a charge of $3.2 million, or $.26 per share, for the cumulative
effect of an accounting change for postretirement benefits other than
pensions (see Note 8).
(d) During the year ended January 31, 1993, the company converted its
outstanding convertible subordinated debentures into its common stock,
which resulted in primary and fully diluted earnings per share being the
same.
32
<PAGE>
Wyle Electronics
SELECTED FINANCIAL DATA (continued)
<TABLE>
<CAPTION>
In thousands, except per Years ended January 31,
share amounts and --------------------------------------------------------------------------------------------
percentages 1993 1992 1991 1990 1989 1988 1987 1986
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS
Net sales $446,609 $359,868 $358,921 $319,061 $318,107 $265,395 $224,559 $195,384
Cost of sales 353,558 280,414 273,374 246,368 246,502 207,992 174,294 149,787
Interest expense, net 2,283 2,426 2,668 3,240 3,770 3,140 2,413 1,971
Income (loss) from
continuing operations
before income taxes 18,310 7,793 14,688 5,859 6,463 1,989 (1,187) (3,601)
Income (loss) from
continuing operations 11,787 5,275 9,350 3,782 3,957 1,136 65 (1,432)
Net income (loss) 15,428 9,668 12,694 7,478 7,800 5,779 4,307 (3,196)
Income (loss) per share
Primary
Continuing operations 1.11 .52 .94 .38 .39 .11 .01 (.15)
Net income (loss) 1.45 .95 1.28 .75 .77 .57 .44 (.33)
Fully diluted(d)
Continuing operations 1.03 .53 .89 .41 .42 .16 .02 (.15)
Net income (loss) 1.33 .90 1.18 .72 .74 .56 .43 (.33)
Dividends per common share .28 .28 .28 .28 .28 .27 .26 .26
Dividends paid 2,990 2,792 2,728 2,791 2,837 2,673 2,461 2,432
============================================================================================
YEAR-END FINANCIAL DATA
Working capital $141,970 $133,074 $115,268 $101,611 $ 96,220 $106,466 $ 81,256 $ 75,432
Net investment in property,
plant and equipment 29,884 30,513 30,902 31,306 30,243 25,860 27,137 24,031
Total assets 236,213 216,530 194,341 176,142 182,913 175,761 148,574 137,840
Long-term debt, including
subordinated debentures 10,120 41,991 36,039 36,571 32,405 43,724 25,882 21,472
Shareholders' equity 158,897 115,303 105,535 94,286 93,851 88,522 80,612 78,373
Book value per common share 13.09 11.48 10.79 9.77 9.26 8.78 8.37 8.18
Income (loss) from
continuing operations as a
% of sales 2.6% 1.5% 2.6% 1.2% 1.2% .4% - (.7)%
Annualized return from
continuing operations on
average shareholders'
equity 8.6% 4.8% 9.4% 4.0% 4.3% 1.3% .1% (1.8)%
============================================================================================
</TABLE>
33
<PAGE>
Wyle Electronics
RESULTS BY QUARTER AND CAPITAL STOCK INFORMATION
Unaudited
<TABLE>
<CAPTION>
Year ended December 31, 1995 Year ended December 31, 1994
by Quarter by Quarter(a)
In thousands, except per ---------------------------------------------------------------------------------------
share amounts First Second Third Fourth First Second Third Fourth
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $250,036 $254,899 $273,499 $299,033 $175,579 $188,104 $204,148 $224,478
Gross profit 40,337 45,203 49,120 52,114 28,863 31,313 33,067 35,325
Income from continuing
operations 6,730 8,774 10,139 10,567 2,117 3,318 3,125(b) 5,420
Discontinued operations
Income (loss) from
operations,
net of taxes - - - - 692 976 (250) -
Loss on sale, net of taxes - - - - - - (13,442) (2,337)
Net income (loss) $ 6,730 $ 8,774 $ 10,139 $ 10,567 $ 2,809 $ 4,294 $(10,567) $ 3,083
=======================================================================================
Income (loss) per share
Income from continuing
operations $ .54 $ .70 $ .80 $ .83 $ .17 $ .27 $ .25(b) $ (.44)
Discontinued operations
Income (loss) from
operations,
net of taxes - - - - .06 .08 (.02) -
Loss on sale, net of taxes - - - - - - (1.08) (.19)
Net income (loss) $ .54 $ .70 $ .80 $ .83 $ .23 $ .35 $ (.85) $ (.25)
=======================================================================================
</TABLE>
(a) On December 23, 1994, the company completed the sale of its Scientific
Services & Systems ("SS&S") business.
(b) Includes a special charge of $1.2 million, after tax, or $.09 per share,
primarily for anticipated expenses related to a particular litigation
matter.
Wyle Electronics common stock is traded on the New York Stock Exchange under the
symbol WYL. The high and low price ranges and dividends paid per share for each
quarterly period during the past two years are as follows:
<TABLE>
<CAPTION>
Price Range Price Range
Year ended -------------------- Dividends Year ended ----------------- Dividends
December 31, 1995 High Low Per Share December 31, 1994 High Low Per Share
- ----------------------------------------------------------------------------------------------------------------------
QUARTER ENDED QUARTER ENDED
<S> <C> <C> <C> <C> <C> <C> <C>
March 31, 1995 $24 1/2 $19 3/8 $.07 March 31, 1994 $20 3/4 $17 3/4 $.07
June 30, 1995 29 1/4 23 .07 June 30, 1994 19 3/8 16 1/4 .07
September 30, 1995 45 3/8 27 3/8 .07 September 30, 1994 20 3/4 16 3/4 .07
December 31, 1995 46 1/2 33 1/2 .07 December 31, 1994 20 16 3/4 .07
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
The financial section of this report is printed on recycle paper.
50% TOTAL RECOVERED FIBER.
[RECYCLE LOGO]
20% POST-CONSUMER WASTE.
34
<PAGE>
EXHIBIT 21
WYLE ELECTRONICS
SUBSIDIARIES
The following is a list of all the subsidiaries of the Company, as of December
31, 1995, which are included in the Company's Consolidated Financial Statements
and the percentage of voting securities for each owned by the Company.
State of Percentage of
Name of Company Incorporation Ownership
--------------- ------------- ------------
Wyle Distribution Group-Santa Clara, Inc. California 100%
Redwing of California, Inc. (Inactive) California 100%
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
reports included or incorporated by reference in this Form 10-K, into the
Company's previously filed Registration Statements File Nos. 2-61600, 2-85129,
33-6360, 33-29071, 33-52922, 33-55637 and 33-00149.
ARTHUR ANDERSEN LLP
Los Angeles, California
February 16, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 15,694
<SECURITIES> 0
<RECEIVABLES> 166,252
<ALLOWANCES> 6,423
<INVENTORY> 203,413
<CURRENT-ASSETS> 386,231
<PP&E> 52,837
<DEPRECIATION> 18,508
<TOTAL-ASSETS> 439,344
<CURRENT-LIABILITIES> 130,729
<BONDS> 87,600
0
0
<COMMON> 90,482
<OTHER-SE> 105,188
<TOTAL-LIABILITY-AND-EQUITY> 439,344
<SALES> 1,077,467
<TOTAL-REVENUES> 1,077,467
<CGS> 890,693
<TOTAL-COSTS> 890,693
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<INCOME-TAX> 23,839
<INCOME-CONTINUING> 36,210
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<NET-INCOME> 36,210
<EPS-PRIMARY> 2.86
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</TABLE>
