<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- - ------- SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
OR
- - ------- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
------------- ------------
Commission file number 1-5374
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 No.)
15370 BARRANCA PARKWAY
IRVINE, CALIFORNIA 92618
- - --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (714) 753-9953
-----------------------------
- - --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
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
------ -----
At October 31, 1996 registrant had 12,676,715 shares of common stock
outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
- - ------------------------------
Item 1. Financial Statements
WYLE ELECTRONICS
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
-------------------- --------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $295,191 $273,499 $928,578 $778,434
-------- -------- -------- --------
Costs and expenses
Cost of sales 241,559 224,379 758,608 643,774
Selling and administrative expenses 37,891 31,391 113,588 91,060
Interest expense, net 1,986 1,043 5,915 1,940
Miscellaneous, net (86) (214) (481) (866)
-------- -------- -------- --------
281,350 256,599 877,630 735,908
-------- -------- -------- --------
Income before income taxes 13,841 16,900 50,948 42,526
Income taxes 5,228 6,761 20,219 16,883
-------- -------- -------- --------
Net income $ 8,613 $ 10,139 $ 30,729 $ 25,643
======== ======== ======== ========
Net income per share $ .67 $ .80 $ 2.38 $ 2.03
======== ======== ======== ========
Average common and common
equivalent shares 12,904 12,726 12,895 12,613
======== ======== ======== ========
Dividends per share $ .08 $ .07 $ .24 $ .21
======== ======== ======== ========
</TABLE>
See accompanying notes.
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<PAGE>
WYLE ELECTRONICS
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
(Unaudited)
ASSETS 9/30/96 12/31/95
- - ------ ------- --------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 15,994 $ 15,694
Receivables (less allowances of $7,431 at
9/30/96 and $6,423 at 12/31/95) 169,232 159,829
Inventories 208,424 203,413
Prepaid expenses and deferred tax assets 9,645 7,295
-------- ---------
Total current assets 403,295 386,231
-------- ---------
Property, plant and equipment 62,125 52,837
Less accumulated depreciation 25,237 18,508
-------- ---------
36,888 34,329
-------- ---------
Goodwill, net 27,655 241
-------- ---------
Other assets and deferred tax assets 25,329 18,543
-------- ---------
Total assets $493,167 $ 439,344
======== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
- - ------------------------------------
Current liabilities
Current maturities of long-term debt $ 3,133 $ 3,000
Accounts payable 95,147 97,697
Accrued expenses 41,278 30,032
-------- ---------
Total current liabilities 139,558 130,729
-------- ---------
Long-term debt, less current maturities 98,800 87,600
-------- ---------
Other liabilities 24,961 25,345
-------- ---------
Commitments and contingencies
Shareholders' equity
Common stock 97,102 90,482
Retained earnings 132,792 105,188
Foreign currency translation adjustment (46) -
-------- ---------
229,848 195,670
-------- ---------
Total liabilities and shareholders' equity $493,167 $ 439,344
======== =========
</TABLE>
See accompanying notes.
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<PAGE>
WYLE ELECTRONICS
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine Months
Ended September 30,
---------------------
1996 1995
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 30,729 $ 25,643
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Depreciation and amortization 7,045 3,472
Provision for losses on receivables 2,258 2,133
Provision for deferred income taxes (1,270) 1,861
(Increase) in receivables (2,568) (37,716)
(Increase) in inventories (1,735) (35,773)
(Increase) decrease in prepaid expenses (847) 163
Increase (decrease) in accounts payable (7,008) 8,305
Increase (decrease) in accrued expenses 8,461 (1,727)
Other, net 890 142
--------- ---------
Net cash provided by (used for) operating activities 35,955 (33,497)
--------- ---------
FINANCING ACTIVITIES
Additions to long-term debt 10,202 55,574
Exercise of stock options 2,751 3,430
Dividends on common stock (3,026) (2,591)
Purchase of common stock - (847)
--------- ---------
Net cash provided by financing activities 9,927 55,566
--------- ---------
INVESTING ACTIVITIES
Cash consideration paid for acquired business,
net of $1,302 cash received (30,188) -
Additions to property, plant and equipment (9,565) (19,130)
Additions to other non-current assets and liabilities, net (5,783) (461)
--------- ---------
Net cash (used for) investing activities (45,536) (19,591)
--------- ---------
Foreign currency translation adjustment (46) -
--------- ---------
Increase in cash and cash equivalents 300 2,478
Cash and cash equivalents at beginning of period 15,694 9,319
--------- ---------
Cash and cash equivalents at end of period $ 15,994 $ 11,797
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 4,963 $ 2,188
Income taxes 18,593 14,912
</TABLE>
See accompanying notes.
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<PAGE>
WYLE ELECTRONICS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 -- Basis of Presentation
The consolidated financial statements included herein have been prepared by the
Company, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been omitted pursuant to such rules and regulations.
The accompanying consolidated financial statements have been prepared on the
same basis as the consolidated financial statements for the year ended December
31, 1995. These financial statements should be read in conjunction with the
financial statements and the notes thereto included in the Company's Annual
Report to Shareholders for the year ended December 31, 1995.
The consolidated financial statements include the accounts of the Company and
all of its subsidiaries after eliminating all significant intercompany
transactions and reflect all normal recurring adjustments which are, in the
opinion of management, necessary to present a fair statement of the results for
the interim periods reported. The results of operations for the nine months
ended September 30, 1996 are not necessarily indicative of the results to be
expected for the full year.
The Company's fiscal quarters are on a 13-week basis. The third quarter of 1996
ended on September 29, 1996 (the Sunday nearest September 30, 1996). Last year's
third quarter ended on October 1, 1995. For clarity of presentation, the Company
uses calendar month-end dates for financial reporting purposes.
Note 2 -- Acquisition
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. The
transaction was accounted for using the purchase method of accounting. Goodwill
recorded as part of the acquisition of Ginsbury is being amortized using the
straight-line method over a 40 year period.
4 0f 8
<PAGE>
The results of operations of the Company for the three and nine months ended
September 30, 1996 include the results of Ginsbury. If the acquisition of
Ginsbury had taken place at the beginning of 1995 rather than on January 2,
1996, pro forma consolidated net sales, net income and net income per share
would approximate $286,219,000, $10,527,000 and $.83, respectively, for the
quarter ended September 30, 1995. For the nine months ended September 30, 1995
pro forma consolidated net sales, net income and net income per share would
approximate $816,394,000, $26,552,000 and $2.09, respectively. Such pro forma
amounts are not necessarily indicative of what the actual consolidated results
would have been for the full year of 1995.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
- - ---------------------
Consolidated sales for the three and nine months ended September 30, 1996
totaled $295,191,000 and $928,578,000, respectively. Net income aggregated
$8,613,000 for the current year's third quarter and $30,729,000 for the first
nine months. In comparison to the prior year, sales rose by 8% in the third
quarter and advanced 19% for the year-to-date. Net income was down 15% in the
third quarter, but increased 20% for the first nine months versus the previous
year.
The gain in sales for the third quarter and first nine months of 1996, in
comparison to the prior year, resulted mainly from increased shipments of
computer products. Higher computer product billings were driven by customer
demand for computer systems and mass storage devices.
Semiconductor revenues during the third quarter of 1996 were down versus the
same period a year ago, while shipments for the first nine months of this year
increased over the prior year. Shipments of semiconductor products in both the
second and third quarter of 1996 were negatively affected by customers
attempting to reduce excess inventory levels as a result of shorter product
delivery lead times. Sales of application specific integrated circuits (ASICs)
were up significantly from the corresponding periods a year ago.
The decline in net income for the third quarter of 1996, compared to the prior
year, reflects higher selling and administrative expenses as a percentage of
sales. Expenses in this year's third quarter were higher than in the prior year
as the Company has had a cost structure in place during 1996 to support
anticipated sales levels comparable to those achieved in the first two quarters
of this year. The increased net income for the first three quarters of 1996,
versus the same period a year ago, can be attributed mainly to sales growth
along with an increase in the Company's aggregate gross margin percentage,
offset partly by a rise in selling and administrative expenses as a percentage
of sales. Earnings in 1996 also reflect a higher level of interest expense
compared to the same periods last year, due to increased borrowing requirements
to finance additional working capital in support of higher sales levels as well
as the cash portion of an acquisition.
5 of 8
<PAGE>
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. Accordingly, the results of operations of the Company for 1996
include the results of Ginsbury.
During October 1996, the Company was notified by Advanced Micro Devices (AMD)
and Philips Semiconductors that they would be terminating their distribution
agreements with Wyle Electronics. AMD and Philips combined represented
approximately 7% of the Company's consolidated sales for the three months ended
September 30, 1996. The Company believes it has the opportunity to recover a
significant portion of these sales from comparable products offered by Wyle's
existing suppliers, along with incremental sales from the new National
Semiconductor and Fairchild Semiconductor product lines announced early in the
third quarter.
The Company's business is affected by the cyclical nature of the electronics
industry and the effect of general economic and market conditions, industry
market conditions caused by changes in the supply and demand for semiconductors
and computer products, intense industry competition and other risks. There is
hereby incorporated by reference the information appearing under the caption
"Risk Factors" in Part I of the Company's Annual Report on Form 10-K for the
year ended December 31, 1995.
Financial Condition
- - -------------------
Working capital as of September 30, 1996 totaled $263,737,000, up $8,235,000
from December 31, 1995. The growth in working capital can be attributed mainly
to higher receivable and inventory levels, offset partially by a rise in accrued
expenses. The current ratio at September 30, 1996 and December 31, 1995 was 2.9
and 3.0, respectively. The ratio of long-term debt to total capital (long-term
debt plus equity) was 30% at September 30, 1996 and 31% at December 31, 1995.
In April 1996, the Company issued $30 million of senior unsecured notes due
2001, which bear interest at 6.98%. The proceeds were used to repay bank
borrowings. At the same time, the Company amended its $140 million three-year
revolving credit agreement by reducing the committed credit line to $110
million.
Capital expenditures for the nine months ended September 30, 1996 aggregated
$9,565,000, which are lower than the prior year due to costs incurred in 1995
for the construction of a new warehouse/value-added distribution center.
During the first quarter of 1996, the company paid, before expenses, $30.8
million relating to the cash portion of the purchase price for Ginsbury.
On October 31, 1996, the Company's Board of Directors authorized the purchase of
up to 1 million shares of Wyle Electronics' common stock in the open market or
through negotiated purchases.
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.
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<PAGE>
PART II - OTHER INFORMATION
- - ---------------------------
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
10(a). Limited Liability Company Agreement of Accord Contract
Services LLC between Wyle Electronics and Marshall
Industries dated August 8, 1996
10(b). Warrant Agreement between Wyle Electronics and Marshall
Industries dated August 8, 1996
10(c). Standstill Agreement between Wyle Electronics and Marshall
Industries dated August 8, 1996
10(d). Registration Rights Agreement between Wyle Electronics and
Marshall Industries dated August 8, 1996
11. Calculation of Income Per Share
27. Financial Data Schedule
(b) Reports on Form 8-K:
None.
No responses are given to any other items of Part II because the answers are
either negative or not applicable.
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<PAGE>
SIGNATURE
---------
Pursuant to the requirements 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.
WYLE ELECTRONICS
Date: November 13, 1996 By: R. VAN NESS HOLLAND, JR.
--------------------------
R. Van Ness Holland, Jr.
Executive Vice President-
Finance and Treasurer,
Chief Financial Officer
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<PAGE>
WYLE ELECTRONICS
INDEX TO EXHIBITS FILED WITH FORM 10-Q
For the Quarter Ended September 30, 1996
Exhibits:
- - ---------
10(a). Limited Liability Company Agreement of Accord Contract Services LLC
between Wyle Electronics and Marshall Industries dated August 8, 1996
10(b). Warrant Agreement between Wyle Electronics and Marshall Industries dated
August 8, 1996
10(c). Standstill Agreement between Wyle Electronics and Marshall Industries
dated August 8, 1996
10(d). Registration Rights Agreement between Wyle Electronics and Marshall
Industries dated August 8, 1996
11. Calculation of Income Per Share
27. Financial Data Schedule
<PAGE>
EXHIBIT 10(a)
LIMITED LIABILITY COMPANY AGREEMENT
OF
ACCORD CONTRACT SERVICES LLC
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I CERTAIN DEFINITIONS........................................ 1
ARTICLE II FORMATION; NAME; PLACE OF BUSINESS......................... 1
2.1 Formation of LLC; Certificate of Formation................. 1
2.2 Name of LLC................................................ 2
2.3 Place of Business.......................................... 2
2.4 Registered Office and Registered Agent..................... 3
2.5 Associated Agreements...................................... 3
2.6 Representations and Warranties............................. 3
2.7 Partnership Interest....................................... 4
ARTICLE III PURPOSES AND POWERS OF LLC................................. 5
3.1 Purposes................................................... 5
3.2 Powers..................................................... 5
ARTICLE IV TERM OF LLC................................................ 5
ARTICLE V CAPITAL.................................................... 6
5.1 Initial Capital Contributions of the Members............... 6
5.2 Additional Capital Contributions of the Members............ 6
5.3 Capital Accounts........................................... 6
5.4 No Interest on Capital Contributions or Capital Accounts... 6
5.5 Advances to LLC............................................ 6
5.6 Liability of Members and the Board of Representatives...... 7
5.7 Return of Capital.......................................... 7
5.8 Future Financing........................................... 7
ARTICLE VI ALLOCATION OF PROFITS AND LOSSES; DISTRIBUTIONS; TAXES..... 7
6.1 Allocation of Net Income or Net Loss....................... 7
6.2 Allocation of Income and Loss With Respect to LLC Interests
Transferred............................................... 7
6.3 Distributions and Withholding.............................. 8
6.4 Overriding Allocations of Net Income and Net Loss.......... 8
6.5 Taxes...................................................... 9
</TABLE>
i
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<TABLE>
<CAPTION>
Page
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<S> <C> <C>
ARTICLE VII MANAGEMENT................................................. 10
7.1 Management of the LLC by the Board of Representatives...... 10
7.2 Officers................................................... 14
7.3 Other Activities of Members or Affiliates; No
Restrictions on Competition............................... 15
7.4 Certain Transactions....................................... 15
7.5 Indemnification and Exculpation of the Members,
Representatives, Officers any Affiliate.................... 15
7.6 Rights and Obligations of Members.......................... 17
7.7 Performance of Duties; Liability of Representatives........ 17
7.8 Limited Liability.......................................... 18
ARTICLE VIII DEADLOCKS.................................................. 18
8.1 Deadlock Resolution........................................ 18
ARTICLE IX BANK ACCOUNTS; BOOKS AND RECORDS; STATEMENTS;
TAXES; FISCAL YEAR........................................ 19
9.1 Bank Accounts.............................................. 19
9.2 Books and Records.......................................... 19
9.3 Financial Statements and Information....................... 19
9.4 Accounting Decisions....................................... 20
9.5 Where Maintained........................................... 20
9.6 Fiscal Year................................................ 20
ARTICLE X TRANSFER AND CONVERSION OF LLC INTERESTS AND THE ADDITION,
SUBSTITUTION AND WITHDRAWAL OF MEMBERS.................... 20
10.1 Transfer of LLC Interests.................................. 20
10.2 Restrictions on Transfers.................................. 21
10.3 No Right to Withdraw....................................... 21
10.4 Removal.................................................... 21
</TABLE>
ii
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<TABLE>
<CAPTION>
Page
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<S> <C> <C>
ARTICLE XI DISSOLUTION AND LIQUIDATION.................................. 22
11.1 Events Causing Dissolution................................... 22
11.2 Cancellation of Certificate.................................. 25
11.3 Distributions Upon Dissolution............................... 25
11.4 Reasonable Time for Winding Up............................... 26
11.5 Distribution in Kind......................................... 26
11.6 Survival of Obligations...................................... 26
11.7 Deficit Capital Accounts..................................... 26
11.8 Transitional Cooperation..................................... 26
ARTICLE XII MISCELLANEOUS PROVISIONS..................................... 27
12.1 Compliance with Delaware LLC Act............................. 27
12.2 Additional Actions and Documents............................. 27
12.3 Notices...................................................... 27
12.4 Severability................................................. 28
12.5 Survival..................................................... 28
12.6 Waivers...................................................... 28
12.7 Exercise of Rights........................................... 28
12.8 Binding Effect............................................... 29
12.9 Limitation on Benefits of this Agreement..................... 29
12.10 Amendment Procedure.......................................... 29
12.11 Entire Agreement............................................. 29
12.12 Pronouns..................................................... 29
12.13 Headings..................................................... 29
12.14 Governing Law................................................ 29
12.15 Execution in Counterparts.................................... 29
12.16 Announcements................................................ 30
12.17 Dispute Resolution........................................... 30
12.18 Nondisclosure of Information................................. 32
12.19 Waiver of Partition and Certain Other Rights................. 34
12.20 Involvement of the LLC in Certain Proceedings................ 34
12.21 Attorney-in-Fact............................................. 34
12.22 Member Systems............................................... 35
</TABLE>
Schedules:
----------
Schedule 2.5
Schedule 5.1
Schedule 12.22
iii
<PAGE>
LIMITED LIABILITY COMPANY AGREEMENT
OF
ACCORD CONTRACT SERVICES LLC
THIS LIMITED LIABILITY COMPANY AGREEMENT ("Agreement") is entered into as
of August 8, 1996, by and among Wyle Electronics, a California corporation
("Member A") and Marshall Industries, Inc., a California corporation ("Member
B"). Member A and Member B and any other persons or entities who shall in the
future execute and deliver this Agreement pursuant to the provisions hereof
shall hereinafter collectively be referred to as the "Members."
Member A and Member B propose to form a joint venture to provide materials
management services for each of the Members, including, without limitation, the
acquisition of components and products and the provision of kitting, turnkey and
autoreplenishment services to customers and related administrative and other
related services in connection therewith. Member A and Member B further propose
that the joint venture be organized as a limited liability company pursuant to
the Delaware Limited Liability Company Act (the "Delaware LLC Act") under the
name "ACCORD CONTRACT SERVICES LLC" (the "LLC").
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the Members hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Unless the context otherwise specifies or requires, capitalized terms used
herein shall have the respective meanings assigned thereto in ADDENDUM I,
attached hereto and incorporated herein by reference, for all purposes of this
Agreement (such definitions to be equally applicable to both the singular and
the plural forms of the terms defined). Unless otherwise specified, all
references herein to Articles or Sections are to Articles or Sections of this
Agreement.
ARTICLE II
FORMATION; NAME; PLACE OF BUSINESS
2.1 FORMATION OF LLC; CERTIFICATE OF FORMATION. The Members of the LLC
hereby:
<PAGE>
(a) authorize the formation of the LLC by the Members as a limited
liability company pursuant to the Delaware LLC Act, and further authorize the
filing of the Certificate with the Recording Office as required under the
Delaware LLC Act;
(b) confirm and agree to their status as Members of the LLC;
(c) execute this Agreement for the purpose of confirming the existence of
the LLC and establishing the rights, duties and relationship of the Members;
(d) agree that if the laws of any jurisdiction in which the LLC transacts
business so require, the Board of Representatives also shall file, with the
appropriate office in that jurisdiction, any documents necessary for the LLC to
qualify or register to transact business under such laws; and
(e) agree to execute, acknowledge, and cause to be filed, in the place or
places and manner prescribed by law, any amendments to the Certificate as may be
required, either by the Delaware LLC Act, by the laws of any jurisdiction in
which the LLC transacts business or by this Agreement, to reflect changes in the
information contained therein or otherwise to comply with the requirements of
law for the continuation, preservation, and operation of the LLC as a limited
liability company under the Delaware LLC Act.
In the event of any inconsistency between any terms and conditions contained
in this Agreement and any non-mandatory provisions of the Delaware LLC Act, the
terms and conditions contained in this Agreement shall govern.
2.2 NAME OF LLC. The name under which the LLC shall conduct its business
is "ACCORD CONTRACT SERVICES LLC." The business of the LLC may be conducted
under any other name permitted by the Delaware LLC Act that is selected by the
Board of Representatives, in its sole and absolute discretion. The Board of
Representatives promptly shall execute, file and record any assumed or
fictitious name certificates required by the laws of the State of Delaware or
any state in which the LLC conducts business.
2.3 PLACE OF BUSINESS. The location of the principal place of business of
the LLC shall be 165 Technology Drive, Irvine, California 92618. The Board of
Representatives may change the principal place of business of the LLC to such
other place or places within the United States as the Board of Representatives
may from time to time determine, in its sole and absolute discretion, provided
that the Board of Representatives shall give written notice of the change to the
Members within thirty (30) days after the effective date of the change and, if
necessary, the Board of Representatives shall amend the Certificate in
accordance with the applicable requirements of the Delaware LLC Act. The Board
of Representatives may, in its sole and absolute discretion, establish and
maintain such other offices and additional places
2
<PAGE>
of business of the LLC, either within or without the State of Delaware, as it
deems appropriate.
2.4 REGISTERED OFFICE AND REGISTERED AGENT. The street address of the initial
registered office of the LLC shall be 15 East North Street, Dover, Delaware
19901, and the LLC's registered agent at such address shall be Incorporating
Services, Ltd.
2.5 ASSOCIATED AGREEMENTS. Concurrently with or within ninety (90) days
following the execution of this Agreement (the "Associated Agreement Negotiation
Period"), the LLC, Member A and Member B, as applicable, shall execute and
deliver the Associated Agreements (as defined below). The LLC, Member A and
Member B, as applicable, shall each allocate the necessary resources and meet
together as soon as possible following the execution of this Agreement and as
often as a party reasonably requests thereafter, in order to negotiate in good
faith the Associated Agreements not executed concurrently with this Agreement.
The execution and delivery of, and performance by the LLC of its obligations
under, the Associated Agreements, and any agreements, instruments or other
documents contemplated thereby to be entered into by the LLC in connection
therewith, are hereby authorized (without requirement for further approval under
Article VII hereof), and the LLC General Manager of the LLC acting alone is
authorized to execute and deliver such documents on behalf of the LLC.
"Associated Agreement(s)" as used herein shall mean the following contracts
which shall address, at a minimum, those issues set forth in the outlines
attached hereto as Schedule 2.5 (each as the same may be amended or supplemented
from time to time):
Personnel Secondment Agreement
Supply Agreement
Value Added Services Agreement
[Sub] Lease Agreement
Systems License Agreement
Administrative Services (Transition) Agreement
2.6 REPRESENTATIONS AND WARRANTIES.
(a) REPRESENTATIONS AND WARRANTIES OF MEMBER A. Member A hereby
represents and warrants to Member B as follows (such representations and
warranties on the date of this Agreement being true and correct in all material
respects):
(i) Member A is a corporation duly organized, validly existing and in
good standing under the laws of the State of California and is duly qualified to
do business in each jurisdiction where the nature of its activities requires it
to be so qualified. Member A has the corporate power and authority to own,
lease, and operate its assets, properties, and businesses and to enter into this
Agreement and to carry out its obligations hereunder. The execution, delivery,
and performance of this Agreement by Member A have been duly authorized by all
necessary corporate action on the part of
3
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Member A, and, this Agreement is legally binding upon Member A in accordance
with its terms.
(ii) The execution, delivery, and performance by Member A of this
Agreement and the transactions contemplated hereby will not (i) violate the
provisions of any order, judgment, or decree of any court or other governmental
agency or any arbitrator applicable to Member A or the Restated Articles of
Incorporation or bylaws of Member A; (ii) result in a material breach of or
constitute (with due notice or lapse of time or both) a material default under
any contract or agreement to which Member A is a party or by which Member A is
bound; or (iii) violate any provision of law of the United States of America or
any state thereof, the violation of which is likely to have a material adverse
effect on the business, operations or condition (financial or otherwise) of
Member A or the LLC.
(b) REPRESENTATIONS AND WARRANTIES OF MEMBER B. Member B hereby
represents and warrants to Member A as follows (such representations and
warranties on the date of this Agreement being true and correct in all material
respects):
(i) Member B is a corporation duly organized, validly existing and in
good standing under the laws of the State of California and is duly qualified to
do business in each jurisdiction where the nature of its activities requires it
to be so qualified. Member B has the corporate power and authority to own, lease
and operate its assets, properties, and business and to enter into this
Agreement and to carry out its obligations hereunder. The execution, delivery,
and performance of this Agreement by Member B have been duly authorized by all
necessary corporate action on the part of Member B, and this Agreement is
legally binding upon Member B in accordance with its terms.
(ii) The execution, delivery, and performance by Member B of this
Agreement and the transactions contemplated hereby will not (i) violate the
provisions of any order, judgment, or decree of any court or other governmental
agency or any arbitrator applicable to Member B or the Articles of Incorporation
or Bylaws of Member B, (ii) result in a material breach of or constitute (with
due notice or lapse of time or both) a material default under any contract or
agreement to which Member B is a party or by which Member B is bound or (iii)
violate any provision of law of the United States of America or any state
thereof, the violation of which is likely to have a material adverse effect on
the business, operations or condition (financial or otherwise) of Member B or
the LLC.
2.7 PARTNERSHIP INTEREST. It is the intent of the Members that the LLC be
operated in a manner consistent with its treatment as a "partnership" for
federal and state income tax purposes. No Member shall take any action
inconsistent with the express intent of the parties hereto as set forth in this
Section. The Members hereby agree and acknowledge that only the Board of
Representatives by unanimous vote may commence a voluntary case on behalf of the
LLC under a chapter of Title 11 U.S.C. by
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the filing of a "petition" (as defined in 11 U.S.C. 101(42)) with the United
States Bankruptcy Court. Any such petition filed by any other Member or agent
of the LLC shall be deemed an unauthorized and bad faith filing and all parties
to this Agreement shall use their best efforts to cause such petition to be
dismissed.
ARTICLE III
PURPOSES AND POWERS OF LLC
3.1 PURPOSES. The purposes of the LLC shall be:
(a) to provide materials management services to the Members, including,
without limitation, the acquisition of components and products and the provision
of kitting, turnkey and autoreplenishment services to customers and related
administrative and other related services in connection therewith, and the
design, construction, operation and financing of material management systems
related thereto;
(b) to engage in any other business activities that have been approved in
writing by the Members from time-to-time;
(c) to acquire, hold, own, operate, manage, finance, encumber, sell, or
otherwise dispose of and otherwise use the LLC Assets pursuant to, and in
accordance with, this Agreement and the Associated Agreements; and
(d) to enter into any lawful transaction and engage in any lawful
activities in furtherance of the foregoing purposes and as may be necessary,
incidental or convenient to carry out the business of the LLC as contemplated by
this Agreement.
3.2 POWERS. The LLC shall have the power to do any and all acts and
things necessary, appropriate, advisable, or convenient for the furtherance and
accomplishment of the purposes of the LLC, including, without limitation, to
engage in any kind of activity and to enter into and perform obligations of any
kind necessary to or in connection with, or incidental to, the accomplishment of
the purposes of the LLC, so long as said activities and obligations may be
lawfully engaged in or performed by a limited liability company under the
Delaware LLC Act.
ARTICLE IV
TERM OF LLC
The LLC commenced on the date upon which the Certificate was duly filed with
the Recording Office and shall continue for thirty (30) years, unless dissolved
and liquidated before the Termination Date in accordance with the provisions of
Article XI.
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ARTICLE V
CAPITAL
5.1 INITIAL CAPITAL CONTRIBUTIONS OF THE MEMBERS. Concurrently with the
execution of this Agreement, Member A and Member B shall contribute to the LLC
the cash, property and services set forth in Schedule 5.1 attached hereto and
incorporated herein by this reference (each such contribution an "Initial
Contribution"). The cash portion of the Initial Capital Contribution of each
Member shall be made by immediately available wire transfer payable to the order
of the LLC or its designated agent. The Members shall not be required to make
any Capital Contributions to the LLC other than as set forth in this Section 5.1
or in Section 5.2.
5.2 ADDITIONAL CAPITAL CONTRIBUTIONS OF THE MEMBERS. Upon the agreement of all
of the Members, a Member shall make an additional Capital Contribution (an
"Additional Capital Contributions"); provided, however, that the contribution
obligation of Members under Section 7.5(h) hereof shall not require unanimous
approval hereunder. The cash portion of any Additional Capital Contributions to
the LLC shall be made by the Members by immediately available wire transfer
payable to the order of the LLC or its designated agent. The Percentage
Interests of the Members shall not be adjusted to reflect any Additional Capital
Contribution without the written consent of all Members.
5.3 CAPITAL ACCOUNTS. A separate capital account (a "Capital Account")
shall be established and maintained for each Member in accordance with the
requirements of Treasury Regulations Sections 1.704-1(b)(2)(iv) and 1.704-2.
Subject to the preceding sentence, the Capital Account of each Member shall be
(a) increased by the amount of any cash contributions or fair market value of
any non-cash contribution made to the LLC by the Member, (b) increased or
decreased by items of Net Income or Net Loss allocated to the Member pursuant to
Article VI, and (c) decreased by any distributions made by the LLC to the
Member.
5.4 NO INTEREST ON CAPITAL CONTRIBUTIONS OR CAPITAL ACCOUNTS. No Member
shall be entitled to receive any interest on its Capital Contributions or its
outstanding Capital Account balance.
5.5 ADVANCES TO LLC. No Member shall advance funds or make loans to the
LLC in excess of the amounts required hereunder to be contributed by it to the
capital of the LLC without the express written consent of the other Member. Any
such approved advances or loans by a Member shall not result in any increase in
the amount of such Member's Capital Account or entitle it to any increase in its
Percentage Interest. The amounts of such advances or loans shall be a debt of
the LLC to such Member and shall be payable or collectible only out of the LLC
Assets in accordance with terms and conditions agreed upon by all Members.
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5.6 LIABILITY OF MEMBERS AND THE BOARD OF REPRESENTATIVES. Except as
otherwise required by any non-waivable provision in the Delaware LLC Act, the
debts, obligations and liabilities of the LLC, whether arising in contract, tort
or otherwise, shall be solely the debts, obligations and liabilities of the LLC,
and none of the Members or the Representatives shall be obligated personally for
any such debt, obligation or liability of the LLC solely by reason of being a
Member or a Representative.
5.7 RETURN OF CAPITAL. Except upon the dissolution of the LLC or as may be
specifically provided in this Agreement, no Member shall have the right to
demand or to receive the return of all or any part of its Capital Account or its
Capital Contributions to the LLC.
5.8 FUTURE FINANCING. The Members anticipate that in the future the LLC
may require additional funds for capital expenditures or working capital
requirements, and any such additional funding shall be obtained from any of the
following sources as may unanimously be approved by the Members.
(a) cash reserves of the LLC;
(b) loans to be obtained from banks and other such independent
sources, in which event, the Members shall exert reasonable efforts to assist
the LLC in obtaining any such loans;
(c) additional Capital Contributions made to the LLC by the Members,
in proportion to their Percentage Interests, in amounts determined by mutual
agreement of the Members;
(d) loans to be made to the LLC by (i) the Members and/or (ii) an
Affiliate of either of the Members; or
(e) any other funding source unanimously agreed upon by the Members.
ARTICLE VI
ALLOCATION OF PROFITS AND LOSSES;
DISTRIBUTIONS; TAXES
6.1 ALLOCATION OF NET INCOME OR NET LOSS. Except as otherwise provided in
this Article VI, the Net Income or Net Loss, other items of income, gains,
losses, deductions and credits, and the taxable income, gains, losses,
deductions and credits of the LLC, if any, for each Fiscal Year (or portion
thereof) shall be allocated to the Members in proportion to their Percentage
Interests.
6.2 ALLOCATION OF INCOME AND LOSS WITH RESPECT TO LLC INTERESTS
TRANSFERRED. If any LLC Interest is transferred during any Fiscal Year, the Net
Income or Net Loss
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(and other items referred to in Section 6.1) attributable to such LLC Interest
for such Fiscal Year shall be allocated between the transferor and the
transferee by any method allowed pursuant to Section 706 of the Code and any
regulations promulgated in connection therewith, as determined by the Board of
Representatives.
6.3 DISTRIBUTIONS AND WITHHOLDING.
(a) DISTRIBUTIONS. Distributions to the Members may be made at times
and in amounts as are determined by the Board of Representatives. Except as
otherwise provided in Article XI, distributions shall be made to the Members in
proportion to their Percentage Interests. Distributions may be made in cash or
by distributing property in kind.
(b) WITHHOLDING. The LLC may withhold distributions or portions
thereof if it is required to do so by any applicable rule, regulation or law,
and each Member hereby authorizes the LLC to withhold from or pay on behalf of
or with respect to such Member any amount of federal, state, local or foreign
taxes that the Board of Representatives determines that the LLC is required to
withhold or pay with respect to any amount distributable or allocable to such
Member pursuant to this Agreement. Any amount paid on behalf of or with respect
to a Member pursuant to this Section 6.3(b) shall be treated as having been
distributed to such Member.
6.4 OVERRIDING ALLOCATIONS OF NET INCOME AND NET LOSS.
(a) Prior to any allocation under this Article VI, if there is a net
decrease in LLC minimum gain during any Fiscal Year, each Member shall be
specially allocated items of LLC income and gain for such year (and, if
necessary, subsequent years) in an amount equal to the portion of such Member's
share of the net decrease in LLC minimum gain determined in accordance with
Treasury Regulations Section 1.704-2. Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts required to be
allocated to each respective Member pursuant thereto. This Section 6.4(a) is
intended to comply with the minimum gain chargeback requirements in
Section 1.704-2 of the Treasury Regulations and shall be interpreted
consistently therewith.
(b) Prior to any allocation hereunder (other than the allocation set
forth in Section 6.4(a)), if there is a net decrease in Member minimum gain
attributable to a Member nonrecourse debt during any Fiscal Year, each Member
who has a share of the Member minimum gain attributed to such Member nonrecourse
debt, determined in accordance with Treasury Regulations Section 1.704-2(i)(5),
shall be specially allocated items of LLC income and gain for such year (and, if
necessary, subsequent years) in an amount equal to the portion of such Member's
share of the net decrease in Member minimum gain attributable to such Member
nonrecourse debt, determined in accordance with Treasury Regulations
Section 1.704-2(i)(5). Allocations pursuant to the previous sentence shall be
made in proportion to the respective amounts required to be allocated
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to each Member pursuant thereto. This Section 6.4(b) is intended to comply with
the partner minimum chargeback requirement in Section 1.704-2 of the Treasury
Regulations and shall be interpreted consistently therewith.
(c) If, during any Fiscal Year a Member unexpectedly receives any
adjustment, allocation or distribution described in Treasury Regulation
Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), and, as a result of such
adjustment, allocation or distribution, such Member has an Excess Negative
Balance in its Capital Account, then items of gross income shall first be
allocated to such Member in an amount equal to its Excess Negative Balance.
(d) Any LLC deductions that are characterized as "nonrecourse
deductions" pursuant to Treasury Regulations Sections 1.704-2(b)(1) and 1.704-
2(c) shall be allocated among the Members in proportion to their Percentage
Interests. Any LLC deductions that are characterized as "partner nonrecourse
deductions" under Treasury Regulations Sections 1.704-2(i)(1) and 1.704-(i)(2)
shall be allocated among the Members as required by Treasury Regulations
Section 1.704-2(g).
6.5 TAXES.
(a) REPORTS. As soon as practicable after the end of each Fiscal
Year, the LLC shall prepare and mail to each Member a report containing all
information necessary for the Member to include its share of taxable income or
loss (or items thereof) in its income tax return.
(b) TAX ALLOCATIONS. Subject to the provisions of Section 6.5(c),
all items of income, gain, loss and deduction for federal and state tax purposes
shall be allocated in accordance with the corresponding "book" items set forth
in Section 6.1 hereof.
(c) CONTRIBUTIONS OF PROPERTY. In accordance with Section 704(c) of
the Code and the Treasury Regulations thereunder, depreciation, amortization,
gain and loss, as determined for tax purposes, with respect to any contributed
property the book value of which differs from its adjusted basis for federal
income tax purposes, shall, for tax purposes, be allocated between the Members
so as to take account of any variation between the adjusted basis of such
property to the LLC for federal income tax purposes and its book value.
Allocations pursuant to this Section 6.5(c) are solely for purposes of federal,
state and local taxes and shall not affect, or in any way be taken into account
in computing, the capital account of any Member or such Member's share of
profit, loss, other items, or distributions pursuant to any provision of this
Agreement. The provisions of this Section 6.5(c) relating to federal income tax
treatment of an item shall apply for state and local income tax purposes to the
extent permitted under applicable law. Any elections or other decisions
relating to such allocations shall be made by the Board of Representatives
pursuant to Section 7.1(e) of this Agreement.
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(d) TAX MATTERS PARTNER. The "Tax Matters Partner" of the LLC shall be
designated from time to time by the Board of Representatives. The Tax Matters
Partner shall not extend the statue of limitations on behalf of the LLC, submit
any written material to any taxing authority, settle or offer to settle any
controversy, select the LLC's choice of litigation forum in a tax controversy,
or take any other action in its capacity as Tax Matters Partner without the
consent of the Board of Representatives. The Tax Matters Partner shall keep the
Board of Representatives fully advised of the progress of any audit and shall
supply the Board of Representatives with copies of any written communications
received from the Internal Revenue Service or other taxing authority relating to
any audit within ten (10) days of receipt thereof, and shall at least ten (10)
business days prior to submitting any materials to the Internal Revenue Service,
or other taxing authority, provide such materials to the Board of
Representatives. The Tax Matters Partner shall be reimbursed by the LLC for any
reasonable expenses incurred in its capacity as Tax Matters Partner.
ARTICLE VII
MANAGEMENT
7.1 MANAGEMENT OF THE LLC BY THE BOARD OF REPRESENTATIVES.
(a) MANAGEMENT BY THE MEMBERS THROUGH THE BOARD OF REPRESENTATIVES.
The Members shall have the right to manage the business of the LLC and shall
have all powers and rights necessary, appropriate or advisable to effectuate and
carry out the purposes and business of the LLC. However, the Members may
appoint, employ or otherwise contract with any persons or entities for the
transaction of the business of the LLC or the performance of services for or on
behalf of the LLC, and the Members may delegate to any such person(s) or
entity(ies) such authority to act on behalf of the LLC as the Members may from
time to time deem appropriate. Without limiting their rights as Members to
manage the business of the LLC in any way, and as a means to facilitate
efficient communication and operation of the LLC, the Members hereby unanimously
agree that with respect to the management of the business and affairs of the
LLC, the Members shall act through a board of representatives (the "Board of
Representatives"), subject to the limitations set forth in Sections 7.1(j) and
7.4 hereof.
(b) COMPOSITION OF BOARD REPRESENTATIVES; APPOINTMENT AND REMOVAL.
(i) The Board of Representatives shall at all times be composed
of four (4) Representatives (each, a "Representative").
(ii) Each Member shall appoint two individuals to serve as its
initial representatives on the Board of Representatives. Each such individual
shall be a director, officer or employee of the Member that appointed him/her
during the entire time such individual serves on the Board, and shall serve
until such time as he or she resigns, retires, dies or is removed. Any
Representative may be removed with or without
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cause by the Member who appointed such Representative. Upon the resignation,
retirement, death or removal of any Representative, the Member who appointed
such Representative shall designate the replacement Representative.
(c) MEETINGS AND ACTIONS.
(i) The Board of Representatives shall meet (1) at least once
each Fiscal Quarter at the principal offices of the LLC or at such other place
as may be agreed upon from time to time by the Board of Representatives (unless
such meeting shall be waived by all of the Representatives); (2) at such other
times as may be determined by the Board of Representatives; (3) upon the request
of at least two Representatives upon ten (10) days' notice to all
Representatives; or (4) in accordance with Section 8.1, following a failure by
the Board of Representatives to adopt or reject a proposal for action presented
to it. Meetings may be held by telephone if at least one Representative
appointed by each Member so consents. The Board of Representatives shall cause
written minutes to be prepared of all actions taken by the Board of
Representatives and shall cause a copy thereof to be delivered to each
Representative within fifteen (15) days thereof.
(ii) No action may be taken at a meeting of the Board of
Representatives unless a quorum consisting of at least one Representative
appointed by each member is present.
(iii) Each Representative shall be entitled to cast one vote with
respect to any decision made by the Board of Representatives, except with
respect to a determination to seek indemnification pursuant to Section 7.5
hereof, in which event a Representative seeking indemnification hereunder shall
have no vote with respect to his indemnification. Any action to be taken by the
Board of Representatives shall require at least three affirmative votes.
Approval or action by the Board of Representatives shall constitute approval or
action by the LLC and shall be binding on the Members. A Representative may
grant a proxy entitling the other Representative appointed by the same Member to
exercise his voting rights. Such proxy shall be in writing and shall specify a
termination date. The Representatives appointed by the other Member shall be
entitled to inspect the proxy on demand.
(iv) Any action to be taken by the Board of Representatives may
be taken without a meeting if consents in writing setting forth the action so
taken are signed by at least three Representatives.
(d) SUBCOMMITTEES. The Board of Representatives may designate a
subcommittee consisting of at least one Representative appointed by each Member.
Any subcommittee, to the extent provided by the Board of Representatives, shall
have and may exercise all the power and authority of the Board of
Representatives.
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(e) POWER AND AUTHORITY OF THE BOARD OF REPRESENTATIVES. The Board
of Representatives (acting on behalf of the Members of the LLC), by its own
action, or by action of a subcommittee of the Board of Representatives, but not
by delegation to officers or other employees of the LLC, shall have the
exclusive right, power and authority to take the following actions, and no such
action will be taken without the approval of the Board of Representatives.
(i) making overall policy decisions with respect to the business
and affairs of the LLC;
(ii) reviewing and approving annual budgets, strategic plans,
business plans and operating guidelines;
(iii) approving any material contract, agreement or commitment;
(iv) approving the choice of bank depositories, and approving
arrangements relating to signatories on bank accounts;
(v) approving, amending, modifying, terminating or enforcing all
contracts, agreements, leases or other arrangements between the
LLC and any Member or Affiliate of a Member, in accordance with
the criteria set forth in Section 7.4;
(vi) approving any change of the LLC's fiscal year;
(vii) approving all distributions to the Members;
(viii) approving any material conveyance, sale, transfer, assignment,
pledge, encumbrance, or disposal of, or the granting of a
security interest in, any assets of the LLC;
(ix) approving the entry of the LLC into any other partnership or
joint venture;
(x) incurring any material indebtedness or loaning any material sum
or extending credit to any Person in a material amount;
(xi) guaranteeing any material indebtedness of any other Person, or
guaranteeing any contractual obligations of any other Person;
(xii) entering into any material real estate lease, or the
acquisition by the LLC of any real estate;
(xiii) authorizing any Member to act for or to assume any obligation
or responsibility on behalf of the LLC;
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(xiv) employing, appointing, determining the compensation and
removing any LLC employee who will be involved in the day to day management of
the business of the LLC;
(xv) changing any accounting principles used by the LLC,
except to the extent required by generally accepted accounting principles;
(xvi) approving any tax elections of the LLC;
(xvii) conducting litigation to which the LLC is a party;
(xviii) approving the acquisition of any business or a business
division from any Person, whether by asset purchase, stock purchase, merger or
other business combination;
(xix) approving the transfer of any material assets of the LLC,
or any interest therein, other than in the ordinary course of business;
(xx) approving any material amendment to or terminating any
Associated Agreement; and
(xxi) addressing any other strategic issue or approving any
other decision that at least two Representatives determine in good faith should
require approval or other determination by the Representatives.
(f) THIRD PARTY RELIANCE. Third parties dealing with the LLC shall
be entitled to rely conclusively upon the power and authority of the Board of
Representatives and the officers of the LLC as set forth herein.
(g) FIDUCIARY RELATIONSHIP. No Representative or LLC General Manager
shall be liable to the LLC or its Members for monetary damages for breach of
fiduciary duty as an LLC General Manager or Representative or otherwise liable,
responsible or accountable to the LLC or its Members for monetary damages or
otherwise for any acts performed, or for any failure to act; provided, however,
that this provision shall not eliminate or limit the liability of an LLC General
Manager or Representative (i) for any breach of the LLC General Manager's or
Representative's duty of loyalty to the LLC, (ii) for acts or omissions which
involve gross negligence, intentional misconduct or a knowing violation of law,
or (iii) for any transaction from which the Representative received any improper
personal benefit.
(h) REIMBURSEMENT. All expenses incurred with respect to the
organization, operation and management of the LLC shall be borne equally by each
Member. None of the Representatives, in their capacity as such, shall be
entitled to any fees for services rendered for or on behalf of the LLC.
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(i) NO INDIVIDUAL AUTHORITY. Except as otherwise expressly provided
in this Agreement, no Member, acting alone, shall have any obligation to act
for, or undertake or assume any obligation or responsibility on behalf of, the
other Member or the LLC.
(j) MEMBER APPROVAL. Notwithstanding the general authority of the
Representatives under Section 7.1(e), the following matters shall require the
unanimous approval of the Members:
(i) any amendment of this Agreement;
(ii) any merger or consolidation of or involving the LLC;
(iii) any lease, sale, exchange, conveyance, or other transfer
or disposition of all, or substantially all, of the assets of the LLC;
(iv) a change of the name of the LLC;
(v) engaging in a business other than as provided for by this
Agreement;
(vi) the contribution of additional capital by any Member to
the LLC;
(vii) the assignment of any of the property of the LLC in trust
for the benefit of creditors, or the making or filing, or acquiescence in the
making or filing by any other person, of a petition or other action requesting
the reorganization or liquidation of the LLC under the Bankruptcy Laws;
(viii) the issuance of any additional interests in the LLC, the
admission of additional Members, or the admission of substituted Members in
accordance with Section 10.2;
(ix) any other matter that is subject to the agreement,
consent, or approval of the Members hereunder or under any non-waivable
provision of the Delaware LLC Act; and
(x) the withdrawal or resignation of any Member.
7.2 OFFICERS.
(a) LLC GENERAL MANAGER. The Board of Representatives shall appoint
an operations manager of the LLC (the "LLC General Manager"). Subject to the
supervision and authority of the Board of Representatives and the approval
rights of Members, the LLC General Manager (i) shall have responsibility and
authority for
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management of the day-to-day operations of the LLC, and (ii) may execute
agreements and contracts on behalf of the LLC in the ordinary course of the
LLC's business.
(b) OTHER REPRESENTATIVES. The Board of Representatives may appoint
other managers or authorized representatives of the LLC with the authority and
upon terms and conditions the Board of Representatives deem necessary and
appropriate. Any representative shall hold his or her respective office unless
and until such representative is removed by the Board of Representatives.
7.3 OTHER ACTIVITIES OF MEMBERS OR AFFILIATES; NO RESTRICTIONS ON
COMPETITION. Any Member or any Affiliate thereof may have other business
interests or may engage in other business ventures of any nature or description
whatsoever, whether currently existing or hereafter created, and may compete,
directly or indirectly, with the business of the LLC. No Member or Affiliate
thereof shall incur any liability to the LLC as a result of its pursuit of such
other permitted business interests, ventures and competitive activity, and
neither the LLC nor the other Members shall have any right to participate in
such other business ventures or to receive or share in any income or profits
derived therefrom.
7.4 CERTAIN TRANSACTIONS. The LLC is expressly permitted in the normal
course of its business to enter into transactions with any or all Members or
with any Affiliate of any or all Members provided that the price and other terms
of such transactions are fair to the LLC and that the price and other terms of
such transactions are not less favorable to the LLC than those generally
prevailing with respect to comparable transactions between unrelated parties.
7.5 INDEMNIFICATION AND EXCULPATION OF THE MEMBERS, REPRESENTATIVES,
OFFICERS ANY AFFILIATE.
(a) RIGHT OF INDEMNIFICATION. In accordance with Section 18-108 of
the Delaware LLC Act, the LLC shall indemnify and hold harmless any Member,
Representative, LLC General Manager, officer, and Affiliate thereof
(individually, in each case, an "Indemnitee") to the fullest extent permitted by
law from and against any and all losses, claims, demands, costs, damages,
liabilities joint or several), expenses of any nature (including attorneys' fees
and disbursements), judgments, fines, settlements and other amounts arising from
any and all claims, demands, actions, suits or proceedings, whether civil,
criminal, administrative or investigative, in which the Indemnitee may be
involved or threatened to be involved, as a party or otherwise, arising out of
or incidental to the business or activities of or relating to the LLC regardless
of whether the Indemnitee continues to be a Member, a Representative, an LLC
General Manager, an officer or any Affiliate thereof at the time any such
liability or expense is paid or incurred; provided, however, that this provision
shall not eliminate or limit the liability of an Indemnitee (i) for any breach
of the Indemnitee's duty of loyalty to the LLC or its Members, (ii) for acts or
omissions which involve gross negligence, intentional
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misconduct or a knowing violation of law, or (iii) for any transaction from
which the Indemnitee received any improper personal benefit.
(b) ADVANCES OF EXPENSES. Expenses incurred by an Indemnitee in defending
any claim, demand, action, suit, or proceeding subject to this Section 7.5
shall, from time to time, upon request by the Indemnitee, be advanced by the LLC
prior to the final disposition of such claim, demand, action, suit or proceeding
upon receipt by the LLC of an undertaking by or on behalf of the Indemnitee to
repay such amount if it shall be determined in a judicial proceeding or a
appropriate. Any representative shall hold his or her respective office unless
binding arbitration that such Indemnitee is not entitled to be indemnified as
authorized in this Section 7.5.
(c) OTHER RIGHTS. The indemnification provided by this Section 7.5 shall be
in addition to any other rights to which an Indemnitee may be entitled under any
agreement, vote of the Board of Representatives as a matter of law or equity, or
otherwise, both as to an action in the Indemnitee's capacity as a Member, a
Representative, an LLC General Manager, an officer or any Affiliate thereof, and
as to an action in another capacity, and shall continue as to an Indemnitee who
has ceased to serve in such capacity and shall inure to the benefit of the
heirs, successors, assigns, and administrators of the Indemnitee.
(d) INSURANCE. The LLC may purchase and maintain insurance on behalf of the
Board of Representatives and such other Persons as the Board of Representatives
shall determine against any liability that may be asserted against or expense
that may be incurred by such Persons in connection with the offering of
interests in the LLC or the business or activities of the LLC, regardless of
whether the LLC would have the power to indemnify such Persons against such
liability under the provisions of this Agreement.
(e) EFFECT OF INTEREST IN TRANSACTION. An Indemnitee shall not be denied
indemnification in whole or in part under this Section 7.5 or otherwise by
reason of the fact that the Indemnitee had an interest in the transaction with
respect to which the indemnification applies if the transaction was otherwise
permitted or not expressly prohibited by the terms of this Agreement.
(f) NO THIRD PARTY RIGHTS. The provisions of this Section 7.5 are for the
benefit of the Indemnitees, their heirs, successors, assigns and administrators
and shall not be deemed to create any rights for the benefit of any other
Persons.
(g) EXCULPATION. The doing of any act or the failure to do any act by any
officer or Representative, or LLC General Manager, the effect of which may cause
or result in loss or damage to the LLC, if done or omitted to be done in good
faith reliance upon advice of independent legal counsel or accountants employed
by or on behalf of the LLC, or if done or omitted to be done in good faith and
in a manner reasonably believed to be within the scope of the authority granted
to such officer or Representative or LLC General Manager, by this Agreement or
the Board of
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Representatives and in or not opposed to the best interests of the LLC shall not
subject any such Person to any liability to the LLC or the Members; provided,
however, that the foregoing shall not relieve any Person of liability hereunder
if it shall have been determined by a court of competent jurisdiction that such
Person acted so as to be liable for fraud, deceit, willful misfeasance, reckless
or intentional misconduct, knowing violation of the law by the Representative or
LLC General Manager, or gross negligence, which liability shall survive such
Person's ceasing to hold its or his office and any dissolution of the LLC.
(h) CONTRIBUTION. If LLC assets are exhausted then to the extent that the
indemnification obligations of the LLC under this Section 7.5 hereof exceed the
assets of the LLC, each Member shall contribute to the LLC fifty percent (50%)
of the amounts necessary to fulfill the obligations of the LLC under Section 7.5
hereof.
7.6 RIGHTS AND OBLIGATIONS OF MEMBERS.
(a) LIMITED LIABILITY. No Member shall be personally liable for any debts,
liabilities, or obligations of the LLC; provided that each Member shall be
responsible (i) for the making of any Capital Contribution required to be made
to the LLC by such Member pursuant to the terms hereof, (ii) for the amount of
any distribution made to such Member that must be returned to the LLC pursuant
to any non-waivable provision of the Delaware LLC Act, and (iii) fifty percent
(50%) of the indemnification obligations of the LLC under Section 7.5 as set
forth in Section 7.5(h) hereof.
7.7 PERFORMANCE OF DUTIES; LIABILITY OF REPRESENTATIVES.
(a) STANDARDS. The Representatives and LLC General Manager shall perform
their managerial duties in good faith, in a manner they reasonably believe to be
in the best interests of the LLC and its Members, and with such care, including
reasonable inquiry, as an ordinarily prudent person in a like position would use
under similar circumstances. A Representative or LLC General Manager who so
performs the duties of Representative or LLC General Manager shall not have any
liability by reason of being or having been a Representative or LLC General
Manager of the LLC. The Representatives shall be entitled to delegate such of
their powers, authority and responsibilities under this Agreement as they may
deem appropriate from time to time.
(b) RELIANCE ON OTHERS. In performing their duties, the Representatives
shall be entitled to rely on information, opinions, reports or statements,
including financial statements and other financial data, of the following
persons or groups unless they have knowledge concerning the matter in question
that would cause such reliance to be unwarranted and provided that the
Representatives act in good faith and after reasonable inquiry if needed under
the circumstances:
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(i) one or more officers, employees or other agents of the LLC whom the
Representatives reasonably believe to be reliable and competent in the matters
presented; or
(ii) any attorney, independent accountant, valuation consultant, or other
person as to matters that the Representatives reasonably believe to be within
such person's professional or expert competence.
7.8 LIMITED LIABILITY. No person who is a Representative or officer or both a
Representative and an officer of the LLC shall be personally liable under any
judgment of a court, or in any other manner, for any debt, obligation, or
liability of the LLC, whether that liability or obligation arises in contract,
tort, or otherwise, solely by reason of being a Representative or officer or
both a Representative and an officer of the LLC.
ARTICLE VIII
DEADLOCKS
8.1 DEADLOCK RESOLUTION.
(a) DEFINITION OF DEADLOCK. "Deadlock" shall occur if: (i) the Members are
unable to reach unanimous agreement on any matter requiring the unanimous
approval of the Members under Section 7.1(j) during the sixty (60) day period
following a request for a Member vote, (ii) the Board of Representatives casts a
tie vote on a matter (except those matters set forth in Section 7.1(e)(v))
submitted to it at a meeting or in the form of a proposed written consent, and
during the sixty (60) day period following this tie vote, the Board of
Representatives is unable to break the tie. (If the matter is presented in the
form of a proposed written consent, the sixty (60) day period shall commence on
the date that the Representative who was last to receive the proposal received
it.) During this sixty (60) day period, the Board of Representatives shall hold
at least one additional meeting at which it shall make a good faith effort to
break the tie. The additional meeting shall be held at the time and place agreed
to by the Representatives, or if the Representatives are unable to agree, at a
time and place determined by the LLC General Manager, on at least five (5) days'
written notice.
(b) RESOLUTION OF DEADLOCK. If a Deadlock occurs, then such Deadlock shall
promptly be submitted, by any Member, to the dispute resolution procedure set
forth in Section 12.17 hereof ("ADR"). If the Members or Representatives, as the
case may be, are unable to resolve the dispute after complying with the
procedures set forth on the ADR, then either Member may terminate the LLC in
accordance with the provisions of Section 11.1. Further, if the dispute is not
resolved and the LLC is dissolved as provided in the preceding sentence, the
Neutral Party shall be instructed to issue an opinion whether or not, based on a
preponderance of the evidence the Neutral Party has seen or observed during the
ADR that either of the Members has used the provisions of this Section 8.1 as a
means to force a dissolution of the LLC in order to
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avoid the transfer or withdrawal procedures set forth in Article X or
dissolution and liquidation procedures set forth in Article XI. If the Neutral
Party's opinion concludes that one of the Members has used the provisions of
this Section 8.1 in such a manner then an "Improper Deadlock" shall be deemed to
have occurred. In such case, the Member not responsible for improper use of the
provisions of Section 8.1 shall be referred to as the "Non-deadlock Member." If
an Improper Deadlock has occurred then the Non-deadlock Member shall have the
right to terminate the Agreement and receive a Termination Transition Fee in
accordance with Section 11.1(c) hereof.
ARTICLE IX
BANK ACCOUNTS; BOOKS AND RECORDS;
STATEMENTS; TAXES; FISCAL YEAR
9.1 BANK ACCOUNTS. All funds of the LLC shall be deposited in its name in such
checking and savings accounts, time deposits, certificates of deposit or other
accounts at such banks as shall be designated by the Board of Representatives
from time to time, and the Board of Representatives shall arrange for the
appropriate conduct of such account or accounts.
9.2 BOOKS AND RECORDS. The Board of Representatives shall keep, or cause to be
kept, accurate, full and complete books and accounts showing assets,
liabilities, income, operations, transactions and the financial condition of the
LLC. Such books and accounts shall be prepared on the accrual basis of
accounting. Any Member or its designee shall have access thereto at any
reasonable time during regular business hours and shall have the right to copy
said records at its expense. In addition, the LLC will provide such records and
assistance as reasonably requested by either Member to meet such Member's
obligations with respect to audits or internal financial controls.
9.3 FINANCIAL STATEMENTS AND INFORMATION.
(a) PREPARATION IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES.
All financial statements prepared pursuant to this Section shall present fairly
the financial position and operating results of the LLC and shall be prepared in
accordance with generally accepted accounting principles on the accrual basis
for each Fiscal Year of the LLC during the term of this Agreement.
(b) QUARTERLY REPORT. Within thirty (30) days after the end of each
quarterly period (the "Fiscal Quarter") of each Fiscal Year, commencing with the
first Fiscal Quarter after the date of this Agreement, the Board of
Representatives shall prepare and submit or cause to be prepared and submitted
to the Members an unaudited statement of profit and loss for the LLC for such
Fiscal Quarter and an unaudited balance sheet of the LLC dated as of the end of
such Fiscal Quarter, in each case prepared in accordance with generally accepted
accounting principles consistently applied.
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(c) ANNUAL REPORTS. Within ninety (90) days after the end of each Fiscal
Year during the term of this Agreement, the Board of Representatives shall
prepare and submit or cause to be prepared and submitted to the Members (i) a
balance sheet, together with statements of profit and loss, Members' equity and
changes in financial position for the LLC during such Fiscal Year; (ii) a report
of the activities of the LLC during the Fiscal Year; (iii) a report summarizing
the fees and other remuneration paid by the LLC for such Fiscal Year to the
Board of Representatives and any Affiliate thereof; and (iv) a statement showing
any amounts distributed to the Members in respect of such Fiscal Year.
(d) OTHER REPORTS. The Board of Representatives shall provide to the Members
such other reports and information concerning the business and affairs of the
LLC as may be required by the Delaware LLC Act or by any other law or regulation
of any regulatory body applicable to the LLC.
9.4 ACCOUNTING DECISIONS. All decisions as to accounting matters, except as
specifically provided to the contrary herein, shall be made by the Board of
Representatives.
9.5 WHERE MAINTAINED. The books, accounts and records of the LLC at all
times shall be maintained at the LLC's principal office.
9.6 FISCAL YEAR. The fiscal year of the LLC for financial, accounting,
Federal, state and local income tax purposes shall initially be the fiscal year
commencing on January 1 and ending on December 31 (the "Fiscal Year"). The
Board of Representatives shall have authority to change the beginning and ending
dates of the Fiscal Year if the Board of Representatives, in its sole and
absolute discretion, deems such change to be necessary or appropriate to the
business of the LLC, and shall give written notice of any such change to the
Members within thirty (30) days after the occurrence thereof.
ARTICLE X
TRANSFER AND CONVERSION OF LLC INTERESTS AND THE ADDITION,
SUBSTITUTION AND WITHDRAWAL OF MEMBERS
10.1 TRANSFER OF LLC INTERESTS.
(a) DEFINITION OF TRANSFER. The term "transfer," when used in this Article X
with respect to an LLC Interest, shall include any sale, assignment, gift,
pledge, hypothecation, mortgage, exchange or other disposition, whether by
operation of law or otherwise.
(b) VOID TRANSFERS. No LLC Interest shall be transferred, in whole or in
part, except in accordance with the terms and conditions set forth in this
Article X.
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Any transfer or purported transfer of any LLC Interest not made in accordance
with this Article X shall be void ab initio.
10.2 RESTRICTIONS ON TRANSFERS
(a) CONSENT REQUIRED. No Member may transfer all or any portion of its LLC
Interest or its Capital Account without the express written consent of the
nontransferring Member which may be granted or withheld in its sole and absolute
discretion; provided, however, that no such consent shall be required to permit
a Member to transfer all (or any portion) of its LLC Interest to its wholly
owned subsidiary only for so long as the transferee remains a wholly-owned
subsidiary; provided further that such transfer shall give such wholly-owned
subsidiary only the right to receive distributions, income, gain and loss
allocable to such Member's LLC Interest to which such Member would otherwise be
entitled and such wholly-owned subsidiary must comply with Section 10.2(b) to
become a substituted Member.
(b) SUBSTITUTION. Any transferee of an LLC Interest shall become a
substituted Member upon (i) the express written unanimous consent of the Members
which may be granted or withheld in their sole and absolute discretion; (ii) the
transferee agreeing to be bound by all the terms and conditions of the
Certificate and this Agreement as then in effect; and (iii) receipt of any
necessary regulatory approvals. Unless and until a transferee is admitted as a
substituted Member, the transferee shall have no right to exercise any of the
powers, rights or privileges of a Member hereunder. A Member who has
transferred its LLC Interest shall cease to be a Member upon transfer of the
Member's entire LLC Interest and substitution of the transferee as a Member and
thereafter shall have no further powers, rights or privileges as a Member
hereunder except as provided in Section 7.5.
(c) DEALING WITH MEMBERS. The LLC, each Member, the Board of
Representatives, the LLC General Manager and any other Person or Persons having
business with the LLC need deal only with Members who are admitted as Members or
as substituted Members of the LLC, and they shall not be required to deal with
any other person by reason of transfer by a Member except as otherwise provided
in this Agreement. In the absence of the substitution (as provided herein) of a
Member for a transferring Member, any payment to a Member shall acquit the LLC
and the Board of Representatives of all liability to any other persons who may
be interested in such payment by reason of an assignment by such Member.
10.3 NO RIGHT TO WITHDRAW. No Member shall have any right to resign or
otherwise withdraw from the LLC, without the express written consent of all the
other Members.
10.4 REMOVAL. No Member shall be removed or terminated without such Member's
express written consent.
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ARTICLE XI
DISSOLUTION AND LIQUIDATION
11.1 EVENTS CAUSING DISSOLUTION.
(a) EVENTS. The LLC shall be dissolved and its affairs wound up upon the
occurrence of any of the following events:
(i) DISSOLUTION BY AGREEMENT. The LLC shall be dissolved upon the passage
of ninety (90) days after the consent in writing by all of the Members to
dissolve an wind up the affairs of the LLC (a "Dissolution By Agreement").
(ii) SALE OF ASSETS. The LLC shall be dissolved upon the sale or
disposition of all or substantially all the LLC Assets (which sale or
disposition shall require the unanimous consent of the Members) (a "Sale of
Assets").
(iii) BANKRUPTCY EVENT. The LLC shall be dissolved upon the Bankruptcy,
dissolution, liquidation or, in accordance with Section 7.1(j)(x) hereof, the
withdrawal or resignation (each, a "Bankruptcy Event") of any Member (a
"Bankruptcy Member"). Upon the dissolution of the LLC pursuant to this
subsection (iii) (the "Applicable Date"), the Member other than the Bankruptcy
Member (a "TO Member"), shall be entitled to receive a payment from the other
Member equal in amount to the Termination Transition Fee, which fee shall be
payable within thirty days after the Applicable Date.
(iv) LLC EXPIRATION. The LLC shall be dissolved on the Termination Date
(the "LLC Expiration").
(v) UNLAWFUL EVENT. The LLC shall be dissolved upon the occurrence of any
event (an "Unlawful Event") that would make it unlawful for the business of the
LLC to be continued; PROVIDED, HOWEVER, that if the Unlawful Event was caused by
or resulted from a Member's ("Unlawful Event Member") gross negligence or
intentional conduct, such event shall constitute a "Member Unlawful Event." The
LLC shall be dissolved upon the occurrence of a Member Unlawful Event only upon
notice (also a "Termination Notice") by the Member other than the Unlawful Event
Member (also a "TO Member"), which notice must be given, if at all, within 60
days following the Member Unlawful Event. Upon receipt and delivery of the
Termination Notice (the "Applicable Date"), the TO Member shall be entitled to
receive a payment from the Unlawful Event Member equal in amount to the
Termination Transition Fee, which fee shall be payable within thirty days after
the Applicable Date.
(vi) DEADLOCK. The LLC shall be dissolved upon written notice by either
Member, if a Deadlock occurs and a resolution is not reached after engaging in
the ADR procedure set forth in Section 12.17 hereof; PROVIDED, HOWEVER, that if
the Deadlock is determined pursuant to Section 8.1(b) to be an Improper
Deadlock, then the
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LLC shall be dissolved only upon written notice (a "Termination Notice") by the
Non-deadlock Member (also a "TO Member"), which notice must be given, if at all,
within 60 days following the determination that an Improper Deadlock existed.
Upon the delivery and receipt of the Termination Notice (the "Applicable Date"),
the TO Member shall be entitled to receive a payment from the Deadlock Member
equal in amount to the Termination Transition Fee, which fee shall be payable
within thirty days after the Applicable Date.
(vii) TERMINATION FOR CONVENIENCE. The LLC shall be dissolved upon ninety
(90) days' written notice (a "Termination Notice") by one Member (the
"Terminating Member") to the other Member (the "Non-terminating Member") of its
desire to terminate the LLC ("Termination for Convenience"). Upon the delivery
and receipt of the Termination Notice (the "Applicable Date"), the Non-
terminating Member (also a "TO Member") shall be entitled to receive a payment
from the Terminating Member equal in amount to the Termination Transition Fee,
which fee shall be payable within thirty days after the Applicable Date.
(viii) INTENTIONALLY OMITTED
(ix) LLC START-UP FAILURE. If the Members are unable to reach agreement
as to any of the Associated Agreeements (that were not executed concurrently
with this Agreement) or reach agreement on the Termination Formula (as defined
in Appendix I) within the Associated Agreement Negotiation Period (as may be
extended by mutual consent of the Members), then the Members may, upon mutual
agreement, submit the Associated Agreement disputes and/or the Termination
Formula disputes to the dispute resolution procedure set forth in Section 12.17.
If the Members do not mutually agree to utilize the dispute resolution
procedure, or if such procedure once utilized does not result in an agreement by
the Members on the Associated Agreements or the Termination Formula (as
applicable) (in either case, an "LLC Start-up Failure"), then the LLC shall be
dissolved on the day following the Associated Agreement Negotiation Period or at
the end of the ADR process, as applicable.
(x) UNCURED DEFAULT. If a Member fails to perform any of its material
obligations (a "Defaulting Member") under this Agreement or any of the
Associated Agreements (an "Event of Default"), then the other Member (a
"Nondefaulting Member") shall have the right to give the Defaulting Member
notice (a "Notice of Default"). The Notice of Default shall set forth the nature
of the obligations which the Defaulting Member has failed to perform. If the
Defaulting Member shall dispute whether an Event of Default has occurred, or the
amount of the loss, damage, cost of expense incurred by the Nondefaulting Member
as a consequence of an Event of Default, the matter shall promptly be submitted
to the dispute resolution procedure set forth in Section 12.17 hereof. If the
Defaulting Member fails to cure the Event of Default within thirty (30) days of
the later of (1) receipt of the Nondefaulting Member's Notice of Default in
compliance with this Section, or (2) a determination pursuant to the dispute
resolution procedure set forth in Section 12.17, then an "Uncured Default" shall
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be deemed to have occurred. If an Uncured Default occurs, the LLC shall be
dissolved upon written notice (a "Termination Notice") by the Nondefaulting
Member (also a "TO Member") of its desire to terminate the LLC, which notice
shall be delivered, if at all, within sixty (60) days following the occurrence
of the Uncured Default. Upon the delivery and receipt of the Termination Notice
(the "Applicable Date"), the TO Member shall be entitled to receive a payment
from the Defaulting Member equal in amount to the Termination Transition Fee,
which fee shall be payable within thirty days after the Applicable Date.
(xi) EXERCISE EVENT. If an Exercise Event (as defined in the Warrant
Agreement) occurs with respect to a Member (the "Event Member"), the LLC shall
be dissolved upon written notice (a "Termination Notice") by the Member other
than the Event Member (also a "TO Member") of its desire to terminate the LLC,
which notice shall be delivered, if at all, within sixty (60) days following the
occurrence of the Exercise Event. Upon the delivery and receipt of the
Termination Notice (the "Application Date"), the TO Member shall be entitled to
receive a payment from the Event Member equal in amount to the Termination
Transition Fee, which fee shall be payable within thirty days after the
Applicable Date.
(b) INTENTIONALLY OMITTED
(c) CHANGE IN CONTROL TERMINATION FEES.
(i) Upon the occurrence of an Exercise Event with respect to either
Member and the subsequent delivery of a Termination Notice by the TO Member
pursuant to Section 11.1(a)(xi) at any time during the term of the LLC, or, if
later: (i) prior to the first anniversary of a Deadlock, upon dissolution of the
LLC pursuant to Section 11.1(a)(vi) (other than an Improper Deadlock), or (ii)
prior to the first anniversary of the effective date of this Agreement, upon
dissolution of the LLC pursuant to Section 11.1(a)(ix), such Member shall pay to
the other Member in cash an amount equal to the Change in Control Termination
Fee, which amount shall be payable within thirty (30) days following the
occurrence of the Exercise Event.
(ii) If the LLC is dissolved pursuant to Section 11.1(a) as a result of:
(1) an Uncured Default, (2) an Improper Deadlock, (3) a Bankruptcy Event, (4) a
Member Unlawful Event, or (5) an Exercise Event (with each of the foregoing
hereafter referred to as a "Termination Option Event"), and an Exercise Event
occurs prior to the first anniversary of the Applicable Date relating to such
occurrence (as determined by reference to Section 11.1(a) above), then the TO
Member with respect to such occurrence (also as determined by reference to
Section 11.1(a) above) shall be entitled to receive a payment from the other
Member equal in amount to the Change in Control Termination Fee, which fee shall
be payable within thirty (30) days following the occurrence of the Exercise
Event. In addition, if the LLC is dissolved pursuant to Section 11.1(a)(vii) as
a result of a Termination for Convenience (also, a "Termination Option Event"),
and an Exercise Event occurs prior to the first anniversary of such
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dissolution, then the TO Member with respect to such Termination for Convenience
(as determined by reference to Section 11.1(a) above) shall be entitled to
receive a payment from the other Member equal in amount to the Change in Control
Termination Fee, which fee shall be payable within thirty (30) days following
the occurrence of the Exercise Event. Any Change in Control Termination Fee
payable hereunder shall be in addition to, and not in lieu of, any Termination
Transition Fees payable pursuant to Section 11.1(a).
(iii) Notwithstanding any provision of this Agreement: (a) neither Member
shall be paid more than one Change in Control Termination Fee hereunder, and (b)
no Member shall have any right to receive any Change in Control Termination Fee
or Termination Transition Fee from and after the earlier of (1) such Member
becoming an Event Member (as defined in Section 11.1(a)(xi)), or (2) the other
Member becoming a TO Member. This Article XI shall survive the dissolution and
liquidation of the LLC regardless of the cause. The Members agree that damages
resulting from the dissolution of the LLC as described herein may be impossible
to measure; therefore the Members further agree that the Change in Control
Termination Fee and Termination Transition Fee constitute the Members' best
estimate of the damages that will result to the Member that receives them as a
result of such LLC dissolution; reflecting, among other things, diminution in
the market reputation of such Member, disruption of such Member's ongoing
operations and such Member's costs associated with rebuilding the service
capacity lost as a result of such termination, and therefore the Members agree
that such damages are reasonable under the circumstances and are not a penalty.
The rights granted in this Section 11.1 above shall not be deemed the exclusive
remedy of a Member, but all other rights and remedies, legal and equitable,
shall be available to it.
11.2 CANCELLATION OF CERTIFICATE. Upon the dissolution of the LLC, the
Certificate shall be canceled in accordance with the provisions of Section
18-203 of the Delaware LLC Act, and the Board of Representatives (or any other
person or entity responsible for winding up the affairs of the LLC) shall
promptly notify the Members of such dissolution.
11.3 DISTRIBUTIONS UPON DISSOLUTION.
(a) Upon the dissolution of the LLC, the Board of Representatives (or
any other person or entity responsible for winding up the affairs of the LLC)
shall proceed without any unnecessary delay to sell or otherwise liquidate the
LLC Assets and pay or make due provision for the payment of all debts,
liabilities and obligations of the LLC.
(b) The Board of Representatives (or any other person or entity responsible
for winding up the affairs of the LLC) shall distribute the net liquidation
proceeds and any other liquid assets of the LLC after the payment of all debts,
liabilities and obligations of the LLC (including, without limitation, all
amounts owing to a Member under this Agreement or under any agreement between
the LLC and a Member
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entered into by the Member other than in its capacity as a Member in the LLC),
the payment of expenses of liquidation of the LLC, and the establishment of a
reasonable reserve in an amount estimated by the Board of Representatives to be
sufficient to pay any amounts reasonably anticipated to be required to be paid
by the LLC, which shall be distributed to the Members PRO RATA, in proportion to
the positive balances, if any, in their respective Capital Accounts. It is the
intent of the Members that the Capital Account balances on liquidation would be
such that the Members would receive the same amount of proceeds hereunder as
they would have received had such proceeds been distributed to them under
Section 6.3 hereof; accordingly, if necessary to achieve this economic result
the Board of Representatives is authorized to allocate Net Income, Net Loss and
other items of income, gross income, gain, loss and deduction to the respective
Capital Accounts of the Members to cause them, to the extent possible, to have a
balance equal to the cash which would otherwise be distributed under
Section 6.3.
11.4 REASONABLE TIME FOR WINDING UP. A reasonable time shall be allowed for
the orderly winding up of the business and affairs of the LLC (including,
without limitation, completing commitments under current LLC contracts and
depleting the existing LLC inventory of parts and components) and the
liquidation of its assets pursuant to Section 11.3 in order to minimize any
losses otherwise attendant upon such a winding up.
11.5 DISTRIBUTION IN KIND. Upon the dissolution of the LLC, a Member may in
its sole discretion, choose to receive all or a portion of the distribution due
to it, in kind. Such Member shall be permitted to receive, in kind, any property
that made up any portion of such Members' Capital Contribution or Additional
Capital Contribution. In the event of a distribution in kind, the assets
distributed, in kind, shall be valued by any reasonable means selected by the
Board of Representatives (or any other person or entity responsible for winding
up the affairs of the LLC, and such assets shall be deemed to have been sold for
such value and the Members' capital accounts adjusted by any gain or loss deemed
to have been realized on such deemed sale.
11.6 SURVIVAL OF OBLIGATIONS. Dissolution of the LLC and any termination of
the Associated Agreements for any cause shall not release any party from any
liability which at the time of dissolution or termination has already accrued to
any party.
11.7 DEFICIT CAPITAL ACCOUNTS. No Member shall have any obligation to restore
a deficit balance in its Capital Account upon liquidation of the LLC.
11.8 TRANSITIONAL COOPERATION.
(a) COOPERATION. Each Member and the LLC agree that upon expiration or
termination of this Agreement for any reason and during any notice period
preceding same, the Members and the LLC shall use their best efforts to effect
an orderly and efficient transition of the services provided by the LLC pursuant
to this Agreement and the Associated Agreements ("LLC Services") to each Member.
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(b) TERMINATION ASSISTANCE. Commencing upon any notice of termination by
either Member or ninety (90) days prior to the expiration of the term of this
Agreement, the Members and the LLC will provide any and all assistance
reasonably requested by a Member or the LLC to allow the LLC Services to
continue without interruption or adverse effect and to aid in and facilitate the
orderly and efficient transfer of responsibility for the LLC Services to each
Member. Such termination assistance shall include, without limitation, the
following:
(i) developing, with the assistance of the Members and the LLC, a plan
for the transition of operations from the LLC to each Member; and
(ii) providing to the LLC all products and services upon the same terms
and conditions hereof or in the Associated Agreements until the later of
expiration or termination of: (1) this Agreement, or (2) any agreements entered
into between a Member and a customer prior to the notice of termination that
require components, products or services from the LLC or the other Member.
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 COMPLIANCE WITH DELAWARE LLC ACT. Each Member agrees not to take any
action or fail to take any action which, considered alone or in the aggregate
with other actions or events, would result in the termination of the LLC under
applicable law.
12.2 ADDITIONAL ACTIONS AND DOCUMENTS. Each of the Members hereby agrees
to take or cause to be taken such further actions, to execute, acknowledge,
deliver and file or cause to be executed, acknowledged, delivered and filed such
further documents and instruments, and to use best efforts to obtain such
consents, as may be necessary or as may be reasonably requested to fully
effectuate the purposes, terms and conditions of this Agreement, whether before,
at or after the closing of the transactions contemplated by this Agreement.
12.3 NOTICES. All notices, demands, requests or other communications which
may be or are required to be given, served or sent by a Member pursuant to this
Agreement shall be in writing and shall be hand delivered (including delivery by
courier), mailed by first-class, registered or certified mail, return receipt
requested, postage prepaid, or transmitted by telegram, telex or facsimile
transmission, addressed as follows:
If to Member A: Wyle Electronics
15370 Barranca Parkway
Irvine, CA 92718-2215
Facsimile: (714) 753-9908
ATTN: Stephen D. Natcher, Esq.
General Counsel and Secretary
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If to Member B: Marshall Industries, Inc.
9320 Telstar
El Monte, CA 91731
Facsimile: (818) 307-6348
ATTN: Henry Chin
Chief Financial Officer
Each Member may designate by notice in writing a new address to which any
notice, demand, request or communication may thereafter be so given, served or
sent. Each notice, demand, request or communication which shall be delivered,
mailed or transmitted in the manner described above shall be deemed sufficiently
given, served, sent or received for all purposes at such time as it is delivered
to the addressee (with an affidavit of personal delivery, the return receipt,
the delivery receipt or (with respect to a telex) the answer back being deemed
conclusive evidence of such delivery) or at such time as delivery is refused by
the addressee upon presentation.
12.4 SEVERABILITY. The invalidity of any one or more provisions hereof or
of any other agreement or instrument given pursuant to or in connection with
this Agreement shall not affect the remaining portions of this Agreement or any
such other agreement or instrument or any part thereof, all of which are
included subject to the condition that they are held valid in law; and in the
event that one or more of the provisions contained herein or therein should be
invalid, or should operate to render this Agreement or any such other agreement
or instrument invalid, this Agreement and such other agreements and instruments
shall be construed as if such invalid provisions had not been inserted.
12.5 SURVIVAL. It is the express intention and agreement of the Members
that all covenants, agreements, statements, representations, warranties and
indemnities made in this Agreement shall survive the execution and delivery of
this Agreement.
12.6 WAIVERS. Neither the waiver by a Member of a breach of or a default
under any of the provisions of this Agreement, nor the failure of a Member, on
one or more occasions, to enforce any of the provisions of this Agreement or to
exercise any right, remedy or privilege hereunder, shall thereafter be construed
as a waiver of any subsequent breach or default of a similar nature, or as a
waiver of any such provisions, rights, remedies or privileges hereunder.
12.7 EXERCISE OF RIGHTS. No failure or delay on the part of a Member or the
LLC in exercising any right, power or privilege hereunder and no course of
dealing between the Members or between a Member and the LLC shall operate as a
waiver thereof, nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
expressly provided are cumulative and not exclusive of any other rights or
remedies which a Member or the LLC would otherwise have at law or in equity or
otherwise.
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12.8 BINDING EFFECT. Subject to any provisions hereof restricting assignment,
this Agreement shall be binding upon and shall inure to the benefit of the
Members and their respective heirs, devises, executors, administrators, legal
representatives, successors and assigns.
12.9 LIMITATION ON BENEFITS OF THIS AGREEMENT. Subject to Section 7.5, it
is the explicit intention of the Members that no person or entity other than the
Members and the LLC is or shall be entitled to bring any action to enforce any
provision of this Agreement against any Member or the LLC, and that the
covenants, undertakings and agreements set forth in this Agreement shall be
solely for the benefit of, and shall be enforceable only by, the Members (or
their respective successors and assigns as permitted hereunder) and the LLC.
12.10 AMENDMENT PROCEDURE. This Agreement may only be modified or amended
by the unanimous written consent of the Members.
12.11 ENTIRE AGREEMENT. This Agreement (including the Exhibits and Schedules
hereto which by this reference are incorporated herein) contains the entire
agreement between the Members with respect to the transactions contemplated
herein, and supersedes all prior oral or written agreements, commitments or
understandings with respect to the matters provided for herein and therein.
12.12 PRONOUNS. All pronouns and any variations thereof shall be deemed to
refer to the masculine, feminine, neuter, singular or plural, as the identity of
the person or entity may require.
12.13 HEADINGS. Article, Section and subsection headings contained in this
Agreement are inserted for convenience of reference only, shall not be deemed to
be a part of this Agreement for any purpose, and shall not in any way define or
affect the meaning, construction or scope of any of the provisions hereof.
12.14 GOVERNING LAW. This Agreement, the rights and obligations of the parties
hereto, and any claims or disputes relating thereto, shall be governed by and
construed in accordance with the laws of the State of Delaware excluding the
choice of law rules thereof.
12.15 EXECUTION IN COUNTERPARTS. To facilitate execution, this Agreement may
be executed in as many counterparts as may be required; and it shall not be
necessary that the signatures of, or on behalf of, each party, or that the
signatures of all persons required to bind any party, appear on each
counterpart; but it shall be sufficient that the signature of, or on behalf of,
each party, or that the signatures of the persons required to bind any party,
appear on one or more of the counterparts. All counterparts shall collectively
constitute a single agreement. It shall not be necessary in making proof of this
Agreement to produce or account for more than a number of counterparts
containing the respective signatures of, or on behalf of, all of the parties
hereto.
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12.16 ANNOUNCEMENTS. Except as required by law or applicable stock exchange
regulation, no party hereto shall make any announcement, press release or other
public statement relating in any manner to this Agreement, the terms hereof or
the relationship of the parties hereto without first obtaining the consent of
the other parties to the disclosure proposed to be made. The other parties
hereto shall not unreasonably withhold their consent to any request made by a
party pursuant to this Section 12.16. The Members shall use their best efforts
to consult and coordinate with each other before making any announcement, press
release or other public statement as required by law or applicable stock
exchange regulation.
12.17 DISPUTE RESOLUTION.
(a) INVOKING PROCEDURE. In the event of a dispute between the Members
arising out of or related to this Agreement, either Member may invoke the
procedures specified in this Section by giving written notice to the other
Member. Such written notice will describe briefly the nature of the dispute and
shall identify an individual with authority to settle the dispute on behalf of
that Member. The Member receiving such notice shall have ten (10) days within
which to designate an individual with authority to settle the dispute on its
behalf and to notify the other Member of its designation (the individuals so
designated shall be referred to as the "Authorized Individuals").
(b) INVESTIGATION. Each Member's Authorized Individual shall make
whatever investigation each deems appropriate and promptly thereafter, but no
later than thirty (30) days from the date of the original notice invoking these
procedures, shall commence discussions concerning resolution of the dispute. If
the dispute has not been resolved within sixty (60) days from the date of the
original notice invoking these procedures ("Negotiation Period"), the Members
shall submit the matter to alternative dispute resolution ("ADR") in accordance
with the following procedure.
(c) NEUTRAL PARTY. The Members shall have ten (10) days from the expiration
of the Negotiation Period to submit the matter to ADR and agree upon a mutually
acceptable person not affiliated with either party ("Neutral Party"). If no
Neutral Party has been selected within that time period, the Members agree
jointly to request the American Arbitration Association, the Center for Public
Resources, or other mutually agreed-upon organization, to supply within ten (10)
days a list of at least three (3) potential Neutral Parties with qualifications
as specified by the Members in the joint request. Within seven (7) days of
receipt of the list, the Members shall rank the proposed candidates
independently, exchange rankings and select as the Neutral Party the individual
who receives the highest combined ranking who is available to serve.
(d) SCHEDULE. In consultation with the Neutral Party, the Members shall
designate a mutually convenient time and place for the ADR, and unless
circumstances require otherwise, such time shall be not later than forty-five
(45) days after the selection of the Neutral Party.
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(e) DISCOVERY. In the event one or both Members have substantial need for
information in the possession of the other Member or a need to take certain
limited depositions and/or production of principal documents in order to prepare
for the ADR, the Members shall attempt in good faith to agree on a plan for the
expeditious exchange of such information. Should they fail to reach agreement,
either Member may request a meeting with the Neutral Party who shall assist them
in reaching an accommodation; however, if the Neutral Party is unable to assist
them in reaching an accommodation within two (2) days, then the Neutral Party
shall be the final arbiter of permitted discovery.
(f) WRITTEN SUBMISSION. One week prior to the first scheduled session of
the ADR, each Member shall deliver to the Neutral Party and to the other Member
a written summary of its views on the matter in dispute. The summary shall be no
longer than twenty double-spaced pages unless the Members agree otherwise.
(g) REPRESENTATIVES. In the ADR, each Member shall be represented by the
Authorized Individual and by counsel. In addition, each Member may bring
additional persons as necessary to respond to questions or contribute
information as needed. The number of such additional persons to be allowed shall
be mutually agreed by the Members with the assistance of the Neutral Party, if
necessary.
(h) STRUCTURE. The Neutral Party is authorized to conduct joint and
separate meetings with the Members and to help the Members structure whatever
form of presentation of the matter in dispute is most likely to facilitate
resolution. Notwithstanding the form of the presentation, it is the intent of
the Members to provide an opportunity for their Authorized Individual, with or
without the assistance of counsel, and with the assistance of the Neutral Party,
to negotiate a resolution of the matters in dispute. In the event the Neutral
Party holds separate private caucuses with either Member, he or she shall keep
confidential all information learned in such private caucuses unless
specifically authorized to make disclosure of the information to the other
Member. There shall be no stenographic, visual, or audio record made of the ADR.
(i) MANDATORY. The Members agree to participate in the ADR to its
conclusion as designated by the Neutral Party and not to terminate negotiations
concerning resolution of the matters in dispute until at least two (2) weeks
thereafter. Each Member agrees not to commence a lawsuit or seek other remedies
prior to the conclusion of the two (2) week post-ADR negotiation period,
provided that either Member may commence litigation on any date after which the
commencement of litigation could be barred by an applicable statute of
limitations or in order to request an injunction to prevent irreparable harm. In
such event, the Members agree (except as prohibited by court order) to continue
to participate in the ADR to its conclusion.
(j) FEES. The fees of, and authorized costs incurred by, the Neutral Party
shall be advanced by the Members and shared equally by the Members. The
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Neutral Party shall be disqualified as a witness, consultant, expert, or counsel
for any Member with respect to the matters in dispute and any related matters.
(k) LATER PROCEEDINGS. The ADR is a compromise negotiation for purposes of
the Federal Rules of Evidence and state rules of evidence. The entire procedure
is confidential. All conduct, statements, promises, offers, views, and opinions,
whether oral or written, made in the course of the ADR by any of the Members,
their agents, employees, representatives, or other invitees to the ADR and by
the Neutral Party (except as provided in Section 8.1), who is the parties' joint
agent for purposes of these compromise negotiations, are confidential and shall,
in addition and where appropriate, be deemed to be work product and privileged.
Such conduct, statements, promises, offers, views, and opinions shall not be
discoverable or admissible for any purposes, including impeachment, in any
litigation or other proceeding involving the Members and shall not be disclosed
to anyone not an agent, employee, expert, witness, or representative for any of
the Members. Evidence otherwise discoverable or admissible is not excluded from
discovery or admission as a result of its use in the ADR.
12.18 NONDISCLOSURE OF INFORMATION.
(a) CONFIDENTIALITY. All disclosures of information concerning a Member
(whether provided or prepared by such Member, its advisors, representatives or
agents or the LLC (the "Agent") or otherwise), trade secrets, know-how,
financial information, or other confidential information (including, without
limitation, the Member Systems as defined in Section 12.22) (the "Confidential
Information") made by the LLC to any Member or made by any Member to the LLC or
other Member under or in connection with this Agreement or the Associated
Agreements, as well as the terms of this Agreement and all Associated
Agreements, shall be received and maintained in confidence by the recipient
during the term hereof and for three (3) years after dissolution of the LLC and
each Member shall treat all such Confidential Information as confidential and
shall not disclose or use the Confidential Information except as required solely
for the purpose of carrying out this Agreement and the Associated Agreements:
(i) as to the persons directly responsible for the performance of the
obligations of this Agreement and for the effective operation of the LLC;
(ii) as to the professional advisers of the Members and the LLC;
(iii) as to such disclosures to customers of the LLC as are necessary
for the effective carrying on of business by the LLC;
(iv) as to such information as is required by law to be disclosed by the
Members or the LLC in compliance with Section 12.18(c) hereof; and
(v) as to such information as is within the public domain otherwise than
in violation of the provisions of this Section 12.18(a) is already in a
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recipient's possession or becomes available to a recipient from a source other
than an Agent, provided that such information was lawfully obtained and is not
known by such recipient to be subject to another confidentiality agreement with
or other obligation of secrecy to the other Member or another person.
(b) DUTY OF CARE. Each Member will take such steps as lie within its power
to assure that all managers, officers and employees of the LLC, or of any
Affiliates, to whom confidential information is disclosed, take all proper
precautions to prevent the unauthorized disclosure and use of the Confidential
Information referenced in Section 12.18(a).
(c) REQUESTS FOR DISCLOSURE. If either Member or the LLC is requested or is
required by applicable law (by interrogatories, requests for information or
documents, subpoena, civil investigative demand or similar process) to disclose
any Confidential Information, such Member or LLC will provide the other Member
or LLC with immediate notice of such request and requirement so that the other
Member or LLC may consider seeking a protective order. If in the absence of a
protective order or the receipt of a waiver hereunder the Member or LLC
receiving the request or requirement is nonetheless, in the written opinion of
counsel independent of such Member or LLC and reasonably acceptable to the other
Member or LLC, compelled to disclose any Confidential Information to any
tribunal or any other person or else stand liable for contempt or suffer other
material censure or penalty, such party may disclose such information to such
tribunal or other party without liability hereunder.
(d) RETURN OF MATERIALS. Upon dissolution of the LLC each Member and the
LLC shall promptly redeliver to the other Member all written and other tangible
Confidential Information of such Member. Each Member and the LLC agrees not to
retain any copies, extracts or other reproductions in whole or in part of such
Confidential Information of the other Member. All documents, memoranda, notes
and other writings whatsoever prepared by a Member, its Agents or the LLC based
on or reflecting the information in the Confidential Information of the other
Member also will be destroyed by the preparing Member or LLC as the case may be,
and such destruction will be certified in writing to the Member that provided
such Confidential Information by the authorized officer of the Member who
supervised such destruction.
(e) INJUNCTIVE RELIEF. Each Member and the LLC agrees that money damages
would not be a sufficient remedy for any breach of the agreements in this
Section 12.18 and that the non-breaching party will be entitled to injunctive
relief, specific performance and/or any other appropriate equitable remedies for
any such breach without first complying with the ADR procedures set forth in
Section 12.17 hereof. Such remedies shall not be deemed to be exclusive, but
shall be in addition to all other remedies available at law or in equity. In
addition, if successful, the non-breaching Member will be entitled to payment of
its legal fees and disbursements, court costs and other expenses of enforcing,
defending or otherwise protecting its interests hereunder.
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12.19 WAIVER OF PARTITION AND CERTAIN OTHER RIGHTS. Each of the Members
irrevocably waives any right or power that such Member might have to:
(a) cause the LLC or any of the LLC assets to be partitioned;
(b) cause the appointment of a receiver for all or any portion of the LLC
assets;
(c) compel any sale of all or any portion of the LLC assets; and
(d) file a complaint, or to institute proceeding at law or in equity, to
cause the dissolution or liquidation of the LLC.
Each of the Members has been induced to enter into this Agreement in reliance
upon the waivers set forth in this Section 12.19, and without those waivers no
Member would have entered into this Agreement.
12.20 INVOLVEMENT OF THE LLC IN CERTAIN PROCEEDINGS. If any Member becomes
involved in legal proceedings unrelated to the business of the LLC in which the
LLC is called upon to provide information, the Member will indemnify and hold
harmless the LLC against all costs and expenses, including without limitation
fees and expenses of attorneys and other advisors, incurred by the LLC in
preparing or producing the required information or in resisting any request for
production or obtaining a protective order limiting the availability of the
information actually provided by the LLC.
12.21 ATTORNEY-IN-FACT. Each Member, by execution of this Agreement,
irrevocably constitutes and appoints each Representative as such Member's true
and lawful attorney-in-fact and agent, with full power and authority in such
Member's name, place and stead to execute, acknowledge and deliver, and to file
or record in any appropriate public office (a) any certificate or other
instrument that may be necessary, desirable or appropriate to qualify the LLC as
a limited liability company or to transact business as such in any jurisdiction
in which the LLC conducts business; (b) any amendment to this Agreement adopted
in accordance with Section 12.10, and any certificate or amendment to the
Certificate of Formation or to any certificate or other instrument that may be
necessary, desirable or appropriate to reflect any such amendment to this
Agreement or to reflect any other action of the Board that is taken in
accordance with its power or authority granted under this Agreement or the Act;
(c) any certificates or instruments that may be necessary, desirable or
appropriate to reflect the dissolution and winding up of the LLC; and (d) any
certificates necessary to comply with the provisions of this Agreement. This
power of attorney will be deemed to be coupled with an interest and will survive
the transfer of the Member's Membership Interest.
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12.22 MEMBER SYSTEMS.
(a) SYSTEMS LICENSE. Each Member grants to the LLC a royalty free
non-exclusive license ("License") to use the systems of such Member described in
Schedule 12.22 attached hereto and incorporated herein by this reference as
amended by the Members from time to time (the "Member Systems"), to the extent
such use is permitted by such Member's license agreement with any third party
vendor for such systems, if any. The LLC hereby covenants and agrees that it
shall not, without the express written consent of the licensing Member, which
consent may be withheld in the licensing Member's sole and absolute discretion,
use such licensing Member's Member Systems for the benefit of any party other
than the LLC and LLC shall not disclose information regarding any one Member's
Member System or such Member's data related thereto to the other Member.
(b) REQUIRED CONSENTS. Each Member shall use reasonable efforts without
incurring any expense in excess of a commercially reasonable amount to obtain
any required consents from third parties necessary for the LLC to operate such
Member's Member Systems as contemplated by this Agreement. If the required
consents cannot be obtained for the LLC to operate the Member Systems necessary
to provide services to Members as described in this Agreement and the Associated
Agreements, then each Member and the LLC will work together to achieve an
alternate solution.
(c) FORMAL LICENSE. Prior to the expiration of the Associated Agreement
Negotiation Period, the licensing Member and the LLC shall execute the Systems
License Agreement(s) attached hereto as Exhibit 12.22 granting the LLC a right
to use certain systems as needed to perform the services described in this
Agreement and the Associated Agreements.
(d) LICENSE TERMINATION. The LLC's license to use the Member Systems shall
terminate upon the dissolution of the LLC.
(e) SYSTEM WARRANTIES. With respect to the Member Systems licensed by each
Member hereunder, the Member licensing the particular system ("Licensor") hereby
warrants and represents to the LLC as follows:
(i) OWNERSHIP. Licensor is the owner of Licensor's Member Systems or
otherwise has the right to grant to the LLC the license to use same set forth in
this Section 12.22 without violating any rights of any third party, and there is
currently no actual or threatened suit by any such third party based on an
alleged violation of such right by Licensor;
(ii) QUALITY WARRANTY. Licensor's Member System shall not contain any
material defects and shall function in substantial conformity with the
description, specifications and documentation set forth in Schedule 12.22.
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(f) THE ABOVE IS A LIMITED WARRANTY AND IT IS THE ONLY WARRANTY MADE BY
LICENSOR. LICENSOR MAKES AND LLC RECEIVES NO OTHER WARRANTY, EXPRESS OR IMPLIED,
AND THERE ARE EXPRESSLY EXCLUDED ALL WARRANTIES OF MERCHANTABILITY AND FITNESS
FOR A PARTICULAR PURPOSE. LICENSOR SHALL HAVE NO LIABILITY WITH RESPECT TO ITS
OBLIGATIONS UNDER THIS SECTION 12.22 FOR CONSEQUENTIAL, EXEMPLARY, OR INCIDENTAL
DAMAGES EVEN IF IT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. THE
STATED EXPRESS WARRANTY IS IN LIEU OF ALL LIABILITIES OR OBLIGATIONS OF LICENSOR
FOR DAMAGES ARISING OUT OF OR IN CONNECTION WITH THE DELIVERY, USE OR
PERFORMANCE OF LICENSOR'S MEMBER SYSTEMS.
(g) INDEMNITY. Licensor agrees to indemnify and hold harmless the LLC and
its directors, officers, employees and agents, against any and all losses,
liabilities, judgments, awards and costs (including legal fees and expenses)
arising out of or related to any claim that the LLC's use or possession of
Licensor's Member System, or the License granted by Licensor hereunder,
infringes or violates the copyright, trade secret or other proprietary right of
any third party. Licensor shall defend and settle at its sole expense all suits
or proceedings arising out of the foregoing, provided that the LLC gives
Licensor prompt notice of any such claim of which it learns. No settlement which
prevents the LLC from continuing to use Licensor's Member Systems provided
herein shall be made without the prior written consent of the LLC. In all
events, the LLC shall have the right to participate in the defense of any such
suit or proceeding through counsel of its own choosing.
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IN WITNESS WHEREOF, the undersigned have duly executed this Limited Liability
Company Agreement or have caused this Limited Liability Company Agreement to be
duly executed on their behalf as of the day and year first set forth above.
Member A:
WYLE ELECTRONICS,
A California Corporation
By: /s/ RALPH OZORKIEWICZ
-----------------------------------
Name: Ralph Ozorkiewicz
Title: President and
Chief Executive Officer
Member B:
MARSHALL INDUSTRIES,
A California Corporation
By: /s/ ROBERT RODIN
-----------------------------------
Name: Robert Rodin
Title: President and
Chief Executive Officer
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ADDENDUM I
DEFINITIONS
ADDITIONAL CAPITAL CONTRIBUTION: As defined in Section 5.2.
AFFILIATE: Any Person directly or indirectly controlling, controlled by, or
under common control with the Person in question; if the Person in question is a
corporation, any executive officer or director of the Person in question or of
any corporation directly or indirectly controlling the Person in question. As
used in this definition of "Affiliate", the term "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
securities, by contract, or otherwise.
AGREEMENT: This Limited Liability Company Agreement, as it may be further
amended or supplemented from time to time.
APPRAISER: An Independent appraiser or investment bank.
BANKRUPTCY: For the purposes of this Agreement, a Member shall be deemed
"Bankrupt" upon, (i) the entry of a decree or order for relief of the Member by
a court of competent jurisdiction in any involuntary case involving the Member
under any bankruptcy, insolvency or other similar law now or hereafter in
effect; (ii) the appointment of a receiver, liquidator, assignee, custodian,
trustee, sequestrator or other similar agent for the Member or for any
substantial part of the Member's assets or property; (iii) the ordering of the
winding up or liquidation of the Member's affairs; (iv) the filing with respect
to the Member of a petition in any such involuntary bankruptcy case, which
petition remains undismissed for a period of ninety (90) days or which is
dismissed or suspended pursuant to Section 305 of the Federal Bankruptcy Code
(or any corresponding provision of any future United States bankruptcy law); (v)
the commencement by the Member of a voluntary case under any bankruptcy,
insolvency or other similar law now or hereafter in effect; (vi) the consent by
the Member to the entry of an order for relief in an involuntary case under any
such law or to the appointment of or taking possession by a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar agent
for the Member or for any substantial part of the Member's assets or property;
(vii) the making by the Member of any assignment for the benefit of creditors;
or (viii) the failure by the Member generally to pay its debts as such debts
become due. To the extent not included herein, any event of bankruptcy set
forth in Section 18-304 of the Delaware LLC Act is deemed incorporated into this
definition.
BANKRUPTCY LAW: as used herein means Title 11, U.S. Code or any similar
Federal or state law for the relief of debtors.
BOARD OF REPRESENTATIVES: As defined in Section 7.1.
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BUSINESS DAY: Monday through Friday of-each week, except that a legal
holiday recognized as such by the Government of the United States shall not be
regarded as a Business Day.
CAPITAL ACCOUNT: As defined in Section 5.3.
CAPITAL CONTRIBUTION: Any property, cash or services contributed to the LLC by
or on behalf of a Member.
CERTIFICATE: The Certificate of Formation, and any and all amendments thereto,
filed on behalf of the LLC with the Recording Office as required under the
Delaware LLC Act.
CODE: The Internal Revenue Code of 1986, as in effect and hereafter amended,
and, unless the context otherwise requires, applicable regulations thereunder.
Any reference herein to a specific section or sections of the Code shall be
deemed to include a reference to any corresponding provision of future law.
DEADLOCK: As defined in Section 8.1.
DELAWARE LLC ACT: The Delaware Limited Liability Company Act, as amended
from time to time.
EVENT OF DEFAULT: As defined in Section 11.1(a)(x).
EXCESS NEGATIVE BALANCE: The excess, if any, of (1) the negative balance in a
Member's Capital Account after reducing such balance as required by the Treasury
Regulations, over (2) the sum of (i) the amount, if any, which the Member is
obligated or deemed obligated to restore upon liquidation of the LLC, and (ii)
the Member's share of any minimum gain and of any minimum gain attributable to
Member nonrecourse debt as determined under Treasury Regulations Section 1.704-
2.
FAIR MARKET VALUE: With respect to any property or asset, the dollar value
of the property or asset determined (i) by mutual agreement of the Members, or
(ii) if the Members cannot so agree within twenty (20) days after one Member
first proposes in writing to the other Member that Fair Market Value be
determined, by two independent Appraisers, one selected by each Member,
provided, that if a Member fails to appoint an Appraiser within, ten (10) days
following the expiration of such twenty (20) day period, Fair Market Value shall
be determined by the Appraiser selected by the other Member. If two Appraisers
are selected, each Appraiser shall submit to the Members their respective
appraisals within thirty (30) days after their selection. If a discrepancy
between the dollar value of the appraisals exceeds 10% of the higher appraisal
and the Members do not agree on a settlement of the discrepancy within ten (10)
days after receipt of the appraisals, then a third Appraiser mutually selected
by the Members (or if they cannot so select, then selected by the first two
Appraisers), shall be afforded access
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to the first two appraisals. The third Appraiser shall select one of the
appraisals of the first two Appraisers, which selection shall constitute a final
determination of Fair Market Value of the property or asset and shall be binding
upon the Members. If a discrepancy between the appraisals of the first two
Appraisers is less than 10% of the higher appraisal, then the average of the two
appraisals shall constitute a final determination of Fair Market Value of the
property or asset and shall be binding upon the Members.
FISCAL YEAR: As defined in Section 9.6.
INITIAL CAPITAL CONTRIBUTION: As defined in Section 5.1.
LLC: As defined in the preamble.
LLC ASSETS: All assets and property, whether tangible or intangible and
whether real, personal, or mixed, at any time owned by or held for the benefit
of the LLC.
LLC INTEREST: As to any Member, all of the interest of that Member in the
LLC, including, without limitation, such Member's (i) right to a distributive
share of the income, gain, losses and deductions of the LLC in accordance with
this Agreement, and (ii) right to a distributive share of LLC Assets.
LLC GENERAL MANAGER: As defined in Section 7.2(a).
MEMBER: Member A and Member B and any other Person who shall in the future
execute and deliver this Agreement pursuant to the provisions hereof.
NET INCOME AND NET LOSS. For a period as determined for federal income tax
purposes, the taxable income or loss, respectively, computed with the following
adjustments:
(h) items of gain, loss and deduction relating to LLC Assets shall be
computed based on the Carrying Values of the LLC Assets rather than upon their
Adjusted Bases, and in the case of depreciation, amortization or other cost
recovery deductions, computed using the same method and useful life used by the
LLC in computing such deductions for federal income tax purposes;
(i) income of the LLC shall be treated, for purposes of this definition
only, as gross income; and
(j) expenditures of the LLC described in Section 705(a)(2)(B) of the Code
or treated as such expenditures pursuant to Section 1.704-l(b)(2)(iv)(i) of the
regulations under the Code shall be treated, for purposes of this definition
only, as deductible expenses.
NOTICE OF DEFAULT: As defined in Section 11.1(a)(x).
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PERCENTAGE INTEREST: A Member's percentage share of the total LLC Interests,
which shall be as follows, unless modified by an amendment to this Agreement:
equal to the percentage that its Capital Contributions bears to the sum of all
Capital Contributions. Member A's Initial Percentage Interest is fifty percent
(50%), and Member B's Percentage Interest is fifty percent (50%).
PERSON: Any individual, corporation, association, partnership, limited
liability company, joint venture, trust, estate, or other entity or
organization.
RECORDING OFFICE: The office of the Secretary of State of the State of
Delaware.
REPRESENTATIVE: Any member of the Board of Representatives.
TAX MATTERS PARTNER: That person required by Section 6231(a)(7) of the Code.
TERMINATION DATE: The thirtieth anniversary of the date upon which the
Certificate is duly filed with the Recording Office.
TERMINATION FORMULA: That formula, as mutually agreed between the Members,
which shall be used to calculate an amount that will reflect the value of the
LLC to the TO Member. Member A and Member B, as applicable, shall each allocate
the necessary resources and meet together as soon as possible following the
execution of this Agreement and as often as a party reasonably requests
thereafter, in order to negotiate in good faith the Termination Formula which
shall be mutually agreed between the parties prior to the expiration of the
Associated Agreement Negotiation Period, as extended by mutual agreement between
the Members.
TERMINATION TRANSITION FEE: Equals the greater of: (i) One Hundred Fifty
Thousand Dollars ($150,000), or (ii) the lessor of: (a) the TO Member's actual
share of the LLC operating expenses during the ninety (90) day period
immediately preceding, the notice of termination, if any, otherwise that ninety
(90) day period immediately preceding the LLC termination ("Expense Period") or
(b) fifty percent (50%) of the actual LLC operating expenses for the Expense
Period.
CHANGE IN CONTROL TERMINATION FEE: Equals, initially, twenty five million
dollars ($25,000,000) (which shall be replaced by an amount calculated pursuant
to the Termination Formula upon that date the Members mutually agree upon the
Termination Formula) minus the Warrant Value (as defined below); provided,
however, that if the Change in Control Termination Fee resulting from the
foregoing subtraction is a number that is less than zero, then the Change in
Control Termination Fee shall be deemed to be zero.
TO WARRANT AGREEMENT: That certain Warrant Agreement by and between the TO
Member (as Venture Partner) and the other Member (as Company), dated
concurrently herewith.
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WARRANT AGREEMENT: As to each Member, that certain Warrant Agreement between
such Member (as Venture Partner) and the other Member (as Company) dated
concurrently herewith.
WARRANT VALUE: Equals the average Market Price (as defined in the TO
Warrant Agreement) per share of the Common Stock (as defined in the TO Warrant
Agreement) for the thirty (30) trading days immediately following the Exercise
Event (as defined in the TO Warrant Agreement) minus the then current Exercise
Price (as defined in the TO Warrant Agreement) times the then current Warrant
Number (as defined in the TO Warrant Agreement) related to the Warrants (as
defined in the TO Warrant Agreement) held by the TO Member, its designees or
assigns.
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EXHIBIT 10(b)
WARRANT AGREEMENT (WYLE)
WARRANT AGREEMENT (the "Agreement") dated as of August 8, 1996 between
Wyle Electronics, a California corporation (the "Company"), and Marshall
Industries, a California corporation (the "Venture Partner").
WHEREAS, the Company and the Venture Partner have entered into that
certain Limited Liability Company Agreement of Accord Contract Services, LLC of
even date herewith (the "LLC Agreement") establishing a joint venture (the "LLC
Venture") between the Company and the Venture Partner;
WHEREAS, the LLC Venture is intended to benefit the Company, the
Venture Partner and their respective shareholders by allowing the Company and
the Venture Partner to achieve, among other things, increased sales and reduced
operating costs, to improve efficiency in certain areas of their respective
businesses and to increase their respective capabilities in providing value
added materials management programs to their respective customers;
WHEREAS, the benefits expected to be derived by the Company and the
Venture Partner from the LLC Venture are based upon the unique characteristics
of the other party and each of the Company and the Venture Partner believes that
a material change in the ownership of the other party would significantly
disrupt the operation of the LLC Venture and jeopardize the value derived by the
respective parties therefrom;
WHEREAS, the Company wishes to provide a means to compensate the
Venture Partner in the event that certain events affecting the Company result in
a termination of the LLC Venture and therefore proposes to issue to the Venture
Partner, certain warrants (the "Warrants") to purchase shares of the Company's
common stock, without par value, (the "Common Stock") which will become
exercisable upon the occurrence of certain events, as hereinafter described;
WHEREAS, the Venture Partner has also entered into a Warrant Agreement
of event date herewith (the "Venture Partner Warrant Agreement") pursuant to
which the Venture Partner has issued certain warrants to the Company on terms
substantially identical to the terms of the Warrants granted herein;
WHEREAS, the Company and the Venture Partner have entered into (i)
that certain Standstill Agreement of even date herewith (the "Standstill
Agreement") providing for certain limitations on the conduct of the Venture
Partner as a shareholder of the Company and (ii) that certain Registration
Rights Agreement of even date herewith (the "Registration Rights Agreement")
providing for certain registration rights with respect to the shares of Common
Stock issuable upon exercise of the Warrants (the "Warrant Shares");
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:
SECTION 1. ISSUANCE OF WARRANTS. Concurrently with the execution of
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this Agreement, the Company will issue and deliver to the Venture Partner a
certificate (the "Warrant Certificate") evidencing right to acquire 1,138,383
shares of the Company's Common
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Stock. Such certificate shall be in registered form only and shall be in form
set forth as Exhibit A attached hereto. The Warrant Certificate shall be dated
the date of issuance by the Company.
SECTION 2. EXECUTION OF WARRANT CERTIFICATES. The Warrant
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Certificate shall be signed on behalf of the Company by its Chairman of the
Board or its Chief Executive Officer, President or a Vice President. Each such
signature upon the Warrant Certificate may be in the form of a facsimile
signature of the present or any future Chairman of the Board, Chief Executive
Officer, President or Vice President, and may be imprinted or otherwise
reproduced on the Warrant Certificate and for that purpose the Company may adopt
and use the facsimile signature of any person who shall have been Chairman of
the Board, Chief Executive Officer, President or Vice President, notwithstanding
the fact that at the time the Warrant Certificate shall be delivered or disposed
of such person shall have ceased to hold such office. Each Warrant Certificate
shall also be manually signed on behalf of the Company by its Secretary or an
Assistant Secretary under its corporate seal. The seal of the Company may be in
the form of a facsimile thereof and may be impressed, affixed, imprinted or
otherwise reproduced on the Warrant Certificate.
SECTION 3. REGISTRATION. The Company shall number and register the
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Warrant Certificates in a register as they are issued. The Company may deem and
treat the registered holder(s) of the Warrant Certificate(s) (the "Holder(s)")
as the absolute owner(s) thereof (notwithstanding any notation of ownership or
other writing thereon made by anyone) for all purposes and shall not be affected
by any notice to the contrary. The Warrants shall be registered initially in
the name of the Venture Partner.
SECTION 4. RESTRICTIONS ON TRANSFER; REGISTRATION OF TRANSFERS AND
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EXCHANGES.
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The Warrants (and any Warrant Shares issued upon the exercise of the
Warrants) shall not be transferable except in accordance with the terms of this
Agreement and the Standstill Agreement.
Prior to the commencement of the Exercise Period (as defined in
Section 5 below) the Warrants will not be transferable by the Venture Partner to
any person other than a wholly-owned subsidiary of the Venture Partner;
provided, however, that if, at any time prior to the commencement of the
Exercise Period, the Warrants are held by any person other than the Venture
Partner or a wholly-owned subsidiary of the Venture Partner, then the Warrants
will be deemed to have been transferred in contravention of the terms of this
Agreement and such Warrants shall be automatically cancelled and of no further
force or effect.
From and after the commencement of the Exercise Period, no transfer of
the Warrants or the Warrant Shares shall be made unless either (i) such transfer
is either made pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the "Securities Act") or pursuant to Rule
144 promulgated thereunder (or any similar rule or regulation) or, (ii) prior to
any such transfer, the transferring Holder shall have delivered to the Company,
if so requested by the Company, an opinion of counsel reasonably satisfactory in
form and substance to the Company, to the effect that the Warrants or Warrant
Shares, as applicable, may be sold or otherwise transferred without registration
under the Securities Act. Upon original issuance thereof, and until such time
as the same shall have been registered under the Securities Act or sold pursuant
to Rule 144 promulgated thereunder (or any similar rule or regulation) each
Warrant Certificate and any certificates evidencing Warrant Shares shall bear
any legend required by the Securities Act or pursuant to the Standstill
Agreement,
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unless in the opinion of such counsel, such legend is no longer required by the
Securities Act or such legend required by the Standstill Agreement is no longer
required thereunder.
Subject to the limitations set forth above, the Company shall from
time to time register the transfer of any outstanding Warrant Certificate in a
Warrant register to be maintained by the Company upon surrender thereof,
accompanied by a written instrument or instruments of transfer in form
satisfactory to the Company, duly executed by the registered Holder or Holders
thereof or by the duly appointed legal representative thereof or by a duly
authorized attorney. Upon any such registration of transfer, a new Warrant
Certificate shall be issued to the transferee(s) and the surrendered Warrant
Certificate shall be canceled and disposed of by the Company.
Any Warrant Certificate may be exchanged at the option of the
Holder(s) thereof, when surrendered to the Company at its office for another
Warrant Certificate or other Warrant Certificate of like series and tenor and
representing in the aggregate a like number of Warrants. Warrant Certificates
surrendered for exchange shall be canceled and disposed of by the Company.
SECTION 5. WARRANTS; EXERCISE OF WARRANTS. Subject to the conditions
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set forth in Section 6 below and the other terms of this Agreement, each Holder
shall have the right, which may be exercised at any time or from time to time
during the Exercise Period (as defined below) to receive from the Company the
number of fully paid and nonassessable Warrant Shares (and such other
consideration) as the Holder may at the time be entitled to receive on exercise
of such Warrants and payment of the Exercise Price then in effect for such
Warrant Shares. In the alternative, each Holder may exercise its right, during
the Exercise Period, to receive Warrant Shares on a net basis, such that,
without the exchange of any funds, the Holder receives that number of Warrant
Shares (and such other consideration) otherwise issuable (or payable) upon
exercise of its Warrants less that number of Warrant Shares having an aggregate
Current Market Value (as defined in Section 11, but based on the average Market
Price for the Common Stock for the twenty trading days ending on the day
immediately preceding the date on which the notice of exercise is delivered to
the Company) at the time of exercise equal to the aggregate Exercise Price that
would otherwise have been paid by the Holder for the Warrant Shares. Each
Warrant not exercised during the Exercise Period shall become void and all
rights thereunder and all rights in respect thereof under this Agreement shall
cease as of such time. No adjustments as to dividends will be made upon
exercise of the Warrants, except as otherwise expressly provided herein.
The Warrants shall be exercisable during a period (the "Exercise
Period") which shall commence upon the Exercise Date (as defined below) and
expire, at 5:00 p.m., Los Angeles time, on the first anniversary of the
commencement of such Exercise Period.
"Exercise Date" shall mean such time as each of the following events
shall have occurred (i) the occurrence of an Exercise Event (as defined below);
and (ii) the termination of the LLC Venture pursuant to Article 11 of the LLC
Agreement.
"Exercise Event" shall mean the occurrence of any of the following
events with respect to the Company:
(1) The approval by the shareholders of the Company of the
dissolution or liquidation of the Company;
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(2) The consummation by any person (other than the Company or the
Venture Partner) of a tender offer or exchange offer to purchase any shares
of the Company's Common Stock such that, upon the consummation of such
offer, such person owns or controls 20% or more of the then outstanding
Common Stock of the Company;
(3) The execution by the Company or any subsidiary of the Company
of an agreement with any person (other than the Venture Partner) to (i)
merge, consolidate or otherwise reorganize with or into one or more
entities that are not subsidiaries of the Company, as a result of which
less than 50% of the outstanding voting securities of the surviving or
resulting entity immediately after the consummation of such transaction
are, or will be, owned by shareholders of the Company immediately before
such reorganization (assuming for purposes of such determination that there
is no change in the record ownership of the Company's securities from the
record date for such approval until such transaction is consummated and
that such record holders hold no securities of the other party or parties
to such a transaction), (ii) sell, lease or otherwise dispose of assets of
the Company or its subsidiaries representing 50% or more of the
consolidated assets of the Company and its subsidiaries or (iii) issue,
sell or otherwise dispose of (including by way of merger, consolidation,
share exchange or any similar transaction) securities representing 50% or
more of the voting power of the Company;
(4) The acquisition by any person (other than the Venture
Partner) of beneficial ownership (as such term is defined in Rule 13d-3
under the Exchange Act) or the right to acquire beneficial ownership of, or
any "group" (as such term is defined under the Exchange Act) shall have
been formed which beneficially owns or has the right to acquire beneficial
ownership of, 20% or more of the then outstanding Common Stock of the
Company; or
(5) The failure at any time, during any period of two consecutive
years, of individuals who at the beginning of such period constituted the
Board of Directors of the Company, 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 (including for these
purposes, new members whose election or nomination was so approved).
The price at which each Warrant shall be exercisable shall initially
be $31.80 (representing an amount per share equal to the average Market Price
per share for the 30 trading days ending on August 5, 1996). Such initial
exercise price of $31.80, as such amount may be adjusted from time to time in
accordance with the provisions of Section 11 hereof, is referred to herein as
the "Exercise Price."
A Warrant may be exercised upon surrender to the Company at its office
address set forth in Section 12 hereof) of the Warrant Certificate or
Certificate to be exercised with the form of election to purchase attached
thereto duly filled in and signed, and upon payment to the Company of the
Exercise Price for the number of Warrant Shares in respect of which such
Warrants are then exercised. Payment of the aggregate Exercise Price shall be
made in cash or by certified or official bank check payable to the order of the
Company or by
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wire transfer of immediately available funds to an account designated by the
Company or in the manner provided in the first paragraph of this Section 5.
Subject to the provisions of Section 6 and 8 hereof, upon such
surrender of Warrants and payment of the Exercise Price the Company shall issue
and cause to be delivered with all reasonable dispatch to or upon the written
order of the Holder and in such name or names as such Holder may designate a
certificate or certificates for the number of full Warrant Shares issuable upon
the exercise of such Warrants (and such other consideration as may be
deliverable upon exercise of such Warrants) together with cash for fractional
Warrant Shares as provided in Section 12. Such certificate or certificates
shall be deemed to have been issued and the person so named therein shall be
deemed to have become a holder of record of such Warrant Shares as of the date
of the surrender of such Warrants and payment of the Exercise Price,
irrespective of the date of delivery of such certificate or certificates for
Warrant Shares.
Each Warrant shall be exercisable during the Exercise Period, at the
election of the Holder thereof, either in full or from time to time in part and,
in the event that a Warrant Certificate is exercised in respect of fewer than
all of the Warrant Shares issuable on such exercise at any time prior to the
date of expiration of the Warrants, a new certificate evidencing the remaining
Warrant or Warrants will be issued and delivered pursuant to the provisions of
this Section and of Section 2 hereof.
All Warrant Certificates surrendered upon exercise of Warrants shall
be cancelled and disposed of by the Company. The Company shall keep copies of
this Agreement and any notices given or received hereunder available for
inspection by the Holders during normal business hours at its office.
SECTION 6. CONDITIONS TO EXERCISE. The right of the Venture Partner
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to exercise the Warrants as contemplated by Section 5 above shall be subject to
the prior satisfaction of each of the following conditions precedent:
(a) The Holder shall not be in material breach of its obligations
under this Agreement, the LLC Agreement or the Standstill Agreement;
(b) The applicable waiting period, and any extensions thereof, under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, to the
extent applicable to the acquisition by the Holder of the Warrant Shares, shall
have terminated, and such termination shall have been confirmed by the Federal
Trade Commission and/or the Department of Justice; and
(c) No injunction shall have been entered, and not vacated, by any
court which enjoins or prohibits the issuance of the Warrant Shares to the
Holder pursuant to the terms of this Agreement.
SECTION 7. REPRESENTATIONS AND WARRANTIES. (a) The Company hereby
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represents and warrants to the Venture Partner as follows:
(1) The Company has all requisite corporate power and authority
to enter into this Agreement and, subject to any approvals referred to
herein, to consummate the transactions contemplated hereby. The execution
and delivery of this
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Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of the
Company. This Agreement has been duly executed and delivered by the Company
and constitutes a valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms.
(2) The Company has taken all necessary corporate and other
action to authorize and reserve for issuance, upon exercise of the
Warrants, a number of shares of Common Stock sufficient to permit the
Warrants to be exercised in full and the Company will take all necessary
corporate action to authorize and reserve for issuance all additional
shares of Common Stock or other securities which may become issuable upon
exercise of the Warrants pursuant to the provisions of Section 11 hereof.
The shares of Common Stock to be issued upon exercise of the Warrants,
including all additional shares of Common Stock or other securities that
may become issuable pursuant to Section 11, will be duly and validly
issued, fully paid and nonassessable, and shall be delivered free and clear
of all liens, claims, charges and encumbrances of any kind or nature
whatsoever, including any preemptive rights of any shareholder of the
Company.
(3) The execution and delivery of this Agreement does not, and
the consummation of the transactions contemplated hereby will not, conflict
with or violate any provision of the Articles of Incorporation or Bylaws of
the Company or any material agreement or obligation of the Company.
The Venture Partner hereby represents and warrants to the Company
that:
(1) The Venture Partner has all requisite corporate power and
authority to enter into this Agreement and, subject to any approvals or
consents referred to herein, to consummate the transactions contemplated
hereby.
(2) The Venture Partner is an "accredited investor" within the
meaning of Regulation D promulgated under the Securities Act and is
acquiring the Warrants for its own account and without a view to any
distribution thereof.
SECTION 8. PAYMENT OF TAXES. The Company will pay all documentary
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stamp taxes and other governmental charges (excluding all foreign, federal or
state income, franchise, property, estate, inheritance, gift or similar taxes)
in connection with the issuance or delivery of the Warrants hereunder, as well
as all such taxes attributable to the initial issuance or delivery of Warrant
Shares upon the exercise of Warrants and payment of the Exercise Price. The
Company shall not, however, be required to pay any tax that may be payable in
respect of any subsequent transfer of the Warrants or any transfer involved in
the issuance and delivery of Warrant Shares in a name other than that in which
the Warrants to which such issuance relates were registered, and, if any such
tax would otherwise be payable by the Company, no such issuance or delivery
shall be made unless and until the person requesting such issuance has paid to
the Company the amount of any such tax, or it is established to the reasonable
satisfaction of the Company that any such tax has been paid.
SECTION 9. MUTILATED OR MISSING WARRANT CERTIFICATE. If any Warrant
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Certificate or certificate evidencing Warrant Shares shall be mutilated, lost,
stolen or
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destroyed, the Company shall issue, in exchange and substitution therefor and
upon cancellation of the mutilated Warrant Certificate or other certificate, or
in lieu of and substitution for the Warrant Certificate or other certificate
lost, stolen or destroyed, a new Warrant Certificate or other certificate of
like tenor and representing an equivalent number of Warrants or Warrant Shares.
SECTION 10. RESERVATION OF WARRANT SHARES. The Company shall at all
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times reserve and keep available, free from preemptive rights, out of the
aggregate of its authorized but unissued Common Stock or its authorized and
issued Common Stock held in its treasury, for the purpose of enabling it to
satisfy any obligation to issue Warrant Shares upon exercise of Warrants, the
maximum number of shares of Common Stock which may then be deliverable upon the
exercise of all outstanding Warrants.
The Company or, if appointed, the transfer agent for the Common Stock
and each transfer agent for any shares of the Company's capital stock issuable
upon the exercise of any of the Warrants (collectively, the "Transfer Agent")
will be irrevocably authorized and directed at all times to reserve such number
of authorized shares as shall be required for such purpose. The Company shall
keep a copy of this Agreement on file with the Transfer Agent. The Company will
supply the Transfer Agent with duly executed certificates for such purposes and
will provide or otherwise make available all other consideration that may be
deliverable upon exercise of the Warrants. The Company will furnish such
Transfer Agent a copy of all notices of adjustments and certificates related
thereto, transmitted to each Holder pursuant to Section 13 hereof.
Before taking any action which would cause an adjustment pursuant to
Section 11 hereof to reduce the Exercise Price below the then par value of the
Warrant Shares, the Company shall take any corporate action which may, in the
opinion of its counsel, be necessary in order that the Company may validly and
legally issue fully paid and nonassessable Warrant Shares at the Exercise Price
as so adjusted.
The Company covenants that all Warrant Shares and other capital stock
issued upon exercise of Warrants will, upon payment of the Exercise Price
therefor and issue, be validly authorized and issued, fully paid, nonassessable,
free of preemptive rights and free from all taxes, liens, charges and security
interests with respect to the issue thereof (subject to the provisions of the
Standstill Agreement and the Registration Rights Agreement).
The Company shall from time to time take all action which may be
necessary or appropriate so that the Common Stock issuable upon conversion of
Warrant Shares following an exercise of Warrants, will be listed on the
principal securities exchanges and markets within the United States of America,
if any, on which other shares of the same class of Common Stock of the Company
are then listed.
SECTION 11. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES
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ISSUABLE. The Exercise Price and the number of shares of Common Stock issuable
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upon the exercise of each Warrant (the "Warrant Number") are subject to
adjustment from time to time upon the occurrence of the events enumerated in, or
as otherwise provided in, this Section 11.
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(a) Adjustment for Change in Common Stock
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If the Company:
(1) pays a dividend or makes a distribution on its Common Stock
in shares of its Common Stock;
(2) subdivides or reclassifies its outstanding shares of Common
Stock into a greater number of shares; or
(3) combines or reclassifies its outstanding shares of Common
Stock into a smaller number of shares;
then the Exercise Price in effect immediately prior to such action shall be
proportionately adjusted so that the holder of any Warrant thereafter exercised
may receive the aggregate number and kind of shares of capital stock of the
Company which he or it would have owned immediately following such action if
such Warrant had been exercised immediately prior to such action.
The adjustment shall become effective immediately after the record
date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision, combination or reclassification.
Such adjustment shall be made successively whenever any event listed
above shall occur. If the occurrence of any event listed above results in an
adjustment under subsections (b) or (c) below, no further adjustment shall be
made under this subsection (a).
(b) Adjustment for Rights Issue
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If the Company distributes any rights, options or warrants to all
holders of its Common Stock entitling them (for a period expiring within 60 days
after the date fixed for determination of shareholders entitled to receive such
rights, options or warrants) to purchase shares of Common Stock at a price per
share less than the Current Market Value per share on the record date relating
to such distribution, the Exercise Price shall be adjusted in accordance with
the formula:
O + N x P
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E = E x M
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O + N
where:
E = the adjusted Exercise Price.
E = the then current Exercise Price.
O = the number of shares of Common Stock outstanding on the record
date for any such distribution.
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N = the number of additional shares of Common Stock issuable upon
exercise of such rights, options or warrants.
P = the exercise price per share of such rights, options or
warrants.
M = the Current Market Value per share of Common Stock on the record
date for any such distribution.
The adjustment shall be made successively whenever any such rights,
options or warrants are issued and shall become effective immediately after the
opening of business on the day following the record date for the determination
of shareholders entitled to receive the rights, options or warrants. If at the
end of the period during which such rights, options or warrants are exercisable,
not all rights, options or warrants shall have been exercised, the Exercise
Price shall be immediately readjusted to what it would have been if "N" in the
above formula had been the number of shares actually issued. In determining
whether any rights or warrants entitle the holders to subscribe for or purchase
shares of Common Stock at less than such Current Market Value, and in
determining the aggregate offering price of such shares of Common Stock, there
shall be taken into account any consideration received for such rights, options
or warrants, the value of such consideration, if other than cash, to be
determined by the Board of Directors.
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(c) Adjustment for Other Distributions
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If the Company distributes to all holders of its Common Stock (i) any
evidences of indebtedness of the Company or any of its subsidiaries, (ii) any
assets of the Company or any of its subsidiaries (other than dividends or
distributions paid exclusively in cash), (iii) any shares of capital stock of
the Company other than Common Stock, and (iv) any rights, options or warrants to
acquire any of the foregoing or to acquire any Common Stock of the Company (the
items referred to in the foregoing clauses (i)-(iv) being hereinafter
collectively referred to as the "Distributed Property"), the Exercise Price
shall be adjusted in accordance with the formula:
E = E x M - F
-----
M
where:
E = the adjusted Exercise Price.
E = the then current Exercise Price.
M = the Current Market Value per share of Common Stock on the record
date mentioned below.
F = the fair market value on the record date mentioned below of the
Distributed Property, distributable to the holder of one share of
Common Stock (as reasonably determined in good faith by the Board
of Directors of the Company).
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The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of shareholders entitled to receive the distribution.
If an adjustment is made pursuant to this subsection (c) as a result of the
issuance of rights, options or warrants and at the end of the period during
which any such rights, options or warrants are exercisable, not all such rights,
options or warrants shall have been exercised, the Exercise Price shall be
immediately readjusted as if "F" in the above formula was the fair market value
on the record date of the indebtedness, assets or capital stock actually
distributed upon exercise of such rights, options or warrants divided by the
number of shares of Common Stock outstanding on the record date.
This subsection does not apply to any dividend or distribution
referred to in subsections (a) or (b) of this Section 11.
Notwithstanding the foregoing, in the event that the fair market value
of the Distributed Property so distributed exceeds such Current Market Value per
share of Common Stock, or such Current Market Value exceeds such fair market
value by less than $0.10 per share, the Exercise Price shall not be adjusted
pursuant to this subsection (c) and, in lieu of such an adjustment, adequate
provision will be made so that each Holder will be entitled to receive upon
exercise of the Warrants the amount of Distributed Property such Holder would
have received had such Warrants been exercised immediately prior to the Record
Date for such distribution.
In addition, notwithstanding the foregoing provisions of this
subsection (c), no adjustment shall be made hereunder for any distribution of
Distributed Property if the Company makes proper provision so that each Holder
who exercises a Warrant (or any portion thereof) after the date fixed for
determination of shareholders entitled to receive such distribution shall be
entitled to receive upon such conversion, in addition to the shares of Common
Stock issuable upon such conversion, the amount and kind of Distributed Property
that such Holder would have been entitled to receive if such Holder had,
immediately prior to such determination date, exercised such Warrant; provided
that, with respect to any Distributed Property that is convertible, exchangeable
or exercis able, the foregoing provision shall only apply to the extent (and so
long as) the Distributed Property receivable upon exercise of such Warrant would
be convertible, exchangeable or exercisable, as appli cable, without any loss of
rights or privileges for a period of at least 60 days following exercise of such
Warrant.
Rights or warrants distributed by the Company to all Holders of its
Common Stock (whether before or after the date hereof) entitling the Holders
thereof to subscribe for or purchase shares of the Company's capital stock
(either initially or under certain circumstances), which rights or warrants,
until the occurrence of a specified event or events (the "Trigger Event") (i)
are deemed to be transferred with such shares of Common Stock, (ii) are not
exercisable and (iii) are also issued in respect of future issuances of Common
Stock, shall be deemed to be distributed for purposes of this subsection (c)
(and the appropriate adjustment to the Exercise Price shall be required) only
upon the occurrence of the earliest Trigger Event. In addition, in the event of
any distribution of rights or warrants, or any Trigger Event with respect
thereto, that shall have resulted in an adjustment to the Exercise Price under
this subsection (c), (1) in the case of any such rights or warrants that shall
all have been redeemed or repurchased without exercise by any Holders thereof,
the Conversion Price shall be readjusted upon such final redemption or
repurchase to give effect to such distribution
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or Trigger Event, as the case may be, as though it were a cash distribution,
equal to the per share redemption or repurchase price received by a holder of
Common Stock with respect to such rights or warrants (assuming such holder had
retained such rights or warrants), made to all Holders of Common Stock as of the
date of such redemption or repurchase, and (2) in the case of such rights or
warrants all of which shall have expired or been terminated without exercise by
any Holder thereof, the Exercise Price shall be readjusted as if such
distribution had not occurred.
If after an adjustment a holder of a Warrant upon exercise of it may
receive shares of two or more classes of capital stock of the Company, the
Company shall determine the allocation of the adjusted Exercise Price between
the classes of capital stock. After such allocation, the exercise privilege and
the Exercise Price of each class of capital stock shall thereafter be subject to
adjustment on terms comparable to those applicable to Common Stock in this
Section.
(d) In case the Company or any Subsidiary of the Company shall make
any distribution consisting exclusively of cash (excluding any cash portion of
distributions for which an adjustment is required to be made in accordance with
subsection (c) above, or cash distributed upon a merger or consolidation to
which subsection (n) applies) to all holders of Common Stock in an aggregate
amount that, combined together with (i) all other such all-cash distributions
made within the then preceding 12 months in respect of which no adjustment to
the Exercise Price has been made and (ii) any cash and the fair market value of
other consideration paid or payable in respect of any tender offer by the
Company or any of its Subsidiaries for Common Stock concluded within the
preceding 12 months in respect of which no adjustment has been made pursuant to
subsection (e) below, exceeds 10% of the Company's market capitalization
(defined as being the product of the then Current Market Value per share of the
Common Stock (determined as provided in subsection (h) below) times the
number of shares of Common Stock then outstanding) on the record date of such
distribution, then in each such case the Exercise Price shall be adjusted in
accordance with the following formula:
E = E x M - F
-----
M
where:
E = the adjusted Exercise Price.
E = the then current Exercise Price.
M = the Current Market Value per share of Common Stock on the record
date for such distribution.
F = the total combined amount of cash so distributed per share of
Common Stock (determined by dividing such total amount by the
number of shares of Common Stock outstanding on such record
date).
Notwithstanding the foregoing, in the event that the cash so distributed
applicable to one share of Common Stock equals or exceeds such current market
price per share of Common Stock, or such current market price exceeds such
amount of cash by less than $0.10 per
12
<PAGE>
share, the Exercise Price shall not be adjusted pursuant to this subsection (d)
and, in lieu of such an adjustment, adequate provision will be made so that each
Holder will be entitled to receive upon exercise of the Warrants the amount of
cash such Holder would have received had such Warrants been exercised
immediately prior to the record date for such distribution.
In addition, notwithstanding the foregoing provisions of this
subsection (c), no adjustment shall be made hereunder for any distribution of
such cash if the Company makes proper provision so that each Holder who
exercises a Warrant (or any portion thereof) after the date fixed for
determination of shareholders entitled to receive such distribution shall be
entitled to receive upon such conversion, in addition to the shares of Common
Stock issuable upon such conversion, the amount of cash that such Holder would
have been entitled to receive if such Holder had, immediately prior to such
determination date, exercised such Warrant.
(e) In case there shall be completed a tender or exchange offer made
by the Company or any Subsidiary of the Company for all or any portion of the
Common Stock (any such tender or exchange offer being referred to as an "Offer")
that involves an aggregate consideration having a fair market value as of the
expiration of such Offer (the "Expiration Time") that, together with (i) any
cash and the fair market value of any other consideration payable in respect of
any other Offer, as of the expiration of such other Offer, expiring within the
12 months preceding the expiration of such Offer and in respect for which no
Conversion Price adjustment pursuant to this subsection (e) has been made and
(ii) the aggregate amount of any all-cash distributions referred to in
subsection (d) of this Section 11 to all holders of Common Stock within the 12
months preceding the expiration of such Offer for which no conversion price
adjustment pursuant to such subsection (d) has been made, exceeds 10% of the
product of the then Current Market Value per share (determined as provided in
subsection (h) below) of the Common Stock on the Expiration Time times the
number of shares of Common Stock outstanding (including any tendered shares) on
the Expiration Time, then unless the Company elects to reserve a ratable portion
of such cash for distribution upon exercise of the Warrants, the Exercise Price
shall be adjusted in accordance with the following formula:
13
<PAGE>
E = E x (M x O) - F
-----------
M x (O - P)
where:
E = the adjusted Exercise Price.
E = the then current Exercise Price.
M = the Current Market Value per share of Common Stock immediately
prior to the Expiration Time.
O = the number of shares of Common Stock outstanding at the
Expiration Time (including any tendered shares).
F = the fair market value of the aggregate consideration payable to
shareholders based on the acceptance (up to any maximum specified
in the terms of the Offer) of all shares validly tendered and not
withdrawn as of the Expiration Time (the shares deemed so
accepted being defined as the "Purchased Shares").
P = the number of Purchased Shares.
Any such adjustment shall become effective immediately prior to the opening of
business on the day following the Expiration Time.
For purposes of this subsection (e), the fair market value of any
consideration with respect to an Offer shall be reasonably determined in good
faith by the Board of Directors of the
Company and described in a Board Resolution.
(f) Adjustment for Common Stock Issue
---------------------------------
If the Company issues shares of Common Stock for a consideration per
share less than the Current Market Value per share on the date the Company fixes
the offering price of such additional shares, the Exercise Price shall be
adjusted in accordance with the formula:
O + P
---
E = E x M
--------
A
where:
E = the adjusted Exercise Price.
E = the then current Exercise Price.
O = the number of shares of Common Stock outstanding immediately
prior to the issuance of such additional shares of Common Stock.
14
<PAGE>
P = the aggregate consideration received for the issuance of such
additional shares of Common Stock.
M = the Current Market Value per share of Common Stock on the date of
issuance of such additional shares.
A = the number of shares of Common Stock outstanding immediately
after the issuance of such additional shares of Common Stock.
The adjustment shall be made successively whenever any such issuance
is made, and shall become effective immediately after such issuance.
This subsection (f) does not apply to:
(1) any of the transactions described in subsection (a) of this
Section 11; or
(2) Common Stock issued to the Company's employees, directors or
consultants under bona fide benefit plans adopted by the Board of
Directors, or in connection with the acquisition of a business approved by
the Board of Directors, if such Common Stock would otherwise be covered by
this subsection (f) (but only to the extent that the aggregate number of
shares excluded hereby and issued after the date of this Warrant Agreement
(plus the number of shares of Common Stock issuable upon the exercise of
options, warrants or other securities referred to in subsection (g)(3)
below) shall not exceed 10% of the number of shares of Common Stock
outstanding on the date of this Agreement (as such number may be adjusted
from time to time to reflect stock splits, stock dividends and other
similar events)); or
(3) the issuance of Common Stock in connection with (i) the
exercise of Warrants, or (ii) the conversion, exchange or exercise of any
options, warrants, or other securities convertible into or exchangeable or
exercisable for Common Stock; or
(4) the issuance of Common Stock in any bona fide underwritten
public offering.
(g) Adjustment for Convertible Securities Issue
-------------------------------------------
If the Company issues any options, warrants or other securities
convertible into or exchangeable or exercisable for Common Stock for a
consideration per share of Common Stock initially deliverable upon conversion,
exchange or exercise of such securities less than the Current Market Value per
share on the date of issuance of such securities, the Exercise Price shall be
adjusted in accordance with this formula:
15
<PAGE>
O + P
---
E = E x M
-------
O + D
where:
E = the adjusted Exercise Price.
E = the then current Exercise Price.
O = the number of shares of Common Stock outstanding immediately
prior to the issuance of such securities.
P = the aggregate consideration received for the issuance of such
securities.
M = the Current Market Value per share of Common Stock on the date of
issuance of such securities.
D = the maximum number of shares of Common Stock deliverable upon
conversion or in exchange for or upon exercise of such securities
at the initial conversion, exchange or exercise rate.
The adjustment shall be made successively whenever any such issuance
is made, and shall become effective immediately after such issuance.
If all of the Common Stock deliverable upon conversion, exchange or
exercise of such securities has not been issued when such securities are no
longer outstanding, then the Exercise Price shall promptly be readjusted to the
Exercise Price which would then be in effect had the adjustment upon the
issuance of such securities been made on the basis of the actual number of
shares of Common Stock issued upon conversion, exchange or exercise of such
securities.
This subsection (g) does not apply to:
(1) any transaction described in subsection (b) of this Section
11; or
(2) the issuance of the Warrants; or
(3) any such options, warrants or other securities issued to the
Company's employees, directors or consultants under bona fide benefit
plans adopted by the Board of Directors, or in connection with the
acquisition of a business approved by the Board of Directors, if such
options, warrants or other securities would otherwise be covered by
this subsection (g) (but only to the extent that the aggregate number
of shares excluded hereby and issued after the date of this Warrant
Agreement (plus the number of shares of Common Stock referred to in
subsection (f)(2) above) shall not exceed 10% of the number of shares
of Common Stock outstanding on the date of this Agreement (as such
number may be adjusted from time to time to reflect stock splits,
stock dividends and other similar events)); or
16
<PAGE>
(4) the issuance of any such options, warrants or other
securities in any bona fide underwritten public offering.
(h) Current Market Value
--------------------
"Current Market Value" per share of Common Stock or of any other
security (herein collectively referred to as a "Security") at any date shall be
the average of the daily Market Prices for a share of Common Stock for the 10
consecutive trading days selected by the Company commencing not more than 20
trading days before, and ending not later than, the earlier of the date in
question and the date immediately prior to the "'ex- date," with respect to the
issuance, distribution or Offer requiring such computation. For purposes of
this paragraph, the term "'ex' date," when used with respect to any issuance,
distribution or payments with respect to an Offer, means the first date on which
the Common Stock trades regular way on the New York Stock Exchange (or if not
listed or admitted to trading thereon, then on the principal national securities
exchange on which the Common Stock is listed or admitted to trading) without the
right to receive such issuance, distribution or Offer.
The "Market Price" for any Security on each business day means: (A)
if such Security is listed or admitted to trading on any securities exchange,
the closing price, regular way, on such day on the principal exchange on which
such Security is traded, or if no sale takes place on such day, the average of
the closing bid and asked prices on such day, (B) if such Security is not then
listed or admitted to trading on any securities exchange, the last reported sale
price on such day, or if there is no such last reported sale price on such day,
the average of the closing bid and the asked prices on such day, as reported by
a reputable quotation source designated by the Company, or (C) if neither clause
(A) nor (B) is applicable, the average of the reported high bid and low asked
prices on such day, as reported by a reputable quotation service, or a newspaper
of general circulation in the Borough of Manhattan, City of New York,
customarily published on each business day, designated by the Company. If there
are no such prices on a business day, then the Market Price shall not be
determinable for such business day.
(i) Consideration Received
----------------------
For purposes of any computation respecting consideration received
pursuant to subsections (f) and (g) of this Section 11, the following shall
apply:
(1) in the case of the issuance of shares of Common Stock for
cash, the consideration shall be the amount of such cash, provided that in
no case shall any deduction be made for any commissions, discounts or other
expenses incurred by the Company for any underwriting of the issue or
otherwise in connection therewith;
(2) in the case of the issuance of shares of Common Stock for a
consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to be the fair market value thereof (irrespective
of the accounting treatment thereof) as determined in good faith by the
Board of Directors; and
(3) in the case of the issuance of options, warrants or other
securities convertible into or exchangeable or exercisable for shares of
Common Stock, the aggregate consideration received therefor shall be deemed
to be the consideration received by the Company for the issuance of such
securities plus the additional
17
<PAGE>
minimum consideration, if any, to be received by the Company upon the
conversion, exchange or exercise thereof (the consideration in each case to
be determined in the same manner as provided in clauses (1) and (2) of this
subsection).
(j) When De Minimis Adjustment May Be Deferred
------------------------------------------
No adjustment in the Exercise Price need be made unless the adjustment
would require an increase or decrease of at least 1% in the Exercise Price. No
adjustment in the Warrant Number need be made unless the adjustment would
require an increase or decrease of at least 0.5% in the Warrant Number. Any
adjustments that are not made shall be carried forward and taken into account in
any subsequent adjustment, provided that no such adjustment shall be deferred
beyond the date on which a Warrant is exercised.
All calculations under this Section 11 shall be made to the nearest
1/1000th of a share.
(k) When No Adjustment Required
---------------------------
If an adjustment is made upon the establishment of a record date or
issuance date for a distribution or issuance subject to subsections (a), (b) or
(c) or (d) hereof and such distribution or issuance is subsequently cancelled,
the Exercise Price then in effect shall be readjusted, effective as of the date
when the Board of Directors determines to cancel such distribution, to that
which would have been in effect if such record date had not been fixed.
To the extent the Warrants become convertible into cash, no adjustment
need be made thereafter as to the amount of cash into which such Warrants are
exercisable. Interest will not accrue on the cash.
(l) Notice of Adjustment
--------------------
Whenever the Exercise Price or the Warrant Number is adjusted, the
Company shall provide the notices required by Section 13 hereof.
(m) When Issuance or Payment May Be Deferred
----------------------------------------
In any case in which this Section 11 shall require that an adjustment
in the Exercise Price and Warrant Number be made effective as of a record date
for a specified event, the Company may elect to defer until the occurrence of
such event (i) issuing to the Holder of any Warrant exercised after such record
date the Warrant Shares and other capital stock of the Company, if any, issuable
upon such exercise over and above the Warrant Shares and other capital stock of
the Company, if any, issuable upon such exercise on the basis of the Warrant
Number prior to such adjustment, and (ii) paying to such Holder any amount in
cash in lieu of a fractional share pursuant to Section 11; provided, however,
that the Company shall deliver to such Holder a due bill or other appropriate
instrument evidencing such Holder's right to receive such additional Warrant
Shares, other capital stock and cash upon the occurrence of the event requiring
such adjustment.
(n) Reorganizations
---------------
18
<PAGE>
In case of any capital reorganization, other than in the cases
referred to in Sections 11(a), (b), (c) hereof, or the consolidation or merger
of the Company with or into another corporation (other than a merger or
consolidation which does not result in any reclassification of the outstanding
shares of Common Stock into shares of other stock or other securities or
property), or the sale of the property of the Company as an entirety or
substantially as an entirety (collectively such actions being hereinafter
referred to as "Reorganizations"), there shall thereafter be deliverable upon
exercise of any Warrant (in lieu of the number of shares of Common Stock
theretofore deliverable) the number of shares of stock or other securities or
property to which a holder of the number of shares of Common Stock that would
otherwise have been deliverable upon the exercise of such Warrant would have
been entitled upon such Reorganization if such Warrant had been exercised in
full immediately prior to such Reorganization. In case of any Reorganization,
appropriate adjustment, as determined in good faith by the Board of Directors of
the Company, whose determination shall be described in a duly adopted resolution
certified by the Company's Secretary or Assistant Secretary, shall be made in
the application of the provisions herein set forth with respect to the rights
and interests of Holders so that the provisions set forth herein shall
thereafter be applicable, as nearly as possible, in relation to any shares or
other property thereafter deliverable upon exercise of Warrants.
The Company shall not effect any such Reorganization unless prior to
or simultaneously with the consummation thereof the successor corporation (if
other than the Company) resulting from such Reorganization or the corporation
purchasing or leasing such assets or other appropriate corporation or entity
shall expressly assume, by a supplemental Warrant Agreement or other
acknowledgement executed and delivered to the Holder(s), the obligation to
deliver to each such Holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such holder may be entitled to
purchase, and all other obligations and liabilities under this Agreement.
(o) Adjustment in Number of Shares.
------------------------------
Upon each adjustment of the Exercise Price pursuant to this Section
11, each Warrant outstanding prior to the making of the adjustment in the
Exercise Price shall thereafter evidence the right to receive upon payment of
the adjusted Exercise Price that number of shares of Common Stock (calculated to
the nearest thousandth) obtained from the following formula:
N = N x E
--
E
where:
N = the adjusted number of Warrant Shares issuable upon exercise of a
Warrant by payment of the adjusted Exercise Price.
N = the number of Warrant Shares previously issuable upon exercise of
a Warrant by payment of the Exercise Price prior to adjustment.
E = the adjusted Exercise Price.
E = the Exercise Price prior to adjustment.
19
<PAGE>
(p) Form of Warrants
----------------
Irrespective of any adjustments in the Exercise Price or the number or
kind of shares purchasable upon the exercise of the Warrants, Warrants
theretofore or thereafter issued may continue to express the same price and
number and kind of shares as are stated in the Warrants initially issuable
pursuant to this Agreement.
(q) Adjustments in Other Securities
-------------------------------
If as a result of any event or for any other reason, any adjustment is
made which increases the number of shares of Common Stock issuable upon
conversion, exercise or exchange of, or in the conversion or exercise price or
exchange ratio applicable to, any outstanding securities of the Company that are
convertible into, or exercisable or exchangeable for, Common Stock of the
Company, then a corresponding adjustment shall be made hereunder to increase the
number of shares of Common Stock issuable upon exercise of the Warrants, but
only to the extent that no such adjustment has been made pursuant to Sections
11(a), (b), (c) or (d) hereof with respect to such event or for such other
reason.
(r) Miscellaneous
-------------
For purpose of this Section 11 the term "shares of Common Stock" shall
mean (i) shares of any class of stock designated as Common Stock of the Company
at the date of this Agreement, and (ii) shares of any other class of stock
resulting from successive changes or reclassification of such shares consisting
solely of changes in par value, or from par value to no par value, or from no
par value to par value. In the event that at any time, as a result of an
adjustment made pursuant to this Section 11, the holders of Warrants shall
become entitled to purchase any securities of the Company other than, or in
addition to, shares of Common Stock, thereafter the number or amount of such
other securities so purchasable upon exercise of each Warrant shall be subject
to adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Warrant Shares contained in
subsections (a) through (r) of this Section 11, inclusive, and the provisions of
Sections 5, 8, 10 and 12 with respect to the Warrant Shares or the Common Stock
shall apply on like terms to any such other securities.
SECTION 12. FRACTIONAL INTERESTS. The Company shall not be required
--------------------
to issue fractional Warrant Shares on the exercise of Warrants. If more than
one Warrant shall be presented for exercise in full at the same time by the same
holder, the number of full Warrant Shares which shall be issuable upon the
exercise thereof shall be computed on the basis of the aggregate number of
Warrant Shares purchasable on exercise of the Warrants so presented. If any
fraction of a Warrant Share would, except for the provisions of this Section 12,
be issuable on the exercise of any Warrants (or specified portion thereof), the
Company shall pay an amount in cash equal to the fair market value of the
Warrant Share so issuable (as determined in good faith by the Board of
Directors), multiplied by such fraction.
SECTION 13. NOTICES TO WARRANT HOLDERS. Upon any adjustment pursuant
--------------------------
to Section 9 hereof, the Company shall promptly thereafter (i) cause to be filed
with the Company a certificate of an officer of the Company setting forth the
Warrant Number and Exercise Price after such adjustment and setting forth in
reasonable detail the method of calculation and the facts upon which such
calculations are based, and (ii) cause to be given to each of the registered
holders of the Warrant Certificate at his or its address appearing on the
20
<PAGE>
Warrant register written notice of such adjustments by first class mail, postage
prepaid. Where appropriate, such notice may be given in advance and included as
a part of the notice required to be mailed under the other provisions of this
Section 13.
In case:
(a) the Company shall authorize the issuance to all holders of
shares of Common Stock of rights, options or warrants to subscribe for or
purchase shares of Common Stock or of any other subscription rights or
warrants; or
(b) the Company shall authorize the distribution to all holders
of shares of Common Stock of assets, including cash, evidences of its
indebtedness, or other securities; or
(c) of any consolidation or merger to which the Company is a
party and for which approval of any shareholders of the Company is
required, or of the conveyance or transfer of the properties and assets of
the Company substantially as an entirety, or of any reclassification or
change of Common Stock issuable upon exercise of the Warrants (other than a
change in par value, or from par value to no par value, or from no par
value to par value, or as a result of a subdivision or combination), or a
tender offer or exchange offer for shares of Common Stock; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company; or
(e) the Company proposes to take any action that would require an
adjustment to the Warrant Number or the Exercise Price pursuant to Section
11 hereof;
then the Company shall cause to be given to each of the registered holders of
the Warrant Certificate at his or its address appearing on the Warrant register,
at least 20 days prior to the applicable record date hereinafter specified, or
20 days prior to the date of the event in the case of events for which there is
no record date, by first-class mail, postage prepaid, a written notice stating
(i) the date as of which the holders of record of shares of Common Stock to be
entitled to receive any such rights, options, warrants or distribution are to be
determined, or (ii) the initial expiration date set forth in any tender offer or
exchange offer for shares of Common Stock, or (iii) the date on which any such
consolidation, merger, conveyance, transfer, dissolution, liquidation or winding
up is expected to become effective or consummated, and the date as of which it
is expected that holders of record of shares of Common Stock shall be entitled
to exchange such shares for securities or other property, if any, deliverable
upon such reclassification, consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up. The failure to give the notice required
by this Section 13 or any defect therein shall not affect the legality or
validity of any distribution, right, option, warrant, consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding up, or the vote upon
any action.
Nothing contained in this Agreement or in any Warrant Certificate
shall be construed as conferring upon the Holders of Warrants (prior to the
exercise of such Warrants) the right to vote or to consent or to receive notice
as shareholder in respect of the meetings of shareholders or the election of
Directors of the Company or any other matter, or any rights whatsoever as
shareholders of the Company; provided that nothing in the foregoing provision is
intended to detract from any rights explicitly granted to any Holder hereunder.
21
<PAGE>
SECTION 14. TERMINATION. Notwithstanding any other provision hereof,
-----------
this Warrant Agreement will terminate, and all Warrants outstanding hereunder
shall be canceled and of no further force or effect, upon the first to occur of
the following events:
(a) The termination of the LLC Venture pursuant to the provisions
of Section 11.1(a) of the LLC Agreement or, if earlier, upon (i) the
delivery of a "Specified Termination Notice" (as defined) by the Company
(as the Venture Partner) pursuant to Section 14(a) of the Venture Partner
Warrant Agreement or (ii) the delivery by the Venture Partner of a notice
to terminate for convenience pursuant to Section 11(a)(vii) of the LLC
Agreement; provided, however, that upon the occurrence of a "Termination
-------- -------
Option Event" with respect to which the Venture Partner is the "TO Member"
(in each case, as defined in Section 11(c) of the LLC Agreement), this
Agreement shall remain operative and the Warrants shall remain outstanding
and enforceable in accordance with their terms until the first anniversary
of the date on which the "TO Member" delivers a notice of termination (a
"Specified Termination Notice") as a result of the occurrence of an
"Uncured Default," a "Member Unlawful Event" or an "Improper Deadlock" (in
each case, as defined in Section 11(a) of the LLC Agreement) or, with
respect to any other "Termination Option Event," until the first
anniversary of the date of termination of the LLC Venture; and, provided
--------
further, that (i) in the event that either party terminates the LLC
-------
Agreement pursuant to Section 11(a)(vi) thereof, other than in the case
where an "Improper Deadlock" (as defined in the LLC Agreement) is found to
exist, which shall be governed by the first proviso of this paragraph when
-------
the Venture Partner is the "TO Member" with respect to such "Improper
Deadlock," this Agreement shall remain operative and the Warrants shall
remain outstanding and enforceable in accordance with their terms only
until the first anniversary of the occurrence of the "Deadlock" (as defined
in the LLC Agreement), and (ii) in the event that either party terminates
the LLC Agreement pursuant to Section 11(a)(ix) thereof, this Agreement
shall remain operative and the Warrants shall remain outstanding and
enforceable in accordance with their terms only until the first anniversary
of the date of execution of this Agreement;
(b) The expiration of a period of five years commencing on the
date hereof; or
(c) The exercise of all Warrants outstanding under this
Agreement;
provided, however, that if the Exercise Period has commenced less than one
------------------
year prior to the date on which this Agreement would otherwise terminate
pursuant to clauses (a) or (b) above, this Agreement shall remain
operative, and the Warrants shall remain outstanding and enforceable in
accordance with their terms, until the expiration of such Exercise Period.
SECTION 15. NOTICES TO THE COMPANY AND THE VENTURE PARTNER. All
----------------------------------------------
notices, consents, requests, instructions, approvals and other communications
provided for herein and all legal process in regard hereto shall be in writing
and shall be decreed to be validly given, made or served when delivered
personally, transmitted by telex or telecopier, or deposited in the U.S. mail,
postage prepaid, for delivery by express, registered or certified mail, or
delivered to a recognized overnight courier service, addressed as follows:
22
<PAGE>
If to the Company:
Wyle Electronics
15370 Barranca Parkway
Irvine, California 92718
Attention: Chief Financial Officer
23
<PAGE>
If to the Venture Partner:
Marshall Industries
9320 Telstar Avenue
El Monte, California 91731
Attention: Chief Financial Officer
or to such other address as may be specified in a notice given pursuant to this
Section. All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back if telexed; when receipt acknowledged, if telecopied; and the next
business day after timely delivery to the courier, if sent by overnight air
courier guaranteeing next day delivery. The parties may change the address to
which notices are to be given by giving five days' prior notice of such change
in accordance herewith.
SECTION 16. SUPPLEMENTS AND AMENDMENTS. The Company may from time to
--------------------------
time supplement or amend this Agreement without the approval of any Holders of
Warrant Certificate in order to cure any ambiguity or to correct or supplement
any provision contained herein which may be defective or inconsistent with any
other provision herein, or to make any other provisions in regard to matters or
questions arising hereunder which the Company may deem necessary or desirable
and which shall not in any way adversely affect the interests of the Holders of
Warrant Certificate.
SECTION 17. SUCCESSORS AND ASSIGNS. All the covenants and provisions
----------------------
of this Agreement by or for the benefit of the Company shall bind and inure to
the benefit of its respective successors and assigns hereunder.
SECTION 18. NO RIGHTS OR LIABILITIES AS SHAREHOLDER. Nothing
---------------------------------------
contained herein shall be construed as conferring upon any Holder any rights as
a shareholder of the Company or as imposing any obligation on such holder to
purchase any securities or as imposing any liabilities on such holder as a
shareholder of the Company, whether such obligation or liabilities are asserted
by the Company or by creditors of the Company.
SECTION 19. GOVERNING LAW. This Agreement and each Warrant
-------------
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of California and for all purposes shall be construed in
accordance with the internal laws of said State.
SECTION 20. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement
--------------------------
shall be construed to give to any person or corporation other than the Company
and the registered Holders of the Warrant Certificate any legal or equitable
right, remedy or claim under this Agreement; but this Agreement shall be for the
sole and exclusive benefit of the Company and the registered Holders of the
Warrant Certificate.
SECTION 21. AMENDMENTS AND WAIVERS. No provision of this Agreement
----------------------
may be amended or waived except by an instrument in writing signed by the party
sought to be bound or except as provided pursuant to Section 16 hereof; provided
that any amendment or waiver sought from the Holders of any provision of this
Agreement which affects Holders generally shall be given by Holders of at least
a majority of the Warrants outstanding and any
24
<PAGE>
amendment or waiver so given shall be binding on all Holders. No failure or
delay by any party in exercising any right or remedy hereunder shall operate as
a waiver thereof, and a waiver of a particular right or remedy on one occasion
shall not be deemed a waiver of any other right or remedy or a waiver of the
same right or remedy on any subsequent occasion.
SECTION 22. CONSTRUCTION; INTERPRETATION. This Agreement shall not
----------------------------
be construed for or against any party by reason of the authorship or alleged
authorship of any provision hereof or by reason of the status of the respective
parties. This Agreement shall be construed reasonably to carry out its intent
without presumption against or in favor of any party. The natural persons
executing this Agreement on behalf of each party have the full right, power and
authority to do and affirm the foregoing warranty on behalf of each party and on
their own behalf. The captions on sections are provided for purposes of
convenience and are not intended to limit, define the scope of or aid in
interpretation of any of the provisions hereof. All pronouns and singular or
plural references as used herein shall be deemed to have interchangeably (where
the sense of the sentence requires) a masculine, feminine or neuter, and/or
singular or plural meaning, as the case may be.
SECTION 23. COUNTERPARTS. This Agreement may be executed in any
------------
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
25
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the day and year first above written.
WYLE ELECTRONICS
By:
----------------------------------------
Name:
Title:
MARSHALL INDUSTRIES
By:
----------------------------------------
Name:
Title:
26
<PAGE>
EXHIBIT A
[Form of Warrant Certificate]
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD OR TRANSFERRED IN
THE ABSENCE OF REGISTRATION UNDER SAID ACT EXCEPT PURSUANT TO AN EXEMPTION FROM
SUCH REGISTRATION REQUIREMENTS.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON
VOTING AND TRANSFER AS SET FORTH IN A STANDSTILL AGREEMENT AND A WARRANT
AGREEMENT BETWEEN THE COMPANY AND THE HOLDER OF SUCH SECURITIES AND MAY NOT BE
SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT IN
ACCORDANCE THEREWITH. COPIES OF SAID STANDSTILL AGREEMENT AND WARRANT AGREEMENT
ARE ON FILE AT THE OFFICE OF THE CORPORATE SECRETARY OF THE COMPANY.
No. 1996-LLC-1 1,138,383 Warrants
Warrant Certificate
Wyle Electronics
This Warrant Certificate certifies that Marshall Industries, or its
permitted assigns, is the registered holder of the number of Warrants (the
"Warrants") set forth above to purchase Common Stock, without par value (the
"Common Stock"), of Wyle Electronics, a California corporation (the "Company").
Each Warrant entitles the holder upon exercise to receive from the Company one
fully paid and nonassessable share of Common Stock (a "Warrant Share") at an
initial exercise price of $31.80, subject to adjustment as provided in the
Warrant Agreement (the "Exercise Price") payable in lawful money of the United
States of America, upon surrender of this Warrant Certificate and payment of the
Exercise Price at the office of the Company designated for such purpose, but
only subject to the conditions set forth herein and in the Warrant Agreement
referred to hereinafter. The Warrants may be exercised only during the Exercise
Period (as defined in the Warrant Agreement). Furthermore, Warrants may be
exercised during the Exercise Period without the exchange of funds pursuant to
the net exercise provisions of Section 5 of the Warrant Agreement. The Exercise
Price and number of Warrant Shares issuable upon exercise of the Warrants are
subject to adjustment upon the occurrence of certain events, as set forth in the
Warrant Agreement.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants, and are issued pursuant to a Warrant Agreement
dated as of August 8, 1996 (the "Warrant Agreement"), duly executed and
delivered by the Company, which Warrant Agreement is hereby incorporated by
reference in and made a part of this instrument and is hereby referred to for a
description of the rights, limitation of rights, obligations, duties and
immunities thereunder of the Company and the holders (the words "holders" or
"holder" meaning the registered holders or registered holder) of the Warrants.
A copy of the Warrant Agreement may be obtained by the holder hereof upon
written request to the Company.
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The holder of Warrants evidenced by this Warrant Certificate may
exercise such Warrants during the Exercise Period under and pursuant to the
terms and conditions of the Warrant Agreement by surrendering this Warrant
Certificate, with the form of election to purchase set forth hereon (and by this
reference made a part hereof) properly completed and executed, together with
payment of the Exercise Price in cash or by certified or bank check at the
office of the Company designated for such purpose or by wire transfer of
immediately available funds to an account designated by the Company. In the
event that upon any exercise of warrants evidenced hereby the number of Warrants
exercised shall be less than the total number of Warrants evidenced hereby,
there shall be issued by the Company to the holder hereof or his or its
registered assignee a new Warrant Certificate evidencing the number of Warrants
not exercised.
The Warrant Agreement provides that upon the occurrence of certain
events the number of Warrants and the Exercise Price set forth on the face
hereof may, subject to certain conditions, be adjusted. No fractions of a share
of Common Stock will be issued upon the exercise of any Warrant, but the Company
will pay the cash value thereof determined as provided in the Warrant Agreement.
Upon exercise of the Warrants, the holder of Common Stock issued upon
such exercise will be bound by and subject to the terms of that certain
Standstill Agreement dated as of the date hereof, by and between the Company
(the "Standstill Agreement"), unless such holder is not subject to the
provisions of said Standstill Agreement in accordance with its terms.
The holders of the Warrants are entitled to certain registration
rights with respect to the Common Stock issuable upon the exercise thereof.
Said registration rights are set forth in a Registration Rights Agreement (Wyle)
dated as of August 8, 1996, by and between the Company and the Venture Partner
(the "Registration Rights Agreement"). By acceptance of this Warrant
Certificate, the holder hereof agrees that upon exercise of some or all of the
Warrants evidenced hereby, he or it will be bound by the Registration Rights
Agreement as a holder of Registrable Securities thereunder. A copy of the
Registration Rights Agreement may be obtained by the holder hereof upon written
request to the Company.
Warrant Certificates, when surrendered at the office of the Company by
the registered holder thereof in person or by legal representative or attorney
duly authorized in writing, may be exchanged, in the manner and subject to the
limitations provided in the Warrant Agreement, but without payment of any
service charge, for another Warrant Certificate or Warrant Certificates of like
tenor evidencing in the aggregate a like number of Warrants.
Subject to the terms and conditions of the Warrant Agreement, upon due
presentation for registration of transfer of this Warrant Certificate at the
office of the Company a new Warrant Certificate or Warrant Certificate of like
tenor and evidencing in the aggregate a like number of Warrants shall be issued
to the transferee(s) in exchange for this Warrant
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Certificate, subject to the limitations provided in the Warrant Agreement,
without charge except for any tax or other governmental charge imposed in
connection therewith.
The Company may deem and treat the registered holder(s) thereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, of any distribution to the holder(s) hereof, and for all other
purposes, and the Company shall not be affected by any notice to the contrary.
Neither the Warrants nor this Warrant Certificate entitles any holder hereof to
any rights of a shareholder of the Company.
IN WITNESS WHEREOF, Wyle Electronics has caused this Warrant
Certificate to be signed by its Chairman of the Board, Chief Executive Officer,
President or Vice President and by its Secretary or Assistant Secretary and has
caused its corporate seal to be affixed hereunto or imprinted hereon.
Dated: August 8, 1996 WYLE ELECTRONICS
By:
----------------------------------------
Name:
Title:
By:
----------------------------------------
Name:
Title:
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FORM OF ELECTION TO PURCHASE
(To Be Executed Upon Exercise Of Warrant)
The undersigned holder hereby represents that it is the registered
holder of this Warrant Certificate, and hereby irrevocably elects to exercise
the right, represented by this Warrant Certificate, to receive __________ shares
of Common Stock, without par value, of Wyle Electronics and herewith tenders
payment for such shares to the order of Wyle Electronics the amount of
$_______________ in accordance with the terms hereof (unless the holder is
exercising Warrants pursuant to the net exercise provisions of Section 5 of the
Warrant Agreement). The undersigned requests that a certificate for such shares
be registered in the name of the undersigned or nominee hereinafter set forth,
and further that such certificate be delivered to the undersigned at the address
hereinafter set forth or to such other person or entity as is hereinafter set
forth. If said number of shares is less than all of the shares of Common Stock
purchasable hereunder, the undersigned requests that a new Warrant Certificate
representing the remaining balance of such shares be registered in the name of
the undersigned or nominee hereinafter set forth, and further that such
certificate be delivered to the undersigned at the address hereinafter set forth
or to such other person or entity as is hereinafter set forth.
Certificate to be registered as follows:
----------------------------------------
Name:
----------------------------------------
Address:
----------------------------------------
----------------------------------------
----------------------------------------
Social Security or
Taxpayer Identification No.:
----------------------
Certificate to be delivered as follows:
---------------------------------------
Name:
----------------------------------------
Address:
----------------------------------------
----------------------------------------
----------------------------------------
Date: Signature:
------------- -----------------------------------
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ASSIGNMENT FORM
To assign this Warrant after the commencement of the Exercise Period (as defined
in the Warrant Agreement), fill in the form below:
(I) or (we) assign and transfer this Warrant to:
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
- - --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
and irrevocably appoint
--------------------------------------------------------
agent to transfer this Warrant on the
- - ---------------------------------------
books of the Company. The agent may substitute another to act for him.
Date: _____________ Your Signature:________________________________________
(Sign exactly as your name appears on the other
side of this Warrant)
Signature Guarantee:
A-5
31
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EXHIBIT 10(C)
STANDSTILL AGREEMENT
STANDSTILL AGREEMENT, dated as of August 8, 1996 (this "AGREEMENT"), between
Marshall Industries, a California corporation (the "MARSHALL") and Wyle
Electronics, a California corporation ("WYLE"). Marshall and Wyle are also each
referred to herein individually as a "VENTURE PARTNER" and collectively as the
"VENTURE PARTNERS."
WHEREAS, the Venture Partners have entered into that certain Limited
Liability Company Agreement of Accord Contract Services, LLC of even date
herewith (the "LLC AGREEMENT") establishing a joint venture between the Venture
Partners;
WHEREAS, Marshall has granted to Wyle certain warrants (the "MARSHALL
WARRANTS") to purchase shares of the common stock, $1.00 par value of Marshall
(the "MARSHALL COMMON STOCK")
WHEREAS, Wyle has granted to Marshall certain warrants (the "WYLE
WARRANTS" and together with the "MARSHALL WARRANTS," the "WARRANTS") to purchase
shares of the common stock, without par value, of Wyle (the "WYLE COMMON STOCK"
and, together with the "MARSHALL COMMON STOCK," the "COMMON STOCK");
WHEREAS, each of the Venture Partners believes that it is desirable to
establish certain limitations and procedures with respect to the ownership by
the other Venture Partner of their respective Warrants and Common Stock and
certain other matters affecting the corporate affairs of the Venture Partners;
NOW, THEREFORE, in consideration of the mutual covenants and premises
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS. As used in this Agreement, the following terms
shall have the following meanings:
"AFFILIATE" as applied to any specified person, shall mean any other person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified person and, in the case of a person who is an
individual, shall include (i) members of such specified Person's immediate
family (as defined in Instruction 2 of Item 404(a) of Regulation S-K under the
Securities Act) and (ii) trusts, the trustee and all beneficiaries of which are
such specified person or members of such person's immediate family as determined
in accordance with the foregoing clause (i). For the purposes of this
definition, "CONTROL", when used with respect to any person, means the power to
direct the management and policies of such person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
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"BENEFICIAL OWNERSHIP", "PERSON" and "GROUP" shall have the respective
meanings ascribed to such terms pursuant to Regulation 13D-G adopted by the SEC
under the Exchange Act, as in effect on the date hereof.
"COMBINED VOTING POWER" shall mean, at any measurement date, with respect to
either Venture Partner, the total number of votes which could have been cast in
an election of directors of such Venture Partners, assuming that a meeting of
the shareholders of such Venture Partner been duly held, based upon a record
date as of the measurement date, and further assuming that all of such Venture
Partner's Voting Securities then outstanding and entitled to vote at such
meeting were present and voted to the fullest extent possible at such meeting.
"VOTING SECURITIES" shall mean, with respect to either Venture Partner, the
Common Stock of such Venture Partner, any preferred stock of such Venture
Partner that is entitled to vote generally for the election of directors, any
other class or series of such Venture Partner's securities that is entitled to
vote generally for the election of directors and any other securities, warrants
(including the applicable Warrants, whether or not then exercisable), options or
rights of any nature (whether or not issued by such Venture Partner) that are
convertible into, exchangeable for, or exercisable for the purchase of, or
otherwise give the holder thereof any rights in respect of, the Common Stock of
such Venture Partner or any other class or series of securities of such Venture
Partner that is entitled to vote generally for the election of directors.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"13D/G GROUP" shall mean two or more persons acting together for the purpose
of acquiring, holding, voting or disposing of any Voting Securities of a Venture
Partner, which persons would be required under the Exchange Act to file a
statement on Schedule 13D or 13G with the SEC as a "person" within the meaning
of Section 13(d)(3) of the Exchange Act if such persons beneficially owned
sufficient securities to require such a filing under the Exchange Act.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
SECTION 2. REPRESENTATIONS AND WARRANTIES.
Each Venture Partner represents and warrants to the other Venture Partner as
follows:
(a) Such Venture Partner is a validly existing corporation under the
laws of the State of California and has the corporate power and authority to
enter into this Agreement and perform its obligations hereunder.
(b) This Agreement has been duly authorized, executed and delivered by
such Venture Partner and constitutes the legally valid and binding agreement of
such Venture Partner, enforceable against such Venture Partner in accordance
with the terms hereof.
(c) Neither the execution and delivery of this Agreement by such Venture
Partner, nor the performance of its obligations hereunder, will conflict with or
result in a breach
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of or constitute a default under, any law, rule, regulation, judgment, order or
decree of any court, arbitrator or governmental agency or instrumentality, or of
any agreement or instrument to which such Venture Partner is party, or of any of
the charter documents of such Venture Partner.
(d) As of the date hereof, such Venture Partner does not own more than
100 shares of Common Stock of the other Venture Partner or any other Voting
Securities of such other Venture Partner.
(e) Other than this Agreement, neither such Venture Partner nor any of
its affiliates, has any agreement, arrangement or other understanding with any
person with respect to acquiring, holding, voting or disposing the other Venture
Partner's Voting Securities.
SECTION 3. COVENANTS WITH RESPECT TO THE VENTURE PARTNER VOTING SECURITIES
AND OTHER MATTERS.
3.1. ACQUISITION OF VENTURE PARTNER VOTING SECURITIES. Subject to Section
3.2, neither Venture Partner shall directly or indirectly acquire, offer to
acquire, agree to acquire, become the beneficial owner of or obtain any rights
in respect of any Voting Securities of the other Venture Partner, by purchase or
otherwise, or take any action in furtherance thereof, if the effect of such
acquisition, agreement or other action would be (either immediately or upon
consummation of any such acquisition, agreement or other action, or upon the
expiration of any period of time provided in any such acquisition, agreement or
other action) to increase the aggregate beneficial ownership of such other
Venture Partner's Voting Securities by the first Venture Partner and its
affiliates to a number of Voting Securities that represents or possesses 15% or
more of the Combined Voting Power of such other Venture Partner's Voting
Securities, without the approval of such other Venture Partner's Board of
Directors. Notwithstanding the foregoing maximum percentage limitation, no
Venture Partner shall be obligated to dispose of any Voting Securities of the
other Venture Partner beneficially owned in violation of such maximum percentage
limitation if, and solely to the extent that, its beneficial ownership is or
will be increased solely as a result of a repurchase, redemption or other
acquisition of any Voting Securities by the other Venture Partner or any of its
subsidiaries.
3.2. TAKEOVER PROPOSALS. Neither Venture Partner shall submit a proposal
to acquire a majority of the Combined Voting Power of the other Venture
Partner's Voting Securities (a "CHANGE OF CONTROL PROPOSAL") to any person
unless such Change of Control Proposal (or the submission thereof to any such
person) has been approved by the Board of Directors of such other Venture
Partner and the following conditions are satisfied:
(a) Any such Change of Control Proposal shall contemplate either (i) a
tender offer for all of the outstanding Common Stock of such other Venture
Partner not owned by the Venture Partner making such proposal and must be
conditioned upon a majority of such Common Stock not owned by such Venture
Partner being tendered, or (ii) a merger transaction conditioned upon the
holders of a majority of Combined Voting Power of the specified Venture Partner
not owned by the Venture Partner making such proposal, present, in person or by
proxy, voting in favor of such transaction. In the case of either (i) or (ii),
the same consideration must be offered to all of the specified Venture Partner's
shareholders.
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<PAGE>
(b) Any such Change of Control Proposal must be approved by the Board of
Directors of such other Venture Partner, which shall not give its approval
unless it has received an opinion from a nationally recognized investment
banking firm to the effect that the Change of Control Proposal is fair to the
shareholders of the specified Venture Partner from a financial point of view
(other than the other Venture Partner making such proposal).
Unless the foregoing conditions have been previously satisfied, a Change of
Control Proposal shall not be presented to the shareholders of either Venture
Partner (including by way of a tender offer, merger proposal or other Change of
Control Proposal that is conditioned on satisfaction of this Section 3.2).
3.3. DISPOSITION OF VENTURE PARTNER VOTING SECURITIES AND OTHER RELATED
MATTERS.
(a) Without the prior approval of the Board of Directors of the other
Venture Partner, neither Venture Partner shall, directly or indirectly, sell,
transfer any beneficial interest in, pledge, hypothecate or otherwise dispose of
any Voting Security of the other Venture Partner:
(i) in a transaction or series of related transactions that would
result in a transfer to any person or group of more than 3.0% of the
Combined Voting Power of such other Venture Partner, except in response to
certain tender or exchange offers as permitted by Section 3.3(b); and
(ii) in a transaction or series of related transactions that would
result in a transfer to any person or group that, to the knowledge of the
transferring Venture Partner at the time of such transaction, upon
consummation of such sale, transfer or disposition, would, directly or
indirectly, have beneficial ownership of, or the right to acquire beneficial
ownership of, such number of Voting Securities of the other Venture Partner
that would represent greater than 5.0% (or in the case of any mutual fund or
similar institutional investor with the stated intention to remain a passive
investor, greater than 10%), of the Combined Voting Power of such other
Venture Partner, except in response to certain tender or exchange offers as
permitted by Section 3.3(b).
The selling Venture Partner shall request all purchasers of Voting Securities of
the other Venture Partner from them in negotiated transactions, and all
underwriters, placement agents or brokers ("AGENTS") for any public offerings or
open market transactions involving such Voting Securities, to represent and
warrant that the requirements of this Section 3.3(a) have been satisfied with
respect to such transactions, such representations by Agents to be qualified to
the best of such Agents' knowledge.
(b) Notwithstanding Section 3.3(a), on and after the eleventh business
day following the commencement of a tender or exchange offer for outstanding
Voting Securities of the other Venture Partner, the specified Venture Partner
may tender or exchange any Voting Securities of the other Venture Partner
beneficially owned by it pursuant to such offer if such offer shall have been
previously approved by the Board of Directors of the subject Venture Partner.
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<PAGE>
(c) Proposed transfers of Voting Securities by either Venture Partner
that are not in compliance with this Section shall be of no force or effect and
shall be null and void.
3.4. PROXY SOLICITATIONS, ETC. Neither Venture Partner shall solicit
proxies, assist any other person in any way, directly or indirectly, in the
solicitation of proxies, become a "participant" in a "solicitation," or assist
any "participant" in a "solicitation" (as such terms are defined in Rule 14a-1
of Regulation 14A under the Exchange Act) in opposition to the recommendation of
the Board of Directors of the other Venture Partner, or submit any proposal for
the vote of shareholders of the other Venture Partner, or recommend or request
or induce or attempt to induce any other person to take any such actions, or
seek to advise, encourage or influence any other person with respect to the
voting of Voting Securities of the other Venture Partner, in each case without
the prior approval of the Board of Directors of such other Venture Partner.
3.5. NO VOTING TRUSTS, POOLING AGREEMENTS, OR FORMATION OF "GROUPS".
Without the prior approval of the Board of Directors of the other Venture
Partner, neither Venture Partner shall form, join in or in any other way
participate in any partnership, pooling agreement, syndicate, voting trust or
other "group", including a 13D/G Group, with respect to the Voting Securities of
the other Venture Partner, or enter into any agreement (other than this
Agreement or the Registration Rights Agreement) or arrangement or otherwise act
in concert with any other person or group, for the purpose of acquiring,
holding, voting or disposing of the Voting Securities of the other Venture
Partner.
3.6. NO SOLICITATION OF BIDDERS. Neither Venture Partner shall directly or
indirectly assist, solicit, encourage or induce any person to bid for or acquire
outstanding Voting Securities of the other Venture Partners in excess of 5.0% of
the Combined Voting Power of the Voting Securities of the other Venture Partner.
3.7. NON-CIRCUMVENTION. Neither Venture Partner or any affiliate of any
such Venture Partner shall take any action, alone or in concert with any other
person or group, to seek control of the other Venture Partner or otherwise seek
to circumvent the limitations of the provisions of this Section 3 of this
Agreement without the approval of the Board of Directors of the other Venture
Partner. Without limiting the generality of the foregoing, neither Venture
Partner shall, without the approval of the Board of Directors of the other
Venture Partner, (i) present to such other Venture Partner or to any third party
any proposal that could reasonably be expected to result in a change of control
of such other Venture Partner or in any increase beyond the percentage specified
in Section 3.1 in the Combined Voting Power of the Voting Securities of such
other Venture Partner beneficially owned in the aggregate by the first Venture
Partner, (ii) publicly suggest or announce its willingness or desire to engage
in a transaction or group of transactions, or have another person engage in a
transaction or group of transactions, that would result in a change of control
of the first Venture Partner or in any increase beyond the percentage specified
in Section 3.1 in the Combined Voting Power of the Voting Securities of such
other Venture Partner beneficially owned in the aggregate by the first Venture
Partner, (iii) initiate, request, induce or attempt to induce or give
encouragement to any other person to initiate any proposal that could reasonably
be expected to result in a change of control of such other Venture Partner or in
any increase beyond the percentage specified in Section 3.1 in the Combined
Voting Power of the Voting Securities of such other Venture Partner beneficially
owned in the aggregate
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by the first Venture Partner, or (iv) publicly request, suggest or announce its
desire to amend or obtain a waiver of any provision of this Agreement.
3.8. CONFIDENTIAL INFORMATION. The provisions of Section 12.18 of the LLC
Agreement, as in effect on the date hereof, are hereby incorporated by reference
and made a part of this document as though fully set forth herein. Such
obligations shall continue to be binding on the parties to this Agreement during
its term, notwithstanding any earlier termination of the LLC Agreement.
In addition, each Venture Partner hereby acknowledges that the United States
securities laws prohibit any person who has received from an issuer material,
non-public information, including certain information that may be part of the
Confidential Material (as defined in the LLC Agreement), while such information
is non-public, from purchasing or selling securities of such issuer or from
communicating such information to any other person under circumstances in which
it is reasonably foreseeable that such person is likely to purchase or sell such
securities.
3.9. VOTING. Each of the Venture Partners shall, at any annual or special
meeting of the shareholders at which directors of the other Venture Partner are
to be elected, or in connection with a solicitation of consents through which
directors of the other Venture Partner are to be selected, vote (or give a
written consent with respect to) all of its Voting Securities in the other
Venture Partner (i) in favor of the election to the Board of Directors of such
other Venture Partner of the persons nominated by the Board of Directors of such
other Venture Partner, and all other proposals recommended by the Board of
Directors of such other Venture Partner, and (ii) in opposition to any nominee
or proposal opposed by such Board of Directors.
3.10. NO SOLICITATION OF EMPLOYEES. Each Venture Partner hereby
agrees that during the term of this Agreement, it will not, and will direct its
Representatives (as defined in the LLC Agreement) not to, (i) solicit for
employment or advise or recommend to any other person that it solicit for
employment any executive officer of the other Venture Partner or any other
employee of the other Venture Partner directly involved in the activities of the
Joint Venture, (ii) advise or encourage any such executive officer or other
employee of the other Venture Partner to terminate his employment with such
other Venture Partner, or (iii) interfere or attempt to interfere with the
employment or any contractual relationship between the other Venture Partner and
any such executive officer or other employee.
3.11. WAIVER OF REQUIREMENTS. Notwithstanding anything in this Section 3
to the contrary, any of the terms of Sections 3.10 through 3.9 may be waived, in
whole or in part, and as to particular transactions or matters, if the Board of
Directors of the affected Venture Partner shall have approved such waiver.
SECTION 4. TERM OF AGREEMENT.
This Agreement shall terminate on August 8, 2006; PROVIDED, HOWEVER, that in
the event that the LLC Agreement is terminated for any reason, then this
Agreement shall terminate upon the later to occur of (i) the 18th month
anniversary of such termination, or (ii) such time as such Venture Partner owns
Voting Securities of the other Venture Partner representing less than
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2% of the Combined Voting Power of such other Venture Partner's Voting
Securities and, PROVIDED, FURTHER, HOWEVER, that in no event shall this
Agreement expire prior to August 8, 1999.
SECTION 5. LEGEND AND STOP TRANSFER ORDER.
To assist in effectuating the provisions of this Agreement, each Venture
Partner hereby consents (i) to the placement within 10 business days after any
Voting Securities of the other Venture Partner become subject to the provisions
of this Agreement, of the following legend on all certificates representing
ownership of Voting Securities owned of record or beneficially by the specified
Venture Partner, until such shares are sold, transferred or disposed in a manner
permitted hereby:
The securities represented by this certificate are subject to restrictions
on voting and transfer as set forth in a Standstill Agreement and a Warrant
Agreement by and between the Company and the holder of such securities, and
may not be sold, transferred, pledged, hypothecated or otherwise disposed of
except in accordance therewith. Copies of said Standstill Agreement and
Warrant Agreement are on file at the office of the Corporate Secretary of
the Company.
and (ii) to the entry of stop transfer orders with the transfer agent or agents
of Company Voting Securities against the transfer by such Venture Partner of
Voting Securities of the other Venture Partner except in compliance with the
requirements of this Agreement. Each Venture Partner agrees to remove promptly
all legends and stop transfer orders with respect to the transfer of Voting
Securities made in compliance with the provisions of this Agreement.
SECTION 6. REMEDIES.
Each of the Venture Partners acknowledge and agree that (i) the
provisions of this Agreement are reasonable and necessary to protect the proper
and legitimate interests of the parties hereto, and (ii) the parties would be
irreparably damaged in the event any of the provisions of this Agreement were
not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to
preliminary and permanent injunctive relief to prevent breaches of the
provisions of this Agreement by the other parties without the necessity of
proving actual damages or of posting any bond, and to enforce specifically the
terms and provisions hereof and thereof in any court of the United States or any
state thereof having jurisdiction, which rights shall be cumulative and in
addition to any other remedy to which the parties may be entitled hereunder or
at law or equity.
SECTION 7. GENERAL PROVISIONS.
7.1. CHOICE OF LAW. This Agreement shall be construed, interpreted and the
rights of the parties determined in accordance with the laws of the State of
California without reference to the choice of laws provisions thereof.
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7.2. NOTICES. All notices, consents, requests, instructions, approvals and
other communications provided for herein and all legal process in regard hereto
shall be in writing and shall be decreed to be validly given, made or served
when delivered personally, transmitted by telex or telecopier, or deposited in
the U.S. mail, postage prepaid, for delivery by express, registered or certified
mail, or delivered to a recognized overnight courier service, addressed as
follows:
If to Marshall:
Marshall Industries
9320 Telstar Avenue
El Monte, California 91731
Attention: Chief Financial Officer
If to Wyle:
Wyle Electronics
15370 Barranca Parkway
Irvine, California 92718
Attention: Chief Financial Officer
or to such other address as may be specified in a notice given pursuant to this
Section. All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back if telexed; when receipt acknowledged, if telecopied; and the next
business day after timely delivery to the courier, if sent by overnight air
courier guaranteeing next day delivery. The parties may change the address to
which notices are to be given by giving five days' prior notice of such change
in accordance herewith.
7.3. SEVERABILITY. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions shall remain in full force and effect and shall in no way be
affected, impaired or invalidated. The parties hereto agree that they will use
their best efforts at all times to support and defend this Agreement.
7.4. CERTAIN TRANSFERS. Each affiliate of a Venture Partner that shall
have the right to become the beneficial owner, within the meaning and scope of
Section 3 hereof, of Voting Securities of the other Venture Partner shall,
promptly upon becoming such owner or holder, execute and deliver to such other
Venture Partner, a joinder agreement, agreeing to be legally bound by this
Agreement. Neither Venture Partner shall transfer Voting Securities of the other
Venture Partner to any affiliate of such first Venture Partner unless the
transferee shall agree to be bound by this Agreement in the manner specified
above.
7.5. AMENDMENTS; WAIVERS. Any provision of this Agreement may be amended
or waived if, and only if, such amendment or waiver is in writing and signed by
each party hereto. No failure or delay by any party hereto in exercising any
right, power or privilege hereunder shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or
8
<PAGE>
privilege. The rights and remedies herein provided shall be cumulative and not
exclusive of any rights or remedies provided by law.
7.6. DESCRIPTIVE HEADINGS. Descriptive headings are for convenience only
and shall not control or affect the meaning or construction of any provision of
this Agreement. Reference in this Agreement to Sections are to Sections of this
Agreement. All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the identity of the applicable person
or persons may require.
7.7. ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other instruments
and agreements referred to herein embody the entire agreement of the parties
hereto with respect to the subject matter hereof and supersede all prior
agreements with respect thereto.
7.8. COUNTERPARTS. This Agreement shall become binding when one or more
counterparts hereof, individually or taken together, bears the signatures of
each of the parties hereto. This Agreement may be executed in any number of
counterparts, each of which shall be an original as against the party whose
signature appears thereon, or on whose behalf such counterpart is executed, but
all of which taken together shall be one and the same agreement.
7.9. NO PARTNERSHIP. No partnership, joint venture or joint undertaking is
intended to be, or is, formed between the parties hereto or any of them by
reason of this Agreement or the transactions contemplated herein.
7.10. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the successors and assigns of the
parties hereto. All of the terms, covenants and agreements contained in this
Agreement are solely for the benefit of the parties hereto, and their respective
successors and assigns, and no other parties (including, without limitation, any
other shareholder or creditor of either Venture Partner, or any director,
officer or employee of such Venture Partner) are intended to be benefitted by,
or entitled to enforce, this Agreement.
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto intending to be legally bound have
duly executed this Agreement, all as of the day and year first above written.
MARSHALL INDUSTRIES
By:
-----------------------------------------
Name:
Title:
WYLE ELECTRONICS
By:
-----------------------------------------
Name:
Title:
S-1
<PAGE>
EXHIBIT 10(d)
REGISTRATION RIGHTS AGREEMENT (WYLE)
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and entered
---------
into as of August 8, 1996 by and between Wyle Electronics, a California
corporation (the "Company") and Marshall Industries, a California corporation
-------
("Marshall").
- - ----------
WHEREAS, the Company and Marshall have entered into that certain Limited
Liability Company Agreement of Accord Contract Services LLC of even date
herewith (the "LLC Agreement") establishing a joint venture between the Company
-------------
and Marshall;
WHEREAS, the Company has entered into a Warrant Agreement of even date
herewith (the "Warrant Agreement") pursuant to which it has granted to Marshall
-----------------
certain warrants (the "Warrants") to purchase shares of the Company's Common
--------
Stock, without par value, (the "Common Stock") upon the occurrence of certain
------------
events;
WHEREAS, the Company has agreed to provide the registration rights set
forth in this Agreement in connection with the issuance of the Warrants;
NOW THEREFORE, in consideration of the mutual covenants herein contained
and for other good and valuable consideration, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
-----------
SECTION 1.1 DEFINITIONS. The following capitalized terms shall have the
meanings ascribed to them below:
"Affiliate," as applied to any specified Person, shall mean any other
---------
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person and, in the case of a Person
who is an individual, shall include (i) members of such specified Person's
immediate family (as defined in Instruction 2 of Item 404(a) of Regulation S-K
under the Securities Act) and (ii) trusts, the trustee and all beneficiaries of
which are such specified Person or members of such Person's immediate family as
determined in accordance with the foregoing clause (i). For the purposes of
this definition, "control", when used with respect to any Person, means the
-------
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Business Day" means any day that is not a Saturday, Sunday or a day on
------------
which banking institutions in New York, New York or Los Angeles, California are
not required to be open.
"Common Stock" means the Common Stock, without par value, of the Company.
------------
<PAGE>
"Deferral Period" is defined in Section 2.1.
---------------
"Demand Notice" is defined in Section 2.1.
-------------
"Demand Registration" is defined in Section 2.1.
-------------------
"Demanding Holder" means any Holder initiating a registration request in
----------------
compliance with Section 2.1(a); provided that any action required or permitted
to be taken under this Agreement by any Demanding Holders shall be taken by
action of the holders of a majority of the Registrable Securities held by such
Demanding Holders.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
------------
the rules and regulations promulgated thereunder.
"Holder" or "Holders" means Marshall and any other holder or holders of
------ -------
Registrable Securities.
"Person" means an individual, partnership, corporation, limited liability
------
company, trust or unincorporated organization, or a government or agency or
political subdivision thereof.
"Piggyback Registration" is defined in Section 2.2.
----------------------
"Piggyback Holder" is defined in Section 2.2.
----------------
"Prospectus" means the prospectus included in a Registration Statement, as
----------
amended or supplemented by any prospectus supplement and by all other amendments
thereto, including post-effective amendments, and all material incorporated by
reference into such Prospectus.
"Public Distribution" shall mean any bona fide underwritten public
-------------------
distribution of Stock pursuant to an effective registration statement under the
Securities Act or any other applicable law, or any bona fide public sale in an
open market transaction under Rule 144 of the Securities Act (or any successor
rule) if such sale is in compliance with the requirements of paragraphs (c),
(d), (e), (f) and (g) of such Rule (notwithstanding the provisions of paragraph
(k) of such Rule).
"Public Offering" shall mean any bona fide underwritten public distribution
---------------
of Stock pursuant to an effective registration statement under the Securities
Act or any other applicable law.
"Registrable Securities" means each share of Stock issued or issuable upon
----------------------
the exercise of the Warrants, until (i) it has been effectively registered under
the Securities Act and disposed of by a Holder pursuant to an effective
registration statement, or (ii) it is sold by such Holder pursuant to Rule 144
(or any similar provisions then in force) under the Securities Act.
"Registration Statement" means any registration statement of the Company
----------------------
relating to a Demand Registration pursuant to Section 2.1 or a Piggyback
Registration
2
<PAGE>
pursuant to Section 2.2, in each case, including the Prospectus included
therein, all amendments and supplements thereto (including post-effective
amendments) and all exhibits and material incorporated by reference therein.
"SEC" means the Securities and Exchange Commission.
---
"Securities Act" means the Securities Act of 1933, as amended, and the
--------------
rules and regulations promulgated thereunder.
"Selling Holder" means a Holder who sells or proposes to sell Registrable
--------------
Securities pursuant to a Registration Statement under the Securities Act.
"Stock" means the following securities: (i) the Common Stock or (ii) any
-----
security or other instrument (a) received as a dividend on, or other payment
made to the holders of, the Common Stock (or any other security or instrument
referred to in this definition) or (b) issued in connection with a split of the
Common Stock (or any other security or instrument referred to in this
definition) or as a result of any exchange or reclassification of the Common
Stock (or any other security or instrument referred to in this definition),
reorganization, consolidation, merger or recapitalization.
"Underwritten Registration" or "Underwritten Offering" means a registration
------------------------- ---------------------
in which Stock of the Company is sold to an underwriter for re-offering to the
public.
ARTICLE II
REGISTRATION RIGHTS
-------------------
SECTION 2.1 DEMAND REGISTRATIONS.
(a) Request for Registration. At any time and from time to time on or
------------------------
after the commencement of the Exercise Period (as defined in the Warrant
Agreement), the Holder or Holders of a majority of the Registrable Securities
then outstanding may make a written request of the Company for registration with
the SEC, under and in accordance with the provisions of the Securities Act, of
all or part (but not less than 20% of Registrable Securities then outstanding)
of their Registrable Securities (a "Demand Registration") by giving written
-------------------
notice to the Company of such demand (a "Demand Notice"), provided that (i) the
-------------
Company shall be required to effect only one Demand Registration during any six-
month period and (ii) the Holders will not be entitled to request more than two
such Demand Registrations. Each such Demand Notice will specify the number of
Registrable Securities proposed to be sold pursuant to such Demand Registration
and will also specify the intended method of disposition thereof. The Holders
may request that the Company effect a "shelf registration" that is to remain
continuously effective for a period not to exceed three years from the date on
which the Warrants have been fully exercised.
Promptly after receipt of any Demand Notice, but in no event later than 60
days after receipt of such Demand Notice, the Company shall file a Registration
Statement with the SEC with respect to the Registrable Securities included in
the Demand Notice and shall use its best efforts to have such Registration
Statement declared effective as promptly as
3
<PAGE>
practicable; provided, however, that the Company may postpone the filing of such
Registration Statement for a period of up to 90 days (the "Deferral Period") if
---------------
the Board of Directors reasonably determines that (i) such a filing would
adversely affect any proposed financing, acquisition, divestiture or other
material transaction by the Company or (ii) such a filing would otherwise
represent an undue hardship for the Company. The Company shall not be entitled
to request more than one such deferral with respect to any group of Holders
requesting a Demand Registration within any 365-day period. If the Company does
elect to defer any such Demand Registration, the Holders requesting such Demand
Registration may, at their election by written notice to the Company, (i)
confirm their request to proceed with such Demand Registration upon the
expiration of the Deferral Period or (ii) withdraw their request for such Demand
Registration in which case no such request for a Demand Registration shall be
deemed to have occurred for purposes of this Agreement.
The Company shall give written notice of any Demand Notice by any Holder,
which request complies with this Section 2.1(a), within 5 days after the receipt
thereof, to each Holder who did not initially join in such request. Within 10
days after receipt of such notice, any such Holder may request in writing that
its Registrable Securities be included in such registration, and the Company
shall include in the Demand Registration the Registrable Securities of each such
Holder requested to be so included, subject to the provisions of Section 2.1(e).
Each such request shall specify the number of shares of Registrable Securities
proposed to be sold and the intended method of disposition thereof.
(b) Effective Registration. Except as provided in subsection (c) below, a
----------------------
registration will not be deemed to have been effected as a Demand Registration
unless it has been declared effective by the SEC; provided that if, after it has
become effective, the offering of Registrable Securities pursuant to such
registration is or becomes the subject of any stop order, injunction or other
order or requirement of the SEC or any other governmental or administrative
agency, or if any court prevents or otherwise limits the sale of Registrable
Securities pursuant to the registration (for any reason other than the acts or
omissions of the Holders), such registration will be deemed not to have been
effected. If (i) a registration requested pursuant to this Section 2.1 is
deemed not to have been effected in accordance with the provisions of the
preceding sentence or (ii) the registration requested pursuant to this Section
2.1 does not remain continuously effective for a period of at least 120 days
beyond the effective date thereof or until the consummation of the distribution
by the Holders of the Registrable Securities included in such registration
statement (the "Demand Registration Statement"), then such Demand Registration
-----------------------------
Statement shall not count as a Demand Registration that may be requested by the
Demanding Holder(s) in question and the Company shall continue to be obligated
to effect a registration pursuant to this Section 2.1.
(c) Withdrawal. The Demanding Holders may withdraw all or any part of the
----------
Registrable Securities from a Demand Registration at any time (whether before or
after the filing or effective date of the Demand Registration Statement), and if
all such Registrable Securities are withdrawn, to withdraw the demand related
thereto. If at any time a registration statement is filed pursuant to a Demand
Registration, and subsequently a sufficient number of Registrable Securities are
withdrawn from the Demand Registration so that such Demand Registration
Statement does not cover at least the required amounts specified by Section
2.1(a), and an additional number of Registrable Securities is not so included,
the Company may (or shall, if requested by the Demanding Holders) withdraw such
Demand Registration Statement; provided that such withdrawn registration
statement will count as a
4
<PAGE>
Demand Registration unless the Demanding Holders elect to bear the expenses
associated with such withdrawn registration statement. If the Demanding Holders
elect to bear such expenses, such expenses shall be borne by the Demanding
Holder(s) whose withdrawal of Registrable Securities resulted in such Demand
Registration Statement not covering the specified required amounts.
(d) Selection of Underwriter. If the Demanding Holders so elect, the
------------------------
offering of Registrable Securities pursuant to a Demand Registration shall be in
the form of an Underwritten Offering. The Demanding Holders shall select one or
more nationally recognized firms of investment bankers to act as the managing
Underwriter or Underwriters in connection with such offering and shall select
any additional investment bankers and managers to be used in connection with
such offering; provided that such investment bankers and managers must be
reasonably satisfactory to the Company. The Company shall (together with all
Holders of Registrable Securities proposing to distribute such Registrable
Securities through such underwriting) enter into an underwriting agreement
in customary form with the underwriter or underwriters selected for such
underwriting in the manner set forth above.
(e) Priority on Demand Registrations. If, in any Demand Registration
--------------------------------
involving an Underwritten Offering the managing underwriter or underwriters
thereof advise the Demanding Holders or the Company in writing that in its or
their reasonable opinion the number of Registrable Securities proposed to be
sold in such Demand Registration exceeds the number that can be sold in such
offering or will adversely affect the success of such offering (including,
without limitation, an impact on the selling price or the number of Registrable
Securities that any participant may sell), the Company shall include in such
registration only the number of Registrable Securities, if any, which in the
opinion of such underwriter or underwriters can be sold without having an
adverse effect on the success of the offering and in accordance with the
following priority: (i) first, Registrable Securities held by Demanding Holders
-----
in the group initially requesting such registration, allocated pro rata among
such group (based upon the number of Registrable Securities requested to be
included in such Demand Registration) and (ii) second, pro rata (based upon the
------
number of Registrable Securities requested to be included in such registration
by such Holders) among the other Holders of Registrable Securities who have
requested to include Registrable Securities in such registration. If all
Registrable Securities requested to be sold in the Underwritten Offering are
included therein, the Company may include other shares of Stock in such offering
in accordance with the following priority, but not to exceed the number
recommended by the managing underwriter or underwriters: (x) first, pro rata
-----
among any other shareholders of the Company having piggyback or other similar
registration rights and (y) second, shares of Stock proposed to be sold by or
------
for the account of the Company.
SECTION 2.2 PIGGYBACK REGISTRATIONS.
(a) Right to Participate in Registration. If, at any time following the
------------------------------------
commencement of the Exercise Period (as defined in the Warrant Agreement), the
Company proposes to file a registration statement under the Securities Act with
respect to an offering by the Company for its own account or for the account of
any holders of any class of common equity securities (other than (i) a
registration statement on Form S-4 or S-8 (or any substitute form that may be
adopted by the SEC) or (ii) a registration statement filed in connection with a
Demand Registration or (iii) a registration statement filed in connection with
an offering of securities solely to the Company's existing securityholders),
then the Company shall give
5
<PAGE>
written notice of such proposed filing to the Holders as soon as practicable
(but in no event less than 20 days before the anticipated filing date), and such
notice shall offer such Holder the opportunity to register such number of shares
of Registrable Securities as each such Holder may request, which request shall
specify the Registrable Securities intended to be disposed of by such Holder and
the intended method of distribution thereof (or, if the offering is a proposed
Underwritten Offering, that such Holder elects to have the number of Registrable
Securities so specified included in such Underwritten Offering) (a "Piggyback
---------
Registration").
- - ------------
The Company shall use its best efforts to cause the managing Underwriter or
Underwriters of a proposed Underwritten Offering to permit the Registrable
Securities requested by the Holders thereof to be included in a Piggyback
Registration (the "Piggyback Holders") to be included on the same terms and
-----------------
conditions as any similar securities of the Company or any other securityholder
included therein and to permit the sale or other disposition of such Registrable
Securities in accordance with the intended method of distribution thereof.
No registration effected under this Section 2.2 and no failure to effect a
registration under this Section 2.2(a), shall relieve the Company of its
obligations pursuant to Section 2.1, and no failure to effect a registration
under this Section 2.2(a) and complete the sale of shares in connection
therewith shall relieve the Company of any other obligation under this Agreement
(including, without limitation, the Company's obligations under Sections 3.2 and
4.1).
(b) Priority on Piggyback Registrations. Unless the registration statement
-----------------------------------
is being filed pursuant to a Demand Registration (in which case the priority of
piggyback rights shall be as provided in Section 2.1(e) above), if the managing
underwriter or underwriters advise the Company in writing that in its or their
reasonable opinion the number of equity securities of the Company proposed to be
sold in such registration (including Registrable Securities to be included
pursuant to subsection (a) above) will adversely affect the success of such
offering (including, without limitation, an impact on the selling price or the
number of equity securities of the Company that any participant may sell), the
Company shall include in such registration the number of equity securities of
the Company, if any, which in the opinion of such underwriter or underwriters
can be sold without having an adverse effect on the offering and in accordance
with the following priority: (i) first, the securities the Company proposes to
-----
sell for its own account, (ii) second, pro rata based on the number of
------
Registrable Securities that each Holder or other Person having similar rights
shall have requested to be included therein.
(c) Withdrawal. The Piggyback Holders may withdraw all or any part of the
----------
Registrable Securities from a Piggyback Registration at any time (before but not
after the effective date of such registration statement), by delivering written
notice of such withdrawal request to the Company, unless such Piggyback
Registration is underwritten, in which case Registrable Securities may not be
withdrawn after the effective date of the Registration Statement.
(d) Termination of Registration by the Company. If the Company shall
------------------------------------------
determine for any reason (x) not to register or (y) to delay a registration
which includes Registrable Securities pursuant to this Section 2.2, the Company
may, at its election, give
6
<PAGE>
written notice of such determination to the Holders of the Registrable
Securities and, thereupon (i) in the case of a determination not to register,
shall be relieved of its obligation to register any Registrable Securities in
connection with such registration (but not from its obligation to pay the
Registration Expenses (as defined below) in connection therewith), without
prejudice, however, to the rights, if any, of any Holder or Holders of
Registrable Securities to request that such registration be effected as a Demand
Registration under Section 2.1, and (ii) in the case of a delay in registering,
shall be permitted to delay registering any Registrable Securities for the same
period as the delay in registering such other shares.
ARTICLE III
REGISTRATION PROCEDURES
-----------------------
SECTION 3.1 REGISTRATION PROCEDURES.
(a) General Provisions. In connection with any Registration Statement and
------------------
any related Prospectus required by this Agreement to permit the sale or resale
of Registrable Securities, the Company shall:
(1) prepare and file with the SEC a registration statement with
respect to such Registrable Securities within the time periods specified
herein, make all required filings with the NASD and use its best efforts to
cause such registration statement to become effective as promptly as
practicable (subject to the Company's right to withdraw the registration
statement under the circumstances described in Sections 2.1(c) or 2.2(d));
(2) promptly prepare and file with the SEC such amendments and
post-effective amendments to the Registration Statement as may be necessary
to keep the Registration Statement effective for the applicable period set
forth in Sections 2.1 or 2.2, as applicable, or such shorter period as will
terminate when all Registrable Securities covered by such Registration
Statement have been sold; cause the Prospectus to be supplemented by a
required Prospectus supplement, and as so supplemented to be filed pursuant
to Rule 424 under the Securities Act, and to comply fully with the
applicable provision of Rules 424 and 430A under the Securities Act in a
timely manner; and comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such Registration
Statement during the applicable period in accordance with the intended
method or methods of distribution by the sellers thereof set forth in such
Registration Statement or supplement to the Prospectus;
(3) use its best efforts to keep such Registration Statement
continuously effective and provide all requisite financial statements for
the period specified in Sections 2.1 and 2.2, as applicable; upon the
occurrence of any event that would cause any such Registration Statement or
the Prospectus contained therein (A) to contain a material misstatement or
omission or (B) not to be effective and usable for resale of Registrable
Securities during the period required by this Agreement, the Company shall
file promptly an appropriate amendment to such Registration Statement, in
the case of clause (A), correcting any such misstatement or omission, and,
in the case of either clause (A) or (B), use its best efforts to cause such
7
<PAGE>
amendment to declared effective and such Registration Statement and related
Prospectus to become usable for their intended purposes(s) as soon as
practicable thereafter;
(4) provide (A) the Holders of Registrable Securities
participating in the registration, (B) the underwriters (which term, for
purposes of this Agreement, shall include a Person deemed to be an
underwriter within the meaning of Section 2(11) of the Securities Act), if
any, of the Registrable Securities to be registered, (C) the sale or
placement agent therefor, if any, (D) counsel for such underwriters or
agent, and (E) counsel for the Holders thereof, as selected by Holders of a
majority of the Registrable Securities covered by such registration
statement, the opportunity to participate in the preparation of such
registration statement, each prospectus included therein or filed with the
SEC, and each amendment or supplement thereto, and for a reasonable period
prior to the filing of such registration statement, and throughout the
period specified in Section 3.4(b) hereof, make available for inspection by
the parties referred to in (A) through (E) above such financial and other
information and books and records of the Company, provide access to
properties of the Company and cause the officers, directors, employees,
counsel and independent certified public accountants of the Company to
respond to such inquiries as shall be reasonably necessary to conduct a
reasonable investigation within the meaning of Section 11 of the Securities
Act;
(5) advise the underwriters, if any, and Selling Holders promptly
and, if requested by such Persons, to confirm such advice in writing, (A)
when the Prospectus or any Prospectus supplement or post-effective
amendment has been filed, and, with respect to any Registration Statement
or any post-effective amendment thereto, when the same has become
effective, (B) of any request by the SEC for amendments to the Registration
Statement or amendments or supplements to the Prospectus or for additional
information relating thereto, (C) of the issuance by the SEC of any stop
order suspending the effectiveness of the Registration Statement under the
Securities Act or of the suspension by any state securities commission of
the qualification of the Registrable Securities for offering or sale in any
jurisdiction, or the initiation of any proceeding for any of the preceding
purposes, (D) of the existence of any fact or the happening of any event
that makes any statement of a material fact made in the registration
Statement, the Prospectus, any amendment or supplement thereto, or any
document incorporated by reference therein untrue, or that requires the
making of any additions to or changes in the Registration Statement or the
Prospectus in order to make the statements therein not misleading. If at
any time the SEC shall issue any stop order suspending the effectiveness of
the Registration Statement, or any state securities commission or other
regulatory authority shall issue an order suspending the qualification or
exemption from qualification of the Registrable Securities under state
securities or Blue Sky laws, the Company shall use its best efforts to
obtain the withdrawal or lifting of such order at the earliest possible
time;
(6) furnish to each Selling Holder named in any Registration
Statement or Prospectus and each of the underwriter(s) in connection with
such sale, if any, such number of copies of any Registration Statement or
Prospectus included therein or any amendments or supplements to any such
Registration Statement or Prospectus (including all documents incorporated
by reference after the initial filing of
8
<PAGE>
such Registration Statement and all exhibits filed therewith), reasonably
requested by such Person;
(7) if requested by any selling Holders or the underwriter(s) in
connection with such sale, if any, promptly include in any Registration
Statement or Prospectus, pursuant to a supplement or post-effective
amendment if necessary, such information as such selling Holders and such
underwriter(s), if any, may reasonably request to have included therein,
including, without limitation, information relating to the "Plan of
Distribution" of the Registrable Securities, information with respect to
the principal amount of Registrable Securities being sold to such
underwriter(s), the purchase price being paid therefor and any other terms
of the offering of the Registrable Securities to be sold in such offering,
and make all required filing of such Prospectus supplement or post-
effective amendment as soon as practicable after the Company is notified of
the matters to be included in such Prospectus supplement or post-effective
amendment;
(8) deliver to each Selling Holder and each of the
underwriter(s), if any, without charge, as many copies of the Prospectus
(including each preliminary prospectus) and any amendment or supplement
thereto as such Persons reasonably may request; the Company hereby consents
to the use of the Prospectus and any amendment or supplement thereto by
each of the Selling Holders and each of the underwriter(s), if any, in
connection with the offering and the sale of the Registrable Securities
covered by the Prospectus or any amendment or supplement thereto;
(9) in connection with any Underwritten Offering pursuant to a
Demand Registration, enter into an underwriting agreement with one or more
underwriters designated in accordance with this Agreement, such agreement
to be of the form, scope and substance as is customary in underwritten
offerings, and take all such other actions as are reasonably requested by
the managing underwriter(s) in order to expedite or facilitate the
disposition of such Registrable Securities and in such connection: (i) make
such representations and warranties to the underwriters in form, scope and
substance as are customarily made by issuers to underwriters in
underwritten offerings with respect to the business of the Company; (ii)
obtain opinions of counsel to the Company and updates thereof (which
counsel and opinions (in form, scope and substance) shall be reasonably
satisfactory to the managing underwriter(s)) addressed to the managing
underwriter(s) covering the matters customarily covered in opinions
requested in underwritten offerings and such other matters as may be
reasonably requested by the underwriters; (iii) obtain "comfort" letters
and updates thereof from the Company's independent certified public
accountants addressed to the underwriters, such "comfort" letters to be in
customary form and covering matters of the type customarily covered in
"comfort" letters in connection with underwritten offerings; (iv) deliver
such documents and certificates as may be reasonably requested by the
managing underwriter(s) to evidence compliance with any customary
conditions contained in the underwriting agreement or other agreement
entered into by the Company. The above shall be done at each closing under
such underwriting or similar agreement.
(10) prior to any public offering of Registrable Securities,
cooperate with the Selling Holders, the underwriter(s), if any, and their
respective counsel in
9
<PAGE>
connection with the registration and qualification of the Registrable
Securities under the securities or Blue Sky laws of such jurisdictions as
the Selling Holders or underwriter(s), if any, may request and do any and
all other acts or things necessary or advisable to enable the disposition
in such jurisdictions or the Registrable Securities covered by the
applicable Registration Statement; provided, however, that the Company
shall not be required to register or qualify as a foreign corporation where
it is not now so qualified or to take any action that would subject it to
the service of process in suits or to taxation, except as is required as a
result of the Registration Statement, in any jurisdiction where it is not
now so subject;
(11) in connection with any sale of Registrable Securities that
will result in such securities no longer being Registrable Securities,
cooperate with the Selling Holders and the underwriter(s), if any, to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold and not bearing any restrictive legends;
and to register such Registrable Securities in such denominations and such
names as the Selling Holders or the underwriter(s), if any, may request at
least two Business Days prior to such sale of Registrable Securities;
(12) if requested by the Selling Holders, provide a CUSIP number
for all Registrable Securities not later than the effective date of the
Registration Statement covering such Registrable Securities and provide the
Company's transfer agent(s) and registrar(s) for the Registrable Securities
with printed certificates for the Registrable Securities;
(13) cooperate and assist in any filings required to be made with
the NASD and in the performance of any due diligence investigation by any
underwriter (including any "qualified independent underwriter") that is
required to be retained in accordance with the rules and regulations of the
NASD, and use their best efforts to cause such Registration Statement to
become effective and approved by such governmental agencies or authorities
as may be necessary to enable the Selling Holders or underwriters, if any,
to consummate the disposition of such Registrable Securities;
(14) otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC, and make generally available to its
security holders, as soon as practicable, a consolidated earnings statement
meeting the requirements of Rule 158 under the Securities Act (which need
not be audited) covering a period of at least twelve month periods, but not
more than eighteen months, beginning with the first month of the Company's
first quarter commencing after the effective date of the Registration
Statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Securities Act; and
(15) cause all Registrable Securities covered by the Registration
Statement to be listed on each securities exchange on which securities of
the same class issued by the Company are then listed if requested by the
Selling Holders holding a majority of the Registered Securities or the
managing underwriter(s), if any.
(b) Provision by Holders of Certain Information. No Holder of
-------------------------------------------
Registrable Securities may include any of its Registrable Securities in any
Registration Statement
10
<PAGE>
pursuant to this Agreement unless and until such Holder furnishes to the Company
in writing, within 20 days after receipt of a request therefor, such information
as the Company may reasonably request specified in item 507 of Regulation S-K
under the Securities Act for use in connection with any Registration Statement
or Prospectus or preliminary Prospectus included therein. Each Holder as to
which any Registration Statement is being effected agrees to furnish promptly to
the Company all information required to be disclosed in order to make the
information previously furnished to the Company by such Holder not materially
misleading.
SECTION 3.2 REGISTRATION EXPENSES.
(a) All expenses incident to the Company's performance of or
compliance with this Section 3.2 will be paid by the Company, regardless of
whether any registration statement required hereunder becomes effective,
including, without limitation:
(1) all registration and filing fees;
(2) fees and expenses of compliance with securities or blue sky
laws (including, without limitation, reasonable fees and disbursements of
counsel for the underwriters or selling Holders in connection with blue sky
qualifications of the Registrable Securities and determination of their
eligibility for investment under the laws of such jurisdictions as the
managing underwriters or Holders of Registrable Securities being sold may
designate);
(3) printing (including, without limitation, expenses of printing
or engraving certificates for the Registrable Securities in a form eligible
for trading on the New York Stock Exchange or for deposit with the
Depository Trust Company and of printing prospectuses), messenger,
telephone and delivery expenses;
(4) reasonable fees and disbursements of counsel for the Company,
for the underwriters and for the Selling Holders (subject to the provisions
of Section 3.2(c) hereof);
(5) reasonable fees and disbursements of all independent
certified public accountants of the Company (including, without limitation,
the expenses of any special audit and "cold comfort" letters required by or
incident to such performance); and
(6) reasonable fees and disbursements of underwriters (excluding
discounts, commissions or fees of underwriters, selling brokers, dealer
managers or similar securities industry professionals relating to the
distribution of the Registrable Securities or legal expenses of any Person
other than the Company, the underwriters or the Selling Holders);
(7) fees and expenses of other Persons retained by the Company;
and
(8) fees and expenses associated with any NASD filing required to
be made in connection with the registration of the Registrable Securities,
including, if applicable, the reasonable fees and expenses of any
"qualified independent
11
<PAGE>
underwriter" (and its counsel) that is required to be retained in
accordance with the rules and regulations of the NASD;
(all such expenses being herein called "Registration Expenses").
---------------------
(b) The Company will, in any event, pay its internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expense of any annual
audit, the fees and expenses incurred in connection with the listing of the
Registrable Securities to be registered on each national securities exchange (or
other principal trading market) on which similar securities issued by the
Company are then listed, rating agency fees and the fees and expenses of any
Person, including special experts, retained by the Company.
(c) In connection with each Demand Registration or Piggyback
Registration required hereunder, the Company will reimburse the Holders of
Registrable Securities being registered pursuant to a registration statement
required hereunder for the reasonable fees and disbursements of not more than
one counsel chosen by the holders of a majority in number of such Registrable
Securities.
SECTION 3.3 PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Holder may
participate in any Underwritten Registration hereunder unless such Holder (i)
agrees to sell its Registrable Securities on the basis provided in any
underwriting arrangements approved by the Persons entitled hereunder to approve
such arrangements and (b) completes and executes all reasonable questionnaires,
powers of attorney, underwriting agreements, hold-back agreements letters and
other documents customarily required under the terms of such underwriting
arrangements. Notwithstanding the foregoing, (x) no Selling Holder shall be
required to make any representations or warranties except those which relate
solely to such Holder and its intended method of distribution, and (y) the
liability of each such Holder to any underwriter under such underwriting
agreement will be limited to liability arising from misstatements or omissions
regarding such Holder and its intended method of distribution and any such
liability shall not exceed an amount equal to the amount of net proceeds such
Holder derives from such registration; provided, however, that in an offering by
the Company in which any Holder requests to be included in a Piggyback
Registration, the Company shall use its best efforts to arrange the terms of the
offering such that the provisions set forth in clauses (x) and (y) of this
Section 3.3 are true. Nothing in this Section 3.3 shall be construed to create
any additional rights regarding the registration of Registrable Securities in
any Person otherwise than as set forth herein.
SECTION 3.4 HOLD-BACK AGREEMENTS.
(a) Restrictions on Public Distribution by Holder of Registrable
------------------------------------------------------------
Securities. Upon the written request of the managing underwriter or
- - ----------
underwriters of a Public Offering, each Holder of Registrable Securities shall
not effect any Public Distribution of such securities, or any securities
convertible into or exchangeable or exercisable for such securities, including a
sale pursuant to Rule 144 under the Securities Act (except as part of such
Public Offering), during the 14-day period prior to, and during the 90-day
period following, the offering date for each Public Offering made pursuant to
such registration statement (as identified by such underwriter or underwriters
or the Company in good faith). The foregoing provisions shall not apply to any
Holder that is prevented by applicable statute or regulation from entering into
any
12
<PAGE>
such agreement; provided, however, that any such Holder shall undertake not to
effect any Public Distribution of the class of securities covered by such
registration statement (except as part of such Underwritten Offering) during
such period unless it has provided 60 days' prior written notice of such Public
Distribution to the managing underwriter.
(b) Restrictions on Public Distribution by the Company and Others.
-------------------------------------------------------------
The Company agrees and it shall use its best efforts to cause its Affiliates
(other than Persons who are Holders hereunder) to agree: (1) not to effect any
Public Distribution of any securities being registered in accordance with
Article II hereof, or any securities convertible into or exchangeable or
exercisable for such securities, during the 14-day period prior to, and during
the 90-day period following, the offering date for each Public Offering made
pursuant to a registration statement filed under Article II hereof, if requested
in writing by the managing underwriters (except as part of such Public Offering
or pursuant to registrations in connection with mergers, acquisitions, exchange
offers, subscription offers, dividend reinvestment plans or stock options or
other employee benefit plans); and (2) to use its best efforts to cause each
Holder of its privately placed Registrable Securities that are issued by the
Company at any time on or after the date of this Agreement to agree not to
effect any Public Distribution, including a sale pursuant to Rule 144 under the
Securities Act, of any Registrable Securities during the period set forth in
clause (1) above (except as part of such Public Offering, if and to the extent
permitted).
ARTICLE IV
INDEMNIFICATION AND CONTRIBUTION
--------------------------------
SECTION 4.1 INDEMNIFICATION BY THE COMPANY. The Company agrees to
indemnify and hold harmless each Selling Holder, each person, if any, who
controls such Holder (within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act) (hereinafter referred to as a "controlling
-----------
person"), the respective officers, directors, partners, employees,
- - ------
representatives and agents of any Holder or any controlling person (each an
"Indemnified Holder"), to the fullest extent lawful, from and against any and
- - -------------------
all losses, claims, damages, liabilities, judgments, actions and expenses
(including without limitation and as incurred, reimbursement of all reasonable
costs of investigating, preparing, pursuing or defending any claim or action, or
any investigation or proceeding by any governmental agency or body, commenced or
threatened, including the reasonable fees and expenses of counsel to any
Indemnified Holder) directly or indirectly caused by, related to, based upon,
arising out of or in connection with any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement or
Prospectus (or any amendment or supplement thereto), or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as such
losses, claims, damages, liabilities or expenses are caused by an untrue
statement or omission or alleged untrue statement or omission that is made in
reliance upon and in conformity with information relating to any of the Holders
furnished in writing to the Company by any of the Holders expressly for use
therein.
SECTION 4.2 INDEMNIFICATION BY HOLDERS OF REGISTRABLE SECURITIES. Each
Selling Holder agrees, severally and not jointly, to indemnify and hold harmless
the Company and its directors, officers and any person controlling (within the
meaning of Section 15 of the
13
<PAGE>
Securities Act or Section 20 of the Exchange Act) the Company and its respective
officers, directors, partners, employees, representatives and agents of each
such person, to the same extent as the foregoing indemnity from the Company to
each of the Indemnified Holders, but only with respect to losses, claims,
damages, liabilities, judgments, actions and expenses (including without
limitation and as incurred, reimbursement of all reasonable costs of
investigating, preparing, pursuing or defending any claim or action, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, including the reasonable fees and expenses of counsel to the
Company) directly or indirectly caused by, related to, based upon, arising out
of or in connection with any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement or Prospectus (or any
amendment or supplement thereto), or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, to the extent, but only to the extent, that
such untrue statement or omission is contained in any information relating to
such Holder furnished in writing by such Holder expressly for use in any
Registration Statement or Prospectus. In case any action or proceeding shall be
brought against the Company or its directors or officers or any such controlling
person in respect of which indemnity may be sought against a Holder of
Registrable Securities, such Holder shall have the rights and duties given the
Company, and the Company or its directors or officers or such controlling person
shall have the rights and duties given to each Holder by the preceding
paragraph. Each Selling Holder also agrees to indemnify and hold harmless each
other Selling Holder or underwriters participating in the distribution on
substantially the same basis as that of the indemnification of the Company
provided in this Section 4.2. In no event shall the liability of any selling
Holder hereunder be greater in amount than the dollar amount of the proceeds
received by such Holder upon the sale of the Registrable Securities giving rise
to such indemnification obligation. The Company shall be entitled to receive
indemnities from underwriters, selling brokers, dealer managers and similar
securities industry professionals participating in the distribution, to the same
extent as provided above with respect to information so furnished in writing by
such Persons specifically for inclusion in any Registration Statement or
Prospectus.
SECTION 4.3 CONDUCT OF INDEMNIFICATION PROCEEDINGS. Any Person entitled
to indemnification hereunder (an "Indemnified Party") will (i) promptly give
-----------------
notice of any claim, action or proceeding (including any governmental or
regulatory investigation or proceeding) or the commencement of any such action
or proceeding to the Person against whom such indemnity may be sought (an
"Indemnifying Party"); provided that the failure to give such notice shall not
- - -------------------
relieve the Indemnifying Party of its obligations pursuant to this Agreement
except to the extent that such Indemnifying Party has been prejudiced in any
material respect by such failure, and (ii) permit the Indemnifying Party to
assume the defense of such claim with counsel reasonably satisfactory to such
Indemnified Party; provided that the Indemnified Party shall have the right to
employ separate counsel and participate in the defense of such claim, but the
fees and expenses of such counsel shall be at the expense of such Indemnified
Party unless (a) the Indemnifying Party has agreed to pay for such fees and
expenses, or (b) the Indemnifying Party shall have failed to assume the defense
of such claim and employ counsel reasonably satisfactory to such Indemnified
Party or (c) in the reasonable judgment of such Indemnified Party, based upon
advice of its counsel, a conflict of interest may exist between such Indemnified
Party and the Indemnifying Party with respect to such claims. If such defense is
not assumed by the Indemnifying Party, the Indemnifying Party will not be
subject to any liability for any settlement of any such claim effected without
the Indemnifying Party's prior written consent, which consent shall not be
unreasonably withheld. The
14
<PAGE>
Indemnifying Party shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying Party agrees to
indemnify and hold harmless any indemnified Party from and against any loss,
claim damage, liability or expense by reason of any settlement of any such claim
or action. No indemnifying Party shall, without the prior written consent of
each Indemnified Party, settle or compromise or consent to the entry of judgment
in or otherwise seek to terminate any pending or threatened action, claim,
litigation or proceeding in respect of which indemnification or contribution may
be sought hereunder (whether or not any indemnified party is a party thereto),
unless such settlement, compromise, consent or termination includes an
unconditional release of each indemnified party from all liability arising out
of such action, claim, litigation or proceeding. An Indemnifying Party who is
not entitled to, or elects not to, assume the defense of the claim will not be
obligated to pay the fees and expenses of more than one counsel for all parties
indemnified by such Indemnifying Party with respect to such claim, unless in the
reasonable judgement of any indemnified party a conflict of interest may exist
between such indemnified party and any other such indemnified parties with
respect to such claim, in which event the Indemnifying Party shall be obligated
to pay the fees and expenses of such additional counsel or counsels.
SECTION 4.4 CONTRIBUTION. If the indemnification provided for in this
Article IV is unavailable to an Indemnified Party (other than by reason of
exceptions provided in those Sections) in respect of any losses, claims,
damages, liabilities or expenses referred to therein, then each applicable
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall have a
joint and severable obligation to contribute to the amount paid or payable by
such Indemnified Party as a result of such losses, claims, damages, liabilities
or expenses in such proportion as is appropriate to reflect the relative fault
of the Indemnifying Party, on the one hand, and of the Indemnified Party, on the
other, in connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative fault of the Indemnifying Party, on the
one hand, and of the Indemnified Party, on the other, shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission to state a material fact relates to
information supplied by the Indemnifying Party or by the Indemnified Party and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The amount paid or payable by
a party as a result of the losses, claims, damages, liabilities and expenses
referred to above shall be deemed to include, subject to the limitations set
forth in the second paragraph of Section 4.1, any legal or other fees or
expenses reasonably incurred by such party in connection with investigating or
defending any action or claim.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 4.4 were determined by pro rata allocation
(even if the Holders were treated as one entity for such purpose) or by any
other method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages, liabilities or expenses referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 4.4, none of the Indemnified
Holders shall be required to contribute, in the aggregate, any amount in excess
of the amount by which the net proceeds received by such Holder with respect to
the
15
<PAGE>
Registrable Securities exceeds the greater of (A) the amount paid by such Holder
for its Registrable Securities and (B) the amount of any damages which such
Holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Holders' obligation to contribute pursuant to
this Section 4.4 are several in proportion to the respective number of
Registrable Securities held by each of the Holders hereunder and not joint.
For purposes of this Article IV, each controlling person of a Holder
shall have the same rights to contribution as such Holder, and each officer,
director, and person, if any, who controls the Company within the meaning of
Section 15 of the Securities Act or Section 20(a) of the Exchange Act shall have
the same rights to contribution as the Company, subject in each case to the
limitations set forth in the immediately preceding paragraph. Any party
entitled to contribution will, promptly after receipt of notice of commencement
of any action, suit or proceeding against such party in respect of which a claim
for contribution may be made against another party or parties under this Article
IV, notify such party or parties from whom contribution may be sought, but the
omission to so notify such party or parties shall not relieve the party or
parties from who contribution may be sought from any obligation it or they may
have under this Article IV or otherwise except to the extent that it has been
prejudiced in any material respect by such failure. No party shall be liable
for contribution with respect to any action or claim settled without its written
consent; provided, however, that such written consent was not unreasonably
withheld.
SECTION 4.5 ADDITIONAL INDEMNITY. The indemnity, contribution and expense
reimbursement obligations under this Article IV shall be in addition to any
liability each Indemnifying Party may otherwise have; provided, however, that
any payment made by the Company which results in an Indemnified Party receiving
from any source(s) indemnification, contribution or reimbursement for an amount
in excess of the actual loss, liability or expense incurred by such Indemnified
Party, shall be refunded to the Company by the Indemnified Party receiving such
excess payment.
ARTICLE V
MISCELLANEOUS
-------------
SECTION 5.1 RULE 144. The Company agrees it will file in a timely manner
all reports required to be filed by it pursuant to the Securities Act and the
Exchange Act and the rules and regulations adopted by the SEC thereunder and
will take such further action as any Holder of Registrable Securities may
reasonably request in order that such Holder may affect sales of Registrable
Securities without registration within the limitations of the exemptions
provided by Rule 144, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the SEC. At any reasonable time
and upon the request of a Holder of Registrable Securities, the Company will
furnish such Holder with such information as may be necessary to enable the
Holder to effect sales of Registrable Securities pursuant to Rule 144 under the
Securities Act and will deliver to such Holder a written statement as to whether
it has complied with such information and requirements.
16
<PAGE>
SECTION 5.2 SPECIFIC PERFORMANCE. Each Holder, in addition to being
entitled to exercise all rights provided herein or granted by law, including
recovery of liquidated or other damages, will be entitled to specific
performance of its rights under this Agreement. The Company agrees that
monetary damages would not be adequate compensation for any loss incurred by
reason of a breach by it of the provisions of this Agreement and hereby agrees
to waive the defense in any action for specific performance that a remedy at law
would be adequate.
SECTION 5.3 NO INCONSISTENT AGREEMENTS. The Company will not on or after
the date of this Agreement enter into any agreement with respect to its
securities that is inconsistent with the rights granted to the Holders in this
Agreement or otherwise conflicts with the provisions hereof. The Company has
not previously entered into any agreement granting any registration rights with
respect to its securities to any Person. The rights granted to the Holders
hereunder do not in any way conflict with and are not inconsistent with the
rights granted to the holders of the Company's securities under any agreement in
effect on the date hereof.
SECTION 5.4 AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to or departures from the provisions
hereof may not be given unless the Company has obtained the written consent of
Holders of a majority of the outstanding shares of Registrable Securities.
SECTION 5.5 NOTICES. Unless otherwise provided herein, any notice,
request, instruction or other document to be given hereunder by any party to the
others shall be made in writing, by hand-delivery, telegraph, telex, telecopier,
registered first-class mail or air courier guaranteeing overnight deliver as
follows:
if to the Company, to:
Wyle Electronics
15370 Barranca Parkway
Irvine, California 92718
Attention: Chief Financial Officer
if to Marshall, to:
Marshall Industries
9320 Telstar Avenue
El Monte, California 91731
Attention: Chief Financial Officer
if to any other Holder:
to the address specified by any such Holder from time-to-time;
or to such other place and with such other copies as any party hereto may
designate as to itself by written notice to the others. All such notices and
communications shall be deemed to have been duly given: at the time delivered by
hand, if personally delivered; five Business
17
<PAGE>
Days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt acknowledged, if telecopied: and on the
next Business Day if timely delivered to an air courier guaranteeing overnight
delivery.
SECTION 5.6 SUCCESSORS AND ASSIGNS. This Agreement shall inure to
the benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent holders of Registrable Securities, provided that the
Company may not assign its rights or obligations under this Agreement to any
other person or entity without the written consent of a majority of the
outstanding shares of Registrable Securities.
SECTION 5.7 COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
SECTION 5.8 HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not limit o otherwise affect the meaning
hereof.
SECTION 5.9 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of California, without regard
to the choice of law provisions thereof.
SECTION 5.10 SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
SECTION 5.11 ENTIRE AGREEMENT. This Agreement is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein with respect to the registration rights granted by the Company with
respect to the Registrable Securities. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
SECTION 5.12 PRONOUNS. Whenever the context may require, any
pronouns used herein shall be deemed also to include the corresponding neuter,
masculine or feminine forms.
SECTION 5.13 ATTORNEY'S FEES. In any action or proceeding brought to
enforce any provision of this Agreement, the successful party shall be entitled
to recover reasonable attorney's fees in addition to its costs and expenses and
any other available remedy.
SECTION 5.14 SECURITIES HELD BY THE COMPANY OR ITS SUBSIDIARIES.
Whenever the consent or approval of Holders of a specified percentage or
Registrable Securities is required hereunder, Registrable Securities held by the
Company or its Subsidiaries shall not
18
<PAGE>
be counted in determining whether such consent or approval was given by the
Holders of such required percentage.
SECTION 5.15 FURTHER ASSURANCES. Each party shall cooperate and take
such action as may be reasonably requested by another party in order to carry
out the provisions and purposes of this Agreement and the transactions
contemplated hereby.
SECTION 5.16 TERMINATION. Unless sooner terminated in accordance
with its terms or as otherwise herein provided, this Agreement shall terminate
upon the earlier to occur of (i) the mutual agreement by the parties hereto,
(ii) with respect to any Holder, such Holder ceasing to own any Registrable
Securities, (iii) the third anniversary after such time as all outstanding
Warrants have been exercised.
SECTION 5.17 REPRESENTATIONS AND WARRANTIES. The Company hereby
represents and warrants to the Holder as follows:
(a) The Company has all requisite corporate power and authority to
enter into this Agreement and, subject to any approvals referred to herein, to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of the
Company. This Agreement has been duly executed and delivered by the Company and
constitutes a valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms.
(b) The execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby will not, conflict with or
violate any provision of the Articles of Incorporation or Bylaws of the Company
or any material agreement or obligation of the Company.
(signature page follows)
19
<PAGE>
IN WITNESS HEREOF, the parties hereto have executed and delivered this
Agreement as of the date first written above.
WYLE ELECTRONICS
By:___________________________________________
Name:
Title:
MARSHALL INDUSTRIES
By:___________________________________________
Name:
Title:
S-1
<PAGE>
EXHIBIT 11
----------
WYLE ELECTRONICS
CALCULATION OF INCOME PER SHARE
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
------------------- -------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income............................ $ 8,613 $10,139 $30,729 $25,643
======= ======= ======= =======
PRIMARY
Common and common equivalent shares
Weighted average number of common
shares outstanding................ 12,650 12,347 12,593 12,296
Stock options included under the
treasury stock method (1)......... 254 379 302 317
------- ------- ------- -------
12,904 12,726 12,895 12,613
======= ======= ======= =======
Net income per share.................. $ .67 $ .80 $ 2.38 $ 2.03
======= ======= ======= =======
FULLY DILUTED (2)
Common and common equivalent shares
Weighted average number of common
shares outstanding................ 12,650 12,347 12,593 12,296
Stock options included under the
treasury stock method (1)......... 255 414 305 438
------- ------- ------- -------
12,905 12,761 12,898 12,734
======= ======= ======= =======
Net income per share.................. $ .67 $ .79 $ 2.38 $ 2.01
======= ======= ======= =======
</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.
(2) Net income per average common and common equivalent share presented on the
face of the consolidated statements of income represents primary earnings
per share. 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.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 15,994
<SECURITIES> 0
<RECEIVABLES> 176,663
<ALLOWANCES> 7,431
<INVENTORY> 208,424
<CURRENT-ASSETS> 403,295
<PP&E> 62,125
<DEPRECIATION> 25,237
<TOTAL-ASSETS> 493,167
<CURRENT-LIABILITIES> 139,558
<BONDS> 98,800
0
0
<COMMON> 97,102
<OTHER-SE> 132,746
<TOTAL-LIABILITY-AND-EQUITY> 493,167
<SALES> 928,578
<TOTAL-REVENUES> 928,578
<CGS> 758,608
<TOTAL-COSTS> 758,608
<OTHER-EXPENSES> 110,849
<LOSS-PROVISION> 2,258
<INTEREST-EXPENSE> 5,915
<INCOME-PRETAX> 50,948
<INCOME-TAX> 20,219
<INCOME-CONTINUING> 30,729
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 30,729
<EPS-PRIMARY> 2.38
<EPS-DILUTED> 0
</TABLE>
