<PAGE>
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE YEAR ENDED DECEMBER 31, 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
[LOGO OF WYLE]
WYLE ELECTRONICS
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
California 95-1779998
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>
15370 Barranca Parkway, Irvine, California 92618
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(714) 753-9953
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
<S> <C>
Common Stock New York Stock Exchange
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceeding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein and will not be contained, to
the best of registrant's knowledge, in definitive Proxy or Information
Statements incorporated by reference in Park III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting stock of the registrant held by
non-affiliates of the registrant, based on the closing price at which such stock
was sold on the New York Stock Exchange on February 28, 1997, was $483,735,044.
At February 28, 1997, the registrant has 12,693,804 shares of common
stock outstanding.
Parts I and III incorporate information by reference from the
registrant's definitive Proxy Statement filed in connection with the
registrant's 1997 Annual Meeting of Shareholders. Parts II and IV incorporate
information by reference from the registrant's Annual Report to Shareholders for
the year ended December 31, 1996.
================================================================================
<PAGE>
WYLE ELECTRONICS
PART I
ITEM 1. BUSINESS
Wyle Electronics (the "Company") is a leading international electronics
distributor marketing semiconductors and computer products, as well as providing
value-added services. These services include complex materials management
systems and engineering design for application-specific integrated circuits,
including field and programmable logic devices. Wyle Electronics was founded in
1949 and incorporated in California in 1953.
On January 2, 1996, the Company purchased all the outstanding capital stock
of Sylvan Ginsbury, Ltd., a New Jersey corporation, and certain affiliated
entities ("Ginsbury"), an international distributor of active, passive and
interconnect electronic products with operations in the United States and six
European countries.
CUSTOMERS AND MARKETS SERVED
The Company serves a broad base of customers in the computer, networking,
telecommunications, military and industrial markets. The Company believes it
offers its products and services in all major electronic products markets within
the United States, through a network of over 30 sales facilities. With the
acquisition of Ginsbury, the Company also provides products and services to
European markets from sales locations in Denmark, Finland, France, Germany,
Sweden and the United Kingdom.
PRODUCTS SOLD AND SERVICES RENDERED
The Company stocks approximately 35,000 items from over 45 electronic
component and computer product suppliers. Principal products distributed include
semiconductors and computer products. For the year ended December 31, 1996,
semiconductor and computer product sales represented approximately 70% and 30%,
respectively, of total sales.
Most manufacturers of electronic components and computer products rely on
industrial distributors to augment their own sales and marketing operations.
Distributors provide stocking, marketing, technical, design and financing
services, reducing a manufacturer's operating costs associated with stocking and
selling its products. These services also reduce the manufacturer's investment
in finished goods inventories and accounts receivable, while providing
geographically dispersed sales and delivery capabilities.
1
<PAGE>
During the year ended December 31, 1996, the Company's ten largest
suppliers, which in aggregate represented approximately 76% of its sales, were
Intel, Quantum, Digital Equipment Corporation, Altera, Motorola, Advanced Micro
Devices, Texas Instruments, LSI Logic, Actel, and Analog Devices. For the year
ended December 31, 1996, Intel, Quantum and Digital Equipment Corporation, the
Company's three largest suppliers, accounted for approximately 17%, 11% and 11%,
respectively, of its sales.
The Company focuses on providing higher complexity semiconductor products
such as user-configurable and fixed ASIC (application-specific integrated
circuit) devices. The Company distributes a full range of semiconductor
technologies, from discrete transistors through field programmable logic and
gate arrays.
The principal computer products offered by the Company include medium and
small scale multi-user systems, workstations, personal computers, motherboards
and related peripheral equipment products. The Company's peripheral equipment
products include mass storage devices, terminals, controllers, printers and
complementary software.
The Company offers various value-added services such as kitting,
autoreplenishment, and turnkey manufacturing materials management services and
semiconductor design engineering, programming and testing, as well as computer
systems integration and technical support. These value-added services are
designed to enhance the competitiveness of the Company's customers by providing
cost efficiencies through outsourcing along with the ability to introduce
products into the marketplace more quickly and efficiently. Electronic Data
Interchange (EDI) is made available to customers to expedite order processing as
a key feature of the Company's materials management services. Various types of
EDI technology solutions are available depending on a customer's specific needs.
In August 1996, the Company announced the formation of a joint venture with
Marshall Industries ("Marshall"), another distributor of electronic components
and computer products. The venture, known as Accord Contract Services LLC
("Accord"), is 50% owned by each of the Company and Marshall. Accord provides
value-added materials management services to customers of the Company and
Marshall including autoreplenishment systems, component kitting and turnkey
manufacturing solutions.
Under its kitting program, Accord provides the complete bill-of-materials
of components for a customer's product, which is inspected and packaged in
production-ready kit form to customer specifications. Completed kits are
typically shipped directly to the customer's production line or subcontractor on
a Just-in-time (JIT) basis.
Autoreplenishment systems offered by Accord provide customers the
benefit of a fully automated inventory ordering system which is initiated
electronically based on a customer's present production requirements or
forecasts. These automatic electronic order initiation programs, which transmit
directly to the Company's warehouse for same day shipment, minimize a
customer's carrying cost of inventory by providing product on a JIT basis.
2
<PAGE>
Turnkey manufacturing solutions are offered through alliances with
independent contract manufacturers. Under such arrangements, components are
supplied directly to contract manufacturers who perform assembly and test to
produce a completed product, such as a printed circuit board, to customer
specifications.
The Company's design engineers, located in the field, provide capabilities
to develop customized semiconductor products for unique customer applications.
The Company operates five IDEAL(R) (Integrated Design Engineering And Logic)
centers that provide customers with services such as programming, testing and
symbolization in a controlled environment for programmable logic devices.
Products from suppliers such as Actel, Altera, Intel, Micron Technology,
Motorola, National Semiconductor, Texas Instruments, Wafer Scale and Xicor can
be programmed and tested at these centers as required by individual customers.
The Company's System Enhancement Center, located in Phoenix, Arizona,
provides a full range of value-added services for integration of computer system
and peripheral products to a particular customer requirement. System Enhancement
Center personnel perform design engineering and all aspects of systems
integration, including systems configuration, networking and software
verification, as well as assembly and testing.
The Company's Value-Added Distribution Center ("VADC"), located in Phoenix,
Arizona, became fully operational in 1996. This high-technology facility
provides 200,000 square feet for warehousing, semiconductor programming,
computer systems integration and other value-added activities.
RELATIONSHIP WITH SUPPLIERS
The Company has distribution agreements with its component and computer
products manufacturers. Distribution agreements are nonexclusive and are
generally subject to cancellation at will or upon 30 days' notice. Although the
loss of a major supplier could significantly impact operating results, the
Company does not regard any one supplier to be essential to its operations. In
addition, the Company believes that most products currently sold are available
from other suppliers at competitive prices.
During October 1996, the Company was notified by Advanced Micro Devices
("AMD") and Philips Semiconductor that they would be terminating their
distribution agreements with the Company. AMD and Philips combined represented
approximately 7% of the Company's consolidated sales immediately prior to the
termination. The Company believes it has the opportunity to recover a
significant portion of these sales from comparable products offered by its
existing suppliers, along with incremental sales from the newly acquired lines
of National Semiconductor and Fairchild Semiconductor, which were announced in
August 1996.
3
<PAGE>
The Company's distribution agreements with suppliers generally provide,
among other things, that the Company can return inventory declared obsolete by
the manufacturer or inventory in excess of current requirements, up to a
specified percentage of the dollar amount purchased from the manufacturer and
subject to certain restrictions. Most manufacturers protect the Company against
subsequent manufacturer price reductions by issuing credits to the Company with
respect to the affected product in the Company's inventory. As part of its
value-added services, the Company purchases certain products from suppliers that
have not entered into distribution agreements with the Company. Consequently,
the Company may not receive the same level of inventory protection as that
available under its distribution agreements, particularly the ability to return
obsolete or excess inventory.
RISK FACTORS
The Company's business is subject to intense competition from
international, national, regional and local independent distributors along with
direct sales by manufacturers. The principal factors of competition are quality
of service, price, variety and availability of products carried and value-added
services capability.
The Company's business is affected by the cyclical nature of the
electronics industry and the effect of general economic and market conditions.
The electronics distribution industry is highly sensitive to fluctuating market
conditions, primarily caused by changes in the supply and demand for
semiconductors and computer products, which can dramatically affect market
prices and product availability. Accordingly, the Company's financial results
may reflect significant variations from period-to-period due to these factors.
In addition to the potential adverse impact of the above factors, the
Company cautions that its future financial results also could be negatively
affected by various other circumstances which include, but are not limited to:
loss of significant supplier franchises or material changes in supplier
distribution agreements affecting pricing, inventory obsolescence protection or
other terms; loss of significant customers; uncollectible customer accounts
receivable; inventory obsolescence and other charges related to non-franchised
product; losses due to substantial damage or destruction of major facilities and
contents; technological obsolescence of machinery, equipment and software;
increased selling and administrative expense due to changes in business
strategies, asset valuations and organizational structures; inability to
successfully access capital markets; and the affect of governmental regulations
including those relative to environmental matters.
BACKLOG
Most orders received by the Company are for short-term delivery.
Consequently, the dollar amount of unfilled orders is subject to rapid change
and represents customer orders for products for which the Company is awaiting
delivery from the manufacturer, or customer orders for products with delivery
dates scheduled as much as twelve months in advance. However, since these orders
are for products normally stocked, cancellation of an order would not have a
significant effect on the operations of the Company.
4
<PAGE>
EMPLOYEES
As of December 31, 1996, the Company employed a total of 1,600 persons.
FINANCIAL INFORMATION RELATING TO INDUSTRY SEGMENTS
The Company is engaged in the business of distribution of semiconductors
and computer products. Sales and earnings derived from outside the United States
were immaterial.
ITEM 2. PROPERTIES
At December 31, 1996, the Company had facility leases for its marketing,
inventory and distribution activities, with terms expiring from 1997 through
2005, aggregating 489,000 square feet of which approximately 93% were located in
the United States. The Company has a lease for 512,000 square feet of land in
Phoenix, Arizona, on which its Value-Added Distribution Center is located, that
expires in 2014.
The Company also occupies owned facilities within the United States
totaling approximately 315,000 square feet. The Company believes that its
facilities are in good operating condition, well-maintained and adequate for its
present needs.
ITEM 3. LEGAL PROCEEDINGS
In May 1993, Avnet, Inc. ("Avnet") and Hall-Mark Electronics Corporation
("Hall-Mark") filed a civil action against the Company and a former employee of
Hall-Mark in the Superior Court of Fulton County, Georgia, seeking injunctive
relief and monetary damages, and alleging, inter alia, that the Company
conspired with Hall-Mark employees to tortiously interfere with the employment
relations of Hall-Mark and its employees and a proposed business combination
between the plaintiffs, which combination was consummated subsequently.
Plaintiffs' motion for a preliminary injunction was denied in part by the trial
court and affirmed by the Georgia Supreme Court in December 1993. In October
1995, plaintiffs voluntarily dismissed their claims in Georgia without
prejudice.
In September 1995, Avnet refiled the same action against the Company and
certain Company employees in the Circuit Court of Hillsborough County, Florida,
which litigation is still pending. Company believes that plaintiffs' complaint
is without merit and will contest it vigorously. The Company recorded a special
charge of $1,900,000 during the third quarter of 1994, primarily for anticipated
legal expenses associated with the defense of this litigation. Although
management cannot predict the ultimate outcome with any certainty, management
believes that a result adverse to the Company in this matter is unlikely.
The Company also has other contingent liabilities arising in the ordinary
course of business. In the opinion of management, the ultimate disposition of
such matters will not materially affect the Company's results of operations or
financial position.
5
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
fourth quarter of the year ended December 31, 1996.
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS OF THE REGISTRANT
Year in which
they became
Officer Position Age an officer
- --------------------------- ------------------------- --- -------------
<S> <C> <C> <C>
Ralph L. Ozorkiewicz(1) President and Chief
Executive Officer 50 1985
Joseph A. Adamczyk Executive Vice President
and Chief Operating
Officer 53 1992
R. Van Ness Holland, Jr. Executive Vice President-
Finance and Treasurer,
Chief Financial Officer 43 1985
James N. Smith Executive Vice President 51 1995
- -----------------------------------------------------------------------------
</TABLE>
(1) Also a director of the Company.
There are no family relationships between the officers listed above. The
term of office of each executive officer is until his respective successor is
elected and has qualified, or until his death, resignation or removal. Officers
generally are elected by the Board of Directors annually at its first meeting
following the Annual Meeting of Shareholders; however, for a discussion of
employment agreements with certain executive officers of the Company, there is
hereby incorporated by reference the information appearing under the caption
"Employment Agreements" in the Company's definitive Proxy Statement for the 1997
Annual Meeting of Shareholders.
For a discussion of the background and business experience of Ralph L.
Ozorkiewicz there is hereby incorporated by reference the information appearing
under the caption "Election of Directors" in the Company's definitive Proxy
Statement for the 1997 Annual Meeting of Shareholders.
6
<PAGE>
Mr. Adamczyk was elected Executive Vice President and Chief Operating
Officer in January 1995. He served as Executive Vice President of the
Corporation and President of Electronics Marketing Group from May 1994 to
January 1995. From September 1992 to May 1994 he served as Vice President of the
Corporation and President of Electronics Marketing Group. Prior to that, he
served at the Electronics Marketing Group as Executive Vice President-Sales from
February 1990 to September1992.
Mr. Holland was elected Executive Vice President - Finance and Treasurer,
Chief Financial Officer of the Company in January 1992. He served as Senior Vice
President and Corporate Controller from June 1990 to January 1992.
Mr. Smith was elected Executive Vice President in January 1996. He served
as Senior Vice President of the Corporation and President of Liberty Contract
Services from January 1995 to January 1996 and at the Electronics Marketing
Group as Executive Vice President Operations and President of Liberty Contract
Services from September 1992 to January 1995. Prior to that, he served as Vice
President, Operations and Quality Assurance from May 1987 to September 1992.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There is hereby incorporated by reference the information appearing under
the caption "Results by Quarter and Capital Stock Information" in the Company's
Annual Report to Shareholders for the year ended December 31, 1996. The
Company's shareholders of record on February 28, 1997 totaled 1,857.
ITEM 6. SELECTED FINANCIAL DATA
There is hereby incorporated by reference the information appearing under
the caption "Selected Financial Data" in the Company's Annual Report to
Shareholders for the year ended December 31, 1996.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
There is hereby incorporated by reference the information appearing under
the caption "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in the Company's Annual Report to Shareholders for the
year ended December 31, 1996.
7
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
There is hereby incorporated by reference the information appearing in the
"Consolidated Financial Statements," "Notes to Consolidated Financial
Statements" and "Results by Quarter and Capital Stock Information" in the
Company's Annual Report to Shareholders for the year ended December 31, 1996.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
There is hereby incorporated by reference the information appearing under
the captions "Election of Directors" and "Compliance with Section 16 (a) of the
Securities Exchange Act of 1934" in the Company's definitive Proxy Statement for
the 1997 Annual Meeting of Shareholders and the information appearing under the
caption "Executive Officers of the Registrant" in Part I of this Annual Report
on Form 10-K for the year ended December 31, 1996.
ITEM ll. EXECUTIVE COMPENSATION
There is hereby incorporated by reference the information appearing under
the captions "Director Compensation" and "Executive Officers' Compensation and
Other Information" in the Company's definitive Proxy Statement for the 1997
Annual Meeting of Shareholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
There is hereby incorporated by reference the information appearing under
the caption "Security Ownership" in the Company's definitive Proxy Statement for
the 1997 Annual Meeting of Shareholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There is hereby incorporated by reference the information appearing under
the captions "Compensation Committee Interlocks and Insider Participation in
Compensation Decisions" and "Certain Transactions" in the Company's definitive
Proxy Statement for the 1997 Annual Meeting of Shareholders.
8
<PAGE>
PART IV
ITEM l4. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
a. Financial Statements
l. The following financial statements are included in the Company's Annual
Report to Shareholders for the year ended December 3l, 1996 and are hereby
incorporated by reference.
<TABLE>
<CAPTION>
Page Reference
--------------
Annual Report
--------------
<S> <C>
Consolidated Statements of Income for the years ended
December 31, 1996, 1995 and 1994........................... 17
Consolidated Balance Sheets at December 31, 1996 and 1995... 18-19
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994........................... 20
Consolidated Statements of Shareholders' Equity for the
years ended December 31, 1996, 1995 and 1994............... 21
Notes to Consolidated Financial Statements.................. 22-30
Report of Independent Public Accountants.................... 31
</TABLE>
2. Financial Statement Schedules
<TABLE>
<CAPTION>
Page Reference
--------------
Form 10-K
--------------
<S> <C>
Report of Independent Public Accountants........... 14
Schedule II Valuation and Qualifying Accounts .... 15
</TABLE>
All other schedules have been omitted since they are either not applicable
or required or the information is included in the Company's consolidated
financial statements or notes thereto.
<TABLE>
<CAPTION>
3. Exhibits
<C> <S>
3(a) Restated Articles of Incorporation of the Company dated June 16, 1986, as
amended to date. Incorporated herein by reference to Exhibit 3(a) filed with
the Company's Quarterly Report on Form 10-Q for the second quarter ended June
30, 1995
3(b) Bylaws of the Company, as amended to date. Incorporated herein by reference
to Exhibit 3(b) filed with the Company's Quarterly Report on Form 10-Q for
the third quarter ended September 30, 1995
</TABLE>
9
<PAGE>
<TABLE>
<C> <S>
4(a) Article Three of Restated Articles of Incorporation of the
Company defines the rights of holders of the Company's common
stock. Incorporated herein by reference to Exhibit 3(a)
4(b) Amended And Restated Rights Agreement between Wyle Electronics and Chemical
Bank as Rights Agent, dated February 23, 1995. Incorporated herein by reference
to Exhibit 4(c) filed with the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994
10(a) 1978 Non-Qualified Stock Option Plan, as amended, dated June 14, 1988.
Incorporated herein by reference to Exhibit 10(a) filed with the Company's
Annual Report on Form 10-K for the fiscal year ended January 31, 1989
10(b) 1982 Stock Option Plan, as amended, dated June 14, 1988. Incorporated
herein by reference to Exhibit 10(b) filed with the Company's Annual Report
on Form 10-K for the fiscal year ended January 31, 1989
10(c) 1985 Stock Option Plan, as amended, dated June 14, 1988. Incorporated herein
by reference to Exhibit 10(c) filed with the Company's Annual Report on Form
10-K for the fiscal year ended January 31, 1989
10(d) 1988 Stock Option Plan. Incorporated herein by reference to
Exhibit 10(d) filed with the Company's Annual Report on Form
10-K for the fiscal year ended January 31, 1989
10(e) 1992 Stock Incentive Plan. Incorporated herein by reference to Exhibit A to
the Company's definitive Proxy Statement dated April 28, 1992 in connection
with the 1992 Annual Meeting of Shareholders
10(f) 1995 Stock Incentive Plan. Incorporated herein by reference to Annex C to
the Company's definitive Proxy Statement dated March 28, 1995 in connection
with the 1995 Annual Meeting of Shareholders
10(g) 1993 Eligible Directors' Stock Option Plan. Incorporated herein by reference
to Exhibit A to the Company's definitive Proxy Statement dated March 28,
1994 in connection with the 1994 Annual Meeting of Shareholders
10(h) 1996 Eligible Directors' Stock Option Plan. Incorporated herein by reference
to the Company's definitive Proxy Statement dated March 28, 1997 in
connection with the 1997 Annual Meeting of Shareholders
10(i) Compensation Agreement between Frank S. Wyle and the Company dated February
10, 1981. Incorporated herein by reference to Exhibit 10(c) filed with the
Company's Annual Report on Form 10-K for the fiscal year ended January 31, 1981
10(j) Amendment to Compensation Agreement between Frank S. Wyle and the Company dated
November 16, 1989. Incorporated herein by reference to Exhibit 10(g) filed with the
Company's Annual Report on Form 10-K for the fiscal year ended January 31, 1991
10(k) Second Amendment to Compensation Agreement between Frank S. Wyle and the Company dated
December 23, 1991. Incorporated herein by reference to Exhibit 10(h) filed with the
Company's Annual Report on Form 10-K for the fiscal year ended January 31, 1992
</TABLE>
10
<PAGE>
<TABLE>
<C> <S>
10(l) Agreement between Charles M. Clough and the Company dated January 1, 1995.
Incorporated herein by reference to Exhibit 10(k) filed with the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1995
10(m) Employment Agreement between Ralph L. Ozorkiewicz and the Company dated January 1,
1995. Incorporated herein by reference to Exhibit 10(k) filed with the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1994
10(n) Employment Agreement between Joseph A. Adamczyk and the Company dated January 1, 1995.
Incorporated herein by reference to Exhibit 10(l) filed with the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1994
10(o) Employment Agreement between R. Van Ness Holland, Jr. and the Company dated January 1,
1995. Incorporated herein by reference to Exhibit 10(m) filed with the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1994
10(p) Employment Agreement between James N. Smith and the Company dated January 1,
1995. Incorporated herein by reference to Exhibit 10(n) filed with the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1994
10(q) Form of Executive Officer Employment Agreement adopted March 6, 1997 for Messrs.
Ozorkiewcz, Adamczyk, Holland and Smith
10(r) Supplemental Executive Retirement Plan, as amended to date. Incorporated
herein by reference to Exhibit 10(o) filed with the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1993
10(s) Supplemental Executive Retirement Trust Agreement between the Company and Bank of America NT & SA
(successor by merger to Security Pacific National Bank), as trustee, dated March 11, 1992.
Incorporated herein by reference to Exhibit 10(o) filed with the Company's Annual Report on Form
10-K for the fiscal year ended January 31, 1992
10(t) Supplemental Executive Retirement Agreement between Theodore M. Freedman and the Company dated
February 1, 1985, as amended to date. Incorporated herein by reference to Exhibit 10(q) filed with
the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993
10(u) Supplemental Executive Retirement Agreement between Charles M. Clough and the Company dated
February 1, 1985, as amended to date. Incorporated herein by reference to Exhibit 10(r) filed with
the Company's Annual Report on Form 10-K for the fiscal year by ended December 31, 1993
10(v) Supplemental Executive Retirement Agreement between Charles M. Clough and the Company dated
January 28, 1988, as amended to date. Incorporated herein by reference to Exhibit 10(s) filed with
the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993
10(w) Wyle Electronics Executive Deferred Compensation Plan dated July 1, 1996
10(x) Deferred Compensation Plan for Directors of Wyle Electronics. Incorporated herein by reference to
Exhibit 10(m) filed with the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 1986
</TABLE>
11
<PAGE>
<TABLE>
<C> <S>
10(y) Directors Deferred Compensation Trust Agreement between the Company and Bank of America NT & SA
(successor by merger to Security Pacific National Bank), as trustee, dated March 11, 1992. Incorporated
herein by reference to Exhibit 10(y) filed with the Company's Annual Report on Form 10-K for the fiscal
year ended January 31, 1992
10(z) Retirement Plan for Outside Directors of Wyle Electronics, as amended, dated October 1, 1996
10(aa) Form of Indemnity Agreement entered into between the Company and each of its directors and executive
officers and each of the directors and officers of its subsidiaries. Incorporated herein by
reference to Exhibit 10(e) filed with the Company's Annual Report on Form 10-K for the fiscal
year ended January 31, 1988
10(ab) Form of Indemnification Agreement entered into between the Company and each of its executive
officers and directors and each of the officers and directors of its subsidiaries. Incorporated
herein by reference to Exhibit 10(r) filed with the Company's Annual Report on Form 10-K for the
fiscal year ended January 31, 1989
10(ac) Incentive Compensation Plan for Corporate Officers of Wyle Electronics (excerpt from March 22, 1990
Board of Directors meeting minutes), as amended to date
10(ad) Agreements between the Company and Hewitt Associates for Hewitt Associates to act as consultant
under the Supplemental Executive Retirement Trust Agreement and Directors Deferred Compensation
Trust Agreement dated March 26, 1992. Incorporated herein by reference to Exhibit 10(ah) filed with
the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 1992
10(ae) Form of Restricted Stock Award Agreements, as amended. Incorporated herein by reference to Exhibit
10(ab) filed with the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995
10(af) Form of Restricted Stock Award for Officers (Related to Deferral of 1996 Incentive Compensation Award).
Incorporated herein by reference to Exhibit 4.4 to the Company's Registration Statement on Form S-8
dated November 8, 1995 in connection with the 1995 Stock Incentive Plan
10(ag) Form of Restricted Stock Award Agreement (Relating to Deferral of 1996 Incentive Compensation Award)
10(ah) Trust Agreement between the Company and The Bank of New York dated December 8, 1992 relating to the
establishment of a master trust for the Wyle Electronics retirement plan. Incorporated herein by
reference to Exhibit 10(ak) filed with the Company's Annual Report on Form 10-K for the fiscal year
ended January 31, 1993
10(ai) Second Amended and Restated Credit Agreement Dated as of December 20, 1996, among Wyle Electronics,
various Financial Institutions and Bank of America NT & SA, individually and as agent
</TABLE>
12
<PAGE>
<TABLE>
<C> <S>
10(aj) Note Purchase and Private Shelf Agreement Dated as of April 26,1996 among Wyle Electronics and The
Prudential Insurance Company of America along with Pruco Life Insurance Company
10(ak) Limited Liability Company Agreement of Accord Contract Services LLC between Wyle Electronics and
Marshall Industries dated August 8, 1996. Incorporated herein by reference to Exhibit 10(a) filed
with the Company's Quarterly Report on Form 10-Q for the third quarter ended September 30, 1996
10(al) First, Second and Third Amendments to the Limited Liability Company Agreement of Accord
Contract Services LLC between Wyle Electronics and Marshall Industries
10(am) Warrant Agreement between Wyle Electronics and Marshall Industries dated August 8,
1996. Incorporated herein by reference to Exhibit 10(b) filed with the Company's
Quarterly Report on Form 10-Q for the third quarter ended September 30, 1996
10(an) Wyle Warrant Rescission Agreement dated February 28, 1997
10(ao) Marshall Warrant Rescission Agreement dated February 28, 1997
10(ap) Standstill Agreement between Wyle Electronics and Marshall Industries dated August 8, 1996. Incorporated
herein by reference to Exhibit 10(c) filed with the Company's Quarterly Report on Form 10-Q for the
third quarter ended September 30, 1996
10(aq) Registration Rights Agreement between Wyle Electronics and Marshall Industries dated August 8, 1996.
Incorporated herein by reference to Exhibit 10(d) filed with the Company's Quarterly Report on Form 10-Q
for the third quarter ended September 30, 1996
11 Calculation of Income (Loss) Per Share
13 Financial Section of Annual Report to Shareholders for the year ended December 31, 1996.
21 Subsidiaries of the Company
23 Consent of Independent Public Accountants
27 Financial Data Schedule
</TABLE>
b. Reports on Form 8-K
None.
13
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Wyle Electronics:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements included in Wyle Electronics' Annual
Report to Shareholders incorporated by reference in this Form 10-K, and have
issued our report thereon dated February 14, 1997. Our audits were made for the
purpose of forming an opinion on those statements taken as a whole. The schedule
listed in the accompanying index is the responsibility of the Company's
management and is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic consolidated financial
statements. This schedule has been subjected to the auditing procedures applied
in the audits of the basic consolidated financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic consolidated financial statements
taken as a whole.
ARTHUR ANDERSEN LLP
Los Angeles, California
February 14, 1997
14
<PAGE>
SCHEDULE II
WYLE ELECTRONICS
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 1994, 1995 and 1996
(In Thousands)
<TABLE>
<CAPTION>
Amounts
Balance at Charged to Amounts Balance at
Beginning Costs & Written End of
of Period Expenses Off Other (1) Period
---------- ---------- -------- ------------ ----------
<S> <C> <C> <C> <C> <C>
December 31, 1994:
Allowance for
doubtful accounts $4,183 $2,143 $ (884) $ (109)(2) $5,333
========== ========== ======= ======== ==========
December 31, 1995
Allowance for
doubtful accounts $5,333 $2,794 $(2,013) $ 309 $6,423
========== ========== ======= ======== ==========
December 31, 1996
Allowance for
doubtful accounts $6,423 $3,490 $(1,595) $ 169(3) $8,487
========== ========== ======= ======== ==========
</TABLE>
- --------------
NOTES:
(1) Primarily represents changes in the amount of credit memo reserve.
(2) Includes a reduction in the allowance for doubtful accounts of $138,000
associated with trade receivables sold as part of the divestiture of the
Company's former Scientific Services & Systems business.
(3) Includes an increase in the allowance for doubtful accounts of $121,000
associated with trade receivables purchased as part of the Ginsbury
acquisition.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 28th day of
March, 1997.
WYLE ELECTRONICS
By: /s/ R. VAN NESS HOLLAND, JR.
--------------------------
R. Van Ness Holland, Jr.
Executive Vice President-
Finance and Treasurer,
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ CHARLES M. CLOUGH Chairman of the Board March 28, 1997
- --------------------------
(Charles M. Clough)
/s/ RALPH L. OZORKIEWICZ President and Chief March 28, 1997
- --------------------------- Executive Officer
(Ralph L. Ozorkiewicz)
/s/ R. VAN NESS HOLLAND, JR. Executive Vice President- March 28, 1997
- ---------------------------- Finance and Treasurer,
(R. Van Ness Holland, Jr.) Chief Financial Officer
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ MICHAEL R. CORBOY Director March 28, 1997
------------------------------
(Michael R. Corboy)
/s/ THEODORE M. FREEDMAN Director March 28, 1997
------------------------------
(Theodore M. Freedman)
/s/ JACK S. KILBY Director March 28, 1997
------------------------------
(Jack S. Kilby)
/s/ EDWARD SANDERS Director March 28, 1997
-------------------------------
(Edward Sanders)
/s/ STANLEY A. WAINER Director March 28, 1997
-------------------------------
(Stanley A. Wainer)
/s/ KIRK WEST Director March 28, 1997
-------------------------------
(Kirk West)
/s/ FRANK S. WYLE Director March 28, 1997
-------------------------------
(Frank S. Wyle)
</TABLE>
17
<PAGE>
WYLE ELECTRONICS
INDEX TO EXHIBITS FILED WITH FORM 10-K
For the Year Ended December 31, 1996
<TABLE>
<CAPTION>
Exhibits:
- ---------
<S> <C>
10(q) Form of Executive Officer Employment Agreement adopted March 6,
1997 for Messrs. Ozorkiewcz, Adamczyk, Holland and Smith
10(w) Wyle Electronics Executive Deferred Compensation Plan dated July
1, 1996
10(z) Retirement Plan for Outside Directors of Wyle Electronics, as
amended, dated October 1, 1996
10(ac) Incentive Compensation Plan for Corporate Officers of Wyle
(excerpt from March 22, 1990 Board of Directors meeting minutes),
as amended to date
10(ag) Form of Restricted Stock Award Agreement (Relating to Deferral of
1996 Incentive Compensation Award)
10(ai) Second Amended and Restated Credit Agreement Dated as of December
20, 1996, among Wyle Electronics, various Financial Institutions
and Bank of America NT & SA, individually and as agent
10(aj) Note Purchase and Private Shelf Agreement Dated as of April 26,
1996 among Wyle Electronics and The Prudential Insurance Company
of America along with Pruco Life Insurance Company
10(al) First, Second and Third Amendments to the Limited Liability
Company Agreement of Accord Contract Services LLC between Wyle
Electronics and Marshall Industries
10(an) Wyle Warrant Rescission Agreement dated February 28, 1997
10(ao) Marshall Warrant Rescission Agreement dated February 28, 1997
11 Calculation of Income (Loss) Per Share
13 Financial Section of Annual Report to Shareholders for the year
ended December 31, 1996.
21 Subsidiaries of the Company
23 Consent of Independent Public Accountants
27 Financial Data Schedule
</TABLE>
<PAGE>
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made and entered into as
of February 1, 1997 by and between _____________________________ ("Employee")
and Wyle Electronics, a California corporation (the "Company").
The parties agree as follows:
1. Employment.
-----------
1.1 Title & Duties. The Company hereby employs Employee, and Employee
--------------
hereby accepts employment, as _________________________ of the Company. Employee
shall be given duties consistent with such offices and positions. There shall be
no change in Employee's titles or duties without the mutual consent of the
Company and Employee.
1.2 Place. Employee shall not be required to perform any duties as
-----
described in section 1.1 at any place other than in the County of Orange, State
of California, except insofar as his duties shall require reasonable business
trips and/or visits to suppliers or customers or Company facilities.
2. Extent of Services; Noncompetition.
-----------------------------------
2.1 General. It is recognized that the services to be rendered by
-------
Employee are of such a nature as to be peculiarly rendered by Employee,
encompass the individual ability of Employee and cannot be measured exclusively
in terms of hours or services rendered in any particular period. Employee agrees
to devote his full time and best efforts to the performance of his duties and
exclusively to advance the interests of the Company.
2.2 Vacation. Employee shall be entitled to such vacations and other
--------
absences from work as shall be reasonably consistent with the performance of his
duties as provided in this Agreement.
2.3 Noncompetition.
---------------
(a) Employee agrees that during the term of this Agreement (as
defined in Section 3 below) he will neither directly nor indirectly
engage in a business competing with any of the businesses conducted by
the Company or any of its subsidiaries or affiliates, nor without the
prior written consent of the Board of Directors of the Company directly
or indirectly have any interest in, own, manage, operate, control, be
connected with as a stockholder, joint venturer, officer, employee,
partner or consultant, or otherwise engage, invest or participate in any
business which is competitive with any of the businesses conducted by the
1
<PAGE>
Company or by any subsidiary or affiliate of the Company; provided,
however, that nothing contained in this section 2.3 shall prevent
Employee from investing or trading in stocks, bonds, commodities,
securities, real estate or other forms of investment for his own account
and benefit (directly or indirectly), so long as such investment
activities do not significantly interfere with Employee's services to be
rendered hereunder and are consistent with the conflict of interest
provisions contained in the Company's Business Ethics Policy as it exists
from time-to-time.
(b) Employee agrees that should his or her employment by the Company
terminate for any reason, Employee (and any corporation or entity of
which he or she is then a director, officer, employee, or greater than 5%
shareholder) shall not for a period of one year after such termination:
(1) solicit for employment and then employ any employee of the
Company or any of its affiliates or subsidiaries or any person who is
an independent contractor involved in sales or manufacture of products
sold or manufactured by the Company or any of its affiliates or
subsidiaries; or
(2) make any public statement concerning the Company, any of
its affiliates or subsidiaries, or Employee's employment by the
Company unless such statement is previously approved by the Board of
Directors of the Company, except as may be required by law; or
(3) induce, attempt to induce or knowingly encourage any
Customer of the Company or any of its affiliates or subsidiaries to
divert any business or income from the Company or any of its
affiliates or subsidiaries or to stop or alter the manner in which
they are then doing business with the Company or any of its affiliates
or subsidiaries. "Customer" shall mean any individual or business firm
that was or is a customer or client of, or one that was or is a party
in a selling agreement with, or whose business was actively solicited
by, the Company or any of its affiliates or subsidiaries at any time,
regardless of whether such customer was generated, in whole or in
part, by Employee's efforts.
3. Term. The term of this Agreement (the "Term") shall commence on the date
----
hereof and shall end on the later of (a) the third (3rd) anniversary of the date
of this Agreement, or (b) three (3) years following the effective date on which
notice of non-renewal or termination of this Agreement is given to the other by
either the Employee or the Company. Thus, this
2
<PAGE>
Agreement shall be renewed automatically on a daily basis so that the
outstanding Term is always three (3) years following the effective date of any
notice of non-renewal or notice of termination given by the Company or the
Employee pursuant to Section 6.1.
4. Compensation.
-------------
4.1 Cash Compensation. The Company shall compensate Employee for
-----------------
services rendered under this Agreement in an amount of not less than Employee's
"Cash Compensation", as defined below, per year, as determined from time to time
by the Board of Directors. Employee shall be considered in the Company's annual
review of executive compensation and he shall be a participant in the Company's
executive bonus plans as may be in effect from time-to-time. All cash
compensation paid to Employee under this Agreement shall be considered for
purposes of meeting the requirement described in this paragraph, whether in the
form of annual compensation or in the form of bonuses.
"Cash Compensation" shall mean base salary $___________ plus (i) if the
applicable target(s) relating to Employee's target bonus is achieved for any
year, an amount equal to one-half (1/2) of Employee's target bonus for that
year, or (ii) if the applicable target(s) relating to Employee's target bonus is
not achieved for that year, an amount equal to the lesser of Employee's actual
bonus for that year or one-half (1/2) of Employee's target bonus for that year.
Base Salary shall be determined in the discretion of the Board of Directors.
4.2 Employee Benefits. Employee shall be entitled to receive fringe
-----------------
benefits consistent with Employee's duties and position, which benefits shall
(except as specified below) be no less than those to which he is entitled as of
the date hereof, including but not limited to all plans of life, accident and
health, salary continuation and other insurance which is or becomes generally
available to other employees, officers or executives of the Company and
participation in the Company's Retirement Plan. Employee shall be provided with
the full time use of an automobile consistent with the Company's corporate
policy on automobiles as in effect from time to time. The Company reserves the
right to modify, suspend or discontinue any and all of its fringe benefits
referred to in this Section 4.2 at any time without recourse by Employee so long
as such action is taken generally with respect to other similarly situated peer
executives and does not single out Employee.
4.3 Expenses. Employee shall be reimbursed for all expenses reasonably
--------
incurred in the furtherance of the business of the Company. Employee shall keep
complete and accurate records of all expenditures such that Employee may fully
account to the Board of Directors, if requested, or as may then be required by
the Internal Revenue Service.
3
<PAGE>
5. Confidential Information.
-------------------------
5.1 General. Employee acknowledges that during his employment by, and
-------
as a result of his relationship with, the Company he will obtain knowledge of
and gain access to information regarding the Company's business, operations,
products, proposed products, production methods, processes, customer lists,
advertising, marketing and promotional plans and materials, price lists, pricing
policies, financial information and other trade secrets, confidential
information and material proprietary to the Company or designated as being
confidential by the Company which is not generally known to non-Company
personnel, including information and material originated, discovered or
developed in whole or in part by Employee (collectively referred to herein as
"Confidential Information"). Employee agrees that during the term of this
Agreement and, to the fullest extent permitted by law, thereafter, he will, in a
fiduciary capacity for the benefit of the Company, hold all Confidential
Information strictly in confidence and will not directly or indirectly reveal,
report, disclose, publish or transfer any of such Confidential Information to
any person, firm or other entity, or utilize any of the Confidential Information
for any purpose, except in furtherance of his employment under this Agreement.
5.2 Return of Materials. Employee agrees that upon the expiration or
-------------------
earlier termination of this Agreement, he will immediately surrender and return
to the Company all lists, books, records and other Confidential Information of
the Company, or obtained in connection with the Company's business, it being
expressly acknowledged by Employee that all such items are the exclusive
property of the Company, and all other property belonging to the Company then in
the possession of Employee, and Employee shall not make or retain any copies
thereof.
6. Termination Prior to Expiration of Term. Employee's employment, and his
---------------------------------------
rights under this Agreement, may be terminated prior to the expiration of the
Term of this Agreement (as provided in section 3 hereof) only as provided in
this section 6.
6.1 Discharge or Resignation.
------------------------
(a) Employee may be discharged prior to the expiration of the term
of this Agreement (1) for "Just Cause"; or (2) upon 60 days written notice,
even if "Just Cause" does not exist.
(b) For a discharge which occurs prior to a "Change in Control," as
defined herein, "Just Cause" shall mean that the Company, acting in good
faith based upon the information then known to the Company, determines that
Employee has: (1) committed a material breach of his duties
4
<PAGE>
and responsibilities to the Company (other than as a result of incapacity due
to the Employee's disability); or (2) been convicted of a crime involving
moral turpitude; or (3) refused to perform his required duties and
responsibilities or performed them incompetently; or (4) violated any
fiduciary duty owed to the Company; or (5) taken actions which are injurious
to the Company and which involve moral turpitude or actual malice towards the
Company. For a discharge which occurs coincident with or after a "Change in
Control," "Just Cause" means (x) Employee's conviction of a crime involving
moral turpitude; or (y) actions of Employee which are injurious to the
Company and involve moral turpitude or actual malice toward the Company.
(c) Employee may resign prior to the term of this Agreement (1) for
"Good Reason"; or (2) upon 60 days written notice, even if "Good Reason" does
not exist. Regardless of whether a resignation occurs prior to, coincident
with or after a "Change in Control," "Good Reason" shall mean the material
failure by the Company to fulfill its obligations under this Agreement, to
the extent not remedied in a reasonable period of time after receipt of
written notice by the Employee specifying the material failure by the
Company. Any reduction or attempted reduction of compensation or benefits
below that required by Section 4 is deemed material. For a resignation which
occurs coincident with or following a Change in Control, "Good Reason" shall
also mean the failure by the Company or its successors to assume expressly
and agree to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if a succession had not
occurred.
(d) (1) If Employee is discharged for "Just Cause" or resigns
without "Good Reason," the Company shall not be obligated to pay the
Employee any sums of money other than all compensation and benefits due
employee as of the date of discharge or resignation and the bonus (if
any) for the period of his employment prior to the discharge or
resignation.
(2) If employee is discharged without "Just Cause" or resigns
for "Good Reason," Employee shall be entitled to the following:
(i) all compensation and benefits due Employee as of the
date of discharge or resignation and the bonus for the period of
employment prior to the discharge or resignation; plus
(ii) A lump sum payment equal to the present value of the
compensation which would be
5
<PAGE>
received by Employee (using the greater of (A) the Employee's
highest annual amount of compensation during any of the preceding
three years regardless of whether this Agreement was in force
during such year, or (B) the Employee's base salary and full target
bonus for the year in which the Employee's resignation or discharge
occurs) for the remaining Term of this Agreement. The present value
shall be determined by using the applicable federal mid-term rate,
compounded monthly, as determined under Section 1274(d) of the
Internal Revenue Code of 1986, as amended (the "Code"), or its
successor, as of the date of discharge or resignation. The entire
lump-sum amount shall be paid within 30 days of the effective date
of resignation or discharge. Employee shall have no duty to
mitigate or attempt to mitigate his damages.
(e) (1) Notwithstanding anything to the contrary in this Agreement,
payments to the Employee which constitute "parachute payments," as defined
in Section 280G of the Code, shall be limited, if necessary, so that the
maximum amount of such payments to the Employee shall be one dollar
($1.00) less than the amount which would cause the payments to the
Employee (including payments to the Employee which are not included in
this Agreement) to be subject to the excise tax imposed by Section 4999 of
the Code.
(2) Any determination that payments to the Employee must be
limited and the assumptions to be utilized in arriving at such
determination, shall be made by Arthur Andersen and Company (the
"Accounting Firm") which shall provide detailed supporting calculations
both to the Company and the Employee within 15 business days of the time
such calculation is requested by the Company or the Employee. In the event
that the Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting the Change of Control, the Employee
shall appoint another nationally recognized accounting firm to make the
determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All fees and expenses of
the Accounting Firm shall be borne solely by the Company. If the
Accounting Firm determines that payments to the Employee shall be limited,
it shall furnish the Employee with written opinion that failure to limit
the payments would result in the imposition of a tax under Section 4999 of
the Code. Any determination by the Accounting Firm shall be binding upon
the Company and the Employee. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of
6
<PAGE>
the initial determination by the Accounting Firm hereunder, it is possible
that payments to the Employee which will not have been made by the Company
should have been made ("Underpayment"). The Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit
of the Employee. In the event that any payment made to the Employee shall
be determined by the Accounting Firm to result in the imposition of any
tax under Section 4999 of the Code, the Employee shall promptly reimburse
the Company for the amount of such excess together with interest on such
amount (at the same rate as is applied to determine the present value of
payments under Section 280G or any successor thereto), from the date the
reimbursable payment was received by the Employee to the date the same is
repaid to the Company. The parties hereto acknowledge and agree that the
amount of any such reimbursement shall be deemed never paid to the
Employee.
(f) For purposes of this Agreement; a "Change of Control" shall be deemed
to have occurred if (1) any "person" (as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act
of 1934), directly or indirectly, or securities of the Company representing
30% or more of the combined voting power of the Company's then outstanding
securities; or (2) during any period of two consecutive years, individuals who
at the beginning of such period constitute the Board of Directors of the
Company (the "Board") cease for any reason to constitute at least a majority
thereof, unless the election, or the nomination for election by the Company's
shareholders, of each new Board member was approved by a vote of at least
three-fourths of the Board members then still in office who were Board members
at the beginning of such period.
7
<PAGE>
6.2 Disability. If the Company in good faith determines that the Employee
----------
has become ill or injured and such illness or injury will prevent Employee from
performing the services required under this Agreement for a period of more than
12 consecutive months on substantially a full time basis, the Company may give
Employee written notice that it intends to terminate the employment of Employee.
Such termination of employment shall become effective 30 days after receipt of
such notice by Employee, provided that, within 30 days after such receipt,
Employee shall not have returned to full time performance of his duties. If
Employee's employment is so terminated, Employee shall be entitled to receive
his full compensation and benefits until the expiration of 12 months from the
date on which he was first unable to substantially perform his duties hereunder.
6.3 Death. The death of Employee shall result in automatic termination of
-----
this Agreement, and the Company shall not be obligated to pay the estate or
personal representative of Employee any sums of money other than any and all
compensation and benefits due Employee at the date of his death and bonus for
the period of his employment prior to death.
7. Arbitration.
------------
7.1 General. Any dispute, controversy or claim arising out of or
-------
relating to this Agreement, the breach hereof or the coverage or enforceability
of this arbitration provision shall be settled by arbitration in Los Angeles
County, California, conducted in accordance with the Commercial Arbitration
Rules of the American Arbitration Association, as such rules are in effect in
Los Angeles on the date of delivery of demand for arbitration. The arbitration
of any such issue, including the determination of the amount of any damages
suffered by either party hereto by reason of the acts or omissions of the other,
shall be to the exclusion of any court of law. Notwithstanding the foregoing,
either party hereto may seek any provisional remedy in a court, including but
not limited to an action for injunctive relief or attachment, without waiving
the right to arbitration.
7.2 Procedure. There shall be three arbitrators, one to be chosen by
---------
each party at will within 10 days from the date of delivery of demand for
arbitration and the third arbitrator to be selected by the two arbitrators so
chosen. If the two arbitrators are unable to select a third arbitrator within 10
days after the last of the two arbitrators is chosen by the parties, the third
arbitrator will be designated, on application by either party, by the American
Arbitration Association. The decision of a majority of the arbitrators shall be
final and binding on both parties and their respective heirs, executors,
administrators, personal representatives, successors and assigns. The Company
shall have the burden of proving Just Cause for any
8
<PAGE>
discharge of Employee under section 6.1 hereof; for a resignation which occurs
prior to a Change in Control, the Employee shall have the burden of proving Good
Reason, and for a resignation which occur after a Change in Control, the Company
shall have the burden of proving that Good Reason did not exist. Judgment upon
any award of the arbitrators may be entered in any court having jurisdiction, or
application may be made to any such court for the judicial acceptance of the
award and for an order of enforcement.
7.3 Costs and Expenses. The Company shall pay the fees of all
------------------
arbitrators, witnesses and such other expenses as may be generated by the
arbitration, except Employee's attorneys fees, unless a majority of the
arbitrators concludes that such arbitration procedure was not instituted in good
faith by Employee. In such event the arbitrators shall be empowered to allocate
fees and assess costs and other expenses of the arbitration, except attorneys
fees, as they may deem appropriate, bearing in mind the relative financial
abilities of the parties and the respective merits of their positions.
8. Non-Assignment. This Agreement shall not be assignable nor the duties
--------------
hereunder delegable by Employee. None of the payments hereunder may be
encumbered, transferred or in any way anticipated. The Company shall not assign
this Agreement nor shall it transfer all or any substantial part of its assets
without first obtaining in conjunction with such transfer the express assumption
of the obligations hereof by the assignee or transferee.
9. Remedies. Employee acknowledges that the services he is to render under
--------
this Agreement are of a unique and special nature, the loss of which cannot
reasonably or adequately be compensated for in monetary damages, and that
irreparable injury and damage will result to the Company in the event of any
default or breach of this Agreement by Employee. Because of the unique nature
of the Confidential Information, Employee further acknowledges and agrees that
the Company will suffer irreparable harm if Employee fails to comply with his
obligations in section 5 hereof and that monetary damages would be inadequate to
compensate the Company for such breach. Accordingly, Employee agrees that the
Company will, in addition to any other remedies available to it at law, in
equity or, without limitation, otherwise, be entitled to injunctive relief
and/or specific performance to enforce the terms, or prevent or remedy the
violation, of any provisions of this Agreement. This provision shall not
constitute a waiver by the Company of any rights to damages or other remedies
which it may have pursuant to this Agreement or otherwise.
10. Survival. The provisions of sections 5, 7 and 9 shall survive the
--------
expiration or earlier termination of this Agreement.
9
<PAGE>
11. Notices. Any notices or other communications relating to this Agreement
-------
shall be in writing and delivered personally or mailed by certified mail, return
receipt requested, to the party concerned at the address set forth below:
If to Company: Wyle Electronics
15370 Barranca Parkway
Irvine, California 92618
Attn: Senior Vice President
If to Employee: At his residence address as maintained by the Company in
the regular course of its business for payroll purposes.
Either party may change the address for the giving of notices at any time by
notice given to the other party under the provisions of this section 11.
12. Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties and supersedes all prior written and oral and all
contemporaneous oral agreements (including Employee's prior Employment Agreement
with the Company dated January 1, 1995), understandings and negotiations with
respect to the subject matter hereof. This Agreement may not be changed orally,
but only by an agreement in writing signed by both parties.
13. Construction. This Agreement shall be governed under and construed in
------------
accordance with the laws of the State of California. The paragraph headings and
captions contained herein are for reference purposes and convenience only and
shall not in any way affect the meaning or interpretation of this Agreement. It
is intended by the parties that this Agreement be interpreted in accordance with
its fair and simple meaning, not for or against either party, and neither party
shall be deemed to be the drafter of this Agreement.
14. Severability. If any portion or provision of this Agreement is
------------
determined by arbitration or by a court of competent jurisdiction to be invalid,
illegal or unenforceable, the remaining portions or provisions hereof shall not
be affected.
15. Binding Effect. The rights and obligations of the parties under this
--------------
Agreement shall be binding upon and inure to the benefit of the permitted
successors, assigns, heirs, administrators, executors and personal
representatives of the parties.
10
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and
in the year first written above.
WYLE ELECTRONICS
By: ______________________________________
Stephen D. Natcher
Its: Senior Vice President
EMPLOYEE
__________________________________________
11
<PAGE>
EXHIBIT 10(w)
WYLE ELECTRONICS
EXECUTIVE DEFERRED COMPENSATION PLAN
Effective as of July 1, 1996
<PAGE>
WYLE ELECTRONICS
EXECUTIVE DEFERRED COMPENSATION PLAN
TABLE OF CONTENTS
-----------------
Page
----
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE I
TITLE AND DEFINITIONS
1.1 - Title......................................................... 2
1.2 - Definitions................................................... 2
ARTICLE II
PARTICIPATION
2.1 - Participation................................................. 6
ARTICLE III
DEFERRAL ELECTIONS
3.1 - Elections to Defer Compensation............................... 7
3.2 - Investment Elections.......................................... 8
ARTICLE IV
ACCOUNTS
4.1 - Deferral Account.............................................. 9
4.2 - Company Contribution Account.................................. 10
ARTICLE V
VESTING
5.1 - Deferral Account.............................................. 12
5.2 - Company Contribution Account.................................. 12
ARTICLE VI
DISTRIBUTIONS
6.1 - Distribution of Deferred Compensation........................ 13
6.2 - Inability to Locate Participant.............................. 15
6.3 - Payment by Trust............................................. 15
6.4 - Hardship Distributions....................................... 16
6.5 - Loans........................................................ 16
6.6 - Distributions on Disability.................................. 17
ARTICLE VII
DEATH BENEFITS
7.1 - In General.................................................... 17
7.2 - Payment of Death Benefits..................................... 17
ARTICLE VIII
ARBITRATION
8.1 - Arbitration................................................... 18
ARTICLE IX
ADMINISTRATION
9.1 - Committee.................................................... 21
9.2 - Committee Action............................................. 21
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
9.3 - Powers and Duties of the Committee........................... 22
9.4 - Construction and Interpretation.............................. 23
9.5 - Information.................................................. 23
9.6 - Compensation, Expenses and Indemnity......................... 23
9.7 - Quarterly Statements......................................... 24
ARTICLE X
MISCELLANEOUS
10.1 - Unsecured General Creditor.................................. 25
10.2 - Restriction Against Assignment.............................. 25
10.3 - Withholding................................................. 26
10.4 - Amendment, Modification, Suspension or Termination.......... 26
10.5 - Governing Law............................................... 27
10.6 - Receipt or Release.......................................... 27
10.7 - Payments on Behalf of Persons Under Incapacity.............. 27
10.8 - Headings, etc. Not Part of Agreement........................ 28
</TABLE>
ii
<PAGE>
WYLE ELECTRONICS
EXECUTIVE DEFERRED COMPENSATION PLAN
WHEREAS, Wyle Electronics (the "Company") desires to establish a deferred
compensation plan to provide supplemental retirement income benefits for a
select group of management and highly compensated employees (consisting of
corporate officers and company vice presidents) through deferrals of salary and
through the Company's contributions, effective as of July 1, 1996; and
WHEREAS, it is believed that the adoption of this plan providing for
deferred compensation at the election of each executive will be in the best
interests of the Company;
NOW, THEREFORE, it is hereby declared as follows:
<PAGE>
ARTICLE I
TITLE AND DEFINITIONS
1.1 - TITLE.
-----
This Plan shall be known as the Wyle Electronics Executive Deferred
Compensation Plan.
1.2 - DEFINITIONS.
-----------
Whenever the following words and phrases are used in this Plan, with the
first letter capitalized, they shall have the meanings specified below.
"Account" or "Accounts" shall mean a Participant's Deferral Account and/or
Company Contribution Account.
"Base Compensation" shall mean the portion of the Participant's Compensation
exclusive of bonuses and other portions of Compensation not considered by the
Company as part of base compensation.
"Beneficiary" or "Beneficiaries" shall mean the person or persons, including
a trustee, personal representative or other fiduciary, last designated in
writing by a Participant in accordance with procedures established by the
Committee to receive the benefits specified hereunder in the event of the
Participant's death. No Beneficiary designation shall become effective until it
is filed
2
<PAGE>
with the Committee. If there is no Beneficiary designation in effect, or if
there is no surviving designated Beneficiary, then the Participant's surviving
spouse shall be the Beneficiary. If there is no surviving spouse to receive any
benefits payable in accordance with the preceding sentence, the duly appointed
and currently acting personal representative of the participant's estate (which
shall include either the Participant's probate estate or living trust) shall be
the Beneficiary. In any case where there is no such personal representative of
the Participant's estate duly appointed and acting in that capacity within 90
days after the Participant's death (or such extended period as the Committee
determines is reasonably necessary to allow such personal representative to be
appointed, but not to exceed 180 days after the Participant's death), then
Beneficiary shall mean the person or persons who can verify by affidavit or
court order to the satisfaction of the Committee that they are legally entitled
to receive the benefits specified hereunder. In the event any amount is payable
under the Plan to a minor, payment shall not be made to the minor, but instead
be paid (1) to that person's living parent(s) to act as custodian, (2) if that
person's parents are then divorced, and one parent is the sole custodial parent,
to such custodial parent, or (3) if no parent of that person is then living, to
a custodian selected by the Committee to hold the funds for the minor under the
Uniform Transfers or Gifts to Minors Act in effect in the jurisdiction in which
the minor resides. If no parent is living and the Committee decides not to
select another custodian to hold the funds for the minor, then payment shall be
made to the duly appointed and
3
<PAGE>
currently acting guardian of the estate for the minor or, if no guardian of the
estate for the minor is duly appointed and currently acting within 60 days after
the date the amount becomes payable, payment shall be deposited with the court
having jurisdiction over the estate of the minor.
"Board of Directors" or "Board" shall mean the Board of Directors of the
Company.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Committee" shall mean the Committee appointed by the Board to administer
the Plan in accordance with Article IX.
"Company" shall mean Wyle Electronics, any successor corporation and each
corporation which is a member of a controlled group of corporations (within the
meaning of Section 414(b) of the Code) of which Wyle Electronics is a component
member.
"Company Contribution Account" shall mean the bookkeeping account maintained
by the Committee for each Participant that is credited with an amount equal to
the Company Contribution Amount, if any, and earnings or losses pursuant to
Section 4.2.
"Company Contribution Amount" shall equal the amount described in Section
4.2.
4
<PAGE>
"Compensation" shall mean the salary, wage paid to the Eligible Employee,
including bonuses, exclusive of expenses, subsistence allowance or any extra
payments in a Plan Year.
"Deferral Account" shall mean the bookkeeping account maintained by the
Committee for each Participant that is credited with amounts equal to (1) the
portion of the Participant's Base Compensation that he or she elects to defer,
and (2) investment gains and losses pursuant to Section 4.1.
"Disabled" or "Disability" shall mean that a Participant is disabled due to
sickness or injury which qualifies the Participant for disability payments under
the Company's long term disability plan. A Participant shall be considered
totally and permanently disabled on the date he qualifies for such long term
disability payments.
"Effective Date" shall mean July 1, 1996.
"Eligible Employee" shall mean officers and other highly compensated
employees of the Company at the Vice President level or higher who are selected
by the Committee to participate in the Plan.
"Fund" or "Funds" shall mean one or more of the investments selected by the
Committee pursuant to Section 3.2(b).
5
<PAGE>
"Investment Return" shall mean, for each Fund, an amount equal to the net
investment performance of such Fund on a given day, as determined by the
Committee.
"Participant" shall mean any Eligible Employee who elects to defer
Compensation in accordance with Section 3.1.
"Plan" shall mean the Wyle Electronic's Executive Deferred Compensation Plan
set forth herein, now in effect, or as amended from time to time.
"Plan Year" shall mean the 12 consecutive month period beginning on January
1, provided, however, that the first Plan Year shall be a short year beginning
on July 1, 1996 and ending on December 31, 1996.
"Years of Vesting Service" for any Participant shall equal the Participant's
"Years of Service" under the Wyle Electronics 401(k) Plan.
ARTICLE II
PARTICIPATION
2.1 - PARTICIPATION.
-------------
6
<PAGE>
An Eligible Employee shall become a Participant in the Plan by electing to
defer a portion of his or her Base Compensation in accordance with Section 3.1.
7
<PAGE>
ARTICLE III
DEFERRAL ELECTIONS
3.1 - ELECTIONS TO DEFER COMPENSATION.
-------------------------------
(a) Election Period. Each Eligible Employee may elect to defer Base
Compensation by filing with the Committee an election that conforms to the
requirements of this Section 3.1, on a form provided by the Committee, no later
than December 31 of the year preceding the year for which the election is to
become effective. However, for the initial Plan Year, the election is to be
made no later than June 30, 1996. Such election for the initial Plan Year will
be effective for Base Compensation earned during the period between July 1, 1996
and December 31, 1996.
(b) Deferral Percentage. The amount of Base Compensation which an Eligible
Employee may elect to defer is any percentage or dollar amount of Base
Compensation up to 25%.
(d) Duration of Deferral Election. Any deferral election made under
paragraph (a) of this Section 3.1 shall remain in effect and be irrevocable,
notwithstanding any change in the Participant's Base Compensation, for the
entire Plan Year for which it is effective. Subject to the provisions of this
Section 3.1, a Participant shall file a new election each year with the
Committee by December 31, for Base Compensation earned during the Plan Year
beginning on January 1 of the immediately following year.
8
<PAGE>
3.2 - INVESTMENT ELECTIONS.
--------------------
(a) At the time of making the deferral elections described in Section 3.1,
the Participant shall designate, in a manner prescribed by the Committee, which
of the following Funds the Participant's Accounts will be deemed to be invested
in for purposes of determining the Investment Return to be credited to those
Accounts:
1) Cash Fund
2) Bond Fund
3) Balanced Fund
4) Core U.S. Equity Fund
5) Aggressive Growth Fund
6) International Stock Fund
In making the designation pursuant to this Section 3.2, the Participant may
specify that all or any whole percentage of his Accounts be deemed to be
invested in one or more of the Funds. A Participant may change the designation
made under this Section 3.2, on any business day by filing an election on a form
provided by the Committee. Such change shall be effective as soon as
administratively feasible after such form is received by the Committee.
(b) If a Participant fails to elect a type of fund under this Section 3.2,
he or she shall be deemed to have elected the Cash Fund.
9
<PAGE>
(c) Although the Participant may designate the Funds according to paragraph
(a) above, the Committee shall select from time to time, in its sole discretion,
a commercially available mutual fund or contract representing each of the Funds
described in paragraph (a). The Investment Return of each such commercially
available mutual fund or contract shall be used to determine the amount of
earnings to be credited to Participants' Accounts under Article IV.
ARTICLE IV
ACCOUNTS
4.1 - DEFERRAL ACCOUNT.
----------------
The Committee shall establish and maintain a Deferral Account for each
Participant under the Plan. Each Participant's Deferral Account shall be
further divided into separate subaccounts ("subaccounts"), each of which
corresponds to a Fund elected by the Participant pursuant to Section 3.2(a). A
Participant's Deferral Account shall be credited as follows:
(a) As of the last day of each payroll period, the Committee shall credit
the subaccounts of the Participant's Deferral Account with an amount equal to
the Base Compensation deferred by the Participant during such payroll period in
accordance with the Participant's election under Section 3.2(a); that is, the
portion of the Participant's deferred Base Compensation that the Participant
10
<PAGE>
has elected to be deemed to be invested in a certain Fund shall be credited to
the subaccount corresponding to that Fund; and
(b) Each subaccount of a Participant's Deferral Account shall, as of each
business day, be credited with earnings and debited with losses in an amount
equal to that determined by multiplying the balance credited to such subaccount
as of the previous day by the Investment Return for the corresponding Fund
selected by the Company pursuant to Section 3.2(b).
4.2 - COMPANY CONTRIBUTION ACCOUNT.
----------------------------
The Committee shall establish and maintain a Company Contribution Account
for each Participant under the Plan. Each Participant's Company Contribution
Account shall be further divided into separate subaccounts corresponding to the
Fund elected by the Participant pursuant to Section 3.2(a). A Participant's
Company Contribution Account shall be credited as follows:
(a) As of the last day of each payroll period, the Committee shall credit
the subaccounts of the Participant's Company Contribution Account with an amount
equal to the Company Contribution Amount, if any, applicable to that
Participant; that is, the portion of the Company Contribution Amount, if any,
which the Participant elected to be deemed to be invested in a certain type of
Fund shall be credited to the corresponding subaccount. Subject to paragraph
(d) below, a Participant's Company Contribution
11
<PAGE>
Amount for any payroll period shall be equal to: (1) 50% of the Compensation
deferred by the Participant during such payroll period in accordance with the
Participant's election under Section 3.2(a), disregarding any such deferral in
excess of 6% of the Participant's Compensation for such payroll period; less (2)
any contributions that the Company made on behalf of the Participant to the
Company's 401(k) Plan for such payroll period;
(b) Each subaccount of a Participant's Company Contribution Account shall be
credited daily with earnings or losses in an amount equal to that determined by
multiplying the balance credited to such subaccount as of the previous day by
the Investment Return for the corresponding Fund selected by the Company
pursuant to Section 3.2(b);
(c) As of the last day of each month, forfeitures that occurred during such
month shall be returned to the Company for its unrestricted use; and
(d) As of the last day of the last month for each Plan Year, a Participant's
Company Contribution Amount to be credited on such date pursuant to paragraph
(a) above, shall be adjusted so that the Participant's total Company
Contribution Amounts for the payroll periods ending in the Plan Year equal: (1)
50% of the salary deferred by the Participant during the payroll periods ending
in that Plan Year, disregarding any such deferrals in excess of 6% of the
Participant's Compensation for such payroll periods ending in
12
<PAGE>
that Plan Year; less (2) any contributions that the Company made on behalf of
the Participant to the Company's 401(k) Plan for such payroll periods ending in
that Plan Year.
(e) Notwithstanding the above paragraphs of this Section 4.2, from time-to-
time and in its sole discretion, the Board may provide that additional Company
Contribution Amounts be credited to some or all Participants, according to the
terms and conditions determined by the Board.
ARTICLE V
VESTING
5.1 - DEFERRAL ACCOUNT.
----------------
A Participant's Deferral Account shall be 100% vested at all times.
5.2 - COMPANY CONTRIBUTION ACCOUNT.
----------------------------
(a) Each Participant's Company Contribution Account shall become
nonforfeitable in the following increments: (1) 25% upon the Participant's
completion of three years of vesting service, (2) an additional 25% (50% total)
upon completion of four years of vesting service, and (3) in its entirety after
the Participant's completion of five years of vesting service. Notwithstanding
the foregoing, a Participant's Company Contribution Account shall be entirely
13
<PAGE>
nonforfeitable if the Participant performed services for the Company as an
employee on or before June 30, 1994.
(b) Notwithstanding paragraph (a) of this Section 5.2, a Participant's
Company Contribution Account shall become 100% vested should: (1) the
Participant die while employed by the Company, (2) the Participant become
Disabled while employed by the Company, or (3) there occurs a "Change of
Control," as defined in the Wyle Electronics Supplemental Executive Retirement
Plan.
(c) When a Participant terminates employment, the portion of his or her
Company Contribution Account which is not vested shall immediately be forever
forfeited to the Company, and the Company shall have no obligation to the
Participant (or Beneficiary) with respect to such forfeited amount.
ARTICLE VI
DISTRIBUTIONS
6.1 - DISTRIBUTION OF DEFERRED COMPENSATION.
-------------------------------------
(a) Initial Election Period. For purposes of this Section 6.1, a
Participant's "Initial Election Period" shall mean the period ending June 30,
1996, or the 30-day period following the Eligible Employee's date of hire.
During such Initial Election Period, the Participant may elect, on the form
provided by the Committee to defer Compensation under Section 3.1, to receive
one of the optional
14
<PAGE>
forms of payment described in Section 6.1(c). If such an election is made, it
shall be effective for all subsequent years, subject to the Participant electing
a new optional form of payment pursuant to Section 6.1(c).
(b) Termination of Employment. The amount credited to a Participant's
Deferral Account and the vested portion of the amount credited to his or her
Company Contribution Account shall be paid to the Participant (or, in the case
of his or her death, Beneficiary) in the form of payment the participant elected
during his or her Initial Election Period, as described in Section 6.1(a), or
the optional form of payment elected pursuant to Section 6.1(c). If no such
elections were made, the payment shall be made in the form of a cash lump sum
payment within 90 days following the Participant's termination of employment.
(c) Optional Forms of Payment. A Participant may elect one of the following
optional forms of payment provided that his or her election is filed with the
Committee at least one year prior to his or her termination date, and provided
that such optional form of payment does not occur or commence before his or her
termination date:
(1) A lump sum payment on the date designated by the Participant in his
or her election, or
15
<PAGE>
(2) Substantially equal annual installments over five, or ten years, to
begin on a date designated by the Participant in his or her election.
If such an election is made, it shall be effective for all subsequent years,
subject to the Participant electing a new optional form of payment pursuant to
this Section 6.1(c).
(d) The unpaid portion of a Participant's Accounts shall continue to be
credited monthly with earnings pursuant to Section 4.1 of the Plan until all
amounts credited to his or her Accounts under the Plan have been distributed. If
installment payments are made under this Plan, the Committee shall adjust the
amount of the installments as it deems appropriate to take into account
investment gains or losses which occur during the period when installment
payments are made. Such adjustments shall be made so that the total payments to
the Participant equal the Participant's Accounts, adjusted for investment gains
and losses.
6.2 - INABILITY TO LOCATE PARTICIPANT.
-------------------------------
In the event that the Committee is unable to locate a Participant or
Beneficiary within two years following the date the Participant was to commence
receiving payment pursuant to Section 6.1(b), the entire amount allocated to the
Participant's Deferral Account and Company Contribution Account shall be
forfeited. If, after such forfeiture, the Participant or Beneficiary later
claims
16
<PAGE>
such benefit, such benefit shall be reinstated without interest or earnings from
the date payment was to commence in Section 6.1(b), provided that Section 6.2
shall still apply.
6.3 - PAYMENT BY TRUST.
----------------
The Company may cause the payment of benefits under this Plan to be made in
whole or in part by the Trustee of Wyle Electronics Trust Agreement for
Executive Deferred Compensation Plan (the "Trust"). The Committee shall direct
the Trustee to pay the Participant's or Beneficiary's benefit at the time and in
the amount described in Section 6.1, 6.4 or Article VII to the extent of the
amounts allocated to Participant. In the event the amounts allocated to the
Participant are not sufficient to provide the full amount of benefit payable to
the Participant, the Company shall pay for the remainder of such benefit at the
time set forth in Section 6.1.
17
<PAGE>
6.4 - HARDSHIP DISTRIBUTIONS.
----------------------
Notwithstanding anything in this Article VI, the Plan shall permit an
in-service hardship distribution, subject to the approval of the Committee, if a
Participant has a financial hardship. A hardship exists if the Participant
demonstrates to the satisfaction of the Committee that he has suffered a severe
financial hardship which is unforeseeable, and that he does not have other
assets sufficient to satisfy the financial need created by the hardship. A
hardship includes, but is not limited to, a financial hardship as defined in the
Company's 401(k) Plan. The determination of whether a Participant has suffered
a hardship shall be made by the Committee in its sole discretion. A hardship
distribution, if made, shall not exceed the lesser of: (1) the amount needed to
satisfy the hardship, as determined by the Committee; (2) the Participant's
aggregate Base Compensation deferrals under Section 3.1; or (3) the
Participant's Deferral Account.
6.5 - LOANS.
-----
There shall be no loans permitted under the Plan.
6.6 - DISTRIBUTIONS ON DISABILITY.
---------------------------
If a Participant becomes Disabled, such Participant's Account shall be
distributed pursuant to Section 6.1(b).
18
<PAGE>
ARTICLE VII
DEATH BENEFITS
7.1 - IN GENERAL.
----------
Upon the death of a Participant, and before his or her Account has been paid
in full (either in a lump sum or installment payments), his or her Beneficiary
shall receive the balance of the Participant's vested Account as of the date of
death in accordance with Section 7.2.
7.2 - PAYMENT OF DEATH BENEFITS.
-------------------------
The death benefit payable pursuant to Section 7.1 shall be paid to the
Participant's Beneficiary according to Section 6.1(b).
Notwithstanding the foregoing, the Committee may, in its sole and absolute
discretion and at the request of the Beneficiary, accelerate any such payments.
19
<PAGE>
ARTICLE VIII
ARBITRATION
8.1 - ARBITRATION.
-----------
(a) A Participant or, following the Participant's death, a Beneficiary
(collectively referred to in this section as "Claimant") may, if he desires,
submit any claim for payment under the Plan or any dispute regarding the
interpretation of the Plan to arbitration. This right to select arbitration
shall be solely that of the Claimant, and the Claimant may decide whether or not
to arbitrate in his discretion. The "right to select arbitration" does not
impose on the Claimant a requirement to submit a dispute for arbitration. The
Claimant may, in lieu of arbitration, bring an action in appropriate civil
court. The Claimant retains the right to select arbitration, even if a civil
action (including, without limitation, an action for declaratory relief) is
brought by the Company or any other fiduciary of the Plan prior to the
commencement of arbitration. If arbitration is selected by the Claimant after a
civil action concerning the Claimant's dispute has been brought by a person
other than the Claimant, the Company, the trustee of any grantor trust that
holds assets for the purpose of making benefit payments under the Plan
("Trustee"), and the Claimant shall take such actions as are necessary or
appropriate, including dismissal of the civil action, so that the arbitration
can be timely heard. Once arbitration is commenced, it may not be discontinued
without the unanimous consent of all parties to the arbitration. During the
20
<PAGE>
lifetime of the Participant only he can use the arbitration procedure set forth
in this section.
(b) Any claim for arbitration may be submitted as follows: if the Claimant
disagrees with an interpretation of the Plan by the Company or any fiduciary of
the Plan, or disagrees with the calculation of his benefit under the Plan, such
claim may be filed in writing with an arbitrator of the Claimant's choice who is
selected by the method described in the next four sentences. The first step of
the selection shall consist of the Claimant submitting in writing a list of five
potential arbitrators to the Company and to the Trustee. Each of the five
arbitrators must be either (1) a member of the National Academy of Arbitrators
located in the state of the Claimant's principal residence or (2) a retired
California Superior Court or Appellate Court judge. Within one week after
receipt of the list, the Trustee and the Company shall jointly select one of the
five arbitrators as the arbitrator of the dispute in question. If the Trustee
and Company fail to select an arbitrator in a timely manner (including failure
to select an arbitrator by reason of disagreement between the Trustee and the
Company as to the arbitrator to be selected), the Claimant then shall designate
one of the five arbitrators as the arbitrator of the dispute in question.
(c) The arbitration hearing shall be held within seven days (or as soon
thereafter as possible) after the selection of the arbitrator. No continuance
of said hearing shall be allowed without
21
<PAGE>
the mutual consent of the Claimant, the Trustee, and the Company. Absence from
or nonparticipation at the hearing by any party shall not prevent the issuance
of an award. Hearing procedures that will expedite the hearing may be ordered at
the arbitrator's discretion, and the arbitrator may close the hearing in his
sole discretion when he decides he has heard sufficient evidence to justify
issuance of an award.
(d) The arbitrator's award shall be rendered as expeditiously as possible
and in no event later than one week after the close of the hearing. In the
event the arbitrator finds that the Claimant is entitled to the benefits he
claimed, the arbitrator shall order the Company and/or the Trustee to pay such
benefits, in the amounts and at such time as the arbitrator determines. The
obligation of the Trustee to pay such benefits shall not, however, exceed the
assets of the trust, and the Company shall be jointly and severally liable for
any amount that the Trustee is ordered to pay. The award of the arbitrator
shall be final and binding on the parties. The Company shall thereupon pay the
Claimant immediately the amount that the arbitrator orders to be paid in the
manner described in the award. The award may be enforced in any appropriate
court as soon as possible after its rendition. If any action is brought to
confirm the award, no appeal shall be taken by any party from any decision
rendered in such action.
(e) If the arbitrator determines either that the Claimant is entitled
to the claimed benefits or that the claim by the Claimant
22
<PAGE>
was made in good faith, the arbitrator shall direct the Company to pay to the
Claimant, and Company agrees to pay to the Claimant in accordance with such
order, an amount equal to the Claimant's expenses in pursuing the claim,
including attorneys' fees.
23
<PAGE>
ARTICLE IX
ADMINISTRATION
9.1 - COMMITTEE.
---------
A committee shall be appointed by, and serve at the pleasure of, the Board
of Directors. The number of members comprising the Committee shall be
determined by the Board which may from time to time vary the number of members.
A member of the Committee may resign by delivering a written notice of
resignation to the Board. The Board may remove any member by delivering a
certified copy of its resolution of removal to such member. Vacancies in the
membership of the Committee shall be filled promptly by the Board.
9.2 - COMMITTEE ACTION.
----------------
The Committee shall act at meetings by affirmative vote of a majority of the
members of the Committee. Any action permitted to be taken at a meeting may be
taken without a meeting if, prior to such action, a written consent to the
action is signed by all members of the Committee and such written consent is
filed with the minutes of the proceedings of the Committee. A member of the
Committee shall not vote or act upon any matter which relates solely to himself
or herself as a Participant. The Chairman or any other member or members of the
Committee designated by the Chairman may
24
<PAGE>
execute any certificate or other written direction on behalf of the Committee.
9.3 - POWERS AND DUTIES OF THE COMMITTEE.
----------------------------------
(a) The Committee, on behalf of the Participants and their Beneficiaries,
shall enforce the Plan in accordance with its terms, shall be charged with the
general administration of the Plan, and shall have all powers necessary to
accomplish its purposes, including, but not by way of limitation, the following:
(1) To select the funds or contracts to be the Funds in accordance
with Section 3.2(b) hereof;
(2) To construe and interpret the terms and provisions of this Plan;
(3) To compute and certify to the amount and kind of benefits payable
to Participants and their Beneficiaries;
(4) To maintain all records that may be necessary for the
administration of the Plan;
(5) To provide for the disclosure of all information and the filing or
provision of all reports and statements to Participants,
Beneficiaries or governmental agencies as shall be required by
law;
(6) To make and publish such rules for the regulation of the Plan and
procedures for the administration of the
25
<PAGE>
Plan as are not inconsistent with the terms hereof; and
(7) To appoint a plan administrator or any other agent, and to
delegate to them such powers and duties in connection with the
administration of the Plan as the Committee may from time to time
prescribe.
9.4 - CONSTRUCTION AND INTERPRETATION.
-------------------------------
The Committee shall have full discretion to construe and interpret the terms
and provisions of this Plan, which interpretation or construction shall be final
and binding on all parties, including but not limited to the Company and any
Participant or Beneficiary. The Committee shall administer such terms and
provisions in a uniform and nondiscriminatory manner and in full accordance with
any and all laws applicable to the Plan.
9.5 - INFORMATION.
-----------
To enable the Committee to perform its functions, the Company shall supply
full and timely information to the Committee on all matters relating to the
Compensation of all Participants, their death, Disability, or other cause of
termination, and such other pertinent facts as the Committee may require.
26
<PAGE>
9.6 - COMPENSATION, EXPENSES AND INDEMNITY.
------------------------------------
(a) The Committee is authorized at the expense of the Company to employ such
legal counsel as it may deem advisable to assist in the performance of its
duties hereunder. Expenses and fees in connection with the administration of
the Plan shall be paid by the Company.
(b) To the extent permitted by applicable state law, the Company shall
indemnify and save harmless the Committee and each member thereof, the Board of
Directors and any delegate of the Committee who is an employee of the Company
against any and all expenses, liabilities and claims, including legal fees to
defend against such liabilities and claims arising out of their discharge in
good faith of responsibilities under or incident to the Plan, other than
expenses and liabilities arising out of willful misconduct. This indemnity
shall not preclude such further indemnities as may be available under insurance
purchased by the Company or provided by the Company under any bylaw, agreement
or otherwise, as such indemnities are permitted under state law.
9.7 - QUARTERLY STATEMENTS.
--------------------
Under procedures established by the Committee, a Participant shall receive a
statement with respect to such Participant's Accounts on a quarterly basis as of
each March 31, June 30, September 30 and December 31.
27
<PAGE>
ARTICLE X
MISCELLANEOUS
10.1 - UNSECURED GENERAL CREDITOR.
--------------------------
Participants and their Beneficiaries, heirs, successors, and assigns shall
have no legal or equitable rights, claims, or interest in any specific property
or assets of the Company. No assets of the Company shall be held under any
trust, or held in any way as collateral security for the fulfilling of the
obligations of the Company under this Plan. Any and all of the Company's assets
shall be, and remain, the general unpledged, unrestricted assets of the Company.
The Company's obligation under the Plan shall be merely that of an unfunded and
unsecured promise of the Company to pay money in the future, and the rights of
the Participants and Beneficiaries shall be no greater than those of unsecured
general creditors.
10.2 - RESTRICTION AGAINST ASSIGNMENT.
------------------------------
The Company shall pay all amounts payable hereunder only to the person or
persons designated by the Plan and not to any other person or corporation. No
part of a Participant's Accounts shall be liable for the debts, contracts, or
engagements of any Participant, his or her Beneficiary, or successors in
interest, nor shall a Participant's Accounts be subject to execution by levy,
attachment, or garnishment or by any other legal or equitable proceeding, nor
28
<PAGE>
shall any such person have any right to alienate, anticipate, commute, pledge,
encumber, or assign any benefits or payments hereunder in any manner whatsoever.
If any Participant, Beneficiary or successor in interest is adjudicated bankrupt
or purports to anticipate, alienate, sell, transfer, assign, pledge, encumber or
charge any distribution or payment from the Plan, voluntarily or involuntarily,
the Committee, in its discretion, may cancel such distribution or payment (or
any part thereof) to or for the benefit of such Participant, Beneficiary or
successor in interest in such manner as the Committee shall direct.
10.3 - WITHHOLDING.
-----------
There shall be deducted from each payment made under the Plan or any other
compensation payable to the Participant (or Beneficiary) all taxes which are
required to be withheld by the Company in respect to such payment or this Plan.
The Company shall have the right to reduce any payment (or compensation) by the
amount of cash sufficient to provide the amount of said taxes.
10.4 - AMENDMENT, MODIFICATION, SUSPENSION OR TERMINATION.
--------------------------------------------------
The Company may amend, modify, suspend or terminate the Plan in whole or in
part, except that (a) no amendment, modification, suspension or termination
shall have any retroactive effect to reduce any amounts allocated to a
Participant's Accounts, and (b) Section 8.1 may not be amended with respect to
any Participant or
29
<PAGE>
Beneficiary following the date the Participant or Beneficiary makes a claim for
benefits under the Plan. In the event that this Plan is terminated, the amounts
credited to a Participant's Accounts (including any previously unvested amounts)
shall be distributed to the Participant or, in the event of his or her death,
his or her Beneficiary in a lump sum within thirty (30) days following the date
of termination.
10.5 - GOVERNING LAW.
-------------
This Plan shall be construed, governed and administered in accordance with
the laws of the State of California.
10.6 - RECEIPT OR RELEASE.
------------------
Any payment to a Participant or the Participant's Beneficiary in accordance
with the provisions of the Plan shall, to the extent thereof, be in full
satisfaction of all claims against the Committee, the Company and the Trustee.
The Committee may require such Participant or Beneficiary, as a condition
precedent to such payment, to execute a receipt and release to such effect.
30
<PAGE>
10.7 - PAYMENTS ON BEHALF OF PERSONS UNDER INCAPACITY.
----------------------------------------------
In the event that any amount becomes payable under the Plan to a person who,
in the sole judgement of the Committee, is considered by reason of physical or
mental condition to be unable to give a valid receipt therefore, the Committee
may direct that such payment be made to any person found by the Committee, in
its sole judgement, to have assumed the care of such person. Any payment made
pursuant to such determination shall constitute a full release and discharge of
the Committee and the Company.
10.8 - HEADINGS, ETC. NOT PART OF AGREEMENT.
------------------------------------
Headings and subheadings in this Plan are inserted for convenience of
reference only and are not to be considered in the construction of the
provisions hereof.
31
<PAGE>
IN WITNESS WHEREOF, the Company has caused this document to be executed by
its duly authorized officer on this 20th day of June, 1996.
WYLE ELECTRONICS
BY: /s/ Stephen D. Natcher
- --------------------------------------
ITS: Senior Vice President
- --------------------------------------
32
<PAGE>
EXHIBIT 10(z)
RETIREMENT PLAN
FOR OUTSIDE DIRECTORS OF WYLE ELECTRONICS
(as amended effective October 1, 1996)
1. Establishment of Plan.
----------------------
There is hereby established for the benefit of the directors of Wyle
Electronics (the "Company") who are not employees of the Company (the "Outside
Directors") an unfunded plan of deferred compensation to be known as the
"Outside Directors Retirement Plan" (the "Plan").
2. Effective Date.
---------------
This plan shall be effective as of June 10, 1986 (the "Effective
Date").
3. Eligibility and Participation.
------------------------------
(a) All retired Outside Directors and all Outside Directors who served
on the Board of Directors of the Company (the "Board") on October 1, 1996 shall
be eligible and shall remain participants in this Plan ("Participants"). Any
Outside Director appointed or elected to the Board after October 1, 1996 shall
not be eligible and shall not become a Participant in this Plan.
(b) A copy of this Plan shall be given to all Participants.
(c) A Participant shall cease to be a Participant upon the earlier of
(i) the payment of the total amount of the Participant's vested Accrued Benefit
under Section 5; (ii) the payment of the total amount payable to the Participant
under Section 11; (iii) the Participant's death; or (iv) the date the
Participant ceases to be director of the Company if on such date the Participant
is not 100% vested in his or her Accrued Benefit.
1
<PAGE>
4. Accrued Benefit and Vesting.
----------------------------
(a) The "Accrued Benefit" of a Participant as of any date is the
Participant's Normal Retirement Benefit.
(b) The Accrued Benefit of a Participant shall vest only in accordance
with the following schedule:
Consecutive 12-Month
Periods of Service as Vested Percentage
an Outside Director of Accrued Benefit
---------------------- -------------------
Less than five None
Five or more 100%
5. Benefits.
--------
(a) Normal Retirement Benefit. Commencing upon a Participant's Normal
-------------------------
Retirement Date (as defined in Paragraph (b) of this Section 5), and except as
provided in Paragraph (d) of this Section 5, the Company shall pay a Participant
while living an annual benefit (the "Normal Retirement Benefit") in the amount
equal to 100% of the Outside Director retainer in effect at the time of the
Participant's Normal Retirement Date, for the lesser of 10 years or the number
of years equal to the number of consecutive 12-month periods (including periods
prior to the effective date of this Plan) the Participant served as an Outside
Director of the Company.
(b) Normal Retirement Date. A Participant shall have reached the
----------------------
"Normal Retirement Date" upon the later of (1) the date the Participant attains
age 65 or (ii) the date the Participant actually retires from the Board, i.e.,
the date the Participant ceases to be a director (other than a "Director
Emeritus") of the Company.
2
<PAGE>
(c) Payment of Normal Retirement Benefit. The Normal Retirement
------------------------------------
Benefit payable in the year a Participant reaches the Normal Retirement Date
shall be pro rated for that portion of the Company's current fiscal year after
the Participant reaches the Normal Retirement Date. Such pro rated benefit shall
be due within 30 days after the Participant reaches the Normal Retirement Date.
Thereafter, the Normal Retirement Benefit shall be due on February 1 of each
succeeding year.
(d) Cessation Upon Death. Upon the death of a Participant, all Normal
--------------------
Retirement Benefits payable hereunder after the date of death shall cease;
provided, however, that the estate of the deceased Outside Director shall remain
entitled to any Normal Retirement Benefits paid (or due but not yet paid) prior
to the date of death.
(e) Increase in Normal Retirement Benefit. In the event that the Plan
-------------------------------------
is amended to increase the amount of the Normal Retirement Benefit, such
increase for Participants currently receiving payments under the Plan shall be
prospective only.
6. Accounting.
----------
No fund or escrow deposit shall be established for any benefits payable
pursuant to this Plan, and the obligation to pay benefits hereunder shall be a
general unsecured obligation of the Company. The Secretary of the Company shall
keep a record of the vested amount of the Accrued Benefit of each Participant.
Within sixty (60) days after the close of each fiscal year, the Secretary shall
furnish each Participant with a statement of the vested amount of the
Participant's then Accrued Benefit as of the last day of the preceding fiscal
year.
7. Nonalienation of Benefits.
-------------------------
3
<PAGE>
No right or benefit under this Plan shall be subject to anticipation,
alienation, sale, assignment, pledge, encumbrance or charge, and any attempt to
alienate, sell, assign, pledge, encumber of charge the same shall be void. No
right or benefit hereunder shall in any manner be liable for or subject to the
debts, contracts, liabilities or torts of the person entitled to such right or
benefit, nor shall any right or benefit be subject to attachment for legal
process.
8. Amendment or Termination of Plan.
--------------------------------
The Board may amend or terminate this Plan at any time; provided,
however, that any amendment or termination of this Plan shall not affect the
rights of ny Participant to continued payments or payments upon retirement in
accordance with Section 5 of the Participant's vested Accrued Benefit as of the
time of such amendment or termination. Thus, for example, if at the time of
amendment or termination of this Plan, a Participant has served as an Outside
Director for 10 years, then regardless of the Participant's age, no amendment or
termination of this Plan may affect the Participant's right to the payment of a
Normal Retirement Benefit for 10 years following the Normal Retirement Date as
provided in Section 5.
9. Administration.
--------------
This Plan shall be administered by the Board, which shall interpret the
Plan, adopt and revise rules and regulations relating to the Plan and make any
other determinations which it believes necessary or advisable for the proper
administration
4
<PAGE>
of the Plan. The interpretation and construction of the Plan or any of its
provisions by the Board shall be final.
10. Merger or Consolidation.
-----------------------
In the event of a merger or consolidation to which the Company is a
party but of which it is not the surviving corporation, the Board will make
provision in connection with such transaction for the continuance of this Plan
and the assumption of all liabilities for Accrued Benefits to which Participants
are entitled.
11. Effect of Change of Control.
----------------------------
Notwithstanding the foregoing, in the event of a Change of Control,
unless prior to the date of such Change of Control a Participant has elected in
writing by notice delivered to the Secretary of the Company that this Section 11
shall not apply with respect to such Change of Control, the rights of each
Participant in his or her Accrued Benefit shall thereupon become fully vested
and nonforfeitable notwithstanding any other provision of this Plan, and the
Company shall pay each Participant, within 10 days after the date of such Change
of Control, a lump sum cash payment in an amount equal to the present value, as
of the date of such lump sum payment, of either:
(a) If benefits are not then being paid to such Participant pursuant
to this Plan, the benefits which would but for the provisions of this Section 11
otherwise have thereafter been payable to him or her pursuant to the Plan upon
the Participant's reaching his or her Normal Retirement Date; provided, however,
that in calculating the amount of such benefits, the Participant shall be 100%
vested in his or her Accrued Benefit; and further provided, however, that in
calculating the amount of such benefits,
5
<PAGE>
the Participant shall be credited for, and the amount of benefits shall be based
on, the number of consecutive 12-month periods (including periods prior to the
effective date of this Plan) that the Participant served as an Outside Director
of the Company through the date of such Change of Control; or
(b) if benefits are then being paid to such Participant pursuant to
this Plan, the benefits which would but for the provisions of this Section 22
otherwise thereafter be payable to him or her or them pursuant to this Plan.
When such payment has been made, the Participant shall have no further
rights under this Plan. For purposes hereof (i) in determining the amount of
benefits which would have been payable or are thereafter payable pursuant to
this Plan, the 1983 Group Annuity Mortality Table shall be employed; (ii) the
present value of the benefits which would have been payable or are thereafter
payable pursuant to this Plan shall be determined by using a discount rate equal
to 100 percent of the applicable Federal Rate (determined under Section 1274(d)
of the Internal Revenue Code of 1986, as amended) for the month during which the
lump sum payment is required to be made pursuant to this Section 11, compounded
semiannually; (iii) if benefits are not then being paid to a Participant as of
the date of such Change of Control, then in employing the mortality table to
determine the amount of such Participant benefits pursuant to clause (i) above,
and in determining the present value of such amount pursuant to clause (ii)
above, it shall be assumed that the Company would have commenced the payment of
such benefits to such Participant upon the later of (x) the Participant's 65th
birthday, or (y) the date of such Change of Control; and (iv) a "Change of
Control" shall
6
<PAGE>
be deemed to have occurred if any "person" (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act
of 1934), directly or indirectly, of securities of the Company representing 35%
or more of the combined voting power of the Company's then outstanding
securities; or during any period of two consecutive years, individuals who at
the beginning of such period constitute the Board of Directors of the Company
(the "Board") cease for any reason to constitute at least a majority thereof,
unless the election, or the nomination for election by the Company's
shareholders, of each new Board member was approved by a vote of at least three-
fourths of the Board members then still in office who were Board members at the
beginning of such period.
7
<PAGE>
EXHIBIT 10(ac)
EXCERPT FROM MARCH 22, 1990
BOARD OF DIRECTORS MEETING MINUTES
Mr. Clough then introduced a proposal for incentive compensation for the
corporate officers of Wyle, based on corporate performance against established
goals. In particular, non-operating corporate officers would have part of their
bonus based on the return on equity ("ROE") of Wyle for fiscal 1991, i.e.,
actual ROE performance for fiscal 1991 would result in a predetermined factor
that would be multiplied by half of the prior year's bonus to determine the ROE
part of the fiscal 1991 bonus; the remaining bonus amount would be
discretionary.
For Messrs. Herring and Ozorkiewicz, the operating officers, their respective
operating group's RONA performance would each result in a predetermined factor
that would each be multiplied by 1/3 of the prior year's bonus to determine the
RONA and ROE portions of their fiscal 1991 bonus; the remaining bonus amounts
would be discretionary.
Mr. Irell indicated that a copy of the proposed plan had been sent to the
members of the Executive Compensation Committee and, after consideration, the
Committee recommended the plan for adoption to the Board of Directors. Mr.
Sanders also spoke in favor of the motion and added a few comments concerning
the plan. A copy of the performance goals and recommended plan is attached to
these minutes.
After further discussion among the directors, upon motion duly made, seconded
and unanimously carried, with Messrs. Clough, Freedman and Herring abstaining,
the incentive compensation plan for corporate officers of Wyle Laboratories was
adopted.
DESCRIPTION OF INCENTIVE COMPENSATION PLAN
FOR EXECUTIVE OFFICERS OF WYLE ELECTRONICS
The Company's Board of Directors has extended the plan, originally effective for
its fiscal year ended January 31, 1991, on substantially the same terms for the
fiscal years ended December 31, 1995. For the fiscal years after December 31,
1995, incentives are based solely upon financial performance against targets
based upon RONA and earnings growth established prior to the beginning of the
fiscal year. The Company believes that disclosure of specific performance
targets or criteria would place the Company at a competitive disadvantage and
may be misleading to shareholders.
1
<PAGE>
EXHIBIT 10(ag)
WYLE ELECTRONICS
RESTRICTED STOCK AWARD AGREEMENT
(RELATING TO DEFERRAL OF 1996 INCENTIVE COMPENSATION AWARD)
THIS RESTRICTED STOCK AWARD AGREEMENT ("AGREEMENT") is dated as of the
____ day of _______, 199_, between WYLE ELECTRONICS, a California corporation
(the "Corporation"), and _________________________ (the "Employee").
W I T N E S S E T H
WHEREAS, the Corporation has adopted and the shareholders of the
Corporation have approved the Wyle Electronics 1995 Stock Incentive Plan (the
"Plan");
WHEREAS, the Executive Compensation Committee of the Board has
approved the Wyle Electronics 1996 Incentive Compensation Award Program ("1996
Incentive Program") to provide for the payment of cash incentive awards to
executive officers and vice presidents in accordance with the terms of the 1996
Incentive Program;
WHEREAS, Employee has elected to defer a portion of any award
otherwise payable to Employee under the 1996 Program in the form of the
Corporation's Common Stock issued under the Plan subject to certain
restrictions;
WHEREAS, pursuant to the Employee's election and Article IV of the
Plan, the Committee has granted to the Employee a restricted stock award upon
the terms and conditions evidenced hereby, as required by the Plan;
NOW, THEREFORE, in consideration of the services rendered and to be
rendered by the Employee, the Corporation and the Employee agree to the terms
and conditions set forth herein (including the terms and conditions incorporated
by reference from the Plan).
1. Defined Terms. Capitalized terms not otherwise defined herein
-------------
shall have the meaning assigned to such terms in the Plan.
2. Election and Determination of Number of Shares of Restricted Stock.
------------------------------------------------------------------
Employee has elected to defer a portion of his 1996 Incentive Program award in
the form of restricted shares of the Corporation's Common Stock as set forth in
the Election Form attached hereto as Exhibit A, the terms of which are hereby
1
<PAGE>
incorporated by reference and made a part of this Agreement. The portion of
Employee's 1996 Incentive Program award which Employee has elected to defer in
restricted shares of the Corporation's Common Stock shall be increased by a 25%
premium. Such sum shall then be converted into whole shares of Restricted Stock
based upon the closing price of the Corporation's Common Stock on the last
trading day of the performance period under the 1996 Incentive Program ending
December 31, 1996. Amounts which would otherwise result in fractional shares
will be paid in cash on the regular payment date for awards under the 1996
Incentive Program.
3. Award and Purchase of Restricted Stock.The Corporation hereby
--------------------------------------
awards to the Employee, effective as of ___________, 19__
(the "Award Date"), the right to purchase from the Corporation and the Employee
hereby agrees to purchase __________ shares of Common Stock of the Corporation,
determined pursuant to Section 2 above. The purchase price for the shares of
Common Stock being purchased shall be $1.00 per share.
4. Consideration to Corporation. As partial consideration for
----------------------------
the issuance of Restricted Stock by the Corporation, Employee agrees to render
faithful and efficient services to the Corporation or a Subsidiary with such
duties and responsibilities as the Corporation shall from time to time
prescribe. Nothing in this Agreement or in the Plan shall confer upon Employee
any right to continue in the employ of the Corporation or any Subsidiary or
shall interfere with or restrict in any way the rights of the Corporation and
its Subsidiaries, which are hereby expressly reserved, to terminate employment
of Employee at any time for any reason, with or without cause.
5. Restrictions on Transfer. The shares of Common Stock awarded to
------------------------
the Employee pursuant to Section 3 hereof and any additional shares attributable
thereto received by the Employee as a result of any stock dividend,
recapitalization, merger, reorganization or similar event described in Section
6.2 of the Plan (collectively, the "Restricted Stock") shall be subject to the
restrictions set forth herein and may not be sold, assigned, transferred,
pledged or otherwise disposed of, or encumbered, during the applicable
Restricted Period (as defined below), except as permitted hereby. The Restricted
Period shall commence as the Award Date and shall terminate as follows:
(a) With respect to the number of shares of Restricted Stock
attributable to the Employee's 1996 Incentive Program award as described in
Section 3, exclusive of the number of shares attributable to the 25%
premium described in Section 2, (i.e., _______ shares), as follows:
----
2
<PAGE>
<TABLE>
<CAPTION>
Date Shares Become Percentage of Shares
Free From Restrictions Free From Restrictions
---------------------- ----------------------
<S> <C>
[Insert first anniversary 33-1/3%
of Award Date]
[Insert second anniversary 33-1/3%
of Award Date]
[Insert third anniversary 33-1/3%
of Award Date]
</TABLE>
(b) With respect to the number of shares of Restricted Stock
attributable to the 25% premium described in Section 2 (i.e., _________
----
shares), as follows:
<TABLE>
<CAPTION>
Date Shares Become Percentage of Shares
Free From Restrictions Free From Restrictions
---------------------- ----------------------
<S> <C>
[insert third anniversary 100%
of Award Date]
</TABLE>
6. Termination of Employment. If the Employee ceases to be employed
-------------------------
by the Corporation other than by reason of death, Total Disability, Retirement
(as defined below) or on account of a discharge by the Company without Just
Cause (as defined below), all shares of Restricted Stock which are then subject
to any restrictions set forth above, shall upon such termination of employment
be forfeited and returned to the Corporation. If the employment of the Employee
terminates by reason of death, Total Disability or Retirement (as defined
below), or if the Employee is discharged by the Company without Just Cause (as
defined below) all shares of Restricted Stock which are then subject to any
restrictions set forth above shall automatically be made free from such
restrictions. A leave of absence approved in writing by the Committee shall not
be deemed a termination of employment for purposes of this section. For
purposes of this Agreement, Employee will be considered to have terminated by
reason of Retirement if the Employee retires under the provisions of any
retirement plan of the Corporation then in effect and immediately commences to
receive benefits thereunder.
In addition, for purposes of this Agreement, "Just Cause" shall mean
prior to a Change in Control Event that the Corporation, acting in good faith
based upon the information then known to the Corporation, determines that
Employee has: (i) committed a material breach of his duties and
responsibilities to the Corporation (other than as a result of incapacity due to
the Employee's disability); or (ii) been convicted of a crime involving moral
turpitude; or (iii) refused to perform his required duties and responsibilities
or performed them incompetently; or (iv) violated any fiduciary duty owed to the
3
<PAGE>
Corporation; or (v) taken actions which are injurious to the Corporation and
which involve moral turpitude or actual malice towards the Corporation. For a
discharge which occurs coincident with or after a Change in Control Event, "Just
Cause" means (x) Employee's conviction of a crime involving moral turpitude; or
(y) actions of Employee which are injurious to the Corporation and involve moral
turpitude or actual malice toward the Corporation.
7. Stock Certificate. A stock certificate issued in respect of the
-----------------
shares of Restricted Stock issued pursuant to this Agreement shall be registered
in the name of the Employee and shall be deposited by the Employee with the
Corporation together with a stock power endorsed in blank. The Corporation
shall provide the Employee with a receipt for such stock certificate
acknowledging that the Corporation is holding such certificate pursuant to the
terms of this Agreement.
All stock certificates for shares of Restricted Stock during the
Restricted Period shall bear the following legend:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions contained in an
Agreement entered into between the registered owner and Wyle Electronics.
A copy of such Agreement is on file in the office of the Secretary of Wyle
Electronics, 15370 Barranca Parkway, Irvine, California 92718."
With regard to any shares of Restricted Stock which cease to be
subject to restrictions pursuant to Section 5, the Corporation shall, within 60
days of the date such shares cease to be subject to restrictions, transfer such
shares free of all restrictions set forth in the Plan and this Agreement to the
Employee or, in the event of such the Employee's death, to the Employee's legal
representative, heir or legatee.
8. Shareholder's Rights. Subject to the terms of this Agreement,
--------------------
during the Restricted Period, the Employee shall have, with respect to the
Restricted Stock, all rights of a shareholder of the Corporation, including the
right to vote such shares and the right to receive all regular cash dividends
paid with respect to the shares of Restricted Stock; provided, that the right to
receive regular cash dividends shall terminate immediately with respect to any
shares of Restricted Stock upon forfeiture of those shares pursuant to Section 6
of this Agreement.
9. Regulatory Compliance. The issue and sale of shares of
---------------------
Restricted Stock shall be subject to full compliance with all then applicable
requirements of law and the requirements
4
<PAGE>
of any stock exchange upon which the Common Stock of the Corporation may
be listed.
10. Withholding Tax. The Employee agrees that, in the event the
---------------
purchase of the Restricted Stock or the expiration of restrictions thereon
results in the Employee's realization of income which for federal, state or
local income tax purposes is, in the opinion of counsel for the Corporation,
subject to withholding of tax at source by the Corporation, the Employee will
pay to the Corporation an amount equal to such withholding tax (or the
Corporation may withhold such amount from the Employee's salary or from
dividends deposited with the Corporation with respect to the Restricted Stock).
11. Investment Representation. The Employee represents and agrees
-------------------------
that if the Employee purchases the Restricted Stock at a time when there is not
in effect under the Securities Act of 1933 (the "Securities Act") a registration
statement relating to the shares and there is not available for delivery a
prospectus meeting the requirements of Section 10(a)(3) of the Securities Act,
(i) the Employee will acquire the shares upon such purchase for the purpose of
investment and not with a view to their resale or distribution, (ii) that upon
such purchase, the Employee will furnish to the Corporation an investment letter
in form and substance satisfactory to the Corporation, (iii) prior to selling or
offering for sale any such shares, the Employee will furnish the Corporation
with an opinion of counsel satisfactory to it to the effect that such sale may
lawfully be made and will furnish it with such certificates as to factual
matters as it may reasonably request, and (iv) that certificates representing
such shares may be marked with an appropriate legend describing such conditions
precedent to sale or transfer.
12. Federal Income Tax Election. The Employee hereby acknowledges
---------------------------
receipt of advice that pursuant to current federal income tax laws, (i) the
Employee has 30 days in which to elect to be taxed in the current taxable year
on the difference between the amount paid, if any, for the Restricted Stock and
the Fair Market Value thereof in accordance with the provisions of Internal
Revenue Code Section 83(b) and, (ii) if no such election is made, the taxable
event will occur when the shares of Restricted Stock cease to be subject to
restriction, and the tax will be measured by the difference between the amount
paid, if any, for the Restricted Stock and the Fair Market Value of the
Restricted Stock on the date of the taxable event.
13. Notices. Any notice to be given to the Corporation under the
-------
terms of this Agreement shall be in writing and addressed to the Corporation at
its principal office located at 15370 Barranca Parkway, Irvine, California
92718, Attention: Corporation Secretary, and any notice to be given to the
Employee
5
<PAGE>
shall be addressed to him or her at the address given beneath the
Employee's signature hereto, or at such other address as either party may
hereafter designate in writing to the other party.
14. Amendment, Termination and Suspension. The amendment,
-------------------------------------
termination and suspension of the Plan shall be governed by Section 6.6 of the
Plan. The Committee with the consent of the Employee may make such
modifications of the terms and conditions of the award under this Agreement as
the Committee shall deem advisable, including, without limitation, those
adjustments described in Section 6.6(d) of the Plan.
15. General Terms. The award of Restricted Stock and this Agreement
-------------
are subject to, and the Corporation and the Employee agree to be bound by, the
provisions of the Plan that apply to the Restricted Stock, including but not
limited to Articles I, IV, VI and VII. Such provisions are incorporated herein
by this reference. The Employee acknowledges receiving a copy of the Plan and
reading its applicable provisions. Provisions of the Plan that grant
discretionary authority to the Committee shall not create any rights in the
Employee, unless such rights are expressly set forth herein.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first written above.
WYLE ELECTRONICS
By: __________________________
Title: _______________________
EMPLOYEE
______________________________
(Signature)
------------------------------
(Print Name)
______________________________
(Address)
______________________________
6
<PAGE>
(City, State, Zip Code)
______________________________
(Social Security Number)
7
<PAGE>
EXHIBIT A
---------
ELECTION FORM ATTACHED
A-1
<PAGE>
CONSENT OF SPOUSE
-----------------
In consideration of the execution of the foregoing Restricted Stock
Award Agreement by the Corporation, I, _________________, the spouse of the
Employee herein named, do hereby join with my spouse in executing the foregoing
Restricted Stock Award Agreement and do hereby agree to be bound by all of the
terms and provisions thereof and of the Plan.
DATED: _______________, 19__. ____________________________
Signature of Spouse
A-2
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
EXHIBIT 10(ai)
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
DATED AS OF DECEMBER 20, 1996
AMONG
WYLE ELECTRONICS
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
AS AGENT
AND
THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO
[Bank of America Logo]
--------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1 DEFINITIONS. . . . . . . . . . . . . . . . . . . . . 1
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . 1
1.2 Use of Defined Terms . . . . . . . . . . . . . . . . 15
1.3 Accounting Terms . . . . . . . . . . . . . . . . . . 15
1.4 Exhibits and Schedules . . . . . . . . . . . . . . . 15
SECTION 2 COMMITMENTS OF THE BANKS; TYPES OF LOANS; LETTER
OF CREDIT, BORROWING AND CONVERSION PROCEDURES . . . 16
2.1 Commitments. . . . . . . . . . . . . . . . . . . . . 16
2.1.1 Letters of Credit . . . . . . . . . . . . . . 16
2.1.2 Loans . . . . . . . . . . . . . . . . . . . . 16
2.1.3 Commitment Limits . . . . . . . . . . . . . . 17
2.2 Evidence of Indebtedness . . . . . . . . . . . . . . 17
2.2.1 Loan Accounts . . . . . . . . . . . . . . . . 17
2.2.2 Notes . . . . . . . . . . . . . . . . . . . . 17
2.2.3 Recordkeeping . . . . . . . . . . . . . . . . 17
2.3 Borrowing Procedures . . . . . . . . . . . . . . . . 18
2.4 Conversion and Continuation Procedures . . . . . . . 19
2.5 Reduction or Termination of Commitments. . . . . . . 20
2.6 Voluntary Prepayments. . . . . . . . . . . . . . . . 20
2.7 Letters of Credit. . . . . . . . . . . . . . . . . . 21
2.7.1 Letter of Credit Procedures . . . . . . . . . 21
2.7.2 Determination of Issuing Bank: Replacement
of Credit . . . . . . . . . . . . . . . . . . 22
2.7.3 Participations in Letters of Credit . . . . . 22
2.7.4 Reimbursement Obligations . . . . . . . . . . 22
2.7.5 Limitation on the Issuing Bank's
Obligations . . . . . . . . . . . . . . . . . 23
2.7.6 Reimbursement Obligations Deemed to be
Loans; Funding by Banks to an Issuing Bank. . 24
2.7.7 Letter of Credit Fees . . . . . . . . . . . . 25
2.8 Interest . . . . . . . . . . . . . . . . . . . . . . 26
2.8.1 Interest Rates. . . . . . . . . . . . . . . . 26
2.8.2 Interest Payment Dates. . . . . . . . . . . . 26
2.8.3 Setting and Notice of Eurodollar Rates. . . . 27
2.8.4 Computation of Interest . . . . . . . . . . . 27
2.9 Fees . . . . . . . . . . . . . . . . . . . . . . . . 27
2.9.1 Facility Fee. . . . . . . . . . . . . . . . . 27
2.9.2 Agent's Fee . . . . . . . . . . . . . . . . . 27
2.9.3 Interest on Fees. . . . . . . . . . . . . . . 27
2.10 Payment Instructions . . . . . . . . . . . . . . . . 27
2.11 Making of Payments . . . . . . . . . . . . . . . . . 28
2.12 Application of Certain Payments . . . . . . . . . . 28
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
2.13 Due Date Extension: Payments Due on Business
Days . . . . . . . . . . . . . . . . . . . . . . . . 29
2.14 Pro Rata Treatment . . . . . . . . . . . . . . . . . 29
2.15 Proration of Payments. . . . . . . . . . . . . . . . 29
2.16 Extension of Termination Date. . . . . . . . . . . . 30
2.17 Increase in Commitments. . . . . . . . . . . . . . . 30
SECTION 3 TAXES. YIELD PROTECTION AND ILLEGALITY . . . . . . . 31
3.1 Taxes. . . . . . . . . . . . . . . . . . . . . . . . 31
3.2 Increased Costs. . . . . . . . . . . . . . . . . . . 32
3.3 Basis for Determining Interest Rate Inadequate or
Unfair . . . . . . . . . . . . . . . . . . . . . . . 34
3.4 Changes in Law Rendering Eurodollar Loans
Unlawful . . . . . . . . . . . . . . . . . . . . . . 34
3.5 Funding Losses . . . . . . . . . . . . . . . . . . . 35
3.6 Right of Banks to Fund through Other Offices . . . . 35
3.7 Discretion of Banks as to Manner of Funding. . . . . 36
3.8 Conclusiveness of Statements; Survival of
Provisions . . . . . . . . . . . . . . . . . . . . . 36
3.9 Banks' Obligation to Mitigate. . . . . . . . . . . . 36
SECTION 4 CONDITIONS OF LENDING . . . . . . . . . . . . . . . 37
4.1 Initial Letter of Credit or Loan . . . . . . . . . . 37
4.1.1 Loan Documents. . . . . . . . . . . . . . . . 37
4.1.2 Consents, etc . . . . . . . . . . . . . . . . 37
4.1.3 Secretary's Certificate . . . . . . . . . . . 38
4.1.4 Officer's Certificate . . . . . . . . . . . . 38
4.1.5 Opinion of Counsel for the Company. . . . . . 38
4.1.6 Notice of Borrowing or Notice of
Conversion/Continuation . . . . . . . . . . . 38
4.1.7 Compliance Certificate. . . . . . . . . . . . 38
4.1.8 Other . . . . . . . . . . . . . . . . . . . . 38
4.2 All Loans and Letters of Credit . . . . . . . . . . 39
4.2.1 No Default. . . . . . . . . . . . . . . . . . 39
4.2.2 Confirmatory Certificate. . . . . . . . . . . 39
SECTION 5 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . 39
5.1 Organization, Etc. . . . . . . . . . . . . . . . . . 39
5.2 Authorization: No Conflict . . . . . . . . . . . . . 40
5.3 Validity and Binding Nature . . . . . . . . . . . . 41
5.4 Financial Information . . . . . . . . . . . . . . . 41
5.5 No Material Adverse Change; Conduct of Business . . 42
5.6 Litigation . . . . . . . . . . . . . . . . . . . 42
5.7 Ownership of Properties; Liens . . . . . . . . . 42
5.8 Subsidiaries . . . . . . . . . . . . . . . . . . . . 42
5.9 Compliance with ERISA . . . . . . . . . . . . . . . 42
5.10 Investment Company Act . . . . . . . . . . . . . . . 43
5.11 Public Utility Holding Company Act . . . . . . . . . 43
5.12 Regulation U; Other Governmental Regulation . . . . 43
5.13 Taxes. . . . . . . . . . . . . . . . . . . . . . . . 44
5.14 Solvency, etc. . . . . . . . . . . . . . . . . . . . 44
5.15 Hazardous Materials. . . . . . . . . . . . . . . . . 44
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
5.15.1 Release and Disposal. . . . . . . . . . . . 44
5.15.2 Treatment and Storage. . . . . . . . . . . . 45
5.16 Ownership . . . . . . . . . . . . . . . . . . . . . 45
5.17 Information . . . . . . . . . . . . . . . . . . . . 45
SECTION 6 AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . . . 46
6.1 Reports, Certificates and Other Information . . . . 46
6.1.1 Audit Report. . . . . . . . . . . . . . . . . 46
6.1.2 Monthly Reports; Quarterly Cash Flow
Statement . . . . . . . . . . . . . . . . . . 46
6.1.3 Compliance Certificates . . . . . . . . . . . 47
6.1.4 Reports to SEC, to the Public and to
Stockholders: Press Releases. . . . . . . . . 47
6.1.5 Notice of Default, Litigation, Material
Adverse Change. . . . . . . . . . . . . . . . 47
6.1.6 Subsidiaries. . . . . . . . . . . . . . . . . 48
6.1.7 Management Reports. . . . . . . . . . . . . . 48
6.1.8 Projections . . . . . . . . . . . . . . . . . 48
6.1.9 ERISA . . . . . . . . . . . . . . . . . . . . 48
6.1.10 Other Information . . . . . . . . . . . . . . 49
6.2 Books, Records and Inspections . . . . . . . . . . . 49
6.3 Insurance. . . . . . . . . . . . . . . . . . . . . . 50
6.4 Compliance with Laws: Payment of Taxes and
Liabilities. . . . . . . . . . . . . . . . . . . . . 50
6.5 Maintenance of Existence, Etc. . . . . . . . . . . . 50
6.6 Use of Proceeds. . . . . . . . . . . . . . . . . . . 51
6.7 Employee Benefit Plans . . . . . . . . . . . . . . . 51
6.8 Environmental Covenants. . . . . . . . . . . . . . . 51
6.8.1 Environmental Response Obligation . . . . . . 51
6.8.2 Environmental Liabilities . . . . . . . . . . 51
6.9 Material Agreements. . . . . . . . . . . . . . . . . 52
6.10 Maintenance of Properties. . . . . . . . . . . . . . 52
6.11 Subsidiary Guaranties. . . . . . . . . . . . . . . . 52
SECTION 7 NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . 52
7.1 Liens. . . . . . . . . . . . . . . . . . . . . . . . 52
7.2 Restricted Payments. . . . . . . . . . . . . . . . . 54
7.3 Mergers, Consolidations, Sales . . . . . . . . . . . 54
7.4 Modification of Nature of Business; Modification
of Organizational Documents. . . . . . . . . . . . . 55
7.5 Investments. . . . . . . . . . . . . . . . . . . . . 55
7.6 No Negative Pledge . . . . . . . . . . . . . . . . . 56
7.7 Funded Debt of Subsidiaries. . . . . . . . . . . . . 56
7.8 Capital Expenditures . . . . . . . . . . . . . . . . 56
7.9 Financial Covenants. . . . . . . . . . . . . . . . . 57
7.9.1 Minimum Tangible Net Worth. . . . . . . . . . 57
7.9.2 Maximum Leverage. . . . . . . . . . . . . . . 57
7.9.3 Minimum Fixed Charge Coverage . . . . . . . . 57
7.9.4 Current Ratio . . . . . . . . . . . . . . . . 57
SECTION 8 EVENTS OF DEFAULT AND THEIR EFFECT . . . . . . . . . 57
8.1 Events of Default. . . . . . . . . . . . . . . . . . 57
</TABLE>
-iii-
<PAGE>
<TABLE>
<S> <C>
8.1.1 Non-Payment of the Loans, etc. . . . . . . . 58
8.1.2 Non-Payment of Other Debt . . . . . . . . . 58
8.1.3 Bankruptcy, Insolvency, etc. . . . . . . . . 58
8.1.4 Non-Compliance with Provisions of This
Agreement or Any Other Loan Document . . . . 58
8.1.5 Warranties . . . . . . . . . . . . . . . . . 59
8.1.6 ERISA. . . . . . . . . . . . . . . . . . . . 59
8.1.7 Judgments . . . . . . . . . . . . . . . . . 60
8.1.8 Guaranties . . . . . . . . . . . . . . . . . 60
8.1.9 Change of Control . . . . . . . . . . . . . 60
8.2 Effect of Event of Default . . . . . . . . . . . . 60
SECTION 9 THE AGENT . . . . . . . . . . . . . . . . . . . . . 61
9.1 Appointment and Authorization; "Agent". . . . . . . 61
9.2 Delegation of Duties. . . . . . . . . . . . . . . . 61
9.3 Liability of Agent. . . . . . . . . . . . . . . . . 62
9.4 Reliance by Agent . . . . . . . . . . . . . . . . . 62
9.5 Notice of Default . . . . . . . . . . . . . . . . . 63
9.6 Credit Decision . . . . . . . . . . . . . . . . . . 63
9.7 Indemnification of Agent. . . . . . . . . . . . . . 64
9.8 Agent in Individual Capacity. . . . . . . . . . . . 64
9.9 Successor Agent . . . . . . . . . . . . . . . . . . 64
9.10 Withholding Tax . . . . . . . . . . . . . . . . . . 65
SECTION 10 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . 67
10.1 Waiver: Amendments. . . . . . . . . . . . . . . . . 67
10.2 Confirmations. . . . . . . . . . . . . . . . . . . 67
10.3 Notices . . . . . . . . . . . . . . . . . . . . . . 67
10.4 Computations . . . . . . . . . . . . . . . . . . . 68
10.5 Regulation U . . . . . . . . . . . . . . . . . . . 68
10.6 Costs, Expenses and Taxes . . . . . . . . . . . . . 69
10.7 Captions . . . . . . . . . . . . . . . . . . . . . 69
10.8 Assignments; Participations . . . . . . . . . . . . 69
10.8.1 Assignments . . . . . . . . . . . . . . . . 69
10.8.2 Participations. . . . . . . . . . . . . . . 71
10.9 Governing Law . . . . . . . . . . . . . . . . . . . 72
10.10 Counterparts . . . . . . . . . . . . . . . . . . . 72
10.11 Successors and Assigns . . . . . . . . . . . . . . 72
10.12 Indemnification by the Company . . . . . . . . . . 73
10.13 Forum Selection and Consent to Jurisdiction . . . . 73
10.14 Waiver of Jury Trial . . . . . . . . . . . . . . . 74
10.15 Setoff . . . . . . . . . . . . . . . . . . . . . . 74
10.16 Further Assurances . . . . . . . . . . . . . . . . 74
10.17 Reinstatement. . . . . . . . . . . . . . . . . . . 74
10.18 Waivers. . . . . . . . . . . . . . . . . . . . . . 75
10.19 Confidentiality. . . . . . . . . . . . . . . . . . 75
10.20 Amendment and Restatement. . . . . . . . . . . . . 75
</TABLE>
-iv-
<PAGE>
EXHIBITS
- --------
A Form of Note
B-1 Notice of Borrowing
B-2 Notice of Conversion/Continuation
C Compliance Certificate
D Subsidiary Guaranty
E Form of Notice of Assignment
F Opinion of Counsel
SCHEDULES
- ---------
2.1 Commitments
5.6 Litigation
5.8 Subsidiaries
5.9 ERISA Plans
7.1 Existing Liens
7.5 Existing Investments
10.3 Addresses and Agent's Payment Office
-v-
<PAGE>
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
--------------------------------------------
This SECOND AMENDED AND RESTATED CREDIT AGREEMENT,
dated as of December 20, 1996 (as amended or otherwise modified
from time to time, this "Agreement"), is entered into among WYLE
ELECTRONICS, a California corporation (the "Company"), the
undersigned financial institutions (together with their
respective successors and assigns, collectively the "Banks" and
individually each a "Bank") and BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION (in its individual capacity and as agent
("Agent") for the Banks), and amends and restates that certain
Credit Agreement dated as of December 9, 1993 among the Company,
the financial institutions party thereto and the Agent, as
further amended and restated by the First Amended and Restated
Credit Agreement dated as of December 29, 1995, as amended, among
the Company, the Banks and the Agent (collectively, the "Existing
Credit Agreement").
AGREEMENT:
---------
In consideration of the premises and the mutual
agreements herein contained and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1 DEFINITIONS.
1.1 Definitions. When used herein the following terms
-----------
shall have the following meaning (such definitions to be
applicable to both the singular and plural forms of such terms):
"Accounting Changes" - see Section 10.4.
------------------ ------------
"Affected Loan" - see Section 3.4.
------------- -----------
"Affiliate" of any Person means any other Person which,
---------
directly or indirectly, controls or is controlled by or is under
common control with such Person.
"Agent" means BofA in its capacity as agent for the
-----
Banks hereunder, and any successor agent arising under Section
-------
9.9.
- ---
"Agent-Related Persons" means BofA and any successor
---------------------
agent arising under Section 9.9, together with their respective
-----------
Affiliates, and the officers, directors, employees, agents and
attorneys-in-fact of such Persons and Affiliates.
-1-
<PAGE>
"Agent's Payment Office" means the address for payments
----------------------
set forth on Schedule 10.3 or such other address as the Agent may
-------------
from time to time specify.
"Agreement" - see the Preamble.
---------
"Applicable Margin" means, (a) for the Pricing Period
-----------------
from the Effective Date through February 24, 1997, the per annum
rate, expressed in basis points, indicated by the Compliance
Certificate delivered on the Effective Date, and (b) for each
Pricing Period thereafter, the applicable per annum rate in basis
points set forth below opposite the indicated ratios as of the
last day of the Fiscal Quarter most recently ended prior to the
commencement of that Pricing Period, as set forth in the most
recently delivered Compliance Certificate:
Applicable Margin
(in basis points per annum)
---------------------------------------------------------
<TABLE>
<CAPTION>
Eurodollar
Leverage Ratio Facility Loans
Fee ----------
Letter of
Credit Fee
---------------------------------------------------------
<S> <C> <C>
less than 1.00:1 12.50 25.00
greater than or
equal to 1.00:1
but less than 1.50:1 15.00 30.00
greater than or
equal to 1.50:1
but less than 2.00:1 17.50 37.50
greater than or
equal to 2.00:1 20.00 55.00
---------------------------------------------------------
</TABLE>
The Applicable Margin shall be based on the Leverage Ratio as set
forth in the most recent Compliance Certificate; provided,
--------
however, that if Agent does not receive a Compliance Certificate
- -------
by the date required by Section 6.1.3 the Applicable Margin
-------------
shall, effective as of such date, increase to the highest level
to but excluding the date the Agent receives such Compliance
Certificate.
"Arranger" means BA Securities, Inc.
--------
"Bank" - see the Preamble.
----
"Bank Party" - see Section 10.12.
---------- -------------
"Base Rate" means at any time the higher of (a) the
---------
Federal Funds Rate plus 1/2 of 1% and (b) the rate of interest in
effect for such day as publicly announced from time to time by
BofA in San Francisco, California, as its "reference rate." (The
"reference rate" is a rate set by BofA based upon various factors
-2-
<PAGE>
including BofA's costs and desired return, general economic
conditions and other factors, and is used as a reference point
for pricing some loans, which may be priced at, above, or below
such announced rate.) Any change in the reference rate announced
by BofA shall take effect at the opening of business on the day
specified in the public announcement of such change. The Agent
will give notice promptly to the Company and the Banks of changes
in the Base Rate.
"Base Rate Loan" means any Loan which bears interest at
--------------
or by reference to the Base Rate.
"BofA" - Bank of America National Trust and Savings
Association, in its individual capacity.
"BofA Illinois" means Bank of America Illinois, an
-------------
Illinois banking corporation.
"Business Day" means any day other than a Saturday,
------------
Sunday or other day on which commercial banks in New York City or
San Francisco are authorized or required by law to close and, if
the applicable Business Day relates to any Eurodollar Loan, means
such a day on which dealings are carried on in the applicable
offshore dollar interbank market.
"Capital Expenditures" means, for any period and with
--------------------
respect to any Person, the aggregate of all expenditures and
commitments for expenditures by such Person and its Subsidiaries,
including the capitalized portion of obligations under Capital
Leases, which, in conformity with Generally Accepted Accounting
Principles, is or should be accounted for as property, plant or
equipment on the consolidated balance sheet of such Person.
"Capital Lease" means, with respect to any Person, any
-------------
lease of (or other agreement conveying the right to use) any real
or personal property which, in conformity with Generally Accepted
Accounting Principles, is or should be accounted for as a capital
lease on the balance sheet of such Person.
"Cash Equivalent Investment" means, at any time:
--------------------------
(a) any evidence of debt, maturing not more than one
year after such time, issued or guaranteed by the United
States Government (provided that the full faith and credit
of the United States is pledged in support thereof), or by
any of the following United States federal agencies: Federal
National Mortgage Association, Federal Home Loan Bank Board,
or Federal Home Loan Mortgage Corporation;
(b) marketable direct obligations issued by any state
of the United States of America or the District of Columbia
or any political subdivision thereof or any public
-3-
<PAGE>
instrumentality thereof (including without limitation tax-
exempt and tax-advantaged municipal bond investments)
maturing not more than one year after such time and rated at
least A or better by both S&P and Moody's;
(c) commercial paper, variable rate demand notes or
other short-term obligations issued by
(i) a corporation (except an Affiliate of the
Company) organized under the laws of any state of the
United States of America or of the District of Columbia
and rated at least A-2 by S&P and P-2 by Moody's, or
(ii) any Bank (or its holding company) as of the
date hereof;
(d) any certificate of deposit or bankers' acceptance
or eurodollar time deposit, maturing not more than one year
after the date of issue, which is issued by either
(i) a financial institution that is a member of
the Federal Reserve System and has a combined capital
and surplus and undivided profits of not less than
$500,000,000 or an international bank that has a
combined capital and surplus and undivided profits of
not less than $1,000,000,000 (or the equivalent), or
(ii) any Bank as of the date hereof;
(e) shares of money market funds that invest
substantially in instruments described in subsections (a)
through (d) above;
(f) participations in loans made to a borrower (other
than an Affiliate of the Company) which borrower has a debt
rating of at least A-2 from S&P and P-2 from Moody's;
provided, however, that such loans must mature within six
-------- -------
months from the date such participation is purchased;
(g) short-term asset management accounts offered by
any Bank, brokerage house or other investment manager for
the purpose of investing in notes issued by a corporation
(other than an Affiliate of the Company) organized under the
laws of any state of the United States or of the District of
Columbia and rated at least A-2 by S&P and P-2 by Moody's;
and
(h) auction preferred securities which are either (x)
issued by a corporation (other than an Affiliate of the
Company) organized under the laws of any state of the United
States or of the District of Columbia and rated at least A
by S&P and Moody's or (y) issued by a corporation (other
-4-
<PAGE>
than an Affiliate of the Company) not organized under the
laws of any state of the United States or of the District of
Columbia and rated at least AA by S&P and Moody's;
provided that all Cash Equivalent Investments must be
- --------
denominated solely for payment in Dollars, and provided, further,
-------- -------
that if any Investment which is required to carry at least a
specified rating by both S&P and Moody's in order to constitute a
Cash Equivalent Investment hereunder is only rated by one but not
both of S&P and Moody's, such Investment shall nonetheless
qualify as a Cash Equivalent Investment if such Investment
carries the required rating from either S&P or Moody's.
"Code" means the Internal Revenue Code of 1986, as
----
amended, and any successor statute of similar import, together
with the regulations thereunder, in each case as in effect from
time to time. References to sections of the Code also refer to
any successor sections.
"Commitment" means each commitment of any Issuing Bank
----------
to issue, and of each Bank to participate in, Letters of Credit
pursuant to Section 2.1.1 and the commitment of the Banks to make
-------------
Loans pursuant to Section 2.1.2. The initial amount of each
-------------
Commitment is set forth on Schedule 2.1 hereto.
------------
"Company" - see the Preamble.
------- --------
"Compliance Certificate" - see Section 6.1.3.
---------------------- -------------
"Computation Period" means any period of four
------------------
consecutive Fiscal Quarters ending on the last day of a Fiscal
Quarter.
"Consolidated EBITDA" means, for any period for the
-------------------
Company and its consolidated Subsidiaries, an amount equal to the
(a) Consolidated Net Income plus (b) Interest Expense plus
---- ----
(c) the amount of taxes, based on or measured by income, used or
included in the determination of Consolidated Net Income plus
----
(d) the amount of depreciation and amortization expense deducted
in determining Consolidated Net Income less (e) interest income,
----
all determined in conformity with Generally Accepted Accounting
Principles; provided, however, that Consolidated Net Income shall
-------- -------
be computed for these purposes without giving effect to
extraordinary losses or extraordinary gains.
"Consolidated Net Income" means, with respect to the
-----------------------
Company and its consolidated Subsidiaries for any period, the net
income (or loss) of the Company and its consolidated Subsidiaries
for such period; provided that there shall be excluded therefrom
--------
the income of any Subsidiary to the extent that the declaration
or payment of dividends or similar distributions by such
Subsidiary of such income is not at the time permitted by
-5-
<PAGE>
operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to such Subsidiary.
"Contingent Liability" means any agreement,
--------------------
undertaking or arrangement by which any Person guarantees,
endorses or otherwise becomes or is contingently liable upon (by
direct or indirect agreement, contingent or otherwise, to provide
funds for payment, to supply funds to or otherwise to invest in a
debtor, or otherwise to assure a creditor against loss) any
indebtedness, lease payment or other obligation of any other
Person (other than by endorsements of negotiable instruments for
collection in the course of business), or guarantees the payment
of dividends or other distributions upon the shares of any other
Person, including without limitation contingent reimbursement
obligations with respect to undrawn letters of credit issued for
the account of such Person. The amount of any Person's
obligation in respect of any Contingent Liability shall be deemed
to be the stated or determinable amount of the primary obligation
in respect of which such Contingent Liability arises (subject to
any stated or determinable limitation set forth therein), or if
such amount is not stated or determinable, the maximum liability
in respect thereof.
"Debt" of any Person means, without duplication, (a)
----
all indebtedness of such Person for borrowed money, whether or
not evidenced by bonds, debentures, notes or similar instruments,
(b) all obligations of such Person as lessee under Capital
Leases, (c) all indebtedness created or arising under any
conditional sale, deferred purchase price or other title
retention agreement with respect to property or services owned or
acquired by such Person other than trade accounts payable in the
ordinary course of business (whether or not the rights and
remedies of the seller or lender under such agreement in the
event of default are limited to repossession or sale of such
property), (d) all indebtedness secured by a Lien on the property
of such Person, whether or not such indebtedness shall have been
assumed by such Person, (e) all unpaid reimbursement obligations
under letters of credit issued for the account of such Person and
(f) all Contingent Liabilities of such Person.
"Designated Employee" means any of the (a) Executive
-------------------
Vice President-Finance and Treasurer, Chief Financial Officer,
(b) Vice President and Controller or (c) Senior Vice
President-Administration, General Counsel and Secretary.
"Dollar" and the sign "$" mean lawful money of the
------ -
United States of America.
"Effective Date" - see Section 4.1.
-------------- -----------
-6-
<PAGE>
"Eligible Assignee" means (a) a commercial bank
-----------------
organized under the laws of the United States, or any state
thereof, and having a combined capital and surplus of at least
$100,000,000; (b) a commercial bank organized under the laws of
any other country which is a member of the Organization for
Economic Cooperation and Development (the "OECD"), or a political
subdivision of any such country, and having a combined capital
and surplus of at least $100,000,000, provided that such bank is
acting through a branch or agency located in the country in which
it is organized or another country which is also a member of the
OECD; and (c) a Person that is primarily engaged in the business
of commercial banking and that is (i) a Subsidiary of a Bank,
(ii) a Subsidiary of a Person of which a Bank is a Subsidiary, or
(iii) a Person of which a Bank is a Subsidiary.
"ERISA" means the Employee Retirement Income Security
-----
Act of 1974, as amended, and any successor statute of similar
import, together with the regulations thereunder, in each case as
in effect from time to time. References to sections of ERISA
also refer to any successor sections.
"ERISA Controlled Group" means, when used with respect
----------------------
to a Plan, ERISA, the PBGC or a provision of the Code, pertaining
to employee benefit plans, a group consisting of any Person and
all members of a controlled group of corporations and all trades
or businesses (whether or not incorporated) under common control
with such Person that, together with such Person, are treated as
a single employer under regulations of the PBGC, which are
consistent and coextensive with regulations prescribed for
similar purposes by the Secretary of the Treasury under
subsections (b) and (c) of Section 414 of the Code.
"ERISA Plan" means (a) any Plan which is subject to
----------
Title IV of ERISA (i) that is not a Multiemployer Plan and (ii)
the fair market value of the assets of which is less than the
present value of all benefits under such Plan, including all
benefit liabilities as defined in Section 4001(a)(16) of ERISA,
all determined as of the then most recent valuation date for such
Plan (on the basis of assumptions prescribed by the PBGC for the
purpose of Section 4044 of ERISA), and (b) any Plan that is a
Multiemployer Plan.
"Eurocurrency Reserve Percentage" means, with respect
-------------------------------
to any Eurodollar Loan for any Interest Period, a percentage
(expressed as a decimal) equal to the daily average during such
Interest Period of the percentage in effect on each day of such
Interest Period, as prescribed by the Board of Governors of the
Federal Reserve System (or any successor), for determining the
aggregate maximum reserve requirements applicable to
"Eurocurrency Liabilities" pursuant to Regulation D or any other
then applicable regulation of such Board of Governors which
-7-
<PAGE>
prescribes reserve requirements applicable to "Eurocurrency
Liabilities" as presently defined in Regulation D.
"Eurodollar Loan" means any Loan which bears interest
---------------
at a rate determined by reference to the Eurodollar Rate (Reserve
Adjusted).
"Eurodollar Office" means with respect to any Bank the
-----------------
office or offices of such Bank which shall be making or
maintaining the Eurodollar Loans of such Bank hereunder or such
other office or offices through which such Bank determines its
Eurodollar Rate. A Eurodollar Office of any Bank may be, at the
option of such Bank, either a domestic or foreign office.
"Eurodollar Rate" means, with respect to any Eurodollar
---------------
Loan for any Interest Period, the rate per annum at which Dollar
deposits in immediately available funds are offered to BofA two
Business Days prior to the beginning of such Interest Period by
major banks in the London eurodollar market at approximately
11:00 a.m., London time, for delivery on the first day of such
Interest Period, for the number of days comprised therein and in
an amount equal or comparable to the amount of the Eurodollar
Loan of BofA Illinois for such Interest Period.
"Eurodollar Rate (Reserve Adjusted)" means, with
----------------------------------
respect to any Eurodollar Loan for any Interest Period, a rate
per annum (rounded upwards, if necessary, to the nearest 1/100 of
one percent) determined pursuant to the following formula:
<TABLE>
<S> <C>
Eurodollar Rate Eurodollar Rate
---------------
(Reserve Adjusted) = l-Eurocurrency
Reserve Percentage
</TABLE>
"Event of Default" means any of the events described in
----------------
Section 8.1.
"Existing Credit Agreement" - see the Preamble.
------------------------- --------
"Extension Date" means the date four years prior to the
--------------
Termination Date.
"Federal Funds Rate" means, for any day, the rate set
------------------
forth in the weekly statistical release designated as H.15(519),
or any successor publication, published by the Federal Reserve
Bank of New York (including any such successor, "H.15(519)") on
the preceding Business Day opposite the caption "Federal Funds
(Effective)"; or, if for any relevant day such rate is not so
published on any such preceding Business Day, the rate for such
day will be the arithmetic mean as determined by the Agent of the
rates for the last transaction in overnight Federal funds
arranged prior to 9:00 a.m. (New York City time) on that day by
-8-
<PAGE>
each of three leading brokers of Federal funds transactions in
New York City selected by the Agent.
"Fiscal Quarter" means a fiscal quarter of a Fiscal
--------------
Year.
"Fiscal Year" means the fiscal year of the Company and
-----------
its Subsidiaries, which period shall be the year ended
December 31 of each year. References to a Fiscal Year with a
number corresponding to any calendar year (e.g., "Fiscal Year
1996") refer to the Fiscal Year ending on December 31 of such
calendar year.
"Generally Accepted Accounting Principles" means, as of
----------------------------------------
any date of determination, and subject to Section 10.4,
------------
accounting principles referenced as "generally accepted" in then
currently effective Statements of the Auditing Standards Board of
the American Institute of Certified Public Accountants, or if
such statements are not then in effect, accounting principles
that are then approved by a significant segment of the accounting
profession in the United States of America, including in each
case, the materiality standards as generally accepted. The term
"consistently applied," as used in connection therewith, means
that the accounting principles are applied on a basis consistent
with the audited financial statements certified by Arthur
Andersen LLP for Fiscal Year 1995.
"Ginsbury Acquisition" means the acquisition of the
--------------------
assets or stock of certain companies comprising The Ginsbury
Group.
"Hazardous Material" means any hazardous, toxic or
------------------
dangerous substance or material defined as such in (or for
purposes of) the Comprehensive Environmental Response,
Compensation and Liability Act, any so-called "Superfund" or
"Superliens" law or any other Federal, state or local statute,
law, ordinance, code, regulation or order, or any other
requirement of any governmental authority regulating, relating
to, or imposing liability for, or standards of conduct
concerning, any hazardous, toxic or dangerous waste, substance or
material as now or any time hereafter in effect.
"Inactive Subsidiary" means any Subsidiary of the
-------------------
Company which, on a consolidated basis with its Subsidiaries, has
total assets of less than $50,000, total liabilities of less than
$50,000, and conducts no business or operations of any kind.
"Indemnified Liabilities" - see Section 10.12.
----------------------- -------------
"Interest Expense" means for any period the
----------------
consolidated interest expense of the Company and its Subsidiaries
-9-
<PAGE>
for such period (including, without limitation, all imputed
interest on Capital Leases).
"Interest Period" means, for each Eurodollar Loan, the
---------------
period commencing on the date such Eurodollar Loan is made or
converted from a Base Rate Loan, or on the date of expiration of
the immediately preceding Interest Period for such Eurodollar
Loan, and ending on the date which is one, two, three or six
months thereafter, as the Company may specify; provided, that
--------
each Interest Period for a Eurodollar Loan which would otherwise
end on a day which is not a Business Day shall end on the
immediately succeeding Business Day (unless such immediately
succeeding Business Day is the first Business Day of a calendar
month, in which case such Interest Period shall end on the
immediately preceding Business Day), and the Company may not
select any Interest Period which would end after the Termination
Date.
"Investment" means, with respect to any Person, any
----------
direct or indirect loan, advance or other extension of credit or
capital contribution made by such Person to any other Person and
any ownership or similar interest held by such Person in any
other Person.
"Issuing Bank" means BofA Illinois or with respect to
------------
any Letter of Credit issued by any other Bank designated by BofA
Illinois, such other Bank.
"Letter of Credit" - see Section 2.1.1.
---------------- -------------
"Letter of Credit Application" means a letter of credit
----------------------------
application in the form then used by the Issuing Bank for the
type of letter of credit requested (with appropriate adjustments
to indicate that any letter of credit issued thereunder is to be
issued pursuant to, and subject to the terms and conditions of,
this Agreement).
"Letter of Credit Commitment" means $30,000,000.
---------------------------
"Leverage Ratio" means, at any time, the ratio of (a)
--------------
consolidated Debt at the end of the Computation Period to (b)
Consolidated EBITDA for the Computation Period.
"Lien" means, when used with respect to any Person, any
----
interest granted by such Person or otherwise created in any real
or personal property, asset or other right owned or being
purchased or acquired by such Person which secures payment or
performance of any obligation and shall include any, mortgage,
lien, encumbrance, charge or other security interest of any kind,
and shall include the interest of a vendor or lessor under any
conditional sale agreement, Capital Lease or other title
-10-
<PAGE>
retention document, whether such Lien is arising by contract, as
a matter of law, by judicial process or otherwise.
"Loan Documents" means this Agreement, the Notes, the
--------------
Letter of Credit Applications, the Subsidiary Guaranties and all
other documents, instruments, certificates, and agreements
entered into in connection herewith and therewith by the Company
or any of its Subsidiaries, as amended or otherwise modified from
time to time.
"Loan Parties" means the Company and each of its
------------
Subsidiaries party to a Subsidiary Guaranty (individually, a
"Loan Party").
"Loans" - see Section 2.1.2.
----- -------------
"Margin Stock" means any "margin stock" as defined in
------------
Regulation U of the Board of Governors of the Federal Reserve
System.
"Material Subsidiary" means a Subsidiary of the
-------------------
Company, including its Subsidiaries, which either (a) is
irrevocably designated by the Company by notice to the Agent and
each Bank as a "Material Subsidiary" or (b) at any time on or
after the Effective Date meets any of the following conditions:
(i) The Company's and its other Subsidiaries'
investments in and advances to the Subsidiary exceed five percent
of the total assets of the Company and its Subsidiaries
consolidated as of the end of the most recently completed Fiscal
Year (for a proposed business combination to be accounted for as
a pooling of interests, this condition is also met when the
number of common shares exchanged or to be exchanged by the
Company exceeds five percent of its total common shares
outstanding at the date the combination is initiated);
(ii) The Company's and its other Subsidiaries'
proportionate share of the total assets (after intercompany
eliminations) of the Subsidiary exceeds five percent of the total
assets of the Company and its Subsidiaries consolidated as of the
end of the most recently completed Fiscal Year;
(iii) The Company's and its other Subsidiaries'
equity in the income from continuing operations before income
taxes, extraordinary items and cumulative effect of a change in
accounting principles of the Subsidiary exceeds five percent of
such income of the Company and its Subsidiaries consolidated for
the most recently completed Fiscal Year; or
(iv) The Company's and its other Subsidiaries' equity
in the revenue from continuing operations of the Subsidiary
exceeds five percent of such revenue of the Company and its
-11-
<PAGE>
Subsidiaries consolidated for the most recently completed Fiscal
Year;
provided, however, that for purposes of calculating the income or
- -------- -------
revenue test above, the following shall be applied:
(x) When a loss has been incurred by either the
Company and its consolidated Subsidiaries or the tested
Subsidiary, but not both, the equity in the income or revenue, as
applicable, or loss of the tested Subsidiary should be excluded
from the income or revenue, as applicable, of the Company and its
consolidated Subsidiaries for purposes of the computation.
(y) If income or revenue of the Company and its
Subsidiaries consolidated for the most recent Fiscal Year is at
least five percent lower than the average of the income or
revenue, as applicable, for the last five Fiscal Years, such
average income or revenue, as applicable, should be substituted
for purposes of the computation. Any loss years should be
omitted for purposes of computing average income or revenue, as
applicable.
"Moody's" means Moody's Investors Services, Inc.
-------
"Multiemployer Plan" shall have the meaning set forth
------------------
in Section 4001(a)(3) of ERISA.
"Net Worth" means the Company's consolidated
---------
shareholders' equity.
"Note" - see Section 2.2.2.
---- -------------
"Notice of Borrowing" means a Notice of Borrowing,
-------------------
substantially in the form attached hereto as Exhibit B-1.
-----------
"Notice of Conversion/Continuation" means a Notice of
---------------------------------
Conversion/Continuation, substantially in the form attached
hereto as Exhibit B-2.
-----------
"Operating Lease" means any lease of (or other
---------------
agreement conveying the right to use) any real or personal
property by the Company or any Subsidiary, as lessee, other than
a Capital Lease.
"PBGC" means the Pension Benefit Guaranty corporation
----
and any entity succeeding to any or all of its functions under
ERISA.
"Percentage" means as to any Bank the percentage which
----------
the aggregate amount of such Bank's Commitment is of the
aggregate amount of all Commitments. The Percentage for each
Bank is set forth on Schedule 2.1 hereto.
------------
-12-
<PAGE>
"Person" means any natural person, corporation,
------
partnership, trust, association, firm, governmental authority or
unit, or any other entity, whether acting in an individual,
fiduciary or other capacity.
"Plan" means (a) any employee benefit plan as defined
----
in Section 3(3) of ERISA which is maintained by or contributed to
by the Company or a member of its ERISA Controlled Group on or
after the Effective Date and (b) any employee pension benefit
plan which is subject to the minimum funding standards under
Section 412 of the Code and any multi-employer or single-employer
plan covered by Title IV of ERISA, the funding requirements of
which: (i) were the responsibility of the Company or a member of
its ERISA Controlled Group at any time within the five calendar
years immediately preceding the date hereof, (ii) are currently
the responsibility of the Company or a member of its ERISA
Controlled Group, or (iii) hereafter become the responsibility of
the Company or a member of its ERISA Controlled Group, including
any such plans as may have been, or may hereafter be, terminated
for any reason. Notwithstanding the foregoing, any plan
described in clause (ii) of the foregoing definition shall not be
considered to be a Plan after it ceases to be maintained by the
Company or any member of its ERISA Controlled Group, except with
respect to any representation or covenant, the breach of which
with respect to such plan would result in any liability of the
Company or any member of its ERISA Controlled Group.
"Pricing Period" means (a) the period commencing on the
--------------
Effective Date and ending on February 24, 1997, and (b) the
period commencing on each February 25 and ending on the next
following May 24, (c) the period commencing on each May 25 and
ending on the next following August 24, (d) the period commencing
on each August 25 and ending on the next following November 24
and (e) the period commencing on each November 25 and ending on
the next following February 24.
"Prudential Note Purchase Agreement" means that certain
----------------------------------
Note Purchase Agreement dated on April 26, 1996 between the
Company, Prudential and certain affiliates of Prudential pursuant
to which the Company issued (a) its unsecured 6.98% Notes due
April 26, 2001 in an aggregate principal amount of $30,000,000
and (b) its unsecured 7.18% Notes due October 26, 2006 in an
aggregate principal amount of $20,000,000, in each case as
amended, supplemented, modified, but not increased, from time to
time.
"Replaced Bank" - see Section 10.8.1.
------------- --------------
"Reportable Event" has the meaning set forth in Section
----------------
4043(b) of ERISA (other than a Reportable Event as to which the
provision of 30 days' notice to the PBGC is waived under
-13-
<PAGE>
applicable regulations), or is the occurrence of the events
described in Section 4063(a) of ERISA.
"Reportable Quantity" has the meaning given such term
-------------------
in 40 C.F.R. (S)(S)302.3.
"Required Banks" means Banks having an aggregate
--------------
Percentage of 66 2/3% or more.
"Requested Increase Amount" - see Section 2.17.
------------------------- ------------
"S&P" means Standard & Poor's Ratings Group.
---
"SEC" means the Securities and Exchange Commission.
---
"Stated Amount" means with respect to any Letter of
-------------
Credit at any date of determination, the maximum aggregate amount
available thereunder at any time during the then ensuing term of
such Letter of Credit under any and all circumstances, plus the
aggregate amount of all unreimbursed payments and disbursements
under such Letter of Credit.
"Subsidiary" means, with respect to any Person, any
----------
corporation, association or other business entity of which more
than 50% of the total voting power of shares of stock (or
equivalent ownership or controlling interest) entitled (without
regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the
time owned or controlled, directly or indirectly, by that Person
or one or more of the other Subsidiaries of that Person or a
combination thereof. Unless the context otherwise requires, each
reference to Subsidiaries herein shall be a reference to
Subsidiaries of the Company.
"Subsidiary Guaranty" means a Subsidiary Guaranty,
-------------------
substantially in the form attached hereto as Exhibit D, to be
---------
executed and delivered by each Material Subsidiary, as such
Subsidiary Guaranty may be amended, supplemented or modified from
time to time.
"Tangible Net Worth" means the Net Worth of the Company
------------------
after subtracting all intangible assets of the Company and its
consolidated Subsidiaries. For purposes of the foregoing,
"intangible assets" means goodwill, patents, trade names,
trademarks, copyrights, franchises, organization expenses and any
other assets that are properly classified as intangible assets in
accordance with Generally Accepted Accounting Principles.
"Taxes" - see Section 3.1.
----- -----------
"Termination Date" means December 31, 2001, as such
----------------
date may be extended from time to time pursuant to Section 2.16,
------------
-14-
<PAGE>
or such other date on which the Commitments shall terminate
pursuant to Section 2.5 or 8.2.
----------- ---
"Termination Event" means (a) a Reportable Event,
-----------------
(b) the withdrawal by the Company or by any member of its ERISA
Controlled Group from an ERISA Plan during a plan year in which
it was a "substantial employer" as defined in Section 4001(a)(2)
of ERISA, (c) the initiation of an action by the Company, any
member of its ERISA Controlled Group or any ERISA Plan fiduciary
to terminate an ERISA Plan or the treatment of an amendment to an
ERISA Plan as a termination under ERISA, or (d) the institution
of proceedings by the PBGC under Section 4042 of ERISA to
terminate an ERISA Plan or to appoint a trustee to administer any
ERISA Plan.
"Total Liabilities" means all liabilities, including
-----------------
all Debt and Contingent Liabilities, of the Company and its
consolidated Subsidiaries (excluding any intercompany Debt).
"Type of Loan or Borrowing" means Base Rate Loans or
-------------------------
borrowings and Eurodollar Loans or borrowings.
"Unfunded Benefits" means with respect to any Plan
-----------------
which is subject to Title IV of ERISA, other than a Multiemployer
Plan, at any time, the amount (if any) by which (a) the present
value of all benefits under such Plan, including all benefit
liabilities as defined in Section 4001(a) (16) of ERISA, exceeds
(b) the fair market value of all Plan assets allocable to such
benefits, all determined as of the then most recent valuation
date for such Plan (on the basis of assumptions prescribed by the
PBGC for the purpose of Section 4044 of ERISA).
"Unmatured Event of Default" means any event which if
--------------------------
it continues uncured will, with lapse of time or notice or lapse
of time and notice, constitute an Event of Default.
1.2 Use of Defined Terms. Any defined term used in
--------------------
the plural shall refer to all members of the relevant class, and
any defined term used in the singular shall refer to any one or
more of the members of the relevant class.
1.3 Accounting Terms. All accounting terms not
----------------
specifically defined in this Agreement shall be construed in
conformity with, and all financial data required to be submitted
by this Agreement shall be prepared in conformity with Generally
Accepted Accounting Principles consistently applied.
1.4 Exhibits and Schedules. All Exhibits and
----------------------
Schedules to this Agreement, either as originally existing or as
the same may from time to time be supplemented, modified, or
amended, are incorporated herein by reference. A matter
-15-
<PAGE>
disclosed on any Schedule shall be deemed disclosed on all
Schedules.
SECTION 2 COMMITMENTS OF THE BANKS; TYPES OF LOANS;
LETTER OF CREDIT, BORROWING AND CONVERSION
PROCEDURES.
2.1 Commitments. On and subject to the terms and
-----------
conditions of this Agreement, each of the Banks, severally and
for itself alone, agrees to issue or participate in the issuance
of Letters of Credit for the account of the Company, and to make
Loans to the Company, as follows:
2.1.1 Letters of Credit. (a) The Issuing Bank
-----------------
will issue non-financial (as determined by the Issuing Bank
consistent with Federal Reserve Regulation Y, Appendix A),
standby letters of credit, including without limitation standby
letters of credit to support the Company's performance
obligations under operating contracts and to support bids by the
Company for operating contracts, in each case containing such
terms and conditions as are permitted by this Agreement and are
reasonably satisfactory to the Issuing Bank (collectively the
"Letters of Credit" and individually each a "Letter of Credit"),
at the request of and for the account of the Company from time to
time before the Termination Date, and (b) as more fully set forth
in Section 2.7.3, each Bank agrees to purchase a participation in
-------------
each such Letter of Credit; provided, further, that no Bank shall
-------- -------
be obligated to issue any Letter of Credit or purchase a
participation, as applicable, if (w) such issuance or purchase
would cause such Bank's portion of the aggregate Stated Amount
outstanding plus the aggregate amount of such Bank's Loans
outstanding to exceed such Bank's Commitment; (x) such issuance
or purchase would cause such Bank's portion of the aggregate
Stated Amount outstanding to exceed such Bank's Percentage times
the Letter of Credit Commitment; (y) such issuance or purchase
would cause the aggregate Stated Amount outstanding plus the
aggregate amount of all Loans outstanding to exceed the aggregate
Commitments; or (z) such issuance or purchase would cause the
aggregate Stated Amount outstanding to exceed the Letter of
Credit Commitment.
2.1.2 Loans. Each Bank will make loans to the
-----
Company on a revolving basis ("Loans") from time to time before
the Termination Date in such Bank's Percentage of such aggregate
amounts as the Company may from time to time request from all
Banks; provided, however, that no Bank shall be obligated to make
-------- -------
any Loan if such Loan would cause the aggregate principal amount
of such Bank's Loans outstanding plus such Bank's portion of the
Aggregate Stated Amount outstanding to exceed such Bank's
Commitment, or the aggregate principal amount of all Loans
outstanding plus the aggregate Stated Amount outstanding to
-16-
<PAGE>
exceed the aggregate Commitments. Any bid loans made from time
to time to the Company outside this Agreement shall not count as
usage under the Commitments.
2.1.3 Commitment Limits. Notwithstanding any
-----------------
other provision of this Agreement, the sum of (a) the aggregate
outstanding principal amount of all Loans plus (b) the aggregate
Stated Amount shall not at any time exceed the aggregate
Commitments. In the event the aggregate amount of all
outstanding Loans plus the aggregate Stated Amount exceeds the
aggregate Commitments at any time, the Company shall immediately
repay any Loans, or provide cash collateralization with respect
to any outstanding Letters of Credit pursuant to documentation in
form and substance satisfactory to the Issuing Bank and the
Required Banks, in an amount necessary to eliminate any such
overadvance.
2.2 Evidence of Indebtedness.
------------------------
2.2.1 Loan Accounts. The Loans made by each Bank
-------------
shall be evidenced by one or more accounts or records maintained
by such Bank in the ordinary course of business. The accounts or
records maintained by each Bank shall be conclusive evidence,
absent demonstrable error, of the amount of the Loans made by the
Banks to the Company, and the interest and payments thereon. The
failure to so record any such amount or any error in so recording
any such amount shall not, however, limit or otherwise affect the
obligations of the Company hereunder to repay the principal
amount of the Loans made by such Bank together with all interest
accruing thereon.
2.2.2 Notes. Upon the request of any Bank made
-----
through the Agent, the Loans of each Bank shall be evidenced by a
promissory note (as amended, supplemented, replaced or otherwise
modified from time to time, individually each a "Note" and
collectively for all Banks the "Notes") substantially in the form
set forth in Exhibit A, with appropriate insertions, dated the
---------
Effective Date (or such earlier date as shall be satisfactory to
the Agent and the Company), payable to the order of such Bank in
an amount equal to such Bank's Percentage of the Commitments (or,
if less, in the aggregate unpaid principal amount of such Bank's
Loans).
2.2.3 Recordkeeping. Each Bank shall record in
-------------
its records, or at its option on the schedule attached to its
Note, the date and amount of each Loan made by such Bank, each
repayment or conversion thereof and, in the case of each
Eurodollar Loan, the dates on which each Interest Period for such
Loan shall begin and end. The aggregate unpaid principal amount
so recorded shall be conclusive evidence, absent demonstrable
error, of the principal amount owing and unpaid on such Note.
The failure to so record any such amount or any error in so
-17-
<PAGE>
recording any such amount shall not, however, limit or otherwise
affect the obligations of the Company hereunder or under any Note
to repay the principal amount of the Loans evidenced by such Note
together with all interest accruing thereon.
2.3 Borrowing Procedures. (a) The Company shall give
--------------------
written, facsimile or telephonic notice (which shall, in the case
of telephonic notice, be immediately confirmed by facsimile in
the form of Notice of Borrowing) to the Agent of each proposed
borrowing not later than (i) in the case of a Base Rate
borrowing, 10:00 a.m., San Francisco time, on the proposed date
of such borrowing, and (ii) in the case of a Eurodollar
borrowing, 10:00 a.m., San Francisco time, at least three
Business Days prior to the proposed date of such borrowing. Each
such Notice of Borrowing shall be substantially in the form of
Exhibit B-1 (with appropriate insertions), shall be effective
- -----------
upon receipt by the Agent and shall specify the date, amount and
type of borrowing and, in the case of a Eurodollar borrowing, the
initial Interest Period therefor. Each borrowing shall be on a
Business Day and shall be in an aggregate amount of at least
$3,000,000 and an integral multiple of $1,000,000 in excess
thereof (in the case of borrowings of Eurodollar Loans) or in an
aggregate amount of at least $1,000,000 and an integral multiple
of $500,000 in excess thereof (in the case of borrowings of Base
Rate Loans); provided, however, that the Company may borrow the
-------- -------
total amount available for borrowings under this Agreement as
Base Rate Loans if, at the time of such borrowing, such amount
was less than $1,000,000.
(b) Promptly upon receipt of such notice, the Agent
shall advise each Bank thereof. Not later than 12:00 Noon San
Francisco time, on the date of a proposed borrowing, each Bank
shall provide the Agent at the principal office of the Agent in
San Francisco with immediately available funds covering such
Bank's Percentage of such borrowing and, subject to the
satisfaction of the conditions precedent set forth in Section 4
---------
with respect to such borrowing, the Agent shall pay over the
requested amount to the Company on the requested borrowing date,
subject to the obligation of the Company to repay all or a
portion of the requested amount to the Agent pursuant to Section
-------
9.7.
- ---
(c) Unless the Agent receives notice from a Bank by
11:00 a.m., San Francisco time, on the day of a proposed
borrowing that such Bank will not make available to the Agent the
amount which would constitute its Percentage of such borrowing in
accordance with Section 2.3(b), the Agent may assume that such
--------------
Bank has made such amount available to the Agent and, in reliance
upon such assumption, make a corresponding amount available to
the Company. If and to the extent any Bank shall not have made
its full amount available to the Agent in immediately available
funds and the Agent in such circumstances has made available to
-18-
<PAGE>
the Company such amount, that Bank shall on the Business Day
following such borrowing date make such amount available to the
Agent, together with interest at the Federal Funds Rate for each
day during such period. A notice of the Agent submitted to any
Bank with respect to amounts owing under this subsection (c)
shall be conclusive, absent manifest error. If such amount is so
made available, such payment to the Agent shall constitute such
Bank's Loan on the date of borrowing for all purposes of this
Agreement. If such amount is not made available to the Agent on
the Business Day following the borrowing date, the Agent will
notify the Company of such failure to fund and, upon demand by
the Agent, the Company shall pay such amount to the Agent for the
Agent's account, together with interest thereon for each day
elapsed since the date of such borrowing, at a rate per annum
equal to the interest rate applicable at the time to the Loans
comprising such borrowing. Nothing set forth in this subsection
(c) shall relieve any Bank of any obligation it may have to make
any Loan hereunder.
(d) The failure of any Bank to make a requested
Loan or to purchase a participation in any Letter of Credit on
any date shall not relieve any other Bank of its obligation to
make a Loan or purchase a participation in any Letter of Credit
on such date, but no Bank shall be responsible for the failure of
any other Bank to make any Loan or purchase any participation in
any Letter of Credit to be made by such other Bank.
(e) Not more than five different Interest Periods
for Eurodollar Loans shall be outstanding at any one time.
2.4 Conversion and Continuation Procedures.
--------------------------------------
(a) Subject to the provisions of Section 4.2, the Company may convert
-----------
all or any part of any outstanding Loan into a Loan of a
different type or continue any Eurodollar Loan as a Eurodollar
Loan by giving written, facsimile or telephonic notice (which
shall, in the case of telephonic notice, be immediately confirmed
by facsimile in the form of Notice of Conversion/Continuation) to
the Agent not later than (a) in the case of a conversion into a
Base Rate Loan, 10:00 a.m., San Francisco time, on the proposed
date of such conversion, and (b) in the case of a conversion into
or continuation of a Eurodollar Loan, 10:00 a.m., San Francisco
time, at least three Business Days prior to the proposed date of
such conversion or continuation. Each such Notice of
Conversion/Continuation shall be effective upon receipt by the
Agent and shall specify the date and amount of such conversion or
continuation, the Loan to be so converted or continued, the type
of Loan to be converted or continued into and, in the case of a
conversion into or continuation of a Eurodollar Loan, the initial
Interest Period therefor. Promptly upon receipt of such Notice
of Conversion/Continuation, the Agent shall advise each Bank
thereof. Subject to Sections 2.4(b) and 4.2, such Loan shall be
-------------- ---
so converted or continued on the requested date of conversion or
-19-
<PAGE>
continuation. Each conversion or continuation shall be on a
Business Day and, after giving effect to any conversion or
continuation, the aggregate principal amount of Eurodollar Loans
shall be at least $3,000,000 and an integral multiple of
$1,000,000. If the Company fails to give such notice, such Loan
shall automatically become a Base Rate Loan at the end of the
then-current Interest Period.
(b) After giving effect to any conversion or
continuation, not more than five different Interest Periods for
Eurodollar Loans shall be outstanding.
2.5 Reduction or Termination of Commitments. The
---------------------------------------
Company may from time to time on at least five Business Days,
prior written notice received by the Agent (which shall promptly
advise each Bank thereof) permanently reduce the amount of the
Commitments to an amount not less than the sum of (a) the
aggregate unpaid principal amount of the Loans plus (b) the
aggregate Stated Amount of all outstanding Letters of Credit.
Any such reduction shall be in an amount not less than $5,000,000
and an integral multiple of $1,000,000. The Company may at any
time on like notice terminate the Commitments upon payment in
full in cash of all Loans and all other obligations of the
Company hereunder, and, with respect to each outstanding Letter
of Credit, (x) cash collateralization in full, pursuant to
documentation in form and substance satisfactory to the Agent,
the Issuing Bank and the Required Banks, of all obligations
arising with respect to any applicable Letter of Credit, (y)
delivery to the applicable Issuing Bank, with a copy to the
Agent, of any applicable Letter of Credit for cancellation, or
(z) delivery to the applicable Issuing Bank, with a copy to each
Bank and the Agent, of evidence satisfactory to the Banks that a
replacement letter of credit has been issued to replace any
applicable Letter of Credit and that such applicable Letter of
Credit is to be returned promptly for cancellation. All
reductions of the Commitments shall be pro rata among the Banks
according to their respective Percentages.
2.6 Voluntary Prepayments. The Company may from time
---------------------
to time prepay the Loans in whole or in part; provided that (a)
--------
the Company shall give the Agent (which shall promptly advise
each Bank) written notice thereof (i) on or before 10:00 a.m.,
San Francisco time, not less than three Business Days prior
thereto in the case of Eurodollar Loans and (ii) on or before
10:00 a.m., San Francisco time, on the date of such prepayment in
the case of Base Rate Loans, specifying the Loans to be prepaid
and the date and amount of prepayment, (b) any prepayment of a
Eurodollar Loan prior to the end of an Interest Period therefor
shall be subject to Section 3.5, (c) each partial prepayment of a
-----------
Eurodollar Loan shall be in a principal amount of at least
$3,000,000 and an integral multiple of $1,000,000, (d) each
partial prepayment of a Base Rate Loan shall be in a principal
-20-
<PAGE>
amount of at least $1,000,000 and an integral multiple of
$500,000 and (e) any prepayment of a Eurodollar Loan shall
include accrued interest to the date of prepayment on the
principal amount being repaid.
2.7 Letters of Credit.
-----------------
2.7.1 Letter of Credit Procedures. The Company
---------------------------
shall give notice to the Issuing Bank, with a copy to the Agent,
of the proposed issuance of each Letter of Credit on a Business
Day which is at least five Business Days (or fewer Business Days
if agreed to by the Issuing Bank) prior to the proposed date of
issuance of such Letter of Credit. Each such notice shall be
accompanied by a Letter of Credit Application, duly executed by
the Company and in all respects satisfactory to the Issuing Bank,
together with such other documentation as the Issuing Bank may
reasonably request in support thereof, it being understood that
each Letter of Credit Application shall specify, among other
things, the date on which the proposed Letter of Credit is to be
issued and the expiration date of such Letter of Credit (which
shall not extend beyond the earlier of (a) one year from the date
of issuance or (b) 30 days prior to the Termination Date). Such
notice and Letter of Credit Application may be delivered to the
Issuing Bank and the Agent by facsimile; provided, however, that
-------- -------
the original notice and Letter of Credit Application are promptly
delivered to the Issuing Bank thereafter, but in any event prior
to the issuance of such Letter of Credit. Subject to the
satisfaction of the conditions precedent set forth in Section 4
---------
with respect to the issuance or extension of such Letter of
Credit, the Issuing Bank shall issue such Letter of Credit on the
requested issuance date. In the event the Company requests that
the expiration date of any Letter of Credit be extended, the
Company shall notify the Issuing Bank, with a copy to the Agent,
in accordance with the applicable notice provision set forth in
the Letter of Credit with respect to extensions, or, in the event
the Letter of Credit contains no such notice provision, on a
Business Day which is at least five Business Days (or fewer
Business Days if agreed to by the Issuing Bank) prior to the
existing expiration date under the Letter of Credit. Such notice
shall be duly executed by the Company and in all respects
satisfactory to the Issuing Bank, together with such other
documentation as the Issuing Bank may reasonably request in
support thereof, and shall state the proposed extended expiration
date (which date shall not extend beyond the earlier of (x) one
year from the date of such extension or (y) 30 days prior to the
Termination Date). Such notice may be delivered to the Issuing
Bank and the Agent by facsimile; provided, however, that the
-------- -------
original notice is promptly delivered to the Issuing Bank
thereafter, but in any event prior to the expiration of the
applicable Letter of Credit. Subject to the satisfaction of the
conditions precedent set forth in Section 4 with respect to the
---------
issuance of Letters of Credit, the issuing Bank shall extend the
-21-
<PAGE>
expiration date of such Letter of Credit to the requested
expiration date.
2.7.2 Determination of Issuing Bank: Replacement
------------------------------------------
of Credit. BofA Illinois shall be the Issuing Bank with respect
- ---------
to each Letter of Credit, unless each of the Company, BofA
Illinois, the Agent and another Bank designate such other Bank to
be the Issuing Bank with respect to any Letter of Credit, in
which case such other Bank shall be the Issuing Bank with respect
to such Letter of Credit. A Letter of Credit may be replaced by
a Letter of Credit issued by another Issuing Bank selected
pursuant to the terms of this Section 2.7.2, upon receipt of the
-------------
existing Letter of Credit for cancellation by the issuer thereof.
2.7.3 Participations in Letters of Credit.
-----------------------------------
Concurrently with the issuance of each Letter of Credit, the
Issuing Bank shall be deemed to have sold and transferred to each
other Bank, and each other Bank shall be deemed irrevocably and
unconditionally to have purchased and received from the Issuing
Bank, without recourse or warranty, an undivided interest and
participation, to the extent of such other Bank's Percentage, in
such Letter of Credit and the Company's reimbursement obligations
with respect thereto. For the purposes of this Agreement, the
unparticipated portion of each Letter of Credit shall be deemed
to be the Issuing Bank's "participation" therein. The Issuing
Bank hereby agrees, upon request of the Agent or any Bank, to
deliver to such Bank and the Agent a list of all outstanding
Letters of Credit issued by such Issuing Bank, together with such
information related thereto as such other Bank may reasonably
request.
2.7.4 Reimbursement Obligations. The Company
-------------------------
hereby unconditionally and irrevocably agrees to reimburse the
Issuing Bank for each payment or disbursement made by the Issuing
Bank under any Letter of Credit honoring any demand for payment
made by the beneficiary thereunder, in each case on the date that
such payment or disbursement is made, including, without
limitation, under the following circumstances:
(a) any lack of validity or enforceability of any
Letter of Credit;
(b) the existence of any claim, set-off, defense or
other right which the Company or any other account party may
have at any time against a beneficiary or any transferee of
any Letter of Credit (or any persons or entities for whom
any such transferee may be acting), the Issuing Bank, any
Bank or any other Person, whether in connection with this
Agreement, the transactions contemplated herein or any
unrelated transaction (including any underlying transaction
between the account party or one of the other Loan Parties
-22-
<PAGE>
and the beneficiary for which the Letter of Credit was
procured);
(c) any draft, demand, certificate or any other
document presented under any Letter of Credit proving to be
forged, fraudulent, invalid or insufficient in any respect
or any statement therein being untrue or inaccurate in any
respect;
(d) payment by the Issuing Bank under any Letter of
Credit against presentation of a demand, draft or
certificate or other document which does not comply with the
terms of such Letter of Credit;
(e) any other circumstances or happening whatsoever,
which is similar to any of the foregoing; or
(f) the fact that an Event of Default or Unmatured
Event of Default shall have occurred and be continuing;
provided that the obligation of the Company to so reimburse the
- --------
Issuing Bank shall be reduced to the extent of any direct losses
suffered by the Company as the result of any event set forth in
subsections (c), (d) or (e) above which is finally judicially
determined to constitute gross negligence or wilful misconduct of
the Issuing Bank. To the extent that any obligation of the
Company to reimburse the issuing Bank is reduced pursuant to the
immediately preceding sentence, the Issuing Bank shall reimburse
the Banks for any such amounts which the Banks have paid on
account of such unreimbursed obligations.
Any amount not reimbursed on the date of such payment or
disbursement (by the making or deemed making of Base Rate Loans
pursuant to Section 2.7.6 or otherwise, notwithstanding if any
-------------
such Loans would cause a default under Section 2.1.3 or any other
-------------
provision hereunder) shall bear interest from and including the
date of such payment or disbursement to but not including the
date that the issuing Bank is reimbursed by the Company therefor,
payable on demand, at a rate per annum equal to the Base Rate
from time to time in effect plus two percent per annum. The
Issuing Bank shall notify the Company and the Agent whenever any
demand for payment is made under any Letter of Credit by the
beneficiary thereunder within five Business Days of receiving
such demand; provided, however, that the failure of the Issuing
-------- -------
Bank to so notify the Company or the Agent shall not affect the
rights of the Issuing Bank or the Banks in any manner whatsoever.
2.7.5 Limitation on the Issuing Bank's
--------------------------------
Obligations. As between the Company, any Issuing Bank and the
- -----------
Banks, the Company assumes all risks of the acts and omissions
of, or misuse of the Letters of Credit issued by such Issuing
Bank by, the respective beneficiaries of such Letters of Credit,
-23-
<PAGE>
except to the extent of the gross negligence or willful
misconduct of such Issuing Bank. In furtherance and not in
limitation of the foregoing, neither any Issuing Bank nor any
Bank shall be responsible, except to the extent of its own gross
negligence or willful misconduct:
(a) for the form, validity, sufficiency, accuracy,
genuineness or legal effect of any document submitted by any
party in connection with the application for and issuance of such
Letters of Credit, even if it should in fact prove to be in any
or all respects invalid, insufficient, inaccurate, fraudulent or
forged;
(b) for the validity or insufficiency of any instrument
transferring or assigning or purporting to transfer or assign any
such Letter of Credit or the rights or benefits thereunder or
proceeds thereof, in whole or in part, which may prove to be
invalid or ineffective for any reason;
(c) for failure of the beneficiary of any such Letter
of Credit to comply fully with conditions required in order to
draw upon such Letter of Credit;
(d) for errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, cable,
telegraph, telex or otherwise, whether or not they be in cipher;
(e) for errors in interpretation of technical terms;
(f) for any loss or delay in the transmission or
otherwise of any document required in order to make a drawing
under any such Letter of Credit or of the proceeds thereof; and
(g) for the misapplication by the beneficiary of any
such Letter of Credit of the proceeds of any drawing under such
Letter of Credit.
None of the above shall affect, impair, or prevent the vesting of
any of the Issuing Bank's or any Banks' rights or powers
hereunder. In furtherance and extension and not in limitation of
the specific provisions hereinabove set forth, any action taken
or omitted by any Issuing Bank under or in connection with the
Letters of Credit issued by it, if taken or omitted in good
faith, shall not put such Issuing Bank under any resulting
liability to the Company or the Banks, except to the extent of
the gross negligence or willful misconduct of such Issuing Bank.
2.7.6 Reimbursement Obligations Deemed to be
--------------------------------------
Loans; Funding by Banks to an Issuing Bank. An Issuing Bank
- ------------------------------------------
shall immediately notify the Agent upon making any payment or
disbursement under any Letter of Credit and upon receipt of any
reimbursements with respect thereto. If an Issuing Bank makes
-24-
<PAGE>
any payment or disbursement under any Letter of Credit and the
Company has not reimbursed such Issuing Bank in full in cash for
such payment or disbursement by 11:00 a.m., San Francisco time,
such Issuing Bank shall notify the Agent accordingly, and on the
date of such payment or disbursement (a) if such payment or
disbursement is made prior to the Termination Date, the Banks
shall be deemed to have made Base Rate Loans (pro rata according
to their respective Percentages) (notwithstanding if any such
Loans would cause a default under Section 2.1.3 or any other
-------------
provision hereunder) to the Company in an aggregate amount equal
to the amount of such payment or disbursement, or (b) if such
payment or disbursement is made on or after the Termination Date,
or if any reimbursement received by such Issuing Bank from the
Company is or must be returned or rescinded upon or during any
bankruptcy or reorganization of the Company or otherwise, each
other Bank shall be obligated to pay to such Issuing Bank, in
full or partial payment of the purchase price of its
participation in such Letter of Credit, its pro rata share
(according to its Percentage) of such payment or disbursement
(but no such payment shall diminish the obligations of the
Company under Section 2.7.4, and in either of the cases described
-------------
in subsections (a) or (b) above, the Agent shall promptly notify
each other Bank thereof. Each other Bank irrevocably and
unconditionally agrees to so pay to the Agent in immediately
available funds for such Issuing Bank's account the amount of
such other Bank's Percentage of such payment or disbursement if
and to the extent any Bank shall not have made such amount
available to the Agent by 2:00 p.m., San Francisco time, on the
Business Day on which such Bank receives notice from the Agent of
such payment or disbursement, such Bank agrees to pay interest on
such amount to the Agent for such Issuing Bank's account
forthwith on demand for each day from and including the date such
amount was to have been delivered to the Agent to but excluding
the date such amount is paid, at a rate per annum equal to (a)
for the first three days after demand, the Federal Funds Rate
from time to time in effect and (b) thereafter, the Base Rate
from time to time in effect. Any Bank's failure to make
available to the Agent its Percentage of any such payment or
disbursement shall not relieve any other Bank of its obligation
hereunder to make available to the Agent such other Bank's
Percentage of such payment, but no Bank shall be responsible for
the failure of any other Bank to make available to the Agent such
other Bank's Percentage of any such payment or disbursement.
2.7.7 Letter of Credit Fees. (a) The Company
---------------------
agrees to pay to the Agent for the account of the Banks pro rata
according to their respective Percentages a letter of credit fee
for each Letter of Credit in an amount equal to the Applicable
Margin for Letter of Credit fees per annum (computed for the
actual number of days elapsed on the basis of a year of 360 days,
which results in a higher fee than if a 365/366-day year were
used) of the face amount of such Letter of Credit, payable in
-25-
<PAGE>
arrears on the last day of each calendar quarter and on the
Termination Date for the period from and including the date of
the issuance of such Letter of Credit to but excluding the date
such payment is due or, if earlier, the date on which such Letter
of Credit expired or was terminated.
(b) In addition, with respect to each Letter of
Credit, the Company agrees to pay to the Issuing Bank (i) such
fees and expenses as and when such Issuing Bank customarily
requires in connection with the issuance, negotiation,
processing, extension and/or administration of letters of credit
in similar situations and (ii) a letter of credit fee for each
Letter of Credit issued by such Issuing Bank in an amount equal
to 0.125% per annum (computed for the actual number of days
elapsed on the basis of a year of 360 days) of the face amount of
such Letter of Credit, payable in arrears on the last day of each
calendar quarter and on the Termination Date for the period from
and including the date of the issuance of such Letter of Credit
to but excluding the date such payment is due or, if earlier, the
date on which such Letter of Credit expired or was terminated.
2.8 Interest.
--------
2.8.1 Interest Rates. The Company agrees to pay
--------------
to the Agent for the account of each Bank interest on the unpaid
principal amount of each Loan for the period commencing on and
including the date of such Loan to but excluding the date such
Loan is paid in full in cash, which in no event shall be less
than one day, as follows:
(a) at all times while such Loan is a Base Rate
Loan, at a rate per annum equal to the Base Rate from
time to time in effect; and
(b) at all times while such Loan is a Eurodollar
Loan, at a rate per annum equal to the sum of the
Eurodollar Rate (Reserve Adjusted) applicable to each
Interest Period for such Eurodollar Loan plus the
Applicable Margin for Eurodollar Loans;
provided, however, that at any time an Event of Default exists,
- -------- -------
the interest rate otherwise applicable to each Loan shall be
increased by two percent per annum.
2.8.2 Interest Payment Dates. Accrued interest
----------------------
on each Base Rate Loan shall be payable on the last day of each
calendar quarter and on the Termination Date, commencing with the
first of such dates to occur after the date of such Loan.
Accrued interest on each Eurodollar Loan shall be payable on the
last day of each Interest Period relating to such Loan (and, in
the case of each Eurodollar Loan with an Interest Period in
excess of three months, the date which falls three months after
-26-
<PAGE>
the beginning of such Interest Period) and on the Termination
Date. After the Termination Date, accrued interest on all Loans
shall be payable on demand.
2.8.3 Setting and Notice of Eurodollar Rates.
--------------------------------------
The applicable Eurodollar Rate for each Interest Period shall be
determined by the Agent, and notice thereof shall be given by the
Agent promptly to the Company and each Bank. Each determination
of the applicable Eurodollar Rate by the Agent shall be
conclusive and binding upon the parties hereto, in the absence of
demonstrable error.
2.8.4 Computation of Interest. Interest shall be
-----------------------
computed for the actual number of days elapsed on the basis of a
year of 360 days, which results in more interest than if a
365/366-day year were used. The applicable interest rate for
each Base Rate Loan shall change simultaneously with each change
in the Base Rate.
2.9 Fees.
----
2.9.1 Facility Fee. The Company agrees to
------------
pay to the Agent for the account of each Bank a facility fee for
the period from and including the Effective Date, to but
excluding the Termination Date, equal to the Applicable Margin
for the facility fee on the average daily portion of each Bank's
Commitment. Such facility fee shall be payable in arrears on the
last day of each calendar quarter, commencing in March 1997 and
on the Termination Date for any period then ending for which such
facility fee shall not have been theretofore paid. The facility
fee shall be computed for the actual number of days elapsed on
the basis of a year of 360 days, which results in a higher fee
than if a 365/366-day year were used.
2.9.2 Agent's Fee. The Company agrees to pay to
-----------
the Agent, individually, an agent's fee in the amount agreed upon
in writing by the Company and the Agent pursuant to a fee letter
dated on or about December 29, 1995.
2.9.3 Interest on Fees. All fees provided for in
----------------
Section 2.7.7 and this Section 2.9 shall bear interest from and
- ------------- -----------
including the date such fees become payable to but not including
the date that such payments are made, payable on demand, at a
rate per annum equal to the reimbursement rate charged on Base
Rate Loans.
2.10 Payment Instructions. All funds to be delivered
--------------------
to Agent shall be wire transferred in immediately available funds
to the Agent's Payment Office re: Wyle Electronics, Attention:
Agency Administrative Services #5596, maintained at BofA, ABA No.
1210-00358, with the purpose of the payment indicated, or shall
-27-
<PAGE>
be delivered as the Agent may otherwise request from time to
time.
2.11 Making of Payments. (a) All payments of principal
------------------
or interest on the Notes, of all fees, and of all other amounts
payable hereunder by the Company, shall be made by the Company to
the Agent in immediately available funds without offset or
counterclaim at its office in San Francisco not later than noon,
San Francisco time, on the date due; and funds received after
that hour shall be deemed to have been received by the Agent on
the next following Business Day. The Agent shall promptly remit
to each Bank or other holder of a Note its share of all such
payments received in collected funds by the Agent for the account
of such Bank or holder.
(b) Unless the Agent receives notice from the Company
prior to the due date for any payment hereunder that the Company
does not intend to make such payment, the Agent may assume that
the Company has made such payment and, in reliance upon such
assumption, make available to each Bank its share of such
payment. If and to the extent that the Company has not made any
such payment to the Agent, each Bank which received a share of
such payment shall repay such share (or the relevant portion
thereof) to the Agent forthwith on demand, together with interest
thereon at the Federal Funds Rate for each day from the date such
amount is distributed to such Bank until the date repaid by such
Bank. Nothing set forth in this subsection (b) shall relieve the
Company of any obligation it may have to make any payment
hereunder.
2.12 Application of Certain Payments. Each payment
-------------------------------
shall be applied to such Loans or other obligations of the
Company hereunder as the Company shall direct by notice to be
received by the Agent on or before the date of such payment or,
in the absence of such notice or during any Event of Default or
Unmatured Event of Default under Section 8.1.3, as follows:
-------------
(a) first, to pay all obligations hereunder or under
-----
any Loan Document in respect of any fees, expense
reimbursements or indemnities then due to the Agent (solely
in its capacity as the Agent and not as a Bank);
(b) second, to pay ratably interest due in respect of
------
(i) all Loans and (ii) (without duplication) reimbursement
obligations in connection with Letters of Credit;
(c) third, to pay or prepay ratably the principal
-----
amount of all Loans and (without duplication) reimbursement
obligations in connection with Letters of Credit (or to
provide collateral in respect of Letters of Credit to the
extent such reimbursement obligations are contingent);
-28-
<PAGE>
(d) fourth, to pay ratably all obligations hereunder
------
or under any Loan Document in respect of any fees and
expenses and indemnities then due to the Banks (including
any issuing Bank); and
(e) fifth, to pay ratably all other obligations
-----
hereunder or under any Loan Document.
The order of priority set forth in this Section and the related
provisions of this Agreement are set forth solely to determine
the rights and priorities of the Agent and the Banks as among
themselves and may at any time or from time to time be changed,
and any application of funds hereunder may be reversed and
reapplied, by the Agent and the Banks in writing as they may
elect, without necessity of notice to or consent of or approval
by the Company or any other Person, provided that such change
shall not have the result of causing amounts not otherwise due
under this Agreement to become due. The Agent shall advise the
Banks as to the application of any payment upon request.
2.13 Due Date Extension: Payments Due on Business Days.
-------------------------------------------------
If any payment of principal or interest with respect to any of
the Notes, facility fees, Letter of Credit fees, or other
obligations of the Company hereunder falls due on a day which is
not a Business Day, then such due date shall be extended to the
next following Business Day (unless, in the case of a Eurodollar
Loan, such next following Business Day is the first Business Day
of a calendar month, in which case such due date shall be the
immediately preceding Business Day) and, in the case of principal
and any other amounts on which interest is payable hereunder,
additional interest shall accrue and be payable for the period of
any such extension.
2.14 Pro Rata Treatment. All borrowings, conversions
------------------
and repayments shall be effected so that after giving effect
thereto each Bank will have a pro rata share (according to its
Percentage) of all types (subject to Section 3.4) and borrowings
-----------
of Loans and Stated Amounts.
2.15 Proration of Payments. If any Bank shall obtain
---------------------
any payment or other recovery (whether voluntary, involuntary, by
application of set-off or banker's lien or otherwise) on account
of principal of or interest on any Note (or on account of its
participation in any Letter of Credit) or any other obligation
under any of the Loan Documents, whether from any Loan Party or
any other Person, in excess of its pro rata share of payments and
other recoveries obtained by all Banks on account of principal of
and interest on Notes and on such participations then held by
them (other than in respect of an Affected Loan to the extent
contemplated by Section 3.4 or indemnities or other obligations
-----------
owed solely to such Bank and not owed to the Banks generally
based upon their respective Percentages), such Bank shall
-29-
<PAGE>
purchase from the other Banks such participations in the Notes
(or sub-participations in Letters of Credit) held by them as
shall be necessary to cause such purchasing Bank to share the
excess payment or other recovery ratably with each of them;
provided, however, that if all or any portion of the excess
- -------- -------
payment or other recovery is thereafter recovered from such
purchasing Bank, the purchase shall be rescinded and the purchase
price restored to the extent of such recovery.
2.16 Extension of Termination Date. The Termination
-----------------------------
Date shall be extended for an additional year on each Extension
Date upon satisfaction of each of the conditions set forth in
this Section 2.16:
------------
(a) The Company and each other Loan Party shall
have delivered a written request of such extension to
the Agent (who shall promptly notify the Banks) not
less than 45 nor more than 90 days prior to the
applicable Extension Date; and
(b) The Agent and each Bank, each in its sole and
absolute discretion, shall have agreed to such
extension by written notice to the Agent (which in turn
shall notify the Company and the Banks), no later than
45 days after delivery of the extension request
described in subsection (a) above (it being understood
that if the Agent or any Bank does not agree to such
extension (any failure by the Agent or any Bank to
respond within the required time period shall be deemed
to be a decision by such non-responding party not to
agree to such extension), then such extension shall not
be granted);
provided, that nothing in this Section 2.16 shall limit the right
- -------- ------------
of the Company to request any extension of the Termination Date
at any time or the right of the Agent and the Banks, each in
their sole and absolute discretion, to grant or to not grant any
such extension.
2.17 Increase in Commitments. From time to time, but
-----------------------
not more often than once in any calendar year, and provided no
Unmatured Event of Default or Event of Default exists or would
result therefrom, the Company may request that the combined
Commitments be increased in $10,000,000 increments, up to a
maximum of $140,000,000 combined Commitments, upon satisfaction
of each of the conditions set forth in this Section 2.17:
------------
(a) The Company and each other Loan Party shall
have delivered a written request of such increase in
the Commitments (the amount of such increase in the
Commitments being hereinafter referred to as the
-30-
<PAGE>
"Requested Increased Amount") to the Agent (who shall
promptly notify the Banks); and
(b) Each Bank, in its sole and absolute
discretion, may agree to increase its Commitment in an
amount equal to (but not less than, without the consent
of the Company) its Pro Rata Share of the Requested
Increased Amount by written notice to the Agent (which
in turn shall notify the Company and the Banks), no
later than 30 days after delivery of the increase
request described in subsection (a) above. Any Bank
not responding within the foregoing time period shall
be deemed to have declined to participate in such
Requested Increased Amount. If any Bank declines, or
is deemed to have declined, to increase its Commitment
by all or a portion of its Pro Rata Share of the
Requested Increased Amount, any Banks previously
agreeing to such increase may, in their sole and
absolute discretion, further increase their respective
Commitments by notice to the Agent by an amount equal
to all or a portion of the Requested Increased Amount
so declined. If, after giving effect to the foregoing
procedure, any portion of the Requested Increased
Amount still remains uncommitted by any Bank, the
Company may request that new Banks selected by it,
which qualify as Eligible Assignees that are otherwise
acceptable to the Agent and the Issuing Bank, be
offered all or part of such remaining portion;
provided, however, that the Commitment of any such new
-------- -------
Bank shall not be less than $10,000,000.
SECTION 3 TAXES. YIELD PROTECTION AND ILLEGALITY.
3.1 Taxes. All payments of principal of, and interest
-----
on, the Loans and all other amounts payable hereunder shall be
made free and clear of and (except to the extent required by law)
without deduction for any present or future income, excise, stamp
or franchise taxes and other taxes, fees, duties, withholdings or
other charges of any nature whatsoever imposed by any taxing
authority, but excluding franchise taxes and taxes imposed on or
measured by any Bank's net income or receipts (all non-excluded
items being called "Taxes"). If any withholding or deduction
from any payment to be made by the company hereunder is required
in respect of any Taxes pursuant to any applicable law, rule or
regulation, then the Company will:
(a) pay directly to the relevant authority the full
amount required to be so withheld or deducted;
-31-
<PAGE>
(b) promptly forward to the Agent an official receipt
or other documentation satisfactory to the Agent evidencing
such payment to such authority; and
(c) pay to the Agent for the account of the Banks such
additional amount or amounts as is necessary to ensure that
the net amount actually received by each Bank will equal the
full amount such Bank would have received had no such
withholding or deduction been required.
Moreover, if any Taxes are directly asserted against the Agent or
any Bank with respect to any payment received by the Agent or
such Bank hereunder, the Agent or such Bank may pay such Taxes
and the Company will promptly pay such additional amounts
(including any penalty, interest and expense) as is necessary in
order that the net amount received by such Person after the
payment of such Taxes (including any Taxes on such additional
amount) shall equal the amount such Person would have received
had such Taxes not been asserted.
If the Company fails to pay any Taxes when due to the
appropriate taxing authority or fails to remit to the Agent, for
the account of the respective Banks, the required receipts or
other required documentary evidence, the Company shall indemnify
the Banks for any incremental Taxes, interest or penalties that
may become payable by any Bank as a result of any such failure.
Upon its execution of this Agreement, and thereafter on
each anniversary thereof, and in addition upon the request from
time to time of the Company or the Agent, each Bank that is
organized under the laws of a jurisdiction other than the United
States of America shall, pursuant to Section 9.10, execute and
------------
deliver to the Company and the Agent one or more (as the Company
or the Agent may reasonably request) United States Internal
Revenue Service Forms 4224 or Forms 1001 or such other forms or
documents, appropriately completed, as may be applicable to
establish that any payment to such Bank is exempt from
withholding or deduction of Taxes. The Company shall not be
required to pay any additional amount to any Bank under this
Section 3.1 if such Bank shall have failed to satisfy the
- -----------
requirements of the immediately preceding sentence; provided that
--------
if a Bank shall have satisfied such requirements on or about the
date that it became a party to this Agreement, nothing in this
paragraph shall relieve the Company of its obligation to pay any
amounts pursuant to this Section 3.1 in the event that such Bank
-----------
is no longer properly entitled to deliver certificates, documents
or other evidence at a subsequent date establishing the fact that
such Bank is not subject to withholding as described in the
immediately preceding sentence.
3.2 Increased Costs. (a) If, after the date hereof,
---------------
(i) Regulation D of the Board of Governors of the Federal Reserve
-32-
<PAGE>
System, or (ii) any applicable law, rule or regulation, or any
change therein, or the interpretation or administration thereof
by any governmental authority, central bank or comparable agency
charged with the interpretation or administration thereof, or
compliance by any Bank (or any Eurodollar Office of such Bank)
with any request or directive (whether or not having the force of
law) of any such authority, central bank or comparable agency:
(A) shall subject any Bank (or any Eurodollar Office
of such Bank) to any tax, duty or other charge with respect
to its Eurodollar Loans, its Note or its obligation to make
Eurodollar Loans, or shall change the basis of taxation of
payments to any Bank of the principal of or interest on its
Eurodollar Loans or any other amounts due under this
Agreement in respect of its Eurodollar Loans or its
obligation to make Eurodollar Loans (except for changes in
the rate of tax on the overall net income of such Bank or
its Eurodollar Office imposed by the jurisdiction in which
such Bank's principal executive office or Eurodollar Office
is located); or
(B) shall impose, modify or deem applicable any
reserve (including, without limitation, any reserve imposed
by the Board of Governors of the Federal Reserve System, but
excluding any Eurocurrency Reserve Percentage), special
deposit or similar requirement Against assets of, deposits
with or for the account of, or credit extended by any Bank
(or any Eurodollar Office of such Bank); or
(C) shall impose on any Bank (or its Eurodollar
Office) any other condition affecting its Eurodollar Loans,
its Note or its obligation to make Eurodollar Loans;
and the result of any of the foregoing is to increase the cost to
(or in the case of Regulation D referred to above, to impose a
cost on) such Bank (or any Eurodollar Office of such Bank) of
making or maintaining any Eurodollar Loan, or to reduce the
amount of any sum received or receivable by such Bank (or its
Eurodollar Office) under this Agreement or under its Note with
respect thereto, then within 10 days after written demand by such
Bank (a copy of which shall be furnished to the Agent), the
Company shall pay to such Bank, such additional amount or amounts
as will compensate such Bank for such increased cost or such
reduction.
(b) If any Bank shall reasonably determine that, after
the date hereof, the adoption or phase-in of any applicable law,
rule or regulation regarding capital adequacy, or any change
therein, or any change in the interpretation or administration
thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof,
or compliance by any Bank (or its Eurodollar Office) or any
-33-
<PAGE>
Person controlling such Bank with any request or directive
regarding capital adequacy (whether or not having the force of
law) of any such authority, central bank or comparable agency,
has or would have the effect of reducing the rate of return on
such Bank's or such controlling Person's capital as a consequence
of such Bank's obligations hereunder (including, without
limitation, such Bank's obligations under the Commitment) to a
level below that which such Bank or such controlling Person could
have achieved but for such adoption, change or compliance (taking
into consideration such Bank's or such controlling Person's
policies with respect to capital adequacy), then from time to
time, within 10 days after written demand by such Bank (a copy of
which shall be furnished to the Agent), the Company shall pay to
such Bank, such additional amount or amounts as will compensate
such Bank or such controlling Person for such reduction.
(c) Any demand under this Section 3.2 shall be
-----------
accompanied by a certificate setting forth the calculation of any
additional amount payable under this Section 3.2, which
-----------
certificate shall be conclusive for all purposes absent manifest
error.
3.3 Basis for Determining Interest Rate Inadequate or
-------------------------------------------------
Unfair. If with respect to any Interest Period:
- ------
(a) deposits in Dollars (in the applicable amounts)
are not being offered to one or more Banks in the relevant market
for such Interest Period, or the Agent otherwise reasonably
determines (which determination shall be binding and conclusive
on the Company) that by reason of circumstances affecting the
interbank eurodollar market adequate and reasonable means do not
exist for ascertaining the applicable Eurodollar Rate; or
(b) Banks having an aggregate Percentage of 33 1/3% or
more advise the Agent that the Eurodollar Rate (Reserve Adjusted)
as determined by the Agent will not adequately and fairly reflect
the cost to such Banks of maintaining or funding such Loans for
such Interest Period, or that the making or funding of Eurodollar
Loans has become impracticable in the opinion of such Banks, then
the Agent shall promptly notify the other parties thereof and, so
long as such circumstances shall continue, (i) no Bank shall be
under any obligation to make, or convert Loans into, Eurodollar
Loans and (ii) on the last day of the current Interest Period for
each Eurodollar Loan, such Loan shall, unless then repaid in
full, automatically convert to a Base Rate Loan.
3.4 Changes in Law Rendering Eurodollar Loans
-----------------------------------------
Unlawful. In the event that any change in (including the
- --------
adoption of any new) applicable laws or regulations, or any
change in the interpretation of applicable laws or regulations by
any governmental or other regulatory body charged with the
administration thereof, should make it unlawful for any Bank (or
-34-
<PAGE>
in the good faith judgment of any Bank cause a substantial
question as to whether it is unlawful for such Bank) to make,
maintain or fund Eurodollar Loans, then such Bank shall promptly
notify each of the other parties hereto and, so long as such
circumstances shall continue, (a) such Bank shall have no
obligation to make or convert into Eurodollar Loans (but shall
make Base Rate Loans concurrently with the making of or
conversion into Eurodollar Loans by the Banks which are not so
affected in each case in an amount equal to such Bank's
Percentage of all Eurodollar Loans which would be made or
converted into at such time in the absence of such circumstances)
and (b) on the last day of the current Interest Period for each
Eurodollar Loan of such Bank (or, in any event, if such Bank so
requests, on such earlier date as such Bank determines may be
required by the relevant law, regulation or interpretation), such
Eurodollar Loan shall, unless then repaid in full, automatically
convert to a Base Rate Loan. Each Base Rate Loan made by a Bank
which, but for the circumstances described in the foregoing
sentence, would be a Eurodollar Loan (an "Affected Loan") shall,
notwithstanding any other provision of this Agreement, remain
outstanding for the same period as the borrowing of Eurodollar
Loans of which such Affected Loan would be a part absent such
circumstances.
3.5 Funding Losses. The Company hereby agrees that
--------------
upon demand by any Bank (a copy of which shall be furnished to
the Agent) the Company will indemnify such Bank against any net
loss or expense which such Bank may sustain or incur (including,
without limitation, any net loss or expense incurred by reason of
the liquidation or reemployment of deposits or other funds
acquired by such Bank to fund or maintain any Eurodollar Loan and
any amounts which such Bank would have received had such
Eurodollar Loan remained outstanding to the last day of the
applicable Interest Period, net of any amounts actually received
by such Bank in connection with the redeployment of such funds
for such period as such Bank elects consistent with its business
practices), as reasonably determined by such Bank, as a result of
(a) any payment or, prepayment or conversion of any Eurodollar
Loan of such Bank on a date other than the last day of an
Interest Period for such Loan (including, without limitation, any
conversion pursuant to Section 3.4) or (b) any failure of the
-----------
Company to borrow or convert or continue any Loans on a date
specified therefor in a Notice of Borrowing or Notice of
Conversion/Continuation pursuant to this Agreement. For this
purpose, all notices to the Agent pursuant to this Agreement
shall be deemed to be irrevocable.
3.6 Right of Banks to Fund through Other Offices.
--------------------------------------------
Each Bank may, if it so elects, fulfill its commitment as to any
Eurodollar Loan by causing a foreign branch or affiliate of such
Bank to make such Loan; provided that in such event for the
--------
purposes of this Agreement such Loan shall be deemed to have been
-35-
<PAGE>
made by such Bank and the obligation of the Company to repay such
Loan shall nevertheless be to such Bank and shall be deemed held
by it, to the extent of such Loan, for the account of such branch
or affiliate.
3.7 Discretion of Banks as to Manner of Funding.
-------------------------------------------
Notwithstanding any provision of this Agreement to the contrary,
each Bank shall be entitled to fund and maintain its funding of
all or any part of its Loans in any manner it sees fit, it being
understood, however, that for the purposes of this Agreement all
determinations hereunder shall be made as if such Bank had
actually funded and maintained each Eurodollar Loan during each
Interest Period for such Loan through the purchase of deposits
having a maturity corresponding to such Interest Period and
bearing an interest rate equal to the Eurodollar Rate for such
Interest Period.
3.8 Conclusiveness of Statements; Survival of
-----------------------------------------
Provisions. Determinations and statements of any Bank pursuant
- ----------
to Section 3.2, 3.3, 3.4 or 3.5 shall be conclusive absent
----------- --- --- ---
manifest error. The provisions of such Sections shall survive
repayment of the Loans, cancellation of the Notes, cancellation
or expiration of the Letters of Credit and any termination of
this Agreement, with respect to all Loans and other obligations
made or incurred hereunder or under the other Loan Documents, and
the Notes, Letters of Credit and the other Loan Documents entered
into in connection herewith.
3.9 Banks' Obligation to Mitigate. Each Bank agrees
-----------------------------
that, as promptly as practicable after the officer of such Bank
responsible for administering Loans under this Agreement becomes
aware of the occurrence of an event or the existence of a
condition that would cause such Bank to have Affected Loans or
that would entitle such Bank to receive payments (other than
insubstantial amounts) under Section 3.2, it will, to the extent
-----------
not inconsistent with such Bank's internal policies and
practices, use reasonable efforts (a) to make, fund or maintain
the Commitments of such Bank or the Affected Loans of such Bank
through another lending office of such Bank, or (b) take such
other measures as such Bank may deem reasonable, if as a result
thereof the circumstances which would cause such Bank to have
Affected Loans would cease to exist or the additional amounts
which would otherwise be required to be paid to such Bank
pursuant to Section 3.2 would not be required to be paid to such
-----------
Bank or would be substantially reduced and if, as determined by
such Bank in its reasonable discretion, the making, funding,or
maintaining of such Commitments or Loans through such other
lending office or in accordance with such other measures, as the
case may be, would not adversely affect such Commitments or Loans
or the interests of such Bank. The Company hereby agrees to pay
all reasonable costs and expenses incurred by any Bank to the
extent allocable to such Bank's Commitments (including reasonable
-36-
<PAGE>
fees and expenses of outside counsel and allocated costs of in-
house counsel) incurred in connection with this Section 3.9.
-----------
SECTION 4 CONDITIONS OF LENDING.
The obligation of each Bank to make or continue its
Loans (other than any Loans deemed to have been made pursuant to
Section 2.7.4 and 2.7.6) and of each Issuing Bank to issue
- ------------- -----
Letters of Credit is subject to the following conditions
precedent:
4.1 Initial Letter of Credit or Loan. The obligation
--------------------------------
of each Bank to continue and make Loans and of each Issuing Bank
to issue any Letter of Credit, whichever first occurs, is, in
addition to the conditions precedent specified in Section 4.2,
-----------
subject to the conditions precedent (and the date on which all
such conditions precedent have been satisfied or waived in
writing by the Banks is called the "Effective Date") that (a)
since December 31, 1995, (i) no material adverse change has
occurred in, or development reasonably likely to have a material
adverse effect on, the financial condition, operations, assets,
business, properties or, to the knowledge of the Company,
prospects of the Company and its Subsidiaries taken as a whole,
(ii) no occurrence or event which is reasonably likely to have a
material adverse effect on the rights and remedies of the Agent
or the Banks or on the ability of any party to any Loan Document
to perform its obligations to the Agent or the Banks shall have
occurred, and (iii) there shall not have occurred a substantial
impairment of the financial markets generally which, in the
opinion of the Required Banks, has materially and adversely
affected the transactions contemplated hereby, and (b) the Agent
shall have received (i) all fees which are then due and payable
pursuant to Section 2.9, and (ii) all of the following, each duly
-----------
executed and dated the Effective Date (or such earlier date as
shall be satisfactory to the Agent), in form and substance
satisfactory to the Agent, and each (except for the Notes, of
which only the originals shall be signed) in sufficient number of
signed counterparts to provide one for each Bank:
4.1.1 Loan Documents. This Agreement, the Notes,
--------------
any Letter of Credit Applications, the Subsidiary Guaranties and
any other Loan Documents required to be delivered on or before
the Effective Date (other than the letter referred to in Section
-------
2.9.2, which has been delivered to the Agent).
- -----
4.1.2 Consents, etc. Certified copies of all
-------------
documents evidencing any necessary corporate action, consents and
governmental approvals (if any) required for the execution,
delivery and performance of the Loan Documents by the Company or
any other Loan Party.
-37-
<PAGE>
4.1.3 Secretary's Certificate. To the extent not
-----------------------
received in connection with the Existing Credit Agreement, a
certificate of the Secretary or an Assistant Secretary of each
Loan Party, certifying (a) a copy (attached thereto) of such Loan
Party's Articles or Certificate of Incorporation (certified by
the Secretary of State of the state of such Loan Party's
incorporation) and Bylaws, as amended and in effect on the other
matters reasonably requested by any Bank dated as of the
Effective Date, (b) copies (attached thereto) of resolutions of
the Board of Directors of each Loan Party, authorizing or
ratifying the execution, delivery and performance by such Loan
Party of the Loan Documents to which such Loan Party is a party,
and (c) the names of the officer or officers of such Loan Party
authorized to sign the Loan Documents to which such Loan Party is
a party, together with a sample of the true signature of each
such officer (it being understood that the Agent and each Bank
may conclusively rely on each such certificate until formally
advised by a like certificate of any changes therein).
4.1.4 Officer's Certificate. A certificate of a
---------------------
Designated Employee of each Loan Party, certifying (a) that all
of the representations and warranties made by such Loan Party in
any Loan Document are true, correct and complete in all material
respects as of the Effective Date, (b) that no Events of Default
or Unmatured Events of Default exist or will exist after giving
effect to any Loans to be made and Letters of Credit to be issued
on the Effective Date, (c) that all conditions to make Loans or
to issue Letters of Credit have been satisfied, and (d) to all
other matters reasonably requested by any Bank.
4.1.5 Opinion of Counsel for the Company. The
----------------------------------
opinion of Stephen Natcher, Senior Vice President-Administration,
General Counsel and Secretary of the Company substantially in the
form attached hereto as Exhibit F.
---------
4.1.6 Notice of Borrowing or Notice of
--------------------------------
Conversion/Continuation. A Notice of Borrowing or a Notice of
- -----------------------
Conversion/Continuation duly completed for any borrowing on the
Effective Date.
4.1.7 Compliance Certificate. A Compliance
----------------------
Certificate dated as of September 30, 1996 for purposes of
calculating the Applicable Margin.
4.1.8 Other. Such other documents as the Agent
-----
or any Bank may reasonably request.
Upon satisfaction or written waiver of each of the conditions set
forth in this Section 4.1 and in Section 4.2 on the Effective
----------- -----------
Date, the Company shall have satisfied the requirements for the
initial Loan or the initial Letter of Credit, whichever first
occurs, and if no such Loan is made or Letter of Credit issued on
-38-
<PAGE>
the Effective Date, the conditions applicable to the initial Loan
and the initial Letter of Credit when made or issued after the
Effective Date shall be as set forth in Section 4.2 hereof.
-----------
4.2 All Loans and Letters of Credit. The obligation
-------------------------------
of each Bank to make each Loan (other than any Loans deemed to
have been made pursuant to Section 2.7.4 and 2.7.6), to convert
------------- -----
into or permit the continuation at the end of the applicable
Interest Period of any Eurodollar Loan and of each Issuing Bank
to issue or extend any Letter of Credit is subject to the
following further conditions precedent that:
4.2.1 No Default. (a) No Event of Default or
----------
Unmatured Event of Default has occurred and is continuing or
will result from the making of such Loan or the issuance or
extension of such Letter of Credit and (b) the warranties of the
Company contained in Section 5 are true and correct as of the
---------
date of such requested Loan or issuance or extension of such
Letter of Credit, with the same effect as though made on such
date.
4.2.2 Confirmatory Certificate. If requested by
------------------------
the Agent or by any Bank through the Agent, the Agent shall have
received (in sufficient counterparts to provide one to each Bank)
a certificate dated the date of such requested Loan or issuance
or extension of such Letter of Credit and signed by a duly
authorized representative of the Company as to the matters set
out in Section 4.2.1 (it being understood that each request by
-------------
the Company for the making of a Loan or the issuance of a Letter
of Credit shall be deemed to constitute a warranty by the Company
that the conditions precedent set forth in Section 4.2.1 will be
-------------
satisfied at the time of the making of such Loan or the issuance
of such Letter of Credit).
SECTION 5 REPRESENTATIONS AND WARRANTIES.
To induce each Issuing Bank to issue Letters of Credit
and to induce the Agent and the Banks to enter into this
Agreement and to induce the Banks to make Loans and purchase
participations in Letters of Credit hereunder, the Company
warrants to the Agent and the Banks that:
5.1 Organization, Etc. (a) The Company is a
-----------------
corporation duly organized, validly existing and in good standing
under the laws of the State of California; each Loan Party other
than the Company is a corporation duly organized, validly
existing and in good standing in the jurisdiction of its
incorporation; the Company and each other Loan Party is duly
qualified to do business in each jurisdiction where the nature of
its business makes such qualification necessary (except in those
instances in which the failure to be qualified would not be
-39-
<PAGE>
reasonably expected to materially adversely affect either (i) the
financial condition, operations, assets, business, properties or,
to the knowledge of the Company, prospects of the Company and its
Subsidiaries taken as a whole or (ii) the ability of the Loan
Parties to perform their obligations under the Loan Documents)
and the Company and each other Loan Party has full power and
authority, and has all material licenses, permits and
authorizations required, to own its property and conduct its
business as presently conducted and as proposed to be conducted
by it.
(b) The Company and the other Loan Parties are in
compliance with their respective Articles or Certificates of
Incorporation, Bylaws and other organizational documents, all
material agreements, indentures, instruments and other documents
which are binding on the Company or the other Loan Parties,
respectively, and all laws, rules, regulations and orders,
decrees and judgments of any court or other government authority
or agency which are binding on the Company or any of the other
Loan Parties and the Company and the other Loan Parties have and
are in compliance with all permits, licenses and other
authorizations required by law, rule or regulation (except in
those instances in which the failure to be in compliance would
not be reasonably expected to materially adversely affect either
(i) the financial condition, operations, assets, business,
properties or, to the knowledge of the Company, prospects of the
Company and its Subsidiaries taken as a whole or (ii) the ability
of the Loan Parties to perform their obligations under the Loan
Documents).
5.2 Authorization: No Conflict. (a) The execution and
--------------------------
delivery by the Company of this Agreement and each other Loan
Document to which it is a party, the borrowings hereunder, and
the performance by the Company of its obligations under each Loan
Document to which it is a party are within the corporate powers
of the Company, have been duly authorized by all necessary
corporate action on the part of the Company (including any
necessary stockholder action), have received all necessary
governmental approval (if any shall be required), and do not and
will not (i) violate any provision of law or any order, decree or
judgment of any court or other government authority or agency
which is binding on the Company, (ii) contravene or conflict
with, or result in a breach of, any provision of the Articles of
Incorporation, Bylaws or other organizational documents of the
Company or of any material agreement, indenture, instrument or
other document which is binding on the Company or any other Loan
Party (copies of which, including any amendments, supplements or
modifications thereof, have been delivered to the Agent) or (iii)
result in, or require, the creation or imposition of any Lien on
any property of the Company or any other Loan Party (except Liens
in favor of the Agent and the Banks as provided in this
Agreement), except in those instances in which such violation or
-40-
<PAGE>
breach would not be reasonably expected to materially adversely
affect either (i) the financial condition, operations, assets,
business, properties or, to the knowledge of the Company,
prospects of the Company and its Subsidiaries taken as a whole or
(ii) the ability of the Loan Parties to perform their obligations
under the Loan Documents.
(b) The execution and delivery by each Loan Party
other than the Company of each Loan Document to which it is a
party and the performance by such Loan Party of its obligations
under each Loan Document to which it is a party are within the
corporate powers of such Loan Party, have been duly authorized by
all necessary corporate action on the part of such Loan Party
(including any necessary stockholder action), have received all
necessary governmental approval (if any shall be required), and
do not and will not (i) violate any provision of law or any
order, decree or judgment of any court or other government
authority or agency which is binding on such Loan Party, (ii)
contravene or conflict with, or result in a breach of, any
provision of the Articles or Certificate of Incorporation, Bylaws
or other organizational documents of such Loan Party or of any
material agreement, indenture, instrument or other document which
is binding on the Company or any other Loan Party (copies of
which, including any amendments, supplements or modifications
thereof, have been delivered to the Agent) or (iii) result in, or
require, the creation or imposition of any Lien on any property
of the Company or any other Loan Party (except Liens in favor of
the Agent and the Banks as provided in this Agreement), except in
those instances in which such violation or breach would not be
reasonably expected to materially adversely affect either (A) the
financial condition, operations, assets, business, properties or,
to the knowledge of the Company, prospects of the Company and its
Subsidiaries taken as a whole or (B) the ability of the Loan
Parties to perform their obligations under the Loan Documents.
5.3 Validity and Binding Nature. This Agreement is,
---------------------------
and upon the execution and delivery thereof each other Loan
Document to which the Company or any other Loan Party is a party
will be, the legal, valid and binding obligation of the Company
or any such Loan Party, respectively, enforceable against the
Company or such Loan Party in accordance with its terms, except
as such enforceability may be limited by the effect of
bankruptcy, insolvency, reorganization, moratorium or other
similar laws limiting creditors, rights generally or by equitable
principles.
5.4 Financial Information. The audited consolidated
---------------------
financial statements of the Company and its Subsidiaries as of
and for the Fiscal Year ended December 31, 1995, copies of which
have been delivered to each Bank, have been prepared in
accordance with Generally Accepted Accounting Principles and
present fairly the consolidated financial condition of the
-41-
<PAGE>
Company and its Subsidiaries taken as a whole as at such date and
the results of their operations for the period then ended.
5.5 No Material Adverse Change; Conduct of Business.
-----------------------------------------------
Since December 31, 1995, there has been no material adverse
change in either (a) the financial condition, operations, assets,
business, properties or, to the knowledge of the Company,
prospects of the Company and its Subsidiaries taken as a whole or
(b) the ability of the Loan Parties to perform their obligations
under the Loan Documents.
5.6 Litigation. Except for matters listed in Schedule
---------- --------
5.6, no litigation (including, without limitation, derivative
- ---
actions), arbitration proceeding or governmental proceeding is
pending or, to the Company's knowledge, threatened against the
Company or any of its Subsidiaries which could reasonably be
expected to materially and adversely affect either (a) the
financial condition, operations, assets, business, properties or,
to the knowledge of the Company, prospects of the Company and its
Subsidiaries taken as a whole or (b) the ability of the Loan
Parties to perform their obligations under the Loan Documents.
5.7 Ownership of Properties; Liens. Each of the
------------------------------
Company and its Subsidiaries owns good and marketable title to
all of its properties and assets, real and personal, tangible and
intangible, of any nature whatsoever (including patents,
trademarks, trade names, service marks and copyrights), free and
clear of all Liens, charges and claims (including infringement
claims with respect to patents, trademarks, copyrights and the
like) except as permitted pursuant to Section 7.1.
-----------
5.8 Subsidiaries. The Company has no Subsidiaries,
------------
except those listed in Schedule 5.8, as such schedule may be
------------
updated from time to time.
5.9 Compliance with ERISA. Schedule 5.9 contains a
--------------------- ------------
list of all Plans as of the Effective Date. Each Plan (other
than a Multiemployer Plan) is in compliance with ERISA and the
applicable provisions of the Code in all material respects with
respect to each Plan other than a Multiemployer Plan, all reports
required under ERISA or any other applicable law or regulation to
be filed by the Company or a member of its ERISA Controlled Group
with the relevant governmental authority the failure of which to
file could reasonably result in a material liability of the
Company or a member of its ERISA Controlled Group have been duly
filed and all such reports are true and correct in all material
respects as of the date given. Neither the Company nor a member
of its ERISA Controlled Group has engaged in a "prohibited
transaction," as such term is defined in Section 4975 of the Code
or in a transaction subject to the prohibitions of Section 406 of
ERISA, in connection with any Plan which would subject the
Company or a member of its ERISA Controlled Group (after giving
-42-
<PAGE>
effect to any exemption) to the tax or penalty on prohibited
transactions imposed by Section 4975 of the Code, Section 502 of
ERISA or any other liability under ERISA which tax, penalty or
other liability would involve more than $100,000. There are no
claims (other than claims for benefits in the normal course),
actions or lawsuits asserted or instituted against, and neither
the Company nor a member of its ERISA Controlled Group has
knowledge of any threatened litigation or claims against, the
assets of any Plan (other than a Multiemployer Plan) or against
any fiduciary of such Plan (other than a Multiemployer Plan) with
respect to the operation of such Plan (other than a Multiemployer
Plan). The aggregate present value of all Unfunded Benefits
under the ERISA Plans, excluding any Multiemployer Plan, does not
exceed $20,000,000. The Company and the members of its ERISA
Controlled Group are currently obligated to make contributions
only to the Multiemployer Plans set forth in Schedule 5.9. With
------------
respect to all Multiemployer Plans to which the Company and the
members of its ERISA Controlled Group now contribute, have ever
contributed or have ever had an obligation to contribute, all
obligations of the Company and the members of its ERISA
Controlled Group have been satisfied in full. The aggregate
potential withdrawal liability of the Company and the members of
its ERISA Controlled Group with respect to all Multiemployer
Plans to which the Company and the members of its ERISA
Controlled Group currently contribute does not exceed $1,000,000.
The obligation of the Company and its ERISA Controlled Group to
provide post-retirement welfare benefits (other than as required
by Sections 601 through 608 of ERISA and Section 4980B of the
Code) is fairly presented according to applicable financial
reporting standards in the financial statements of the Company
and its Subsidiaries.
5.10 Investment Company Act. Neither the Company nor
----------------------
any of its Subsidiaries is an "investment company" or a company
"Controlled" by an "investment company," within the meaning of
the Investment Company Act of 1940, as amended.
5.11 Public Utility Holding Company Act. Neither the
----------------------------------
Company nor any of its Subsidiaries is a "holding company," or a
"subsidiary company" of a "holding company," or an "affiliate" of
a "holding company" or of a "subsidiary company" of a "holding
company," within the meaning of the Public Utility Holding
Company Act of 1935, as amended.
5.12 Regulation U; Other Governmental Regulation.
-------------------------------------------
Neither the Company nor any of its Subsidiaries is (a) engaged
principally, or as one of its important activities, in the
business of extending credit for the purpose of purchasing or
carrying Margin Stock, or (b) subject to other laws, regulations
or orders which would have a material adverse effect on the
Company's ability to borrow money or the ability of the Company
-43-
<PAGE>
or any other Loan Party to perform its respective obligations
under any Loan Document.
5.13 Taxes. Each of the Company and its Subsidiaries
-----
has filed all tax returns and reports required by law to have
been filed by it and has paid all taxes and governmental charges
thereby shown to be owing, except any such taxes or charges which
are being diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with
Generally Accepted Accounting Principles shall have been set
aside on its books.
5.14 Solvency, etc. (a) On the Effective Date, and
-------------
immediately prior to and after giving effect to the issuance of
each Letter of Credit and each borrowing hereunder and the use of
the proceeds thereof, (i) the Company's assets will exceed its
liabilities and (ii) the Company will be solvent, will be able to
pay its debts as they mature, will own property with fair
saleable value greater than the amount required to pay its debts
and will have capital sufficient to carry on its business as then
constituted.
(b) On the Effective Date and for 90 days prior
thereto, and immediately prior to and after giving effect to the
issuance of each Letter of Credit and each borrowing hereunder
and the use of the proceeds thereof, (a) the assets of each Loan
Party (other than the Company and any Subsidiary which is not a
Material Subsidiary) will exceed its respective liabilities and
(b) each Loan Party (other than the Company and any Subsidiary
which is not a Material Subsidiary) will be solvent, will be able
to pay its debts as they mature, will own property with fair
saleable value greater than the amount required to pay its debts
and will have capital sufficient to carry on its business as then
constituted.
5.15 Hazardous Materials.
-------------------
5.15.1 Release and Disposal. To the best
--------------------
knowledge of the Company, except in compliance with applicable
law, (a) none of the Company, any of its Subsidiaries or any
other Person has ever caused or permitted any Hazardous Material
to be treated or stored on, under or at any real property owned,
leased or operated by the Company or any of its Subsidiaries, (b)
such real property has never been used (by the Company, any of
its Subsidiaries or by any other Person) as a temporary storage
site for any Hazardous Material, and (c) none of the Company, any
of its Subsidiaries or any of their respective predecessors has
ever caused or permitted any Hazardous Material (except for any
which may have been present in raw materials or any products) to
be transported to, treated, or stored at any locations other than
those identified pursuant to subsection (a), except where such
treatment, storage or transport could not reasonably be expected
-44-
<PAGE>
to materially and adversely affect either (i) the financial
condition, operations, assets, business, properties or, to the
knowledge of the Company, prospects of the Company and its
Subsidiaries taken as a whole or (ii) the ability of the Loan
Parties to perform their obligations under the Loan Documents.
5.15.2 Treatment and Storage. To the best
---------------------
knowledge of the Company, except in compliance with applicable
law, (a) none of the Company, any of its Subsidiaries or any
other Person has ever caused or permitted any Hazardous Material
to be treated or stored on, under or at any real property owned,
leased or operated by the Company or any of its Subsidiaries, (b)
such real property has never been used (by the Company, any of
its Subsidiaries or by any other Person) as a temporary storage
site for any Hazardous Material, and (c) none of the Company, any
of its Subsidiaries or any of their respective predecessors has
ever caused or permitted any Hazardous Material (except for any
which may have been present in raw materials or any products) to
be transported to, treated, or stored at any locations other than
those identified pursuant to subsection (a), except where such
treatment, storage or transport could not reasonably be expected
to materially and adversely affect either (i) the financial
condition, operations, assets, business, properties or, to the
knowledge of the Company, prospects of the Company and its
Subsidiaries taken as a whole or (ii) the ability of the Loan
Parties to perform their obligations under the Loan Documents.
5.16 Ownership. The Company is the legal and
---------
beneficial owner of 100% of the capital stock of each of its
Subsidiaries. All of the outstanding shares of capital stock of
the Company and each of its Subsidiaries have been duly
authorized and validly issued and are fully paid and
non-assessable.
5.17 Information. All information heretofore or
-----------
contemporaneously herewith furnished by or on behalf of the
Company or any of its Subsidiaries to any Bank for purposes of or
in connection with this Agreement and the transactions
contemplated hereby is, and all information hereafter furnished
by or on behalf of the Company or any of its Subsidiaries
pursuant hereto or in connection herewith will be, true and
accurate in every material respect on the date as of which such
information is dated or certified, and none of such information
is or will be incomplete by omitting to state any material fact
necessary to make such information not misleading (it being
recognized by the Agent and each Bank that projections and
forecasts provided by the Company or any of its Subsidiaries are
not to be viewed as facts and that actual results during the
period or periods covered by any such projections and forecasts
may differ from projected or forecasted results).
-45-
<PAGE>
SECTION 6 AFFIRMATIVE COVENANTS.
Until the expiration or termination of the Commitments
and thereafter until all obligations of the Company hereunder and
under the other Loan Documents are paid in full in cash and all
Letters of Credit have been terminated, the Company agrees that,
unless at any time the Required Banks shall otherwise expressly
consent in writing, it will:
6.1 Reports, Certificates and Other Information.
-------------------------------------------
Furnish to the Agent and each Bank:
6.1.1 Audit Report. Promptly when available and
------------
in any event within 100 days after the close of each Fiscal Year,
(a) a copy of the annual audit report of the Company and its
Subsidiaries for such Fiscal Year, including therein consolidated
balance sheets of the Company and its Subsidiaries as of the end
of such Fiscal Year and consolidated statements of earnings and
cash flow of the Company and its Subsidiaries for such Fiscal
Year certified without qualification as to going concern or scope
by Arthur Andersen LLP or other independent auditors of
nationally recognized standing selected by the Company, together
with a written statement from such accountants to the effect that
in making the examination necessary for the signing of such
annual audit report by such accountants, they have not become
aware of any Event of Default or Unmatured Event of Default that
has occurred and is continuing or, if they have become aware of
any such event, describing it in reasonable detail; and (b)
consolidating balance sheets of the Company and its Subsidiaries
as of the end of such Fiscal Year and a consolidating statement
of earnings for the Company and its Subsidiaries for such Fiscal
Year, certified by the Executive Vice President--Finance and
Treasurer, CFO or Vice President and Controller of the Company.
The Company may satisfy a portion of its obligations under this
Section 6.1.1 by delivery of copies of the Annual Report on Form
- -------------
10-K of the Company for such Fiscal Year filed with the
Securities and Exchange Commission.
6.1.2 Monthly Reports; Quarterly Cash Flow
------------------------------------
Statement. Promptly when available and in any event within 30
- ---------
days after the end of each month, consolidated and consolidating
balance sheets of the Company and its Subsidiaries as of the end
of such month and consolidated and consolidating statements of
earnings for such month and for the period beginning with the
first day of such Fiscal Year and ending on the last day of such
month, and for each month-end which is also the end of a Fiscal
Quarter, promptly when available and in any event within 55 days
after the end of such Fiscal Quarter, a consolidated statement of
cash flow for such Fiscal Quarter and for the period beginning
with the first day of such Fiscal Year and ending on the last day
of such Fiscal Quarter, in each case certified by the Executive
Vice President-Finance and Treasurer, CFO or Vice President and
-46-
<PAGE>
Controller of the Company. The Company may satisfy a portion of
its obligations under this Section 6.1.2 by delivery of copies of
-------------
the Quarterly Report on Form 10-Q of the Company for any
applicable period filed with the Securities and Exchange
Commission.
6.1.3 Compliance Certificates. Contemporaneously
-----------------------
with the furnishing of a copy of each annual audit report
pursuant to Section 6.1.1 and of each set of monthly statements
-------------
pursuant to Section 6.1.2 for any month which is the last month
-------------
of a Fiscal Quarter, a duly completed certificate in the form of
Exhibit C (herein called a "Compliance Certificate"), with
- ---------
appropriate insertions, dated the date of such annual report or
such monthly statements and signed by the Executive Vice
President-Finance and Treasurer, CFO or Vice President and
Controller of the Company, containing a computation of each of
the financial ratios and restrictions set forth in Section 6 and
---------
stating that such officer has not become aware of any Event of
Default or Unmatured Event of Default that has occurred and is
continuing after undertaking due inquiry in respect thereof or,
if there is any such event, describing it and the steps, if any,
being taken to cure it.
6.1.4 Reports to SEC, to the Public and to
------------------------------------
Stockholders: Press Releases. Promptly upon the filing or
- ----------------------------
distribution thereof, a copy of any annual, periodic or special
report or registration statement (inclusive of exhibits thereto)
filed with the SEC or any securities exchange by the Company, or
otherwise publicly available; any report, proxy statement or
other communication to the stockholders of the Company or any
other Loan Party in their capacity as stockholders; and any press
releases of the Company or any other Loan Party.
6.1.5 Notice of Default, Litigation, Material
---------------------------------------
Adverse Change. Immediately upon becoming aware of any of the
- --------------
following, written notice describing the same and the steps being
taken by the Company or any of its Subsidiaries affected thereby
with respect thereto: (a) the occurrence of an Event of Default
or an Unmatured Event of Default; (b) any litigation (including,
without limitation, derivative actions), arbitration or
governmental investigation or proceeding not previously disclosed
by the Company to the Banks which has been instituted or, to the
knowledge of the Company, is threatened against the Company or
any of its Subsidiaries or to which any of the properties of any
thereof is subject which, if adversely determined, could
reasonably be expected to materially adversely affect either (i)
the financial condition, operations, assets, business, properties
or, to the knowledge of the Company, prospects of the Company and
its Subsidiaries, taken as a whole or (ii) the ability of the
Loan Parties to perform their obligations under the Loan
Documents; (c) any material adverse change in the financial
condition, operations, assets, business, properties or, to the
-47-
<PAGE>
knowledge of the Company, prospects of the Company and its
Subsidiaries taken as a whole or (d) termination of any material
franchise agreement with any supplier.
6.1.6 Subsidiaries. Promptly upon any Person
------------
becoming a Subsidiary of the Company, notification thereof
together with a certificate from a Designated Employee stating
whether such Subsidiary is a Material Subsidiary or an Inactive
Subsidiary.
6.1.7 Management Reports. Promptly upon receipt
------------------
thereof, copies of all detailed financial and management reports
submitted to the Board of Directors of the Company by independent
auditors in connection with each annual or interim audit made by
such auditors of the financial statements of the Company.
6.1.8 Projections. As soon as available, and in
-----------
accordance with the Company's customary planning procedures,
copies of all forecasted statements of income, statements of
financial position and statements of cash flows for the Company
and its Subsidiaries for the forthcoming three Fiscal Years,
quarter-by-quarter for the first Fiscal Year therein forecasted
and annually thereafter, together with any changes thereto deemed
by the Company, in its reasonable discretion, to be significant
or substantial.
6.1.9 ERISA. As soon as possible and in any
-----
event within ten days after the Company or a member of its ERISA
Controlled Group knows, or has reason to know, that: (a) any
Termination Event with respect to a Plan has occurred or is
likely to occur; (b) any condition exists with respect to a Plan
which presents or is likely to present a material risk of
termination of the Plan or imposition of a material excise tax or
other liability on the Company or a member of its ERISA
Controlled Group or the imposition of a Lien on any assets of the
Company or a member of its ERISA Controlled Group in favor of the
PBGC or a Plan; (c) the Company or a member of its ERISA
Controlled Group has applied for a waiver of the minimum funding
standard (including any required installment payments) or an
extension of any amortization period under Section 412 of the
Code and Section 302 of ERISA, or has committed a failure
sufficient to give rise to a Lien under Section 302(f) of ERISA;
(d) the Company or a member of its ERISA Controlled Group has
engaged in a "prohibited transaction," as defined in Section 4975
of the Code or in a transaction subject to the prohibitions of
Section 406 of ERISA, that is not exempt under Section 4975 of
the Code and Section 408 of ERISA or under an applicable
individual or class exemption and which presents or is likely to
present the possibility of the imposition of a material liability
or material excise tax on the Company or a member of its ERISA
Controlled Group; (e) the aggregate present value of the Unfunded
Benefits under all ERISA Plans has increased to an amount in
-48-
<PAGE>
excess of $20,000,000; (f) any Reportable Event with respect to a
Plan has occurred; a certificate of a Designated Employee setting
forth the details of such event described in subsections (a)
through (f) above, as applicable, and the action which the
Company or such member of its ERISA Controlled Group proposes to
take with respect thereto, together with a copy of any notice of
filing from the PBGC or which may be required by the PBGC or
other agency of the United States government with respect
thereto. As soon as possible, and in any event within three
Business Days after the receipt by either the Company or a member
of its ERISA Controlled Group, of (i) a demand letter from the
PBGC notifying the Company or member of its ERISA Controlled
Group of the final decision finding liability under Sections
4062, 4063 or 4064 of ERISA with respect to a Plan and the date
by which such liability must be paid or (ii) a notice from the
PBGC that a Lien has been or is to be imposed on any assets of
the Company or a member of its ERISA Controlled Group in favor of
the PBGC or a Plan, a copy of such letter or notice, together
with a certificate of a Designated Employee setting forth the
action which the Company or such member of its ERISA Controlled
Group proposes to take with respect thereto.
6.1.10 Other Information. From time to time such
-----------------
other information concerning the Company and its Subsidiaries as
any Bank or the Agent may reasonably request.
6.2 Books, Records and Inspections. Keep, and cause
------------------------------
each of its Subsidiaries to keep, its books and records in
accordance with sound business practices sufficient to allow the
preparation of financial statements in accordance with Generally
Accepted Accounting Principles; permit, and cause each of its
Subsidiaries to permit, on reasonable notice and at reasonable
times (or without notice and at any time during the existence of
an Event of Default or an Unmatured Event of Default) any Bank or
the Agent or any representative thereof to inspect the properties
and operations of the Company and its Subsidiaries; and permit,
and cause each of its Subsidiaries to permit, on reasonable
notice and at reasonable times (or without notice and at any time
during the existence of an Event of Default or an Unmatured Event
of Default) any Bank or the Agent or any representative thereof
to visit any or all of its offices to discuss its financial
matters with its officers and its independent auditors, and to
examine (and, at the expense of the Company or the applicable
Subsidiary, photocopy extracts from) any of its books or other
corporate records. The Company shall authorize its auditors to
discuss the financial matters of the Company and its Subsidiaries
with any Bank or the Agent, or any representative thereof, and
acknowledges the Agent's and the Banks, reliance on past, present
and future financial statements, which authorization and
acknowledgement shall be delivered in writing by the Company to
its auditors upon request by the Agent or the Required Banks.
The Company agrees to pay the fees of the Company's auditors
-49-
<PAGE>
incurred in connection with any reasonable exercise of the rights
of the Agent and the Banks pursuant to this Section. So long as
no Event of Default or Unmatured Event of Default shall have
occurred and be continuing, the Company may, in its sole
discretion, elect to have one or more of its executive officers
present at and participate in any discussions conducted pursuant
to this Section 6.2.
-----------
6.3 Insurance. Maintain, and cause each of its
---------
Subsidiaries to maintain, with financially responsible insurance
companies, such insurance as may be required by any law or
governmental regulation or court decree or order applicable to it
and such other insurance, to such extent and against such hazards
and liabilities, as is customarily maintained by companies
similarly situated; and, upon request of the Agent or any Bank,
furnish to the Agent or such Bank a certificate of the Company
setting forth in reasonable detail the nature and extent of all
insurance maintained by the Company and each of its Subsidiaries.
6.4 Compliance with Laws: Payment of Taxes and
------------------------------------------
Liabilities. (a) Comply, and cause each of its Subsidiaries to
- -----------
comply, with all applicable laws, rules, regulations, judgments,
decrees and orders and maintain and comply with all permits,
licenses and other authorizations required by law, rule or
regulation, except where the failure to do so would not be
reasonably expected to materially adversely affect either (i) the
financial condition, operations, assets, business, properties or,
to the knowledge of the Company, prospects of the Company and its
Subsidiaries, taken as a whole or (ii) the ability of its
Subsidiaries to perform their obligations under the Loan
Documents; and (b) pay, and cause each of its Subsidiaries to
pay, prior to delinquency, all taxes and other governmental
charges against it or any of its property, as well as claims of
any kind which, if unpaid, might become a material Lien on any of
its property; provided, however, that the foregoing shall not
-------- -------
require the Company or any of its Subsidiaries to pay any such
tax or charge so long as it shall contest the validity thereof in
good faith by appropriate proceedings and shall set aside on its
books adequate reserves with respect thereto in accordance with
Generally Accepted Accounting Principles and such Lien, if any,
is effectively stayed.
6.5 Maintenance of Existence, Etc. Maintain and
------------------------------
preserve, and (subject to Section 7.3) cause each of its
-----------
Subsidiaries to maintain and preserve, (a) its existence and good
standing in the jurisdiction of its incorporation and (b) its
qualification and good standing as a foreign corporation in each
jurisdiction where the nature of its business makes such
qualification necessary (except in those instances in which the
failure to be qualified or in good standing does not materially
adversely affect either (a) the financial condition, operations,
assets, business, properties or, to the knowledge of the Company,
-50-
<PAGE>
prospects of the Company and its Subsidiaries taken as a whole or
(b) the ability of its Subsidiaries to perform their obligations
under the Loan Documents).
6.6 Use of Proceeds. Use the proceeds of the Loans
---------------
solely for general corporate purposes; and not use or permit any
proceeds of any Loan to be used, either directly or indirectly,
for the purpose, whether immediate, incidental or ultimate, of
"purchasing or carrying" any Margin Stock.
6.7 Employee Benefit Plans. Maintain, and cause each
----------------------
other Subsidiary to maintain, each Plan in material compliance
with all applicable requirements of law and regulations.
6.8 Environmental Covenants.
-----------------------
6.8.1 Environmental Response Obligation. (a)
---------------------------------
Comply, and cause each of its Subsidiaries to comply, with any
valid Federal or state judicial or administrative order requiring
the performance at any real property owned, operated, or leased
by the Company or any of its Subsidiaries of activities in
response to the release or threatened release of a Hazardous
Material, except where such failure to comply could not
reasonably be expected to materially and adversely affect either
(i) the financial condition, operations, assets, business,
properties or, to the knowledge of the Company, prospects of the
Company and its Subsidiaries taken as a whole or (ii) the ability
of the Company or any of its Subsidiaries to perform their
obligations under the Loan Documents; (b) notify the Agent within
ten days of the receipt of any written claim, demand, proceeding,
Action, or notice of liability by any Person arising out of or
relating to the release or threatened release of a Hazardous
Material on, under or from any property owned, operated or leased
by the Company or any of its Subsidiaries; and (c) notify the
Agent within ten days of any release, threat of release, or
disposal of Hazardous Material reported to any governmental
regulatory authority at any real property owned, operated, or
leased by the Company or any of its Subsidiaries.
6.8.2 Environmental Liabilities. Not, and not
-------------------------
permit any of its Subsidiaries to, violate any requirement of law
regarding Hazardous Materials; and, without limiting the
foregoing, not commence disposal of any Hazardous Material into
or onto any real property owned, operated, or leased by the
Company or any of its Subsidiaries nor allow any lien imposed
pursuant to any law, regulation or order relating to Hazardous
Materials or the disposal thereof to remain on such real
property, except as could not reasonably be expected to
materially and adversely affect either (a) the financial
condition, operations, assets, business, properties or, to the
knowledge of the Company, prospects of the Company and its
Subsidiaries taken as a whole or (b) the ability of the Company
-51-
<PAGE>
or any of its Subsidiaries to perform their obligations under the
Loan Documents.
6.9 Material Agreements. Comply with and perform, and
-------------------
cause each of its Subsidiaries to comply with and perform, every
covenant, term, condition and other provision of every agreement
indenture, instrument and other document which is binding on the
Company or any of its Subsidiaries Party (except in those
instances in which the failure to so comply and perform could not
reasonably be expected to materially adversely affect either (a)
the financial condition, operations, assets, business, properties
or, to the knowledge of the Company, prospects of the Company and
its Subsidiaries taken as a whole or (b) the ability of the
Company and its Subsidiaries to perform their obligations under
the Loan Documents).
6.10 Maintenance of Properties. Maintain, and cause
-------------------------
each of its Subsidiaries to maintain, its material equipment,
improvements and other property in good repair, working order and
condition, ordinary wear and tear excepted, and will make, and
cause each of its Subsidiaries to make, such repairs,
replacements and additions as may be necessary to maintain such
condition.
6.11 Subsidiary Guaranties. Immediately upon the
---------------------
formation or acquisition of any Material Subsidiary or upon any
Person becoming a Material Subsidiary or upon any Person becoming
a Material Subsidiary, the Company shall cause such Subsidiary to
execute and deliver to the Agent a Subsidiary Guaranty
substantially in the form of Exhibit D.
---------
SECTION 7 NEGATIVE COVENANTS.
Until the expiration or termination of the Commitments
and thereafter until all obligations of the Company hereunder and
under the other Loan Documents are paid in full in cash and all
Letters of Credit have been terminated, the Company agrees that,
unless at any time the Required Banks shall otherwise expressly
consent in writing, it will not:
7.1 Liens. Permit, or permit any of its Subsidiaries
-----
to, create or permit to exist any Lien on any of its real or
personal properties, assets or rights of whatsoever nature
(whether now owned or hereafter acquired), except:
(a) Liens for taxes or other governmental charges the
payment of which is not at the time required pursuant to Section
-------
6.4;
- ---
(b) (i) Liens of carriers, warehousemen, mechanics and
materialmen and other similar Liens imposed by law and (ii) Liens
-52-
<PAGE>
incurred in connection with worker's compensation, unemployment
compensation and other types of social security (excluding Liens
arising under ERISA), in each case for sums not overdue or being
contested in good faith by appropriate proceedings and such Lien
is effectively stayed and not involving any deposits or advances
or borrowed money or the deferred purchase price of property or
services, and, in each case, for which it maintains adequate
reserves;
(c) Liens identified on Schedule 7.1;
------------
(d) Liens in connection with Capital Leases (to the
extent permitted hereunder);
(e) easements, rights of way, restrictions, minor
defects or irregularities in title and other similar Liens not
interfering in any material respect with the ordinary conduct of
the business of the Company or any of its Subsidiaries;
(f) Liens to secure the performance of statutory
obligations, surety and appeal bonds, government contracts and
trade contracts;
(g) any interest or title of a lessor or lessee under
any lease permitted by this Agreement;
(h) Liens granted in the ordinary course of business in
favor of Intel Corporation, a Delaware corporation, to secure
accounts payable owed to Intel Corporation with respect to, and
covering only, inventory purchased from Intel Corporation,
pursuant to agreements between the Company and Intel Corporation
as in effect on the Effective Date and as subsequently amended,
restated or modified;
(i) Liens granted in the ordinary course of business in
favor of suppliers of inventory other than Intel Corporation, a
Delaware corporation, to secure trade payables owed to such
suppliers with respect to, and covering only, inventory purchased
from such suppliers, pursuant to such suppliers' standard terms
and conditions for sale of such inventory and securing trade
payables owed to such suppliers not to exceed $5,000,000 at any
one time outstanding;
(j) Liens applicable to the property, plant and
equipment comprising the new warehouse facility described in
Section 7.8 securing indebtedness for borrowed money incurred to
- -----------
finance the cost of acquisition and/or construction of such
facility;
(k) Liens securing purchase money indebtedness incurred
in the ordinary course of business (excluding purchase money
indebtedness incurred in connection with the purchase of
-53-
<PAGE>
inventory) and/or Industrial Revenue Bond financings, provided
--------
that the aggregate amount of indebtedness secured by such Liens
does not exceed $7,500,000 at any one time outstanding and, in
the case of purchase money indebtedness, at least 75% of the
purchase price of such assets is provided by the proceeds of such
purchase money indebtedness and the Lien is applicable only to
the assets acquired with such purchase money indebtedness; and
(l) Liens not otherwise permitted by this Section 7.1
-----------
applicable to assets with a fair market value not to exceed
$5,000,000 (measured at the time each such Lien attaches)
securing obligations not to exceed $2,500,000 at any one time
outstanding.
7.2 Restricted Payments. (a) Declare or pay any
-------------------
dividends on any of its capital stock (other than stock
dividends), (b) purchase or redeem any of its capital stock or
any warrants, options or other rights in respect of its capital
stock, (c) make any other distribution to stockholders, (d)
prepay, purchase or redeem any subordinated debt, (e) pay any
management fees or similar payments of any kind or description to
any holder of common stock of the Company or any Affiliate of
such holder, (f) make any payments under any "earn-out"
provisions in connection with any acquisition or otherwise in
excess of $5,000,000 for the Ginsbury Acquisition, or (g) set
aside funds for any of the foregoing; provided that the Company
--------
may purchase or redeem its capital stock for not more than fair
market value and may pay dividends on its common stock so long as
the aggregate amount paid by the Company for such purchases,
redemptions and dividends after September 30, 1996 shall not
exceed the sum of (i) $43,450,000 plus (ii) 50% of Consolidated
----
Net Income for each Fiscal Quarter (beginning with the Fiscal
Quarter ended December 31, 1996) in which such Consolidated Net
Income is greater than zero minus (iii) 100% of Consolidated Net
-----
Income for each Fiscal Quarter (beginning with the Fiscal Quarter
ended December 31, 1996) in which such Consolidated Net Income is
less than zero, in each case so long as no Event of Default or
Unmatured Event of Default has occurred and is continuing or
would occur as a result thereof.
7.3 Mergers, Consolidations, Sales. Permit, or
------------------------------
permit any of its Subsidiaries to, be a party to any merger or
consolidation, or purchase or otherwise acquire all or
substantially all of the assets or stock of any class of, or any
partnership or joint venture interest in, any other Person or
sell, transfer, convey or lease all or any substantial part of
its assets, or sell or assign with or without recourse any
receivables, except for:
(a) any such merger or consolidation, sale, transfer,
conveyance, lease or assignment of or by any wholly owned
-54-
<PAGE>
Subsidiary of the Company into, with or to the Company or any
other wholly owned Subsidiary of the Company;
(b) any such purchase or other acquisition by the
Company or any wholly owned Subsidiary of the assets or stock of
any wholly owned Subsidiary of the Company;
(c) the sale (for not less than fair market value) of
the Company's presently-owned facility located in Santa Clara,
California in connection with the relocation of all or a portion
of the operations taking place at that location or the sale and
leaseback of all or a portion of such facility;
(d) the sale (for not less than fair market value) and
lease-back of the new warehouse facility to be acquired by the
Company as set forth in the proviso to Section 7.8;
-----------
(e) any sale by the Company or any of its Subsidiaries
in the ordinary course of business of assets which are obsolete
or are no longer used or useful in the business of the Company or
any of its Subsidiaries;
(f) the purchase or other acquisition of all or
substantially all of the assets or stock of any other Person in
the same line of business as the Company (or one related thereto)
provided that the purchase price of such assets or stock,
- --------
including therein the amount of any liabilities assumed in
connection therewith, shall not exceed $10,000,000 in the
aggregate in any Fiscal Year; and
(g) sales, transfers, conveyances or leases of assets,
or contributions of assets to joint ventures or partnerships,
provided that the fair market value of the assets sold,
- --------
transferred, conveyed, leased or contributed pursuant to this
subsection (g) in any Fiscal Year shall not exceed five percent
of Tangible Net Worth as of the last day of the immediately
preceding Fiscal Year.
7.4 Modification of Nature of Business; Modification
------------------------------------------------
of Organizational Documents. Make or permit any material change
- ---------------------------
in the nature of its business; provided that this Section shall
--------
not prevent the Company from engaging in businesses engaged in as
of the Effective Date and similar or related businesses; and not
permit the Articles of Incorporation, Bylaws or other
organizational documents of the Company or any of its
Subsidiaries to be amended or modified in any way that would
adversely affect the interests of the Agent or the Banks
hereunder or under any of the other Loan Documents.
7.5 Investments. Permit, or permit any of its
-----------
Subsidiaries to, make, incur, assume or suffer to exist any
Investment in any other Person, except:
-55-
<PAGE>
(a) Investments existing on the Effective Date and
identified in Schedule 7.5 and Investments made after the
------------
Effective Date expressly included in Schedule 7.5;
------------
(b) Cash Equivalent Investments;
(c) Investments by the Company in its wholly owned
Subsidiaries which are Material Subsidiaries;
(d) Investments by the Company in its wholly owned
Subsidiaries which are not Material Subsidiaries, provided
--------
that such Investments made after September 30, 1996 shall
not exceed $10,000,000 (without giving effect to any
increase or decrease in the value of any such Investment
after the date made);
(e) loans or advances made by any Subsidiary of the
Company to the Company;
(f) reasonable loans or advances to officers and
employees for travel and relocation expenses in the ordinary
course of business; and
(g) other Investments, provided that the net aggregate
--------
amount invested by the Company and its Subsidiaries pursuant
to this subsection (g) (without giving effect to any
increase or decrease in the value of any such Investment
after the date made) shall not exceed $2,000,000.
7.6 No Negative Pledge. Permit, or permit any of its
------------------
Subsidiaries to, enter into or become bound by any agreement
containing any provision which would restrict the ability of the
Company or any of its Subsidiaries to grant a Lien on any of its
assets or which would be violated or breached by any borrowing by
the Company hereunder or issuance or payment of reimbursement
obligations under any Loan or by the performance by the Company
or any of its Subsidiaries of any of its obligations hereunder or
under any other Loan Document, other than the restrictions set
forth in the Prudential Note Purchase Agreement.
7.7 Funded Debt of Subsidiaries. Permit any
---------------------------
Subsidiary to incur any Debt for borrowed money, except:
(a) that a Material Subsidiary which has executed and
delivered a Subsidiary Guaranty may guaranty unsecured Debt of
the Company under the Prudential Note Purchase Agreement; and
(b) Unsecured Debt up to a maximum principal amount of
$10,000,000 in the aggregate for all Subsidiaries.
7.8 Capital Expenditures. Permit, or permit its
--------------------
Subsidiaries to, make or commit to make Capital Expenditures in
-56-
<PAGE>
any Fiscal Year in excess of 225% of the amount expensed as
depreciation in determining Consolidated Net Income from
continuing operations for the immediately preceding Fiscal Year;
provided, however, that Capital Expenditures may exceed the
- -------- -------
foregoing limit in the Fiscal Year ending December 31, 1996.
7.9 Financial Covenants.
-------------------
7.9.1 Minimum Tangible Net Worth. Permit
--------------------------
Tangible Net Worth at any time to be less than an amount equal to
(a) $184,695,000 plus (b) 75% of Consolidated Net Income (with no
----
deduction for losses) for each Fiscal Quarter ending on and after
December 31, 1996 in which such Consolidated Net Income is
greater than zero plus (c) 100% of the net proceeds of any equity
----
securities issued by the Company or any Subsidiary after
September 30, 1996 less (d) up to $5,000,000 in the aggregate
----
paid by the Company under any "earn out" provisions related to
the Ginsbury Acquisition less $25,000,000 in the aggregate paid
by the Company for the purchase or redemption of its common stock
after September 30, 1996.
7.9.2 Maximum Leverage. Permit the Leverage
----------------
Ratio for any Computation Period ending on the last day of any
Fiscal Quarter in the fiscal periods indicated below to exceed
the maximum ratio indicated:
<TABLE>
<CAPTION>
Fiscal Quarters
ending in Fiscal Years Maximum Ratio
---------------------- -------------
<S> <C>
Effective Date - 12/30/97 2.00 to 1.00
12/31/97 and thereafter 1.75 to 1.00
</TABLE>
7.9.3 Minimum Fixed Charge Coverage. Permit the
-----------------------------
ratio of (a) Consolidated Net Income before deducting Interest
Expense, income taxes and lease payments for any Computation
Period less all interest income included in Consolidated Net
Income for such Computation Period, to (b) (i) all Interest
Expense for such Computation Period plus (ii) all lease payments
----
for such Computation Period, to be less than 2.25 to 1, for any
Computation Period.
7.9.4 Current Ratio. Permit the ratio of
-------------
consolidated current assets to current liabilities for the
Company and its consolidated Subsidiaries at any time to be less
than 2.0 to 1.
SECTION 8 EVENTS OF DEFAULT AND THEIR EFFECT.
8.1 Events of Default. Each of the following shall
-----------------
constitute an Event of Default under this Agreement:
-57-
<PAGE>
8.1.1 Non-Payment of the Loans, etc. (a) Default
-----------------------------
in the payment when due of the principal of any Loan, including
without limitation any amount payable pursuant to Section 2.1.3,
-------------
or (b) default in the payment when due of the interest on any
Loan, fees, reimbursement obligations with respect to any Letter
of Credit or any other amounts payable or deliverable by the
Company hereunder or under any other Loan Document, and in the
case of this subsection (b), continuance of such failure for five
days.
8.1.2 Non-Payment of Other Debt. Any default
-------------------------
shall occur under the terms applicable to any Debt of the Company
or any of its Subsidiaries in an aggregate amount (for all Debt
so affected) exceeding $2,500,000 and such default shall (a)
consist of the failure to pay such Debt when due (subject to any
applicable grace period), whether by acceleration or otherwise,
or (b) accelerate the maturity of such Debt or permit the holder
or holders thereof, or any trustee or agent for such holder or
holders, to cause such Debt to become due and payable prior to
its expressed maturity.
8.1.3 Bankruptcy, Insolvency, etc. Any
---------------------------
Subsidiary (other than a Subsidiary which is not a Material
Subsidiary) becomes insolvent or generally fails to pay, or
admits in writing its inability or refusal to pay, its debts as
they become due; or applies for, consents to, or acquiesces in
the appointment of a trustee, receiver or other custodian for
such Person or any property thereof, or makes a general
assignment for the benefit of creditors; or, in the absence of
such application, consent or acquiescence, a trustee, receiver or
other custodian is appointed for any Subsidiary or for a
substantial part of the property of any thereof and is not
discharged within 60 days; or any bankruptcy, reorganization,
debt arrangement, or other case or proceeding under any
bankruptcy or insolvency law, or any dissolution or liquidation
proceeding is commenced in respect of any Subsidiary (other than
a Subsidiary which is not a Material Subsidiary), and if such
case or proceeding is not commenced by the Company and its
Subsidiaries, it is consented to or acquiesced in by the Company
and its Subsidiaries or any order for relief is entered in
connection therewith, or such case or proceeding remains for 60
days undismissed; or any Subsidiary (other than a Subsidiary
which is not a Material Subsidiary) takes any corporate action to
authorize, or in furtherance of, any of the foregoing.
8.1.4 Non-Compliance with Provisions of This
--------------------------------------
Agreement or Any Other Loan Document. Failure by the Company to
- ------------------------------------
comply with or to perform any covenant set forth in Sections
--------
6.1.5(a), 6.1.9, 6.5, 6.11 and Sections 7.1 through 7.9,
- --------------------------------------------------------
inclusive; or failure by the Company to comply with or perform
- ---------
any covenant set forth in Section 6.1.5 (other than subsection
-------------
(a) thereof) and continuance of such failure for 5 days, or
-58-
<PAGE>
failure by the Company or any of its Subsidiaries to comply with
or to perform any other provision of this Agreement or any
provision of any other Loan Document (and not constituting an
Event of Default under any of the other provisions of this
Section 8) and continuance of such failure for 30 days; provided
- --------- --------
that in the event of any failure to comply with Section 6.4 or
-----------
Section 6.8 (to the extent such failure relates to Hazardous
- -----------
Materials), such failure shall not be deemed to be an Event of
Default so long as the Company commences to cure such non-
compliance within such 30-day period and thereafter diligently
proceeds to cure in accordance with the rules, regulations and
procedures of the applicable federal, state and local agencies
regulating Hazardous Materials and completes such cure within 180
days of the date of such failure.
8.1.5 Warranties. Any warranty made herein or in
----------
any other Loan Document by the Company or any other Loan Party is
breached or is false or misleading in any material respect, any
schedule, certificate, financial statement, report, notice or
other writing furnished by or on behalf of the Company or any
Subsidiary of the Company to the Agent or any Bank is false or
misleading in any material respect, in each case on the date as
of which the facts therein set forth are stated or certified or
deemed stated or certified (it being recognized by the Agent and
each Bank that projections and forecasts provided by the Company
are not to be viewed as facts and that actual results during the
period or periods covered by any such projections and forecasts
may differ from projected or forecasted results).
8.1.6 ERISA. (a) Any Termination Event with
-----
respect to an ERISA Plan shall occur which could reasonably be
expected to result in the imposition of liability on the Company
or any member of its ERISA Controlled Group in excess of
$2,500,000 in the aggregate; (b) any Plan (other than a
Multiemployer Plan) shall incur an "accumulated funding
deficiency" (as defined in Section 412 of the Code or Section 302
of ERISA) for which a waiver shall not have been obtained in
accordance with the applicable provisions of the Code or ERISA or
for which a waiver shall have been obtained on the condition that
security be provided by the Company or any member of its ERISA
Controlled Group; (c) the Company or a member of its ERISA
Controlled Group shall have engaged in a transaction which is
prohibited under Section 4975 of the Code or Section 406 of ERISA
which could reasonably be expected to result in the imposition of
liability on the Company or any member of its ERISA Controlled
Group in excess of $2,500,000 in the aggregate; (d) the Company
or any member of its ERISA Controlled Group shall fail to pay
when due an amount in excess of $2,500,000 which it shall have
become liable to pay to the PBGC, a Plan or a trust established
under Title IV of ERISA; (e) a condition shall exist by reason of
which the PBGC would be entitled to obtain a decree adjudicating
that an ERISA Plan (other than a Multiemployer Plan) must be
-59-
<PAGE>
terminated or have a trustee appointed to administer such Plan
(other than a Multiemployer Plan); or (f) a Lien shall be imposed
on any assets of the Company or a member of its ERISA Controlled
Group in favor of the PBGC or a Plan.
8.1.7 Judgments. Final judgments which exceed an
---------
aggregate of $2,500,000 (or the equivalent at the time in
question in any other currency) or any judgment which otherwise
could reasonably be expected to have a material adverse effect on
either (a) the financial condition, operations, assets, business,
properties or, to the knowledge of the Company, prospects of the
Company and its Subsidiaries taken as a whole or (b) the ability
of the Loan Parties to perform their obligations under the Loan
Documents shall be rendered against the Company or any Subsidiary
and shall not have been satisfied, paid, discharged or vacated or
had execution thereof stayed pending appeal within 60 days after
entry or filing of such judgments.
8.1.8 Guaranties. Any of the Subsidiary
----------
Guaranties shall, after the execution and delivery thereof, cease
to be in full force and effect or is declared to be null and
void, or the validity or enforceability thereof is contested in a
judicial proceeding, or any guarantor under any of the Subsidiary
Guaranties denies that it has any further liability thereunder.
8.1.9 Change of Control. Any Person or group of
-----------------
Persons shall become the beneficial owner, directly or
indirectly, of capital stock of the Company representing 30% or
more of the voting power of the Company or otherwise enabling
such Person or group of Persons to exercise effective control
over the management of the Company.
8.2 Effect of Event of Default. If any Event of
--------------------------
Default described in Section 8.1.3 with respect to the Company
-------------
shall occur, the Commitments (if they have not theretofore
terminated) shall immediately terminate and the Notes and all
other obligations hereunder shall become immediately due and
payable and the Company shall become immediately obligated to
deliver to the Agent cash collateral in an amount equal to the
outstanding Stated Amount of all Letters of Credit, all without
presentment, demand, protest or notice of any kind; and, in the
case of any other Event of Default, the Agent may (and upon
written request of the Required Banks shall) declare the
Commitments (if they have not theretofore terminated) to be
terminated and/or declare all Notes and all other obligations
hereunder to be due and payable and/or demand that the Company
immediately deliver to the Agent cash collateral in an amount
equal to the outstanding Stated Amount of all Letters of Credit,
whereupon the Commitments (if they have not theretofore
terminated) shall immediately terminate and/or all Notes and all
other obligations hereunder shall become immediately due and
payable and/or the Company shall immediately become obligated to
-60-
<PAGE>
deliver to the Agent cash collateral in an amount equal to the
Stated Amount of all Letters of Credit, all without presentment,
demand, protest or notice of any kind. Notwithstanding the
foregoing, the effect of an Event of Default of any event
described in Section 8.1.1 or Section 8.1.3 with respect to the
------------- -------------
Company may be waived by the written concurrence of all of the
Banks, and the effect of an Event of Default of any other event
described in this Section 8 may be waived by the written
---------
concurrence of the Required Banks. Any cash collateral hereunder
shall be delivered to the Agent (without liability for interest
thereon), and the Agent may apply the Cash Collateral to
obligations arising in connection with any drawing under a Letter
of Credit. Upon the expiration or termination of any Letters of
Credit, such cash collateral in excess of the Stated Amount of
the remaining Letters of Credit may be applied by the Agent to
any remaining obligations hereunder and any excess (as determined
by the Agent or by a court of competent jurisdiction) shall be
delivered to the Company or as a court of competent jurisdiction
may direct.
SECTION 9 THE AGENT.
9.1 Appointment and Authorization; "Agent". Each
--------------------------------------
Bank hereby irrevocably (subject to Section 9.9) appoints,
-----------
designates and authorizes the Agent to take such action on its
behalf under the provisions of this Agreement and each other Loan
Document and to exercise such powers and perform such duties as
are expressly delegated to it by the terms of this Agreement or
any other Loan Document, together with such powers as are
reasonably incidental thereto. Notwithstanding any provision to
the contrary contained elsewhere in this Agreement or in any
other Loan Document, the Agent shall not have any duties or
responsibilities, except those expressly set forth herein, nor
shall the Agent have or be deemed to have any fiduciary
relationship with any Bank, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be
read into this Agreement or any other Loan Document or otherwise
exist against the Agent. Without limiting the generality of the
foregoing sentence, the use of the term "agent" in this Agreement
with reference to the Agent is not intended to connote any
fiduciary or other implied (or express) obligations arising under
agency doctrine of any applicable law. Instead, such term is
used merely as a matter of market custom, and is intended to
create or reflect only an administrative relationship between
independent contracting parties.
9.2 Delegation of Duties. The Agent may execute any
--------------------
of its duties under this Agreement or any other Loan Document by
or through agents, employees or attorneys-in-fact and shall be
entitled to advice of counsel concerning all matters pertaining
to such duties. The Agent shall not be responsible for the
-61-
<PAGE>
negligence or misconduct of any agent or attorney-in-fact that it
selects with reasonable care.
9.3 Liability of Agent. None of the Agent-Related
------------------
Persons shall (a) be liable for any action taken or omitted to be
taken by any of them under or in connection with this Agreement
or any other Loan Document or the transactions contemplated
hereby (except for its own gross negligence or willful
misconduct), or (b) be responsible in any manner to any of the
Banks for any recital, statement, representation or warranty made
by the Company or any Subsidiary or Affiliate of the Company, or
any officer thereof, contained in this Agreement or in any other
Loan Document, or in any certificate, report, statement or other
document referred to or provided for in, or received by the Agent
under or in connection with, this Agreement or any other Loan
Document, or the validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Loan
Document, or for any failure of the Company or any other party to
any Loan Document to perform its obligations hereunder or
thereunder. No Agent-Related Person shall be under any
obligation to any Bank to ascertain or to inquire as to the
observance or performance of any of the agreements contained in,
or conditions of, this Agreement or any other Loan Document, or
to inspect the properties, books or records of the Company or any
of the Company's Subsidiaries or Affiliates.
9.4 Reliance by Agent. (a) The Agent shall be
-----------------
entitled to rely, and shall be fully protected in relying, upon
any writing, resolution, notice, consent, certificate, affidavit,
letter, telegram, facsimile, telex or telephone message,
statement or other document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the
proper Person or Persons, and upon advice and statements of legal
counsel (including counsel to the Company), independent
accountants and other experts selected by the Agent. The Agent
shall be fully justified in failing or refusing to take any
action under this Agreement or any other Loan Document unless it
shall first receive such advice or concurrence of the Required
Banks as it deems appropriate and, if it so requests, it shall
first be indemnified to its satisfaction by the Banks against any
and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action. The
Agent shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement or any other Loan
Document in accordance with a request or consent of the Required
Banks and such request and any action taken or failure to act
pursuant thereto shall be binding upon all of the Banks.
(b) For purposes of determining compliance with the
conditions specified in Section 4, each Bank that has executed
---------
this Agreement shall be deemed to have consented to, approved or
accepted or to be satisfied with, each document or other matter
-62-
<PAGE>
either sent by the Agent to such Bank for consent, approval,
acceptance or satisfaction, or required thereunder to be
consented to or approved by or acceptable or satisfactory to the
Bank.
9.5 Notice of Default. The Agent shall not be deemed
-----------------
to have knowledge or notice of the occurrence of any Default or
Event of Default, except with respect to defaults in the payment
of principal, interest and fees required to be paid to the Agent
for the account of the Banks, unless the Agent shall have
received written notice from a Bank or the Company referring to
this Agreement, describing such Default or Event of Default and
stating that such notice is a "notice of default". The Agent
will notify the Banks of its receipt of any such notice. The
Agent shall take such action with respect to such Default or
Event of Default as may be requested by the Required Banks in
accordance with Section 10.1; provided, however, that unless and
------------ -------- -------
until the Agent has received any such request, the Agent may (but
shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of
Default as it shall deem advisable or in the best interest of the
Banks.
9.6 Credit Decision. Each Bank acknowledges that
---------------
none of the Agent-Related Persons has made any representation or
warranty to it, and that no act by the Agent hereinafter taken,
including any review of the affairs of the Company and its
Subsidiaries, shall be deemed to constitute any representation or
warranty by any Agent-Related Person to any Bank. Each Bank
represents to the Agent that it has, independently and without
reliance upon any Agent-Related Person and based on such
documents and information as it has deemed appropriate, made its
own appraisal of and investigation into the business, prospects,
operations, property, financial and other condition and credit
worthiness of the Company and its Subsidiaries, and all
applicable bank regulatory laws relating to the transactions
contemplated hereby, and made its own decision to enter into this
Agreement and to extend credit to the Company hereunder. Each
Bank also represents that it will, independently and without
reliance upon any Agent-Related Person and based on such
documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and
decisions in taking or not taking action under this Agreement and
the other Loan Documents, and to make such investigations as it
deems necessary to inform itself as to the business, prospects,
operations, property, financial and other condition and credit
worthiness of the Company. Except for notices, reports and other
documents expressly herein required to be furnished to the Banks
by the Agent, the Agent shall not have any duty or responsibility
to provide any Bank with any credit or other information
concerning the business, prospects, operations, property,
financial and other condition or credit worthiness of the Company
-63-
<PAGE>
which may come into the possession of any of the Agent-Related
Persons.
9.7 Indemnification of Agent. Whether or not the
------------------------
transactions contemplated hereby are consummated, the Banks shall
indemnify upon demand the Agent-Related Persons (to the extent
not reimbursed by or on behalf of the Company and without
limiting the obligation of the Company to do so), pro rata, from
and against any and all Indemnified Liabilities; provided,
--------
however, that no Bank shall be liable for the payment to the
- -------
Agent-Related Persons of any portion of such Indemnified
Liabilities resulting solely from such Person's gross negligence
or willful misconduct. Without limitation of the foregoing, each
Bank shall reimburse the Agent upon demand for its ratable share
of any costs or out-of-pocket expenses (including the fees and
charges of counsel for the Agent, including, without limitation,
all allocated costs of the Agent's internal counsel, and of local
counsel, if any, who may be retained) incurred by the Agent in
connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether
through negotiations, legal proceedings or otherwise) of, or
legal advice in respect of rights or responsibilities under, this
Agreement, any other Loan Document, or any document contemplated
by or referred to herein, to the extent that the Agent is not
reimbursed for such expenses by or on behalf-of the Company. The
undertaking in this Section shall survive the payment of all
Obligations hereunder and the resignation or replacement of the
Agent.
9.8 Agent in Individual Capacity. BofA and its
----------------------------
Affiliates may make loans to, issue letters of credit for the
account of, accept deposits from, acquire equity interests in and
generally engage in any kind of banking, trust, financial
advisory, underwriting or other business with the Company and its
Subsidiaries and Affiliates as though BofA were not the Agent
hereunder and without notice to or consent of the Banks. The
Banks acknowledge that pursuant to such activities, BofA or its
Affiliates may receive information regarding the Company or its
Affiliates (including information that may be subject to
confidentiality obligations in favor of the Company or such
Subsidiary) and acknowledge that the Agent shall be under no
obligation to provide such information to them. With respect to
its Loans, BofA shall have the same rights and powers under this
Agreement as any other Bank and may exercise the same as though
it were not the Agent, and the terms "Bank" and "Banks" include
BofA in its individual capacity.
9.9 Successor Agent. The Agent may, and at the
---------------
request of the Required Banks shall, resign as Agent upon 30
days' notice to the Banks. If the Agent resigns under this
Agreement, the Required Banks shall appoint from among the Banks
a successor agent for the Banks which successor agent shall be
-64-
<PAGE>
approved by the Company. If no successor agent is appointed
prior to the effective date of the resignation of the Agent, the
Agent may appoint, after consulting with the Banks and the
Company, a successor agent from among the Banks. Upon the
acceptance of its appointment as successor agent hereunder, such
successor agent shall succeed to all the rights, powers and
duties of the retiring Agent and the term "Agent" shall mean such
successor agent and the retiring Agent's appointment, powers and
duties as Agent shall be terminated. After any retiring Agent's
resignation hereunder as Agent, the provisions of this Section 9
---------
and Sections 10.6 and 10.12 shall inure to its benefit as to any
------------- -----
actions taken or omitted to be taken by it while it was Agent
under this Agreement. If no successor agent has accepted
appointment as Agent by the date which is 30 days following a
retiring Agent's notice of resignation, the retiring Agent's
resignation shall nevertheless thereupon become effective and the
Banks shall perform all of the duties of the Agent hereunder
until such time, if any, as the Required Banks appoint a
successor agent as provided for above.
9.10 Withholding Tax. (a) If any Bank is a "foreign
---------------
corporation, partnership or trust" within the meaning of the Code
and such Bank claims exemption from, or a reduction of, U.S.
withholding tax under Sections 1441 or 1442 of the Code, such
Bank agrees with and in favor of the Agent, to deliver to the
Agent:
(i) if such Bank claims an exemption from, or a
reduction of, withholding tax under a United States tax
treaty, two properly completed and executed copies of IRS
Form 1001 before the payment of any interest in the first
calendar year and before the payment of any interest in each
third succeeding calendar year during which interest may be
paid under this Agreement;
(ii) if such Bank claims that interest paid under this
Agreement is exempt from United States withholding tax
because it is effectively connected with a United States
trade or business of such Bank, two properly completed and
executed copies of IRS Form 4224 before the payment of any
interest is due in the first taxable year of such Bank and
in each succeeding taxable year of such Bank during which
interest may be paid under this Agreement; and
(iii) such other form or forms as may be required
under the Code or other laws of the United States as a
condition to exemption from, or reduction of, united States
withholding tax.
Such Bank agrees to promptly notify the Agent of any change in
circumstances which would modify or render invalid any claimed
exemption or reduction.
-65-
<PAGE>
(b) If any Bank claims exemption from, or reduction
of, withholding tax under a United States tax treaty by providing
IRS Form 1001 and such Bank sells, assigns, grants a
participation in, or otherwise transfers all or part of the
Obligations of the Company to such Bank, such Bank agrees to
notify the Agent of the percentage amount in which it is no
longer the beneficial owner of Obligations of the Company to such
Bank. To the extent of such percentage amount, the Agent will
treat such Bank's IRS Form 1001 as no longer valid.
(c) If any Bank claiming exemption from United States
withholding tax by filing IRS Form 4224 with the Agent sells,
assigns, grants a participation in, or otherwise transfers all or
part of the Obligations of the Company to such Bank, such Bank
agrees to undertake sole responsibility for complying with the
withholding tax requirements imposed by Sections 1441 and 1442 of
the Code.
(d) If any Bank is entitled to a reduction in the
applicable withholding tax, the Agent may withhold from any
interest payment to such Bank an amount equivalent to the
applicable withholding tax after taking into account such
reduction. However, if the forms or other documentation required
by subsection (a) of this Section are not delivered to the Agent,
then the Agent may withhold from any interest payment to such
Bank not providing such forms or other documentation an amount
equivalent to the applicable withholding tax imposed by Sections
1441 and 1442 of the Code, without reduction.
(e) If the IRS or any other Governmental Authority of
the United States or other jurisdiction asserts a claim that the
Agent did not properly withhold tax from amounts paid to or for
the account of any Bank (because the appropriate form was not
delivered or was not properly executed, or because such Bank
failed to notify the Agent of a change in circumstances which
rendered the exemption from, or reduction of, withholding tax
ineffective, or for any other reason) such Bank shall indemnify
the Agent fully for all amounts paid, directly or indirectly, by
the Agent as tax or otherwise, including penalties and interest,
and including any taxes imposed by any jurisdiction on the
amounts payable to the Agent under this Section, together with
all costs and expenses (including the fees and charges of counsel
for the Agent, including, without limitation, all allocated costs
of the Agent's internal counsel, and of local counsel, if any,
who may be retained). The obligation of the Banks under this
subsection shall survive the payment of all Obligations and the
resignation or replacement of the Agent.
-66-
<PAGE>
SECTION 10 MISCELLANEOUS.
10.1 Waiver: Amendments. No delay on the part of the
------------------
Agent, any Bank or any other holder of a Note in the exercise of
any right, power or remedy shall operate as a waiver thereof, nor
shall any single or partial exercise by any of them of any right,
power or remedy preclude other or further exercise thereof, or
the exercise of any other right, power or remedy. No amendment,
modification or waiver of, or consent with respect to, any
provision of this Agreement, the Notes or the other Loan
Documents shall in any event be effective unless the same shall
be in writing and signed and delivered by the Agent and signed
and delivered by Banks having an aggregate Percentage of not less
than the aggregate Percentage expressly designated herein with
respect thereto or, in the absence of such designation as to any
provision of this Agreement, the Notes or the other Loan
Documents, by the Required Banks, and then any such amendment,
modification, waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
No amendment, modification, waiver or consent shall:
(a) extend or increase the amount of the
Commitments;
(b) extend the date for payment of any principal
of or interest on the Loans, any reimbursement obligation under
any Letter of Credit or any interest or any fees payable
hereunder;
(c) reduce the principal amount of any Loan or any
reimbursement obligation under any Letter of Credit, the rate of
interest thereon or any fees payable hereunder;
(d) reduce the aggregate Percentage required to
effect an amendment, modification, waiver or consent; or
(e) release any Subsidiary party to a Subsidiary
Guaranty from its obligations thereunder without, in each case,
the consent of all Banks.
No provisions of Section 9 shall be amended, modified or waived
---------
without the consent of the Agent.
10.2 Confirmations. The Company and each holder of a
-------------
Note agree from time to time, upon written request received by it
from the other, to confirm to the other in writing (with a copy
of each such confirmation to the Agent) the aggregate unpaid
principal amount of the Loans then outstanding under such Note.
10.3 Notices. Except as otherwise provided in
-------
Sections 2.3 and 2.4, all notices hereunder shall be in writing
- ------------ ---
(including, without limitation, facsimile transmission) and shall
-67-
<PAGE>
be sent to the applicable party at its address shown on Schedule
--------
10.3 hereto or at such other address as such party may, by
- ----
written notice received by the other party, have designated as
its address for such purpose. Notices sent by facsimile
transmission shall be deemed to have been given when sent;
notices sent by mail shall be deemed to have been given three
Business Days after the date when sent by registered or certified
mail, postage prepaid; notices sent by overnight courier shall be
deemed to have been given one Business Day after the date when
sent; and notices sent by hand delivery shall be deemed to have
been given when received. For purposes of Sections 2.3 and 2.4,
------------ ---
the Agent shall be entitled to rely on instructions from any
person that the Agent in good faith believes is a Designated
Employee of the Company. The Company shall be bound by such
instructions in the same manner as if such person were a
Designated Employee and shall indemnify and hold the Agent and
each Bank harmless from any loss, cost or expense resulting from
any such reliance.
10.4 Computations. Where the character or amount of
------------
any asset or liability or item of income or expense is required
to be determined, or any consolidation or other accounting
computation is required to be made, for the purpose of this
Agreement, such determination or calculation shall, to the extent
applicable and except as otherwise specified in this Agreement,
be made in accordance with Generally Accepted Accounting
Principles applicable at the time of such computation (or, if
"Accounting Changes" (as defined below) shall have occurred and
the affected provisions of this Agreement shall not have been
amended as contemplated by the next sentence, in accordance with
generally accepted accounting principles applicable immediately
prior to such Accounting Changes) and applied on a basis
consistent with the audited financial statements certified by
Arthur Andersen LLP for Fiscal Year 1995. In the event that any
"Accounting Changes" (as defined below) occur and such changes
result in a change in the method of calculation of financial
covenants, standards or terms in this Agreement, then the Company
and the Banks agree to enter into negotiations in order to amend
such provisions of this Agreement so as to equitably reflect such
Accounting Changes with the desired result that the criteria for
evaluating the Company's financial condition shall be the same
after such Accounting Changes as if such Accounting Changes had
not been made. "Accounting Changes" means: (a) changes in
accounting principles required by the promulgation of any rule,
regulation, pronouncement or opinion by the Financial Accounting
Standards Board of the American Institute of Certified Public
Accountants (or successors thereto or agencies with similar
functions); and (b) changes in accounting principles recommended
and implemented by the Company's certified public accountants.
10.5 Regulation U. Each Bank represents that it in
------------
good faith is not relying, either directly or indirectly, upon
-68-
<PAGE>
any Margin Stock as collateral security for the extension or
maintenance by it of any credit provided for in this Agreement.
10.6 Costs, Expenses and Taxes. The Company agrees to
-------------------------
pay on demand all reasonable out-of-pocket costs and expenses of
the Agent (including the fees and charges of counsel for the
Agent, including, without limitation, all allocated costs of the
Agent's internal counsel, and of local counsel, if any, who may
be retained) in connection with the preparation, execution,
delivery and administration of this Agreement, the other Loan
Documents and all other documents provided for herein or
delivered or to be delivered hereunder or in connection herewith
(including, without limitation, any amendments, supplements or
waivers to any Loan Documents), and all out-of-pocket costs and
expenses (including reasonable attorneys' fees, court costs and
other legal expenses and allocated costs of staff counsel)
incurred by the Agent and each Bank after an Event of Default in
connection with the enforcement of this Agreement, the other Loan
Documents or any such other documents. Each Bank agrees to
reimburse the Agent for such Bank's pro rata share (based on its
respective Percentage) of any such costs and expenses of the
Agent not paid by the Company. In addition, the Company agrees
to pay, and to save the Agent and the Banks harmless from all
liability for, any stamp or other taxes which may be payable in
connection with the execution and delivery of this Agreement, the
borrowings hereunder, the issuance of the Notes or the execution
and delivery of any other Loan Document or any other document
provided for herein or delivered or to be delivered hereunder or
in connection herewith. All obligations provided for in this
Section 10.6 shall bear interest from and including the date such
- ------------
obligations or fees become payable to but not including the date
that such payments are made, payable on demand, at a rate per
annum equal to the then applicable rate charged on Base Rate
Loans. All obligations provided for in this Section 10.6 shall
------------
survive repayment of the Loans and all reimbursement obligations
under Letters of Credit, cancellation of the Notes and any
termination of the Commitments and this Agreement.
10.7 Captions. Section captions used in this
--------
Agreement are for convenience only and shall not affect the
construction of this Agreement.
10.8 Assignments; Participations.
---------------------------
10.8.1 Assignments. Any Bank may, with the prior
-----------
consent of each Issuing Bank (provided that such Issuing Bank has
--------
any Letters of Credit then outstanding at the time of such
proposed assignment), the Agent and the Company (which consents
shall not be unreasonably delayed or withheld), at any time
assign and delegate to one or more Eligible Assignees (any Person
to whom such an assignment and delegation is to be made being
herein called an "Assignee"), all or any fraction of such Bank's
-69-
<PAGE>
Loans, Note, direct or participation interest in any Letter of
Credit, Commitment or any other interest of such Bank hereunder
(which assignment and delegation shall be of a constant, and not
a varying, percentage of all the assigning Bank's Loans, direct
or participation interest in Letters of Credit and Commitment),
subject to a minimum aggregate amount if the Assignee is not a
Bank equal to the lesser of (a) the assigning Bank's remaining
Commitment and (b) $5,000,000; provided, however, that the
-------- -------
Company and the Agent shall be entitled to continue to deal
solely and directly with such Bank in connection with the
interests so assigned and delegated to an Assignee until five
Business Days (or such lesser period of time as the Agent and the
assigning Bank shall agree) after the date when all of the
following conditions shall have been met:
(i) written notice of such assignment and delegation,
together with payment instructions, addresses and related
information with respect to such Assignee, shall have been
given to the Company and the Agent by such assigning Bank
and the Assignee,
(ii) the assigning Bank and the assignee shall have
executed and delivered to the Company and the Agent an
assignment agreement substantially in the form of Exhibit E
---------
(a "Notice of Assignment"), together with any documents
required to be delivered thereunder, including, without
limitation, United States Internal Revenue Service Form 4224
or Form 1001, which Notice of Assignment shall have been
accepted by the Agent, the Company and each such Issuing
Bank, and
(iii) the assigning Bank or the Assignee shall have
paid the Agent a processing fee of $2,500.
From and after the date on which the conditions described above
have been met, (x) such Assignee shall be deemed automatically to
have become a party hereto and, to the extent that rights and
obligations hereunder have been assigned and delegated to such
Assignee pursuant to such Notice of Assignment, shall have the
rights and obligations of a Bank hereunder, and (y) the assigning
Bank, to the extent that rights and obligations hereunder have
been assigned and delegated by it pursuant to such Notice of
Assignment, shall be released from its obligations hereunder.
Within ten Business Days after effectiveness of any assignment
and delegation, the Company shall execute and deliver to the
Agent (for delivery to the Assignee and the Assignor, as
applicable) a new Note in the principal amount of the Assignee's
Percentage of the total amount of the Commitments and, if the
assigning Bank has retained a Percentage of the total amount of
the Commitments hereunder, a replacement Note in the principal
amount of the Percentage of the Loan retained by the assigning
Bank (such Note to be in exchange for, but not in payment of, the
-70-
<PAGE>
predecessor Note held by such assigning Bank). Each such Note
shall be dated the date of the Note so assigned. The assigning
Bank shall mark the predecessor Note "exchanged" and deliver it
to the Company. Accrued interest on that part of the predecessor
Note being assigned shall be paid as provided in the Notice of
Assignment. Accrued interest and fees on that part of the
predecessor Note not being assigned shall be paid to the
assigning Bank. Accrued interest and accrued fees shall be paid
at the same time or times provided in the predecessor Note and in
this Agreement. Any attempted assignment and delegation not made
in accordance with this Section 10.8.1 shall be null and void.
--------------
In addition to the foregoing, at the request of the
Company, any Bank designated by the Company for replacement (a
"Replaced Bank") shall, upon five Business Days, (or such lesser
period of time as the Company, the Agent and the Replaced Bank
shall agree) prior notice, assign all (but not less than all) of
such Bank's Loans, Note, direct or participation interest in any
Letter of Credit, Commitment and all other interests of such Bank
hereunder and under the other Loan Documents (other than
contingent rights which survive such transfer) to an Assignee
designated by the Company and approved by the Agent and each
other Bank (each in their sole discretion) at par value. Such
assignment shall be effected as set forth in this Section 10.8.1.
--------------
Notwithstanding the foregoing provisions of this
Section 10.8.1 or any other provision of this Agreement, any Bank
- --------------
may at any time assign all or any portion of its Loans and its
Note to a Federal Reserve Bank (but no such assignment shall
release any Bank from any of its obligations hereunder).
10.8.2 Participations. Any Bank may at any time
--------------
sell to one or more commercial banks or other Persons
participating interests in any Loan owing to such Bank, the Note
held by such Bank, the Commitment of such Bank, the direct or
participation interest of such Bank in any Letter of Credit or
any other interest of such Bank hereunder (any Person purchasing
any such participating interest being herein called a
"Participant"). In the event of a sale by a Bank of a
participating interest to a Participant, (x) such Bank shall
remain the holder of its Note for all purposes of this Agreement,
(y) the Company and the Agent shall continue to deal solely and
directly with such Bank in connection with such Bank's rights and
obligations hereunder and (z) all amounts payable by the Company
shall be determined as if such Bank had not sold such
participation and shall be paid directly to such Bank. No Bank
shall grant any Participant any voting rights with respect to
amendments or modifications of this Agreement or any of the other
Loan Documents, except with respect to any of the events
described in the penultimate sentence of Section 10.1. Each Bank
------------
agrees to incorporate the requirements of the preceding sentence
into each participation agreement which such Bank enters into
-71-
<PAGE>
with any Participant. The Company agrees that if amounts
outstanding under this Agreement and the Notes are due and
payable (as a result of acceleration or otherwise), each
Participant shall be deemed to have the right of setoff in
respect of its participating interest in amounts owing under this
Agreement, any Note and with respect to any Letter of Credit to
the same extent as if the amount of its participating interest
were owing directly to it as a Bank under this Agreement or such
Note; provided that such right of setoff shall be subject to the
--------
obligation of each Participant to share with the Banks, and the
Banks agree to share with each Participant, as provided in
Section 2.15. The Company also agrees that each Participant
- ------------
shall be entitled to the benefits of Section 3.1 and Sections 3.2
----------- ------------
through 3.9, inclusive, as if it were a Bank (provided that no
- ----------------------
Participant shall receive any greater compensation pursuant to
Section 3.1 and Sections 3.2 through 3.9, inclusive, than would
- ----------- -----------------------------------
have been paid to the participating Bank if no participation had
been sold).
10.9 Governing Law. This Agreement and each Note
-------------
shall be a contract made under and governed by the internal laws
of the State of California. Whenever possible each provision of
this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of
this Agreement shall be prohibited by or invalid under applicable
law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
All obligations of the Company and rights of the Agent, the Banks
and any other holder of a Note expressed herein or in any other
Loan Document shall be in addition to and not in limitation of
those provided by applicable law.
10.10 Counterparts. This Agreement may be executed in
------------
any number of counterparts and by the different parties hereto on
separate counterparts and each such counterpart shall be deemed
to be an original, but all such counterparts shall together
constitute but one and the same Agreement. When counterparts
executed by all of the parties hereto shall have been lodged with
the Agent (or, in the case of any Bank as to which an executed
counterpart shall not have been so lodged, the Agent shall have
received confirmation from such Bank of execution of a
counterpart hereof by such Bank), this Agreement shall become
effective as of the date hereof, and at such time the Agent shall
notify the Company and each Bank.
10.11 Successors and Assigns. This Agreement shall be
----------------------
binding upon the Company, the Banks and the Agent and their
respective successors and assigns, and shall inure to the benefit
of the Company, the Banks and the Agent and the successors and
assigns of the Banks and the Agent. The Company may not assign
-72-
<PAGE>
its rights or obligations hereunder or under any other Loan
Document without the consent of each of the Banks.
10.12 Indemnification by the Company. In
------------------------------
consideration of the execution and delivery of this Agreement by
the Agent and the Banks and the agreement to extend the
Commitments provided hereunder, the Company hereby agrees to
indemnify and hold the Agent, each Bank and each of the officers,
directors, employees and agents of the Agent and each Bank
(collectively the "Bank Parties" and individually each a "Bank
Party") harmless from and against any and all actions, causes of
action, suits, losses, liabilities, damages and expenses,
including, without limitation, reasonable attorneys' fees and
charges and allocated costs of staff counsel (collectively
therein called the "Indemnified Liabilities"), incurred by the
-----------------------
Bank Parties or any of them as a result of, or arising out of, or
relating to the execution, delivery, performance or enforcement
of this Agreement or any other Loan Document by any of the Bank
Parties, or the exercise of rights or remedies with respect
hereto or thereto, except that no Bank Party shall be entitled to
such indemnification to the extent of any such Indemnified
Liabilities arising on account of such Bank Party's gross
negligence or willful misconduct. If and to the extent that the
foregoing undertaking may be unenforceable for any reason, the
Company hereby agrees to make the maximum contribution to the
payment and satisfaction of each of the Indemnified Liabilities
which is permissible under applicable law. Nothing set forth
above shall be construed to relieve any Bank Party from any
obligation it may have under this Agreement. All obligations
provided for in this Section 10.12 shall survive repayment of the
-------------
Loans and reimbursement obligations under Letters of Credit,
cancellation of the Notes, termination of the Letters of Credit,
termination of the Commitments and any termination of this
Agreement. Nothing in this Section 10.12 shall obligate the
-------------
Company to reimburse any Bank for any costs or expenses incurred
by such Bank prior to the Effective Date in connection with the
preparation of this Agreement or the other Loan Documents.
10.13 Forum Selection and Consent to Jurisdiction.
-------------------------------------------
ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, SHALL
BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE
OF CALIFORNIA OR IN THE UNITED STATES DISTRICT COURT FOR THE
CENTRAL DISTRICT OF CALIFORNIA; PROVIDED, HOWEVER, THAT ANY SUIT
SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY
BE BROUGHT, AT THE AGENT'S OPTION, IN THE COURTS OF ANY
JURISDICTION WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE
FOUND. THE COMPANY HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO
THE JURISDICTION OF THE COURTS OF THE STATE OF CALIFORNIA AND OF
THE UNITED STATES DISTRICT COURT FOR THE CENTRAL DISTRICT OF
CALIFORNIA FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH
ABOVE. THE COMPANY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE
-73-
<PAGE>
OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL
SERVICE WITHIN OR WITHOUT THE STATE OF CALIFORNIA. THE COMPANY
HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY
SUCH COURT REFERRED TO ABOVE AND ANY THAT ANY SUCH LITIGATION HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE EXTENT THAT THIS
COMPANY HAS OR MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY
COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR
NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF
EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY,
THE COMPANY HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF
ITS OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS.
10.14 Waiver of Jury Trial. EACH OF THE COMPANY, THE
--------------------
AGENT AND EACH BANK HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN
ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER
THIS AGREEMENT, ANY NOTE, ANY OTHER LOAN DOCUMENT AND ANY
AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH
MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR
THEREWITH OR ARISING FROM ANY BANKING RELATIONSHIP EXISTING IN
CONNECTION WITH ANY OF THE FOREGOING, AND AGREES THAT ANY SUCH
ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE
A JURY.
10.15 Setoff. The Company agrees that the Agent,
------
each Bank and each other holder of a Note have all rights of
set-off and bankers' lien provided by applicable law, and in
addition thereto, the Company agrees that at any time any
Unmatured Event of Default under Section 8.1.3 or any Event of
-------------
Default exists, the Agent, each Bank and each such holder may
apply to the payment of such payment or other amount (or, in the
case of subsection (b) thereof, to any obligations of the Company
hereunder, whether or not then due) any and all balances,
credits, deposits, accounts or moneys of the Company then or
thereafter with the Agent, such Bank or such holder.
10.16 Further Assurances. The Company shall, and
------------------
shall cause each of the other Loan Parties to, take all further
actions and execute all further documents and instruments as the
Agent or any Bank may at any time reasonably determine in its
sole discretion to be necessary or advisable to carry out and
consummate the transactions contemplated by the Loan Documents.
10.17 Reinstatement. This Agreement shall remain in
-------------
full force and effect until payment in full in cash of all
obligations under, and Performance of all provisions of, the Loan
Documents. If, at any time, all or part of any payment of such
obligations made by the Company or any other Person is rescinded
or otherwise returned by the Agent or any Bank for any reason
whatsoever (including, without limitation, the insolvency,
-74-
<PAGE>
bankruptcy or reorganization of the Company or any other Person),
this Agreement shall continue to be effective or shall be
reinstated, as the case may be, as to such obligations which were
satisfied by the payment to be rescinded or returned, all as
though such payment had not been made.
10.18 Waivers. The Company waives diligence,
-------
presentment, demand of payment, protest, notice of dishonor or
nonpayment of any liability, suit or taking of other action by
the Agent or any of the Banks against, and any other notice to,
any Loan Party (other than the Company) liable with respect to
any Letter of Credit Application or any other Loan Document. The
Company further waives any requirement on the part of the Agent
or any of the Banks to mitigate damages resulting from any
default under any Letter of Credit Application or any other Loan
Document.
10.19 Confidentiality. The Agent and each Bank hereby
---------------
agrees to hold all non-public information about the Company and
its Subsidiaries obtained from the Company or its Subsidiaries or
their respective officers, auditors or counsel pursuant to the
requirements of this Agreement confidential and not to disclose
any such information, except for disclosure of such information
(a) to another Bank or to the Agent, (b) to any prospective
Assignee or Participant (provided that such prospective Assignee
--------
or Participant agrees to maintain the confidentiality of such
information as if such Person were bound by this Section 10.19,
-------------
(c) to its legal counsel, accountants, appraisers and other
professional advisers, (d) to regulatory officials having
jurisdiction over Agent or such Bank, (e) as Agent or Bank
determines, in its sole discretion, is required by law or
regulation or to honor subpoenas or other legal process, or (f)
with the consent of the Company.
10.20 Amendment and Restatement. (a) This Agreement
-------------------------
amends and restates the Existing Credit Agreement effective as of
the Effective Date. Loans and letters of credit outstanding
under the Existing Credit Agreement shall be deemed continued as
the Loans and Letters of Credit hereunder as of the Effective
Date. From and after the Effective Date, such Loans and Letters
of Credit shall bear interest and fees as set forth herein.
(b) The parties hereto agree that all references in
the Loan Documents to the Existing Credit Agreement shall be
deemed a reference to this Agreement, as it may be amended,
restated or otherwise modified from time to time.
-75-
<PAGE>
IN WITNESS WHEREOF, the parties have executed and
delivered this Agreement as of the date first written above.
WYLE ELECTRONICS
By /s/ R. VAN NESS HOLLAND, JR.
--------------------------------------
Title: Executive Vice President-Finance
--------------------------------------
and Treasurer, Chief Financial Officer
S-1
<PAGE>
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent
By /s/ GINA M. WEST
----------------
Gina M. West
Vice President
BANK OF AMERICA ILLINOIS
By /s/ GINA M. WEST
----------------
Gina M. West
Vice President
S-2
<PAGE>
THE FIRST NATIONAL BANK OF CHICAGO
By /s/ L. GENE BEUKE
---------------------
Title: Senior Vice President
---------------------
S-3
<PAGE>
THE BANK OF NEW YORK
By /s/ REBECCA K. LEVINE
------------------------
Title: Assistant Vice President
------------------------
S-4
<PAGE>
BANQUE NATIONALE DE PARIS
By /s/ CLIVE BETTLES
-------------------------------
Title: Senior Vice President & Manager
-------------------------------
By /s/ MITCHELL M. OZAWA
------------------------------
Title: Vice President
------------------------------
S-5
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EXHIBIT 10(aj)
WYLE ELECTRONICS
NOTE PURCHASE AND PRIVATE SHELF AGREEMENT
$30,000,000
6.98% SERIES A SENIOR NOTES DUE APRIL 26, 2001
$20,000,000
PRIVATE SHELF FACILITY
DATED AS OF APRIL 26, 1996
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
(not part of agreement)
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. AUTHORIZATION OF ISSUE OF NOTES....................................... 1
1A. AUTHORIZATION OF ISSUE OF SERIES A NOTES................ 1
1B. AUTHORIZATION OF ISSUE OF SHELF NOTES................... 1
2. PURCHASE AND SALE OF NOTES............................................ 2
2A. PURCHASE AND SALE OF SERIES A NOTES..................... 2
2B. PURCHASE AND SALE OF SHELF NOTES........................ 2
2B(1). FACILITY................................................ 2
2B(2). ISSUANCE PERIOD......................................... 3
2B(3). REQUEST FOR PURCHASE.................................... 3
2B(4). RATE QUOTES............................................. 3
2B(5). ACCEPTANCE.............................................. 4
2B(6). MARKET DISRUPTION....................................... 4
2B(7). FACILITY CLOSINGS....................................... 4
2B(8). FEES.................................................... 5
2B(8)(i). STRUCTURING FEE......................................... 5
2B(8)(ii). ISSUANCE FEE............................................ 5
2B(8)(iii). DELAYED DELIVERY FEE.................................... 5
2B(8)(iv). CANCELLATION FEE........................................ 6
3. CONDITIONS OF CLOSING................................................. 6
3A. CERTAIN DOCUMENTS....................................... 6
3B. OPINION OF PURCHASER'S SPECIAL COUNSEL.................. 8
3C. REPRESENTATIONS AND WARRANTIES; NO DEFAULT.............. 8
3D. PURCHASE PERMITTED BY APPLICABLE LAWS................... 8
3E. PAYMENT OF FEES......................................... 8
4. PREPAYMENTS........................................................... 8
4A. NO REQUIRED PREPAYMENTS OF SERIES A NOTES............... 8
4B. REQUIRED PREPAYMENTS OF SHELF NOTES..................... 8
4C. OPTIONAL PREPAYMENT WITH YIELD-MAINTENANCE AMOUNT....... 8
4D. NOTICE OF OPTIONAL PREPAYMENT........................... 9
4E. APPLICATION OF PREPAYMENTS.............................. 9
4F. RETIREMENT OF NOTES..................................... 9
5. AFFIRMATIVE COVENANTS................................................. 10
5A. FINANCIAL STATEMENTS; NOTICE OF DEFAULTS................ 10
5B. INFORMATION REQUIRED BY RULE 144A....................... 11
5C. INSPECTION OF PROPERTY.................................. 11
5D. COVENANT TO SECURE NOTES EQUALLY........................ 12
5E. MAINTENANCE OF INSURANCE................................ 12
5F. COMPLIANCE WITH LAWS.................................... 12
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
6. NEGATIVE COVENANTS.................................................... 12
6A. CONSOLIDATED TANGIBLE NET WORTH......................... 12
6B. INTENTIONALLY OMITTED................................... 12
6C. LIEN, FUNDED DEBT AND OTHER RESTRICTIONS................ 13
6C(1). LIEN RESTRICTIONS....................................... 13
6C(2). DEBT RESTRICTIONS....................................... 14
6C(3). LOANS, ADVANCES AND INVESTMENTS......................... 14
6C(4). SALE OF STOCK AND DEBT OF SUBSIDIARIES.................. 15
6C(5). MERGER AND CONSOLIDATION................................ 15
6C(6). TRANSFER OF ASSETS...................................... 15
6C(7). SALE AND LEASE-BACK..................................... 16
6C(8). SALE OR DISCOUNT OF RECEIVABLES......................... 16
6D. GUARANTOR REVENUES & ASSETS LIMITS...................... 16
7. EVENTS OF DEFAULT..................................................... 16
7A. ACCELERATION............................................ 16
7B. RESCISSION OF ACCELERATION.............................. 20
7C. NOTICE OF ACCELERATION OR RESCISSION.................... 20
7D. OTHER REMEDIES.......................................... 20
8. REPRESENTATIONS, COVENANTS AND WARRANTIES............................. 20
8A. ORGANIZATION............................................ 21
8B. FINANCIAL STATEMENTS.................................... 21
8C. ACTIONS PENDING......................................... 21
8D. OUTSTANDING DEBT........................................ 21
8E. TITLE TO PROPERTIES..................................... 22
8F. TAXES................................................... 22
8G. CONFLICTING AGREEMENTS AND OTHER MATTERS................ 22
8H. OFFERING OF NOTES....................................... 22
8I. USE OF PROCEEDS......................................... 23
8J. ERISA................................................... 23
8K. GOVERNMENTAL CONSENT.................................... 23
8L. ENVIRONMENTAL COMPLIANCE................................ 24
8M. DISCLOSURE.............................................. 24
8N. HOSTILE TENDER OFFERS................................... 24
9. REPRESENTATIONS OF THE PURCHASERS..................................... 24
9A. NATURE OF PURCHASE...................................... 24
9B. SOURCE OF FUNDS......................................... 24
10. DEFINITIONS; ACCOUNTING MATTERS....................................... 25
10A. YIELD-MAINTENANCE TERMS................................. 25
10B. OTHER TERMS............................................. 26
10C. ACCOUNTING PRINCIPLES, TERMS AND DETERMINATIONS......... 34
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
11. MISCELLANEOUS......................................................... 34
11A. NOTE PAYMENTS........................................... 34
11B. EXPENSES................................................ 34
11C. CONSENT TO AMENDMENTS................................... 35
11D. FORM, REGISTRATION, TRANSFER AND EXCHANGE OF NOTES;
LOST NOTES.............................................. 35
11E. PERSONS DEEMED OWNERS; PARTICIPATIONS; RIGHT OF
FIRST OFFER............................................. 36
11F. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE
AGREEMENT............................................... 37
11G. SUCCESSORS AND ASSIGNS.................................. 37
11H. INDEPENDENCE OF COVENANTS............................... 37
11I. NOTICES................................................. 38
11J. PAYMENTS DUE ON NON-BUSINESS DAYS....................... 38
11K. SEVERABILITY............................................ 38
11L. DESCRIPTIVE HEADINGS.................................... 38
11M. SATISFACTION REQUIREMENT................................ 39
11N. GOVERNING LAW........................................... 39
11O. SEVERALTY OF OBLIGATIONS................................ 39
11P. COUNTERPARTS............................................ 39
11Q. BINDING AGREEMENT....................................... 40
</TABLE>
EXHIBITS AND SCHEDULES
Purchaser Schedule for Series A Notes
Information Schedule
Exhibit A-1 -- Form of Series A Note
Exhibit A-2 -- Form of Shelf Note
Exhibit B -- Form of Request for Purchase
Exhibit C -- Form of Confirmation of Acceptance
Exhibit D-1 -- Form of Opinion of Company Counsel, Series A Note Closing
Exhibit D-2 -- Form of Opinion of Company Counsel, Shelf Note Closing
Exhibit E -- Form of Guaranty Agreement
Schedule 6C -- Existing Liens and Funded Debt
Schedule 8G -- Agreements Restricting Debt
-iii-
<PAGE>
WYLE ELECTRONICS
15370 Barranca Parkway
Irvine, California 92718
As of April 26, 1996
The Prudential Insurance Company
of America ("PRUDENTIAL")
Pruco Life Insurance Company ("PRUCO")
Each Prudential Affiliate (as hereinafter
defined) which becomes bound by certain
provisions of this Agreement as hereinafter
provided (together with Prudential and Pruco,
the "PURCHASERS")
c/o Prudential Capital Group
777 South Figueroa Street
Suite 2950
Los Angeles, California 90017
Ladies and Gentlemen:
The undersigned, Wyle Electronics (herein called the "COMPANY"),
hereby agrees with you as follows:
1. AUTHORIZATION OF ISSUE OF NOTES.
1A. AUTHORIZATION OF ISSUE OF SERIES A NOTES. The Company will
authorize the issue of its guaranteed senior promissory notes (the "SERIES A
NOTES") in the aggregate principal amount of $30,000,000, to be dated the date
of issue thereof, to mature April 26, 2001, to bear interest (computed on the
basis of a 360 day year -- 30 day month) on the unpaid balance thereof from the
date thereof until the principal thereof shall have become due, payable semi-
annually on the twenty-sixth day of April and October in each year at the rate
of 6.98% per annum, and on overdue principal, Yield-Maintenance Amount and
interest at the rate and at the time specified therein, and to be substantially
in the form of Exhibit A-1 attached hereto. The terms "SERIES A NOTE" and
-----------
"SERIES A NOTES" as used herein shall include each Series A Note delivered
pursuant to any provision of this Agreement and each Series A Note delivered in
substitution or exchange for any such Series A Note pursuant to any such
provision.
1B. AUTHORIZATION OF ISSUE OF SHELF NOTES. The Company will
authorize the issue of its additional guaranteed senior promissory notes (the
"SHELF NOTES") in the aggregate principal amount of $20,000,000, to be dated
the date of issue thereof, to mature, in the
<PAGE>
case of each Shelf Note so issued, no more than ten years after the date of
original issuance thereof, to have an average life, in the case of each Shelf
Note so issued, of no more than ten years after the date of original issuance
thereof, to bear interest on the unpaid balance thereof from the date thereof at
the rate per annum, and to have such other particular terms, as shall be set
forth, in the case of each Shelf Note so issued, in the Confirmation of
Acceptance with respect to such Shelf Note delivered pursuant to paragraph
2B(5), and to be substantially in the form of Exhibit A-2 attached hereto.
-----------
The terms "SHELF NOTE" and "SHELF NOTES" as used herein shall include each Shelf
Note delivered pursuant to any provision of this Agreement and each Shelf Note
delivered in substitution or exchange for any such Shelf Note pursuant to any
such provision. The terms "NOTE" and "NOTES" as used herein shall include each
Series A Note and each Shelf Note delivered pursuant to any provision of this
Agreement and each Note delivered in substitution or exchange for any such Note
pursuant to any such provision. Notes which have (i) the same final maturity,
(ii) the same principal prepayment dates, (iii) the same principal prepayment
amounts (as a percentage of the original principal amount of each Note), (iv)
the same interest rate, (v) the same interest payment periods and (vi) the same
date of issuance (which, in the case of a Note issued in exchange for another
Note, shall be deemed for these purposes the date on which such Note's ultimate
predecessor Note was issued), are herein called a "SERIES" of Notes.
2. PURCHASE AND SALE OF NOTES.
2A. PURCHASE AND SALE OF SERIES A NOTES. The Company hereby agrees
to sell to Prudential and Pruco and, subject to the terms and conditions herein
set forth, Prudential and Pruco each agrees to purchase from the Company the
aggregate principal amount of Series A Notes set forth opposite its name on the
Purchaser Schedule attached hereto at 100% of such aggregate principal amount.
On April 26, 1996 or any other date prior to April 26, 1996 upon which the
Company, Prudential and Pruco may agree (herein called the "SERIES A CLOSING
DAY"), the Company will deliver to each of Prudential and Pruco at the offices
of Prudential Capital Group, 180 North Stetson, Suite 5600, Chicago, Illinois
60601, one or more Series A Notes registered in its name, evidencing the
aggregate principal amount of Series A Notes to be purchased by each of
Prudential and Pruco and in the denomination or denominations specified with
respect to each of Prudential and Pruco in the Purchaser Schedule attached
hereto, against payment of the purchase price thereof by transfer of immediately
available funds for credit to the Company's account #12337-53706 at Bank of
America, Global Payment Operations #5693, 1850 Gateway Boulevard, Concord, CA
94520, ABA Routing Number 121-000-358.
2B. PURCHASE AND SALE OF SHELF NOTES.
2B(1). FACILITY. Prudential is willing to consider, in its sole
discretion and within limits which may be authorized for purchase by Prudential
and Prudential Affiliates from time to time, the purchase of Shelf Notes
pursuant to this Agreement. The willingness of Prudential to consider such
purchase of Shelf Notes is herein called the "FACILITY". At any time, the
aggregate principal amount of Shelf Notes stated in paragraph 1B, minus the
-----
aggregate principal amount of Shelf Notes purchased and sold pursuant to this
Agreement prior to such time, minus the aggregate principal amount of Accepted
-----
Notes (as hereinafter defined) which have not yet been purchased and sold
hereunder prior to such time, is herein called the
2
<PAGE>
"AVAILABLE FACILITY AMOUNT" at such time. NOTWITHSTANDING THE WILLINGNESS OF
PRUDENTIAL TO CONSIDER PURCHASES OF SHELF NOTES, THIS AGREEMENT IS ENTERED INTO
ON THE EXPRESS UNDERSTANDING THAT NEITHER PRUDENTIAL NOR ANY PRUDENTIAL
AFFILIATE SHALL BE OBLIGATED TO MAKE OR ACCEPT OFFERS TO PURCHASE SHELF NOTES,
OR TO QUOTE RATES, SPREADS OR OTHER TERMS WITH RESPECT TO SPECIFIC PURCHASES OF
SHELF NOTES, AND THE FACILITY SHALL IN NO WAY BE CONSTRUED AS A COMMITMENT BY
PRUDENTIAL OR ANY PRUDENTIAL AFFILIATE.
2B(2). ISSUANCE PERIOD. Shelf Notes may be issued and sold pursuant
to this Agreement until the earlier of (i) the second anniversary of the date of
this Agreement (or if such anniversary is not a Business Day, the Business Day
next preceding such anniversary) and (ii) the thirtieth day after Prudential
shall have given to the Company, or the Company shall have given to Prudential,
written notice stating that it elects to terminate the issuance and sale of
Shelf Notes pursuant to this Agreement (or if such thirtieth day is not a
Business Day, the Business Day next preceding such thirtieth day). The period
during which Shelf Notes may be issued and sold pursuant to this Agreement is
herein called the "ISSUANCE PERIOD".
2B(3). REQUEST FOR PURCHASE. The Company may from time to time during
the Issuance Period make requests for purchases of Shelf Notes (each such
request being herein called a "REQUEST FOR PURCHASE"). Each Request for
Purchase shall be made to Prudential by telecopier or overnight delivery
service, and shall (i) specify the aggregate principal amount of Shelf Notes
covered thereby, which shall not be less than $5,000,000 and not be greater than
the Available Facility Amount at the time such Request for Purchase is made,
(ii) specify the principal amounts, final maturities, principal prepayment dates
and amounts and interest payment periods (quarterly or semi-annual in arrears)
of the Shelf Notes covered thereby, (iii) specify the use of proceeds of such
Shelf Notes, (iv) specify the proposed day for the closing of the purchase and
sale of such Shelf Notes, which shall be a Business Day during the Issuance
Period not less than 10 days and not more than 25 days after the making of such
Request for Purchase, (v) specify the number of the account and the name and
address of the depository institution to which the purchase prices of such Shelf
Notes are to be transferred on the Closing Day for such purchase and sale, (vi)
certify that the representations and warranties contained in paragraph 8 are
true on and as of the date of such Request for Purchase and that there exists on
the date of such Request for Purchase no Event of Default or Default, (vii)
specify the Designated Spread for such Shelf Notes and (viii) be substantially
in the form of Exhibit B attached hereto. Each Request for Purchase shall be in
---------
writing and shall be deemed made when received by Prudential.
2B(4). RATE QUOTES. Not later than five Business Days after the
Company shall have given Prudential a Request for Purchase pursuant to paragraph
2B(3), Prudential may, but shall be under no obligation to, provide to the
Company by telephone or telecopier, in each case between 9:30 A.M. and 1:30 P.M.
New York City local time (or such later time as Prudential may elect) interest
rate quotes for the several principal amounts, maturities, principal prepayment
schedules, and interest payment periods of Shelf Notes specified in such Request
for Purchase. Each quote shall represent the interest rate per annum payable
on the outstanding principal balance of such Shelf Notes at which Prudential or
a Prudential Affiliate would be willing to purchase such Shelf Notes at 100% of
the principal amount thereof.
3
<PAGE>
2B(5). ACCEPTANCE. Within 30 minutes after Prudential shall have
provided any interest rate quotes pursuant to paragraph 2B(4) or such shorter
period as Prudential may specify to the Company (such period herein called the
"ACCEPTANCE WINDOW"), the Company may, subject to paragraph 2B(6), elect to
accept such interest rate quotes as to not less than $5,000,000 aggregate
principal amount of the Shelf Notes specified in the related Request for
Purchase. Such election shall be made by an Authorized Officer of the Company
notifying Prudential by telephone or telecopier within the Acceptance Window
that the Company elects to accept such interest rate quotes, specifying the
Shelf Notes (each such Shelf Note being herein called an "ACCEPTED NOTE") as to
which such acceptance (herein called an "ACCEPTANCE") relates. The day the
Company notifies an Acceptance with respect to any Accepted Notes is herein
called the "ACCEPTANCE DAY" for such Accepted Notes. Any interest rate quotes
as to which Prudential does not receive an Acceptance within the Acceptance
Window shall expire, and no purchase or sale of Shelf Notes hereunder shall be
made based on such expired interest rate quotes. Subject to paragraph 2B(6) and
the other terms and conditions hereof, the Company agrees to sell to Prudential
or a Prudential Affiliate, and Prudential agrees to purchase, or to cause the
purchase by a Prudential Affiliate of, the Accepted Notes at 100% of the
principal amount of such Notes. As soon as practicable following the Acceptance
Day, the Company, Prudential and each Prudential Affiliate which is to purchase
any such Accepted Notes will execute a confirmation of such Acceptance
substantially in the form of Exhibit C attached hereto (herein called a
---------
"CONFIRMATION OF ACCEPTANCE"). If the Company should fail to execute and return
to Prudential within three Business Days following receipt thereof a
Confirmation of Acceptance with respect to any Accepted Notes, Prudential may
at its election at any time prior to its receipt thereof cancel the closing with
respect to such Accepted Notes by so notifying the Company in writing.
2B(6). MARKET DISRUPTION. Notwithstanding the provisions of paragraph
2B(5), if Prudential shall have provided interest rate quotes pursuant to
paragraph 2B(4) and thereafter prior to the time an Acceptance with respect to
such quotes shall have been notified to Prudential in accordance with paragraph
2B(5) the domestic market for U.S. Treasury securities or derivatives shall
have closed or there shall have occurred a general suspension, material
limitation, or significant disruption of trading in securities generally on the
New York Stock Exchange or in the domestic market for U.S. Treasury securities
or derivatives, then such interest rate quotes shall expire, and no purchase or
sale of Shelf Notes hereunder shall be made based on such expired interest rate
quotes. If the Company thereafter notifies Prudential of the Acceptance of any
such interest rate quotes, such Acceptance shall be ineffective for all purposes
of this Agreement, and Prudential shall promptly notify the Company that the
provisions of this paragraph 2B(6) are applicable with respect to such
Acceptance.
2B(7). FACILITY CLOSINGS. Not later than 11:30 A.M. (New York City
local time) on the Closing Day for any Accepted Notes, the Company will deliver
to each Purchaser listed in the Confirmation of Acceptance relating thereto at
the offices of the Prudential Capital Group which the Purchasers specify, the
Accepted Notes to be purchased by such Purchaser in the form of one or more
Notes in authorized denominations as such Purchaser may request for each Series
of Accepted Notes to be purchased on the Closing Day, dated the Closing Day and
registered in such Purchaser's name (or in the name of its nominee), against
payment of the purchase price thereof by transfer of immediately available funds
for credit to the Company's account specified in the Request for Purchase of
such Notes. If the Company fails
4
<PAGE>
to tender to any Purchaser the Accepted Notes to be purchased by such Purchaser
on the scheduled Closing Day for such Accepted Notes as provided above in this
paragraph 2B(7), or any of the conditions specified in paragraph 3 shall not
have been fulfilled by the time required on such scheduled Closing Day, the
Company shall, prior to 1:00 P.M., New York City local time, on such scheduled
Closing Day notify Prudential (which notification shall be deemed received by
each Purchaser) in writing whether (i) such closing is to be rescheduled (such
rescheduled date to be a Business Day during the Issuance Period not less than
one Business Day and not more than 10 Business Days after such scheduled Closing
Day (the "RESCHEDULED CLOSING DAY")) and certify to Prudential (which
certification shall be for the benefit of each Purchaser) that the Company
reasonably believes that it will be able to comply with the conditions set forth
in paragraph 3 on such Rescheduled Closing Day and that the Company will pay the
Delayed Delivery Fee in accordance with paragraph 2B(8)(iii) or (ii) such
closing is to be canceled. In the event that the Company shall fail to give such
notice referred to in the preceding sentence, Prudential (on behalf of each
Purchaser) may at its election, at any time after 1:00 P.M., New York City local
time, on such scheduled Closing Day, notify the Company in writing that such
closing is to be canceled. Notwithstanding anything to the contrary appearing in
this Agreement, the Company may not elect to reschedule a closing with respect
to any given Accepted Notes on more than one occasion, unless Prudential shall
have otherwise consented in writing.
2B(8). FEES.
2B(8)(i). STRUCTURING FEE. In consideration for the time, effort and
expense involved in the preparation, negotiation and execution of this
Agreement, the Company has paid to Prudential in immediately available funds a
fee (herein called the "STRUCTURING FEE") in the amount of $25,000.
2B(8)(ii). ISSUANCE FEE. The Company will pay to Prudential in
immediately available funds a fee (herein called the "ISSUANCE FEE") on each
Closing Day (other than the Series A Closing Day and any other Closing Day which
occurs on or before August 26, 1996) in an amount equal to 0.15% of the
aggregate principal amount of Notes sold on such Closing Day.
2B(8)(iii). DELAYED DELIVERY FEE. If the closing of the purchase and
sale of any Accepted Note is delayed for any reason beyond the original Closing
Day for such Accepted Note, the Company will pay to Prudential (a) on the
Cancellation Date or actual closing date of such purchase and sale and (b) if
earlier, the next Business Day following 90 days after the Acceptance Day for
such Accepted Note and on each Business Day following 90 days after the prior
payment hereunder, a fee (herein called the "DELAYED DELIVERY FEE") calculated
as follows:
(BEY - MMY) X DTS/360 X PA
where "BEY" means Bond Equivalent Yield, i.e., the bond equivalent yield per
annum of such Accepted Note; "MMY" means Money Market Yield, i.e., the yield per
annum on a commercial paper investment of the highest quality selected by
Prudential on the date Prudential receives notice of the delay in the closing
for such Accepted Note having a maturity date or dates the same as, or closest
to, the Rescheduled Closing Day or Rescheduled Closing Days (a new
5
<PAGE>
alternative investment being selected by Prudential each time such closing is
delayed); "DTS" means Days to Settlement, i.e., the number of actual days
elapsed from and including the original Closing Day with respect to such
Accepted Note (in the case of the first such payment with respect to such
Accepted Note) or from and including the date of the next preceding payment (in
the case of any subsequent delayed delivery fee payment with respect to such
Accepted Note) to but excluding the date of such payment; and "PA" means
Principal Amount, i.e., the principal amount of the Accepted Note for which such
calculation is being made. In no case shall the Delayed Delivery Fee be less
than zero. Nothing contained herein shall obligate any Purchaser to purchase any
Accepted Note on any day other than the Closing Day for such Accepted Note, as
the same may be rescheduled from time to time in compliance with paragraph
2B(7).
2B(8)(iv). CANCELLATION FEE. If the Company at any time notifies
Prudential in writing that the Company is canceling the closing of the purchase
and sale of any Accepted Note, or if Prudential notifies the Company in writing
under the circumstances set forth in the last sentence of paragraph 2B(5) or the
penultimate sentence of paragraph 2B(7) that the closing of the purchase and
sale of such Accepted Note is to be canceled, or if the closing of the purchase
and sale of such Accepted Note is not consummated on or prior to the last day of
the Issuance Period (the date of any such notification, or the last day of the
Issuance Period, as the case may be, being herein called the "CANCELLATION
DATE"), the Company will pay to Prudential in immediately available funds an
amount (the "CANCELLATION FEE") calculated as follows:
PI X PA
where "PI" means Price Increase, i.e., the quotient (expressed in decimals)
obtained by dividing (a) the excess of the ask price (as determined by
Prudential) of the Hedge Treasury Note(s) on the Cancellation Date over the bid
price (as determined by Prudential) of the Hedge Treasury Notes(s) on the
Acceptance Day for such Accepted Note by (b) such bid price; and "PA" has the
meaning ascribed to it in paragraph 2B(8)(iii). The foregoing bid and ask
prices shall be as reported by Telerate Systems, Inc. (or, if such data for any
reason ceases to be available through Telerate Systems, Inc., any publicly
available source of similar market data). Each price shall be based on a U.S.
Treasury security having a par value of $100.00 and shall be rounded to the
second decimal place. In no case shall the Cancellation Fee be less than zero.
3. CONDITIONS OF CLOSING. The obligation of any Purchaser to
purchase and pay for any Notes is subject to the satisfaction, on or before the
Closing Day for such Notes, of the following conditions:
3A. CERTAIN DOCUMENTS. Such Purchaser shall have received the
following, each dated the date of the applicable Closing Day:
(i) The Note(s) to be purchased by such Purchaser.
6
<PAGE>
(ii) The Guaranty dated the Series A Closing Day in the form of
Exhibit E attached hereto.
(iii) Certified copies of the resolutions of the Boards of Directors
of the Company and the Guarantor authorizing (as applicable) the execution
and delivery of this Agreement and the Guaranty and the issuance of the
Notes, and of all documents evidencing other necessary corporate action and
governmental approvals, if any, with respect to this Agreement, the
Guaranty and the Notes.
(iv) Certificates of the Secretary or an Assistant Secretary and one
other officer of the Company and the Guarantor certifying the names and
true signatures of the officers of the Company and the Guarantor authorized
(as applicable) to sign this Agreement, the Guaranty and the Notes and the
other documents to be delivered hereunder.
(v) Certified copies of the Articles of Incorporation and By-laws
of the Company and the Guarantor.
(vi) A favorable opinion of Stephen D. Natcher, General Counsel of
the Company (or such other counsel designated by the Company and acceptable
to the Purchaser(s)) satisfactory to such Purchaser and substantially in
the form of Exhibit D-1 (in the case of the Series A Notes) or D-2 (in the
----------- ---
case of any Shelf Notes) attached hereto and as to such other
matters as such Purchaser may reasonably request. The Company hereby
directs each such counsel to deliver such opinion, agrees that the issuance
and sale of any Notes will constitute a reconfirmation of such direction,
and understands and agrees that each Purchaser receiving such an opinion
will and is hereby authorized to rely on such opinion.
(vii) Good standing certificates for the Company and the Guarantor
from the Secretary of State of California dated as of a recent date and
such other evidence of the status of the Company and the Guarantor as such
Purchaser may reasonably request.
(viii) Certified copies of Requests for Information or Copies (Form
UCC-11) or equivalent reports listing all effective financing statements
which name the Company or any Subsidiary (under its present name and
previous names) as debtor and which are filed in the offices of the
Secretaries of State of California and Arizona, together with copies of
such financing statements.
(ix) Additional documents or certificates with respect to legal
matters or corporate or other proceedings related to the transactions
contemplated hereby as may be reasonably requested by such Purchaser.
7
<PAGE>
3B. OPINION OF PURCHASER'S SPECIAL COUNSEL. Such Purchaser shall
have received from James F. Evert, Assistant General Counsel of Prudential or
such other counsel who is acting as special counsel for it in connection with
this transaction, a favorable opinion satisfactory to such Purchaser as to such
matters incident to the matters herein contemplated as it may reasonably
request.
3C. REPRESENTATIONS AND WARRANTIES; NO DEFAULT. The representations
and warranties (i) of the Company contained in paragraph 8 hereof and (ii) of
the Guarantor in Section 3 of the Guaranty shall be true on and as of such
Closing Day, except to the extent of changes caused by the transactions herein
contemplated; there shall exist on such Closing Day no Event of Default or
Default; and the Company and the Guarantor (as appropriate) shall have delivered
to such Purchaser an Officer's Certificate, dated such Closing Day, to both such
effects.
3D. PURCHASE PERMITTED BY APPLICABLE LAWS. The purchase of and
payment for the Notes to be purchased by such Purchaser on the terms and
conditions herein provided (including the use of the proceeds of such Notes by
the Company) shall not violate any applicable law or governmental regulation
(including, without limitation, Section 5 of the Securities Act or Regulation G,
T or X of the Board of Governors of the Federal Reserve System) and shall not
subject such Purchaser to any tax, penalty, liability or other onerous condition
under or pursuant to any applicable law or governmental regulation, and such
Purchaser shall have received such certificates or other evidence as it may
request to establish compliance with this condition.
3E. PAYMENT OF FEES. The Company shall have paid to Prudential any
fees due it pursuant to or in connection with this Agreement, including any
Issuance Fee due pursuant to paragraph 2B(8)(ii) and any Delayed Delivery Fee
due pursuant to paragraph 2B(8)(iii).
4. PREPAYMENTS. The Series A Notes and any Shelf Notes shall be
subject to required prepayment as and to the extent provided in paragraphs 4A
and 4B, respectively. The Series A Notes and any Shelf Notes shall also be
subject to prepayment under the circumstances set forth in paragraph 4C. Any
prepayment made by the Company pursuant to any other provision of this paragraph
4 shall not reduce or otherwise affect its obligation to make any required
prepayment as specified in paragraph 4A or 4B.
4A. NO REQUIRED PREPAYMENTS OF SERIES A NOTES. The Series A Notes
shall not be subject to required prepayment.
4B. REQUIRED PREPAYMENTS OF SHELF NOTES. Each Series of Shelf Notes
shall be subject to the required prepayments, if any, set forth in the Notes of
such Series.
4C. OPTIONAL PREPAYMENT WITH YIELD-MAINTENANCE AMOUNT. The Notes of
each Series shall be subject to prepayment, in whole at any time or from time to
time in part (in integral multiples of $100,000 and in a minimum amount of
$1,000,000), at the option of the
8
<PAGE>
Company, at 100% of the principal amount so prepaid plus interest thereon to the
prepayment date and the Yield-Maintenance Amount, if any, with respect to each
such Note. Any partial prepayment of a Series of the Notes pursuant to this
paragraph 4C shall be applied in satisfaction of required payments of principal
in inverse order of their scheduled due dates. Any prepayment of the Notes which
is made as contemplated by clause (iii)(b) of paragraph 6C(6) shall be made
pursuant to this paragraph 4C. Any purchase of Notes pursuant to paragraph
11E(3) shall not be subject to this paragraph 4C.
4D. NOTICE OF OPTIONAL PREPAYMENT. The Company shall give the holder
of each Note of a Series to be prepaid pursuant to paragraph 4C irrevocable
written notice of such prepayment not less than 5 Business Days prior to the
prepayment date, specifying such prepayment date, the aggregate principal amount
of the Notes of such Series to be prepaid on such date, the principal amount of
the Notes of such Series held by such holder to be prepaid on that date and that
such prepayment is to be made pursuant to paragraph 4C. Notice of prepayment
having been given as aforesaid, the principal amount of the Notes specified in
such notice, together with interest thereon to the prepayment date and together
with the Yield-Maintenance Amount, if any, herein provided, shall become due and
payable on such prepayment date. The Company shall, on or before the day on
which it gives written notice of any prepayment pursuant to paragraph 4C, give
telephonic notice of the principal amount of the Notes to be prepaid and the
prepayment date to each Significant Holder which shall have designated a
recipient for such notices in the Purchaser Schedule attached hereto or the
applicable Confirmation of Acceptance or by notice in writing to the Company.
4E. APPLICATION OF PREPAYMENTS. In the case of each prepayment of
less than the entire unpaid principal amount of all outstanding Notes of any
Series pursuant to paragraph 4B or 4C, the amount to be prepaid shall be applied
pro rata to all outstanding Notes of such Series (including, for the purpose of
this paragraph 4E only, all Notes prepaid or otherwise retired or purchased or
otherwise acquired by the Company or any of its Subsidiaries or Affiliates other
than by prepayment pursuant to paragraph 4B or 4C) according to the respective
unpaid principal amounts thereof.
4F. RETIREMENT OF NOTES. The Company shall not, and shall not permit
any of its Subsidiaries or Affiliates to, prepay or otherwise retire in whole or
in part prior to their stated final maturity (other than by prepayment pursuant
to paragraph 4B or 4C or upon acceleration of such final maturity pursuant to
paragraph 7A), or purchase or otherwise acquire, directly or indirectly, Notes
of any Series held by any holder unless the Company or such Subsidiary or
Affiliate shall have offered to prepay or otherwise retire or purchase or
otherwise acquire, as the case may be, the same proportion of the aggregate
principal amount of Notes of such Series held by each other holder of Notes of
such Series at the time outstanding upon the same terms and conditions. Any
Notes so prepaid or otherwise retired or purchased or otherwise acquired by the
Company or any of its Subsidiaries or Affiliates shall not be deemed to be
outstanding for any purpose under this Agreement, except as provided in
------
paragraph 4E.
9
<PAGE>
5. AFFIRMATIVE COVENANTS. During the Issuance Period and so long
thereafter as any Note is outstanding and unpaid, the Company covenants as
follows:
5A. FINANCIAL STATEMENTS; NOTICE OF DEFAULTS. The Company covenants
that it will deliver to each Significant Holder in triplicate:
(i) as soon as practicable and in any event within 55 days after the
end of each quarterly period (other than the last quarterly period) in each
fiscal year (or, if sooner, on the date delivered to any other creditor of
the Company or a Subsidiary), consolidated statements of income, cash flows
and shareholders' equity of the Company and its Subsidiaries for the
period from the beginning of the current fiscal year to the end of such
quarterly period, and a consolidated balance sheet of the Company and its
Subsidiaries as at the end of such quarterly period, setting forth in each
case in comparative form figures for the corresponding period in the
preceding fiscal year, all in reasonable detail and certified by an
authorized financial officer of the Company, subject to changes resulting
from year-end adjustments; provided, however, that delivery pursuant to
-------- -------
clause (iii) below of copies of the Quarterly Report on Form 10-Q of the
Company for such quarterly period filed with the Securities and Exchange
Commission shall be deemed to satisfy the requirements of this clause (i);
(ii) as soon as practicable and in any event within 100 days after the
end of each fiscal year (or, if sooner, the date delivered to any other
creditor of the Company or a Subsidiary), consolidated statements of
income, cash flows and shareholders' equity of the Company and its
Subsidiaries for such year, and a consolidated balance sheet of the
Company and its Subsidiaries as at the end of such year, setting forth in
each case in comparative form corresponding consolidated figures from the
preceding annual audit, all in reasonable detail and satisfactory in form
to the Required Holder(s) and reported on by independent public
accountants of recognized national standing selected by the Company whose
report shall be without limitation as to scope of the audit and
satisfactory in substance to the Required Holder(s); provided, however,
-------- -------
that delivery pursuant to clause (iii) below of copies of the Annual Report
on Form 10-K of the Company for such fiscal year filed with the Securities
and Exchange Commission shall be deemed to satisfy the requirements of this
clause (ii);
(iii) promptly upon transmission thereof, copies of all such
financial statements, proxy statements, notices and reports as it shall
send to its public stockholders and copies of all registration statements
(without exhibits and exclusive of any registration statement on From S-8
or any successor thereto) and all reports which it files with the
Securities and Exchange Commission (or any governmental body or agency
succeeding to the functions of the Securities and Exchange Commission);
10
<PAGE>
(iv) promptly upon receipt thereof, a notice that independent
accountants have submitted to the board of directors of the Company or any
Subsidiary any other report in connection with any annual, interim or
special audit made by them of the books of the Company or any Subsidiary;
and
(v) with reasonable promptness, such other financial data (including
reports with respect to any special audit referenced in clause (iv), above)
as such Significant Holder may reasonably request.
Together with each delivery of financial statements required by clauses (i) and
(ii) above, the Company will deliver to each Significant Holder an Officer's
Certificate demonstrating (with computations in reasonable detail) compliance
by the Company and its Subsidiaries with the provisions of paragraphs 6A, 6C(1),
6C(2), 6C(3), 6C(4), 6C(6), 6C(7) and 6D (including, with respect to paragraph
6C(2), the relevant 45-day period for each rolling twelve-month period ended
during such fiscal period) and stating that there exists no Event of Default or
Default, or, if any Event of Default or Default exists, specifying the nature
and period of existence thereof and what action the Company proposes to take
with respect thereto. Together with each delivery of financial statements
required by clause (ii) above, the Company will deliver to each Significant
Holder a certificate of such accountants stating that, in making the audit
necessary for their report on such financial statements, they have obtained no
knowledge of any Event of Default or Default, or, if they have obtained
knowledge of any Event of Default or Default, specifying the nature and period
of existence thereof. Such accountants, however, shall not be liable to anyone
by reason of their failure to obtain knowledge of any Event of Default or
Default which would not be disclosed in the course of an audit conducted in
accordance with generally accepted auditing standards.
The Company also covenants that immediately after any Responsible
Officer obtains knowledge of an Event of Default or Default, it will deliver to
each Significant Holder an Officer's Certificate specifying the nature and
period of existence thereof and what action the Company proposes to take with
respect thereto.
5B. INFORMATION REQUIRED BY RULE 144A. The Company covenants that it
will, upon the request of the holder of any Note, provide such holder, and any
qualified institutional buyer designated by such holder, such financial and
other information as such holder may reasonably determine to be necessary in
order to permit compliance with the information requirements of Rule 144A under
the Securities Act in connection with the resale of Notes, except at such times
as the Company is subject to and in compliance with the reporting requirements
of section 13 or 15(d) of the Exchange Act. For the purpose of this paragraph
5B, the term "QUALIFIED INSTITUTIONAL BUYER" shall have the meaning specified in
Rule 144A under the Securities Act.
5C. INSPECTION OF PROPERTY. The Company covenants that it will
permit any Person designated by any Significant Holder in writing, at such
Significant Holder's expense, to visit and inspect any of the properties of the
Company and its Subsidiaries, to examine the corporate books and financial
records of the Company and its Subsidiaries and make copies
11
<PAGE>
thereof or extracts therefrom and to discuss the affairs, finances and accounts
of any of such corporations with the principal officers of the Company and its
independent public accountants, all at such reasonable times and as often as
such Significant Holder may reasonably request.
5D. COVENANT TO SECURE NOTES EQUALLY. The Company covenants that, if
it or any Subsidiary shall create or assume any Lien upon any of its property or
assets, whether now owned or hereafter acquired, other than Liens permitted by
the provisions of paragraph 6C(1) (unless prior written consent to the creation
or assumption thereof shall have been obtained pursuant to paragraph 11C), it
will make or cause to be made effective provision whereby the Notes will be
secured by such Lien equally and ratably with any and all other Debt thereby
secured so long as any such other Debt shall be so secured.
5E. MAINTENANCE OF INSURANCE. The Company covenants that it and each
Subsidiary will maintain, with financially sound and reputable insurers,
insurance in such amounts and against such liabilities and hazards as
customarily is maintained by other companies operating similar businesses.
Together with each delivery of financial statements under paragraph 5A, the
Company will, upon the request of any Significant Holder, deliver an Officer's
Certificate specifying the details of such insurance in effect.
5F. COMPLIANCE WITH LAWS. The Company covenants that it will, and
will cause each of the Subsidiaries to, comply in a timely fashion with, or
operate pursuant to valid waivers of the provisions of, all applicable statutes,
rules, regulations and orders of all federal, state, local and foreign
governments, courts, agencies or regulatory bodies, including all Environmental
Laws, except (i) where a good faith dispute exists between the Company or a
Subsidiary and any such governmental authority regarding compliance with or
application of any such statute, rule, regulation or order (including
Environmental Laws) and (ii) where noncompliance would not materially adversely
affect the business, condition (financial or otherwise) or operations of the
Company and the Subsidiaries taken as a whole.
6. NEGATIVE COVENANTS. During the Issuance Period and so long
thereafter as any Note or other amount due hereunder is outstanding and unpaid,
the Company covenants as follows:
6A. CONSOLIDATED TANGIBLE NET WORTH. The Company covenants that it
will not permit Consolidated Tangible Net Worth at any time to be less than an
amount equal to $160,000,000 plus (a) the proceeds from the sale of preferred or
common stock of the Company issued after the date hereof (excluding the proceeds
from common stock issued pursuant to the exercise of stock options) and (b) to
the extent positive, an amount equal to 25% of Consolidated Net Earnings for the
period, taken as one accounting period, commencing on January 1, 1996, and
ending as of the last day of the fiscal quarter most recently ended as of any
date of determination.
6B. [INTENTIONALLY OMITTED.]
12
<PAGE>
6C. LIEN, DEBT AND OTHER RESTRICTIONS. The Company covenants and
agrees that the Company shall not and shall not permit any Subsidiary to:
6C(1). LIEN RESTRICTIONS. Create, assume or suffer to exist any Lien
of any kind on or with respect to any of its property or assets, whether now
owned or hereafter acquired (whether or not provision is made for the equal and
ratable securing of Notes in accordance with the provisions of paragraph 5D
hereof), except
(i) Liens for taxes not yet due or which are being actively
contested in good faith by appropriate proceedings,
(ii) other Liens incidental to the conduct of its business or the
ownership of its property and assets which were not incurred in connection
with the borrowing of money or the obtaining of advances or credit, and
which do not in the aggregate materially detract from the value of the
property or assets of the Company and its Subsidiaries taken as a whole or
materially impair the use thereof in the operation of the business of the
Company and its Subsidiaries taken as a whole,
(iii) Liens on property or assets of a Subsidiary to secure
obligations of such Subsidiary to the Company or another Subsidiary,
(iv) any Lien existing on any property of any corporation at the time
it becomes a Subsidiary, or existing prior to the time of acquisition upon
any property acquired by the Company or any Subsidiary through purchase,
merger or consolidation or otherwise, whether or not assumed by the Company
or such Subsidiary, or placed upon property at the time of acquisition by
the Company or any Subsidiary, to secure a portion of the purchase price
thereof, provided that (a) any such Lien shall not encumber any other
property of the Company or such Subsidiary and (b) at the time of
incurrence of any such Lien the aggregate amount of Debt secured by all
such Liens does not exceed 10% of Consolidated Tangible Net Worth,
(v) any Lien on property of the Company or a Subsidiary which is in
existence on the date of this Agreement, and which is set forth on Schedule
6C hereto,
(vi) any Lien renewing, extending or refunding any Lien permitted by
clauses (iv) and (v) of this paragraph 6C(1), provided that (a) the
--------
principal amount of Debt secured thereby is not increased, and (b) the Lien
is not extended to other property, and
(vii) other Liens securing Debt, provided that the aggregate amount
--------
of Priority Debt outstanding at no time exceeds 15% of Consolidated
Tangible Net Worth;
13
<PAGE>
6C(2). DEBT RESTRICTIONS. Create, incur, assume or suffer to exist
any Debt except
(i) Funded Debt of the Company represented by the Notes and of the
Guarantor represented by the Guaranty,
(ii) Debt of the Company and Subsidiaries outstanding as of the date
of this Agreement as set forth on Schedule 6C, and
(iii) other Debt of the Company and its Subsidiaries,
provided that (a) at the time of incurrence of any Debt after the date hereof
- --------
the ratio of Total Debt to Consolidated Capitalization shall not exceed .55 to
1.00, (b) the ratio of Total Debt to Consolidated Capitalization shall not
exceed .50 to 1.00 at any time during a period of 45 consecutive days in each
rolling twelve-month period ended on the last day of a calendar month and (c)
Priority Debt shall at no time exceed 15% of Consolidated Tangible Net Worth;
6C(3). LOANS, ADVANCES AND INVESTMENTS. Make or permit to remain
outstanding any loan or advance to, or own, purchase or acquire stock,
obligations or securities of, or any other interest in, or make any capital
contribution to, any Person, except that the Company and its Subsidiaries may
(i) make or permit to remain outstanding loans or advances to any
Subsidiary,
(ii) own, purchase or acquire stock, obligations or securities of a
corporation which immediately after such purchase or acquisition will be a
Subsidiary,
(iii) acquire and own stock, obligations or securities received in
settlement of debt (created in the ordinary course of business) owing to
the Company or any Subsidiary,
(iv) own, purchase or acquire (a) prime commercial paper (rated A1/P1
or A2/P2), (b) certificates of deposit in and repurchase agreements from
United States commercial banks having capital resources in excess of
$150,000,000, in each case due within one year from the date of purchase
and payable in the United States in United States dollars, (c) Euro-dollar
deposits in commercial banks having capital resources in excess of
$150,000,000, due within one year from the date of purchase and payable in
the United States in United States dollars, (d) obligations of the United
States Government or any agency thereof and (e) obligations guaranteed by
the United States Government,
(v) provided that the aggregate amount thereof outstanding at no
time shall exceed $2,000,000 (a) make or permit to remain outstanding
travel
14
<PAGE>
and other like advances to officers and employees in the ordinary
course of business, (b) guarantee obligations of officers and employees and
(c) make or permit to remain outstanding advances to or investments in
connection with the relocation of officers and employees, and
(vi) make other loans, advances and investments, provided that the
aggregate amount thereof (at original cost, in the case of investments)
shall at no time exceed 10% of Consolidated Tangible Net Worth;
6C(4). SALE OF STOCK AND DEBT OF SUBSIDIARIES. Sell or otherwise
dispose of, or part with control of, any shares of stock (except Directors'
qualifying shares) or Debt of any Subsidiary, except to the Company or another
Subsidiary, and except that all shares of stock and Debt of any Subsidiary at
the time owned by or owed to the Company and all Subsidiaries may be sold as an
entirety to any Person for a consideration which represents fair value (as
determined in good faith by the Board of Directors of the Company) at the time
of sale of the shares of stock and Debt so sold, provided that (a) the sale of
--------
such Subsidiary shall be treated as a sale of the assets of such Subsidiary and
is permitted by clause (iii) of paragraph 6C(6) and (b) at the time of such
sale, such Subsidiary shall not own, directly or indirectly, any shares of stock
or Debt of any other Subsidiary or of the Company (unless all of the shares of
stock and Debt of such other Subsidiary owned, directly or indirectly, by the
Company and all Subsidiaries are simultaneously being sold as permitted by this
paragraph 6C(4));
6C(5). MERGER AND CONSOLIDATION. Merge with or into or consolidate
with any other Person, except that
(i) any Subsidiary may merge with the Company (provided that the
Company shall be the continuing or surviving corporation) or with any one
or more other Subsidiaries, and
(ii) the Company may merge with any other corporation, provided that
--------
(a) the Company shall be the continuing or surviving corporation and (b)
immediately after giving effect thereto, no Default or Event of Default
would exist;
6C(6). TRANSFER OF ASSETS. Transfer any of its assets except that
------
(i) any Subsidiary may Transfer assets to the Company or another
Subsidiary,
(ii) the Company or any Subsidiary may sell inventory in the ordinary
course of business, and
(iii) the Company or any Subsidiary may otherwise Transfer assets,
provided that (a) after giving effect thereto (1) the Annual Percentage of
--------
Assets Transferred pursuant to this clause (iii) and paragraph 6C(4) shall
not exceed 15% and (2) the Cumulative Percentage of Assets Transferred
pursuant to this
15
<PAGE>
clause (iii) and paragraph 6C(4) shall not exceed 40% or (b) within five
Business Days after receipt thereof the aggregate proceeds from such
Transfer (net of expenses reasonably incurred in connection with such
Transfer) are applied to the prepayment of unsecured senior debt of the
Company (including the Notes, which prepayment of the Notes shall be made
pursuant to paragraph 4C hereof) on a pro rata basis;
--- ----
6C(7). SALE AND LEASE-BACK. Enter into any arrangement with any
lender or investor or to which such lender or investor is a party providing for
the leasing by the Company or any Subsidiary for more than one year of real
property which is to be sold or transferred by the Company or any Subsidiary to
such lender or investor or to any Person to whom funds have been or are to be
advanced by such lender or investor on the security of such property or rental
obligations of the Company or any Subsidiary; provided that the Company or any
--------
Subsidiary may enter into such arrangements with (i) the Company or any other
Subsidiary and (ii) other Persons to the extent that the aggregate value of all
assets sold by the Company and Subsidiaries to such other Persons during the
period commencing January 1, 1996 through any date of determination does not
exceed 5% of Consolidated Tangible Net Worth at the time of sale; and
6C(8). SALE OR DISCOUNT OF RECEIVABLES. Sell with recourse, pledge
or discount or otherwise sell for less than the face value thereof, any of its
notes or accounts receivable; provided that foreign Subsidiaries may (as and to
--------
the extent reflected on Schedule 6C) pledge notes or accounts receivable as
security for Debt described on Schedule 6C not to exceed $670,000 at any time
outstanding.
6D. GUARANTOR REVENUES AND ASSETS LIMITS. The Company covenants that
(i) the consolidated assets of the Guarantor and its subsidiaries shall not at
any time exceed 15% of the consolidated assets of the Company and Subsidiaries
and (ii) the consolidated revenues of the Guarantor and its subsidiaries shall
not exceed 25% of the consolidated revenues of the Company and Subsidiaries
during any period of twelve consecutive calendar months. The foregoing covenant
should be of no further force or effect at such time as (i) Prudential and the
holders of the Notes have entered into an inter-creditor agreement (which inter-
creditor agreement shall be in form and content satisfactory to them) with the
lenders under the Bank Agreement providing for the sharing of amounts received
from the Guarantor pursuant to the Guaranty and the Guarantor's guaranty of the
Bank Agreement or (ii) the lenders under the Bank Agreement have released the
guaranty provided by the Guarantor of the obligations under the Bank Agreement,
in which event the holders and Prudential agree that the Guaranty shall be
released.
7. EVENTS OF DEFAULT.
7A. ACCELERATION. If any of the following events shall occur and be
continuing for any reason whatsoever (and whether such occurrence shall be
voluntary or involuntary or come about or be effected by operation of law or
otherwise):
16
<PAGE>
(i) the Company defaults in the payment of any principal of or Yield-
Maintenance Amount on any Note when the same shall become due, either by
the terms thereof or otherwise as herein provided; or
(ii) the Company defaults in the payment of any interest on any Note
for more than 10 days after the date due; or
(iii)(a) the Company or any Subsidiary defaults (whether as primary
obligor or as surety) in any payment of principal of or interest on any
other obligation for money borrowed (or any Capitalized Lease Obligation,
any obligation under a conditional sale or other title retention agreement,
any obligation issued or assumed as full or partial payment for property
whether or not secured by a purchase money mortgage or any obligation under
notes payable or drafts accepted representing extensions of credit) or (b)
the Company or any Subsidiary fails to perform or observe any other
agreement, term or condition contained in any agreement under which any
such obligation referred to in sub- clause (a) above is created (or if any
other event thereunder or under any such agreement shall occur and be
continuing) and the effect of such failure or other event is to cause, or
to permit the holder or holders of such obligation (or a trustee on behalf
of such holder or holders) to cause, such obligation to become due (or to
be repurchased by the Company or any Subsidiary ) prior to any stated
maturity and the Company shall not have received a waiver from the holders
of such obligation within 45 days after any officer of the Company obtains
actual knowledge of the default thereunder (such 45-day period to be deemed
to have expired if such obligation is accelerated, required to be
repurchased or is otherwise the subject of enforcement), provided that the
--------
aggregate amount of all obligations as to which such a payment default
shall occur and be continuing or such a failure or other event causing or
permitting acceleration, enforcement or resale to the Company or any
Subsidiary shall occur and be continuing exceeds $5,000,000; or
(iv) any representation or warranty made by the Company herein or by
the Company or any of its officers in any writing furnished in connection
with or pursuant to this Agreement shall be false in any material respect
on the date as of which made; or
(v) the Company fails to perform or observe any agreement contained in
paragraph 6; or
(vi) the Company fails to perform or observe any other agreement, term
or condition contained herein and such failure shall not be remedied within
30 days after any Responsible Officer obtains actual knowledge thereof; or
17
<PAGE>
(vii) the Company or any Subsidiary makes an assignment for the
benefit of creditors or is generally not paying its debts as such debts
become due; or
(viii) any decree or order for relief in respect of the Company or
any Subsidiary is entered under any bankruptcy, reorganization, compromise,
arrangement, insolvency, readjustment of debt, dissolution or liquidation
or similar law, whether now or hereafter in effect (herein called the
"BANKRUPTCY LAW"), of any jurisdiction; or
(ix) the Company or any Subsidiary petitions or applies to any
tribunal for, or consents to, the appointment of, or taking possession by,
a trustee, receiver, custodian, liquidator or similar official of the
Company or any Subsidiary, or of any substantial part of the assets of the
Company or any Subsidiary, or commences a voluntary case under the
Bankruptcy Law of the United States or any proceedings (other than
proceedings for the voluntary liquidation and dissolution of a Subsidiary)
relating to the Company or any Subsidiary under the Bankruptcy Law of any
other jurisdiction; or
(x) any such petition or application is filed, or any such proceedings
are commenced, against the Company or any Subsidiary and the Company or
such Subsidiary by any act indicates its approval thereof, consent thereto
or acquiescence therein, or an order, judgment or decree is entered
appointing any such trustee, receiver, custodian, liquidator or similar
official, or approving the petition in any such proceedings, and such
order, judgment or decree remains unstayed and in effect for more than 30
days; or
(xi) any order, judgment or decree is entered in any proceedings
against the Company decreeing the dissolution of the Company and such
order, judgment or decree remains unstayed and in effect for more than 60
days: or
(xii) any order, judgment or decree is entered in any proceedings
against the Company or any Subsidiary decreeing a split-up of the Company
or such Subsidiary which requires the divestiture of assets representing a
substantial part, or the divestiture of the stock of a Subsidiary whose
assets represent a substantial part, of the consolidated assets of the
Company and its Subsidiaries (determined in accordance with generally
accepted accounting principles) or which requires the divestiture of
assets, or stock of a Subsidiary, which shall have contributed a
substantial part of the consolidated net income of the Company and its
Subsidiaries (determined in accordance with generally accepted accounting
principles) for any of the three fiscal years then most recently ended, and
such order, judgment or decree remains unstayed and in effect for more than
60 days; or
18
<PAGE>
(xiii) one or more final judgments in an aggregate amount in excess
of $10,000,000 (excluding from such calculation any judgment which is
covered by insurance or a bond, to the extent of such coverage) is
rendered against the Company or any Subsidiary and, within 60 days after
entry thereof, any such judgment is not discharged or execution thereof
stayed pending appeal, or within 60 days after the expiration of any such
stay, such judgment is not discharged; or
(xiv) if (a) any Plan shall fail to satisfy any applicable minimum
funding standards of ERISA or the Code for any plan year or part thereof or
a waiver of such standards or extension of any amortization period is
sought or granted under section 412 of the Code, (b) a notice of intent to
terminate any Plan shall have been or is reasonably expected to be filed
with the PBGC or the PBCG shall have instituted proceedings under ERISA
section 4042 to terminate or appoint a trustee to administer any Plan or
the PBCG shall have notified the Company or any ERISA Affiliate that a Plan
may become a subject of any such proceedings, (c) the aggregate "amount of
unfunded benefit liabilities" (within the meaning of section 4001(a)(18) of
ERISA) under all Plans, determined in accordance with Title IV of ERISA,
shall exceed $1,000,000, (d) the Company or any ERISA Affiliate shall have
incurred or is reasonably expected to incur any liability pursuant to Title
I or IV of ERISA or the penalty or excise tax provisions of the Code
relating to employee benefit plans, (e) the Company or any ERISA Affiliate
withdraws from any Multiemployer Plan, or (f) the Company or any Subsidiary
establishes or amends any employee welfare benefit plan that provides post-
employment welfare benefits in a manner that would increase the liability
of the Company or any Subsidiary thereunder; and any such event or events
described in clauses (a) through (f) above, either individually or together
with any other such event or events, could reasonably be expected to have a
material adverse effect on the financial condition of the Company and its
Subsidiaries taken as a whole; or
(xv) a default occurs under the Guaranty or the Guaranty shall cease
to be, or shall be asserted by the Guarantor not to be, enforceable against
the Guarantor;
then (a) if such event is an Event of Default specified in clause (i) or (ii) of
this paragraph 7A, any holder of any Note may at its option during the
continuance of such Event of Default, by notice in writing to the Company,
declare all of the Notes held by such holder to be, and all of the Notes held by
such holder shall thereupon be and become, immediately due and payable at par
together with interest accrued thereon, without presentment, demand, protest or
notice of any kind, all of which are hereby waived by the Company, (b) if such
event is an Event of Default specified in clause (viii), (ix) or (x) of this
paragraph 7A with respect to the Company, all of the Notes at the time
outstanding shall automatically become immediately due and payable together with
interest accrued thereon and together with the Yield-Maintenance Amount, if any,
with respect to each Note, without presentment, demand, protest or notice of
19
<PAGE>
any kind, all of which are hereby waived by the Company, and (c) with respect to
any event constituting an Event of Default, the Required Holder(s) of the Notes
of any Series may at its or their option during the continuance of such Event of
Default, by notice in writing to the Company, declare all of the Notes of such
Series to be, and all of the Notes of such Series shall thereupon be and become,
immediately due and payable together with interest accrued thereon and together
with the Yield-Maintenance Amount, if any, with respect to each Note of such
Series, without presentment, demand, protest or notice of any kind, all of which
are hereby waived by the Company.
7B. RESCISSION OF ACCELERATION. At any time after any or all of the
Notes of any Series shall have been declared immediately due and payable
pursuant to paragraph 7A, the Required Holder(s) of the Notes of such Series
may, by notice in writing to the Company, rescind and annul such declaration and
its consequences if (i) the Company shall have paid all overdue interest on the
Notes of such Series, the principal of and Yield-Maintenance Amount, if any,
payable with respect to any Notes of such Series which have become due otherwise
than by reason of such declaration, and interest on such overdue interest and
overdue principal and Yield-Maintenance Amount at the rate specified in the
Notes of such Series, (ii) the Company shall not have paid any amounts which
have become due solely by reason of such declaration, (iii) all Events of
Default and Defaults, other than non-payment of amounts which have become due
solely by reason of such declaration, shall have been cured or waived pursuant
to paragraph 11C, and (iv) no judgment or decree shall have been entered for the
payment of any amounts due pursuant to the Notes of such Series or this
Agreement. No such rescission or annulment shall extend to or affect any
subsequent Event of Default or Default or impair any right arising therefrom.
7C. NOTICE OF ACCELERATION OR RESCISSION. Whenever any Note shall be
declared immediately due and payable pursuant to paragraph 7A or any such
declaration shall be rescinded and annulled pursuant to paragraph 7B, the
Company shall forthwith give written notice thereof to the holder of each Note
of each Series at the time outstanding.
7D. OTHER REMEDIES. If any Event of Default or Default shall occur
and be continuing, the holder of any Note may proceed to protect and enforce its
rights under this Agreement and such Note by exercising such remedies as are
available to such holder in respect thereof under applicable law, either by suit
in equity or by action at law, or both, whether for specific performance of any
covenant or other agreement contained in this Agreement or in aid of the
exercise of any power granted in this Agreement. No remedy conferred in this
Agreement upon the holder of any Note is intended to be exclusive of any other
remedy, and each and every such remedy shall be cumulative and shall be in
addition to every other remedy conferred herein or now or hereafter existing at
law or in equity or by statute or otherwise.
8. REPRESENTATIONS, COVENANTS AND WARRANTIES. The Company
represents, covenants and warrants as follows (all references to "Subsidiary"
and "Subsidiaries" in this paragraph 8 shall be deemed omitted if the Company
has no Subsidiaries at the time the representations herein are made or
repeated):
20
<PAGE>
8A. ORGANIZATION. The Company is a corporation duly organized and
existing in good standing under the laws of the State of California, each
Subsidiary is duly organized and existing in good standing under the laws of
the jurisdiction in which it is incorporated, and the Company has and each
Subsidiary has the corporate power to own its respective property and to carry
on its respective business as now being conducted.
8B. FINANCIAL STATEMENTS. The Company has furnished each Purchaser
of the Series A Notes and any Accepted Notes with the following financial
statements, identified by a principal financial officer of the Company: (i) a
consolidated balance sheet of the Company and its Subsidiaries as at December 31
in each of the three fiscal years of the Company most recently completed prior
to the date as of which this representation is made or repeated to such
Purchaser (other than fiscal years completed within 100 days prior to such date
for which audited financial statements have not been released) and consolidated
statements of income, cash flows and shareholders' equity of the Company and its
Subsidiaries for each such year, all reported on by Arthur Andersen LLP and (ii)
a consolidated balance sheet of the Company and its Subsidiaries as at the end
of the quarterly period (if any) most recently completed prior to such date and
after the end of such fiscal year (other than quarterly periods completed within
55 days prior to such date for which financial statements have not been
released) and the comparable quarterly period in the preceding fiscal year and
consolidated statements of income, cash flows and shareholders' equity for the
periods from the beginning of the fiscal years in which such quarterly periods
are included to the end of such quarterly periods, prepared by the Company.
Such financial statements (including any related schedules and/or notes) are
true and correct in all material respects (subject, as to interim statements, to
changes resulting from audits and year-end adjustments), have been prepared in
accordance with generally accepted accounting principles consistently followed
throughout the periods involved and show all liabilities, direct and contingent,
of the Company and its Subsidiaries required to be shown in accordance with such
principles. The balance sheets fairly present the condition of the Company and
its Subsidiaries as at the dates thereof, and the statements of income,
stockholders' equity and cash flows fairly present the results of the operations
of the Company and its Subsidiaries and their cash flows for the periods
indicated. There has been no material adverse change in the business, property
or assets, condition (financial or otherwise), operations or prospects of the
Company and its Subsidiaries taken as a whole since the end of the most recent
fiscal year for which such audited financial statements have been furnished.
8C. ACTIONS PENDING. There is no action, suit, investigation or
proceeding pending or, to the knowledge of the Company, threatened against the
Company or any of its Subsidiaries, or any properties or rights of the Company
or any of its Subsidiaries, by or before any court, arbitrator or administrative
or governmental body which might result in any material adverse change in the
business, property or assets, condition (financial or otherwise) or operations
of the Company and its Subsidiaries taken as a whole.
8D. OUTSTANDING DEBT. The Company and Subsidiaries have no
outstanding Debt as of the Series A Closing Day other than as set forth on
Schedule 6C. Neither the Company nor any of its Subsidiaries has outstanding
any Debt except as permitted by
21
<PAGE>
paragraph 6C(2). There exists no default under the provisions of any instrument
evidencing such outstanding Debt or of any agreement relating thereto.
8E. TITLE TO PROPERTIES. The Company has and each of its
Subsidiaries has good and indefeasible title to its respective real properties
(other than properties which it leases) and good title to all of its other
respective properties and assets, including the properties and assets reflected
in the most recent audited balance sheet referred to in paragraph 8B (other than
properties and assets disposed of in the ordinary course of business), subject
to no Lien of any kind except Liens permitted by paragraph 6C(1). All leases
necessary in any material respect for the conduct of the respective businesses
of the Company and its Subsidiaries are valid and subsisting and are in full
force and effect.
8F. TAXES. The Company has and each of its Subsidiaries has filed
all federal, state and other income tax returns which, to the best knowledge of
the officers of the Company and its Subsidiaries, are required to be filed, and
each has paid all taxes as shown on such returns and on all assessments received
by it to the extent that such taxes have become due, except such taxes as are
being contested in good faith by appropriate proceedings for which adequate
reserves have been established in accordance with generally accepted accounting
principles.
8G. CONFLICTING AGREEMENTS AND OTHER MATTERS. Neither the Company
nor any of its Subsidiaries is a party to any contract or agreement or subject
to any charter or other corporate restriction which materially and adversely
affects its business, property or assets, condition (financial or otherwise) or
operations. Neither the execution nor delivery of this Agreement, the Guaranty
or the Notes, nor the offering, issuance and sale of the Notes, nor fulfillment
of nor compliance with the terms and provisions hereof, of the Guaranty and of
the Notes will conflict with, or result in a breach of the terms, conditions or
provisions of, or constitute a default under, or result in any violation of, or
result in the creation of any Lien upon any of the properties or assets of the
Company or any of its Subsidiaries pursuant to, the articles of incorporation or
by-laws of the Company or any of its Subsidiaries, any award of any arbitrator
or any agreement (including any agreement with shareholders), instrument, order,
judgment, decree, statute, law, rule or regulation to which the Company or any
of its Subsidiaries is subject. Neither the Company nor any of its
Subsidiaries is a party to, or otherwise subject to any provision contained in,
any instrument evidencing Indebtedness of the Company or such Subsidiary, any
agreement relating thereto or any other contract or agreement (including its
articles of incorporation) which limits the amount of, or otherwise imposes
restrictions on the incurring of, Debt of the Company of the type to be
evidenced by the Notes, or of the Guarantor of the type to be evidenced by the
Guaranty, except in each case as set forth in the agreements listed in Schedule
--------
8G attached hereto (as such Schedule 8G may have been modified from time to time
- --
subsequent to the Series A Closing Day by written supplements thereto delivered
by the Company to Prudential).
8H. OFFERING OF NOTES. Neither the Company nor any agent acting on
its behalf has, directly or indirectly, offered the Notes or any similar
security of the Company for sale to, or solicited any offers to buy the Notes or
any similar security of the Company from,
22
<PAGE>
or otherwise approached or negotiated with respect thereto with, any Person
other than institutional investors, and neither the Company nor any agent acting
on its behalf has taken or will take any action which would subject the issuance
or sale of the Notes to the provisions of Section 5 of the Securities Act or to
the provisions of any securities or Blue Sky law of any applicable jurisdiction.
8I. USE OF PROCEEDS. The proceeds of the Series A Notes will be used
to repay indebtedness. None of the proceeds of the sale of any Notes will be
used, directly or indirectly, for the purpose, whether immediate, incidental or
ultimate, of purchasing or carrying any "MARGIN STOCK" as defined in Regulation
G (12 CFR Part 207) of the Board of Governors of the Federal Reserve System
(herein called "margin stock") or for the purpose of maintaining, reducing or
retiring any Indebtedness which was originally incurred to purchase or carry any
stock that is then currently a margin stock or for any other purpose which might
constitute the purchase of such Notes a "purpose credit" within the meaning of
such Regulation G, unless the Company shall have delivered to the Purchaser
which is purchasing such Notes, on the Closing Day for such Notes, an opinion of
counsel satisfactory to such Purchaser stating that the purchase of such Notes
does not constitute a violation of such Regulation G. Neither the Company nor
any agent acting on its behalf has taken or will take any action which might
cause this Agreement or the Notes to violate Regulation G, Regulation T or any
other regulation of the Board of Governors of the Federal Reserve System or to
violate the Exchange Act, in each case as in effect now or as the same may
hereafter be in effect.
8J. ERISA. No accumulated funding deficiency (as defined in section
302 of ERISA and section 412 of the Code), whether or not waived, exists with
respect to any Plan (other than a Multiemployer Plan). No liability to the
Pension Benefit Guaranty Corporation has been or is expected by the Company or
any ERISA Affiliate to be incurred with respect to any Plan (other than a
Multiemployer Plan) by the Company, any Subsidiary or any ERISA Affiliate which
is or would be materially adverse to the business, property or assets, condition
(financial or otherwise) or operations of the Company and its Subsidiaries taken
as a whole. Neither the Company, any Subsidiary nor any ERISA Affiliate has
incurred or presently expects to incur any withdrawal liability under Title IV
of ERISA with respect to any Multiemployer Plan which is or would be materially
adverse to the business, property or assets, condition (financial or otherwise)
or operations of the Company and its Subsidiaries taken as a whole. The
execution and delivery of this Agreement and the issuance and sale of the Notes
will be exempt from or will not involve any transaction which is subject to the
prohibitions of section 406 of ERISA and will not involve any transaction in
connection with which a penalty could be imposed under section 502(i) of ERISA
or a tax could be imposed pursuant to section 4975 of the Code. The
representation by the Company in the next preceding sentence is made in reliance
upon and subject to the accuracy of the representation of each Purchaser in
paragraph 9B as to the source of funds to be used by it to purchase any Notes.
8K. GOVERNMENTAL CONSENT. Neither the nature of the Company or of
any Subsidiary, nor any of their respective businesses or properties, nor any
relationship between the Company or any Subsidiary and any other Person, nor any
circumstance in connection with the offering, issuance, sale or delivery of the
Notes or issuance of the Guaranty is such as to
23
<PAGE>
require any authorization, consent, approval, exemption or any action by or
notice to or filing with any court or administrative or governmental body (other
than routine filings after the Closing Day for any Notes with the Securities and
Exchange Commission and/or state Blue Sky authorities) in connection with the
execution and delivery of this Agreement or the Guaranty, the offering,
issuance, sale or delivery of the Notes or fulfillment of or compliance with the
terms and provisions hereof or of the Guaranty or the Notes.
8L. ENVIRONMENTAL COMPLIANCE. The Company and its Subsidiaries and
all of their respective properties and facilities have complied at all times and
in all respects with all Environmental Laws except, in any such case, where
------
failure to comply would not result in a material adverse effect on the business,
condition (financial or otherwise) or operations of the Company and its
Subsidiaries taken as a whole.
8M. DISCLOSURE. Neither this Agreement nor the Guaranty nor any
other document, certificate or statement furnished to any Purchaser by or on
behalf of the Company or the Guarantor in connection herewith or with the
Guaranty contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein and
therein not misleading. There is no fact peculiar to the Company or any of its
Subsidiaries which materially adversely affects or in the future may (so far as
the Company can now foresee) materially adversely affect the business, property
or assets, condition (financial or otherwise) or operations of the Company or
any of its Subsidiaries and which has not been set forth in this Agreement and
the schedules hereto.
8N. HOSTILE TENDER OFFERS. None of the proceeds of the sale of any
Notes will be used to finance a Hostile Tender Offer.
9. REPRESENTATIONS OF THE PURCHASERS.
Each Purchaser represents as follows:
9A. NATURE OF PURCHASE. Such Purchaser is not acquiring the Notes
purchased by it hereunder with a view to or for sale in connection with any
distribution thereof within the meaning of the Securities Act, provided that
the disposition of such Purchaser's property shall at all times be and remain
within its control.
9B. SOURCE OF FUNDS. The source of the funds being used by such
Purchaser to pay the purchase price of the Notes being purchased by such
Purchaser hereunder constitutes assets allocated to: (i) the "insurance company
general account" of such Purchaser (as such term is defined under Section V of
the Untied States Department of Labor's Prohibited Transaction Class Exemption
("PTCE") 95-60), and as of the date of the purchase of the Notes such Purchaser
satisfies all of the applicable requirements for relief under Sections I and IV
of PTCE 95-60 or (ii) a separate account maintained by such Purchaser in which
no employee benefit plan, other than employee benefit plans identified on a list
which has been furnished by such Purchaser to the Company, participates to the
extent
24
<PAGE>
of 10% or more. For the purpose of this paragraph 9B, the terms "SEPARATE
ACCOUNT" and "EMPLOYEE BENEFIT PLAN" shall have the respective meanings
specified in section 3 of ERISA.
10. DEFINITIONS; ACCOUNTING MATTERS. For the purpose of this
Agreement, the terms defined in paragraphs 10A and 10B (or within the text of
any other paragraph) shall have the respective meanings specified therein and
all accounting matters shall be subject to determination as provided in
paragraph 10C.
10A. YIELD-MAINTENANCE TERMS.
"CALLED PRINCIPAL" shall mean, with respect to any Note, the principal
of such Note that is to be prepaid pursuant to paragraph 4C or is declared to be
immediately due and payable pursuant to paragraph 7A, as the context requires.
"DESIGNATED SPREAD" shall mean 0 in the case of each Series A Note and
0 in the case of each Note of any other Series unless the Confirmation of
Acceptance with respect to the Notes of such Series specifies a different
Designated Spread in which case it shall mean, with respect to each Note of such
Series, the Designated Spread so specified.
"DISCOUNTED VALUE" shall mean, with respect to the Called Principal of
any Note, the amount obtained by discounting all Remaining Scheduled Payments
with respect to such Called Principal from their respective scheduled due dates
to the Settlement Date with respect to such Called Principal, in accordance with
accepted financial practice and at a discount factor (as converted to reflect
the periodic basis on which interest on such Note is payable, if payable other
than on a semi-annual basis) equal to the Reinvestment Yield with respect to
such Called Principal.
"REINVESTMENT YIELD" shall mean, with respect to the Called Principal
of any Note, the Designated Spread over the yield to maturity implied by (i) the
yields reported, as of 10:00 A.M. (New York City local time) on the Business Day
next preceding the Settlement Date with respect to such Called Principal, on the
display designated as "Page 678" on the Telerate Service (or such other display
as may replace page 678 on the Telerate Service) for actively traded U.S.
Treasury securities having a maturity equal to the Remaining Average Life of
such Called Principal as of such Settlement Date, or if such yields shall not be
reported as of such time or the yields reported as of such time shall not be
ascertainable, (ii) the Treasury Constant Maturity Series yields reported, for
the latest day for which such yields shall have been so reported as of the
Business Day next preceding the Settlement Date with respect to such Called
Principal, in Federal Reserve Statistical Release H.15 (519) (or any comparable
successor publication) for actively traded U.S. Treasury securities having a
constant maturity equal to the Remaining Average Life of such Called Principal
as of such Settlement Date. Such implied yield shall be determined, if
necessary, by (a) converting U.S. Treasury bill quotations to bond-equivalent
yields in accordance with accepted financial practice and (b) interpolating
linearly between yields reported for various maturities.
25
<PAGE>
"REMAINING AVERAGE LIFE" shall mean, with respect to the Called
Principal of any Note, the number of years (calculated to the nearest one-
twelfth year) obtained by dividing (i) such Called Principal into (ii) the sum
of the products obtained by multiplying (a) each Remaining Scheduled Payment of
such Called Principal (but not of interest thereon) by (b) the number of years
(calculated to the nearest one-twelfth year) which will elapse between the
Settlement Date with respect to such Called Principal and the scheduled due date
of such Remaining Scheduled Payment.
"REMAINING SCHEDULED PAYMENTS" shall mean, with respect to the Called
Principal of any Note, all payments of such Called Principal and interest
thereon that would be due on or after the Settlement Date with respect to such
Called Principal if no payment of such Called Principal were made prior to its
scheduled due date.
"SETTLEMENT DATE" shall mean, with respect to the Called Principal of
any Note, the date on which such Called Principal is to be prepaid pursuant to
paragraph 4C or is declared to be immediately due and payable pursuant to
paragraph 7A, as the context requires.
"YIELD-MAINTENANCE AMOUNT" shall mean, with respect to any Note, an
amount equal to the excess, if any, of the Discounted Value of the Called
Principal of such Note over the sum of (i) such Called Principal plus (ii)
interest accrued thereon as of (including interest due on) the Settlement Date
with respect to such Called Principal. The Yield-Maintenance Amount shall in no
event be less than zero.
10B. OTHER TERMS.
"ACCEPTANCE" shall have the meaning specified in paragraph 2B(5).
"ACCEPTANCE DAY" shall have the meaning specified in paragraph 2B(5).
"ACCEPTANCE WINDOW" shall have the meaning specified in paragraph
2B(5).
"ACCEPTED NOTE" shall have the meaning specified in paragraph 2B(5).
"AFFILIATE" shall mean any Person directly or indirectly controlling,
controlled by, or under direct or indirect common control with, the Company,
except a Subsidiary. A Person shall be deemed to control a corporation if such
Person possesses, directly or indirectly, the power to direct or cause the
direction of the management and policies of such corporation, whether through
the ownership of voting securities, by contract or otherwise.
"ANNUAL PERCENTAGE OF ASSETS TRANSFERRED" shall mean, with respect to
any four consecutive fiscal quarter period, the sum of the Percentages of Assets
Transferred for each asset of the Company and its Subsidiaries that is
Transferred during such period.
26
<PAGE>
"AUTHORIZED OFFICER" shall mean (i) in the case of the Company, its
chief executive officer, its chief financial officer, any vice president of the
Company designated as an "Authorized Officer" of the Company in the Information
Schedule attached hereto or any vice president or other officer of the Company
designated as an "Authorized Officer" of the Company for the purpose of this
Agreement in an Officer's Certificate executed by the Company's chief executive
officer or chief financial officer and delivered to Prudential, and (ii) in the
case of Prudential, any officer of Prudential designated as its "Authorized
Officer" in the Information Schedule or any officer of Prudential designated as
its "Authorized Officer" for the purpose of this Agreement in a certificate
executed by one of its Authorized Officers. Any action taken under this
Agreement on behalf of the Company by any individual who on or after the date of
this Agreement shall have been an Authorized Officer of the Company and whom
Prudential in good faith believes to be an Authorized Officer of the Company at
the time of such action shall be binding on the Company even though such
individual shall have ceased to be an Authorized Officer of the Company, and any
action taken under this Agreement on behalf of Prudential by any individual who
on or after the date of this Agreement shall have been an Authorized Officer of
Prudential and whom the Company in good faith believes to be an Authorized
Officer of Prudential at the time of such action shall be binding on Prudential
even though such individual shall have ceased to be an Authorized Officer of
Prudential.
"AVAILABLE FACILITY AMOUNT" shall have the meaning specified in
paragraph 2B(1).
"BANK AGREEMENT" shall mean the First Amended and Restated Credit
Agreement dated as of December 29, 1995 among the Company, Bank of America
National Trust and Savings Association and the other financial institutions
named as parties thereto, as amended as of April 26, 1996.
"BANKRUPTCY LAW" shall have the meaning specified in clause (viii) of
paragraph 7A.
"BUSINESS DAY" shall mean any day other than (i) a Saturday or a
Sunday, (ii) a day on which commercial banks in New York City are required or
authorized to be closed and (iii) for purposes of paragraph 2B(3) hereof only, a
day on which The Prudential Insurance Company of America is not open for
business.
"CANCELLATION DATE" shall have the meaning specified in paragraph
2B(8)(iv).
"CANCELLATION FEE" shall have the meaning specified in paragraph
2B(8)(iv).
"CAPITALIZED LEASE OBLIGATION" shall mean any rental obligation which,
under generally accepted accounting principles, is or will be required to be
capitalized on the books of the Company or any Subsidiary, taken at the amount
thereof accounted for as indebtedness (net of interest expenses) in accordance
with such principles.
"CLOSING DAY" shall mean, with respect to the Series A Notes, the
Series A Closing Day and, with respect to any Accepted Note, the Business Day
specified for the closing
27
<PAGE>
of the purchase and sale of such Accepted Note in the Request for Purchase of
such Accepted Note, provided that (i) if the Company and the Purchaser which is
--------
obligated to purchase such Accepted Note agree on an earlier Business Day for
such closing, the "CLOSING DAY" for such Accepted Note shall be such earlier
Business Day, and (ii) if the closing of the purchase and sale of such Accepted
Note is rescheduled pursuant to paragraph 2B(7), the Closing Day for such
Accepted Note, for all purposes of this Agreement except references to "original
Closing Day" in paragraph 2B(8)(iii), shall mean the Rescheduled Closing Day
with respect to such Accepted Note.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"CONFIRMATION OF ACCEPTANCE" shall have the meaning specified in
paragraph 2B(5).
"CONSOLIDATED CAPITALIZATION" shall mean, at any time of determination
thereof, the sum of Total Debt and Consolidated Tangible Net Worth.
"CONSOLIDATED NET EARNINGS" shall mean, for any period, the
consolidated gross revenues of the Company and its Subsidiaries less all
operating and non-operating expenses of the Company and its Subsidiaries
including all charges of a proper character (including current and deferred
taxes on income, provision for taxes and unremitted foreign earnings which are
included in gross revenues and current additions to reserves), but not
including, for amounts in excess of $100,000 only, (i) extraordinary items as
determined in accordance with generally accepted accounting principles, or (ii)
any gains or losses (including the effect of expenses and taxes applicable
thereto) resulting from the sale, conversion or other disposition of capital
assets (i.e. assets other than current assets) or any gains resulting from the
write-up of assets (other than the write-up of current assets as a result of
revaluations or realignment of currencies), any equity of the Company or any
Subsidiary in the unremitted earnings of any Person which is not a Subsidiary,
any earnings of any Person acquired by the Company or any Subsidiary through
purchase, merger or consolidation or otherwise for any period prior to the date
of acquisition, or any deferred credit representing the excess of equity in any
Subsidiary at the date of acquisition over the cost of the investment in such
Subsidiary.
"CONSOLIDATED TANGIBLE NET WORTH" shall mean, as of any time of
determination thereof, the shareholders' equity of the Company less the
aggregate unamortized amount of Intangibles booked by the Company and
Subsidiaries subsequent to December 31, 1995.
"CUMULATIVE PERCENTAGE OF ASSETS TRANSFERRED" shall mean, with respect
to the period commencing January 1, 1996 through any date of determination, the
sum of the Percentages of Assets Transferred for each asset of the Company and
its Subsidiaries that is Transferred during such period.
"CURRENT DEBT" shall mean, with respect to any Person, all
Indebtedness of such Person for borrowed money which by its terms or by the
terms of any instrument or agreement relating thereto matures on demand or
within one year from the date of the
28
<PAGE>
creation thereof and is not directly or indirectly renewable or extendible at
the option of the debtor to a date more than one year from the date of the
creation thereof, provided that Indebtedness for borrowed money outstanding
under a revolving credit or similar agreement which obligates the lender or
lenders to extend credit over a period of more than one year shall constitute
Funded Debt and not Current Debt, even though such Indebtedness by its terms
matures on demand or within one year from the date of the creation thereof.
"DEBT" shall mean Current Debt and Funded Debt.
"DELAYED DELIVERY FEE" shall have the meaning specified in paragraph
2B(8)(iii).
"ENVIRONMENTAL LAWS" shall mean all federal, state, local and foreign
laws relating to pollution or protection of the environment, including laws
relating to emissions, discharges, releases or threatened releases of
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes into the environment (including, without limitation,
ambient air, surface water, ground water or land), or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants, chemicals, or industrial,
toxic or hazardous substances or wastes, and any and all regulations, codes,
plans, orders, decrees, judgments, injunctions, notices or demand letters
issued, entered, promulgated or approved thereunder.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA AFFILIATE" shall mean any corporation which is a member of the
same controlled group of corporations as the Company within the meaning of
section 414(b) of the Code, or any trade or business which is under common
control with the Company within the meaning of section 414(c) of the Code.
"EVENT OF DEFAULT" shall mean any of the events specified in paragraph
7A, provided that there has been satisfied any requirement in connection with
such event for the giving of notice, or the lapse of time, or the happening of
any further condition, event or act, and "DEFAULT" shall mean any of such
events, whether or not any such requirement has been satisfied.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"FACILITY" shall have the meaning specified in paragraph 2B(1).
"FUNDED DEBT" shall mean with respect to any Person, all Indebtedness
of such Person which by its terms or by the terms of any instrument or agreement
relating thereto matures, or which is otherwise payable or unpaid, more than one
year from, or is directly or indirectly renewable or extendible at the option of
the debtor to a date more than one year (including an option of the debtor under
a revolving credit or similar agreement obligating the
29
<PAGE>
lender or lenders to extend credit over a period of more than one year) from,
the date of the creation thereof.
"GUARANTEE" shall mean, with respect to any Person, any direct or
indirect liability, contingent or otherwise, of such Person with respect to any
indebtedness, lease, dividend or other obligation of another, including, without
limitation, any such obligation directly or indirectly guaranteed, endorsed
(otherwise than for collection or deposit in the ordinary course of business) or
discounted or sold with recourse by such Person, or in respect of which such
Person is otherwise directly or indirectly liable, including, without
limitation, any such obligation in effect guaranteed by such Person through any
agreement (contingent or otherwise) to purchase, repurchase or otherwise acquire
such obligation or any security therefor, or to provide funds for the payment or
discharge of such obligation (whether in the form of loans, advances, stock
purchases, capital contributions or otherwise), or to maintain the solvency or
any balance sheet or other financial condition of the obligor of such
obligation, or to make payment for any products, materials or supplies or for
any transportation or service, regardless of the non-delivery or non-furnishing
thereof, in any such case if the purpose or intent of such agreement is to
provide assurance that such obligation will be paid or discharged, or that any
agreements relating thereto will be complied with, or that the holders of such
obligation will be protected against loss in respect thereof. The amount of any
Guarantee shall be equal to the outstanding principal amount of the obligation
guaranteed or such lesser amount to which the maximum exposure of the guarantor
shall have been specifically limited.
"GUARANTOR" shall mean Wyle Distribution Group - Santa Clara, Inc., a
California corporation.
"GUARANTY" shall mean the guaranty agreement of the Guarantor in the
form of Exhibit E hereto.
"HEDGE TREASURY NOTE(S)" shall mean, with respect to any Accepted
Note, the United States Treasury Note or Notes whose duration (as determined by
Prudential) most closely matches the duration of such Accepted Note.
"HOSTILE TENDER OFFER" shall mean, with respect to the use of proceeds
of any Note, any offer to purchase, or any purchase of, shares of capital stock
of any corporation or equity interests in any other entity, or securities
convertible into or representing the beneficial ownership of, or rights to
acquire, any such shares or equity interests, if such shares, equity interests,
securities or rights are of a class which is publicly traded on any securities
exchange or in any over-the-counter market, other than purchases for portfolio
investment purposes of such shares, equity interests, securities or rights
which, together with any such shares, equity, interests, securities or rights
than held, represent less than 5% of the equity interests or beneficial
ownership of such corporation or other entity, and such offer or purchase has
not been duly approved by the board of directors of such corporation or the
equivalent governing body of such other entity prior to the date on which the
Company makes the Request for Purchase of such Note.
30
<PAGE>
"INCLUDING" shall mean, unless the context clearly requires otherwise,
"including without limitation".
"INDEBTEDNESS" shall mean, with respect to any Person, without
duplication, (i) all items (excluding items of contingency reserves or of
reserves for deferred income taxes) which in accordance with generally accepted
accounting principles would be included in determining total liabilities as
shown on the liability side of a balance sheet of such Person as of the date on
which Indebtedness is to be determined, (ii) all indebtedness secured by any
Lien on any property or asset owned or held by such Person subject thereto,
whether or not the indebtedness secured thereby shall have been assumed, and
(iii) all indebtedness of others with respect to which such Person has become
liable by way of Guarantee.
"INTANGIBLES" shall mean (i) the good will and deferred financing
charges of the Company and Subsidiaries and (ii) the excess over $100,000 of the
aggregate book value of the Company's and Subsidiaries' patents, trademarks,
trade names, and any other items classified as intangibles under generally
accepted accounting principles; but shall not include up to $33,000,000 of
Intangibles booked in connection with the Company's acquisition of Sylvan
Ginsbury, Ltd. and its affiliated companies.
"ISSUANCE FEE" shall have the meaning specified in paragraph
2B(8)(ii).
"ISSUANCE PERIOD" shall have the meaning specified in paragraph 2B(2).
"LIEN" shall mean any mortgage, pledge, security interest,
encumbrance, lien (statutory or otherwise) or charge of any kind (including any
agreement to give any of the foregoing, any conditional sale or other title
retention agreement, any lease in the nature thereof, and the filing of or
agreement to give any financing statement under the Uniform Commercial Code of
any jurisdiction) or any other type of preferential arrangement for the purpose,
or having the effect, of protecting a creditor against loss or securing the
payment or performance of an obligation.
"MULTIEMPLOYER PLAN" shall mean any Plan which is a "multiemployer
plan" (as such term is defined in section 4001(a)(3) of ERISA.
"NOTES" shall have the meaning specified in paragraph 1B.
"OFFICER'S CERTIFICATE" shall mean a certificate signed in the name of
the Company by an Authorized Officer of the Company.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or any
successor or replacement entity thereto under ERISA.
"PERCENTAGE OF ASSETS TRANSFERRED" shall mean, with respect to each
asset Transferred pursuant to clause (iii) of paragraph 6C(6) or paragraph
6C(4), the ratio (expressed as a percentage) of (i) the value of such asset
(which value, with respect to each
31
<PAGE>
asset, shall be the higher of its fair market value or its net book value on the
date of its Transfer) to (ii) the consolidated assets of the Company and
Subsidiaries as of the last day of the fiscal quarter immediately preceding the
date of such Transfer.
"PERSON" shall mean and include an individual, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization and a government
or any department or agency thereof.
"PLAN" shall mean any employee pension benefit plan (as such term is
defined in section 3 of ERISA) which is or has been established or maintained,
or to which contributions are or have been made, by the Company or any ERISA
Affiliate.
"PRIORITY DEBT" shall mean (i) Debt of the Company secured by a Lien,
exclusive of Debt secured by Liens permitted by clauses (iv), (v) and (vi) of
paragraph 6C(1), and (ii) Debt of Subsidiaries, including Debt resulting from a
Guarantee provided by a Subsidiary (other than the Guaranty, the Guarantor's
guarantee of the notes of the Company issued under the note agreement dated
January 2, 1990 and the Guarantor's guarantee of up to $140,000,000 of Debt of
the Company under the Bank Agreement), and excluding Debt of a Subsidiary
secured by Liens permitted by clauses (iv) and (vi) of paragraph 6C(1).
"PRUCO" shall mean Pruco Life Insurance Company.
"PRUDENTIAL" shall mean The Prudential Insurance Company of America.
"PRUDENTIAL AFFILIATE" shall mean (i) any corporation or other entity
all of the Voting Stock (or equivalent voting securities or interests) of which
is owned by Prudential either directly or through Prudential Affiliates and
(ii) any trust managed by Prudential or a Prudential Affiliate described in the
foregoing clause (i).
"PURCHASERS" shall mean Prudential with respect to the Series A Notes
and, with respect to any Accepted Notes, Prudential and/or the Prudential
Affiliate(s), which are purchasing such Accepted Notes.
"REQUEST FOR PURCHASE" shall have the meaning specified in paragraph
2B(3).
"REQUIRED HOLDER(S)" shall mean the holder or holders of more than 50%
of the aggregate principal amount of the Notes or of a Series of Notes, as the
context may require, from time to time outstanding; provided that for purposes
--------
of an acceleration of Notes of any Series pursuant to clause (c) of paragraph
7A, it shall mean the holder or holders of at least 66 2/3% of the Notes of such
Series.
"RESCHEDULED CLOSING DAY" shall have the meaning specified in
paragraph 2B(7).
"RESPONSIBLE OFFICER" shall mean the chief executive officer, chief
operating officer, chief financial officer or chief accounting officer of the
Company, general counsel of the
32
<PAGE>
Company or any other officer of the Company involved principally in its
financial administration or its controllership function.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SERIES" shall have the meaning specified in paragraph 1B.
"SERIES A CLOSING DAY" shall have the meaning specified in paragraph
2A.
"SERIES A NOTE(S)" shall have the meaning specified in paragraph 1A.
"SHELF NOTES" shall have the meaning specified in paragraph 1B.
"SIGNIFICANT HOLDER" shall mean (i) Prudential, so long as Prudential
or any Prudential Affiliate shall hold (or be committed under this Agreement to
purchase) any Note, or (ii) any other holder of at least 5% of the aggregate
principal amount of the Notes of any Series from time to time outstanding.
"STRUCTURING FEE" shall have the meaning provided in paragraph
2B(8)(i).
"SUBSIDIARY" shall mean any corporation organized under the laws of
any state of the United States of America, Canada, or any province of Canada,
which conducts the major portion of its business in and makes the major portion
of its sales to Persons located in the United States of America or Canada, and
all of the stock of every class of which, except directors' qualifying shares
shall, at the time as of which any determination is being made, be owned by the
Company either directly or through Subsidiaries.
"TOTAL DEBT" shall mean, as of any time of determination thereof
without duplication, the aggregate amount of Debt of the Company and
Subsidiaries, exclusive of (i) Debt of Subsidiaries owed to the Company and
===
other Subsidiaries and (ii) Debt of the Company owed to a Subsidiary which has
executed and delivered to Prudential (for the benefit of all holders of Notes)
an agreement containing subordination provisions substantially in the form set
forth in Section 2.7 of Exhibit E hereto.
"TRANSFER" shall mean, with respect to any item, the sale, exchange,
conveyance, lease, transfer or other disposition of such item.
"TRANSFEREE" shall mean any direct or indirect transferee of all or
any part of any Note purchased by any Purchaser under this Agreement.
"VOTING STOCK" shall mean, with respect to any corporation, any shares
of stock of such corporation whose holders are entitled under ordinary
circumstances to vote for the election of directors of such corporation
(irrespective of whether at the time stock of any other class or classes shall
have or might have voting power by reason of the happening of any contingency).
33
<PAGE>
10C. ACCOUNTING PRINCIPLES, TERMS AND DETERMINATIONS. All references
in this Agreement to "generally accepted accounting principles" shall be deemed
to refer to generally accepted accounting principles in effect in the United
States at the time of application thereof. Unless otherwise specified herein,
all accounting terms used herein shall be interpreted, all determinations with
respect to accounting matters hereunder shall be made, and all unaudited
financial statements and certificates and reports as to financial matters
required to be furnished hereunder shall be prepared, in accordance with
generally accepted accounting principles applied on a basis consistent with the
most recent audited financial statements delivered pursuant to clause (ii) of
paragraph 5A or, if no such statements have been so delivered, the most recent
audited financial statements referred to in clause (i) of paragraph 8B.
11. MISCELLANEOUS.
11A. NOTE PAYMENTS. The Company agrees that, so long as any Purchaser
shall hold any Note, it will make payments of principal of, interest on, and any
Yield-Maintenance Amount payable with respect to, such Note, which comply with
the terms of this Agreement, by wire transfer of immediately available funds for
credit (not later than 12:00 noon, New York City local time, on the date due) to
(i) the account or accounts of such Purchaser specified in the Purchaser
Schedule attached hereto in the case of any Series A Note, (ii) the account or
accounts of such Purchaser specified in the Confirmation of Acceptance with
respect to such Note in the case of any Shelf Note or (iii) such other account
or accounts in the United States as such Purchaser may from time to time
designate in writing, notwithstanding any contrary provision herein or in any
Note with respect to the place of payment. Each Purchaser agrees that, before
disposing of any Note, it will make a notation thereon (or on a schedule
attached thereto) of all principal payments previously made thereon and of the
date to which interest thereon has been paid. The Company agrees to afford the
benefits of this paragraph 11A to any Transferee which shall have made the same
agreement as the Purchasers have made in this paragraph 11A.
11B. EXPENSES. The Company agrees, whether or not the transactions
contemplated hereby shall be consummated, to pay, and save Prudential, each
Purchaser and any Transferee harmless against liability for the payment of, all
out-of-pocket expenses arising in connection with such transactions, including
(i) all document production and duplication charges and the fees and expenses of
any special counsel engaged by the Purchasers or any Transferee in connection
with this Agreement, the transactions contemplated hereby and any subsequent
proposed modification of, or proposed consent under, this Agreement, whether or
not such proposed modification shall be effected or proposed consent granted
(exclusive of any such amounts incurred through the Series A Closing Day), and
(ii) the costs and expenses, including attorneys' fees, incurred by any
Purchaser or any Transferee in enforcing (or determining whether or how to
enforce) any rights under this Agreement or the Notes or in responding to any
subpoena or other legal process or informal investigative demand issued in
connection with this Agreement or the transactions contemplated hereby or by
reason of any Purchaser's or any Transferee's having acquired any Note,
including without limitation costs and expenses incurred in any bankruptcy case.
The obligations of the Company under
34
<PAGE>
this paragraph 11B shall survive the transfer of any Note or portion thereof or
interest therein by any Purchaser or any Transferee and the payment of any Note.
11C. CONSENT TO AMENDMENTS. This Agreement may be amended, and the
Company may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, if the Company shall obtain the written consent
to such amendment, action or omission to act, of the Required Holder(s) of the
Notes of each Series except that, (i) with the written consent of the holders of
all Notes of a particular Series, and if an Event of Default shall have occurred
and be continuing, of the holders of all Notes of all Series, at the time
outstanding (and not without such written consents), the Notes of such Series
may be amended or the provisions thereof waived to change the maturity thereof,
to change or affect the principal thereof, or to change or affect the rate or
time of payment of interest on or any Yield-Maintenance Amount payable with
respect to the Notes of such Series, (ii) without the written consent of the
holder or holders of all Notes at the time outstanding, no amendment to or
waiver of the provisions of this Agreement shall change or affect the provisions
of paragraph 7A or this paragraph 11C insofar as such provisions relate to
proportions of the principal amount of the Notes of any Series, or the rights of
any individual holder of Notes, required with respect to any declaration of
Notes to be due and payable or with respect to any consent, amendment, waiver or
declaration, (iii) with the written consent of Prudential (and not without the
written consent of Prudential) the provisions of paragraph 2B may be amended or
waived (except insofar as any such amendment or waiver would affect any rights
or obligations with respect to the purchase and sale of Notes which shall have
become Accepted Notes prior to such amendment or waiver), and (iv) with the
written consent of all of the Purchasers which shall have become obligated to
purchase Accepted Notes of any Series (and not without the written consent of
all such Purchasers), any of the provisions of paragraphs 2B and 3 may be
amended or waived insofar as such amendment or waiver would affect only rights
or obligations with respect to the purchase and sale of the Accepted Notes of
such Series or the terms and provisions of such Accepted Notes. Each holder of
any Note at the time or thereafter outstanding shall be bound by any consent
authorized by this paragraph 11C, whether or not such Note shall have been
marked to indicate such consent, but any Notes issued thereafter may bear a
notation referring to any such consent. No course of dealing between the
Company and the holder of any Note nor any delay in exercising any rights
hereunder or under any Note shall operate as a waiver of any rights of any
holder of such Note. As used herein and in the Notes, the term "THIS AGREEMENT"
and references thereto shall mean this Agreement as it may from time to time be
amended or supplemented.
11D. FORM, REGISTRATION, TRANSFER AND EXCHANGE OF NOTES; LOST NOTES.
The Notes are issuable as registered notes without coupons in denominations of
at least $100,000, except as may be necessary to reflect any principal amount
not evenly divisible by $100,000. The Company shall keep at its principal
office a register in which the Company shall provide for the registration of
Notes and of transfers of Notes. Upon surrender for registration of transfer of
any Note at the principal office of the Company, the Company shall, at its
expense, execute and deliver one or more new Notes of like tenor and of a like
aggregate principal amount, registered in the name of such transferee or
transferees. At the option of the holder of any Note, such Note may be
exchanged for other Notes of like tenor and of any
35
<PAGE>
authorized denominations, of a like aggregate principal amount, upon surrender
of the Note to be exchanged at the principal office of the Company. Whenever any
Notes are so surrendered for exchange, the Company shall, at its expense,
execute and deliver the Notes which the holder making the exchange is entitled
to receive. Each prepayment of principal payable on each prepayment date upon
each new Note issued upon any such transfer or exchange shall be in the same
proportion to the unpaid principal amount of such new Note as the prepayment of
principal payable on such date on the Note surrendered for registration of
transfer or exchange bore to the unpaid principal amount of such Note. No
reference need be made in any such new Note to any prepayment or prepayments of
principal previously due and paid upon the Note surrendered for registration of
transfer or exchange. Every Note surrendered for registration of transfer or
exchange shall be duly endorsed, or be accompanied by a written instrument of
transfer duly executed, by the holder of such Note or such holder's attorney
duly authorized in writing. Any Note or Notes issued in exchange for any Note or
upon transfer thereof shall carry the rights to unpaid interest and interest to
accrue which were carried by the Note so exchanged or transferred, so that
neither gain nor loss of interest shall result from any such transfer or
exchange. Upon receipt of written notice from the holder of any Note of the
loss, theft, destruction or mutilation of such Note and, in the case of any such
loss, theft or destruction, upon receipt of such holder's unsecured indemnity
agreement, or in the case of any such mutilation upon surrender and cancellation
of such Note, the Company will make and deliver a new Note, of like tenor, in
lieu of the lost, stolen, destroyed or mutilated Note.
11E. PERSONS DEEMED OWNERS; PARTICIPATIONS; RIGHT OF FIRST OFFER.
(i) Prior to due presentment for registration of transfer, the Company
may treat the Person in whose name any Note is registered as the owner and
holder of such Note for the purpose of receiving payment of principal of
and interest on, and any Yield-Maintenance Amount payable with respect to,
such Note and for all other purposes whatsoever, whether or not such Note
shall be overdue, and the Company shall not be affected by notice to the
contrary.
(ii) Subject to the preceding clause (i), the holder of any Note may
from time to time grant participations in all or any part of such Note to
any Person on such terms and conditions as may be determined by such holder
in its sole and absolute discretion.
(iii) In the event any holder shall desire to sell a Note, or any
part thereof, such holder shall promptly notify the Company in writing of
the material terms and conditions of such proposed sale (the "PROPOSAL")
whereupon the Company shall have a period of thirty days after receipt
thereof in which to agree in writing to repurchase the Note or part
thereof being offered pursuant to the Proposal for the cash consideration
stated in the Proposal and on the other terms and conditions thereof. If
the Company has not agreed in writing to repurchase such Note or part
thereof on the terms and conditions set forth
36
<PAGE>
in the Proposal on or before the expiration of thirty days after the
Company's receipt thereof, said holder may sell such Note or part thereof
strictly on the terms and conditions set forth in the Proposal (provided
that the cash consideration received may be greater than that set forth in
the proposal). If the closing of such transfer does not take place within
ninety days after the Company's right to purchase has expired, such holder
shall again offer such Note or part thereof to the Company in accordance
with the above-described terms before any sale to a third party. If the
Company agrees to repurchase such Note or part thereof, the closing will
take place on the terms and conditions set forth in the Proposal except
that the closing will be no earlier than fifteen days after such holder's
receipt of the Company's acceptance of the Proposal. This right of first
offer will apply to any subsequent sale of a Note or any part thereof. Any
repurchase of a Note by the Company pursuant to this paragraph 11E shall
not be deemed a prepayment of such note pursuant to the provisions of
paragraph 4 of this Agreement. Nothing in this clause (iii) shall be deemed
to prohibit the holder from selling participations in the Notes or any
Note, but in any such event, the Company shall not be required to recognize
any participant as a Noteholder or to issue new Notes to any such
participant. This clause (iii) shall not apply to sales or proposed sales
of Notes (or parts thereof) by Prudential or a Prudential Affiliate to
Prudential or a Prudential Affiliate.
11F. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All representations and warranties contained herein or made in writing by or on
behalf of the Company in connection herewith shall survive the execution and
delivery of this Agreement and the Notes, the transfer by any Purchaser of any
Note or portion thereof or interest therein and the payment of any Note, and may
be relied upon by any Transferee, regardless of any investigation made at any
time by or on behalf of any Purchaser or any Transferee. Subject to the
preceding sentence, this Agreement and the Notes embody the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof and supersede all prior agreements and understandings relating to such
subject matter.
11G. SUCCESSORS AND ASSIGNS. All covenants and other agreements in
this Agreement contained by or on behalf of any of the parties hereto shall bind
and inure to the benefit of the respective successors and assigns of the parties
hereto (including, without limitation, any Transferee) whether so expressed or
not.
11H. INDEPENDENCE OF COVENANTS. All covenants hereunder shall be
given independent effect so that if a particular action or condition is
prohibited by any one of such covenants, the fact that it would be permitted by
an exception to, or otherwise be in compliance within the limitations of,
another covenant shall not (i) avoid the occurrence of a Default or Event of
Default if such action is taken or such condition exists or (ii) in any way
prejudice an attempt by the holder of any Note to prohibit, through equitable
action or otherwise, the taking of any action by the Company or any Subsidiary
which would result in a Default or Event of Default.
37
<PAGE>
11I. NOTICES. All written communications provided for hereunder
(other than communications provided for under paragraph 2) shall be sent by
first class mail or nationwide overnight delivery service (with charges prepaid)
and (i) if to any Purchaser, addressed as specified for such communications in
the Purchaser Schedule attached hereto (in the case of the Series A Notes) or
the Purchaser Schedule attached to the applicable Confirmation of Acceptance (in
the case of any Shelf Notes) or at such other address as any such Purchaser
shall have specified to the Company in writing, (ii) if to any other holder of
any Note, addressed to it at such address as it shall have specified in writing
to the Company or, if any such holder shall not have so specified an address,
then addressed to such holder in care of the last holder of such Note which
shall have so specified an address to the Company and (iii) if to the Company,
addressed to it at 15370 Barranca Parkway, Irvine, California 92718, Attention:
Chief Financial Officer, provided, however, that any such communication to the
-------- -------
Company may also, at the option of the Person sending such communication, be
delivered by any other means either to the Company at its address specified
above or to any Authorized Officer of the Company. Any communication pursuant
to paragraph 2 shall be made by the method specified for such communication in
paragraph 2, and shall be effective to create any rights or obligations under
this Agreement only if, in the case of a telephone communication, an Authorized
Officer of the party conveying the information and of the party receiving the
information are parties to the telephone call, and in the case of a telecopier
communication, the communication is signed by an Authorized Officer of the party
conveying the information, addressed to the attention of an Authorized Officer
of the party receiving the information, and in fact received at the telecopier
terminal the number of which is listed for the party receiving the communication
in the Information Schedule or at such other telecopier terminal as the party
receiving the information shall have specified in writing to the party sending
such information.
11J. PAYMENTS DUE ON NON-BUSINESS DAYS. Anything in this Agreement or
the Notes to the contrary notwithstanding, any payment of principal of or
interest on, or Yield-Maintenance Amount payable with respect to, any Note that
is due on a date other than a Business Day shall be made on the next succeeding
Business Day. If the date for any payment is extended to the next succeeding
Business Day by reason of the preceding sentence, the period of such extension
shall be included in the computation of the interest payable on such Business
Day.
11K. SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
11L. DESCRIPTIVE HEADINGS. The descriptive headings of the several
paragraphs of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
38
<PAGE>
11M. SATISFACTION REQUIREMENT. If any agreement, certificate or other
writing, or any action taken or to be taken, is by the terms of this Agreement
required to be satisfactory to any Purchaser, to any holder of Notes or to the
Required Holder(s), the determination of such satisfaction shall be made by such
Purchaser, such holder or the Required Holder(s), as the case may be, in the
sole and exclusive judgment (exercised in good faith) of the Person or Persons
making such determination.
11N. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE
INTERNAL LAW OF THE STATE OF CALIFORNIA.
11O. SEVERALTY OF OBLIGATIONS. The sales of Notes to the Purchasers
are to be several sales, and the obligations of Prudential and the Purchasers
under this Agreement are several obligations. No failure by Prudential or any
Purchaser to perform its obligations under this Agreement shall relieve any
other Purchaser or the Company of any of its obligations hereunder, and neither
Prudential nor any Purchaser shall be responsible for the obligations of, or any
action taken or omitted by, any other such Person hereunder.
11P. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
39
<PAGE>
11Q. BINDING AGREEMENT. When this Agreement is executed and delivered
by the Company, Prudential and Pruco, it shall become a binding agreement
between the Company, Prudential and Pruco. This Agreement shall also inure to
the benefit of each Purchaser which shall have executed and delivered a
Confirmation of Acceptance, and each such Purchaser shall be bound by this
Agreement to the extent provided in such Confirmation of Acceptance.
Very truly yours,
WYLE ELECTRONICS
By: /s/ BARRY EMERSON
---------------------------------------------
Name: Barry Emerson
Vice President and Controller
The foregoing Agreement is hereby accepted
as of the date first above written.
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: /s/ E. ALLEN RODRIGUEZ
--------------------------
Vice President
PRUCO LIFE INSURANCE COMPANY
By: /s/ E. ALLEN RODRIGUEZ
---------------------------
Assistant Vice President
40
<PAGE>
EXHIBIT 10(al)
AMENDMENT NO. 1
This Amendment No. 1 ("Amendment No. 1") to the Limited Liability Company
Agreement of Accord Contract Services LLC dated August 8, 1996 (the "Agreement")
is made and entered into and effective as of November 5, 1996 (the "Amendment
No. 1 Effective Date") by and between Wyle Electronics, a California corporation
("WYLE") and Marshall Industries, Inc., a California corporation ("MARSHALL").
WHEREAS, WYLE AND MARSHALL wish to amend the terms of the Agreement.
NOW THEREFORE, the parties agree as follows:
1. WYLE and MARSHALL hereby agree that the definition of the term
"Associated Agreement Negotiation Period" (as defined in Section 2.5 of the
Agreement is hereby amended to be defined as that period from August 8, 1996
until December 31, 1996.
2. Except as expressly set forth in this Amendment No. 1 all other terms of
the Agreement shall remain in full force and effect.
3. This Amendment No. 1 may be executed in any number of counterparts, each
of which shall be an original and all of which together shall constitute one and
the same instrument.
4. This Amendment No. 1 may be executed and delivered by facsimile and,
upon such execution and delivery, shall have the same force and effect as an
originally executed instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to
be executed and delivered by their duly authorized representatives as of the
date first above written.
MARSHALL INDUSTRIES, INC., WYLE ELECTRONICS,
a California corporation a California corporation
By: /s/ HENRY W. CHIN By: /s/ R. VAN NESS HOLLAND, JR.
------------------------ -----------------------------
Henry W. Chin R. Van Ness Holland, Jr.
Vice President and Executive Vice President and
Chief Financial Officer Chief Financial Officer
1
<PAGE>
AMENDMENT NO. 2
This Amendment No. 2 ("Amendment No. 2") to the Limited Liability Company
Agreement of Accord Contract Services LLC dated August 8, 1996 (the "Agreement")
is made and entered into and effective as of December 24, 1996 (the "Amendment
No. 2 Effective Date") by and between Wyle Electronics, a California corporation
("WYLE") and Marshall Industries, Inc., a California corporation ("MARSHALL").
WHEREAS, WYLE AND MARSHALL wish to amend the terms of the Agreement.
NOW THEREFORE, the parties agree as follows:
1. WYLE and MARSHALL hereby agree that the definition of the term
"Associated Agreement Negotiation Period" (as defined in Section 2.5 of the
Agreement) is hereby amended to be defined as that period from August 8, 1996
until February 28, 1997.
2. Except as expressly set forth in Amendment No. 2 all other terms of the
Agreement shall remain in full force and effect.
3. This Amendment No. 2 may be executed in any number of counterparts,
each of which shall be an original and all of which together shall constitute
one and the same instrument.
4. This Amendment No. 2 may be executed and delivered by facsimile and,
upon such execution and delivery, shall have the same force and effect as an
originally executed instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 2 to
be executed and delivered by their duly authorized representatives as of the
date first above written.
MARSHALL INDUSTRIES, INC., WYLE ELECTRONICS,
a California corporation a California corporation
By:/s/ HENRY W. CHIN By: /s/ R. VAN NESS HOLLAND, JR.
----------------------- ----------------------------
Henry W. Chin R. Van Ness Holland, Jr.
Vice President and Executive Vice President and
Chief Financial Officer Chief Financial Officer
<PAGE>
AMENDMENT NO. 3 TO LIMITED LIABILITY COMPANY AGREEMENT
OF ACCORD CONTRACT SERVICES LLC
This Amendment No. 3 (the "Amendment") to the Limited Liability
Company Agreement of Accord Contract Services LLC dated as of August 8, 1996
(the "Agreement") is hereby entered into as of February 28, 1997 by and between
Wyle Electronics, a California corporation ("Wyle") and Marshall Industries, a
California corporation ("Marshall"). Capitalized terms used but not otherwise
defined herein shall have the meanings ascribed thereto in the Agreement.
R E C I T A L S
---------------
A. Wyle and Marshall (together, the "Members") formed Accord Contract
Services LLC, a Delaware limited liability company (the "LLC"), to provide
certain 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.
B. The Agreement sets forth certain understandings and agreements of
the Members with respect to the LLC.
C. Pursuant to the Agreement, the Members have agreed upon the
"Termination Formula" (as defined in the Agreement).
D. The Members now desire to enter into this Amendment in order to
incorporate the Termination Formula into, and to make certain amendments to, the
Agreement, as mutually agreed upon by the Members and as set forth below.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
A G R E E M E N T
-----------------
1. Additional Definitions. The following definitions shall be, and hereby
----------------------
are, added to the Agreement:
a. ACQUISITION MULTIPLE: Upon the occurrence of an Exercise Event, the
quotient of (i) the Acquisition Value of the Event Member, divided by
------- --
(ii) the net sales from all sources for the Event Member for the
twelve full calendar months immediately preceding the month in which
the Exercise Event occurred.
b. ACQUISITION VALUE: Upon the occurrence of an Exercise Event, the value
of the Event Member in its entirety, as determined in the usual and
customary manner with reference to the particular event resulting in
the Exercise Event. In the event
3
<PAGE>
that the Exercise Event does not entail the acquisition of the common
stock or substantially all of the assets of the Event Member for cash
or securities that are traded on a national securities exchange,
reported through the National Association of Securities Dealers
Automated Quotation System or traded over-the-counter, then the
Acquisition Value shall be determined by agreement of the Members or,
if the Members are unable to so agree, then by a Neutral Party
selected in accordance with Section 12.17(c) of this Agreement.
c. AGGREGATE BASELINE SALES: Means the aggregate net sales by both
Members from the provision of Value Added Services for the twelve full
calendar months immediately preceding the effective date of the
Agreement.
d. EXERCISE EVENT: For purposes of the Agreement, the term "Exercise
Event" shall mean the occurrence of any of the following events with
respect to a Member:
(1) The approval by the shareholders of any Member of the
dissolution or liquidation of the Member;
(2) The consummation by any person (other than a Member) of
a tender offer or exchange offer to purchase any shares of a Member'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 such Member;
(3) The execution by a Member or any subsidiary thereof of
an agreement with any person (other than the other Member) to (i)
merge, consolidate or otherwise reorganize with or into one or more
entities that are not subsidiaries of such Member, 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 such Member
immediately before such reorganization (assuming for purposes of such
determination that there is no change in the record ownership of the
Member'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 such Member or its
subsidiaries representing 50% or more of the consolidated assets of
the Member 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 such Member;
(4) The acquisition by any person (other than a Member) of
beneficial ownership (as such term is defined in Rule 13d-3 under the
Securities Exchange Act of 1934, as amended (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
4
<PAGE>
acquire beneficial ownership of, 20% or more of the then outstanding
common stock of a Member; 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 a Member, for any reason, to
constitute at least a majority thereof, unless the election, or the
nomination for election by such Member'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).
e. GROWTH MULTIPLE: Means, upon the occurrence of an Exercise Event, the
growth, stated as a percentage, of the aggregate sales generated by
the United States electronic components distribution industry from
August 8, 1996 through the date of such Exercise Event, as determined
by agreement of the Members or, if the Members are unable to so agree,
then by a Neutral Party selected in accordance with Section 12.17(c).
f. INCREMENTAL SALES: Means, upon the occurrence of an Exercise Event,
the difference between (i) the aggregate net sales by both Members
from the provision of Value Added Services for the twelve full
calendar months immediately preceding the month in which the Exercise
Event occurred, minus (ii) the product of the Aggregate Baseline
-----
Sales, multiplied by the Growth Multiple.
g. VALUE ADDED SERVICES: Means those types of materials management
services that are intended to be provided to the Members by the LLC,
including, without limitation, kitting, turnkey, autoreplenishment and
related services.
2. Amended Definitions. The following definitions shall be, and hereby are,
-------------------
amended as follows:
a. CHANGE IN CONTROL TERMINATION FEE: Equals the greater of (i) $25
million, or (ii) the amount calculated pursuant to the Termination
Formula, but in no event shall such Change in Control Termination Fee
exceed $40 million. Notwithstanding the foregoing, unless otherwise
agreed to in writing by the Members prior thereto, the Change in
Control Termination Fee shall equal $0 in connection with any Exercise
Event that occurs after August 7, 2001.
b. TERMINATION FORMULA: The Termination Formula shall mean, upon an
Exercise Event, fifty percent (50%) of the product of Incremental
Sales, multiplied by one hundred thirty percent (130%) of the
----------
Acquisition Multiple.
5
<PAGE>
3. Deleted Definitions. The following definitions, and any and all references
-------------------
to the defined terms in the Agreement, shall be, and hereby is, deleted:
TO WARRANT AGREEMENT
WARRANT AGREEMENT
WARRANT VALUE
4. Termination Notice Upon Exercise Event. It is the intention of the Members
--------------------------------------
that either Member be permitted to terminate the LLC upon the occurrence of an
Exercise Event with respect to a Member by providing a Termination Notice to the
other Member, in accordance with, and subject to the terms and conditions
contained in, the Agreement (including, without limitation, the payment of the
Change in Control Termination Fee by the Event Member pursuant to Section
11.1(c) of the Agreement). In furtherance of the foregoing, the Agreement shall
be, and hereby is, amended as follows:
a. The first sentence of Section 11.1(a)(xi) shall be, and hereby is,
amended by the insertion of the phrase "or by the Event Member"
immediately following the phrase "by the Member other than the Event
Member (also a "TO Member")".
b. Section 11.1(c)(i) shall be, and hereby is, amended and restated in
its entirety as follows:
"(i) Upon the occurrence of an Exercise Event with respect to an
Event Member and the subsequent delivery of a Termination Notice
by the TO Member or the Event 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
Event Member shall pay to the TO 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."
5. Extension of Time. Wyle and Marshall hereby agree that the "Associated
-----------------
Agreement Negotiation Period" (as defined in Section 2.5 of the Agreement) has
been extended through (and including) March 31, 1997 with respect to the
agreements previously referred to in the Agreement as: (i) the Systems License;
and (ii) the [Sub] Lease Agreement.
6. Entire Agreement. The Agreement, as amended by this Amendment, constitutes
----------------
the entire agreement between the parties pertaining to the subject matter hereof
and fully supersedes any and all prior or contemporaneous agreements or
understandings between the parties hereto pertaining to the subject matter
hereof.
6
<PAGE>
7. Full Force and Effect. Except as expressly amended in Amendment No. 1,
---------------------
Amendment No. 2 and this Amendment, the Agreement shall remain in full force and
effect.
8. Counterparts. This Amendment may be executed in any number of
------------
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have duly executed this Amendment or have
caused this Amendment to be duly executed on their behalf as of the day and year
first set forth above.
WYLE ELECTRONICS,
a California corporation
By: /s/ R. VAN NESS HOLLAND, JR.
----------------------------
Name: R. Van Ness Holland, Jr.
Title: Executive Vice President and
Chief Financial Officer
MARSHALL INDUSTRIES,
a California corporation
By: /s/ Henry W. Chin
-----------------
Name: Henry W. Chin
Title: Vice President and
Chief Financial Officer
7
<PAGE>
EXHIBIT 10(an)
WYLE WARRANT RESCISSION AGREEMENT
This WYLE WARRANT RESCISSION AGREEMENT (this "Agreement") is
---------
made and entered into as of February 29, 1997, by and between Marshall
Industries, a California corporation ("Marshall"), and Wyle Electronics, a
--------
California corporation ("Wyle").
----
RECITALS
A. Marshall and Wyle are parties to that certain Limited Liability
Company Agreement of Accord Contract Services LLC ("Accord") dated as of
------
August 8, 1996 establishing Accord as a joint venture between Marshall and Wyle.
B. In connection with the establishment of Accord, Marshall and Wyle
entered into the following agreements: (1) that certain Warrant Agreement
(Wyle) dated as of August 8, 1996 (the "Wyle Warrant Agreement"), pursuant to
----------------------
which Wyle agreed to grant to Marshall certain warrants (the "Wyle Warrants") to
-------------
purchase shares of Wyle's common stock, no par value (the "Wyle Common Stock"),
-----------------
upon the occurrence of certain events, and (2) that certain Registration Rights
Agreement (Wyle) dated as of August 8, 1996 (the "Wyle Registration Rights
------------------------
Agreement," and, together with the Wyle Warrant Agreement, the "Wyle
- --------- ----
Agreements"), pursuant to which Wyle agreed to grant certain registration
- ----------
rights to Marshall in connection with the issuance of the Wyle Warrants.
C. The effectiveness of the Wyle Agreements the delivery of a warrant
certificate to Marshall in connection with the Wyle Warrant Agreement (the "Wyle
----
Certificate"), were conditioned upon the parties reaching agreement on an
- -----------
overall exit strategy that incorporated such agreements (and the Wyle
Certificate) in connection with the termination of Accord.
D. The parties have reached an agreement on such exit strategy which
does not incorporate the Wyle Agreements and which does not require the
issuance or delivery of the Wyle Certificate.
E. Therefore, Marshall and Wyle desire to rescind the Wyle Agreements.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby confirmed and acknowledged, the parties hereto
agree as follows:
1. Rescission. The parties hereto acknowledge and agree that each of
----------
the Wyle Agreements is hereby rescinded and shall be of no further force and
effect. The parties hereto further acknowledge and agree that they each shall
have no further rights, duties or obligations under any of the Wyle Agreements.
1
<PAGE>
2. Cancellation of Warrant Certificate. The parties hereto acknowledge
-----------------------------------
and agree that the Wyle Certificate shall be canceled and become null and void
simultaneously with the execution of this Agreement. All benefits owed to any
party and all duties imposed upon any party under the Wyle Certificate shall be
canceled. The parties believe that the Wyle Certificate has not been delivered,
however, if such Wyle Certificate has been delivered, then within ten (10) days
of the effective date of this Agreement, Marshall shall return the original Wyle
Certificate to Wyle with the word "CANCELED" printed on each page and
initialed by the person(s) executing this Agreement on behalf of Marshall.
3. Successors. This Agreement shall inure to the benefit of and be
----------
binding upon the parties hereto and their respective successors and assigns.
4. Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
5. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of California, without regard to otherwise
governing principles of conflict of laws.
6. Expenses. Any and all expenses incurred by any party due to the
--------
execution of this Agreement shall be the sole responsibility of that party.
7. Entire Agreement. This Agreement contains the entire agreement
----------------
between the parties with respect to the subject matter thereof and shall be
binding upon their respective successors and assigns. This Agreement may not be
altered or amended except with the written consent of all parties.
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement
effective as of the date first above written.
MARSHALL INDUSTRIES
a California corporation
By: /s/ HENRY W. CHIN
--------------------------------
Name: Henry W. Chin
Title: Vice President
and Chief Financial Officer
WYLE ELECTRONICS,
a California corporation
By: /s/ R. VAN NESS HOLLAND, JR.
--------------------------------
Name: R. Van Ness Holland, Jr.
Title: Executive Vice President and
Chief Financial Officer
3
<PAGE>
EXHIBIT 10(ao)
MARSHALL WARRANT RESCISSION AGREEMENT
This MARSHALL WARRANT RESCISSION AGREEMENT (this "Agreement") is made
---------
and entered into as of February 28, 1997, by and between Marshall Industries, a
California corporation ("Marshall"), and Wyle Electronics, a California
--------
corporation ("Wyle").
----
RECITALS
A. Marshall and Wyle are parties to that certain Limited Liability
Company Agreement of Accord Contract Services LLC ("Accord") dated as of August
------
8, 1996 establishing Accord as a joint venture between Marshall and Wyle.
B. In connection with the establishment of Accord, Marshall and Wyle
entered into the following agreements: (1) that certain Warrant Agreement
(Marshall) dated as of August 8, 1996 (the "Marshall Warrant Agreement"),
--------------------------
pursuant to which Marshall agreed to grant to Wyle certain warrants (the
"Marshall Warrants") to purchase shares of Marshall's common stock, $1.00 par
- ------------------
value (the "Marshall Common Stock"), upon the occurrence of certain events, and
---------------------
(2) that certain Registration Rights Agreement (Marshall) dated as of August 8,
1996 (the "Marshall Registration Rights Agreement," and, together with the
--------------------------------------
Marshall Warrant Agreement, the "Marshall Agreements"), pursuant to which
-------------------
Marshall agreed to grant certain registration rights to Wyle in connection with
the issuance of the Marshall Warrants.
C. The effectiveness of the Marshall Agreements and the delivery of
a warrant certificate to Wyle in connection with the Marshall Warrant Agreement
(the "Marshall Certificate"), were conditioned upon the parties reaching
--------------------
agreement on an overall exit strategy that incorporated such agreements (and the
Marshall Certificate) in connection with the termination of Accord.
D. The parties have reached an agreement on such exit strategy which
does not incorporate the Marshall Agreements, and which does not require the
issuance or delivery of the Marshall Certificate.
E. Therefore, Marshall and Wyle desire to rescind the Marshall
Agreements.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby confirmed and acknowledged, the parties hereto
agree as follows:
1. Rescission. The parties hereto acknowledge and agree that each of
----------
the Marshall Agreements is hereby rescinded and shall be of no further force and
effect. The parties hereto further acknowledge and agree that they each shall
have no further rights, duties or obligations under any of the Marshall
Agreements.
1
<PAGE>
2. Cancellation of Warrant Certificate. The parties hereto
-----------------------------------
acknowledge and agree that the Marshall Certificate shall be canceled and become
null and void simultaneously with the execution of this Agreement. All benefits
owed to any party and all duties imposed upon any party under the Marshall
Certificate shall be canceled. The parties believe that the Marshall
Certificate has not been delivered, however, if such Marshall Certificate has
been delivered, then within ten (10) days of the effective date of this
Agreement, Wyle shall return the original Marshall Certificate to Marshall with
the word "CANCELED" printed on each page and initialed by the person(s)
executing this Agreement on behalf of Wyle.
3. Successors. This Agreement shall inure to the benefit of and be
----------
binding upon the parties hereto and their respective successors and assigns.
4. Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
5. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of California, without regard
to otherwise governing principles of conflict of laws.
6. Expenses. Any and all expenses incurred by any party due to the
--------
execution of this Agreement shall be the sole responsibility of that party.
7. Entire Agreement. This Agreement contains the entire agreement
----------------
between the parties with respect to the subject matter thereof and shall be
binding upon their respective successors and assigns. This Agreement may not be
altered or amended except with the written consent of all parties.
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have entered into this
Agreement effective as of the date first above written.
MARSHALL INDUSTRIES,
a California corporation
By: /s/ Henry W. Chin
-----------------
Name: Henry W. Chin
Title: Vice President and
Chief Financial Officer
WYLE ELECTRONICS,
a California corporation
By: /s/ R. Van Ness Holland, Jr.
----------------------------
Name: R. Van Ness Holland, Jr.
Title: Executive Vice President and
Chief Finacial Officer
3
<PAGE>
EXHIBIT 11
WYLE ELECTRONICS PAGE 1 OF 2
CALCULATION OF INCOME (LOSS) PER SHARE
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- ---------
<S> <C> <C> <C>
Income (loss) applicable to common shares:
Income from continuing operations $40,215 $36,210 $ 13,980
Discontinued operations
Income from operations, net of taxes - - 1,418
Loss on sale, net of taxes - - (15,779)
------- ------- --------
Net income (loss) $40,215 $36,210 $ (381)
======= ======= ========
PRIMARY
Common and common equivalent shares -
Weighted average number of
common shares outstanding 12,601 12,322 12,252
Stock options included under
the treasury stock method (1) 292 342 173
------- ------- --------
12,893 12,664 12,425
======= ======= ========
Income (loss) per share -
Income from continuing operations $ 3.12 $ 2.86 $ 1.13
======= ======= ========
Discontinued operations
Income from operations, net of taxes $ - $ - $ .11
======= ======= ========
Loss on sale, net of taxes $ - $ - $ (1.27)
======= ======= ========
Net income (loss) per common share $ 3.12 $ 2.86 $ (.03)
======= ======= ========
</TABLE>
<PAGE>
EXHIBIT 11
WYLE ELECTRONICS PAGE 2 OF 2
CALCULATION OF INCOME (LOSS) PER SHARE
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- --------
<S> <C> <C> <C>
FULLY DILUTED (2)
Common and common equivalent shares -
Weighted average number of
common shares outstanding 12,601 12,322 12,252
Stock options included under
the treasury stock method (1) 329 360 184
------- ------- -------
12,930 12,682 12,436
======= ======= =======
Income (loss) per share -
Income from continuing operations $ 3.11 $ 2.86 $ 1.12
======= ======= =======
Discontinued operations
Income from operations, net of taxes $ - $ - $ .11
======= ======= =======
Loss on sale, net of taxes $ - $ - $ (1.27)
======= ======= =======
Net income (loss) per common share $ 3.11 $ 2.86 $ (.03)
======= ======= =======
</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.
<PAGE>
EXHIBIT 13
Wyle Electronics 1996: Financial Review
<TABLE>
<S> <C>
Management's Discussion and Analysis of Financial Condition and Results of Operations 14
Consolidated Statements of Income 17
Consolidated Balance Sheets 18
Consolidated Statements of Cash Flows 20
Consolidated Statements of Shareholders' Equity 21
Notes to Consolidated Financial Statements 22
Report of Independent Public Accountants 31
Selected Financial Data 32
Results by Quarter and Capital Stock Information 34
</TABLE>
13
<PAGE>
Wyle Electronics Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
Sales and income from continuing operations for the year ended December 31, 1996
totaled $1.25 billion and $40.2 million, respectively. In comparison to 1995,
sales rose by 16% and income from continuing operations advanced 11%. The growth
in sales for 1996, compared to 1995, resulted primarily from increased shipments
of computer products, mainly computer systems and peripherals, and mass storage
devices. Semiconductor revenues in 1996 rose slightly from 1995 due mainly to
increased shipments of application-specific integrated circuits (ASICs).
Semiconductor orders slowed significantly in the second and third quarters of
1996 as customers reduced excess inventory levels in light of shorter product
lead times. In the fourth quarter of 1996, customer inventory levels came more
in line with market conditions and certain customers began returning to more
normal ordering patterns.
The company's increase in income from continuing operations for 1996 versus 1995
can be attributed mainly to sales growth along with a higher aggregate gross
margin percentage. The improved gross margin primarily reflects a change in the
mix of products and services sold. Earnings in 1996 also reflect a higher level
of interest expense compared to the prior year.
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 (see Note 8 of Notes to Consolidated Financial Statements herein).
Revenues generated from Ginsbury also contributed to the company's 1996 sales
growth and earnings.
During October 1996, the company was notified by Advanced Micro Devices ("AMD")
and Philips Semiconductor that they would be terminating their distribution
agreements with the company. AMD and Philips combined represented approximately
7% of the company's consolidated sales immediately prior to the termination. The
company believes it has the opportunity to recover a significant portion of
these sales from comparable products offered by its existing suppliers, along
with incremental sales from the newly acquired lines of National Semiconductor
and Fairchild Semiconductor, which were announced in August of 1996.
For the year ended December 31, 1995, the company reported sales of $1.08
billion and income from continuing operations of $36.2 million. Compared to
1994, sales rose by 36% and income from continuing operations increased 159%.
The growth in sales for 1995, in comparison to 1994, resulted mainly from
increased shipments of semiconductor products, particularly those offered
through the company's value-added activities such as design of ASICs, and other
semiconductor design/programming services, along with kitting, turnkey
manufacturing and autoreplenishment. Shipments of lower-margin PC
microprocessors in 1995 were down from 1994. The company also registered
significantly higher shipments of computer systems and mass storage devices in
1995 versus 1994.
14
<PAGE>
The increase in income from continuing operations in 1995 over 1994 primarily
reflects the company's growth in sales. Additionally, the company's aggregate
gross margin percentage increased in comparison to the prior year, due mainly to
a change in the mix of products sold. Earnings for 1995 benefited from lower
selling and administrative expense as a percentage of sales, due in part to an
increase in sales for the company's new expansion branches, which began
operations in mid-1993. Operating results for 1995 reflected a higher level of
interest expense due to an increased level of credit line borrowings.
For the year ended December 31, 1994, the company reported sales of $792.3
million and income from continuing operations of $14.0 million. In 1994, the
company recorded a special charge to continuing operations of $1.9 million ($1.2
million after income taxes) primarily for anticipated legal expenses associated
with a certain litigation matter (see Note 11 of Notes to Consolidated Financial
Statements herein). Additionally, on December 23, 1994, the company completed
the sale of its Scientific Services & Systems Group, which it accounted for as a
discontinued operation (see Note 10 of Notes to Consolidated Financial
Statements herein), and recorded a loss on the sale of $15.8 million, after
income taxes. After recording the loss on sale and income from discontinued
operations, the company reported a net loss of $381,000 for 1994.
In May 1993, the company initiated a major geographic expansion program to open
ten new facilities in key eastern and midwestern markets within the United
States. As anticipated, the expansion operations incurred quarterly operating
losses through June 30, 1994 during this initial investment period. Sales for
the new expansion divisions increased steadily from inception and aggregate
operating losses for these divisions continued to decline throughout the quarter
ended June 30, 1994. During the second half of 1994, the expansion divisions, as
a whole, began providing a positive income contribution.
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.
Discontinued Operations
Operating results for the Scientific Services & Systems Group are classified as
discontinued operations in the company's consolidated statements of income. The
company's sales and income from continuing operations for all periods reflect
only the operating results of its electronics distribution business.
Other
Net interest expense for 1996 of $7.6 million increased in comparison to 1995,
due mainly to higher borrowing levels that were incurred primarily to finance
additional working capital in support of higher sales levels, as well as the
cash portion of the Ginsbury acquisition.
Net interest expense for 1995 of $3.3 million increased from 1994, due to higher
borrowing levels resulting mainly from funding working capital requirements
associated with sales growth and to finance the construction of a new
warehouse/value-added distribution center.
The company's effective income tax rate for continuing operations was 39.5%,
39.7% and 38.5% for the years ended December 31, 1996, 1995 and 1994,
respectively.
15
<PAGE>
Wyle Electronics Management's Discussion and Analysis of
Financial Condition and Results of Operations
In October 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123"), which encourages, but does not require, a fair
value based method of accounting for stock-based compensation plans. On January
1, 1996, as permitted under SFAS No. 123, the company elected to comply with the
statement's pro forma disclosure requirements and to continue to account for its
stock-based compensation plans in accordance with Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees." The adoption of this
statement did not have a material effect on the company's net income (loss) or
financial position.
Liquidity and Capital Resources
The company's working capital at December 31, 1996 of $280.3 million rose by
$24.8 million from December 31, 1995. Working capital growth resulted primarily
from an increase in trade receivables and inventories due to higher sales
levels, offset partially by higher accrued expenses. The current ratio was 3.1
to 1 at December 31, 1996 compared with 3.0 to 1 at December 31, 1995. The ratio
of long-term debt to total capital was 32% and 31% at December 31, 1996 and
1995, respectively.
Capital expenditures for 1996 aggregated $13.5 million, which are lower than
1995 due mainly to capital outlays incurred in 1995 for the construction of a
new value-added distribution center that became fully operational during the
first half of 1996. The company expects its total capital expenditures for 1997
to be approximately $10-12 million.
Many factors affect the company's cash requirements such as changes in its sales
level and inventory turnover rate. During electronics industry growth periods,
increases in receivable and inventory balances have typically been financed
through cash on hand and cash flow from operations as well as borrowings. During
electronics industry recessionary periods, cash has been generated through
receivable and inventory reductions.
In April 1996, the company issued $30 million of senior unsecured notes due
2001, which bear interest at 6.98%. In November 1996, the company issued an
additional $20 million of senior unsecured notes due 2006, which bear interest
at 7.18%. The proceeds from both issuances were used to repay bank borrowings.
In April 1996, the company amended its $140 million three-year revolving credit
agreement by reducing the committed credit line to $110 million. In December
1996, the company amended its $110 million revolving credit agreement by
increasing its term from three to five years, extending the maturity of the
agreement to December 2001. In addition, the company has arrangements with a
number of other banks to provide short-term financing on a non-committed basis.
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.
16
<PAGE>
Wyle Electronics Consolidated Statements of Income
<TABLE>
<CAPTION>
Years ended December 31,
-------------------------------------
In thousands, except per share amounts 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $1,244,504 $1,077,467 $792,309
--------------------------------------
Costs and expenses
Cost of sales 1,020,796 890,693 663,741
Selling and administrative expenses 150,287 124,603 103,253
Special charge - - 1,900
Interest expense, net 7,623 3,315 1,289
Miscellaneous, net (673) (1,193) (604)
--------------------------------------
1,178,033 1,017,418 769,579
--------------------------------------
Income from continuing operations before income taxes 66,471 60,049 22,730
Income taxes 26,256 23,839 8,750
--------------------------------------
Income from continuing operations 40,215 36,210 13,980
Discontinued operations
Income from operations, net of taxes - - 1,418
Loss on sale, net of taxes - - (15,779)
--------------------------------------
Net income (loss) $ 40,215 $ 36,210 $ (381)
======================================
Income (loss) per share
Income from continuing operations $3.12 $2.86 $ 1.13
======================================
Discontinued operations
Income from operations, net of taxes $ - $ - $ .11
======================================
Loss on sale, net of taxes $ - $ - $(1.27)
======================================
Net income (loss) $3.12 $2.86 $ (.03)
======================================
Average common and common equivalent shares 12,893 12,664 12,425
======================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
Wyle Electronics Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31,
------------------------
In thousands, except shares 1996 1995
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 13,857 $ 15,694
Receivables (less allowances of $8,487 and $6,423, respectively) 174,530 159,829
Inventories 216,544 203,413
Prepaid expenses and deferred tax assets 8,563 7,295
------------------------
Total current assets 413,494 386,231
------------------------
Property, plant & equipment
Land 862 862
Buildings and improvements 24,480 22,394
Machinery and equipment 39,821 29,581
------------------------
65,163 52,837
Less accumulated depreciation and amortization 27,324 18,508
------------------------
37,839 34,329
------------------------
Goodwill, net of amortization 28,236 241
------------------------
Other assets and deferred tax assets 26,683 18,543
------------------------
Total assets $506,252 $439,344
========================
</TABLE>
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
<TABLE>
<CAPTION>
December 31,
------------------------
1996 1995
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Liabilities and Shareholders' Equity
Current liabilities
Current maturities of long-term debt $ 575 $ 3,000
Accounts payable 93,111 97,697
Accrued expenses 39,465 30,032
------------------------
Total current liabilities 133,151 130,729
------------------------
Long-term debt, less current maturities 111,845 87,600
------------------------
Other liabilities 25,111 25,345
------------------------
Commitments and contingencies
Shareholders' Equity
Common stock, 25,000,000 shares authorized
(shares outstanding: December 31, 1996 - 12,588,609
and December 31, 1995 - 12,447,946) 97,091 90,482
Retained earnings 139,006 105,188
Foreign currency translation adjustment 48 -
------------------------
236,145 195,670
------------------------
Total liabilities and shareholders' equity $506,252 $439,344
========================
</TABLE>
19
<PAGE>
Wyle Electronics Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Years ended December 31,
-----------------------------------
In thousands 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Activities
Net income (loss) $ 40,215 $ 36,210 $ (381)
Adjustments to reconcile net income (loss) to net cash
provided by (used for) operating activities:
Depreciation and amortization 9,609 5,007 6,761
Provision for losses on receivables 3,490 2,794 2,143
Provision for deferred income taxes (1,294) (943) (161)
Loss on sale of discontinued operations - - 15,779
(Increase) in receivables (9,098) (47,541) (44,529)
(Increase) in inventories (9,855) (63,081) (39,636)
(Increase) decrease in prepaid expenses (12) 1,157 1,354
Increase (decrease) in accounts payable (9,044) 27,253 12,232
Increase in accrued expenses 6,648 215 4,790
Other, net 959 770 (1,003)
-----------------------------------
Net cash provided by (used for) operating activities 31,618 (38,159) (42,651)
-----------------------------------
Financing activities
Additions to long-term debt 50,000 72,798 14,802
Payments of long-term debt (29,311) (3,000) (4,120)
Exercise of stock options 3,331 3,686 684
Dividends on common stock (4,033) (3,457) (3,431)
Purchase of common stock (2,977) (847) (1,634)
-----------------------------------
Net cash provided by financing activities 17,010 69,180 6,301
-----------------------------------
Investing activities
Cash consideration paid for acquired business, net of
$1,302 cash received (30,971) - -
Additions to property, plant and equipment (13,453) (21,561) (7,905)
Additions to capitalized software costs (3,171) (2,563) (677)
Proceeds from sale of discontinued operations - - 30,000
Other non-current assets and liabilities, net (2,918) (522) 503
-----------------------------------
Net cash provided by (used for) investing activities (50,513) (24,646) 21,921
-----------------------------------
Foreign currency translation adjustment 48 - -
-----------------------------------
Increase (decrease) in cash and cash equivalents (1,837) 6,375 (14,429)
Cash and cash equivalents at beginning of year 15,694 9,319 23,748
-----------------------------------
Cash and cash equivalents at end of year $ 13,857 $ 15,694 $ 9,319
===================================
Supplemental disclosures of cash flow information
Cash paid during the year for:
Interest $ 7,414 $ 3,710 $ 1,542
Income taxes 29,730 21,708 10,168
-----------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
20
<PAGE>
Wyle Electronics Consolidated Statements of Shareholders' Equity
<TABLE>
<CAPTION>
Foreign
Common Stock Currency
For the years ended December 31, 1996, 1995 ------------------------ Retained Translation
and 1994 (in thousands, except shares) Shares Amount Earnings Adjustment
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, December 31, 1993 12,216,923 $86,348 $ 78,008 $ -
Net loss (381)
Dividends on common stock (3,431)
Exercise of stock options 61,368 780 (96)
Restricted stock awards, net 3,950 152
Purchase of common stock (89,200) (633) (1,001)
--------------------------------------------------------
Balance, December 31, 1994 12,193,041 86,647 73,099 -
Net income 36,210
Dividends on common stock (3,457)
Exercise of stock options 215,341 3,800 (114)
Restricted stock awards, net 80,464 326 6
Purchase of common stock (40,900) (291) (556)
--------------------------------------------------------
Balance, December 31, 1995 12,447,946 90,482 105,188 -
Net income 40,215
Dividends on common stock (4,033)
Exercise of stock options 148,068 3,403 (72)
Restricted stock awards, net 2,990 913 (22)
Issuance of restricted stock for an acquisition 81,605 3,000
Purchase of common stock (92,000) (707) (2,270)
Foreign currency translation adjustment 48
--------------------------------------------------------
Balance, December 31, 1996 12,588,609 $97,091 $139,006 $ 48
========================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
21
<PAGE>
Wyle Electronics Notes to Consolidated Financial Statements
Note 1. Summary of Significant Accounting Policies
Nature of Operations The company is a leading international electronics
distributor marketing semiconductors and computer products, as well as providing
value-added services. These services include complex materials management
systems and engineering design for application-specific integrated circuits,
including field programmable logic devices.
Principles of Consolidation The consolidated financial statements include the
accounts of Wyle Electronics and its subsidiaries. All significant intercompany
accounts and transactions have been eliminated.
Discontinued Operations On December 23, 1994, the company completed the sale of
its Scientific Services & Systems ("SS&S") business (see Note 10). Operating
results for SS&S are classified as discontinued operations in the company's
consolidated statements of income.
Change in Accounting Principles In October 1995, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation" ("SFAS No. 123"), which
encourages, but does not require, a fair value based method of accounting for
stock-based compensation plans. On January 1, 1996, as permitted under SFAS No.
123, the company elected to comply with the statement's pro forma disclosure
requirements and continue to account for its stock-based compensation plans in
accordance with Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees." The adoption of this statement did not have a
material effect on the company's net income (loss) or financial position (see
Note 6).
Use of Estimates The preparation of financial statements, in conformity with
generally accepted accounting principles, requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Revenue Recognition Sales are generally recognized at the time of shipment of
the product.
Interest Income Interest income earned on short-term investments is classified
in the consolidated statements of income as a reduction of interest expense.
Interest income for the years presented was immaterial.
Income (Loss) per Share Income (loss) per share is computed based on the
average number of shares of common stock and common equivalent shares (stock
options) outstanding, after giving effect to the assumed exercise of dilutive
stock options. Dual presentation of primary and fully diluted earnings per share
has not been made on the consolidated statements of income because the
differences are immaterial.
Receivables Receivables include amounts billed to customers for products
shipped or services performed which are anticipated to be collected within one
year. Concentrations of credit risk with respect to trade receivables are
limited by the large number of customers comprising the company's customer base
and their dispersion across different industries.
Inventories Inventories are stated at the lower of cost (first-in first-out or
average cost) or market.
Property, Plant and Equipment Property, plant and equipment are stated at cost.
Major improvements and betterments are capitalized. Maintenance, repairs and
minor refurbishments are expensed as incurred. Depreciation is provided using
the straight-line method based on estimated useful lives. Useful lives range
from 2 to 40 years for buildings and improvements and from 2 to 10 years for
machinery and equipment. Leasehold improvements are amortized over the lesser of
the lease term or estimated useful life.
Goodwill Goodwill represents the excess of the purchase price over the
estimated fair value of net assets acquired, and is being amortized over 40
years on a straight-line basis. The company evaluates the carrying value and the
remaining useful life of its goodwill, and will adjust the carrying value and
related amortization period if appropriate.
22
<PAGE>
Capitalized Software Costs The company capitalizes the purchase costs and
certain internal development costs of computer software. Such costs include
vendor design, testing and implementation consulting fees. Capitalized internal
development costs consist primarily of direct labor attributable to
implementation.
Foreign Currency Translation The functional currency of the company's foreign
operations is the applicable local currency. The assets and liabilities of
foreign operations are translated at the exchange rates in effect at the balance
sheet date, while the results of foreign operations are translated at the
weighted average exchange rate for the period. The related translation gains or
losses are reported as a separate component of shareholders' equity.
Gains or losses resulting from foreign currency transactions, which were
immaterial, are included in results of operations.
Consolidated Statements of Cash Flows For the purpose of reporting cash flows,
cash and cash equivalents include cash on hand and cash invested in short-term
securities with original maturities of three months or less. The company places
its temporary cash investments in high-quality securities and, by policy, limits
the amount that can be invested in any one particular instrument.
Note 2. Detail of Certain Balance Sheet Amounts
A detail of certain balance sheet amounts at December 31 follows:
<TABLE>
<CAPTION>
------------------
In thousands 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Accrued expenses:
Payroll and employee benefits $12,112 $12,144
Other 27,353 17,888
------------------
Total $39,465 $30,032
==================
Accounts payable:
Trade and other $84,650 $67,320
Checks outstanding 8,461 30,377
------------------
Total $93,111 $97,697
==================
</TABLE>
Note 3. Bank Loans and Long-Term Debt
Long-term debt at December 31 consists of the following:
<TABLE>
<CAPTION>
------------------
In thousands 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Non-committed credit line borrowings $ 61,600 $57,600
Revolving credit agreement - 30,000
Senior unsecured notes:
At 6.98% due 2001 30,000 -
At 7.18% due 2006 20,000 -
At 8.95% due 1996 - 3,000
Other obligations 820 -
------------------
112,420 90,600
Less current maturities 575 3,000
------------------
$111,845 $87,600
==================
</TABLE>
At December 31, 1996, the company had credit line arrangements with a number of
banks that provide short-term borrowings on a non-committed basis. The non-
committed credit line borrowings outstanding at December 31, 1996 bear interest
at rates ranging from 6.13 - 7.35%, and mature on various dates through January
6, 1997. Such unsecured amounts are classified as long-term debt on the
consolidated balance sheets, since they may be refinanced at any time with
borrowings under the company's multi-year revolving credit agreement.
In April 1996, the company amended its $140 million three-year revolving credit
agreement by reducing the committed credit line to $110 million. In December
1996, the company amended its $110 million revolving credit agreement by
increasing its term from three to five years, extending the maturity of the
agreement to December 2001. The credit agreement provides for borrowings at
either the agent bank's reference rate or the Eurodollar rate plus .25% to .55%,
depending on the company's leverage ratio. An annual facility fee of .125% to
.20%, also based on the company's leverage ratio, is payable on the amount of
the commitment.
23
<PAGE>
Wyle Electronics Notes to Consolidated Financial Statements
In April 1996, the company issued $30 million of senior unsecured notes due
2001, which bear interest at 6.98%. In November 1996, the company issued an
additional $20 million of senior unsecured notes due 2006, which bear interest
at 7.18%. The proceeds from both issuances were used to repay bank borrowings.
Other obligations consist mainly of borrowings to support the working capital
requirements of the company's foreign operations. Such borrowings have various
interest rates and due dates.
Terms of certain borrowing agreements of the company provide, among other
things, for the maintenance of certain amounts or ratios relating to working
capital, debt, tangible net worth and fixed charge coverage. The agreements also
provide for restrictions on additional debt, payment of dividends, purchase of
company stock and capital expenditures. Pursuant to the most restrictive
covenants of these agreements, retained earnings of $44,208,000 were available
at December 31, 1996 for the payment of cash dividends on common stock. The
company is in full compliance with the restrictive covenants contained in the
borrowing agreements.
Aggregate maturities of long-term debt are: $575,000 for 1997; $245,000 for
1998; $91,600,000 for 2001; and $20,000,000 thereafter.
Note 4. Income Taxes
The provision for income taxes from continuing operations was computed using
effective tax rates calculated as follows:
<TABLE>
<CAPTION>
--------------------
1996 1995 1994
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Federal statutory tax rate 35.0% 35.0% 35.0%
State income taxes, net
of federal tax benefit 4.7 5.2 5.3
Other, net (.2) (.5) (1.8)
--------------------
Effective tax rate 39.5% 39.7% 38.5%
====================
</TABLE>
The provision for income taxes from continuing operations consists of:
<TABLE>
<CAPTION>
-----------------------------
In thousands 1996 1995 1994
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Current
Federal $22,718 $20,069 $7,074
State 4,460 4,713 1,837
Foreign 372 - -
-----------------------------
27,550 24,782 8,911
-----------------------------
Deferred taxes arising
from temporary
differences:
State income taxes (164) (755) (112)
Receivables allowance (649) (273) (440)
Inventory valuation (1,465) (767) (487)
Depreciation and
amortization (138) (122) (87)
Accruals and other 1,122 974 965
-----------------------------
(1,294) (943) (161)
-----------------------------
$26,256 $23,839 $8,750
=============================
</TABLE>
Net deferred tax assets (liabilities) at December 31 were composed of the
following:
<TABLE>
<CAPTION>
------------------
In thousands 1996 1995
- ---------------------------------------------------------------------------
<S> <C> <C>
Employee benefit programs $ 3,134 $ 2,799
Inventory valuation 4,080 2,616
Receivables allowance 2,624 1,974
Postretirement benefits 2,077 2,206
Depreciation and amortization 184 152
Discontinued operations 4,053 4,741
Operating accruals and other (964) (594)
------------------
$15,188 $13,894
==================
</TABLE>
Net deferred tax assets at December 31, 1996 of $15,188,000 consisted of
deferred tax assets of $25,412,000 and deferred tax liabilities of $10,224,000.
Net deferred tax assets at December 31, 1995 of $13,894,000 consisted of
deferred tax assets of $19,540,000 and deferred tax liabilities of $5,646,000.
Deferred taxes are classified in the consolidated balance sheets as current or
noncurrent based on the classification of the related asset or liability. Net
current deferred tax assets of $6,707,000 and $5,675,000 are included in prepaid
expenses at December 31, 1996 and 1995, respectively. No valuation allowance was
required for the deferred tax assets.
24
<PAGE>
Note 5. Capital Stock and Dividends
Common stock authorized is 25,000,000 shares. The company declared and paid
dividends on common stock of $.32 and $.28 per share during 1996 and 1995,
respectively. Preference stock authorized is 500,000 shares. No preference stock
was outstanding at December 31, 1996 or 1995.
The company has a Shareholder Rights Plan (the "Plan") which provides for one
stock purchase right (the "Rights") to be traded initially in tandem with each
share of its common stock. The Plan provides that if any person becomes the
beneficial owner of 15% or more of the outstanding shares of common stock of the
company, each Right (other than Rights held by the 15% shareholder) will be
exercisable, on or after the close of business on the tenth business day
following such event, to purchase common stock having a market value equal to
two times the then current exercise price of the Rights (currently $85.00), or
may be exchangeable for one share of common stock.
The Plan further provides that if, on or after the occurrence of such event, the
company is merged into any other corporation or if 50% or more of the company's
assets or earning power are sold, appropriate provision shall be made so that
each Right (other than Rights held by the 15% shareholder) will be exercisable
to purchase common stock of the acquiring corporation having a market value
equal to two times the exercise price of the Rights. The Rights expire on
February 23, 2005, and are subject to redemption by the Board of Directors at
$.01 per Right at any time prior to the first date upon which they become
exercisable.
In October 1996, the company's Board of Directors authorized a plan to purchase
from time to time up to 1,000,000 shares of the corporation's common stock in
the open market or through negotiated purchases and revoked prior repurchase
authorizations. During 1996, 92,000 shares were purchased, all of which were
acquired in the fourth quarter. Under a previous plan initiated in 1993, the
company purchased 40,900 shares during 1995.
Note 6. Stock Options and Awards
Under the company's stock option and stock incentive plans, non-qualified and
incentive stock options, restricted stock, performance awards and stock
appreciation rights may be granted to selected key employees. Provisions of the
company's stock option plans, prior to its 1995 Stock Incentive Plan, allow non-
qualified stock options to be granted at prices less than 100% of the fair
market value of the company's common stock on the date of grant. Through
December 31, 1996, no stock options have been granted at less than fair market
value and no stock appreciation rights have been awarded under any of the plans.
Options generally become exercisable beginning one year from the date of grant
in equal annual installments over a five-year period. Options are exercisable on
a cumulative basis and expire ten years from the date of grant.
A summary of changes in the shares under option follows:
<TABLE>
<CAPTION>
Weighted-Average
Shares Exercise Price
- ---------------------------------------------------------------------
<S> <C> <C>
December 31, 1993 900,097 $14.59
Granted 156,000 17.80
Canceled (23,800) 14.87
Exercised (68,497) 10.13
--------------------------
December 31, 1994 963,800 15.42
Granted 141,500 38.56
Canceled (12,000) 14.63
Exercised (223,444) 13.96
--------------------------
December 31, 1995 869,856 19.57
Granted 257,000 36.68
Canceled (32,200) 27.55
Exercised (150,286) 13.80
--------------------------
December 31, 1996 944,370 $24.87
==========================
</TABLE>
At December 31, 1996, 1995 and 1994, exercisable options aggregated 395,751,
399,168 and 425,171, respectively. Options available for future grant at
December 31, 1996, 1995 and 1994 totaled 351,909, 335,387 and 53,702,
respectively. No amounts have been reflected in the company's consolidated
statements of income with respect to these stock options.
25
<PAGE>
Wyle Electronics Notes to Consolidated Financial Statements
Stock options outstanding at December 31, 1996:
<TABLE>
<CAPTION>
Weighted-Average
------------------------
Remaining
Range of Number Contractual Exercise
Exercise Prices Outstanding Life Price
- -------------------------------------------------------------------------
<S> <C> <C> <C>
$ 9.00 to 17.00 292,090 5.10 $14.50
17.25 to 19.75 272,380 6.96 18.36
20.00 to 37.88 172,900 9.03 35.81
38.50 to 44.38 207,000 9.87 38.93
- -------------------------------------------------------------------------
$ 9.00 to 44.38 944,370 7.40 $24.87
=========================================================================
</TABLE>
Stock options exercisable at December 31, 1996:
<TABLE>
<CAPTION>
Range of Number Weighted-Average
Exercise Prices Exercisable Exercise Price
- -------------------------------------------------------------------------
<S> <C> <C>
$ 9.00 to 17.00 219,192 $13.68
17.25 to 19.75 144,056 18.28
20.00 to 37.88 27,502 36.45
38.50 to 44.38 5,001 44.38
- -------------------------------------------------------------------------
$ 9.00 to 44.38 395,751 $17.32
=========================================================================
</TABLE>
In October 1996, the Board of Directors adopted the "1996 Eligible Directors'
Stock Option Plan," (the "1996 Plan") subject to shareholder approval, under
which current non-employee directors will receive an annual grant of 4,000 non-
qualified stock options. New non-employee directors after October 1, 1996 will
each receive a one-time grant of 10,000 non-qualified stock options along with
an annual grant thereafter of 6,000 non-qualified stock options. Under the 1996
Plan, non-qualified stock options are exercisable six months after the date of
grant. Under the "1993 Eligible Directors' Stock Option Plan," (the "1993 Plan")
non-employee members of the company's Board of Directors received a grant of
5,000 non-qualified stock options annually up to a maximum of 10,000 that are
exercisable in equal annual installments over a three-year period. No additional
non-qualified stock options will be granted under the 1993 Plan. Stock options
under both plans are exercisable at prices equal to the fair market value on the
date of grant. Stock options granted under these plans, which are included in
the tables above, totaled 37,000 for 1996, 15,000 for 1995 and 50,000 for 1994.
Restricted stock awards of the company's common stock are subject to certain
restriction periods from the date of grant, during which they may not be sold,
assigned, pledged or otherwise encumbered. Restricted stock awards of 13,778,
80,997 and 3,950 shares were granted during 1996, 1995 and 1994, respectively.
The unvested portion of restricted stock is included as an offset to common
stock in the consolidated statements of shareholders' equity and is amortized as
vesting occurs. Certain key employees can elect to receive a portion or all of
their annual incentive in restricted stock awards in lieu of cash. Such
restricted stock awards, which are included in the total number of restricted
stock awards granted above, aggregated 7,918 and 49,047 in 1996 and 1995,
respectively. The weighted average market price of restricted stock awards on
the date of grant was $29.53 in 1996, $35.69 in 1995 and $18.37 in 1994.
Based on provisions of SFAS No. 123, the company has calculated the fair value
of options granted utilizing the Black-Scholes option-pricing model. The
weighted average fair value of options granted in 1996 and 1995 was $14.16 and
$14.57, respectively. The following assumptions were used in determining the
weighted average fair value of options granted in 1996 and 1995, respectively:
dividend yield of .83% and .85%; expected volatility of 33% for both years;
risk-free interest rate of 6.16% and 5.77%; and an expected term of 6 years for
both years.
If the company had elected to adopt SFAS No. 123 by recognizing the fair value
of stock-based compensation, the company's pro forma net income and net income
per share would have approximated $39,551,000 and $3.07 for 1996 and $36,147,000
and $2.85 for 1995. The impact of applying SFAS No. 123 in this pro forma
disclosure is not necessarily indicative of the effect on income in the future.
SFAS No. 123 does not apply to awards granted prior to 1995. The company
anticipates making additional stock-based compensation awards in the future.
26
<PAGE>
Note 7. Retirement and Other Employee Benefits Plans
The company has a defined benefit pension plan covering substantially all of its
employees. Plan benefits are generally based on employees' years of service and
average compensation during the final years of employment. Funding of retirement
costs for the plan complies with the funding requirements specified by the
Employee Retirement Income Security Act. At December 31, 1996, plan assets were
invested in diversified equity portfolios (60%), pooled funds of fixed income
securities (34%) or in guaranteed income contracts (6%).
Pension expense, including discontinued operations, consists of the following
components:
<TABLE>
<CAPTION>
-----------------------------
In thousands 1996 1995 1994
- ---------------------------------------------------------------
<S> <C> <C> <C>
Service cost-benefits earned
during the period $ 1,611 $ 1,355 $ 2,504
Interest cost on projected
benefit obligation 4,313 4,133 4,134
Actual return on plan assets (5,714) (9,387) (626)
Net amortization and
deferral 521 4,419 (3,833)
-----------------------------
Net periodic pension cost 731 520 2,179
Curtailment gain - - (1,880)
-----------------------------
Net pension expense $ 731 $ 520 $ 299
=============================
</TABLE>
In 1996, the company amended its defined benefit pension plan by reducing the
plan benefit formula. The company's pension expense for 1994 included a
curtailment gain, which was included in the loss on sale of discontinued
operations (see Note 10).
The pension plan's funded status and amounts recognized in the company's
consolidated balance sheets at December 31 were as follows:
<TABLE>
<CAPTION>
--------------------
In thousands 1996 1995
- ---------------------------------------------------------------
<S> <C> <C>
Actuarial present value of
benefit obligations:
Vested benefits $(58,670) $(53,645)
Nonvested benefits (1,574) (994)
--------------------
Accumulated benefit obligation (60,244) (54,639)
Effect of projected future
compensation increases (1,934) (4,706)
--------------------
Projected benefit obligation (62,178) (59,345)
Market value of plan assets 60,393 56,352
--------------------
Plan assets (less than) projected
benefit obligation (1,785) (2,993)
Unrecognized actuarial net loss 6,455 5,388
Unrecognized prior service cost (2,327) (415)
Unrecognized net asset at
February 1, 1987 (1,052) (1,169)
--------------------
Prepaid pension liability $ 1,291 $ 811
====================
</TABLE>
In determining the actuarial present value of the projected benefit obligation
under the pension plan at December 31, 1996 and 1995, the discount rate used was
7.5% and the rate of increase in future compensation levels was 5.0%. The
expected long-term rate of return on pension plan assets was 9.5% for 1996 and
1995.
The company's pension plan provides that in the event the plan is terminated
following an involuntary change of control any excess plan assets over plan
liabilities would be used to provide increased benefits under the pension plan
or other employee benefit plans.
At December 31, 1996, Ginsbury had a defined benefit pension plan covering
substantially all of its U.S. employees, which was subsequently merged with the
company's defined benefit pension plan on January 1, 1997. Assets and
obligations related to this plan were immaterial.
The company has a supplemental executive retirement plan ("SERP") which provides
benefits to certain employees whose benefits under the defined benefit pension
plan are reduced as a result of limitations
27
<PAGE>
Wyle Electronics Notes to Consolidated Financial Statements
imposed by the Internal Revenue Code. The present value of the accumulated
benefit obligation related to this plan totaled $4,219,000 at December 31, 1996
and $3,437,000 at December 31, 1995. Expense under the SERP was $696,000,
$641,000 and $393,000 for 1996, 1995 and 1994, respectively.
The company maintains an employee savings plan under Section 401(k) of the
Internal Revenue Code for employees meeting certain service requirements.
Eligible employees can contribute up to 15% of their annual compensation,
subject to certain restrictions. In July of 1996, the company modified its
method of matching employee contributions by increasing the company match to 50%
of the first 6% contributed by an employee compared to a previous match of 25%
on the first $1,200 contributed. Company matching contributions for 1996, 1995
and 1994 aggregated $887,000, $182,000 and $316,000, respectively.
The company has Rabbi trusts to fund benefit payments under its SERP and other
executive and director deferred compensation plans. Trust assets are irrevocable
to the company but are subject to creditor claims under certain conditions.
Assets held in the trusts at December 31, 1996 and 1995 totaled $4,379,000 and
$3,724,000, respectively.
The company amended its unfunded retirement plan for non-employee directors by
limiting participation in the plan to present participants and directors as of
October 1, 1996. Amounts expensed related to this plan, which were immaterial
for the periods presented, are accrued over the estimated service period for
each covered director.
The company has a Voluntary Employees' Beneficiary Association ("VEBA'') trust
to fund certain employee benefit payments. Trust assets, which are irrevocable
to the company, totaled $702,000 and $734,000 at December 31, 1996 and 1995,
respectively.
The company provides postretirement medical coverage to qualifying employees.
Upon retirement the company's employees may become eligible for benefits if they
meet certain age and length of service requirements as specified in the plan.
The provision for postretirement benefits, including discontinued operations,
consists of the following components:
<TABLE>
<CAPTION>
-----------------------
In thousands 1996 1995 1994
- ---------------------------------------------------------
<S> <C> <C> <C>
Service cost-benefits earned
during the period $ 109 $199 $ 292
Interest cost on accumulated
postretirement benefit
obligation ("APBO") 296 473 449
Net amortization and deferral (210) 19 15
----------------------
Net periodic postretirement
benefit cost 195 691 756
Curtailment gain (115) - (827)
----------------------
Net postretirement medical
expense (income) $ 80 $691 $ (71)
======================
</TABLE>
In 1996, the company's postretirement benefits provision included a curtailment
gain due mainly to an amendment which, among other things, limited participation
in the plan to present participants and employees as of July 1, 1996 meeting
specified age and service requirements. In 1994, the company's postretirement
benefits provision included a curtailment gain, which was included in the loss
on sale of discontinued operations (see Note 10). The company will continue to
be responsible for certain postretirement benefit obligations relating to the
discontinued operations.
Components of the APBO recognized in the consolidated balance sheets at December
31 were as follows:
<TABLE>
<CAPTION>
-------------------
In thousands 1996 1995
- ---------------------------------------------------------
<S> <C> <C>
Actuarial present value of
benefit obligations:
Retirees and beneficiaries $(1,611) $(3,558)
Fully eligible active plan
participants (332) (674)
Other active plan participants (426) (2,286)
==================
Total APBO (2,369) (6,518)
Unrecognized (gain) loss (2,652) 1,160
==================
Accrued postretirement
benefit liability $(5,021) $(5,358)
==================
</TABLE>
28
<PAGE>
In determining the actuarial present value of the APBO as of December 31, 1996
and 1995, the assumed health care cost trend rate was 10%, reducing gradually to
an ultimate rate of 5.5% in 2001, and the discount rate was 7.5%. If the health
care cost trend rate were increased by 1% in each year, the effect on the APBO
and the net periodic postretirement benefits provision would be insignificant at
December 31, 1996.
Note 8. 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
included personal property, inventory, accounts receivable, intellectual
property, assigned contracts, permits and other identifiable intangible assets.
The negotiated purchase price of the 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. For 1996, no amount was due
under the earnout provision. The acquisition was financed mainly through
borrowings under the company's revolving credit agreement.
The results of operations of the company for 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, unaudited pro forma consolidated net sales,
net income and net income per share for 1995 would have approximated
$1,122,009,000, $36,907,000 and $2.90, respectively. Such pro forma amounts are
not necessarily indicative of what the actual consolidated results would have
been for the full year of 1995.
Note 9. Accord Contract Services Joint Venture
On August 8, 1996, the company announced the formation of a joint venture with
Marshall Industries ("Marshall"), another distributor of electronic components
and computer products. The venture, known as Accord Contract Services LLC
("Accord"), is 50% owned by each of the company and Marshall (the "members").
Accord provides value-added services to each of its members, including component
kitting, turnkey manufacturing solutions and autoreplenishment systems.
The joint venture is subject to termination under various circumstances,
including the election by either member. Upon a change in control of one of the
members, either member may elect to terminate the joint venture, but the member
subject to the change in control would then be required to pay the other member
a fee as compensation for the termination of the venture. The fee, which can
range from $25 million to $40 million, is based on the value of the venture at
the time of termination considering its sales volume and other factors. In
connection with the establishment of Accord, each member initially agreed to
grant certain warrants to the other member and entered into other related
agreements. The warrant agreements and certain of the related agreements were
subsequently rescinded.
Note 10. Discontinued Operations
On December 23, 1994, the company completed the sale of its SS&S business to
WESS Investment Corporation ("WESS"), a buyout group led by William E. Simon &
Sons and certain members of the SS&S management along with a current and two
former members of the company's Board of Directors. Under the terms of the
agreement, WESS acquired certain assets and liabilities of SS&S for a negotiated
purchase price of $30 million in cash, subject to adjustment, plus additional
amounts that may be paid to the company under a five-year earnout provision.
Certain excess real properties of SS&S were excluded from the sale to WESS. Such
assets are stated at their estimated net realizable value of $3,156,000 and
$3,433,000 at December 31, 1996 and 1995, respectively, and are classified in
other assets. The company intends to sell these assets in the future.
29
<PAGE>
Wyle Electronics Notes to Consolidated Financial Statements
During 1994, the company recorded a loss on sale of discontinued operations of
$15.8 million, after income tax benefits of $9.9 million. The loss on sale
included certain transaction costs and reserves associated with the disposition,
and was reduced by certain curtailment gains as discussed in Note 7. Operating
results for SS&S are classified as discontinued operations on the company's
consolidated statement of income for 1994. Long-term liabilities related to
discontinued operations totaled $12,651,000 and $14,574,000 at December 31, 1996
and 1995, respectively.
Note 11. Commitments and Contingencies
Commitments The minimum aggregate rentals payable on long-term leases
subsequent to December 31, 1996 approximate $24,997,000. The amounts are payable
as follows: 1997 - $6,269,000; 1998 - $5,376,000; 1999 - $4,502,000; 2000 -
$3,440,000; 2001 - $2,353,000; and thereafter - $3,057,000. Rental expense
(including month to month rentals) approximated $8,336,000, $7,300,000 and
$8,096,000 for 1996, 1995 and 1994, respectively. Certain facilities occupied by
Ginsbury in the U.S. and Europe are leased from a member of Ginsbury's
management and his family at costs that approximate market rates. The minimum
aggregate rentals payable on these related party leases to December 31, 1996,
included above, approximated $1,733,000. Rental expense related to these
facilities in 1996 approximated $406,000.
Contingencies In May 1993, Avnet, Inc. ("Avnet") and Hall-Mark Electronics
Corporation ("Hall-Mark") filed a civil action against the company and a former
employee of Hall-Mark in the Superior Court of Fulton County, Georgia, seeking
injunctive relief and monetary damages, and alleging, inter alia, that the
company conspired with Hall-Mark employees to tortiously interfere with the
employment relations of Hall-Mark and its employees and with a proposed business
combination between the plaintiffs, which combination was consummated
subsequently. Plaintiffs' motion for a preliminary injunction was denied in part
by the trial court and affirmed by the Georgia Supreme Court in December 1993.
In October 1995, plaintiffs voluntarily dismissed their claims in Georgia
without prejudice.
In September 1995, Avnet refiled the same action against the company and certain
company employees in the Circuit Court of Hillsborough County, Florida, which
litigation is still pending. The company believes that plaintiffs' complaint is
without merit and will contest it vigorously. The company recorded a special
charge of $1,900,000 during the third quarter of 1994, primarily for anticipated
legal expenses associated with the defense of this litigation. Although
management cannot predict the ultimate outcome with any certainty, management
believes that a result adverse to the company in this matter is unlikely.
The company also has other contingent liabilities arising in the ordinary course
of business. In the opinion of management, the ultimate disposition of such
matters will not materially affect the company's results of operations or
financial position.
30
<PAGE>
Wyle Electronics Report of Independent Public Accountants
To the Board of Directors and Shareholders of Wyle
Electronics:
We have audited the accompanying consolidated balance sheets
of Wyle Electronics (a California corporation) and
subsidiaries as of December 31, 1996 and 1995 and the
related consolidated statements of income, shareholders'
equity and cash flows for the years ended December 31, 1996,
1995 and 1994. These financial statements are the
responsibility of the company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects,
the financial position of Wyle Electronics and subsidiaries
as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for the years ended December
31, 1996, 1995 and 1994 in conformity with generally
accepted accounting principles.
/s/ Arthur Andersen LLP
Los Angeles, California Arthur Andersen LLP
February 14, 1997
31
<PAGE>
Wyle Electronics Selected Financial Data
<TABLE>
<CAPTION>
Years ended December 31,
---------------------------------------
In thousands, except per share amounts and percentages 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating results
Net sales $1,244,504 $1,077,467 $792,309
Cost of sales 1,020,796 890,693 663,741
Interest expense, net 7,623 3,315 1,289
Income (loss) from continuing operations before income taxes 66,471 60,049 22,730
Income from continuing operations 40,215 36,210 13,980
Net income (loss) 40,215 36,210 (381)/(a)/
Income (loss) per share
Primary
Continuing operations 3.12 2.86 1.13
Net income (loss) 3.12 2.86 (.03)/(a)/
Fully diluted
Continuing operations - - -
Net income (loss) - - -
Dividends per common share .32 .28 .28
Dividends paid 4,033 3,457 3,431
======================================
Year-end financial data
Working capital $ 280,343 $ 255,502 $170,773
Net investment in property, plant and equipment 37,839 34,329 15,497
Total assets 506,252 439,344 305,913
Long-term debt, including subordinated debentures 111,845 87,600 17,802
Shareholders' equity 236,145 195,670 159,746
Book value per common share 18.76 15.72 13.10
Income from continuing operations as a % of sales 3.2% 3.4% 1.8%
Annualized return from continuing operations on average
shareholders' equity 18.6% 20.4% 8.6%
======================================
</TABLE>
/(a)/Includes a net loss on sale of discontinued operations of $15.8 million,
or $1.27 per share (see Note 10).
32
<PAGE>
<TABLE>
<CAPTION>
Eleven months
ended Years ended January 31,
December 31, ---------------------------------------------------------------------------------------------------
1993 1993 1992 1991 1990 1989 1988 1987
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$473,443 $446,609 $359,868 $358,921 $319,061 $318,107 $265,395 $224,559
382,513 353,558 280,414 273,374 246,368 246,502 207,992 174,294
174 2,283 2,426 2,668 3,240 3,770 3,140 2,413
12,734 18,310 7,793 14,688 5,859 6,463 1,989 (1,187)
8,336 11,787 5,275 9,350 3,782 3,957 1,136 65
8,136 15,428 9,668 12,694 7,478 7,800 5,779 4,307
.67 1.11 .52 .94 .38 .39 .11 .01
.66 1.45 .95 1.28 .75 .77 .57 .44
- 1.03 .53 .89 .41 .42 .16 .02
- 1.33 .90 1.18 .72 .74 .56 .43
.28 .28 .28 .28 .28 .28 .27 .26
3,412 2,990 2,792 2,728 2,791 2,837 2,673 2,461
====================================================================================================================
$143,432 $141,970 $133,074 $115,268 $101,611 $ 96,220 $106,466 $ 81,256
30,606 29,884 30,513 30,902 31,306 30,243 25,860 27,137
260,571 236,213 216,530 194,341 176,142 182,913 175,761 148,574
6,000 10,120 41,991 36,039 36,571 32,405 43,724 25,882
164,356 158,897 115,303 105,535 94,286 93,851 88,522 80,612
13.45 13.09 11.48 10.79 9.77 9.26 8.78 8.37
1.8% 2.6% 1.5% 2.6% 1.2% 1.2% .4 % -
5.6% 8.6% 4.8% 9.4% 4.0% 4.3% 1.3 % .1%
====================================================================================================================
</TABLE>
33
<PAGE>
Wyle Electronics Results by Quarter and Capital Stock Information
Unaudited
<TABLE>
<CAPTION>
Year ended December 31, 1996 Year ended December 31, 1995
by Quarter by Quarter
In thousands, except -------------------------------------------- -----------------------------------------
per share amounts First Second Third Fourth First Second Third Fourth
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $326,506 $306,881 $295,191 $315,926 $250,036 $254,899 $273,499 $299,033
Gross profit 57,886 58,452 53,632 53,738 40,337 45,203 49,120 52,114
Net income 11,003 11,113 8,613 9,486 6,730 8,774 10,139 10,567
Net income per share $.86 $.86 $.67 $.74 $.54 $.70 $.80 $.83
==============================================================================================
</TABLE>
Wyle Electronics common stock is traded on the New York Stock Exchange under the
symbol WYL. The high and low price ranges and dividends paid per share for each
quarterly period during the past two years are as follows:
<TABLE>
<CAPTION>
Price Range Price Range
Year ended -------------------- Dividends Year ended --------------------- Dividends
December 31, 1996 High Low Per Share December 31, 1995 High Low Per Share
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Quarter ended Quarter ended
March 31, 1996 $35 5/8 $27 5/8 $.08 March 31, 1995 $24 1/2 $19 3/8 $.07
June 30, 1996 44 1/4 33 1/8 .08 June 30, 1995 29 1/4 23 .07
September 30, 1996 34 1/8 28 5/8 .08 September 30, 1995 45 3/8 27 3/8 .07
December 31, 1996 39 1/2 29 7/8 .08 December 31, 1995 46 1/2 33 1/2 .07
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
34
<PAGE>
EXHIBIT 21
WYLE ELECTRONICS
SUBSIDIARIES
The following is a list of all the subsidiaries of the Company, as of December
31, 1996, which are included in the Company's Consolidated Financial Statements
and the percentage of voting securities for each owned by the Company.
<TABLE>
<CAPTION>
State or
Country of Percentage of
Name of Company Incorporation Ownership
--------------- -------------- ----------
<S> <C> <C>
Wyle Distribution Group-Santa Clara, Inc....... California 100%
Wyle Ginsbury Electronics, Inc................. New Jersey 100%
Wyle Ginsbury Electronics (U.K.), Ltd.......... United Kingdom 100%
Wyle Ginsbury Electronics GmbH................. Germany 100%
Wyle Ginsbury Electronique S.A................. France 100%
Wyle Ginsbury Electronics A/S.................. Denmark 100%
Wyle Ginsbury Electronics OY................... Finland 100%
Wyle Ginsbury Electronics Scandinavia A.B...... Sweden 100%
Wyle Electronics, Ltd.......................... Barbados 100%
Wyle Electronics Canada Corp. (Inactive)....... Canada 100%
Wyle Electronics Caribbean Corp. (Inactive).... Puerto Rico 100%
Redwing of California, Inc. (Inactive)......... California 100%
</TABLE>
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our reports included or incorporated by reference in this Form 10-K, into the
Company's previously filed Registration Statements File Nos. 2-61600, 2-85129,
33-6360, 33-29071, 33-52922, 33-55637, 33-00149 and 33-04537.
ARTHUR ANDERSEN LLP
Los Angeles, California
February 14, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 13,857
<SECURITIES> 0
<RECEIVABLES> 183,017
<ALLOWANCES> 8,487
<INVENTORY> 216,544
<CURRENT-ASSETS> 413,494
<PP&E> 65,163
<DEPRECIATION> 27,324
<TOTAL-ASSETS> 506,252
<CURRENT-LIABILITIES> 133,151
<BONDS> 111,845
0
0
<COMMON> 97,091
<OTHER-SE> 139,054
<TOTAL-LIABILITY-AND-EQUITY> 506,252
<SALES> 1,244,504
<TOTAL-REVENUES> 1,244,504
<CGS> 1,020,796
<TOTAL-COSTS> 1,020,796
<OTHER-EXPENSES> 146,124
<LOSS-PROVISION> 3,490
<INTEREST-EXPENSE> 7,623
<INCOME-PRETAX> 66,471
<INCOME-TAX> 26,256
<INCOME-CONTINUING> 40,215
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 40,215
<EPS-PRIMARY> 3.12
<EPS-DILUTED> 0.0
</TABLE>
