<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED MAY 31, 1996
/ / 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 1-5441
<TABLE>
<S> <C>
------------------------------------------------------------------------------------
FORM 10-K MARSHALL INDUSTRIES
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
CALIFORNIA 95-2048764
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
9320 TELSTAR AVENUE (REGISTRANT'S TELEPHONE NUMBER,
EL MONTE, CALIFORNIA 91731-2895 INCLUDING AREA CODE) (818) 307-6000
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
Securities registered pursuant to Section 12(b) of the Act:
COMMON STOCK, PAR VALUE $1.00 PER SHARE NEW YORK STOCK EXCHANGE
(TITLE OF EACH CLASS) (NAME OF EACH EXCHANGE ON WHICH
REGISTERED)
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports) and (2) has been subject to such filing
requirements for the past 90 days. YES /X/ NO / /
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of Registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. / /
State the aggregate market value of the voting stock held by
non-affiliates of the registrant.
$439,455,969 (computed on the basis of $26.875 per share, which
was the last sale price on the New York Stock Exchange on July
31, 1996).
Indicate the number of shares outstanding of each of the
Registrant's classes of common stock, as of the latest
practicable date.
<TABLE>
<S> <C> <C>
DOCUMENTS (CLASS OF STOCK) NUMBER OF OUTSTANDING SHARES AS OF JULY
INCORPORATED COMMON STOCK, PAR VALUE $1.00 PER SHARE 31, 1996
17,128,864
BY REFERENCE Proxy Statement for Annual Meeting of Shareholders to be held October 22, 1996 PART
III
------------------------------------------------------------------------------------
</TABLE>
<PAGE>
FORM 10-K
Marshall Industries
Year Ended May 31, 1996
- --------------------------------------------------------------------------------
PART I
ITEM 1. BUSINESS
GENERAL
Marshall Industries ("Marshall" or the "Company") is among the
largest domestic distributors of industrial electronic
components and production supplies. The Company also provides
its customers with a variety of value added services, such as
inventory management, kitting, programming of programmable logic
devices, and testing services.
The Company distributes approximately 125,000 different
products manufactured by over 50 major suppliers to more than
30,000 customers, including a wide range of original equipment
manufacturers, contract manufacturers, and value added
resellers. The Company emphasizes responsive customer service
through its network of 37 sales and distribution facilities and
3 corporate support and distribution centers in the United
States and Canada. This local customer service is supported by
advanced on-line management information systems, 24-hour sales
and technical support service and an automated distribution
facility.
The Company supplies and services a broad range of products,
including semiconductors, passive components, connectors and
interconnect products, and computer systems and peripheral
products, as well as production supplies. The distribution of
electronic components accounted for approximately 94% of total
Company sales in each of fiscal 1995 and 1996. The distribution
of industrial production supplies accounted for the balance, or
6% of total Company sales in each of such periods. The Company
believes it is the largest domestic distributor in sales volume
of industrial production supplies to customers in the
electronics industry.
Distributors have become an increasingly important marketing
channel for electronics products, permitting manufacturers to
market their products economically to a broad range of end-
users. Most manufacturers are unable to serve their entire
customer base directly and rely on distributors, such as the
Company, to extend their marketing operations. Distributors not
only provide product, but also provide technical service support
to customers. In addition, distributors relieve manufacturers
from a portion of the costs associated with selling their
products, including large investments in inventories, accounts
receivable and personnel. At the same time, distributors offer
customers the convenience of diverse inventory, rapid
deliveries, credit and a wide range of value-added services.
Marshall is a customer-oriented company which uses automation
and information technology to enhance customer service and
intimacy. The Company has invested substantial resources to
improve its inventory management and information systems,
thereby assisting its customers in controlling costs, reducing
cycle times and keeping pace with changes in technology. These
investments have also increased the Company's efficiency and
improved its cost competitiveness. Marshall's extensive
line-card provides customers with the opportunity to purchase
their electronic component requirements from a single source,
thus improving their materials resource planning and
facilitating their inventory procurement needs. The Company
provides additional support to its customers through field
application engineers, electronic data interchange and other
value-added services. Marshall also utilizes the Internet to
allow customers to access a variety of services, including
obtaining product availability information, prices and technical
specifications.
--------
1
<PAGE>
FORM 10-K
Marshall Industries
Year Ended May 31, 1996
- --------------------------------------------------------------------------------
PRODUCTS AND
SUPPLIERS
The distribution of semiconductor products accounted for
approximately 73% and 76%, respectively, of total Company sales
in fiscal 1995 and 1996. Passive components, connectors and
interconnect products accounted for approximately 11% of total
Company sales for both of those periods. Sales of computer
systems and peripheral products accounted for approximately 10%
and 7%, respectively, of total Company sales in fiscal 1995 and
1996. Distribution of industrial production supplies accounted
for approximately 6% of total Company sales in each of fiscal
1995 and 1996.
SEMICONDUCTOR PRODUCTS
Texas Instruments ("TI") is the Company's largest supplier of
semiconductor products. TI's semiconductor products accounted
for approximately 14% and 15% of total Company sales in fiscal
1995 and 1996, respectively. The Company carries the full range
of semiconductor products manufactured by TI and distributes the
products of a number of other leading American manufacturers.
The Company is also the major distributor in sales volume of
Japanese semiconductor products in the United States. Sales of
these products accounted for approximately 22% and 23% of total
Company sales in fiscal 1995 and 1996, respectively.
Additionally, the Company distributes components manufactured by
European suppliers, such as Siemens Components, Inc. ("Siemens")
and Philips Semiconductors, a North American Philips Company
("Philips").
Semiconductor products include memory, logic and programmable
logic devices, microprocessors and microperipheral components.
The Company's principal suppliers are Advanced Micro Devices,
Inc., Atmel Corporation, Cypress Semiconductor Corporation,
Fujitsu, Hitachi, IBM Technology Products, a unit of IBM,
Lattice Semiconductor Corporation, Linear Technology, Philips,
NEC Electronics, Inc., Siemens, Sony Electronics, Inc., Sharp
Electronics Corporation, TI, Toshiba America, Inc., and Xilinx,
Inc.
PASSIVE COMPONENTS, CONNECTORS AND INTERCONNECT PRODUCTS
The Company distributes passive components, including
multilayer ceramic, tantalum and foil capacitors as well as
resistor networks. These products are manufactured by such
leading suppliers as AVX Corporation, a subsidiary of Kyocera
Corporation, and Bourns, Inc.
Connectors and interconnect products include surface mount
sockets and fiber optic systems, along with printed circuit
board level connectors. The Company's principal suppliers of
connectors and interconnect products are AMP Incorporated and
T&B/Ansley Corporation, which rank among the leading suppliers
of these products.
COMPUTER SYSTEMS AND PERIPHERALS
The Company's product offerings include liquid crystal
displays, optical, hard and floppy disk drives, power supplies,
monitors, motherboards for personal computers, and other systems
components. Computer Products Inc., Fujitsu, IBM Personal
Computer Company, NEC Electronics, Inc., Sharp Electronics
Corporation, Sony Components Products, and Toshiba America
Information Systems, Inc. are the major suppliers of these
products to the Company. Subsequent to May 31, 1996, Quantum
Corporation awarded the Company a franchise agreement to
distribute its disk drives.
- ---------
2
<PAGE>
- --------------------------------------------------------------------------------
PRODUCTS AND
SUPPLIERS
(CONTINUED)
INDUSTRIAL PRODUCTION SUPPLIES
The Company believes that it is the largest domestic
distributor in sales volume of industrial production supplies to
customers in the electronics industry. Such supplies include
hand tools, static control products, test equipment, soldering
supplies and equipment and work stations. Leading suppliers
include Cooper Tools, a division of Cooper Industries, Kester
Solder, a division of Litton Industries, Fluke Corporation,
Tektronix, Inc., Loctite Corporation and 3M. Although the
distribution of industrial production supplies may be distinct
from distribution of electronic components, the Company believes
that there are certain synergies and strategic benefits from
being the leading distributor of industrial production supplies.
VALUE ADDED SERVICES
In addition to the distribution of products, the Company
provides a variety of value added services to its customers. The
Company provides component testing and assembly, just in time
("JIT") inventory management and delivery systems, programmable
logic array and PROM and EPROM programming and certain types of
testing services. In recent years, the Company has introduced a
number of sophisticated automated inventory procurement and
management services for its customers through its electronic
data interchange ("EDI") and auto-replenishment programs. The
Company also packages electronic components in production ready
kits to customers' specifications ("kitting"). Completed kits
are typically shipped directly to the customer's production line
on a JIT basis. Turnkey manufacturing solutions are offered to
meet customer requirements or through alliances with independent
contract manufacturers as an extension of the Company's
JIT/kitting business. Under such arrangements, the Company
supplies components directly to contract manufacturers who
perform assembly and testing to produce a completed product to
customer specifications. In fiscal 1996, the Company introduced
24-hour sales and technical support services for its customers.
As described in Note 8 to the financial statements, Marshall
and Wyle Electronics completed the formation of a value added
services joint venture called Accord Contract Services LLC in
August, 1996. The joint venture is designed to provide material
management services such as component kitting, turnkey
manufacturing solutions and auto-replenishment systems.
- --------------------------------------------------------------------------------
RELATIONSHIP WITH
SUPPLIERS
The majority of the products sold by the Company are purchased
pursuant to distributor agreements. These agreements are
typically for terms of one year, renewable annually, non-
exclusive, and authorize the Company to sell through its sales
and distribution locations all or a portion of the products
produced by that manufacturer. These agreements may be canceled
by either party on short notice and generally provide for a
return of the manufacturer's inventory upon cancellation. The
Company's ten largest suppliers accounted for approximately 60%
of total Company sales in each of fiscal 1995 and 1996. Except
for TI, which accounted for 14% and 15% of total Company sales
for fiscal 1995 and 1996, respectively, no supplier accounted
for more than 10% of total Company sales in such periods.
Cancellation of an agreement with, or trade restrictions
affecting purchases from, a major supplier could have a material
adverse effect upon the Company's business. The Company believes
that it has satisfactory relationships with its suppliers,
including its Japanese suppliers. Nonetheless, because of
uncertainties relating to U.S. trade issues, the possibility
exists that continued access to Japanese products could be
affected. In addition, the Company cannot determine the
direction of U.S. trade policy or its ultimate effect on the
competitive environment and the Company's results.
--------
3
<PAGE>
FORM 10-K
Marshall Industries
Year Ended May 31, 1996
- --------------------------------------------------------------------------------
RELATIONSHIP WITH
SUPPLIERS
(CONTINUED)
Most manufacturers of electronic components, including foreign
manufacturers, protect authorized distributors, such as the
Company, against potential inventory losses from declining
prices and obsolescence. To protect their distributors from
declining market prices, most electronic component manufacturers
allow their distributors pricing adjustments as products are
sold to customers as well as credits on unsold inventory when
the manufacturers reduce prices on their price lists. In
addition, under the terms of many such agreements, the
distributor has the right to return to the manufacturer, for
credit, any product classified as obsolete by the manufacturer
and a specified portion of other inventory items purchased
within a designated period of time. In the event of a
termination of a distributor agreement, the manufacturer is
generally required to purchase from the distributor the products
of such manufacturer carried in the distributor's inventory. In
some cases, the repurchase of the inventory requires a
restocking charge. Such agreements provide important but not
complete protection from inventory losses. No assurance can be
given, however, that such price adjustment and return policies
will continue.
To service its kitting and turnkey contract manufacturing
customers, the Company must buy a certain amount of products
from third parties on a non-franchised basis. Since there are
typically no return or price protection provisions applicable to
these purchases, there are significantly greater inventory risks
associated with kitting and turnkey contract manufacturing
orders than with the purchase and stocking of inventory pursuant
to its normal distributor agreements.
- --------------------------------------------------------------------------------
SALES AND
MARKETING
Distributors offer electronics customers the convenience of
immediate price and delivery information, backlog status,
diverse off-the-shelf inventories in small and large quantities,
rapid deliveries and the financing of their purchases. The
Company's electronics distribution business services
approximately 30,000 customers, the majority of which are small
and medium size companies in the following industries:
computers, communications, capital and office equipment,
industrial control and medical equipment and systems
integration. In recent years, contract manufacturers have also
become major customers for electronic component distributors,
including the Company, as many original equipment manufacturers
have outsourced their purchasing and manufacturing functions to
them. No single customer accounted for more than 4% of the
Company's sales during any of the last five fiscal years.
The Company's products are sold by both field and inside sales
people. Sales personnel work directly with customers providing
price, delivery, backlog and technical information regarding the
products which the Company distributes. Approximately 45% of the
Company's employees were involved in sales at May 31, 1996.
Most of the Company's branches are also staffed by field
application engineers who provide technical assistance to
customers in their design of new products. Through this process,
Marshall has the opportunity to develop a preferred or exclusive
supply relationship with respect to components incorporated into
the resulting products. The Company believes that field
application engineers play an important role in its marketing
efforts.
Each sales and distribution center is electronically linked to
the Company's central computer system, which provides fully
integrated on-line, real-time data with respect to the Company's
nationwide inventory levels. The Company's computer system
facilitates the control of purchasing and payables, shipping and
receiving, and billing and collections. A salesperson may order
shipment of a product from any distribution center within a
matter of minutes. The Company has made significant investments
in its computerized information systems which management
- ---------
4
<PAGE>
- --------------------------------------------------------------------------------
SALES AND
MARKETING
(CONTINUED)
believes have the capabilities to support future changes and
enhancements required to meet market needs and growth. These
systems have also allowed the Company to increase its EDI
capabilities with its suppliers and customers. Due to the high
volume of transactions and the cost competitiveness of the
electronics components distribution industry, the Company
believes that the expansion and upgrading of its information
systems will be an ongoing requirement. In July, 1994, the
Company introduced an electronic telecommunications service that
allows customers to design, engineer and purchase products via
the Internet. In addition, the outside field sales staff has
been equipped with laptop computers to increase their customer
service and productivity capabilities.
The Company currently has a national distribution network in
the United States and Canada consisting of 37 sales and
distribution centers and 3 corporate support and distribution
centers. The Company believes that it has sales facilities in
all of the major electronic products markets in the United
States, including the Los Angeles/Orange County, San
Francisco/Silicon Valley, Boston, Chicago, Denver, Philadelphia,
Portland, Seattle, Connecticut, Florida, New Jersey, Georgia,
Maryland, Minnesota, Ohio, Nevada and Texas areas. In Canada the
Company has sales facilities in Toronto, Montreal and Vancouver.
As described in Note 6 to the financial statements, the
Company has made an investment in Sonepar Electronique
International, the fourth largest electronic component
distributor in Europe.
At May 31, 1996, the Company had approximately 1,440
employees, substantially all of whom were employed full-time.
- --------------------------------------------------------------------------------
BACKLOG
Information concerning backlog is not material to an
understanding of the Company's business, as the Company's
objective is to ship orders on the same day they are received
unless the customer has requested a specific future delivery
date on an order. Additionally, it is common industry practice
for customers, in most cases, to be able to re-schedule or
cancel orders for standard products with future delivery dates
without significant penalties. In the electronics industry, the
book-to-bill ratio, which is the ratio of sales orders received
to shipments made, is commonly used as an indicator of business
trends. A book-to-bill ratio greater than 1.00 reflects bookings
in excess of billings and thus increasing sales trends.
Following several years of generally positive book-to-bill
ratios for both the industry and the Company, in late calendar
1995 the semiconductor book-to-bill ratio as well as the
Company's book-to-bill ratios began declining and are currently
below 1.00.
- --------------------------------------------------------------------------------
CERTAIN
CONSIDERATIONS
CYCLICAL NATURE OF ELECTRONICS INDUSTRY; FLUCTUATIONS IN
QUARTERLY OPERATING RESULTS
The Company's business is affected by the cyclical nature of
the electronics industry and overall trends in the general
economy. The electronics distribution industry is very sensitive
to fluctuating market conditions, primarily caused by changes in
the supply and demand for electronic products, which impact
product availability and prices. As a result, the Company's
financial results may reflect significant variations from period
to period due to these factors. Other factors which affect
operating results include but are not limited to availability of
products from suppliers, the product mix sold by the Company,
price competition for products sold by the Company, price
decreases or obsolescence on inventory that is not price
protected or returnable to suppliers, and the Company's
customers' ability to pay their obligations.
--------
5
<PAGE>
FORM 10-K
Marshall Industries
Year Ended May 31, 1996
- --------------------------------------------------------------------------------
CERTAIN
CONSIDERATIONS
(CONTINUED)
NATURE OF DISTRIBUTOR AGREEMENTS
The Company's distributor agreements with its suppliers are
non-exclusive. Consequently, the Company competes with numerous
other distributors who sell the same or similar products, as
well as with its suppliers, which tend to sell directly to their
larger customers. The distributors' customers are generally
smaller and less credit worthy than the principal customers of
the suppliers. The Company's distributor agreements are also
terminable on short notice. Suppliers have from time to time
terminated such agreements with the Company and there can be no
assurance that such terminations will not occur in the future.
The Company's ten largest suppliers accounted for approximately
60% of the Company's total sales in each of fiscal 1995 and
1996. The loss of a key supplier could have a material adverse
effect upon the Company and its future results of operations.
PRODUCT SUPPLIES AND PRICING
From time to time, the industry has experienced product
shortages and excess supplies. The prices and margins on the
Company's products are often materially impacted by these
product shortages and excess supplies. Since late calendar 1995,
there has been an increase in the availability of electronic
component products, particularly memory devices. Since that
time, memory devices have experienced significant market pricing
and margin pressures.
COMPETITION
Supplying and servicing the electronics industry is a highly
competitive business. The Company competes with other large
national distributors, numerous local and regional distributors,
as well as some of the Company's suppliers. The Company believes
that competition is based primarily on customer service, product
lines, product availability, competitive pricing and technical
information, as well as value added services.
From time to time, the Company has experienced competition
from "unauthorized" U.S. distributors and brokers of electronic
components who purchase these products from various sources,
including sources outside the United States, at prices below
those which the Company may purchase such products directly from
its suppliers. In addition, a limited number of the Company's
customers have moved their manufacturing operations out of the
United States in recent years. Such changes have not had a
material impact on the Company's business.
DEPENDENCE UPON KEY PERSONNEL
The Company's success depends to a significant extent upon the
continued contributions of its management and key employees. The
loss of these key employees could adversely impact the Company.
The Company's future success will also depend in part upon its
ability to attract and retain highly qualified personnel.
- --------------------------------------------------------------------------------
ITEM 2. PROPERTIES
The Company presently has 37 sales and distribution facilities
and 3 corporate support and distribution centers. The Company's
executive offices and corporate support and distribution center
are located in El Monte, California. This facility is Company
owned, has 258,000 square feet of space and utilizes an
automated inventory handling system. The Company owns an
additional 65,500 square foot warehouse and office facility in
El Monte.
- ---------
6
<PAGE>
- --------------------------------------------------------------------------------
In addition to the El Monte facilities, a majority of the
sales and distribution facilities located in Marshall's major
markets are Company owned. The three largest facilities range
from approximately 58,000 to approximately 65,000 square feet in
size and are located in Milpitas, California; Irvine,
California; and Boston, Massachusetts. The Company also owns
facilities in Austin, Texas; Endicott, New York; San Diego,
California; and Wallingford, Connecticut of approximately 8,000
to 15,000 square feet each.
The Company leases its remaining sales and distribution
facilities. They are located in cities throughout the United
States and Canada, vary in size depending on sales volume and
are subject to leases whose initial terms expire at various
dates through fiscal 2002. Substantially all of those leases
include renewal provisions.
In the opinion of the Company, the current facilities are
adequate for the Company's operating requirements.
- --------------------------------------------------------------------------------
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the
Company is a party.
- --------------------------------------------------------------------------------
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during
the quarter ended May 31, 1996.
- --------------------------------------------------------------------------------
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's Common Stock is listed on the New York Stock
Exchange under the symbol MI. The following table shows, for the
periods indicated, the published closing sale prices per share
for the Company's Common Stock.
<TABLE>
<S> <C> <C>
- --------------------------------------------------------
High Low
- --------------------------------------------------------
FISCAL YEAR 1995
First Quarter $ 25 3/8 $ 20 1/4
Second Quarter 26 1/2 23 3/8
Third Quarter 26 3/4 22 3/4
Fourth Quarter 28 1/2 25 1/4
- --------------------------------------------------------
FISCAL YEAR 1996
First Quarter $ 35 $ 26 1/4
Second Quarter 37 3/4 32
Third Quarter 35 1/8 29 3/4
Fourth Quarter 32 1/4 29 1/2
- --------------------------------------------------------
</TABLE>
The Company had approximately 6,000 shareholders at May 31,
1996. It has never paid a cash dividend. Earnings have been
retained to provide for the growth and expansion of the
Company's business.
--------
7
<PAGE>
FORM 10-K
Marshall Industries
Year Ended May 31, 1996
- --------------------------------------------------------------------------------
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial data with
respect to the statements of income of the Company for the five
fiscal years ended May 31, 1996, and the balance sheets of the
Company at year end for each of those years. The selected
financial data is derived from financial statements for such
years and at such dates as audited by Arthur Andersen LLP,
independent public accountants, including the statements of
income for the three years ended May 31, 1996, and the balance
sheets at May 31, 1995 and 1996 included elsewhere herein.
- --------------------------------------------------------------------------------
STATEMENTS OF
INCOME
<TABLE>
<CAPTION>
Years Ended May 31, 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
(In thousands except for per share data)
Net sales $575,223 $652,899 $822,548 $1,009,315 $1,164,812
Cost of sales 441,709 502,955 652,121 820,571 955,331
- --------------------------------------------------------------------------------------------------------
Gross profit 133,514 149,944 170,427 188,744 209,481
Selling, general and administrative expenses 98,917 108,394 112,220 117,287 123,188
- --------------------------------------------------------------------------------------------------------
Income from operations 34,597 41,550 58,207 71,457 86,293
Interest expense and other -- net(1) 2,689 2,016 1,931 1,916 989
- --------------------------------------------------------------------------------------------------------
Income before provision for income taxes 31,908 39,534 56,276 69,541 85,304
Provision for income taxes 12,615 15,640 23,105 29,130 35,250
- --------------------------------------------------------------------------------------------------------
Net income $ 19,293 $ 23,894 $ 33,171 $ 40,411 $ 50,054
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Net income per share(2) $ 1.13 $ 1.38 $ 1.91 $ 2.32 $ 2.86
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Cash dividends per share(3) -- -- -- -- --
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Weighted average number of shares outstanding 17,114 17,278 17,357 17,439 17,507
</TABLE>
- --------------------------------------------------------------------------------
BALANCE SHEETS --
SUMMARY
<TABLE>
<CAPTION>
May 31, 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
(In thousands)
Working capital $162,080 $206,970 $229,019 $ 254,394 $ 284,508
Total assets 273,429 330,844 363,659 423,307 472,611
Long-term debt, net of current portion 36,216 54,468 34,742 45,205 25,000
Shareholders' investment 178,464 202,791 238,716 279,752 329,994
</TABLE>
- --------------------------------------------------------------------------------
(1) Amounts are net of interest income of $1.2 million and $1.7
million in 1995 and 1996, respectively.
(2) Net income per share is computed on the basis of the
weighted average common and common equivalent shares
outstanding during each year. All amounts have been
restated to reflect the two for one stock split on February
28, 1994.
(3) The Company has never paid a cash dividend. Earnings have
been retained to provide for the growth and expansion of
the Company's business.
- ---------
8
<PAGE>
- --------------------------------------------------------------------------------
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF
OPERATIONS
The following table sets forth items in the statements of
income as a percent of net sales for periods shown:
<TABLE>
<CAPTION>
- -------------------------------------------------------------
Years Ended May 31, 1994 1995 1996
- -------------------------------------------------------------
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Cost of sales 79.3 81.3 82.0
- -------------------------------------------------------------
Gross profit 20.7 18.7 18.0
Selling, general and administrative
expenses 13.7 11.6 10.6
- -------------------------------------------------------------
Income from operations 7.0 7.1 7.4
Interest expense and other--net .2 .2 .1
- -------------------------------------------------------------
Income before provision for
income taxes 6.8 6.9 7.3
Provision for income taxes 2.8 2.9 3.0
- -------------------------------------------------------------
Net income 4.0% 4.0% 4.3%
- -------------------------------------------------------------
- -------------------------------------------------------------
</TABLE>
As an aid to understanding the results of operations, the
following is a summary of the Company's unaudited quarterly
results of operations for fiscal years 1994, 1995 and 1996 (in
thousands except for per share data):
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
First Second Third Fourth
1994 Quarter Quarter Quarter Quarter Year
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $ 199,807 $ 200,594 $ 197,628 $ 224,519 $ 822,548
Gross profit 42,900 42,740 40,767 44,020 170,427
Net income 7,487 8,643 7,819 9,222 33,171
Net income per share .43 .50 .45 .53 1.91
1995
- -------------------------------------------------------------------------------------
Net sales $ 223,101 $ 243,827 $ 261,623 $ 280,764 $1,009,315
Gross profit 44,112 46,265 47,019 51,348 188,744
Net income 8,736 9,389 10,092 12,194 40,411
Net income per share .50 .54 .58 .70 2.32
1996
- -------------------------------------------------------------------------------------
NET SALES $ 275,870 $ 295,532 $ 288,008 $ 305,402 $1,164,812
GROSS PROFIT 50,945 53,692 52,220 52,624 209,481
NET INCOME 12,199 13,639 12,250 11,966 50,054
NET INCOME PER SHARE .70 .78 .70 .68 2.86
</TABLE>
All per share amounts have been restated to reflect the two
for one stock split on February 28, 1994.
--------
9
<PAGE>
FORM 10-K
Marshall Industries
Year Ended May 31, 1996
- --------------------------------------------------------------------------------
FISCAL 1996
COMPARED TO FISCAL
1995
The increase in net sales for fiscal 1996, as compared to
fiscal 1995, was almost entirely due to an increase in the sales
volume of semiconductor products. As compared to last year,
sales of such products increased by $152,911,000. The increase
in the sales of semiconductor products was mainly the result of
continuing strong market demand for these products. The sales
volume of most of the Company's other major products remained
relatively unchanged, as compared to the prior year.
The Company has experienced industry-wide shortages and excess
supplies from time to time. Beginning the latter part of
calendar 1995, there has been an increase in the availability of
products, particularly memory devices. Since that time, memory
devices have experienced significant market pricing and margin
pressures. Memory products accounted for approximately 19% and
22% of the Company's net sales for fiscal 1996 and 1995,
respectively.
The decrease in gross profit as a percent of sales for fiscal
1996, as compared to fiscal 1995, was due to a decline in the
margins on many of the Company's major products. This decline in
margins mainly resulted from market pressures on the pricing of
a number of the Company's products. The Company believes that
these conditions affecting margins may continue in the near
term.
The increase in selling, general and administrative ("SG&A")
expenses, in dollars for fiscal 1996, as compared to fiscal
1995, was mainly due to the addition of approximately 50
salespeople and several senior managers, partly offset by a
reduction in warehouse and accounting clerical headcount. Salary
adjustments and increases in incentive payments from the
Company's higher profitibility levels also contributed to the
increase in SG&A expenses in fiscal 1996, as compared to fiscal
1995. In addition, there were increases in expenses from
information systems enhancement projects, and higher delivery
and advertising costs. Primarily due to the increase in sales
volume with lower levels of increase in operating costs to meet
this volume, SG&A as a percentage of sales declined to 10.6% for
fiscal 1996 as compared to 11.6% for fiscal 1995.
Interest expense, net of interest income, decreased in fiscal
1996 due primarily to overall lower levels of borrowings.
- --------------------------------------------------------------------------------
FISCAL 1995
COMPARED TO FISCAL
1994
The increase in net sales for fiscal 1995, as compared to
fiscal 1994, was due primarily to an increase in the sales
volume of semiconductor products. Sales of semiconductor
products increased by $157,126,000 primarily as a result of the
strong market demand for such products. The sales volume of the
Company's other major products increased modestly from the prior
year.
The decrease in gross profit for fiscal 1995, as compared to
fiscal 1994, resulted from market pressures on the pricing of
most of the Company's products, including value added products,
and an increase in the sales volume of lower margin products,
primarily memory products.
The increase in SG&A expenses, in dollars, for fiscal 1995, as
compared to fiscal 1994, was primarily due to higher operating
costs to meet the requirements from the significant increase in
sales volume. SG&A expenses as a percentage of sales declined to
11.6% for fiscal 1995 as compared to 13.7% for fiscal 1994. Of
the $5,067,000 increase in SG&A expenses for fiscal 1995,
compared to fiscal 1994, approximately $2,200,000 was
attributable to higher salaries, incentives and fringe benefits.
There were also increases in delivery costs and bad debt
expense, mostly due to higher sales volume.
Interest expense, net of interest income, for fiscal 1995
remained at relatively the same amount as fiscal 1994, as the
lower borrowing levels were offset by higher interest rates.
- --------
10
<PAGE>
- --------------------------------------------------------------------------------
LIQUIDITY AND
CAPITAL
RESOURCES
The Company has been able to fund its working capital
requirements for the past three years through cash flow from
operations and bank borrowings.
For the three years ended May 31, 1996, cash provided from
operating activities amounted to $67,250,000. This cash was used
primarily for debt repayment of $56,231,000 and capital
expenditures of $9,901,000. Costs incurred for the field sales
automation program and upgrade and expansion of the Company's
information system accounted for a significant portion of the
capital expenditures for the last three years.
The Company's sources of liquidity at May 31, 1996 consisted
principally of working capital of $284,508,000 and unsecured
bank credit lines of $55,000,000, of which there were no
borrowings outstanding as of May 31, 1996. Subsequent to May 31,
1996, the aggregate amount of the unsecured credit lines was
increased to $70,000,000. As described in Note 4 to the
financial statements, the credit lines were increased to
primarily meet the requirements of the stock repurchase program
authorized by the Board of Directors in May, 1996. The Company
believes that its working capital, borrowing capabilities, and
the funds generated from operations should be sufficient to
finance its anticipated operational requirements.
--------
11
<PAGE>
FORM 10-K
Marshall Industries
Year Ended May 31, 1996
- --------------------------------------------------------------------------------
ITEM 8. FINANCIAL STATEMENTS
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO MARSHALL
INDUSTRIES:
We have audited the accompanying balance sheets of Marshall
Industries (a California corporation) as of May 31, 1995 and
1996, and the related statements of income, shareholders'
investment and cash flows for each of the three years in the
period ended May 31, 1996. 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 financial statements referred to above
present fairly, in all material respects, the financial position
of Marshall Industries as of May 31, 1995 and 1996, and the
results of its operations and its cash flows for each of the
three years in the period ended May 31, 1996, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Los Angeles, California
July 19, 1996
(except with respect to the
matters discussed in Note 8, as to which
the date is August 8, 1996)
- --------
12
<PAGE>
BALANCE SHEETS
Marshall Industries
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS May 31, 1995 1996
<S> <C> <C> <C>
-----------------------------------------------------------------------------------
(Dollars in
thousands)
CURRENT ASSETS:
Cash $ 3,508 $ 2,208
Receivables, less reserves of $6,775 in 1995 and
$8,405 in 1996 137,892 140,785
Inventories 196,097 240,882
Prepaid expenses 507 759
Deferred income tax benefits (Note 3) 10,216 13,845
-----------------------------------------------------------------------------------
Total current assets 348,220 398,479
-----------------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT, at cost (Note 1):
Land 8,863 8,863
Buildings and improvements 34,282 34,552
Equipment, furniture, fixtures and other 22,291 23,181
Computer equipment 20,929 12,179
-----------------------------------------------------------------------------------
86,365 78,775
Accumulated depreciation and amortization (45,704) (38,610)
-----------------------------------------------------------------------------------
40,661 40,165
NOTE RECEIVABLE (Note 6) 29,050 30,689
OTHER ASSETS -- NET (Note 1) 5,376 3,278
-----------------------------------------------------------------------------------
$ 423,307 $ 472,611
-----------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
LIABILITIES AND
SHAREHOLDERS'
INVESTMENT CURRENT LIABILITIES:
Current portion of long-term debt (Note 2) $ 410 $ --
Accounts payable 80,055 98,686
Other accrued liabilities including salaries and wages 10,561 14,171
Income taxes payable 2,800 1,114
-----------------------------------------------------------------------------------
Total current liabilities 93,826 113,971
-----------------------------------------------------------------------------------
LONG-TERM DEBT (Note 2) 45,205 25,000
DEFERRED INCOME TAX LIABILITIES (Note 3) 4,524 3,646
COMMITMENTS AND CONTINGENCIES (Note 4)
SHAREHOLDERS' INVESTMENT (Notes 1 and 5):
Common stock, $1.00 par value
Shares authorized -- 40,000,000
Shares issued and outstanding -- 17,268,864 in 1995 and
17,278,864 in 1996 17,269 17,279
Additional paid-in capital 53,475 53,653
Retained earnings 209,008 259,062
-----------------------------------------------------------------------------------
279,752 329,994
-----------------------------------------------------------------------------------
$ 423,307 $ 472,611
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE BALANCE SHEETS.
</TABLE>
--------
13
<PAGE>
STATEMENTS OF INCOME
Marshall Industries
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended May 31, 1994 1995 1996
<S> <C> <C> <C> <C>
--------------------------------------------------------------------------------
(In thousands except per share
data)
Net sales $ 822,548 $1,009,315 $1,164,812
Cost of sales 652,121 820,571 955,331
--------------------------------------------------------------------------------
Gross profit 170,427 188,744 209,481
Selling, general and administrative expenses 112,220 117,287 123,188
--------------------------------------------------------------------------------
Income from operations 58,207 71,457 86,293
Interest expense, net (Note 1) 1,931 1,916 989
--------------------------------------------------------------------------------
Income before provision for income taxes 56,276 69,541 85,304
Provision for income taxes (Notes 1 and 3) 23,105 29,130 35,250
--------------------------------------------------------------------------------
NET INCOME $ 33,171 $ 40,411 $ 50,054
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NET INCOME PER SHARE (Note 1) $1.91 $2.32 $2.86
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
</TABLE>
- ---------
14
<PAGE>
STATEMENTS OF SHAREHOLDERS' INVESTMENT
Marshall Industries
For the Years Ended May 31, 1994, 1995 and 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stock Additional
------------------------ Paid-in Retained
Shares Amount Capital Earnings
<S> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------------
(Dollars in thousands)
BALANCE, MAY 31, 1993 17,037,864 $ 17,038 $ 50,327 $ 135,426
Compensation expense related to nonqualified stock
options (Note 5) -- -- 103 --
Exercise of stock options 194,000 194 1,276 --
Tax benefit from stock options exercised -- -- 1,181 --
Net income -- -- -- 33,171
--------------------------------------------------------------------------------------------------------
BALANCE, MAY 31, 1994 17,231,864 17,232 52,887 168,597
Compensation expense related to nonqualified stock
options (Note 5) -- -- 92 --
Exercise of stock options 37,000 37 252 --
Tax benefit from stock options exercised -- -- 244 --
Net income -- -- -- 40,411
--------------------------------------------------------------------------------------------------------
BALANCE, MAY 31, 1995 17,268,864 17,269 53,475 209,008
Compensation expense related to nonqualified stock
options (Note 5) -- -- 30 --
Exercise of stock options 10,000 10 79 --
Tax benefit from stock options exercised -- -- 69 --
Net income -- -- -- 50,054
--------------------------------------------------------------------------------------------------------
BALANCE, MAY 31, 1996 17,278,864 $ 17,279 $ 53,653 $ 259,062
--------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
</TABLE>
--------
15
<PAGE>
STATEMENTS OF CASH FLOWS
Marshall Industries
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended May 31, 1994 1995 1996
<S> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------
(Dollars in thousands)
CASH FLOWS FROM Net income $ 33,171 $ 40,411 $ 50,054
Adjustments to reconcile netincome to net cash
OPERATING
provided by operating activities:
ACTIVITIES:
Depreciation and amortization 8,194 7,566 7,877
Provision for bad debts 1,704 3,339 2,964
Interest on note receivable -- (1,096) (1,639)
Change in current assets and liabilities:
Increase in receivables (21,073) (20,742) (5,857)
Increase in inventories (17,473) (15,344) (44,785)
Increase in accounts payable 16,711 9,216 18,631
Increase in other accrued liabilities, including salaries
and wages 350 870 3,610
Increase (decrease) in income taxes payable 514 (64) (1,686)
Deferred income tax benefit, net (1,198) (2,816) (4,507)
Other 462 70 (184)
-----------------------------------------------------------------------------------------------
Total adjustments (11,809) (19,001) (25,576)
-----------------------------------------------------------------------------------------------
Net cash provided by operating activities 21,362 21,410 24,478
- -------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM Capital expenditures, net (1,771) (2,861) (5,269)
INVESTING Note receivable -- (27,954) --
ACTIVITIES: Deferred software costs -- (829) (52)
-----------------------------------------------------------------------------------------------
Net cash used in investing activities (1,771) (31,644) (5,321)
- -------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM Net repayments under bank credit lines (18,000) (10,000) (20,000)
FINANCING Repayments of long-term debt (2,131) (5,485) (615)
ACTIVITIES: Term loan borrowings -- 25,000 --
Stock options 2,651 533 158
-----------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (17,480) 10,048 (20,457)
-----------------------------------------------------------------------------------------------
Net increase (decrease) in cash 2,111 (186) (1,300)
Cash at beginning of year 1,583 3,694 3,508
-----------------------------------------------------------------------------------------------
Cash at end of year $ 3,694 $ 3,508 $ 2,208
-----------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL Cash paid during the year for the following:
DISCLOSURES OF
CASH FLOW
INFORMATION:
Interest $ 2,052 $ 2,691 $ 2,399
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
Income taxes $ 23,132 $ 31,435 $ 41,253
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
</TABLE>
- ---------
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Marshall Industries
May 31, 1996
- --------------------------------------------------------------------------------
NOTE 1.
SUMMARY OF
SIGNIFICANT
ACCOUNTING
POLICIES
NATURE OF OPERATIONS:
Through a network of 37 sales and distribution facilities and
3 corporate support and distribution centers in the United
States and Canada, the Company supplies and services a broad
range of products, including semiconductors, passive components,
connectors and interconnect products, and computer systems and
peripheral products, as well as production supplies.
REVENUE RECOGNITION:
Sales are recognized at the time of product shipment.
DEPRECIATION AND AMORTIZATION:
Depreciation on buildings is computed using the straight-line
method over useful lives of 25 years. Building and leasehold
improvements are amortized on the straight-line method over the
shorter of the lives of the buildings or the remaining terms of
the leases or useful lives of the assets. Depreciation on all
other plant and equipment is computed on the straight-line and
declining balance methods over useful lives of two to ten years.
Maintenance and repairs and minor replacements of property are
charged to expense when incurred. Major expenditures for
additions and improvements are capitalized at cost. When assets
are retired, or otherwise disposed of, the cost and related
reserves are removed from the accounts, and any resulting gain
or loss is included in income.
INTEREST EXPENSE:
Interest income of $1,180,000 and $1,711,000 is netted against
interest expense in fiscal 1995 and 1996, respectively. Interest
income was not material in fiscal 1994.
TAX DEFERRED PROFIT SHARING PLAN:
Under the provisions of the Marshall Industries Tax Deferred
Profit Sharing Plan (the "Plan"), participating employees may
agree to defer from two to twelve percent, with certain
limitations, of their earnings each payroll period, and such
amount is deposited in a nonforfeitable, fully vested trust
account for the employees' benefit. The Company contributes
quarterly an amount equal to 50 percent of the employees'
contributions, limited to 3% of such employee earnings for the
quarter, reduced by employee forfeitures of prior Company
contributions. Company contributions may be limited to the
extent of net profits and must be invested in the Company's
common stock. The Plan, however, may not own more than 20
percent of the Company's outstanding shares. At May 31, 1996,
the Plan owned less than 2% of the Company's outstanding shares.
Company contributions and expenses related to the Plan amounted
to $1,125,000 in 1994, $1,141,000 in 1995 and $1,538,000 in
1996.
INCOME TAXES:
The Company has adopted Statement of Financial Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes." Under
SFAS No. 109, deferred tax assets and liabilities are computed
based on the difference between the financial statement and
income tax bases of assets and liabilities using the enacted tax
rates.
--------
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Marshall Industries
May 31, 1996
- --------------------------------------------------------------------------------
NOTE 1.
SUMMARY OF
SIGNIFICANT
ACCOUNTING
POLICIES
(CONTINUED)
CASH AND ACCOUNTS PAYABLE:
The Company's banking system provides for the daily
replenishment of its bank accounts for check clearing
requirements. Accordingly, outstanding checks of $11,169,000 and
$16,354,000 that had not yet been paid by the Company's banks at
May 31, 1995 and 1996, respectively, are reflected in cash and
accounts payable in the accompanying financial statements.
INVENTORIES:
The Company values its inventories at the lower of average
cost or market.
SHAREHOLDERS' INVESTMENT:
The Company has authorized 200,000 shares of no par value
preferred stock, of which none was outstanding at May 31, 1995
or 1996.
CAPITALIZED DEFERRED SOFTWARE COSTS:
Deferred software costs are included in other assets and
represent payments to vendors for the design, purchase and
implementation of the computer software for the Company's
operating and financial systems. Such deferred costs,
aggregating to $10,140,000, are amortized over periods not to
exceed five years. At May 31, 1995 and 1996, the accumulated
amortization of such costs were $5,084,000 and $7,196,000,
respectively.
NET INCOME PER SHARE:
Per share amounts are computed on the basis of weighted
average common and common equivalent shares outstanding
(17,357,000 in 1994, 17,439,000 in 1995 and 17,507,000 in 1996).
Common equivalent shares include the dilutive effect of
outstanding stock options, if applicable. All share and per
share data included in these financial statements have been
restated to reflect the two-for-one stock split on February 28,
1994.
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 disclosures 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.
Management believes that these estimates and assumptions provide
a reasonable basis for the fair presentation of the financial
statements.
CONCENTRATION OF CREDIT RISK:
The Company places its cash in what it believes to be
credit-worthy financial institutions. However, cash balances
exceed FDIC insured levels at various institutions. In addition,
the Company has significant receivables from certain customers.
LONG-LIVED ASSETS:
The Financial Accounting Standards Board ("FASB") has recently
issued Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of" ("SFAS 121"). The Company
will formally adopt
- ---------
18
<PAGE>
- --------------------------------------------------------------------------------
NOTE 1.
SUMMARY OF
SIGNIFICANT
ACCOUNTING
POLICIES
(CONTINUED)
SFAS 121 in the first quarter of fiscal year 1997. The Company
has considered the impact of SFAS 121 and believes it will have
no material impact on its financial position or results of
operations.
STOCK BASED COMPENSATION:
In October 1995, the FASB issued Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"). SFAS 123 is effective for fiscal
years beginning after December 15, 1995 and encourages, but does
not require a fair value based method of accounting for employee
stock options or similar equity instruments. The Company expects
to adopt SFAS 123 in fiscal 1997 and will continue to measure
compensation cost under APB 25 and comply with the pro forma
disclosure requirements. The Company believes there will be no
adjustment to reflect the adoption of SFAS 123.
- --------------------------------------------------------------------------------
NOTE 2.
LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
May 31,
- --------------------------------------------------------------------
1995 1996
<S> <C> <C>
- --------------------------------------------------------------------
Bank credit lines $20,000 $ --
Term loan (Note 6) 25,000 25,000
Industrial revenue bonds:
75.8% of prime, due through 1996 615 --
- --------------------------------------------------------------------
45,615 25,000
Less current portion 410 --
- --------------------------------------------------------------------
$45,205 $25,000
- --------------------------------------------------------------------
- --------------------------------------------------------------------
</TABLE>
BANK CREDIT LINES
The Company has revolving credit line agreements with two
major banks to borrow up to $55,000,000 in the aggregate. These
unsecured credit line agreements, with borrowing limits of up to
$25,000,000 and $30,000,000 each, mature on September 30, 1998.
The interest rates under these credit lines are determined at
the time of borrowing based on a choice of options as specified
in the agreements. The options range from floating rates of
LIBOR, IBOR, certificate of deposit, offshore, or banker's
acceptance plus 1/2%, up to prime rate. At May 31, 1996, the
prime rate was 8.25%. A commitment fee is payable based on 1/4%
per annum on the daily average unused amounts of the lines of
credit. In addition, both banks require a facility fee of 1/8%
per annum on the commitment balance. There are no compensating
balance requirements.
The terms of these credit agreements require the Company,
among other things, to maintain a minimum net worth of
$230,000,000 which is adjusted upward quarterly by 70 percent of
net income and 70 percent of net proceeds from any sales of
capital stock or subordinated debentures. At May 31, 1996, at
least $280,703,000 of shareholders' investment was required to
meet this covenant. The credit agreements also require the
Company to meet certain specified working capital and financial
ratios and not to make capital expenditures or incur lease
liabilities in excess of certain specified amounts. The Company
is in compliance with all conditions and covenants of these
agreements.
--------
19
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Marshall Industries
May 31, 1996
- --------------------------------------------------------------------------------
NOTE 2.
LONG-TERM DEBT
(CONTINUED)
Subsequent to May 31, 1996, the Company amended one of its
revolving credit line agreements to allow the Company to borrow
up to $70,000,000 under these agreements in aggregate. There
were no other changes to the terms of the credit line
agreements. This increase in borrowing capabilities was done
primarily to meet the requirements of the stock repurchase
program described in Note 4.
TERM LOAN
In August 1994, the Company obtained an unsecured term loan in
the amount of $25,000,000 with principal repayment due on
September 30, 1997. The Company has the option of repaying the
loan, or a portion thereof, prior to the maturity date. The
interest rate on the loan is based on the 90 day LIBOR rate plus
1/2%. At May 31, 1996 the interest rate on the loan was 5.94%.
The term loan agreement requires the Company to maintain a
minimum net worth ($260,638,000 at May 31, 1996) and to meet
certain specified working capital and financial ratios. The
agreement prohibits capital expenditures in excess of specified
amounts and issuance of debt, guarantees, loans or advances
beyond specified amounts. The Company is in compliance with all
conditions and covenants of the term loan agreement.
MATURITIES OF LONG-TERM DEBT
Long-term debt at May 31, 1996 is payable in fiscal 1998.
The Company's bank credit lines, term loan and industrial
revenue bonds approximate fair value as they bear floating
interest rates.
- --------------------------------------------------------------------------------
NOTE 3.
INCOME TAXES
The provision for income taxes consists of the following (in
thousands):
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
Current: 1994 1995 1996
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal $ 19,357 $ 25,675 $ 31,458
State 4,946 6,271 8,299
- ----------------------------------------------------------------------------------
24,303 31,946 39,757
- ----------------------------------------------------------------------------------
Deferred:
Federal (1,024) (2,435) (3,615)
State (174) (381) (892)
- ----------------------------------------------------------------------------------
(1,198) (2,816) (4,507)
- ----------------------------------------------------------------------------------
Total $ 23,105 $ 29,130 $ 35,250
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
</TABLE>
The difference between the income tax provision at the Federal
statutory rate and the recorded income tax provision is
reconciled as follows (in thousands):
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
1994 1995 1996
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Computed Federal income taxes at
the statutory rate $ 19,697 $ 24,339 $ 29,856
State income taxes, net of Federal income tax
benefit 3,102 3,829 4,814
Other, net 306 962 580
- ----------------------------------------------------------------------------------
Provision for income taxes $ 23,105 $ 29,130 $ 35,250
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
</TABLE>
- ---------
20
<PAGE>
- --------------------------------------------------------------------------------
NOTE 3.
INCOME TAXES
(CONTINUED)
As of May 31, 1995 and 1996, deferred tax assets (liabilities)
were comprised of the following (in thousands):
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
1995 1996
- -----------------------------------------------------------------------------------
<S> <C> <C>
Operating reserves $ 6,152 $ 8,157
Tax depreciation in excess of book amounts (3,087) (2,824)
Capitalization of deferred software costs for book purposes (1,540) (927)
Capitalization of inventory costs for income tax purposes 1,136 790
State tax provision 1,148 1,522
Vacation expense accrued for book purposes 913 986
Other, net 970 2,495
- -----------------------------------------------------------------------------------
Total net deferred tax asset $ 5,692 $ 10,199
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
</TABLE>
As of May 31, 1996, the Company had total deferred tax assets
of $13,845,000 and total deferred tax liabilities of $3,646,000.
The Company did not record any valuation allowances against
deferred tax assets at May 31, 1996.
- --------------------------------------------------------------------------------
NOTE 4.
COMMITMENTS AND
CONTINGENCIES
LEASE COMMITMENTS:
The Company leases certain facilities and equipment under
operating leases expiring at various dates through fiscal year
2002. The aggregate rent expense for all operating leases was
$2,324,000 in 1994, $2,665,000 in 1995 and $2,323,000 in 1996.
The future minimum lease payments under all leases are shown
below (in thousands):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Operating Leases
- ------------------------------------------------------------------------------------
Year Ending May 31 --
<S> <C>
1997 $ 1,733
1998 1,219
1999 678
2000 36
2001 (64)
Thereafter 40
- ------------------------------------------------------------------------------------
$ 3,642
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
</TABLE>
Amounts shown above are net of sublease income of $429,000,
$443,000, $339,000, $327,000 and $218,000 for 1997, 1998, 1999,
2000, and 2001, respectively.
STOCK BUY-BACK:
In May, 1996, the Company announced that its Board of
Directors authorized the purchase of up to 1 million shares of
the Company's common stock. Shares may be purchased from time to
time in the open market or otherwise at prevailing prices. The
Company purchased 214,100 shares during the first quarter of
fiscal 1997.
LITIGATION:
There are no material pending legal proceedings to which the
Company is a party.
--------
21
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Marshall Industries
May 31, 1996
- --------------------------------------------------------------------------------
NOTE 5.
STOCK OPTIONS
The Company has two active stock option plans which provide
for the granting of incentive and nonqualified stock options
covering 1,200,000 shares of common stock. There were three
other plans, which are inactive, during the periods reported.
Nonqualified stock options may have an exercise price which is
less than market value at the date of grant; incentive stock
options must have an exercise price equal to market value at the
date of grant. There were 50,000, 40,000 and 50,000 options
granted in fiscal 1994, 1995 and 1996, respectively, at exercise
prices ranging from $24.00 to $35.875 per share. At May 31,
1996, 220,000 shares were available for additional grants.
The following is a summary of changes in outstanding options
for the Company's stock option
plans for the three years ended May 31, 1996:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Under
Option Option Price
- -----------------------------------------------------------------------------------
<S> <C> <C>
OPTIONS OUTSTANDING AT MAY 31, 1993 589,500 $ 6.50 - $14.00
Options granted 50,000 24.00
Options exercised (194,000) 6.50 - 9.89
Options expired or canceled (1,000) 7.60
---------
OPTIONS OUTSTANDING AT MAY 31, 1994 444,500 7.60 - 24.00
Options granted 40,000 25.25 - 27.875
Options exercised (37,000) 7.60 - 8.675
Options expired or canceled (4,000) 7.60
---------
OPTIONS OUTSTANDING AT MAY 31, 1995 443,500 8.675 - 27.875
Options granted 50,000 35.875
Options exercised (10,000) 8.90
---------
OPTIONS OUTSTANDING AT MAY 31, 1996 483,500 8.675 - 35.875
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
Options exercisable 138,500 $ 8.675 - $27.875
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
</TABLE>
The difference between the quoted market value of the shares
at the date of grant and the option price for grants made under
the nonqualified plans is charged to income as compensation
expense over the vesting periods of the related options. During
fiscal 1994, 1995 and 1996, $103,000, $92,000 and $30,000,
respectively, were charged against income and credited to
additional paid-in capital under these plans. Options granted
are exercisable over a period of ten to twenty years. The income
tax effect of any difference between the market price at the
grant date and the market price at the exercise date is credited
to additional paid-in capital as the options are exercised.
- ---------
22
<PAGE>
- --------------------------------------------------------------------------------
NOTE 6.
INVESTMENT IN
SONEPAR
ELECTRONIQUE
INTERNATIONAL
In August, 1994, the Company invested 151 million French
Francs ($28 million in U.S. dollars) in Sonepar Electronique
International ("SEI"), one of the four largest electronic
component distributors in Europe. This investment is in the form
of an interest bearing, convertible note, guaranteed by a major
French bank as to default. The interest on the note is the same
as the Company's borrowing rates under its unsecured term loan,
as described in Note 2. The note plus accrued interest will be
converted in fiscal 1998 into a minority equity interest of up
to 20% in Eurotronics S.A.S. if certain anticipated sales and
pre-tax income goals are met by SEI. If these goals are not met,
the Company will have the option to call for the repayment in
U.S. dollar equivalent of the original loan (plus accrued
interest) or to convert the loan into a 20% equity interest in
Eurotronics S.A.S. At conversion, the companies making up SEI
will be transferred to Eurotronics S.A.S. Following the
conversion, SEI will have a 2 year option to purchase an
equivalent amount in U.S. dollars of the Company's stock of up
to 5% of the Company's outstanding shares on a fully diluted
basis. The option price will be based on market prices at the
time of conversion. In addition, the Company will have the
option of increasing its equity investment to 49% in Eurotronics
S.A.S. To finance its investment in SEI, the Company obtained an
unsecured term loan in the amount of $25,000,000 (Note 2).
- --------------------------------------------------------------------------------
NOTE 7.
BUSINESS SEGMENT
The Company is engaged in the distribution of industrial
electronic components and production supplies through a
nationwide network of sales and distribution facilities. In the
opinion of management, the Company's products are identifiable
to only one industry segment.
The Company's Canadian operations are currently not material
to its results of operations or financial position.
- --------------------------------------------------------------------------------
NOTE 8.
SUBSEQUENT EVENTS
On August 8, 1996, the Company announced the formation of a
joint venture with Wyle Electronics ("Wyle"), another
distributor of semiconductors and computer products. The
venture, known as Accord Contract Services LLC ("Accord"), is
50% owned by each of the Company and Wyle (the "members").
Accord will provide value added services to each of its members,
including component kitting, turnkey manufacturing solutions,
and auto-replenishment systems. In connection with the
establishment of Accord, the Company granted Wyle warrants to
acquire 1,299,841 shares of its common stock (representing 7.5%
of its outstanding shares at July 31, 1996) at an exercise price
of $27.85 per share. Wyle, in turn, granted the Company warrants
to acquire 1,138,383 shares of its common stock (representing 9%
of Wyle's outstanding shares at July 28, 1996) at an exercise
price of $31.80 per share. Each of the warrants has a five year
term and is exercisable only upon the occurrence of certain
events relating to changes in the ownership or management of the
party granting the warrant and the termination of the venture.
The Companies have also entered into related standstill and
registration rights agreements. The venture is subject to
termination under various circumstances, including the election
of either member. Upon a termination, the warrants of one or
both members may remain outstanding for a period of up to one
year following the date of termination. In addition, the members
have agreed to develop a definitive formula for establishing the
value of Accord for the purpose of ensuring that either member
is fairly compensated upon a change in control of the other
member and the venture is terminated.
- --------------------------------------------------------------------------------
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
NONE
--------
23
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Marshall Industries
May 31, 1996
- --------------------------------------------------------------------------------
PART III
Marshall will file with the Securities and Exchange Commission
a definitive Proxy Statement pursuant to Regulation 14A
involving the election of directors. The Proxy Statement for the
Annual Meeting of Shareholders to be held on October 22, 1996 is
incorporated herein by this reference.
- --------------------------------------------------------------------------------
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(A) 1. FINANCIAL STATEMENTS -- The following financial
statements of Marshall Industries are set forth in Item 8 of
this Annual Report on Form 10-K:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Page
- ------------------------------------------------------------------------------------
<S> <C>
Report of Independent Public Accountants 12
Financial Statements:
Balance Sheets -- May 31, 1995 and 1996 13
Statements for the years ended May 31, 1994, 1995 and 1996 --
Income 14
Shareholders' Investment 15
Cash Flows 16
Notes to Financial Statements 17
</TABLE>
(A) 2. FINANCIAL STATEMENT SCHEDULES -- All schedules are
omitted since they are not applicable, not required, or the
required information is included in the financial statements or
notes thereto.
(A) 3. EXHIBITS -- The following exhibits are attached to this
Annual Report on Form 10-K:
<TABLE>
<S> <C>
Exhibit 3.1: Articles of Incorporation, as amended.
Exhibit 3.2: Amended and Restated By-Laws. (Incorporated herein by reference
to Exhibit (ii) to the Company's Quarterly Report on Form 10-Q
for the quarter ended August 31, 1987.)
Exhibit 3.3: Certificate of Amendment to By-Laws of Marshall Industries.
(Incorporated herein by reference to Exhibit C to the Company's
Proxy Statement for the annual meeting of shareholders held on
October 11, 1988.)
Exhibit 10.1: Credit Agreement dated March 1, 1993 between Marshall
Industries and Bank of America National Trust and Savings
Association. (Incorporated by reference to Exhibit (ii) to the
Company's Quarterly Report on Form 10-Q for the quarter ended
February 28, 1993.)
Exhibit 10.2: First Amendment to Credit Agreement dated May 3, 1993 between
Marshall Industries and Bank of America National Trust and
Savings Association. (Incorporated by reference to Exhibit 4.3
to the Company's Annual Report on Form 10-K for the fiscal year
ended May 31, 1993.)
</TABLE>
- ---------
24
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Exhibit 10.3: Second Amendment to Credit Agreement dated March 25, 1994
between Marshall Industries and Bank of America National Trust
and Savings Association.
Exhibit 10.4: Third Amendment to Credit Agreement dated June 1, 1995 between
Marshall Industries and Bank of America National Trust and
Savings Association. (Incorporated by reference to Exhibit (ii)
to the Company's Quarterly Report on Form 10-Q for the quarter
ended August 31, 1995.)
Exhibit 10.5: Fourth Amendment to Credit Agreement dated August 12, 1996
between Marshall Industries and Bank of America National Trust
and Savings Association.
Exhibit 10.6: Term Loan Agreement dated August 26, 1994 between Marshall
Industries and First Union National Bank of North Carolina.
Exhibit 10.7: Revolving Credit Loan Agreement dated October 2, 1995 between
Marshall Industries and First Union National Bank of North
Carolina. (Incorporated by reference to Exhibit (i) to the
Company's Quarterly Report on Form 10-Q for the quarter ended
August 31, 1995.)
Exhibit 10.8*: Marshall Industries 1984 Stock Option Plan. (Incorporated
herein by reference to Exhibit A to the Company's Final Proxy
Statement dated September 17, 1984.)
Exhibit 10.9*: Marshall Industries 1992 Nonqualified Stock Option Plan.
(Incorporated herein by reference to Exhibit A to the Company's
Final Proxy Statement dated August 31, 1992.)
Exhibit 10.10*: Change in Control Agreement dated February 6, 1996 between
Marshall Industries and Gordon S. Marshall. (Incorporated by
reference to Exhibit 99.1 to the Company's Quarterly Report on
Form 10-Q for the quarter ended February 29, 1996.)
Exhibit 10.11*: Change in Control Agreement dated February 7, 1996 between
Marshall Industries and Robert Rodin. (Incorporated by
reference to Exhibit 99.2 to the Company's Quarterly Report on
Form 10-Q for the quarter ended February 29, 1996.)
Exhibit 23: Consent of Independent Public Accountants.
Exhibit 27: Financial Data Schedule.
</TABLE>
(B) REPORTS ON FORM 8-K -- Marshall has not filed any reports
on Form 8-K during the quarter ended May 31, 1996
* Management contract, compensatory plan or arrangement.
--------
25
<PAGE>
- --------------------------------------------------------------------------------
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934, Marshall has duly caused this
report to be signed on its behalf by the undersigned, thereunto
duly authorized.
MARSHALL INDUSTRIES
<TABLE>
<S> <C>
By: /s/ HENRY W. CHIN August 28, 1996
--------------------------------------------
Henry W. Chin
VICE PRESIDENT, FINANCE, CHIEF FINANCIAL
OFFICER AND SECRETARY
</TABLE>
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>
<S> <C>
/s/ GORDON S. MARSHALL August 28, 1996
- ---------------------------------------------
Gordon S. Marshall
CHAIRMAN OF THE BOARD AND DIRECTOR
/s/ ROBERT RODIN August 28, 1996
- ---------------------------------------------
Robert Rodin
PRESIDENT, CHIEF EXECUTIVE OFFICER AND
DIRECTOR
(PRINCIPAL EXECUTIVE OFFICER)
/s/ HENRY W. CHIN August 28, 1996
- ---------------------------------------------
Henry W. Chin
VICE PRESIDENT, FINANCE, CHIEF FINANCIAL
OFFICER AND SECRETARY
(PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER)
/s/ RICHARD D. BENTLEY August 28, 1996
- ---------------------------------------------
Richard D. Bentley
DIRECTOR
/s/ RICHARD C. COLYEAR August 28, 1996
- ---------------------------------------------
Richard C. Colyear
DIRECTOR
- ---------------------------------------------
Jean Fribourg
DIRECTOR
/s/ LATHROP HOFFMAN August 28, 1996
- ---------------------------------------------
Lathrop Hoffman
DIRECTOR
- ---------------------------------------------
Jose Menendez
DIRECTOR
/s/ RAYMOND G. RINEHART August 28, 1996
- ---------------------------------------------
Raymond G. Rinehart
DIRECTOR
/s/ HOWARD C. WHITE August 28, 1996
- ---------------------------------------------
Howard C. White
DIRECTOR
</TABLE>
- ---------
26
<PAGE>
- --------------------------------------------------------------------------------
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
- ---------
<C> <S> <C>
3.1 Articles of Incorporation, as amended
10.3 Second Amendment to Credit Agreement dated March 25, 1994
10.5 Fourth Amendment to Credit Agreement dated August 12, 1996
10.6 Term Loan Agreement dated August 26, 1994
23 Consent of Independent Public Accountants
27 Financial Data Schedule
</TABLE>
--------
27
<PAGE>
RESTATED
ARTICLES OF INCORPORATION
OF
MARSHALL INDUSTRIES
a California Corporation
GORDON S. MARSHALL AND THOMAS B. WHITTEN certify that:
1. They are the duly elected and acting president and secretary,
respectively, of MARSHALL INDUSTRIES, a California corporation.
2. The articles of incorporation of said corporation, as amended to the
date of filing of this certificate, are restated to read as follows:
"FIRST: The name of the corporation is MARSHALL INDUSTRIES.
"SECOND: The primary business in which the corporation intends
initially to engage is:
(a) To manufacture, fabricate, produce, purchase, sell, lease,
rent, import, export and otherwise deal in and with electronic
equipment and devices of all types and varieties, and to invent,
develop and conduct research with regard to any of the same; and to
render field engineering services and to act as manufacturers'
representative in the field of electronic equipment, instruments,
components and devices of all kinds.
Other purposes for which this corporation is formed are as follows:
<PAGE>
5469000001
404-174-881011
(b) To acquire, hold, use, sell, assign, transfer, exchange,
lease, or otherwise dispose of, as principal or agent for others, to
manufacture, fabricate, assemble, trade, deal in or deal with wares,
goods, merchandise and supplies and all other personal property of
every class and description, including but not limited to electronic
components and to perform as principal or as agent for others any and
all services, including but not limited to field engineering services
in connection therewith.
(c) To purchase, acquire, own, hold, use, lease (either as
lessor or lessee), grant, sell, exchange, subdivide, mortgage, convey
in trust, manage, improve, construct, operate, and generally deal in
any and all real estate, improved or unimproved, stores, office
buildings, dwelling houses, apartment houses, hotels, manufacturing
plants and other buildings, and any and all other property of every
kind or description, real, personal, mixed, and wheresoever situated,
either in California, other states of the Unites States, the District
of Columbia, territories and colonies of the United States, or foreign
countries.
(d) To act as agent, broker, or attorney in fact, for any other
person, corporation or association; to negotiate sales, leases,
mortgages, deeds of trust, and other encumbrances of properties of
other persons, corporations and associations, real, personal, and
mixed, wheresoever situated, and generally to maintain, conduct, and
carry on business of a real estate loan broker.
(e) To acquire, by purchase, or otherwise, the good will,
business, property rights, franchises, and assets of every kind, with
or without undertaking, either wholly or in part, the liabilities of
any person, firm, association, or corporation; and to acquire any
property or business as a going concern or otherwise (i) by purchase
of the assets thereof wholly or in part, (ii) by acquisition of the
shares or any part thereof, or (iii) in any other manner, and to pay
for the same in cash or in shares or bonds or other evidences of
indebtedness of this corporation, or otherwise; to hold, maintain, and
operate, or in any manner dispose of, the whole or any part of the
good will, business, rights, and property so acquired, and to conduct
in any lawful manner the whole or any part of any business so
acquired; and to exercise all the powers necessary or convenient in
and about the management of such business.
2.
<PAGE>
5469000001
404-174-881011
(f) To take, purchase and otherwise acquire, own, hold, use,
sell, assign, transfer, exchange, lease, mortgage, convey in trust,
pledge, hypothecate, grant licenses in respect of and otherwise
dispose of letters patent of the United States or any foreign country,
patent rights, licenses, and privileges, inventions, improvements, and
processes, copyrights, trademarks, and trade names, and governmental,
state, territorial, county, and municipal grants and concessions of
every character which this corporation may deem advantageous in the
prosecution of its business or in the maintenance, operation,
development or extension of its properties.
(g) To enter into, make, perform, and carry out contracts of
every kind for any lawful purpose without limit as to amount, with any
person, firm, association, or corporation, municipality, county,
parish, state, territory, government or other municipal or
governmental subdivision.
(h) To become a partner (either general or limited or both) and
to enter into agreements of partnership, with one or more other
persons or corporations, for the purpose of carrying on any business
whatsoever which this corporation may deem proper or convenient in
connection with any of the purposes herein set forth or otherwise, or
which may be calculated, directly or indirectly, to promote the
interests of this corporation or to enhance the value of its property
or business.
(i) From time to time to apply for, purchase, acquire by
assignment, transfer or otherwise exercise, carry out and enjoy any
benefit, right, privilege, prerogative or power conferred by, acquired
under, or granted by any statute, ordinance, order, license, power,
authority, franchise, commission, right or privilege which any
government or authority or governmental agency or corporation or other
public body may be empowered to enact, make, or grant; to pay for, aid
in, and contribute toward carrying the same into effect and to
appropriate any of this corporation's shares, bonds, and/or assets to
defray the costs, charges, and expenses thereof.
(j) to subscribe or cause to be subscribed for, and to take,
purchase, and otherwise acquire, own, hold, use, sell, assign,
transfer, exchange, distribute, and otherwise dispose of, the whole or
any part of the shares of the capital stock, bonds, coupons,
mortgages, deeds of trust, debentures,
3.
<PAGE>
5469000001
404-174-881011
securities, obligations, evidences of indebtedness, notes, good will,
rights, assets, and property of any and every kind, or any part
thereof, of any other corporation or corporations, association or
associations, firm or firms, or person or persons, together with
shares, rights, units or interest in, or in respect of, any trust
estate, now or hereafter existing, and whether created by the laws of
the State of California or of any other state, territory or country;
and to operate, manage and control such properties, or any of them,
either in the name of such other corporation or corporations or in the
name of this corporation, and while the owners of any of said shares
of capital stock, to exercise all the rights, powers, and privileges
of ownership of every kind and description, including the right to
vote thereon, with power to designate some person or persons for that
purpose from time to time, and to the same extent as natural persons
might or could do.
(k) To promote or to aid in any manner, financially or
otherwise, any person, firm, corporation or association of which any
shares of stock, bonds, notes, debentures or other securities or
evidence of indebtedness are held directly or indirectly by this
corporation; and for this purpose to guarantee the contracts,
dividends, shares, bonds, debentures, notes and other obligations of
such other persons, firms, corporations or associations; and to do any
other acts or things designed to protect, preserve, improve or enhance
the value of such shares, bonds, notes, debentures or other securities
or evidence of indebtedness.
(l) To borrow and lend money, but nothing herein contained shall
be construed as authorizing the business of banking, or as including
the business purposes of a commercial bank, savings bank or trust
company.
(m) To issue bonds, notes, debentures, or other obligations of
this corporation from time to time for any of the objects or purposes
of this corporation, and to secure the same by mortgage, deed of
trust, pledge, or otherwise, or to issue the same unsecured; to
purchase or otherwise acquire its own bonds, debentures or other
evidences of its indebtedness or obligations; to purchase, hold, sell,
and transfer the shares of its own capital stock to the extent and in
the
4.
<PAGE>
5469000001
404-174-881011
manner provided by the laws of the State of California as the same are
now in force or may be hereafter amended.
(n) To purchase, acquire, take, hold, own, use and enjoy, and to
sell, lease, transfer, pledge, mortgage, convey, grant, assign, or
otherwise dispose of, and generally to invest, trade, deal in and with
oil royalties, mineral rights of all kinds, oil, gas, and mineral
leases, and all rights and interests therein, and in general products
of the earth and deposits, both subsoil and surface, of every nature
and description.
(o) To carry on any business whatsoever, either as principal or
as agent or both or as a partnership, which this corporation may deem
proper or convenient in connection with any of the foregoing purposes
or otherwise, or which may be calculated directly or indirectly to
promote the interests of this corporation or to enhance the value of
its property or business; to conduct its business in this state, in
other states, in the District of Columbia, in the territories and
colonies of the United States, and in foreign countries.
(p) To have and to exercise all the powers conferred by the laws
of California upon corporations formed under the laws pursuant to and
under which this corporation is formed, as such laws are now in effect
or may at any time hereafter be amended.
The foregoing statement of purposes shall be construed as a statement
of both purposes and powers, and the purposes and powers stated in each
clause shall, except where otherwise expressed, be in nowise limited or
restricted by reference to or inference from the terms or provisions of any
other clause, but shall be regarded as independent purposes and powers.
"THIRD: The principal office for the transaction of the business of
this corporation is to be located in the County of Los Angeles, State of
California.
5.
<PAGE>
5469000001
404-174-881011
"FOURTH: This corporation is authorized to issue two classes of
shares which shall be designated "Common Stock" and "Preferred Stock". The
total number of said shares shall be twenty million two hundred thousand
(20,200,000) shares; the aggregate par value of all shares that are to have
par value shall be Twenty Million Dollars ($20,000,000); the total number
of Common shares shall be twenty million (20,000,000), and the par value of
each Common share shall be One Dollar ($1.00); the total number of
Preferred shares shall be two hundred thousand (200,000); all of said
Preferred shares shall be without par value.
The shares of Preferred Stock may be issued from time to time in one
or more series. The Board of Directors hereby is authorized to fix or
alter the dividend rights, dividend rate, conversion rights, voting rights,
the rights and terms of redemption (including sinking fund provision),
redemption price or prices, or the liquidation preferences of any wholly
unissued series of Preferred Stock, or the number of shares constituting
any unissued series of Preferred Stock and the designation of such series,
or all or any of them; or to increase or to decrease (but not below the
number of shares of such series then outstanding) the number of shares
constituting any outstanding series the number of shares of which was fixed
by the Directors. In case the number of shares of any series shall be so
decreased, the shares constituting such decrease shall resume the status
they had prior to the adoption of the resolution originally fixing the
number of shares of such series.
"FIFTH: The number of directors of this corporation shall be not
less than five (5) nor more than eight (8), the exact number of directors
to be fixed from time to time by a by-law or amendment thereof duly
6.
<PAGE>
5469000001
404-174-881011
adopted by the shareholders or by the Board of Directors of this
corporation, within the limits specified in these Articles of
Incorporation."
3. This restatement of articles of incorporation does not itself amend
the articles of incorporation of said corporation in any respect and has been
duly approved by the Board of Directors.
We further declare under penalty of perjury under the laws of the State of
California that the matters set forth herein are true and correct of our own
knowledge.
Dated: October 17, 1988 /s/ Gordon S. Marshall
-----------------------------------------
GORDON S. MARSHALL
President
/s/ Thomas B. Whitten
-----------------------------------------
THOMAS B. WHITTEN
Secretary
7.
<PAGE>
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
Gordon S. Marshall and Thomas B. Whitten certify that:
1. They are the president and secretary, respectively, of Marshall
Industries, a California corporation.
2. The Articles of Incorporation of this corporation are amended to
include an ARTICLE SIXTH that reads as follows:
"SIXTH:
SECTION 1. The liability of the directors of the corporation for
monetary damages shall be eliminated to the fullest extent permissible
under California law.
SECTION 2. This corporation is authorized to provide
indemnification of agents (as defined in Section 317 of the
Corporations Code) for breach of duty to the corporation and its
shareholders through bylaw provisions or through agreements with the
agents, or both, in excess of the indemnification otherwise permitted
by Section 317 of the Corporations Code, subject only to the
applicable limits on such excess indemnification set forth in Section
204 of the Corporations Code.
SECTION 3. This corporation is authorized to purchase and maintain
insurance on behalf of its agents against any liability asserted
against or incurred by the agent in such capacity or arising out of
the agent's status as such from a company, the shares of which are
owned in whole or in part by this corporation, provided that any
policy issued by such company is limited to the extent required by
applicable law.
SECTION 4. Any repeal or modification of the foregoing provisions
of this ARTICLE SIXTH by the shareholders of this corporation shall
not adversely affect any right or protection of an agent of this
corporation existing at the time of that repeal or modification."
1. The foregoing Amendment of Articles of Incorporation was duly
approved by the Board of Directors at its meeting held on August 23, 1988, at
which a quorum was present and acting throughout.
<PAGE>
2. The foregoing Amendment of Articles of Incorporation has been duly
approved by the required vote of shareholders in accordance with Section 902 of
the California General Corporation Law, at a meeting duly held on October 11,
1988. The corporation has no shares of preferred stock outstanding. The total
number of shares of Common Stock outstanding at the record date for determining
shareholders entitled to vote was 9,120,182. The number of shares of Common
Stock voting in favor of the amendment equalled or exceeded the vote required.
We further declare under penalty of perjury under the laws of the State of
California that the matters set forth in this Certificate are true of our own
knowledge.
Executed at El Monte, California on October 17, 1988.
/s/ Gordon S. Marshall
-----------------------------------
Gordon S. Marshall, President
/s/ Thomas B. Whitten
-----------------------------------
Thomas B. Whitten, Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
Robert Rodin and Henry W. Chin certify that:
1. They are the President and Secretary, respectively, of Marshall Industries,
a California corporation.
2. Article FOURTH of the articles of incorporation of this corporation is
amended to read as follows:
"FOURTH: This corporation is authorized to issue two classes of
shares which shall be designated 'Common Stock' and 'Preferred Stock'.
The total number of said shares shall be forty million two hundred
thousand (40,200,000) shares; the aggregate par value of all shares
that are to have par value shall be Forty Million Dollars
($40,000,000); the total number of Common shares shall be forty
million (40,000,000), and the par value of each Common share shall be
One Dollar ($1.00); the total number of Preferred shares shall be two
hundred thousand (200,000); all of said Preferred shares shall be
without par value.
The shares of Preferred Stock may be issued from time to time in
one or more series. The Board of Directors hereby is authorized to
fix or alter the dividend rights, dividend rate, conversion rights,
voting rights, the rights and terms of redemption (including sinking
fund provision), redemption price or prices, or the liquidation
preferences of any wholly unissued series of Preferred Stock, or the
number of shares constituting any unissued series of Preferred Stock
and the designation of such series, or all or any of them; or to
increase or to decrease (but not below the number of shares of such
series then outstanding) the number of shares constituting any
outstanding series the number of shares of which was fixed by the
Directors. In case the number of shares of
<PAGE>
any series shall be so decreased, the shares constituting such
decrease shall resume the status they had prior to the adoption of the
resolution originally fixing the number of shares of such series.
Upon the amendment of this Article Fourth to read as hereinabove
set forth, each share of Common Stock issued and outstanding at the
close of business on February 14, 1994, is divided into two shares of
Common Stock."
3. The foregoing Amendment of Articles of Incorporation has been duly approved
by the Board of Directors.
4. The foregoing Amendment to the Articles of Incorporation was one which may
be adopted with approval by the Board of Directors alone, pursuant to
Section 902(c) of the California General Corporation Law, because one class
of shares of the Corporation is outstanding.
/s/ Robert Rodin
----------------------------------------
Robert Rodin, President
/s/ Henry W. Chin
----------------------------------------
Henry W. Chin, Secretary
2
<PAGE>
The undersigned declare under penalty of perjury that the matters set forth
in the foregoing certificate are true of their own knowledge. Executed at El
Monte, California on February 1, 1994.
/s/ Robert Rodin
----------------------------------------
Robert Rodin, President
/s/ Henry W. Chin
----------------------------------------
Henry W. Chin, Secretary
<PAGE>
CERTIFICATE OF AMENDMENT OF
ARTICLES OF INCORPORATION
Robert Rodin and Henry W. Chin certify that:
1. They are the President and Secretary, respectively, of Marshall
Industries, a California corporation.
2. ARTICLE FIFTH of the Article of Incorporation of this corporation is
amended to read as follows:
"FIFTH: The number of directors of this corporation shall be not
less than seven (7) nor more than thirteen (13), the exact number of
directors to be fixed from time to time by a by-law or amendment
thereof duly adopted by the shareholders or by the Board of Directors
of this corporation, within the limits specified in these Articles of
Incorporation."
3. The foregoing Amendment of Articles of Incorporation was duly approved
by the Board of Directors at its meeting held on October 24, 1994, at which a
quorum was present and acting throughout.
4. The foregoing Amendment of Articles of Incorporation has been duly
approved by the required vote of shareholders in accordance with Section 902 of
the California General Corporation Law, at a meeting duly held on October 24,
1994. The corporation has no shares of preferred stock outstanding. The total
number of shares of Common Stock outstanding at the recored date for determining
shareholders entitled to vote was 17,232,864. The number of shares of Common
Stock voting in favor of the amendment equalled or exceeded the vote required.
The undersigned declare under penalty of perjury under the laws of the
State of California that the matters set forth in the foregoing Certificate are
true of our own knowledge.
Date: October 24, 1994
/s/ Robert Rodin
----------------------------------------
Robert Rodin, President
/s/ Henry W. Chin
----------------------------------------
Henry W. Chin, Secretary
<PAGE>
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT (this "AMENDMENT"), dated as of
March 25, 1994, is entered into by and between MARSHALL INDUSTRIES, a California
corporation (the "COMPANY"), and BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION (the "BANK").
RECITALS
A. The Bank and the Company are parties to a Credit Agreement dated as of
March 1, 1993, which was amended by a First Amendment to Credit Agreement dated
as of May 3, 1993 (as amended, the "CREDIT AGREEMENT"), pursuant to which the
Bank has extended certain credit facilities to the Company.
B. The Company desires to invest 151,000,000 French Francs (approximately
$27,000,000 U.S.) in Eurotronics, a holding company that owns Sonepar
Electronique International's various electronics distributor companies in
Europe.
C. The Company has requested that the Bank agree to certain amendments of
the Credit Agreement to permit the foregoing. The Bank is willing to amend the
Credit Agreement, subject to the terms and conditions of this Amendment.
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties hereto hereby agree as follows:
1. DEFINED TERMS. Unless otherwise defined herein, capitalized terms used
herein shall have the meanings, if any, assigned to them in the Credit
Agreement.
2. AMENDMENT TO CREDIT AGREEMENT.
(a) Subsection 7.03(c) of the Credit Agreement is hereby amended by
deleting it in its entirety and replacing it in full as follows:
"(c) The Company may merge with another entity, or enter into joint
ventures, or acquire the assets or business of any Person, or invest in
Affiliates, but only to the extent that the aggregate consideration paid in
cash or promissory notes in connection with all such mergers, joint
ventures, acquisitions, or investments in Affiliates does not exceed (i)
$5,000,000, during the period from the Effective Date through the first
anniversary thereof, and (ii) ten percent (10%) of the Tangible Net Worth
as of the end of the immediately preceding fiscal year, during each one
year period after the first anniversary of the Effective Date; PROVIDED,
HOWEVER, that the Company may
<PAGE>
invest 151,000,000 French Francs (but in any event not more than $30,000,000
U.S.) in Eurotronics pursuant to the letter of intent dated February 4, 1994
between Sonepar Electronique International and the Company, a true and
correct copy of which has been provided to the Bank."
(b) Section 7.04 of the Credit Agreement is hereby amended by deleting the
amount "$55,000,000" and inserting in lieu thereof the amount "$80,000,000".
3. REPRESENTATIONS AND WARRANTIES. The Company hereby represents and
warrants to the Bank as follows:
(a) No Default or Event of Default has occurred and is continuing.
(b) The execution, delivery and performance by the Company of this
Amendment have been duly authorized by all necessary corporate and other
action and do not and will not require any registration with, consent or
approval of, notice to or action by, any person (including any Governmental
Authority) in order to be effective and enforceable. The Credit Agreement
as amended by this Amendment constitutes the legal, valid, and binding
obligations of the Company, enforceable against it in accordance with its
respective terms, without defense, counterclaim or offset.
(c) All representations and warranties of the Company contained in
the Credit Agreement are true and correct.
(d) The Company is entering into this Amendment on the basis of its
own investigation and for its own reasons, without reliance upon the Bank
or any other person.
4. EFFECTIVE DATE. This Amendment will become effective as of March
25, 1994 (the "EFFECTIVE DATE"), PROVIDED THAT each of the following conditions
precedent has been satisfied:
(a) The Bank has received from the Company a duly executed original
of this Amendment.
(b) The Bank has received from the Company a copy of a resolution
passed by the board of directors of the Company, certified by the Secretary
or an Assistant Secretary of the Company as being in full force and effect
on the date hereof, authorizing the execution, delivery and performance of
this Amendment.
<PAGE>
5. MISCELLANEOUS.
(a) Except as herein expressly amended, all terms, covenants and
provisions of the Credit Agreement are and shall remain in full force and effect
and all references therein to such Credit Agreement shall henceforth refer to
the Credit Agreement as amended by this Amendment. This Amendment shall be
deemed incorporated into, and a part of, the Credit Agreement.
(b) This Amendment shall be binding upon and inure to the benefit of
the parties hereto and thereto and their respective successors and assigns. No
third party beneficiaries are intended in connection with this Amendment.
(c) This Amendment shall be governed by and construed in accordance
with the law of the State of California.
(d) This Amendment may be executed in any number of counterparts,
each of which shall be deemed an original, but all such counterparts together
shall constitute but one and the same instrument.
(e) This Amendment, together with the Credit Agreement, contains the
entire and exclusive agreement of the parties hereto with reference to the
matters discussed herein and therein. This Amendment supersedes all prior
drafts and communications with respect thereto. This Amendment may not be
amended except in writing executed by both of the parties hereto.
(f) If any term or provision of this Amendment shall be deemed
prohibited by or invalid under any applicable law, such provision shall be
invalidated without affecting the remaining provisions of this Amendment or the
Credit Agreement, respectively.
(g) The Company covenants to pay to or reimburse the Bank, upon
demand, for all costs and expenses (including allocated costs of in-house
counsel) incurred in connection with the development, preparation, negotiation,
execution and delivery of this Amendment, including without limitation
appraisal, audit, search and filing fees incurred in connection therewith.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Amendment as of the date first above written.
MARSHALL INDUSTRIES
By: /s/ Henry W. Chin
-------------------------------------
Title: Vice President, Finance
----------------------------------
By: /s/ Robert Rodin
-------------------------------------
Title: President
----------------------------------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: /s/ Mark W. Bigley
-------------------------------------
Mark W. Bigley
Vice President
<PAGE>
FOURTH AMENDMENT TO CREDIT AGREEMENT
THIS FOURTH AMENDMENT TO CREDIT AGREEMENT (the "AMENDMENT"), dated as of
August 12, 1996 is entered into by and between MARSHALL INDUSTRIES (the
"COMPANY") and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION (the
"BANK").
RECITALS
A. The Company and the Bank are parties to a Credit Agreement dated as of
March 1, 1993, as amended by that certain First Amendment to Credit Agreement
dated as of May 3, 1993, that certain Second Amendment to Credit Agreement dated
as of March 25, 1994, and that certain Third Amendment to Credit Agreement dated
as of June 1, 1995 (effective as of June 1, 1995) (as so amended, the "CREDIT
AGREEMENT"), pursuant to which the Bank has extended certain credit facilities
to the Company.
B. The Company has requested that the Bank agree to that certain
amendment of the Credit Agreement.
C. The Bank is willing to amend the Credit Agreement, subject to the terms
and conditions of this Amendment.
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties hereto hereby agree as follows:
1. DEFINED TERMS. Unless otherwise defined herein, capitalized terms
used herein shall have the meanings, if any, assigned to them in the Credit
Agreement.
2. AMENDMENT TO CREDIT AGREEMENT. Section 1.01 of the Credit Agreement
shall be amended at the defined term "Commitment" by amending and reinstating it
in its entirety as follows:
"'COMMITMENT' means Forty-Five Million Dollars ($45,000,000), as
such amount may be reduced from time to time pursuant to Section
2.07."
3. REPRESENTATIONS AND WARRANTIES. The Company hereby represents and
warrants to the Bank as follows:
(a) No Default or Event of Default has occurred and is continuing.
(b) The execution, delivery and performance by the Company of this
Amendment have been duly authorized by all necessary corporate and other action
and do not and will not require any registration with, consent or approval of,
notice to or action by, any Person (including any Governmental Authority) in
order to be effective and enforceable. The Credit Agreement
<PAGE>
as amended by this Amendment constitutes the legal, valid and binding
obligations of the Company, enforceable against it in accordance with its
respective terms, without defense, counterclaim or offset.
(c) All representations and warranties of the Company contained in
the Credit Agreement are true and correct.
(d) The Company is entering into this Amendment on the basis of its
own investigation and for its own reasons, without reliance upon the Bank of any
other Person.
4. EFFECTIVE DATE. This Amendment will become effective as of September
3, 1996 (the "EFFECTIVE DATE"), PROVIDED THAT each of the following conditions
precedent is satisfied:
(a) The Bank has received from the Company a duly executed original
(or, if elected by the Bank, an executed facsimile copy) of this Amendment.
(b) The Bank has received from the Company a copy of a resolution
passed by the board of directors of such corporation, certified by the Secretary
or an Assistant Secretary of such corporation as being in full force and effect
on the date hereof, authorizing the execution, delivery and performance of this
Amendment.
5. RESERVATION OF RIGHTS. The Company acknowledges and agrees that the
execution and delivery by the Bank of this Amendment shall not be deemed to
create a course of dealing or otherwise obligate the Bank to execute similar
amendments under the same or similar circumstances in the future.
6. MISCELLANEOUS.
(a) Except as herein expressly amended, all terms, covenants and
provisions of the Credit Agreement are and shall remain in full force and effect
and all references therein to such Credit Agreement shall henceforth refer to
the Credit Agreement as amended by this Amendment. This Amendment shall be
deemed incorporated into, and a part of, the Credit Agreement.
(b) This Amendment shall be binding upon and inure to the benefit of
the parties hereto and thereto and their respective successors and assigns. No
third party beneficiaries are intended in connection with this Amendment.
(c) This Amendment shall be governed by and construed in accordance
with the law of the State of California.
(d) This Amendment may be executed in any number of counterparts, each
of which shall be deemed an original, but all such counterparts together shall
constitute but one and the same instrument. Each of the parties hereto
understands and agrees that this document (and any other document required
herein) may
2
<PAGE>
be delivered by any party thereto either in the form of an executed original or
an executed original sent by facsimile transmission to be followed promptly by
mailing of a hard copy original, and that receipt by the Bank of a facsimile
transmitted document purportedly bearing the signature of the Company shall bind
the Company with the same force and effect as the delivery of a hard copy
original. Any failure by the Bank to receive the hard copy executed original of
such document shall not diminish the binding effect of receipt of the facsimile
transmitted executed original of such document which hard copy page was not
received by the Bank.
(e) This Amendment, together with the Credit Agreement, contains the
entire and exclusive agreement of the parties hereto with reference to the
matters discussed herein and therein. This Amendment supersedes all prior
drafts and communications with respect thereto. This Amendment may not be
amended except in accordance with the provisions of Section 9.03 of the Credit
Agreement.
(f) If any term or provision of this Amendment shall be deemed
prohibited by or invalid under any applicable law, such provision shall be
invalidated without affecting the remaining provisions of this Amendment or
the Credit Agreement, respectively.
(g) Company covenants to pay to or reimburse the Bank, upon demand,
for all costs and expenses (including allocated costs of in-house counsel)
incurred in connection with the development, preparation, negotiation, execution
and delivery of this Amendment.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Amendment as of the date first above written.
MARSHALL INDUSTRIES
By: /s/ Henry W. Chin
------------------------------------
Title: Vice President/CFO
----------------------------------
By: /s/ Robert Rodin
----------------------------------
Title: President and CEO
----------------------------------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By:
-----------------------------------
Title: Vice President
4
<PAGE>
- -------------------------------------------------------------------------------
TERM LOAN AGREEMENT
DATED AS OF AUGUST 26, 1994
BETWEEN
MARSHALL INDUSTRIES
AND
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2. GENERAL. . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 1.3. OTHER DEFINITIONS AND PROVISIONS . . . . . . . . . . 11
ARTICLE II LOAN FACILITY . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 2.1. TERM LOAN. . . . . . . . . . . . . . . . . . . . . . 12
SECTION 2.2. REPAYMENT OF LOAN. . . . . . . . . . . . . . . . . . 12
SECTION 2.3. NOTE . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 2.4. PROCEDURE FOR ADVANCE OF LOAN. . . . . . . . . . . . 12
SECTION 2.5. USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . 12
SECTION 2.6. INTEREST . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 2.7. FACILITY FEE . . . . . . . . . . . . . . . . . . . . 14
SECTION 2.8. PREPAYMENTS. . . . . . . . . . . . . . . . . . . . . 14
SECTION 2.9. MANNER OF PAYMENT. . . . . . . . . . . . . . . . . . 14
SECTION 2.10. CREDITING OF PAYMENTS AND PROCEEDS . . . . . . . . . 14
SECTION 2.11. CHANGED CIRCUMSTANCES. . . . . . . . . . . . . . . . 15
SECTION 2.12. INDEMNITY. . . . . . . . . . . . . . . . . . . . . . 16
SECTION 2.13. CAPITAL REQUIREMENTS . . . . . . . . . . . . . . . . 17
SECTION 2.14. TAXES. . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE III CLOSING; CONDITIONS OF CLOSING AND BORROWING. . . . . . . . 18
SECTION 3.1. CLOSING. . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 3.2. CONDITIONS OF LOAN . . . . . . . . . . . . . . . . . 18
SECTION 3.3. WAIVER OF CONDITIONS PRECEDENT.. . . . . . . . . . . 21
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BORROWER. . . . . . . . . 21
SECTION 4.1. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . 21
SECTION 4.2. SURVIVAL OF REPRESENTATIONS AND
WARRANTIES, ETC.. . . . . . . . . . . . . . . . . . . . . 27
ARTICLE V FINANCIAL INFORMATION AND NOTICES . . . . . . . . . . . . . 27
SECTION 5.1. FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . 27
SECTION 5.2. OFFICER'S CERTIFICATE. . . . . . . . . . . . . . . . 28
SECTION 5.3. NOTICE OF PERMITTED SEI TRANSACTION. . . . . . . . . 28
SECTION 5.4. OTHER REPORTS. . . . . . . . . . . . . . . . . . . . 28
SECTION 5.5. NOTICE OF LITIGATION AND OTHER MATTERS . . . . . . . 29
SECTION 5.6. ACCURACY OF INFORMATION. . . . . . . . . . . . . . . 30
ii
<PAGE>
ARTICLE VI AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . 31
SECTION 6.1. PRESERVATION OF CORPORATE EXISTENCE AND
RELATED MATTERS. . . . . . . . . . . . . . . . . . . 31
SECTION 6.2. MAINTENANCE OF PROPERTY. . . . . . . . . . . . . . . 31
SECTION 6.3. INSURANCE. . . . . . . . . . . . . . . . . . . . . . 31
SECTION 6.4. ACCOUNTING METHODS AND FINANCIAL RECORDS;
VISITS . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 6.5. PAYMENT AND PERFORMANCE OF OBLIGATIONS.. . . . . . . 31
SECTION 6.6. COMPLIANCE WITH LAWS AND APPROVALS.. . . . . . . . . 32
SECTION 6.7. ENVIRONMENTAL MANAGEMENT.. . . . . . . . . . . . . . 32
SECTION 6.8. COMPLIANCE WITH ERISA. . . . . . . . . . . . . . . . 32
SECTION 6.9. COMPLIANCE WITH AGREEMENTS.. . . . . . . . . . . . . 32
SECTION 6.10. CONDUCT OF BUSINESS. . . . . . . . . . . . . . . . . 32
SECTION 6.11. FURTHER ASSURANCES.. . . . . . . . . . . . . . . . . 32
ARTICLE VII NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . 33
SECTION 7.1. FINANCIAL COVENANTS. . . . . . . . . . . . . . . . . 33
SECTION 7.2. LIMITATIONS ON DEBT. . . . . . . . . . . . . . . . . 33
SECTION 7.3. LIMITATIONS ON GUARANTEES. . . . . . . . . . . . . . 34
SECTION 7.4. LIMITATIONS ON LIENS . . . . . . . . . . . . . . . . 34
SECTION 7.5. LIMITATIONS ON LOANS, ADVANCES AND
INVESTMENTS. . . . . . . . . . . . . . . . . . . . . 34
SECTION 7.6. RESTRICTIONS ON MERGER, SALE OF
ASSETS, ETC. . . . . . . . . . . . . . . . . . . . . 35
SECTION 7.7. RESTRICTIONS ON DIVIDENDS AND
DISTRIBUTIONS. . . . . . . . . . . . . . . . . . . . 35
SECTION 7.8. TRANSACTIONS WITH AFFILIATES . . . . . . . . . . . . 35
SECTION 7.9. REGULATIONS G, T AND U . . . . . . . . . . . . . . . 36
SECTION 7.10. LEASE OBLIGATIONS. . . . . . . . . . . . . . . . . . 36
SECTION 7.11. INTENTIONALLY OMITTED . . . . . . . . . . . . . . . 36
SECTION 7.12. COMPLIANCE WITH ERISA. . . . . . . . . . . . . . . . 36
ARTICLE VIII DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 8.1. EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . 37
SECTION 8.2. REMEDIES . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 8.3. RIGHTS AND REMEDIES CUMULATIVE;
NON-WAIVER; ETC. . . . . . . . . . . . . . . . . . . 40
ARTICLE IX MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 9.1. NOTICES. . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 9.2. EXPENSES . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 9.3. STAMP AND OTHER TAXES. . . . . . . . . . . . . . . . 42
SECTION 9.4. SET-OFF. . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 9.5. GOVERNING LAW. . . . . . . . . . . . . . . . . . . . 42
SECTION 9.6. CONSENT TO JURISDICTION. . . . . . . . . . . . . . . 43
SECTION 9.7. WAIVER OF JURY TRIAL.. . . . . . . . . . . . . . . . 43
SECTION 9.8. REVERSAL OF PAYMENTS . . . . . . . . . . . . . . . . 43
iii
<PAGE>
SECTION 9.9. INJUNCTIVE RELIEF. . . . . . . . . . . . . . . . . . 43
SECTION 9.10. ACCOUNTING MATTERS . . . . . . . . . . . . . . . . . 43
SECTION 9.11. ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . 44
SECTION 9.12. AMENDMENTS, WAIVERS AND CONSENTS . . . . . . . . . . 44
SECTION 9.13. PERFORMANCE OF BORROWER'S DUTIES . . . . . . . . . . 44
SECTION 9.14. INDEMNIFICATION. . . . . . . . . . . . . . . . . . . 44
SECTION 9.15. ALL POWERS COUPLED WITH INTEREST . . . . . . . . . . 45
SECTION 9.16. SURVIVAL OF INDEMNITIES. . . . . . . . . . . . . . . 45
SECTION 9.17. TITLES AND CAPTIONS. . . . . . . . . . . . . . . . . 45
SECTION 9.18. SEVERABILITY OF PROVISIONS . . . . . . . . . . . . . 45
SECTION 9.19. COUNTERPARTS . . . . . . . . . . . . . . . . . . . . 45
SECTION 9.20. TERM OF AGREEMENT. . . . . . . . . . . . . . . . . . 45
SECTION 9.21. INCONSISTENCIES WITH OTHER DOCUMENTS.. . . . . . . . 45
LIST OF EXHIBITS
Exhibit A -- Form of Term Note
Exhibit B -- Form of Officer's Certificate
LIST OF SCHEDULES
Schedule 4.1(t) - List of Debt, Operating Leases and Guarantees
Schedule 4.1(v) - Litigation
iv
<PAGE>
TERM LOAN AGREEMENT
THIS TERM LOAN AGREEMENT dated as of the 26th of August, 1994 by and among
MARSHALL INDUSTRIES, a California corporation (the "Borrower") and FIRST UNION
NATIONAL BANK OF NORTH CAROLINA, a national banking association (the "Lender").
STATEMENT OF PURPOSE
The Borrower has requested and the Lender has agreed to extend a certain
term loan facility to the Borrower on the terms and conditions of this
Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the parties
hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. DEFINITIONS. The following terms when used in this Agreement
shall have the meanings assigned to them below:
"AFFILIATE" means, with respect to a Person, any other Person which
directly or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such Person. The term "control"
means (a) the power to vote twenty percent (20%) or more of the securities or
other equity interests of a Person having ordinary voting power, or (b) the
possession, directly or indirectly, of any other power to direct or cause the
direction of the management and policies of a Person, whether through ownership
of voting securities, by contract or otherwise.
"AGREEMENT" means this Term Loan Agreement, as amended or supplemented from
time to time.
"APPLICABLE LAW" means all applicable provisions of constitutions,
statutes, rules, regulations and orders of all Governmental Authorities and all
orders and decrees of all courts and arbitrators.
"APPLICABLE MARGIN" shall have the meaning assigned thereto in Section
2.6(a).
"BASE RATE" means, at any time, the higher of (a) the Prime Rate or (b) the
Federal Funds Rate as determined by the Lender PLUS 1/2 of 1%; each change in
the Base Rate shall take effect simultaneously with the corresponding change or
changes in the Prime Rate or the Federal Funds Rate.
<PAGE>
"BASE RATE LOAN" means any Loan bearing interest at a rate determined with
reference to the Base Rate as provided in Section 2.6 hereof.
"BORROWER" means Marshall Industries, a California corporation, and its
permitted successors and assigns.
"BUSINESS DAY" means (a) for all purposes other than as set forth in clause
(b) below, any day other than a Saturday, Sunday or legal holiday on which banks
in Charlotte, North Carolina are open for the conduct of their commercial
banking business, and (b) with respect to all notices and determinations in
connection with, and payments of principal and interest on, any LIBOR Rate Loan,
any day that is a Business Day described in clause (a) and that is also a day
for trading by and between banks in U.S. Dollar deposits in the London interbank
market.
"CAPITAL EXPENDITURES" means, for any period and with respect to any
Person, the aggregate of all expenditures by such Person and its Subsidiaries
for the acquisition or leasing of fixed or capital assets or additions to
equipment (including replacements, capitalized repairs and improvements during
such period) which should be capitalized under GAAP on a consolidated balance
sheet of such Person and its Subsidiaries. For the purpose of this definition,
the purchase price of equipment which is purchased simultaneously with the
trade-in of existing equipment owned by such Person or any of its Subsidiaries
or with insurance proceeds shall be included in Capital Expenditures only to the
extent of the gross amount of such purchase price less the credit granted by the
seller of such equipment for such equipment being traded in at such time, or the
amount of such proceeds, as the case may be.
"CAPITAL LEASE" means any lease of any property that would, in accordance
with GAAP, be required to be classified and accounted for as a capital lease on
a balance sheet of the Borrower.
"CAPITAL LEASE OBLIGATION" means, with respect to any Capital Lease, the
amount of the obligation of the Borrower thereunder that would, in accordance
with GAAP, appear on a balance sheet as a liability in respect of such Capital
Lease.
"CASH EQUIVALENTS" means
(a) securities issued or fully guaranteed or insured by the United States
Government or any agency thereof and backed by the full faith and credit of the
United States having maturities of not more than six (6) months from the date of
acquisition;
(b) certificates of deposit, time deposits, Eurodollar time deposits, or
bankers' acceptances having in each case a tenor of not more than six (6)
months, issued by the Lender, or by any U.S. commercial bank or any branch or
agency of a non-U.S. bank licensed to conduct business in the U.S. having
combined capital and surplus of not less than One Hundred Million dollars
($100,000,000) whose short term securities are rated at least A-1 by Standard &
Poor's Corporation or P-1 by Moody's Investors Service, Inc. and whose long-term
securities
2
<PAGE>
are rated at least "A" by Standard & Poor's Corporation or by Moody's
Investors Service, Inc. (such bank, an "ELIGIBLE BANK");
(c) commercial paper, of an issuer whose long-term securities are rated at
least "A" by Standard & Poor's Corporation or by Moody's Investors Service,
Inc., that is rated at least A-1 by Standard & Poor's Corporation or P-1 by
Moody's Investors Service, Inc. and having a tenor of not more than six (6)
months.
"CHANGE IN CONTROL" shall have the meaning assigned thereto in Section
8.1(i).
"CLOSING DATE" means the date of this Agreement or such later date on which
the Lender shall have determined that all conditions precedent set forth in
Article IV of this Agreement have been satisfied in full or waived.
"CODE" means the Internal Revenue Code of 1986, and the rules and
regulations thereunder, each as amended or supplemented from time to time.
"CONSOLIDATED" means, when used with reference to financial statements or
financial statement items of the Borrower and its Subsidiaries, such statements
or items on a consolidated basis in accordance with applicable principals of
consolidation under GAAP.
"CONTINGENT OBLIGATIONS" means, as to any Person, (a) any Guarantee of that
Person; and (b) any direct or indirect obligation or liability, contingent or
otherwise, of that Person, (i) in respect of any letter of credit or similar
instrument issued for the account of that Person or as to which that Person is
otherwise liable for reimbursement of drawings, (ii) to purchase any materials,
supplies or other property from, or to obtain the services of, another Person if
the relevant contract or other related document or obligation requires that
payment for such materials, supplies or other property, or for such services,
shall be made regardless of whether delivery of such materials, supplies or
other property is ever made or tendered, or such services are ever performed or
tendered, or (iii) in respect of any Interest Rate Contract that is not entered
into in connection with a bona fide hedging operation that provides offsetting
benefits to such Person. The amount of any Contingent Obligation shall, relating
to any Guarantee, be deemed equal to the maximum reasonably anticipated
liability in respect thereof, and shall, with respect to item (b)(iii) of this
definition, be marked to market on a current basis.
"CONTRACTUAL OBLIGATIONS" means, as to any Person, any provision of any
security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage, deed of trust or other instrument, document or agreement to
which such Person is a party or by which it or any of its property is bound.
"CURRENT ASSETS" means, with respect to the Borrower and its Subsidiaries
at a particular date, all amounts which would, in conformity with GAAP, be
included under current assets on a Consolidated balance sheet of the Borrower
and its Subsidiaries as at such date.
3
<PAGE>
"CURRENT LIABILITIES" means, with respect to the Borrower and its
Subsidiaries at a particular date, all amounts which would, in conformity with
GAAP, be included under current liabilities on a Consolidated balance sheet of
the Borrower and its Subsidiaries as at such date, but in any event including
the amount of (a) all Debt of any such Person payable on demand or, at the
option of the Person to whom such Debt is owed, not more than twelve months
after such date, (b) any payments in respect of any Debt of any such Person
(whether installment, serial maturity or sinking fund payments or otherwise)
required to be made not more than twelve months after such date, and (c) all
reserves in respect of liabilities or Debt payable on demand or, at the option
of the Person to whom such Debt is owed, not more than twelve months after such
date, the validity of which is contested at such date.
"DEBT" means all liabilities, obligations and indebtedness at any date of
the Borrower and its Subsidiaries of any and every kind and nature, whether now
or hereafter owing or arising and whether primary, secondary, direct,
contingent, fixed or otherwise and whether matured or unmatured, including
without limitation: (a) all obligations for borrowed money (including all notes
payable and drafts accepted representing extensions of credit) and all
obligations evidenced by bonds, debentures, notes or other similar instruments
on which interest charges are customarily paid; (b) all obligations, contingent
or otherwise, relative to the face amount of all letters of credit, whether or
not drawn, and banker's acceptances issued for the account of the Borrower and
its Subsidiaries; (c) all Capital Lease Obligations; (d) all obligations to pay
the deferred purchase price of property or services, and all indebtedness
secured by a Lien on property owned by the Borrower and its Subsidiaries whether
or not such indebtedness shall have been assumed by the Borrower and its
Subsidiaries or is limited in recourse; (e) all obligations arising under
consulting and non-compete agreements entered into by any Person with, or for
the benefit of, the Borrower and its Subsidiaries; (f) all liabilities,
obligations and indebtedness to trade creditors; (g) all Contingent Obligations
of the Borrower and its Subsidiaries; and (h) all net obligations under any
interest rate cap, collar, swap or other similar interest rate hedging
arrangements.
"DEFAULT" means any of the events specified in Section 8.1 which with the
passage of time, the giving of notice or any other condition, would constitute
an Event of Default.
"DOLLARS" and "$" means dollars in lawful currency of the United States of
America.
"EMPLOYEE BENEFIT PLAN" means any employee benefit plan within the meaning
of Section 3(3) of ERISA which (a) is maintained for employees of the Borrower
or any ERISA Affiliate or (b) has at any time within the preceding six years
been maintained for the employees of the Borrower or any current or former ERISA
Affiliate.
"ENVIRONMENTAL LAWS" means any and all federal, state and local laws,
statutes, ordinances, rules, regulations, permits, licenses, approvals,
interpretations and orders of courts or Governmental Authorities, relating to
the protection of human health or the environment, including, but not limited
to, requirements pertaining to the manufacture, processing, distribution, use,
treatment, storage, disposal, transportation, handling, reporting, licensing,
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permitting, investigation or remediation of Hazardous Materials. Environmental
Laws include, without limitation, the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C. Section 9601 et. seq.), the Hazardous
Material Transportation Act (49 U.S.C. Section 331 et. seq.), the Resource
Conservation and Recovery Act (42 U.S.C. Section 6901 et. seq.), the Federal
Water Pollution Control Act (33 U.S.C. Section 1251 et. seq.), the Clean Air Act
(42 U.S.C. Section 7401 et. seq.), the Toxic Substances Control Act (15 U.S.C.
Section 2601 et. seq.), the Safe Drinking Water Act (42 U.S.C. Section 300, et.
seq.), the Environmental Protection Agency's regulations relating to underground
storage tanks (40 C.F.R. Parts 280 and 281), and the Occupational Safety and
Health Act (29 U.S.C. Section 651 et. seq.), and the rules and regulations
thereunder, each as amended, modified or supplemented from time to time.
"ERISA" means the Employee Retirement Income Security Act of 1974, and the
rules and regulations thereunder, each as amended, modified or supplemented from
time to time.
"ERISA AFFILIATE" means any Person, who together with the Borrower is
treated as a single employer within the meaning of Section 414(b), (c), (m) or
(o) of the Code or Section 4001(b) of ERISA.
"EVENT OF DEFAULT" means any of the events specified in Section 8.1;
PROVIDED, that any requirement for passage of time, giving of notice or any
other condition has been satisfied.
"FACILITY AMOUNT" means Twenty-five Million Dollars ($25,000,000).
"FEDERAL FUNDS RATE" means, for any day, a fluctuating interest rate per
annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published at 11:00 a.m. (Charlotte time) for such day (or, if
such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by the Lender from three Federal funds brokers of
recognized standing selected by it.
"FISCAL YEAR" means the fiscal year of the Borrower ending on May 31.
"FRANCS" and "L" means francs in lawful currency of the Republic of France.
"FUNDED DEBT" means, at any date and without duplication, all Debt of the
Borrower and its Subsidiaries (including the current portion thereof) which
matures by its terms, or is renewable or extendable at the option of the
Borrower and its Subsidiaries to a date, more than one year after the date of
creation thereof and includes without limitation, the Debt outstanding under
this Agreement, any Subordinated Debt and all Capital Lease Obligations.
"GAAP" means generally accepted accounting principles, as recognized by the
American Institute of Certified Public Accountants and the Financial Accounting
Standards Board,
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consistently applied and maintained on a consistent basis for the Borrower
and its Subsidiaries throughout the period indicated and consistent with the
prior financial practice of the Borrower and its Subsidiaries.
"GOVERNMENTAL APPROVALS" means all authorizations, consents, approvals,
licenses and exemptions of, registrations and filings with, and reports to, all
Governmental Authorities.
"GOVERNMENTAL AUTHORITY" means any nation, province, state or other
political subdivision thereof, and any government or any Person exercising
executive, legislative, regulatory or administrative functions of or pertaining
to government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.
"GUARANTEE" means, without duplication, any obligation, contingent or
otherwise, of the Borrower or any of its Subsidiaries pursuant to which the
Borrower or any of its Subsidiaries has directly or indirectly guaranteed any
indebtedness, liability or other obligation of any other Person and, without
limiting the generality of the foregoing, any obligation, direct or indirect,
contingent or otherwise, of the Borrower or any of its Subsidiaries (a) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
indebtedness, liability or other obligation (whether arising by virtue of
partnership arrangements, by agreement to keep well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain financial statement
condition or otherwise) or (b) entered into for the purpose of assuring in any
other manner the obligee of such indebtedness, liability or other obligation of
the payment thereof or to protect such obligee against loss in respect thereof
(in whole or in part); PROVIDED, that the term Guarantee shall not include
endorsements for collection or deposit in the ordinary course of business.
"HAZARDOUS MATERIALS" means any substances or materials (a) which are or
become defined as hazardous wastes, hazardous substances, pollutants,
contaminants or toxic substances under any Environmental Law, (b) which are
toxic, explosive, corrosive, flammable, infectious, radioactive, mutagenic or
otherwise hazardous and are or become regulated by any Governmental Authority,
(c) the presence of which require investigation or remediation under any
Environmental Law or common law, (d) which are deemed to constitute a nuisance,
a trespass or pose a health or safety hazard to persons or neighboring
properties, (e) which are materials consisting of underground or aboveground
storage tanks, whether empty, filled or partially filled with any substance, or
(f) which contain, without limitation, asbestos, polychlorinated biphenyls, urea
formaldehyde foam insulation, petroleum hydrocarbons, petroleum derived
substances or waste, crude oil, nuclear fuel, natural gas or synthetic gas.
"INTEREST RATE CONTRACTS" means interest rate swap, cap and collar
agreements, interest rate insurance, and other agreements or arrangements
designed to provide protection against fluctuations in interest rates.
"INTEREST PERIOD" shall have the meaning assigned thereto in Section
2.7(b).
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"LENDER" means First Union National Bank of North Carolina, a national
banking association organized under the laws of the United States, its
successors and assigns.
"LIBOR RATE" means (a) LIBOR DIVIDED BY (b) one (1) MINUS the Reserve
Percentage. For purposes of this definition: "LIBOR" means that rate per annum
at which, in the opinion of the Lender, U.S. Dollars in the amount equal to the
applicable Principal Component are being offered to leading banks at
approximately 11:00 a.m. London time two Business Days prior to the commencement
of the applicable Interest Period for settlement in immediately available funds
by leading banks in the London interbank market for a period equal to the
applicable Interest Period; and "Reserve Percentage" means the daily arithmetic
reserve requirement imposed by the Board of Governors of the Federal Reserve
System (or any successor) under Regulation D on eurocurrency liabilities (as
defined in Regulation D) for the applicable Interest Period as of the first day
of such Interest Period, but subject only to any changes in such reserve
requirement becoming effective during the Interest Period. For purposes of
calculating the Reserve Percentage, the reserve requirement shall be as set
forth in Regulation D without benefit of credit for prorations, exemptions or
offsets under Regulation D, and further without regard to whether or not the
Lender elects to actually fund any Loan or portion thereof with eurocurrency
liabilities.
"LIBOR RATE LOAN" means any Loan bearing interest at a rate determined with
reference to the LIBOR Rate as provided in Section 2.6 hereof.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
For the purposes of this Agreement, a Person shall be deemed to own subject to a
Lien any asset which it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, Capital Lease or other
title retention agreement relating to such asset.
"LOAN" means the term loan made or to be made to the Borrower pursuant to
Section 2.1.
"LOAN DOCUMENTS" means, collectively, this Agreement, the Notes, and each
other document, instrument and agreement executed and delivered by the Borrower,
its Subsidiaries or their counsel in connection with this Agreement or otherwise
referred to herein or contemplated hereby, all as amended, modified or
supplemented from time to time.
"LOAN FACILITY" means the term loan facility established by Lender under
Article II hereof.
"MATERIAL ADVERSE EFFECT" means, with respect to the Borrower or any of
its Subsidiaries, a material adverse effect on the properties, business,
prospects, operations or condition (financial or otherwise) of such Persons
taken as a whole or the ability of any such Person to perform its obligations
under the Loan Documents or Material Contracts, in each case to which it is a
party.
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"MATERIAL CONTRACT" means (a) any contract or other agreement, written or
oral, of the Borrower or any of its Subsidiaries involving monetary liability of
or to any such Person in an amount in excess of $2,000,000 per annum, or (b) any
other contract or agreement, written or oral, of the Borrower or any of its
Subsidiaries the failure to comply with which could reasonably be expected to
have a Material Adverse Effect; PROVIDED that Material Contract shall not
include (i) any contract or agreement terminable by the Borrower or any of its
Subsidiaries in accordance with its terms upon notice of thirty (30) days or
less without liability for further payment other than a nominal penalty or (ii)
any purchase contract or purchase order entered into by the Borrower for the
purchase of electronic components and tools for resale in the ordinary course of
the Borrower's business.
"MATURITY DATE" means September 30, 1997.
"MAXIMUM RATE" shall have the meaning assigned thereto in Section 2.6(e).
"MOODY'S" means Moody's Investors Service, Inc. or any successor rating
agency thereof.
"MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate is making, or
is accruing an obligation to make, contributions within the preceding six (6)
years.
"NET INCOME" means, for any period, the Consolidated net income (or loss)
of the Borrower and its Subsidiaries for such period determined in accordance
with GAAP; PROVIDED, that there shall be excluded from net income any gain or
credit of an extraordinary nature.
"NOTE" means the Term Note made by the Borrower payable to the order of the
Lender, substantially in the form of EXHIBIT A hereto, evidencing the Loan
Facility, and any amendments, modifications and supplements thereto, any
substitutes therefor, and any replacements, restatements, renewals or extensions
thereof, in whole or in part.
"OBLIGATIONS" means, in each case, whether now in existence or hereafter
arising: (a) the principal of and interest on (including interest accruing
after the filing of any bankruptcy or similar petition) the Loan, and (c) all
other fees (including attorney's fees), commissions, charges, indebtedness,
loans, liabilities, financial accommodations, obligations, covenants and duties
owing by the Borrower to the Lender, of every kind, nature and description,
direct or indirect, absolute or contingent, due or to become due, contractual or
tortious, liquidated or unliquidated, and whether or not evidenced by any note,
and whether or not for the payment of money under or in respect of this
Agreement, the Note, or any of the other Loan Documents.
"OPERATING LEASE" means any lease which the Borrower or its Subsidiaries,
as lessee thereunder, is not, under GAAP, required to classify as a Capital
Lease for financial reporting purposes.
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"PBGC" means the Pension Benefit Guaranty Corporation and any successor
agency.
"PENSION PLAN" means any Employee Benefit Plan, other than a Multiemployer
Plan, which is subject to the provisions of Title IV of ERISA or Section 412 of
the Code and which (a) is maintained for employees of the Borrower or any ERISA
Affiliate or (b) has at any time within the preceding six years been maintained
for the employees of the Borrower or any of their current or former ERISA
Affiliates.
"PERSON" means an individual, corporation, partnership, limited liability
company, association, trust, business trust, joint venture, joint stock company,
pool, syndicate, sole proprietorship, unincorporated organization, Governmental
Authority or any other form of entity not specifically listed herein.
"PERMITTED SEI TRANSACTION" means the Borrower's investment in Sonepar
Electronique International in the amount not to exceed the amount set forth in
Section 7.5(f).
"PRIME RATE" means, at any time, the rate of interest per annum publicly
announced from time to time by the Lender as its prime rate. Each change in the
Prime Rate shall be effective as of the opening of business on the day such
change in the Prime Rate occurs. The parties hereto acknowledge that the rate
announced publicly by the Lender as its Prime Rate is an index or base rate and
shall not necessarily be its lowest rate charged to its customers.
"SOLVENT" means, as to any Person on a particular date, that such Person
(a) has capital sufficient to carry on its business and transactions and all
business and transactions in which it is about to engage and is able to pay its
debts as they mature, (b) owns property having a value, both at fair valuation
and at present fair saleable value, greater than the amount required to pay its
probable liabilities (including contingencies), and (c) does not believe that it
will incur debts or liabilities beyond its ability to pay such debts or
liabilities as they mature.
"SUBSIDIARY" means as to any Person, any corporation, partnership or other
entity of which more than fifty percent (50%) of the outstanding capital stock
or other ownership interests having ordinary voting power to elect a majority of
the board of directors or other managers of such corporation, partnership or
other entity is at the time, directly or indirectly, owned by or the management
is otherwise controlled by such Person (irrespective of whether, at the time,
capital stock of any other class or classes of such corporation shall have or
might have voting power by reason of the happening of any contingency). Unless
otherwise qualified references to "Subsidiary" or "Subsidiaries" herein shall
refer to those of the Borrower.
"SUBORDINATED DEBT" means any Debt of Borrower or any Subsidiary
subordinated in right and time of payment to the Obligations on terms
satisfactory to the Lender.
"STANDARD & POOR'S" means Standard & Poor's Corporation and any successor
rating agency thereof.
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"TANGIBLE NET WORTH" means with respect to the Borrower and its
Subsidiaries the excess of total assets over total liabilities, total assets and
total liabilities each to be determined in accordance with GAAP consistent with
those applied in the preparation of the Consolidated financial statements
referred to in Section 5.1, EXCLUDING, HOWEVER, from the determination of total
assets (i) goodwill, organizational expenses, research and development expenses,
trademarks, trade names, copyrights, patents, patent applications, licenses and
rights in any thereof, and other similar intangibles, (ii) all prepaid expenses,
deferred charges or unamortized debt discount and expenses, (iii) all reserves
carried and not deducted from assets, (iv) treasury stock and capital stock,
obligations or other securities of, or capital contributions to, or investments
in, any Subsidiary, (v) securities which are not readily marketable, (vi) cash
held in a sinking or other analogous fund established for the purpose of
redemption, retirement or prepayment of capital stock or indebtedness, (vii) any
write-up in the book value of any asset resulting from a revaluation thereof
subsequent to May 30, 1993, and (viii) any items not included in clauses (i)
through (vii) above which are treated as intangibles in conformity with GAAP.
"TERMINATION EVENT" means: (a) a "Reportable Event" described in Section
4043 of ERISA and the regulations issued thereunder, (b) the withdrawal of the
Borrower or any ERISA Affiliate from a Pension Plan during a plan year in which
it was a "substantial employer" as defined in Section 4001(a)(2) or 4068(f) of
ERISA, (c) the termination of a Pension Plan, the filing of a notice of intent
to terminate a Pension Plan or the treatment of a Pension Plan amendment as a
termination under Section 4041 of ERISA, (d) the institution of proceedings to
terminate, or the appointment of a trustee with respect to, any Pension Plan by
the PBGC, (e) any other event or condition which would constitute grounds under
Section 4042(a) of ERISA for the termination of, or the appointment of a trustee
to administer, any Pension Plan, (f) the partial or complete withdrawal of the
Borrower or any ERISA Affiliate from a Multiemployer Plan, (g) the imposition of
a Lien pursuant to Section 412 of the Code or Section 302 of ERISA, (h) any
event or condition which results in the reorganization or insolvency of a
Multiemployer Plan under Sections 4241 or 4245 of ERISA or (i) any event or
condition which results in the termination of a Multiemployer Plan under Section
4041A of ERISA or the institution by PBGC of proceedings to terminate a
Multiemployer Plan under Section 4042 of ERISA.
"TOTAL LIABILITIES" of the Borrower and it Subsidiaries on a Consolidated
basis means all obligations which in accordance with GAAP would be included in
determining total liabilities as shown on the liabilities side of a balance
sheet of such Person, including, without limitation, all Debt of such Person.
SECTION 1.2. GENERAL. All terms of an accounting nature not specifically
defined herein shall have the meaning assigned thereto by GAAP. Unless
otherwise specified, a reference in this Agreement to a particular section,
subsection, Schedule or Exhibit is a reference to that section, subsection,
Schedule or Exhibit of this Agreement. Wherever from the context it appears
appropriate, each term stated in either the singular or plural shall include the
singular and plural, and pronouns stated in the masculine, feminine or neuter
gender shall include the
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masculine, the feminine and the neuter. Any reference herein to "Charlotte
time" shall refer to the applicable time of day in Charlotte, North Carolina.
SECTION 1.3. OTHER DEFINITIONS AND PROVISIONS.
(a) USE OF CAPITALIZED TERMS. Unless otherwise defined therein, all terms
defined in this Agreement shall have the defined meanings when used in the Note
and the other Loan Documents or any certificate, report or other document made
or delivered pursuant to this Agreement.
(b) MISCELLANEOUS. The words "hereof", "herein" and "hereunder" and words
of similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement.
ARTICLE II
LOAN FACILITY
SECTION 2.1. TERM LOAN. Subject to the terms and conditions of this
Agreement, Lender agrees to make a term loan to the Borrower on the Closing Date
in a principal amount equal to the Facility Amount.
SECTION 2.2. REPAYMENT OF LOAN. The Borrower shall repay the principal
amount of the Loan in a single installment due on September 30, 1997 (the
"Maturity Date").
SECTION 2.3. NOTE. The Lender's Loan and the obligation of the Borrower
to repay the Loan shall be evidenced by a Term Note (the "Note") in the form
attached hereto as EXHIBIT A, payable to the order of the Lender representing
the Borrower's obligation to pay the Facility Amount. The Note shall be dated
the Closing Date and shall bear interest on the unpaid principal amount thereof
at the applicable interest rate per annum specified in Section 2.6.
SECTION 2.4. PROCEDURE FOR ADVANCE OF LOAN. Subject to the terms and
conditions of this Agreement, not later than 1:00 p.m. (Charlotte time) on the
Closing Date, Lender will disburse the proceeds of the Loan in immediately
available funds by crediting such proceeds to a deposit account of the Borrower
maintained with the Lender.
SECTION 2.5. USE OF PROCEEDS. The Borrower shall use the proceeds of the
Loan to provide for an investment by Borrower in Sonepar Electronique
International and for general working capital purposes.
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SECTION 2.6. INTEREST.
(a) INTEREST RATE OPTIONS. Subject to the provisions of this Section 2.7
and except to the extent that the LIBOR Rate is otherwise not available to the
Borrower pursuant to the provisions of this Article II, the aggregate principal
balance of the Note shall bear interest at the LIBOR Rate PLUS one-half of one
percent (1/2%) (the "Applicable Margin"). If the Loan is converted from a LIBOR
Rate Loan to a Base Rate Loan pursuant to the provisions of Section 2.6(c) or
Section 2.11 hereof, the aggregate principal balance of the Note shall bear
interest at the Base Rate plus the Applicable Margin, until such time as the
Loan is converted back to a LIBOR Rate Loan pursuant to the provisions of
Section 2.6(c) or Section 2.11 hereof.
(b) INTEREST PERIOD. The Interest Period to be applicable to the Loan, to
the extent the Loan is permitted hereunder to be a LIBOR Rate Loan, shall be a
period of three (3) months with respect to the initial Interest Period and each
successive Interest Period thereafter; PROVIDED, that:
(i) the Interest Period shall commence on the date of initial advance
of the Loan and, in the case of immediately successive Interest Periods, each
successive Interest Period shall commence on the date on which the next
preceding Interest Period expires;
(ii) if any Interest Period would otherwise expire on a day that is
not a Business Day, such Interest Period shall expire on the next succeeding
Business Day; PROVIDED, that if any Interest Period would otherwise expire on a
day that is not a Business Day but is a day of the month after which no further
Business Day occurs in such month, such Interest Period shall expire on the next
preceding Business Day;
(iii) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding day
in the calendar month at the end of such Interest Period) shall end on the last
Business Day of the calendar month at the end of such Interest Period;
(iv) no Interest Period shall extend beyond the final Maturity Date;
and
(v) there shall be no more than one (1) Interest Period outstanding at
any time.
(c) DEFAULT RATE. Upon the occurrence and during the continuance of an
Event of Default, (i) to the extent then a LIBOR Rate Loan, the Loan shall bear
interest at a rate per annum two percent (2%) in excess of the then applicable
LIBOR Rate until the end of the applicable Interest Period and thereafter at the
Base Rate plus two percent (2%), and (ii) to the extent then a Base Rate Loan,
the Loan shall bear interest at the Base Rate plus two percent (2%). Interest
shall continue to accrue on the Note after the filing by or against the Borrower
of any petition seeking any relief in bankruptcy or under any act or law
pertaining to insolvency or debtor relief, whether state, federal or foreign.
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(d) INTEREST PAYMENT AND COMPUTATION. During the period that the Loan is
a Base Rate Loan, interest on the Loan shall be payable in arrears on the last
Business Day of each calendar month commencing with the last Business Day of the
calendar month during which the Loan was converted to a Base Rate Loan. During
the period that the Loan is a LIBOR Rate Loan, interest on the Loan shall be
payable in arrears on the last day of each Interest Period applicable thereto.
All interest rates and fees provided hereunder shall be computed on the basis of
a 360 day year and assessed for the actual number of days elapsed.
(e) MAXIMUM RATE. In no contingency or event whatsoever shall the
aggregate of all amounts deemed interest hereunder or under the Note charged or
collected pursuant to the terms of this Agreement or pursuant to the Note exceed
the highest rate permissible under any Applicable Law which a court of competent
jurisdiction shall, in a final determination, deem applicable hereto. In the
event that such a court determines that the Lender has charged or received
interest hereunder in excess of the highest applicable rate, the rate in effect
hereunder shall automatically be reduced to the maximum rate permitted by
Applicable Law and the Lender shall promptly refund to the Borrower on a pro
rata basis, any interest received by Lender in excess of the maximum lawful rate
or, if so requested by Borrower, shall apply such excess to the principal
balance of the Obligations. It is the intent hereof that the Borrower not pay
or contract to pay, and that Lender shall not receive or contract to receive,
directly or indirectly in any manner whatsoever, interest in excess of that
which may be paid by the Borrower under Applicable Law.
SECTION 2.7. FACILITY FEE. On the Closing Date, in consideration of the
making of the Loan under this Agreement and in order to compensate the Lender
for certain costs associated with processing, approving and closing the Loan,
the Borrower shall pay to Lender on the Closing Date, a facility fee in an
amount equal to one-quarter of one percent (1/4%) of the Facility Amount, and
such facility fee shall be fully earned on the Closing Date and shall not be
refundable or rebatable by reason of prepayment, acceleration upon an Event of
Default or any other circumstance and shall survive any termination of this
Agreement.
SECTION 2.8. PREPAYMENTS. The Borrower may, upon at least five (5)
Business Days notice to the Lender stating the proposed date and principal
amount of the prepayment, and if such notice is given, the Borrower shall,
prepay the outstanding principal balance of the Loan in whole or in part,
together with accrued interest to the date of such prepayment on the principal
amount prepaid, PROVIDED, HOWEVER, that (a) each partial prepayment shall be in
an aggregate principal amount of not less than $250,000.00 or any integral
multiple thereof, and (b) in the event at the time of such prepayment the Loan
is a LIBOR Rate Loan, the Borrower shall not prepay the Loan on any day other
than the last day of the Interest Period, and to the extent the Borrower does
prepay such Loan on any day other than the last day of the Interest Period, the
Borrower shall be obligated to reimburse the Lender in respect thereof pursuant
to Section 2.12.
SECTION 2.9. MANNER OF PAYMENT. Each payment (including prepayments) by
the Borrower on account of the principal of or interest on the Loan or of any
fee or other amounts
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payable to the Lender under this Agreement or the Note shall be made not
later than 1:00 p.m. (Charlotte time) on the date specified for payment under
this Agreement to the Lender, in immediately available funds and shall be
made without any set-off, counterclaim or deduction whatsoever. Any payment
received after such time but before 2:00 p.m. (Charlotte time) on such day
shall be deemed a payment on such date for the purposes of Section 9.1, but
for all other purposes shall be deemed to have been made on the next
succeeding Business Day. If any payment under this Agreement or the Note
shall be specified to be made upon a day which is not a Business Day, it
shall be made on the next succeeding day which is a Business Day and such
extension of time shall in such case be included in computing interest, if
any, in accordance with such payment.
SECTION 2.10. CREDITING OF PAYMENTS AND PROCEEDS. In the event that the
Borrower shall fail to pay any of the Obligations when due, all payments
received by the Lender upon the Note and the other Obligations and all net
proceeds from the enforcement of the Obligations shall be applied in the manner
as the Lender may elect in its sole and absolute discretion.
SECTION 2.11. CHANGED CIRCUMSTANCES.
(a) CIRCUMSTANCES AFFECTING LIBOR RATE AVAILABILITY. If, with respect to
any Interest Period, the Lender shall determine that, by reason of circumstances
affecting the foreign exchange and interbank markets generally, deposits in
eurodollars in the applicable amounts are not being offered to the Lender for
such Interest Period, then Lender shall forthwith give notice thereof to the
Borrower. Thereafter, until Lender notifies the Borrower that such
circumstances no longer exist, the right of the Borrower to continue any Loan as
a LIBOR Rate Loan, shall be suspended, and the Borrower shall repay in full (or
cause to be repaid in full) the then outstanding principal amount of the Loan,
together with accrued interest thereon, on the last day of the then current
Interest Period applicable to the Loan or convert the then outstanding principal
amount of the Loan to a Base Rate Loan as of the last day of such Interest
Period.
(b) LAWS AFFECTING LIBOR RATE AVAILABILITY. If, after the date hereof,
the introduction of, or any change in, any Applicable Law or 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 the Lender (or its respective lending office) with any
request or directive (whether or not having the force of law) of any such
Governmental Authority, central bank or comparable agency, shall make it
unlawful or impossible for the Lender (or its lending office) to honor its
obligations hereunder to maintain the Loan as a LIBOR Rate Loan, the Lender
shall forthwith give notice thereof to the Borrower. Thereafter, until the
Lender notifies the Borrower that such circumstances no longer exist, (i) the
obligations of the Lender to maintain the Loan as a LIBOR Rate Loan and the
right of the Borrower to continue the Loan as a LIBOR Rate Loan shall be
suspended, and (ii) if the Lender may not lawfully continue to maintain the Loan
as a LIBOR Rate Loan to the end of the then current Interest Period applicable
thereto the Loan shall immediately be converted to a Base Rate Loan for the
remainder of such Interest Period. For purposes of this Section 2.11(b), a
change in law, rule, regulation, interpretation or administration shall include,
without limitation, any
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change made or which becomes effective on the basis of a law, rule,
regulation, interpretation or administration presently in force, the
effective date of which change is delayed by the terms of such law, rule,
regulation, interpretation or administration.
(c) INCREASED COST OF LIBOR RATE LOAN. If, after the date hereof, the
introduction of, or any change in, any Applicable Law or 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 the Lender (or its lending offices) with any request or directive
(whether or not having the force of law) of such Governmental Authority, central
bank or comparable agency:
(i) shall subject the Lender (or any of its lending offices) to any
tax, duty or other charge with respect to any LIBOR Rate Loan or the Note
or shall change the basis of taxation of payments to the Lender (or its
lending offices) of the principal of or interest on any LIBOR Rate Loan or
the Note or any other amounts due under this Agreement in respect thereof
(except for changes in the rate of tax on the overall net income of the
Lender or its lending offices imposed by the jurisdiction in which the
Lender's principal executive office or lending office is located); or
(ii) shall impose, modify or deem applicable any reserve (including,
without limitation, any imposed by the Board of Governors of the Federal
Reserve System), special deposit or similar requirement against assets of,
deposits with or for the account of, or credit extended by the Lender (or
its lending offices) or shall impose on the Lender (or its lending offices)
or the foreign exchange and interbank markets any other condition affecting
any LIBOR Rate Loan or the Note;
and the result of any of the foregoing is to increase the cost to the Lender of
maintaining any LIBOR Rate Loan or to reduce the amount of any sum received or
receivable by the Lender under this Agreement or under the Note in respect of a
LIBOR Rate Loan, then the Lender shall promptly notify the Borrower of such fact
and demand compensation therefor and, within fifteen (15) days after such notice
by Lender, the Borrower agrees to pay to the Lender such additional amount or
amounts as will compensate the Lender for such increased cost or reduction. The
Lender will promptly notify the Borrower of any event of which it has knowledge
which will entitle the Lender to compensation pursuant to this Section 2.11(c);
PROVIDED, that the Lender shall incur no liability whatsoever to the Borrower in
the event it fails to do so. A certificate of the Lender setting forth the
basis for determining such additional amount or amounts necessary to compensate
the Lender shall be conclusively presumed to be correct save for manifest error.
For purposes of this Section, a change in Applicable Law, interpretation,
administration, request or directive shall include, without limitation, any
change made or which becomes effective on the basis of a law, rule, regulation,
interpretation, administration, request or directive presently in force, the
effective date of which change is delayed by the terms of such law, rule,
regulation, interpretation, administration, request or directive.
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SECTION 2.12. INDEMNITY. The Borrower hereby indemnifies the Lender
against any loss or expense which may arise or be attributable to the Lender's
obtaining, liquidating or employing deposits or other funds acquired to effect,
fund or maintain the Loan (a) as a consequence of any failure by the Borrower to
make any payment when due of any amount due hereunder in connection with a LIBOR
Rate Loan, (b) due to any failure of the Borrower to borrow on a date specified
therefor in a Notice of Borrowing or (c) due to any payment or prepayment of a
LIBOR Rate Loan on a date other than the last day of the Interest Period
therefor. Such loss or expense shall be calculated based upon the present value
of payments due from the Borrower with respect to a deposit obtained by the
Lender in order to fund such LIBOR Rate Loan to the Borrower. The Lender's
calculations of any such loss or expense shall be furnished to the Borrower.
SECTION 2.13. CAPITAL REQUIREMENTS. If either (a) the introduction of, or
any change in, or in the interpretation of, any Applicable Law or (b) compliance
with any guideline or request from any central bank or comparable agency or
other Governmental Authority (whether or not having the force of law), has or
would have the effect of reducing the rate of return on the capital of, or has
affected or would affect the amount of capital required to be maintained by, the
Lender or any corporation controlling the Lender as a consequence of, or with
reference to the Lender's commitment hereunder and other commitments of this
type, below the rate which the Lender or such other corporation could have
achieved but for such introduction, change or compliance, then within five (5)
Business Days after written demand by the Lender, the Borrower shall pay to the
Lender from time to time as specified by the Lender additional amounts
sufficient to compensate the Lender or other corporation for such reduction.
SECTION 2.14. TAXES.
(a) PAYMENTS FREE AND CLEAR. Any and all payments by the Borrower
hereunder or under the Note shall be made free and clear of and without
deduction for any and all present or future taxes, levies, imposts, deductions,
charges or withholding, and all liabilities with respect thereto excluding (i)
in the case of the Lender, taxes imposed upon its income and franchise taxes
imposed upon it by the jurisdiction under the laws of which the Lender (as the
case may be) is organized or is or should be qualified to do business or any
political subdivision thereof, and (ii) in the case of the Lender, taxes imposed
upon its income and franchise taxes imposed upon it by the jurisdiction of the
Lender's lending office or any political subdivision thereof (all such non-
excluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "Taxes"). If the Borrower shall be
required by law to deduct any Taxes from or in respect of any sum payable
hereunder or under the Note to the Lender, (i) the sum payable shall be
increased as may be necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section
2.14) the Lender receives an amount equal to the amount it would have received
had no such deductions been made, (ii) the Borrower shall make such deductions,
(iii) the Borrower shall pay the full amount deducted to the relevant taxing
authority or other authority in accordance with applicable law, and (iv) the
Borrower shall deliver to the Lender evidence of such payment to the relevant
taxing authority or other authority in the manner provided in Section 2.14(d).
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(b) STAMP AND OTHER TAXES. In addition, the Borrower shall pay any
present or future stamp, registration, recordation or documentary taxes or any
other similar fees or charges or excise or property taxes (other than excise and
property taxes to which the Lender would have been subject in the absence of
this Agreement and the provision for security in connection with the execution
of this Agreement), levies of the United States or any state or political
subdivision thereof or any applicable foreign jurisdiction which arise from any
payment made hereunder or from the execution, delivery or registration of, or
otherwise with respect to, this Agreement, the Loan, the Loan Documents, or the
perfection of any rights or security interest in respect thereto (hereinafter
referred to as "Other Taxes").
(c) INDEMNITY. The Borrower shall indemnify the Lender for the full
amount of Taxes and Other Taxes (including, without limitation, any Taxes and
Other Taxes imposed by any jurisdiction on amounts payable under this Section
2.14) paid by the Lender (as the case may be) and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto,
whether or not such Taxes or Other Taxes were correctly or legally asserted;
PROVIDED, that the Borrower shall not be liable for penalties or interest with
respect to delinquent Taxes or Other Taxes paid by the Lender unless the Lender
gave written notice to the Borrower of the imposition of such Taxes or Other
Taxes within thirty (30) days after its determination that such Taxes or Other
Taxes were due; and PROVIDED FURTHER, that the Borrower shall have the right, at
its expense, to contest the imposition of such Taxes or Other Taxes so long as
during the period of such contest, the payment of such Taxes or Other Taxes is
stayed and such contest would not, in the reasonable judgment of the Lender,
have an adverse effect on the business or financial condition of the Lender.
Except as above provided, such indemnification shall be made within thirty (30)
days from the date the Lender makes written demand therefor.
(d) EVIDENCE OF PAYMENT. Within thirty (30) days after the date of any
payment of Taxes or Other Taxes, the Borrower shall furnish to the Lender, at
its address referred to in Section 9.1, the original or a certified copy of a
receipt evidencing payment thereof or other evidence of payment satisfactory to
the Lender.
(e) SURVIVAL. Without prejudice to the survival of any other agreement of
the Borrower hereunder, the agreements and obligations of the Borrower contained
in this Section 2.14 shall survive the payment in full of the Obligations.
ARTICLE III
CLOSING; CONDITIONS OF CLOSING AND BORROWING
SECTION 3.1. CLOSING. The closing shall take place at the offices of
Kennedy Covington Lobdell & Hickman in Charlotte, North Carolina or in such
other location as the parties hereto shall mutually agree, on August 26, 1994,
or on such other date as the parties hereto shall mutually agree.
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SECTION 3.2. CONDITIONS OF LOAN. The obligation of the Lender to make the
Loan on the Closing Date is subject to the satisfaction of each of the following
conditions:
(a) EXECUTED LOAN DOCUMENTS. This Agreement and the Note, in form and
substance satisfactory to the Lender shall have been duly authorized, executed
and delivered to the Lender by the Borrower shall be in full force and effect
and no default shall exist thereunder, and the Borrower shall have delivered
original counterparts thereof to the Lender.
(b) CLOSING CERTIFICATES; ETC.
(i) CERTIFICATE OF THE BORROWER. The Lender shall have received a
certificate dated as of the Closing Date from the chief executive officer or
chief financial officer of the Borrower, in form and substance satisfactory to
the Lender, to the effect that all representations and warranties of the
Borrower contained in this Agreement and the other Loan Documents are true,
correct and complete in all material respects; that the Borrower is not in
violation of any of the covenants contained in this Agreement and the other Loan
Documents; that, after giving effect to the transactions contemplated by this
Agreement, no Default or Event of Default has occurred and is continuing; and
that the Borrower has satisfied each of the closing conditions.
(ii) CERTIFICATE OF THE SECRETARY OF THE BORROWER. The Lender shall
have received a certificate dated as of the Closing Date of the secretary or
assistant secretary of the Borrower certifying that attached thereto is a true
and complete copy of the articles of incorporation of the Borrower and all
amendments thereto, certified as of a recent date by the appropriate
Governmental Authority in its jurisdiction of incorporation; that attached
thereto is a true and complete copy of the bylaws of the Borrower as in effect
on the date of such certification; that attached thereto is a true and complete
copy of resolutions duly adopted by the Board of Directors of the Borrower
authorizing, the borrowings contemplated hereunder and the execution, delivery
and performance of this Agreement and the other Loan Documents; and as to the
incumbency and genuineness of the signature of each officer of the Borrower
executing this Agreement and the other Loan Documents.
(iii) CERTIFICATES OF GOOD STANDING. The Lender shall have received
long-form certificates as of a recent date of the good standing of the Borrower
under the laws of its jurisdiction of organization and each state where the
Borrower is transacting business.
(iv) OPINIONS OF COUNSEL. The Lender shall have received the
favorable opinion of the law firm of Greenberg, Glusker, Fields, Claman &
Machtinger, counsel to the Borrower, dated as of the Closing Date and addressed
to the Lender, in form and substance satisfactory to the Lender.
(c) CONSENTS; NO ADVERSE CHANGE.
(i) GOVERNMENTAL AND THIRD PARTY APPROVALS. All necessary approvals,
authorizations and consents, if any be required, of any Person and of all
Governmental
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Authorities and courts having jurisdiction with respect to the transactions
contemplated by this Agreement shall have been obtained.
(ii) PERMITS AND LICENSES. All permits and licenses, including
permits and licenses required under applicable Environmental Laws, necessary to
the conduct of business by the Borrower shall have been obtained.
(iii) NO INJUNCTION, ETC. No action, proceeding, investigation,
regulation or legislation shall have been instituted, threatened or proposed
before any Governmental Authority to enjoin, restrain, or prohibit, or to obtain
substantial damages in respect of, or which is related to or arises out of this
Agreement or the consummation of the transactions contemplated hereby or which,
in the Lender's discretion, would make it inadvisable to consummate the
transactions contemplated by this Agreement.
(iv) NO MATERIAL ADVERSE CHANGE. In the judgment of the Lender, there
shall not have occurred any Material Adverse Change in the business, business
prospects, financial condition or results of operations of the Borrower.
(v) NO EVENT OF DEFAULT. No Default or Event of Default shall have
occurred and be continuing.
(d) FINANCIAL MATTERS.
(i) FINANCIAL STATEMENTS. The Lender shall have received (A) audited
financial statements for the Fiscal Year of the Borrower ended May 31, 1993
certified by Arthur Anderson & Company, certified public accountants to the
Borrower and in form and substance satisfactory to the Lender, and (B) such
other financial information including the interim financial statements described
in Section 4.1(p) as may be reasonably requested by the Lender.
(ii) FINANCIAL CONDITION CERTIFICATE. The Borrower shall have
delivered a certificate, in form and substance satisfactory to the Lender, and
certified as accurate in all material respects by the chief executive officer or
chief financial officer of the Borrower, that (A) the Borrower is Solvent and
(B) the liquidity position of the Borrower as of the Closing Date is not
materially different from the financial information previously furnished to the
Lender.
(iii) PAYMENT AT CLOSING. There shall have been paid by the Borrower
to the Lender the facility fee and any other accrued and unpaid fees due
hereunder (including, without limitation, legal fees and expenses), and to any
other Person such amount as may be due, including all taxes, fees and other
charges in connection with the execution, delivery, recording, filing and
registration of any of the Loan Documents.
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(e) MISCELLANEOUS.
(i) NOTICE OF BORROWING; DISBURSEMENT INSTRUCTIONS. The Lender shall
have received written instructions from the Borrower to the Lender directing the
payment of any proceeds of Loans made under this Agreement that are to be paid
on the Closing Date.
(ii) PROCEEDINGS AND DOCUMENTS. All opinions, certificates and other
instruments and all proceedings in connection with the transactions contemplated
by this Agreement shall be satisfactory in form and substance to the Lender.
The Lender shall have received copies of all other instruments and other
evidence as the Lender may reasonably request, in form and substance
satisfactory to the Lender, with respect to the transactions contemplated by
this Agreement and the taking of all actions in connection therewith.
(iii) DUE DILIGENCE AND OTHER DOCUMENTS. The Borrower shall have
delivered to the Lender such other documents, certificates and opinions as the
Lender reasonably requests.
(f) REPRESENTATIONS AND WARRANTIES. The representations and warranties
made by the Borrower contained in Article IV and in the other Loan Documents
shall be true and correct on and as of the Closing Date with the same effect as
if made on and as of such date.
SECTION 3.3. WAIVER OF CONDITIONS PRECEDENT. If the Lender makes the Loan
or advance hereunder prior to the fulfillment of any of the conditions precedent
set forth in this Article III, the making of such Loan or advance shall
constitute only an extension of time for the fulfillment of such condition and
not a waiver thereof, and the Borrower shall thereafter use its best efforts to
fulfill each such condition promptly.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BORROWER
SECTION 4.1. REPRESENTATIONS AND WARRANTIES. In order to induce the
Lender to enter into this Agreement and to make the Loan, the Borrower hereby
represents and warrants to the Lender that:
(a) ORGANIZATION; POWER; QUALIFICATION. The Borrower is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or formation, has the power and authority to own its properties
and to carry on its business as now being and hereafter proposed to be conducted
and is duly qualified and authorized to do business in each jurisdiction in
which the character of its properties or the nature of its business requires
such qualification and authorization.
(b) OWNERSHIP. All outstanding shares of the Borrower have been duly
authorized and validly issued and are fully paid and nonassessable. There are
no outstanding stock purchase warrants, subscriptions, options, securities,
instruments or other rights of any type or nature
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whatsoever, which are convertible into, exchangeable for or otherwise provide
for or permit the issuance of capital stock of the Borrower.
(c) AUTHORIZATION OF AGREEMENT, NOTES, LOAN DOCUMENTS AND BORROWING. The
Borrower and the other Loan Parties, as applicable, has the right, power and
authority and has taken all necessary corporate and other action to authorize
the execution, delivery and performance of this Agreement, the Note and each of
the other Loan Documents to which it is a party in accordance with their
respective terms. This Agreement, the Note and each of the other Loan Documents
have been duly executed and delivered by the duly authorized officers of the
Borrower thereto and constitute the legal, valid and binding obligation of the
Borrower enforceable in accordance with their respective terms except as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors rights
generally, and the availability of equitable remedies.
(d) COMPLIANCE OF AGREEMENT, NOTE, LOAN DOCUMENTS AND BORROWING WITH LAWS,
ETC. The execution, delivery and performance by the Borrower of this Agreement,
the Note and each of the other Loan Documents to which it is a party, in
accordance with their respective terms, the borrowings hereunder and the
transactions contemplated hereby do not and will not, by the passage of time,
the giving of notice or otherwise, (i) require any Governmental Approval or
violate any Applicable Law relating to the Borrower, as applicable; (ii)
conflict with, result in a breach of or constitute a default under the articles
of incorporation, bylaws, or other organizational documents of the Borrower or
any indenture, agreement or other instrument to which the Borrower is a party or
by which any of their respective properties may be bound or any Governmental
Approval relating to the Borrower; or (iii) result in or require the creation or
imposition of any Lien upon or with respect to any property now owned or
hereafter acquired by the Borrower, other than Liens permitted pursuant to
Section 7.4.
(e) COMPLIANCE WITH LAW; GOVERNMENTAL APPROVALS. The Borrower (i) has all
material Governmental Approvals required by any Applicable Law for it to conduct
its business, each of which is in full force and effect, is final and not
subject to review on appeal and is not the subject of any pending or, to its
knowledge, threatened attack by direct or collateral proceeding; and (ii) is in
compliance with each Governmental Approval applicable to it and in compliance
with all other Applicable Laws relating to it or any of its respective
properties.
(f) TAX RETURNS AND PAYMENTS. To the best of the Borrower's knowledge,
the Borrower has filed all applicable tax returns (Federal, state and local) and
paid the taxes shown as due thereon, including interest and penalties, or
provided adequate reserves for the payment thereof.
(g) ENVIRONMENTAL MATTERS. (i) Neither the Borrower nor any of its
properties and operations is in material violation of any applicable
Environmental Law; (ii) without limitation of clause (i) above, neither the
Borrower nor any of its properties and operations is in material violation of
any Environmental Law, or subject to any existing, pending or threatened
investigation, inquiry or proceeding by any Governmental Authority or to any
remedial obligations under any Environmental Law; and (iii) all notices,
permits, licenses or similar
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authorizations, if any, required to be obtained or filed by the Borrower
relating to Hazardous Materials, including, without limitation, past or
present treatment, storage, disposal or release of any Hazardous Materials or
solid waste into the environment, have been obtained or filed and the
Borrower is in full compliance with the requirements of such permits,
licenses or authorizations.
(h) ERISA.
(i) Neither the Borrower nor any ERISA Affiliate maintains or
contributes to, or has any obligation under, any Employee Benefit Plans;
(ii) The Borrower and each ERISA Affiliate are in compliance with all
applicable provisions of ERISA and the regulations and published interpretations
thereunder with respect to all Employee Benefit Plans except where failure to
comply would not result in a material liability to the Borrower and except for
any required amendments for which the remedial amendment period as defined in
Section 401(b) of the Code has not yet expired. Each Employee Benefit Plan that
is intended to be qualified under Section 401(a) of the Code has been determined
by the Internal Revenue Service to be so qualified, and each trust related to
such plan has been determined to be exempt under Section 501(a) of the Code. No
material liability has been incurred by the Borrower or any ERISA Affiliate
which remains unsatisfied for any taxes or penalties with respect to any
Employee Benefit Plan or any Multiemployer Plan;
(iii) No Pension Plan has been terminated, nor has any accumulated
funding deficiency (as defined in Section 412 of the Code) been incurred
(without regard to any waiver granted under Section 412 of the Code), nor has
any funding waiver from the Internal Revenue Service been received or requested
with respect to any Pension Plan, nor has the Borrower or any ERISA Affiliate
failed to make any contributions or to pay any amounts due and owing as required
by Section 412 of the Code, Section 302 of ERISA or the terms of any Pension
Plan prior to the due dates of such contributions under Section 412 of the Code
or Section 302 of ERISA, nor has there been any event requiring any disclosure
under Section 4041(c)(3)(C), 4063(a) or 4068(f) of ERISA with respect to any
Pension Plan;
(iv) Neither the Borrower nor any ERISA Affiliate has: (A) engaged
in a nonexempt prohibited transaction described in Section 406 of the ERISA or
Section 4975 of the Code, (B) incurred any liability to the PBGC which remains
outstanding other than the payment of premiums and there are no premium payments
which are due and unpaid, (C) failed to make a required contribution or payment
to a Multiemployer Plan or (D) failed to make a required installment or other
required payment under Section 412 of the Code;
(v) No Termination Event has occurred or is reasonably expected to
occur; and
(vi) No material proceeding, claim, lawsuit and/or investigation is
existing or, to the best knowledge of the Borrower after due inquiry, threatened
concerning or involving any (A) employee welfare benefit plan (as defined in
Section 3(1) of ERISA) currently maintained
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or contributed to by the Borrower or any ERISA Affiliate, (B) Pension Plan or
(C) Multiemployer Plan.
(i) MARGIN STOCK. The Borrower is not engaged principally or as one of
its activities in the business of extending credit for the purpose of
"purchasing" or "carrying" any "margin stock" (as each such term is defined or
used in Regulations G and U of the Board of Governors of the Federal Reserve
System). No part of the proceeds of any of the Loans will be used for
purchasing or carrying margin stock or for any purpose which violates, or which
would be inconsistent with, the provisions of Regulation G, T, U or X of such
Board of Governors. If requested by the Lender or any one or more of the
Lenders, the Borrower will furnish to the Lender a statement or statements in
conformity with the requirements of said Regulation G, T, U or X to the
foregoing effect.
(j) INVESTMENT COMPANY ACT. The Borrower is not an "investment company"
or a company "controlled" by an "investment company" (as each such term is
defined or used in the Investment Company Act of 1940, as amended).
(k) FRANCHISES, LICENSES, PATENTS AND TRADEMARKS. The Borrower owns or
possesses rights to use all franchises, licenses, patents, patent rights or
licenses, patent applications, trademarks, trademark rights, trade names, trade
name rights, copyrights and rights with respect to the foregoing which are
required to conduct its business as now and presently planned to be conducted
without conflict with the rights of others. No event has occurred which
permits, or after notice or lapse of time or both would permit, the revocation
or termination of any such rights.
(l) MATERIAL CONTRACTS. Each Material Contract is, and after giving
effect to the consummation of the transactions contemplated by the Loan
Documents will be, in full force and effect in accordance with the terms
thereof; and there are no material defaults by the Borrower or, to the best of
its knowledge, by any other party under any such Material Contract.
(m) EMPLOYEE RELATIONS. The Borrower is not a party to any collective
bargaining agreement nor has any labor union been recognized as the
representative of its employees. The Borrower does not know of any pending,
threatened or contemplated strikes, work stoppage or other collective labor
disputes involving its employees.
(n) BURDENSOME PROVISIONS. The Borrower is not a party to any indenture,
agreement, lease or other instrument, or subject to any corporate or partnership
restriction, Governmental Approval or Applicable Law which is so unusual or
burdensome as in the foreseeable future might materially and adversely affect or
impair the business or condition, financial or otherwise, of the Borrower. The
Borrower does not presently anticipate that future expenditures needed to meet
the provisions of federal or state statutes, orders, rules or regulations will
be so burdensome as to affect or impair in a materially adverse manner the
business or condition, financial or otherwise, of the Borrower.
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(o) FINANCIAL STATEMENTS. The balance sheet of the Borrower as of May 31,
1993, and the related statements of income and retained earnings and cash flows
for the Fiscal Year then ended, copies of which have been furnished to the
Lender, are complete and correct and fairly present the assets, liabilities and
financial position of the Borrower as at such date, and the results of the
operations and changes of financial position for the Fiscal Year then ended.
The unaudited balance sheet of the Borrower as of November 30, 1993, and the
related unaudited statement of income and retained earnings and cash flows for
the six (6) month period ended on such date, copies of which have been furnished
to the Lender, are complete and correct and fairly present the assets,
liabilities and financial position of the Borrower as at such date, and the
results of its operations and changes in its financial position for the six (6)
month period then ended (subject to normal year-end audit adjustments). All
such financial statements, including the related schedules and notes thereto,
have been prepared in accordance with GAAP applied consistently throughout the
periods involved. The Borrower has no material Debt, obligation or other
unusual forward or long-term commitment which is not fairly reflected in the
foregoing financial statements or in the notes thereto.
(p) NO MATERIAL ADVERSE CHANGE. Since May 31, 1993, there has been no
material adverse change in the properties, businesses, results of operations,
prospects, management or financial or other condition of the Borrower,
including, but not limited to, any material adverse change resulting from any
fire, explosion, accident, drought, storm, hail, earthquake, embargo, act of
God, or of the public enemy or other casualty (whether or not covered by
insurance).
(q) TITLES TO PROPERTIES. The Borrower has good and marketable title to
the real property owned by it and valid and legal title to all of its personal
property and assets, including, but not limited to, those reflected on the
balance sheet of the Borrower delivered pursuant to Section 4.1(o), except those
which have been disposed of by the Borrower subsequent to such date which
dispositions have been in the ordinary course of business.
(r) LIENS. None of the properties and assets of the Borrower is subject
to any Lien, except Liens permitted pursuant to Section 7.4.
(s) DEBT, OPERATING LEASES AND GUARANTEES. SCHEDULE 4.1(T) sets forth a
complete and accurate list of all material Debt, Operating Leases and Guarantees
of the Borrower as of the Closing Date. The term "material" as used in this
subsection shall mean such Debt, Operating Leases and Guarantees representing
Obligations individually in excess of $2,000,000 but shall exclude purchase
contracts or purchase orders entered into by the Borrower for the purchase of
electronic components and tools for resale in the ordinary course of the
Borrower's business. The Borrower has performed and is in compliance with all
of the terms of such Debt, Operating Leases and Guarantees and all instruments
and agreements relating thereto, and no default or event of default, or event or
condition which with notice or lapse of time or both would constitute such a
default or event of default on the part of the Borrower exists with respect to
any such Debt, Operating Leases or Guarantees.
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(t) SOLVENCY. As of the Closing Date and after giving effect to the Loan
made on the Closing Date and the transactions contemplated by the Loan
Documents, the Borrower will be Solvent.
(u) LITIGATION. Except as set forth on SCHEDULE 4.1(V), there are no
material actions, suits or proceedings pending nor, to the knowledge of the
Borrower, threatened against or in any other way relating adversely to or
affecting the Borrower or any of its properties in any court or before any
arbitrator of any kind or before or by any Governmental Authority; for the
purposes of this subsection (u), the term "material" shall mean with respect to
actions, suits or proceedings, those actions, suits or proceedings (i) in which
injunctive or similar relief is sought and which, if adversely determined, could
have a Material Adverse Effect; or (ii) in which the amount in controversy is
equal to or greater than $1,000,000 per action, suit or proceeding, or in the
aggregate is equal to or greater than $5,000,000, but any such monetary actions,
suits or proceedings, which are covered in full by appropriate insurance and
accepted for defense or payment by reputable insurance companies of national
standing, shall not be deemed "material". There are no outstanding or unpaid
judgments against the Borrower which, individually exceed $1,000,000, or in the
aggregate exceed $5,000,000.
(v) ABSENCE OF DEFAULTS. No event has occurred or is continuing which
constitutes a Default or an Event of Default, or which constitutes, or which
with the passage of time or giving of notice or both would constitute, a default
or event of default by the Borrower under any material agreement (other than
this Agreement) or judgment, decree or order to which the Borrower is a party or
by which the Borrower or any of its properties may be bound or which would
require the Borrower to make any payment thereunder prior to the scheduled
maturity date therefor.
(w) ACCURACY AND COMPLETENESS OF INFORMATION. All written information,
reports and other papers and data produced by or on behalf of the Borrower and
furnished to the Lender were, at the time the same were so furnished, complete
and correct in all material respects to the extent necessary to give the
recipient a true and accurate knowledge of the subject matter. No document
furnished or written statement made to the Lender by the Borrower in connection
with the negotiation, preparation or execution of this Agreement or any of the
Loan Documents contains or will contain any untrue statement of a fact material
to the creditworthiness of the Borrower or omits or will omit to state a
material fact necessary in order to make the statements contained therein not
misleading. The Borrower is not aware of any facts which it has not disclosed
in writing to the Lender having a material adverse effect, or insofar as the
Borrower can now foresee, could have a material adverse effect, on the
properties, businesses, prospects, results of operations or financial or other
condition of the Borrower or the ability of the Borrower to perform its
obligations under this Agreement, the Notes and the other Loan Documents.
SECTION 4.2. SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC. All
representations and warranties set forth in this Article IV and all
representations and warranties contained in any certificate or any of the Loan
Documents (including but not limited to any such representation or warranty made
in or in connection with any amendment thereto) shall constitute repre-
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sentations and warranties made under this Agreement. All representations and
warranties made under this Agreement shall be made or deemed to be made at
and as of the Closing Date, shall survive the Closing Date and shall not be
waived by the execution and delivery of this Agreement.
ARTICLE V
FINANCIAL INFORMATION AND NOTICES
Until all the Obligations have been finally and indefeasibly paid and
satisfied in full, unless consent has been obtained in the manner set forth in
Section 9.12 hereof, the Borrower will furnish to the Lender at the Lender's
Office at the address set forth in Section 9.1 hereof, or such other office as
may be designated by the Lender from time to time:
SECTION 5.1. FINANCIAL STATEMENTS.
(a) QUARTERLY FINANCIAL STATEMENTS. As soon as practicable and in any
event within forty-five (45) days after the end of the first three (3) fiscal
quarters of each Fiscal Year, an unaudited Consolidated balance sheet of the
Borrower and its Subsidiaries as of the close of such fiscal quarter and
Consolidated unaudited statements of income, retained earnings and cash flows
for the fiscal quarter then ended and that portion of the Fiscal Year then
ended, all in reasonable detail setting forth in comparative form the
corresponding figures for the preceding Fiscal Year and the budgeted figures for
the current Fiscal Year and prepared by the Borrower in accordance with GAAP
applied on a basis consistent with that of the preceding period and, if
applicable, containing disclosure of the effect on the financial position or
results of operations of any change in the application of accounting principles
and practices during the period, and certified by the chief financial officer of
the Borrower to present fairly in all material respects the financial condition
of the Borrower and its Subsidiaries as of their respective dates and the
results of operations of the Borrower and its Subsidiaries for their respective
periods then ended, subject to normal year end adjustments; and
(b) ANNUAL FINANCIAL STATEMENTS. As soon as practicable and in any event
within ninety (90) days after the end of each Fiscal Year, an audited
Consolidated balance sheet of the Borrower and its Subsidiaries as of the close
of such Fiscal Year and audited Consolidated statements of income, retained
earnings and cash flows for the Fiscal Year then ended, including the notes
thereto, all in reasonable detail setting forth in comparative form the
corresponding figures for the preceding Fiscal Year and the budgeted figures for
the current Fiscal Year and prepared by an independent certified public
accounting firm acceptable to the Lender in accordance with GAAP applied on a
basis consistent with that of the preceding year, and, if applicable, containing
disclosure to the effect on the financial position or results of operation of
any change in the application of accounting principles and practices during the
year, and accompanied by a report thereon by such certified public accountants
that is not qualified with respect to scope limitations imposed by the Borrower
or any of its Subsidiaries or with respect
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to accounting principles followed by the Borrower or any of its Subsidiaries
not in accordance with GAAP.
SECTION 5.2. OFFICER'S CERTIFICATE. At each time financial statements are
delivered pursuant to Sections 5.1(a) or (b) and at such other times as the
Lender shall reasonably request, a certificate of the chief financial officer of
the Borrower in the form of EXHIBIT B hereto:
(a) stating that to such officer's knowledge, based on a reasonable
examination sufficient to enable him to make an informed statement, no Default
or Event of Default exists, or, if such is not the case, specifying such Default
or Event of Default and its nature, when it occurred, whether it is continuing
and the steps being taken by the Borrower with respect to such Default or Event
of Default; and
(b) setting forth as at the end of such fiscal quarter or Fiscal Year, as
the case may be, the calculations required to establish whether or not the
Borrower was in compliance with the financial covenants set forth in Article VII
hereof as at the end of each respective period.
SECTION 5.3. NOTICE OF PERMITTED SEI TRANSACTION. Promptly upon
completion deliver written evidence, in form and substance reasonably
satisfactory to the Lender, that the Permitted SEI Transaction shall have been
consummated.
SECTION 5.4. OTHER REPORTS.
(a) Promptly upon receipt thereof, copies of all reports, if any,
submitted to the Borrower or its Board of Directors by its independent public
accountants in connection with their auditing function, including, without
limitation, any management report and any management responses thereto;
(b) As soon as practicable, copies of all financial statements and reports
that the Borrower shall send to its shareholders and copies of all registration
statements and all periodic and other reports (including reports on Form 10-Q
and 10-K) which the Borrower shall file with the Securities and Exchange
Commission or any successor commission;
(c) If requested by the Lender, statements in conformity with the
requirements of Federal Reserve Form G-1 or U-1 referred to in Regulations G and
U, respectively, of the Board of Governors of the Federal Reserve System; and
(d) Such other information regarding the operations, business affairs and
financial condition of the Borrower as the Lender or any Lender may reasonably
request.
SECTION 5.5. NOTICE OF LITIGATION AND OTHER MATTERS. Prompt (but in no
event later than five (5) days after an officer of the Borrower obtains
knowledge thereof) telephonic and written notice of:
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(a) the commencement of all proceedings and investigations by or before
any Governmental Authority and all actions and proceedings in any court or
before any arbitrator against or involving the Borrower or any Subsidiary
thereof or any of their respective properties, assets or businesses which,
individually involve an amount in controversy in excess of $1,000,000, or in the
aggregate involve an amount in controversy in excess of $5,000,000;
(b) any labor controversy that has resulted in, or threatens to result in,
a strike or other work action against the Borrower or any Subsidiary thereof;
(c) any attachment, judgment, lien, levy or order which, individually
exceeds $1,000,000, or in the aggregate exceeds $5,000,000, that may be assessed
against or threatened against the Borrower or any Subsidiary thereof;
(d) any Default or Event of Default, or any event which constitutes or
which with the passage of time or giving of notice or both would constitute a
default or event of default under any Material Contract to which the Borrower or
any Subsidiary thereof is a party or by which the Borrower, or any Subsidiary
thereof or any of their respective property may be bound;
(e) (i) the establishment of any new Employee Benefit Plan, the
commencement of contributions to any plan to which the Borrower or any ERISA
Affiliate was not previously contributing or any increase in the benefits of any
existing Employee Benefit Plan, (ii) each funding waiver request filed with
respect to any Employee Benefit Plan and all communications received or sent by
the Borrower or any ERISA Affiliate with respect to such request, (iii) the
failure of the Borrower or any ERISA Affiliate to make a required installment or
payment under Section 302 of ERISA or Section 412 of the Code by the due date,
(iv) any Termination Event or "prohibited transaction", as such term is defined
in Section 406 of ERISA or Section 4975 of the Code, in connection with any
Pension Plan or any trust created thereunder, along with a description of the
nature thereof, what action the Borrower has taken, is taking or proposes to
take with respect thereto and, when known, any action taken or threatened by the
Internal Revenue Service, the Department of Labor or the PBGC with respect
thereto, (v) any favorable or unfavorable determination letter from the Internal
Revenue Service regarding the qualification of an Employee Benefit Plan under
Section 401(a) of the Code (along with a copy thereof), (vi) all notices
received by the Borrower or any ERISA Affiliate of the PBGC's intent to
terminate any Pension Plan or to have a trustee appointed to administer any
Pension Plan, (vii) each Schedule B (Actuarial Information) to the annual report
(Form 5500 Series) filed by the Borrower or any ERISA Affiliate with the
Internal Revenue Service with respect to each Pension Plan, (viii) all notices
received by the Borrower of any ERISA Affiliate from a Multiemployer Plan
sponsor concerning the imposition or amount of withdrawal liability pursuant to
Section 4202 of ERISA and (ix) the Borrower obtaining knowledge or reason to
know that the Borrower or any ERISA Affiliate has filed or intends to file a
notice of intent to terminate any Pension Plan under a distress termination
within the meaning of Section 4041(c) of ERISA;
(f) any event which makes any of the representations set forth in Section
4.1 inaccurate in any material respect; and
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(g) any proposed material amendment, change or modification to, or waiver
of any material provision of, or any termination of, any Material Contract.
SECTION 5.6. ACCURACY OF INFORMATION. All written information, reports,
statements and other papers and data furnished by or on behalf of the Borrower
to the Lender (other than financial forecasts) whether pursuant to this Article
V or any other provision of this Agreement, or any of the other Loan Documents,
shall be, at the time the same is so furnished, complete and correct in all
material respects to the extent necessary to give the Lender complete, true and
accurate knowledge of the subject matter based on the Borrower's knowledge
thereof.
ARTICLE VI
AFFIRMATIVE COVENANTS
Until all of the Obligations have been finally and indefeasibly paid and
satisfied in full, unless consent has been obtained in the manner provided for
in Section 9.12, the Borrower will and will cause each of its Subsidiaries to:
SECTION 6.1. PRESERVATION OF CORPORATE EXISTENCE AND RELATED MATTERS.
Preserve and maintain its separate corporate existence and all rights,
franchises, licenses and privileges necessary to the conduct of its business;
and qualify and remain qualified as a foreign corporation and authorized to do
business in each jurisdiction in which the character of its properties or the
nature of its business requires such qualification or authorization.
SECTION 6.2. MAINTENANCE OF PROPERTY. Protect and preserve all properties
useful in and material to its business, including copyrights, patents, trade
names and trademarks; maintain in good working order and condition all
buildings, equipment and other tangible real and personal property, and, from
time to time make or cause to be made all renewals, replacements and additions
to such property reasonably necessary for the conduct of its business, so that
the business carried on in connection therewith may be properly and
advantageously conducted at all times.
SECTION 6.3. INSURANCE. Maintain insurance with responsible insurance
companies against such risks and in such amounts as are customarily maintained
by similar businesses including without limitation, fire, public liability,
property damage, product liability, workers' compensation and interruption of
business insurance, or as may be required by Applicable Law.
SECTION 6.4. ACCOUNTING METHODS AND FINANCIAL RECORDS; VISITS. Maintain a
system of accounting, and keep such books, records and accounts (which shall be
true and complete in all material respects) as may be required or as may be
necessary to permit the preparation of financial statements in accordance with
GAAP consistently applied and in compliance with the regulations of any
Governmental Authority having jurisdiction over it or any of its properties;
permit representatives of Lender at all reasonable times to have access to and
to examine its
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properties, books and records, to make copies of or take extracts therefrom,
and to discuss Borrower's financial condition with both independent
accountants and employees of Borrower.
SECTION 6.5. PAYMENT AND PERFORMANCE OF OBLIGATIONS. Pay and perform (a)
all Obligations under this Agreement and the other Loan Documents; (b) all
taxes, assessments and other governmental charges that may be levied or assessed
upon it or its property, except to the extent and so long as: (i) the same are
being contested in good faith and by appropriate proceedings in such manner as
not to cause any Material Adverse Effect or the loss of any right of redemption
from any sale thereunder, and (ii) the Borrower shall have set aside on its
books reserves (segregated to the extent required by GAAP) adequate with respect
thereto; and (c) all other indebtedness, obligations and liabilities in
accordance with customary trade practices. Pay all governmental charges or
taxes (except income, franchise or other similar taxes) at any time payable or
ruled to be payable in respect of the existence, execution or delivery of this
Agreement, or the existence or issuance of the Note by reason of any existing or
hereinafter enacted federal or state statute.
SECTION 6.6. COMPLIANCE WITH LAWS AND APPROVALS. Observe and remain in
compliance with all Applicable Laws and maintain in full force and effect all
Governmental Approvals, in each case applicable or necessary to the conduct of
its business including, without limitation, all Environmental Laws and all
Governmental Approvals required thereunder.
SECTION 6.7. ENVIRONMENTAL MANAGEMENT. In addition to and without
limiting the generality of Section 6.6, maintain its business premises (whether
leased or owned in fee) free of any Hazardous Materials the removal of which is
required under Environmental Laws; and adopt and maintain prudent management,
disposal, clean-up and other practices as may be required by Environmental Laws
for all other Hazardous Materials located on its business premises.
SECTION 6.8. COMPLIANCE WITH ERISA. In addition to and without limiting
the generality of Section 6.6, make timely payment of contributions required to
meet the minimum funding standards set forth in ERISA with respect to any
Employee Benefit Plan; not take any action or fail to take action the result of
which could be a material liability to the PBGC or to a Multiemployer Plan; not
participate in any prohibited transaction that could result in any material
civil penalty under ERISA or material tax under the Code; furnish to the Lender
upon the Lender's request such additional information about any Employee Benefit
Plan as may be reasonably requested by the Lender; and operate each Employee
Benefit Plan in such a manner that will not incur any material tax liability
under Section 4980B of the Code or any material liability to any qualified
beneficiary as defined in Section 4980B of the Code.
SECTION 6.9. COMPLIANCE WITH AGREEMENTS. Comply with each material term,
condition and provision of all Material Contracts.
SECTION 6.10. CONDUCT OF BUSINESS. Engage only in businesses in
substantially the same fields as the businesses conducted on the Closing Date.
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SECTION 6.11. FURTHER ASSURANCES. Make, execute and deliver all such
additional and further acts, things, deeds and instruments as the Lender may
reasonably require to document and consummate the transactions contemplated
hereby and to vest completely in and insure the Lender their respective rights
under this Agreement, the Note and the other Loan Documents.
ARTICLE VII
NEGATIVE COVENANTS
Until all of the Obligations have been finally and indefeasibly paid and
satisfied in full, unless consent has been obtained in the manner set forth in
Section 9.12 hereof, the Borrower will not:
SECTION 7.1. FINANCIAL COVENANTS.
(a) TANGIBLE NET WORTH. Permit its Tangible Net Worth on a Consolidated
basis at any time to be less than the sum of (i) $185,000,000 PLUS (ii) 70% of
the Borrower's Net Income (but not less any net losses for any period) earned in
each fiscal quarter starting with the fiscal quarter ended February 28, 1994,
PLUS (iii) 70% of the proceeds (whether in cash, other property, or in kind) of
equity securities or Subordinated Debt issued by the Company from and after the
fiscal quarter ended February 28, 1994, LESS repurchases of the Borrower's
capital stock made after November 30, 1993 and not exceeding $25,000,000 in the
aggregate.
(b) TANGIBLE NET WORTH RATIO. Permit its ratio of Tangible Net Worth to
Total Liabilities at the end of any fiscal quarter to be less than 1.00 to 1.00.
(c) QUICK RATIO. Permit its ratio of (i) the aggregate of cash, Cash
Equivalents, and other marketable securities which are not classified as long
term investments according to GAAP, and current net accounts receivable, to
(ii) Current Liabilities, at end of any fiscal quarter, to be less than 1.00 to
1.00.
(d) CURRENT RATIO. Permit its ratio of Current Assets to Current
Liabilities at the end of any fiscal quarter to be less than 2.0 to 1.0.
(e) CAPITAL EXPENDITURES. Make, commit to make or incur Capital
Expenditures during any Fiscal Year in an aggregate amount in excess of
$15,000,000.
SECTION 7.2. LIMITATIONS ON DEBT. Create or suffer to exist, or permit
any of its Subsidiaries to create or suffer to exist, any Debt except (a) the
Loan provided for herein, (b) loans from Bank of America N.T. & S.A., pursuant
to Credit Agreement dated as of March 1, 1993, as amended, and any replacement
agreement thereof, and Citicorp USA, Inc. pursuant to Credit Agreement dated
March 1, 1993, as amended, and any replacement agreement thereof, (c) other
loans from banks or other financial institutions not to exceed $10,000,000,
(d) indebtedness outstanding as of November 30, 1993 as shown in Borrower's
financial
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statements heretofore delivered to Lender, (e) Subordinated Debt, (f)
indebtedness incurred for the acquisition of goods, supplies, services or
merchandise in the ordinary course of business or (g) secured indebtedness
permitted by Section 7.4 below. For the purposes of this Section, "DEBT" means
(i) indebtedness for borrowed money, (ii) obligations evidenced by bonds,
debentures, notes or other similar instruments, (iii) obligations to pay the
deferred purchase price of property or services, (iv) Capital Lease Obligations,
and (v) obligations under direct or indirect guaranties in respect of, and
obligations (contingent or otherwise) to purchase or otherwise acquire, or
otherwise to assure a creditor against loss in respect of, indebtedness or
obligations of others of the kinds referred to in clause (i) through (iv) above.
SECTION 7.3. LIMITATIONS ON GUARANTEES. Guarantee or otherwise become
responsible (including, but not limited to, an agreement to purchase any
obligations, stock, assets, goods or services or to supply or advance any funds,
assets goods or services) for obligations of any Person in excess of an
aggregate sum of $2,000,000 except by endorsement, in the ordinary course of
collection, of negotiable instruments, except for flooring arrangements with
customers to repurchase goods Borrower sold to such customers, but not to exceed
$2,000,000 in aggregate.
SECTION 7.4. LIMITATIONS ON LIENS. Create or suffer to exist, or permit
any of its Subsidiaries to create or exist, any lien, security interest or other
charge or encumbrance, or any other type of preferential arrangement, upon or
with respect to any of its properties, whether now owned or hereafter acquired,
or assign, or permit any of its Subsidiaries to assign, any right to receive
income, in each case to secure or provide for the payment of any Debt (as
defined in Section 7.2) of any person or entity, other than (a) purchase money
liens or purchase money security interests upon or in any property acquired or
held by the Borrower or any Subsidiary in the ordinary course of business to
secure the purchase price of such property or to secure indebtedness incurred
solely for the purpose of financing the acquisition of such property, including
the mortgage or remortgage of 9320 Telstar Avenue, El Monte, California or (b)
liens or security interests existing on such property at the time of its
acquisition (other than any such lien or security interest created in
contemplation of such acquisition), or (c) mechanics' workmen's materialmen's
landlord's, carrier's or other like liens arising in the ordinary and normal
course of business with respect to obligations which are not due or which are
being contested in good faith, PROVIDED that the aggregate principal amount of
the indebtedness secured by the liens or security interests referred to in
clauses (a), (b), and (c) above shall not exceed $50,000,000 at any time
outstanding.
SECTION 7.5. LIMITATIONS ON LOANS, ADVANCES AND INVESTMENTS. Lend money
or extend credit other than in the ordinary and normal course of its business as
presently conducted and except for loans to its officers or employees not to
exceed individually the sum of $2,000,000, or in the aggregate the sum of
$5,000,000; invest other than in (a) direct obligations of the United States
Government, (b) interest bearing certificates of deposit issued by any
commercial banking institution with total assets of not less than One Hundred
Fifty Million Dollars ($150,000,000) and organized under the laws of the United
States or any State thereof, (c) prime commercial paper rated Prime 1 or higher
by Moody's or A-1 or higher by Standard
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and Poors, and F-1 or higher by Fitch, (d) securities acquired with Borrower
contributions as required under the Marshall Industries Employees Savings and
Retirement Plan, (e) common stock of competitors, suppliers or customers, not
to exceed $250,000 in aggregate per fiscal year and (f) those certain
convertible debentures of Sonepar Electronique International in an amount not
to exceed the lesser of (i) One Hundred Fifty One Million Francs
(L151,000,000) or (ii) Thirty Million Dollars ($30,000,000), as consistent
with the purposes of this Loan Facility.
SECTION 7.6. RESTRICTIONS ON MERGER, SALE OF ASSETS, ETC. Merge or
consolidate with or into, or convey, transfer, lease or otherwise dispose of
(whether now or owned or hereafter acquired) to, or acquire all or substantially
all of the assets of, any person or entity, or permit any of its Subsidiaries to
do so if the aggregate purchase price (in cash and notes) for all such
transactions occurring in any Fiscal Year is in excess of 10% of Borrower's
Consolidated Tangible Net Worth; or liquidate dissolve, merge or consolidated or
commence any proceeding therefor; sell any assets except in the ordinary and
normal course of its business as now conducted, including the acquisition and
sale of office and warehouse facilities for use in the business; or lease,
assign or transfer any substantial part of its fixed assets or business, or any
property or other assets, necessary for the continuances of its business,
including without limitation, the selling of any property or other assets which
includes the leasing back of such property or other assets, PROVIDED, HOWEVER,
that any Subsidiary of Borrower may merge or consolidate with or into, or
dispose of assets to, or acquire assets of, any other Subsidiary of Borrower and
except that any Subsidiary of Borrower may merge into or dispose of assets to
Borrower and Borrower may merge, or consolidate with (or into), and any
Subsidiary of Borrower.
SECTION 7.7. RESTRICTIONS ON DIVIDENDS AND DISTRIBUTIONS. Declare or make
any dividend payment or other distribution of assets, properties, cash, rights,
obligations or securities on account of any shares of any class of capital stock
of the Borrower (permit or any of its Subsidiaries to do so), or purchase,
redeem or otherwise acquire for value (or permit any of its Subsidiaries to do
so) any shares of any class of capital stock of the Borrower or any warrants,
rights or options to acquire any such shares, now or hereafter outstanding,
except that the Borrower or any of its Subsidiaries may (a) declare and make any
dividend payment or other distribution payable solely in common stock of the
Borrower or any of its Subsidiaries, (b) purchase, redeem or otherwise acquire
shares of its common stock or warrants rights or options to acquire any such
shares with the proceeds received from substantially concurrent issue or new
shares of its common stock, (c) declare or pay cash dividends to its
shareholders, and (d) purchase, redeem or otherwise acquire shares of its
capital stock or warrants, rights or options to acquire any such shares for cash
not to exceed the sum of $25,000,000 in the aggregate in any Fiscal Year;
PROVIDED, that, immediately after giving effect to such proposed action, no
Event of Default or Default would exist.
SECTION 7.8. TRANSACTIONS WITH AFFILIATES. Directly or indirectly, (a)
make any loan or advance to, or purchase, assume or guarantee any note or other
obligation to or from, any of its officers, directors, shareholders or other
Affiliates, or to or from any member of the immediate family of any of its
officers, directors, shareholders or other Affiliates, or subcontract
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any operations to any of its Affiliates, or (b) enter into, or be a party to,
any transaction with any of its Affiliates, except as permitted by Section
7.5 above or except pursuant to the reasonable requirements of its business
and upon fair and reasonable terms that are fully disclosed to and approved
in writing by the Lender and are no less favorable to it than it would obtain
in a comparable arm's length transaction with a Person not its Affiliate.
Furthermore, it is understood that neither the Permitted SEI Transaction nor
any purchase contracts entered into by the Borrower with Amistar, Inc. in the
ordinary course of business shall constitute a transaction with an Affiliate
for the purposes of this Section 7.8.
SECTION 7.9. REGULATIONS G, T AND U. Use of proceeds of the Loan
hereunder, directly or indirectly, to purchase or carry any margin stock (within
the meaning of Regulations G, T and U of the Board of Governors of the Federal
Reserve System) or to extend credit to others for the purpose of purchasing or
carrying, directly or in directly, any margin stock.
SECTION 7.10. LEASE OBLIGATIONS. Create or suffer to exist, or permit any
of its Subsidiaries to create or suffer to exist, any obligations for the
payment of rental for any property under leases or agreements to lease having a
term of one year or more which would cause the direct or contingent liabilities
of the Borrower and its Subsidiaries, on a Consolidated basis, in respect of all
such obligations to exceed $6,000,000 payable in any period of twelve (12)
consecutive calendar months excluding rentals for Borrower's electronic data
processing equipment but including, without limitation, all other rentals
capitalized under FASB 13.
SECTION 7.11. INTENTIONALLY OMITTED.
SECTION 7.12. COMPLIANCE WITH ERISA.
(a) Permit the occurrence of any Termination Event which would result in a
liability to the Borrower or any ERISA Affiliate in excess of $1,000,000;
(b) Permit the present value of all benefit liabilities under all Pension
Plans to exceed the current value of the assets of such Pension Plans allocable
to such benefit liabilities by more than $1,000,000;
(c) Permit any accumulated funding deficiency in excess of $1,000,000 (as
defined in Section 302 of ERISA and Section 412 of the Code) with respect to any
Pension Plan, whether or not waived;
(d) Fail to make any contribution or payment to any Multiemployer Plan
which the Borrower or any ERISA Affiliate may be required to make under any
agreement relating to such Multiemployer Plan, or any law pertaining thereto
which results in or is likely to result in a liability in excess of $1,000,000;
(e) Engage, or permit the Borrower or any ERISA Affiliate to engage, in
any prohibited transaction under Section 406 of ERISA or Section 4975 of the
Code for which a civil
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penalty pursuant to Section 502(i) of ERISA or a tax pursuant to Section 4975
of the Code in excess of $1,000,000 is imposed;
(f) Permit the establishment of any Employee Benefit Plan providing post-
retirement welfare benefits or establish or amend any Employee Benefit Plan
which establishment or amendment could result in liability to the Borrower or
any ERISA Affiliate or increase the obligation of the Borrower or any ERISA
Affiliate to a Multiemployer Plan which liability or increase, individually or
together with all similar liabilities and increases, is material to the Borrower
or any ERISA Affiliate; or
(g) Fail, or permit the Borrower or any ERISA Affiliate to fail, to
establish, maintain and operate each Employee Benefit Plan in compliance in all
material respects with the provisions of ERISA, the Code and all other
applicable laws and the regulations and interpretations thereof.
ARTICLE VIII
DEFAULT AND REMEDIES
SECTION 8.1. EVENTS OF DEFAULT. Each of the following shall constitute an
Event of Default, whatever the reason for such event and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment or order of any court or any order, rule or regulation of any
Governmental Authority or otherwise:
(a) DEFAULT IN PAYMENT OF LOANS. The Borrower shall default in any
payment of principal of, or interest on, any Loan or the Note when and as due
(whether at maturity, by reason of acceleration or otherwise) and such default
shall continue for ten (10) days after such due date.
(b) OTHER PAYMENT DEFAULT. The Borrower shall default in the payment when
and as due of any other Obligation and such default shall continue for five (5)
days after written notice thereof has been given to the Borrower by the Lender
at the address specified herein.
(c) MISREPRESENTATION. Any representation or warranty made or deemed to
be made by the Borrower under this Agreement, any Loan Document, or any
amendment hereto or thereto, shall at any time prove to have been incorrect or
misleading in any material respect when made.
(d) DEFAULT IN PERFORMANCE OF CERTAIN COVENANTS. The Borrower shall
default in the performance or observance of any covenant or agreement contained
in Sections 5.5, 5.6, 6.1, 6.3, 6.6, or Section 7.1 through and including
Section 7.7 of this Agreement.
(e) DEFAULT IN PERFORMANCE OF OTHER COVENANTS AND CONDITIONS. The
Borrower shall default in the performance or observance of any term, covenant,
condition or agreement
35
<PAGE>
contained in this Agreement (other than as specifically provided for
otherwise in this Section 8.1) and such default shall continue for a period
of ten (10) days after written notice thereof has been given to the Borrower
by the Lender; PROVIDED, that if the Borrower shall diligently pursue the
cure of such default during such ten (10) day period and such default would
not, in the reasonable judgment of the Lenders, have a material adverse
effect on the business or financial condition of the Borrower, the Borrower
shall have such longer period, not to exceed forty-five (45) days, as may be
necessary to cure such default.
(f) LOAN DOCUMENTS. Any event of default shall occur under any Loan
Document other than this Agreement.
(g) DEBT CROSS-DEFAULT. The Borrower shall (i) default in the payment of
any Debt (other than the Notes) or Operating Leases the aggregate outstanding
amount of which or aggregate obligations in respect of which is in excess of
$2,000,000 beyond the period of grace, if any, provided in the instrument or
agreement under which such Debt or Operating Leases were created; or (ii)
default in the observance or performance of any other agreement or condition
relating to any Debt (other than the Notes) or Operating Leases the aggregate
outstanding amount of which or aggregate obligations in respect of which is in
excess of $2,000,000 or contained in any instrument or agreement evidencing,
securing or relating thereto or any other event shall occur or condition exist,
the effect of which default or other event or condition is to cause, or to
permit the holder or holders of such Debt or Operating Leases (or a trustee or
agent on behalf of such holder or holders) to cause, with the giving of notice
if required, any such Debt or Operating Leases to become due prior to its stated
maturity (any applicable grace period having expired).
(h) OTHER CROSS-DEFAULTS. The Borrower shall default in the payment when
due, or in the performance or observance, of any obligation or condition of any
Material Contract the breach of which could have a material adverse effect on
the Borrower unless, but only as long as, the existence of any such default is
being contested by the Borrower in good faith by appropriate proceedings and
adequate reserves in respect thereof have been established on the books of the
Borrower to the extent required by GAAP.
(i) CHANGE OF CONTROL. (i) any Person or two or more Persons acting in
concert shall have acquired beneficial ownership (within the meaning of Rule
13d-3 of the Securities and Exchange Commission under the Securities Exchange
Act of 1934), directly or indirectly, of securities of the Borrower (or other
securities convertible into such securities) representing 35% or more of the
combined voting power of all securities of the Borrower entitled to vote in the
election of directors, other than securities having such power only by reason of
the happening of the contingency; or (ii) any Person or two or more Persons
acting in concert shall have acquired by contract or otherwise, or shall have
entered into a contract or arrangement that upon consummation, will result in
its or their acquisition of, the power to exercise, directly or indirectly, a
controlling influence over the management or policies of the Borrower; or (iii)
the existing directors of the Borrower for any reason, other than the death or
incapacity of any such existing directors, cease to constitute a majority of the
Borrower's board of directors. "Existing
36
<PAGE>
directors" means (x) individuals constituting the Borrower's board of
directors on the Closing Date, and (y) any subsequent director whose election
by the Borrower's stockholders was approved by a vote of at least two-thirds
(2/3) of the directors then in office, which directors either were directors
on the Closing Date or whose election or nomination for election was
previously so approved.
(j) VOLUNTARY BANKRUPTCY PROCEEDING. The Borrower shall (i) commence a
voluntary case under the federal bankruptcy laws (as now or hereafter in
effect); (ii) file a petition seeking to take advantage of any other laws,
domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding
up or composition for adjustment of debts; (iii) consent to or fail to contest
in a timely and appropriate manner any petition filed against it in an
involuntary case under such bankruptcy laws or other laws; (iv) apply for or
consent to, or fail to contest in a timely and appropriate manner, the
appointment of, or the taking of possession by, a receiver, custodian, trustee,
or liquidator of itself or of a substantial part of its property, domestic or
foreign; (v) admit in writing its inability to pay its debts as they become due;
(vi) make a general assignment for the benefit of creditors; or (vii) take any
corporate action for the purpose of authorizing any of the foregoing.
(k) INVOLUNTARY BANKRUPTCY PROCEEDING. A case or other proceeding shall
be commenced against the Borrower in any court of competent jurisdiction seeking
(i) relief under the federal bankruptcy laws (as now or hereafter in effect) or
under any other laws, domestic or foreign, relating to bankruptcy, insolvency,
reorganization, winding up or adjustment of debts; or (ii) the appointment of a
trustee, receiver, custodian, liquidator or the like for the Borrower or for all
or any substantial part of their respective assets, domestic or foreign, and
such case or proceeding shall continue undismissed or unstayed for a period of
sixty (60) consecutive calendar days, or an order granting the relief requested
in such case or proceeding (including, but not limited to, an order for relief
under such federal bankruptcy laws) shall be entered.
(l) ERISA EVENTS. The occurrence of any of the following events: (i) the
Borrower or any ERISA Affiliate fails to make full payment when due of all
amounts which, under the provisions of any Pension Plan or Section 412 of the
Code, the Borrower or any ERISA Affiliate is required to pay as contributions
thereto; or (ii) an accumulated funding deficiency in excess of $1,000,000,
occurs or exists, whether or not waived, with respect to any Pension Plan; or
(iii) a Termination Event; or (iv) the Borrower or any ERISA Affiliate as
employers under one or more Multiemployer Plans makes a complete or partial
withdrawal from such Multiemployer Plans and the plan sponsor of such
Multiemployer Plans notifies such withdrawing employer that such employer has
incurred a withdrawal liability requiring payments in an amount exceeding
$1,000,000.
(m) JUDGMENT. A judgment or order for the payment of money which exceeds
$1,000,000 in amount, or which when combined with any such other unsatisfied
judgment or order for the payment of money exceeds $5,000,000, shall be entered
against the Borrower by
37
<PAGE>
any court and such judgment or order shall continue undischarged or unstayed
for a period of thirty (30) days.
(n) ATTACHMENT. A warrant or writ of attachment or execution or similar
process shall be issued against any property of the Borrower which exceeds
$1,000,000 in value, or which when combined with any such other unsatisfied
warrant, writ or similar process exceeds $5,000,000 in value, and such warrant
or process shall continue undischarged or unstayed for a period of thirty (30)
days.
SECTION 8.2. REMEDIES. Upon the occurrence of an Event of Default, the
Lender may by notice to the Borrower:
(a) ACCELERATION; TERMINATION OF FACILITIES. Declare the principal of
and interest on the Loans and the Note at the time outstanding, and all other
amounts owed to the Lender under this Agreement or any of the other Loan
Documents and all other Obligations, to be forthwith due and payable, whereupon
the same shall immediately become due and payable without presentment, demand,
protest or other notice of any kind, all of which are expressly waived, anything
in this Agreement or the other Loan Documents to the contrary notwithstanding.
(b) RIGHTS OF COLLECTION. Exercise on behalf of the Lender all of its
other rights and remedies under this Agreement, the other Loan Documents and
Applicable Law, in order to satisfy all of the Borrower's Obligations.
SECTION 8.3. RIGHTS AND REMEDIES CUMULATIVE; NON-WAIVER; ETC. The
enumeration of the rights and remedies of the Lender set forth in this Agreement
is not intended to be exhaustive and the exercise by the Lender of any right or
remedy shall not preclude the exercise of any other rights or remedies, all of
which shall be cumulative, and shall be in addition to any other right or remedy
given hereunder or under the Loan Documents or that may now or hereafter exist
in law or in equity or by suit or otherwise. No delay or failure to take action
on the part of the Lender in exercising any right, power or privilege shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right, power or privilege preclude other or further exercise thereof or the
exercise of any other right, power or privilege or shall be construed to be a
waiver of any Event of Default. No course of dealing between Borrower and the
Lender or their respective agents or employees shall be effective to change,
modify or discharge any provision of this Agreement or any of the other Loan
Documents or to constitute a waiver of any Event of Default.
38
<PAGE>
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. NOTICES.
(a) METHOD OF COMMUNICATION. Except as otherwise provided in this
Agreement, all notices and communications hereunder shall be in writing, or by
telephone subsequently confirmed in writing. Any notice shall be effective if
delivered by hand delivery or sent via telecopy, recognized overnight courier
service or certified mail, return receipt requested, and shall be presumed to be
received by a party hereto (i) on the date of delivery if delivered by hand or
sent by telecopy, (ii) on the next Business Day if sent by recognized overnight
courier service and (iii) on the third Business Day following the date sent by
certified mail, return receipt requested. A telephonic notice to the Lender as
understood by the Lender will be deemed to be the controlling and proper notice
in the event of a discrepancy with or failure to receive a confirming written
notice.
(b) ADDRESSES FOR NOTICES. Notices to any party shall be sent to it at
the following addresses, or any other address as to which all the other parties
are notified in writing.
If to the Borrower: Marshall Industries
9320 Telstar Avenue
El Monte, California 91731
Attn: Henry W. Chin,
Chief Financial Officer
Telephone No.: (818) 307-6232
Telecopy No.: (818) 307-6257
If to the Lender: First Union National Bank
of North Carolina
One First Union Center
301 South College Street
Charlotte, North Carolina 28288
Attention: Leo Leitner
Telephone No.: (704) 382-5210
Telecopy No.: (704) 374-2802
(c) LENDER'S OFFICE. The Lender hereby designates its office located at
the address set forth above, or any subsequent office which shall have been
specified for such purpose by written notice to the Borrower, as the Lender's
Office referred to herein, to which payments due are to be made.
39
<PAGE>
SECTION 9.2. EXPENSES. The Borrower will pay all out-of-pocket expenses
of the Lender in connection with: (a) the preparation, execution and delivery
of this Agreement and each of the other Loan Documents, whenever the same shall
be executed and delivered, including appraiser's fees, search fees, recording
fees, taxes and the reasonable fees and disbursements of counsel for the Lender;
(b) the preparation, execution and delivery of any waiver, amendment or consent
by the Lender relating to this Agreement or any of the Loan Documents including
fees and disbursements of counsel for the Lender; and (c) upon an Event of
Default, consulting with one or more Persons, including accountants and
attorneys, concerning or related to the nature, scope or value of any right or
remedy of the Lender hereunder or under any of the other Loan Documents,
including any review of factual matters in connection therewith, which expenses
shall include the fees and disbursements of such Persons. In addition, the
Borrower will pay all out-of-pocket expenses of the Lender in connection with
prosecuting or defending any claim in any way arising out of, related to,
connected with, or enforcing any provision of, this Agreement or any of the
other Loan Documents, which expenses shall include the fees and disbursements of
counsel and of experts and other consultants retained by the Lender.
SECTION 9.3. STAMP AND OTHER TAXES. The Borrower will pay any and all
stamp, registration, recordation and similar taxes, fees or charges and shall
indemnify the Lender against any and all liabilities with respect to or
resulting from any delay in the payment or omission to pay any such taxes, fees
or charges which may be payable or determined to be payable in connection with
the execution, delivery, performance or enforcement of this Agreement and any of
the other Loan Documents or the perfection of any rights thereunder.
SECTION 9.4. SET-OFF. In addition to any rights now or hereafter granted
under Applicable Law and not by way of limitation of any such rights, upon and
after the occurrence of any Event of Default and during the continuance thereof,
the Lender, any Affiliates of the Lender and any participant of the Lender in
accordance with Section 9.11 are hereby authorized by the Borrower at any time
or from time to time, without notice to the Borrower or to any other Person, any
such notice being hereby expressly waived, to set off and to appropriate and to
apply any and all deposits (general or special, time or demand, including, but
not limited to, indebtedness evidenced by certificates of deposit, whether
matured or unmatured, excluding government securities required by Applicable Law
to be held as security for worker's compensation and similar claims) and any
other indebtedness at any time held or owing by the Lender or any Affiliate of
the Lender, or any participant to or for the credit or the account of the
Borrower against and on account of the Obligations (applied to current
Obligations first) irrespective of whether or not (a) the Lender shall have made
any demand under this Agreement or any of the other Loan Documents, or (b) the
Lender shall have declared any or all of the Obligations to be due and payable
as permitted by Section 8.2 and although such Obligations shall be contingent or
unmatured.
SECTION 9.5. GOVERNING LAW. This Agreement, the Note and the other Loan
Documents, unless otherwise expressly set forth therein, shall be governed by,
construed and
40
<PAGE>
enforced in accordance with the laws of the State of North Carolina, without
reference to the conflicts or choice of law principles thereof.
SECTION 9.6. CONSENT TO JURISDICTION. The Borrower hereby irrevocably
consents to the personal jurisdiction of the state and federal courts located in
Mecklenburg County, North Carolina, in any action, claim or other proceeding
arising out of any dispute in connection with this Agreement, the Note and the
other Loan Documents, any rights or obligations hereunder or thereunder, or the
performance of such rights and obligations. The Borrower hereby irrevocably
consents to the service of a summons and complaint and other process in any
action, claim or proceeding brought by the Lender in connection with this
Agreement, the Note or the other Loan Documents, any rights or obligations
hereunder or thereunder, or the performance of such rights and obligations, on
behalf of itself or its property, in the manner specified in Section 9.1.
Nothing in this Section 9.6 shall affect the right of the Lender to serve legal
process in any other manner permitted by Applicable Law or affect the right of
the Lender to bring any action or proceeding against the Borrower or its
properties in the courts of any other jurisdictions.
SECTION 9.7. WAIVER OF JURY TRIAL. THE LENDER AND THE BORROWER HEREBY
IRREVOCABLY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL WITH RESPECT TO ANY
ACTION, CLAIM OR OTHER PROCEEDING ARISING OUT OF ANY DISPUTE IN CONNECTION WITH
THIS AGREEMENT, THE NOTES OR THE OTHER LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS
HEREUNDER OR THEREUNDER, OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS.
SECTION 9.8. REVERSAL OF PAYMENTS. To the extent the Borrower makes a
payment or payments to the Lender or the Lender receives any payment for the
Borrower's benefit, which payments or proceeds or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then, to
the extent of such payment or proceeds received, the Obligations or part thereof
intended to be satisfied shall be revived and continued in full force and effect
as if such payment or proceeds had not been received by the Lender.
SECTION 9.9. INJUNCTIVE RELIEF. The Borrower recognizes that, in the
event the Borrower fails to perform, observe or discharge any of its obligations
or liabilities under this Agreement, any remedy of law may prove to be
inadequate relief to the Lender. Therefore, the Borrower agrees that the Lender,
at the Lender's option, shall be entitled to temporary and permanent injunctive
relief in any such case without the necessity of proving actual damages.
SECTION 9.10. ACCOUNTING MATTERS. All financial and accounting
calculations, measurements and computations made for any purpose relating to
this Agreement, including, without limitation, all computations utilized by the
Borrower to determine whether it is in compliance with any covenant contained
herein, shall, except as otherwise expressly
41
<PAGE>
contemplated hereby or unless there is an express written direction by the
Lender to the contrary agreed to by the Borrower, be performed in accordance
with GAAP. In the event that changes in GAAP shall be mandated by the
Financial Accounting Standards Board, or any similar accounting body of
comparable standing, or shall be recommended by the Borrower's certified
public accountants, to the extent that such changes would modify such
accounting terms or the interpretation or computation thereof, such changes
shall be followed in defining such accounting terms only from and after the
date the Borrower and the Lender shall have amended this Agreement to the
extent necessary to reflect any such changes in the financial covenants and
other terms and conditions of this Agreement.
SECTION 9.11. ASSIGNMENT. The terms hereof shall be binding upon and
inure to the benefit of the heirs, successors, assigns, and personal
representatives of the parties hereto; PROVIDED, that the Borrower shall not
assign this Agreement or any of its rights, interests, duties or obligations
hereunder or any Loan proceeds or any other moneys to be advanced hereunder in
whole or in part without the prior written consent of the Lender and that any
such assignment (whether voluntary or by operation of law) without said consent
shall be void. It is expressly recognized and agreed that the Lender may
assign, or grant participation in, this Agreement, the Note and any other Loan
Document, in whole or in part to any other person, firm or legal entity provided
that all of the provisions hereof shall continue in full force and effect and,
in the event of such assignment, the Lender shall thereafter be relieved of all
liability hereunder and any Loan disbursements made by any assignee shall be
deemed made in pursuance and not in modification hereof and shall be evidenced
by the Note.
SECTION 9.12. AMENDMENTS, WAIVERS AND CONSENTS. Any term, covenant,
agreement or condition of this Agreement or of any other Loan Document may be
amended or waived by the Lender, and any consent given by the Lender if, but
only if, such amendment, waiver or consent is in writing signed by the Lender
and, in the case of an amendment, by the Borrower.
SECTION 9.13. PERFORMANCE OF BORROWER'S DUTIES. The Borrower's
obligations under this Agreement and each of the other Loan Documents shall be
performed by the Borrower at its sole cost and expense.
SECTION 9.14. INDEMNIFICATION. The Borrower agrees to reimburse the
Lender for all reasonable costs and expenses, including counsel fees and
disbursements, incurred, and to indemnify and hold the Lender harmless from and
against all losses suffered by the Lender in connection with (a) the exercise by
the Lender of any right (other than the rights described in Section 9.11 hereof)
or remedy granted to them under this Agreement or any of the other Loan
Documents, (b) any claim, and the prosecution or defense thereof, arising out of
or in any way connected with this Agreement or any of the other Loan Documents,
and (c) the collection or enforcement of the Obligations or any of them;
PROVIDED, that the Borrower shall not be obligated to reimburse the Lender for
costs and expenses, or indemnify the Lender for any loss, resulting from the bad
faith, gross negligence or willful misconduct of the Lender.
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<PAGE>
SECTION 9.15. ALL POWERS COUPLED WITH INTEREST. All powers of attorney
and other authorizations granted to the Lender and any Persons designated by the
Lender pursuant to any provisions of this Agreement or any of the other Loan
Documents shall be deemed coupled with an interest and shall be irrevocable so
long as any of the Obligations remain unpaid or unsatisfied.
SECTION 9.16. SURVIVAL OF INDEMNITIES. Notwithstanding any termination of
this Agreement, the indemnities to which the Lender is entitled under the
provisions of this Article IX and any other provision of this Agreement and the
other Loan Documents shall continue in full force and effect and shall protect
the Lender against events arising after such termination as well as before.
SECTION 9.17. TITLES AND CAPTIONS. Titles and captions of Articles,
Sections and subsections in this Agreement are for convenience only, and neither
limit nor amplify the provisions of this Agreement.
SECTION 9.18. SEVERABILITY OF PROVISIONS. Any provision of this Agreement
or any other Loan Document which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective only to the extent
of such prohibition or unenforceability without invalidating the remainder of
such provision or the remaining provisions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.
SECTION 9.19. COUNTERPARTS. This Agreement may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and shall be binding
upon all parties, their successors and assigns, and all of which taken together
shall constitute one and the same agreement.
SECTION 9.20. TERM OF AGREEMENT. This Agreement shall remain in effect
from the Closing Date through and including the date upon which all Obligations
shall have been indefeasibly and irrevocably paid and satisfied in full. No
termination of this Agreement shall affect the rights and obligations of the
parties hereto arising prior to such termination.
SECTION 9.21. INCONSISTENCIES WITH OTHER DOCUMENTS. In the event there is
a conflict or inconsistency between this Agreement, the Note and the other Loan
Documents, the terms of this Agreement shall control.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers, all as of the day and year first
written above.
BORROWER:
[CORPORATE SEAL]
MARSHALL INDUSTRIES
Attest:
By: /s/ Henry W. Chin By: /s/ Robert Rodin
------------------------------ ------------------------------
Name: Henry W. Chin Name: Robert Rodin
--------------------------- ----------------------------
Title: Vice President Finance and Title: President
Secretary --------------
LENDER:
[SEAL]
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA
Attest:
By: /s/ Michael T. Grady By: /s/ Leo G. Leitner
------------------------------ ------------------------------
Name: Michael T. Grady Name: Leo G. Leitner, III
--------------------------- ----------------------------
Title: Vice President and Secretary Title: Vice-President
---------
44
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LIST OF EXHIBITS
Exhibit A -- Form of Term Note
Exhibit B -- Form of Officer's Certificate
<PAGE>
LIST OF SCHEDULES
Schedule 4.1(t) - List of Debt, Operating Leases and Guarantees
Schedule 4.1(v) - Litigation
<PAGE>
EXHIBIT A
TERM NOTE
$25,000,000 ____________, 1994
FOR VALUE RECEIVED, the undersigned MARSHALL INDUSTRIES, INC., a
California corporation (the "Borrower"), hereby promises to pay to the order
of FIRST UNION NATIONAL BANK OF NORTH CAROLINA, a national banking
association (the "Bank"), at the times, at the place and in the
manner provided in the Term Loan Agreement hereinafter referred to, the
principal sum of TWENTY FIVE MILLION DOLLARS ($25,000,000), together with
interest at the rates as in effect from time to time with respect to each
portion of the principal amount hereof, determined and payable as provided in
Article II of the Term Loan Agreement.
This Note is the Term Note referred to in, and is entitled to the
benefits of, the Term Loan Agreement dated as of August 26, 1994 between the
Borrower and the Bank (as amended or supplemented from time to time, the
"Term Loan Agreement"). The Term Loan Agreement contains, among other things,
provisions for the time, place and manner of payment of this Note, the
determination of the interest rate borne by and fees payable in respect of
this Note, the acceleration of the payment of this Note upon the happening of
certain stated events and the mandatory prepayment of this Note under certain
circumstances.
The Borrower agrees to pay on demand all costs of collection, including
reasonable attorneys' fees, if any part of this Note, principal or interest,
is collected after maturity with the aid of an attorney.
Presentment for payment, notice of dishonor, protest and notice of
protest are hereby waived. All amounts owing hereunder are payable by the
Borrower without relief from any valuation or appraisal laws.
This Note may not be changed, modified or terminated orally, but only by
an agreement in writing signed by the party to be charged.
THIS NOTE IS MADE AND DELIVERED IN THE STATE OF NORTH CAROLINA AND SHALL
BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF
NORTH CAROLINA, WITHOUT REFERENCE TO THE CONFLICTS OR CHOICE OF LAW
PRINCIPLES THEREOF.
1
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IN WITNESS WHEREOF, the Borrower has caused this Note to be executed by
its duly authorized officer as of the day and year first above written.
BORROWER:
MARSHALL INDUSTRIES, a
California corporation
[CORPORATE SEAL]
Attest: By: /s/ ROBERT RODIN
---------------------------------
Name: Robert Rodin
--------------------------------
Its: President
---------------------------------
/s/ HENRY W. CHIN
- ------------------------------
Vice President, Finance and Secretary
2
<PAGE>
EXHIBIT B
OFFICER'S CERTIFICATE
The undersigned, on behalf of MARSHALL INDUSTRIES, a California
corporation (the "Borrower"), hereby certifies the following to FIRST UNION
NATIONAL BANK OF NORTH CAROLINA, a national banking association (the
"Lender"):
1. This Certificate is delivered pursuant to Section 5.2 of the Term
Loan Agreement (the "Agreement") dated as of August 26, 1994 by and among the
Borrower and the Lender. The undersigned acknowledges that (a) in entering
into the Agreement, the Lender is entitled to rely and has, in fact, relied
on the information, contained herein and (b) any successor or assign of the
Lender is entitled to rely on the information contained herein. Capitalized
terms used herein and not defined herein shall have the meanings assigned
thereto in the Credit Agreement.
2. All representations and warranties of the Borrower contained in the
Agreement and the other Loan Documents are true, correct and complete in all
material respects.
3. The Borrower is not in violation of any of the covenants contained in
the Agreement and the other Loan Documents.
4. After giving effect to the transactions contemplated by the
Agreement, no Default or Event of Default has occurred and is continuing.
5. The Borrower has satisfied each of the closing conditions set forth
in the Agreement.
WITNESS the following signature as of the 26th day of August, 1994.
/s/ HENRY W. CHIN [SEAL]
--------------------------------------------
Name: Henry W. Chin
---------------------------------------
Title: Vice President, Finance and Secretary
---------------------------------------
<PAGE>
EXHIBIT 23
- --------------------------------------------------------------------------------
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our report included in this Form 10-K, into
Marshall Industries' previously filed Registration Statements on
Form S-8, File Numbers 33-1587 and 33-82510.
ARTHUR ANDERSEN LLP
Los Angeles, California
August 26, 1996
- ---------
28
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MARSHALL
ANNUAL REPORT ON FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
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0
0
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