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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
/x/ QUARTERLY REPORT UNDER SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended August 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.
MARSHALL INDUSTRIES
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 95-2048764
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9320 Telstar Avenue, El Monte, California 91731-2895
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (818) 307-6000
Common Stock outstanding by class as of August 31, 1996
Common Stock 17,064,764 shares
- --------------------------------------------------------------------------------
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
1
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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
----- -----
2
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MARSHALL INDUSTRIES
CONDENSED BALANCE SHEETS
(000's Omitted)
ASSETS
------
August 31, May 31,
1996 1996
(Unaudited) (Audited)
----------- ---------
Current Assets:
Cash and cash equivalents $ 10,928 $ 2,208
Receivables - net 120,641 140,785
Inventories 229,933 240,882
Deferred income tax benefits 13,845 13,845
Prepaid expenses 830 759
-------- --------
Total Current Assets 376,177 398,479
-------- --------
Property, Plant and Equipment, net
of accumulated depreciation and
amortization of $40,320 at
August 31, 1996 and $38,610
at May 31, 1996 39,258 40,165
Note Receivable (Note 4) 31,519 30,689
Other Assets - net 2,841 3,278
-------- --------
Total Assets $449,795 $472,611
-------- --------
-------- --------
LIABILITIES AND SHAREHOLDERS' INVESTMENT
----------------------------------------
Current Liabilities:
Accounts payable and accrued
expenses $94,011 $112,857
Income taxes payable 4,731 1,114
-------- --------
Total Current Liabilities 98,742 113,971
-------- --------
Term Loan 15,000 25,000
Deferred Income Tax Liabilities 3,646 3,646
Shareholders' Investment 332,407 329,994
-------- --------
3
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Total Liabilities and
Shareholders' Investment $449,795 $472,611
-------- --------
-------- --------
The accompanying notes are an integral part of these condensed balance sheets.
4
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MARSHALL INDUSTRIES
CONDENSED INCOME STATEMENTS
(Unaudited)
(000's omitted except per share data)
THREE MONTHS ENDED
AUGUST 31,
1996 1995
---- ----
Net sales $269,290 $275,870
Cost of sales 222,428 224,925
-------- --------
Gross profit 46,862 50,945
Selling, general and
administrative expenses 31,791 29,898
-------- --------
Income from operations 15,071 21,047
Interest (income)
expense- net (137) 308
-------- --------
Income before income taxes 15,208 20,739
Provision for income taxes 6,425 8,540
-------- --------
Net income $ 8,783 $ 12,199
-------- --------
-------- --------
Net income per share $ .51 $ .70
-------- --------
-------- --------
Average number of shares outstanding 17,350 17,499
-------- --------
-------- --------
The accompanying notes are an integral part of these condensed income
statements.
5
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MARSHALL INDUSTRIES
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(000's omitted)
THREE MONTHS ENDED
AUGUST 31,
1996 1995
---- ----
Cash flows from operating activities:
Net income $ 8,783 $ 12,199
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 2,250 1,844
Net decrease (increase) in
current assets and liabilities 15,793 (8,283)
Interest on note receivable (830) (411)
Other operating activities (9) 7
-------- --------
Net cash provided by operating activities 25,987 5,356
Cash flows from investing activities:
Capital expenditures (814) (1,005)
Deferred software costs (83) ---
-------- --------
Net cash used for investing activities (897) (1,005)
Cash flows from financing activities:
Net paydown under bank
lines of credit --- (6,000)
Repayments of other long-term debt (10,000) (615)
Purchase of common stock (6,370) ---
Other financing activities --- 89
-------- --------
Net cash used in financing activities (16,370) (6,526)
Net increase (decrease) in cash 8,720 (2,175)
Cash and cash equivalents
at the beginning of the period 2,208 3,508
-------- --------
Cash and cash equivalents
at the end of the period $ 10,928 $ 1,333
-------- --------
-------- --------
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Cash payments during the quarter
for the following:
Interest $ 641 $ 573
-------- --------
-------- --------
Income taxes $ 2,808 $ 4,664
-------- --------
-------- --------
The accompanying notes are an integral part of these condensed cash flow
statements.
7
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MARSHALL INDUSTRIES
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE 1: GENERAL
The condensed financial statements included herein have been prepared by the
Company, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are adequate to
make the information presented not misleading. These condensed financial
statements should be read in conjunction with the financial statements and the
notes thereto in the Company's annual report on Form 10-K for the year ended May
31, 1996.
In the opinion of the Company, the unaudited condensed financial statements
reflect all adjustments (consisting of normal recurring accruals) considered
necessary to present fairly the Company's financial position as of August 31,
1996 and the results of its operations and cash flows for the three month
periods ended August 31, 1996 and 1995.
NOTE 2: ACCOUNTING POLICIES
Reference is made to Note 1 of Notes to Financial Statements in the Company's
annual report on Form 10-K for the summary of significant accounting policies.
NOTE 3: CASH EQUIVALENTS
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
NOTE 4: INVESTMENT IN SONEPAR ELECTRONIQUE INTERNATIONAL
8
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As described in Note 6 to the Financial Statements in the Company's Annual
Report on Form 10-K for the year ended May 31, 1996, the Company invested 151
million French Francs (approximately $28 million in U.S. dollars) in Sonepar
Electronique International ("SEI"), one of the 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.
NOTE 5: BANK LINES OF CREDIT
On August 12, 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
agreements. This increase in borrowing capabilities was done primarily to meet
the requirements of the stock purchase program described in Note 6.
NOTE 6: 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. The 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.
NOTE 7: JOINT VENTURE
As described in Note 8 to the Financial Statements in the Company's Report on
Form 10-K for the year ended May 31, 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.
9
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MARSHALL INDUSTRIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
CONDENSED STATEMENTS OF INCOME
THREE MONTHS ENDED
AUGUST 31,
------------------------
1996 1995
---- ----
Net sales 100.0% 100.0%
Cost of sales 82.6 81.5
-------- --------
Gross profit 17.4 18.5
Selling, general and administrative expenses 11.8 10.9
-------- --------
Income from operations 5.6 7.6
Interest (income) expense - net (.1) .1
-------- --------
Income before provision for income taxes 5.7 7.5
Provision for income taxes 2.4 3.1
-------- --------
Net income 3.3% 4.4%
-------- --------
-------- --------
THREE MONTH PERIODS ENDED AUGUST 31, 1996 AND 1995
The decrease in net sales for the three months ended August 31, 1996, the first
quarter of fiscal 1997, as compared to fiscal 1996, was primarily due to a
decrease in the sales of semiconductor products. The sales of such products
decreased by $6,519,000 for the first quarter of fiscal 1997 as compared to the
same period of a year ago. This decrease in semiconductor sales was caused
mainly by the significant market decline in the pricing of memory products that
began in December, 1995. These products accounted for approximately 18% and 19%,
respectively, of the Company's first quarter fiscal 1997 and 1996 net sales.
The sales of the other products declined modestly or remained unchanged between
periods.
10
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The Company has experienced industry-wide shortages and excess supplies from
time to time. Beginnning the latter part of calendar 1995, there has been an
increase in the availability of many products and a moderation in demand for
some of the products that the Company sells.
The decrease in net margins for the first quarter of fiscal 1997, as compared to
fiscal 1996, was due to market pressures on the pricing of many of the Company's
major products, particularly memory products.
The Company believes that market conditions affecting supplies and margins may
continue in the near term.
Selling, general, and administrative expenses ("SG&A") increased for the first
quarter of fiscal 1997, as compared to fiscal 1996, largely due to higher salary
costs and information systems enhancements. There was also a change in the
staffing mix between years with the addition of approximately 60 salespeople and
several senior managers, partly offset by a reduction in warehouse and
accounting clerical headcount. In addition, there were decreases in bad debt
expense. SG&A as a percentage of sales increased to 11.8% for the first quarter
of fiscal 1997, as compared to 10.9% for fiscal 1996, due to a combination of
increased costs and the decrease in sales.
The decrease in net interest expense for the first quarter of fiscal 1997, as
compared to fiscal 1996, was due to increased cash flows resulting primarily
from reductions in receivables and inventories which allowed the Company to
reduce outstanding debt and invest excess cash in short-term investments. The
reduction in receivables and inventories was mainly due to the decline in the
Company's net sales, and resulting decline in purchases, for the quarter ended
August 31, 1996, from the quarter ended May 31, 1996.
The Company's sources of liquidity at August 31, 1996 consisted principally of
working capital of $277,435,000 and unsecured bank lines of credit of
$70,000,000, of which there were no borrowings outstanding at August 31, 1996.
The Company believes that its working capital, borrowing capabilities and
additional funds generated from operations should be sufficient to finance its
anticipated operating requirements.
11
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PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Limited Liability Company Agreement dated as of August 8, 1996
between Marshall Industries and Wyle Electronics.
10.2 Warrant Agreement dated as of August 8, 1996 between Marshall
Industries and Wyle Electronics.
10.3 Standstill Agreement dated as of August 8, 1996 between Marshall
Industries, and Wyle Electronics.
10.4 Registration Rights Agreement dated as of August 8, 1996 between
Marshall Industries and Wyle Electronics.
27 Financial Data Schedule
(b) No reports on Form 8-K have been filed during the quarter for which this
report is filed.
12
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MARSHALL INDUSTRIES
/s/ Henry W. Chin
October 15, 1996 ______________________________
Henry W. Chin
Vice President, Finance and
Chief Financial Officer
(Mr. Chin is the principal
financial officer and is duly
authorized to sign for the
Company)
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EXHIBIT 10.1
LIMITED LIABILITY COMPANY AGREEMENT
OF
ACCORD CONTRACT SERVICES LLC
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I CERTAIN DEFINITIONS . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II FORMATION; NAME; PLACE OF BUSINESS. . . . . . . . . . . . . . 1
2.1 Formation of LLC; Certificate of Formation. . . . . . . . . . 1
2.2 Name of LLC . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 Place of Business . . . . . . . . . . . . . . . . . . . . . . 2
2.4 Registered Office and Registered Agent. . . . . . . . . . . . 3
2.5 Associated Agreements . . . . . . . . . . . . . . . . . . . . 3
2.6 Representations and Warranties. . . . . . . . . . . . . . . . 3
2.7 Partnership Interest. . . . . . . . . . . . . . . . . . . . . 4
ARTICLE III PURPOSES AND POWERS OF LLC. . . . . . . . . . . . . . . . . . 5
3.1 Purposes. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.2 Powers. . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE IV TERM OF LLC . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE V CAPITAL . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.1 Initial Capital Contributions of the Members. . . . . . . . . 6
5.2 Additional Capital Contributions of the Members . . . . . . . 6
5.3 Capital Accounts. . . . . . . . . . . . . . . . . . . . . . . 6
5.4 No Interest on Capital Contributions or Capital Accounts. . . 6
5.5 Advances to LLC . . . . . . . . . . . . . . . . . . . . . . . 6
5.6 Liability of Members and the Board of Representatives . . . . 7
5.7 Return of Capital . . . . . . . . . . . . . . . . . . . . . . 7
5.8 Future Financing. . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE VI ALLOCATION OF PROFITS AND LOSSES;
DISTRIBUTIONS; TAXES. . . . . . . . . . . . . . . . . . . . . 7
6.1 Allocation of Net Income or Net Loss. . . . . . . . . . . . . 7
6.2 Allocation of Income and Loss With Respect to LLC Interests
Transferred . . . . . . . . . . . . . . . . . . . . . . . . . 7
6.3 Distributions and Withholding . . . . . . . . . . . . . . . . 8
6.4 Overriding Allocations of Net Income and Net Loss . . . . . . 8
6.5 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
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Page
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ARTICLE VII MANAGEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . 10
7.1 Management of the LLC by the Board of Representatives . . . . 10
7.2 Officers. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.3 Other Activities of Members or Affiliates; No
Restrictions on Competition . . . . . . . . . . . . . . . . . 15
7.4 Certain Transactions. . . . . . . . . . . . . . . . . . . . . 15
7.5 Indemnification and Exculpation of the Members,
Representatives, Officers any Affiliate . . . . . . . . . . . 15
7.6 Rights and Obligations of Members . . . . . . . . . . . . . . 17
7.7 Performance of Duties; Liability of Representatives . . . . . 17
7.8 Limited Liability . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE VIII DEADLOCKS . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8.1 Deadlock Resolution . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE IX BANK ACCOUNTS; BOOKS AND RECORDS; STATEMENTS;
TAXES; FISCAL YEAR. . . . . . . . . . . . . . . . . . . . . . 19
9.1 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . 19
9.2 Books and Records . . . . . . . . . . . . . . . . . . . . . . 19
9.3 Financial Statements and Information. . . . . . . . . . . . . 19
9.4 Accounting Decisions. . . . . . . . . . . . . . . . . . . . . 20
9.5 Where Maintained. . . . . . . . . . . . . . . . . . . . . . . 20
9.6 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE X TRANSFER AND CONVERSION OF LLC INTERESTS AND
THE ADDITION, SUBSTITUTION AND WITHDRAWAL OF
MEMBERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
10.1 Transfer of LLC Interests . . . . . . . . . . . . . . . . . . 20
10.2 Restrictions on Transfers . . . . . . . . . . . . . . . . . . 21
10.3 No Right to Withdraw. . . . . . . . . . . . . . . . . . . . . 21
10.4 Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
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Page
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ARTICLE XI DISSOLUTION AND LIQUIDATION . . . . . . . . . . . . . . . . . 22
11.1 Events Causing Dissolution. . . . . . . . . . . . . . . . . . 22
11.2 Cancellation of Certificate . . . . . . . . . . . . . . . . . 25
11.3 Distributions Upon Dissolution. . . . . . . . . . . . . . . . 25
11.4 Reasonable Time for Winding Up. . . . . . . . . . . . . . . . 26
11.5 Distribution in Kind. . . . . . . . . . . . . . . . . . . . . 26
11.6 Survival of Obligations . . . . . . . . . . . . . . . . . . . 26
11.7 Deficit Capital Accounts. . . . . . . . . . . . . . . . . . . 26
11.8 Transitional Cooperation. . . . . . . . . . . . . . . . . . . 26
ARTICLE XII MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . . . . . . 27
12.1 Compliance with Delaware LLC Act. . . . . . . . . . . . . . . 27
12.2 Additional Actions and Documents. . . . . . . . . . . . . . . 27
12.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
12.4 Severability. . . . . . . . . . . . . . . . . . . . . . . . . 28
12.5 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
12.6 Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
12.7 Exercise of Rights. . . . . . . . . . . . . . . . . . . . . . 28
12.8 Binding Effect. . . . . . . . . . . . . . . . . . . . . . . . 29
12.9 Limitation on Benefits of this Agreement. . . . . . . . . . . 29
12.10 Amendment Procedure . . . . . . . . . . . . . . . . . . . . . 29
12.11 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . 29
12.12 Pronouns. . . . . . . . . . . . . . . . . . . . . . . . . . . 29
12.13 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . 29
12.14 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 29
12.15 Execution in Counterparts . . . . . . . . . . . . . . . . . . 29
12.16 Announcements . . . . . . . . . . . . . . . . . . . . . . . . 30
12.17 Dispute Resolution. . . . . . . . . . . . . . . . . . . . . . 30
12.18 Nondisclosure of Information. . . . . . . . . . . . . . . . . 32
12.19 Waiver of Partition and Certain Other Rights. . . . . . . . . 34
12.20 Involvement of the LLC in Certain Proceedings . . . . . . . . 34
12.21 Attorney-in-Fact. . . . . . . . . . . . . . . . . . . . . . . 34
12.22 Member Systems. . . . . . . . . . . . . . . . . . . . . . . . 35
Schedules:
----------
Schedule 2.5
Schedule 5.1
Schedule 12.22
iii
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LIMITED LIABILITY COMPANY AGREEMENT
OF
ACCORD CONTRACT SERVICES LLC
THIS LIMITED LIABILITY COMPANY AGREEMENT ("Agreement") is entered into as
of August 8, 1996, by and among Wyle Electronics, a California corporation
("Member A") and Marshall Industries, Inc., a California corporation ("Member
B"). Member A and Member B and any other persons or entities who shall in the
future execute and deliver this Agreement pursuant to the provisions hereof
shall hereinafter collectively be referred to as the "Members."
Member A and Member B propose to form a joint venture to provide materials
management services for each of the Members, including, without limitation, the
acquisition of components and products and the provision of kitting, turnkey and
autoreplenishment services to customers and related administrative and other
related services in connection therewith. Member A and Member B further propose
that the joint venture be organized as a limited liability company pursuant to
the Delaware Limited Liability Company Act (the "Delaware LLC Act") under the
name "ACCORD CONTRACT SERVICES LLC" (the "LLC").
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the Members hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Unless the context otherwise specifies or requires, capitalized terms used
herein shall have the respective meanings assigned thereto in ADDENDUM I,
attached hereto and incorporated herein by reference, for all purposes of this
Agreement (such definitions to be equally applicable to both the singular and
the plural forms of the terms defined). Unless otherwise specified, all
references herein to Articles or Sections are to Articles or Sections of this
Agreement.
ARTICLE II
FORMATION; NAME; PLACE OF BUSINESS
2.1 FORMATION OF LLC; CERTIFICATE OF FORMATION. The Members of the LLC
hereby:
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(a) authorize the formation of the LLC by the Members as a limited
liability company pursuant to the Delaware LLC Act, and further authorize the
filing of the Certificate with the Recording Office as required under the
Delaware LLC Act;
(b) confirm and agree to their status as Members of the LLC;
(c) execute this Agreement for the purpose of confirming the
existence of the LLC and establishing the rights, duties and relationship of the
Members;
(d) agree that if the laws of any jurisdiction in which the LLC
transacts business so require, the Board of Representatives also shall file,
with the appropriate office in that jurisdiction, any documents necessary for
the LLC to qualify or register to transact business under such laws; and
(e) agree to execute, acknowledge, and cause to be filed, in the
place or places and manner prescribed by law, any amendments to the Certificate
as may be required, either by the Delaware LLC Act, by the laws of any
jurisdiction in which the LLC transacts business or by this Agreement, to
reflect changes in the information contained therein or otherwise to comply with
the requirements of law for the continuation, preservation, and operation of the
LLC as a limited liability company under the Delaware LLC Act.
In the event of any inconsistency between any terms and conditions
contained in this Agreement and any non-mandatory provisions of the Delaware LLC
Act, the terms and conditions contained in this Agreement shall govern.
2.2 NAME OF LLC. The name under which the LLC shall conduct its business
is "ACCORD CONTRACT SERVICES LLC." The business of the LLC may be conducted
under any other name permitted by the Delaware LLC Act that is selected by the
Board of Representatives, in its sole and absolute discretion. The Board of
Representatives promptly shall execute, file and record any assumed or
fictitious name certificates required by the laws of the State of Delaware or
any state in which the LLC conducts business.
2.3 PLACE OF BUSINESS. The location of the principal place of business of
the LLC shall be 165 Technology Drive, Irvine, California 92618. The Board of
Representatives may change the principal place of business of the LLC to such
other place or places within the United States as the Board of Representatives
may from time to time determine, in its sole and absolute discretion, provided
that the Board of Representatives shall give written notice of the change to the
Members within thirty (30) days after the effective date of the change and, if
necessary, the Board of Representatives shall amend the Certificate in
accordance with the applicable requirements of the Delaware LLC Act. The Board
of Representatives may, in its sole and absolute discretion, establish and
maintain such other offices and additional places
2
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of business of the LLC, either within or without the State of Delaware, as it
deems appropriate.
2.4 REGISTERED OFFICE AND REGISTERED AGENT. The street address of the
initial registered office of the LLC shall be 15 East North Street, Dover,
Delaware 19901, and the LLC's registered agent at such address shall be
Incorporating Services, Ltd.
2.5 ASSOCIATED AGREEMENTS. Concurrently with or within ninety (90) days
following the execution of this Agreement (the "Associated Agreement Negotiation
Period"), the LLC, Member A and Member B, as applicable, shall execute and
deliver the Associated Agreements (as defined below). The LLC, Member A and
Member B, as applicable, shall each allocate the necessary resources and meet
together as soon as possible following the execution of this Agreement and as
often as a party reasonably requests thereafter, in order to negotiate in good
faith the Associated Agreements not executed concurrently with this Agreement.
The execution and delivery of, and performance by the LLC of its obligations
under, the Associated Agreements, and any agreements, instruments or other
documents contemplated thereby to be entered into by the LLC in connection
therewith, are hereby authorized (without requirement for further approval under
Article VII hereof), and the LLC General Manager of the LLC acting alone is
authorized to execute and deliver such documents on behalf of the LLC.
"Associated Agreement(s)" as used herein shall mean the following contracts
which shall address, at a minimum, those issues set forth in the outlines
attached hereto as Schedule 2.5 (each as the same may be amended or supplemented
from time to time):
Personnel Secondment Agreement
Supply Agreement
Value Added Services Agreement
[Sub] Lease Agreement
Systems License Agreement
Administrative Services (Transition) Agreement
2.6 REPRESENTATIONS AND WARRANTIES.
(a) REPRESENTATIONS AND WARRANTIES OF MEMBER A. Member A hereby
represents and warrants to Member B as follows (such representations and
warranties on the date of this Agreement being true and correct in all material
respects):
(i) Member A is a corporation duly organized, validly existing
and in good standing under the laws of the State of California and is duly
qualified to do business in each jurisdiction where the nature of its activities
requires it to be so qualified. Member A has the corporate power and authority
to own, lease, and operate its assets, properties, and businesses and to enter
into this Agreement and to carry out its obligations hereunder. The execution,
delivery, and performance of this Agreement by Member A have been duly
authorized by all necessary corporate action on the part of
3
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Member A, and, this Agreement is legally binding upon Member A in accordance
with its terms.
(ii) The execution, delivery, and performance by Member A of
this Agreement and the transactions contemplated hereby will not (i) violate the
provisions of any order, judgment, or decree of any court or other governmental
agency or any arbitrator applicable to Member A or the Restated Articles of
Incorporation or bylaws of Member A; (ii) result in a material breach of or
constitute (with due notice or lapse of time or both) a material default under
any contract or agreement to which Member A is a party or by which Member A is
bound; or (iii) violate any provision of law of the United States of America or
any state thereof, the violation of which is likely to have a material adverse
effect on the business, operations or condition (financial or otherwise) of
Member A or the LLC.
(b) REPRESENTATIONS AND WARRANTIES OF MEMBER B. Member B hereby
represents and warrants to Member A as follows (such representations and
warranties on the date of this Agreement being true and correct in all material
respects):
(i) Member B is a corporation duly organized, validly existing
and in good standing under the laws of the State of California and is duly
qualified to do business in each jurisdiction where the nature of its activities
requires it to be so qualified. Member B has the corporate power and authority
to own, lease and operate its assets, properties, and business and to enter into
this Agreement and to carry out its obligations hereunder. The execution,
delivery, and performance of this Agreement by Member B have been duly
authorized by all necessary corporate action on the part of Member B, and this
Agreement is legally binding upon Member B in accordance with its terms.
(ii) The execution, delivery, and performance by Member B of
this Agreement and the transactions contemplated hereby will not (i) violate the
provisions of any order, judgment, or decree of any court or other governmental
agency or any arbitrator applicable to Member B or the Articles of Incorporation
or Bylaws of Member B, (ii) result in a material breach of or constitute (with
due notice or lapse of time or both) a material default under any contract or
agreement to which Member B is a party or by which Member B is bound or (iii)
violate any provision of law of the United States of America or any state
thereof, the violation of which is likely to have a material adverse effect on
the business, operations or condition (financial or otherwise) of Member B or
the LLC.
2.7 PARTNERSHIP INTEREST. It is the intent of the Members that the LLC be
operated in a manner consistent with its treatment as a "partnership" for
federal and state income tax purposes. No Member shall take any action
inconsistent with the express intent of the parties hereto as set forth in this
Section. The Members hereby agree and acknowledge that only the Board of
Representatives by unanimous vote may commence a voluntary case on behalf of the
LLC under a chapter of Title 11 U.S.C. by
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the filing of a "petition" (as defined in 11 U.S.C. 101(42)) with the United
States Bankruptcy Court. Any such petition filed by any other Member or agent
of the LLC shall be deemed an unauthorized and bad faith filing and all parties
to this Agreement shall use their best efforts to cause such petition to be
dismissed.
ARTICLE III
PURPOSES AND POWERS OF LLC
3.1 PURPOSES. The purposes of the LLC shall be:
(a) to provide materials management services to the Members,
including, without limitation, the acquisition of components and products and
the provision of kitting, turnkey and autoreplenishment services to customers
and related administrative and other related services in connection therewith,
and the design, construction, operation and financing of material management
systems related thereto;
(b) to engage in any other business activities that have been
approved in writing by the Members from time-to-time;
(c) to acquire, hold, own, operate, manage, finance, encumber, sell,
or otherwise dispose of and otherwise use the LLC Assets pursuant to, and in
accordance with, this Agreement and the Associated Agreements; and
(d) to enter into any lawful transaction and engage in any lawful
activities in furtherance of the foregoing purposes and as may be necessary,
incidental or convenient to carry out the business of the LLC as contemplated by
this Agreement.
3.2 POWERS. The LLC shall have the power to do any and all acts and
things necessary, appropriate, advisable, or convenient for the furtherance and
accomplishment of the purposes of the LLC, including, without limitation, to
engage in any kind of activity and to enter into and perform obligations of any
kind necessary to or in connection with, or incidental to, the accomplishment of
the purposes of the LLC, so long as said activities and obligations may be
lawfully engaged in or performed by a limited liability company under the
Delaware LLC Act.
ARTICLE IV
TERM OF LLC
The LLC commenced on the date upon which the Certificate was duly filed
with the Recording Office and shall continue for thirty (30) years, unless
dissolved and liquidated before the Termination Date in accordance with the
provisions of Article XI.
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ARTICLE V
CAPITAL
5.1 INITIAL CAPITAL CONTRIBUTIONS OF THE MEMBERS. Concurrently with the
execution of this Agreement, Member A and Member B shall contribute to the LLC
the cash, property and services set forth in Schedule 5.1 attached hereto and
incorporated herein by this reference (each such contribution an "Initial
Contribution"). The cash portion of the Initial Capital Contribution of each
Member shall be made by immediately available wire transfer payable to the order
of the LLC or its designated agent. The Members shall not be required to make
any Capital Contributions to the LLC other than as set forth in this Section 5.1
or in Section 5.2.
5.2 ADDITIONAL CAPITAL CONTRIBUTIONS OF THE MEMBERS. Upon the agreement
of all of the Members, a Member shall make an additional Capital Contribution
(an "Additional Capital Contributions"); provided, however, that the
contribution obligation of Members under Section 7.5(h) hereof shall not require
unanimous approval hereunder. The cash portion of any Additional Capital
Contributions to the LLC shall be made by the Members by immediately available
wire transfer payable to the order of the LLC or its designated agent. The
Percentage Interests of the Members shall not be adjusted to reflect any
Additional Capital Contribution without the written consent of all Members.
5.3 CAPITAL ACCOUNTS. A separate capital account (a "Capital Account")
shall be established and maintained for each Member in accordance with the
requirements of Treasury Regulations Sections 1.704-1(b)(2)(iv) and 1.704-2.
Subject to the preceding sentence, the Capital Account of each Member shall be
(a) increased by the amount of any cash contributions or fair market value of
any non-cash contribution made to the LLC by the Member, (b) increased or
decreased by items of Net Income or Net Loss allocated to the Member pursuant to
Article VI, and (c) decreased by any distributions made by the LLC to the
Member.
5.4 NO INTEREST ON CAPITAL CONTRIBUTIONS OR CAPITAL ACCOUNTS. No Member
shall be entitled to receive any interest on its Capital Contributions or its
outstanding Capital Account balance.
5.5 ADVANCES TO LLC. No Member shall advance funds or make loans to the
LLC in excess of the amounts required hereunder to be contributed by it to the
capital of the LLC without the express written consent of the other Member. Any
such approved advances or loans by a Member shall not result in any increase in
the amount of such Member's Capital Account or entitle it to any increase in its
Percentage Interest. The amounts of such advances or loans shall be a debt of
the LLC to such Member and shall be payable or collectible only out of the LLC
Assets in accordance with terms and conditions agreed upon by all Members.
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5.6 LIABILITY OF MEMBERS AND THE BOARD OF REPRESENTATIVES. Except as
otherwise required by any non-waivable provision in the Delaware LLC Act, the
debts, obligations and liabilities of the LLC, whether arising in contract, tort
or otherwise, shall be solely the debts, obligations and liabilities of the LLC,
and none of the Members or the Representatives shall be obligated personally for
any such debt, obligation or liability of the LLC solely by reason of being a
Member or a Representative.
5.7 RETURN OF CAPITAL. Except upon the dissolution of the LLC or as may be
specifically provided in this Agreement, no Member shall have the right to
demand or to receive the return of all or any part of its Capital Account or its
Capital Contributions to the LLC.
5.8 FUTURE FINANCING. The Members anticipate that in the future the LLC
may require additional funds for capital expenditures or working capital
requirements, and any such additional funding shall be obtained from any of the
following sources as may unanimously be approved by the Members.
(a) cash reserves of the LLC;
(b) loans to be obtained from banks and other such independent
sources, in which event, the Members shall exert reasonable efforts to assist
the LLC in obtaining any such loans;
(c) additional Capital Contributions made to the LLC by the Members,
in proportion to their Percentage Interests, in amounts determined by mutual
agreement of the Members;
(d) loans to be made to the LLC by (i) the Members and/or (ii) an
Affiliate of either of the Members; or
(e) any other funding source unanimously agreed upon by the Members.
ARTICLE VI
ALLOCATION OF PROFITS AND LOSSES;
DISTRIBUTIONS; TAXES
6.1 ALLOCATION OF NET INCOME OR NET LOSS. Except as otherwise provided in
this Article VI, the Net Income or Net Loss, other items of income, gains,
losses, deductions and credits, and the taxable income, gains, losses,
deductions and credits of the LLC, if any, for each Fiscal Year (or portion
thereof) shall be allocated to the Members in proportion to their Percentage
Interests.
6.2 ALLOCATION OF INCOME AND LOSS WITH RESPECT TO LLC INTERESTS
TRANSFERRED. If any LLC Interest is transferred during any Fiscal Year, the Net
Income or Net Loss
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(and other items referred to in Section 6.1) attributable to such LLC Interest
for such Fiscal Year shall be allocated between the transferor and the
transferee by any method allowed pursuant to Section 706 of the Code and any
regulations promulgated in connection therewith, as determined by the Board of
Representatives.
6.3 DISTRIBUTIONS AND WITHHOLDING.
(a) DISTRIBUTIONS. Distributions to the Members may be made at times
and in amounts as are determined by the Board of Representatives. Except as
otherwise provided in Article XI, distributions shall be made to the Members in
proportion to their Percentage Interests. Distributions may be made in cash or
by distributing property in kind.
(b) WITHHOLDING. The LLC may withhold distributions or portions
thereof if it is required to do so by any applicable rule, regulation or law,
and each Member hereby authorizes the LLC to withhold from or pay on behalf of
or with respect to such Member any amount of federal, state, local or foreign
taxes that the Board of Representatives determines that the LLC is required to
withhold or pay with respect to any amount distributable or allocable to such
Member pursuant to this Agreement. Any amount paid on behalf of or with respect
to a Member pursuant to this Section 6.3(b) shall be treated as having been
distributed to such Member.
6.4 OVERRIDING ALLOCATIONS OF NET INCOME AND NET LOSS.
(a) Prior to any allocation under this Article VI, if there is a net
decrease in LLC minimum gain during any Fiscal Year, each Member shall be
specially allocated items of LLC income and gain for such year (and, if
necessary, subsequent years) in an amount equal to the portion of such Member's
share of the net decrease in LLC minimum gain determined in accordance with
Treasury Regulations Section 1.704-2. Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts required to be
allocated to each respective Member pursuant thereto. This Section 6.4(a) is
intended to comply with the minimum gain chargeback requirements in
Section 1.704-2 of the Treasury Regulations and shall be interpreted
consistently therewith.
(b) Prior to any allocation hereunder (other than the allocation set
forth in Section 6.4(a)), if there is a net decrease in Member minimum gain
attributable to a Member nonrecourse debt during any Fiscal Year, each Member
who has a share of the Member minimum gain attributed to such Member nonrecourse
debt, determined in accordance with Treasury Regulations Section 1.704-2(i)(5),
shall be specially allocated items of LLC income and gain for such year (and, if
necessary, subsequent years) in an amount equal to the portion of such Member's
share of the net decrease in Member minimum gain attributable to such Member
nonrecourse debt, determined in accordance with Treasury Regulations
Section 1.704-2(i)(5). Allocations pursuant to the previous sentence shall be
made in proportion to the respective amounts required to be allocated
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to each Member pursuant thereto. This Section 6.4(b) is intended to comply with
the partner minimum chargeback requirement in Section 1.704-2 of the Treasury
Regulations and shall be interpreted consistently therewith.
(c) If, during any Fiscal Year a Member unexpectedly receives any
adjustment, allocation or distribution described in Treasury Regulation
Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), and, as a result of such
adjustment, allocation or distribution, such Member has an Excess Negative
Balance in its Capital Account, then items of gross income shall first be
allocated to such Member in an amount equal to its Excess Negative Balance.
(d) Any LLC deductions that are characterized as "nonrecourse
deductions" pursuant to Treasury Regulations Sections 1.704-2(b)(1) and 1.704-
2(c) shall be allocated among the Members in proportion to their Percentage
Interests. Any LLC deductions that are characterized as "partner nonrecourse
deductions" under Treasury Regulations Sections 1.704-2(i)(1) and 1.704-(i)(2)
shall be allocated among the Members as required by Treasury Regulations
Section 1.704-2(g).
6.5 TAXES.
(a) REPORTS. As soon as practicable after the end of each Fiscal
Year, the LLC shall prepare and mail to each Member a report containing all
information necessary for the Member to include its share of taxable income or
loss (or items thereof) in its income tax return.
(b) TAX ALLOCATIONS. Subject to the provisions of Section 6.5(c),
all items of income, gain, loss and deduction for federal and state tax purposes
shall be allocated in accordance with the corresponding "book" items set forth
in Section 6.1 hereof.
(c) CONTRIBUTIONS OF PROPERTY. In accordance with Section 704(c) of
the Code and the Treasury Regulations thereunder, depreciation, amortization,
gain and loss, as determined for tax purposes, with respect to any contributed
property the book value of which differs from its adjusted basis for federal
income tax purposes, shall, for tax purposes, be allocated between the Members
so as to take account of any variation between the adjusted basis of such
property to the LLC for federal income tax purposes and its book value.
Allocations pursuant to this Section 6.5(c) are solely for purposes of federal,
state and local taxes and shall not affect, or in any way be taken into account
in computing, the capital account of any Member or such Member's share of
profit, loss, other items, or distributions pursuant to any provision of this
Agreement. The provisions of this Section 6.5(c) relating to federal income tax
treatment of an item shall apply for state and local income tax purposes to the
extent permitted under applicable law. Any elections or other decisions
relating to such allocations shall be made by the Board of Representatives
pursuant to Section 7.1(e) of this Agreement.
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(d) TAX MATTERS PARTNER. The "Tax Matters Partner" of the LLC shall
be designated from time to time by the Board of Representatives. The Tax
Matters Partner shall not extend the statue of limitations on behalf of the LLC,
submit any written material to any taxing authority, settle or offer to settle
any controversy, select the LLC's choice of litigation forum in a tax
controversy, or take any other action in its capacity as Tax Matters Partner
without the consent of the Board of Representatives. The Tax Matters Partner
shall keep the Board of Representatives fully advised of the progress of any
audit and shall supply the Board of Representatives with copies of any written
communications received from the Internal Revenue Service or other taxing
authority relating to any audit within ten (10) days of receipt thereof, and
shall at least ten (10) business days prior to submitting any materials to the
Internal Revenue Service, or other taxing authority, provide such materials to
the Board of Representatives. The Tax Matters Partner shall be reimbursed by the
LLC for any reasonable expenses incurred in its capacity as Tax Matters Partner.
ARTICLE VII
MANAGEMENT
7.1 MANAGEMENT OF THE LLC BY THE BOARD OF REPRESENTATIVES.
(a) MANAGEMENT BY THE MEMBERS THROUGH THE BOARD OF REPRESENTATIVES.
The Members shall have the right to manage the business of the LLC and shall
have all powers and rights necessary, appropriate or advisable to effectuate and
carry out the purposes and business of the LLC. However, the Members may
appoint, employ or otherwise contract with any persons or entities for the
transaction of the business of the LLC or the performance of services for or on
behalf of the LLC, and the Members may delegate to any such person(s) or
entity(ies) such authority to act on behalf of the LLC as the Members may from
time to time deem appropriate. Without limiting their rights as Members to
manage the business of the LLC in any way, and as a means to facilitate
efficient communication and operation of the LLC, the Members hereby unanimously
agree that with respect to the management of the business and affairs of the
LLC, the Members shall act through a board of representatives (the "Board of
Representatives"), subject to the limitations set forth in Sections 7.1(j) and
7.4 hereof.
(b) COMPOSITION OF BOARD REPRESENTATIVES; APPOINTMENT AND REMOVAL.
(i) The Board of Representatives shall at all times be composed
of four (4) Representatives (each, a "Representative").
(ii) Each Member shall appoint two individuals to serve as its
initial representatives on the Board of Representatives. Each such individual
shall be a director, officer or employee of the Member that appointed him/her
during the entire time such individual serves on the Board, and shall serve
until such time as he or she resigns, retires, dies or is removed. Any
Representative may be removed with or without
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cause by the Member who appointed such Representative. Upon the resignation,
retirement, death or removal of any Representative, the Member who appointed
such Representative shall designate the replacement Representative.
(c) MEETINGS AND ACTIONS.
(i) The Board of Representatives shall meet (1) at least once
each Fiscal Quarter at the principal offices of the LLC or at such other place
as may be agreed upon from time to time by the Board of Representatives (unless
such meeting shall be waived by all of the Representatives); (2) at such other
times as may be determined by the Board of Representatives; (3) upon the request
of at least two Representatives upon ten (10) days' notice to all
Representatives; or (4) in accordance with Section 8.1, following a failure by
the Board of Representatives to adopt or reject a proposal for action presented
to it. Meetings may be held by telephone if at least one Representative
appointed by each Member so consents. The Board of Representatives shall cause
written minutes to be prepared of all actions taken by the Board of
Representatives and shall cause a copy thereof to be delivered to each
Representative within fifteen (15) days thereof.
(ii) No action may be taken at a meeting of the Board of
Representatives unless a quorum consisting of at least one Representative
appointed by each member is present.
(iii) Each Representative shall be entitled to cast one vote with
respect to any decision made by the Board of Representatives, except with
respect to a determination to seek indemnification pursuant to Section 7.5
hereof, in which event a Representative seeking indemnification hereunder shall
have no vote with respect to his indemnification. Any action to be taken by the
Board of Representatives shall require at least three affirmative votes.
Approval or action by the Board of Representatives shall constitute approval or
action by the LLC and shall be binding on the Members. A Representative may
grant a proxy entitling the other Representative appointed by the same Member to
exercise his voting rights. Such proxy shall be in writing and shall specify a
termination date. The Representatives appointed by the other Member shall be
entitled to inspect the proxy on demand.
(iv) Any action to be taken by the Board of Representatives may
be taken without a meeting if consents in writing setting forth the action so
taken are signed by at least three Representatives.
(d) SUBCOMMITTEES. The Board of Representatives may designate a
subcommittee consisting of at least one Representative appointed by each Member.
Any subcommittee, to the extent provided by the Board of Representatives, shall
have and may exercise all the power and authority of the Board of
Representatives.
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(e) POWER AND AUTHORITY OF THE BOARD OF REPRESENTATIVES. The Board
of Representatives (acting on behalf of the Members of the LLC), by its own
action, or by action of a subcommittee of the Board of Representatives, but not
by delegation to officers or other employees of the LLC, shall have the
exclusive right, power and authority to take the following actions, and no such
action will be taken without the approval of the Board of Representatives.
(i) making overall policy decisions with respect to the
business and affairs of the LLC;
(ii) reviewing and approving annual budgets, strategic plans,
business plans and operating guidelines;
(iii) approving any material contract, agreement or commitment;
(iv) approving the choice of bank depositories, and approving
arrangements relating to signatories on bank accounts;
(v) approving, amending, modifying, terminating or enforcing
all contracts, agreements, leases or other arrangements between the LLC and any
Member or Affiliate of a Member, in accordance with the criteria set forth in
Section 7.4;
(vi) approving any change of the LLC's fiscal year;
(vii) approving all distributions to the Members;
(viii) approving any material conveyance, sale, transfer,
assignment, pledge, encumbrance, or disposal of, or the granting of a security
interest in, any assets of the LLC;
(ix) approving the entry of the LLC into any other partnership
or joint venture;
(x) incurring any material indebtedness or loaning any
material sum or extending credit to any Person in a material amount;
(xi) guaranteeing any material indebtedness of any other
Person, or guaranteeing any contractual obligations of any other Person;
(xii) entering into any material real estate lease, or the
acquisition by the LLC of any real estate;
(xiii) authorizing any Member to act for or to assume any
obligation or responsibility on behalf of the LLC;
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(xiv) employing, appointing, determining the compensation and
removing any LLC employee who will be involved in the day to day management of
the business of the LLC;
(xv) changing any accounting principles used by the LLC,
except to the extent required by generally accepted accounting principles;
(xvi) approving any tax elections of the LLC;
(xvii) conducting litigation to which the LLC is a party;
(xviii) approving the acquisition of any business or a business
division from any Person, whether by asset purchase, stock purchase, merger or
other business combination;
(xix) approving the transfer of any material assets of the LLC,
or any interest therein, other than in the ordinary course of business;
(xx) approving any material amendment to or terminating any
Associated Agreement; and
(xxi) addressing any other strategic issue or approving any
other decision that at least two Representatives determine in good faith should
require approval or other determination by the Representatives.
(f) THIRD PARTY RELIANCE. Third parties dealing with the LLC shall
be entitled to rely conclusively upon the power and authority of the Board of
Representatives and the officers of the LLC as set forth herein.
(g) FIDUCIARY RELATIONSHIP. No Representative or LLC General Manager
shall be liable to the LLC or its Members for monetary damages for breach of
fiduciary duty as an LLC General Manager or Representative or otherwise liable,
responsible or accountable to the LLC or its Members for monetary damages or
otherwise for any acts performed, or for any failure to act; provided, however,
that this provision shall not eliminate or limit the liability of an LLC General
Manager or Representative (i) for any breach of the LLC General Manager's or
Representative's duty of loyalty to the LLC, (ii) for acts or omissions which
involve gross negligence, intentional misconduct or a knowing violation of law,
or (iii) for any transaction from which the Representative received any improper
personal benefit.
(h) REIMBURSEMENT. All expenses incurred with respect to the
organization, operation and management of the LLC shall be borne equally by each
Member. None of the Representatives, in their capacity as such, shall be
entitled to any fees for services rendered for or on behalf of the LLC.
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(i) NO INDIVIDUAL AUTHORITY. Except as otherwise expressly provided
in this Agreement, no Member, acting alone, shall have any obligation to act
for, or undertake or assume any obligation or responsibility on behalf of, the
other Member or the LLC.
(j) MEMBER APPROVAL. Notwithstanding the general authority of the
Representatives under Section 7.1(e), the following matters shall require the
unanimous approval of the Members:
(i) any amendment of this Agreement;
(ii) any merger or consolidation of or involving the LLC;
(iii) any lease, sale, exchange, conveyance, or other transfer
or disposition of all, or substantially all, of the assets of the LLC;
(iv) a change of the name of the LLC;
(v) engaging in a business other than as provided for by this
Agreement;
(vi) the contribution of additional capital by any Member to
the LLC;
(vii) the assignment of any of the property of the LLC in trust
for the benefit of creditors, or the making or filing, or acquiescence in the
making or filing by any other person, of a petition or other action requesting
the reorganization or liquidation of the LLC under the Bankruptcy Laws;
(viii) the issuance of any additional interests in the LLC, the
admission of additional Members, or the admission of substituted Members in
accordance with Section 10.2;
(ix) any other matter that is subject to the agreement,
consent, or approval of the Members hereunder or under any non-waivable
provision of the Delaware LLC Act; and
(x) the withdrawal or resignation of any Member.
7.2 OFFICERS.
(a) LLC GENERAL MANAGER. The Board of Representatives shall appoint
an operations manager of the LLC (the "LLC General Manager"). Subject to the
supervision and authority of the Board of Representatives and the approval
rights of Members, the LLC General Manager (i) shall have responsibility and
authority for
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management of the day-to-day operations of the LLC, and (ii) may execute
agreements and contracts on behalf of the LLC in the ordinary course of the
LLC's business.
(b) OTHER REPRESENTATIVES. The Board of Representatives may appoint
other managers or authorized representatives of the LLC with the authority and
upon terms and conditions the Board of Representatives deem necessary and
appropriate. Any representative shall hold his or her respective office unless
and until such representative is removed by the Board of Representatives.
7.3 OTHER ACTIVITIES OF MEMBERS OR AFFILIATES; NO RESTRICTIONS ON
COMPETITION. Any Member or any Affiliate thereof may have other business
interests or may engage in other business ventures of any nature or description
whatsoever, whether currently existing or hereafter created, and may compete,
directly or indirectly, with the business of the LLC. No Member or Affiliate
thereof shall incur any liability to the LLC as a result of its pursuit of such
other permitted business interests, ventures and competitive activity, and
neither the LLC nor the other Members shall have any right to participate in
such other business ventures or to receive or share in any income or profits
derived therefrom.
7.4 CERTAIN TRANSACTIONS. The LLC is expressly permitted in the normal
course of its business to enter into transactions with any or all Members or
with any Affiliate of any or all Members provided that the price and other terms
of such transactions are fair to the LLC and that the price and other terms of
such transactions are not less favorable to the LLC than those generally
prevailing with respect to comparable transactions between unrelated parties.
7.5 INDEMNIFICATION AND EXCULPATION OF THE MEMBERS, REPRESENTATIVES,
OFFICERS ANY AFFILIATE.
(a) RIGHT OF INDEMNIFICATION. In accordance with Section 18-108 of
the Delaware LLC Act, the LLC shall indemnify and hold harmless any Member,
Representative, LLC General Manager, officer, and Affiliate thereof
(individually, in each case, an "Indemnitee") to the fullest extent permitted by
law from and against any and all losses, claims, demands, costs, damages,
liabilities joint or several), expenses of any nature (including attorneys' fees
and disbursements), judgments, fines, settlements and other amounts arising from
any and all claims, demands, actions, suits or proceedings, whether civil,
criminal, administrative or investigative, in which the Indemnitee may be
involved or threatened to be involved, as a party or otherwise, arising out of
or incidental to the business or activities of or relating to the LLC regardless
of whether the Indemnitee continues to be a Member, a Representative, an LLC
General Manager, an officer or any Affiliate thereof at the time any such
liability or expense is paid or incurred; provided, however, that this provision
shall not eliminate or limit the liability of an Indemnitee (i) for any breach
of the Indemnitee's duty of loyalty to the LLC or its Members, (ii) for acts or
omissions which involve gross negligence, intentional
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misconduct or a knowing violation of law, or (iii) for any transaction from
which the Indemnitee received any improper personal benefit.
(b) ADVANCES OF EXPENSES. Expenses incurred by an Indemnitee in
defending any claim, demand, action, suit, or proceeding subject to this Section
7.5 shall, from time to time, upon request by the Indemnitee, be advanced by the
LLC prior to the final disposition of such claim, demand, action, suit or
proceeding upon receipt by the LLC of an undertaking by or on behalf of the
Indemnitee to repay such amount if it shall be determined in a judicial
proceeding or a binding arbitration that such Indemnitee is not entitled to be
indemnified as authorized in this Section 7.5.
(c) OTHER RIGHTS. The indemnification provided by this Section 7.5
shall be in addition to any other rights to which an Indemnitee may be entitled
under any agreement, vote of the Board of Representatives as a matter of law or
equity, or otherwise, both as to an action in the Indemnitee's capacity as a
Member, a Representative, an LLC General Manager, an officer or any Affiliate
thereof, and as to an action in another capacity, and shall continue as to an
Indemnitee who has ceased to serve in such capacity and shall inure to the
benefit of the heirs, successors, assigns, and administrators of the Indemnitee.
(d) INSURANCE. The LLC may purchase and maintain insurance on behalf
of the Board of Representatives and such other Persons as the Board of
Representatives shall determine against any liability that may be asserted
against or expense that may be incurred by such Persons in connection with the
offering of interests in the LLC or the business or activities of the LLC,
regardless of whether the LLC would have the power to indemnify such Persons
against such liability under the provisions of this Agreement.
(e) EFFECT OF INTEREST IN TRANSACTION. An Indemnitee shall not be
denied indemnification in whole or in part under this Section 7.5 or otherwise
by reason of the fact that the Indemnitee had an interest in the transaction
with respect to which the indemnification applies if the transaction was
otherwise permitted or not expressly prohibited by the terms of this Agreement.
(f) NO THIRD PARTY RIGHTS. The provisions of this Section 7.5 are
for the benefit of the Indemnitees, their heirs, successors, assigns and
administrators and shall not be deemed to create any rights for the benefit of
any other Persons.
(g) EXCULPATION. The doing of any act or the failure to do any act
by any officer or Representative, or LLC General Manager, the effect of which
may cause or result in loss or damage to the LLC, if done or omitted to be done
in good faith reliance upon advice of independent legal counsel or accountants
employed by or on behalf of the LLC, or if done or omitted to be done in good
faith and in a manner reasonably believed to be within the scope of the
authority granted to such officer or Representative or LLC General Manager, by
this Agreement or the Board of
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Representatives and in or not opposed to the best interests of the LLC shall not
subject any such Person to any liability to the LLC or the Members; provided,
however, that the foregoing shall not relieve any Person of liability hereunder
if it shall have been determined by a court of competent jurisdiction that such
Person acted so as to be liable for fraud, deceit, willful misfeasance, reckless
or intentional misconduct, knowing violation of the law by the Representative or
LLC General Manager, or gross negligence, which liability shall survive such
Person's ceasing to hold its or his office and any dissolution of the LLC.
(h) CONTRIBUTION. If LLC assets are exhausted then to the extent
that the indemnification obligations of the LLC under this Section 7.5 hereof
exceed the assets of the LLC, each Member shall contribute to the LLC fifty
percent (50%) of the amounts necessary to fulfill the obligations of the LLC
under Section 7.5 hereof.
7.6 RIGHTS AND OBLIGATIONS OF MEMBERS.
(a) LIMITED LIABILITY. No Member shall be personally liable for any
debts, liabilities, or obligations of the LLC; provided that each Member shall
be responsible (i) for the making of any Capital Contribution required to be
made to the LLC by such Member pursuant to the terms hereof, (ii) for the amount
of any distribution made to such Member that must be returned to the LLC
pursuant to any non-waivable provision of the Delaware LLC Act, and (iii) fifty
percent (50%) of the indemnification obligations of the LLC under Section 7.5 as
set forth in Section 7.5(h) hereof.
7.7 PERFORMANCE OF DUTIES; LIABILITY OF REPRESENTATIVES.
(a) STANDARDS. The Representatives and LLC General Manager shall
perform their managerial duties in good faith, in a manner they reasonably
believe to be in the best interests of the LLC and its Members, and with such
care, including reasonable inquiry, as an ordinarily prudent person in a like
position would use under similar circumstances. A Representative or LLC General
Manager who so performs the duties of Representative or LLC General Manager
shall not have any liability by reason of being or having been a Representative
or LLC General Manager of the LLC. The Representatives shall be entitled to
delegate such of their powers, authority and responsibilities under this
Agreement as they may deem appropriate from time to time.
(b) RELIANCE ON OTHERS. In performing their duties, the
Representatives shall be entitled to rely on information, opinions, reports or
statements, including financial statements and other financial data, of the
following persons or groups unless they have knowledge concerning the matter in
question that would cause such reliance to be unwarranted and provided that the
Representatives act in good faith and after reasonable inquiry if needed under
the circumstances:
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(i) one or more officers, employees or other agents of the
LLC whom the Representatives reasonably believe to be reliable and competent in
the matters presented; or
(ii) any attorney, independent accountant, valuation
consultant, or other person as to matters that the Representatives reasonably
believe to be within such person's professional or expert competence.
7.8 LIMITED LIABILITY. No person who is a Representative or officer or
both a Representative and an officer of the LLC shall be personally liable under
any judgment of a court, or in any other manner, for any debt, obligation, or
liability of the LLC, whether that liability or obligation arises in contract,
tort, or otherwise, solely by reason of being a Representative or officer or
both a Representative and an officer of the LLC.
ARTICLE VIII
DEADLOCKS
8.1 DEADLOCK RESOLUTION.
(a) DEFINITION OF DEADLOCK. "Deadlock" shall occur if: (i) the
Members are unable to reach unanimous agreement on any matter requiring the
unanimous approval of the Members under Section 7.1(j) during the sixty (60) day
period following a request for a Member vote, (ii) the Board of Representatives
casts a tie vote on a matter (except those matters set forth in Section
7.1(e)(v)) submitted to it at a meeting or in the form of a proposed written
consent, and during the sixty (60) day period following this tie vote, the Board
of Representatives is unable to break the tie. (If the matter is presented in
the form of a proposed written consent, the sixty (60) day period shall commence
on the date that the Representative who was last to receive the proposal
received it.) During this sixty (60) day period, the Board of Representatives
shall hold at least one additional meeting at which it shall make a good faith
effort to break the tie. The additional meeting shall be held at the time and
place agreed to by the Representatives, or if the Representatives are unable to
agree, at a time and place determined by the LLC General Manager, on at least
five (5) days' written notice.
(b) RESOLUTION OF DEADLOCK. If a Deadlock occurs, then such Deadlock
shall promptly be submitted, by any Member, to the dispute resolution procedure
set forth in Section 12.17 hereof ("ADR"). If the Members or Representatives, as
the case may be, are unable to resolve the dispute after complying with the
procedures set forth on the ADR, then either Member may terminate the LLC in
accordance with the provisions of Section 11.1. Further, if the dispute is not
resolved and the LLC is dissolved as provided in the preceding sentence, the
Neutral Party shall be instructed to issue an opinion whether or not, based on a
preponderance of the evidence the Neutral Party has seen or observed during the
ADR that either of the Members has used the provisions of this Section 8.1 as a
means to force a dissolution of the LLC in order to
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avoid the transfer or withdrawal procedures set forth in Article X or
dissolution and liquidation procedures set forth in Article XI. If the Neutral
Party's opinion concludes that one of the Members has used the provisions of
this Section 8.1 in such a manner then an "Improper Deadlock" shall be deemed to
have occurred. In such case, the Member not responsible for improper use of the
provisions of Section 8.1 shall be referred to as the "Non-deadlock Member." If
an Improper Deadlock has occurred then the Non-deadlock Member shall have the
right to terminate the Agreement and receive a Termination Transition Fee in
accordance with Section 11.1(c) hereof.
ARTICLE IX
BANK ACCOUNTS; BOOKS AND RECORDS;
STATEMENTS; TAXES; FISCAL YEAR
9.1 BANK ACCOUNTS. All funds of the LLC shall be deposited in its name in
such checking and savings accounts, time deposits, certificates of deposit or
other accounts at such banks as shall be designated by the Board of
Representatives from time to time, and the Board of Representatives shall
arrange for the appropriate conduct of such account or accounts.
9.2 BOOKS AND RECORDS. The Board of Representatives shall keep, or cause
to be kept, accurate, full and complete books and accounts showing assets,
liabilities, income, operations, transactions and the financial condition of the
LLC. Such books and accounts shall be prepared on the accrual basis of
accounting. Any Member or its designee shall have access thereto at any
reasonable time during regular business hours and shall have the right to copy
said records at its expense. In addition, the LLC will provide such records and
assistance as reasonably requested by either Member to meet such Member's
obligations with respect to audits or internal financial controls.
9.3 FINANCIAL STATEMENTS AND INFORMATION.
(a) PREPARATION IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES. All financial statements prepared pursuant to this Section shall
present fairly the financial position and operating results of the LLC and shall
be prepared in accordance with generally accepted accounting principles on the
accrual basis for each Fiscal Year of the LLC during the term of this Agreement.
(b) QUARTERLY REPORT. Within thirty (30) days after the end of each
quarterly period (the "Fiscal Quarter") of each Fiscal Year, commencing with the
first Fiscal Quarter after the date of this Agreement, the Board of
Representatives shall prepare and submit or cause to be prepared and submitted
to the Members an unaudited statement of profit and loss for the LLC for such
Fiscal Quarter and an unaudited balance sheet of the LLC dated as of the end of
such Fiscal Quarter, in each case prepared in accordance with generally accepted
accounting principles consistently applied.
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(c) ANNUAL REPORTS. Within ninety (90) days after the end of each
Fiscal Year during the term of this Agreement, the Board of Representatives
shall prepare and submit or cause to be prepared and submitted to the Members
(i) a balance sheet, together with statements of profit and loss, Members'
equity and changes in financial position for the LLC during such Fiscal Year;
(ii) a report of the activities of the LLC during the Fiscal Year; (iii) a
report summarizing the fees and other remuneration paid by the LLC for such
Fiscal Year to the Board of Representatives and any Affiliate thereof; and (iv)
a statement showing any amounts distributed to the Members in respect of such
Fiscal Year.
(d) OTHER REPORTS. The Board of Representatives shall provide to the
Members such other reports and information concerning the business and affairs
of the LLC as may be required by the Delaware LLC Act or by any other law or
regulation of any regulatory body applicable to the LLC.
9.4 ACCOUNTING DECISIONS. All decisions as to accounting matters, except
as specifically provided to the contrary herein, shall be made by the Board of
Representatives.
9.5 WHERE MAINTAINED. The books, accounts and records of the LLC at all
times shall be maintained at the LLC's principal office.
9.6 FISCAL YEAR. The fiscal year of the LLC for financial, accounting,
Federal, state and local income tax purposes shall initially be the fiscal year
commencing on January 1 and ending on December 31 (the "Fiscal Year"). The
Board of Representatives shall have authority to change the beginning and ending
dates of the Fiscal Year if the Board of Representatives, in its sole and
absolute discretion, deems such change to be necessary or appropriate to the
business of the LLC, and shall give written notice of any such change to the
Members within thirty (30) days after the occurrence thereof.
ARTICLE X
TRANSFER AND CONVERSION OF LLC INTERESTS AND THE ADDITION,
SUBSTITUTION AND WITHDRAWAL OF MEMBERS
10.1 TRANSFER OF LLC INTERESTS.
(a) DEFINITION OF TRANSFER. The term "transfer," when used in this
Article X with respect to an LLC Interest, shall include any sale, assignment,
gift, pledge, hypothecation, mortgage, exchange or other disposition, whether by
operation of law or otherwise.
(b) VOID TRANSFERS. No LLC Interest shall be transferred, in whole
or in part, except in accordance with the terms and conditions set forth in this
Article X.
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Any transfer or purported transfer of any LLC Interest not made in accordance
with this Article X shall be void ab initio.
10.2 RESTRICTIONS ON TRANSFERS
(a) CONSENT REQUIRED. No Member may transfer all or any portion of
its LLC Interest or its Capital Account without the express written consent of
the nontransferring Member which may be granted or withheld in its sole and
absolute discretion; provided, however, that no such consent shall be required
to permit a Member to transfer all (or any portion) of its LLC Interest to its
wholly owned subsidiary only for so long as the transferee remains a wholly-
owned subsidiary; provided further that such transfer shall give such wholly-
owned subsidiary only the right to receive distributions, income, gain and loss
allocable to such Member's LLC Interest to which such Member would otherwise be
entitled and such wholly-owned subsidiary must comply with Section 10.2(b) to
become a substituted Member.
(b) SUBSTITUTION. Any transferee of an LLC Interest shall become a
substituted Member upon (i) the express written unanimous consent of the Members
which may be granted or withheld in their sole and absolute discretion; (ii) the
transferee agreeing to be bound by all the terms and conditions of the
Certificate and this Agreement as then in effect; and (iii) receipt of any
necessary regulatory approvals. Unless and until a transferee is admitted as a
substituted Member, the transferee shall have no right to exercise any of the
powers, rights or privileges of a Member hereunder. A Member who has
transferred its LLC Interest shall cease to be a Member upon transfer of the
Member's entire LLC Interest and substitution of the transferee as a Member and
thereafter shall have no further powers, rights or privileges as a Member
hereunder except as provided in Section 7.5.
(c) DEALING WITH MEMBERS. The LLC, each Member, the Board of
Representatives, the LLC General Manager and any other Person or Persons having
business with the LLC need deal only with Members who are admitted as Members or
as substituted Members of the LLC, and they shall not be required to deal with
any other person by reason of transfer by a Member except as otherwise provided
in this Agreement. In the absence of the substitution (as provided herein) of a
Member for a transferring Member, any payment to a Member shall acquit the LLC
and the Board of Representatives of all liability to any other persons who may
be interested in such payment by reason of an assignment by such Member.
10.3 NO RIGHT TO WITHDRAW. No Member shall have any right to resign or
otherwise withdraw from the LLC, without the express written consent of all the
other Members.
10.4 REMOVAL. No Member shall be removed or terminated without such
Member's express written consent.
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ARTICLE XI
DISSOLUTION AND LIQUIDATION
11.1 EVENTS CAUSING DISSOLUTION.
(a) EVENTS. The LLC shall be dissolved and its affairs wound up upon
the occurrence of any of the following events:
(i) DISSOLUTION BY AGREEMENT. The LLC shall be dissolved
upon the passage of ninety (90) days after the consent in writing by all of the
Members to dissolve an wind up the affairs of the LLC (a "Dissolution By
Agreement").
(ii) SALE OF ASSETS. The LLC shall be dissolved upon the sale
or disposition of all or substantially all the LLC Assets (which sale or
disposition shall require the unanimous consent of the Members) (a "Sale of
Assets").
(iii) BANKRUPTCY EVENT. The LLC shall be dissolved upon the
Bankruptcy, dissolution, liquidation or, in accordance with Section 7.1(j)(x)
hereof, the withdrawal or resignation (each, a "Bankruptcy Event") of any Member
(a "Bankruptcy Member"). Upon the dissolution of the LLC pursuant to this
subsection (iii) (the "Applicable Date"), the Member other than the Bankruptcy
Member (a "TO Member"), shall be entitled to receive a payment from the other
Member equal in amount to the Termination Transition Fee, which fee shall be
payable within thirty days after the Applicable Date.
(iv) LLC EXPIRATION. The LLC shall be dissolved on the
Termination Date (the "LLC Expiration").
(v) UNLAWFUL EVENT. The LLC shall be dissolved upon the
occurrence of any event (an "Unlawful Event") that would make it unlawful for
the business of the LLC to be continued; PROVIDED, HOWEVER, that if the Unlawful
Event was caused by or resulted from a Member's ("Unlawful Event Member") gross
negligence or intentional conduct, such event shall constitute a "Member
Unlawful Event." The LLC shall be dissolved upon the occurrence of a Member
Unlawful Event only upon notice (also a "Termination Notice") by the Member
other than the Unlawful Event Member (also a "TO Member"), which notice must be
given, if at all, within 60 days following the Member Unlawful Event. Upon
receipt and delivery of the Termination Notice (the "Applicable Date"), the TO
Member shall be entitled to receive a payment from the Unlawful Event Member
equal in amount to the Termination Transition Fee, which fee shall be payable
within thirty days after the Applicable Date.
(vi) DEADLOCK. The LLC shall be dissolved upon written notice
by either Member, if a Deadlock occurs and a resolution is not reached after
engaging in the ADR procedure set forth in Section 12.17 hereof; PROVIDED,
HOWEVER, that if the Deadlock is determined pursuant to Section 8.1(b) to be an
Improper Deadlock, then the
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LLC shall be dissolved only upon written notice (a "Termination Notice") by the
Non-deadlock Member (also a "TO Member"), which notice must be given, if at all,
within 60 days following the determination that an Improper Deadlock existed.
Upon the delivery and receipt of the Termination Notice (the "Applicable Date"),
the TO Member shall be entitled to receive a payment from the Deadlock Member
equal in amount to the Termination Transition Fee, which fee shall be payable
within thirty days after the Applicable Date.
(vii) TERMINATION FOR CONVENIENCE. The LLC shall be dissolved
upon ninety (90) days' written notice (a "Termination Notice") by one Member
(the "Terminating Member") to the other Member (the "Non-terminating Member") of
its desire to terminate the LLC ("Termination for Convenience"). Upon the
delivery and receipt of the Termination Notice (the "Applicable Date"), the Non-
terminating Member (also a "TO Member") shall be entitled to receive a payment
from the Terminating Member equal in amount to the Termination Transition Fee,
which fee shall be payable within thirty days after the Applicable Date.
(viii) INTENTIONALLY OMITTED
(ix) LLC START-UP FAILURE. If the Members are unable to reach
agreement as to any of the Associated Agreeements (that were not executed
concurrently with this Agreement) or reach agreement on the Termination Formula
(as defined in Appendix I) within the Associated Agreement Negotiation Period
(as may be extended by mutual consent of the Members), then the Members may,
upon mutual agreement, submit the Associated Agreement disputes and/or the
Termination Formula disputes to the dispute resolution procedure set forth in
Section 12.17. If the Members do not mutually agree to utilize the dispute
resolution procedure, or if such procedure once utilized does not result in an
agreement by the Members on the Associated Agreements or the Termination Formula
(as applicable) (in either case, an "LLC Start-up Failure"), then the LLC shall
be dissolved on the day following the Associated Agreement Negotiation Period or
at the end of the ADR process, as applicable.
(x) UNCURED DEFAULT. If a Member fails to perform any of its
material obligations (a "Defaulting Member") under this Agreement or any of the
Associated Agreements (an "Event of Default"), then the other Member (a
"Nondefaulting Member") shall have the right to give the Defaulting Member
notice (a "Notice of Default"). The Notice of Default shall set forth the
nature of the obligations which the Defaulting Member has failed to perform. If
the Defaulting Member shall dispute whether an Event of Default has occurred, or
the amount of the loss, damage, cost of expense incurred by the Nondefaulting
Member as a consequence of an Event of Default, the matter shall promptly be
submitted to the dispute resolution procedure set forth in Section 12.17 hereof.
If the Defaulting Member fails to cure the Event of Default within thirty (30)
days of the later of (1) receipt of the Nondefaulting Member's Notice of Default
in compliance with this Section, or (2) a determination pursuant to the dispute
resolution procedure set forth in Section 12.17, then an "Uncured Default" shall
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be deemed to have occurred. If an Uncured Default occurs, the LLC shall be
dissolved upon written notice (a "Termination Notice") by the Nondefaulting
Member (also a "TO Member") of its desire to terminate the LLC, which notice
shall be delivered, if at all, within sixty (60) days following the occurrence
of the Uncured Default. Upon the delivery and receipt of the Termination Notice
(the "Applicable Date"), the TO Member shall be entitled to receive a payment
from the Defaulting Member equal in amount to the Termination Transition Fee,
which fee shall be payable within thirty days after the Applicable Date.
(xi) EXERCISE EVENT. If an Exercise Event (as defined in the
Warrant Agreement) occurs with respect to a Member (the "Event Member"), the LLC
shall be dissolved upon written notice (a "Termination Notice") by the Member
other than the Event Member (also a "TO Member") of its desire to terminate the
LLC, which notice shall be delivered, if at all, within sixty (60) days
following the occurrence of the Exercise Event. Upon the delivery and receipt
of the Termination Notice (the "Application Date"), the TO Member shall be
entitled to receive a payment from the Event Member equal in amount to the
Termination Transition Fee, which fee shall be payable within thirty days after
the Applicable Date.
(b) INTENTIONALLY OMITTED
(c) CHANGE IN CONTROL TERMINATION FEES.
(i) Upon the occurrence of an Exercise Event with respect to
either Member and the subsequent delivery of a Termination Notice by the TO
Member pursuant to Section 11.1(a)(xi) at any time during the term of the LLC,
or, if later: (i) prior to the first anniversary of a Deadlock, upon
dissolution of the LLC pursuant to Section 11.1(a)(vi) (other than an Improper
Deadlock), or (ii) prior to the first anniversary of the effective date of this
Agreement, upon dissolution of the LLC pursuant to Section 11.1(a)(ix), such
Member shall pay to the other Member in cash an amount equal to the Change in
Control Termination Fee, which amount shall be payable within thirty (30) days
following the occurrence of the Exercise Event.
(ii) If the LLC is dissolved pursuant to Section 11.1(a) as a
result of: (1) an Uncured Default, (2) an Improper Deadlock, (3) a Bankruptcy
Event, (4) a Member Unlawful Event, or (5) an Exercise Event (with each of the
foregoing hereafter referred to as a "Termination Option Event"), and an
Exercise Event occurs prior to the first anniversary of the Applicable Date
relating to such occurrence (as determined by reference to Section 11.1(a)
above), then the TO Member with respect to such occurrence (also as determined
by reference to Section 11.1(a) above) shall be entitled to receive a payment
from the other Member equal in amount to the Change in Control Termination Fee,
which fee shall be payable within thirty (30) days following the occurrence of
the Exercise Event. In addition, if the LLC is dissolved pursuant to Section
11.1(a)(vii) as a result of a Termination for Convenience (also, a "Termination
Option Event"), and an Exercise Event occurs prior to the first anniversary of
such
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dissolution, then the TO Member with respect to such Termination for Convenience
(as determined by reference to Section 11.1(a) above) shall be entitled to
receive a payment from the other Member equal in amount to the Change in Control
Termination Fee, which fee shall be payable within thirty (30) days following
the occurrence of the Exercise Event. Any Change in Control Termination Fee
payable hereunder shall be in addition to, and not in lieu of, any Termination
Transition Fees payable pursuant to Section 11.1(a).
(iii) Notwithstanding any provision of this Agreement: (a)
neither Member shall be paid more than one Change in Control Termination Fee
hereunder, and (b) no Member shall have any right to receive any Change in
Control Termination Fee or Termination Transition Fee from and after the earlier
of (1) such Member becoming an Event Member (as defined in Section 11.1(a)(xi)),
or (2) the other Member becoming a TO Member. This Article XI shall survive the
dissolution and liquidation of the LLC regardless of the cause. The Members
agree that damages resulting from the dissolution of the LLC as described herein
may be impossible to measure; therefore the Members further agree that the
Change in Control Termination Fee and Termination Transition Fee constitute the
Members' best estimate of the damages that will result to the Member that
receives them as a result of such LLC dissolution; reflecting, among other
things, diminution in the market reputation of such Member, disruption of such
Member's ongoing operations and such Member's costs associated with rebuilding
the service capacity lost as a result of such termination, and therefore the
Members agree that such damages are reasonable under the circumstances and are
not a penalty. The rights granted in this Section 11.1 above shall not be
deemed the exclusive remedy of a Member, but all other rights and remedies,
legal and equitable, shall be available to it.
11.2 CANCELLATION OF CERTIFICATE. Upon the dissolution of the LLC, the
Certificate shall be canceled in accordance with the provisions of Section
18-203 of the Delaware LLC Act, and the Board of Representatives (or any other
person or entity responsible for winding up the affairs of the LLC) shall
promptly notify the Members of such dissolution.
11.3 DISTRIBUTIONS UPON DISSOLUTION.
(a) Upon the dissolution of the LLC, the Board of Representatives (or
any other person or entity responsible for winding up the affairs of the LLC)
shall proceed without any unnecessary delay to sell or otherwise liquidate the
LLC Assets and pay or make due provision for the payment of all debts,
liabilities and obligations of the LLC.
(b) The Board of Representatives (or any other person or entity
responsible for winding up the affairs of the LLC) shall distribute the net
liquidation proceeds and any other liquid assets of the LLC after the payment of
all debts, liabilities and obligations of the LLC (including, without
limitation, all amounts owing to a Member under this Agreement or under any
agreement between the LLC and a Member
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entered into by the Member other than in its capacity as a Member in the LLC),
the payment of expenses of liquidation of the LLC, and the establishment of a
reasonable reserve in an amount estimated by the Board of Representatives to be
sufficient to pay any amounts reasonably anticipated to be required to be paid
by the LLC, which shall be distributed to the Members PRO RATA, in proportion to
the positive balances, if any, in their respective Capital Accounts. It is the
intent of the Members that the Capital Account balances on liquidation would be
such that the Members would receive the same amount of proceeds hereunder as
they would have received had such proceeds been distributed to them under
Section 6.3 hereof; accordingly, if necessary to achieve this economic result
the Board of Representatives is authorized to allocate Net Income, Net Loss and
other items of income, gross income, gain, loss and deduction to the respective
Capital Accounts of the Members to cause them, to the extent possible, to have a
balance equal to the cash which would otherwise be distributed under
Section 6.3.
11.4 REASONABLE TIME FOR WINDING UP. A reasonable time shall be allowed
for the orderly winding up of the business and affairs of the LLC (including,
without limitation, completing commitments under current LLC contracts and
depleting the existing LLC inventory of parts and components) and the
liquidation of its assets pursuant to Section 11.3 in order to minimize any
losses otherwise attendant upon such a winding up.
11.5 DISTRIBUTION IN KIND. Upon the dissolution of the LLC, a Member may
in its sole discretion, choose to receive all or a portion of the distribution
due to it, in kind. Such Member shall be permitted to receive, in kind, any
property that made up any portion of such Members' Capital Contribution or
Additional Capital Contribution. In the event of a distribution in kind, the
assets distributed, in kind, shall be valued by any reasonable means selected
by the Board of Representatives (or any other person or entity responsible for
winding up the affairs of the LLC, and such assets shall be deemed to have been
sold for such value and the Members' capital accounts adjusted by any gain or
loss deemed to have been realized on such deemed sale.
11.6 SURVIVAL OF OBLIGATIONS. Dissolution of the LLC and any termination
of the Associated Agreements for any cause shall not release any party from any
liability which at the time of dissolution or termination has already accrued to
any party.
11.7 DEFICIT CAPITAL ACCOUNTS. No Member shall have any obligation to
restore a deficit balance in its Capital Account upon liquidation of the LLC.
11.8 TRANSITIONAL COOPERATION.
(a) COOPERATION. Each Member and the LLC agree that upon expiration
or termination of this Agreement for any reason and during any notice period
preceding same, the Members and the LLC shall use their best efforts to effect
an orderly and efficient transition of the services provided by the LLC pursuant
to this Agreement and the Associated Agreements ("LLC Services") to each Member.
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(b) TERMINATION ASSISTANCE. Commencing upon any notice of
termination by either Member or ninety (90) days prior to the expiration of the
term of this Agreement, the Members and the LLC will provide any and all
assistance reasonably requested by a Member or the LLC to allow the LLC Services
to continue without interruption or adverse effect and to aid in and facilitate
the orderly and efficient transfer of responsibility for the LLC Services to
each Member. Such termination assistance shall include, without limitation, the
following:
(i) developing, with the assistance of the Members and the
LLC, a plan for the transition of operations from the LLC to each Member; and
(ii) providing to the LLC all products and services upon the
same terms and conditions hereof or in the Associated Agreements until the later
of expiration or termination of: (1) this Agreement, or (2) any agreements
entered into between a Member and a customer prior to the notice of termination
that require components, products or services from the LLC or the other Member.
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 COMPLIANCE WITH DELAWARE LLC ACT. Each Member agrees not to take any
action or fail to take any action which, considered alone or in the aggregate
with other actions or events, would result in the termination of the LLC under
applicable law.
12.2 ADDITIONAL ACTIONS AND DOCUMENTS. Each of the Members hereby agrees
to take or cause to be taken such further actions, to execute, acknowledge,
deliver and file or cause to be executed, acknowledged, delivered and filed such
further documents and instruments, and to use best efforts to obtain such
consents, as may be necessary or as may be reasonably requested to fully
effectuate the purposes, terms and conditions of this Agreement, whether before,
at or after the closing of the transactions contemplated by this Agreement.
12.3 NOTICES. All notices, demands, requests or other communications which
may be or are required to be given, served or sent by a Member pursuant to this
Agreement shall be in writing and shall be hand delivered (including delivery by
courier), mailed by first-class, registered or certified mail, return receipt
requested, postage prepaid, or transmitted by telegram, telex or facsimile
transmission, addressed as follows:
If to Member A: Wyle Electronics
15370 Barranca Parkway
Irvine, CA 92718-2215
Facsimile: (714) 753-9908
ATTN: Stephen D. Natcher, Esq.
General Counsel and Secretary
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If to Member B: Marshall Industries, Inc.
9320 Telstar
El Monte, CA 91731
Facsimile: (818) 307-6348
ATTN: Henry Chin
Chief Financial Officer
Each Member may designate by notice in writing a new address to which any
notice, demand, request or communication may thereafter be so given, served or
sent. Each notice, demand, request or communication which shall be delivered,
mailed or transmitted in the manner described above shall be deemed sufficiently
given, served, sent or received for all purposes at such time as it is delivered
to the addressee (with an affidavit of personal delivery, the return receipt,
the delivery receipt or (with respect to a telex) the answer back being deemed
conclusive evidence of such delivery) or at such time as delivery is refused by
the addressee upon presentation.
12.4 SEVERABILITY. The invalidity of any one or more provisions hereof or
of any other agreement or instrument given pursuant to or in connection with
this Agreement shall not affect the remaining portions of this Agreement or any
such other agreement or instrument or any part thereof, all of which are
included subject to the condition that they are held valid in law; and in the
event that one or more of the provisions contained herein or therein should be
invalid, or should operate to render this Agreement or any such other agreement
or instrument invalid, this Agreement and such other agreements and instruments
shall be construed as if such invalid provisions had not been inserted.
12.5 SURVIVAL. It is the express intention and agreement of the Members
that all covenants, agreements, statements, representations, warranties and
indemnities made in this Agreement shall survive the execution and delivery of
this Agreement.
12.6 WAIVERS. Neither the waiver by a Member of a breach of or a default
under any of the provisions of this Agreement, nor the failure of a Member, on
one or more occasions, to enforce any of the provisions of this Agreement or to
exercise any right, remedy or privilege hereunder, shall thereafter be construed
as a waiver of any subsequent breach or default of a similar nature, or as a
waiver of any such provisions, rights, remedies or privileges hereunder.
12.7 EXERCISE OF RIGHTS. No failure or delay on the part of a Member or
the LLC in exercising any right, power or privilege hereunder and no course of
dealing between the Members or between a Member and the LLC shall operate as a
waiver thereof, nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
expressly provided are cumulative and not exclusive of any other rights or
remedies which a Member or the LLC would otherwise have at law or in equity or
otherwise.
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12.8 BINDING EFFECT. Subject to any provisions hereof restricting
assignment, this Agreement shall be binding upon and shall inure to the benefit
of the Members and their respective heirs, devises, executors, administrators,
legal representatives, successors and assigns.
12.9 LIMITATION ON BENEFITS OF THIS AGREEMENT. Subject to Section 7.5, it
is the explicit intention of the Members that no person or entity other than the
Members and the LLC is or shall be entitled to bring any action to enforce any
provision of this Agreement against any Member or the LLC, and that the
covenants, undertakings and agreements set forth in this Agreement shall be
solely for the benefit of, and shall be enforceable only by, the Members (or
their respective successors and assigns as permitted hereunder) and the LLC.
12.10 AMENDMENT PROCEDURE. This Agreement may only be modified or amended
by the unanimous written consent of the Members.
12.11 ENTIRE AGREEMENT. This Agreement (including the Exhibits and
Schedules hereto which by this reference are incorporated herein) contains the
entire agreement between the Members with respect to the transactions
contemplated herein, and supersedes all prior oral or written agreements,
commitments or understandings with respect to the matters provided for herein
and therein.
12.12 PRONOUNS. All pronouns and any variations thereof shall be deemed to
refer to the masculine, feminine, neuter, singular or plural, as the identity of
the person or entity may require.
12.13 HEADINGS. Article, Section and subsection headings contained in this
Agreement are inserted for convenience of reference only, shall not be deemed to
be a part of this Agreement for any purpose, and shall not in any way define or
affect the meaning, construction or scope of any of the provisions hereof.
12.14 GOVERNING LAW. This Agreement, the rights and obligations of the
parties hereto, and any claims or disputes relating thereto, shall be governed
by and construed in accordance with the laws of the State of Delaware excluding
the choice of law rules thereof.
12.15 EXECUTION IN COUNTERPARTS. To facilitate execution, this Agreement
may be executed in as many counterparts as may be required; and it shall not be
necessary that the signatures of, or on behalf of, each party, or that the
signatures of all persons required to bind any party, appear on each
counterpart; but it shall be sufficient that the signature of, or on behalf of,
each party, or that the signatures of the persons required to bind any party,
appear on one or more of the counterparts. All counterparts shall collectively
constitute a single agreement. It shall not be necessary in making proof of
this Agreement to produce or account for more than a number of counterparts
containing the respective signatures of, or on behalf of, all of the parties
hereto.
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12.16 ANNOUNCEMENTS. Except as required by law or applicable stock
exchange regulation, no party hereto shall make any announcement, press release
or other public statement relating in any manner to this Agreement, the terms
hereof or the relationship of the parties hereto without first obtaining the
consent of the other parties to the disclosure proposed to be made. The other
parties hereto shall not unreasonably withhold their consent to any request made
by a party pursuant to this Section 12.16. The Members shall use their best
efforts to consult and coordinate with each other before making any
announcement, press release or other public statement as required by law or
applicable stock exchange regulation.
12.17 DISPUTE RESOLUTION.
(a) INVOKING PROCEDURE. In the event of a dispute between the
Members arising out of or related to this Agreement, either Member may invoke
the procedures specified in this Section by giving written notice to the other
Member. Such written notice will describe briefly the nature of the dispute and
shall identify an individual with authority to settle the dispute on behalf of
that Member. The Member receiving such notice shall have ten (10) days within
which to designate an individual with authority to settle the dispute on its
behalf and to notify the other Member of its designation (the individuals so
designated shall be referred to as the "Authorized Individuals").
(b) INVESTIGATION. Each Member's Authorized Individual shall make
whatever investigation each deems appropriate and promptly thereafter, but no
later than thirty (30) days from the date of the original notice invoking these
procedures, shall commence discussions concerning resolution of the dispute. If
the dispute has not been resolved within sixty (60) days from the date of the
original notice invoking these procedures ("Negotiation Period"), the Members
shall submit the matter to alternative dispute resolution ("ADR") in accordance
with the following procedure.
(c) NEUTRAL PARTY. The Members shall have ten (10) days from the
expiration of the Negotiation Period to submit the matter to ADR and agree upon
a mutually acceptable person not affiliated with either party ("Neutral Party").
If no Neutral Party has been selected within that time period, the Members agree
jointly to request the American Arbitration Association, the Center for Public
Resources, or other mutually agreed-upon organization, to supply within ten (10)
days a list of at least three (3) potential Neutral Parties with qualifications
as specified by the Members in the joint request. Within seven (7) days of
receipt of the list, the Members shall rank the proposed candidates
independently, exchange rankings and select as the Neutral Party the individual
who receives the highest combined ranking who is available to serve.
(d) SCHEDULE. In consultation with the Neutral Party, the Members
shall designate a mutually convenient time and place for the ADR, and unless
circumstances require otherwise, such time shall be not later than forty-five
(45) days after the selection of the Neutral Party.
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(e) DISCOVERY. In the event one or both Members have substantial
need for information in the possession of the other Member or a need to take
certain limited depositions and/or production of principal documents in order to
prepare for the ADR, the Members shall attempt in good faith to agree on a plan
for the expeditious exchange of such information. Should they fail to reach
agreement, either Member may request a meeting with the Neutral Party who shall
assist them in reaching an accommodation; however, if the Neutral Party is
unable to assist them in reaching an accommodation within two (2) days, then the
Neutral Party shall be the final arbiter of permitted discovery.
(f) WRITTEN SUBMISSION. One week prior to the first scheduled
session of the ADR, each Member shall deliver to the Neutral Party and to the
other Member a written summary of its views on the matter in dispute. The
summary shall be no longer than twenty double-spaced pages unless the Members
agree otherwise.
(g) REPRESENTATIVES. In the ADR, each Member shall be represented
by the Authorized Individual and by counsel. In addition, each Member may bring
additional persons as necessary to respond to questions or contribute
information as needed. The number of such additional persons to be allowed
shall be mutually agreed by the Members with the assistance of the Neutral
Party, if necessary.
(h) STRUCTURE. The Neutral Party is authorized to conduct joint
and separate meetings with the Members and to help the Members structure
whatever form of presentation of the matter in dispute is most likely to
facilitate resolution. Notwithstanding the form of the presentation, it is the
intent of the Members to provide an opportunity for their Authorized Individual,
with or without the assistance of counsel, and with the assistance of the
Neutral Party, to negotiate a resolution of the matters in dispute. In the
event the Neutral Party holds separate private caucuses with either Member, he
or she shall keep confidential all information learned in such private caucuses
unless specifically authorized to make disclosure of the information to the
other Member. There shall be no stenographic, visual, or audio record made of
the ADR.
(i) MANDATORY. The Members agree to participate in the ADR to its
conclusion as designated by the Neutral Party and not to terminate negotiations
concerning resolution of the matters in dispute until at least two (2) weeks
thereafter. Each Member agrees not to commence a lawsuit or seek other remedies
prior to the conclusion of the two (2) week post-ADR negotiation period,
provided that either Member may commence litigation on any date after which the
commencement of litigation could be barred by an applicable statute of
limitations or in order to request an injunction to prevent irreparable harm.
In such event, the Members agree (except as prohibited by court order) to
continue to participate in the ADR to its conclusion.
(j) FEES. The fees of, and authorized costs incurred by, the
Neutral Party shall be advanced by the Members and shared equally by the
Members. The
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Neutral Party shall be disqualified as a witness, consultant, expert, or counsel
for any Member with respect to the matters in dispute and any related matters.
(k) LATER PROCEEDINGS. The ADR is a compromise negotiation for
purposes of the Federal Rules of Evidence and state rules of evidence. The
entire procedure is confidential. All conduct, statements, promises, offers,
views, and opinions, whether oral or written, made in the course of the ADR by
any of the Members, their agents, employees, representatives, or other invitees
to the ADR and by the Neutral Party (except as provided in Section 8.1), who is
the parties' joint agent for purposes of these compromise negotiations, are
confidential and shall, in addition and where appropriate, be deemed to be work
product and privileged. Such conduct, statements, promises, offers, views, and
opinions shall not be discoverable or admissible for any purposes, including
impeachment, in any litigation or other proceeding involving the Members and
shall not be disclosed to anyone not an agent, employee, expert, witness, or
representative for any of the Members. Evidence otherwise discoverable or
admissible is not excluded from discovery or admission as a result of its use in
the ADR.
12.18 NONDISCLOSURE OF INFORMATION.
(a) CONFIDENTIALITY. All disclosures of information concerning a
Member (whether provided or prepared by such Member, its advisors,
representatives or agents or the LLC (the "Agent") or otherwise), trade secrets,
know-how, financial information, or other confidential information (including,
without limitation, the Member Systems as defined in Section 12.22) (the
"Confidential Information") made by the LLC to any Member or made by any Member
to the LLC or other Member under or in connection with this Agreement or the
Associated Agreements, as well as the terms of this Agreement and all Associated
Agreements, shall be received and maintained in confidence by the recipient
during the term hereof and for three (3) years after dissolution of the LLC and
each Member shall treat all such Confidential Information as confidential and
shall not disclose or use the Confidential Information except as required solely
for the purpose of carrying out this Agreement and the Associated Agreements:
(i) as to the persons directly responsible for the
performance of the obligations of this Agreement and for the effective operation
of the LLC;
(ii) as to the professional advisers of the Members and the
LLC;
(iii) as to such disclosures to customers of the LLC as are
necessary for the effective carrying on of business by the LLC;
(iv) as to such information as is required by law to be
disclosed by the Members or the LLC in compliance with Section 12.18(c) hereof;
and
(v) as to such information as is within the public domain
otherwise than in violation of the provisions of this Section 12.18(a) is
already in a
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recipient's possession or becomes available to a recipient from a source other
than an Agent, provided that such information was lawfully obtained and is not
known by such recipient to be subject to another confidentiality agreement with
or other obligation of secrecy to the other Member or another person.
(b) DUTY OF CARE. Each Member will take such steps as lie within
its power to assure that all managers, officers and employees of the LLC, or of
any Affiliates, to whom confidential information is disclosed, take all proper
precautions to prevent the unauthorized disclosure and use of the Confidential
Information referenced in Section 12.18(a).
(c) REQUESTS FOR DISCLOSURE. If either Member or the LLC is
requested or is required by applicable law (by interrogatories, requests for
information or documents, subpoena, civil investigative demand or similar
process) to disclose any Confidential Information, such Member or LLC will
provide the other Member or LLC with immediate notice of such request and
requirement so that the other Member or LLC may consider seeking a protective
order. If in the absence of a protective order or the receipt of a waiver
hereunder the Member or LLC receiving the request or requirement is nonetheless,
in the written opinion of counsel independent of such Member or LLC and
reasonably acceptable to the other Member or LLC, compelled to disclose any
Confidential Information to any tribunal or any other person or else stand
liable for contempt or suffer other material censure or penalty, such party may
disclose such information to such tribunal or other party without liability
hereunder.
(d) RETURN OF MATERIALS. Upon dissolution of the LLC each Member
and the LLC shall promptly redeliver to the other Member all written and other
tangible Confidential Information of such Member. Each Member and the LLC
agrees not to retain any copies, extracts or other reproductions in whole or in
part of such Confidential Information of the other Member. All documents,
memoranda, notes and other writings whatsoever prepared by a Member, its Agents
or the LLC based on or reflecting the information in the Confidential
Information of the other Member also will be destroyed by the preparing Member
or LLC as the case may be, and such destruction will be certified in writing to
the Member that provided such Confidential Information by the authorized officer
of the Member who supervised such destruction.
(e) INJUNCTIVE RELIEF. Each Member and the LLC agrees that money
damages would not be a sufficient remedy for any breach of the agreements in
this Section 12.18 and that the non-breaching party will be entitled to
injunctive relief, specific performance and/or any other appropriate equitable
remedies for any such breach without first complying with the ADR procedures set
forth in Section 12.17 hereof. Such remedies shall not be deemed to be
exclusive, but shall be in addition to all other remedies available at law or in
equity. In addition, if successful, the non-breaching Member will be entitled
to payment of its legal fees and disbursements, court costs and other expenses
of enforcing, defending or otherwise protecting its interests hereunder.
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12.19 WAIVER OF PARTITION AND CERTAIN OTHER RIGHTS. Each of the Members
irrevocably waives any right or power that such Member might have to:
(a) cause the LLC or any of the LLC assets to be partitioned;
(b) cause the appointment of a receiver for all or any portion of
the LLC assets;
(c) compel any sale of all or any portion of the LLC assets; and
(d) file a complaint, or to institute proceeding at law or in
equity, to cause the dissolution or liquidation of the LLC.
Each of the Members has been induced to enter into this Agreement in
reliance upon the waivers set forth in this Section 12.19, and without those
waivers no Member would have entered into this Agreement.
12.20 INVOLVEMENT OF THE LLC IN CERTAIN PROCEEDINGS. If any Member becomes
involved in legal proceedings unrelated to the business of the LLC in which the
LLC is called upon to provide information, the Member will indemnify and hold
harmless the LLC against all costs and expenses, including without limitation
fees and expenses of attorneys and other advisors, incurred by the LLC in
preparing or producing the required information or in resisting any request for
production or obtaining a protective order limiting the availability of the
information actually provided by the LLC.
12.21 ATTORNEY-IN-FACT. Each Member, by execution of this Agreement,
irrevocably constitutes and appoints each Representative as such Member's true
and lawful attorney-in-fact and agent, with full power and authority in such
Member's name, place and stead to execute, acknowledge and deliver, and to file
or record in any appropriate public office (a) any certificate or other
instrument that may be necessary, desirable or appropriate to qualify the LLC as
a limited liability company or to transact business as such in any jurisdiction
in which the LLC conducts business; (b) any amendment to this Agreement adopted
in accordance with Section 12.10, and any certificate or amendment to the
Certificate of Formation or to any certificate or other instrument that may be
necessary, desirable or appropriate to reflect any such amendment to this
Agreement or to reflect any other action of the Board that is taken in
accordance with its power or authority granted under this Agreement or the Act;
(c) any certificates or instruments that may be necessary, desirable or
appropriate to reflect the dissolution and winding up of the LLC; and (d) any
certificates necessary to comply with the provisions of this Agreement. This
power of attorney will be deemed to be coupled with an interest and will survive
the transfer of the Member's Membership Interest.
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12.22 MEMBER SYSTEMS.
(a) SYSTEMS LICENSE. Each Member grants to the LLC a royalty free
non-exclusive license ("License") to use the systems of such Member described in
Schedule 12.22 attached hereto and incorporated herein by this reference as
amended by the Members from time to time (the "Member Systems"), to the extent
such use is permitted by such Member's license agreement with any third party
vendor for such systems, if any. The LLC hereby covenants and agrees that it
shall not, without the express written consent of the licensing Member, which
consent may be withheld in the licensing Member's sole and absolute discretion,
use such licensing Member's Member Systems for the benefit of any party other
than the LLC and LLC shall not disclose information regarding any one Member's
Member System or such Member's data related thereto to the other Member.
(b) REQUIRED CONSENTS. Each Member shall use reasonable efforts
without incurring any expense in excess of a commercially reasonable amount to
obtain any required consents from third parties necessary for the LLC to operate
such Member's Member Systems as contemplated by this Agreement. If the required
consents cannot be obtained for the LLC to operate the Member Systems necessary
to provide services to Members as described in this Agreement and the Associated
Agreements, then each Member and the LLC will work together to achieve an
alternate solution.
(c) FORMAL LICENSE. Prior to the expiration of the Associated
Agreement Negotiation Period, the licensing Member and the LLC shall execute the
Systems License Agreement(s) attached hereto as Exhibit 12.22 granting the LLC a
right to use certain systems as needed to perform the services described in this
Agreement and the Associated Agreements.
(d) LICENSE TERMINATION. The LLC's license to use the Member
Systems shall terminate upon the dissolution of the LLC.
(e) SYSTEM WARRANTIES. With respect to the Member Systems licensed
by each Member hereunder, the Member licensing the particular system
("Licensor") hereby warrants and represents to the LLC as follows:
(i) OWNERSHIP. Licensor is the owner of Licensor's Member
Systems or otherwise has the right to grant to the LLC the license to use same
set forth in this Section 12.22 without violating any rights of any third party,
and there is currently no actual or threatened suit by any such third party
based on an alleged violation of such right by Licensor;
(ii) QUALITY WARRANTY. Licensor's Member System shall not
contain any material defects and shall function in substantial conformity with
the description, specifications and documentation set forth in Schedule 12.22.
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(f) THE ABOVE IS A LIMITED WARRANTY AND IT IS THE ONLY WARRANTY
MADE BY LICENSOR. LICENSOR MAKES AND LLC RECEIVES NO OTHER WARRANTY, EXPRESS OR
IMPLIED, AND THERE ARE EXPRESSLY EXCLUDED ALL WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE. LICENSOR SHALL HAVE NO LIABILITY WITH RESPECT
TO ITS OBLIGATIONS UNDER THIS SECTION 12.22 FOR CONSEQUENTIAL, EXEMPLARY, OR
INCIDENTAL DAMAGES EVEN IF IT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES. THE STATED EXPRESS WARRANTY IS IN LIEU OF ALL LIABILITIES OR
OBLIGATIONS OF LICENSOR FOR DAMAGES ARISING OUT OF OR IN CONNECTION WITH THE
DELIVERY, USE OR PERFORMANCE OF LICENSOR'S MEMBER SYSTEMS.
(g) INDEMNITY. Licensor agrees to indemnify and hold harmless the
LLC and its directors, officers, employees and agents, against any and all
losses, liabilities, judgments, awards and costs (including legal fees and
expenses) arising out of or related to any claim that the LLC's use or
possession of Licensor's Member System, or the License granted by Licensor
hereunder, infringes or violates the copyright, trade secret or other
proprietary right of any third party. Licensor shall defend and settle at its
sole expense all suits or proceedings arising out of the foregoing, provided
that the LLC gives Licensor prompt notice of any such claim of which it learns.
No settlement which prevents the LLC from continuing to use Licensor's Member
Systems provided herein shall be made without the prior written consent of the
LLC. In all events, the LLC shall have the right to participate in the defense
of any such suit or proceeding through counsel of its own choosing.
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IN WITNESS WHEREOF, the undersigned have duly executed this Limited
Liability Company Agreement or have caused this Limited Liability Company
Agreement to be duly executed on their behalf as of the day and year first set
forth above.
Member A:
WYLE ELECTRONICS,
A California Corporation
By: /s/ Ralph Ozorkiewicz
-----------------------------------
Name: Ralph Ozorkiewicz
Title: President and
Chief Executive Officer
Member B:
MARSHALL INDUSTRIES,
A California Corporation
By: /s/ ROBERT RODIN
-----------------------------------
Name: Robert Rodin
Title: President and
Chief Executive Officer
<PAGE>
ADDENDUM I
DEFINITIONS
ADDITIONAL CAPITAL CONTRIBUTION: As defined in Section 5.2.
AFFILIATE: Any Person directly or indirectly controlling, controlled by,
or under common control with the Person in question; if the Person in question
is a corporation, any executive officer or director of the Person in question or
of any corporation directly or indirectly controlling the Person in question.
As used in this definition of "Affiliate", the term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract, or otherwise.
AGREEMENT: This Limited Liability Company Agreement, as it may be further
amended or supplemented from time to time.
APPRAISER: An Independent appraiser or investment bank.
BANKRUPTCY: For the purposes of this Agreement, a Member shall be deemed
"Bankrupt" upon, (i) the entry of a decree or order for relief of the Member by
a court of competent jurisdiction in any involuntary case involving the Member
under any bankruptcy, insolvency or other similar law now or hereafter in
effect; (ii) the appointment of a receiver, liquidator, assignee, custodian,
trustee, sequestrator or other similar agent for the Member or for any
substantial part of the Member's assets or property; (iii) the ordering of the
winding up or liquidation of the Member's affairs; (iv) the filing with respect
to the Member of a petition in any such involuntary bankruptcy case, which
petition remains undismissed for a period of ninety (90) days or which is
dismissed or suspended pursuant to Section 305 of the Federal Bankruptcy Code
(or any corresponding provision of any future United States bankruptcy law); (v)
the commencement by the Member of a voluntary case under any bankruptcy,
insolvency or other similar law now or hereafter in effect; (vi) the consent by
the Member to the entry of an order for relief in an involuntary case under any
such law or to the appointment of or taking possession by a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar agent
for the Member or for any substantial part of the Member's assets or property;
(vii) the making by the Member of any assignment for the benefit of creditors;
or (viii) the failure by the Member generally to pay its debts as such debts
become due. To the extent not included herein, any event of bankruptcy set
forth in Section 18-304 of the Delaware LLC Act is deemed incorporated into this
definition.
BANKRUPTCY LAW: as used herein means Title 11, U.S. Code or any similar
Federal or state law for the relief of debtors.
BOARD OF REPRESENTATIVES: As defined in Section 7.1.
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BUSINESS DAY: Monday through Friday of-each week, except that a legal
holiday recognized as such by the Government of the United States shall not be
regarded as a Business Day.
CAPITAL ACCOUNT: As defined in Section 5.3.
CAPITAL CONTRIBUTION: Any property, cash or services contributed to the
LLC by or on behalf of a Member.
CERTIFICATE: The Certificate of Formation, and any and all amendments
thereto, filed on behalf of the LLC with the Recording Office as required under
the Delaware LLC Act.
CODE: The Internal Revenue Code of 1986, as in effect and hereafter
amended, and, unless the context otherwise requires, applicable regulations
thereunder. Any reference herein to a specific section or sections of the Code
shall be deemed to include a reference to any corresponding provision of future
law.
DEADLOCK: As defined in Section 8.1.
DELAWARE LLC ACT: The Delaware Limited Liability Company Act, as amended
from time to time.
EVENT OF DEFAULT: As defined in Section 11.1(a)(x).
EXCESS NEGATIVE BALANCE: The excess, if any, of (1) the negative balance
in a Member's Capital Account after reducing such balance as required by the
Treasury Regulations, over (2) the sum of (i) the amount, if any, which the
Member is obligated or deemed obligated to restore upon liquidation of the LLC,
and (ii) the Member's share of any minimum gain and of any minimum gain
attributable to Member nonrecourse debt as determined under Treasury Regulations
Section 1.704-2.
FAIR MARKET VALUE: With respect to any property or asset, the dollar value
of the property or asset determined (i) by mutual agreement of the Members, or
(ii) if the Members cannot so agree within twenty (20) days after one Member
first proposes in writing to the other Member that Fair Market Value be
determined, by two independent Appraisers, one selected by each Member,
provided, that if a Member fails to appoint an Appraiser within, ten (10) days
following the expiration of such twenty (20) day period, Fair Market Value shall
be determined by the Appraiser selected by the other Member. If two Appraisers
are selected, each Appraiser shall submit to the Members their respective
appraisals within thirty (30) days after their selection. If a discrepancy
between the dollar value of the appraisals exceeds 10% of the higher appraisal
and the Members do not agree on a settlement of the discrepancy within ten (10)
days after receipt of the appraisals, then a third Appraiser mutually selected
by the Members (or if they cannot so select, then selected by the first two
Appraisers), shall be afforded access
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to the first two appraisals. The third Appraiser shall select one of the
appraisals of the first two Appraisers, which selection shall constitute a final
determination of Fair Market Value of the property or asset and shall be binding
upon the Members. If a discrepancy between the appraisals of the first two
Appraisers is less than 10% of the higher appraisal, then the average of the two
appraisals shall constitute a final determination of Fair Market Value of the
property or asset and shall be binding upon the Members.
FISCAL YEAR: As defined in Section 9.6.
INITIAL CAPITAL CONTRIBUTION: As defined in Section 5.1.
LLC: As defined in the preamble.
LLC ASSETS: All assets and property, whether tangible or intangible and
whether real, personal, or mixed, at any time owned by or held for the benefit
of the LLC.
LLC INTEREST: As to any Member, all of the interest of that Member in the
LLC, including, without limitation, such Member's (i) right to a distributive
share of the income, gain, losses and deductions of the LLC in accordance with
this Agreement, and (ii) right to a distributive share of LLC Assets.
LLC GENERAL MANAGER: As defined in Section 7.2(a).
MEMBER: Member A and Member B and any other Person who shall in the future
execute and deliver this Agreement pursuant to the provisions hereof.
NET INCOME AND NET LOSS. For a period as determined for federal income tax
purposes, the taxable income or loss, respectively, computed with the following
adjustments:
(h) items of gain, loss and deduction relating to LLC Assets shall
be computed based on the Carrying Values of the LLC Assets rather than upon
their Adjusted Bases, and in the case of depreciation, amortization or other
cost recovery deductions, computed using the same method and useful life used by
the LLC in computing such deductions for federal income tax purposes;
(i) income of the LLC shall be treated, for purposes of this
definition only, as gross income; and
(j) expenditures of the LLC described in Section 705(a)(2)(B) of
the Code or treated as such expenditures pursuant to Section
1.704-l(b)(2)(iv)(i) of the regulations under the Code shall be treated, for
purposes of this definition only, as deductible expenses.
NOTICE OF DEFAULT: As defined in Section 11.1(a)(x).
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PERCENTAGE INTEREST: A Member's percentage share of the total LLC
Interests, which shall be as follows, unless modified by an amendment to this
Agreement: equal to the percentage that its Capital Contributions bears to the
sum of all Capital Contributions. Member A's Initial Percentage Interest is
fifty percent (50%), and Member B's Percentage Interest is fifty percent (50%).
PERSON: Any individual, corporation, association, partnership, limited
liability company, joint venture, trust, estate, or other entity or
organization.
RECORDING OFFICE: The office of the Secretary of State of the State of
Delaware.
REPRESENTATIVE: Any member of the Board of Representatives.
TAX MATTERS PARTNER: That person required by Section 6231(a)(7) of the
Code.
TERMINATION DATE: The thirtieth anniversary of the date upon which the
Certificate is duly filed with the Recording Office.
TERMINATION FORMULA: That formula, as mutually agreed between the Members,
which shall be used to calculate an amount that will reflect the value of the
LLC to the TO Member. Member A and Member B, as applicable, shall each allocate
the necessary resources and meet together as soon as possible following the
execution of this Agreement and as often as a party reasonably requests
thereafter, in order to negotiate in good faith the Termination Formula which
shall be mutually agreed between the parties prior to the expiration of the
Associated Agreement Negotiation Period, as extended by mutual agreement between
the Members.
TERMINATION TRANSITION FEE: Equals the greater of: (i) One Hundred Fifty
Thousand Dollars ($150,000), or (ii) the lessor of: (a) the TO Member's actual
share of the LLC operating expenses during the ninety (90) day period
immediately preceding, the notice of termination, if any, otherwise that ninety
(90) day period immediately preceding the LLC termination ("Expense Period") or
(b) fifty percent (50%) of the actual LLC operating expenses for the Expense
Period.
CHANGE IN CONTROL TERMINATION FEE: Equals, initially, twenty five million
dollars ($25,000,000) (which shall be replaced by an amount calculated pursuant
to the Termination Formula upon that date the Members mutually agree upon the
Termination Formula) minus the Warrant Value (as defined below); provided,
however, that if the Change in Control Termination Fee resulting from the
foregoing subtraction is a number that is less than zero, then the Change in
Control Termination Fee shall be deemed to be zero.
TO WARRANT AGREEMENT: That certain Warrant Agreement by and between the TO
Member (as Venture Partner) and the other Member (as Company), dated
concurrently herewith.
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WARRANT AGREEMENT: As to each Member, that certain Warrant Agreement
between such Member (as Venture Partner) and the other Member (as Company) dated
concurrently herewith.
WARRANT VALUE: Equals the average Market Price (as defined in the TO
Warrant Agreement) per share of the Common Stock (as defined in the TO Warrant
Agreement) for the thirty (30) trading days immediately following the Exercise
Event (as defined in the TO Warrant Agreement) minus the then current Exercise
Price (as defined in the TO Warrant Agreement) times the then current Warrant
Number (as defined in the TO Warrant Agreement) related to the Warrants (as
defined in the TO Warrant Agreement) held by the TO Member, its designees or
assigns.
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WARRANT AGREEMENT (MARSHALL)
WARRANT AGREEMENT (the "Agreement") dated as of August 8, 1996 between
Marshall Industries, a California corporation (the "Company"), and Wyle
Electronics, a California corporation (the "Venture Partner").
WHEREAS, the Company and the Venture Partner have entered into that
certain Limited Liability Company Agreement of Accord Contract Services, LLC of
even date herewith (the "LLC Agreement") establishing a joint venture (the "LLC
Venture") between the Company and the Venture Partner;
WHEREAS, the LLC Venture is intended to benefit the Company, the
Venture Partner and their respective shareholders by allowing the Company and
the Venture Partner to achieve, among other things, increased sales and reduced
operating costs, to improve efficiency in certain areas of their respective
businesses and to increase their respective capabilities in providing value
added materials management programs to their respective customers;
WHEREAS, the benefits expected to be derived by the Company and the
Venture Partner from the LLC Venture are based upon the unique characteristics
of the other party and each of the Company and the Venture Partner believes that
a material change in the ownership of the other party would significantly
disrupt the operation of the LLC Venture and jeopardize the value derived by the
respective parties therefrom;
WHEREAS, the Company wishes to provide a means to compensate the
Venture Partner in the event that certain events affecting the Company result in
a termination of the LLC Venture and therefore proposes to issue to the Venture
Partner, certain warrants (the "Warrants") to purchase shares of the Company's
common stock, having a par value of $1.00 per share (the "Common Stock") which
will become exercisable upon the occurrence of certain events, as hereinafter
described;
WHEREAS, the Venture Partner has also entered into a Warrant Agreement
of event date herewith (the "Venture Partner Warrant Agreement") pursuant to
which the Venture Partner has issued certain warrants to the Company on terms
substantially identical to the terms of the Warrants granted herein;
WHEREAS, the Company and the Venture Partner have entered into (i)
that certain Standstill Agreement of even date herewith (the "Standstill
Agreement") providing for certain limitations on the conduct of the Venture
Partner as a shareholder of the Company and (ii) that certain Registration
Rights Agreement of even date herewith (the "Registration Rights Agreement")
providing for certain registration rights with respect to the shares of Common
Stock issuable upon exercise of the Warrants (the "Warrant Shares");
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:
SECTION 1. ISSUANCE OF WARRANTS. Concurrently with the execution
of this Agreement, the Company will issue and deliver to the Venture Partner a
certificate (the "Warrant Certificate") evidencing right to acquire 1,299,841
shares of the Company's Common Stock. Such
<PAGE>
certificate shall be in registered form only and shall be in form set forth as
Exhibit A attached hereto. The Warrant Certificate shall be dated the date of
issuance by the Company.
SECTION 2. EXECUTION OF WARRANT CERTIFICATES. The Warrant
Certificate shall be signed on behalf of the Company by its Chairman of the
Board or its Chief Executive Officer, President or a Vice President. Each such
signature upon the Warrant Certificate may be in the form of a facsimile
signature of the present or any future Chairman of the Board, Chief Executive
Officer, President or Vice President, and may be imprinted or otherwise
reproduced on the Warrant Certificate and for that purpose the Company may adopt
and use the facsimile signature of any person who shall have been Chairman of
the Board, Chief Executive Officer, President or Vice President, notwithstanding
the fact that at the time the Warrant Certificate shall be delivered or disposed
of such person shall have ceased to hold such office. Each Warrant Certificate
shall also be manually signed on behalf of the Company by its Secretary or an
Assistant Secretary under its corporate seal. The seal of the Company may be in
the form of a facsimile thereof and may be impressed, affixed, imprinted or
otherwise reproduced on the Warrant Certificate.
SECTION 3. REGISTRATION. The Company shall number and register
the Warrant Certificates in a register as they are issued. The Company may deem
and treat the registered holder(s) of the Warrant Certificate(s) (the
"Holder(s)") as the absolute owner(s) thereof (notwithstanding any notation of
ownership or other writing thereon made by anyone) for all purposes and shall
not be affected by any notice to the contrary. The Warrants shall be registered
initially in the name of the Venture Partner.
SECTION 4. RESTRICTIONS ON TRANSFER; REGISTRATION OF TRANSFERS AND
EXCHANGES.
The Warrants (and any Warrant Shares issued upon the exercise of the
Warrants) shall not be transferable except in accordance with the terms of this
Agreement and the Standstill Agreement.
Prior to the commencement of the Exercise Period (as defined in
Section 5 below) the Warrants will not be transferable by the Venture Partner to
any person other than a wholly-owned subsidiary of the Venture Partner;
provided, however, that if, at any time prior to the commencement of the
Exercise Period, the Warrants are held by any person other than the Venture
Partner or a wholly-owned subsidiary of the Venture Partner, then the Warrants
will be deemed to have been transferred in contravention of the terms of this
Agreement and such Warrants shall be automatically cancelled and of no further
force or effect.
From and after the commencement of the Exercise Period, no transfer of
the Warrants or the Warrant Shares shall be made unless either (i) such transfer
is either made pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the "Securities Act") or pursuant to Rule
144 promulgated thereunder (or any similar rule or regulation) or, (ii) prior to
any such transfer, the transferring Holder shall have delivered to the Company,
if so requested by the Company, an opinion of counsel reasonably satisfactory in
form and substance to the Company, to the effect that the Warrants or Warrant
Shares, as applicable, may be sold or otherwise transferred without registration
under the Securities Act. Upon original issuance thereof, and until such time
as the same shall have been registered under the Securities Act or sold pursuant
to Rule 144 promulgated thereunder (or any similar rule or regulation) each
Warrant Certificate and any certificates evidencing Warrant Shares shall bear
any legend required by the Securities Act or pursuant to the Standstill
Agreement, unless in the opinion of such counsel, such legend is no longer
required by the Securities Act or such legend required by the Standstill
Agreement is no longer required thereunder.
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Subject to the limitations set forth above, the Company shall from
time to time register the transfer of any outstanding Warrant Certificate in a
Warrant register to be maintained by the Company upon surrender thereof,
accompanied by a written instrument or instruments of transfer in form
satisfactory to the Company, duly executed by the registered Holder or Holders
thereof or by the duly appointed legal representative thereof or by a duly
authorized attorney. Upon any such registration of transfer, a new Warrant
Certificate shall be issued to the transferee(s) and the surrendered Warrant
Certificate shall be canceled and disposed of by the Company.
Any Warrant Certificate may be exchanged at the option of the
Holder(s) thereof, when surrendered to the Company at its office for another
Warrant Certificate or other Warrant Certificate of like series and tenor and
representing in the aggregate a like number of Warrants. Warrant Certificates
surrendered for exchange shall be canceled and disposed of by the Company.
SECTION 5. WARRANTS; EXERCISE OF WARRANTS. Subject to the
conditions set forth in Section 6 below and the other terms of this Agreement,
each Holder shall have the right, which may be exercised at any time or from
time to time during the Exercise Period (as defined below) to receive from the
Company the number of fully paid and nonassessable Warrant Shares (and such
other consideration) as the Holder may at the time be entitled to receive on
exercise of such Warrants and payment of the Exercise Price then in effect for
such Warrant Shares. In the alternative, each Holder may exercise its right,
during the Exercise Period, to receive Warrant Shares on a net basis, such that,
without the exchange of any funds, the Holder receives that number of Warrant
Shares (and such other consideration) otherwise issuable (or payable) upon
exercise of its Warrants less that number of Warrant Shares having an aggregate
Current Market Value (as defined in Section 11, but based on the average Market
Price for the Common Stock for the twenty trading days ending on the day
immediately preceding the date on which the notice of exercise is delivered to
the Company) at the time of exercise equal to the aggregate Exercise Price that
would otherwise have been paid by the Holder for the Warrant Shares. Each
Warrant not exercised during the Exercise Period shall become void and all
rights thereunder and all rights in respect thereof under this Agreement shall
cease as of such time. No adjustments as to dividends will be made upon
exercise of the Warrants, except as otherwise expressly provided herein.
The Warrants shall be exercisable during a period (the "Exercise
Period") which shall commence upon the Exercise Date (as defined below) and
expire, at 5:00 p.m., Los Angeles time, on the first anniversary of the
commencement of such Exercise Period.
"EXERCISE DATE" shall mean such time as each of the following events
shall have occurred (i) the occurrence of an Exercise Event (as defined below);
and (ii) the termination of the LLC Venture pursuant to Article 11 of the LLC
Agreement.
"EXERCISE EVENT" shall mean the occurrence of any of the following
events with respect to the Company:
(1) The approval by the shareholders of the Company of the
dissolution or liquidation of the Company;
(2) The consummation by any person (other than the Company or
the Venture Partner) of a tender offer or exchange offer to purchase any
shares of the Company's Common Stock such that, upon the consummation of
such offer, such person owns or controls 20% or more of the then
outstanding Common Stock of the Company;
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<PAGE>
(3) The execution by the Company or any subsidiary of the
Company of an agreement with any person (other than the Venture Partner) to
(i) merge, consolidate or otherwise reorganize with or into one or more
entities that are not subsidiaries of the Company, as a result of which
less than 50% of the outstanding voting securities of the surviving or
resulting entity immediately after the consummation of such transaction
are, or will be, owned by shareholders of the Company immediately before
such reorganization (assuming for purposes of such determination that there
is no change in the record ownership of the Company's securities from the
record date for such approval until such transaction is consummated and
that such record holders hold no securities of the other party or parties
to such a transaction), (ii) sell, lease or otherwise dispose of assets of
the Company or its subsidiaries representing 50% or more of the
consolidated assets of the Company and its subsidiaries or (iii) issue,
sell or otherwise dispose of (including by way of merger, consolidation,
share exchange or any similar transaction) securities representing 50% or
more of the voting power of the Company;
(4) The acquisition by any person (other than the Venture
Partner) of beneficial ownership (as such term is defined in Rule 13d-3
under the Exchange Act) or the right to acquire beneficial ownership of, or
any "group" (as such term is defined under the Exchange Act) shall have
been formed which beneficially owns or has the right to acquire beneficial
ownership of, 20% or more of the then outstanding Common Stock of the
Company; or
(5) The failure at any time, during any period of two
consecutive years, of individuals who at the beginning of such period
constituted the Board of Directors of the Company, for any reason, to
constitute at least a majority thereof, unless the election, or the
nomination for election by the Company's shareholders, of each new Board
member was approved by a vote of at least three-fourths of the Board
members then still in office who were Board members at the beginning of
such period (including for these purposes, new members whose election or
nomination was so approved).
The price at which each Warrant shall be exercisable shall initially
be $27.85 (representing an amount per share equal to the average Market Price
per share for the 30 trading days ending on August 5, 1996). Such initial
exercise price of $27.85, as such amount may be adjusted from time to time in
accordance with the provisions of Section 11 hereof, is referred to herein as
the "Exercise Price."
A Warrant may be exercised upon surrender to the Company at its office
address set forth in Section 12 hereof) of the Warrant Certificate or
Certificate to be exercised with the form of election to purchase attached
thereto duly filled in and signed, and upon payment to the Company of the
Exercise Price for the number of Warrant Shares in respect of which such
Warrants are then exercised. Payment of the aggregate Exercise Price shall be
made in cash or by certified or official bank check payable to the order of the
Company or by wire transfer of immediately available funds to an account
designated by the Company or in the manner provided in the first paragraph of
this Section 5.
Subject to the provisions of Section 6 and 8 hereof, upon such
surrender of Warrants and payment of the Exercise Price the Company shall issue
and cause to be delivered with all reasonable dispatch to or upon the written
order of the Holder and in such name or names as such Holder may designate a
certificate or certificates for the number of full Warrant Shares issuable upon
the exercise of such Warrants (and such other consideration as may be
deliverable upon exercise of
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<PAGE>
such Warrants) together with cash for fractional Warrant Shares as provided in
Section 12. Such certificate or certificates shall be deemed to have been
issued and the person so named therein shall be deemed to have become a holder
of record of such Warrant Shares as of the date of the surrender of such
Warrants and payment of the Exercise Price, irrespective of the date of delivery
of such certificate or certificates for Warrant Shares.
Each Warrant shall be exercisable during the Exercise Period, at the
election of the Holder thereof, either in full or from time to time in part and,
in the event that a Warrant Certificate is exercised in respect of fewer than
all of the Warrant Shares issuable on such exercise at any time prior to the
date of expiration of the Warrants, a new certificate evidencing the remaining
Warrant or Warrants will be issued and delivered pursuant to the provisions of
this Section and of Section 2 hereof.
All Warrant Certificates surrendered upon exercise of Warrants shall
be cancelled and disposed of by the Company. The Company shall keep copies of
this Agreement and any notices given or received hereunder available for
inspection by the Holders during normal business hours at its office.
SECTION 6. CONDITIONS TO EXERCISE. The right of the Venture
Partner to exercise the Warrants as contemplated by Section 5 above shall be
subject to the prior satisfaction of each of the following conditions precedent:
(a) The Holder shall not be in material breach of its obligations
under this Agreement, the LLC Agreement or the Standstill Agreement;
(b) The applicable waiting period, and any extensions thereof, under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, to the
extent applicable to the acquisition by the Holder of the Warrant Shares, shall
have terminated, and such termination shall have been confirmed by the Federal
Trade Commission and/or the Department of Justice; and
(c) No injunction shall have been entered, and not vacated, by any
court which enjoins or prohibits the issuance of the Warrant Shares to the
Holder pursuant to the terms of this Agreement.
SECTION 7. REPRESENTATIONS AND WARRANTIES. (a) The Company hereby
represents and warrants to the Venture Partner as follows:
(1) The Company has all requisite corporate power and authority
to enter into this Agreement and, subject to any approvals referred to
herein, to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of the Company. This Agreement has been duly executed
and delivered by the Company and constitutes a valid and binding obligation
of the Company, enforceable against the Company in accordance with its
terms.
(2) The Company has taken all necessary corporate and other
action to authorize and reserve for issuance, upon exercise of the
Warrants, a number of shares of Common Stock sufficient to permit the
Warrants to be exercised in full and the Company will take all necessary
corporate action to authorize and reserve for issuance all additional
shares
5
<PAGE>
of Common Stock or other securities which may become issuable upon exercise of
the Warrants pursuant to the provisions of Section 11 hereof. The shares of
Common Stock to be issued upon exercise of the Warrants, including all
additional shares of Common Stock or other securities that may become issuable
pursuant to Section 11, will be duly and validly issued, fully paid and
nonassessable, and shall be delivered free and clear of all liens, claims,
charges and encumbrances of any kind or nature whatsoever, including any
preemptive rights of any shareholder of the Company.
(3) The execution and delivery of this Agreement does not, and
the consummation of the transactions contemplated hereby will not, conflict
with or violate any provision of the Articles of Incorporation or Bylaws of
the Company or any material agreement or obligation of the Company.
The Venture Partner hereby represents and warrants to the Company
that:
(1) The Venture Partner has all requisite corporate power and
authority to enter into this Agreement and, subject to any approvals or
consents referred to herein, to consummate the transactions contemplated
hereby.
(2) The Venture Partner is an "accredited investor" within the
meaning of Regulation D promulgated under the Securities Act and is
acquiring the Warrants for its own account and without a view to any
distribution thereof.
SECTION 8. PAYMENT OF TAXES. The Company will pay all documentary
stamp taxes and other governmental charges (excluding all foreign, federal or
state income, franchise, property, estate, inheritance, gift or similar taxes)
in connection with the issuance or delivery of the Warrants hereunder, as well
as all such taxes attributable to the initial issuance or delivery of Warrant
Shares upon the exercise of Warrants and payment of the Exercise Price. The
Company shall not, however, be required to pay any tax that may be payable in
respect of any subsequent transfer of the Warrants or any transfer involved in
the issuance and delivery of Warrant Shares in a name other than that in which
the Warrants to which such issuance relates were registered, and, if any such
tax would otherwise be payable by the Company, no such issuance or delivery
shall be made unless and until the person requesting such issuance has paid to
the Company the amount of any such tax, or it is established to the reasonable
satisfaction of the Company that any such tax has been paid.
SECTION 9. MUTILATED OR MISSING WARRANT CERTIFICATE. If any
Warrant Certificate or certificate evidencing Warrant Shares shall be mutilated,
lost, stolen or destroyed, the Company shall issue, in exchange and substitution
therefor and upon cancellation of the mutilated Warrant Certificate or other
certificate, or in lieu of and substitution for the Warrant Certificate or other
certificate lost, stolen or destroyed, a new Warrant Certificate or other
certificate of like tenor and representing an equivalent number of Warrants or
Warrant Shares.
SECTION 10. RESERVATION OF WARRANT SHARES. The Company shall at
all times reserve and keep available, free from preemptive rights, out of the
aggregate of its authorized but unissued Common Stock or its authorized and
issued Common Stock held in its treasury, for the purpose of enabling it to
satisfy any obligation to issue Warrant Shares upon exercise of Warrants, the
maximum number of shares of Common Stock which may then be deliverable upon the
exercise of all outstanding Warrants.
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<PAGE>
The Company or, if appointed, the transfer agent for the Common Stock
and each transfer agent for any shares of the Company's capital stock issuable
upon the exercise of any of the Warrants (collectively, the "Transfer Agent")
will be irrevocably authorized and directed at all times to reserve such number
of authorized shares as shall be required for such purpose. The Company shall
keep a copy of this Agreement on file with the Transfer Agent. The Company will
supply the Transfer Agent with duly executed certificates for such purposes and
will provide or otherwise make available all other consideration that may be
deliverable upon exercise of the Warrants. The Company will furnish such
Transfer Agent a copy of all notices of adjustments and certificates related
thereto, transmitted to each Holder pursuant to Section 13 hereof.
Before taking any action which would cause an adjustment pursuant to
Section 11 hereof to reduce the Exercise Price below the then par value of the
Warrant Shares, the Company shall take any corporate action which may, in the
opinion of its counsel, be necessary in order that the Company may validly and
legally issue fully paid and nonassessable Warrant Shares at the Exercise Price
as so adjusted.
The Company covenants that all Warrant Shares and other capital stock
issued upon exercise of Warrants will, upon payment of the Exercise Price
therefor and issue, be validly authorized and issued, fully paid, nonassessable,
free of preemptive rights and free from all taxes, liens, charges and security
interests with respect to the issue thereof (subject to the provisions of the
Standstill Agreement and the Registration Rights Agreement).
The Company shall from time to time take all action which may be
necessary or appropriate so that the Common Stock issuable upon conversion of
Warrant Shares following an exercise of Warrants, will be listed on the
principal securities exchanges and markets within the United States of America,
if any, on which other shares of the same class of Common Stock of the Company
are then listed.
SECTION 11. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT
SHARES ISSUABLE. The Exercise Price and the number of shares of Common Stock
issuable upon the exercise of each Warrant (the "Warrant Number") are subject to
adjustment from time to time upon the occurrence of the events enumerated in, or
as otherwise provided in, this Section 11.
(a) ADJUSTMENT FOR CHANGE IN COMMON STOCK
If the Company:
(1) pays a dividend or makes a distribution on its Common Stock
in shares of its Common Stock;
(2) subdivides or reclassifies its outstanding shares of Common
Stock into a greater number of shares; or
(3) combines or reclassifies its outstanding shares of Common
Stock into a smaller number of shares;
then the Exercise Price in effect immediately prior to such action shall be
proportionately adjusted so that the holder of any Warrant thereafter exercised
may receive the aggregate number and kind of
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<PAGE>
shares of capital stock of the Company which he or it would have owned
immediately following such action if such Warrant had been exercised immediately
prior to such action.
The adjustment shall become effective immediately after the record
date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision, combination or reclassification.
Such adjustment shall be made successively whenever any event listed
above shall occur. If the occurrence of any event listed above results in an
adjustment under subsections (b) or (c) below, no further adjustment shall be
made under this subsection (a).
(b) ADJUSTMENT FOR RIGHTS ISSUE
If the Company distributes any rights, options or warrants to all
holders of its Common Stock entitling them (for a period expiring within 60 days
after the date fixed for determination of shareholders entitled to receive such
rights, options or warrants) to purchase shares of Common Stock at a price per
share less than the Current Market Value per share on the record date relating
to such distribution, the Exercise Price shall be adjusted in accordance with
the formula:
O + N x P
-----
E' = E x M
----------
O + N
where:
E' = the adjusted Exercise Price.
E = the then current Exercise Price.
O = the number of shares of Common Stock outstanding on the
record date for any such distribution.
N = the number of additional shares of Common Stock issuable
upon exercise of such rights, options or warrants.
P = the exercise price per share of such rights, options or
warrants.
M = the Current Market Value per share of Common Stock on the
record date for any such distribution.
The adjustment shall be made successively whenever any such rights,
options or warrants are issued and shall become effective immediately after the
opening of business on the day following the record date for the determination
of shareholders entitled to receive the rights, options or warrants. If at the
end of the period during which such rights, options or warrants are exercisable,
not all rights, options or warrants shall have been exercised, the Exercise
Price shall be immediately readjusted to what it would have been if "N" in the
above formula had been the number of shares actually issued. In determining
whether any rights or warrants entitle the holders to subscribe for or purchase
shares of Common Stock at less than such Current Market Value, and in
determining the aggregate offering price of such shares of Common Stock, there
shall be taken into account any
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consideration received for such rights, options or warrants, the value of such
consideration, if other than cash, to be determined by the Board of Directors.
(c) ADJUSTMENT FOR OTHER DISTRIBUTIONS
If the Company distributes to all holders of its Common Stock (i) any
evidences of indebtedness of the Company or any of its subsidiaries, (ii) any
assets of the Company or any of its subsidiaries (other than dividends or
distributions paid exclusively in cash), (iii) any shares of capital stock of
the Company other than Common Stock, and (iv) any rights, options or warrants to
acquire any of the foregoing or to acquire any Common Stock of the Company (the
items referred to in the foregoing clauses (i)-(iv) being hereinafter
collectively referred to as the "Distributed Property"), the Exercise Price
shall be adjusted in accordance with the formula:
E' = E x M - F
-----
M
where:
E' = the adjusted Exercise Price.
E = the then current Exercise Price.
M = the Current Market Value per share of Common Stock on the
record date mentioned below.
F = the fair market value on the record date mentioned below of
the Distributed Property, distributable to the holder of one
share of Common Stock (as reasonably determined in good
faith by the Board of Directors of the Company).
The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of shareholders entitled to receive the distribution.
If an adjustment is made pursuant to this subsection (c) as a result of the
issuance of rights, options or warrants and at the end of the period during
which any such rights, options or warrants are exercisable, not all such rights,
options or warrants shall have been exercised, the Exercise Price shall be
immediately readjusted as if "F" in the above formula was the fair market value
on the record date of the indebtedness, assets or capital stock actually
distributed upon exercise of such rights, options or warrants divided by the
number of shares of Common Stock outstanding on the record date.
This subsection does not apply to any dividend or distribution
referred to in subsections (a) or (b) of this Section 11.
Notwithstanding the foregoing, in the event that the fair market value
of the Distributed Property so distributed exceeds such Current Market Value per
share of Common Stock, or such Current Market Value exceeds such fair market
value by less than $0.10 per share, the Exercise Price shall not be adjusted
pursuant to this subsection (c) and, in lieu of such an adjustment, adequate
provision will be made so that each Holder will be entitled to receive upon
exercise of the Warrants the amount of Distributed Property such Holder would
have received had such Warrants been exercised immediately prior to the Record
Date for such distribution.
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In addition, notwithstanding the foregoing provisions of this
subsection (c), no adjustment shall be made hereunder for any distribution of
Distributed Property if the Company makes proper provision so that each Holder
who exercises a Warrant (or any portion thereof) after the date fixed for
determination of shareholders entitled to receive such distribution shall be
entitled to receive upon such conversion, in addition to the shares of Common
Stock issuable upon such conversion, the amount and kind of Distributed Property
that such Holder would have been entitled to receive if such Holder had,
immediately prior to such determination date, exercised such Warrant; provided
that, with respect to any Distributed Property that is convertible, exchangeable
or exercisable, the foregoing provision shall only apply to the extent (and so
long as) the Distributed Property receivable upon exercise of such Warrant would
be convertible, exchangeable or exercisable, as applicable, without any loss of
rights or privileges for a period of at least 60 days following exercise of such
Warrant.
Rights or warrants distributed by the Company to all Holders of its
Common Stock (whether before or after the date hereof) entitling the Holders
thereof to subscribe for or purchase shares of the Company's capital stock
(either initially or under certain circumstances), which rights or warrants,
until the occurrence of a specified event or events (the "Trigger Event") (i)
are deemed to be transferred with such shares of Common Stock, (ii) are not
exercisable and (iii) are also issued in respect of future issuances of Common
Stock, shall be deemed to be distributed for purposes of this subsection (c)
(and the appropriate adjustment to the Exercise Price shall be required) only
upon the occurrence of the earliest Trigger Event. In addition, in the event of
any distribution of rights or warrants, or any Trigger Event with respect
thereto, that shall have resulted in an adjustment to the Exercise Price under
this subsection (c), (1) in the case of any such rights or warrants that shall
all have been redeemed or repurchased without exercise by any Holders thereof,
the Conversion Price shall be readjusted upon such final redemption or
repurchase to give effect to such distribution or Trigger Event, as the case may
be, as though it were a cash distribution, equal to the per share redemption or
repurchase price received by a holder of Common Stock with respect to such
rights or warrants (assuming such holder had retained such rights or warrants),
made to all Holders of Common Stock as of the date of such redemption or
repurchase, and (2) in the case of such rights or warrants all of which shall
have expired or been terminated without exercise by any Holder thereof, the
Exercise Price shall be readjusted as if such distribution had not occurred.
If after an adjustment a holder of a Warrant upon exercise of it may
receive shares of two or more classes of capital stock of the Company, the
Company shall determine the allocation of the adjusted Exercise Price between
the classes of capital stock. After such allocation, the exercise privilege and
the Exercise Price of each class of capital stock shall thereafter be subject to
adjustment on terms comparable to those applicable to Common Stock in this
Section.
(d) In case the Company or any Subsidiary of the Company shall make
any distribution consisting exclusively of cash (excluding any cash portion of
distributions for which an adjustment is required to be made in accordance with
subsection (c) above, or cash distributed upon a merger or consolidation to
which subsection (n) applies) to all holders of Common Stock in an aggregate
amount that, combined together with (i) all other such all-cash distributions
made within the then preceding 12 months in respect of which no adjustment to
the Exercise Price has been made and (ii) any cash and the fair market value of
other consideration paid or payable in respect of any tender offer by the
Company or any of its Subsidiaries for Common Stock concluded within the
preceding 12 months in respect of which no adjustment has been made pursuant to
subsection (e) below, exceeds 10% of the Company's market capitalization
(defined as being the product of the then Current Market Value per share of the
Common Stock (determined as provided in subsection (h) below) times the
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number of shares of Common Stock then outstanding) on the record date of such
distribution, then in each such case the Exercise Price shall be adjusted in
accordance with the following formula:
E' = E x M - F
-----
M
where:
E' = the adjusted Exercise Price.
E = the then current Exercise Price.
M = the Current Market Value per share of Common Stock on the
record date for such distribution.
F = the total combined amount of cash so distributed per share
of Common Stock (determined by dividing such total amount by
the number of shares of Common Stock outstanding on such
record date).
Notwithstanding the foregoing, in the event that the cash so distributed
applicable to one share of Common Stock equals or exceeds such current market
price per share of Common Stock, or such current market price exceeds such
amount of cash by less than $0.10 per share, the Exercise Price shall not be
adjusted pursuant to this subsection (d) and, in lieu of such an adjustment,
adequate provision will be made so that each Holder will be entitled to receive
upon exercise of the Warrants the amount of cash such Holder would have received
had such Warrants been exercised immediately prior to the record date for such
distribution.
In addition, notwithstanding the foregoing provisions of this
subsection (c), no adjustment shall be made hereunder for any distribution of
such cash if the Company makes proper provision so that each Holder who
exercises a Warrant (or any portion thereof) after the date fixed for
determination of shareholders entitled to receive such distribution shall be
entitled to receive upon such conversion, in addition to the shares of Common
Stock issuable upon such conversion, the amount of cash that such Holder would
have been entitled to receive if such Holder had, immediately prior to such
determination date, exercised such Warrant.
(e) In case there shall be completed a tender or exchange offer made
by the Company or any Subsidiary of the Company for all or any portion of the
Common Stock (any such tender or exchange offer being referred to as an "Offer")
that involves an aggregate consideration having a fair market value as of the
expiration of such Offer (the "Expiration Time") that, together with (i) any
cash and the fair market value of any other consideration payable in respect of
any other Offer, as of the expiration of such other Offer, expiring within the
12 months preceding the expiration of such Offer and in respect for which no
Conversion Price adjustment pursuant to this subsection (e) has been made and
(ii) the aggregate amount of any all-cash distributions referred to in
subsection (d) of this Section 11 to all holders of Common Stock within the 12
months preceding the expiration of such Offer for which no conversion price
adjustment pursuant to such subsection (d) has been made, exceeds 10% of the
product of the then Current Market Value per share (determined as provided in
subsection (h) below) of the Common Stock on the Expiration Time times the
number of shares of Common Stock outstanding (including any tendered shares) on
the Expiration Time, then unless the Company elects to reserve a ratable portion
of such cash for distribution upon exercise of the Warrants, the Exercise Price
shall be adjusted in accordance with the following formula:
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E' = E x (M x O) - F
-----------
M x (O - P)
where:
E' = the adjusted Exercise Price.
E = the then current Exercise Price.
M = the Current Market Value per share of Common Stock
immediately prior to the Expiration Time.
O = the number of shares of Common Stock outstanding at the
Expiration Time (including any tendered shares).
F = the fair market value of the aggregate consideration payable
to shareholders based on the acceptance (up to any maximum
specified in the terms of the Offer) of all shares validly
tendered and not withdrawn as of the Expiration Time (the
shares deemed so accepted being defined as the "Purchased
Shares").
P = the number of Purchased Shares.
Any such adjustment shall become effective immediately prior to the opening of
business on the day following the Expiration Time.
For purposes of this subsection (e), the fair market value of any
consideration with respect to an Offer shall be reasonably determined in good
faith by the Board of Directors of the
Company and described in a Board Resolution.
(f) ADJUSTMENT FOR COMMON STOCK ISSUE
If the Company issues shares of Common Stock for a consideration per
share less than the Current Market Value per share on the date the Company fixes
the offering price of such additional shares, the Exercise Price shall be
adjusted in accordance with the formula:
O + P
---
E' = E x M
-------
A
where:
E' = the adjusted Exercise Price.
E = the then current Exercise Price.
O = the number of shares of Common Stock outstanding immediately
prior to the issuance of such additional shares of Common
Stock.
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P = the aggregate consideration received for the issuance of
such additional shares of Common Stock.
M = the Current Market Value per share of Common Stock on the
date of issuance of such additional shares.
A = the number of shares of Common Stock outstanding immediately
after the issuance of such additional shares of Common
Stock.
The adjustment shall be made successively whenever any such issuance
is made, and shall become effective immediately after such issuance.
This subsection (f) does not apply to:
(1) any of the transactions described in subsection (a) of this
Section 11; or
(2) Common Stock issued to the Company's employees, directors or
consultants under BONA FIDE benefit plans adopted by the Board of
Directors, or in connection with the acquisition of a business approved by
the Board of Directors, if such Common Stock would otherwise be covered by
this subsection (f) (but only to the extent that the aggregate number of
shares excluded hereby and issued after the date of this Warrant Agreement
(plus the number of shares of Common Stock issuable upon the exercise of
options, warrants or other securities referred to in subsection (g)(3)
below) shall not exceed 10% of the number of shares of Common Stock
outstanding on the date of this Agreement (as such number may be adjusted
from time to time to reflect stock splits, stock dividends and other
similar events)); or
(3) the issuance of Common Stock in connection with (i) the
exercise of Warrants, or (ii) the conversion, exchange or exercise of any
options, warrants, or other securities convertible into or exchangeable or
exercisable for Common Stock; or
(4) the issuance of Common Stock in any BONA FIDE underwritten
public offering.
(g) ADJUSTMENT FOR CONVERTIBLE SECURITIES ISSUE
If the Company issues any options, warrants or other securities
convertible into or exchangeable or exercisable for Common Stock for a
consideration per share of Common Stock initially deliverable upon conversion,
exchange or exercise of such securities less than the Current Market Value per
share on the date of issuance of such securities, the Exercise Price shall be
adjusted in accordance with this formula:
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<PAGE>
O + P
---
E' = E x M
-------
O + D
where:
E' = the adjusted Exercise Price.
E = the then current Exercise Price.
O = the number of shares of Common Stock outstanding immediately
prior to the issuance of such securities.
P = the aggregate consideration received for the issuance of
such securities.
M = the Current Market Value per share of Common Stock on the
date of issuance of such securities.
D = the maximum number of shares of Common Stock deliverable
upon conversion or in exchange for or upon exercise of such
securities at the initial conversion, exchange or exercise
rate.
The adjustment shall be made successively whenever any such issuance
is made, and shall become effective immediately after such issuance.
If all of the Common Stock deliverable upon conversion, exchange or
exercise of such securities has not been issued when such securities are no
longer outstanding, then the Exercise Price shall promptly be readjusted to the
Exercise Price which would then be in effect had the adjustment upon the
issuance of such securities been made on the basis of the actual number of
shares of Common Stock issued upon conversion, exchange or exercise of such
securities.
This subsection (g) does not apply to:
(1) any transaction described in subsection (b) of this
Section 11; or
(2) the issuance of the Warrants; or
(3) any such options, warrants or other securities issued to the
Company's employees, directors or consultants under BONA FIDE benefit
plans adopted by the Board of Directors, or in connection with the
acquisition of a business approved by the Board of Directors, if such
options, warrants or other securities would otherwise be covered by
this subsection (g) (but only to the extent that the aggregate number
of shares excluded hereby and issued after the date of this Warrant
Agreement (plus the number of shares of Common Stock referred to in
subsection (f)(2) above) shall not exceed 10% of the number of shares
of Common Stock outstanding on the date of this Agreement (as such
number may be adjusted from time to time to reflect stock splits,
stock dividends and other similar events)); or
(4) the issuance of any such options, warrants or other
securities in any BONA FIDE underwritten public offering.
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<PAGE>
(h) CURRENT MARKET VALUE
"Current Market Value" per share of Common Stock or of any other
security (herein collectively referred to as a "Security") at any date shall be
the average of the daily Market Prices for a share of Common Stock for the 10
consecutive trading days selected by the Company commencing not more than 20
trading days before, and ending not later than, the earlier of the date in
question and the date immediately prior to the " ex date," with respect to the
issuance, distribution or Offer requiring such computation. For purposes of
this paragraph, the term "'ex' date," when used with respect to any issuance,
distribution or payments with respect to an Offer, means the first date on which
the Common Stock trades regular way on the New York Stock Exchange (or if not
listed or admitted to trading thereon, then on the principal national securities
exchange on which the Common Stock is listed or admitted to trading) without the
right to receive such issuance, distribution or Offer.
The "Market Price" for any Security on each business day means:
(A) if such Security is listed or admitted to trading on any securities
exchange, the closing price, regular way, on such day on the principal exchange
on which such Security is traded, or if no sale takes place on such day, the
average of the closing bid and asked prices on such day, (B) if such Security is
not then listed or admitted to trading on any securities exchange, the last
reported sale price on such day, or if there is no such last reported sale price
on such day, the average of the closing bid and the asked prices on such day, as
reported by a reputable quotation source designated by the Company, or (C) if
neither clause (A) nor (B) is applicable, the average of the reported high bid
and low asked prices on such day, as reported by a reputable quotation service,
or a newspaper of general circulation in the Borough of Manhattan, City of New
York, customarily published on each business day, designated by the Company. If
there are no such prices on a business day, then the Market Price shall not be
determinable for such business day.
(i) CONSIDERATION RECEIVED
For purposes of any computation respecting consideration received
pursuant to subsections (f) and (g) of this Section 11, the following shall
apply:
(1) in the case of the issuance of shares of Common Stock for
cash, the consideration shall be the amount of such cash, provided that in
no case shall any deduction be made for any commissions, discounts or other
expenses incurred by the Company for any underwriting of the issue or
otherwise in connection therewith;
(2) in the case of the issuance of shares of Common Stock for a
consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to be the fair market value thereof (irrespective
of the accounting treatment thereof) as determined in good faith by the
Board of Directors; and
(3) in the case of the issuance of options, warrants or other
securities convertible into or exchangeable or exercisable for shares of
Common Stock, the aggregate consideration received therefor shall be deemed
to be the consideration received by the Company for the issuance of such
securities plus the additional minimum consideration, if any, to be
received by the Company upon the conversion, exchange or exercise thereof
(the consideration in each case to be determined in the same manner as
provided in clauses (1) and (2) of this subsection).
15
<PAGE>
(j) WHEN DE MINIMIS ADJUSTMENT MAY BE DEFERRED
No adjustment in the Exercise Price need be made unless the adjustment
would require an increase or decrease of at least 1% in the Exercise Price. No
adjustment in the Warrant Number need be made unless the adjustment would
require an increase or decrease of at least 0.5% in the Warrant Number. Any
adjustments that are not made shall be carried forward and taken into account in
any subsequent adjustment, provided that no such adjustment shall be deferred
beyond the date on which a Warrant is exercised.
All calculations under this Section 11 shall be made to the nearest
1/1000th of a share.
(k) WHEN NO ADJUSTMENT REQUIRED
If an adjustment is made upon the establishment of a record date or
issuance date for a distribution or issuance subject to subsections (a), (b) or
(c) or (d) hereof and such distribution or issuance is subsequently cancelled,
the Exercise Price then in effect shall be readjusted, effective as of the date
when the Board of Directors determines to cancel such distribution, to that
which would have been in effect if such record date had not been fixed.
To the extent the Warrants become convertible into cash, no adjustment
need be made thereafter as to the amount of cash into which such Warrants are
exercisable. Interest will not accrue on the cash.
(l) NOTICE OF ADJUSTMENT
Whenever the Exercise Price or the Warrant Number is adjusted, the
Company shall provide the notices required by Section 13 hereof.
(m) WHEN ISSUANCE OR PAYMENT MAY BE DEFERRED
In any case in which this Section 11 shall require that an adjustment
in the Exercise Price and Warrant Number be made effective as of a record date
for a specified event, the Company may elect to defer until the occurrence of
such event (i) issuing to the Holder of any Warrant exercised after such record
date the Warrant Shares and other capital stock of the Company, if any, issuable
upon such exercise over and above the Warrant Shares and other capital stock of
the Company, if any, issuable upon such exercise on the basis of the Warrant
Number prior to such adjustment, and (ii) paying to such Holder any amount in
cash in lieu of a fractional share pursuant to Section 11; PROVIDED, HOWEVER,
that the Company shall deliver to such Holder a due bill or other appropriate
instrument evidencing such Holder's right to receive such additional Warrant
Shares, other capital stock and cash upon the occurrence of the event requiring
such adjustment.
(n) REORGANIZATIONS
In case of any capital reorganization, other than in the cases
referred to in Sections 11(a), (b), (c) hereof, or the consolidation or merger
of the Company with or into another corporation (other than a merger or
consolidation which does not result in any reclassification of the outstanding
shares of Common Stock into shares of other stock or other securities or
property), or the sale of the property of the Company as an entirety or
substantially as an entirety (collectively such
16
<PAGE>
actions being hereinafter referred to as "Reorganizations"), there shall
thereafter be deliverable upon exercise of any Warrant (in lieu of the number of
shares of Common Stock theretofore deliverable) the number of shares of stock or
other securities or property to which a holder of the number of shares of Common
Stock that would otherwise have been deliverable upon the exercise of such
Warrant would have been entitled upon such Reorganization if such Warrant had
been exercised in full immediately prior to such Reorganization. In case of any
Reorganization, appropriate adjustment, as determined in good faith by the Board
of Directors of the Company, whose determination shall be described in a duly
adopted resolution certified by the Company's Secretary or Assistant Secretary,
shall be made in the application of the provisions herein set forth with respect
to the rights and interests of Holders so that the provisions set forth herein
shall thereafter be applicable, as nearly as possible, in relation to any shares
or other property thereafter deliverable upon exercise of Warrants.
The Company shall not effect any such Reorganization unless prior to
or simultaneously with the consummation thereof the successor corporation (if
other than the Company) resulting from such Reorganization or the corporation
purchasing or leasing such assets or other appropriate corporation or entity
shall expressly assume, by a supplemental Warrant Agreement or other
acknowledgement executed and delivered to the Holder(s), the obligation to
deliver to each such Holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such holder may be entitled to
purchase, and all other obligations and liabilities under this Agreement.
(o) ADJUSTMENT IN NUMBER OF SHARES.
Upon each adjustment of the Exercise Price pursuant to this Section
11, each Warrant outstanding prior to the making of the adjustment in the
Exercise Price shall thereafter evidence the right to receive upon payment of
the adjusted Exercise Price that number of shares of Common Stock (calculated to
the nearest thousandth) obtained from the following formula:
N' = N x E
---
E'
where:
N' = the adjusted number of Warrant Shares issuable upon exercise
of a Warrant by payment of the adjusted Exercise Price.
N = the number of Warrant Shares previously issuable upon
exercise of a Warrant by payment of the Exercise Price prior
to adjustment.
E' = the adjusted Exercise Price.
E = the Exercise Price prior to adjustment.
(p) FORM OF WARRANTS
Irrespective of any adjustments in the Exercise Price or the number or
kind of shares purchasable upon the exercise of the Warrants, Warrants
theretofore or thereafter issued may continue to express the same price and
number and kind of shares as are stated in the Warrants initially issuable
pursuant to this Agreement.
(q) ADJUSTMENTS IN OTHER SECURITIES
17
<PAGE>
If as a result of any event or for any other reason, any adjustment is
made which increases the number of shares of Common Stock issuable upon
conversion, exercise or exchange of, or in the conversion or exercise price or
exchange ratio applicable to, any outstanding securities of the Company that are
convertible into, or exercisable or exchangeable for, Common Stock of the
Company, then a corresponding adjustment shall be made hereunder to increase the
number of shares of Common Stock issuable upon exercise of the Warrants, but
only to the extent that no such adjustment has been made pursuant to Sections
11(a), (b), (c) or (d) hereof with respect to such event or for such other
reason.
(r) MISCELLANEOUS
For purpose of this Section 11 the term "shares of Common Stock" shall
mean (i) shares of any class of stock designated as Common Stock of the Company
at the date of this Agreement, and (ii) shares of any other class of stock
resulting from successive changes or reclassification of such shares consisting
solely of changes in par value, or from par value to no par value, or from no
par value to par value. In the event that at any time, as a result of an
adjustment made pursuant to this Section 11, the holders of Warrants shall
become entitled to purchase any securities of the Company other than, or in
addition to, shares of Common Stock, thereafter the number or amount of such
other securities so purchasable upon exercise of each Warrant shall be subject
to adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Warrant Shares contained in
subsections (a) through (r) of this Section 11, inclusive, and the provisions of
Sections 5, 8, 10 and 12 with respect to the Warrant Shares or the Common Stock
shall apply on like terms to any such other securities.
SECTION 12. FRACTIONAL INTERESTS. The Company shall not be
required to issue fractional Warrant Shares on the exercise of Warrants. If
more than one Warrant shall be presented for exercise in full at the same time
by the same holder, the number of full Warrant Shares which shall be issuable
upon the exercise thereof shall be computed on the basis of the aggregate number
of Warrant Shares purchasable on exercise of the Warrants so presented. If any
fraction of a Warrant Share would, except for the provisions of this Section 12,
be issuable on the exercise of any Warrants (or specified portion thereof), the
Company shall pay an amount in cash equal to the fair market value of the
Warrant Share so issuable (as determined in good faith by the Board of
Directors), multiplied by such fraction.
SECTION 13. NOTICES TO WARRANT HOLDERS. Upon any adjustment
pursuant to Section 9 hereof, the Company shall promptly thereafter (i) cause to
be filed with the Company a certificate of an officer of the Company setting
forth the Warrant Number and Exercise Price after such adjustment and setting
forth in reasonable detail the method of calculation and the facts upon which
such calculations are based, and (ii) cause to be given to each of the
registered holders of the Warrant Certificate at his or its address appearing on
the Warrant register written notice of such adjustments by first class mail,
postage prepaid. Where appropriate, such notice may be given in advance and
included as a part of the notice required to be mailed under the other
provisions of this Section 13.
In case:
(a) the Company shall authorize the issuance to all holders of
shares of Common Stock of rights, options or warrants to subscribe for or
purchase shares of Common Stock or of any other subscription rights or
warrants; or
18
<PAGE>
(b) the Company shall authorize the distribution to all holders
of shares of Common Stock of assets, including cash, evidences of its
indebtedness, or other securities; or
(c) of any consolidation or merger to which the Company is a
party and for which approval of any shareholders of the Company is
required, or of the conveyance or transfer of the properties and assets of
the Company substantially as an entirety, or of any reclassification or
change of Common Stock issuable upon exercise of the Warrants (other than a
change in par value, or from par value to no par value, or from no par
value to par value, or as a result of a subdivision or combination), or a
tender offer or exchange offer for shares of Common Stock; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company; or
(e) the Company proposes to take any action that would require
an adjustment to the Warrant Number or the Exercise Price pursuant to
Section 11 hereof;
then the Company shall cause to be given to each of the registered holders of
the Warrant Certificate at his or its address appearing on the Warrant register,
at least 20 days prior to the applicable record date hereinafter specified, or
20 days prior to the date of the event in the case of events for which there is
no record date, by first-class mail, postage prepaid, a written notice stating
(i) the date as of which the holders of record of shares of Common Stock to be
entitled to receive any such rights, options, warrants or distribution are to be
determined, or (ii) the initial expiration date set forth in any tender offer or
exchange offer for shares of Common Stock, or (iii) the date on which any such
consolidation, merger, conveyance, transfer, dissolution, liquidation or winding
up is expected to become effective or consummated, and the date as of which it
is expected that holders of record of shares of Common Stock shall be entitled
to exchange such shares for securities or other property, if any, deliverable
upon such reclassification, consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up. The failure to give the notice required
by this Section 13 or any defect therein shall not affect the legality or
validity of any distribution, right, option, warrant, consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding up, or the vote upon
any action.
Nothing contained in this Agreement or in any Warrant Certificate
shall be construed as conferring upon the Holders of Warrants (prior to the
exercise of such Warrants) the right to vote or to consent or to receive notice
as shareholder in respect of the meetings of shareholders or the election of
Directors of the Company or any other matter, or any rights whatsoever as
shareholders of the Company; provided that nothing in the foregoing provision is
intended to detract from any rights explicitly granted to any Holder hereunder.
SECTION 14. TERMINATION. Notwithstanding any other provision
hereof, this Warrant Agreement will terminate, and all Warrants outstanding
hereunder shall be canceled and of no further force or effect, upon the first to
occur of the following events:
(a) The termination of the LLC Venture pursuant to the
provisions of Section 11.1(a) of the LLC Agreement or, if earlier, upon (i)
the delivery of a "Specified Termination Notice" (as defined) by the
Company (as the Venture Partner) pursuant to Section 14(a) of the Venture
Partner Warrant Agreement or (ii) the delivery by the Venture Partner of a
notice to terminate for convenience pursuant to Section 11(a)(vii) of the
LLC
19
<PAGE>
Agreement; PROVIDED, HOWEVER, that upon the occurrence of a "Termination
Option Event" with respect to which the Venture Partner is the "TO Member"
(in each case, as defined in Section 11(c) of the LLC Agreement), this
Agreement shall remain operative and the Warrants shall remain outstanding
and enforceable in accordance with their terms until the first anniversary
of the date on which the "TO Member" delivers a notice of termination (a
"Specified Termination Notice") as a result of the occurrence of a an
"Uncured Default," a "Member Unlawful Event" or an "Improper Deadlock" (in
each case, as defined in Section 11(a) of the LLC Agreement) or, with
respect to any other "Termination Option Event," until the first
anniversary of the date of termination of the LLC Venture; and, PROVIDED
FURTHER, that (i) in the event that either party terminates the LLC
Agreement pursuant to Section 11(a)(vi) thereof, other than in the case
where an "Improper Deadlock" (as defined in the LLC Agreement) is found to
exist, which shall be governed by the first PROVISO of this paragraph when
the Venture Partner is the "TO Member" with respect to such "Improper
Deadlock," this Agreement shall remain operative and the Warrants shall
remain outstanding and enforceable in accordance with their terms only
until the first anniversary of the occurrence of the "Deadlock" (as defined
in the LLC Agreement), and (ii) in the event that either party terminates
the LLC Agreement pursuant to Section 11(a)(ix) thereof, this Agreement
shall remain operative and the Warrants shall remain outstanding and
enforceable in accordance with their terms only until the first anniversary
of the date of execution of this Agreement;
(b) The expiration of a period of five years commencing on the
date hereof; or
(c) The exercise of all Warrants outstanding under this
Agreement;
PROVIDED, HOWEVER, that if the Exercise Period has commenced less than one
year prior to the date on which this Agreement would otherwise terminate
pursuant to clauses (a) or (b) above, this Agreement shall remain
operative, and the Warrants shall remain outstanding and enforceable in
accordance with their terms, until the expiration of such Exercise Period.
SECTION 15. NOTICES TO THE COMPANY AND THE VENTURE PARTNER. All
notices, consents, requests, instructions, approvals and other communications
provided for herein and all legal process in regard hereto shall be in writing
and shall be decreed to be validly given, made or served when delivered
personally, transmitted by telex or telecopier, or deposited in the U.S. mail,
postage prepaid, for delivery by express, registered or certified mail, or
delivered to a recognized overnight courier service, addressed as follows:
If to the Company:
Marshall Industries
9320 Telstar Avenue
El Monte, California 91731
Attention: Chief Financial Officer
20
<PAGE>
If to the Venture Partner:
Wyle Electronics
15370 Barranca Parkway
Irvine, California 92718
Attention: Chief Financial Officer
or to such other address as may be specified in a notice given pursuant to this
Section. All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back if telexed; when receipt acknowledged, if telecopied; and the next
business day after timely delivery to the courier, if sent by overnight air
courier guaranteeing next day delivery. The parties may change the address to
which notices are to be given by giving five days' prior notice of such change
in accordance herewith.
SECTION 16. SUPPLEMENTS AND AMENDMENTS. The Company may from time
to time supplement or amend this Agreement without the approval of any Holders
of Warrant Certificate in order to cure any ambiguity or to correct or
supplement any provision contained herein which may be defective or inconsistent
with any other provision herein, or to make any other provisions in regard to
matters or questions arising hereunder which the Company may deem necessary or
desirable and which shall not in any way adversely affect the interests of the
Holders of Warrant Certificate.
SECTION 17. SUCCESSORS AND ASSIGNS. All the covenants and
provisions of this Agreement by or for the benefit of the Company shall bind and
inure to the benefit of its respective successors and assigns hereunder.
SECTION 18. NO RIGHTS OR LIABILITIES AS SHAREHOLDER. Nothing
contained herein shall be construed as conferring upon any Holder any rights as
a shareholder of the Company or as imposing any obligation on such holder to
purchase any securities or as imposing any liabilities on such holder as a
shareholder of the Company, whether such obligation or liabilities are asserted
by the Company or by creditors of the Company.
SECTION 19. GOVERNING LAW. This Agreement and each Warrant
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of California and for all purposes shall be construed in
accordance with the internal laws of said State.
SECTION 20. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement
shall be construed to give to any person or corporation other than the Company
and the registered Holders of the Warrant Certificate any legal or equitable
right, remedy or claim under this Agreement; but this Agreement shall be for the
sole and exclusive benefit of the Company and the registered Holders of the
Warrant Certificate.
SECTION 21. AMENDMENTS AND WAIVERS. No provision of this Agreement
may be amended or waived except by an instrument in writing signed by the party
sought to be bound or except as provided pursuant to Section 16 hereof; PROVIDED
that any amendment or waiver sought from the Holders of any provision of this
Agreement which affects Holders generally shall be given by Holders of at least
a majority of the Warrants outstanding and any amendment or waiver so given
shall be binding on all Holders. No failure or delay by any party in exercising
any right or remedy hereunder shall operate as a waiver thereof, and a waiver of
a particular right or remedy on one
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<PAGE>
occasion shall not be deemed a waiver of any other right or remedy or a waiver
of the same right or remedy on any subsequent occasion.
SECTION 22. CONSTRUCTION; INTERPRETATION. This Agreement shall not
be construed for or against any party by reason of the authorship or alleged
authorship of any provision hereof or by reason of the status of the respective
parties. This Agreement shall be construed reasonably to carry out its intent
without presumption against or in favor of any party. The natural persons
executing this Agreement on behalf of each party have the full right, power and
authority to do and affirm the foregoing warranty on behalf of each party and on
their own behalf. The captions on sections are provided for purposes of
convenience and are not intended to limit, define the scope of or aid in
interpretation of any of the provisions hereof. All pronouns and singular or
plural references as used herein shall be deemed to have interchangeably (where
the sense of the sentence requires) a masculine, feminine or neuter, and/or
singular or plural meaning, as the case may be.
SECTION 23. COUNTERPARTS. This Agreement may be executed in any
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
22
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the day and year first above written.
MARSHALL INDUSTRIES
By:
-------------------------------------
Name:
Title:
WYLE ELECTRONICS
By:
-------------------------------------
Name:
Title:
23
<PAGE>
EXHIBIT A
[Form of Warrant Certificate]
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD OR TRANSFERRED IN
THE ABSENCE OF REGISTRATION UNDER SAID ACT EXCEPT PURSUANT TO AN EXEMPTION FROM
SUCH REGISTRATION REQUIREMENTS.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON
VOTING AND TRANSFER AS SET FORTH IN A STANDSTILL AGREEMENT AND A WARRANT
AGREEMENT BETWEEN THE COMPANY AND THE HOLDER OF SUCH SECURITIES AND MAY NOT BE
SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT IN
ACCORDANCE THEREWITH. COPIES OF SAID STANDSTILL AGREEMENT AND WARRANT AGREEMENT
ARE ON FILE AT THE OFFICE OF THE CORPORATE SECRETARY OF THE COMPANY.
No. 1996-LLC-1 1,299,841 Warrants
WARRANT CERTIFICATE
MARSHALL INDUSTRIES
This Warrant Certificate certifies that Wyle Electronics, or its
permitted assigns, is the registered holder of the number of Warrants (the
"Warrants") set forth above to purchase Common Stock, $1.00 par value (the
"Common Stock"), of Marshall Industries, a California corporation (the
"Company"). Each Warrant entitles the holder upon exercise to receive from the
Company one fully paid and nonassessable share of Common Stock (a "Warrant
Share") at an initial exercise price of $27.85, subject to adjustment as
provided in the Warrant Agreement (the "Exercise Price") payable in lawful money
of the United States of America, upon surrender of this Warrant Certificate and
payment of the Exercise Price at the office of the Company designated for such
purpose, but only subject to the conditions set forth herein and in the Warrant
Agreement referred to hereinafter. The Warrants may be exercised only during
the Exercise Period (as defined in the Warrant Agreement). Furthermore,
Warrants may be exercised during the Exercise Period without the exchange of
funds pursuant to the net exercise provisions of Section 5 of the Warrant
Agreement. The Exercise Price and number of Warrant Shares issuable upon
exercise of the Warrants are subject to adjustment upon the occurrence of
certain events, as set forth in the Warrant Agreement.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants, and are issued pursuant to a Warrant Agreement
dated as of August 8, 1996 (the "Warrant Agreement"), duly executed and
delivered by the Company, which Warrant Agreement is hereby incorporated by
reference in and made a part of this instrument and is hereby referred to for a
description of the rights, limitation of rights, obligations, duties and
immunities thereunder of the Company and the holders (the words "holders" or
"holder" meaning the registered holders or registered holder) of the Warrants.
A copy of the Warrant Agreement may be obtained by the holder hereof upon
written request to the Company.
A-1
<PAGE>
The holder of Warrants evidenced by this Warrant Certificate may
exercise such Warrants during the Exercise Period under and pursuant to the
terms and conditions of the Warrant Agreement by surrendering this Warrant
Certificate, with the form of election to purchase set forth hereon (and by this
reference made a part hereof) properly completed and executed, together with
payment of the Exercise Price in cash or by certified or bank check at the
office of the Company designated for such purpose or by wire transfer of
immediately available funds to an account designated by the Company. In the
event that upon any exercise of warrants evidenced hereby the number of Warrants
exercised shall be less than the total number of Warrants evidenced hereby,
there shall be issued by the Company to the holder hereof or his or its
registered assignee a new Warrant Certificate evidencing the number of Warrants
not exercised.
The Warrant Agreement provides that upon the occurrence of certain
events the number of Warrants and the Exercise Price set forth on the face
hereof may, subject to certain conditions, be adjusted. No fractions of a share
of Common Stock will be issued upon the exercise of any Warrant, but the Company
will pay the cash value thereof determined as provided in the Warrant Agreement.
Upon exercise of the Warrants, the holder of Common Stock issued upon
such exercise will be bound by and subject to the terms of that certain
Standstill Agreement dated as of the date hereof, by and between the Company
(the "Standstill Agreement"), unless such holder is not subject to the
provisions of said Standstill Agreement in accordance with its terms.
The holders of the Warrants are entitled to certain registration
rights with respect to the Common Stock issuable upon the exercise thereof.
Said registration rights are set forth in a Registration Rights Agreement
(Marshall) dated as of August 8, 1996, by and between the Company and the
Venture Partner (the "Registration Rights Agreement"). By acceptance of this
Warrant Certificate, the holder hereof agrees that upon exercise of some or all
of the Warrants evidenced hereby, he or it will be bound by the Registration
Rights Agreement as a holder of Registrable Securities thereunder. A copy of
the Registration Rights Agreement may be obtained by the holder hereof upon
written request to the Company.
Warrant Certificates, when surrendered at the office of the Company by
the registered holder thereof in person or by legal representative or attorney
duly authorized in writing, may be exchanged, in the manner and subject to the
limitations provided in the Warrant Agreement, but without payment of any
service charge, for another Warrant Certificate or Warrant Certificates of like
tenor evidencing in the aggregate a like number of Warrants.
Subject to the terms and conditions of the Warrant Agreement, upon due
presentation for registration of transfer of this Warrant Certificate at the
office of the Company a new Warrant Certificate or Warrant Certificate of like
tenor and evidencing in the aggregate a like number of Warrants shall be issued
to the transferee(s) in exchange for this Warrant Certificate, subject to the
limitations provided in the Warrant Agreement, without charge except for any tax
or other governmental charge imposed in connection therewith.
The Company may deem and treat the registered holder(s) thereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, of any distribution to the holder(s) hereof, and for all other
purposes, and the Company shall not be affected by any notice to the contrary.
Neither the Warrants nor this Warrant Certificate entitles any holder hereof to
any rights of a shareholder of the Company.
A-2
<PAGE>
IN WITNESS WHEREOF, Marshall Industries has caused this Warrant
Certificate to be signed by its Chairman of the Board, Chief Executive Officer,
President or Vice President and by its Secretary or Assistant Secretary and has
caused its corporate seal to be affixed hereunto or imprinted hereon.
Dated: August 8, 1996 Marshall Industries
By:
-------------------------------------
Name:
Title:
By:
-------------------------------------
Name:
Title:
A-3
<PAGE>
FORM OF ELECTION TO PURCHASE
(To Be Executed Upon Exercise Of Warrant)
The undersigned holder hereby represents that it is the registered
holder of this Warrant Certificate, and hereby irrevocably elects to exercise
the right, represented by this Warrant Certificate, to receive __________ shares
of Common Stock, $1.00 par value, of Marshall Industries and herewith tenders
payment for such shares to the order of Marshall Industries the amount of
$_______________ in accordance with the terms hereof (unless the holder is
exercising Warrants pursuant to the net exercise provisions of Section 5 of the
Warrant Agreement). The undersigned requests that a certificate for such shares
be registered in the name of the undersigned or nominee hereinafter set forth,
and further that such certificate be delivered to the undersigned at the address
hereinafter set forth or to such other person or entity as is hereinafter set
forth. If said number of shares is less than all of the shares of Common Stock
purchasable hereunder, the undersigned requests that a new Warrant Certificate
representing the remaining balance of such shares be registered in the name of
the undersigned or nominee hereinafter set forth, and further that such
certificate be delivered to the undersigned at the address hereinafter set forth
or to such other person or entity as is hereinafter set forth.
CERTIFICATE TO BE REGISTERED AS FOLLOWS:
Name: ________________________________________________
Address: ________________________________________________
________________________________________________
________________________________________________
Social Security or
Taxpayer Identification No.: _____________________________
CERTIFICATE TO BE DELIVERED AS FOLLOWS:
Name: ________________________________________________
Address: ________________________________________________
________________________________________________
________________________________________________
Date: ___________________ Signature: _____________________________
A-4
<PAGE>
ASSIGNMENT FORM
To assign this Warrant after the commencement of the Exercise Period (as defined
in the Warrant Agreement), fill in the form below:
(I) or (we) assign and transfer this Warrant to:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
________________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
and irrevocably appoint _______________________________________________________
___________________________________________________ agent to transfer this
Warrant on the books of the Company. The agent may substitute another to act
for him.
Date: ____________ Your Signature: _________________________________
(Sign exactly as your name appears on
the other side of this Warrant)
Signature Guarantee:
A-5
<PAGE>
STANDSTILL AGREEMENT
STANDSTILL AGREEMENT, dated as of August 8, 1996 (this "AGREEMENT"),
between Marshall Industries, a California corporation (the "MARSHALL") and Wyle
Electronics, a California corporation ("WYLE"). Marshall and Wyle are also each
referred to herein individually as a "VENTURE PARTNER" and collectively as the
"VENTURE PARTNERS."
WHEREAS, the Venture Partners have entered into that certain Limited
Liability Company Agreement of Accord Contract Services, LLC of even date
herewith (the "LLC AGREEMENT") establishing a joint venture between the Venture
Partners;
WHEREAS, Marshall has granted to Wyle certain warrants (the "MARSHALL
WARRANTS") to purchase shares of the common stock, $1.00 par value of Marshall
(the "MARSHALL COMMON STOCK");
WHEREAS, Wyle has granted to Marshall certain warrants (the "WYLE
WARRANTS" and together with the "MARSHALL WARRANTS," the "WARRANTS") to purchase
shares of the common stock, without par value, of Wyle (the "WYLE COMMON STOCK"
and, together with the "MARSHALL COMMON STOCK," the "COMMON STOCK");
WHEREAS, each of the Venture Partners believes that it is desirable to
establish certain limitations and procedures with respect to the ownership by
the other Venture Partner of their respective Warrants and Common Stock and
certain other matters affecting the corporate affairs of the Venture Partners;
NOW, THEREFORE, in consideration of the mutual covenants and premises
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS. As used in this Agreement, the following
terms shall have the following meanings:
"AFFILIATE" as applied to any specified person, shall mean any other
person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified person and, in the case of a person
who is an individual, shall include (i) members of such specified Person's
immediate family (as defined in Instruction 2 of Item 404(a) of Regulation S-K
under the Securities Act) and (ii) trusts, the trustee and all beneficiaries of
which are such specified person or members of such person's immediate family as
determined in accordance with the foregoing clause (i). For the purposes of
this definition, "CONTROL", when used with respect to any person, means the
power to direct the management and policies of such person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
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<PAGE>
"BENEFICIAL OWNERSHIP", "PERSON" and "GROUP" shall have the respective
meanings ascribed to such terms pursuant to Regulation 13D-G adopted by the SEC
under the Exchange Act, as in effect on the date hereof.
"COMBINED VOTING POWER" shall mean, at any measurement date, with
respect to either Venture Partner, the total number of votes which could have
been cast in an election of directors of such Venture Partners, assuming that a
meeting of the shareholders of such Venture Partner been duly held, based upon a
record date as of the measurement date, and further assuming that all of such
Venture Partner's Voting Securities then outstanding and entitled to vote at
such meeting were present and voted to the fullest extent possible at such
meeting.
"VOTING SECURITIES" shall mean, with respect to either Venture
Partner, the Common Stock of such Venture Partner, any preferred stock of such
Venture Partner that is entitled to vote generally for the election of
directors, any other class or series of such Venture Partner's securities that
is entitled to vote generally for the election of directors and any other
securities, warrants (including the applicable Warrants, whether or not then
exercisable), options or rights of any nature (whether or not issued by such
Venture Partner) that are convertible into, exchangeable for, or exercisable for
the purchase of, or otherwise give the holder thereof any rights in respect of,
the Common Stock of such Venture Partner or any other class or series of
securities of such Venture Partner that is entitled to vote generally for the
election of directors.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"13D/G GROUP" shall mean two or more persons acting together for the
purpose of acquiring, holding, voting or disposing of any Voting Securities of a
Venture Partner, which persons would be required under the Exchange Act to file
a statement on Schedule 13D or 13G with the SEC as a "person" within the meaning
of Section 13(d)(3) of the Exchange Act if such persons beneficially owned
sufficient securities to require such a filing under the Exchange Act.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
SECTION 2. REPRESENTATIONS AND WARRANTIES.
Each Venture Partner represents and warrants to the other Venture
Partner as follows:
(a) Such Venture Partner is a validly existing corporation under
the laws of the State of California and has the corporate power and authority to
enter into this Agreement and perform its obligations hereunder.
(b) This Agreement has been duly authorized, executed and
delivered by such Venture Partner and constitutes the legally valid and binding
agreement of such Venture Partner, enforceable against such Venture Partner in
accordance with the terms hereof.
(c) Neither the execution and delivery of this Agreement by such
Venture Partner, nor the performance of its obligations hereunder, will conflict
with or result in a breach
2
<PAGE>
of or constitute a default under, any law, rule, regulation, judgment, order or
decree of any court, arbitrator or governmental agency or instrumentality, or of
any agreement or instrument to which such Venture Partner is party, or of any of
the charter documents of such Venture Partner.
(d) As of the date hereof, such Venture Partner does not own
more than 100 shares of Common Stock of the other Venture Partner or any other
Voting Securities of such other Venture Partner.
(e) Other than this Agreement, neither such Venture Partner nor
any of its affiliates, has any agreement, arrangement or other understanding
with any person with respect to acquiring, holding, voting or disposing the
other Venture Partner's Voting Securities.
SECTION 3. COVENANTS WITH RESPECT TO THE VENTURE PARTNER VOTING
SECURITIES AND OTHER MATTERS.
3.1. ACQUISITION OF VENTURE PARTNER VOTING SECURITIES. Subject to
Section 3.2, neither Venture Partner shall directly or indirectly acquire, offer
to acquire, agree to acquire, become the beneficial owner of or obtain any
rights in respect of any Voting Securities of the other Venture Partner, by
purchase or otherwise, or take any action in furtherance thereof, if the effect
of such acquisition, agreement or other action would be (either immediately or
upon consummation of any such acquisition, agreement or other action, or upon
the expiration of any period of time provided in any such acquisition, agreement
or other action) to increase the aggregate beneficial ownership of such other
Venture Partner's Voting Securities by the first Venture Partner and its
affiliates to a number of Voting Securities that represents or possesses 15% or
more of the Combined Voting Power of such other Venture Partner's Voting
Securities, without the approval of such other Venture Partner's Board of
Directors. Notwithstanding the foregoing maximum percentage limitation, no
Venture Partner shall be obligated to dispose of any Voting Securities of the
other Venture Partner beneficially owned in violation of such maximum percentage
limitation if, and solely to the extent that, its beneficial ownership is or
will be increased solely as a result of a repurchase, redemption or other
acquisition of any Voting Securities by the other Venture Partner or any of its
subsidiaries.
3.2. TAKEOVER PROPOSALS. Neither Venture Partner shall submit a
proposal to acquire a majority of the Combined Voting Power of the other Venture
Partner's Voting Securities (a "CHANGE OF CONTROL PROPOSAL") to any person
unless such Change of Control Proposal (or the submission thereof to any such
person) has been approved by the Board of Directors of such other Venture
Partner and the following conditions are satisfied:
(a) Any such Change of Control Proposal shall contemplate either
(i) a tender offer for all of the outstanding Common Stock of such other Venture
Partner not owned by the Venture Partner making such proposal and must be
conditioned upon a majority of such Common Stock not owned by such Venture
Partner being tendered, or (ii) a merger transaction conditioned upon the
holders of a majority of Combined Voting Power of the specified Venture Partner
not owned by the Venture Partner making such proposal, present, in person or by
proxy, voting in favor of such transaction. In the case of either (i) or (ii),
the same consideration must be offered to all of the specified Venture Partner's
shareholders.
3
<PAGE>
(b) Any such Change of Control Proposal must be approved by the
Board of Directors of such other Venture Partner, which shall not give its
approval unless it has received an opinion from a nationally recognized
investment banking firm to the effect that the Change of Control Proposal is
fair to the shareholders of the specified Venture Partner from a financial point
of view (other than the other Venture Partner making such proposal).
Unless the foregoing conditions have been previously satisfied, a Change of
Control Proposal shall not be presented to the shareholders of either Venture
Partner (including by way of a tender offer, merger proposal or other Change of
Control Proposal that is conditioned on satisfaction of this Section 3.2).
3.3. DISPOSITION OF VENTURE PARTNER VOTING SECURITIES AND OTHER
RELATED MATTERS.
(a) Without the prior approval of the Board of Directors of the
other Venture Partner, neither Venture Partner shall, directly or indirectly,
sell, transfer any beneficial interest in, pledge, hypothecate or otherwise
dispose of any Voting Security of the other Venture Partner:
(i) in a transaction or series of related transactions that
would result in a transfer to any person or group of more than 3.0% of
the Combined Voting Power of such other Venture Partner, except in
response to certain tender or exchange offers as permitted by Section
3.3(b); and
(ii) in a transaction or series of related transactions that
would result in a transfer to any person or group that, to the
knowledge of the transferring Venture Partner at the time of such
transaction, upon consummation of such sale, transfer or disposition,
would, directly or indirectly, have beneficial ownership of, or the
right to acquire beneficial ownership of, such number of Voting
Securities of the other Venture Partner that would represent greater
than 5.0% (or in the case of any mutual fund or similar institutional
investor with the stated intention to remain a passive investor,
greater than 10%), of the Combined Voting Power of such other Venture
Partner, except in response to certain tender or exchange offers as
permitted by Section 3.3(b).
The selling Venture Partner shall request all purchasers of Voting Securities of
the other Venture Partner from them in negotiated transactions, and all
underwriters, placement agents or brokers ("AGENTS") for any public offerings or
open market transactions involving such Voting Securities, to represent and
warrant that the requirements of this Section 3.3(a) have been satisfied with
respect to such transactions, such representations by Agents to be qualified to
the best of such Agents' knowledge.
(b) Notwithstanding Section 3.3(a), on and after the eleventh
business day following the commencement of a tender or exchange offer for
outstanding Voting Securities of the other Venture Partner, the specified
Venture Partner may tender or exchange any Voting Securities of the other
Venture Partner beneficially owned by it pursuant to such offer if such offer
shall have been previously approved by the Board of Directors of the subject
Venture Partner.
4
<PAGE>
(c) Proposed transfers of Voting Securities by either Venture
Partner that are not in compliance with this Section shall be of no force or
effect and shall be null and void.
3.4. PROXY SOLICITATIONS, ETC. Neither Venture Partner shall solicit
proxies, assist any other person in any way, directly or indirectly, in the
solicitation of proxies, become a "participant" in a "solicitation," or assist
any "participant" in a "solicitation" (as such terms are defined in Rule 14a-1
of Regulation 14A under the Exchange Act) in opposition to the recommendation of
the Board of Directors of the other Venture Partner, or submit any proposal for
the vote of shareholders of the other Venture Partner, or recommend or request
or induce or attempt to induce any other person to take any such actions, or
seek to advise, encourage or influence any other person with respect to the
voting of Voting Securities of the other Venture Partner, in each case without
the prior approval of the Board of Directors of such other Venture Partner.
3.5. NO VOTING TRUSTS, POOLING AGREEMENTS, OR FORMATION OF "GROUPS".
Without the prior approval of the Board of Directors of the other Venture
Partner, neither Venture Partner shall form, join in or in any other way
participate in any partnership, pooling agreement, syndicate, voting trust or
other "group", including a 13D/G Group, with respect to the Voting Securities of
the other Venture Partner, or enter into any agreement (other than this
Agreement or the Registration Rights Agreement) or arrangement or otherwise act
in concert with any other person or group, for the purpose of acquiring,
holding, voting or disposing of the Voting Securities of the other Venture
Partner.
3.6. NO SOLICITATION OF BIDDERS. Neither Venture Partner shall
directly or indirectly assist, solicit, encourage or induce any person to bid
for or acquire outstanding Voting Securities of the other Venture Partners in
excess of 5.0% of the Combined Voting Power of the Voting Securities of the
other Venture Partner.
3.7. NON-CIRCUMVENTION. Neither Venture Partner or any affiliate of
any such Venture Partner shall take any action, alone or in concert with any
other person or group, to seek control of the other Venture Partner or otherwise
seek to circumvent the limitations of the provisions of this Section 3 of this
Agreement without the approval of the Board of Directors of the other Venture
Partner. Without limiting the generality of the foregoing, neither Venture
Partner shall, without the approval of the Board of Directors of the other
Venture Partner, (i) present to such other Venture Partner or to any third party
any proposal that could reasonably be expected to result in a change of control
of such other Venture Partner or in any increase beyond the percentage specified
in Section 3.1 in the Combined Voting Power of the Voting Securities of such
other Venture Partner beneficially owned in the aggregate by the first Venture
Partner, (ii) publicly suggest or announce its willingness or desire to engage
in a transaction or group of transactions, or have another person engage in a
transaction or group of transactions, that would result in a change of control
of the first Venture Partner or in any increase beyond the percentage specified
in Section 3.1 in the Combined Voting Power of the Voting Securities of such
other Venture Partner beneficially owned in the aggregate by the first Venture
Partner, (iii) initiate, request, induce or attempt to induce or give
encouragement to any other person to initiate any proposal that could reasonably
be expected to result in a change of control of such other Venture Partner or in
any increase beyond the percentage specified in Section 3.1 in the Combined
Voting Power of the Voting Securities of such other Venture Partner beneficially
owned in the aggregate
5
<PAGE>
by the first Venture Partner, or (iv) publicly request, suggest or announce its
desire to amend or obtain a waiver of any provision of this Agreement.
3.8. CONFIDENTIAL INFORMATION. The provisions of Section 12.18 of
the LLC Agreement, as in effect on the date hereof, are hereby incorporated by
reference and made a part of this document as though fully set forth herein.
Such obligations shall continue to be binding on the parties to this Agreement
during its term, notwithstanding any earlier termination of the LLC Agreement.
In addition, each Venture Partner hereby acknowledges that the United
States securities laws prohibit any person who has received from an issuer
material, non-public information, including certain information that may be part
of the Confidential Material (as defined in the LLC Agreement), while such
information is non-public, from purchasing or selling securities of such issuer
or from communicating such information to any other person under circumstances
in which it is reasonably foreseeable that such person is likely to purchase or
sell such securities.
3.9. VOTING. Each of the Venture Partners shall, at any annual or
special meeting of the shareholders at which directors of the other Venture
Partner are to be elected, or in connection with a solicitation of consents
through which directors of the other Venture Partner are to be selected, vote
(or give a written consent with respect to) all of its Voting Securities in the
other Venture Partner (i) in favor of the election to the Board of Directors of
such other Venture Partner of the persons nominated by the Board of Directors of
such other Venture Partner, and all other proposals recommended by the Board of
Directors of such other Venture Partner, and (ii) in opposition to any nominee
or proposal opposed by such Board of Directors.
3.10. NO SOLICITATION OF EMPLOYEES. Each Venture Partner hereby
agrees that during the term of this Agreement, it will not, and will direct its
Representatives (as defined in the LLC Agreement) not to, (i) solicit for
employment or advise or recommend to any other person that it solicit for
employment any executive officer of the other Venture Partner or any other
employee of the other Venture Partner directly involved in the activities of the
Joint Venture, (ii) advise or encourage any such executive officer or other
employee of the other Venture Partner to terminate his employment with such
other Venture Partner, or (iii) interfere or attempt to interfere with the
employment or any contractual relationship between the other Venture Partner and
any such executive officer or other employee.
3.11. WAIVER OF REQUIREMENTS. Notwithstanding anything in this
Section 3 to the contrary, any of the terms of Sections 3.10 through 3.9 may be
waived, in whole or in part, and as to particular transactions or matters, if
the Board of Directors of the affected Venture Partner shall have approved such
waiver.
SECTION 4. TERM OF AGREEMENT.
This Agreement shall terminate on August 8, 2006; PROVIDED, HOWEVER,
that in the event that the LLC Agreement is terminated for any reason, then this
Agreement shall terminate upon the later to occur of (i) the 18th month
anniversary of such termination, or (ii) such time as such Venture Partner owns
Voting Securities of the other Venture Partner representing less than
6
<PAGE>
2% of the Combined Voting Power of such other Venture Partner's Voting
Securities and, PROVIDED, FURTHER, HOWEVER, that in no event shall this
Agreement expire prior to August 8, 1999.
SECTION 5. LEGEND AND STOP TRANSFER ORDER.
To assist in effectuating the provisions of this Agreement, each
Venture Partner hereby consents (i) to the placement within 10 business days
after any Voting Securities of the other Venture Partner become subject to the
provisions of this Agreement, of the following legend on all certificates
representing ownership of Voting Securities owned of record or beneficially by
the specified Venture Partner, until such shares are sold, transferred or
disposed in a manner permitted hereby:
The securities represented by this certificate are subject
to restrictions on voting and transfer as set forth in a
Standstill Agreement and a Warrant Agreement by and between
the Company and the holder of such securities, and may not
be sold, transferred, pledged, hypothecated or otherwise
disposed of except in accordance therewith. Copies of said
Standstill Agreement and Warrant Agreement are on file at
the office of the Corporate Secretary of the Company.
and (ii) to the entry of stop transfer orders with the transfer agent or agents
of Company Voting Securities against the transfer by such Venture Partner of
Voting Securities of the other Venture Partner except in compliance with the
requirements of this Agreement. Each Venture Partner agrees to remove promptly
all legends and stop transfer orders with respect to the transfer of Voting
Securities made in compliance with the provisions of this Agreement.
SECTION 6. REMEDIES.
Each of the Venture Partners acknowledge and agree that (i) the
provisions of this Agreement are reasonable and necessary to protect the proper
and legitimate interests of the parties hereto, and (ii) the parties would be
irreparably damaged in the event any of the provisions of this Agreement were
not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to
preliminary and permanent injunctive relief to prevent breaches of the
provisions of this Agreement by the other parties without the necessity of
proving actual damages or of posting any bond, and to enforce specifically the
terms and provisions hereof and thereof in any court of the United States or any
state thereof having jurisdiction, which rights shall be cumulative and in
addition to any other remedy to which the parties may be entitled hereunder or
at law or equity.
SECTION 7. GENERAL PROVISIONS.
7.1. CHOICE OF LAW. This Agreement shall be construed, interpreted
and the rights of the parties determined in accordance with the laws of the
State of California without reference to the choice of laws provisions thereof.
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<PAGE>
7.2. NOTICES. All notices, consents, requests, instructions,
approvals and other communications provided for herein and all legal process in
regard hereto shall be in writing and shall be decreed to be validly given, made
or served when delivered personally, transmitted by telex or telecopier, or
deposited in the U.S. mail, postage prepaid, for delivery by express, registered
or certified mail, or delivered to a recognized overnight courier service,
addressed as follows:
If to Marshall:
Marshall Industries
9320 Telstar Avenue
El Monte, California 91731
Attention: Chief Financial Officer
If to Wyle:
Wyle Electronics
15370 Barranca Parkway
Irvine, California 92718
Attention: Chief Financial Officer
or to such other address as may be specified in a notice given pursuant to this
Section. All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back if telexed; when receipt acknowledged, if telecopied; and the next
business day after timely delivery to the courier, if sent by overnight air
courier guaranteeing next day delivery. The parties may change the address to
which notices are to be given by giving five days' prior notice of such change
in accordance herewith.
7.3. SEVERABILITY. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions shall remain in full force and effect and shall in no way be
affected, impaired or invalidated. The parties hereto agree that they will use
their best efforts at all times to support and defend this Agreement.
7.4. CERTAIN TRANSFERS. Each affiliate of a Venture Partner that
shall have the right to become the beneficial owner, within the meaning and
scope of Section 3 hereof, of Voting Securities of the other Venture Partner
shall, promptly upon becoming such owner or holder, execute and deliver to such
other Venture Partner, a joinder agreement, agreeing to be legally bound by this
Agreement. Neither Venture Partner shall transfer Voting Securities of the
other Venture Partner to any affiliate of such first Venture Partner unless the
transferee shall agree to be bound by this Agreement in the manner specified
above.
7.5. AMENDMENTS; WAIVERS. Any provision of this Agreement may be
amended or waived if, and only if, such amendment or waiver is in writing and
signed by each party hereto. No failure or delay by any party hereto in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or
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privilege. The rights and remedies herein provided shall be cumulative and not
exclusive of any rights or remedies provided by law.
7.6. DESCRIPTIVE HEADINGS. Descriptive headings are for convenience
only and shall not control or affect the meaning or construction of any
provision of this Agreement. Reference in this Agreement to Sections are to
Sections of this Agreement. All pronouns and any variations thereof refer to
the masculine, feminine or neuter, singular or plural, as the identity of the
applicable person or persons may require.
7.7. ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other
instruments and agreements referred to herein embody the entire agreement of the
parties hereto with respect to the subject matter hereof and supersede all prior
agreements with respect thereto.
7.8. COUNTERPARTS. This Agreement shall become binding when one or
more counterparts hereof, individually or taken together, bears the signatures
of each of the parties hereto. This Agreement may be executed in any number of
counterparts, each of which shall be an original as against the party whose
signature appears thereon, or on whose behalf such counterpart is executed, but
all of which taken together shall be one and the same agreement.
7.9. NO PARTNERSHIP. No partnership, joint venture or joint
undertaking is intended to be, or is, formed between the parties hereto or any
of them by reason of this Agreement or the transactions contemplated herein.
7.10. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of and be enforceable by the successors and assigns of
the parties hereto. All of the terms, covenants and agreements contained in
this Agreement are solely for the benefit of the parties hereto, and their
respective successors and assigns, and no other parties (including, without
limitation, any other shareholder or creditor of either Venture Partner, or any
director, officer or employee of such Venture Partner) are intended to be
benefitted by, or entitled to enforce, this Agreement.
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IN WITNESS WHEREOF, the parties hereto intending to be legally bound
have duly executed this Agreement, all as of the day and year first above
written.
MARSHALL INDUSTRIES
By:
-----------------------------------------
Name:
Title:
WYLE ELECTRONICS
By:
-----------------------------------------
Name:
Title:
S-1
<PAGE>
REGISTRATION RIGHTS AGREEMENT (MARSHALL)
THIS REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") is made and
entered into as of August 8, 1996 by and between Marshall Industries a
California corporation (the "COMPANY") and Wyle Electronics, a California
corporation ("WYLE").
WHEREAS, the Company and Wyle have entered into that certain Limited
Liability Company Agreement of Accord Contract Services LLC of even date
herewith (the "LLC AGREEMENT") establishing a joint venture between the Company
and Wyle;
WHEREAS, the Company has entered into a Warrant Agreement of even date
herewith (the "WARRANT AGREEMENT") pursuant to which it has granted to Wyle
certain warrants (the "WARRANTS") to purchase shares of the Company's Common
Stock, $1.00 par value, (the "COMMON STOCK") upon the occurrence of certain
events;
WHEREAS, the Company has agreed to provide the registration rights set
forth in this Agreement in connection with the issuance of the Warrants;
NOW THEREFORE, in consideration of the mutual covenants herein
contained and for other good and valuable consideration, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINITIONS. The following capitalized terms shall have the
meanings ascribed to them below:
"AFFILIATE," as applied to any specified Person, shall mean any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person and, in the case of a Person
who is an individual, shall include (i) members of such specified Person's
immediate family (as defined in Instruction 2 of Item 404(a) of Regulation S-K
under the Securities Act) and (ii) trusts, the trustee and all beneficiaries of
which are such specified Person or members of such Person's immediate family as
determined in accordance with the foregoing clause (i). For the purposes of
this definition, "CONTROL", when used with respect to any Person, means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"BUSINESS DAY" means any day that is not a Saturday, Sunday or a day
on which banking institutions in New York, New York or Los Angeles, California
are not required to be open.
"COMMON STOCK" means the Common Stock, $1.00 par value, of the
Company.
"DEFERRAL PERIOD" is defined in Section 2.1.
"DEMAND NOTICE" is defined in Section 2.1.
<PAGE>
"DEMAND REGISTRATION" is defined in Section 2.1.
"DEMANDING HOLDER" means any Holder initiating a registration request
in compliance with Section 2.1(a); PROVIDED that any action required or
permitted to be taken under this Agreement by any Demanding Holders shall be
taken by action of the holders of a majority of the Registrable Securities held
by such Demanding Holders.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"HOLDER" or "HOLDERS" means Wyle and any other holder or holders of
Registrable Securities.
"PERSON" means an individual, partnership, corporation, limited
liability company, trust or unincorporated organization, or a government or
agency or political subdivision thereof.
"PIGGYBACK REGISTRATION" is defined in Section 2.2.
"PIGGYBACK HOLDER" is defined in Section 2.2.
"PROSPECTUS" means the prospectus included in a Registration
Statement, as amended or supplemented by any prospectus supplement and by all
other amendments thereto, including post-effective amendments, and all material
incorporated by reference into such Prospectus.
"PUBLIC DISTRIBUTION" shall mean any BONA FIDE underwritten public
distribution of Stock pursuant to an effective registration statement under the
Securities Act or any other applicable law, or any BONA FIDE public sale in an
open market transaction under Rule 144 of the Securities Act (or any successor
rule) if such sale is in compliance with the requirements of paragraphs (c),
(d), (e), (f) and (g) of such Rule (notwithstanding the provisions of paragraph
(k) of such Rule).
"PUBLIC OFFERING" shall mean any BONA FIDE underwritten public
distribution of Stock pursuant to an effective registration statement under the
Securities Act or any other applicable law.
"REGISTRABLE SECURITIES" means each share of Stock issued or issuable
upon the exercise of the Warrants, until (i) it has been effectively registered
under the Securities Act and disposed of by a Holder pursuant to an effective
registration statement, or (ii) it is sold by such Holder pursuant to Rule 144
(or any similar provisions then in force) under the Securities Act.
"REGISTRATION STATEMENT" means any registration statement of the
Company relating to a Demand Registration pursuant to Section 2.1 or a Piggyback
Registration pursuant to Section 2.2, in each case, including the Prospectus
included therein, all amendments and supplements thereto (including post-
effective amendments) and all exhibits and material incorporated by reference
therein.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
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"SELLING HOLDER" means a Holder who sells or proposes to sell
Registrable Securities pursuant to a Registration Statement under the Securities
Act.
"STOCK" means the following securities: (i) the Common Stock or (ii)
any security or other instrument (a) received as a dividend on, or other payment
made to the holders of, the Common Stock (or any other security or instrument
referred to in this definition) or (b) issued in connection with a split of the
Common Stock (or any other security or instrument referred to in this
definition) or as a result of any exchange or reclassification of the Common
Stock (or any other security or instrument referred to in this definition),
reorganization, consolidation, merger or recapitalization.
"UNDERWRITTEN REGISTRATION" or "UNDERWRITTEN OFFERING" means a
registration in which Stock of the Company is sold to an underwriter for re-
offering to the public.
ARTICLE II
REGISTRATION RIGHTS
SECTION 2.1 DEMAND REGISTRATIONS.
(a) REQUEST FOR REGISTRATION. At any time and from time to time on
or after the commencement of the Exercise Period (as defined in the Warrant
Agreement), the Holder or Holders of a majority of the Registrable Securities
then outstanding may make a written request of the Company for registration with
the SEC, under and in accordance with the provisions of the Securities Act, of
all or part (but not less than 20% of Registrable Securities then outstanding)
of their Registrable Securities (a "DEMAND REGISTRATION") by giving written
notice to the Company of such demand (a "DEMAND NOTICE"), PROVIDED that (i) the
Company shall be required to effect only one Demand Registration during any six-
month period and (ii) the Holders will not be entitled to request more than two
such Demand Registrations. Each such Demand Notice will specify the number of
Registrable Securities proposed to be sold pursuant to such Demand Registration
and will also specify the intended method of disposition thereof. The Holders
may request that the Company effect a "shelf registration" that is to remain
continuously effective for a period not to exceed three years from the date on
which the Warrants have been fully exercised.
Promptly after receipt of any Demand Notice, but in no event later
than 60 days after receipt of such Demand Notice, the Company shall file a
Registration Statement with the SEC with respect to the Registrable Securities
included in the Demand Notice and shall use its best efforts to have such
Registration Statement declared effective as promptly as practicable; PROVIDED,
HOWEVER, that the Company may postpone the filing of such Registration Statement
for a period of up to 90 days (the "DEFERRAL PERIOD") if the Board of Directors
reasonably determines that (i) such a filing would adversely affect any proposed
financing, acquisition, divestiture or other material transaction by the Company
or (ii) such a filing would otherwise represent an undue hardship for the
Company. The Company shall not be entitled to request more than one such
deferral with respect to any group of Holders requesting a Demand Registration
within any 365-day period. If the Company does elect to defer any such Demand
Registration, the Holders requesting such Demand Registration may, at their
election by written notice to the Company, (i) confirm their request to proceed
with such Demand Registration upon the expiration of the Deferral Period or
(ii) withdraw their request for such Demand Registration in which case no such
request for a Demand Registration shall be deemed to have occurred for purposes
of this Agreement.
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The Company shall give written notice of any Demand Notice by any
Holder, which request complies with this Section 2.1(a), within 5 days after the
receipt thereof, to each Holder who did not initially join in such request.
Within 10 days after receipt of such notice, any such Holder may request in
writing that its Registrable Securities be included in such registration, and
the Company shall include in the Demand Registration the Registrable Securities
of each such Holder requested to be so included, subject to the provisions of
Section 2.1(e). Each such request shall specify the number of shares of
Registrable Securities proposed to be sold and the intended method of
disposition thereof.
(b) EFFECTIVE REGISTRATION. Except as provided in subsection (c)
below, a registration will not be deemed to have been effected as a Demand
Registration unless it has been declared effective by the SEC; PROVIDED that if,
after it has become effective, the offering of Registrable Securities pursuant
to such registration is or becomes the subject of any stop order, injunction or
other order or requirement of the SEC or any other governmental or
administrative agency, or if any court prevents or otherwise limits the sale of
Registrable Securities pursuant to the registration (for any reason other than
the acts or omissions of the Holders), such registration will be deemed not to
have been effected. If (i) a registration requested pursuant to this Section
2.1 is deemed not to have been effected in accordance with the provisions of the
preceding sentence or (ii) the registration requested pursuant to this
Section 2.1 does not remain continuously effective for a period of at least 120
days beyond the effective date thereof or until the consummation of the
distribution by the Holders of the Registrable Securities included in such
registration statement (the "DEMAND REGISTRATION STATEMENT"), then such Demand
Registration Statement shall not count as a Demand Registration that may be
requested by the Demanding Holder(s) in question and the Company shall continue
to be obligated to effect a registration pursuant to this Section 2.1.
(c) WITHDRAWAL. The Demanding Holders may withdraw all or any part
of the Registrable Securities from a Demand Registration at any time (whether
before or after the filing or effective date of the Demand Registration
Statement), and if all such Registrable Securities are withdrawn, to withdraw
the demand related thereto. If at any time a registration statement is filed
pursuant to a Demand Registration, and subsequently a sufficient number of
Registrable Securities are withdrawn from the Demand Registration so that such
Demand Registration Statement does not cover at least the required amounts
specified by Section 2.1(a), and an additional number of Registrable Securities
is not so included, the Company may (or shall, if requested by the Demanding
Holders) withdraw such Demand Registration Statement; PROVIDED that such
withdrawn registration statement will count as a Demand Registration unless the
Demanding Holders elect to bear the expenses associated with such withdrawn
registration statement. If the Demanding Holders elect to bear such expenses,
such expenses shall be borne by the Demanding Holder(s) whose withdrawal of
Registrable Securities resulted in such Demand Registration Statement not
covering the specified required amounts.
(d) SELECTION OF UNDERWRITER. If the Demanding Holders so elect, the
offering of Registrable Securities pursuant to a Demand Registration shall be in
the form of an Underwritten Offering. The Demanding Holders shall select one or
more nationally recognized firms of investment bankers to act as the managing
Underwriter or Underwriters in connection with such offering and shall select
any additional investment bankers and managers to be used in connection with
such offering; PROVIDED that such investment bankers and managers must be
reasonably satisfactory to the Company. The Company shall (together with all
Holders of Registrable Securities proposing to distribute such Registrable
Securities through such underwriting) enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting in the manner set forth above.
(e) PRIORITY ON DEMAND REGISTRATIONS. If, in any Demand Registration
involving an Underwritten Offering the managing underwriter or underwriters
thereof advise the Demanding Holders
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or the Company in writing that in its or their reasonable opinion the number of
Registrable Securities proposed to be sold in such Demand Registration exceeds
the number that can be sold in such offering or will adversely affect the
success of such offering (including, without limitation, an impact on the
selling price or the number of Registrable Securities that any participant may
sell), the Company shall include in such registration only the number of
Registrable Securities, if any, which in the opinion of such underwriter or
underwriters can be sold without having an adverse effect on the success of the
offering and in accordance with the following priority: (i) FIRST, Registrable
Securities held by Demanding Holders in the group initially requesting such
registration, allocated PRO RATA among such group (based upon the number of
Registrable Securities requested to be included in such Demand Registration) and
(ii) SECOND, PRO RATA (based upon the number of Registrable Securities requested
to be included in such registration by such Holders) among the other Holders of
Registrable Securities who have requested to include Registrable Securities in
such registration. If all Registrable Securities requested to be sold in the
Underwritten Offering are included therein, the Company may include other shares
of Stock in such offering in accordance with the following priority, but not to
exceed the number recommended by the managing underwriter or underwriters: (x)
FIRST, PRO RATA among any other shareholders of the Company having piggyback or
other similar registration rights and (y) SECOND, shares of Stock proposed to be
sold by or for the account of the Company.
SECTION 2.2 PIGGYBACK REGISTRATIONS.
(a) RIGHT TO PARTICIPATE IN REGISTRATION. If, at any time following
the commencement of the Exercise Period (as defined in the Warrant Agreement),
the Company proposes to file a registration statement under the Securities Act
with respect to an offering by the Company for its own account or for the
account of any holders of any class of common equity securities (other than (i)
a registration statement on Form S-4 or S-8 (or any substitute form that may be
adopted by the SEC) or (ii) a registration statement filed in connection with a
Demand Registration or (iii) a registration statement filed in connection with
an offering of securities solely to the Company's existing securityholders),
then the Company shall give written notice of such proposed filing to the
Holders as soon as practicable (but in no event less than 20 days before the
anticipated filing date), and such notice shall offer such Holder the
opportunity to register such number of shares of Registrable Securities as each
such Holder may request, which request shall specify the Registrable Securities
intended to be disposed of by such Holder and the intended method of
distribution thereof (or, if the offering is a proposed Underwritten Offering,
that such Holder elects to have the number of Registrable Securities so
specified included in such Underwritten Offering) (a "PIGGYBACK REGISTRATION").
The Company shall use its best efforts to cause the managing
Underwriter or Underwriters of a proposed Underwritten Offering to permit the
Registrable Securities requested by the Holders thereof to be included in a
Piggyback Registration (the "PIGGYBACK HOLDERS") to be included on the same
terms and conditions as any similar securities of the Company or any other
securityholder included therein and to permit the sale or other disposition of
such Registrable Securities in accordance with the intended method of
distribution thereof.
No registration effected under this Section 2.2 and no failure to
effect a registration under this Section 2.2(a), shall relieve the Company of
its obligations pursuant to Section 2.1, and no failure to effect a registration
under this Section 2.2(a) and complete the sale of shares in connection
therewith shall relieve the Company of any other obligation under this Agreement
(including, without limitation, the Company's obligations under Sections 3.2 and
4.1).
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(b) PRIORITY ON PIGGYBACK REGISTRATIONS. Unless the registration
statement is being filed pursuant to a Demand Registration (in which case the
priority of piggyback rights shall be as provided in Section 2.1(e) above), if
the managing underwriter or underwriters advise the Company in writing that in
its or their reasonable opinion the number of equity securities of the Company
proposed to be sold in such registration (including Registrable Securities to be
included pursuant to subsection (a) above) will adversely affect the success of
such offering (including, without limitation, an impact on the selling price or
the number of equity securities of the Company that any participant may sell),
the Company shall include in such registration the number of equity securities
of the Company, if any, which in the opinion of such underwriter or underwriters
can be sold without having an adverse effect on the offering and in accordance
with the following priority: (i) FIRST, the securities the Company proposes to
sell for its own account, (ii) SECOND, PRO RATA based on the number of
Registrable Securities that each Holder or other Person having similar rights
shall have requested to be included therein.
(c) WITHDRAWAL. The Piggyback Holders may withdraw all or any part
of the Registrable Securities from a Piggyback Registration at any time (before
but not after the effective date of such registration statement), by delivering
written notice of such withdrawal request to the Company, unless such Piggyback
Registration is underwritten, in which case Registrable Securities may not be
withdrawn after the effective date of the Registration Statement.
(d) TERMINATION OF REGISTRATION BY THE COMPANY. If the Company shall
determine for any reason (x) not to register or (y) to delay a registration
which includes Registrable Securities pursuant to this Section 2.2, the Company
may, at its election, give written notice of such determination to the Holders
of the Registrable Securities and, thereupon (i) in the case of a determination
not to register, shall be relieved of its obligation to register any Registrable
Securities in connection with such registration (but not from its obligation to
pay the Registration Expenses (as defined below) in connection therewith),
without prejudice, however, to the rights, if any, of any Holder or Holders of
Registrable Securities to request that such registration be effected as a Demand
Registration under Section 2.1, and (ii) in the case of a delay in registering,
shall be permitted to delay registering any Registrable Securities for the same
period as the delay in registering such other shares.
ARTICLE III
REGISTRATION PROCEDURES
SECTION 3.1 REGISTRATION PROCEDURES.
(a) GENERAL PROVISIONS. In connection with any Registration
Statement and any related Prospectus required by this Agreement to permit the
sale or resale of Registrable Securities, the Company shall:
(1) prepare and file with the SEC a registration statement with
respect to such Registrable Securities within the time periods specified
herein, make all required filings with the NASD and use its best efforts to
cause such registration statement to become effective as promptly as
practicable (subject to the Company's right to withdraw the registration
statement under the circumstances described in Sections 2.1(c) or 2.2(d));
(2) promptly prepare and file with the SEC such amendments and
post-effective amendments to the Registration Statement as may be necessary
to keep the Registration Statement effective for the applicable period set
forth in Sections 2.1 or 2.2, as applicable, or
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such shorter period as will terminate when all Registrable Securities
covered by such Registration Statement have been sold; cause the Prospectus
to be supplemented by a required Prospectus supplement, and as so
supplemented to be filed pursuant to Rule 424 under the Securities Act, and
to comply fully with the applicable provision of Rules 424 and 430A under
the Securities Act in a timely manner; and comply with the provisions of
the Securities Act with respect to the disposition of all securities
covered by such Registration Statement during the applicable period in
accordance with the intended method or methods of distribution by the
sellers thereof set forth in such Registration Statement or supplement to
the Prospectus;
(3) use its best efforts to keep such Registration Statement
continuously effective and provide all requisite financial statements for
the period specified in Sections 2.1 and 2.2, as applicable; upon the
occurrence of any event that would cause any such Registration Statement or
the Prospectus contained therein (A) to contain a material misstatement or
omission or (B) not to be effective and usable for resale of Registrable
Securities during the period required by this Agreement, the Company shall
file promptly an appropriate amendment to such Registration Statement, in
the case of clause (A), correcting any such misstatement or omission, and,
in the case of either clause (A) or (B), use its best efforts to cause such
amendment to declared effective and such Registration Statement and related
Prospectus to become usable for their intended purposes(s) as soon as
practicable thereafter;
(4) provide (A) the Holders of Registrable Securities
participating in the registration, (B) the underwriters (which term, for
purposes of this Agreement, shall include a Person deemed to be an
underwriter within the meaning of Section 2(11) of the Securities Act), if
any, of the Registrable Securities to be registered, (C) the sale or
placement agent therefor, if any, (D) counsel for such underwriters or
agent, and (E) counsel for the Holders thereof, as selected by Holders of a
majority of the Registrable Securities covered by such registration
statement, the opportunity to participate in the preparation of such
registration statement, each prospectus included therein or filed with the
SEC, and each amendment or supplement thereto, and for a reasonable period
prior to the filing of such registration statement, and throughout the
period specified in Section 3.4(b) hereof, make available for inspection by
the parties referred to in (A) through (E) above such financial and other
information and books and records of the Company, provide access to
properties of the Company and cause the officers, directors, employees,
counsel and independent certified public accountants of the Company to
respond to such inquiries as shall be reasonably necessary to conduct a
reasonable investigation within the meaning of Section 11 of the Securities
Act;
(5) advise the underwriters, if any, and Selling Holders
promptly and, if requested by such Persons, to confirm such advice in
writing, (A) when the Prospectus or any Prospectus supplement or post-
effective amendment has been filed, and, with respect to any Registration
Statement or any post-effective amendment thereto, when the same has become
effective, (B) of any request by the SEC for amendments to the Registration
Statement or amendments or supplements to the Prospectus or for additional
information relating thereto, (C) of the issuance by the SEC of any stop
order suspending the effectiveness of the Registration Statement under the
Securities Act or of the suspension by any state securities commission of
the qualification of the Registrable Securities for offering or sale in any
jurisdiction, or the initiation of any proceeding for any of the preceding
purposes, (D) of the existence of any fact or the happening of any event
that makes any statement of a material fact made in the registration
Statement, the Prospectus, any amendment or supplement thereto, or any
document incorporated by reference therein untrue, or that requires the
making of any additions to or changes in the
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Registration Statement or the Prospectus in order to make the statements
therein not misleading. If at any time the SEC shall issue any stop order
suspending the effectiveness of the Registration Statement, or any state
securities commission or other regulatory authority shall issue an order
suspending the qualification or exemption from qualification of the
Registrable Securities under state securities or Blue Sky laws, the Company
shall use its best efforts to obtain the withdrawal or lifting of such
order at the earliest possible time;
(6) furnish to each Selling Holder named in any Registration
Statement or Prospectus and each of the underwriter(s) in connection with
such sale, if any, such number of copies of any Registration Statement or
Prospectus included therein or any amendments or supplements to any such
Registration Statement or Prospectus (including all documents incorporated
by reference after the initial filing of such Registration Statement and
all exhibits filed therewith), reasonably requested by such Person;
(7) if requested by any selling Holders or the underwriter(s) in
connection with such sale, if any, promptly include in any Registration
Statement or Prospectus, pursuant to a supplement or post-effective
amendment if necessary, such information as such selling Holders and such
underwriter(s), if any, may reasonably request to have included therein,
including, without limitation, information relating to the "Plan of
Distribution" of the Registrable Securities, information with respect to
the principal amount of Registrable Securities being sold to such
underwriter(s), the purchase price being paid therefor and any other terms
of the offering of the Registrable Securities to be sold in such offering,
and make all required filing of such Prospectus supplement or post-
effective amendment as soon as practicable after the Company is notified of
the matters to be included in such Prospectus supplement or post-effective
amendment;
(8) deliver to each Selling Holder and each of the
underwriter(s), if any, without charge, as many copies of the Prospectus
(including each preliminary prospectus) and any amendment or supplement
thereto as such Persons reasonably may request; the Company hereby consents
to the use of the Prospectus and any amendment or supplement thereto by
each of the Selling Holders and each of the underwriter(s), if any, in
connection with the offering and the sale of the Registrable Securities
covered by the Prospectus or any amendment or supplement thereto;
(9) in connection with any Underwritten Offering pursuant to a
Demand Registration, enter into an underwriting agreement with one or more
underwriters designated in accordance with this Agreement, such agreement
to be of the form, scope and substance as is customary in underwritten
offerings, and take all such other actions as are reasonably requested by
the managing underwriter(s) in order to expedite or facilitate the
disposition of such Registrable Securities and in such connection: (i) make
such representations and warranties to the underwriters in form, scope and
substance as are customarily made by issuers to underwriters in
underwritten offerings with respect to the business of the Company; (ii)
obtain opinions of counsel to the Company and updates thereof (which
counsel and opinions (in form, scope and substance) shall be reasonably
satisfactory to the managing underwriter(s)) addressed to the managing
underwriter(s) covering the matters customarily covered in opinions
requested in underwritten offerings and such other matters as may be
reasonably requested by the underwriters; (iii) obtain "comfort" letters
and updates thereof from the Company's independent certified public
accountants addressed to the underwriters, such "comfort" letters to be in
customary form and covering matters of the type customarily covered in
"comfort" letters in connection with underwritten offerings; (iv) deliver
such documents and certificates as may be
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reasonably requested by the managing underwriter(s) to evidence compliance
with any customary conditions contained in the underwriting agreement or
other agreement entered into by the Company. The above shall be done at
each closing under such underwriting or similar agreement.
(10) prior to any public offering of Registrable Securities,
cooperate with the Selling Holders, the underwriter(s), if any, and their
respective counsel in connection with the registration and qualification of
the Registrable Securities under the securities or Blue Sky laws of such
jurisdictions as the Selling Holders or underwriter(s), if any, may request
and do any and all other acts or things necessary or advisable to enable
the disposition in such jurisdictions or the Registrable Securities covered
by the applicable Registration Statement; PROVIDED, HOWEVER, that the
Company shall not be required to register or qualify as a foreign
corporation where it is not now so qualified or to take any action that
would subject it to the service of process in suits or to taxation, except
as is required as a result of the Registration Statement, in any
jurisdiction where it is not now so subject;
(11) in connection with any sale of Registrable Securities that
will result in such securities no longer being Registrable Securities,
cooperate with the Selling Holders and the underwriter(s), if any, to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold and not bearing any restrictive legends;
and to register such Registrable Securities in such denominations and such
names as the Selling Holders or the underwriter(s), if any, may request at
least two Business Days prior to such sale of Registrable Securities;
(12) if requested by the Selling Holders, provide a CUSIP number
for all Registrable Securities not later than the effective date of the
Registration Statement covering such Registrable Securities and provide the
Company's transfer agent(s) and registrar(s) for the Registrable Securities
with printed certificates for the Registrable Securities;
(13) cooperate and assist in any filings required to be made with
the NASD and in the performance of any due diligence investigation by any
underwriter (including any "qualified independent underwriter") that is
required to be retained in accordance with the rules and regulations of the
NASD, and use their best efforts to cause such Registration Statement to
become effective and approved by such governmental agencies or authorities
as may be necessary to enable the Selling Holders or underwriters, if any,
to consummate the disposition of such Registrable Securities;
(14) otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC, and make generally available to its
security holders, as soon as practicable, a consolidated earnings statement
meeting the requirements of Rule 158 under the Securities Act (which need
not be audited) covering a period of at least twelve month periods, but not
more than eighteen months, beginning with the first month of the Company's
first quarter commencing after the effective date of the Registration
Statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Securities Act; and
(15) cause all Registrable Securities covered by the Registration
Statement to be listed on each securities exchange on which securities of
the same class issued by the Company are then listed if requested by the
Selling Holders holding a majority of the Registered Securities or the
managing underwriter(s), if any.
9
<PAGE>
(b) PROVISION BY HOLDERS OF CERTAIN INFORMATION. No Holder of
Registrable Securities may include any of its Registrable Securities in any
Registration Statement pursuant to this Agreement unless and until such Holder
furnishes to the Company in writing, within 20 days after receipt of a request
therefor, such information as the Company may reasonably request specified in
item 507 of Regulation S-K under the Securities Act for use in connection with
any Registration Statement or Prospectus or preliminary Prospectus included
therein. Each Holder as to which any Registration Statement is being effected
agrees to furnish promptly to the Company all information required to be
disclosed in order to make the information previously furnished to the Company
by such Holder not materially misleading.
SECTION 3.2 REGISTRATION EXPENSES.
(a) All expenses incident to the Company's performance of or
compliance with this Section 3.2 will be paid by the Company, regardless of
whether any registration statement required hereunder becomes effective,
including, without limitation:
(1) all registration and filing fees;
(2) fees and expenses of compliance with securities or blue sky
laws (including, without limitation, reasonable fees and disbursements of
counsel for the underwriters or selling Holders in connection with blue sky
qualifications of the Registrable Securities and determination of their
eligibility for investment under the laws of such jurisdictions as the
managing underwriters or Holders of Registrable Securities being sold may
designate);
(3) printing (including, without limitation, expenses of
printing or engraving certificates for the Registrable Securities in a form
eligible for trading on the New York Stock Exchange or for deposit with the
Depository Trust Company and of printing prospectuses), messenger,
telephone and delivery expenses;
(4) reasonable fees and disbursements of counsel for the
Company, for the underwriters and for the Selling Holders (subject to the
provisions of Section 3.2(c) hereof);
(5) reasonable fees and disbursements of all independent
certified public accountants of the Company (including, without limitation,
the expenses of any special audit and "cold comfort" letters required by or
incident to such performance); and
(6) reasonable fees and disbursements of underwriters (excluding
discounts, commissions or fees of underwriters, selling brokers, dealer
managers or similar securities industry professionals relating to the
distribution of the Registrable Securities or legal expenses of any Person
other than the Company, the underwriters or the Selling Holders);
(7) fees and expenses of other Persons retained by the Company;
and
(8) fees and expenses associated with any NASD filing required
to be made in connection with the registration of the Registrable
Securities, including, if applicable, the reasonable fees and expenses of
any "qualified independent underwriter" (and its counsel) that is required
to be retained in accordance with the rules and regulations of the NASD;
(all such expenses being herein called "REGISTRATION EXPENSES").
10
<PAGE>
(b) The Company will, in any event, pay its internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expense of any annual
audit, the fees and expenses incurred in connection with the listing of the
Registrable Securities to be registered on each national securities exchange (or
other principal trading market) on which similar securities issued by the
Company are then listed, rating agency fees and the fees and expenses of any
Person, including special experts, retained by the Company.
(c) In connection with each Demand Registration or Piggyback
Registration required hereunder, the Company will reimburse the Holders of
Registrable Securities being registered pursuant to a registration statement
required hereunder for the reasonable fees and disbursements of not more than
one counsel chosen by the holders of a majority in number of such Registrable
Securities.
SECTION 3.3 PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Holder may
participate in any Underwritten Registration hereunder unless such Holder (i)
agrees to sell its Registrable Securities on the basis provided in any
underwriting arrangements approved by the Persons entitled hereunder to approve
such arrangements and (b) completes and executes all reasonable questionnaires,
powers of attorney, underwriting agreements, hold-back agreements letters and
other documents customarily required under the terms of such underwriting
arrangements. Notwithstanding the foregoing, (x) no Selling Holder shall be
required to make any representations or warranties except those which relate
solely to such Holder and its intended method of distribution, and (y) the
liability of each such Holder to any underwriter under such underwriting
agreement will be limited to liability arising from misstatements or omissions
regarding such Holder and its intended method of distribution and any such
liability shall not exceed an amount equal to the amount of net proceeds such
Holder derives from such registration; PROVIDED, HOWEVER, that in an offering by
the Company in which any Holder requests to be included in a Piggyback
Registration, the Company shall use its best efforts to arrange the terms of the
offering such that the provisions set forth in clauses (x) and (y) of this
Section 3.3 are true. Nothing in this Section 3.3 shall be construed to create
any additional rights regarding the registration of Registrable Securities in
any Person otherwise than as set forth herein.
SECTION 3.4 HOLD-BACK AGREEMENTS.
(a) RESTRICTIONS ON PUBLIC DISTRIBUTION BY HOLDER OF REGISTRABLE
SECURITIES. Upon the written request of the managing underwriter or
underwriters of a Public Offering, each Holder of Registrable Securities shall
not effect any Public Distribution of such securities, or any securities
convertible into or exchangeable or exercisable for such securities, including a
sale pursuant to Rule 144 under the Securities Act (except as part of such
Public Offering), during the 14-day period prior to, and during the 90-day
period following, the offering date for each Public Offering made pursuant to
such registration statement (as identified by such underwriter or underwriters
or the Company in good faith). The foregoing provisions shall not apply to any
Holder that is prevented by applicable statute or regulation from entering into
any such agreement; PROVIDED, HOWEVER, that any such Holder shall undertake not
to effect any Public Distribution of the class of securities covered by such
registration statement (except as part of such Underwritten Offering) during
such period unless it has provided 60 days' prior written notice of such Public
Distribution to the managing underwriter.
(b) RESTRICTIONS ON PUBLIC DISTRIBUTION BY THE COMPANY AND OTHERS.
The Company agrees and it shall use its best efforts to cause its Affiliates
(other than Persons who are Holders hereunder) to agree: (1) not to effect any
Public Distribution of any securities being registered in accordance with
Article II hereof, or any securities convertible into or exchangeable or
exercisable for such securities, during the 14-day period prior to, and during
the 90-day period following, the offering
12
<PAGE>
date for each Public Offering made pursuant to a registration statement filed
under Article II hereof, if requested in writing by the managing underwriters
(except as part of such Public Offering or pursuant to registrations in
connection with mergers, acquisitions, exchange offers, subscription offers,
dividend reinvestment plans or stock options or other employee benefit plans);
and (2) to use its best efforts to cause each Holder of its privately placed
Registrable Securities that are issued by the Company at any time on or after
the date of this Agreement to agree not to effect any Public Distribution,
including a sale pursuant to Rule 144 under the Securities Act, of any
Registrable Securities during the period set forth in clause (1) above (except
as part of such Public Offering, if and to the extent permitted).
ARTICLE IV
INDEMNIFICATION AND CONTRIBUTION
SECTION 4.1 INDEMNIFICATION BY THE COMPANY. The Company agrees to
indemnify and hold harmless each Selling Holder, each person, if any, who
controls such Holder (within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act) (hereinafter referred to as a "CONTROLLING
PERSON"), the respective officers, directors, partners, employees,
representatives and agents of any Holder or any controlling person (each an
"INDEMNIFIED HOLDER"), to the fullest extent lawful, from and against any and
all losses, claims, damages, liabilities, judgments, actions and expenses
(including without limitation and as incurred, reimbursement of all reasonable
costs of investigating, preparing, pursuing or defending any claim or action, or
any investigation or proceeding by any governmental agency or body, commenced or
threatened, including the reasonable fees and expenses of counsel to any
Indemnified Holder) directly or indirectly caused by, related to, based upon,
arising out of or in connection with any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement or
Prospectus (or any amendment or supplement thereto), or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as such
losses, claims, damages, liabilities or expenses are caused by an untrue
statement or omission or alleged untrue statement or omission that is made in
reliance upon and in conformity with information relating to any of the Holders
furnished in writing to the Company by any of the Holders expressly for use
therein.
SECTION 4.2 INDEMNIFICATION BY HOLDERS OF REGISTRABLE SECURITIES. Each
Selling Holder agrees, severally and not jointly, to indemnify and hold harmless
the Company and its directors, officers and any person controlling (within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act)
the Company and its respective officers, directors, partners, employees,
representatives and agents of each such person, to the same extent as the
foregoing indemnity from the Company to each of the Indemnified Holders, but
only with respect to losses, claims, damages, liabilities, judgments, actions
and expenses (including without limitation and as incurred, reimbursement of all
reasonable costs of investigating, preparing, pursuing or defending any claim or
action, or any investigation or proceeding by any governmental agency or body,
commenced or threatened, including the reasonable fees and expenses of counsel
to the Company) directly or indirectly caused by, related to, based upon,
arising out of or in connection with any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement or
Prospectus (or any amendment or supplement thereto), or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, to the extent, but only
to the extent, that such untrue statement or omission is contained in any
information relating to such Holder furnished in writing by such Holder
expressly for use in any Registration Statement or Prospectus. In case any
action or proceeding shall be brought against the Company or its directors or
officers or any such controlling person in respect of
12
<PAGE>
which indemnity may be sought against a Holder of Registrable Securities, such
Holder shall have the rights and duties given the Company, and the Company or
its directors or officers or such controlling person shall have the rights and
duties given to each Holder by the preceding paragraph. Each Selling Holder
also agrees to indemnify and hold harmless each other Selling Holder or
underwriters participating in the distribution on substantially the same basis
as that of the indemnification of the Company provided in this Section 4.2. In
no event shall the liability of any selling Holder hereunder be greater in
amount than the dollar amount of the proceeds received by such Holder upon the
sale of the Registrable Securities giving rise to such indemnification
obligation. The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in the distribution, to the same extent as provided
above with respect to information so furnished in writing by such Persons
specifically for inclusion in any Registration Statement or Prospectus.
SECTION 4.3 CONDUCT OF INDEMNIFICATION PROCEEDINGS. Any Person entitled
to indemnification hereunder (an "INDEMNIFIED PARTY") will (i) promptly give
notice of any claim, action or proceeding (including any governmental or
regulatory investigation or proceeding) or the commencement of any such action
or proceeding to the Person against whom such indemnity may be sought (an
"INDEMNIFYING PARTY"); PROVIDED that the failure to give such notice shall not
relieve the Indemnifying Party of its obligations pursuant to this Agreement
except to the extent that such Indemnifying Party has been prejudiced in any
material respect by such failure, and (ii) permit the Indemnifying Party to
assume the defense of such claim with counsel reasonably satisfactory to such
Indemnified Party; PROVIDED that the Indemnified Party shall have the right to
employ separate counsel and participate in the defense of such claim, but the
fees and expenses of such counsel shall be at the expense of such Indemnified
Party unless (a) the Indemnifying Party has agreed to pay for such fees and
expenses, or (b) the Indemnifying Party shall have failed to assume the defense
of such claim and employ counsel reasonably satisfactory to such Indemnified
Party or (c) in the reasonable judgment of such Indemnified Party, based upon
advice of its counsel, a conflict of interest may exist between such Indemnified
Party and the Indemnifying Party with respect to such claims. If such defense
is not assumed by the Indemnifying Party, the Indemnifying Party will not be
subject to any liability for any settlement of any such claim effected without
the Indemnifying Party's prior written consent, which consent shall not be
unreasonably withheld. The Indemnifying Party shall not be liable for any
settlement of any proceeding effected without its written consent, but if
settled with such consent or if there be a final judgment for the plaintiff, the
Indemnifying Party agrees to indemnify and hold harmless any Indemnified Party
from and against any loss, claim damage, liability or expense by reason of any
settlement of any such claim or action. No Indemnifying Party shall, without
the prior written consent of each Indemnified Party, settle or compromise or
consent to the entry of judgment in or otherwise seek to terminate any pending
or threatened action, claim, litigation or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not any
Indemnified Party is a party thereto), unless such settlement, compromise,
consent or termination includes an unconditional release of each Indemnified
Party from all liability arising out of such action, claim, litigation or
proceeding. An Indemnifying Party who is not entitled to, or elects not to,
assume the defense of the claim will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
Indemnifying Party with respect to such claim, unless in the reasonable
judgement of any Indemnified Party a conflict of interest may exist between such
Indemnified Party and any other such Indemnified Parties with respect to such
Claim, in which event the Indemnifying Party shall be obligated to pay the fees
and expenses of such additional counsel or counsels.
SECTION 4.4 CONTRIBUTION. If the indemnification provided for in this
Article IV is unavailable to an Indemnified Party (other than by reason of
exceptions provided in those Sections) in respect of any losses, claims,
damages, liabilities or expenses referred to therein, then each applicable
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall have a
joint and severable obligation to
13
<PAGE>
contribute to the amount paid or payable by such Indemnified Party as a result
of such losses, claims, damages, liabilities or expenses in such proportion as
is appropriate to reflect the relative fault of the Indemnifying Party, on the
one hand, and of the Indemnified Party, on the other, in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative fault of the Indemnifying Party, on the one hand, and of the
Indemnified Party, on the other, shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The amount paid or payable by a party as a result of the
losses, claims, damages, liabilities and expenses referred to above shall be
deemed to include, subject to the limitations set forth in the second paragraph
of Section 4.1, any legal or other fees or expenses reasonably incurred by such
party in connection with investigating or defending any action or claim.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 4.4 were determined by PRO RATA allocation
(even if the Holders were treated as one entity for such purpose) or by any
other method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages, liabilities or expenses referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 4.4, none of the Indemnified
Holders shall be required to contribute, in the aggregate, any amount in excess
of the amount by which the net proceeds received by such Holder with respect to
the Registrable Securities exceeds the greater of (A) the amount paid by such
Holder for its Registrable Securities and (B) the amount of any damages which
such Holder has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Holders' obligation to
contribute pursuant to this Section 4.4 are several in proportion to the
respective number of Registrable Securities held by each of the Holders
hereunder and not joint.
For purposes of this Article IV, each controlling person of a Holder
shall have the same rights to contribution as such Holder, and each officer,
director, and person, if any, who controls the Company within the meaning of
Section 15 of the Securities Act or Section 20(a) of the Exchange Act shall have
the same rights to contribution as the Company, subject in each case to the
limitations set forth in the immediately preceding paragraph. Any party
entitled to contribution will, promptly after receipt of notice of commencement
of any action, suit or proceeding against such party in respect of which a claim
for contribution may be made against another party or parties under this Article
IV, notify such party or parties from whom contribution may be sought, but the
omission to so notify such party or parties shall not relieve the party or
parties from who contribution may be sought from any obligation it or they may
have under this Article IV or otherwise except to the extent that it has been
prejudiced in any material respect by such failure. No party shall be liable
for contribution with respect to any action or claim settled without its written
consent; PROVIDED, HOWEVER, that such written consent was not unreasonably
withheld.
SECTION 4.5 ADDITIONAL INDEMNITY. The indemnity, contribution and
expense reimbursement obligations under this Article IV shall be in addition to
any liability each Indemnifying Party may otherwise have; PROVIDED, HOWEVER,
that any payment made by the Company which results in an
14
<PAGE>
Indemnified Party receiving from any source(s) indemnification, contribution or
reimbursement for an amount in excess of the actual loss, liability or expense
incurred by such Indemnified Party, shall be refunded to the Company by the
Indemnified Party receiving such excess payment.
ARTICLE V
MISCELLANEOUS
SECTION 5.1 RULE 144. The Company agrees it will file in a timely
manner all reports required to be filed by it pursuant to the Securities Act and
the Exchange Act and the rules and regulations adopted by the SEC thereunder and
will take such further action as any Holder of Registrable Securities may
reasonably request in order that such Holder may affect sales of Registrable
Securities without registration within the limitations of the exemptions
provided by Rule 144, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the SEC. At any reasonable time
and upon the request of a Holder of Registrable Securities, the Company will
furnish such Holder with such information as may be necessary to enable the
Holder to effect sales of Registrable Securities pursuant to Rule 144 under the
Securities Act and will deliver to such Holder a written statement as to whether
it has complied with such information and requirements.
SECTION 5.2 SPECIFIC PERFORMANCE. Each Holder, in addition to being
entitled to exercise all rights provided herein or granted by law, including
recovery of liquidated or other damages, will be entitled to specific
performance of its rights under this Agreement. The Company agrees that
monetary damages would not be adequate compensation for any loss incurred by
reason of a breach by it of the provisions of this Agreement and hereby agrees
to waive the defense in any action for specific performance that a remedy at law
would be adequate.
SECTION 5.3 NO INCONSISTENT AGREEMENTS. The Company will not on or
after the date of this Agreement enter into any agreement with respect to its
securities that is inconsistent with the rights granted to the Holders in this
Agreement or otherwise conflicts with the provisions hereof. The Company has
not previously entered into any agreement granting any registration rights with
respect to its securities to any Person. The rights granted to the Holders
hereunder do not in any way conflict with and are not inconsistent with the
rights granted to the holders of the Company's securities under any agreement in
effect on the date hereof.
SECTION 5.4 AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to or departures from the provisions
hereof may not be given unless the Company has obtained the written consent of
Holders of a majority of the outstanding shares of Registrable Securities.
SECTION 5.5 NOTICES. Unless otherwise provided herein, any notice,
request, instruction or other document to be given hereunder by any party to the
others shall be made in writing, by hand-delivery, telegraph, telex, telecopier,
registered first-class mail or air courier guaranteeing overnight deliver as
follows:
15
<PAGE>
if to the Company, to:
Wyle Electronics
15370 Barranca Parkway
Irvine, California 92718
Attention: Chief Financial Officer
if to Marshall, to:
Marshall Industries
9320 Telstar Avenue
El Monte, California 91731
Attention: Chief Financial Officer
if to any other Holder:
to the address specified by any such Holder from time-to-time;
or to such other place and with such other copies as any party hereto may
designate as to itself by written notice to the others. All such notices and
communications shall be deemed to have been duly given: at the time delivered by
hand, if personally delivered; five Business Days after being deposited in the
mail, postage prepaid, if mailed; when answered back, if telexed; when receipt
acknowledged, if telecopied: and on the next Business Day if timely delivered to
an air courier guaranteeing overnight delivery.
SECTION 5.6 SUCCESSORS AND ASSIGNS. This Agreement shall inure to
the benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent holders of Registrable Securities, provided that the
Company may not assign its rights or obligations under this Agreement to any
other person or entity without the written consent of a majority of the
outstanding shares of Registrable Securities.
SECTION 5.7 COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
SECTION 5.8 HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not limit o otherwise affect the meaning
hereof.
SECTION 5.9 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of California, without regard
to the choice of law provisions thereof.
SECTION 5.10 SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
SECTION 5.11 ENTIRE AGREEMENT. This Agreement is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein. There are no
16
<PAGE>
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein with respect to the registration rights granted by the
Company with respect to the Registrable Securities. This Agreement supersedes
all prior agreements and understandings between the parties with respect to such
subject matter.
SECTION 5.12 PRONOUNS. Whenever the context may require, any
pronouns used herein shall be deemed also to include the corresponding neuter,
masculine or feminine forms.
SECTION 5.13 ATTORNEY'S FEES. In any action or proceeding brought
to enforce any provision of this Agreement, the successful party shall be
entitled to recover reasonable attorney's fees in addition to its costs and
expenses and any other available remedy.
SECTION 5.14 SECURITIES HELD BY THE COMPANY OR ITS SUBSIDIARIES.
Whenever the consent or approval of Holders of a specified percentage or
Registrable Securities is required hereunder, Registrable Securities held by the
Company or its Subsidiaries shall not be counted in determining whether such
consent or approval was given by the Holders of such required percentage.
SECTION 5.15 FURTHER ASSURANCES. Each party shall cooperate and
take such action as may be reasonably requested by another party in order to
carry out the provisions and purposes of this Agreement and the transactions
contemplated hereby.
SECTION 5.16 TERMINATION. Unless sooner terminated in accordance
with its terms or as otherwise herein provided, this Agreement shall terminate
upon the earlier to occur of (i) the mutual agreement by the parties hereto,
(ii) with respect to any Holder, such Holder ceasing to own any Registrable
Securities, (iii) the third anniversary after such time as all outstanding
Warrants have been exercised.
SECTION 5.17 REPRESENTATIONS AND WARRANTIES. The Company hereby
represents and warrants to the Holder as follows:
(a) The Company has all requisite corporate power and authority to
enter into this Agreement and, subject to any approvals referred to herein, to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of the
Company. This Agreement has been duly executed and delivered by the Company and
constitutes a valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms.
(b) The execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby will not, conflict with or
violate any provision of the Articles of Incorporation or Bylaws of the Company
or any material agreement or obligation of the Company.
(SIGNATURE PAGE FOLLOWS)
17
<PAGE>
IN WITNESS HEREOF, the parties hereto have executed and delivered this
Agreement as of the date first written above.
MARSHALL INDUSTRIES
By:
---------------------------------------------
Name:
Title:
WYLE ELECTRONICS
By:
---------------------------------------------
Name:
Title:
S-1
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
MARSHALL INDUSTRIES QUARTERLY REPORT ON FORM 10Q AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1996
<PERIOD-END> AUG-31-1996
<CASH> 10,928
<SECURITIES> 0
<RECEIVABLES> 128,674
<ALLOWANCES> (8,033)
<INVENTORY> 229,933
<CURRENT-ASSETS> 376,177
<PP&E> 79,578
<DEPRECIATION> (40,320)
<TOTAL-ASSETS> 449,795
<CURRENT-LIABILITIES> 98,742
<BONDS> 0
0
0
<COMMON> 17,064
<OTHER-SE> 315,343
<TOTAL-LIABILITY-AND-EQUITY> 449,795
<SALES> 269,290
<TOTAL-REVENUES> 269,290
<CGS> 222,428
<TOTAL-COSTS> 222,428
<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> (137)
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