<PAGE>
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 February 28, 1997
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 February 28, 1997:
Common Stock 16,578,864 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
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
--------- --------
<PAGE>
MARSHALL INDUSTRIES
CONDENSED BALANCE SHEETS
(000'S OMITTED)
<TABLE>
<CAPTION>
ASSETS
February 28, May 31,
1997 1996
(unaudited) (audited)
----------- ---------
<S> <C> <C>
Current Assets:
Cash $ 1,198 $ 2,208
Receivables-net 157,591 140,785
Inventories 234,602 240,882
Deferred income tax benefits 13,845 13,845
Prepaid expenses 829 759
-------- --------
Total Current Assets 408,065 398,479
-------- --------
Property, Plant and Equipment, net of
accumulated depreciation and amortization
of $43,567 at February 28, 1997 and $38,610
at May 31, 1996 37,015 40,165
Note Receivable (Note 3) 32,488 30,689
Other Assets - Net 1,768 3,278
-------- --------
Total Assets $479,336 $472,611
-------- --------
-------- --------
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities:
Accounts payable and accrued expenses $134,288 $112,857
Income taxes payable 1,490 1,114
-------- --------
Total Current Liabilities 135,778 113,971
-------- --------
Long-Term Debt:
Bank lines of credit 3,000 --
Term loan -- 25,000
-------- --------
Total Long-Term Debt 3,000 25,000
-------- --------
Deferred Income Tax Liabilities 3,646 3,646
Shareholders' Investment 336,912 329,994
-------- --------
Total Liabilities and Shareholders'
Investment $479,336 $472,611
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of these condensed balance sheets.
-2-
<PAGE>
MARSHALL INDUSTRIES
CONDENSED INCOME STATEMENTS
(UNAUDITED)
(000'S OMITTED EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
February 28, February 29, February 28, February 29,
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $304,007 $288,008 $859,643 $859,410
Cost of sales 255,733 235,788 716,687 702,553
-------- -------- -------- --------
Gross profit 48,274 52,220 142,956 156,857
Selling, general
and administrative
expenses 31,873 31,102 95,927 91,212
--------- --------- --------- ---------
Income from operations 16,401 21,118 47,029 65,645
Interest expense (income)--net (453) 268 (1,158) 857
--------- --------- --------- ---------
Income before income
taxes 16,854 20,850 48,187 64,788
Provision for income
taxes 7,055 8,600 20,255 26,700
--------- --------- --------- ---------
Net income $ 9,799 $ 12,250 $ 27,932 $ 38,088
--------- --------- --------- ---------
--------- --------- --------- ---------
Net income per share $ .58 $ .70 $ 1.63 $ 2.18
--------- --------- --------- ---------
--------- --------- --------- ---------
Average number of
shares outstanding 16,959 17,504 17,147 17,510
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these condensed
income statements.
-3-
<PAGE>
<TABLE>
<CAPTION> MARSHALL INDUSTRIES
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(000'S OMITTED)
Nine Months Ended
February 28, February 29,
1997 1996
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 27,932 $ 38,088
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 6,708 5,702
Changes in net current assets and current liabilities 11,211 (40,717)
Accrued interest on note receivable (1,799) (1,228)
Other operating activities 13 80
-------- --------
Net cash provided by operating activities 44,065 1,925
-------- --------
Cash flows from investing activities:
Capital expenditures (1,970) (4,554)
Deferred software costs (91) (52)
-------- --------
Net cash used for investing activities (2,061) (4,606)
-------- --------
Cash flows from financing activities:
Net borrowings under bank lines of credit 3,000 2,000
Net repayments of other long-term debt (25,000) (615)
Purchase of common stock (21,014) --
Proceeds from exercise of options -- 89
-------- --------
Net cash (used for) provided by financing activities (43,014) 1,474
-------- --------
Net decrease in cash (1,010) (1,207)
Cash at the beginning of the period 2,208 3,508
-------- --------
Cash at the end of the period $ 1,198 $ 2,301
-------- --------
-------- --------
</TABLE>
-4-
<PAGE>
MARSHALL INDUSTRIES
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(000'S OMITTED)
(CONTINUED)
Nine Months Ended
February 29, February 28,
1997 1996
------------ -----------
Supplemental disclosure of cash flow
information:
Interest paid during the period $ 943 $ 1,919
------- --------
------- --------
Income taxes paid during the period $19,879 $30,630
------- --------
------- --------
The accompanying notes are an integral part of these condensed cash flow
statements.
-5-
<PAGE>
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 February
28, 1997 and the results of its operations for the three month and nine month
periods and its cash flows for the nine month periods ended February 28, 1997
and February 29, 1996.
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: INVESTMENT IN SONEPAR ELECTRONIQUE INTERNATIONAL
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 $28.0 million U.S. dollars) in Sonepar
Electronique International, 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 4: STOCK BUY-BACK
In May 1996, the Company announced that its Board of Directors authorized the
purchase of up to one 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 700,000 shares during the nine month
period ended February 28, 1997.
NOTE 5: ACCORD CONTRACT SERVICES JOINT VENTURE
On August 8, 1996, the Company announced the formation of a joint venture
with Wyle Electronics ("Wyle"), another distributor of semiconductors and
computer products. The venture, known as Accord Contract Services LLC
("Accord"), is 50% owned by each of the Company and Wyle (the "members").
Accord provides value added services to each of its members including
component kitting, turnkey manufacturing solutions, and auto-replenishment
systems. The venture is subject to termination under
- 6 -
<PAGE>
various circumstances, including the election of either member. Upon a
change in control of one of the members, either member may elect to terminate
the joint venture, but the member subject to the change in control would then
be required to pay the other member a fee as compensation for the termination
of the venture. The fee, which can range from $25 million to $40 million, is
based on the value of the venture at the time of termination considering its
sales volume and other factors. In connection with the establishment of
Accord, each member initially agreed to grant certain warrants to the other
member and entered into other related agreements. The warrant agreements and
certain of the related agreements were subsequently rescinded.
NOTE 6: EARNINGS PER SHARE AND CAPITAL STRUCTURE
In March 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share" (SFAS 128) and
Statement of Financial Accounting Standards No. 129, "Disclosure of
Information about Capital Structure" (SFAS 129). SFAS 128 revises and
simplifies the computation for earnings per share and requires certain
additional disclosures. SFAS 129 requires additional disclosures regarding
the Company's capital structure. Both standards will be adopted in fiscal
1998. Management does not expect the adoption of these standards to have a
material effect on the Company's financial position or results of operations.
- 7 -
<PAGE>
MARSHALL INDUSTRIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
OPERATING RESULTS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
February 28, February 29, February 28, February 29,
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 84.1 81.9 83.4 81.8
--------- --------- --------- ---------
Gross profit 15.9 18.1 16.6 18.2
Selling, general
and adminis-
trative expenses 10.5 10.8 11.1 10.6
--------- --------- --------- ---------
Income from
operations 5.4 7.3 5.5 7.6
Interest (income)
expense - net (.1) .1 (.1) .1
--------- --------- --------- ---------
Income before
provision for
income taxes 5.5 7.2 5.6 7.5
Provision for
income taxes 2.3 3.0 2.4 3.1
--------- --------- --------- ---------
Net income 3.2% 4.2% 3.2% 4.4%
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
-8-
<PAGE>
Three and Nine Month Periods Ended February 28, 1997 and February 29, 1996:
The Company's net sales increased by 6% for the third quarter fiscal 1997
from the comparable period of a year ago. The Company's net sales for the
first nine months of fiscal 1997, compared to fiscal 1996, remained
relatively unchanged. Net sales for such periods included substantial
increases in the sales of mass storage, microprocessor, and liquid crystal
display ("LCD") products. The sales of these products increased by
$21,904,000 and $46,860,000 for the third quarter and first nine months of
fiscal 1997, as compared to last year, respectively. The addition of new
suppliers during the last calendar year contributed to most of the increase
in the sales of such products. In addition, the Company recorded increases
in the sales of most major products for the third quarter of fiscal 1997, as
compared to the comparable period for last year. However, the Company's net
sales for the third quarter and the first nine months of fiscal 1997, as
compared to fiscal 1996, included a decrease in revenues from the sales of
semiconductor products, particularly memory products, "DRAMs" and "SRAMs".
The sales of these products decreased by $18,697,000 and $42,344,000 for the
third quarter and the first nine months of fiscal 1997, as compared to fiscal
1996, respectively. While there was a significant increase in the unit
volume sold of memory products in fiscal 1997 from fiscal 1996, the
substantial market decline in unit pricing during the periods reported
accounted for the significant decrease in sales dollars of such products.
The decrease in net margins as a percent of sales for the third quarter and
nine months to date of fiscal 1997, as compared to fiscal 1996, was primarily
due to a shift in the mix of products sold with an increase in the sales of
mass storage products and microprocessors, which are lower margin products.
The decline in the margins on some of the Company's products, particularly
DRAMs, also contributed to the decrease in margins in fiscal 1997, as
compared to fiscal 1996.
Beginning in late calendar year 1995, the industry experienced a moderation
in customer demand and a marked increase in the supply of a number of
electronic component products, particularly memory. These conditions have had
a material impact on the Company's net sales and margins. The industry
continues to experience pressures on pricing and margins.
The increase in selling, general, and administrative expenses ("SG&A") for
the third quarter and first nine months of fiscal 1997, as compared to fiscal
1996, was largely due to higher salary and related expenses. These expenses
increased approximately $1,050,000 and $4,100,000, for the third quarter and
first nine months of fiscal 1997, as compared to the same periods of a year
ago, resulting from salary adjustments and staff additions. The Company's
staff increased by an average of 25 and 55 salespeople for the third quarter
and first nine months of fiscal 1997 from fiscal 1996, respectively. This
increase in salespeople was partially offset by a decrease in administrative
and warehouse staff. The increase in salary costs was partly offset by a
decrease in bad debt expense for the first nine months ended February 28,
1997, as compared to last year. There were no significant changes in bad debt
expense for the third quarter of fiscal 1997, as compared to 1996.
The decrease in net interest expense for the third quarter and first nine
months of fiscal 1997, as compared to last year, was due primarily to the
increased cash flows, which allowed the Company to reduce its outstanding
debt. The interest income recorded for the periods reported was from the note
receivable described in Note 3 and short term investments.
The Company's sources of liquidity at February 28, 1997 consisted principally
of working capital of $272,287,000 and unsecured bank lines of $70,000,000 of
which $3,000,000 was used. The
- 9 -
<PAGE>
Company believes that its working capital, borrowing capabilities and
additional funds generated from operations should be sufficient to finance
its future operations requirements.
- 10 -
<PAGE>
PART II
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the shareholders during the quarter for
which this report is filed.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.15 Marshall Warrant Rescission Agreement dated February 28,
1997 between Marshall Industries and Wyle Electronics.
10.16 Amendment No. 3 to Limited Liability Company Agreement of
Accord Contract Services LLC, dated February 28, 1997
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.
-11-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MARSHALL INDUSTRIES
April 10, 1997 /s/ Henry W. Chin
-------------------------
Henry W. Chin
Vice President, Finance and
Chief Financial Officer
-12-
<PAGE>
Exhibit Index
10.15 Marshall Warrant Rescission Agreement dated February 28,
1997 between Marshall Industries and Wyle Electronics.
10.16 Amendment No. 3 to Limited Liability Company Agreement of
Accord Contract Services LLC, dated February 28, 1997
between Marshall Industries and Wyle Electronics.
27 Financial Data Schedule
-13-
<PAGE>
MARSHALL WARRANT RESCISSION AGREEMENT
This MARSHALL WARRANT RESCISSION AGREEMENT (this "AGREEMENT") is made
and entered into as of February 28, 1997, by and between Marshall Industries, a
California corporation ("MARSHALL"), and Wyle Electronics, a California
corporation ("WYLE").
RECITALS
A. Marshall and Wyle are parties to that certain Limited Liability
Company Agreement of Accord Contract Services LLC ("ACCORD") dated as of August
8, 1996 establishing Accord as a joint venture between Marshall and Wyle.
B. In connection with the establishment of Accord, Marshall and
Wyle entered into the following agreements: (1) that certain Warrant Agreement
(Marshall) dated as of August 8, 1996 (the "MARSHALL WARRANT AGREEMENT"),
pursuant to which Marshall agreed to grant to Wyle certain warrants (the
"MARSHALL WARRANTS") to purchase shares of Marshall's common stock, $1.00 par
value (the "MARSHALL COMMON STOCK"), upon the occurrence of certain events, and
(2) that certain Registration Rights Agreement (Marshall) dated as of August 8,
1996 (the "MARSHALL REGISTRATION RIGHTS AGREEMENT," and, together with the
Marshall Warrant Agreement, the "MARSHALL AGREEMENTS"), pursuant to which
Marshall agreed to grant certain registration rights to Wyle in connection with
the issuance of the Marshall Warrants.
C. The effectiveness of the Marshall Agreements and the delivery of
a warrant certificate to Wyle in connection with the Marshall Warrant Agreement
(the "MARSHALL CERTIFICATE"), were conditioned upon the parties reaching
agreement on an overall exit strategy that incorporated such agreements (and
the Marshall Certificate) in connection with the termination of Accord.
D. The parties have reached an agreement on such exit strategy
which does not incorporate the Marshall Agreements, and which does not require
the issuance or delivery of the Marshall Certificate.
E. Therefore, Marshall and Wyle desire to rescind the Marshall
Agreements.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby confirmed and acknowledged, the parties hereto
agree as follows:
1. RESCISSION. The parties hereto acknowledge and agree that each
of the Marshall Agreements is hereby rescinded and shall be of no further force
and effect. The parties
<PAGE>
hereto further acknowledge and agree that they each shall have no
further rights, duties or obligations under any of the Marshall Agreements.
2. CANCELLATION OF WARRANT CERTIFICATE. The parties hereto
acknowledge and agree that the Marshall Certificate shall be canceled and
become null and void simultaneously with the execution of this Agreement. All
benefits owed to any party and all duties imposed upon any party under the
Marshall Certificate shall be canceled. The parties believe that the Marshall
Certificate has not been delivered, however, if such Marshall Certificate has
been delivered, then within ten (10) days of the effective date of this
Agreement, Wyle shall return the original Marshall Certificate to Marshall with
the word "CANCELED" printed on each page and initialed by the person(s)
executing this Agreement on behalf of Wyle.
3. SUCCESSORS. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and assigns.
4. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
5. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of California, without
regard to otherwise governing principles of conflict of laws.
6. EXPENSES. Any and all expenses incurred by any party due to the
execution of this Agreement shall be the sole responsibility of that party.
7. ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the parties with respect to the subject matter thereof and shall be
binding upon their respective successors and assigns. This Agreement may not
be altered or amended except with the written consent of all parties.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have entered into this
Agreement effective as of the date first above written.
MARSHALL INDUSTRIES,
a California corporation
By:___________________________________________
Name:
Title:
WYLE ELECTRONICS,
a California corporation
By:___________________________________________
Name:
Title:
<PAGE>
AMENDMENT NO. 3 TO LIMITED LIABILITY COMPANY AGREEMENT
OF ACCORD CONTRACT SERVICES LLC
This Amendment No. 3 (the "Amendment") to the Limited Liability
Company Agreement of Accord Contract Services LLC dated as of August 8, 1996
(the "Agreement") is hereby entered into as of February 28, 1997 by and
between Wyle Electronics, a California corporation ("Wyle") and Marshall
Industries, a California corporation ("Marshall"). Capitalized terms used
but not otherwise defined herein shall have the meanings ascribed thereto in
the Agreement.
R E C I T A L S
---------------
A. Wyle and Marshall (together, the "Members") formed Accord
Contract Services LLC, a Delaware limited liability company (the "LLC"), to
provide certain materials management services for each of the Members,
including, without limitation. the acquisition of components and products and
the provision of kitting, turnkey and autoreplenishment services to customers
and related administrative and other related services in connection therewith.
B. The Agreement sets forth certain understandings and agreements
of the Members with respect to the LLC.
c. Pursuant to the Agreement, the Members have agreed upon the
"Termination Formula" (as defined in the Agreement).
D. The Members now desire to enter into this Amendment in order to
incorporate the Termination Formula into, and to make certain amendments to,
the Agreement, as mutually agreed upon by the Members and as set forth below.
NOW, THEREFORE, in consideration of the mutual covenants and
promises contained herein and for other good and valuable consideration the
receipt and adequacy of which are hereby acknowledged, the parties hereto
agree as follows:
A G R E E M E N T
-----------------
1. ADDITIONAL DEFINITIONS. The following definitions shall be, and hereby
are, added to the Agreement:
a. ACQUISITION MULTIPLE: Upon the occurrence of an Exercise Event, the
quotient of (i) the Acquisition Value of the Event Member, DIVIDED BY
(ii) the net sales from all sources for the Event Member for the
twelve full calendar months immediately preceding the month in which
the Exercise Event occurred.
b. ACQUISITION VALUE: Upon the occurrence of an Exercise Event, the
value of the Event Member in its entirety, as determined in the usual
and customary manner
<PAGE>
with reference to the particular event resulting in the Exercise
Event. In the event that the Exercise Event does not entail the
acquisition of the common stock or substantially all of the assets of
the Event Member for cash or securities that are traded on a national
securities exchange, reported through the National Association of
Securities Dealers Automated Quotation System or traded
over-the-counter, then the Acquisition Value shall be determined by
agreement of the Members or, if the Members are unable to so agree,
then by a Neutral Party selected in accordance with Section 12.17(c)
of this Agreement.
c. AGGREGATE BASELINE SALES: Means the aggregate net sales by both
Members from the provision of Value Added Services for the twelve
full calendar months immediately preceding the effective date of the
Agreement.
d. EXERCISE EVENT: For purposes of the Agreement, the term "Exercise
Event" shall mean the occurrence of any of the following events with
respect to a Member:
(1) The approval by the shareholders of any Member of
the dissolution or liquidation of the Member;
(2) The consummation by any person (other than a Member)
of a tender offer or exchange offer to purchase any shares of a
Member's common stock such that, upon the consummation of such
offer, such person owns or controls 20% or more of the then
outstanding common stock of such Member;
(3) The execution by a Member or any subsidiary thereof
of an agreement with any person (other than the other Member) to
(i) merge, consolidate or otherwise reorganize with or into one or
more entities that are not subsidiaries of such Member, as a result
of which less than 50% of the outstanding voting securities of the
surviving or resulting entity immediately after the consummation of
such transaction are, or will be, owned by shareholders of such
Member immediately before such reorganization (assuming for purposes
of such determination that there is no change in the record ownership
of the Member's securities from the record date for such approval
until such transaction is consummated and that such record holders
hold no securities of the other party or parties to such a
transaction), (ii) sell, lease or otherwise dispose of assets of such
Member or its subsidiaries representing 50% or more of the
consolidated assets of the Member and its subsidiaries or (iii)
issue, sell or otherwise dispose of (including by way of merger,
consolidation, share exchange or any similar transaction) securities
representing 50% or more of the voting power of such Member;
(4) The acquisition by any person (other than a
Member) of beneficial ownership (as such term is defined in Rule 13d-
3 under the Securities
2
<PAGE>
Exchange Act of 1934, as amended (the "Exchange Act")) or the right
to acquire beneficial ownership of, or any "group" (as such term is
defined under the Exchange Act) shall have been formed which
beneficially owns or has the right to acquire beneficial ownership of,
20% or more of the then outstanding common stock of a Member; or
(5) The failure at any time, during any period of two
consecutive years, of individuals who at the beginning of such period
constituted the Board of Directors of a Member, for any reason, to
constitute at least a majority thereof, unless the election, or the
nomination for election by such Member's shareholders, of each new
Board member was approved by a vote of at least three-fourths of the
Board members then still in office who were Board members at the
beginning of such period (including for these purposes, new members
whose election or nomination was so approved).
e. GROWTH MULTIPLE: Means, upon the occurrence of an Exercise Event,
the growth, stated as a percentage, of the aggregate sales generated
by the United States electronic components distribution industry from
August 8, 1996 through the date of such Exercise Event, as determined
by agreement of the Members or, if the Members are unable to so
agree, then by a Neutral Party selected in accordance with Section
12.17(c).
f. INCREMENTAL SALES: Means, upon the occurrence of an Exercise Event,
the difference between (i) the aggregate net sales by both Members
from the provision of Value Added Services for the twelve full
calendar months immediately preceding the month in which the Exercise
Event occurred, MINUS (ii) the product of the Aggregate Baseline
Sales, multiplied by the Growth Multiple.
g. VALUE ADDED SERVICES: Means those types of materials management
services that are intended to be provided to the Members by the LLC,
including, without limitation, kitting, turnkey, autoreplenishment
and related services.
2. AMENDED DEFINITIONS. The following definitions shall be, and hereby are,
amended as follows:
a. CHANGE IN CONTROL TERMINATION FEE: Equals the greater of (i) $25
million, or (ii) the amount calculated pursuant to the Termination
Formula, but in no event shall such Change in Control Termination Fee
exceed $40 million. Notwithstanding the foregoing, unless otherwise
agreed to in writing by the Members prior thereto, the Change in
Control Termination Fee shall equal $0 in connection with any Exercise
Event that occurs after August 7, 2001.
3
<PAGE>
b. TERMINATION FORMULA: The Termination Formula shall mean, upon an
Exercise Event, fifty percent (50%) of the product of Incremental
Sales, MULTIPLIED by one hundred thirty percent (130%) of the
Acquisition Multiple.
3. DELETED DEFINITIONS. The following definitions, and any and all
references to the defined terms in the Agreement, shall be, and hereby is,
deleted:
TO WARRANT AGREEMENT
WARRANT AGREEMENT
WARRANT VALUE
4. TERMINATION NOTICE UPON EXERCISE EVENT. It is the intention of the
Members that either Member be permitted to terminate the LLC upon the
occurrence of an Exercise Event with respect to a Member by providing a
Termination Notice to the other Member, in accordance with, and subject to the
terms and conditions contained in, the Agreement (including, without
limitation, the payment of the Change in Control Termination Fee by the Event
Member pursuant to Section 11.1(c) of the Agreement). In furtherance of the
foregoing, the Agreement shall be, and hereby is, amended as follows:
a. The first sentence of Section 11.1(a)(xi) shall be, and hereby is,
amended by the insertion of the phrase "or by the Event Member"
immediately following the phrase "by the Member other than the Event
Member (also a "TO Member")".
b. Section 11.1(c)(i) shall be, and hereby is, amended and restated in
its entirety as follows:
"(i) Upon the occurrence of an Exercise Event with respect
to an Event Member and the subsequent delivery of a Termination
Notice by the TO Member or the Event Member pursuant to
Section 11.1(a)(xi) at any time during the term of the LLC,
or if later: (i) prior to the first anniversary of a Deadlock,
upon dissolution of the LLC pursuant to Section 11.1(a)(vi)
(other than an Improper Deadlock), or (ii) prior to the first
anniversary of the effective date of this Agreement, upon
dissolution of the LLC pursuant to Section 11.1(a)(ix), such
Event Member shall pay to the TO Member in cash an amount equal
to the Change in Control Termination Fee, which amount shall be
payable within thirty (30) days following the occurrence of the
Exercise Event."
5. EXTENSION OF TIME. Wyle and Marshall hereby agree that the "Associated
Agreement Negotiation Period" (as defined in Section 2.5 of the Agreement) has
been extended through (and including) March 31, 1997 with respect to the
agreements previously referred to in the Agreement as: (i) the Systems License;
and (ii) the [Sub] Lease Agreement.
4
<PAGE>
6. ENTIRE AGREEMENT. The Agreement, as amended by this Amendment,
constitutes the entire agreement between the parties pertaining to the subject
matter hereof and fully supersedes any and all prior or contemporaneous
agreements or understandings between the parties hereto pertaining to the
subject matter hereof.
7. FULL FORCE AND EFFECT. Except as expressly amended in Amendment No. 1,
Amendment No. 2 and this Amendment, the Agreement shall remain in full force
and effect.
8. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have duly executed this Amendment or have
caused this Amendment to be duly executed on their behalf as of the day and
year first set forth above.
WYLE ELECTRONICS,
a California corporation
By:
---------------------------
Name:
Title:
MARSHALL INDUSTRIES,
a California corporation
By:
---------------------------
Name:
Title:
5
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MARSHALL
INDUSTRIES QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1996
<PERIOD-END> FEB-28-1997
<CASH> 1,198
<SECURITIES> 0
<RECEIVABLES> 166,169
<ALLOWANCES> (8,578)
<INVENTORY> 234,603
<CURRENT-ASSETS> 408,065
<PP&E> 80,582
<DEPRECIATION> (43,567)
<TOTAL-ASSETS> 479,336
<CURRENT-LIABILITIES> 135,778
<BONDS> 0
0
0
<COMMON> 16,578
<OTHER-SE> 320,334
<TOTAL-LIABILITY-AND-EQUITY> 479,336
<SALES> 859,643
<TOTAL-REVENUES> 859,643
<CGS> 716,687
<TOTAL-COSTS> 716,687
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,585
<INTEREST-EXPENSE> (1,158)
<INCOME-PRETAX> 48,187
<INCOME-TAX> 20,255
<INCOME-CONTINUING> 27,932
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27,932
<EPS-PRIMARY> 1.63
<EPS-DILUTED> 0
</TABLE>
