<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 November 30, 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 November 30, 1996:
Common Stock 16,828,864 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
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
------
November 30, May 31,
1996 1996
(Unaudited) (Audited)
----------- ---------
Current Assets:
Cash and cash equivalents $ 8,144 $ 2,208
Receivables - net 127,443 140,785
Inventories 225,695 240,882
Deferred income tax benefits 13,845 13,845
Prepaid expenses 755 759
-------- --------
Total Current Assets 375,882 398,479
-------- --------
Property, Plant and Equipment, net
of accumulated depreciation and
amortization of $41,923 at
November 30, 1996 and $38,610
at May 31, 1996 37,979 40,165
Note Receivable (Note 4) 32,001 30,689
Other Assets - net 2,279 3,278
-------- --------
Total Assets $448,141 $472,611
-------- --------
-------- --------
LIABILITIES AND SHAREHOLDERS' INVESTMENT
----------------------------------------
Current Liabilities:
Accounts payable and accrued
expenses $108,635 $112,857
Income taxes payable 1,060 1,114
-------- --------
Total Current Liabilities 109,695 113,971
-------- --------
Term Loan --- 25,000
Deferred Income Tax Liabilities 3,646 3,646
Shareholders' Investment 334,800 329,994
-------- --------
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Total Liabilities and
Shareholders' Investment $448,141 $472,611
-------- --------
-------- --------
The accompanying notes are an integral part of these condensed balance sheets.
4
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MARSHALL INDUSTRIES
CONDENSED INCOME STATEMENTS
(000's Omitted Except Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
November 30, November 30,
------------ ------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $286,346 $295,532 $555,636 $571,402
Cost of sales 238,526 241,840 460,954 466,765
------- ------- ------- -------
Gross profit 47,820 53,692 94,682 104,637
Selling, general and
administrative expenses 32,263 30,212 64,054 60,110
------- ------- ------- -------
Income from operations 15,557 23,480 30,628 44,527
Interest (income)
expense--net (568) 281 (705) 589
------- ------- ------- -------
Income before taxes 16,125 23,199 31,333 43,938
Provision for income taxes 6,775 9,560 13,200 18,100
------- ------- ------- -------
Net income $ 9,350 $ 13,639 $ 18,133 $ 25,838
------- ------- ------- -------
------- ------- ------- -------
Net income per share $ .55 $ .78 $ 1.05 $ 1.48
------- ------- ------- -------
------- ------- ------- -------
Average number of shares
outstanding 17,136 17,522 17,240 17,513
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
The accompanying notes are an integral part of these condensed income
statements.
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MARSHALL INDUSTRIES
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(000's omitted)
<TABLE>
<CAPTION>
Six Months Ended
November 30,
------------------
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 18,133 $ 25,838
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 4,477 3,574
Net decrease (increase) in current
assets and liabilities 24,257 (14,557)
Interest accrued on note receivable (1,312) (822)
Other operating activities 23 26
-------- --------
Net cash provided by operating activities 45,578 14,059
Cash flows from investing activities:
Capital expenditures, (1,232) (2,315)
Deferred software costs (83) (56)
-------- --------
Net cash used for investing activities (1,315) (2,371)
Cash flows from financing activities:
Net repayments under bank
lines of credit --- (13,000)
Purchase of common stock (13,327) ---
Net repayments of other long-term debt (25,000) (615)
Proceeds from exercise of options --- 89
-------- --------
Net cash used for
financing activities (38,327) (13,526)
-------- --------
Net increase (decrease) in cash 5,936 (1,838)
Cash and cash equivalents at the
beginning of the period 2,208 3,508
-------- --------
Cash and cash equivalents at the
end of the period $ 8,144 $ 1,670
-------- --------
-------- --------
Cash payments during the six months
6
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for the following:
Interest $ 938 $ 1,300
-------- --------
-------- --------
Income taxes $ 13,254 $ 19,789
-------- --------
-------- --------
</TABLE>
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 November 30,
1996 and the results of its operations for the three and six month periods and
its cash flows for the six month periods ended November 30, 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
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
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("SEI"), the third largest electronic component distributor 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: 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 450,000 shares during the six month period ended
November 30, 1996.
9
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MARSHALL INDUSTRIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
OPERATING RESULTS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
November 30, November 30,
----------- -----------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 83.3 81.8 83.0 81.7
----- ----- ----- -----
Gross profit 16.7 18.2 17.0 18.3
Selling, general and
administrative expenses 11.3 10.2 11.5 10.5
----- ----- ----- -----
Income from operations 5.4 8.0 5.5 7.8
Interest (income)expense - net (.2) .1 (.1) .1
----- ----- ----- -----
Income before provision
for income taxes 5.6 7.9 5.6 7.7
Provision for income taxes 2.3 3.3 2.3 3.2
----- ----- ----- -----
Net income 3.3% 4.6% 3.3% 4.5%
----- ----- ----- -----
----- ----- ----- -----
</TABLE>
THREE AND SIX MONTH PERIODS ENDED NOVEMBER 30, 1996 AND 1995
The decrease in net sales for the second quarter and the first six months 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
$19,556,000 and $26,075,000 for the three and six month periods ended
November 30, 1996, respectively, as compared to the same periods of fiscal
1996. The decrease in semiconductor sales was caused mainly by the
significant market decline in the unit pricing of memory products, "DRAMs"
and "SRAMs", that began in December, 1995. The number of units sold,
however, were substantially higher in fiscal 1997 as compared to fiscal 1996.
These memory products accounted for approximately 22% and 27%, respectively,
of the Company's second quarter fiscal 1997 and 1996 net sales and 24% and 28%,
respectively, of the Company's net sales
10
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for the six months ended November 30, 1996 and 1995. Sales of computer products,
primarily liquid crystal displays ("LCD's") and mass storage products, increased
by $8,657,000 and $9,956,000 for the three and six month periods ended November
30, 1996, respectively, as compared to last year. Sales of the Company's other
major products remained relatively unchanged between periods. The Company has
experienced industry-wide shortages and excess supplies from time to time.
Beginning in the latter part of calendar 1995, there has been an increase in the
availability of products, and a moderation in demand for some of the products
that the Company sells.
The decrease in net margins for the second quarter and six months to date of
fiscal 1997, as compared to fiscal 1996, was primarily due to the continuing
market pressures on many of the Company's products, particularly DRAM's. In
addition, the increase in the sales volume of mass storage products and
microprocessors, which are lower margin products, contributed to the decrease in
margins in fiscal 1997, as compared to fiscal 1996.
The increase in selling, general, and administrative expenses ("SG&A"), for
the second quarter and first six months to date of fiscal 1997, as compared
to fiscal 1996, was largely due to higher salary and related expenses. Most
of this increase of approximately $1,350,000 and $3,060,000, for the second
quarter and first six months of fiscal 1996, respectively, as compared to last
year, was from the addition of approximately 90 salespeople and several
senior managers between November 1995 and 1996. The increase in higher
salary costs was partly offset by a decrease in bad debt expense. SG&A, as a
percentage of sales, increased to 11.3% from 10.2% and 11.5% from 10.5%, for
the three and six month periods ended November 30, 1996, respectively, as
compared to the same periods of a year ago due to a combination of increased
costs and the decrease in sales.
The decrease in net interest expense for the second quarter and first six months
of fiscal 1997, as compared to last year, was due to increased cash flows from
the reductions in receivables and inventories and the Company's continuing
profitability with modest capital expenditures which allowed the Company to
reduce its outstanding debt and invest excess cash in short-term investments.
The Company's sources of liquidity at November 30, 1996 consisted principally of
working capital of $266,187,000 and unsecured bank lines of credit of
$70,000,000. There were no borrowings under these lines of credit at
November 30, 1996. The Company believes
11
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that its working capital, borrowing capabilities and additional funds generated
from operations should be sufficient to finance its anticipated operations
requirements.
12
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PART II
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders of Marshall Industries was held on
October 22, 1996.
The following matters were acted upon at the meeting:
1. ELECTION OF DIRECTORS.
All of the incumbent Directors of the Company were re-elected to serve as
Directors until the next Annual Meeting of Shareholders and until their
successors are elected and have qualified. The vote was as follows:
Votes Votes Abstentions/
Directors for Against Broker Non-votes
- --------- ----- ------- ----------------
Gordon S. Marshall 12,483,530 0 218,174
Robert Rodin 12,491,330 0 210,374
Richard D. Bentley 12,491,630 0 210,074
Richard C. Colyear 12,658,950 0 42,754
Jean Fribourg 12,662,350 0 39,354
Lathrop Hoffman 12,052,950 0 648,754
Jose Menendez 11,126,812 0 1,574,892
Raymond G. Rinehart 12,656,590 0 45,114
Howard C. White 12,660,756 0 40,948
There were 17,064,764 shares outstanding as of the record date of August 26,
1996.
2. RATIFICATION OF APPOINTMENT OF AUDITORS.
The appointment of Arthur Andersen LLP as the Company's independent auditors for
the fiscal year ending May 31, 1996 was ratified by the following vote:
For: 12,513,567 Against: 11,990
Abstentions/Broker Non-Votes: 176,147
13
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.12 Change in Control Agreement dated January 10, 1997 between
Marshall Industries and Richard D. Bentley.
10.13 Form of Indemnification Agreement with certain officers and
directors
10.14 Schedule of Omitted Indemnification Agreements
27 Financial Data Schedule
(b) No reports on Form 8-K have been filed during the quarter for which this
report is filed.
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
January 14, 1997 /s/ HENRY W. CHIN
----------------------------
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)
14
<PAGE>
CHANGE IN CONTROL AGREEMENT
AGREEMENT by and between MARSHALL INDUSTRIES, a California corporation,
(the "Company") and RICHARD D. BENTLEY (the "Executive"), dated as of this 10th
day of January, 1997.
WHEREAS, the Executive currently serves as Executive Vice-President and a
Director of the Company;
WHEREAS, the Chief Executive Officer and the Board of Directors of the
Company (the "Board") have determined that it is in the best interests of the
Company and its shareholders to assure that the Company will have the continued
dedication of the Executive, notwithstanding the possibility of a change in
control of the Company;
WHEREAS, the Chief Executive Officer and the Board wish to diminish the
distraction of the Executive by virtue of any pending or threatened change in
control and to encourage the Executive's full attention and dedication to the
Company currently and in the event of any threatened or pending change in
control;
WHEREAS, the Chief Executive Officer and the Board wish to provide the
Executive with compensation arrangements upon a change in control which satisfy
the expectations of the Executive and which are competitive with those of other
corporations; and
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WHEREAS, the Company desires to retain the consulting services of the
Executive upon his retirement and the Executive desires to provide such
consulting services, on the terms and subject to the conditions set forth below.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. TERM OF AGREEMENT.
(a) The term of this Agreement shall commence on the date of its execution
and, subject to Subsection (b) and Section 3(e) below, shall terminate
on December 31, 1999. Subject to Subsection (b) and Section 3(e)
below, on January 1, 2000, and on each January 1 thereafter, the term
of this Agreement shall automatically be extended for one additional
year, unless not later than the preceding July 1 both parties shall
have agreed in writing not to extend the term of this Agreement. The
term of this Agreement shall also be extended, if necessary, so that
it does not end during a Change in Control Period. All obligations
arising under Sections 5, 6, 8, 9, and 13, if applicable, during the
term of this Agreement shall survive the termination of the Agreement
until such obligations have been satisfied in full.
2
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(b) If a Change in Control occurs during the original term of this
Agreement or any extension thereof under Subsection (a) and the
Executive's employment does not terminate during the associated Change
in Control Period, this Agreement shall terminate on the last day of
the Change in Control Period.
(c) Notwithstanding anything to the contrary in this Section 1 or Section
3, this Agreement shall terminate --
(1) on the date of the termination of the Executive's employment with
the Company for any reason before the Change in Control Date,
subject to the Retirement provisions in Section 3(e) below; or
(2) on the Executive's Date of Termination on or after the Change in
Control Date if the Executive's employment with the Company is
terminated (A) by the Company for Cause or by reason of
Disability, (B) by reason of the Executive's death, or (C) by the
Executive without Good Reason other than by reason of his
Retirement; or
(3) upon the termination of the Executive's consulting arrangement
described in Section 3(e), by reason of the Executive's death or
Disability.
3
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2. CERTAIN DEFINITIONS. The following words and phrases, when used in
this Agreement, shall have the following meanings, unless otherwise
clearly required by the context.
(a) "AGREEMENT" shall mean this Change in Control Agreement.
(b) "BOARD" shall mean the Board of Directors of the Company.
(c) "CAUSE" shall mean:
(1) the willful and continued failure of the Executive as an
employee to perform substantially the Executive's duties
with the Company or its affiliates (for reasons other than
the Executive's Disability), after written notification is
delivered to the Executive specifying the manner in which
the Board believes that the Executive has not substantially
performed the Executive's duties, if the Executive does not
cure such failure within 90 days of receiving such written
notification; or
(2) the willful engaging by the Executive while an Employee in
criminal conduct or gross misconduct which is materially and
demonstrably injurious to the Company.
4
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For purposes of this Subsection (c), no act or failure to act, on
the part of the Executive, shall be considered "willful" unless
it is done, or not done, by the Executive in bad faith or without
reasonable belief that the Executive's action or failure to act
was in the best interests of the Company. Any act, or failure to
act, pursuant to a resolution duly adopted by the Board or upon
the instructions of the Chief Executive Officer or the Chairman
of the Board or based upon the advice of counsel for the Company,
shall be conclusively presumed to be done, or not done, by the
Executive in good faith and in the best interests of the Company.
The termination of employment of the Executive shall not be
deemed to be for Cause unless and until there shall have been
delivered to the Executive a copy of a resolution, duly adopted
by the affirmative vote of not less than three-fourths of the
group consisting of the outside directors of the Company and the
Chairman of the Board, at a meeting of the Board called and held
for such purpose (after reasonable notice is provided to the
Executive and the Executive is given an opportunity, together
with his counsel, to be heard before the Board), finding that, in
the good faith opinion of this portion of the Board, the
Executive is guilty of the conduct or misconduct described in
Paragraph (1) or (2), and specifying the particulars thereof in
detail.
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(d) "CHANGE IN CONTROL" shall mean:
(1) the acquisition by any individual, entity, or group (within the
meaning of Section 13(d) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 30 percent or more of
either:
(A) the then outstanding shares of common stock of the Company
(the "Outstanding Company Common Stock"), or
(B) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the
election of directors (the "Outstanding Company Voting
Securities");
provided, however, that any of the preceding events shall not
constitute a Change in Control unless the conditions of Paragraph
(2) shall also be satisfied within six months of any of the
preceding events; and provided, further, that for purposes of
this Paragraph (1), the following acquisitions shall not
constitute a Change in Control:
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(C) any acquisition directly from the Company (including,
without limitation, a secondary offering of securities by
the Company);
(D) any acquisition by the Company (including, without
limitation, a repurchase or redemption of Company securities
by the Company);
(E) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any
corporation controlled by the Company; or
(F) any acquisition by any corporation pursuant to a transaction
which complies with Subparagraphs (A), (B), and (C) of
Paragraph (3) of this Subsection (d);
(2) the failure of individuals who, as of the date hereof, constitute
the Board (the "Incumbent Board") for any reason to constitute at
least a majority of the Board; provided, however, that any
individual becoming a member of the Board subsequent to the date
hereof whose election, or nomination for election by the
Company's shareholders, has been approved by a vote of at least a
majority of the members
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then comprising the Incumbent Board shall be considered as though
such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or
removal of members or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the
Board;
(3) approval by the shareholders of the Company of a reorganization,
merger, consolidation, or sale or other disposition of all or
substantially all of the assets of the Company (a "Business
Combination"), in each case, unless, following such Business
Combination --
(A) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 70
percent of, respectively, the then outstanding shares of
common stock and the combined voting power of the then
outstanding voting
8
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securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting
from such Business Combination (including, without
limitation, a corporation which as a result of such
transaction owns the Company or all or substantially all of
the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination,
of the Outstanding Company Common Stock and Outstanding
Company Voting Securities, as the case may be;
(B) no Person (excluding any employee benefit plan (or related
trust) of the Company or such corporation resulting from
such Business Combination) beneficially owns, directly or
indirectly, 30 percent or more of, respectively, the then
outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined
voting power of the then outstanding voting securities of
such corporation except to the extent that such ownership
existed prior to the Business Combination; and
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(C) at least a majority of the members of the board of directors
of the corporation resulting from such Business Combination
were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the
Board, providing for such Business Combination; or
(4) approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
(e) "CHANGE IN CONTROL DATE" shall mean the first date on which a Change
in Control occurs. Notwithstanding any provision in this Agreement to
the contrary, if a Change in Control occurs and if the Executive's
employment with the Company terminates prior to the date on which the
Change in Control actually occurs, and if it is reasonably
demonstrated by the Executive that such termination --
(1) was at the request of a third party who has taken steps
reasonably calculated to effect a Change in Control, or
(2) otherwise arose in connection with or anticipation of a Change in
Control,
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for all purposes of this Agreement the Change in Control Date shall
mean the date immediately before the date of such termination of
employment.
(f) "CHANGE IN CONTROL PERIOD" shall mean the 24-month period beginning on
the first Change in Control Date to occur.
(g) "CODE" shall mean the Internal Revenue Code of 1986, as amended, and
all regulatory guidance promulgated thereunder.
(h) "COMPANY" shall mean Marshall Industries.
(i) "COMPENSATION" shall mean the Executive's earned income, wages,
salaries, fees for professional services, and other amounts received
or deferred for personal services actually rendered in the course of
employment with the Company or its affiliates. Compensation shall
include, without limitation, commissions, compensation for services on
the basis of a percentage of profits, bonuses, director fees, amounts
voluntarily deferred by the Executive pursuant to a plan of deferred
compensation, and any contributions by the Executive to or under a
Code Section 125 cafeteria plan or any other employee benefit plan not
specified above. Amounts deferred or contributed by the Executive
pursuant to a qualified or nonqualified deferred compensation plan,
Code Section 125 cafeteria plan, or any other employee benefit plan
shall be deemed Compensation in the year in which
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the deferral or contribution is made rather than in the year any
amounts are received by the Executive under these plans. Bonuses and
other performance-based pay shall be deemed Compensation in the year
for which such pay is earned by the Executive rather than in the year
in which payment is made to the Executive. Notwithstanding the
foregoing, Compensation shall not include any amounts realized in
connection with any stock options or similar arrangements.
(j) "DATE OF TERMINATION" shall mean:
(1) if the Executive's employment is terminated by the Company for
Cause, or by the Executive for Good Reason, the date of receipt
of a written notice of termination, or any later date specified
therein;
(2) if the Executive's employment is terminated by the Company other
than for Cause or by reason of Disability, the date on which the
Company notifies the Executive of such termination; or
(3) if the Executive's employment is terminated by reason of death or
Disability, the date of death or 15 days after the date of
determination by the Company (under Subsection (k)) of
Disability.
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(k) "DISABILITY" shall mean an incapacity, due to physical injury or
illness or mental illness, rendering the Executive unable (1) while an
employee, to perform his duties with the Company on a full-time basis
for a period of at least six consecutive calendar months, or (2) while
covered under the consulting arrangement described in Section 3(e), to
perform his duties under the consulting arrangement. In the case of a
dispute between the Executive and the Company, the determination of
Disability shall be made by a doctor acceptable to both the Executive
and the Company. Nothing in this Agreement shall prevent or limit the
Executive from any benefits to which the Executive is, or may become,
entitled under any short- or long-term disability program sponsored by
the Company or any of its affiliates.
(l) "EXECUTIVE" shall mean Richard D. Bentley.
(m) "GOOD REASON" shall mean:
(1) the assignment to the Executive of any duties inconsistent in any
respect with the Executive's position (including status, offices,
titles, and reporting requirements), authority, duties, or
responsibilities as of the date of this Agreement, or any other
action by the Company which results in a diminution in such
position, authority, duties, or responsibilities, excluding for
this purpose an isolated, insubstantial, or inadvertent action
not taken in bad faith and which is remedied by
13
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the Company promptly after receipt of notice thereof given by the
Executive;
(2) the Company's requiring the Executive to be based at any office
or location more than 30 miles from the Company's corporate
headquarters as of the day before the Change in Control Date or
the Company's requiring the Executive to travel on Company
business to a substantially greater extent than required
immediately prior to the Change in Control Date;
(3) any material reduction in the Executive's total annual cash
compensation from the Company and its affiliates (including,
without limitation, base salary, bonus, and incentive plan
payments) without the consent of the Executive;
(4) any material shift in the composition of the Executive's total
annual compensation from the Company and its affiliates, from
base salary to bonus or incentive plan payments or from cash to
non-cash compensation, without the consent of the Executive;
(5) any purported termination by the Company of the Executive's
employment other than as expressly permitted by this Agreement;
or
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(6) any failure by the Company to comply with and satisfy Section
12(c) of this Agreement.
(n) "Retirement" shall mean the voluntary termination of employment with
the Company by the Executive on or after attainment of age 59.
3. OBLIGATIONS OF THE COMPANY UPON TERMINATION.
(a) TERMINATION OF EMPLOYMENT OTHER THAN FOR CAUSE OR DISABILITY. If,
during the Change in Control Period, the Company terminates the
Executive's employment other than for Cause or Disability, the Company
shall be obligated to pay the Executive the compensation equivalency
under Subsection (a) of Section 4 and to provide the benefits or cash
payments described in Section 5.
(b) TERMINATION OF EMPLOYMENT FOR GOOD REASON. If, during the Change in
Control Period, the Executive terminates employment with the Company
for Good Reason (even if the Executive is eligible for Retirement),
the Company shall be obligated to pay the Executive the compensation
equivalency under Subsection (a) of Section 4 and to provide the
benefits or cash payments described in Section 5.
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(c) TERMINATION OF EMPLOYMENT BY REASON OF DEATH. If, during the Change
in Control Period, the Executive's employment with the Company is
terminated by reason of the Executive's death, this Agreement shall
terminate without further obligation to the Executive's legal
representatives under this Agreement.
(d) TERMINATION OF EMPLOYMENT BY THE COMPANY FOR CAUSE OR BECAUSE OF
DISABILITY, OR BY THE EXECUTIVE WITHOUT GOOD REASON. If, during the
Change in Control Period, the Company terminates the Executive's
employment for Cause or because of Disability, or if, during the
Change in Control Period, the Executive terminates employment without
Good Reason (other than by reason of Retirement), this Agreement shall
terminate without further obligation to the Executive.
(e) TERMINATION OF EMPLOYMENT BY REASON OF RETIREMENT. If, during the
term of this Agreement, the Executive voluntarily terminates
employment with the Company by reason of Retirement, the Company shall
retain the Executive, and the Executive shall act, as a consultant to
the Company for 24 months following the date of his Retirement. Under
this consulting arrangement,
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(1) the Company shall pay the Executive one-twenty-fourth of the
amount described in Section 4(a) in cash per month during the
term of the consulting arrangement;
(2) the Company shall continue to provide benefits or cash payments
described in Section 5 for each month during the term of the
consulting arrangement; and
(3) the Executive shall provide such consulting services as the
Company may reasonably request for up to 60 hours per month on
average, to the extent such consulting services do not prevent
the Executive from performing his obligations to his then current
employer.
Except as specified below, upon Retirement and the concurrent
commencement of this consulting arrangement, the provisions of this
Subsection (e) shall remain in force for 24 months and the consulting
arrangement shall not be terminated by the Company for any reason
other than the death or Disability of the Executive. The provisions
of this Subsection (e) shall not be changed during such 24-month term
without the mutual written consent of the Company and the Executive.
The Company may terminate such consulting relationship other than on
account of the death or Disability of the Executive, provided that the
17
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Company shall continue to provide the benefits or cash payments
described in Section 5 for the remainder of the 24-month period.
Additionally, the Company shall pay to the Executive, in accordance
with the provisions of Sections 7, 8, and 9, in a lump sum cash
payment as soon as practicable after termination of the arrangement,
the difference between the amounts determined under Paragraphs
(4) and (5).
(4) The amount determined under this Paragraph shall be the amount
described in Section 4(a).
(5) The amount determined under this Paragraph shall be the sum of
the monthly payments described in Paragraph (1) that have
actually been paid to the Executive under the consulting
arrangement.
4. COMPENSATION EQUIVALENCY. The following amount shall be paid by the
Company to the Executive to the extent required under, and in accordance
with, the provisions of Sections 3, 7, 8, and 9.
(a) AMOUNT OF PAYMENT. The Executive shall receive a cash payment equal
to the product of two times the greater of (1) the Executive's
Compensation for the last full calendar year ending on or before the
Executive's Date of Termination, or (2) $500,000.
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(b) TIMING OF PAYMENT. The amount determined above shall be payable as
soon as practicable after the Executive's Date of Termination, in a
single lump-sum cash payment.
5. BENEFITS. The following benefits (or cash payments, if applicable) shall
be provided by the Company for or to the Executive and (to the extent
applicable) his immediate family, to the extent required, and in accordance
with, the provisions of Sections 3, 7, 8, and 9.
(a) For two years after the Executive's Date of Termination, or such
longer period as may be provided under the terms of the appropriate
plan, program, practice, or policy, the Company shall continue
benefits to the Executive and/or the Executive's immediate family at a
level substantially equivalent to that which would have been provided
for him and/or them in accordance with the plans, programs, practices,
and policies described in Subsection (b) if the Executive's employment
had not terminated or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other senior
executives of the Company and its affiliates and their families.
Notwithstanding the foregoing, if the Executive becomes reemployed
with another employer (other than pursuant to the consulting
arrangement described in Section 3(e)) and is eligible to receive any
medical or any other
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welfare benefits under any other employer-provided plan, or if the
Executive breaches any of the covenants listed in Section 8, all of
the benefits (or cash payments, if applicable) provided under this
Subsection (a) shall be immediately terminated.
If it is not reasonably practicable to provide the Executive and/or
the Executive's immediate family with one or more of the benefits
discussed above, or if the cost of providing any such benefit or
benefits (other than the cost associated with any benefit self-insured
by the Company) exceeds 200 percent of the average costs
applicable to similarly situated executives of the Company, the
Company instead may pay to the Executive a cash amount equal to 200
percent of said average costs associated with such benefit or
benefits, grossed up for any applicable Federal, state, and local
income taxes on such cash payments.
(b) The benefits described herein shall be all benefits under any welfare
benefit plans, arrangements, or programs provided by the Company and
its affiliates (including, without limitation, medical, prescription
drugs, dental, disability, employee and dependent life, group life,
accidental death, and travel accident insurance plans and programs) to
the extent applicable generally to other executives of the Company and
its affiliates, other than severance benefits, to the extent not
triggered by the Executive's termination of employment with the
Company.
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6. ACCELERATION OF STOCK OPTION VESTING. Upon a Change in Control or the
Retirement of the Executive, the Company shall cause the vesting of
any stock options with regard to stock of the Company or its
affiliates held by the Executive to be accelerated to the Change in
Control Date or the date of Retirement, as applicable. The Executive
shall be entitled to give notice of exercise of all such options for
30 days after the Change in Control Date or the date of Retirement or
such longer period permitted under the original documents granting
such options.
7. CONTINGENT LIMITATION ON AMOUNTS.
(a) Notwithstanding any other provisions of this Agreement or any
other agreement, plan, or arrangement (except as provided in the
following paragraph of this Subsection (a)), if any payment or
benefit received or to be received by the Executive (under the
terms of this Agreement, or any other plan, arrangement, or
agreement with the Company, or any other plan, arrangement, or
agreement with any person whose actions result in a Change in
Control or any person affiliated with the Company or any such
person)(all such payments and benefits being hereinafter called
"Total Payments") would be subject (in whole or in part) to taxes
imposed by Code Section 4999 (the "Excise Tax"), the portion of
the Total Payments payable under this Agreement shall be reduced
as herein provided.
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The Total Payments payable under this Agreement shall be reduced
to the extent necessary so that no portion of the Total Payments
shall be subject to the Excise Tax (after taking into account any
reduction in the Total Payments provided by reason of Code
Section 280G in any other plan, arrangement, or agreement) but
only if the amount determined under Paragraph (1) is greater than
the amount determined under Paragraph (2).
(1) The amount determined hereunder shall be the net amount of
such Total Payments, as so reduced (and after deduction of
the net amount of Federal, state, and local income taxes on
such reduced Total Payments computed at the Executive's
highest marginal tax rate).
(2) The amount determined hereunder shall be the excess of --
(A) the net amount of such Total Payments, without reduction
(but after deduction of the net amount of Federal, state,
and local income taxes (excluding any Excise Tax) on such
Total Payments computed at the Executive's highest marginal
tax rate), over
(B) the amount of Excise Tax to which the Executive would be
subject in respect of such Total Payments.
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<PAGE>
Any reduction of the Total Payments shall be made under one of the two
alternative methods described in Subsection (b).
(b) If the Total Payments all become payable at approximately the same
time,
(1) the payments under Section 4 shall first be reduced (if
necessary, to zero);
(2) the other portions of the Total Payments shall next be reduced
(if necessary, to zero); and
(3) the acceleration of vesting of awards under stock options shall
be reduced as necessary.
If the Total Payments do not become due and payable at approximately
the same time, the respective Total Payments shall be paid in full in
the order in which they become payable until any portion thereof would
not be deductible, and such portion (and any subsequent portions) of
the Total Payments shall be reduced to zero. In such case, the
Company shall make every reasonable effort to make such payments in
the order that results in the most favorable tax treatment and
financial results for the Executive.
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<PAGE>
(c) For purposes of determining whether and the extent to which the Total
Payments would be subject to the Excise Tax,
(1) no portion of the Total Payments the receipt or enjoyment of
which the Executive shall have effectively waived in writing
prior to the date of termination, Retirement, or cancellation of
the Executive's consulting arrangement shall be taken into
account; and
(2) no portion of the Total Payments shall be taken into account
which in the opinion of Arthur Andersen LLP (or suitable experts
selected by the Board) does not constitute a "parachute payment"
within the meaning of Code Section 280G(b)(2), including by
reason of Code Section 280G(b)(4)(A);
(3) no portion of the Total Payments shall be taken into account in
calculating any "excess parachute payment" which in the opinion
of Arthur Andersen LLP (or suitable experts selected by the
Board) which would be deemed reasonable compensation for services
actually rendered under Code Section 280G(b)(4)(B); and
(4) the value of any non-cash benefit or any deferred payment or
benefit included in the Total Payments shall be determined by
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<PAGE>
Arthur Andersen LLP (or suitable experts selected by the Board)
in accordance with the principles of Code Section 280G(d)
(3) and (4).
The Company shall provide the Executive with the calculation of the
foregoing amounts and any supporting materials as are reasonably necessary
for the Executive to evaluate the calculations. All calculations hereunder
shall be performed by Arthur Andersen LLP (or suitable experts selected by
the Board).
8. RESTRICTIVE COVENANTS.
(a) Until Retirement or any other termination of employment with the
Company, the Executive shall devote his full time, attention, and
energies to the business of the Company. The Executive shall not,
during the term of this Agreement, be engaged in any other activity
which interferes with the performance of his duties.
(b) During the term of this Agreement and the two-year period beginning on
the Executive's Date of Termination or Retirement, the Executive shall
not engage directly or indirectly, either as an owner, principal,
shareholder, agent, proprietor, director, officer, employee, or
adviser of (inclusive of the direct or indirect holdings of his
spouse, child, or parent), or participate in the ownership,
management, operation, or control of, or have any other significant
financial interest in, any of the following businesses, their
25
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affiliates, or any part thereof, or any successors or assigns (in
whole or in part) thereto:
(1) Arrow Electronics, Inc.;
(2) Avnet, Inc.;
(3) Bell Industries, Inc.;
(4) Wyle Electronics; or
(5) Pioneer-Standard Electronics, Inc.
(c) As part of the consideration for this Agreement, the Executive shall
not, at any time during the term of this Agreement or thereafter,
divulge to another person trade secrets or confidential information of
the Company and its affiliates including, but not limited to, the
Company's unique business methods, processes, operating techniques,
and "know-how" (all of which have been developed by the Company or its
affiliates through substantial effort and investment), profit and loss
results, market and supplier strategies, customer identity and needs,
information pertaining to employee effectiveness and compensation,
inventory strategy, product costs, gross margins, or any other
information relating to the affairs of the Company and its affiliates
that he may acquire during his employment with the Company.
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<PAGE>
(d) The Executive shall not, at any time during the term of this Agreement
or the two-year period beginning on the Executive's Date of
Termination or Retirement, solicit or induce any of the employees of
the Company or its affiliates to terminate their employment with their
employer.
9. REMEDIES.
(a) The Executive agrees that the provisions of Section 8 are necessary
for the protection of the Company and that any breach thereof will
cause the Company irreparable damage for which there is no adequate
remedy at law. The Executive consents to the issuance of an
injunction in favor of the Company as a matter of right, enjoining the
breach of any of the aforesaid covenants by any court of competent
jurisdiction.
(b) Upon a breach by the Executive of any of the covenants listed in
Section 8, the Company's obligation to make any payments or provide
any benefits under Section 3 which have not yet been paid or provided,
to continue the consulting arrangement under Section 3(e), or to allow
the Executive to exercise any options the vesting of which was
accelerated under Section 6 but which remain unexercised, shall cease
and this Agreement shall cease without further obligations to the
Executive.
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<PAGE>
(c) Upon a breach by the Executive of any of the covenants listed in
Section 8, to the extent the Company shall have paid any of the
compensation equivalency described in Section 4 pursuant to
Subsections (a) through (d) of Section 3, the Executive shall pay to
the Company, within 15 days of receipt of written demand by the
Company, the difference between the amounts determined under
Paragraphs (1) and (2).
(1) The amount determined under this Paragraph shall be 100 percent
of the amount the Executive received as a cash payment under
Sections 3 and 4.
(2) The amount determined under this Paragraph shall be the product
of 100 percent of the amount the Executive received as a cash
payment under Sections 3 and 4, and a fraction. The numerator of
this fraction shall be 730 less the number of days that have
elapsed from the Executive's Date of Termination or Retirement
through the first date of the breach by the Executive of one or
more of the covenants listed in Section 8. The denominator of
the fraction shall be 730.
Upon a breach by the Executive of any of the covenants listed in
Section 8, to the extent the Company shall have paid any of the
amounts described in Section 3(e) pursuant to any consulting
arrangement, the Executive shall pay to the Company, within 15 days of
receipt of written demand by the
28
<PAGE>
Company, the portion of such payments made after the breach by the
Executive of such covenants.
(d) This Section 9 shall survive the termination of this Agreement. The
remedies described herein, including the Company's right to an
injunction, shall be cumulative and in addition to whatever other
remedies the Company may have under this Agreement or otherwise.
10. RIGHTS NOT EXCLUSIVE. Nothing in this Agreement shall prevent or limit the
Executive's continuing or future participation in any plan, program,
policy, or practice provided by the Company or any of its affiliates for
which the Executive may otherwise qualify. Subject to Section 14(e),
nothing herein shall limit or otherwise affect such rights as the Executive
may have under any contract or agreement with the Company or any of its
affiliates. Amounts which are vested benefits or which the Executive is
otherwise entitled to receive under any plan, policy, practice, or program
of, or any contract or agreement with, the Company or any of its affiliates
at or subsequent to the Date of Termination or Retirement shall be payable
in accordance with such plan, policy, practice, program, contract, or
agreement except as explicitly modified by this Agreement.
11. FULL SETTLEMENT; LEGAL FEES. The Company's obligation to make any payments
required under this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense,
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<PAGE>
or other claim, right, or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek
other employment or take any other action by way of mitigation of the
amounts payable or benefits provided to the Executive under any of the
provisions of this Agreement; and, except as specifically provided in
Sections 5, 7, 8, and 9, such amounts or benefits shall not be reduced
whether or not the Executive obtains other employment.
12. SUCCESSORS.
(a) This Agreement is personal to the Executive and, without the prior
written consent of the Company, shall not be assignable by the
Executive, other than by will or the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's legal representatives. Notwithstanding the foregoing, the
rights transferable, assignable, or enforceable pursuant to this
Subsection shall only relate to benefits accrued and actually payable
to the Executive before his death. The provisions of this Subsection
shall not be deemed to create any additional rights or benefits.
(b) This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns.
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(c) The Company shall require any successor (whether direct or indirect,
by purchase, merger, consolidation, or otherwise) to all or
substantially all of the business and/or assets of the Company to
assume expressly and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. As used in this
Agreement, "Company" shall mean the Company as hereinbefore defined
and any successor to its business and/or assets as aforesaid which
assumes and agrees to perform this Agreement by operation of law, or
otherwise.
13. ARBITRATION. Except for the Company's right to seek equitable relief as
provided herein, any controversy arising out of or relating to this
Agreement, or any written modification or extension thereof, including any
claim for damages, whether based on contract, tort, or any theory of law,
shall be settled by arbitration. Such arbitration shall take place in Los
Angeles, California, in accordance with the commercial rules then
applicable of the American Arbitration Association. The arbitrator or
arbitrators sitting in any such controversy shall have no power to alter or
modify any express provisions of this Agreement or any written instrument
modifying or extending this Agreement, or to render any award which by its
terms effects any such alteration or modification. The parties consent to
the jurisdiction of the Superior Court of the State of California and of
the U.S. District Court for the Central District of California for all
purposes in connection with arbitration, including the entry of judgment on
any award. The
31
<PAGE>
parties consent that any process or notice of motion or other application
to any of said courts, and any paper in connection with arbitration, may be
served by certified mail return receipt requested or by personal service or
in such other manner as may be permissible under the rules of the
applicable court or arbitration tribunal, provided a reasonable time for
appearance is allowed. The parties further agree that arbitration
proceedings shall be instituted within one year after the claimed breach
shall have occurred, and that any failure to institute arbitration
proceedings within such period shall constitute an absolute bar to the
institution of any administrative, court, or arbitration proceedings and a
waiver of all claims. The Company shall pay all of the Executive's
reasonable legal expenses and other reasonable costs in presenting the
matter and all reasonable costs of the arbitrator.
14. MISCELLANEOUS.
(a) This Agreement shall be governed by and construed in accordance with
the laws of the State of California, without reference to principles
of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified other than by a written
agreement executed by the parties hereto or their respective
successors and legal representatives.
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<PAGE>
(b) All notices and other communications hereunder shall be in writing and
shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed
as follows:
If to the Executive: Mr. Richard D. Bentley
Executive Vice-President
___________________________________
___________________________________
If to the Company: Mr. Robert Rodin
Chief Executive Officer
Marshall Industries
9320 Telstar Avenue
El Monte, CA 91731
or to such other address as either party shall have furnished to the
other in writing in accordance herewith. Notices and communications
shall be effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision
of this Agreement.
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(d) The Company may withhold from any amounts payable under this Agreement
such Federal, state, local, and foreign taxes as shall be required to
be withheld pursuant to any applicable law or regulation.
The Executive's or the Company's failure to insist upon compliance
with any provision of this Agreement or the failure to assert any
right that the Executive or the Company may have hereunder, including
without limitation the right of the Executive to terminate employment
for Good Reason and the right of the Company to any remedy under
Section 9, shall not be deemed to be a waiver of such provision or
right or any other provision or right of this Agreement.
(e) The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the
Executive and the Company, the employment of the Executive by the
Company is "at will." Prior to Retirement or the Change in Control
Date, the Executive's employment may be terminated by either the
Executive or the Company at any time, in which case the Executive
shall have no further rights under this Agreement. From and after the
Change in Control Date, this Agreement shall supersede any other
agreement between the parties with respect to the subject matter
hereof.
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IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from the Board, the Company has caused
this Agreement to be executed in its name on its behalf, all as of the day
and year first above written.
/S/ RICHARD D. BENTLEY
-----------------------------------
RICHARD D. BENTLEY
Executive Vice-President
MARSHALL INDUSTRIES
By /S/ ROBERT RODIN
--------------------------------
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<PAGE>
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is made as of this ____ day of
___________, 199__, by and between Marshall Industries, a California corporation
(the "Company") and ______________________________________ ("Indemnitee").
WHEREAS, Indemnitee is currently serving as a (director, officer, employee
or other agent) of the Company and the parties wish Indemnitee to continue in
such capacity; and
WHEREAS, the Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitee, to serve as directors, officers,
employees and other agents of the Company and to indemnify some of its
directors, officers, employees and other agents so as to provide them with the
maximum protection permitted by law; and
WHEREAS, the indemnitee may not be willing to continue to serve the Company
in the absence of obtaining insurance or increased indemnification coverage.
NOW, THEREFORE, in order to induce Indemnitee to continue to serve as
(director, officer, employee or other agent) for the Company and in
consideration for his or her continued service, the Company and Indemnitee
hereby agree as follows:
1. INDEMNIFICATION.
(a) THIRD PARTY PROCEEDINGS. The Company shall indemnify Indemnitee if
Indemnitee is or was a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Company) by reason of the fact that Indemnitee is or was a
director, officer, employee or other agent of the Company, or any subsidiary of
the Company or by reason of the fact that Indemnitee is or was serving at the
request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, to the
fullest extent permitted by law, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement (if such settlement is approved
in advance by the Company, which approval shall not be unreasonably withheld)
actually and reasonably incurred by Indemnitee in connection with such action,
suit or proceeding if Indemnitee acted in good faith and in a manner Indemnitee
reasonably believed to be in or not opposed to the best interests of the Company
and its shareholders, and, with respect to any criminal action or proceeding,
had no reasonable cause to believe Indemnitee's conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that Indemnitee did not act in good faith and in a
manner which Indemnitee reasonably believed to be in the best interests of the
Company, or, with respect to any criminal action or proceeding, had reasonable
cause to believe that Indemnitee's conduct was unlawful.
<PAGE>
(b) PROCEEDINGS BY OR IN THE RIGHT OF THE COMPANY. The Company shall
indemnify Indemnitee if Indemnitee was or is a party or is threatened to be
made a party to any threatened, pending or completed action or suit by or in
the right of the Company or any subsidiary of the Company to procure a
judgment in its favor by reason of the fact that Indemnitee is or was a
director, officer, employee or agent of the Company, or any subsidiary of the
Company, or by reason of the fact that Indemnitee is or was serving at the
request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, to the
fullest extent permitted by law, against expenses (including attorneys' fees)
and amounts paid in settlement or otherwise disposing of a pending action, in
each case to the extent actually and reasonably incurred by Indemnitee in
connection with the defense, settlement or disposition of such action or suit
if Indemnitee acted in good faith and in a manner Indemnitee reasonably
believed to be in the best interests of the Company and its shareholders,
except that no indemnification shall be made in respect to any claim, issue
or matter as to which Indemnitee shall have been adjudged to be liable to the
Company in the performance of Indemnitee's duty to the Company and its
shareholders unless and only to the extent that the court in which such
action or suit is or was pending shall determine upon application that, in
view of all the circumstances of the case, Indemnitee is fairly and
reasonably entitled to indemnity for expenses and then only to the extent
that the court shall determine.
(c) MANDATORY PAYMENT OF EXPENSES. To the extent that Indemnitee has been
successful on the merits in defense of any action, suit or proceeding referred
to in Subsections (a) and (b) of this Section 1 or the defense of any claim,
issue or matter therein, Indemnitee shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by Indemnitee in
connection therewith.
(d) EXCEPTIONS. Any other provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
(1) to indemnify or advance expenses to Indemnitee with respect to
proceedings or claims initiated or brought voluntarily by Indemnitee and
not by way of defense, except with respect to proceedings brought to
establish or enforce a right to indemnification under this Agreement or any
other statute or law or otherwise as required under Section 317 of the
California Corporations Code, but such indemnification or advancement of
expenses may be provided by the Company in specific cases if the Board of
Directors has approved the initiation or bringing of such suit; or
(2) to indemnify Indemnitee for any expenses incurred by the
Indemnitee with respect to any proceeding instituted by Indemnitee to
enforce or interpret this Agreement, if a court of competent jurisdiction
determines that each of the material assertions made by the Indemnitee in
such proceeding was not made in good faith or was frivolous; or
(3) to indemnify Indemnitee for expenses or liabilities of any type
whatsoever (including but not limited to judgments, fines, ERISA excise
taxes or penalties, and amounts paid in settlement) which have been paid
directly to Indemnitee by an insurance
2
<PAGE>
carrier under a policy of officers' and directors' liability insurance
maintained by the Company; or
(4) to indemnify Indemnitee for expenses for which Indemnitee is
entitled to indemnity and/or payment by reason of having given notice of
any circumstance which might give rise to a claim under any policy of
insurance, the terms of which have expired prior to the effective date of
this Agreement; or
(5) to indemnify Indemnitee for expenses for which Indemnitee is
indemnified by the Company otherwise than pursuant to this Agreement; or
(6) to indemnify Indemnitee for expenses based on or attributable to
Indemnitee gaining in fact any personal profit or advantage to which he was
not legally entitled; or
(7) to indemnify Indemnitee for expenses brought about or contributed
to by the dishonesty of Indemnitee seeking payment hereunder; however,
notwithstanding the foregoing, Indemnitee shall be protected under this
Agreement to the fullest extent permitted under law as to any claims on
which suit may be brought against him or her by reasons of any alleged
dishonesty on his or her part, unless a judgment or other final
adjudication thereof adverse to Indemnitee shall establish that Indemnitee
committed (i) acts of active and deliberate dishonesty (ii) with actual
dishonest purpose and intent, which acts were material to the cause of
action so adjudicated; or
(8) to indemnify Indemnitee for expenses and the payment of profits
arisings from the purchase and sale by Indemnitee of securities in
violation of Section 16(b) of the Securities Exchange Act of 1934, as
amended, or any similar successor statute.
2. EXPENSES: INDEMNIFICATION PROCEDURE.
(a) ADVANCEMENT OF EXPENSES. The Company shall advance all expenses
incurred by Indemnitee in connection with the investigation, defense,
settlement, or appeal of any civil or criminal action, suit or proceeding
referenced in Section 1(a) or (b) hereof (but not amounts actually paid in
settlement of any such action, suit or proceeding), provided Indemnitee
undertakes to repay such amounts advanced if it shall be determined ultimately
that Indemnitee is not entitled to be indemnified by the Company as authorized
hereby. Notwithstanding anything to the contrary contained in this Agreement,
the Company may refuse to advance expenses, and shall not be required to advance
expenses, if a majority of a quorum of disinterested directors (or independent
legal counsel, if such quorum is not obtainable) in its sole discretion
determines that Indemnitee has likely not met the standards of conduct which
make it permissible pursuant to applicable law to indemnify Indemnitee and the
advancement of expenses would not be in the best interests of the Company and
its shareholders. The advances to be made hereunder shall be paid by the
Company to Indemnitee within thirty (30) days following delivery of a written
request and undertaking therefor by Indemnitee to the Company.
3
<PAGE>
(b) NOTICE BY INDEMNITEE/DETERMINATION OF RIGHT TO INDEMNIFICATION.
Indemnitee shall, as a condition precedent to his or her right to be
indemnified under this Agreement, give the Company notice in writing as soon
as practicable of any claim made against Indemnitee for which indemnification
will or could be sought under this Agreement. Notice to the Company shall be
directed to the Chief Executive Officer of the Company at the address shown
on the signature page of this Agreement (or such other address as the Company
shall designate in writing to Indemnitee), and shall include a description of
the nature of the proceeding and the facts underlying the proceeding and be
accompanied by copies of any documents filed with the court in which the
proceeding is pending. Notice shall be deemed received three business days
after the date postmarked if sent by domestic certified or registered mail,
properly addressed; otherwise notice shall be deemed received when such
notice shall actually be received by the Company. In addition, Indemnitee
shall give the Company such information and cooperation as it may reasonably
require and as shall be within Indemnitee's power. On receipt of such
written notice, the Company shall determine by any of the methods set forth
in Section 317(e) of the California Corporations Code whether Indemnitee has
met the applicable standards of conduct which make it permissible pursuant to
applicable law to indemnify Indemnitee.
(c) PROCEDURE. Any indemnification and advances provided for in Section
1 and this Section 2 shall be made no later than forty-five (45) days after
receipt of the written request of Indemnitee. If a claim pursuant to this
Agreement, pursuant to any statute, or pursuant to any provision of the
Company's Articles of Incorporation or Bylaws providing for indemnification,
is not paid in full by the Company within forty-five (45) days after a
written request for payment thereof has first been received by the Company,
Indemnitee may, but need not, at any time thereafter bring an action against
the Company to recover the unpaid amount of the claim and, subject to Section
12 of this Agreement, Indemnitee shall also be entitled to be paid for the
expenses (including attorneys' fees) of bringing such action. It shall be a
defense to any such action (other than an action brought to enforce a claim
for expenses incurred in connection with any action, suit or proceeding in
advance of its final disposition) that Indemnitee has not met the standards
of conduct which make it permissible under applicable law for the Company to
indemnify Indemnitee for the amount claimed, but the burden of proving such
defense shall be on the Company and Indemnitee shall be entitled to receive
interim payments of expenses pursuant to Subsection 2(a) unless and until
such defense may be finally adjudicated by court order or judgment from which
no further right of appeal exists; provided however that such advance shall
not be made it if is determined by a majority vote of a quorum of
disinterested directors (or by independent legal counsel, if such a quorum is
not obtainable) that Indemnitee acted in bad faith or deliberately breached
his or her duty to the Company and its shareholders and, as a result, it is
more likely than not that Indemnitee will not be entitled to indemnification
under the terms of the Indemnification Agreement. It is the parties'
intention that if the Company contests Indemnitee's right to indemnification,
the question of Indemnitee's right to indemnification shall be for the court
to decide, and neither the failure of the Company (including its Board of
Directors, any committee or subgroup of the Board of Directors, independent
legal counsel, or its stockholders) to have made a determination that
indemnification of Indemnitee is proper in the circumstances because
Indemnitee has met the applicable standard of conduct required by applicable
law, nor an actual determination by the Company (including
4
<PAGE>
its Board of Directors, any committee or subgroup of the Board of Directors,
independent legal counsel, or its stockholders) that Indemnitee has not met
such applicable standard of conduct, shall create a presumption that
Indemnitee has or has not met the applicable standard of conduct.
(d) NOTICE TO INSURERS. If, at the time of the receipt of a notice of a
claim pursuant to Section 2(b) hereof, the Company has directors' and officers'
liability insurance in effect, the Company shall give prompt notice of the
commencement of such proceeding to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall thereafter
take all necessary or desirable action to cause such insurers to pay, on behalf
of Indemnitee, all amounts payable as a result of such proceeding in accordance
with the terms of such policies.
(e) SELECTION OF COUNSEL. In the event the Company shall be obligated
under Section 2(a) hereof to pay the expenses of any proceeding against
Indemnitee, the Company, if appropriate, shall be entitled to assume the defense
of such proceeding, with counsel approved by Indemnitee, which approval shall
not be unreasonably withheld, upon the delivery to Indemnitee of written notice
of its election to do so. After delivery of such notice, approval of such
counsel by Indemnitee and the retention of such counsel by the Company, the
Company will not be liable to Indemnitee under this Agreement for any fees of
counsel subsequently incurred by Indemnitee with respect to the same proceeding,
provided that (i) Indemnitee shall have the right to employ his or her counsel
in any such proceeding at Indemnitee's expense; and (ii) if (A) the employment
of counsel by Indemnitee has been previously authorized by the Company, (B)
Indemnitee shall have reasonably concluded that there may be a conflict of
interest between the Company and Indemnitee in the conduct of any such defense,
or (C) the Company shall not, in fact, have employed counsel to assume the
defense of such proceeding, then the fees and expenses of Indemnitee's counsel
shall be at the expense of the Company.
3. ADDITIONAL INDEMNIFICATION RIGHTS, NONEXCLUSIVITY.
(a) SCOPE. Notwithstanding any other provision of this Agreement, the
Company does hereby agree to indemnify the Indemnitee to the fullest extent
permitted by law, notwithstanding that such indemnification is not specifically
authorized by the other provisions of this Agreement, the Company's Articles of
Incorporation, the Company's Bylaws or by statute. In the event of any change
in any applicable law, statue or rule which narrows the right of a California
corporation to indemnify an Indemnitee, such changes to the extent not otherwise
required by such law, statute or rule to be applied to this Agreement shall have
no effect on this Agreement or the parties' rights and obligations hereunder.
(b) NONEXCLUSIVITY. The indemnification provided by this Agreement shall
not be deemed exclusive of any rights to which Indemnitee may be entitled under
the Company's Articles of Incorporation, its Bylaws, any agreement, any vote of
stockholders or disinterested directors, the Corporation Law of the State of
California, or otherwise, both as to action in Indemnitee's official capacity
and as to action in another capacity while holding the office. The
indemnification provided pursuant to this Agreement shall continue as to
Indemnitee for any
5
<PAGE>
action taken or not taken while serving in any indemnified capacity even though
he or she may have ceased to serve in such capacity at the time of any action,
suit or other covered proceeding.
4. PARTIAL INDEMNIFICATION. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of the expenses, judgments, fines or penalties actually or reasonably
incurred by him or her in the investigation, defense, appeal or settlement of
any civil or criminal action, suit or proceeding, but not, however, for the
total amount thereof, the Company shall nevertheless indemnify Indemnitee for
such portion of such expenses, judgments, fines, or penalties to which
Indemnitee is entitled.
5. MUTUAL ACKNOWLEDGMENT. Both the Company and Indemnitee acknowledge
that in certain instances, Federal law or applicable public policy may prohibit
the Company from indemnifying Indemnitee under this Agreement or otherwise and
Indemnitee understands and acknowledges that the Company has undertaken or may
be required in the future to undertake with the Securities and Exchange
Commission to submit the question of indemnification to a court in certain
circumstances for a determination of the Company's right under public policy to
indemnify Indemnitee.
6. DIRECTORS' AND OFFICERS' LIABILITY INSURANCE. The Company shall, from
time to time, make a good faith determination whether or not it is practicable
for the Company to obtain and maintain a policy or policies of insurance with
reputable insurance companies providing the officers and directors of the
Company with coverage for losses from wrongful acts, or to insure the Company's
performance of its indemnification obligations under this Agreement. Among
other considerations, the Company will weigh the costs of obtaining such
insurance coverage against the protection afforded by such coverage.
Notwithstanding the foregoing, the Company shall have no obligation to obtain or
maintain such insurance if the Company determines in good faith that such
insurance is not reasonably available, if the premium costs for such insurance
are disproportionate to the amount of coverage provided, if the coverage
provided by such insurance is limited by exclusions so as to provide an
insufficient benefit, or if Indemnitee is covered by similar insurance
maintained by a subsidiary or parent of the Company.
7. EFFECTIVENESS OF AGREEMENT. To the extent that the indemnification
permitted under the terms of certain provisions of this Agreement exceeds the
scope of the indemnification provided for in the California General Corporation
Law, such provisions shall not be effective unless and until the Company's
Articles of Incorporation authorize such additional rights of indemnification.
In all other respects, the balance of this Agreement shall be effective as of
the date set forth on the first page and may apply to acts or omissions of
Indemnitee which occurred prior to such date if Indemnitee was a director,
officer, employee or other agent of the Company, or was serving at the request
of the Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, at the time such act or
omission occurred.
6
<PAGE>
8. SEVERABILITY. Nothing in this Agreement is intended to require or
shall be construed as requiring the Company to do or fail to do any act in
violation of applicable law. The Company's inability, pursuant to court order,
to perform its obligations under this Agreement shall be severable as provided
in this Section 8. If this Agreement or any portion hereof shall be invalidated
on any ground by any court of competent jurisdiction, then the Company shall
nevertheless indemnify Indemnitee to the full extent permitted by any applicable
portion of this Agreement that shall not have been invalidated, and the balance
of this Agreement not so invalidated shall be enforceable in accordance with
its terms.
9. CONSTRUCTION OF CERTAIN PHRASES.
(a) For purposes of this Agreement, references to the "Company" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
if Indemnitee is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, Indemnitee shall stand in
the same position under the provisions of this Agreement with respect to the
resulting or surviving corporation as Indemnitee would have with respect to such
constituent corporation if its separate existence had continued.
(b) For purposes of this Agreement, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on Indemnitee with respect to an employee benefit plan,
and references to "serving at the request of the Company" shall include any
service as a director, officer, employee or agent of the Company which imposes
duties on, or involves services by, such director, officer, employee or agent
with respect to an employee benefit plan, its participants, or beneficiaries,
and if Indemnitee acted in good faith and in a manner Indemnitee reasonably
believed to be in the interest of the participants and beneficiaries of an
employee benefit plan, Indemnitee shall be deemed to have acted in a manner "not
opposed to the best interests of the Company" as referred to in this Agreement.
10. COUNTERPARTS. This Agreement may be executed in one or more
counterparts each of which shall constitute an original.
11. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
Company and its successors and assigns, and shall inure to the benefit of
Indemnitee and Indemnitee's estate, heirs, legal representatives and assigns.
12. ATTORNEYS' FEES. In the event that any action is instituted by
Indemnitee under this Agreement to enforce or interpret any of the terms hereof,
Indemnitee shall be entitled to be paid ad court costs and expenses, including
reasonable attorneys' fees, incurred by Indemnitee with respect to such action,
unless as a part of such action, the court of competent jurisdiction
7
<PAGE>
determines that each of the material assertions made by Indemnitee as a basis
for such action were not made in good faith or were frivolous. In the event of
an action instituted by or in the name of the Company under this Agreement or to
enforce or interpret any of the terms of this Agreement, Indemnitee shall be
entitled to be paid all court costs and expenses, including attorneys' fees,
incurred by Indemnitee in defense of such action (including with respect to
Indemnitee's counterclaims and cross-claims made in such action), unless as a
part of such action the court determines that each of Indemnitee's material
defenses to such action were made in bad faith or were frivolous.
13. NOTICE. All notices, requests, demands and other communications under
this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and receipted for by the party addressee, on the date of such
receipt, or (ii) if mailed by domestic certified or registered mail with postage
prepaid, on the third business day after the date postmarked. Addresses for
notice to either party are as shown on the signature page of this Agreement, or
as subsequently modified by written notice.
14. VENUE. The proper and exclusive venue for any action arising from or
in connection with the interpretation or enforcement of this Agreement shall be
the Superior Court for the County of Los Angeles, State of California.
15. CHOICE OF LAW. This Agreement shall be governed by and its provisions
construed in accordance with the laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
MARSHALL INDUSTRIES
By:
-------------------------------------
Its:
------------------------------------
Address: 9320 Telstar Avenue
El Monte, CA 91731-3004
AGREED TO AND ACCEPTED:
INDEMNITEE:
(type name)
- --------------------------
(signature)
- ---------------------------
Address:
-------------------------------
- ---------------------------------------
8
<PAGE>
SCHEDULE OF OMITTED INDEMNIFICATION AGREEMENTS
Marshall Industries entered into Indemnification Agreements in the form filed
as Exhibit 10.13 to this Form 10-Q with the following individuals on the
dates indicated:
NAME DATE
---- ----
Gordon S. Marshall October 22, 1996
Robert Rodin October 22, 1996
Richard D. Bentley October 22, 1996
Henry W. Chin October 22, 1996
Richard C. Colyear October 22, 1996
Jean Fribourg October 22, 1996
Lathrop Hoffman October 22, 1996
Jose Menendez October 22, 1996
Raymond G. Rinehart October 22, 1996
Howard C. White October 22, 1996
Other than the name of the individual party to the agreement and the date,
such Indemnification Agreements are in the same form as Exhibit 10.13.
<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> 6-MOS
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1996
<PERIOD-END> NOV-30-1996
<CASH> 8,144
<SECURITIES> 0
<RECEIVABLES> 135,736
<ALLOWANCES> (8,293)
<INVENTORY> 225,695
<CURRENT-ASSETS> 375,882
<PP&E> 79,902
<DEPRECIATION> (41,923)
<TOTAL-ASSETS> 448,141
<CURRENT-LIABILITIES> 109,695
<BONDS> 0
0
0
<COMMON> 16,828
<OTHER-SE> 317,972
<TOTAL-LIABILITY-AND-EQUITY> 448,141
<SALES> 555,636
<TOTAL-REVENUES> 555,636
<CGS> 460,954
<TOTAL-COSTS> 460,954
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 972
<INTEREST-EXPENSE> (705)
<INCOME-PRETAX> 31,333
<INCOME-TAX> 13,200
<INCOME-CONTINUING> 18,133
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,133
<EPS-PRIMARY> 1.05
<EPS-DILUTED> 0
</TABLE>
