<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT
Under Section 13 or 15(d) of the Securities Exchange Act of 1934
For Quarter Ended Commission file number
May 31, 1997 1-8798
- --------------------------------------------------------------------------
Nu Horizons Electronics Corp.
- --------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 11-2621097
- --------------------------------------- -------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
70 Maxess Road, Melville, New York 11747
- --------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(516) 396-5000
- --------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES X NO
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the close of the period covered by this
report.
Common Stock - Par Value $.0066 8,739,326
------------------------------- -------------------
Class Outstanding Shares
<PAGE>
NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
----------------------------------------------
INDEX
-----
Page(s)
PART I. Financial Information:
ITEM 1. Financial Statements
Consolidated Condensed Balance Sheets -
May 31, 1997 (unaudited) and February 28, 1997 3.
Consolidated Condensed Statements of Income (unaudited) -
Three Months Ended May 31, 1997 and 1996 4.
Consolidated Condensed Statements of Cash Flows (unaudited) -
Three Months Ended May 31, 1997 and 1996 5. - 6.
Notes to Interim Consolidated Condensed Financial
Statements (unaudited) 7. - 8.
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9. - 11.
PART II. Other Information 12.
SIGNATURES 13.
INDEX TO EXHIBITS 14.
Exhibit 10.19 - Indemnity Agreements Dated May 23, 1997 Between the Company
and Messrs. Blau, Durando, Gardner, Lubman, Nadata and
Schuster
Exhibit 11 - Computation of Earnings per Common Share
Exhibit 27 - Financial Data Schedule
2
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. Financial Statements
NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
----------------------------------------------
CONSOLIDATED CONDENSED BALANCE SHEETS
------------------------------------
-ASSETS-
--------
<TABLE>
<CAPTION>
MAY FEBRUARY
<S> <C> <C>
31, 1997 28, 1997
----------- -----------
(unaudited)
CURRENT ASSETS:
Cash (including time deposits) $ 2,050,847 $ 946,084
Accounts receivable-net of allowance for doubt-
ful accounts of $2,267,424 and $2,192,079 for May
31, 1997 and February 28, 1997, respectively 30,818,605 30,636,645
Inventories 33,455,503 29,764,570
Prepaid expenses and other current assets 2,305,399 2,903,269
----------- -----------
TOTAL CURRENT ASSETS 68,630,354 64,250,568
PROPERTY, PLANT AND EQUIPMENT - NET (Note 2) 7,608,985 7,550,356
OTHER ASSETS
Cost in excess of net assets acquired-net 1,870,025 1,909,256
Other assets 1,033,766 1,073,134
----------- -----------
$79,143,130 $74,783,314
=========== ===========
</TABLE>
-LIABILITIES AND SHAREHOLDERS' EQUITY-
--------------------------------------
<TABLE>
<CAPTION>
CURRENT LIABILITIES:
<S> <C> <C>
Accounts payable $ 8,664,603 $ 7,931,500
Accrued expenses 3,135,413 4,186,802
Current portion of long-term debt 163,357 190,794
Income taxes 21,668 -
----------- -----------
TOTAL CURRENT LIABILITIES 11,985,041 12,309,096
----------- -----------
LONG TERM LIABILITIES:
Deferred income taxes 260,174 222,148
Revolving credit line (Note 3) 11,121,599 8,000,000
Long-term debt 214,373 242,335
Subordinated convertible notes (Note 4) 7,059,000 7,059,000
----------- -----------
18,655,146 15,523,483
----------- -----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock, $1 par value, 1,000,000 shares
authorized; none issued or outstanding - -
Common stock, $.0066 par value, 20,000,000 shares
authorized; 8,739,326 and 8,732,299 shares issued
and outstanding for May 31, 1997 and
February 28, 1997, respectively 57,679 57,633
Additional paid-in capital (Note 4) 18,953,765 18,938,984
Retained earnings 29,736,411 28,234,018
----------- -----------
48,747,855 47,230,635
Less: loan to ESOP 244,912 279,900
----------- -----------
48,502,943 46,950,735
----------- -----------
$79,143,130 $74,783,314
=========== ===========
</TABLE>
See notes to interim consolidated condensed financial statements
3
<PAGE>
NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
----------------------------------------------
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
-------------------------------------------
(unaudited)
FOR THE THREE MONTHS ENDED
--------------------------
MAY 31, 1997 MAY 31, 1996
------------ ------------
NET SALES $54,165,706 $57,672,540
----------- -----------
COSTS AND EXPENSES:
Cost of sales 42,223,252 44,746,424
Operating expenses 9,097,921 8,373,949
Interest expense 326,893 433,128
Interest income - -
----------- -----------
51,648,066 53,553,501
----------- -----------
INCOME BEFORE PROVISION FOR INCOME TAXES 2,517,640 4,119,039
Provision for income taxes 1,015,252 1,664,102
----------- -----------
NET INCOME $ 1,502,388 $ 2,454,937
=========== ===========
NET INCOME PER SHARE (Note 5):
Primary $.17 $.27
==== ====
Fully diluted $.15 $.25
==== ====
See notes to interim consolidated condensed financial statements
4
<PAGE>
NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
----------------------------------------------
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(unaudited)
FOR THE THREE MONTHS ENDED
----------------------------
MAY 31, 1997 MAY 31, 1996
------------- -------------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS:
Cash flows from operating activities:
Cash received from customers $ 53,878,746 $ 55,876,526
Cash paid to suppliers and employees (55,162,917) (51,446,177)
Interest received - -
Interest paid (326,893) (433,128)
Income taxes paid (104,000) (1,170,298)
------------ ------------
Net cash (used in) provided by
operating activities (1,715,064) 2,826,923
------------ ------------
Cash flows from investing activities:
Capital expenditures (261,205) (95,463)
Purchase of stock for ESOP - -
------------ ------------
Net cash (used in) investing activities (261,205) (95,463)
------------ ------------
Cash flows from financing activities:
Borrowings under revolving credit line 5,621,599 11,000,000
Repayments under revolving credit line (2,500,000) (13,300,000)
Principal payments of long-term debt (55,399) (97,876)
Proceeds from stock options 14,832 145,929
------------ ------------
Net cash provided by (used in)
financing activities 3,081,032 (2,251,947)
------------ ------------
Net increase in cash and cash equivalents 1,104,763 479,513
Cash and cash equivalents, beginning
of year 946,084 874,267
------------ ------------
Cash and cash equivalents, end of period $ 2,050,847 $ 1,353,780
============ ============
See notes to interim consolidated condensed financial statements
5
<PAGE>
NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
----------------------------------------------
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (CONTINUED)
-----------------------------------------------------------
(unaudited)
FOR THE THREE MONTHS ENDED
----------------------------
MAY 31, 1997 MAY 31, 1996
------------- ------------
RECONCILIATION OF NET INCOME TO NET
CASH (USED IN) OPERATING ACTIVITIES:
Net income $ 1,502,388 $ 2,454,937
------------- -----------
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation and amortization 305,828 296,320
Contribution to ESOP 34,988 34,988
Bad debt provision 105,000 -
Changes in assets and liabilities:
(Increase) in accounts receivable (286,960) (1,796,014)
(Increase) in inventories (3,690,933) (369,910)
Decrease in prepaid expenses
and other current assets 597,870 94,968
(Increase) in other assets (24,653) (196,697)
(Decrease) increase in accounts
payable and accrued expenses (318,286) 1,893,991
Increase in income taxes 21,668 141,766
Increase in other current liabilities - 6,080
Increase in deferred taxes 38,026 266,494
------------- -----------
Total adjustments (3,217,452) 371,986
------------- -----------
Net cash (used in) provided by operating
activities ($ 1,715,064) $ 2,826,923
============= ===========
See notes to interim consolidated condensed financial statements
6
<PAGE>
NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
----------------------------------------------
NOTES TO INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
------------------------------------------------------------
(unaudited)
1. In the opinion of management, the accompanying unaudited interim
consolidated condensed financial statements of Nu Horizons Electronics
Corp. (the "Company") and its subsidiaries (Nu Horizons/Merit Electronics
Corp., NIC Components Corp., Nu Horizons International Corp. and Nu Visions
Manufacturing, Inc.) contain all adjustments necessary to present fairly
the Company's financial position as of May 31, 1997 and February 28, 1997
and the results of its operations and cash flows for the three month
periods ended May 31, 1997 and 1996.
The accounting policies followed by the Company are set forth in Note 2 to
the Company's consolidated financial statements included in its Annual
Report on Form 10-K for the year ended February 28, 1997, which is
incorporated herein by reference. Specific reference is made to this
report for a description of the Company's securities and the notes to
consolidated financial statements included therein.
The results of operations for the three month period ended May 31, 1997 are
not necessarily indicative of the results to be expected for the full year.
2. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment consists of the following:
MAY FEBRUARY
31, 1997 28, 1997
----------- -----------
Land $ 266,301 $ 266,301
Building and improvements 1,941,018 1,747,930
Furniture, fixtures and office
equipment 5,809,893 5,791,946
Computer equipment 2,526,355 2,476,185
Assets held under capitalized
leases 919,834 919,834
Leasehold improvements 984,146 984,146
----------- -----------
12,447,547 12,186,342
Less: accumulated depreciation
and amortization 4,838,562 4,635,986
----------- -----------
$ 7,608,985 $ 7,550,356
=========== ===========
3. BANK LINE OF CREDIT:
On May 23, 1997 the Company entered into a new unsecured revolving line of
credit with two banks, which currently provides for maximum borrowings of
$35,000,000 at either (i) the lead bank's prime rate or (ii) LIBOR plus 57.5
to 112.5 basis points depending on the ratio of the Company's debt to its
earnings before interest, taxes, depreciation and amortization, at the option
of the Company through May 23, 2001.
7
<PAGE>
NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES
----------------------------------------------
NOTES TO INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
------------------------------------------------------------
(unaudited)
4. SUBORDINATED CONVERTIBLE NOTES:
In a private placement completed on August 31, 1994, the Company issued $15
million principal amount of Subordinated Convertible Notes, which are due
in $5,000,000 increments on August 31, 2000, 2001 and 2002. The notes are
subordinate in right of payment to all existing and future senior
indebtedness of the Company. The notes bear interest at 8.25%, payable
quarterly on November 15, February 15, May 15 and August 15. The notes are
convertible into shares of common stock at a conversion price of $9.00 per
share. The cost of issuing these notes was $521,565 and is being amortized
over the life of the notes. As of May 31, 1997, $7,941,000 of the notes
have been converted into 882,333 shares of common stock and $7,059,000
principal amount of subordinated convertible notes remained outstanding and
are due in increments of $2,353,000 on August 31, 2000, 2001 and 2002.
5. NET INCOME PER SHARE:
Net income per share has been computed on the basis of the weighted
average number of common shares and common equivalent shares outstanding
during each period presented. Fully diluted earnings per share has been
computed assuming conversion of all dilutive stock equivalents.
The following average shares were used in the computation of primary and
fully diluted earnings per share:
May May
31, 1997 31, 1996
---------- ----------
Primary 8,832,323 9,130,000
Fully diluted 10,818,859 10,409,109
All per share amounts have been retroactively restated as a result of stock
dividends and a three for two stock split.
A detailed computation of earnings per common share appears in Exhibit 11
of this Form 10-Q.
In February 1997, the Financial Accounting Standards Board issued SFAS No.
128 - Earnings per Share, which changes the method for calculating earnings
per share. SFAS No. 128 requires presentation of "basic" and "diluted"
earnings per share as opposed to "primary" and "fully diluted" earnings per
share and is effective for periods ending after December 15, 1997. Early
adoption is not permitted. Management does not believe that earnings per
share reported in accordance with SFAS No. 128 will differ materially from
earnings per share as currently reported.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-----------------------------------------------------------
AND RESULTS OF OPERATIONS:
--------------------------
Introduction:
-------------
Nu Horizons Electronics Corp. (the "Company") and its wholly-owned
subsidiaries, Nu Horizons/Merit Electronics Corp. ("Merit"), NIC
Components Corp. ("NIC") and Nu Horizons International Corp.
("International"), are engaged in the distribution of high technology
active and passive electronic components to a wide variety of original
equipment manufacturers ("OEMs") of electronic products. Active
components distributed by the Company include semiconductor products
such as memory chips, microprocessors, digital and linear circuits,
microwave/RF and fiberoptic components, transistors and diodes. Passive
components distributed by NIC, principally to OEMs and other
distributors nationally, consist of a high technology line of chip and
leaded components including capacitors, resistors and related networks.
Nu Visions Manufacturing, Inc. ("NUV") located in Springfield,
Massachusetts, another wholly-owned subsidiary of the Company, is a
contract assembler of circuit boards and related electromechanical
devices for various OEM's.
The financial information presented herein includes: (i) Consolidated
Condensed Balance Sheets as of May 31, 1997 and February 28, 1997; (ii)
Consolidated Condensed Statements of Income for the three month periods
ended May 31, 1997 and 1996 and (iii) Consolidated Condensed Statements
of Cash Flows for the three month periods ended May 31, 1997 and 1996.
Results of Operations:
----------------------
Sales for the three month period ended May 31, 1997 were $54,165,706 as
compared to $57,672,540 for the comparable period of the prior year, a
decrease of approximately 6%. Management attributes this reduction in
sales entirely to the core semiconductor distribution business which
experienced excess inventory levels at the semiconductor manufacturing
(supplier) level which resulted in reduced unit pricing and lower
overall sales volume. Management believes that this situation is
temporary and is now in the process of correction; however, no assurance
can be given in this regard.
The gross profit margin for the quarter ended May 31, 1997 was 22.0% as
compared to 22.4% for the quarter ended May 31, 1996. Management
attributes this lower profit margin primarily to a general downward
correction of selling prices in the marketplace for semiconductors
during the period ended May 31, 1997, as compared to the May 31, 1996
period.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-----------------------------------------------------------
AND RESULTS OF OPERATIONS (Continued):
--------------------------------------
Results of Operations (Continued):
----------------------------------
Operating expenses were approximately $9,098,000 for the three months
ended May 31, 1997 as compared to $8,374,000 for the three months ended
May 31, 1996, an increase of approximately $724,000 or 8.6%. The dollar
increase in operating expenses was due to increases in the following
expense categories: Approximately $370,000 or 51% of the increase was
for personnel related costs- new sales people, commissions, salaries,
travel and fringe benefits. Early in fiscal 1997, the Company decided to
pursue a policy of upgrading and enlarging its sales and sales support
staff to support anticipated future growth in the near as well as more
distant future. Increased sales levels in fiscal 1997 and first quarter
fiscal 1998 have not met expectations. The Company continues to believe
in this strategy for long term growth and expects market conditions to
undergo a correction in the near future although no assurances can be
given in this regard. The remaining increase of approximately $354,000
or approximately 49% of the total increment is a result of increases in
various other operating expenses, the bulk of which are related to
incremental occupancy costs for the new corporate headquarters facility.
The Company relocated to this facility on April 1, 1997.
Interest expense decreased from $433,128 for the three months ended May
31, 1996 to $326,893 for the three months ended May 31, 1997 as a result
of lower levels of bank debt as compared to the prior year quarter. The
decrease in bank debt was primarily due to a reduction in the Company's
inventory levels, commensurate with a stabilizing of sales volume as
mentioned above.
INTEREST EXPENSE
FOR THE THREE MONTHS ENDED
--------------------------
MAY MAY
31, 1997 31, 1996
-------- --------
Revolving Bank Credit $ 181,301 $260,942
Sub. Convert. Notes 145,592 172,186
--------- --------
Total Interest Expense $ 326,893 $433,128
========= ========
Net income for the three month period ended May 31, 1997 was $1,502,388
or $.17 per share as compared to $2,454,937 or $.27 per share for the
three month period ended May 31, 1996. Management attributes the
decrease in earnings to increased operating expenses and coupled with a
reduction in sales volume for the May 1997 as compared to the May 1996
period.
Liquidity and Capital Resources:
--------------------------------
At May 31, 1997 the Company's current ratio was 5.7:1 as compared to
5.2:1 at February 28, 1997. Working capital increased from approximately
$51,941,000 at February 28, 1997 to approximately $56,645,000 at May 31,
1997 while cash increased from February 28, 1997 to May 31, 1997 by
approximately $1,105,000. The primary reasons for the increase in
working capital was an increase in cash and inventories financed
primarily through long term debt during the current period.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-----------------------------------------------------------
AND RESULTS OF OPERATIONS (Continued):
--------------------------------------
Liquidity and Capital Resources (Continued):
--------------------------------------------
On May 23, 1997 the Company entered into a new unsecured revolving line
of credit with two banks, which currently provides for maximum
borrowings of $35,000,000 at either (i) the lead bank's prime rate or
(ii) LIBOR plus 57.5 to 112.5 basis points depending on the ratio of the
Company's debt to its earnings before interest, taxes, depreciation and
amortization, at the option of the Company through May 23, 2001.
In a private placement completed on August 31, 1994, the Company issued
$15 million principal amount of Subordinated Convertible Notes, which
are due in $5,000,000 increments on August 31, 2000, 2001 and 2002. The
notes are subordinate in right of payment to all existing and future
senior indebtedness of the Company. The notes bear interest at 8.25%,
payable quarterly on November 15, February 15, May 15 and August 15. The
notes are convertible into shares of common stock at a conversion price
$9.00 per share. The cost of issuing these notes was $521,565 and is
being amortized over the life of the notes. The Company has registered,
under the Securities Act of 1933, for the resale by the holders thereof,
117,666 shares of common stock, representing the number of shares of
common stock obtainable by such holders upon conversion of $1,059,000 of
the outstanding principal amount of such notes. As of May 31, 1997,
$7,941,000 of the notes have been converted into 882,333 shares of
common stock and $7,059,000 principal amount of subordinated convertible
notes remained outstanding and are due in increments of $2,353,000 on
August 31, 2000, 2001 and 2002. No assurance can be given that the notes
will be converted or that the shares of common stock underlying the
notes will be sold by the holders thereof.
The Company anticipates that its resources provided by its cash flow
from operations and its bank lines of credit will be sufficient to meet
its financing requirements for at least the next twelve month period.
Inflationary Impact:
--------------------
Since the inception of operations, inflation has not significantly
affected the operating results of the Company. However, inflation and
changing interest rates have had a significant effect on the economy in
general and therefore could affect the operating results of the Company
in the future.
Other:
------
Except for historical information contained herein, the matters set
forth above may be forward-looking statements that involve certain risks
and uncertainties that could cause actual results to differ from those
in the forward-looking statements. Potential risks and uncertainties
include such factors as the level of business and consumer spending for
electronic products, the amount of sales of the Company's products, the
competitive environment within the electronics industry, the ability of
the Company to continue to expand its operations, the level of costs
incurred in connection with the Company's expansion efforts, economic
conditions in the semiconductor industry and the financial strength of
the Company's customers and suppliers. Investors are also directed to
consider other risks and uncertainties discussed in documents filed by
the Company with the Securities and Exchange Commission.
11
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
There are no material legal proceedings against the Company or in which
any of their property is subject.
ITEM 2. Changes in Securities
None
ITEM 3. Defaults upon Senior Securities
None
ITEM 4. Submission of Matters to a Vote of Security Holders
None
ITEM 5. Other Information
None
ITEM 6. Exhibits and Reports:
(a) Exhibits:
10.19. Indemnity Agreements Dated May 23, 1997 Between the
Company and Messrs. Blau, Durando, Gardner, Lubman, Nadata
and Schuster.
11. Statement re: Computation of Per Share Earnings (See Notes
to Consolidated Financial Statements - Note 5)
27. Financial Data Schedule
(b) Reports on Form 8-K
None
12
<PAGE>
SIGNATURES
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.
Nu Horizons Electronics Corp.
-----------------------------
Registrant
/s/ Arthur Nadata
----------------------------------------
Date: July 11, 1997 Arthur Nadata, President and
Chief Executive Officer
/s/ Paul Durando
----------------------------------------
Date: July 11, 1997 Paul Durando, Vice President-Finance
and Chief Financial Officer
13
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
EXHIBIT INDEX
to
FORM 10-Q
FOR THE FISCAL QUARTER ENDED MAY 31, 1997
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
---------------------
NU HORIZONS ELECTRONICS CORP.
(Exact Name of Registrant as Specified in Its Charter)
EXHIBIT
NUMBER DESCRIPTION
----------------------------------------------------------------------
10.19. Indemnity Agreements Dated May 23, 1997 Between the
Company and Messrs. Blau, Durando, Gardner, Lubman,
Nadata and Schuster.
11 Computation of Per Share Earnings
27 Financial Data Schedule
14
<PAGE>
EXHIBIT 10.19
INDEMNIFICATION AGREEMENT
-------------------------
THIS INDEMNIFICATION AGREEMENT, made and entered into as of this th day
of May, 1987 ("Agreement"), by and between NU HORIZONS ELECTRONICS CORP., a
Delaware corporation (the "Corporation", which term shall include any one or
more of its subsidiaries where appropriate), and ____________("Indemnitee"):
WHEREAS, highly competent persons are becoming more reluctant to serve
publicly-held corporations as directors or as officers or in other capacities
unless they are provided with adequate protection through insurance or adequate
indemnification against inordinate risks of claims and actions against them
arising out of their service to, and activities on behalf of, such corporations;
and
WHEREAS, the statutes and judicial duties regarding the duties of officers
and directors are often difficult to apply, ambiguous or conflicting and
therefore fail to provide such directors and officers with adequate and reliable
knowledge of legal risks to which they are exposed or information regarding the
proper cause of action to take; and
WHEREAS, the current impracticability of obtaining adequate insurance and
the uncertainties relating to indemnification have increased the difficulty of
attracting and retaining such persons; and
WHEREAS, the Board of Directors of the Corporation (the "Board of
Directors") has determined that the difficulty in attracting and retaining such
persons is detrimental to the best interests of the Corporation's stockholders
and that the Corporation should act to assure such persons that there will be
increased certainty of such protection in the future; and
WHEREAS, the Corporation believes it is unfair for the directors and
officers to assume the
<PAGE>
risk of huge judgments and other expenses which may occur in cases in which the
director or officer acted in good faith; and
WHEREAS, Section 145 of the General Corporation law of Delaware ("Section
145") under which the Corporation is organized, empowers the Corporation to
indemnify its officers and directors by agreement and expressly provides that
the indemnification provided by Section 145 is not exclusive; and
WHEREAS, it is reasonable, prudent and necessary for the Corporation
contractually to obligate itself to indemnify such persons to the fullest extent
permitted by applicable law so that they will serve or continue to serve the
Corporation free from undue concern that they will not be so indemnified; and
WHEREAS, Indemnitee is willing to serve, continue to serve and/or to take
on additional service for or on behalf of the Corporation on the condition that
he be so indemnified;
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, the Corporation and Indemnitee do hereby covenant and agree as
follows:
1. DEFINITIONS FOR PURPOSES OF THIS AGREEMENT:
(a) "Change in Control" means a change in control of the Corporation of a
nature that would be required to be reported in response to Item 5(f) of
Schedule 14A of Regulation 14A (or in response to any similar item or similar
schedule or form) promulgated under the Securities Exchange Act of 1934 (the
"Act"), whether or not the Corporation is then subject to such reporting
requirement; provided, however, that, without limitation, such a Change in
Control shall be deemed to have occurred if (i) any "person" (as such term is
used in Sections 13(d) and 14(d) of the Act) is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Act), directly or
2
<PAGE>
indirectly, of securities of the Corporation representing 20% or more of the
combined voting power of the Corporation's then outstanding securities without
the prior approval of at least two-thirds of the members of the Board of
Directors in office immediately prior to such person attaining such percentage
interest; (ii) the Corporation is a party to a merger, consolidation, sale of
assets or other reorganization, or a proxy contest, as a consequence of which
members of the Board of Directors in office immediately prior to such
transaction or event constitute less than two-thirds of the Board of Directors
thereafter; (iii) during any period of twenty-four (24) consecutive months,
individuals who at the beginning of such period constituted the Board of
Directors (including for this purpose any new director whose election or
nomination for election by the Corporation's stockholders was approved by a vote
of at least two-thirds of the directors then still in office who were directors
at the beginning of such period) cease for any reason to constitute at least
two-thirds of the Board of Directors; or (iv) the stockholders of the
Corporation approve a plan of complete liquidation of the Corporation or an
agreement for the sale or disposition by the Corporation (in one transaction or
a series of transactions) of all or substantially all of the Corporation's
assets.
(b) "Potential Change in Control" shall be deemed to have occurred if (i)
the Corporation enters into an agreement, the consummation of which would result
in the occurrence of a Change in Control; (ii) a person (including the
Corporation) publicly announces a legitimate intention to take or to consider
taking actions which if consummated would constitute a Change in Control; (iii)
any person, other than a trustee or other fiduciary holding securities under an
employee benefit plan of the Corporation or a corporation owned, directly or
indirectly, by the shareholders of the Corporation in substantially the same
proportions as their ownership of stock of the Corporation, who is or becomes
the beneficial owner, directly or indirectly, of securities of the
3
<PAGE>
Corporation representing 9.5% or more of the combined voting power of the
Corporation's then outstanding Voting Securities, increases his beneficial
ownership of such securities by five percentage points or more over the
percentage so owned by such person; or (iv) the Board of Directors adopts a
resolution to the effect that, for purposes of this Agreement, a Potential
Change in Control has occurred.
(c) "Corporate Status" describes the status of a person who is or was or
has agreed to become a director of the Corporation, or is or was an officer of
the Corporation.
(d) "Disinterested Director" means a director of the Corporation who is
not and was not a party to the Proceeding in respect of which indemnification is
sought by Indemnitee.
(e) "Proceeding" includes any threatened, pending or completed inquiry,
action, suit, arbitration, alternate dispute resolution mechanism,
investigation, administrative hearing or any other proceeding, whether civil,
criminal, administrative or investigative, except one initiated by an Indemnitee
pursuant to Section 12(a) of this Agreement to enforce his rights under this
Agreement.
(f) "Expenses" includes all direct and indirect costs of any type or
nature whatsoever (including, without limitation, all attorneys' fees and
related disbursements, other out-of-pocket costs and reasonable compensation for
time spent by the Indemnitee for which he is not otherwise compensated by the
Corporation or any third party, provided that the rate of compensation and
estimated time involved is approved in advance by the Board of Directors),
actually and reasonably incurred by the Indemnitee in connection with either the
investigation, defense or appeal of a Proceeding (including amounts paid in
settlement by or on behalf of Indemnitee), or the prosecution of an action or
proceeding, including appeals, to establish or enforce
4
<PAGE>
a right to indemnification under this Agreement, Section 145 or otherwise.
Expenses as defined herein, shall not include any judgments, fines or penalties
actually levied against the Indemnitee.
(g) "Independent Counsel" means (i) any law firm or member of a law firm
which the Board of Directors may designate from time to time provided that the
law firm or member of the law firm so designated is experienced in matters of
corporation law and neither presently is, nor in the past five years has been,
retained to represent: (A) the Corporation or Indemnitee in any matter material
to either such party, or (B) any other party to the Proceeding giving rise to a
claim for indemnification hereunder. Notwithstanding the foregoing, the term
"Independent Counsel" shall not include any person who, under the applicable
standards of professional conduct then prevailing, would have a conflict of
interest in representing either the Corporation or Indemnitee in an action to
determine Indemnitee's rights under this Agreement arising on or after the date
of this Agreement, regardless of when the Indemnitee's act or failure to act
occurred.
2. SERVICES BY INDEMNITEE.
Indemnitee agrees to serve or continue to serve as a director of the
Corporation so long as he is duly appointed or elected and qualified in
accordance with the applicable provisions of the By-Laws of the Corporation or
the By-Laws of any subsidiary of the Corporation or until such time as he
tenders his resignation in writing. This Agreement shall not impose any
obligation on the Indemnitee or the Corporation to continue the Indemnitee's
position with the Corporation beyond any period otherwise applicable, nor to
create any right to continued employment of the Indemnitee in any capacity.
3. GENERAL.
The Corporation shall indemnify, and shall advance Expenses to Indemnitee
as
5
<PAGE>
provided in this Agreement and to the fullest extent permitted by law.
4. PROCEEDINGS OTHER THAN PROCEEDINGS BY OR IN THE RIGHT OF THE CORPORATION.
Indemnitee shall be entitled to the rights of indemnification provided in
this Section 4 if, by reason of his Corporate Status, he is, or is threatened to
be made, a party to any Proceeding, other than a Proceeding by or in the right
of the Corporation. Pursuant to this Section 4, Indemnitee shall be indemnified
against Expenses, including amounts paid in settlement, as well as any
judgments, fines and penalties levied or awarded against him in connection with
such Proceeding or any claim, issue or matter therein, if he acted in good faith
and in a manner he reasonably believed to be in, or not opposed to, the best
interests of the Corporation, and, with respect to any criminal Proceeding, had
no reasonable cause to believe his conduct was unlawful.
5. PROCEEDINGS BY OR IN THE RIGHT OF THE CORPORATION.
Indemnitee shall be entitled to the rights of indemnification provided in
this Section 5, if, by reason of his Corporate Status, he is, or is threatened
to be made, a party to any threatened, pending or completed Proceeding brought
by or in the right of the Corporation to procure a judgment in its favor.
Pursuant to this Section, Indemnitee shall be indemnified against Expenses
actually incurred by him or on his behalf in connection with such Proceeding if
he acted in good faith and in a manner he reasonably believed to be in, or not
opposed to, the best interests of the Corporation. Notwithstanding the
foregoing, no indemnification against such Expenses shall be made in respect of
any claim, issue or matter as to which Indemnitee shall have been adjudged to be
liable to the Corporation if such indemnification is not permitted by the laws
of the State of Delaware or other applicable law; provided, however, that
indemnification against Expenses
6
<PAGE>
nevertheless shall by made by the Corporation in such event to the extent that
the Court of Chancery of the State of Delaware, or the court in which such
Proceeding shall have been brought or is pending, shall determine.
6. INDEMNIFICATION FOR EXPENSES OF A PARTY WHO IS WHOLLY OR PARTLY
SUCCESSFUL.
Notwithstanding any other provision of this Agreement, to the extent that
Indemnitee is, by reason of his Corporate Status, a party to and is successful,
on the merits or otherwise, in any Proceeding, he shall be indemnified against
all Expenses actually incurred by him or on his behalf in connection therewith.
If Indemnitee is not wholly successful in such Proceeding but is successful, on
the merits or otherwise, as to one or more but less than all claims, issues or
matters in such Proceeding, the Corporation shall indemnify Indemnitee against
all Expenses actually incurred by him or on his behalf in connection with each
successfully resolved claim, issue or matter. For purposes of this Section, but
without limitation, the termination of any claim, issue or matter in such a
Proceeding by dismissal or withdrawal, with or without prejudice, shall be
deemed to be a successful result as to such claim, issue or matter.
7. ADVANCE OF EXPENSES.
The Corporation shall advance all reasonable Expenses incurred by or on
behalf of Indemnitee in connection with any Proceeding within twenty days after
the receipt by the Corporation of a statement or statements from Indemnitee
requesting such advance or advances from time to time, whether prior to or after
final disposition of such Proceeding. Such statement or statements shall
evidence or reflect the Expenses incurred by Indemnitee and shall include or be
7
<PAGE>
preceded or accompanied by an undertaking by or on behalf of Indemnitee to repay
any Expenses advanced if it is determined ultimately that Indemnitee is not
entitled to be indemnified against such Expenses.
8. PROCEDURE FOR DETERMINATION OF ENTITLEMENT TO INDEMNIFICATION.
(a) To obtain indemnification under this Agreement, Indemnitee shall
submit to the Corporation a written request, including therein or therewith such
documentation and information as is reasonably available to Indemnitee and is
reasonably necessary to determine whether and to what extent Indemnitee is
entitled to indemnification. Promptly upon receipt of such a request for
indemnification, the Secretary of the Corporation shall advise the Board of
Directors in writing that Indemnitee has requested indemnification.
(b) Upon written request by Indemnitee for indemnification pursuant to
Section 8(a) hereof, a determination, if required by applicable law, with
respect to Indemnitee's entitlement thereto shall be made in the specific case
as follows: (i) if a Change in Control shall have occurred, by Independent
Counsel in a written opinion to the Board of Directors, a copy of which shall be
delivered to Indemnitee (unless Indemnitee shall request that such determination
be made by the Board of Directors, in which case the determination shall be made
in the manner provided below in clauses (ii) or (iii)); (ii) if a Change of
Control shall not have occurred, (A) by the Board of Directors by a majority
vote of a quorum consisting of Disinterested Directors, or (B) if a quorum of
the Board of Directors consisting of Disinterested Directors is not obtainable
or, even if obtainable, if such quorum of Disinterested Directors so directs, by
Independent Counsel in a written opinion to the Board of Directors, a copy of
which shall be delivered to Indemnitee; (iii) as
8
<PAGE>
provided in Section 9(b) of this Agreement; and, if it is determined that
Indemnitee is entitled to indemnification, payment to Indemnitee shall be made
within ten (10) days after such determination. Indemnitee shall cooperate with
the person, persons or entity making such determination with respect to
Indemnitee's entitlement to indemnification, including providing to such person,
persons or entity upon reasonable advance request any documentation or
information which is not privileged or otherwise protected from disclosure and
which is reasonably available to Indemnitee and reasonably necessary to such
determination. Any costs or Expenses (including attorneys' fees and
disbursements) incurred by Indemnitee in so cooperating shall be borne by the
Corporation (regardless of the determination as to Indemnitee's entitlement to
indemnification) and the Corporation hereby indemnifies and agrees to hold
Indemnitee harmless therefrom.
(c) In the event the determination of entitlement to indemnification is
to be made by Independent Counsel pursuant to Section 8(b) of this Agreement,
and no counsel shall have been designated previously by the Board of Directors
or the Independent Counsel so designated is unwilling or unable to serve, then,
(i) if no Change of Control shall have occurred, the Independent Counsel shall
be selected by the Board of Directors and the Corporation shall give written
notice to Indemnitee advising him of the identity of the Independent Counsel so
selected; (ii) if a Change of Control shall have occurred, the Independent
Counsel shall be selected by Indemnitee (unless Indemnitee shall request that
such selection be made by the Board of Directors, in which event the preceding
sentence shall apply), and Indemnitee shall give written notice to the
Corporation advising it of the identity of the Independent Counsel so selected.
In either event, Indemnitee or the Corporation, as the case may be, may, within
7 days after such written notice of selection shall have been given, deliver to
the Corporation or to Indemnitee, as the case may be, a written objection to
9
<PAGE>
such selection. Such objection may be asserted only on the ground that the
Independent Counsel so selected does not meet the requirement of "Independent
Counsel" as defined in this Agreement, and the objection shall set forth with
particularity the factual basis of such assertion. If such written objection is
made, the Independent Counsel so selected may not serve as Independent Counsel
unless and until a court has determined that such objection is without merit.
If, within 20 days after submission by Indemnitee of a written request for
indemnification pursuant to Section 8(a) hereof, no Independent Counsel shall
have been selected or if selected, shall have been objected to, in accordance
with this Section 8(c), either the Corporation or Indemnitee may petition the
Court of Chancery of the State of Delaware or other court of competent
jurisdiction for resolution of any objection which shall have been made by the
Corporation or Indemnitee to the other's selection of Independent Counsel and/or
for the appointment as Independent Counsel of a person selected by the Court or
by such other person as the Court shall designate, and the person with respect
to whom an objection is favorably resolved or the person so appointed shall act
as Independent Counsel under Section 8(b) hereof. The Corporation shall pay any
and all reasonable fees and expenses of Independent Counsel incurred by such
Independent Counsel in connection with the performance of his responsibilities
pursuant to Section 8(b) hereof, and the Corporation shall pay all reasonable
fees and Expenses incident to the implementation of the procedures of this
Section 8(c), regardless of the manner in which such Independent Counsel was
selected or appointed. Upon the due commencement of any judicial proceeding or
arbitration pursuant to Section 12 of this Agreement, Independent Counsel shall
be discharged and relieved of any further responsibility in such capacity
(subject to the applicable standards of professional conduct then prevailing).
9. PRESUMPTIONS AND EFFECT OF CERTAIN PROCEEDINGS.
10
<PAGE>
(a) If a Change of Control shall have occurred, in making a determination
with respect to entitlement to indemnification hereunder, the person, persons or
entity making such determination shall presume that the Indemnitee is entitled
to indemnification under this Agreement if the Indemnitee has submitted a
request for indemnification in accordance with Section 8(a) of this Agreement,
and the Corporation shall have the burden of proof to overcome that presumption
in connection with the making of any determination contrary to that presumption
by any person, persons or entity.
(b) If within 30 days after receipt by the Corporation of the request for
indemnification, the Board shall not have made a determination under Section
8(b)(i) or 8(b)(ii)(A) with regard thereto, the requisite determination of
entitlement to indemnification shall be deemed to have been made in favor of the
Indemnitee who then shall be entitled to such indemnification. The foregoing
provisions of this Section 9(b) shall not apply if the determination of
entitlement to indemnification is to be made by Independent Counsel pursuant to
Section 8(b)(i) or 8(b)(ii)(B) of this Agreement.
(c) The termination of any Proceeding or of any claim, issue or matter
therein by judgment, order, settlement or conviction, or upon a plea of nolo
contendere or its equivalent, shall not (except as otherwise expressly provided
in this Agreement) of itself adversely affect the right of the Indemnitee to
indemnification or create a presumption that the Indemnitee did not act in good
faith and in a manner which he reasonably believed to be in, or not opposed to,
the best interests of the Corporation or, with respect to any criminal
Proceeding, that the Indemnitee had reasonable cause to believe that his conduct
was unlawful.
10. ASSUMPTION OF DEFENSE.
11
<PAGE>
In the event the Corporation shall be obligated to pay the Expenses of
any Proceeding against the Indemnitee, the Corporation, if appropriate, shall be
entitled to assume the defense of such Proceeding, with counsel reasonably
acceptable to the Indemnitee, upon the delivery to the Indemnitee of written
notice of its election to do so. After delivery of such notice, approval of
such counsel by the Indemnitee and the retention of such counsel by the
Corporation, the Corporation will not be liable to the Indemnitee under this
Agreement for any fees of counsel subsequently incurred by the Indemnitee with
respect to the same Proceeding, provided that (i) the Indemnitee shall have the
right to employ his counsel in such Proceeding at the Indemnitee's expense; and
(ii) if (a) the employment of counsel by the Indemnitee has been previously
authorized in writing by the Corporation, (b) the Corporation shall have
reasonably concluded that there may be a conflict of interest between the
Corporation and the Indemnitee in the conduct of any such defense, or (c) the
Corporation shall not, in fact, have employed counsel to assume the defense of
such Proceeding, the fees and Expenses of the Indemnitee's counsel shall be at
the expense of the Corporation.
11. ESTABLISHMENT OF A TRUST.
(a) In the event of a Potential Change in Control, the Corporation, upon
written request by the Indemnitee, shall create a trust for the benefit of the
Indemnitee and from time to time upon written request of the Indemnitee shall
fund such trust in an amount sufficient to satisfy any and all Expenses which at
the time of each such request it is reasonably anticipated will be incurred in
connection with a Proceeding for which the Indemnitee is entitled to rights of
indemnification under Section 4 or 5 hereof, and any and all judgments, fines,
penalties and settlement amounts of any and all proceedings for which the
Indemnitee is entitled to rights of indemnification under
12
<PAGE>
Section 4 or 5 from time to time actually paid or claimed, reasonably
anticipated or proposed to be paid. The amount or amounts to be deposited in
the trust pursuant to the foregoing funding obligation shall be determined by
the party who would be required to make the determination of the Indemnitee's
right to indemnification under Section 8(b) hereof (the "Reviewing Party"). The
terms of the trust shall provide that upon a Change in Control (i) the trust
shall not be revoked or the principal thereof invaded, without the written
consent of the Indemnitee, (ii) the trustee shall advance, within two business
days of a request by the Indemnitee, any and all Expenses to the Indemnitee (and
the Indemnitee hereby agrees to reimburse the trust under the circumstances
under which the Indemnitee would be required to reimburse the Corporation under
Section 7 hereof), (iii) the trust shall continue to be funded by the
Corporation in accordance with the funding obligation set forth above, (iv) the
trustee shall promptly pay to the Indemnitee all amounts for which the
Indemnitee shall be entitled to indemnification pursuant to this Agreement or
otherwise, and (v) all unexpended funds in such trust shall revert to the
Corporation upon a final determination by the Reviewing Party or a court of
competent jurisdiction, as the case may be, that Indemnitee has been fully
indemnified under the terms of this Agreement. The trustee shall be an
institutional trustee with a highly regarded reputation chosen by the
Indemnitee. Nothing in this Section 11 shall relieve the Corporation of any of
its obligations under this Agreement.
(b) Nothing contained in this Section 11 shall prevent the Board of
Directors of the Corporation in its discretion at any time and from time to
time, upon request of the Indemnitee, from providing security to the Indemnitee
for the Corporation's obligations hereunder through an irrevocable line of
credit, funded trust as described in Section (a) above, or other collateral.
Any such security, once provided to the Indemnitee, may not be revoked or
released
13
<PAGE>
without the prior consent of the Indemnitee.
12. REMEDIES OF INDEMNITEE.
(a) In the event that any one or more of the following events shall have
occurred: (i) a determination is made pursuant to Section 8 of this Agreement
that Indemnitee is not entitled to indemnification under this Agreement; (ii)
Expenses are not advanced timely in accordance with Section 7 of this Agreement;
(iii) the determination of entitlement to indemnification is to be made by
Independent Counsel pursuant to Section 8(b) of this Agreement and such
determination shall not have been made and delivered in a written opinion within
90 days after receipt by the Corporation of the request for indemnification;
(iv) payment of indemnification is not made pursuant to Section 6 of this
Agreement within ten days after receipt by the Corporation of a written request
therefor; (v) payment of indemnification is not made within ten days after a
determination has been made that Indemnitee is entitled to indemnification or
such determination is deemed to have been made pursuant to Section 9(b) of this
Agreement; and/or (vi) the Corporation fails to comply with its obligations
under Section 11(a) with regard to the establishment or funding of a trust for
Expenses, the Indemnitee shall be entitled to an adjudication of his entitlement
to such indemnification, advancement of Expenses or the establishment and
funding of the trust in an appropriate court of the State of Delaware, or in any
other court of competent jurisdiction. Alternatively, Indemnitee, at his option,
may seek an award in arbitration to be conducted by a single arbitrator pursuant
to the rules of the American Arbitration Association. Indemnitee shall commence
such proceeding seeking an adjudication or an award in arbitration within 180
days following the date on which Indemnitee first has the right to commence such
proceeding pursuant to this Section 12. The Corporation shall not oppose
Indemnitee's right to seek any such adjudication or award in
14
<PAGE>
arbitration.
(b) Whenever a determination is made pursuant to Section 8 of this
Agreement that Indemnitee is not entitled to indemnification, the judicial
proceeding or arbitration commenced pursuant to this Section 12 shall be
conducted in all respects as a de novo trial, or arbitration, on the merits and
Indemnitee shall not be prejudiced by reason of that adverse determination. If
a Change of Control shall have occurred, the Corporation shall have the burden
of proving that Indemnitee is not entitled to indemnification or advancement of
Expenses, as the case may be, in any judicial proceeding or arbitration
commenced pursuant to this Section 12.
(c) If a determination shall have been made or deemed to have been made
pursuant to Section 8 of this Agreement that Indemnitee is entitled to
indemnification, the Corporation shall be bound by such determination in any
judicial proceeding or arbitration commenced pursuant to this Section 12 absent
(i) a misstatement by Indemnitee of a material fact, or an omission of a
material fact necessary to make Indemnitee's statement not materially
misleading, in connection with the request for indemnification, or (ii) a
prohibition of such indemnification under applicable law.
(d) The Corporation shall be precluded from asserting in any judicial
proceeding or arbitration commenced pursuant to this Section 12 that the
procedures and presumptions of this Agreement are not valid, binding and
enforceable and shall stipulate in any such court or before any such arbitrator
that the Corporation is bound by all the provisions of this Agreement.
(e) In the event that Indemnitee, pursuant to this Section 12 seeks a
judicial adjudication or an award in arbitration to enforce his rights under, or
to recover damages for breach
15
<PAGE>
of, this Agreement, Indemnitee shall be entitled to recover from the
Corporation, and shall be indemnified by the Corporation against, any and all
expenses (of the types described in the definition of Expenses in this
Agreement) actually incurred by him in connection with obtaining such judicial
adjudication or arbitration, but only if he prevails therein. If it shall be
determined in said judicial adjudication or arbitration that Indemnitee is
entitled to receive part but not all of the indemnification or advancement of
Expenses sought, the Expenses incurred by Indemnitee in connection with such
judicial adjudication or arbitration shall be appropriately prorated.
13. NON-EXCLUSIVITY; DURATION OF AGREEMENT; INSURANCE: SUBROGATION.
(a) The rights of indemnification and to receive advancement of Expenses
as provided by this Agreement shall not be deemed exclusive of any other rights
to which Indemnitee may at any time be entitled under applicable law, the
Corporation's certificate of incorporation or by-laws, any other agreement, a
vote of stockholders or a resolution of directors, or otherwise. This Agreement
shall continue until and terminate upon the later of: (a) 10 years after the
date that Indemnitee shall have ceased to serve as an officer or director of the
Corporation, or (b) the final termination of all pending Proceedings in respect
of which Indemnitee is granted rights of indemnification or advancement of
Expenses hereunder and of any proceeding commenced by Indemnitee pursuant to
Section 12 of this Agreement relating thereto. This Agreement shall be binding
upon the Corporation and its successors and assigns and shall inure to the
benefit of Indemnitee and his heirs, executors and administrators.
(b) (i) To the extent that the Corporation maintains an insurance
policy
16
<PAGE>
or policies providing liability insurance for directors and officers of the
Corporation, Indemnitee shall be covered by such policy or policies in
accordance with the terms thereof to the maximum extent of the coverage
available for any such director or officer under such policy or policies. The
Corporation shall take all necessary or appropriate action to cause such
insurers to pay on behalf of the Indemnitee all amounts payable as a result of
the commencement of a proceeding in accordance with the terms of such policy.
(ii) For a period of three years after the date the Indemnitee shall
have ceased to serve as an officer or director of the Corporation, the
Corporation will provide officers and directors liability insurance for
Indemnitee on terms no less favorable than the terms of the liability insurance
which the Corporation then provides to the current officers and directors,
provided that the Corporation provides officers and directors liability
insurance to its current officers and directors, and provided further that the
annual premiums for the liability insurance to be provided to the Indemnitee do
not exceed by more than 50% the premium charged for the coverage available for
any of the Corporation's current officers and directors.
(c) In the event of any payment under this Agreement, the Corporation
shall be subrogated to the extent of such payment to all of the rights of
recovery of Indemnitee, who shall execute all papers required and take all
action necessary to secure such rights, including execution of such documents as
are necessary to enable the Corporation to bring suit to enforce such rights.
(d) The Corporation shall not be liable under this Agreement to make any
payment of amounts otherwise indemnifiable hereunder if and to the extent that
Indemnitee otherwise actually has received such payment under any insurance
policy, contract, agreement or otherwise.
17
<PAGE>
14. SEVERABILITY.
If any provision or provisions of this Agreement shall be held to be
invalid, illegal or unenforceable for any reason whatsoever: (a) the validity,
legality and enforceability of the remaining provisions of this Agreement
(including without limitation, each portion of any Section of this Agreement
containing any such provision held to be invalid, illegal or unenforceable, that
is not itself invalid, illegal or unenforceable) shall not in any way be
affected or impaired thereby; and (b) to the fullest extent possible the
provisions of this Agreement (including, without limitation, each portion of any
Section of this Agreement containing any such provision held to be invalid,
illegal or unenforceable, that is not itself invalid, illegal or unenforceable)
shall be construed so as to give effect to the intent manifested by the
provision held invalid, illegal or unenforceable.
15. EXCEPTION TO RIGHT OF INDEMNIFICATION OR ADVANCEMENT OF EXPENSES.
Except as otherwise provided specifically herein, Indemnitee shall not be
entitled to indemnification or advancement of Expenses under this Agreement with
respect to any Proceeding, or any claim herein, brought or made by him against
the Corporation.
16. HEADINGS.
The headings of the paragraphs of this Agreement are inserted for
convenience only and shall not be deemed to constitute part of this Agreement or
to affect the construction thereof.
17. MODIFICATION AND WAIVER.
This Agreement may be amended from time to time to reflect changes in
Delaware law or for other reasons. No supplement, modification or amendment of
this Agreement shall be
18
<PAGE>
binding unless executed in writing by both of the parties hereto. No waiver of
any of the provisions of this Agreement shall be deemed or shall constitute a
waiver of any other provision hereof (whether or not similar) nor shall such
waiver constitute a continuing waiver.
18. NOTICE BY INDEMNITEE.
Indemnitee agrees promptly to notify the Corporation in writing upon
being served with any summons, citation, subpoena, complaint, indictment,
information or other document relating to any Proceeding or matter which may be
subject to indemnification or advancement of Expenses covered hereunder;
provided, however, that the failure to give any such notice shall not disqualify
the Indemnitee from indemnification hereunder.
19. NOTICES.
All notices, requests, demands and other communications hereunder shall
be in writing and shall be deemed to have been duly given if (i) delivered by
hand to the party to whom said notice or other communication shall have been
directed, or (ii) mailed by certified or registered mail with postage prepaid.
(a) If to Indemnitee, to:
(b) If to the Corporation, to:
NU HORIZONS ELECTRONICS CORP.
70 Maxess Road
Melville, NY 11747
or to such other address as may have been furnished to Indemnitee by the
Corporation or to the Corporation by Indemnitee, as the case may be.
20. GOVERNING LAW.
19
<PAGE>
The parties agree that this Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of Delaware.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day
and year first above written.
ATTEST: NU HORIZONS ELECTRONICS CORP.
_________________________ BY:____________________________________
INDEMNITEE:
________________________________________
20
<PAGE>
NU HORIZONS ELECTRONICS CORP.
EXHIBIT 11
COMPUTATION OF EARNINGS PER COMMON SHARE
----------------------------------------
(Unaudited)
FOR THE THREE MONTHS ENDED
--------------------------
MAY MAY
31, 1997 31, 1996
-------- --------
PRIMARY EARNINGS:
- ----------------
NET INCOME $ 1,502,388 $ 2,454,937
=========== ===========
WEIGHTED AVERAGE SHARES:
Common shares outstanding 8,739,326 8,423,137
Common share equivalents 92,997 706,863
----------- -----------
Weighted average number of
common shares and common share
equivalents outstanding 8,832,323 9,130,000
=========== ===========
PRIMARY EARNINGS PER
COMMON SHARE:
Net Income $.17 $.27
==== ====
FULLY DILUTED EARNINGS:
- ----------------------
Net Income $ 1,502,388 $ 2,454,937
Net (after tax) interest expense
related to convertible debt 85,000 101,589
----------- -----------
NET INCOME AS ADJUSTED $ 1,587,388 $ 2,556,526
=========== ===========
SHARES:
Weighted average number of common
common shares and common share
equivalents outstanding 8,832,323 9,130,000
Additional options
not included above 1,202,203 494,776
Assuming conversion
of convertible debt 784,333 784,333
----------- -----------
Weighted average number of common
shares outstanding as adjusted 10,818,859 10,409,109
=========== ===========
FULLY DILUTED EARNINGS
PER COMMON SHARE $.15 $.25
==== ====
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS FOR THE QUARTER ENDED MAY 31, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-START> MAR-01-1997
<PERIOD-END> MAY-31-1997
<CASH> 2,050,847
<SECURITIES> 0
<RECEIVABLES> 33,086,029
<ALLOWANCES> 2,267,424
<INVENTORY> 33,455,503
<CURRENT-ASSETS> 68,630,354
<PP&E> 12,447,547
<DEPRECIATION> 4,838,562
<TOTAL-ASSETS> 79,143,130
<CURRENT-LIABILITIES> 11,985,041
<BONDS> 0
0
0
<COMMON> 57,679
<OTHER-SE> 48,445,264
<TOTAL-LIABILITY-AND-EQUITY> 79,143,130
<SALES> 54,165,706
<TOTAL-REVENUES> 54,165,706
<CGS> 42,223,252
<TOTAL-COSTS> 42,223,252
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 105,000
<INTEREST-EXPENSE> 326,893
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