Form 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1993
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from............to.................
Commission file number 1-4482
ARROW ELECTRONICS, INC.
(Exact name of registrant as specified in its charter)
New York 11-1806155
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
25 Hub Drive
Melville, New York 11747
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (516) 391-1300
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of Each Class Which Registered
Common Stock, $1 par value New York Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
5-3/4% Convertible Subordinated
Debentures due 2002 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K.
[ X ]
The aggregate market value of voting stock held by nonaffiliates
of the registrant as of March 19, 1994 was $1,270,816,679.
Indicate the number of shares outstanding of each of the
registrant's classes of common stock, as of the latest practicable
date.
Common Stock, $1 par value: 31,417,574 shares outstanding at
March 9, 1994.
The following documents are incorporated herein by reference:
1. Proxy Statement filed in connection with Annual Meeting of
Shareholders to be held May 10, 1994 (incorporated in Part III).
PART I
Item 1. Business.
Arrow Electronics, Inc. (the "company") is the world's largest
distributor of electronic components and computer products to
industrial and commercial customers.
The company's electronics distribution networks, spanning
North America, Europe, and the Pacific Rim, incorporate over 150
selling locations, ten primary distribution centers (four of which
employ advanced automation), and 4,000 remote on-line terminals--all
serving the needs of a diversified base of original equipment
manufacturers (OEMs) and commercial customers worldwide. OEMs
include manufacturers of computer and office products, industrial
equipment (including machine tools, factory automation, and robotic
equipment), telecommunications products, aircraft and aerospace
equipment, and scientific and medical devices. Commercial customers
are mainly value-added resellers (VARs) of computer systems.
In 1993, the company acquired an additional 15% share in
Spoerle Electronic, the largest electronics distributor in Germany,
increasing its holdings to a majority interest. The company also
acquired Zeus Components, Inc. a distributor of high-reliability
electronic components and value-added services, Microprocessor &
Memory Distribution Limited, a focused U.K. distributor of high-
technology semiconductor products, and Components Agent Limited, one
of the largest distributors in Hong Kong. In addition, in 1993 the
company acquired Amitron S.A. and ATD Electronica S.A., distributors
serving the Spanish and Portuguese markets, and CCI Electronique, a
distributor serving the French marketplace. On February 28, 1992,
the company acquired the electronics distribution businesses of Lex
Service PLC ("Lex") in the U.K. and France (the "European
businesses"), and Spoerle acquired the electronics distribution
business of Lex in Germany. On September 27, 1991, the company
acquired Lex Electronics Inc. and Almac Electronics Corporation, the
North American electronics distribution businesses of Lex (the
"North American businesses"), the third largest electronics
distribution business in the United States.
Early in 1994, the company acquired an additional 15% interest
in Spoerle, bringing its holdings to 70%, and increased its holdings
in Silverstar, the company's Italian affiliate, to a majority share.
Additionally, the company acquired the electronic component
distribution business of Field Oy, the largest distributor of
electronic components in Finland, and TH:s Elektronik, a leading
distributor in Sweden and Norway. For information with respect to
these acquisitions, the company's results of operations, and other
matters, see Item 6 (Selected Financial Data), Item 7 (Management's
Discussion and Analysis of Financial Condition and Results of
Operations), and Item 8 (Financial Statements) appearing elsewhere
in this Annual Report.
In North America, the company is organized into four product-
specific sales and marketing groups: The Arrow/Schweber Electronics
Group is the largest dedicated semiconductor distributor in the
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world. Zeus Electronics is the only specialist distributor serving
the military and high-reliability markets. Capstone Electronics
focuses exclusively on the distribution of connectors,
electromechanical, and passive components. And Arrow's Commercial
Systems Group distributes commercial computer products and systems.
Through its wholly-owned subsidiary, Arrow Electronics
Distribution Group - Europe B. V., Arrow is the largest pan-European
electronics distributor. The company's European strategy stresses
two key elements: strong, locally-managed distributors to satisfy
widely varying customer preferences and business practices; and an
electronic backbone uniting Arrow's European partners with one
another and with Arrow worldwide to leverage inventory investment
and better meet the needs of customers in all of Europe's leading
industrial electronics markets. In most of these markets, Arrow
companies hold the number one position: Arrow Electronics (UK) Ltd.
in Britain; Spoerle Electronic in Central Europe; Silverstar Ltd.
S.p.A. in Italy; and Amitron-Arrow and ATD Electronica S.A. in Spain
and Portugal. Arrow Electronique is the fourth largest electronics
distributor in France, and Arrow's Nordic companies, Field Oy and
TH:s Elektronik, are among the largest distributors in the markets
of Finland, Norway, and Sweden.
Arrow is the first American electronics distributor to be
present in the Pacific Rim market. Arrow's Components Agent Limited
(C.A.L.), headquartered in Hong Kong, is the region's leading
multinational distributor, maintaining seven additional facilities
in key cities in Singapore, Malaysia, the People's Republic of
China, and South Korea; an additional Arrow company serves India.
Within these dynamic markets, Arrow is benefiting from two important
growth factors: the decision by many of Arrow's traditional North
American customers to locate production facilities in the region and
the surging demand for electronic products resulting from rising
living standards and massive investments in infrastructure.
The company distributes a broad range of electronic
components, computer products, and related equipment manufactured by
others. About 66% of the company's consolidated sales are of
semiconductor products; industrial and commercial computer products,
including microcomputer boards and systems, design systems, desktop
computer systems, terminals, printers, disc drives, controllers, and
communication control equipment account for about 24%; and the
remaining 10% of sales are of passive, electromechanical, and
connector products, principally capacitors, resistors,
potentiometers, power supplies, relays, switches and connectors.
Worldwide, the company maintains a $435 million inventory of more
than 300,000 different electronic components and computer products
at the company's primary distribution centers.
Most manufacturers of electronic components and computer
products rely on independent authorized distributors such as the
company to augment their product marketing operations. As a
stocking, marketing and financial intermediary, the distributor
relieves its manufacturers of a portion of the costs and personnel
associated with stocking and selling their products (including
otherwise sizable investments in finished goods inventories and
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accounts receivable), while providing geographically dispersed
selling, order processing, and delivery capabilities. At the same
time, the distributor offers a broad range of customers the
convenience of diverse inventories and rapid or scheduled
deliveries. The growth of the electronics distribution industry has
been fostered by the many manufacturers who recognize their
authorized distributors as essential extensions of their marketing
organizations.
The company and its affiliates serve approximately 125,000
industrial and commercial customers in North America, Europe, and
the Pacific Rim. Industrial customers range from major original
equipment manufacturers to small engineering firms, while commercial
customers include value-added resellers, small systems integrators,
and large end-users. Most of the company's customers require
delivery of the products they have ordered on schedules that are
generally not available on direct purchases from manufacturers, and
frequently their orders are of insufficient size to be placed
directly with manufacturers. No single customer accounted for more
than 2% of the company's 1993 sales.
The electronic components and other products offered by the
company are sold by field sales representatives, who regularly call
on customers in assigned market areas, and by telephone from the
company's selling locations, from which inside sales personnel with
access to pricing and stocking data provided by computer display
terminals accept and process orders. Each of the company's North
American selling locations, warehouses, and primary distribution
centers is electronically linked to the business' central computer,
which provides fully integrated, on-line, real-time data with
respect to nationwide inventory levels and facilitates control of
purchasing, shipping, and billing. The company's foreign operations
utilize Arrow's Worldwide Stock Check System, which affords access
to the company's on-line, real-time inventory system. Sales are
managed and coordinated by regional sales managers and by product
managers principally located at the company's headquarters in
Melville, New York.
Of the approximately 200 manufacturers whose products are sold
by the company, the ten largest accounted for about 57% of the
business' purchases during 1993. Intel Corporation accounted for
approximately 18% of the business' purchases because of the market
demand for microprocessors. No other supplier accounted for more
than 9% of 1993 purchases. The company does not regard any one
supplier of products to be essential to its operations and believes
that many of the products presently sold by the company are
available from other sources at competitive prices. Most of the
company's purchases are pursuant to authorized distributor
agreements which are typically cancelable by either party at any
time or on short notice.
Approximately 62% of the company's inventory consists of
semiconductors. It is the policy of most manufacturers to protect
authorized distributors, such as the company, against the potential
write-down of such inventories due to technological change or
manufacturers' price reductions. Under the terms of the related
distributor agreements, and assuming the distributor complies with
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certain conditions, such suppliers are required to credit the
distributor for inventory losses incurred through reductions in
manufacturers' list prices of the items. In addition, under the
terms of many such agreements, the distributor has the right to
return to the manufacturer for credit a defined portion of those
inventory items purchased within a designated period of time. A
manufacturer who elects to terminate a distributor agreement is
generally required to purchase from the distributor the total amount
of its products carried in inventory. While these industry
practices do not wholly protect the company from inventory losses,
management believes that they currently provide substantial
protection from such losses.
The company's business is extremely competitive, particularly
with respect to prices, franchises, and, in certain instances,
product availability. The company competes with several other large
multinational, national, and numerous regional and local,
distributors. As the world's largest electronics distributor, the
company is greater in terms of financial resources and sales than
most of its competitors.
The company and its affiliates employ approximately 4,600
people worldwide.
Executive Officers
The following table sets forth the names and ages of, and the
positions and offices with the company held by, each of the
executive officers of the company.
Name Age Position or Office Held
John C. Waddell 56 Chairman of the Board
Stephen P. Kaufman 52 President and Chief Executive
Officer
Robert E. Klatell 48 Senior Vice President, Chief
Financial Officer, General Counsel,
Secretary, and Treasurer
Carlo Giersch 56 President and Chief Executive
Officer of Spoerle Electronic
Robert J. McInerney 48 Vice President; President,
Commercial Systems Group
Steven W. Menefee 49 Vice President; President,
Arrow/Schweber Electronics Group
Wesley S. Sagawa 46 Vice President; President, Capstone
Electronics Corp.
Jan Salsgiver 37 Vice President; President, Zeus
Electronics
Set forth below is a brief account of the business experience
during the past five years of each executive officer of the company.
John C. Waddell has been Chairman of the Board of the company
for more than five years.
Stephen P. Kaufman has been President and Chief Executive
Officer of the company for more than five years.
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Robert E. Klatell has been Senior Vice President and has
served as General Counsel and Secretary of the company for more than
five years. He has been Chief Financial Officer since January 1992
and Treasurer of the company since October 1990.
Carlo Giersch has been President and Chief Executive Officer
of Spoerle Electronic for more than five years.
Robert J. McInerney has been a Vice President of the company
for more than 5 years and President of the company's Commercial
Systems Group since April 1989.
Steven W. Menefee has been a Vice President of the company and
President of the company's Arrow/Schweber Electronics Group since
November 1990. For more than five years prior thereto, he was a
Vice President of Avnet, Inc., principally an electronics
distributor, and an executive of Avnet's Electronic Marketing Group.
Wesley S. Sagawa has been a Vice President of the company for
more than 5 years and President of Capstone Electronics Corp., the
company's subsidiary which markets passive, electromechanical, and
connector products, since January 1990.
Jan Salsgiver has been a Vice President of the company since
September 1993 and President of the company's Zeus Electronics since
July 1993. For more than five years prior thereto, she held a
variety of senior marketing positions in the company, the most
recent of which was Vice President, Semiconductor Marketing of the
Arrow/Schweber Electronics Group.
Item 2. Properties.
The company's executive office, located in Melville, New York,
is owned by the company. The company occupies additional locations
under leases due to expire on various dates to 2016. One additional
facility is owned by the company, and another two facilities have
been sold and leased back in connection with the financing thereof.
Item 3. Legal Proceedings.
Through a wholly-owned subsidiary, Schuylkill Metals
Corporation, the company was previously engaged in the refining and
selling of lead. In September 1988, the company sold its refining
business.
In mid-1986 the refining business ceased operations at its
battery breaking facility in Plant City, Florida, which facility had
been placed on the list of hazardous waste sites targeted for
cleanup under the federal Super Fund Program. The Plant City site
was not sold to the purchaser of the refining business, and the
company remains subject to various environmental cleanup obligations
at the site under federal and state law. During 1991, the company
engaged in settlement negotiations with the EPA, resulting in the
execution of a consent decree defining those obligations which was
entered by a federal court in Florida and became effective on April
22, 1992. The consent decree requires the company to fund and
implement remedial design and remedial action activity addressing
environmental impacts to site soils and sediment, underlying ground
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water, and wetland areas. The company, through its technical
contractors, has begun implementation of these requirements.
Between January 1, 1993 and the date of this report, a substantial
amount of the work necessary to prepare the site for the planned
remediation activities was completed, the plans for the treatment
and discharge of ground water contemplated by the consent decree
were finalized, the plans for the remediation and mitigation of the
wetland areas were finalized and approved in principle by the
relevant agencies, and the company began the bid process for certain
of the contracts relating to the performance of the remediation
activities (including a previously-agreed upon plan for treating
soils and sediment). Such activities are expected to commence in
mid-1994 and the company believes that a substantial part of such
activities will be completed over the next three years. The extent
of such remediation activities (including the estimated cost thereof
and the time necessary to complete them) is subject to change based
upon conditions actually encountered during remediation, and the EPA
reserves the right to seek additional action if it subsequently
finds further contamination or other conditions rendering the work
insufficiently protective of human health or the environment. The
company believes that the amount expected to be expended in any year
to fund such activities will not have a material adverse impact on
the company's liquidity, capital resources or results of operations.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
PART II
Item 5. Market for the Registrant's Common Equity and
Related Stockholder Matters.
Market Information
The company's common stock is listed on the New York Stock
Exchange (trading symbol: "ARW"). The high and low sales prices
during each quarter of 1993 and 1992 were as follows:
Year High Low
1993:
Fourth Quarter $42-1/4 $33-5/8
Third Quarter 43-1/8 34-5/8
Second Quarter 36-1/4 29-3/4
First Quarter 34-3/8 26-1/2
1992:
Fourth Quarter $30-1/2 $22-1/8
Third Quarter 22-3/4 18-1/2
Second Quarter 19-1/2 15-1/8
First Quarter 18-1/2 14-3/8
Holders
On March 9, 1994, there were approximately 4,000 shareholders
of record of the company's common stock.
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Dividend History and Restrictions
The company has not paid cash dividends on its common stock
during the past two years. While it is the intention of the Board
of Directors to consider the payment of dividends on the common
stock from time to time, the declaration of future dividends will be
dependent upon the company's earnings, financial condition, and
other relevant factors.
The terms of the company's U.S. credit agreement, senior
notes, and certain foreign debt (see Note 4 of the Notes to
Consolidated Financial Statements) restrict the payment of cash
dividends, limit long-term debt and short-term borrowings, and
require that the ratio of earnings to interest expense, ratio of
operating cash flow to interest expense, working capital, and net
worth be maintained at certain designated levels.
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Item 6. Selected Financial Data.
The following table sets forth certain selected consolidated
financial data and should be read in conjunction with the company's
consolidated financial statements and related notes appearing elsewhere in
this Annual Report.
<TABLE>
SELECTED FINANCIAL DATA
(In thousands except per share data)
<S> <C> <C> <C> <C> <C>
<CAPTION>
For the year: 1993(a) 1992 1991(b) 1990 1989
Sales $2,535,584 $1,621,535 $1,043,654 $970,944 $925,207
Operating income 181,542 103,781 34,399(c) 32,682 27,557
Equity in earnings of affiliated
companies 1,673 6,550 5,657 6,395 5,466
Interest expense 24,987 30,061 29,145 28,972 29,809
Earnings before extraordinary
charges 81,559 50,244 8,685 10,105 3,214
Extraordinary charges, net of
income taxes - 5,424 - - -
Net income $ 81,559 $ 44,820 $ 8,685 $ 10,105 $ 3,214
Per common share:
Earnings (loss) before
extraordinary charges(d) $ 2.62 $ 1.81 $ .28 $ .44 $ (.19)
Extraordinary charges - (.21) - - -
Net income (loss)(d) $ 2.62 $ 1.60 $ .28 $ .44 $ (.19)
At year-end:
Accounts receivable and
inventories $ 798,037 $ 539,476 $ 506,496 $ 322,916 $333,578
Total assets 1,191,304 780,893 745,379 478,045 483,528
Long-term debt, including
current portion 159,024 101,146 218,787 104,937 109,017
Subordinated debentures, including
current portion 125,000 125,000 105,965 107,300 108,326
Total long-term debt and
subordinated debentures 284,024 226,146 324,752 212,237 217,343
Shareholders' equity 457,015 351,220 225,836 151,172 149,977
(a) Includes results of Spoerle Electronic, which was accounted for under the equity method
prior to January 1993 when Arrow increased its holdings to a majority interest (see Note
2 of the Notes to Consolidated Financial Statements).
(b) Reflects the acquisition in September 1991 of the North American electronics distribution
businesses of Lex Service PLC (see Note 2 of the Notes to Consolidated Financial
Statements).
(c) Includes special charges of $9.8 million reflecting expenses associated with the integration
of the businesses acquired from Lex Service PLC.
(d) After preferred stock dividends of $.9 million in 1993, $3.9 million in 1992, $4.6 million
in 1991, $4.9 million in 1990, and $5.4 million in 1989.
</TABLE>
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Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
For an understanding of the significant factors that influenced the
company's performance during the past three years, the following
discussion should be read in conjunction with the consolidated financial
statements and other information appearing elsewhere in this report.
Included in the 1993 consolidated results is Spoerle Electronic,
which had been accounted for under the equity method prior to January 1993
when the company acquired an additional 15% share, increasing its holdings
to a majority interest. The 1993 consolidated results also include the
acquired businesses of Zeus Components, Inc., a distributor of high-
reliability electronic components and value-added services, Microprocessor
& Memory Distribution Limited, a focused U.K. distributor of high-
technology semiconductor products, and Components Agent Limited, one of
the largest distributors in Hong Kong. In addition, the 1993 results
include Amitron-Arrow S.A. and ATD Electronica S.A., distributors serving
the Spanish and Portuguese markets, and CCI Electronique, a distributor
serving the French marketplace. On February 28, 1992, the company
acquired the electronics distribution businesses of Lex Service PLC
("Lex") in the U.K. and France (the "European businesses"), and Spoerle
Electronic acquired the electronics distribution business of Lex in
Germany. On September 27, 1991, the company acquired Lex Electronics Inc.
and Almac Electronics Corporation, the North American electronics
distribution businesses of Lex (the "North American businesses"), the
third largest electronics distribution business in the United States. See
Note 2 of the Notes to Consolidated Financial Statements for information
with respect to the 1993 and 1992 acquisitions and the pro forma effect of
these transactions on the company's statement of operations.
Sales
In 1993, consolidated sales of $2.5 billion were 56% ahead of the
1992 sales of $1.6 billion. Excluding Spoerle, sales were $2.2 billion,
an advance of 34% over the year-earlier period. This sales growth was
principally due to increased activity levels in each of the company's
distribution groups and, to a lesser extent, acquisitions in North
America, Europe, and the Pacific Rim, offset in part by weaker currencies
in Europe.
Consolidated sales of $1.6 billion in 1992 were 55% higher than 1991
sales of $1 billion. This increase principally reflects the acquisitions
of the North American and European businesses in September 1991 and
February 1992, respectively, and increased North American sales.
In 1991, consolidated sales of $1 billion were 7.5% higher than 1990
sales of $971 million. The increase in sales primarily reflects the
inclusion of the North American businesses during the fourth quarter of
1991, which more than offset the 5% decrease in sales for the nine months
ended September 30, 1991 principally resulting from declining sales of
commercial computer products and related systems owing to soft market
conditions.
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<PAGE>
Operating Income
In 1993, the company's consolidated operating income increased to
$181.5 million, compared with 1992 operating income of $103.8 million.
The significant improvement in operating income reflects the impact of
increased sales and the consolidation of Spoerle, offset in part by lower
gross profit margins primarily reflecting proportionately higher sales of
low-margin microprocessors. Excluding Spoerle, operating income was
$146.2 million in 1993, and operating expenses as a percentage of sales
were 12.4%, the lowest in the company's history.
The company's 1992 consolidated operating income increased to $103.8
million, compared with operating income of $34.4 million in 1991.
Operating income in 1991 included the recognition of approximately $9.8
million of costs associated with the integration of the North American
businesses. The significant improvement in operating income in 1992
primarily reflected the impact of the company's acquisition of the North
American businesses, improved gross profit margins reflecting a product
mix now more heavily weighted to semiconductor products, and improved
North American sales. The rapid and successful integration of the North
American businesses resulted in the realization of sizable economies of
scale which, when combined with increased sales, enabled the company to
reduce operating expenses as a percentage of sales from 17.6% in 1991 to
14.7% in 1992, the then lowest level in the company's history. Such
economies of scale principally resulted from reductions in personnel
performing duplicative functions and the elimination of duplicative
administrative facilities, selling and stocking locations, and computer
and telecommunications equipment.
In 1991, the company's consolidated operating income increased to
$34.4 million, an advance of 5% over 1990. This improvement was
principally the result of increased sales and reduced operating expenses
as a percentage of sales in the fourth quarter of 1991. The improved
fourth quarter operating results, combined with lower operating expenses
through September 1991, more than offset the special charge of $9.8
million reflecting integration expenses associated with the North American
businesses, the effect of a 5% decrease in sales through September 1991,
and a decrease in the company's gross profit margin as a result of
competitive pricing pressures in the commercial computer products and
related systems markets.
Interest
In 1993, interest expense decreased to $25 million from $30.1
million in 1992. The decrease principally reflects the full-year effect
of the retirement during 1992 of $46 million of the company's 13-3/4%
subordinated debentures and the refinancing of the company's remaining
high-yield debt with securities bearing lower interest rates, offset in
part by the consolidation of Spoerle and borrowings associated with
acquisitions.
Interest expense of $30.1 million in 1992 increased by $.9 million
from the 1991 level, reflecting the company's borrowings to finance the
cash portion of the purchase price of the North American and European
businesses, to pay fees and expenses relating to the acquisitions, to
refinance existing credit facilities of the company, and to provide the
company with working capital. Such increased borrowings were partially
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offset by the company's redemption in May of $46 million of its 13-3/4%
subordinated debentures with the proceeds from the public offering of 4.7
million shares of common stock and lower effective interest rates.
In 1991, interest expense of $29.1 million increased $.1 million
from 1990's level as the financing expense for the purchase of the North
American businesses offset lower interest rates and reduced borrowings
resulting from operating cash flow and improvements in asset management.
Income Taxes
In 1993, the company's effective tax rate was 40.7% compared with
37.4% in 1992. The higher effective tax rate reflects increased U.S.
taxes as a result of higher statutory rates and the consolidation of
Spoerle.
The company recorded a provision for taxes at an effective tax rate
of 37.4% in 1992 compared with 20.4% in 1991. The higher effective tax
rate reflects the depletion of the company's remaining $5.8 million U.S.
net operating loss carryforwards in 1991.
The company's effective tax rate in 1991 was 20.4%, principally as a
result of the utilization of the remaining $5.8 million of U.S. net
operating loss carryforwards.
Net Income
Net income in 1993 was $81.6 million, an advance from $44.8 million
in 1992 (after giving effect to extraordinary charges of 5.4 million
reflecting the net unamortized discount and issuance expenses associated
with the redemption of high-coupon subordinated debentures and other debt
in 1992). The increase in net income is due principally to the increase
in operating income and lower interest expense offset in part by higher
taxes.
The company recorded net income of $50.2 million in 1992, before
extraordinary charges aggregating $5.4 million, compared with net income
of $8.7 million in 1991. Including these charges, net income in 1992 was
$44.8 million. Included in 1991's results was a special charge of $9.8
million ($6.5 million after taxes) associated with the integration of the
acquired businesses. The improvement in net income was principally the
result of the increase in operating income offset in part by the higher
provision for income taxes.
The company's net income in 1991 of $8.7 million decreased 14% from
$10.1 million in 1990. The decrease in net income was principally the
result of the $9.8 million special charge ($6.5 million after taxes)
reflecting integration expenses associated with the North American
businesses and the provision for income taxes. Excluding the special
charge, net income was $15.2 million, an increase of 50% over 1990.
Net income also included the company's equity in earnings of
affiliated companies of $1.7 million in 1993, $6.6 million in 1992, and
$5.7 million in 1991. The decrease in the company's equity in earnings of
affiliated companies in 1993 was due to the consolidation of Spoerle.
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In 1993, the earnings of Silverstar, the company's Italian affiliate,
advanced as a result of significant sales growth offset in part by a
weaker lira. The increase in the company's equity in earnings of
affiliated companies in 1992 was the result of Silverstar's profitability.
The decrease in 1991 was the result of lower earnings in Germany and a
loss in Italy.
Liquidity and Capital Resources
The company maintains a high level of current assets, primarily
accounts receivable and inventories. Consolidated current assets as a
percentage of total assets were 73% in 1993 and 70% in 1992.
Working capital increased in 1993 by $160 million, or 43%, compared
with 1992, as a result of increased sales, the consolidation of Spoerle,
and acquisitions. Working capital increased by $42 million in 1992, as a
result of the acquisition of the European businesses and increased sales.
The net amount of cash provided by operations in 1993 was $41.7
million, the principal element of which was the cash flow resulting from
higher net earnings offset by increased working capital needs to support
sales growth. The net amount of cash used by the company for investing
activities in 1993 amounted to $111.7 million, including $87.9 million for
various acquisitions. Cash flows from financing activities were
$100.3 million, principally resulting from increased borrowings to finance
the 1993 acquisitions in the U.S., Europe, and the Pacific Rim (see Notes
2 and 4 of the Notes to Consolidated Financial Statements for additional
information regarding these acquisitions).
In September 1993, the company completed the conversion of all of
its outstanding series B $19.375 convertible exchangeable preferred stock,
into 1,009,086 shares of its common stock. This conversion eliminated the
company's obligation to pay $1.3 million of annual dividends.
The net amount of cash provided by operating activities in 1992 was
$71.5 million, attributable primarily to the higher net earnings of the
company. The net amount of cash used by the company for investing activi-
ties in 1992 amounted to $45.8 million, including $37.2 million for the
acquisition of the European businesses.
The aggregate cost of the company's acquisition of the electronics
distribution businesses of Lex in the U.K. and France, and Spoerle's
acquisition of the Lex electronics distribution business in Germany, was
$52 million, of which $32 million was paid in cash and $20 million was
paid in the form of a senior subordinated note due in June 1997. The
company financed the cash portion of the purchase price through the sale
of 66,196 shares of newly-created series B preferred stock and U.K. bank
borrowings. In addition, a portion of the proceeds from the company's
public offering of common stock and the issuance of the 5-3/4% convertible
subordinated debentures was used to repay the senior subordinated note.
The German business was purchased by Spoerle for cash (see Notes 2, 4, and
6 of the Notes to Consolidated Financial Statements for additional
information regarding these acquisitions).
The net amount of cash used for financing activities in 1992 was
$23.9 million, principally reflecting the redemption of high-yield
-13-
subordinated debentures, repayment of long-term debt, and the payment of
preferred stock dividends and financing fees, offset by the public
offering of 4,703,500 shares of common stock and the 5-3/4% convertible
subordinated debentures, the issuance of the senior secured notes, and
U.K. bank borrowings.
In September 1992, the company completed the conversion of all of
its outstanding depositary shares, each representing one-tenth share of
its $19.375 convertible exchangeable preferred stock, into 3,615,056
shares of its common stock. This conversion eliminated the company's
obligation to pay $4.6 million of annual dividends relating to the
depositary shares.
Early in 1994, the company purchased an additional 15% share in
Spoerle for approximately $23 million in cash. The company financed the
acquisition through its U.S. credit agreement and German bank
borrowings. Additionally, the company increased its holdings in
Silverstar to a majority share and acquired the electronic component
distribution business of Field Oy, the largest distributor of electronic
components in Finland, and TH:s Elektronik, a leading distributor in
Sweden and Norway.
-14-
Item 8. Financial Statements.
REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Arrow Electronics, Inc.
We have audited the accompanying consolidated balance sheet of Arrow
Electronics, Inc. as of December 31, 1993 and 1992, and the related
consolidated statements of operations, cash flows, and shareholders'
equity for each of the three years in the period ended December 31,
1993. Our audits also included the financial statement schedules
listed in the Index at Item 14(a). These financial statements and
schedules are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial state-
ments and schedules based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of Arrow Electronics, Inc. at December 31, 1993
and 1992, and the consolidated results of its operations and its
cash flows for each of the three years in the period ended December
31, 1993, in conformity with generally accepted accounting princi-
ples. Also, in our opinion, the related financial statement
schedules, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material respects
the information set forth therein.
ERNST & YOUNG
New York, New York
February 24, 1994
-15-
<TABLE>
ARROW ELECTRONICS, INC.
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
ASSETS
<CAPTION>
December 31,
1993 1992
<S> <C> <C>
Current assets:
Cash and short-term investments................................... $ 60,730 $ 3,393
Accounts receivable, less allowance for doubtful
accounts ($16,491 in 1993 and $8,268 in 1992)................... 363,084 240,740
Inventories....................................................... 434,953 298,736
Prepaid expenses and other assets................................. 10,841 5,890
Total current assets................................................ 869,608 548,759
Property, plant and equipment at cost
Land.............................................................. 5,700 4,634
Buildings and improvements........................................ 33,709 27,745
Machinery and equipment........................................... 55,148 35,353
94,557 67,732
Less accumulated depreciation and amortization.................... 38,606 31,950
55,951 35,782
Investments in affiliated companies................................. 13,371 64,893
Cost in excess of net assets of companies acquired,
less accumulated amortization ($13,514 in 1993 and
$8,421 in 1992)................................................... 199,383 97,695
Other assets........................................................ 52,991 33,764
$1,191,304 $780,893
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................. $ 190,013 $120,995
Accrued expenses.................................................. 104,146 56,730
Accrued interest.................................................. 5,421 1,253
Short-term borrowings, including current maturities of
long-term debt.................................................. 40,965 713
Total current liabilities........................................... 340,545 179,691
Long-term debt...................................................... 153,828 100,433
Deferred income taxes and other liabilities......................... 43,457 24,549
Subordinated debentures............................................. 125,000 125,000
Minority interest................................................... 71,459 -
Shareholders' equity:
Preferred stock, par value $1:
Authorized--2,000,000 shares
Issued--66,196 shares in 1992,
$19.375 convertible exchangeable preferred stock.............. - 66
Common stock, par value $1:
Authorized--60,000,000 shares
Issued--31,298,335 shares in 1993 and 29,296,457 shares in 1992 31,298 29,296
Capital in excess of par value.................................... 310,203 285,510
Retained earnings................................................. 124,689 44,010
Foreign currency translation adjustment........................... (7,492) (6,518)
458,698 352,364
Less: Treasury shares (10,872 in 1993 and 14,222 in 1992) at cost 12 19
Unamortized employee stock awards........................... 1,671 1,125
Total shareholders' equity.......................................... 457,015 351,220
$1,191,304 $780,893
</TABLE>
See accompanying notes.
-16-
<TABLE>
ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands except per share data)
<CAPTION>
Years Ended December 31,
1993 1992 1991
<S> <C> <C> <C>
Sales..............................................$2,535,584 $1,621,535 $1,043,654
Costs and expenses:
Cost of products sold............................ 2,022,253 1,279,646 825,709
Selling, general and administrative expenses..... 314,323 225,835 174,094
Depreciation and amortization.................... 17,466 12,273 9,452
2,354,042 1,517,754 1,009,255
Operating income................................... 181,542 103,781 34,399
Equity in earnings of affiliated companies......... 1,673 6,550 5,657
Interest expense................................... 24,987 30,061 29,145
Earnings before income taxes, minority interest
and extraordinary charges....................... 158,228 80,270 10,911
Provision for income taxes......................... 64,448 30,026 2,226
Earnings before minority interest
and extraordinary charges........................ 93,780 50,244 8,685
Minority interest.................................. 12,221 - -
Extraordinary charges.............................. - 5,424 -
Net income.........................................$ 81,559 $ 44,820 $ 8,685
Net income used in per common share
calculation (reflecting deduction of
preferred stock dividends).......................$ 80,679 $ 40,917 $ 4,089
Per common share:
Primary:
Earnings before extraordinary charges..........$ 2.62 $ 1.81 $ .28
Extraordinary charges.......................... - (.21) -
Net income.....................................$ 2.62 $ 1.60 $ .28
Fully diluted:
Earnings before extraordinary charges..........$ 2.43 $ 1.73 $ .28
Extraordinary charges.......................... - (.19) -
Net income.....................................$ 2.43 $ 1.54 $ .28
Average number of common shares and common
share equivalents outstanding:
Primary........................................ 30,766 25,547 14,484
Fully diluted.................................. 35,305 29,378 14,484
</TABLE>
See accompanying notes.
-17-
<TABLE>
ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
<CAPTION>
Years Ended December 31,
1993 1992 1991
<S> <C> <C> <C>
Cash flows from operating activities:
Net income.......................................$ 81,559 $ 44,820 $ 8,685
Adjustments to reconcile net income to net
cash provided by (used for) operations:
Minority interest in earnings................ 12,221 - -
Extraordinary charges........................ - 5,424 -
Special integration charge................... - - 9,850
Depreciation and amortization................ 19,898 14,692 12,690
Equity in undistributed earnings of
affiliated companies....................... (1,673) 2,551 14
Deferred taxes............................... 4,722 14,100 1,305
Prepaid income taxes......................... - - (3,974)
Change in assets and liabilities, net of
effects of acquired businesses:
Accounts receivable...................... (56,437) (3,276) (3,604)
Inventories.............................. (53,079) 8,552 (60)
Prepaid expenses and other assets........ 439 137 (159)
Accounts payable......................... 28,827 8,133 2,002
Accrued expenses......................... (3,983) (15,737) (11,086)
Accrued interest......................... 4,036 (4,594) 174
Other.................................... 5,158 (3,254) (1,719)
Net cash provided by operating activities........ 41,688 71,548 14,118
Cash flows from investing activities:
Acquisition of property, plant and equipment, net (16,817) (3,451) (3,781)
Cash consideration paid for acquired businesses.. (87,875) (37,183) (111,706)
Investment in and loans to affiliate............. (7,000) (9,949) -
Proceeds from sale of property................... - 4,757 -
Net cash used for investing activities...........(111,692) (45,826) (115,487)
Cash flows from financing activities:
Change in short-term borrowings ................. 16,860 (1,520) (201)
Proceeds from long-term debt..................... 61,781 85,533 184,756
Proceeds from common stock offering.............. 17,705 66,394 -
Proceeds from issuance of
subordinated debentures........................ - 125,000 -
Proceeds from preferred stock offering........... - 15,721 -
Proceeds from exercise of stock options.......... 3,560 5,737 1,069
Proceeds from minority partners.................. 2,993 - -
Repayment of long-term debt and subordinated
debentures..................................... (694) (311,656) (72,121)
Dividends paid................................... (880) (4,609) (4,596)
Financing fees paid.............................. (1,041) (4,467) (6,859)
Net cash provided by (used for)
financing activities........................... 100,284 (23,867) 102,048
Net increase in cash and
short-term investments........................... 30,280 1,855 679
Cash and short-term investments at
beginning of year................................ 3,393 1,538 859
Cash and short-term investments from affiliate
at beginning of year............................. 27,057 - -
Cash and short-term investments at end of year.....$ 60,730 $ 3,393 $ 1,538
Supplemental disclosures of cash
flow information:
Cash paid during the year for:
Income taxes...................................$ 44,114 $ 7,809 $ 3,532
Interest....................................... 19,835 31,461 26,872
</TABLE>
See accompanying notes.
-18-
<TABLE>
ARROW ELECTRONICS,INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(In thousands)
<CAPTION>
Preferred Common Capital Foreign Unamortized
Stock Stock in Excess Retained Currency Employee
at Par at Par of Par Earnings Translation Treasury Stock
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Value Value Value (Deficit) Adjustment Shares Awards Total
Balance at December 31, 1990 $237 $11,962 $136,624 $ (290) $ 3,614 $ (81) $ (894) $151,172
Issuance of common stock
for acquisitions - 7,765 62,116 - - - - 69,881
Exercise of stock options - 182 821 - - 66 - 1,069
Restricted stock awards, net - 11 119 - - (3) (127) -
Amortization of employee
stock awards - - - - - - 388 388
Net income - - - 8,685 - - - 8,685
Preferred stock cash dividends - - - (4,596) - - - (4,596)
Translation adjustments - - - - (763) - - (763)
Balance at December 31, 1991 237 19,920 199,680 3,799 2,851 (18) (633) 225,836
Issuance of common stock - 4,704 61,690 - - - - 66,394
Issuance of preferred stock 66 - 15,655 - - - - 15,721
Conversion of preferred stock (237) 3,615 (3,698) - - - - (320)
Exercise of stock options - 973 4,753 - - 11 - 5,737
Tax benefits related to
exercise of stock options - - 6,615 - - - - 6,615
Restricted stock awards, net - 84 920 - - (12) (992) -
Amortization of employee
stock awards - - - - - - 500 500
Net income - - - 44,820 - - - 44,820
Preferred stock cash dividends - - - (4,609) - - - (4,609)
Translation adjustments - - - - (9,369) - - (9,369)
Other - - (105) - - - - (105)
Balance at December 31, 1992 66 29,296 285,510 44,010 (6,518) (19) (1,125) 351,220
Issuance of common stock - 562 17,143 - - - - 17,705
Conversion of preferred stock (66) 1,009 (991) - - - - (48)
Exercise of stock options - 383 3,164 - - 13 - 3,560
Tax benefits related to
exercise of stock options - - 4,142 - - - - 4,142
Restricted stock awards, net - 48 1,235 - - (6) (1,277) -
Amortization of employee
stock awards - - - - - - 731 731
Net income - - - 81,559 - - - 81,559
Preferred stock cash dividends - - - (880) - - - (880)
Translation adjustments - - - - (974) - - (974)
Balance at December 31, 1993 $ - $31,298 $310,203 $124,689 $(7,492) $(12) $(1,671) $457,015
</TABLE>
See accompanying notes.
-19-
ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992, AND 1991
1. Summary of Significant Accounting Policies
Principles of Consolidation
The financial statements include the accounts of the company and its
consolidated subsidiaries. The company's investments in its affiliated
companies which are not majority-owned are accounted for using the
equity method. All significant intercompany transactions are eliminat-
ed.
Basis of Presentation
Certain prior year amounts have been reclassified to conform to the
current year's presentation.
Inventories
Inventories are stated at the lower of cost or market. Cost is deter-
mined on the first-in, first-out (FIFO) method.
Property and Depreciation
Depreciation is computed on the straight-line method for financial
reporting purposes and on accelerated methods for tax reporting purpos-
es. Leasehold improvements are amortized over the shorter of the term
of the related lease or the life of the improvement.
Cost in Excess of Net Assets of Companies Acquired
The cost in excess of net assets of companies acquired is being amor-
tized on a straight-line basis, principally over 40 years.
Foreign Currency
The assets and liabilities of foreign operations are translated at the
exchange rates in effect at the balance sheet date, with the related
translation gains or losses reported as a separate component of share-
holders' equity. The results of foreign operations are translated at
the weighted average exchange rates for the year. Gains or losses
resulting from foreign currency transactions, other than transactions
used to hedge the value of foreign investments, are included in the
statement of operations.
-20-
ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
Income Taxes
Effective January 1, 1991, the company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109"), which requires that the accounting for income taxes be on the
liability method. Deferred taxes reflect the tax consequences on future
years of differences between the tax bases of assets and liabilities and
their financial reporting amounts.
Net Income Per Common Share
Net income per common share is computed after deducting preferred stock
dividends and is based upon the weighted average number of shares of
common stock and common stock equivalents outstanding. The average
number of common stock equivalents was 631,973, 885,137, and 552,128 for
1993, 1992, and 1991, respectively.
Net income per common share on a fully diluted basis assumes that the
convertible exchangeable preferred shares and the convertible subordi-
nated debentures were converted to common stock at either the beginning
of each period or the date of issuance. The dividends related to the
convertible exchangeable preferred stock and the interest expense on the
5-3/4% convertible subordinated debentures, net of taxes, are eliminat-
ed. The 9% convertible subordinated debentures are not assumed to be
converted into common stock in 1992 as they would have been
antidilutive. For 1991, the aforementioned adjustments were not
required as they would have been antidilutive.
Cash and Short-term Investments
Short-term investments which have a maturity of ninety days or less at
time of purchase are considered cash equivalents in the statement of
cash flows. The carrying amount reported in the balance sheet for cash
and short-term investments approximates its fair value.
2. Acquisitions of Electronics Distribution Businesses
In January 1993, the company acquired an additional 15% share, for
approximately $25,145,000, in Spoerle Electronic Handelsgessellschaft
mbH and Co. and its general partner, Spoerle GmbH (collectively,
"Spoerle") the largest distributor of electronic components in Germany,
increasing its holdings to a 55% majority interest. In May 1993, the
company acquired the high-reliability electronic component distribution
and value-added service businesses of Zeus Components, Inc. ("Zeus").
In June 1993, the company acquired Microprocessor & Memory Distribution
Limited ("MMD"), a U.K.-based electronics distributor which focuses on
the distribution of high-technology semiconductor products. In August
1993, the company acquired Components Agent Limited, one of the largest
electronics distributors in Hong Kong. During the third quarter of 1993
the company acquired a majority interest in Amitron S.A. and the ATD
Group, electronics distributors serving the Spanish and Portuguese
markets. In November 1993, the company augmented its French operations
by acquiring CCI Electronique. The aggregate cost of the acquisitions
was $87,875,000, including $4,757,000 for non-competition agreements.
Each acquisition was accounted for as a purchase transaction beginning
in the month of acquisition.
-21-
ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
The following summarizes the allocation of the aggregate consider-
ation paid for the aforementioned acquisitions, except Spoerle, to the
fair market value of the assets acquired and liabilities assumed by the
company (in thousands):
Current assets:
Accounts receivable ..................$48,010
Inventories........................... 31,726
Other................................. 2,972 $ 82,708
Property, plant and equipment........... 3,876
Cost in excess of net assets of
acquired businesses................... 50,797
Other assets............................ 9,113
146,494
Current liabilities:
Accounts payable.....................$(30,412)
Accrued expenses..................... (35,374)
Other................................ (16,789) (82,575)
Net consideration paid................. $ 63,919
In February 1992, the company acquired the electronics distribution
businesses of Lex Service PLC ("Lex") in the U.K. and France, and
Spoerle acquired the electronics distribution business of Lex in
Germany. The aggregate cost of the acquisitions was $51,983,000, of
which $31,983,000 was paid in cash and $20,000,000 was paid in the form
of a 12% senior subordinated note due June 1997. The company financed
the cash portion of the purchase price through the sale of 66,196 shares
of newly-created series B preferred stock and bank borrowings in the
U.K. The German business of Lex was purchased by Spoerle for cash of
$14,800,000. The acquisitions of the European businesses of Lex are
being accounted for as purchase transactions effective February 28,
1992.
The following summarizes the allocation of the consideration paid
for the electronics distribution businesses in the U.K. and France to
the fair market value of the assets acquired and liabilities assumed by
the company (in thousands):
Current assets:
Accounts receivable.................$ 27,479
Inventories......................... 17,947
Other............................... 1,662 $ 47,088
Property, plant and equipment......... 2,975
Cost in excess of net assets of
acquired businesses.................. 21,065
Other assets......................... 3,150
74,278
Current liabilities:
Accounts payable.....................$(10,397)
Accrued expenses..................... (26,698) (37,095)
Net consideration paid............... $ 37,183
-22-
ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
In September 1991, the company acquired the North American
electronics distribution businesses of Lex, consisting of Lex Electron-
ics Inc. and Almac Electronics Corporation (collectively the "North
American businesses"). The aggregate cost of the acquisition was
$173,257,000, including $7,292,000 for a five-year non-competition
agreement, and payment consisted of $111,706,000 of cash and 6,839,000
shares of the company's common stock valued at $61,551,000. The cash
portion of the purchase price was financed under the company's U.S.
credit agreement. The acquisition of the North American businesses has
been accounted for as a purchase transaction effective September 27,
1991.
In October 1991, the company acquired a 50% interest in Silverstar
Ltd. S.p.A. ("Silverstar") in exchange for 926,000 shares of common
stock valued at $8,330,000.
Set forth below is the unaudited pro forma combined summary of
operations for the years ended December 31, 1993 and 1992 as though each
of the acquisitions had been made on January 1, 1992.
1993 1992
(In thousands except per share data)
Sales..................................$2,658,000 $2,182,000
Operating income....................... 185,000 140,000
Earnings before extraordinary charges.. 83,000 51,000
Net income............................. 83,000 45,000
Per common share:
Primary:
Earnings before
extraordinary charges............ 2.63 1.78
Net income......................... 2.63 1.57
Fully diluted:
Earnings before
extraordinary charges............ 2.44 1.70
Net income......................... 2.44 1.52
Average number of common shares and common
share equivalents outstanding:
Primary.............................. 30,994 26,109
Fully diluted........................ 35,533 30,045
The unaudited pro forma combined summary of operations has been
prepared utilizing the historical financial statements of Arrow and the
acquired businesses. The unaudited pro forma combined summary of
operations does not reflect all sales attrition which may result from
the combination of Zeus and MMD with Arrow's businesses or the sales
attrition which may have resulted from the combination of the European
businesses. It also does not reflect the full cost savings the company
expects to achieve from the combination of the Zeus and MMD businesses
with its own.
-23-
ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
The 1992 unaudited pro forma combined summary of operations does
not reflect the cost savings achieved from the combination of the U.K.
business of Lex with its own or any sales attrition which may have
resulted from the combination.
The cost savings achieved result principally from reductions in
personnel performing duplicative functions and the elimination of
duplicative administrative facilities, selling and stocking locations,
and computer and telecommunications equipment. The unaudited pro forma
combined summary of operations does not purport to be indicative of the
results which actually would have been obtained if the acquisitions had
been made at the beginning of 1992.
The unaudited pro forma combined summary of operations includes
the effects of the purchase price allocation adjustments, the additional
interest expense on debt incurred in connection with the acquisitions as
if the debt had been outstanding from the beginning of the periods
presented, and the issuance of additional shares of the company's
preferred stock. The purchase price allocation adjustments include the
adjustment of the net assets acquired to fair market value and the
estimated costs associated with the integration of the businesses. Such
estimated costs include professional fees as well as real estate lease
termination costs, costs associated with the elimination of certain
redundant franchised lines, and severance and other expenses related to
personnel performing duplicative functions, all of which are associated
with facilities and personnel of the acquired businesses.
Early in 1994, the company acquired an additional 15% interest in
Spoerle, bringing its holdings to 70%, and increased its holdings in
Silverstar to a majority share. Silverstar will be consolidated into
the company's results in 1994. Additionally, the company acquired the
electronic component distribution business of Field Oy, the largest
distributor of electronic components in Finland, and TH:s Elektronik, a
leading distributor in Sweden and Norway.
3. Investments in Affiliated Companies
At December 31, 1993, the company had a 50% interest in Silverstar, the
largest distributor of electronic components in Italy. Prior to 1993
when it increased its holdings to a 55% majority interest, the company
had a 40% interest in Spoerle. The investment in Silverstar is account-
ed for using the equity method as was the investment in Spoerle prior to
1993. For the year ended December 31, 1993, Silverstar recorded net
sales of $158,546,000, gross profit of $46,111,000, income before taxes
of $8,959,000 and net income of $4,000,000. For the year ended December
31, 1992, Spoerle and Silverstar recorded net sales of $487,179,000,
gross profit of $135,200,000, income before income taxes of $32,185,000,
and net income of $26,082,000. For the year ended December 31, 1991,
Spoerle recorded net sales of $226,890,000, gross profit of $66,038,000,
-24-
ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
income before income taxes of $26,748,000, and net income of
$20,466,000. Such results are exclusive of interest expense associated
with financing the investment and purchase accounting adjustments
(including amortization of costs assigned to identifiable assets,
principally franchise agreements which are being amortized over 30
years, amortization over 40 years of costs in excess of the company's
interest in net assets acquired, and related income taxes). A summary
of Silverstar's balance sheet at December 31, 1993 and both affiliates'
balance sheets at December 31, 1992, exclusive of the aforementioned
adjustments, follows:
1993 1992
(In thousands)
Current assets........................... $ 94,624 $194,232
Noncurrent assets........................ 4,854 25,946
Total assets ....................... $ 99,478 $220,178
Current liabilities..................... $ 78,836 $106,912
Noncurrent liabilities.................. 7,822 17,603
Equity.................................. 12,820 95,663
Total liabilities and equity....... $ 99,478 $220,178
The above amounts have been translated from deutsche marks and lira
into U.S. dollars based on exchange rates in effect at the end of the
respective year or during such year.
4. Long-Term Debt and Subordinated Debentures
Long-term debt at December 31, 1993 and 1992 consisted of the
following:
1993 1992
(In thousands)
8.29% senior notes due 2000.................... $ 75,000 $ 75,000
U.S. credit agreement due 1998................. 35,000 -
Deutsche mark term loan due 2000............... 28,794 15,442
Pound sterling term loan due 1998.............. 18,596 7,573
Other obligations with various interest rates.. 1,634 3,131
159,024 101,146
Less installments due within one year......... 5,196 713
$ 153,828 $100,433
-25-
<PAGE>
ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
The senior notes are payable in three equal annual installments commenc-
ing in 1998. The senior notes restrict the payment of cash dividends,
limit long-term debt and short-term borrowings, and require net worth
and the ratio of operating cash flow to interest expense be maintained
at certain designated levels.
The company's credit agreement with a group of banks (the "U.S.
credit agreement") was amended in January 1994 to release all collater-
al, to increase to $175,000,000 the amount of loans available, to reduce
the borrowing rate, and to extend the maturity date to January 1998. At
February 24, 1994, the company had outstanding borrowings of $30,500,000
under the U.S. credit agreement and unused borrowing capacity of
$144,500,000.
At the company's option, the interest rate for loans under the
U.S. credit agreement is at the agent bank's prevailing prime rate (6%
at December 31, 1993) or the U.S. dollar London Interbank Offered Rate
("LIBOR") (3.25% at December 31, 1993) plus .75%. The company pays the
banks a commitment fee of .25% per annum on the aggregate unused portion
of the U.S. credit agreement.
The U.S. credit agreement restricts the payment of cash dividends,
limits long-term debt and short-term borrowings, and requires that
working capital, net worth, and the ratio of earnings to interest
expense be maintained at certain designated levels.
The company's wholly-owned German subsidiary has a 50,000,000
deutsche mark term loan from a group of German banks. The loan is
payable in installments and bears interest at deutsche mark LIBOR
(5.9375% at December 31, 1993) plus .75%. The loan is secured by an
assignment of the subsidiary's interest in profit distributions from
Spoerle and is guaranteed by the company. The obligations of the
company under the guarantee are subordinated to the company's obliga-
tions under the U.S. credit agreement and the senior notes.
In January 1994, in connection with the acquisition of an addi-
tional 15% interest in Spoerle, the company borrowed 25,000,000 deutsche
marks from the German banks thereby increasing the loan balance to
75,000,000 deutsche marks.
The company's wholly-owned U.K. subsidiary has a loan agreement
with a British bank which, as amended in June 1993, includes a
L8,000,000 term loan, payable in semi-annual installments from 1994
through 1998, and a revolving credit facility which provides for loans
of up to L5,000,000. Borrowings under the loan agreement bear interest
at sterling LIBOR (5.5% at December 31, 1993) plus 1.5% and are secured
by the assets and common stock of the subsidiary. The loan agreement
also requires that operating cash flow, as defined, and the ratio of
earnings to interest expense be maintained by the subsidiary at certain
designated levels.
-26-
ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
In April 1992, the company used the net proceeds of its common
stock offering to redeem $46,000,000 of its 13-3/4% subordinated
debentures and to repay approximately $13,000,000 of the company's 12%
senior subordinated note issued to Lex in connection with the acquisi-
tion of the European businesses. The redemption of the subordinated
debentures resulted in an extraordinary charge of $4,039,000 ($2,424,000
after taxes), reflecting the net unamortized discount and issuance
expenses of the subordinated debentures.
In November 1992, the company issued $125,000,000 of 5-3/4%
convertible subordinated debentures due in 2002. The debentures are
convertible at any time prior to maturity, unless previously redeemed,
into shares of the company's common stock, at a conversion price of
$33.125. The debentures are not redeemable at the option of the company
prior to October 1995. The net proceeds from the issuance of the
debentures together with the proceeds from the private placement of the
senior notes were used to redeem the balance of the 13-3/4% subordinated
debentures, the 12% subordinated debentures, and the 9% convertible
subordinated debentures, to repay the balance of the 12% senior subordi-
nated note issued to Lex, to repay the then existing term loan under the
U.S. credit agreement, and to provide the company with general working
capital. The redemption of the subordinated debentures and repayment of
the term loan resulted in an extraordinary charge of $4,925,000
($3,000,000 after taxes). The charge resulted from the amortization of
the net unamortized discount and issuance expenses.
The aggregate annual maturities of long-term debt and subordinated
debentures for each of the five years in the period ending December 31,
1998 are: 1994--$5,196,000; 1995--$5,053,000; 1996--$5,056,000; 1997--
$6,943,000; and 1998--$74,151,000.
The carrying amounts of the company's U.S. credit agreement and
foreign borrowings approximate their fair value. At December 31, 1993,
the closing price of the 5-3/4% convertible subordinated debentures on
the New York Stock Exchange was 140% of par. The estimated fair market
value of the 8.29% senior notes at December 31, 1993 was 106% of par.
5. Income Taxes
The provision for income taxes for 1993, 1992, and 1991 consisted
of the following:
1993 1992 1991
(In thousands)
Current
Federal..................... $39,106 $14,080 $ 5,200
State....................... 9,432 3,744 1,000
Foreign..................... 9,376 - -
57,914 17,824 6,200
Deferred
Federal..................... 2,760 9,869 (3,974)
State....................... 552 2,333 -
Foreign..................... 3,222 - -
6,534 12,202 (3,974)
$64,448 $30,026 $ 2,226
-27-
ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
The principal causes of the difference between the U.S. statutory
and effective income tax rates for 1993, 1992, and 1991 are as follows:
1993 1992 1991
(In thousands)
Provision at statutory rate... $55,380 $27,292 $ 3,710
State taxes, net of federal
benefit..................... 6,490 4,011 660
Minority interest............. (4,277) - -
Foreign tax rate differential 3,448 - -
Effect of equity income and
foreign loss................ (385) (1,199) (716)
Amortization of goodwill...... 1,124 775 513
Other differences............. 2,960 176 208
Tax benefit of loss and credit
carryforwards............... (292) (1,029) (2,149)
Income tax provision.......... $64,448 $30,026 $ 2,226
For financial reporting purposes in 1993, income before income
taxes attributable to the United States and foreign operations was
$120,112,000 and $38,116,000, respectively.
The significant components of the company's deferred tax assets
are as follows:
1993 1992
(In thousands)
Inventory reserves............ $ 4,913 $ 8,082
Acquired net operating loss
carryforwards............... 2,931 3,662
Other......................... 1,927 1,192
$ 9,771 $12,936
At December 31, 1993, the company had approximately $7,000,000 of
acquired U.S. net operating loss carryforwards available for tax return
purposes which expire in the years 2001 through 2006. Such carry-
forwards are subject to certain annual restrictions on the amount that
can be utilized for tax return purposes. In France, the company had
approximately $9,500,000 of net operating loss carryforwards, of which
approximately $8,900,000 was acquired, which expire through 1997. In
accordance with SFAS 109, the cost in excess of net assets of companies
acquired has been adjusted by $24,600,000 in conjunction with various
acquisitions to reflect the tax benefits of these net operating loss
carryforwards and other differences in the tax and book bases of the
assets and liabilities acquired. Included in other liabilities are
deferred tax liabilities of $11,954,000 and $11,436,000 at December 31,
1993 and 1992, respectively. The deferred tax liabilities are princi-
pally the result of the differences in the bases of the German assets
and liabilities for tax and financial reporting purposes.
-28-
<PAGE>
ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
6. Shareholders' Equity
The company has 2,000,000 authorized shares of serial preferred
stock with a par value of $1. In February 1992, the company issued
66,196 shares of newly-created series B $19.375 convertible exchangeable
preferred stock (the "series B preferred stock") for approximately
$15,721,000 to provide partial funding for the acquisition of the
European electronics distribution businesses of Lex.
In September 1993, the company completed the conversion of all of
its outstanding series B preferred stock into 1,009,086 shares of its
common stock. This conversion eliminated $1.3 million of annual
dividends.
In 1988, the company paid a dividend of one preferred share
purchase right on each outstanding share of common stock. Each right,
as amended, entitles a shareholder to purchase one one-hundredth of a
share of a new series of preferred stock at an exercise price of $50
(the "exercise price"). The rights are exercisable only if a person or
group acquired 20% or more of the company's common stock or announces a
tender or exchange offer that will result in such person or group
acquiring 30% or more of the company's common stock. Rights owned by
the person acquiring such stock or transferees thereof will automatical-
ly be void. Each other right will become a right to buy, at the
exercise price, that number of shares of common stock having a market
value of twice the exercise price. The rights, which do not have voting
rights, expire on March 2, 1998 and may be redeemed by the company at a
price of $.01 per right at any time until ten days after a 20% ownership
position has been acquired. In the event that the company merges with,
or transfers 50% or more of its consolidated assets or earning power to,
any person or group after the rights become exercisable, holders of the
rights may purchase, at the exercise price, a number of shares of common
stock of the acquiring entity having a market value equal to twice the
exercise price.
7. Employee Stock Plans
Restricted Stock Plan
Under the terms of the Arrow Electronics, Inc. Restricted Stock
Plan (the "Plan"), a maximum of 1,330,000 shares of common stock may be
awarded at the discretion of the Board of Directors to key employees of
the company. The company believes that as many as 50 employees may be
considered for awards under the Plan.
Shares awarded under the Plan may not be sold, assigned, trans-
ferred, pledged, hypothecated, or otherwise disposed of, except as
provided in the Plan. Shares awarded become free of such restrictions
over a four-year period. The company awarded 40,000 shares of common
stock in early 1994 to 35 key employees in respect of 1993, 49,250
shares of common stock to 35 key employees during 1993 (including 39,750
shares of common stock in early 1993 to 31 key employees in respect of
-29-
ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
1992), 84,000 shares of common stock to 32 key employees during 1992
(including 63,000 shares awarded in early 1992 to 30 key employees in
respect of 1991), and 11,000 shares of common stock to five key employ-
ees during 1991. Forfeitures of shares awarded under the Plan were
7,625, 11,875, and 2,875 during 1993, 1992, and 1991, respectively. The
aggregate market value of outstanding awards under the Plan at the
respective dates of award is being amortized over a four-year period and
the unamortized balance is included in shareholders' equity as unamor-
tized employee stock awards.
Stock Option Plan
Under the terms of the Arrow Electronics, Inc. Stock Option Plan
(the "Option Plan"), both nonqualified and incentive stock options were
authorized for grant to key employees at prices determined by the Board
of Directors in its discretion or, in the case of incentive stock
options, prices equal to the fair market value of the shares at the
dates of grant. Options currently outstanding have terms of ten years
and become exercisable in equal annual installments over two or three-
year periods from date of grant. In 1993, the shareholders of the
company approved an increase in the number of shares of common stock
authorized for stock options to an aggregate of 4,500,000 shares.
The following information relates to the Option Plan:
Year ended December 31,
1993 1992 1991
Options outstanding at
beginning of year...... 989,755 1,532,504 1,503,780
Granted.................. 367,250 473,900 268,550
Exercised................ (392,934) (978,446) (202,225)
Forfeited................ (36,337) (38,203) (37,601)
Options outstanding at
end of year............ 927,734 989,755 1,532,504
Prices per share of
options outstanding....$3.63-39.75 $3.63-28.25 $3.63-14.63
Average price per share
of options exercised... $9.06 $5.86 $5.29
Average price per share
of options outstanding. $17.02 $9.73 $6.21
Exercisable options...... 715,170 665,821 1,145,599
Options available for
future grant:
Beginning of year.... 748,959 1,184,656 165,605
End of year.......... 1,918,046 748,959 1,184,656
Stock Ownership Plan
The company maintains a noncontributory employee stock ownership
plan which enables most North American employees to acquire shares of
the company's common stock. Contributions, which are determined by the
Board of Directors, are in the form of company common stock or cash
which is used to purchase the company's common stock for the benefit of
participating employees. Contributions to the plan for 1993, 1992, and
1991 aggregated $2,525,000, $2,360,000, and $1,550,000, respectively.
-30-
ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
8. Retirement Plan
The company has a defined contribution plan for eligible employ-
ees, which qualifies under Section 401(k) of the Internal Revenue Code.
The company's contribution to the plan, which is based on a specified
percentage of employee contributions, amounted to $2,286,000,
$2,131,000, and $1,302,000 in 1993, 1992, and 1991, respectively.
9. Lease Commitments
The company leases certain office, warehouse, and other property
under noncancellable operating leases expiring at various dates through
2016. Rental expenses of noncancellable operating leases amounted to
$16,375,000 in 1993, $12,943,000 in 1992, and $11,588,000 in 1991.
Aggregate minimum rental commitments under all noncancellable operating
leases approximate $69,922,000, exclusive of real estate taxes, insur-
ance, and leases related to facilities closed in connection with the
integration of the acquired businesses. Such commitments on an annual
basis are: 1994-$15,012,000; 1995-$12,145,000; 1996-$9,858,000; 1997-
$6,859,000; 1998-$5,539,000 and $20,509,000 thereafter. The company's
obligations under capitalized leases are reflected as a component of
deferred income taxes and other liabilities.
10. Segment and Geographic Information
The company is engaged in one business segment, the distribution
of electronic components, systems, and related products. The geographic
distribution of consolidated sales, operating income, and identifiable
assets for 1993 and 1992 are as follows (in thousands):
Sales to Identifiable
Unaffiliated Operating Assets at
1993 Customers Income (Loss) December 31,
North America.... $1,890,615 $156,014 $ 717,566
Europe........... 600,935 40,153 367,102
Pacific Rim...... 44,034 1,706 57,416
Eliminations
and Corporate.. - (16,331) 35,849
$2,535,584 $181,542 1,177,933
Investment in affiliated company 13,371
Total assets at December 31, 1993 $1,191,304
-31-
ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
Sales to Identifiable
Unaffiliated Operating Assets at
1992 Customers Income (Loss) December 31,
North America.... $1,504,958 $116,007 $598,017
Europe........... 116,577 1,420 94,145
Pacific Rim...... - - -
Eliminations
and Corporate.. - (13,646) 23,838
$1,621,535 $103,781 716,000
Investments in affiliated companies 64,893
Total assets at December 31, 1992 $780,893
11. Quarterly Financial Data (Unaudited)
A summary of the company's quarterly results of operations for 1993
and 1992 follows:
First Second Third Fourth
Quarter Quarter Quarter Quarter
(In thousands except per share data)
1993:
Sales.......................$551,391 $584,069 $697,825 $702,299
Gross profit................ 120,091 120,847 136,876 135,517
Net income.................. 17,982 19,114 21,734 22,729
Per common share:...........
Primary .................. .59 .62 .69 .72
Fully diluted............. .55 .58 .64 .67
First Second Third Fourth
Quarter Quarter Quarter Quarter
(In thousands except per share data)
1992:
Sales.......................$378,679 $382,041 $407,421 $453,394
Gross profit................ 78,930 82,706 87,038 93,215
Earnings before
extraordinary charges..... 9,270 11,518 13,323 16,133
Net income.................. 9,270 9,094 13,323 13,133
Per common share:
Earnings before
extraordinary charges.... .38 .41 .47 .53
Extraordinary charges ..... - (.10) - (.10)
Net income.................... .38 .31 .47 .43
-32-
Item 9. Changes In and Disagreements with Accountants on
Accounting and Financial Disclosure.
None.
Part III
Item 10. Directors and Executive Officers of the Registrant.
See "Executive Officers" in the response to Item 1 above. In
addition, the information set forth under the heading "Election of
Directors" in the company's Proxy Statement filed in connection with the
Annual Meeting of Shareholders scheduled to be held May 10, 1994 hereby
is incorporated herein by reference.
Item 11. Executive Compensation.
The information set forth under the heading "Executive Compensation
and Other Matters" in the company's Proxy Statement filed in connection
with the Annual Meeting of Shareholders scheduled to be held May 10,
1994 hereby is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Manage-
ment.
The information on page 3 and under the heading "Election of
Directors" in the company's Proxy Statement filed in connection with the
Annual Meeting of Shareholders scheduled to be held May 10, 1994 hereby
is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions.
The information set forth under the heading "Executive Compensation
and Other Matters" in the company's Proxy Statement filed in connection
with the Annual Meeting of Shareholders scheduled to be held May 10,
1994 hereby is incorporated herein by reference.
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K.
(a)1. Financial Statements.
The financial statements listed in the accompanying index to
financial statements and financial statement schedules are filed as part
of this annual report.
2. Financial Statement Schedules.
The financial statement schedules listed in the accompanying
index to financial statements and financial statement schedules are
filed as part of this annual report.
-33-
All other schedules have been omitted since the required
information is not present or is not present in amounts sufficient to
require submission of the schedule, or because the information required
is included in the consolidated financial statements, including the
notes thereto.
ARROW ELECTRONICS, INC.
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
(Item 14 (a))
Page
Report of Ernst & Young, independent auditors 15
Consolidated balance sheet at December 31, 1993 and 1992 16
For the years ended December 31, 1993, 1992 and 1991:
Consolidated statement of operations 17
Consolidated statement of cash flows 18
Consolidated statement of shareholders' equity 19
Notes to consolidated financial statements for
the years ended December 31, 1993, 1992 and 1991 20
Consolidated schedules for the three years
ended December 31, 1993:
II - Amounts receivable from employees 45
VIII - Valuation and qualifying accounts 46
IX - Short-term borrowings 47
-34-
3. Exhibits.
(2)(a) Restated Agreement of Purchase and Sale,
dated as of September 20, 1987, between Ducommun Incorporated and Arrow
Electronics, Inc. (incorporated by reference to Exhibit 2(b) to the
company's Registration Statement on Form S-4, Commission File No.
33-17942).
(b) Letter Agreement dated January 11, 1988
between Ducommun Incorporated and Arrow Electronics, Inc. (incorporated
by reference to Exhibit 2(b) to the company's Current Report on Form 8-K
dated January 21, 1988, Commission File No. 1-4482).
(c) Acquisition Agreement, dated July 28, 1988,
between Craig, Hochreiter & Co., Incorporated and Arrow Electronics,
Inc., as amended and supplemented (incorporated by reference to Exhibit
2 to the company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1988, Commission File No. 1-4482).
(d)(i) Acquisition Agreement, dated July 6, 1989,
between Arrow Electronics (UK) Limited and Electrocomponents plc
(incorporated by reference to Exhibit 2(d)(i) to the company's Annual
Report on Form 10-K for the year ended December 31, 1989, Commission
File No. 1-4482).
(ii) English language translation of Acquisition
Agreement, dated July 6, 1989, between Spoerle Electronic Handelsgesell-
schaft mbH & Co. and Retron Manger Electronic GmbH and Eldi GmbH
Electronik Distributor (incorporated by reference to Exhibit 2(d)(ii) to
the company's Annual Report on Form 10-K for the year ended December 31,
1989, Commission File No. 1-4482).
(iii) Umbrella Agreement, dated July 6, 1989,
between Electrocomponents plc; Retron Elektronische Bauteile und Gerate
Handelsgesellschaft mbH, Manger Elektronik GmbH, and Eldi GmbH Elektro-
nik Distributor; Arrow Electronics, Inc.; Arrow Electronics (UK)
Limited; and Spoerle Electronic Handelsgesellschaft GmbH & Co. (incorpo-
rated by reference to Exhibit 2(d)(iii) to the company's Annual Report
on Form 10-K for the year ended December 31, 1989, Commission File No.
1-4482).
(e)(i) Agreement of Purchase and Sale, as amended,
by and among Lex Service PLC, Lex Burlington Inc., and Arrow Electron-
ics, Inc. (incorporated by reference to Exhibit 6(a) to the company's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1991,
Commission File No. 1-4482).
(ii) Stockholders' Agreement dated as of September
27, 1991 by and among Arrow Electronics, Inc., Lex Service PLC, and Lex
Burlington Inc. (incorporated by reference to Exhibit 2(e)(ii) to the
company's Annual Report on Form 10-K for the year ended December 31,
1991, Commission File No. 1-4482).
(iii) Amendment No. 1 dated as of February 28, 1992
to the Stockholders' Agreement in (2)(e)(ii) above (incorporated by
reference to Exhibit 2(g)(iii) to the company's Annual Report on Form
10-K for the year ended December 31, 1991, Commission File No. 1-4482).
-35-
(iv) Amendment No. 2 dated as of July 30, 1992 to
the Stockholders' Agreement in (2)(e)(ii) above (incorporated by
reference to Exhibit 2(e)(iv) to the company's Annual Report on Form
10-K for the year ended December 31, 1992, Commission File No. 1-4482).
(v) Amendment No. 3 dated as of February 1, 1993
to the Stockholders' Agreement in (2)(e)(ii) above (incorporated by
reference to Exhibit 2(e)(v) to the company's Annual Report on Form 10-K
for the year ended December 31, 1992, Commission File No. 1-4482).
(vi) Registration Rights Agreement dated as of
September 27, 1991 by and among Arrow Electronics, Inc., Lex Service
PLC, and Lex Burlington Inc. (incorporated by reference to Exhibit
2(e)(iii) to the company's Annual Report on Form 10-K for the year ended
December 31, 1991, Commission File No. 1-4482).
(vii) Amendment No. 1 dated as of February 28, 1992
to the Registration Rights Agreement in (2)(e)(vi) above (incorporated
by reference to Exhibit (2)(g)(iv) to the company's Annual Report on
Form 10-K for the year ended December 31, 1991, Commission File No.
1-4482).
(viii) Amendment No. 2 dated as of July 30, 1992 to
the Registration Rights Agreement in (2)(e)(vi) above (incorporated by
reference to Exhibit (2)(e)(viii) to the company's Annual Report on Form
10-K for the year ended December 31, 1992, Commission File No. 1-4482).
(ix) Amendment No. 3 dated as of February 1, 1993
to the Registration Rights Agreement in (2)(e)(vi) above (incorporated
by reference to Exhibit (2)(e)(ix) to the company's Annual Report on
Form 10-K for the year ended December 31, 1992, Commission File No.
1-4482).
(f)(i) Share Purchase Agreement dated as of October
10, 1991 among EDI Electronics Distribution International B.V., Aquarius
Investments Ltd., Andromeda Investments Ltd., and the other persons
named therein (incorporated by reference to Exhibit 2.2 to the company's
Registration Statement on Form S-3, Registration No. 33-42176).
(ii) Standstill Agreement dated as of October 10,
1991 among Arrow Electronics, Inc., Aquarius Investments Ltd., Andromeda
Investments Ltd., and the other persons named therein (incorporated by
reference to Exhibit 4.1 to the company's Registration Statement on Form
S-3, Registration No. 33-42176).
(iii) Shareholder's Agreement dated as of October
10, 1991 among EDI Electronics Distribution International B.V., Giorgio
Ghezzi, Germano Fanelli, and Renzo Ghezzi.
(g) Asset Purchase Agreement, dated as of
February 12, 1993, between Zeus Components, Inc. and Arrow Electronics,
Inc. (incorporated by reference to Exhibit 10(1) to the company's Annual
Report on Form 10-K for the year ended December 31, 1992, Commission
File No. 1-4482).
(h) Agreement dated as of February 28, 1992 among
Lex Service PLC, Arrow Electronics (UK) Limited, EDI Electronics
Distribution International (France) SA, Arrow Electronics GmbH, and
Arrow Electronics, Inc. (incorporated by reference to Exhibit 2(1) to
the company's Current Report on Form 8-K, dated March 11, 1992, Commis-
sion File No. 1-4482).
-36-
(i) Subscription Agreement dated February 7,
1992, between Arrow Electronics, Inc. and various purchasers, pertaining
to the sale of the company's Series B $19.375 Convertible Exchangeable
Preferred Stock (incorporated by reference to Exhibit 2(h) to the
company's Annual Report on Form 10-K for the year ended December 31,
1991, Commission File No. 1-4482).
(3) (a) Amended and Restated Certificate of Incorpo-
ration of the company, as amended (incorporated by reference to Exhibit
4(1) to the company's Registration Statement on Form S-3, Registration
No. 33-67890).
(b) Certificate of Amendment of the Amended and
Restated Certificate of Incorporation of the company dated as of August
24, 1993 (incorporated by reference to Exhibit 4(2) to the company's
Registration Statement on Form S-3, Registration No. 33-67890).
(c) By-Laws of the company, as amended (incorpo-
rated by reference to Exhibit 3(b) to the company's Annual Report on
Form 10-K for the year ended December 31, 1986, Commission File No.
1-4482).
(4) (a) Indenture, including Debenture, dated as of
November 25, 1992 between the company and the Bank of Montreal Trust
Company, as Trustee, with respect to the company's 5-3/4% Convertible
Subordinated Debentures due 2004 (incorporated by reference to Exhibit
4(a) to the company's Annual Report on Form 10-K for the year ended
December 31, 1992, Commission File No. 1-4482).
(b)(i) Rights Agreement dated as of March 2, 1988
between Arrow Electronics, Inc. and Manufacturers Hanover Trust Company,
as Rights Agent, which includes as Exhibit A a Certificate of Amendment
of the Restated Certificate of Incorporation for Arrow Electronics, Inc.
for the Participating Preferred Stock, as Exhibit B a letter to share-
holders describing the Rights and a summary of the provisions of the
Rights Agreement and as Exhibit C the forms of Rights Certificate and
Election to Exercise (incorporated by reference to Exhibit 1 to the
company's Current Report on Form 8-K dated March 3, 1988, Commission
File No. 1-4482).
(ii) First Amendment, dated June 30, 1989, to the
Rights Agreement in (4)(b)(i) above (incorporated by reference to
Exhibit 4(b) to the Company's Current Report on Form 8-K dated June 30,
1989, Commission File No. 1-4482).
(iii) Second Amendment, dated June 8, 1991, to the
Rights Agreement in (4)(b)(i) above (incorporated by reference to
Exhibit 4(i)(iii) to the company's Annual Report on Form 10-K for the
year ended December 31, 1991, Commission File No. 1-4482).
(iv) Third Amendment, dated July 19, 1991, to the
Rights Agreement in (4)(b)(i) above (incorporated by reference to
Exhibit 4(i)(iv) to the company's Annual Report on Form 10-K for the
year ended December 31, 1991, Commission File No. 1-4482).
(v) Fourth Amendment, dated August 26, 1991, to
the Rights Agreement in (4)(b)(i) above (incorporated by reference to
Exhibit 4(i)(v) to the company's Annual Report on Form 10-K for the year
ended December 31, 1991, Commission File No. 1-4482).
-37-
(10)(a) Investment Management Agreement, dated as of
September 28, 1981, between the company and Fayez Sarofim & Co. (incor-
porated by reference to Exhibit 10(b)(ii) to the company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1981, Commission
File No. 1-4482).
(b)(i) Arrow Electronics Savings Plan, as amended
and restated through January 1, 1989 (incorporated by reference to
Exhibit 10(b)(i) to the company's Annual Report on Form 10-K for the
year ended December 31, 1989, Commission File No. 1-4482).
(ii) Amendment No. 1, dated December 7, 1989, to
the Arrow Electronics Savings Plan in (10)(b)(i) above (incorporated by
reference to Exhibit 10(b)(ii) to the company's Annual Report on Form
10-K for the year ended December 31, 1992, Commission File No. 1-4482).
(iii) Amendment No. 2, dated January 18, 1990, to
the Arrow Electronics Savings Plan in (10)(b)(i) above (incorporated by
reference to Exhibit 10(b)(ii) to the company's Annual Report on Form
10-K for the year ended December 31, 1991, Commission File No. 1-4482).
(iv) Amendment No. 3, dated February 21, 1992, to
the Arrow Electronics Savings Plan in (10)(b)(i) above (incorporated by
reference to Exhibit 10(b)(iv) to the company's Annual Report on Form
10-K for the year ended December 31, 1992, Commission File No. 1-4482).
(v) Supplement, dated September 27, 1991, to the
Arrow Electronics Savings Plan in (10)(b)(i) above (incorporated by
reference to Exhibit 10(b)(v) to the company's Annual Report on Form
10-K for the year ended December 31, 1992, Commission File No. 1-4482).
(vi) Supplement No. 3, dated August 24, 1993, to
the Arrow Electronics Savings Plan in 10(b)(i) above.
(vii) Arrow Electronics Stock Ownership Plan, as
amended and restated through January 1, 1989 (incorporated by reference
to Exhibit 10(b)(ii) to the company's Annual Report on Form 10-K for the
year ended December 31, 1989, Commission File No. 1-4482).
(viii) Amendment No. 1, dated November 29, 1989, to
the Arrow Electronics Stock Ownership Plan in (10)(b)(vii) above (incor-
porated by reference to Exhibit 10(b)(vii) to the company's Annual
Report on Form 10-K for the year ended December 31, 1992, Commission
File No. 1-4482).
(ix) Amendment No. 2, dated December 7, 1989, to
the Arrow Electronics Stock Ownership Plan in (10)(b)(vii) above (incor-
porated by reference to Exhibit 10(b)(viii) to the company's Annual
Report on Form 10-K for the year ended December 31, 1992, Commission
File No. 1-4482).
(x) Amendment No. 3, dated January 18, 1990, to
the Arrow Electronics Stock Ownership Plan in (10)(b)(vii) above
(incorporated by reference to Exhibit 10(b)(iv) to the company's Annual
Report on Form 10-K for the year ended December 31, 1991, Commission
File No. 1-4482).
(xi) Amendment No. 4, dated December 31, 1992 to
the Arrow Electronics Stock Ownership Plan in (10)(b)(vii) above (incor-
porated by reference to Exhibit 10(b)(x) to the company's Annual Report
on Form 10-K for the year ended December 31, 1992, Commission File No.
1-4482).
-38-
(xii) Supplement No. 1, dated September 8, 1992, to
the Arrow Electronics Stock Ownership Plan in (10)(b)(vii) above (incor-
porated by reference to Exhibit 10(b)(xi) to the company's Annual Report
on Form 10-K for the year ended December 31, 1992, Commission File No.
1-4482).
(xiii) Supplement No. 3, dated August 24, 1993, to
the Arrow Electronics Stock Ownership Plan in (10)(b)(vii) above.
(xiv) Capstone Electronics Corp. Profit-Sharing
Plan, effective January 1, 1990 (incorporated by reference to Exhibit
10(b)(iii) to the company's Annual Report on Form 10-K for the year
ended December 31, 1990, Commission File No. 1-4482).
(xv) Supplement No. 1, dated September 8, 1992, to
the Capstone Electronics Profit-Sharing Plan in (10)(b)(xiv) above
(incorporated by reference to Exhibit 10(b)(xiii) to the company's
Annual Report on Form 10-K for the year ended December 31, 1992,
Commission File No. 1-4482).
(xvi) Supplement No. 2, dated August 24, 1993, to
the Capstone Electronics Profit Sharing Plan in (10)(b)(xiv) above.
(c)(i) Employment Agreement, dated as of October 16,
1990, between the company and John C. Waddell (incorporated by reference
to Exhibit 10(c)(i) to the company's Annual Report on Form 10-K for the
year ended December 31, 1990, Commission File No. 1-4482).
(ii) Employment Agreement, dated as of March 13,
1991, between the company and Stephen P. Kaufman (incorporated by
reference to Exhibit 10(c)(ii) to the company's Annual Report on Form
10-K for the year ended December 31, 1990, Commission File No. 1-4482).
(iii) Employment Agreement, dated as of March 13,
1991, between the company and Robert E. Klatell (incorporated by
reference to Exhibit 10(c)(iii) to the company's Annual Report on Form
10-K for the year ended December 31, 1990, Commission File No. 1-4482).
(iv) Form of agreement between the company and the
employees parties to the Employment Agreements listed in 10(c)(i), (ii),
and (iii) above providing extended separation benefits under certain
circumstances (incorporated by reference to Exhibit 10(c)(iv) to the
company's Annual Report on Form 10-K for the year ended December 31,
1988, Commission File No. 1-4482).
(v) Form of Employment Agreement, dated as of
April 1, 1989, between the company and Robert J. McInerney (incorporated
by reference to Exhibit 10(c)(v) to the company's Annual Report on Form
10-K for the year ended December 31, 1989, Commission File No. 1-4482).
(vi) Form of Employment Agreement, dated as of
March 13, 1991, between the company and Steven W. Menefee (incorporated
by reference to Exhibit 10(c)(vi) to the company's Annual Report on Form
10-K for the year ended December 31, 1990, Commission File No. 1-4482).
(vii) Form of Employment Agreement, as amended and
restated as of January 1, 1990, between the company and Wesley S. Sagawa
(incorporated by reference to Exhibit 10(c)(vi) to the company's Annual
Report on Form 10-K for the year ended December 31, 1989, Commission
File No. 1-4482).
-39-
(viii) Form of Employment Agreement, dated as of
October 27, 1988, between the company and William J. Smith (incorporated
by reference to Exhibit 10(c)(v) to the company's Annual Report on Form
10-K for the year ended December 31, 1988, Commission File No. 1-4482).
(ix) Employment Agreement, dated as of October 19,
1990, between the company and Don E. Burton (incorporated by reference
to Exhibit 10(c)(ix) to the company's Annual Report on Form 10-K for the
year ended December 31, 1990, Commission File No. 1-4482).
(x) Employment Agreement, dated as of January 7,
1991, between the company and Betty Jane Scheihing (incorporated by
reference to Exhibit 10(c)(xi) to the company's Annual Report on Form
10-K for the year ended December 31, 1990, Commission File No. 1-4482).
(xi) Employment Agreement, dated as of January 7,
1991, between the company and John S. Smith (incorporated by reference
to Exhibit 10(c)(xii) to the company's Annual Report on Form 10-K for
the year ended December 31, 1990, Commission File No. 1-4482).
(xii) Employment Agreement, dated as of March 17,
1993, between the company and Jan Salsgiver.
(xiii) Form of agreement between the company and all
corporate Vice Presidents, including the employees parties to the
Employment Agreements listed in 10(c)(v)-(xii) above, providing extended
separation benefits under certain circumstances (incorporated by
reference to Exhibit 10(c)(ix) to the company's Annual Report on Form
10-K for the year ended December 31, 1988, Commission File No. 1-4482).
(xiv) Form of agreement between the company and
non-corporate officers providing extended separation benefits under
certain circumstances (incorporated by reference to Exhibit 10(c)(x) to
the company's Annual Report on Form 10-K for the year ended December 31,
1988, Commission File No. 1-4482).
(xv) Unfunded Pension Plan for Selected Executives
of Arrow Electronics, Inc. (incorporated by reference to Exhibit
10(c)(xv) to the company's Annual Report on Form 10-K for the year ended
December 31, 1990, Commission File No. 1-4482).
(xvi) English translation of the Service Agreement,
dated January 19, 1993, between Spoerle Electronic and Carlo Giersch
(incorporated by reference to Exhibit 10(f)(v) to the company's Annual
Report on Form 10-K for the year ended December 31, 1992, Commission
File No. 1-4482).
(d)(i) Senior Note Purchase Agreement, dated as of
December 29,1992, with respect to the company's 8.29% Senior Secured
Notes due 2000 (incorporated by reference to Exhibit 10(d) to the
company's Annual Report on Form 10-K for the year ended December 31,
1992, Commission File No. 1-4482).
(ii) First Amendment, dated as of December 22,
1993, to the Senior Note Purchase Agreement in 10(d)(i) above.
(e) Amended and Restated Credit Agreement dated
as of January 28, 1994 among Arrow Electronics, Inc., the several Banks
from time to time parties hereto, Bankers Trust Company and Chemical
Bank, as agents.
-40-
(f)(i) English translation of the Agreement of
Purchase and Sale, dated January 19, 1993, between Carlo Giersch and
Arrow Electronics GmbH with respect to the purchase of an additional 15%
interest in Spoerle Electronic (incorporated by reference to Exhibit
10(f)(i) to the company's Annual Report on Form 10-K for the year ended
December 31, 1992, Commission File No. 1-4482).
(ii) English translation of the Offer Agreement,
with supplemental letters attached, dated January 19, 1993, between
Arrow Electronics GmbH and Carlo Giersch with respect to the purchase of
a second 15% interest in Spoerle Electronic (incorporated by reference
to Exhibit 10(f)(ii) to the company's Annual Report on Form 10-K for the
year ended December 31, 1992, Commission File
No. 1-4482).
(iii) English translation of the Partnership
Agreement of Spoerle Electronic, dated January 19, 1993 (incorporated by
reference to Exhibit 10(f)(iii) to the company's Annual Report on Form
10-K for the year ended December 31, 1992, Commission File No. 1-4482).
(iv) English translation of the Articles of
Spoerle GmbH, dated as of January 1, 1993 (incorporated by reference to
Exhibit 10(f)(iv) to the company's Annual Report on Form 10-K for the
year ended December 31, 1992, Commission File No. 1-4482).
(g) Amendment and Restatement Agreement relating
to a Facilities Agreement dated February 28, 1992, between Arrow
Electronics (UK) Limited and National Westminster Bank PLC.
(h)(i) Credit Agreement, dated April 14, 1993,
between Berliner Handels- und Frankfurter Bank and Arrow Electronics
GmbH.
(ii) Amendment, dated January 28, 1994, to the
Credit Agreement in (10)(h)(i) above.
(iii) Guarantee, dated January 16, 1990, between
Arrow Electronics, Inc. and Berliner Handels- und Frankfurter Bank
(incorporated by reference to Exhibit 10(h)(ii) to the company's Annual
Report on Form 10-K for the year ended December 31, 1989, Commission
File No. 1-4482).
(iv) Subordination Agreement, dated January 16,
1990, between Berliner Handels- und Frankfurter Bank, Arrow Electronics,
Inc., and The First National Bank of Chicago (incorporated by reference
to Exhibit 10(h)(iii) to the company's Annual Report on Form 10-K for
the year ended December 31, 1989, Commission File No. 1-4482).
(v) First Amendment, dated December 29, 1992, to
the Subordination Agreement in (10)(h)(iv) above (incorporated by
reference to Exhibit 10(h)(iv) to the company's Annual Report on Form
10-K for the year ended December 31, 1992, Commission File No. 1-4482).
(vi) Second Amendment, dated January 26, 1993, to
the Subordination Agreement in (10)(h)(iv) above (incorporated by
reference to Exhibit 10(h)(v) to the company's Annual Report on Form
10-K for the year ended December 31, 1992, Commission File No. 1-4482).
-41-
(vii) Third Amendment, dated April 12, 1993, to the
Subordination Agreement in (10)(h)(iv) above.
(viii) Fourth Amendment, dated January 28, 1994, to
the Subordination Agreement in (10)(h)(iv) above.
(viv) Assignments, dated January 16, 1990, by Arrow
Electronics GmbH in favor of Berliner Handels- und Frankfurter Bank
(incorporated by reference to Exhibit 10(h)(iv) to the company's Annual
Report on Form 10-K for the year ended December 31, 1989, Commission
File No. 1-4482).
(i)(i) Arrow Electronics, Inc. Stock Option Plan, as
amended (incorporated by reference to Exhibit (27)(a) to the company's
Registration Statement on Form S-8, Registration No. 33-66594).
(ii) Form of Stock Option Agreement under (i)(i)
above (incorporated by reference to Exhibit 10(k)(ii) to the company's
Annual Report on Form 10-K for the year ended December 31, 1986,
Commission File No. 1-4482).
(iii) Form of Nonqualified Stock Option Agreement
under (i)(i) above (incorporated by reference to Exhibit 10(k)(iv) to
the company's Registration Statement on Form S-4, Registration No.
33-17942).
(j)(i) Restricted Stock Plan of Arrow Electronics,
Inc., as amended and restated (incorporated by reference to Exhibit
10(j)(i) to the company's Annual Report on Form 10-K for the year ended
December 31, 1991, Commission File No. 1-4482).
(ii) Form of Award Agreement under (j)(i) above
(incorporated by reference to Exhibit 10(l)(iv) to the company's
Registration Statement on Form S-4, Registration No. 33-17942).
(k) Form of Indemnification Agreement between the
company and each director (incorporated by reference to Exhibit 10(m) to
the company's Annual Report on Form 10-K for the year ended December 31,
1986, Commission File No. 1-4482).
(l) Share Purchase Agreement dated as of July 2,
1993 between Baring Brothers (Guernsey) Limited and Others and Arrow
Electronics (UK) Limited.
(m) Share Sale Agreement dated as of August 17,
1993 between Ocean Information Holdings Limited and Arrow Electronics,
Inc.
(11) Statement Re: Computation of Earnings Per
Share.
(22) List of Subsidiaries.
(24) Consent of Ernst & Young
(28) (i) Record of Decision, issued by the EPA on
September 28, 1990, with respect to environmental clean-up in Plant
City, Florida (incorporated by reference to Exhibit 28 to the company's
Annual Report on Form 10-K for the year ended December 31, 1990,
Commission File No. 1-4482).
-42-
(ii) Consent Decree lodged with the U.S. District
Court for the Middle District of Florida, Tampa Division, on December
18, 1991, with respect to environmental clean-up in Plant City, Florida
(incorporated by reference to Exhibit 28(ii) to the company's Annual
Report on Form 10-K for the year ended December 31, 1991, Commission
File No. 1-4482).
(b) Reports on Form 8-K
None.
-43-
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statements (Forms S-8 No. 33-66594, No. 33-48252, No. 33-20428 and No.
2-78185) and in the related Prospectuses pertaining to the employee
stock plans of Arrow Electronics, Inc., in Amendment No. 1 to the
Registration Statement (Form S-3 No. 33-67890) and in the related
Prospectus pertaining to the registration of 1,009,086 shares of Arrow
Electronics, Inc. Common Stock, and in Amendment No. 1 to the Registra-
tion Statement (Form S-3 No. 33-42176) and in the related Prospectus
pertaining to the registration of up to 944,445 shares of Arrow Elec-
tronics, Inc. Common Stock held by Aquarius Investments Ltd. and
Andromeda Investments Ltd. of our report dated February 24, 1994 with
respect to the consolidated financial statements and schedules of Arrow
Electronics, Inc. included in this Annual Report on Form 10-K for the
year ended December 31, 1993.
ERNST & YOUNG
New York, New York
March 25, 1994
-44-
ARROW ELECTRONICS, INC.
<TABLE>
SCHEDULE II - AMOUNTS RECEIVABLE FROM EMPLOYEES
For the three years ended December 31, 1993
<CAPTION>
Deductions
Balance at Amounts Balance
beginning Amounts written at end
of year Additions collected off of year
1993
<S> <C> <C> <C> <C> <C>
John C. Waddell (1) $ 120,000 $ - $ - $ - $ 120,000
1992
John C. Waddell (1) 120,000 - - - 120,000
1991
John C. Waddell (1) 120,000 - - - 120,000
(1) Demand note bearing interest at 12% per annum. The obligation was satisfied in full
in 1994.
</TABLE>
-45-
<TABLE>
ARROW ELECTRONICS, INC.
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
For the three years ended December 31, 1993
<CAPTION>
Additions
Balance at Balance
beginning Charged Charged at end
of year to income to other Write-offs of year
Allowance for
doubtful accounts
<C> <C> <C> <C> <C> <C>
1993 $8,268,000 $10,769,000 $3,060,000(1) $ 5,606,000 $16,491,000
1992 $7,734,000 $12,081,000 $1,288,000(2) $12,835,000 $ 8,268,000
1991 $5,678,000 $ 4,677,000 $5,589,000(3) $ 8,210,000 $ 7,734,000
(1) Represents the allowance for doubtful accounts of the electronics distribution
businesses acquired by the company in 1993 including Zeus Components, Inc., Microproces-
sor & Memory Distribution Limited, Amitron-Arrow S.A., ATD Electronica S.A., CCI
Electronique S.A., and Spoerle Electronic.
(2) Represents the allowance for doubtful accounts of the European electronics distribution
businesses acquired from Lex Service PLC in 1992.
(3) Represents the allowance for doubtful accounts of the North American electronics
distribution businesses acquired from Lex Service PLC in 1991.
</TABLE>
-46-
<TABLE>
ARROW ELECTRONICS, INC.
SCHEDULE IX - SHORT-TERM BORROWINGS
For the three years ended December 31, 1993
<CAPTION>
Maximum
Weighted amount Weighted
average outstanding Average average
interest at any amount interest
Balance at rate at month-end outstanding rate
end of end of during during during
the year the year the year the year the year
Short-term borrowings
<C> <C> <C> <C> <C> <C>
1993 $35,769,000 6.61% $35,769,999 $19,666,000 7.82%
1992 $ - - $ 399,000 $ 114,000 8.23%
1991 $1,520,000 8.00% $ 1,790,000 $ 341,000 13.53%
Short-term borrowings represent obligations payable under short-term lines of credit arrange-
ments with various banks. Borrowings were arranged on an as needed basis at either the bank's
prime lending rate or LIBOR plus various credit margins which vary from country to country in
1993, sterling LIBOR plus 2 1/4% in 1992, and sterling LIBOR plus 2% in 1991.
The average amount outstanding during the year was computed by averaging the total month-end
outstanding principal balances during the year. The weighted average interest rate for each
year was computed by dividing the interest expense by the average amount outstanding.
-47-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Registrant has duly
caused this annual report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ARROW ELECTRONICS, INC.
By/s/ Stephen P. Kaufman
Stephen P. Kaufman
President
March 30, 1994
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on
the dates indicated:
By/s/ Stephen P. Kaufman March 30, 1994
Stephen P. Kaufman, Principal
Executive Officer and Director
By/s/ Robert E. Klatell March 30, 1994
Robert E. Klatell, Senior Vice President,
Principal Financial Officer, and Director
By/s/ Paul J. Reilly March 30, 1994
Controller and Principal Accounting
Officer
By/s/ John C. Waddell March 30, 1994
John C. Waddell, Chairman of the
Board of Directors
By/s/ Thomas M. Davidson March 30, 1994
Thomas M. Davidson, Director
By/s/ Daniel W. Duval March 30, 1994
Daniel W. Duval, Director
By/s/ Carlo Giersch March 30, 1994
Carlo Giersch, Director
By/s/ J. Spencer Gould March 30, 1994
J. Spencer Gould, Director
By/s/ Lawrence R. Kem March 30, 1994
Lawrence R. Kem, Director
By/s/ Steven W. Menefee March 30, 1994
Steven W. Menefee, Director
By/s/ Richard S. Rosenbloom March 30, 1994
Richard S. Rosenbloom, Director
-48-
</TABLE>
Exhibit 11
<TABLE>
ARROW ELECTRONICS, INC.
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
<CAPTION>
Year Ended December 31,
1993 1992 1991 1990 1989
(In thousands except per share data)
Primary
<S> <C> <C> <C> <C> <C>
Average shares of common
stock outstanding 30,134 24,662 13,932 11,874 11,760
Net effect of dilutive
stock options - based
on the treasury method 632 885 552 52 -
Total 30,766 25,547 14,484 11,926 11,760
Net income $ 81,559 $ 44,820 $ 8,685 $ 10,105 $ 3,214
Less preferred stock
dividends (880) (3,903) (4,596) (4,899) (5,425)
Total $ 80,679 $ 40,917 $ 4,089 $ 5,206 $ (2,211)
Per share amount $ 2.62 $ 1.60 $ 0.28 $ 0.44 $ (0.19)
Fully Diluted
Average shares of common
stock outstanding 30,134 24,662 13,932 11,874 11,760
Net effect of dilutive
stock options - based
on the treasury method 706 902 637 75 -
Assumed conversion of 9%
convertible subordi-
nated debentures - - 851 862 862
Assumed conversion of
5-3/4% convertible sub-
ordinated debentures 3,774 381 - - -
Assumed conversion of
preferred stock 691 3,433 3,615 3,879 4,268
Total 35,305 29,378 19,035 16,690 16,890
Net income $ 81,559 $ 44,820 $ 8,685 $ 10,105 $ 3,214
Add interest on 9%
convertible subordi-
nated debentures,
net of income tax
effect - - 1,649 2,700 2,700
Add interest on 5-3/4%
convertible subordi-
nated debentures,
net of income tax
effect 4,313 455 - - -
Total $ 85,872 $ 45,275 $ 10,334 $ 12,805 $ 5,914
Per share amount $ 2.43 $ 1.54 $ 0.54(A)$ 0.77(A)$ 0.35(A)
(A) This calculation is submitted in accordance with Regulation S-K Item 601(b)(11) although
it is contrary to paragraph 40 of APB Opinion No. 15 because it produces an anti-
dilutive result.
</TABLE>
SUBSIDIARY LISTING
The Company:
Arrow Electronics, Inc., a New York corporation
Subsidiaries:
Arrow Electronics International, Inc., A Virgin Islandscorporation
Arrow Electronics Canada Ltd., a Canadian corporation
Lex Electronics Ltd., a Canadian corporation
Arrow Electronics Credit Corporation, a Delaware corporation
Schuylkill Metals of Plant City, Inc., a Delaware corporation
Arrow Electronics International Inc., a Delaware corporation
Arrow Electronics (UK) Inc., a Delaware corporation
Arrow/TEK Ltd., a Japanese joint venture (50% owned)
Capstone Electronics Corp., a Delaware corporation
High Tech Ad, Inc., a New York corporation
Arrow-Field Oy, a Finnish company
Arrow-TH:s Elektronik AB, a Swedish company
ARROW Electronics Distribution Group - Europe B.V., a Dutch company and
Subsidiaries which include (1):
Arrow Electronics (UK) Limited, a British company
RR Electronics Limited, a British company
Axiom Electronics Limited, a British company
Jermyn Holdings Limited, a British company and Subsidiaries
Microprocessor & Memory Distribution Ltd., a British company
EDI Electronics Distribution International (France) SA, a French company
Arrow Electronique S.A., a French company
Generim S.A., a French company
Feutrier S.A., a French company
CCI Electronique S.A., a French company
Arrow Electronics GmbH, a German company (2)
ARROW ATD Netherlands B.V., a Dutch company (3)
ARROW Amitron Netherlands B.V., a Dutch company (4)
(1) ARROW Electronics Distribution Group - Europe B.V. also owns 61% of
the shares of Silverstar Ltd. S.p.A. (which owns other Italian
subsidiaries).
(2) Arrow Electronics GmbH owns a 70% interest in Spoerle Electronic
Handelgesellschaft mbH (which owns subsidiaries in Germany, Holland,
Belgium, Switzerland, and Austria).
(3) ARROW ATD Netherlands B.V. owns 55% of the shares of ATD
Electronica S.A..
(4) ARROW Amitron Netherlands B.V. owns 55% of the shares of
Amitron-Arrow S.A..
Components Agent Limited, a British Virgin Islands company and
Subsidiaries which include:
Components Agent Limited, a Hong Kong company
Components Agent China Limited, a Hong Kong company
Components Agent Korea Limited, a Hong Kong company
Components Agent Taiwan Limited, a Hong Kong company
Components Assembly & Sales Pte Ltd, a Singapore company
Casl. (M) Sdn. Berhad, a Malaysian company
FIRST AMENDMENT
TO
SENIOR NOTE PURCHASE AGREEMENT
Arrow Electronics, Inc.
$75,000,000 8.29% Senior Secured Notes Due 2000
THIS FIRST AMENDMENT (the "Amendment") to those
several Senior Note Purchase Agreements each dated as
of December 29, 1992 (collectively referred to herein
as the "Purchase Agreements" and individually as a
"Purchase Agreement"), is made as of December 22, 1993,
by and among ARROW ELECTRONICS INC., a New York corpo-
ration (the "Company"), and the several Purchasers
named in Schedule I hereto (hereinafter, together with
their respective successors and assigns, collectively
called the "Purchasers" and individually a
"Purchaser"). Capitalized terms used herein without
definition shall have the respective meanings ascribed
to such terms in the Purchase Agreements, as hereby
amended.
WHEREAS, the Purchasers and the Company are
parties to the Purchase Agreements, pursuant to which
the Purchasers were issued, in the respective amounts
set forth opposite their names on Schedule I thereto,
$75,000,000 aggregate principal amount of the Company's
8.29% Senior Secured Notes Due 2000 (the "Senior
Notes"); and
WHEREAS, the Company and the Purchasers desire to
amend the Purchase Agreements as provided herein, upon
the terms and conditions set forth herein;
NOW THEREFORE, in consideration of the terms and
conditions contained herein and of other good and
valuable consideration the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree
as follows:
1. Amendments to the Purchase Agreements. Subject to
the satisfaction of the conditions specified in Section
3 hereof, the Purchase Agreements are hereby amended as
follows:
(A) Reference in the Purchase Agreements to "this
Agreement" (and indirect references such as
"hereunder", "hereby", "herein" and "hereof") shall be
deemed to be references to the Purchase Agreement as
amended hereby.
(B) Section 8.01(j) of each Purchase Agreement
shall be amended by adding the following phrase
following subclause (y) of that Section:
"plus (z) Guarantees by the Company of
the Indebtedness of the Foreign Subsidiaries
permitted pursuant to Section 8.08(iv)"
(C) Section 8.04 of each Purchase Agreement shall
be amended by deleting such section in its entirety and
replacing it with the following:
"Section 8.04. Restricted
Payments. The Company will not, and
will not permit any of its Subsidiaries
to, make any Restricted Payments, except
that the Company and its Subsidiaries
may make Restricted Payments in an
aggregate amount not to exceed the sum
of (x) $50,000,000 plus (y) 45% of
cumulative Consolidated Net Income from
Operations from January 1, 1993 to the
date of such Restricted Payment or, if
such cumulative Consolidated Net Income
from Operations is a deficit figure,
then minus 100% of such deficit (provi-
ded that Consolidated Finance Charges
attributable to any Subsidiary shall not
be deducted in the determination of
Consolidated Net Income for purposes of
calculating Consolidated Net Income from
Operations to the extent that the net
earnings of such Subsidiary have been
excluded from the calculation of Consol-
idated Net Income from Operations pursu-
ant to clause (e) of the definition of
such term), provided that the amount
determined pursuant to this clause (y),
if a negative number, shall not reduce
the amount available pursuant to clause
(x), plus (z) 100% of the Net Proceeds
from sales of capital stock of the
Company which is not mandatorily
redeemable or otherwise subject to
mandatory repurchase, retirement, call,
put or other reacquisition (or accelera-
tion of any thereof) prior to or on the
maturity date of the Senior Notes.
Without regard to the foregoing restric-
tion, so long as no Default or Event of
Default under subsection (a) or (b) of
Section 9.01 has occurred and is
continuing, the Company shall be permit-
ted to (i) purchase the remaining
capital stock not owned on the Closing
Date by the Company of Spoerle GmbH, a
German corporation, (ii) purchase the
remaining capital interest not owned by
the Company on the Closing Date of
Spoerle Electronic Handelsgesellschaft
mbH & Co., a German partnership, (iii)
make any Investment in Silverstar S.p.A.
Ltd., an Italian corporation
("Silverstar"), in an aggregate amount
not to exceed $20,000,000, and there-
after, purchase the remaining capital
stock of Silverstar not owned by the
-2-
Company on the Closing Date, (iv) at any
time, whether or not at such time any
Consolidated Net Income from Operations
is available under clause (y) above for
Restricted Payments, redeem shares of
its Series B convertible exchangeable
preferred stock, provided that the
amount of such payments made shall
reduce, dollar for dollar, the amount of
Consolidated Net Income from Operations
that would otherwise be available for
Restricted Payments pursuant to clause
(y) of the preceding sentence, (v) pay
regular dividends on the outstanding
shares of such preferred stock, and (vi)
make Investments up to an aggregate of
$15,000,000 for the purpose of acquiring
the assets or capital stock or ownership
interest of any Person or Persons;
provided, however, that the maximum
amount of proceeds of any Indebtedness
incurred by the Company and its
Subsidiaries other than its Foreign
Subsidiaries (excluding any Guarantees
by the Company or any of its
Subsidiaries of Indebtedness of Foreign
Subsidiaries, so long as such Guarantees
are permitted under clause (iii) of
Section 8.08 ("Permitted Guarantees")),
which may be applied to the purchases
described in clauses (i), (ii) and (iii)
of this sentence shall not exceed
$50,000,000 in the aggregate in each of
the first four fiscal years following
the Closing Date, and provided, further,
that Permitted Guarantees shall not
constitute Restricted Payments hereunder
but Guarantees permitted pursuant to
Section 8.08(iv) shall constitute
Restricted Payments hereunder."
(D) Section 8.08 of each Purchase Agreement shall
be amended by deleting such Section in its entirety and
replacing it with the following:
"Section 8.08. Limitation on
Guarantees. The Company will not, and
will not permit any of its Subsidiaries
to, assume, guarantee, endorse,
contingently agree to purchase or
otherwise become liable upon the
obligation of any Person except: (i)
the Subsidiary Guarantees, (ii)
Guarantees of purchase orders made in
the ordinary course of business, (iii)
Guarantees by the Company of contractual
obligations of any Foreign Subsidiary,
provided that such Guarantees are
unsecured and are expressly subordinated
(on terms substantially similar to those
set forth in the Subordination Agreement
included in the Security Documents) to
the obligations of the Company under
this Agreement, the Other Agreements and
-3-
the Senior Notes, (iv) other Guarantees
by the Company or any of its
Subsidiaries of contractual obligations
of any Foreign Subsidiary which would
not be permitted pursuant to subclause
(iii) hereof, so long as, immediately
after giving effect to any such
Guarantee, the Company continues to be
in compliance with Sections 8.01(j) and
8.04 and (v) Guarantees by Subsidiaries
of the Company not otherwise prohibited
under applicable provisions of this
Agreement."
(E) Section 8.12 of each Purchase Agreement shall
be amended by deleting such Section in its entirety and
replacing it with the following:
"Section 8.12. Consolidated Total
Debt. As of the last day of any
quarterly or annual fiscal period during
the periods set forth below, the Company
will not permit Consolidated Total Debt
to exceed the percentage of Total
Consolidated Capitalization set forth
below opposite such period:
Period Percentage
Closing Date through
December 31, 1993 60%
January 1, 1994 through
December 31, 1995 55%
January 1, 1996 and
thereafter 50%
provided, however, that the applicable
percentage under this Section 8.12 shall
be 50% at all times from and after the
release of the Collateral pursuant to
Section 8.15."
2. Representations and Warranties. In order to
induce the Purchasers to enter into this Amendment, the
Company represents and warrants to each Purchaser that:
(A) The representations and warranties of the
Company contained in the Purchase Agreements are true
on and as of the date hereof to the same extent as if
made on and as of the date hereof, except as set forth
in the Schedules attached hereto and except to the
extent that such representations and warranties
specifically relate to an earlier date, in which case
they are true as of such earlier date; and
(B) The execution, delivery and performance by
the Company of this Amendment is within its corporate
powers and has been duly authorized by all necessary
corporate action on the part of the Company; and this
-4-
Amendment constitutes the legal, valid and binding
obligation of the Company, enforceable against the
Company in accordance with its terms, except as such
enforcement may be affected by any applicable
bankruptcy, insolvency, moratorium, reorganization or
similar laws affecting the enforcement of creditors'
rights generally or by general principles of equity.
3. Conditions Precedent. As provided in Section 1
above, the amendments set forth in Section 1 shall
become and be effective upon the satisfaction of the
following conditions:
(A) All corporate and other proceedings taken or
to be taken in connection with this Amendment and all
documents incident hereto shall be satisfactory in form
and substance to the Purchasers, and the Purchasers
shall have received all such counterpart originals or
certified or other copies of such documents as they may
reasonably request.
(B) The Company shall have duly executed a
counterpart of this Amendment and delivered same to the
Purchasers or their representatives.
(C) The Purchasers shall have received evidence
that the fees of special counsel to the Purchasers
referred to in Section 6 hereof shall have been paid in
full.
4. Effect of Amendment. It is hereby agreed that,
except as specifically provided herein, this Amendment
does not in any way affect or impair the terms, condi-
tions and other provisions of the Purchase Agreements
or the obligations of the Company thereunder, and all
terms, conditions and other provisions of the Purchase
Agreements, shall remain in full force and effect
except to the extent specifically amended or modified
pursuant to the provisions of this Amendment.
5. Counterparts. This Amendment may be executed in
any number of counterparts, each of which shall be
deemed an original, and all of which taken together
shall be deemed to constitute one and the same
instrument.
6. Costs and Expenses. As provided in Section 10.02
of the Purchase Agreements, the Company agrees to pay
on demand all fees, costs and expenses incurred by the
Purchasers in connection with the negotiation, prepara-
tion, execution and delivery of this Amendment and all
other documents executed pursuant to or in connection
herewith, including, without limitation, the fees and
disbursements of Sonnenschein Nath & Rosenthal, special
counsel to the Purchasers, in connection herewith.
-5-
7. Governing Law. THIS AMENDMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH AND SHALL BE GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE
CHOICE OF LAW PRINCIPLES OF SUCH STATE).
8. Headings; Miscellaneous. Section headings are
included herein for convenience of reference only and
shall not constitute a part of this Amendment for any
other purposes.
-6-
IN WITNESS WHEREOF, the parties hereto have
executed this Amendment as of the day and year first
written above.
COMPANY:
ARROW ELECTRONICS, INC.
By:
Name:
Title:
PURCHASERS:
PRINCIPAL MUTUAL LIFE INSURANCE
CO.
By:
Name:
Title:
By:
Name:
Title:
TEACHERS INSURANCE & ANNUITY
ASSOCIATION OF AMERICA
By:
Name:
Title:
CIGNA PROPERTY AND CASUALTY
INSURANCE COMPANY
By: CIGNA Investments, Inc.
By:_____________________
Name:
Title:
CONNECTICUT GENERAL LIFE
INSURANCE COMPANY
By: CIGNA Investments, Inc.
By:_____________________
Name:
Title:
LIFE INSURANCE COMPANY OF NORTH
AMERICA
By: CIGNA Investments, Inc.
By: ____________________
Name:
Title:
LIFE INSURANCE COMPANY OF
GEORGIA
By: Investment Centre, Inc.
its agent
By: ____________________
Name:
Title:
SOUTHLAND LIFE INSURANCE
COMPANY
By: Investment Centre, Inc.
its agent
By: ______________________
Name:
Title:
PEERLESS INSURANCE COMPANY
By: Investment Centre, Inc.
its agent
By: ____________________
Name:
Title:
CONSOLIDATED INSURANCE COMPANY
Investment Centre, Inc.
its agent
By: ______________________
Name:
Title:
-7-
CONFORMED EXECUTION COPY
AMENDED AND RESTATED CREDIT AGREEMENT
among
ARROW ELECTRONICS, INC.,
The Several Banks
from Time to Time Parties Hereto,
BANKERS TRUST COMPANY
and
CHEMICAL BANK,
as Agents
Dated as of January 28, 1994
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS . . . . . . . . . . . . . . 3
1.1 Defined Terms . . . . . . . . . . . . . . 3
1.2 Other Definitional Provisions . . . . . . 20
1.3. Accounting Determinations . . . . . . . . 21
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS . . . . 21
2.1 Revolving Credit Commitments. . . . . . . 21
2.2 Revolving Credit Notes. . . . . . . . . . 21
2.3 Procedure for Revolving Credit
Borrowing . . . . . . . . . . . . . . . . 22
2.4 Swing Line Loans. . . . . . . . . . . . . 23
2.5 Swing Line Notes. . . . . . . . . . . . . 23
2.6 Procedure for Swing Line Borrowing. . . . 23
2.7 Allocating Swing Line Loans; Swing Line
Loan Participations . . . . . . . . . . . 24
2.8 Commitment Fee. . . . . . . . . . . . . . 25
2.9 Termination or Reduction of Commitments . 26
2.10 Optional Prepayments . . . . . . . . . . 26
2.11 Conversion and Continuation Options. . . 27
2.12 Minimum Amounts and Number of Tranches . 27
2.13 Interest Rates and Payment Dates . . . . 28
2.14 Computation of Interest and Fees . . . . 28
2.15 Inability to Determine Interest Rate . . 29
2.16 Pro Rata Treatment and Payments. . . . . 29
2.17 Illegality . . . . . . . . . . . . . . . 30
2.18 Requirements of Law. . . . . . . . . . . 31
2.19 Taxes. . . . . . . . . . . . . . . . . . 32
2.20 Company's Options upon Claims for
Increased Costs and Taxes. . . . . . . . 34
2.21 Indemnity. . . . . . . . . . . . . . . . 35
2.22 Determinations . . . . . . . . . . . . . 36
2.23 Change of Lending Office . . . . . . . . 36
SECTION 3. LETTERS OF CREDIT . . . . . . . . . . . 36
3.1 L/C Commitment. . . . . . . . . . . . . . 36
3.2 Procedure for Issuance of Letters of
Credit. . . . . . . . . . . . . . . . . . 37
3.3 Fees, Commissions and Other Charges.. . . 37
3.4 L/C Participations. . . . . . . . . . . . 38
3.5 Reimbursement Obligation of the
Company.. . . . . . . . . . . . . . . . . 39
3.6 Obligations Absolute. . . . . . . . . . . 40
3.7 Letter of Credit Payments.. . . . . . . . 40
3.8 Application.. . . . . . . . . . . . . . . 40
SECTION 4. REPRESENTATIONS AND WARRANTIES. . . . . 41
4.1 Financial Condition . . . . . . . . . . . 41
4.2 No Change . . . . . . . . . . . . . . . . 42
4.3 Corporate Existence; Compliance with
Law . . . . . . . . . . . . . . . . . . . 42
4.4 Corporate Power; Authorization;
Enforceable Obligations . . . . . . . . . 42
4.5 No Legal Bar. . . . . . . . . . . . . . . 43
4.6 No Material Litigation. . . . . . . . . . 43
4.7 No Default. . . . . . . . . . . . . . . . 43
4.8 Ownership of Property; Liens. . . . . . . 43
4.9 Intellectual Property . . . . . . . . . . 43
4.10 No Burdensome Restrictions . . . . . . . 44
4.11 Taxes. . . . . . . . . . . . . . . . . . 44
4.12 Federal Regulations. . . . . . . . . . . 44
4.13 ERISA. . . . . . . . . . . . . . . . . . 44
4.14 Investment Company Act; Other
Regulations. . . . . . . . . . . . . . . 45
4.15 Subsidiaries . . . . . . . . . . . . . . 46
4.16 Existing Indebtedness. . . . . . . . . . 46
4.17 Accuracy and Completeness of
Information. . . . . . . . . . . . . . . 46
4.18 Purpose of Loans . . . . . . . . . . . . 47
4.19 Senior Indebtedness. . . . . . . . . . . 47
4.20 Environmental Matters. . . . . . . . . . 47
SECTION 5. CONDITIONS PRECEDENT. . . . . . . . . . 48
5.1 Conditions to Closing Date. . . . . . . . 48
5.2 Conditions to Each Extension of Credit. . 51
SECTION 6. AFFIRMATIVE COVENANTS . . . . . . . . . 52
6.1 Financial Statements. . . . . . . . . . . 52
6.2 Certificates; Other Information . . . . . 54
6.3 Payment of Obligations. . . . . . . . . . 55
6.4 Conduct of Business and Maintenance of
Existence . . . . . . . . . . . . . . . . 55
6.5 Maintenance of Property; Insurance. . . . 55
6.6 Inspection of Property; Books and
Records; Discussions. . . . . . . . . . . 56
6.7 Notices . . . . . . . . . . . . . . . . . 56
6.8 Environmental Laws. . . . . . . . . . . . 57
6.9 Additional Subsidiary Guarantees. . . . . 57
SECTION 7. NEGATIVE COVENANTS. . . . . . . . . . . 58
7.1 Financial Condition Covenants . . . . . . 58
7.2 Limitation on Indebtedness of Domestic
Subsidiaries. . . . . . . . . . . . . . . 58
7.3 Limitation on Liens . . . . . . . . . . . 58
7.4 Limitation on Fundamental Changes . . . . 59
7.5 Limitation on Restricted Payments . . . . 59
7.6 Limitation on Negative Pledge Clauses . . 60
7.7 Limitation on Optional Payments;
Modifications of Debt Instruments . . . . 60
SECTION 8. EVENTS OF DEFAULT . . . . . . . . . . . 61
SECTION 9. THE ADMINISTRATIVE AGENT; THE AGENTS
AND THE COLLATERAL AGENT. . . . . . . . 64
9.1 Appointment . . . . . . . . . . . . . . . 64
9.2 Delegation of Duties. . . . . . . . . . . 64
9.3 Exculpatory Provisions. . . . . . . . . . 64
9.4 Reliance by Administrative Agent. . . . . 65
9.5 Notice of Default . . . . . . . . . . . . 65
9.6 Non-Reliance on Administrative Agent and
Other Banks . . . . . . . . . . . . . . . 66
9.7 Indemnification . . . . . . . . . . . . . 66
9.8 Administrative Agent in Its Individual
Capacity. . . . . . . . . . . . . . . . . 67
9.9 Successor Administrative Agent. . . . . . 67
9.10 The Agents; The Collateral Agent . . . . 68
SECTION 10. MISCELLANEOUS. . . . . . . . . . . . . 68
10.1 Amendments and Waivers . . . . . . . . . 68
10.2 Notices. . . . . . . . . . . . . . . . . 69
10.3 No Waiver; Cumulative Remedies . . . . . 69
10.4 Survival of Representations and
Warranties . . . . . . . . . . . . . . . 70
10.5 Payment of Expenses and Taxes. . . . . . 70
10.6 Successors and Assigns; Participations
and Assignments. . . . . . . . . . . . . 71
10.7 Adjustments; Set-off . . . . . . . . . . 75
10.8 Counterparts . . . . . . . . . . . . . . 76
10.9 Severability . . . . . . . . . . . . . . 76
10.10 Integration . . . . . . . . . . . . . . 76
10.11 GOVERNING LAW . . . . . . . . . . . . . 76
10.12 Submission To Jurisdiction; Waivers . . 76
10.13 Acknowledgements. . . . . . . . . . . . 77
10.14 WAIVERS OF JURY TRIAL . . . . . . . . . 77
SCHEDULES
I - Commitments
4.13 - Excluded ERISA Arrangements
4.15 - Subsidiaries
4.16 - Existing Indebtedness
4.20 - Environmental Matters
EXHIBITS
Exhibit A - Form of Revolving Credit Note
Exhibit B - Form of Swing Line Note
Exhibit C - Form of Consent and Confirmation
Exhibit D - Form of Swing Line Loan Participation
Certificate
Exhibit E - Form of Borrowing Certificate
Exhibit F-1 - Form of Opinion of Winthrop, Stimson,
Putnam & Roberts
Exhibit F-2 - Form of Opinion of Robert E. Klatell
Exhibit G - Form of Certificate Pursuant to
Subsection 6.2
Exhibit H - Form of Assignment and Acceptance<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT, dated
as of January 28, 1994, among ARROW ELECTRONICS, INC.,
a New York corporation (the "Company"), the several
banks and other financial institutions from time to
time parties to this Agreement (the "Banks"), BANKERS
TRUST COMPANY, a New York corporation ("Bankers
Trust"), and CHEMICAL BANK, a New York banking corpo-
ration ("Chemical"), as agents for the Banks hereunder
(in such capacity, the "Agents"), BANKERS TRUST
COMPANY, as Collateral Agent (in such capacity, the
"Collateral Agent") and CHEMICAL BANK, as administra-
tive agent for the Lenders hereunder (in such capacity,
the "Administrative Agent").
W I T N E S S E T H :
WHEREAS, the Company, several banks and other
financial institutions (including certain of the Banks)
(the "Existing Banks"), Chemical, as administrative
agent for the Existing Banks (in such capacity, the
"Existing Administrative Agent"), the Collateral Agent
and The First National Bank of Chicago, a national
banking association ("FNBC"), and National Westminster
Bank USA, a New York banking corporation, as co-agents
for the Existing Banks, are parties to the Credit
Agreement, dated as of September 27, 1991, (as the same
has been amended, supplemented or otherwise modified
through the date hereof, the "Existing Credit
Agreement");
WHEREAS, the Collateral Agent and the Company
are parties to the separate Collateral Account Agree-
ments, each dated as of September 27, 1991, with each
of FNBC, Chemical and Banco di Roma, New York Branch
(as each of the same has been amended, supplemented or
otherwise modified through the date hereof, collective-
ly, the "Existing Collateral Account Agreements");
WHEREAS, the Company executed and delivered
in favor of the Collateral Agent for the benefit of the
Existing Banks a Collateral Assignment of Contracts,
dated as of September 27, 1991 (as the same has been
amended, supplemented or otherwise modified through the
date hereof, the "Existing Collateral Assignment");
WHEREAS, the Company executed and delivered
in favor of the Collateral Agent for the benefit of the
Existing Banks a Security Agreement, dated as of
September 27, 1991 (as the same has been amended,
supplemented or otherwise modified through the date
hereof, the "Existing Company Security Agreement");
WHEREAS, the Company executed and delivered
in favor of the Collateral Agent for the benefit of the
Existing Banks a Company Pledge Agreement, dated as of
September 27, 1991 (as the same has been amended,
supplemented or otherwise modified through the date
hereof, the "Existing Company Pledge Agreement");
WHEREAS, each of Capstone Electronics, Corp.,
a Delaware corporation ("Capstone"), and Arrow
Electronics International, Inc., a United States Virgin
Island Corporation ("AEI"), executed and delivered in
favor of the Collateral Agent for the benefit of the
Existing Banks a Guarantee, dated as of September 27,
1991 (as the same has been amended, supplemented or
otherwise modified through the date hereof, collective-
ly, the "Existing Subsidiary Guarantees");
WHEREAS, each of Capstone and AEI executed
and delivered in favor of the Collateral Agent for the
benefit of the Existing Banks a Security Agreement,
each dated as of September 27, 1991 (as the same has
been amended, supplemented or otherwise modified
through the date hereof, collectively the "Existing
Subsidiary Security Agreements");
WHEREAS, each of Capstone and AEI executed
and delivered in favor of the Collateral Agent for the
benefit of the Existing Banks a Subsidiary Pledge
Agreement, each dated as of September 27, 1991 (as the
same has been amended, supplemented or otherwise
modified through the date hereof, collectively the
"Existing Subsidiary Pledge Agreements");
WHEREAS, the Company executed and delivered
in favor of the Collateral Agent for the benefit of the
Existing Banks an Indemnity Assignment, dated as of
September 27, 1991 (as the same has been amended,
supplemented or otherwise modified through the date
hereof, the "Existing Indemnity Assignment");
WHEREAS, the Company and Berliner Handels -
Und Frankfurter Bank, a German bank ("BHF"), executed
and delivered in favor of the Collateral Agent, a
Subordination Agreement, dated as of September 27, 1991
(as the same may be amended, supplemented or otherwise
modified from time to time, the "Subordination
Agreement") pursuant to which the guarantee obligations
of the Company to BHF in respect of certain debt
obligations of Arrow GmbH are subordinated to the
Company's obligations under the Credit Agreement;
WHEREAS, (i) the Company entered into several
Note Purchase Agreements, dated as of December 29,
1992, pursuant to which the Purchasers party thereto
(the "Purchasers") purchased Senior Notes of the
Company (the "Senior Notes") and (ii) in connection
therewith, (A) amendments were entered into by the
Collateral Agent and the Company or one of its Sub-
sidiaries, as the case may be, with respect to each of
the Existing Collateral Account Agreements, the Exist-
ing Collateral Assignment, the Existing Company
Security Agreement, the Existing Company Pledge
Agreement, the Existing Subsidiary Security Agreements,
the Existing Subsidiary Pledge Agreements and the
Existing Indemnity Assignment (collectively, as so
amended, the "Existing Collateral Documents") and the
Existing Subsidiary Guarantees in order to provide that
the collateral held pursuant to the Existing Collateral
Documents (the "Existing Collateral") would thereafter
secure, and the Existing Subsidiary Guarantees would
thereafter guarantee, equally and ratably, obligations
owing in respect of the Senior Notes and obligations
owing in respect of the Existing Credit Agreement and
(B) the Company, the Collateral Agent, the Existing
Banks and the Purchasers executed and delivered an
Intercreditor Agreement, dated as of December 29, 1992
(as the same may have been amended, supplemented or
otherwise modified through the date hereof, the
"Intercreditor Agreement"), pursuant to which the
Collateral Agent now holds the Existing Collateral and
the Existing Subsidiary Guarantees;
WHEREAS, on the Closing Date (as hereinafter
defined), (i) all amounts owing under or in connection
with the Existing Credit Agreement will be paid in
full, (ii) all commitments and obligations of each
Existing Bank that is not a Bank party to this Agree-
ment (each, a "Retiring Bank") under the Existing
Credit Agreement will terminate, (iii) the Existing
Credit Agreement will be amended and restated in its
entirety as set forth in this Agreement and (iv) the
Company may then and thereafter make borrowings from
the Banks under this Agreement in accordance with the
Commitments hereunder; and
WHEREAS, in connection with the amendment and
restatement effected hereby, it is contemplated that
the Existing Collateral will be released and the
Existing Subsidiary Guarantees will remain in effect
(as consented to and confirmed pursuant to this Agree-
ment) and will continue to be held by the Collateral
Agent subject to the Intercreditor Agreement;
NOW, THEREFORE, in consideration of the
premises and mutual covenants herein contained, the
parties hereto hereby agree that, effective on the
Closing Date, the Existing Credit Agreement shall be
and hereby is amended and restated in its entirety to
read as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this
Agreement, the following terms shall have the following
meanings:
"ABR": for any day, a rate per annum
(rounded upwards, if necessary, to the next 1/16
of 1%) equal to the greatest of (a) the Prime Rate
in effect on such day, (b) the Base CD Rate in
effect on such day plus 1% and (c) the Federal
Funds Effective Rate in effect on such day plus
1/2 of 1%. For purposes hereof: "Prime Rate"
shall mean the rate of interest per annum publicly
announced from time to time by the Administrative
Agent as its prime rate in effect at its principal
office in New York City (the Prime Rate not being
intended to be the lowest rate of interest charged
by Chemical in connection with extensions of
credit to debtors); "Base CD Rate" shall mean the
sum of (a) the product of (i) the Three-Month
Secondary CD Rate and (ii) a fraction, the
numerator of which is one and the denominator of
which is one minus the C/D Reserve Percentage and
(b) the C/D Assessment Rate; "Three-Month
Secondary CD Rate" shall mean, for any day, the
secondary market rate for three-month certificates
of deposit reported as being in effect on such day
(or, if such day shall not be a Business Day, the
next preceding Business Day) by the Board of
Governors of the Federal Reserve System (the
"Board") through the public information telephone
line of the Federal Reserve Bank of New York
(which rate will, under the current practices of
the Board, be published in Federal Reserve
Statistical Release H.15(519) during the week
following such day), or, if such rate shall not be
so reported on such day or such next preceding
Business Day, the average of the secondary market
quotations for three-month certificates of deposit
of major money center banks in New York City
received at approximately 10:00 A.M., New York
City time, on such day (or, if such day shall not
be a Business Day, on the next preceding Business
Day) by the Administrative Agent from three New
York City negotiable certificate of deposit
dealers of recognized standing selected by it; and
"Federal Funds Effective Rate" shall mean, for any
day, the weighted average of the rates on
overnight federal funds transactions with members
of the Federal Reserve System arranged by federal
funds brokers, as published on the next succeeding
Business Day by the Federal Reserve Bank of New
York, or, if such rate is not so published for any
day which is a Business Day, the average of the
quotations for the day of such transactions
received by the Administrative Agent from three
federal funds brokers of recognized standing
selected by it. If for any reason the Administra-
tive Agent shall have determined (which determina-
tion shall be conclusive absent manifest error)
that it is unable to ascertain the Base CD Rate or
the Federal Funds Effective Rate, or both, for any
reason, including the inability or failure of the
Administrative Agent to obtain sufficient quota-
tions in accordance with the terms thereof, the
ABR shall be determined without regard to clause
(b) or (c), or both, of the first sentence of this
definition, as appropriate, until the circum-
stances giving rise to such inability no longer
exist. Any change in the ABR due to a change in
the Prime Rate, the Three-Month Secondary CD Rate
or the Federal Funds Effective Rate shall be
effective as of the opening of business on the
effective day of such change in the Prime Rate,
the Three-Month Secondary CD Rate or the Federal
Funds Effective Rate, respectively.
"ABR Loans": Loans the rate of interest
applicable to which is based upon the ABR.
"Adjusted Consolidated EBITDA": for any
fiscal period, (a) the Consolidated Net Income of
the Company and its Subsidiaries for such period,
plus (b) to the extent deducted from earnings in
determining Consolidated Net Income for such
period, the sum, in each case for such period, of
income taxes, interest expense, depreciation
expense, amortization expense, including amortiza-
tion of any goodwill or other intangibles, minus
(c) to the extent included in determining Consoli-
dated Net Income for such period, non-cash equity
earnings of unconsolidated affiliated companies,
plus (d) to the extent excluded in determining
Consolidated Net Income for such period, cash
distributions received by the Company from
unconsolidated Affiliates, minus (e) an amount
equal to the excess of the net income of Spoerle
Electronic for such period over any cash distribu-
tions received by the Company from Spoerle
Electronic during such period, all as determined
on a consolidated basis in accordance with GAAP.
"Administrative Agent": as defined in the
recitals hereof.
"AEI": as defined in the recitals hereof.
"Affected Bank": any Bank affected by the
events described in subsection 2.17, 2.18 or 2.19,
as the case may be, but only for the period during
which such Bank shall be affected by such events.
"Affiliate": as to any Person, (a) any other
Person (other than a Subsidiary) which, directly
or indirectly, is in control of, is controlled by,
or is under common control with, such Person or
(b) any Person who is a director or officer of the
Company or any of its Subsidiaries. For purposes
of this definition, "control" of a Person means
the power, directly or indirectly, either to (i)
vote 10% or more of the securities having ordinary
voting power for the election of directors of such
Person or (ii) direct or cause the direction of
the management and policies of such Person,
whether by contract or otherwise.
"Agents": as defined in the recitals hereof
(individually, each an "Agent").
"Aggregate Outstanding Extensions of Credit":
as to any Bank at any time, an amount equal to the
sum of (a) the aggregate principal amount of all
Loans made by such Lender then outstanding and (b)
such Bank's Commitment Percentage of the L/C
Obligations then outstanding.
"Agreement": this Amended and Restated
Credit Agreement, as amended, supplemented or
otherwise modified from time to time.
"Allocable Share": as to any Assenting Bank
at any time, a fraction, the numerator of which
shall be the Commitment of such Assenting Bank
then in effect and the denominator of which shall
be the aggregate of the Commitments of all
Assenting Banks then in effect.
"Applicable Margin": for each Type of Loan,
the rate per annum determined from time to time
based upon the Ratings in effect by Moody's and
S&P set forth under the relevant column heading
below opposite such Ratings:
Ratings Applicable Margin
(in basis points)
Eurodollar
S&P/Moody's Loans ABR Loans
A-/A3 45.00 0
or higher
BBB+/Baa1 50.00 0
BBB/Baa2 56.25 0
BBB-/Baa3 62.50 0
BBB-/Ba1 75.00 0
BB+/Ba1 87.50 0
BB/Ba2 or lower 125.00 25.00
; provided that, in the event that the Ratings of
S&P and Moody's do not coincide, the Applicable
Margin set forth above opposite the lower of such
Ratings will apply (it being understood that when
the Rating of S&P is BBB- and the Rating of
Moody's is Ba1, the Applicable Margin will be 75
basis points for Eurodollar Loans); provided
further, however, that as long as the Rating in
effect of S&P is BBB-or higher and the Rating in
effect of Moody's is Baa3 or higher, the
Applicable Margin set forth above opposite the
higher of such Ratings shall apply.
Notwithstanding the foregoing, in the event that
no Ratings or one Rating is in effect at such time
of determination, the Applicable Margin will be
determined in a manner to be mutually agreed upon
by the Agents and the Company and consented to by
the Required Banks.
"Application": an application, in such form
as the Issuing Bank may specify from time to time,
requesting the Issuing Bank to open a Letter of
Credit.
"Assenting Bank": as defined in subsection
2.20(a).
"Assignee": as defined in subsection
10.6(c).
"Available Commitment": as to any Bank at
any time, an amount equal to the excess, if any,
of (a) the amount of such Bank's Commitment over
(b) such Bank's Aggregate Outstanding Extensions
of Credit.
"Bankers Trust": as defined in the recitals
hereof.
"Banks": as defined in the recitals hereof.
"Borrowing Date": any Business Day specified
in a notice pursuant to subsection 2.3 or 2.6 as a
date on which the Company requests the Banks to
make Loans hereunder.
"Business": as defined in subsection
4.20(b).
"Business Day": a day other than a Saturday,
Sunday or other day on which commercial banks in
New York City are authorized or required by law to
close.
"Capital Stock": any and all shares,
interests, participations or other equivalents
(however designated) of capital stock of a
corporation, any and all equivalent ownership
interests in a Person (other than a corporation)
and any and all warrants, options or rights to
purchase any of the foregoing.
"Capitalization Documents": the collective
reference to the Governing Documents of the
Company and each of its Subsidiaries, the
certificates of designation and other agreements
governing the issuance of, or setting forth the
terms of, any Capital Stock (including, without
limitation, the Common Stock) issued or to be
issued by the Company or any of its Subsidiaries
and the Rights Agreement.
"Capstone": as defined in the recitals
hereof.
"C/D Assessment Rate": for any day as
applied to any ABR Loan, the net annual assessment
rate (rounded upward to the nearest 1/100th of 1%)
determined by Chemical to be payable on such day
to the Federal Deposit Insurance Corporation or
any successor ("FDIC") for FDIC's insuring time
deposits made in Dollars at offices of Chemical in
the United States.
"C/D Reserve Percentage": for any day as
applied to any ABR Loan, that percentage
(expressed as a decimal) which is in effect on
such day, as prescribed by the Board of Governors
of the Federal Reserve System (or any successor)
(the "Board"), for determining the maximum reserve
requirement for a Depositary Institution (as
defined in Regulation D of the Board) in respect
of new non-personal time deposits in Dollars
having a maturity of 30 days or more.
"Change in Control": one or more of the
following events:
(a) less than a majority of the members
of the Company's board of directors shall be
persons who either (i) were serving as
directors on the Closing Date or (ii) were
nominated as directors and approved by the
vote of the majority of the directors who are
directors referred to in clause (i) above or
this clause (ii); or
(b) the stockholders of the Company
shall approve any plan or proposal for the
liquidation or dissolution of the Company; or
(c) a Person or group of Persons acting
in concert (other than the direct or indirect
beneficial owners of the Capital Stock of the
Company as of the Closing Date) shall, as a
result of a tender or exchange offer, open
market purchases, privately negotiated
purchases or otherwise, have become the
direct or indirect beneficial owner (within
the meaning of Rule 13d-3 under the
Securities Exchange Act of 1934, as amended
from time to time) of securities of the
Company representing 40% or more of the
combined voting power of the outstanding
voting securities for the election of
directors or shall have the right to elect a
majority of the board of directors of the
Company.
"Chemical": as defined in the recitals
hereof.
"Closing Date": the date on which the
conditions precedent set forth in subsection 5.1
shall be satisfied.
"Code": the Internal Revenue Code of 1986,
as amended from time to time.
"Commitment": as to any Bank, the obligation
of such Bank to make Loans to and/or issue or
participate in Letters of Credit issued on behalf
of the Company hereunder in an aggregate principal
and/or face amount at any one time outstanding not
to exceed the amount set forth opposite such
Bank's name on Schedule I, as such amount may be
reduced from time to time in accordance with the
provisions of this Agreement.
"Commitment Fee Rate": a rate per annum
determined from time to time based upon the
Ratings in effect by Moody's and S&P set forth
under the column below opposite such Ratings:
Ratings Commitment Fee Rate
S&P Moody's (in basis points)
A-/A3 15.00
or higher
BBB+/Baa1 18.75
BBB/Baa2 22.50
BBB-/Baa3 25.00
BBB-/Ba1 25.00
BB+/Ba1 31.25
BB/Ba2 37.50
or lower
; provided that, in the event that the Ratings of
S&P and Moody's do not coincide, the Commitment
Fee Rate set forth opposite the lower of such
Ratings will apply (it being understood that when
the Rating of S&P is BBB- and the Rating of
Moody's is Ba1, the Commitment Fee Rate will be 25
basis points); provided further, however, that as
long as the Rating in effect of S&P is BBB- or
higher and the Rating in effect of Moody's is Baa3
or higher, the Commitment Fee Rate set forth above
opposite the higher of such Ratings shall apply.
Notwithstanding the foregoing, in the event that
no Ratings or one Rating is in effect at such time
of determination, the Commitment Fee Rate will be
determined in a manner to be mutually agreed upon
by the Agents and the Company and consented to by
the Required Banks.
"Commitment Letter": the commitment letter
dated December 9, 1993 among the Company, Chemical
and Bankers Trust, as amended, supplemented or
otherwise modified from time to time.
"Commitment Percentage": as to any Bank at
any time, the percentage which such Bank's
Commitment then constitutes of the aggregate
Commitments (or, at any time after the Commitments
shall have expired or terminated, the percentage
which the aggregate principal amount of such
Bank's Loans then outstanding (including, if
applicable, such Bank's participating interest in
Swing Line Loans pursuant to 2.7(c)) constitutes
of the aggregate principal amount of the Loans
then outstanding).
"Commitment Period": the period from and
including the date hereof to but not including the
Termination Date or such earlier date on which the
Commitments shall terminate as provided herein.
"Commonly Controlled Entity": an entity,
whether or not incorporated, which is under common
control with the Company within the meaning of
Section 4001 of ERISA or is part of a group which
includes the Company and which is treated as a
single employer under Section 414 of the Code.
"Company": as defined in the recitals
hereof.
"Consent and Confirmation": the Consent and
Confirmation to be executed and delivered by
Capstone and AEI, substantially in the form of
Exhibit C.
"Consolidated Cash Interest Expense": for
any period, (a) the amount which would, in
conformity with GAAP, be set forth opposite the
caption "interest expense" or any like caption on
a consolidated income statement of the Company and
its Subsidiaries minus (b) the amount of non-cash
interest (including interest paid by the issuance
of additional securities) included in such amount.
"Consolidated Net Income": for any fiscal
period, the consolidated net income (or loss) of
the Company and its Subsidiaries, determined on a
consolidated basis in accordance with GAAP.
"Consolidated Net Worth": at a particular
date, all amounts which would be included under
shareholders' equity on a consolidated balance
sheet of the Company and its Subsidiaries
determined on a consolidated basis in accordance
with GAAP.
"Consolidated Total Capitalization": at a
particular date, the sum of (a) Consolidated Net
Worth plus (b) Consolidated Total Debt as at such
date.
"Consolidated Total Debt": all Indebtedness
of the Company and its Subsidiaries (excluding
Indebtedness of the Company owing to any of its
Subsidiaries or Indebtedness of any Subsidiary of
the Company owing to the Company or any other
Subsidiary of the Company), as determined on a
consolidated basis in accordance with GAAP.
"Contractual Obligation": as to any Person,
any provision of any security issued by such
Person or of any agreement, instrument or other
undertaking to which such Person is a party or by
which it or any of its property is bound.
"Credit Documents": this Agreement, the
Notes, the Applications, the Subsidiary Guarantees
and the Subordination Agreement.
"Default": any of the events specified in
Section 8, whether or not any requirement for the
giving of notice, the lapse of time, or both, or
any other condition, has been satisfied.
"Dollars" and "$": dollars in lawful
currency of the United States of America.
"Domestic Subsidiary": as to any Person, a
Subsidiary of such Person organized under the laws
of the United States or a political subdivision
thereof.
"Environmental Laws": any and all applicable
foreign, Federal, state, local or municipal laws,
rules, orders, regulations, statutes, ordinances,
codes, decrees, requirements of any Governmental
Authority or other Requirements of Law (including,
without limitation, common law) regulating,
relating to or imposing liability or standards of
conduct concerning protection of human health or
the environment, as now or may at any time
hereafter be in effect.
"ERISA": the Employee Retirement Income
Security Act of 1974, as amended from time to
time.
"Eurocurrency Reserve Requirements": for any
day as applied to a Eurodollar Loan, the aggregate
(without duplication) of the rates (expressed as a
decimal fraction) of reserve requirements in
effect on such day (including, without limitation,
basic, supplemental, marginal and emergency
reserves under any regulations of the Board of
Governors of the Federal Reserve System or other
Governmental Authority having jurisdiction with
respect thereto) dealing with reserve requirements
prescribed for eurocurrency funding (currently
referred to as "Eurocurrency Liabilities" in
Regulation D of such Board) maintained by a member
bank of such System.
"Eurodollar Base Rate": with respect to each
day during each Interest Period pertaining to a
Eurodollar Loan, the rate per annum equal to the
rate at which Chemical is offered Dollar deposits
at or about 10:00 A.M., New York City time, two
Business Days prior to the beginning of such
Interest Period in the interbank eurodollar market
where the eurodollar and foreign currency and
exchange operations in respect of its Eurodollar
Loans are then being conducted for delivery on the
first day of such Interest Period for the number
of days comprised therein and in an amount
comparable to the amount of its Eurodollar Loan to
be outstanding during such Interest Period.
"Eurodollar Loans": Loans the rate of
interest applicable to which is based upon the
Eurodollar Rate.
"Eurodollar Rate": with respect to each day
during each Interest Period pertaining to a
Eurodollar Loan, a rate per annum determined for
such day in accordance with the following formula
(rounded upward to the nearest 1/100th of 1%):
Eurodollar Base Rate
1.00 - Eurocurrency Reserve Requirements
"Event of Default": any of the events
specified in Section 8, provided that any
requirement for the giving of notice, the lapse of
time, or both, or any other condition, has been
satisfied.
"Existing Collateral": as defined in the
recitals hereof.
"Existing Subsidiary Guarantees": as defined
in the recitals hereof.
"Fee Letters": the collective reference to
(i) the fee letter, dated as of December 9, 1993
among Chemical, Bankers Trust and the Company and
(ii) the fee letter, dated as of December 9, 1993,
between Chemical and the Company, each as amended,
supplemented or otherwise modified from time to
time.
"Financing Lease": any lease of property,
real or personal, the obligations of the lessee in
respect of which are required in accordance with
GAAP to be capitalized on a balance sheet of the
lessee.
"GAAP": generally accepted accounting
principles in the United States of America in
effect from time to time.
"Governmental Authority": any nation or
government, any state or other political
subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or
administrative functions of or pertaining to
government.
"Governing Documents": as to any Person, the
certificate or articles of incorporation and by-
laws or other organizational or governing
documents of such Person.
"Guarantee Obligation": as to any Person
(the "guaranteeing person"), any obligation of (a)
the guaranteeing person or (b) another Person
(including, without limitation, any bank under any
letter of credit) to induce the creation of which
the guaranteeing person has issued a
reimbursement, counterindemnity or similar
obligation, in either case guaranteeing or in
effect guaranteeing any Indebtedness, leases,
dividends or other obligations (the "primary
obligations") of any other third Person (the
"primary obligor") in any manner, whether directly
or indirectly, including, without limitation, any
obligation of the guaranteeing person, whether or
not contingent, (i) to purchase any such primary
obligation or any property constituting direct or
indirect security therefor, (ii) to advance or
supply funds (1) for the purchase or payment of
any such primary obligation or (2) to maintain
working capital or equity capital of the primary
obligor or otherwise to maintain the net worth or
solvency of the primary obligor, (iii) to purchase
property, securities or services primarily for the
purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor
to make payment of such primary obligation or (iv)
otherwise to assure or hold harmless the owner of
any such primary obligation against loss in
respect thereof; provided, however, that the term
Guarantee Obligation shall not include
endorsements of instruments for deposit or
collection in the ordinary course of business.
The amount of any Guarantee Obligation of any
guaranteeing person shall be deemed to be the
lower of (a) an amount equal to the stated or
determinable amount of the primary obligation in
respect of which such Guarantee Obligation is made
and (b) the maximum amount for which such
guaranteeing person may be liable pursuant to the
terms of the instrument embodying such Guarantee
Obligation, unless such primary obligation and the
maximum amount for which such guaranteeing person
may be liable are not stated or determinable, in
which case the amount of such Guarantee Obligation
shall be such guaranteeing person's maximum
reasonably anticipated liability in respect
thereof as determined by the Company in good
faith.
"Guarantor": any Person delivering a
Subsidiary Guarantee pursuant to this Agreement.
"Hazardous Materials": any hazardous
materials, hazardous wastes, hazardous
constituents, hazardous or toxic substances,
including, without limitation, asbestos, gasoline
and any other petroleum products (including crude
oil or any fraction thereof), polychlorinated
biphenyls and ureaformaldehyde insulation defined
or regulated as such in or under any Environmental
Law.
"Hedging Agreements": (a) Interest Rate
Agreements and (b) any swap, futures, forward or
option agreements or other agreements or
arrangements designed to limit or eliminate the
risk and/or exposure of a Person to fluctuations
in currency exchange rates.
"Hedging Banks": any Bank or any of its
subsidiaries or affiliates which from time to time
enter into Hedging Agreements with the Company or
any of its Subsidiaries.
"Indebtedness": of any Person at any date,
without duplication, (a) all indebtedness of such
Person for borrowed money or for the deferred
purchase price of property or services (other than
current trade liabilities incurred in the ordinary
course of business and payable in accordance with
customary practices), (b) any other indebtedness
of such Person which is evidenced by a note, bond,
debenture or similar instrument, (c) all
obligations of such Person under Financing Leases,
(d) all obligations of such Person in respect of
letters of credit, banker's acceptances or similar
obligations issued or created for the account of
such Person, (e) all liabilities arising under
Hedging Agreements of such Person, (f) all
Guarantee Obligations of such Person, and (g) all
liabilities secured by any Lien on any property
owned by such Person even though such Person has
not assumed or otherwise become liable for the
payment thereof.
"Insolvency": with respect to any
Multiemployer Plan, the condition that such Plan
is insolvent within the meaning of Section 4245 of
ERISA.
"Insolvent": pertaining to a condition of
Insolvency.
"Intercompany Indebtedness": Indebtedness of
the Company to any Domestic Subsidiary and
Indebtedness of any Domestic Subsidiary to the
Company or any other Subsidiary.
"Intercreditor Agreement": as defined in the
recitals hereof.
"Interest Payment Date": (a) as to any ABR
Loan, the last day of each March, June, September
and December to occur while such Loan is
outstanding, (b) as to any Eurodollar Loan having
an Interest Period of three months or less, the
last day of such Interest Period, and (c) as to
any Eurodollar Loan having an Interest Period
longer than three months or 90 days, respectively,
each day which is three months or 90 days,
respectively, or a whole multiple thereof, after
the first day of such Interest Period and the last
day of such Interest Period.
"Interest Period": with respect to any
Eurodollar Loan:
(i) initially, the period commencing
on the borrowing or conversion date, as the
case may be, with respect to such Eurodollar
Loan and ending one, two, three or six months
thereafter, as selected by the Company in its
notice of borrowing or notice of conversion,
as the case may be, given with respect
thereto; and
(ii) thereafter, each period
commencing on the last day of the next
preceding Interest Period applicable to such
Eurodollar Loan and ending one, two, three
or six months thereafter, as selected by the
Company by irrevocable notice to the
Administrative Agent not less than three
Business Days prior to the last day of the
then current Interest Period with respect
thereto;
provided that, all of the foregoing provisions
relating to Interest Periods are subject to the
following:
(1) if any Interest Period would
otherwise end on a day that is not a Business
Day, such Interest Period shall be extended
to the next succeeding Business Day unless
the result of such extension would be to
carry such Interest Period into another
calendar month in which event such Interest
Period shall end on the immediately preceding
Business Day;
(2) any Interest Period that would
otherwise extend beyond the Termination Date
shall end on the Termination Date;
(3) any Interest Period that begins on
the last Business Day of a calendar month (or
on a day for which there is no numerically
corresponding day in the calendar month at
the end of such Interest Period) shall end on
the last Business Day of a calendar month;
and
(4) the Company shall select Interest
Periods so as not to require a payment or
prepayment of any Eurodollar Loan during an
Interest Period for such Loan.
"Interest Rate Agreement": any interest rate
protection agreement, interest rate future,
interest rate option, interest rate swap, interest
rate cap or other interest rate hedge or
arrangement under which the Company is a party or
a beneficiary.
"Issuing Bank": Chemical, in its capacity as
issuer of any Letter of Credit.
"L/C Commitment": $20,000,000.
"L/C Fee Payment Date": the last day of each
March, June, September, and December.
"L/C Obligations": at any time, an amount
equal to the sum of (a) the aggregate then undrawn
and unexpired amount of the then outstanding
Letters of Credit and (b) the aggregate amount of
drawings under Letters of Credit which have not
then been reimbursed pursuant to subsection
3.5(a).
"L/C Participants": the collective reference
to all the Banks other than the Issuing Bank.
"Letters of Credit": as defined in
subsection 3.1(a).
"Lien": any mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien
(statutory or other), charge or other security
interest or any preference, priority or other
security agreement or preferential arrangement of
any kind or nature whatsoever (including, without
limitation, any conditional sale or other title
retention agreement and any Financing Lease having
substantially the same economic effect as any of
the foregoing).
"Loan": any loan made by any Bank pursuant
to this Agreement, including, without limitation,
the Swing Line Loans.
"Loan Parties": the Company and each
Subsidiary of the Company which is a party to a
Credit Document.
"Majority Banks": at any time, Banks the
Commitment Percentages of which aggregate more
than 50%.
"Material Adverse Effect": a material
adverse effect on (a) the business, operations,
property, condition (financial or otherwise) or
prospects of the Company and its Subsidiaries
taken as a whole, (b) the ability of the Company
or Capstone to perform its obligations under this
Agreement, the Notes or other Credit Documents or
(c) the validity or enforceability of this
Agreement, any of the Notes, any Application or
any of the other Credit Documents or the rights or
remedies of the Administrative Agent, the
Collateral Agent, the Agents or the Banks
hereunder or thereunder.
"Materials of Environmental Concern": any
gasoline or petroleum (including crude oil or any
fraction thereof) or petroleum products or any
hazardous or toxic substances, materials or
wastes, defined or regulated as such in or under
any Environmental Law, including, without
limitation, asbestos, polychlorinated biphenyls
and urea-formaldehyde insulation.
"Minority Interests": the portion of the
Voting Stock of any Subsidiary not owned, directly
or indirectly, by the Company and/or by one or
more Subsidiaries of the Company.
"Moody's": Moody's Investors Service, Inc.
"Multiemployer Plan": a Plan which is a
multiemployer plan as defined in Section
4001(a)(3) of ERISA.
"1992 Private Placement Notes": the
$75,000,000 Senior Secured Notes issued by the
Company, which are secured by the Existing
Collateral pari passu with the Existing Banks, as
any of the same may be amended, supplemented,
endorsed or otherwise modified from time to time.
"Non-Excluded Taxes": as defined in
subsection 2.19.
"Note Purchase Agreement": the Senior Note
Purchase Agreement, dated as of December 29, 1992,
among the Company and the respective financial
institutions party thereto as purchasers, as the
same may be amended, supplemented or otherwise
modified from time to time.
"Notes": the collective reference to the
Revolving Credit Notes and the Swing Line Notes.
"Participant": as defined in subsection
10.6(b).
"Participating Creditor": as defined in the
Intercreditor Agreement.
"PBGC": the Pension Benefit Guaranty
Corporation established pursuant to Subtitle A of
Title IV of ERISA.
"Person": an individual, partnership,
corporation, business trust, joint stock company,
trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever
nature.
"Plan": at a particular time, any employee
benefit plan which is covered by ERISA and in
respect of which the Company or a Commonly
Controlled Entity is (or, if such plan were
terminated at such time, would under Section 4069
of ERISA be deemed to be) an "employer" as defined
in Section 3(5) of ERISA.
"Properties": as defined in subsection
4.20(a).
"Ratings": the implied senior unsecured debt
ratings of the Company in effect from time to time
by Moody's, S&P or a similar rating agency.
"Register": as defined in subsection
10.6(d).
"Regulation U": Regulation U of the Board of
Governors of the Federal Reserve System as in
effect from time to time.
"Reimbursement Obligation": the obligation
of the Company to reimburse the Issuing Bank
pursuant to subsection 3.5(a) for amounts drawn
under Letters of Credit.
"Reorganization": with respect to any
Multiemployer Plan, the condition that such plan
is in reorganization within the meaning of Section
4241 of ERISA.
"Replacement Bank": as defined in subsection
2.20(b).
"Reportable Event": any of the events set
forth in Section 4043(b) of ERISA, other than
those events as to which the thirty day notice
period is waived under subsections .13, .14, .16,
.18, .19 or .20 of PBGC Reg. Section 2615.
"Required Banks": at any time, Banks the
Commitment Percentages of which aggregate at least
66-2/3%.
"Requirement of Law": as to any Person, the
Certificate of Incorporation and By-Laws or other
organizational or governing documents of such
Person, and any law, treaty, rule or regulation or
determination of an arbitrator or a court or other
Governmental Authority, in each case applicable to
or binding upon such Person or any of its property
or to which such Person or any of its property is
subject.
"Responsible Officer": as to any Person, the
chief executive officer, the chairman of the
board, the president, the chief financial officer,
the chief accounting officer, any senior vice
president or the treasurer of such Person.
"Restricted Payments": as defined in
subsection 7.5.
"Retiring Banks": as defined in the recitals
hereof.
"Revolving Credit Loans": as defined in
subsection 2.1 and including, as to the Swing Line
Banks, the Swing Line Loans.
"Revolving Credit Note": as defined in
subsection 2.2.
"Rights Agreement": the Rights Agreement,
dated as of March 2, 1988, between the Company and
Chemical Bank, as successor by merger to
Manufacturers Hanover Trust Company, as rights
agent, as amended, supplemented or otherwise
modified from time to time.
"Single Employer Plan": any Plan which is
covered by Title IV of ERISA, but which is not a
Multiemployer Plan.
"S&P": Standard & Poor's Corporation.
"Spoerle Electronic": Spoerle Electronic
Handelsgesellschaft MBH & Co., a German
corporation.
"Subordinated Debentures": the Company's 5-
3/4% Convertible Subordinated Debentures due 2002.
"Subordinated Indebtedness": Indebtedness
outstanding under the Subordinated Debentures or
covered by the Subordination Agreement.
"Subordination Agreement": as defined in the
recitals hereof.
"Subsidiary": as to any Person, a
corporation, partnership or other entity of which
shares of stock or other ownership interests
having ordinary voting power (other than stock or
such other ownership interests having such power
only by reason of the happening of a contingency)
to elect a majority of the board of directors or
other managers of such corporation, partnership or
other entity are at the time owned, or the
management of which is otherwise controlled,
directly or indirectly through one or more
intermediaries, or both, by such Person. Unless
otherwise qualified, all references to a
"Subsidiary" or to "Subsidiaries" in this
Agreement shall refer to a Subsidiary or
Subsidiaries of the Company.
"Subsidiary Guarantee": each of the Existing
Subsidiary Guarantees and each other Subsidiary
Guarantee substantially similar in form to the
Existing Guarantees to be executed and delivered
from time to time by any other Domestic Subsidiary
that accounts for more than 5% of Total Assets at
any date, as the same may be amended, supplemented
or otherwise modified from time to time.
"Swing Line Banks": Chemical and Bankers
Trust acting in their capacities as the swing line
banks pursuant to Section 2.
"Swing Line Limit": the amount of Revolving
Credit Loans which a Swing Line Bank will make
available on a swing line basis pursuant to
subsection 2.4, not to exceed for each Swing Line
Bank an aggregate principal amount at any one time
outstanding of $7,500,000, or $15,000,000 in the
aggregate for both Swing Line Banks.
"Swing Line Loan Participation Certificate":
a certificate substantially in the form of Exhibit
D.
"Swing Line Loans": as defined in subsection
2.4.
"Swing Line Note": as defined in subsection
2.5.
"Swing Line Participation Amount": as
defined in subsection 2.7(c).
"Termination Date": January 27, 1998.
"Total Assets": at a particular date, the
assets of the Company and its Subsidiaries,
determined on a consolidated basis in accordance
with GAAP.
"Total Revenues": at a particular date, the
revenues of the Company and its Subsidiaries,
determined on a consolidated basis in accordance
with GAAP.
"Tranche": the collective reference to
Eurodollar Loans the then current Interest Periods
with respect to all of which begin on the same
date and end on the same later date (whether or
not such Loans shall originally have been made on
the same day).
"Transferee": as defined in subsection
10.6(f).
"Type": as to any Loan, its nature as an ABR
Loan or a Eurodollar Loan.
"UCC": the Uniform Commercial Code as from
time to time in effect in the relevant
jurisdiction.
"Uniform Customs": the Uniform Customs and
Practice for Documentary Credits (1993 Revision),
International Chamber of Commerce Publication No.
500 as the same may be amended from time to time.
"Voting Stock": the capital stock of any
Person of any class or classes, the holders of
which are ordinarily, in the absence of
contingencies, entitled to vote for the election
of members of the board of directors (or Persons
performing similar functions) of such Person.
1.2 Other Definitional Provisions. (a)
Unless otherwise specified therein, all terms defined
in this Agreement shall have the defined meanings when
used in the Notes or any certificate or other document
made or delivered pursuant hereto.
(b) As used herein and in the Notes, and any
certificate or other document made or delivered pursu-
ant hereto, accounting terms relating to the Company
and its Subsidiaries not defined in subsection 1.1 and
accounting terms partly defined in subsection 1.1, to
the extent not defined, shall have the respective
meanings given to them under GAAP.
(c) The words "hereof", "herein" and
"hereunder" and words of similar import when used in
this Agreement shall refer to this Agreement as a whole
and not to any particular provision of this Agreement,
and Section, subsection, Schedule and Exhibit referen-
ces are to this Agreement unless otherwise specified.
(d) The meanings given to terms defined
herein shall be equally applicable to both the singular
and plural forms of such terms.
(e) The phrases "to the knowledge of the
Company" and "of which any Subsidiary is aware" and
phrases of similar import when used in this Agreement
shall mean to the actual knowledge of a Responsible
Officer of the Company or any such Subsidiary, as the
case may be.
1.3. Accounting Determinations. Unless
otherwise specified herein, all accounting determi-
nations for purposes of calculating or determining
compliance with the terms found in subsection 1.1 or
the standards and covenants found in subsection 7.1 and
otherwise to be made under this Agreement shall be made
in accordance with GAAP applied on a basis consistent
in all material respects with that used in preparing
the financial statements delivered to the Administra-
tive Agent on the Closing Date. If GAAP shall change
from the basis used in preparing the financial state-
ments delivered to the Administrative Agent on the
Closing Date, the certificates required to be delivered
pursuant to subsection 6.1 demonstrating compliance
with the covenants contained herein shall set forth
calculations setting forth the adjustments necessary to
demonstrate how the Company is in compliance with the
financial covenants based upon GAAP as in effect on the
Closing Date.
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS
2.1 Revolving Credit Commitments. (a)
Subject to the terms and conditions hereof, each Bank
severally agrees to make revolving credit loans
("Revolving Credit Loans") to the Company from time to
time during the Commitment Period in an aggregate
principal amount at any one time outstanding which,
when added to such Bank's Commitment Percentage of the
then outstanding L/C Obligations, does not exceed the
amount of such Bank's Commitment. During the Commit-
ment Period the Company may use the Commitments by
borrowing, prepaying the Revolving Credit Loans in
whole or in part, and reborrowing, all in accordance
with the terms and conditions hereof.
(b) The Revolving Credit Loans may from time
to time be (i) Eurodollar Loans, (ii) ABR Loans or
(iii) a combination thereof, as determined by the
Company and notified to the Administrative Agent in
accordance with subsections 2.3 and 2.6, provided that
no Revolving Credit Loan shall be made as a Eurodollar
Loan after the day that is one month prior to the
Termination Date.
2.2 Revolving Credit Notes. The Revolving
Credit Loans made by each Bank shall be evidenced by a
promissory note of the Company, substantially in the
form of Exhibit A, with appropriate insertions as to
payee, date and principal amount (a "Revolving Credit
Note"), payable to the order of such Bank and in a
principal amount equal to the lesser of (a) the amount
of the initial Commitment of such Bank and (b) the
aggregate unpaid principal amount of all Revolving
Credit Loans made by such Bank, with interest thereon
as prescribed by subsection 2.13. Each Bank is hereby
authorized to, record the date, Type and amount of each
Revolving Credit Loan made by such Bank, each continua-
tion thereof, each conversion of all or a portion
thereof to another Type pursuant to subsection 2.11,
the date and amount of each payment or prepayment of
principal thereof and, in the case of Eurodollar Loans,
the length of each Interest Period and the Eurodollar
Rate with respect thereto, on the schedules annexed to
and constituting a part of its Revolving Credit Note,
and any such recordation shall constitute prima facie
evidence of the accuracy of the information so
recorded, provided that the failure of any Bank to make
any such recordation (or any error in such recordation)
shall not affect the obligations of the Company here-
under or under such Note. Each Revolving Credit Note
shall (x) be dated the Closing Date, (y) be stated to
mature on the Termination Date and (z) provide for the
payment of interest in accordance with subsection 2.13.
2.3 Procedure for Revolving Credit
Borrowing. The Company may borrow under the Commit-
ments during the Commitment Period on any Business Day,
provided that the Company shall give the Administrative
Agent irrevocable notice (which notice must be received
by the Administrative Agent prior to 12:00 Noon, New
York City time, (a) three Business Days prior to the
requested Borrowing Date, if all or any part of the
requested Revolving Credit Loans are to be initially
Eurodollar Loans, or (b) on the requested Borrowing
Date, otherwise), specifying (i) the amount to be
borrowed, (ii) the requested Borrowing Date, (iii)
whether the borrowing is to be of Eurodollar Loans, ABR
Loans or a combination thereof and (iv) if the borrow-
ing is to be entirely or partly of Eurodollar Loans,
the amount of such Type of Loan and the length of the
initial Interest Period therefor. Each borrowing under
the Commitments shall be in an amount equal to (x) in
the case of ABR Loans, $100,000 or a whole multiple of
$100,000 in excess thereof (or, if the then Available
Commitments are less than $100,000, such lesser amount)
and (y) in the case of Eurodollar Loans, $4,000,000 or
a whole multiple of $100,000 in excess thereof. Upon
receipt of any such notice from the Company, the Admin-
istrative Agent shall promptly notify each Bank there-
of. Each Bank will make the amount of its pro rata
share (based on its Commitment Percentage) of each
borrowing available to the Administrative Agent for the
account of the Company at the office of the Administra-
tive Agent specified in subsection 10.2 prior to 2:00
P.M., New York City time, on the Borrowing Date re-
quested by the Company in funds immediately available
to the Administrative Agent. Such borrowing will then
be made available to the Company by the Administrative
Agent crediting the account of the Company on the books
of such office with the aggregate of the amounts made
available to the Administrative Agent by the Banks and
in like funds as received by the Administrative Agent.
Revolving Credit Loans shall not be deemed to have been
made until the Administrative Agent makes the proceeds
of such Loans available to the Company in accordance
with the preceding sentence.
2.4 Swing Line Loans. Subject to the terms
and conditions hereof, each Swing Line Bank agrees to
make loans to the Company on a swing line basis (col-
lectively, the "Swing Line Loans": individually, a
"Swing Line Loan") from time to time during the
Commitment Period in an aggregate principal amount at
any one time outstanding not to exceed the Swing Line
Limit of such Swing Line Bank; provided, that (i) in no
event may the Company have outstanding at any time
Loans and L/C Obligations in an amount greater than the
aggregate Commitments of all the Banks then in effect
and (ii) in no event may the aggregate outstanding
principal amount of Swing Line Loans and Revolving
Credit Loans of any Swing Line Bank exceed the Commit-
ment of such Swing Line Bank then in effect. All Swing
Line Loans shall be made as ABR Loans and may not be
converted into Eurodollar Loans. During the Commitment
Period, the Company may borrow and prepay the Swing
Line Loans, in whole or in part, all in accordance with
the terms and conditions hereof.
2.5 Swing Line Notes. The Swing Line Loans
made by each Swing Line Bank shall be evidenced by a
promissory note of the Company, substantially in the
form of Exhibit B (a "Swing Line Note"), with appropri-
ate insertions as to date and principal amount, payable
to the order of the applicable Swing Line Bank and in a
principal amount equal to the lesser of (a) the amount
of the initial Swing Line Limit of such Swing Line Bank
and (b) the aggregate unpaid principal amount of all
Swing Line Loans made by the Swing Line Bank, with
interest thereon as prescribed by subsection 2.13.
Each Swing Line Bank is hereby authorized to record the
date and the amount of each Swing Line Loan made by
such Swing Line Bank and the date and amount of each
payment or prepayment of principal thereof, on the
schedules annexed to and constituting a part of such
Swing Line Note and any such recordation shall consti-
tute prima facie evidence of the accuracy of the
information so recorded, provided that the failure of
either Swing Line Bank to make any such recordation (or
any error in such recordation) shall not affect the
obligations of the Company hereunder or under such
Note. Each Swing Line Note shall (a) be dated the
Closing Date, (b) be stated to mature on the Termina-
tion Date and (c) provide for the payment of interest
in accordance with subsection 2.13.
2.6 Procedure for Swing Line Borrowing.
Subject to the Swing Line Limit, the Company may borrow
Swing Line Loans during the Commitment Period on any
Business Day prior to 2:00 P.M., New York City time.
The Swing Line Banks may, subject to the terms and
conditions hereof and in connection with the Company's
cash management system, make available the full amount
of all daily borrowing needs of the Company in the form
of Swing Line Loans, without requiring that the Company
give the Administrative Agent notice with respect to
such borrowing and without giving each Bank prior
notice of the proposed borrowing and its proportionate
share thereof. On each Borrowing Date each Swing Line
Bank shall make available to the Administrative Agent
for the account of the Company at the office of the
Administrative Agent specified in subsection 10.2 an
amount in immediately available funds equal to the
amount of the Swing Line Loan to be made by each such
Swing Line Bank. The proceeds of the requested Swing
Line Loans will then be made available to the Company
by the Administrative Agent on such Borrowing Date by
crediting the account of the Company on the books of
such office with the aggregate amount made available to
the Administrative Agent by the Swing Line Banks and in
like funds received by the Administrative Agent. Swing
Line Loans shall not be deemed to have been made until
the Administrative Agent makes the proceeds of such
Loans available to the Company in accordance with the
preceding sentence.
2.7 Allocating Swing Line Loans; Swing Line
Loan Participations. (a) The Swing Line Banks, at any
time and from time to time in their sole and absolute
discretion, may, on behalf of the Company (and the
Company hereby irrevocably directs the Swing Line Banks
to act on its behalf), on two Business Day's notice to
each Bank given by the Swing Line Banks no later than
11:00 A.M., New York City time, on such Business Day,
direct each Bank to make, and each Bank (including each
Swing Line Bank in its capacity as a Bank having a
Commitment) hereby agrees to make, a Revolving Credit
Loan pursuant to subsection 2.1, in an amount equal to
such Bank's Commitment Percentage of the aggregate
amount of the Swing Line Loans outstanding on the date
of such notice. Unless any of the events described in
Section 8(h) shall have occurred (in which case the
procedures of subsection 2.7(c) shall apply), each Bank
shall make the amount of such Revolving Credit Loan
available to the Administrative Agent at its office set
forth in subsection 10.2 in immediately available
funds, not later than 11:00 A.M., New York City time,
one Business Day after the date of such notice. The
proceeds of such Revolving Credit Loans shall be im-
mediately applied by the Administrative Agent to repay
the Swing Line Loans, pro rata according to the out-
standing Swing Line Loans held by each Swing Line Bank.
Effective on the day such Revolving Credit Loans are
made, the portion of the Swing Line Loans so paid shall
no longer be outstanding as Swing Line Loans, shall no
longer be due under the Swing Line Notes and shall be
due under the respective Revolving Credit Notes of the
Banks in accordance with their respective Revolving
Credit Commitment Percentages. The Company authorizes
the Swing Line Banks to charge the Company's accounts
with the Administrative Agent (up to the amount availa-
ble in each such account) in order to immediately pay
the amount of such Swing Line Loans to the extent
amounts received from the Banks are not sufficient to
repay in full such Swing Line Loans.
(b) Notwithstanding anything herein to the
contrary, the Swing Line Banks shall not make any Swing
Line Loans if a Default or an Event of Default shall
have occurred and be continuing or would result there-
from.
(c) If prior to the time a Revolving Credit
Loan would have otherwise been made pursuant to sub-
section 2.7(a), one of the events described in Section
8(h) shall have occurred, each Bank (other than the
Swing Line Banks) shall, on the date such Revolving
Credit Loan was to have been made pursuant to the
notice referred to in subsection 2.7(a) (the "Refunding
Date"), purchase an undivided participating interest in
outstanding Swing Line Loans in an amount equal to
(i) its Revolving Credit Commitment Percentage times
(ii) the aggregate principal amount of Swing Line Loans
then outstanding which were to have been repaid with
Revolving Credit Loans (the "Swing Line Participation
Amount"). On the Refunding Date, each Bank shall
transfer to the Swing Line Banks, in immediately
available funds, such Bank's Swing Line Participation
Amount and upon receipt thereof the Swing Line Banks
shall deliver to such Bank a Swing Line Loan Participa-
tion Certificate dated the date of the Swing Line
Banks' receipt of such funds and in an amount equal to
the Swing Line Participation Amount.
(d) Whenever, at any time after the Swing
Line Banks have received from any Bank such Bank's
Swing Line Participation Amount, the Swing Line Banks
receive any payment on account of the Swing Line Loans,
the Swing Line Banks will distribute to such Bank its
Swing Line Participation Amount (appropriately
adjusted, in the case of interest payments, to reflect
the period of time during which such Bank's participa-
ting interest was outstanding and funded); provided,
however, that in the event that such payment received
by the Swing Line Banks is required to be returned,
such Bank will return to the Swing Line Banks any
portion thereof previously distributed to it by the
Swing Line Banks.
(e) Each Bank's obligation to make Revolving
Credit Loans pursuant to subsection 2.7(a) and to
purchase participating interests pursuant to subsection
2.7(c) shall be absolute and unconditional and shall
not be affected by any circumstance, including, without
limitation, (i) any set-off, counterclaim, recoupment,
defense or other right which such Bank or the Company
may have against the Swing Line Banks, the Company or
any other Person, as the case may be, for any reason
whatsoever; (ii) the occurrence or continuance of a
Default or an Event of Default; (iii) any adverse
change in the condition (financial or otherwise) of the
Company or any of its Subsidiaries; (iv) any breach of
this Agreement or any other Credit Document by the
Company, any of its Subsidiaries or any Bank; or (v)
any other circumstance, happening or event whatsoever,
whether or not similar to any of the foregoing.
2.8 Commitment Fee. (a) The Company agrees
to pay to the Administrative Agent for the account of
each Bank a commitment fee for the period from and
including the first day of the Commitment Period to,
but excluding, the Termination Date, computed at the
Commitment Fee Rate on the average daily amount of the
Available Commitment of such Bank during the period for
which payment is made, payable quarterly in arrears on
the last day of each March, June, September and
December and on the Termination Date or such earlier
date as the Commitments shall terminate as provided
herein, commencing on the first of such dates to occur
after the date hereof; it being understood that, for
purposes of determining such commitment fee for each
Bank other than the Swing Line Bank, but only if no
Swing Line Loan Participation Certificate shall have
been issued to such Bank, the aggregate principal
amount of the Swing Line Loans then outstanding shall
not be included in determining the Available Commitment
of each such Bank.
(b) The Company agrees to pay each of
Chemical and Bankers Trust, for its own account, such
other fees in the amounts and on the dates set forth
respectively in the Fee Letters.
2.9 Termination or Reduction of Commitments.
The Company shall have the right, upon not less than
three Business Days' notice to the Administrative
Agent, to terminate the Commitments or, from time to
time, to reduce the amount of the Commitments. Any
such reduction shall be in an amount equal to
$5,000,000 or a whole multiple thereof and shall reduce
permanently the Commitments then in effect and shall
reduce the Commitments of the Banks pro rata in
accordance with their respective Commitment Percenta-
ges; provided that no such termination or reduction
shall be permitted if, after giving effect thereto and
to any prepayments of the Revolving Credit Loans and
Swing Line Loans made on the effective date thereof,
the aggregate principal amount of the Revolving Credit
Loans and Swing Line Loans then outstanding, when added
to the then outstanding L/C Obligations, would exceed
the Commitments then in effect; and provided further
that the Commitments may not be reduced to an amount
less than $50,000,000 unless they are terminated in
full.
2.10 Optional Prepayments. The Company may,
at any time and from time to time prepay the Loans, in
whole or in part, without premium or penalty (except
for any and all amounts owing pursuant to subsection
2.21), provided, that the Company shall give to the
Administrative Agent irrevocable notice of such pre-
payment not later than (a) 10:00 A.M., New York City
time, two Business Days before the date of prepayment
(in the case of prepayment of Eurodollar Loans) or (b)
12:00 Noon, New York City time, on the date of pre-
payment (in the case of prepayment of ABR Loans),
specifying the date and amount of prepayment and
whether the prepayment is of Eurodollar Loans, ABR
Loans or a combination thereof, and, if a combination
thereof, the amount allocable to each. In addition,
the Company may at any time and from time to time,
prepay the Swing Line Loans, in whole or in part,
without premium or penalty, upon irrevocable notice
(which notice must be received by the Administrative
Agent not later than 2:00 P.M., New York City time, on
the proposed date of prepayment) specifying the date
and amount of prepayment. Upon receipt of any such
notice the Administrative Agent shall promptly notify
each Bank thereof, in the case of prepayments of
Revolving Credit Loans, or the Swing Line Banks, in the
case of prepayments of Swing Line Loans. If any such
notice is given by the Company, the amount specified in
such notice shall be due and payable on the date speci-
fied therein, together with any amounts payable pursu-
ant to subsection 2.21. Subject to subsection 2.12,
partial prepayments shall be in an aggregate principal
amount of $100,000 or a whole multiple of $50,000 in
excess thereof.
2.11 Conversion and Continuation Options.
(a) The Company may elect from time to time to convert
Eurodollar Loans to ABR Loans, by giving the Adminis-
trative Agent at least two Business Days' prior irrevo-
cable notice of such election, provided that any such
conversion of Eurodollar Loans may only be made on the
last day of an Interest Period with respect thereto.
The Company may elect from time to time to convert ABR
Loans to Eurodollar Loans by giving the Administrative
Agent at least three Business Days' prior irrevocable
notice of such election. Any such notice of conversion
to Eurodollar Loans shall specify the length of the
initial Interest Period therefor. Upon receipt of any
such notice the Administrative Agent shall promptly
notify each Bank thereof. If the requested conversion
of ABR Loans to Eurodollar Loans is not a Business Day,
such conversion shall be on the next succeeding Busi-
ness Day. All or any part of outstanding Eurodollar
Loans and ABR Loans may be converted as provided here-
in, provided that (i) no Loan may be converted into a
Eurodollar Loan when any Event of Default has occurred
and is continuing and the Administrative Agent has or
the Majority Banks have determined that such a con-
version is not appropriate, (ii) any such conversion
may only be made if, after giving effect thereto,
subsection 2.12 would not be contravened and (iii) no
Loan may be converted into a Eurodollar Loan after the
date that is one month or 30 days prior to the
Termination Date.
(b) Any Eurodollar Loans may be continued as
such upon the expiration of the then current Interest
Period with respect thereto by the Company giving
notice to the Administrative Agent, in accordance with
the applicable provisions of the term "Interest Period"
set forth in subsection 1.1, of the length of the next
Interest Period to be applicable to such Loans,
provided that no Eurodollar Loan may be continued as
such (i) when any Event of Default has occurred and is
continuing and the Administrative Agent has or the
Majority Banks have determined that such a continuation
is not appropriate or (ii) if, after giving effect
thereto, subsection 2.12 would be contravened or (iii)
after the date that is one month or 30 days prior to
the Termination Date and provided, further, that if the
Company shall fail to give any required notice as
described above in this paragraph or if such continua-
tion is not permitted pursuant to the preceding proviso
such Loans shall be automatically converted to ABR
Loans on the last day of such then expiring Interest
Period.
2.12 Minimum Amounts and Number of Tranches.
All borrowings, conversions and continuations of Loans
hereunder and all selections of Interest Periods here-
under shall be in such amounts and be made pursuant to
such elections so that, after giving effect thereto (i)
the aggregate principal amount of the Loans comprising
each Tranche shall be equal to $4,000,000 or a whole
multiple of $100,000 in excess thereof and (ii) no more
than ten Tranches shall be outstanding at any one time.
2.13 Interest Rates and Payment Dates. (a)
Each Eurodollar Loan shall bear interest for each day
during each Interest Period with respect thereto at a
rate per annum equal to the Eurodollar Rate determined
for such day plus the Applicable Margin.
(b) Each ABR Loan shall bear interest at a
rate per annum equal to the ABR plus the Applicable
Margin.
(c) If all or a portion of (i) the principal
amount of any Loan, (ii) any interest payable thereon
or (iii) any commitment fee payable hereunder shall not
be paid when due (whether at the stated maturity, by
acceleration or otherwise), such overdue amount shall
bear interest at a rate per annum which is (x) in the
case of overdue principal, the rate that would other-
wise be applicable thereto pursuant to the foregoing
provisions of this subsection plus 2% or (y) in the
case of overdue interest, fees or other amounts payable
hereunder, the rate described in paragraph (b) of this
subsection plus 2%, in each case from the date of such
non-payment until such amount is paid in full (whether
such payment is made before or after a judgment has
been entered).
(d) Interest shall be payable in arrears on
each Interest Payment Date, provided that interest
accruing pursuant to paragraph (c) of this subsection
shall be payable from time to time on demand.
2.14 Computation of Interest and Fees. (a)
Commitment fees, Letter of Credit commissions and,
whenever it is calculated on the basis of ABR, interest
shall be calculated on the basis of a 365- (or 366-, as
the case may be) day year for the actual days elapsed;
and, otherwise, interest shall be calculated on the
basis of a 360-day year for the actual days elapsed.
The Administrative Agent shall as soon as practicable
notify the Company and the Banks of each determination
of a Eurodollar Rate. Any change in the interest rate
on a Loan resulting from a change in the ABR, the
Eurocurrency Reserve Requirements, the C/D Assessment
Rate, the C/D Reserve Percentage or a Rating shall
become effective as of the opening of business on the
day on which such change becomes effective. The
Administrative Agent shall as soon as practicable
notify the Company and the Banks of the effective date
and the amount of each such change in interest rate.
(b) Each determination of an interest rate
by the Administrative Agent pursuant to any provision
of this Agreement shall be conclusive and binding on
the Company and the Banks in the absence of manifest
error. The Administrative Agent shall, at the request
of the Company, deliver to the Company a statement
showing the quotations used by the Administrative Agent
in determining any interest rate pursuant to subsection
2.13(a).
2.15 Inability to Determine Interest Rate.
If prior to the first day of any Interest Period:
(a) the Administrative Agent shall have
determined (which determination shall be conclu-
sive and binding upon the Company) that, by reason
of circumstances affecting the relevant market,
adequate and reasonable means do not exist for
ascertaining the Eurodollar Rate for such Interest
Period, or
(b) the Administrative Agent shall have
received notice from the Majority Banks that the
Eurodollar Rate determined or to be determined for
such Interest Period will not adequately and
fairly reflect the cost to such Banks (as
conclusively certified by such Banks) of making or
maintaining their affected Loans during such
Interest Period,
the Administrative Agent shall give telecopy or tele-
phonic notice thereof to the Company and the Banks as
soon as practicable thereafter. If such notice is
given (x) any Eurodollar Loans, as the case may be,
requested to be made on the first day of such Interest
Period shall be made as ABR Loans, (y) any Loans that
were to have been converted on the first day of such
Interest Period to Eurodollar Loans shall be converted
to or continued as ABR Loans and (z) any outstanding
Eurodollar Loans shall be converted, on the first day
of such Interest Period, to ABR Loans. Until such
notice has been withdrawn by the Administrative Agent,
no further Eurodollar Loans shall be made or continued
as such, nor shall the Company have the right to
convert ABR Loans to Eurodollar Loans.
2.16 Pro Rata Treatment and Payments. (a)
Except as set forth in subsection 2.20, each borrowing
by the Company from the Banks hereunder (other than
Swing Line Loans), each payment by the Company on
account of any commitment fee hereunder and any reduc-
tion of the Commitments of the Banks shall be made pro
rata according to the respective Commitment Percentages
of the Banks. All borrowings of Swing Line Loans shall
be made by and allocated to the Swing Line Banks ac-
cording to their respective shares of the total Swing
Line Limit. Except as set forth in subsection 2.20,
each payment (including each prepayment) by the Company
on account of principal of and interest on the Loans
shall be made pro rata according to the respective
outstanding principal amounts of the Loans then held by
the Banks. All payments (including prepayments) to be
made by the Company hereunder and under the Notes,
whether on account of principal, interest, fees or
otherwise, shall be made without set-off or counter-
claim and shall be made prior to 2:00 P.M., New York
City time, on the due date thereof to the Administra-
tive Agent, for the account of the Banks, at the
Administrative Agent's office specified in subsection
10.2, in Dollars and in immediately available funds.
The Company shall be deemed to have discharged its
obligation to make any payment to any Bank when it has
made such payment to the Administrative Agent in
accordance with the terms of this Agreement. The
Administrative Agent shall distribute such payments to
the Banks promptly upon receipt in like funds as re-
ceived. If any payment hereunder (other than payments
on the Eurodollar Loans) becomes due and payable on a
day other than a Business Day, such payment shall be
extended to the next succeeding Business Day, and, with
respect to payments of principal, interest thereon
shall be payable at the then applicable rate during
such extension. If any payment on a Eurodollar Loan
becomes due and payable on a day other than a Business
Day, the maturity thereof shall be extended to the next
succeeding Business Day unless the result of such
extension would be to extend such payment into another
calendar month, in which event such payment shall be
made on the immediately preceding Business Day.
(b) Unless the Administrative Agent shall
have been notified in writing by any Bank prior to a
borrowing that such Bank will not make the amount that
would constitute its Commitment Percentage of such
borrowing available to the Administrative Agent, the
Administrative Agent may assume that such Bank is
making such amount available to the Administrative
Agent, and the Administrative Agent may, in reliance
upon such assumption, make available to the Company a
corresponding amount. If such amount is not made
available to the Administrative Agent by the required
time on the Borrowing Date therefor, such Bank shall
pay to the Administrative Agent, on demand, such amount
with interest thereon at a rate equal to the daily
average Federal Funds Effective Rate for the period
until such Bank makes such amount immediately available
to the Administrative Agent. A certificate of the
Administrative Agent submitted to any Bank with respect
to any amounts owing under this subsection shall be
conclusive in the absence of manifest error. If such
Bank's Commitment Percentage of such borrowing is not
made available to the Administrative Agent by such Bank
within three Business Days of such Borrowing Date, the
Administrative Agent shall also be entitled to recover
such amount with interest thereon at the rate per annum
applicable to ABR Loans hereunder, on demand, from the
Company. Nothing contained in this subsection 2.16(b)
shall relieve any Bank which has failed to make
available its Commitment Percentage of any borrowing
hereunder from its obligation to do so in accordance
with the terms hereof.
2.17 Illegality. Notwithstanding any other
provision herein, if the adoption of or any change in
any Requirement of Law or in the interpretation or
application thereof shall make it unlawful for any Bank
or any corporation controlling such Bank or from which
such Bank obtains funding or credit to make or maintain
Eurodollar Loans as contemplated by this Agreement, (a)
the commitment of such Bank hereunder to make Euro-
dollar Loans, continue Eurodollar Loans as such and
convert ABR Loans to Eurodollar Loans shall forthwith
be cancelled and (b) such Bank's Loans then outstanding
as Eurodollar Loans, if any, shall be converted auto-
matically to ABR Loans on the respective last days of
the then current Interest Periods with respect to such
Loans or within such earlier period as required by law.
If any such conversion of a Eurodollar Loan occurs on a
day which is not the last day of the then current
Interest Period with respect thereto, the Company shall
pay to such Bank such amounts, if any, as may be
required pursuant to subsection 2.21.
2.18 Requirements of Law. (a) If the
adoption of or any change in any Requirement of Law
(other than the Certificate of Incorporation and By-
Laws or other organizational or governing documents of
the Banks) or in the interpretation or application
thereof or compliance by any Bank with any request or
directive (whether or not having the force of law) from
any central bank or other Governmental Authority made
subsequent to the date hereof:
(i) shall subject any Bank or any
corporation controlling such Bank or from which
such Bank obtains funding or credit to any tax of
any kind whatsoever with respect to this Agree-
ment, any Note, any Letter of Credit or any
Eurodollar Loan made by it, or change the basis of
taxation of payments to such Bank or such corpora-
tion in respect thereof (except for Non-Excluded
Taxes covered by subsection 2.19 (including taxes
excluded under the first sentence of subsection
2.19(a)) and changes in the rate of tax on the
overall net income of such Bank or such corpora-
tion);
(ii) shall impose, modify or hold
applicable any reserve, special deposit,
compulsory loan or similar requirement against
assets held by, deposits or other liabilities in
or for the account of, advances, loans or other
extensions of credit by, or any other acquisition
of funds by, any office of such Bank or any
corporation controlling such Bank or from which
such Bank obtains funding or credit which is not
otherwise included in the determination of the
Eurodollar Rate hereunder; or
(iii) shall impose on such Bank or any
corporation controlling such Bank or from which
such Bank obtains funding or credit any other
condition;
and the result of any of the foregoing is to increase
the cost to such Bank or such corporation, by an amount
which such Bank or such corporation deems to be
material, of making, converting into, continuing or
maintaining Eurodollar Loans or issuing or participa-
ting in Letters of Credit or to reduce any amount
receivable hereunder in respect thereof, then, in any
such case, the Company shall promptly pay such Bank,
within five Business Days after its demand, any
additional amounts necessary to compensate such Bank
for such increased cost or reduced amount receivable,
together with interest on each such amount from the
date due until payment in full at a rate per annum
equal to the ABR plus 2%. If any Bank becomes entitled
to claim any additional amounts pursuant to this sub-
section, it shall promptly notify the Company, through
the Administrative Agent, of the event by reason of
which it has become so entitled. A certificate as to
any additional amounts payable pursuant to this sub-
section submitted by such Bank, through the Administra-
tive Agent, to the Company shall be conclusive in the
absence of manifest error. This covenant shall survive
the termination of this Agreement and the payment of
the Notes and all other amounts payable hereunder.
(b) If any Bank shall have determined that
the adoption of or any change in any Requirement of Law
regarding capital adequacy or in the interpretation or
application thereof or compliance by such Bank or any
corporation controlling such Bank or from which such
Bank obtains funding or credit with any request or
directive regarding capital adequacy (whether or not
having the force of law) from any Governmental
Authority made subsequent to the date hereof does or
shall have the effect of reducing the rate of return on
such Bank's or such corporation's capital as a conse-
quence of its obligations hereunder or under any Letter
of Credit to a level below that which such Bank or such
corporation could have achieved but for such change or
compliance (taking into consideration such Bank's or
such corporation's policies with respect to capital
adequacy) by an amount deemed by such Bank to be
material, then from time to time, after submission by
such Bank to the Company (with a copy to the
Administrative Agent) of a written request therefore
(which written request shall be conclusive in the
absence of manifest error), the Company shall pay to
such Bank such additional amount or amounts as will
compensate such Bank for such reduction.
2.19 Taxes. (a) All payments made by the
Company under this Agreement and the Notes shall be
made free and clear of, and without deduction or
withholding for or on account of, any present or future
income, stamp or other taxes, levies, imposts, duties,
charges, fees, deductions or withholdings, now or
hereafter imposed, levied, collected, withheld or
assessed by any Governmental Authority, excluding, in
the case of the Administrative Agent and each Bank, (i)
net income taxes, capital taxes, doing business taxes
and franchise taxes imposed on the Administrative Agent
or such Bank, as the case may be, as a result of a
present or former connection between the jurisdiction
of the government or taxing authority imposing such tax
and the Administrative Agent or such Bank (excluding a
connection arising solely from such Agent or such Bank
having executed, delivered or performed its obligations
or received a payment under, or enforced, this Agree-
ment or the Notes) or any political subdivision or
taxing authority thereof or therein, (ii) taxes
required to be withheld because of a failure to deliver
any certificate described in this subsection 2.19 or
subsection 10.6 for any reason other than a change in
any Requirement of Law after, in the case of this
subsection 2.19 the date hereof or, in the case of
subsection 10.6(g), the date of transfer and (iii) any
and all United States withholding tax payable with
respect to payments under this Agreement and the Notes
other than such withholding taxes imposed as a result
of any change in or amendment to the laws of the United
States affecting taxation (including any regulation or
ruling proposed or promulgated by a taxing authority
thereof and any treaty provisions) or any change in the
official application, enforcement or interpretation of
such laws, regulations, rulings or treaties or any
other action taken by a taxing authority or a court of
competent jurisdiction, which change, amendment,
application, enforcement, interpretation or action
becomes effective after the date hereof (all such
non-excluded taxes, levies, imposts, duties, charges,
fees, deductions and withholdings being hereinafter
called "Non-Excluded Taxes"). If any Taxes are
required to be withheld from any amounts payable to
either Agent or any Bank hereunder or under the Notes,
the amounts so payable to such Agent or such Bank shall
be increased to the extent necessary to yield to such
Agent or such Bank (after payment of all Non-Excluded
Taxes) interest or any such other amounts payable
hereunder at the rates or in the amounts specified in
this Agreement and the Notes. Whenever any Non-
Excluded Taxes are payable by the Company, as promptly
as possible thereafter the Company shall send to the
Administrative Agent for its own account or for the
account of such Bank, as the case may be, a certified
copy of an original official receipt received by the
Company showing payment thereof. If the Company fails
to pay any Non-Excluded Taxes when due to the appropri-
ate taxing authority or fails to remit to the Admini-
strative Agent the required receipts or other required
documentary evidence, the Company shall indemnify the
Administrative Agent and such Bank for any incremental
taxes, interest or penalties that may become payable by
the Administrative Agent or such Bank as a result of
any such failure. The agreements in this subsection
2.19(a) shall survive the termination of this Agreement
and the payment of the Loans and the Notes and all
other amounts payable hereunder.
(b) Each Bank that is not incorporated under
the laws of the United States of America or a state
thereof agrees that it will deliver to the Company and
the Administrative Agent (i) two duly completed copies
of United States Internal Revenue Service Form 1001 or
4224 or successor applicable form, as the case may be,
and (ii) an Internal Revenue Service Form W-8 or W-9 or
successor applicable form, as the case may be. Each
such Bank also agrees to deliver to the Company and the
Administrative Agent two further copies of the said
Form 1001 or 4224 and Form W-8 or W-9, or successor
applicable forms or other manner of certification, as
the case may be, on or before the date that any such
form expires or becomes obsolete or after the occur-
rence of any event (including, without limitation, a
change in such Bank's lending office) requiring a
change in the most recent form previously delivered by
it to the Company and the Administrative Agent, and
such extensions or renewals thereof as may reasonably
be requested by the Company or the Administrative
Agent, unless in any such case an event (including,
without limitation, any change in treaty, law or regu-
lation) has occurred prior to the date on which any
such delivery would otherwise be required which renders
all such forms inapplicable or which would prevent such
Bank from duly completing and delivering any such form
with respect to it and such Bank so advises the Company
and the Administrative Agent. Such Bank shall certify
(i) in the case of a Form 1001 or 4224, that it is
entitled to receive payments under this Agreement
without deduction or withholding of any United States
federal income taxes and (ii) in the case of a Form W-8
or W-9, that it is entitled to an exemption from United
States backup withholding tax.
(c) If any Bank is, in its sole opinion,
able to apply for any tax credit, tax deduction or
other reduction in tax (a "Tax Benefit") by reason of
any increased amount paid by the Company under this
subsection 2.19, such Bank will use reasonable efforts
to obtain such Tax Benefit and, upon receipt thereof
will pay to the Company such amount, not exceeding the
increased amount paid by the Company, as it considers,
in its sole opinion, to be equal to the net after-tax
value to such Bank of the Tax Benefit or such part
thereof allocable to such withholding or deduction,
having regard to all of such Bank's dealings giving
rise to similar credits and to the cost of obtaining
the same, less any and all expenses incurred by such
Bank in obtaining such Tax Benefit (including any and
all professional fees incurred therewith); provided,
however, that (i) no Bank shall be obligated by this
subsection 2.19 to disclose to the Company any
information regarding its tax affairs or computations,
(ii) nothing in this subsection 2.19 shall interfere
with the right of each Bank to arrange its tax affairs
as it deems appropriate and (iii) nothing in this
subsection 2.19 shall impose an obligation on a Bank to
obtain any Tax Benefit if, in such Bank's sole opinion,
to do so would (x) impose undue hardships, burdens or
expenditures on such Bank or (y) increase such Bank's
exposure to taxation by the jurisdiction in question.
2.20 Company's Options upon Claims for
Increased Costs and Taxes. In the event that any
Affected Bank shall decline to make Eurodollar Loans
pursuant to subsection 2.17 or shall have notified the
Company that it is entitled to claim compensation
pursuant to subsection 2.18 or 2.19, the Company may
exercise any one or both of the following options:
(a) The Company may request one or more of
the Banks which are not Affected Banks to take
over all (but not part) of any Affected Banks's
then outstanding Loans and to assume all (but not
part) of any Affected Bank's Commitments, if any,
and obligations hereunder. If one or more Banks
shall so agree in writing (collectively, the
"Assenting Banks"; individually, an "Assenting
Bank") with respect to an Affected Bank, (i) the
Commitments, if any, of each Assenting Bank and
the obligations of such Assenting Bank under this
Agreement shall be increased by its respective
Allocable Share of the Commitments, if any, and of
the obligations of such Affected Bank under this
Agreement and (ii) each Assenting Bank shall make
Loans to the Company, according to such Assenting
Bank's respective Allocable Share, in an aggregate
principal amount equal to the outstanding princi-
pal amount of the Loans of such Affected Bank, on
a date mutually acceptable to the Assenting Banks,
such Affected Bank and the Company. The proceeds
of such Loans, together with funds of the Company,
shall be used to prepay the Loans of such Affected
Bank, together with all interest accrued thereon
and all other amounts owing to such Affected Bank
hereunder (including any amounts payable pursuant
to subsection 2.21 in connection with such prepay-
ment), and, upon such assumption by the Assenting
Bank and prepayment by the Company, such Affected
Bank shall cease to be a "Bank" for purposes of
this Agreement and shall no longer have any
obligations or rights hereunder (other than any
obligations or rights which according to this
Agreement shall survive the termination of this
Agreement).
(b) The Company may designate a replacement
bank (a "Replacement Bank") to assume the Commit-
ments, if any, and the obligations of any such
Affected Bank hereunder, and to purchase the
outstanding Notes of such Affected Bank's and such
Affected Bank's rights hereunder and with respect
thereto, without recourse upon, or warranty by, or
expense to, such Affected Bank (unless such
Affected Bank agrees otherwise), for a purchase
price equal to the outstanding principal amount of
the Loans of such Affected Bank plus (i) all
interest accrued and unpaid thereon and all other
amounts owing to such Affected Bank hereunder and
(ii) any amount which would be payable to such
Affected Bank pursuant to subsection 2.21, and
upon such assumption and purchase by the Replace-
ment Bank, such Replacement Bank shall be deemed
to be a "Bank" for purposes of this Agreement and
such Affected Bank shall cease to be a "Bank" for
purposes of this Agreement and shall no longer
have any obligations or rights hereunder (other
than any obligations or rights which according to
this Agreement shall survive the termination of
this Agreement).
2.21 Indemnity. The Company agrees to
indemnify each Bank and to hold each Bank harmless from
any loss or expense which such Bank may sustain or
incur as a consequence of (a) default by the Company in
payment when due of the principal amount of or interest
on any Eurodollar Loan, (b) default by the Company in
making a borrowing of, conversion into or continuation
of Eurodollar Loans after the Company has given a
notice requesting the same in accordance with the pro-
visions of this Agreement, (c) default by the Company
in making any prepayment of Eurodollar Loans after the
Company has given a notice thereof in accordance with
the provisions of this Agreement or (d) the making of a
prepayment of Eurodollar Loans on a day which is not
the last day of an Interest Period with respect there-
to, including, without limitation, in each case, any
such loss or expense arising from the reemployment of
funds obtained by such Bank or from fees payable to
terminate the deposits from which such funds were
obtained. Calculation of all amounts payable to a Bank
under this subsection 2.21 shall be made as though that
Bank had actually funded its relevant Eurodollar Loan
through the purchase of a eurodollar deposit bearing
interest at the Eurodollar Rate in an amount equal to
the amount of such Eurodollar Loan and having a
maturity comparable to the Interest Period of such
Eurodollar Loan and through the transfer of such
Eurodollar deposit from an offshore office of that Bank
to a domestic office of that Bank in the United States
of America; provided, however, that each Bank may fund
each of its Eurodollar Loans in any manner it sees fit
and the foregoing assumption shall be utilized only for
the calculation of amounts payable under this sub-
section 2.21. This covenant shall survive the termina-
tion of this Agreement and the payment of the Loans and
the Notes and all other amounts payable hereunder.
2.22 Determinations. In making the determi-
nations contemplated by Sections 2.18, 2.19 and 2.21,
each Bank may make such estimates, assumptions,
allocations and the like that such Bank in good faith
determines to be appropriate. Upon request of the
Company, each Bank shall furnish to the Company, at any
time after demand for payment of an amount under sub-
section 2.18(a) or 2.21, a certificate outlining in
reasonable detail the computation of any amounts owing.
Any certificate furnished by a Bank shall be binding
and conclusive in the absence of manifest error.
2.23 Change of Lending Office. If an event
occurs with respect to any Bank that makes operable the
provisions of Section 2.17 or entitles such Bank to
make a claim under subsection 2.18 or 2.19, such Bank
shall, if requested in writing by the Company, to the
extent not inconsistent with such Bank's internal
policies, use reasonable efforts to designate another
office or offices for the making and maintaining of its
Loans the designation of which will eliminate such
operability or reduce materially the amount such Bank
is so entitled to claim, provided that such designation
would not, in the sole discretion of such Bank, result
in such Bank incurring any costs unless the Company has
agreed to reimburse such Bank therefor.
SECTION 3. LETTERS OF CREDIT
3.1 L/C Commitment. (a) Subject to the
terms and conditions hereof, the Issuing Bank agrees to
issue standby letters of credit ("Letters of Credit")
for the account of the Company on any Business Day
during the Commitment Period in such form as may be
approved from time to time by the Issuing Bank;
provided that the Issuing Bank shall have no obligation
to issue any Letter of Credit if, after giving effect
to such issuance, (i) the L/C Obligations would exceed
the L/C Commitment or (ii) the Available Commitment
would be less than zero.
(b) Each Letter of Credit shall:
(i) be denominated in Dollars and shall be a
standby letter of credit issued to support
obligations of the Company, contingent or other-
wise, to provide credit support for workers'
compensation, other insurance programs and other
corporate purposes consistent with past practices
(a "Letter of Credit") and,
(ii) expire no later than the earlier of 365
days after its date of issuance and the Termina-
tion Date.
(c) Each Letter of Credit shall be subject
to the Uniform Customs and, to the extent not incon-
sistent therewith, the laws of the State of New York.
(d) The Issuing Bank shall not at any time
be obligated to issue any Letter of Credit hereunder if
such issuance would conflict with, or cause the Issuing
Bank or any L/C Participant to exceed any limits
imposed by, any applicable Requirement of Law.
3.2 Procedure for Issuance of Letters of
Credit. The Company may from time to time request that
the Issuing Bank issue a Letter of Credit by delivering
to the Issuing Bank at its address for notices speci-
fied herein an Application therefor, completed to the
satisfaction of the Issuing Bank, and such other
certificates, documents and other papers and informa-
tion as the Issuing Bank may reasonably request. Upon
receipt of any Application, the Issuing Bank will
process such Application and the certificates, docu-
ments and other papers and information delivered to it
in connection therewith in accordance with its custo-
mary procedures and shall promptly issue the Letter of
Credit requested thereby (but in no event shall the
Issuing Bank be required to issue any Letter of Credit
earlier than five Business Days after its receipt of
the Application therefor and all such other certifi-
cates, documents and other papers and information
relating thereto) by issuing the original of such
Letter of Credit to the beneficiary thereof or as
otherwise may be agreed by the Issuing Bank and the
Company. The Issuing Bank shall furnish a copy of such
Letter of Credit to the Company and each Bank promptly
following the issuance thereof.
3.3 Fees, Commissions and Other Charges.
(a) The Company shall pay to the Administrative Agent
a letter of credit commission with respect to each
Letter of Credit, computed as follows:
(i) such commission payable for the
account of the Banks shall be computed at a
rate equal to the then Applicable Margin for
Eurodollar Loans on the daily average undrawn
face amount of such Letter of Credit and
shall be payable to the Administrative Agent
for the account of the Banks (including the
Issuing Bank) pro rata according to their
Commitment Percentages; and
(ii) such commission payable for the
account of the Issuing Bank in its capacity
as such shall be computed at a rate equal to
1/8 of 1% per annum on the daily average
undrawn face amount of such Letter of Credit.
Such commissions shall be payable in arrears on each
L/C Fee Payment Date to occur after the date of
issuance of each Letter of Credit and on the expiration
date of such Letter of Credit and shall be nonrefund-
able.
(b) In addition to the foregoing fees and
commissions, the Company shall pay or reimburse the
Issuing Bank for such normal and customary costs and
expenses as are incurred or charged by the Issuing Bank
in issuing, effecting payment under, amending or other-
wise administering any Letter of Credit.
(c) The Administrative Agent shall, promptly
following its receipt thereof, distribute to the
Issuing Bank and the L/C Participants all fees and
commissions received by the Administrative Agent for
their respective accounts pursuant to this subsection.
3.4 L/C Participations. (a) The Issuing
Bank irrevocably agrees to grant and hereby grants to
each L/C Participant, and, to induce the Issuing Bank
to issue Letters of Credit hereunder, each L/C Parti-
cipant irrevocably agrees to accept and purchase and
hereby accepts and purchases from the Issuing Bank, on
the terms and conditions hereinafter stated, for such
L/C Participant's own account and risk, an undivided
interest equal to such L/C Participant's Commitment
Percentage in the Issuing Bank's obligations and rights
under each Letter of Credit issued hereunder and the
amount of each draft paid by the Issuing Bank there-
under. Each L/C Participant unconditionally and
irrevocably agrees with the Issuing Bank that, if a
draft is paid under any Letter of Credit for which the
Issuing Bank is not reimbursed in full by the Company
in accordance with the terms of this Agreement, such
L/C Participant shall pay to the Issuing Bank upon
demand at the Issuing Bank's address for notices
specified herein an amount equal to such L/C
Participant's Commitment Percentage of the amount of
such draft, or any part thereof, which is not so
reimbursed.
(b) If any amount required to be paid by any
L/C Participant to the Issuing Bank pursuant to sub-
section 3.4(a) in respect of any unreimbursed portion
of any payment made by the Issuing Bank under any
Letter of Credit is paid to the Issuing Bank within
three Business Days after the date such payment is due,
such L/C Participant shall pay to the Issuing Bank on
demand an amount equal to the product of (i) such
amount, times (ii) the daily average Federal funds
rate, as quoted by the Issuing Bank, during the period
from and including the date such payment is required to
the date on which such payment is immediately available
to the Issuing Bank, times (iii) a fraction the numera-
tor of which is the number of days that elapse during
such period and the denominator of which is 360. If
any such amount required to be paid by any L/C Parti-
cipant pursuant to subsection 3.4(a) is not in fact
made available to the Issuing Bank by such L/C
Participant within three Business Days after the date
such payment is due, the Issuing Bank shall be entitled
to recover from such L/C Participant, on demand, such
amount with interest thereon calculated from such due
date at the rate per annum applicable to ABR Loans
hereunder. A certificate of the Issuing Bank submitted
to any L/C Participant with respect to any amounts
owing under this subsection shall be conclusive in the
absence of manifest error.
(c) Whenever, at any time after the Issuing
Bank has made payment under any Letter of Credit and
has received from any L/C Participant its pro rata
share of such payment in accordance with subsection
3.4(a), the Issuing Bank receives any payment related
to such Letter of Credit (whether directly from the
Company or otherwise, including by way of set-off or
proceeds of collateral applied thereto by the Issuing
Bank), or any payment of interest on account thereof,
the Issuing Bank will distribute to such L/C Partici-
pant its pro rata share thereof; provided, however,
that in the event that any such payment received by the
Issuing Bank shall be required to be returned by the
Issuing Bank, such L/C Participant shall return to the
Issuing Bank the portion thereof previously distributed
by the Issuing Bank to it.
3.5 Reimbursement Obligation of the Company.
(a) The Company agrees to reimburse the Issuing Bank
on each date on which the Issuing Bank notifies the
Company of the date and amount of a draft presented
under any Letter of Credit and paid by the Issuing Bank
for the amount of (i) such draft so paid and (ii) any
taxes, fees, charges or other costs or expenses
incurred by the Issuing Bank in connection with such
payment. Each such payment shall be made to the
Issuing Bank at its address for notices specified
herein in lawful money of the United States of America
and in immediately available funds.
(b) Interest shall be payable on any and all
amounts remaining unpaid by the Company under this
subsection from the date such amounts become payable
(whether at stated maturity, by acceleration or other-
wise) until payment in full at the rate which would be
payable on any outstanding ABR Loans which were then
overdue.
(c) Each drawing under any Letter of Credit
shall constitute a request by the Company to the
Administrative Agent for a borrowing pursuant to
subsection 2.3 of ABR Loans in the amount of such
drawing. The Borrowing Date with respect to such
borrowing shall be the date of such drawing.
3.6 Obligations Absolute. Company's obligations
under this Section 3 shall be absolute and unconditional
under any and all circumstances and irrespective of any set-off,
counterclaim or defense to payment which the Company may have or
have had against the Issuing Bank or any beneficiary of
a Letter of Credit.
(b) The Company also agrees with the Issuing
Bank that the Issuing Bank shall not be responsible
for, and the Company's Reimbursement Obligations under
subsection 3.5(a) shall not be affected by, among other
things, (i) the validity or genuineness of documents or
of any endorsements thereon, even though such documents
shall in fact prove to be invalid, fraudulent or
forged, or (ii) any dispute between or among the
Company and any beneficiary of any Letter of Credit or
any other party to which such Letter of Credit may be
transferred or (iii) any claims whatsoever of the
Company against any beneficiary of such Letter of
Credit or any such transferee.
(c) The Issuing Bank shall not be liable for
any error, omission, interruption or delay in transmis-
sion, dispatch or delivery of any message or advice,
however transmitted, in connection with any Letter of
Credit, except for errors or omissions caused by the
Issuing Bank's gross negligence or willful misconduct.
(d) The Company agrees that any action taken
or omitted by the Issuing Bank under or in connection
with any Letter of Credit or the related drafts or
documents, if done in the absence of gross negligence
of willful misconduct and in accordance with the
standards of care specified in the Uniform Commercial
Code of the State of New York, shall be binding on the
Company and shall not result in any liability of the
Issuing Bank to the Company.
3.7 Letter of Credit Payments. If any draft
shall be presented for payment under any Letter of
Credit, the Issuing Bank shall promptly notify the
Company of the date and amount thereof. The responsi-
bility of the Issuing Bank to the Company in connection
with any draft presented for payment under any Letter
of Credit shall, in addition to any payment obligation
expressly provided for in such Letter of Credit, be
limited to determining that the documents (including
each draft) delivered under such Letter of Credit in
connection with such presentment are in conformity with
such Letter of Credit.
3.8 Application. To the extent that any
provision of any Application related to any Letter of
Credit is inconsistent with the provisions of this
Section 3, the provisions of this Section 3 shall
apply.
SECTION 4. REPRESENTATIONS AND WARRANTIES
To induce the Agents, the Administrative
Agent and the Banks to enter into this Agreement and to
make the Loans and issue or participate in the Letters
of Credit, the Company hereby represents and warrants
to each Agent, the Administrative Agent and each Bank
that:
4.1 Financial Condition. The audited
consolidated balance sheets of the Company and its
consolidated Subsidiaries as at December 31, 1992 and
the related consolidated statements of operations and
of cash flows for the fiscal year ended on such date,
reported on by Ernst & Young, copies of which have
heretofore been furnished to each Bank, present fairly
the consolidated financial condition of the Company and
its consolidated Subsidiaries as at such date, and the
consolidated results of their operations and their
consolidated cash flows for the fiscal year then ended.
The unaudited consolidated balance sheet of the Company
and its consolidated Subsidiaries as at September 30,
1993 and the related unaudited consolidated statements
of operations and of cash flows for the nine-month
period ended on such date, certified by a Responsible
Officer, copies of which have heretofore been furnished
to each Bank, present fairly the consolidated financial
condition of the Company and its consolidated
Subsidiaries as at such date, and the consolidated
results of their operations and their consolidated cash
flows for the nine-month period then ended (subject to
normal year-end audit adjustments). The unaudited
consolidating balance sheet of the Company and its
consolidated Subsidiaries by principal operating group
as at September 30, 1993 and the related unaudited
consolidating statements of operations for the nine-
month period ended on such date, certified by a
Responsible Officer, copies of which have heretofore
been furnished to each Bank, present fairly the
consolidating financial condition of the Company and
its consolidated Subsidiaries by principal operating
group as at such date, and the consolidating results of
their operations for the nine-month period then ended
(subject to normal year-end adjustments). All such
financial statements, including the related schedules
and notes thereto, have been prepared in accordance
with GAAP applied consistently throughout the periods
involved (except as approved by such accountants or
Responsible Officer, as the case may be, and as
disclosed therein). Neither the Company nor any of its
consolidated Subsidiaries had, at the date of the most
recent balance sheet referred to above, any material
Guarantee Obligation, contingent liability or liability
for taxes, or any long-term lease or unusual forward or
long-term commitment, including, without limitation,
any interest rate or foreign currency swap or exchange
transaction, which is not reflected in the foregoing
statements or referred to in the notes thereto. During
the period from September 30, 1993 to and including the
date hereof there has been no sale, transfer or other
disposition by the Company or any of its consolidated
Subsidiaries of any material part of its business or
property and no purchase or other acquisition of any
business or property (including any Capital Stock of
any other Person) material in relation to the consoli-
dated financial condition of the Company and its
consolidated Subsidiaries at September 30, 1993 (except
as otherwise disclosed in writing to the Banks prior to
the Closing Date).
4.2 No Change. Since December 31, 1992
there has been no development or event which has had or
could reasonably be expected to have a Material Adverse
Effect.
4.3 Corporate Existence; Compliance with
Law. Each of the Company and its Subsidiaries (a) is
duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization,
(b) has the corporate power and authority, and the
legal right, to own and operate its property, to lease
the property it operates as lessee and to conduct the
business in which it is currently engaged, (c) is duly
qualified as a foreign corporation and in good standing
under the laws of each jurisdiction where its owner-
ship, lease or operation of property or the conduct of
its business requires such qualification, except where
the failure to be duly qualified or in good standing
could not reasonably be expected to have a Material
Adverse Effect, and (d) is in compliance with all
Requirements of Law except to the extent that the
failure to comply therewith could not, in the aggre-
gate, reasonably be expected to have a Material Adverse
Effect.
4.4 Corporate Power; Authorization;
Enforceable Obligations. The Company and each of its
Subsidiaries has the corporate power and authority, and
the legal right, to make, deliver and perform the
Credit Documents to which it is a party and to borrow
hereunder and has taken all necessary corporate action
to authorize the borrowings on the terms and conditions
of this Agreement, the Notes and the Applications and
to authorize the execution, delivery and performance of
the Credit Documents to which it is a party. No con-
sent or authorization of, filing with, notice to or
other act by or in respect of, any Governmental
Authority or any other Person is required in connection
with the borrowings hereunder or with the execution,
delivery, performance, validity or enforceability of
the Credit Documents to which it is a party. This
Agreement has been, and each other Credit Document to
which the Company or any of its Subsidiaries is a party
will be, duly executed and delivered on behalf of the
Company or such Subsidiary, as the case may be. This
Agreement constitutes, and each other Credit Document
to which it is a party when executed and delivered will
constitute, a legal, valid and binding obligation of
the Company or any of its Subsidiaries party thereto
enforceable against the Company or such Subsidiary, as
the case may be, in accordance with its terms, except
as enforceability may be limited by applicable bank-
ruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors'
rights generally and by general equitable principles
(whether enforcement is sought by proceedings in equity
or at law).
4.5 No Legal Bar. The execution, delivery
and performance of the Credit Documents to which the
Company or any of its Subsidiaries is a party, the
borrowings hereunder and the use of the proceeds
thereof will not violate any Requirement of Law or
Contractual Obligation of the Company or of any of its
Subsidiaries (except for violations of Contractual
Obligations which, individually or in the aggregate,
could not reasonably be expected to have a Material
Adverse Effect) and will not result in, or require, the
creation or imposition of any Lien on any of its or
their respective properties or revenues pursuant to any
such Requirement of Law or Contractual Obligation,
except for the Liens expressly permitted by subsection
7.3.
4.6 No Material Litigation. No litigation,
investigation or proceeding of or before any arbitrator
or Governmental Authority is pending or, to the know-
ledge of the Company, threatened by or against the
Company or any of its Subsidiaries or against any of
its or their respective properties or revenues (a) with
respect to any of the Credit Documents or any of the
transactions contemplated hereby or thereby, or (b)
which, if adversely determined, would have a Material
Adverse Effect.
4.7 No Default. Neither the Company nor any
of its Subsidiaries is in default under or with respect
to any of its Contractual Obligations in any respect
which could reasonably be expected to have a Material
Adverse Effect. No Default or Event of Default has
occurred and is continuing.
4.8 Ownership of Property; Liens. Each of
the Company and its Subsidiaries has good record and
marketable title in fee simple to, or a valid leasehold
interest in, all its real property, and good title to,
or a valid leasehold interest in, all its other
property, except where the failure to have such title
or such leasehold interest, as the case may be, could
not reasonably be expected to have a Material Adverse
Effect, and none of such property is subject to any
Lien except as permitted by subsection 7.3.
4.9 Intellectual Property. The Company and
each of its Subsidiaries owns, or is licensed to use,
all domestic and foreign trademarks, tradenames,
copyrights, technology, know-how and processes neces-
sary for the conduct of its business as currently
conducted (the "Intellectual Property") except for
those the failure to own or license which could not
reasonably be expected to have a Material Adverse
Effect. No claim has been asserted and is pending or,
to the knowledge of the Company, has been threatened by
any Person challenging or questioning the use of any
such Intellectual Property or the validity or
effectiveness of any such Intellectual Property which
could reasonably be expected to have a Material Adverse
Effect, nor does the Company know of any valid basis
for any such claim. The use of such Intellectual
Property by the Company and its Subsidiaries does not
infringe on the rights of any Person, except for such
claims and infringements that, in the aggregate, could
not reasonably be expected to have a Material Adverse
Effect.
4.10 No Burdensome Restrictions. No
Requirement of Law or Contractual Obligation of the
Company or any of its Subsidiaries has or could
reasonably be expected to have a Material Adverse
Effect.
4.11 Taxes. Each of the Company and its
consolidated Subsidiaries has filed or caused to be
filed all tax returns which, to the knowledge of the
Company, are required to be filed and has paid all
taxes shown to be due and payable on said returns or on
any assessments made against it or any of its property
and all other taxes, fees or other charges imposed on
it or any of its property by any Governmental Authority
(other than any unfiled tax returns for taxes, and
unpaid taxes, fees and other charges, (a) the amount or
validity of which are currently being contested in good
faith by appropriate proceedings and with respect to
which reserves in conformity with GAAP have been
provided on the books of the Company or its
consolidated Subsidiaries, as the case may be, or (b)
which in each case, individually or in the aggregate,
would not cause the Company and its consolidated
Subsidiaries to have a liability in excess of
$2,500,000); no notice of tax Lien has been filed, and,
to the knowledge of the Company, no claim is being
asserted by any taxing authority, with respect to any
such tax, fee or other charge except for claims the
amount or validity of which are currently being
contested in good faith by appropriate proceedings and
with respect to which reserves in conformity with GAAP
have been provided on the books of the Company or its
consolidated Subsidiaries, as the case may be, and
claims for amounts which, in the aggregate, do not
exceed $5,000,000.
4.12 Federal Regulations. No part of the
proceeds of any Loans will be used for "purchasing" or
"carrying" any "margin stock" within the respective
meanings of each of the quoted terms under Regulation U
of the Board of Governors of the Federal Reserve System
as now and from time to time hereafter in effect or for
any purpose which violates the provisions of the
regulations of such Board of Governors. If requested
by any Bank or the Administrative Agent, the Company
will furnish to the Administrative Agent and each Bank
a statement to the foregoing effect in conformity with
the requirements of FR Form U-1 referred to in said
Regulation U.
4.13 ERISA. Each Plan which is intended to
be qualified under Section 401(a) (or 403(a) as
appropriate) of the Code and each related trust agree-
ment, annuity contract or other funding instrument
which is intended to be tax-exempt under Section 501(a)
of the Code is so qualified and tax-exempt and has been
so qualified and tax-exempt during the period from its
adoption to date. No event has occurred in connection
with which the Company or any Commonly Controlled
Entity or any Plan, directly or indirectly, could
reasonably be expected to be subject to any material
liability under ERISA, the Code or any other law,
regulation or governmental order or under any agree-
ment, instrument, statute, rule of law or regulation
pursuant to or under which the Company or a Subsidiary
has agreed to indemnify or is required to indemnify any
person against liability incurred under, or for a
violation or failure to satisfy the requirements of,
any such statute, regulation or order. No Reportable
Event has occurred during the five-year period prior to
the date on which this representation is made or deemed
made with respect to any Plan, and each Plan has
complied in all material respects with the applicable
provisions of ERISA and the Code. The present value of
all accrued benefits under each Single Employer Plan
maintained by the Company or any Commonly Controlled
Entity or for which the Company or any Commonly
Controlled Entity has or could have any liability
(based on those assumptions used to fund the Plans) did
not, as of the last annual valuation date prior to the
date on which this representation is made or deemed
made, exceed the value of the assets of such Plan
allocable to such accrued benefits. Neither the
Company nor any Commonly Controlled Entity has had a
complete or partial withdrawal from any Multiemployer
Plan, and neither the Company nor any Commonly
Controlled Entity could reasonably be expected to
become subject to any liability under ERISA if the
Company or any such Commonly Controlled Entity were to
withdraw completely from all Multiemployer Plans as of
the valuation date most closely preceding the date on
which this representation is made or deemed made. No
such Multiemployer Plan is in Reorganization or
Insolvent. The present value (determined using actu-
arial and other assumptions which are reasonable in
respect of the benefits provided and the employees
participating) of the unfunded liability of the Company
and each Commonly Controlled Entity for benefits under
all unfunded retirement or severance plans, programs,
policies or other arrangements (including, without
limitation, post retirement benefits to be provided to
their current and former employees under Plans which
are welfare benefit plans (as defined in Section 3(1)
of ERISA)), whether or not funded does not, in the
aggregate, exceed $5,000,000 (excluding those
arrangements set forth on Schedule 4.13).
4.14 Investment Company Act; Other
Regulations. Neither the Company nor any Subsidiary of
the Company is an "investment company", or a company
"controlled" by an "investment company", within the
meaning of the Investment Company Act of 1940, as
amended. Neither the Company nor any Subsidiary of the
Company is subject to regulation under any Federal or
State statute or regulation which limits its ability to
incur Indebtedness.
4.15 Subsidiaries. On the Closing Date, the
only Subsidiaries of the Company, and the only material
partnerships or joint ventures in which the Company or
any Subsidiary has an interest, are those set forth on
Schedule 4.15. On the Closing Date, the Company owns
the percentage of the issued and outstanding Capital
Stock or other evidences of the ownership of each
Subsidiary, partnership or joint venture set forth on
Schedule 4.15 as set forth on such Schedule. On the
Closing Date, except as set forth on Schedule 4.15, no
such Subsidiary, partnership or joint venture has
issued any securities convertible into shares of its
Capital Stock. The outstanding stock and securities
(or other evidence of ownership) of such Subsidiaries,
partnerships or joint ventures owned by the Company and
its Subsidiaries are owned by the Company and its
Subsidiaries free and clear of all Liens, warrants,
options or rights of others of any kind whatsoever
except for Liens permitted by subsection 7.3.
4.16 Existing Indebtedness. Schedule 4.16
lists all Indebtedness of the Company and its Subsi-
diaries outstanding on the Closing Date and all credit
facilities in effect or committed on the Closing Date
under which the Company or any of its Subsidiaries
could obtain extensions of credit.
4.17 Accuracy and Completeness of
Information. No document furnished or statement made
in writing to the Banks by the Company in connection
with the negotiation, preparation or execution of this
Agreement or any of the other Credit Documents contains
any untrue statement of a material fact, or omits to
state any such material fact necessary in order to make
the statements contained therein not misleading, in
either case which has not been corrected, supplemented
or remedied by subsequent documents furnished or state-
ments made in writing to the Banks. All other written
information, reports and other papers and data with
respect to the Company and its Subsidiaries (other than
financial statements), furnished to the Banks by the
Company, or on behalf of the Company, were (a) in the
case of those not prepared for delivery to the Banks,
to the Company's knowledge, at the time the same were
so furnished, complete and correct in all material
respects for the purposes for which the same were
prepared and (b) in the case of those prepared for
delivery to the Banks, to the Company's knowledge,
complete and correct in all material respects, or have
been subsequently supplemented by other information,
reports or other papers or data, to the extent
necessary to give the Banks a true and accurate
knowledge of the subject matter in all material
respects, it being understood that financial pro-
jections as to future events are not to be viewed as
facts and that actual results may differ from projected
results. No fact is known to the Company or any of its
Subsidiaries which has had or could reasonably be
expected to have a Material Adverse Effect, which has
not been set forth in the financial statements referred
to in subsection 4.1 (or otherwise disclosed in writing
to the Banks prior to the Closing Date).
4.18 Purpose of Loans. The proceeds of the
Loans shall be used by the Company for working capital
purposes in the ordinary course of business and for
general corporate purposes of the Company and, to the
extent permitted hereunder, its Subsidiaries.
4.19 Senior Indebtedness. The principal of
and interest on the Loans and the Notes are and will
continue to be within the definition of "Senior
Indebtedness" or any similar term under the
Subordinated Debentures.
4.20 Environmental Matters. Except as set
forth on Schedule 4.20 or insofar as there is no
reasonable likelihood of a Material Adverse Effect
arising from any combination of facts or circumstances
inconsistent with any of the following:
(a) The facilities and properties owned or
operated by the Company or any of its Subsidiaries
(the "Properties") do not contain, and to the best
knowledge of the Company or its Subsidiaries, have
not previously contained, any Materials of Envi-
ronmental Concern in amounts or concentrations
which (i) constitute or constituted a violation
of, or (ii) could reasonably be expected to give
rise to liability under, any Environmental Law.
(b) The Properties and all operations at the
Properties are in compliance with all applicable
Environmental Laws, and there is no contamination
at, under or about the Properties or violation of
any Environmental Law with respect to the Proper-
ties or the business operated by the Company or
any of its Subsidiaries (the "Business") which
could materially interfere with the continued
operation of the Properties.
(c) Neither the Company nor any of its
Subsidiaries has received any notice of violation,
alleged violation, non-compliance, liability or
potential liability regarding environmental
matters or compliance with Environmental Laws with
regard to any of the Properties or the Business,
nor does the Company or any of its Subsidiaries
have knowledge or reason to believe that any such
notice will be received or is being threatened.
(d) To the best knowledge of the Company or
any of its Subsidiaries, Materials of Environ-
mental Concern have not been transported or
disposed of from the Properties in violation of,
or in a manner or to a location which could
reasonably be expected to give rise to liability
under, any Environmental Law, nor have any
Materials of Environmental Concern been generated,
treated, stored or disposed of at, on or under any
of the Properties in violation of, or in a manner
that could reasonably be expected to give rise to
liability under, any applicable Environmental Law.
(e) No judicial proceeding or governmental
or administrative action is pending or, to the
knowledge of the Company or any of its Subsidi-
aries, threatened, under any Environmental Law to
which the Company or any Subsidiary is or will be
named as a party with respect to the Properties or
the Business, nor are there any consent decrees or
other decrees, consent orders, administrative
orders or other orders, or other administrative or
judicial requirements outstanding under any
Environmental Law with respect to the Properties
or the Business.
(f) There has been no release or threat of
release of Materials of Environmental Concern at
or from the Properties, or arising from or related
to the operations of the Company or any Subsidiary
in connection with the Properties or otherwise in
connection with the Business, in violation of or
in amounts or in a manner that could reasonably
give rise to liability under Environmental Laws.
SECTION 5. CONDITIONS PRECEDENT
5.1 Conditions to Closing Date. The
occurrence of the Closing Date, and the agreement of
each Bank to make the initial extension of credit
requested to be made by it on or after the Closing
Date, shall be subject to the satisfaction, on or prior
to the Closing Date, of the following conditions
precedent:
(a) Credit Documents. The Administrative
Agent shall have received (i) this Agreement,
executed and delivered by a duly authorized
officer of the Company, with a counterpart for
each Bank, (ii) for the account of each Bank, a
Revolving Credit Note conforming to the require-
ments hereof and executed by a duly authorized
officer of the Company, (iii) for the account of
each Swing Line Bank, a Swing Line Note conforming
to the requirements hereof and executed by a duly
authorized officer of the Company and (iv) each
Subsidiary Guarantee, together with the related
Consent and Confirmation, executed and delivered
by a duly authorized officer of the Guarantor
party thereto, with a counterpart or a conformed
copy for each Bank.
(b) Borrowing Certificate. The Administra-
tive Agent shall have received with a counterpart
for each Bank, a certificate of the Company, dated
the Closing Date, substantially in the form of
Exhibit E, with appropriate insertions and attach-
ments, satisfactory in form and substance to the
Administrative Agent, executed by the President or
any Vice President and the Secretary or any
Assistant Secretary of the Company.
(c) Corporate Proceedings of the Company.
The Administrative Agent shall have received, with
a counterpart for each Bank, a copy of the resolu-
tions, in form and substance satisfactory to the
Administrative Agent, of the Board of Directors of
the Company authorizing (i) the execution, deli-
very and performance of this Agreement, the Notes
and the other Credit Documents to which it is a
party and (ii) the borrowings contemplated here-
under, certified by the Secretary or an Assistant
Secretary of the Company as of the Closing Date,
which certificate shall be in form and substance
satisfactory to the Administrative Agent and shall
state that the resolutions thereby certified have
not been amended, modified, revoked or rescinded.
(d) Company Incumbency Certificate. The
Administrative Agent shall have received, with a
counterpart for each Bank, a Certificate of the
Company, dated the Closing Date, as to the
incumbency and signature of the officers of the
Company executing any Credit Document satisfactory
in form and substance to the Administrative Agent,
executed by the President or any Vice President
and the Secretary or any Assistant Secretary of
the Company.
(e) Corporate Proceedings of Subsidiaries.
The Administrative Agent shall have received, with
a counterpart for each Bank, a copy of the resolu-
tions, in form and substance satisfactory to the
Administrative Agent, of the Board of Directors of
each Subsidiary of the Company which is a party to
a Credit Document authorizing the execution,
delivery and performance of the Credit Documents
to which it is a party certified by the Secretary
or an Assistant Secretary of each such Subsidiary
as of the Closing Date, which certificate shall be
in form and substance satisfactory to the Admini-
strative Agent and shall state that the resolu-
tions thereby certified have not been amended,
modified, revoked or rescinded.
(f) Subsidiary Incumbency Certificates. The
Administrative Agent shall have received, with a
counterpart for each Bank, a certificate of each
Subsidiary of the Company which is a party to a
Credit Document, dated the Closing Date, as to the
incumbency and signature of the officers of such
Subsidiaries executing any Credit Document,
satisfactory in form and substance to the Admini-
strative Agent, executed by the President or any
Vice President and the Secretary or any Assistant
Secretary of each such Subsidiary.
(g) Corporate Documents. The Administrative
Agent shall have received, with a counterpart for
each Bank, true and complete copies of the certi-
ficate of incorporation and by-laws of the Company
and each Subsidiary which is a party to a Credit
Document, certified as of a date not more than 30
days prior to the Closing Date by the Secretary of
State of the jurisdiction of incorporation and as
of the Closing Date by the Secretary or an Assis-
tant Secretary of the Company or such Subsidiary,
as the case may be, and in the case of the by-
laws, as of the Closing Date as complete and
correct copies thereof by the Secretary or an
Assistant Secretary of the Company or such
Subsidiary, as the case may be.
(h) Certificate as to Conditions for Release
of Existing Security Interests Under Section 8.15
of Note Purchase Agreement. The Administrative
Agent shall have received a certificate of the
Company, dated the Closing Date, with a counter-
part for the Collateral Agent and each Bank,
stating that: (i) no Default or Event of Default
(each as defined in the Note Purchase Agreement)
has occurred and is continuing, (ii) the ratio of
Consolidated Operating Cash Flow (as defined in
the Note Purchase Agreement) to Consolidated
Finance Charges (as defined in the Note Purchase
Agreement) for the period consisting of the four
most recently ended full fiscal quarters is
greater than 2.0 to 1.0, (iii) the ratio of
Consolidated Total Debt (as defined in the Note
Purchase Agreement) to Total Consolidated
Capitalization (as defined in the Note Purchase
Agreement) does not exceed 50%, (iv) the Company
is in compliance with Sections 8.10 and 8.11 of
the Note Purchase Agreement, measured in each case
as of the last day of the most recently ended
fiscal quarter as if the release had been
effective prior thereto, and (v) the 1992 Private
Placement Notes, as an unsecured issue, has
obtained a rating designation of "2" or better
from the National Association of Insurance
Commissioners and such rating has not been
subsequently withdrawn, which certificate shall be
satisfactory otherwise in form and substance to
the Administrative Agent and executed by the
President or any Vice President and the Secretary
or any Assistant Secretary of the Company.
(i) Rating of the 1992 Private Placement
Notes. The Administrative Agent shall have
received, with a counterpart for each Bank, a copy
of the report of the National Association of
Insurance Commissioners referred to in item (h)(v)
of this subsection 5.1.
(j) Termination of Existing Security
Interests. The Administrative Agent shall have
received, with a counterpart for the Collateral
Agent and each Bank, written instructions signed
by each Participating Creditor party to the
Intercreditor Agreement, (i) irrevocably
instructing the Collateral Agent, pursuant to
Section 7.3 of the Intercreditor Agreement, to
release all Existing Collateral held by the
Collateral Agent pursuant to the Intercreditor
Agreement and (ii) authorizing the Collateral
Agent and each Guarantor to execute and deliver a
Consent and Confirmation relating to its
respective Subsidiary Guarantee.
(k) Release of Existing Collateral. The
Administrative Agent shall have received evidence
that the Collateral Agent has released the
Existing Collateral as contemplated by paragraph
(j) of this subsection 5.1.
(l) Fees and Expenses. The Administrative
Agent shall have received (i) the fees to be
received on the Closing Date referred to in
subsection 2.8(b) and (ii) payment for all
expenses to be paid on the Closing Date pursuant
to this Agreement and the Commitment Letter.
(m) Legal Opinions. The Administrative
Agent shall have received, with a counterpart for
each Bank, the following executed legal opinions:
(i) the executed legal opinion of
Winthrop, Stimson, Putnam & Roberts, counsel
to the Company, substantially in the form of
Exhibit F-1, with such other changes therein
as shall be requested or approved by the
Administrative Agent; and
(ii) the executed legal opinion of
Robert E. Klatell, general counsel of the
Company, substantially in the form of Exhibit
F-2, with such other changes therein as shall
be requested or approved by the Administra-
tive Agent.
Each such legal opinion shall cover such other
matters incident to the transactions contemplated
by this Agreement and the other Credit Documents
as the Administrative Agent may reasonably
require;
(n) No Material Litigation. No litigation,
inquiry, injunction or restraining order shall be
pending, entered or threatened (including any
proposed statute, rule or regulation) which in the
reasonable judgment of any Bank could have a
Material Adverse Effect.
(o) Payment of Amounts under Existing Credit
Agreement. All principal of and interest on the
Loans (as defined in the Existing Credit Agree-
ment) and all other amounts owing under or in
connection with the Existing Credit Agreement
shall have been paid in full.
(p) Additional Matters. All corporate and
other proceedings, and all documents, instruments
and other legal matters in connection with the
transactions contemplated by this Agreement and
the other Credit Documents shall be reasonably
satisfactory in form and substance to the Admin-
istrative Agent.
5.2 Conditions to Each Extension of Credit.
The agreement of each Bank to make any extension of
credit requested to be made by it on any date (inclu-
ding, without limitation, its initial extension of
credit) is subject to the satisfaction of the following
conditions precedent:
(a) Representations and Warranties. Each of
the representations and warranties made by the
Company and its Subsidiaries in or pursuant to the
Credit Documents shall be true and correct in all
material respects on and as of such date as if
made on and as of such date.
(b) No Default. No Default or Event of
Default shall have occurred and be continuing on
such date or after giving effect to the Loans
requested to be made on such date.
Each borrowing by and Letter of Credit issued on behalf
of the Company hereunder shall constitute a representa-
tion and warranty by the Company as of the date of such
Loan and/or Letter of Credit that the conditions
contained in this subsection 5.2 have been satisfied.
SECTION 6. AFFIRMATIVE COVENANTS
The Company hereby agrees that, so long as
the Commitments remain in effect, any Note or any
Letter of Credit remains outstanding and unpaid or any
other amount is owing to any Bank, any Agent or the
Administrative Agent hereunder, the Company shall and
(except in the case of delivery of financial informa-
tion, reports and notices) shall cause each of its
Subsidiaries to:
6.1 Financial Statements. Furnish to each
Bank:
(a) as soon as available, but in any event
within 120 days after the end of each fiscal year
of the Company, a copy of the audited consolidated
balance sheet of the Company and its consolidated
Subsidiaries as at the end of such year and the
related consolidated statements of operations and
shareholders equity and of cash flows for such
year, setting forth in each case in comparative
form the figures for the previous year, reported
on without a "going concern" or like qualification
or exception, or qualification arising out of the
scope of the audit, by Ernst & Young or other
independent certified public accountants of
nationally recognized standing reasonably
acceptable to the Majority Banks;
(b) as soon as available, but in any event
within 120 days after the end of each fiscal year
of the Company, the unaudited consolidating
balance sheet of the Company and its consolidated
Subsidiaries by principal operating group as at
the end of such year and the related unaudited
consolidating statements of operations of the
Company and its consolidated Subsidiaries by
principal operating group for such year, setting
forth in each case in comparative form the figures
for the previous year, certified pursuant to
subsection 6.2(b) by a Responsible Officer as
fairly presenting the consolidating financial
condition and results of operations of the Company
and its consolidated Subsidiaries by principal
operating group;
(c) as soon as available, but in any event
within 60 days after the end of each of the first
three quarterly periods of each fiscal year of the
Company, the unaudited consolidated balance sheet
of the Company and its consolidated Subsidiaries
as at the end of such quarter and the related
unaudited consolidated statements of operations
and shareholders' equity and of cash flows of the
Company and its consolidated Subsidiaries for such
quarter and the portion of the fiscal year through
the end of such quarter, setting forth in each
case in comparative form the figures for such
quarter of the previous year, certified by a
Responsible Officer as fairly presenting in all
material respects when considered in relation to
the consolidated financial statements of the
Company and its consolidated Subsidiaries (subject
to normal year-end audit adjustments); provided
that the Company may in lieu of furnishing such
unaudited consolidated balance sheet furnish to
each Bank its Form 10-Q filed with the Securities
and Exchange Commission or any successor or
analogous Governmental Authority for the relevant
quarterly period; and
(d) as soon as available, but in any event
within 60 days after the end of each of the first
three quarterly periods of each fiscal year of the
Company, the unaudited consolidating balance sheet
of the Company and its consolidated Subsidiaries
by principal operating group as at the end of such
quarter and the related unaudited consolidating
statements of operations of the Company and its
consolidated Subsidiaries by principal operating
group for such quarter and the portion of the
fiscal year through the end of such quarter, in
the case of the unaudited consolidating balance
sheet setting forth in comparative form the
figures for the previous year (but not the
corresponding figures for such quarter of the
previous year) and in the case of the statements
of operations setting forth in comparative form
the figures for such quarter of the previous year,
certified by a Responsible Officer as fairly
presenting the consolidating financial condition
and results of operations of the Company and its
consolidated Subsidiaries by principal operating
group (subject to normal year-end audit adjust-
ments); the financial statements to be furnished
pursuant to this subsection 6.1 fairly present the
consolidated (or consolidating by principal
operating group, as appropriate) financial posi-
tion and results of operations of the Company and
its consolidated Subsidiaries in accordance with
GAAP (subject to in the case of subsections 6.1(c)
and (d), normal year-end audit adjustments and the
absence of complete footnotes) applied consistent-
ly throughout the periods reflected therein and
with prior periods (except as approved by such
accountants or Responsible Officer, as the case
may be, and disclosed therein).
6.2 Certificates; Other Information.
Furnish to each Bank:
(a) concurrently with the delivery of the
financial statements referred to in subsection
6.1(a), a certificate of the independent certified
public accountants reporting on such financial
statements stating that in making the examination
necessary therefor no knowledge was obtained of
any Default or Event of Default, except as
specified in such certificate;
(b) concurrently with the delivery of the
financial statements referred to in subsections
6.1(a) and 6.1(b), a certificate of a Responsible
Officer substantially in the form of Exhibit G;
(c) concurrently with the delivery of the
financial statements referred to in subsection
6.1(c), a certificate of a Responsible Officer
stating that, to the best of such Officer's
knowledge, the Company has observed and performed
all of its covenants and other agreements
contained in the Credit Agreement, the Notes and
the other Credit Documents to which it is a party
to be observed or performed by it, and that such
Officer has obtained no knowledge of any Default
or Event of Default except as specified therein;
(d) as soon as delivered, a copy of the
letter, addressed to the Company, of the certified
public accountants who prepared the financial
statements referred to in subsection 6.1(a) for
such fiscal year and otherwise referred to as a
"management letter";
(e) not later than 60 days after the end of
each fiscal year of the Company beginning with the
fiscal year of the Company ending on December 31,
1993, a copy of (i) the projections by the Company
of the operating budget and cash flow budget of
the Company and its Subsidiaries by principal
operating group for the immediately succeeding
fiscal year on a quarterly basis and for each of
the next succeeding fiscal years to the Termina-
tion Date on an annual basis and (ii) the
projected consolidated balance sheet of the
Company and its consolidated Subsidiaries by
principal operating group as at the last day of
such succeeding fiscal quarter and year, as
applicable, such projections and projected
consolidated balance sheet to be accompanied by a
certificate of a Responsible Officer to the effect
that such projections and projected consolidated
balance sheet have been prepared in good faith in
accordance with the Company's normal accounting
procedures based upon assumptions which were
reasonable at the time such projections and
balance sheet are furnished to the Banks and that,
to such Officer's knowledge, they are correct and
not misleading in any material respect;
(f) within five days after the same are
sent, copies of all financial statements and
reports which the Company sends to its stock-
holders generally, and within five days after the
same are filed, copies of all financial statements
and reports which the Company or any of its Subsi-
diaries may make to, or file with, the Securities
and Exchange Commission or any successor or
analogous Governmental Authority; and
(g) promptly, such additional documents,
instruments, legal opinions or financial and other
information as the Administrative Agent or any
Bank may from time to time reasonably request.
6.3 Payment of Obligations. Pay, discharge
or otherwise satisfy at or before maturity or before
they become delinquent, as the case may be, all its
obligations of whatever nature, including, without
limitation, all obligations in respect of taxes, except
where the amount or validity thereof is currently being
contested in good faith by appropriate proceedings and
reserves in conformity with GAAP with respect thereto
have been provided on the books of the Company or its
Subsidiaries, as the case may be, or where the failure
to pay, discharge or otherwise satisfy could not
reasonably be expected to have a Material Adverse
Effect.
6.4 Conduct of Business and Maintenance of
Existence. Continue to engage in business of the same
general type as now conducted by it and preserve, renew
and keep in full force and effect its corporate
existence and take all reasonable action to maintain
all rights, privileges and franchises necessary or
desirable in the normal conduct of its business except
as otherwise permitted pursuant to subsection 7.4;
comply with all Contractual Obligations and Require-
ments of Law except to the extent that failure to
comply therewith could not, in the aggregate,
reasonably be expected to have a Material Adverse
Effect.
6.5 Maintenance of Property; Insurance.
Keep all property useful and necessary in its business
in good working order and condition, except where the
failure to do so could not reasonably be expected to
have a Material Adverse Effect; maintain with finan-
cially sound and reputable insurance companies
insurance on all its property in at least such amounts
and against at least such risks (but including in any
event public liability, product liability and business
interruption) as are usually insured against in the
same general area by companies engaged in the same or a
similar business; and furnish to each Bank, upon
written request, full information as to the insurance
carried.
6.6 Inspection of Property; Books and
Records; Discussions. Keep proper books of records and
account in which the entries are, in all material
respects, full, true and correct in conformity with
sound business practice and all Requirements of Law
shall be made of all dealings and transactions in
relation to its business and activities; and, upon
reasonable notice under the circumstances, permit
representatives of the Administrative Agent or any Bank
to visit and inspect any of its properties and examine
and make abstracts from any of its books and records at
any reasonable time and as often as may reasonably be
desired and to discuss the business, operations,
properties and financial and other condition of the
Company and its Subsidiaries with officers and employ-
ees of the Company and its Subsidiaries and with its
independent certified public accountants.
6.7 Notices. Promptly, after the Company
becomes aware thereof, give notice to the Administra-
tive Agent and each Bank of:
(a) the occurrence of any Default or Event
of Default;
(b) any (i) default or event of default
under any Contractual Obligation of the Company or
any of its Subsidiaries or (ii) litigation,
investigation or proceeding which may exist at any
time between the Company or any of its Subsidi-
aries and any Governmental Authority, which in
either case, if not cured or if adversely
determined, as the case may be, could reasonably
be expected to have a Material Adverse Effect or
cause a Default or an Event of Default;
(c) any litigation or proceeding affecting
the Company or any of its Subsidiaries (i) in
which the amount involved is $5,000,000 or more
and not covered by insurance or (ii) in which
injunctive or similar relief is sought which could
reasonably be expected to have a Material Adverse
Effect;
(d) the following events: (i) the occur-
rence or expected occurrence of any Reportable
Event with respect to any Plan, a failure to make
any required contribution to a Plan, the creation
of any Lien in favor of the PBGC or a Plan or any
withdrawal from, or the termination, Reorganiza-
tion or Insolvency of, any Multiemployer Plan or
(ii) the institution of proceedings or the taking
of any other action by the PBGC or the Company or
any Commonly Controlled Entity or any Multi-
employer Plan with respect to the withdrawal from,
or the terminating (other than a standard termina-
tion under Section 4041(b) of ERISA), Reorganiza-
tion or Insolvency of, any Plan;
(e) any change, development or event
involving a prospective change, which has had or
could reasonably be expected to have a Material
Adverse Effect; and
Each notice pursuant to this subsection shall be
accompanied by a statement of a Responsible Officer
setting forth details of the occurrence referred to
therein and stating what action the Company proposes to
take with respect thereto.
6.8 Environmental Laws. (a) Comply with,
and take all reasonable efforts to ensure compliance by
all tenants and subtenants, if any, in all material
respects with, all applicable Environmental Laws and
obtain and comply with and maintain, and undertake all
reasonable efforts to ensure that all tenants and
subtenants obtain and comply in all material respects
with and maintain, any and all licenses, approvals,
notifications, registrations or permits required by
applicable Environmental Laws.
(b) Conduct and complete all investigations,
studies, sampling and testing, and all remedial,
removal and other actions required under Environmental
Laws and promptly comply in all material respects with
all lawful orders and directives of all Governmental
Authorities regarding Environmental Laws except to the
extent that the same are being contested in good faith
by appropriate proceedings and the pendency of such
proceedings could not reasonably be expected to have a
Material Adverse Effect.
(c) Defend, indemnify and hold harmless the
Administrative Agent and the Banks and their respective
employees, agents, officers and directors, from and
against any claims, demands, penalties, fines, liabili-
ties, settlements, damages, costs and expenses of
whatever kind or nature known or unknown, contingent or
otherwise, arising out of, or in any way relating to
the violation of, noncompliance with or liability
under, any Environmental Law applicable to the
operations of the Company or the Properties, or any
orders, requirements or demands of Governmental
Authorities related thereto, including, without
limitation, attorney's and consultant's fees, investi-
gation and laboratory fees, response costs, court costs
and litigation expenses, except to the extent that any
of the foregoing arise out of the gross negligence or
willful misconduct of the party seeking indemnification
therefor. This indemnity shall survive the termination
of this Agreement and the payment of the Loans and the
Notes and all other amounts payable hereunder.
6.9 Additional Subsidiary Guarantees. In
the event that any Domestic Subsidiary which is not a
Guarantor shall account for more than 5% of Total
Assets at any date, take all actions necessary to cause
such Domestic Subsidiary to execute and deliver a
Subsidiary Guarantee within 60 days of the occurrence
of such event.
SECTION 7. NEGATIVE COVENANTS
The Company hereby agrees that, so long as
the Commitments remain in effect, any Note or any
Letter of Credit remains outstanding and unpaid or any
other amount is owing to any Bank, any Agent or the
Administrative Agent hereunder:
7.1 Financial Condition Covenants. The
Company shall not:
(a) Maintenance of Indebtedness. Permit
Consolidated Total Debt at any time to exceed an
amount equal to 55% of Consolidated Total
Capitalization.
(b) Maintenance of Net Worth. Permit
Consolidated Net Worth at any time to be less than
an amount equal to the sum of $350,000,000 plus
40% of cumulative Consolidated Net Income for the
fiscal quarter commencing October 1, 1993 and for
each fiscal quarter thereafter (without subtrac-
tion for any fiscal quarter during which
Consolidated Net Income is a negative number).
(c) Interest Coverage. Permit for any
period of four consecutive fiscal quarters at any
time the ratio of Adjusted Consolidated EBITDA to
Consolidated Cash Interest Expense to be less than
3.0 to 1.0.
7.2 Limitation on Indebtedness of Domestic
Subsidiaries. The Company shall not permit any of its
Domestic Subsidiaries to, and the Domestic Subsidiaries
shall not, directly or indirectly, create, incur,
assume or suffer to exist any Indebtedness, except (a)
Indebtedness in an aggregate amount not to exceed 10%
of Consolidated Net Worth and (b) any Intercompany
Indebtedness.
7.3 Limitation on Liens. The Company shall
not, and shall not permit any of its Domestic Subsidi-
aries to, directly or indirectly, create, incur, assume
or suffer to exist any Lien upon any of its property,
assets or revenues, whether now owned or hereafter
acquired, except for:
(a) Liens for taxes not yet due or which are
being contested in good faith by appropriate
proceedings, provided that adequate reserves with
respect thereto are maintained on the books of the
Company or its Domestic Subsidiaries, as the case
may be, in conformity with GAAP;
(b) carriers', warehousemen's, mechanics',
materialmen's, repairmen's or other like Liens
arising in the ordinary course of business which
are not overdue for a period of more than 60 days
or which are being contested in good faith by
appropriate proceedings;
(c) pledges or deposits in connection with
workers' compensation, unemployment insurance and
other social security legislation and deposits
securing liability to insurance carriers under
insurance or self-insurance arrangements;
(d) deposits to secure the performance of
bids, trade contracts (other than for borrowed
money), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obliga-
tions of a like nature incurred in the ordinary
course of business;
(e) easements, rights-of-way, restrictions
and other similar encumbrances incurred in the
ordinary course of business which, in the
aggregate, are not substantial in amount and which
do not in any case materially detract from the
value of the property subject thereto or material-
ly interfere with the ordinary conduct of the
business of the Company or such Domestic Subsidi-
ary; and
(f) Liens (not otherwise permitted here-
under) which secure obligations not exceeding (as
to the Company and all Domestic Subsidiaries)
$25,000,000 in aggregate amount at any time
outstanding.
7.4 Limitation on Fundamental Changes. The
Company (a) shall not, and shall not permit any of its
Domestic Subsidiaries to, directly or indirectly, enter
into any merger, consolidation or amalgamation, or
liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution), or convey, sell, lease,
assign, transfer or otherwise dispose of, all or
substantially all of its property, business or assets
and (b) shall not, and shall not permit any of its
Subsidiaries, to make any material change in its
present method of conducting business, except:
(i) any Subsidiary may be merged or
consolidated with or into the Company (provided
that the Company shall be the continuing or
surviving corporation) or with or into any one or
more wholly owned Domestic Subsidiaries or
Capstone; and
(ii) any Subsidiary may sell, lease,
transfer or otherwise dispose of any or all of its
assets (upon voluntary liquidation or otherwise)
to the Company or any other wholly owned Domestic
Subsidiary or Capstone.
7.5 Limitation on Restricted Payments. The
Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly declare or pay
any dividend (other than dividends payable solely in
common stock of the Company) on, or make any payment on
account of, or set apart assets for a sinking or other
analogous fund for, the purchase, redemption, defea-
defeasance, retirement or other acquisition of, any
shares of any class of Capital Stock of the Company,
any Subordinated Indebtedness or any warrants or
options or rights to purchase any such Stock, whether
now or hereafter outstanding, or make any other
distribution in respect thereof, either directly or
indirectly, whether in cash or property or in obli-
gations of the Company or any Subsidiary (such
declarations, payments, setting apart, purchases,
redemptions, defeasances, retirements, acquisitions and
distributions being herein called "Restricted Pay-
ments"), except that, so long as no Default or Event of
Default has occurred and is continuing or would result
therefrom, the Company may declare and make Restricted
Payments in a cumulative aggregate amount from the date
of this Agreement not exceeding $20,000,000 plus 30% of
cumulative Consolidated Net Income from and including
October 1, 1993.
7.6 Limitation on Negative Pledge Clauses.
The Company shall not, and shall not permit any of its
Domestic Subsidiaries to, directly or indirectly enter
into with any Person other than the Banks pursuant
hereto any agreement, other than (a) this Agreement,
(b) the Capitalization Documents and (c) any industrial
revenue bonds, purchase money mortgages or Financing
Leases permitted by this Agreement (in which cases, any
prohibition or limitation shall only be effective
against the assets financed thereby), which prohibits
or limits the ability of the Company or any of its
Domestic Subsidiaries to create, incur, assume or
suffer to exist any Lien upon any of its property,
assets or revenues, whether now owned or hereafter
acquired.
7.7 Limitation on Optional Payments;
Modifications of Debt Instruments. The Company shall
not, and shall not permit any of its Subsidiaries to,
directly or indirectly, (a) make any optional payment
or prepayment on or redemption (including, without
limitation, by making payments to a sinking or
analogous fund) or repurchase of any Subordinated
Indebtedness except for repurchases of Subordinated
Indebtedness permitted by subsection 7.5 or (b) amend,
modify or change, or consent or agree to any amendment,
modification or change to any of the terms of any
Subordinated Indebtedness or any agreement which sets
forth the terms of any Subordinated Indebtedness,
except amendments, modifications or changes which would
not (directly or indirectly) increase the amount of any
payment of principal thereof, increase the interest
rate or premium payable thereon, increase the amount of
fees or any other amounts payable with respect thereto,
shorten the scheduled amortization or average weighted
life thereof, shorten the date for payment of interest
thereon, shorten the final maturity thereof or modify
the subordination provisions thereof.
SECTION 8. EVENTS OF DEFAULT
If any of the following events shall occur
and be continuing:
(a) The Company shall fail to pay any
principal of any Note or any Reimbursement Obli-
gation when due (whether at the stated maturity,
by acceleration or otherwise) in accordance with
the terms thereof or hereof; or the Company shall
fail to pay any interest on any Note or any fee or
any other amount payable hereunder, within five
days after any such interest or other amount
becomes due in accordance with the terms thereof
or hereof; or
(b) Any representation or warranty made or
deemed made by the Company or any Subsidiary
herein or in any other Credit Document or which is
contained in any certificate, document or finan-
cial or other statement furnished by it at any
time under or in connection with this Agreement or
any such other Credit Document shall prove to have
been incorrect in any material respect on or as of
the date made or deemed made; or
default in the observance or performance of any
agreement contained in Section 7 and, with respect
to subsections 7.2 and 7.3, such default shall
continue unremedied for a period of 30 days; or
(d) The Company or any Subsidiary shall
default in the observance or performance of any
other agreement contained in this Agreement or any
other Credit Document (other than as provided in
paragraphs (a) through (c) of this Section), and
such default shall continue unremedied for a
period of 30 days after the Company has knowledge
thereof; or
(e) Any of the Credit Documents shall cease,
for any reason, to be in full force and effect, or
the Company shall so assert in writing; or
(f) The subordination provisions applicable
to any Subordinated Indebtedness, for any reason,
cease to be in full force and effect, or any
Person shall so assert to the Company in writing
and the Company shall not promptly contest such
assertion; or
(g) The Company or any of its consolidated
Subsidiaries shall (i) default in any payment of
principal of or interest of any Indebtedness
(other than the Notes) or in the payment of any
Guarantee Obligation, in either case with an
outstanding principal amount in excess of
$5,000,000 when due beyond the period of grace, if
any, provided in the instrument or agreement under
which such Indebtedness or Guarantee Obligation
was created; or (ii) default in the observance or
performance of any other agreement or condition
relating to any such Indebtedness or Guarantee
Obligation or contained in any instrument or
agreement evidencing, securing or relating there-
to, or any other event shall occur or condition
exist, the effect of which default or other event
or condition is to cause, or to permit the holder
or holders of such Indebtedness or beneficiary or
beneficiaries of such Guarantee Obligation (or a
trustee or agent on behalf of such holder or
holders or beneficiary or beneficiaries) to cause,
with the giving of notice if required, such
Indebtedness to become due prior to its stated
maturity or such Guarantee Obligation to become
payable; or
(h) (i) The Company or any Subsidiary that
accounts for more than 5% of Total Assets at any
date shall commence any case, proceeding or other
action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization or relief
of debtors, seeking to have an order for relief
entered with respect to it, or seeking to adjudi-
cate it a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, winding-
up, liquidation, dissolution, composition or other
relief with respect to it or its debts, or (B)
seeking appointment of a receiver, trustee,
custodian, conservator or other similar official
for it or for all or any substantial part of its
assets, or the Company or any such Subsidiary
shall make a general assignment for the benefit of
its creditors; or (ii) there shall be commenced
against the Company or any such Subsidiary any
case, proceeding or other action of a nature
referred to in clause (i) above which (A) results
in the entry of an order for relief or any such
adjudication or appointment or (B) remains undis-
missed, undischarged or unbonded for a period of
60 days; or (iii) there shall be commenced against
the Company or any such Subsidiary any case,
proceeding or other action seeking issuance of a
warrant of attachment, execution, distraint or
similar process against all or any substantial
part of its assets which results in the entry of
an order for any such relief which shall not have
been vacated, discharged, or stayed or bonded
pending appeal within 60 days from the entry
thereof; or
(i) (i) Any Person shall engage in any
"prohibited transaction" (as defined in Section
406 of ERISA or Section 4975 of the Code)
involving any Plan, (ii) any "accumulated funding
deficiency" (as defined in Section 302 of ERISA),
whether or not waived, shall exist with respect to
any Plan or any Lien in favor of the PBGC or a
Plan shall arise on the assets of the Company or
any Commonly Controlled Entity, (iii) a Reportable
Event shall occur with respect to, or proceedings
shall commence to have a trustee appointed, or a
trustee shall be appointed, to administer or to
terminate, any Single Employer Plan, which Re-
portable Event or commencement of proceedings or
appointment of a trustee is, in the reasonable
opinion of the Required Banks, likely to result in
the termination of such Plan for purposes of Title
IV of ERISA, (iv) any Single Employer Plan shall
terminate for purposes of Title IV of ERISA,
(v) the Company or any Commonly Controlled Entity
shall, or in the reasonable opinion of the
Required Banks is likely to, incur any liability
in connection with a withdrawal from, or the
Insolvency or Reorganization of, a Multiemployer
Plan or (vi) any other event or condition shall
occur or exist with respect to a Plan; and in each
case in clauses (i) through (vi) above, such event
or condition, together with all other such events
or conditions, if any, could reasonably be expect-
ed to subject the Company to any tax, penalty or
other liabilities in the aggregate material in
relation to the business, operations, property or
financial or other condition of the Company; or
(j) One or more judgments or decrees shall
be entered against the Company or any of its
Subsidiaries involving in the aggregate a
liability (not paid or fully covered by insurance)
of $5,000,000 or more, and all such judgments or
decrees shall not have been vacated, discharged,
stayed or bonded pending appeal within 60 days
from the entry thereof; or
for any reason, to be in full force and effect or
any Guarantor shall so assert; or
(l) A Change in Control shall occur;
then, and in any such event, (A) if such event is an
Event of Default specified in clause (i) or (ii) of
paragraph (h) above with respect to the Company,
automatically the Commitments shall immediately
terminate and the Loans hereunder (with accrued
interest thereon) and all other amounts owing under
this Agreement (including, without limitation, all
amounts of L/C Obligations, whether or not the bene-
ficiaries of the then outstanding Letters of Credit
shall have presented the documents required thereunder)
and the Notes shall immediately become due and payable,
and (B) if such event is any other Event of Default,
either or both of the following actions may be taken:
(i) with the consent of the Required Banks, the
Administrative Agent may, or upon the request of the
Required Banks, the Administrative Agent shall, by
notice to the Company declare the Commitments to be
terminated forthwith, whereupon the Commitments shall
immediately terminate; and (ii) with the consent of the
Required Banks, the Administrative Agent may, or upon
the request of the Required Banks, the Administrative
Agent shall, by notice to the Company, declare the
Loans hereunder (with accrued interest thereon) and all
other amounts owing under this Agreement (including,
without limitation, all amounts of L/C Obligations,
whether or not the beneficiaries of the then outstand-
ing Letters of Credit shall have presented the docu-
ments required thereunder)and the Notes to be due and
payable forthwith, whereupon the same shall immediately
become due and payable. After all Letters of Credit
shall have expired or been fully drawn upon, all
Reimbursement Obligations shall have been satisfied and
all other obligations of the Company hereunder and
under the Notes shall have been paid in full, the
excess, if any, of the amount so paid by the Company in
respect of outstanding Letters of Credit over the
amount required to satisfy the Reimbursement Obliga-
tions in respect thereof and all other obligations of
the Company in respect thereof, shall be returned to
the Company.
Except as expressly provided above in this
Section, presentment, demand, protest and all other
notices of any kind are hereby expressly waived.
SECTION 9. THE ADMINISTRATIVE AGENT; THE AGENTS AND
THE COLLATERAL AGENT
9.1 Appointment. Each Bank hereby
irrevocably designates and appoints Chemical as the
Administrative Agent of such Bank under this Agreement
and the other Credit Documents, and each such Bank
irrevocably authorizes Chemical, as the Administrative
Agent for such Bank, to take such action on its behalf
under the provisions of this Agreement and the other
Credit Documents and to exercise such powers and
perform such duties as are expressly delegated to the
Administrative Agent by the terms of this Agreement and
the other Credit Documents, together with such other
powers as are reasonably incidental thereto. Notwith-
standing any provision to the contrary elsewhere in
this Agreement, the Administrative Agent shall not have
any duties or responsibilities, except those expressly
set forth herein, or any fiduciary relationship with
any Bank, and no implied covenants, functions, re-
sponsibilities, duties, obligations or liabilities
shall be read into this Agreement or any other Credit
Document or otherwise exist against the Administrative
Agent.
9.2 Delegation of Duties. The Administra-
tive Agent may execute any of its duties under this
Agreement and the other Credit Documents by or through
agents or attorneys-in-fact and shall be entitled to
advice of counsel concerning all matters pertaining to
such duties. The Administrative Agent shall not be
responsible for the negligence or misconduct of any
agents or attorneys in-fact selected by it with
reasonable care.
9.3 Exculpatory Provisions. Neither the
Administrative Agent nor any of its officers,
directors, employees, agents, attorneys-in-fact or
Affiliates shall be (i) liable for any action lawfully
taken or omitted to be taken by it or such Person under
or in connection with this Agreement or any other
Credit Document (except for its or such Person's own
gross negligence or willful misconduct) or (ii)
responsible in any manner to any of the Banks for any
recitals, statements, representations or warranties
made by the Company or any officer thereof contained in
this Agreement or any other Credit Document or in any
certificate, report, statement or other document
referred to or provided for in, or received by the
Administrative Agent under or in connection with, this
Agreement or any other Credit Document or for the
value, validity, effectiveness, genuineness, enforce-
ability or sufficiency of this Agreement or the Notes
or any other Credit Document or for any failure of the
Company to perform its obligations hereunder or there-
under. The Administrative Agent shall not be under any
obligation to any Bank to ascertain or to inquire as to
the observance or performance of any of the agreements
contained in, or conditions of, this Agreement or any
other Credit Document, or to inspect the properties,
books or records of the Company.
9.4 Reliance by Administrative Agent. The
Administrative Agent shall be entitled to rely, and
shall be fully protected in relying, upon any Note,
writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, telecopy, telex
or teletype message, statement, order or other document
or conversation believed by it to be genuine and
correct and to have been signed, sent or made by the
proper Person or Persons and upon advice and statements
of legal counsel (including, without limitation, coun-
sel to the Company), independent accountants and other
experts selected by the Administrative Agent. The
Administrative Agent may deem and treat the payee of
any Note as the owner thereof for all purposes unless a
written notice of assignment, negotiation or transfer
thereof shall have been filed with the Administrative
Agent. The Administrative Agent shall be fully
justified in failing or refusing to take any action
under this Agreement or any other Credit Document
unless it shall first receive such advice or concur-
rence of the Required Banks as it deems appropriate or
it shall first be indemnified to its satisfaction by
the Banks against any and all liability and expense
which may be incurred by it by reason of taking or
continuing to take any such action. The Administrative
Agent shall in all cases be fully protected from
liability to the Banks in acting, or in refraining from
acting, under this Agreement and the Notes and the
other Credit Documents in accordance with a request of
the Required Banks, and such request and any action
taken or failure to act pursuant thereto shall be
binding upon all the Banks and all future holders of
the Notes.
9.5 Notice of Default. The Administrative
Agent shall not be deemed to have knowledge or notice
of the occurrence of any Default or Event of Default
hereunder unless the Administrative Agent has received
notice from a Bank or the Company referring to this
Agreement, describing such Default or Event of Default
and stating that such notice is a "notice of default".
In the event that the Administrative Agent receives
such a notice, the Administrative Agent shall give
notice thereof to the Banks. The Administrative Agent
shall take such action with respect to such Default or
Event of Default as shall be reasonably directed by the
Required Banks; provided that unless and until the
Administrative Agent shall have received such direc-
tions, the Administrative Agent may (but shall not be
obligated to) take such action, or refrain from taking
such action, with respect to such Default or Event of
Default as it shall deem advisable in the best
interests of the Banks.
9.6 Non-Reliance on Administrative Agent and
Other Banks. Each Bank expressly acknowledges that
neither the Administrative Agent nor any of its
officers, directors, employees, agents, attorneys-in-
fact or Affiliates has made any representations or
warranties to it and that no act by the Administrative
Agent hereinafter taken, including any review of the
affairs of the Company, shall be deemed to constitute
any representation or warranty by the Administrative
Agent to any Bank. Each Bank represents to the
Administrative Agent that it has, independently and
without reliance upon the Administrative Agent or any
other Bank, and based on such documents and information
as it has deemed appropriate, made its own appraisal of
and investigation into the business, operations,
property, financial and other condition and credit-
worthiness of the Company and made its own decision to
make its Loans hereunder and enter into this Agreement
and the other Credit Documents to which it is or will
be a party. Each Bank also represents that it will,
independently and without reliance upon the Admini-
strative Agent or any other Bank, and based on such
documents and information as it shall deem appropriate
at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action
under this Agreement and the other Credit Documents,
and to make such investigation as it deems necessary to
inform itself as to the business, operations, property,
financial and other condition and creditworthiness of
the Company and its Subsidiaries. Except for notices,
reports and other documents expressly required to be
furnished to the Banks by the Administrative Agent
hereunder, the Administrative Agent shall not have any
duty or responsibility to provide any Bank with any
credit or other information concerning the business,
operations, property, condition (financial or other-
wise), prospects or creditworthiness of the Company and
its Subsidiaries which may come into the possession of
the Administrative Agent or any of its officers,
directors, employees, agents, attorneys-in-fact or
Affiliates.
9.7 Indemnification. The Banks agree to
indemnify the Administrative Agent in its capacity as
such (to the extent not reimbursed by the Company and
without limiting the obligation of the Company to do
so), ratably according to their respective Commitment
Percentages in effect on the date on which indemnifi-
cation is sought under this subsection (or, if indem-
nification is sought after the date upon which the
Commitments shall have terminated and the Loans shall
have been paid in full, ratably in accordance with
their Commitment Percentages immediately prior to such
date), from and against any and all liabilities,
obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of
any kind whatsoever which may at any time (including,
without limitation, at any time following the payment
of the Notes) be imposed on, incurred by or asserted
against the Administrative Agent in any way relating to
or arising out of this Agreement, any of the other
Credit Documents or any documents contemplated by or
referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or
omitted by the Administrative Agent under or in
connection with any of the foregoing; provided that no
Bank shall be liable for the payment of any portion of
such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses
or disbursements resulting solely from the Administra-
tive Agent's gross negligence or willful misconduct.
The agreements in this subsection shall survive the
payment of the Notes and all other amounts payable
hereunder.
9.8 Administrative Agent in Its Individual
Capacity. The Administrative Agent and its Affiliates
may make loans to, accept deposits from and generally
engage in any kind of business with the Company and any
of its Subsidiaries as though the Administrative Agent
were not the Administrative Agent hereunder and under
the other Credit Documents. With respect to its Loans
made or renewed by it and any Note issued to it and
with respect to any Letter of Credit issued or
participated in by it, the Administrative Agent shall
have the same rights and powers under this Agreement
and the other Credit Documents as any Bank and may
exercise the same as though it were not the Admini-
strative Agent, and the terms "Bank" and "Banks" shall
include the Administrative Agent in its individual
capacity.
9.9 Successor Administrative Agent. The
Administrative Agent may resign as Administrative Agent
upon 10 days' notice to the Banks; provided that any
such resignation shall not be effective until a
successor agent has been appointed and approved in
accordance with this subsection 9.9, and such successor
agent has accepted its appointment. If the Administra-
tive Agent shall resign as Administrative Agent under
this Agreement and the other Credit Documents, then the
Required Banks shall appoint from among the Banks a
successor administrative agent for the Banks, which
successor agent shall be approved by the Company (which
approval shall not be unreasonably withheld), whereupon
such successor administrative agent shall succeed to
the rights, powers and duties of the Administrative
Agent, and the term "Administrative Agent" shall mean
such successor agent effective upon such appointment
and approval, and the former Administrative Agent's
rights, powers and duties as Administrative Agent shall
be terminated, without any other or further act or deed
on the part of such former Administrative Agent or any
of the parties to this Agreement or any holders of the
Notes. After any retiring Administrative Agent's
resignation as Administrative Agent, the provisions of
this subsection shall inure to its benefit as to any
actions taken or omitted to be taken by it while it
was Administrative Agent under this Agreement and the
other Credit Documents.
9.10 The Agents; The Collateral Agent. (a)
Each Bank hereby irrevocably designates and appoints
Bankers Trust and Chemical as Agents under this
Agreement and the Credit Documents. Each Bank
acknowledges that the Agents, in such capacity, shall
have no duties or responsibilities, and shall incur no
liabilities, under this Agreement or the other Credit
Documents.
(b) Each Bank (including each Hedging Bank)
acknowledges and confirms that Bankers Trust is
Collateral Agent under the Intercreditor Agreement and
in such capacity shall have such duties, responsibili-
ties, liabilities, rights and indemnities as are
provided for in the Intercreditor Agreement.
SECTION 10. MISCELLANEOUS
10.1 Amendments and Waivers. Neither this
Agreement, any Note or any other Credit Document, nor
any terms hereof or thereof may be amended, supple-
mented or modified except in accordance with the
provisions of this subsection. The Majority Banks may,
or, with the written consent of the Majority Banks, the
Administrative Agent may, from time to time, (a) enter
into with the Company written amendments, supplements
or modifications hereto and to the Notes and the other
Credit Documents for the purpose of adding any provi-
sions to this Agreement, the Notes or the other Credit
Documents or changing in any manner the rights of the
Banks or of the Company hereunder or thereunder or (b)
waive, on such terms and conditions as the Majority
Banks or the Administrative Agent, as the case may be,
may specify in such instrument, any of the requirements
of this Agreement, the Notes or the other Credit
Documents or any Default or Event of Default and its
consequences; provided, however, that no such waiver
and no such amendment, supplement or modification shall
(a) reduce the amount or extend the scheduled date of
maturity of any Note or of any installment thereof, or
reduce the stated rate of any interest or fee payable
hereunder or extend the scheduled date of any payment
thereof or increase the aggregate amount or extend the
expiration date of any Bank's Commitment, in each case
without the consent of each Bank affected thereby, or
(b) amend, modify or waive any provision of this
subsection or reduce the percentage specified in the
definition of Required Banks or Majority Banks, or
consent to the assignment or transfer by the Company of
any of its rights and obligations under this Agreement
and the other Credit Documents or amend, modify or
waive subsection 10.6(a), or release any Subsidiary
from its Subsidiary Guarantee, or increase the Swing
Line Limit to more than $15,000,000 in the aggregate,
in each case without the written consent of all the
Banks, or (c) amend, modify or waive any provision of
Section 9 without the written consent of the then
Administrative Agent. Any such waiver and any such
amendment, supplement or modification shall apply
equally to each of the Banks and shall be binding upon
the Company, the Banks, the Agents, the Administrative
Agent and all future holders of the Notes. In the case
of any waiver, the Company, the Banks and the Admini-
strative Agent shall be restored to their former
position and rights hereunder and under the outstanding
Notes and any other Credit Documents, and any Default
or Event of Default waived shall be deemed to be cured
and not continuing; but no such waiver shall extend to
any subsequent or other Default or Event of Default, or
impair any right consequent thereon.
10.2 Notices. All notices, requests and
demands to or upon the respective parties hereto to be
effective shall be in writing (including by telecopy),
and, unless otherwise expressly provided herein, shall
be deemed to have been duly given or made when deliv-
ered by hand, or five days after being deposited in the
mail, postage prepaid, or, in the case of telecopy
notice, when received, addressed as follows in the case
of the Company and the Administrative Agent, and as set
forth in Schedule I in the case of the other parties
hereto, or to such other address as may be hereafter
notified by the respective parties hereto and any
future holders of the Notes:
The Company: Arrow Electronics, Inc.
25 Hub Drive
Melville, New York 11747
Attention: Robert E. Klatell
Telecopy: (516) 391-1683
The Administrative
Agent: Chemical Bank
270 Park Avenue
New York, New York 10017
Attention: W. Marc Lane
Telecopy: (212) 972-9073
The Collateral
Agent: As provided in the
Intercreditor Agreement
; provided that any notice, request or demand to or
upon the Administrative Agent or the Banks pursuant to
subsection 2.3, 2.6, 2.9, 2.10, 2.11 or 2.16 shall not
be effective until received.
10.3 No Waiver; Cumulative Remedies. No
failure to exercise and no delay in exercising, on the
part of the Administrative Agent or any Bank, any
right, remedy, power or privilege hereunder or under
the other Credit Documents shall operate as a waiver
thereof; nor shall any single or partial exercise of
any right, remedy, power or privilege hereunder
preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privi-
lege. The rights, remedies, powers and privileges
herein provided are cumulative and not exclusive of any
rights, remedies, powers and privileges provided by
law.
10.4 Survival of Representations and
Warranties. All representations and warranties made
hereunder, in the other Credit Documents and in any
document, certificate or statement delivered pursuant
hereto or in connection herewith shall survive the
execution and delivery of this Agreement and the Notes
and the making of the Loans hereunder.
10.5 Payment of Expenses and Taxes. The
Company agrees (a) to pay or reimburse the Admini-
strative Agent for all its out-of-pocket costs and
expenses incurred in connection with the development,
preparation and execution of, and any amendment,
supplement or modification to, this Agreement, the
Notes and the other Credit Documents and any other
documents prepared in connection herewith or therewith,
and the consummation and administration of the trans-
actions contemplated hereby and thereby, including,
without limitation, the fees and disbursements of
counsel to the Administrative Agent, (b) to pay or
reimburse each Bank and the Administrative Agent for
all its costs and expenses incurred in connection with
the enforcement or preservation of any rights under
this Agreement, the Notes, the other Credit Documents
and any such other documents upon the occurrence of an
Event of Default, including, without limitation, the
fees and disbursements of counsel to the Administrative
Agent and to the several Banks, and (c) to pay, indem-
nify, and hold each Bank and the Administrative Agent
harmless from, any and all recording and filing fees
and any and all liabilities with respect to, or
resulting from any delay in paying, stamp, excise and
other taxes, if any, which may be payable or determined
to be payable in connection with the execution and
delivery of, or consummation or administration of any
of the transactions contemplated by, or any amendment,
supplement or modification of, or any waiver or consent
under or in respect of, this Agreement, the Notes, the
other Credit Documents and any such other documents,
and (d) to pay, indemnify, and hold each Bank and the
Administrative Agent harmless from and against any and
all other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses
or disbursements of any kind or nature whatsoever with
respect to the execution, delivery, enforcement,
performance and administration of this Agreement, the
Notes, the other Credit Documents and any such other
documents, including, without limitation, any of the
foregoing relating to the violation of, noncompliance
with or liability under, any Environmental Law applica-
ble to the operations of the Company, any of its
Subsidiaries or any of the Properties (it being
understood that costs and expenses incurred in
connection with the enforcement or preservation of
rights under this Agreement, the Notes and the other
Credit Documents shall be paid or reimbursed in
accordance with clause (b) above rather than this
clause (d)) (all the foregoing in this clause (d),
collectively, the "indemnified liabilities"), provided,
that the Company shall have no obligation hereunder to
the Agent or any Bank with respect to indemnified
liabilities arising from (i) the gross negligence or
willful misconduct of the Administrative Agent or any
such Bank or (ii) legal proceedings commenced against
the Administrative Agent or any such Bank by any
security holder or creditor thereof arising out of and
based upon rights afforded any such security holder or
creditor solely in its capacity as such. Any payments
required to be made by the Company under this sub-
section 10.5 shall be made within 30 days of the demand
therefor. The agreements in this subsection shall
survive repayment of the Notes and all other amounts
payable hereunder.
10.6 Successors and Assigns; Participations
and Assignments. (a) This Agreement shall be binding
upon and inure to the benefit of the Company, the
Banks, the Administrative Agent, all future holders of
the Notes and their respective successors and assigns,
except that the Company may not assign or transfer any
of its rights or obligations under this Agreement
without the prior written consent of each Bank.
(b) Any Bank may, in the ordinary course of
its commercial banking business and in accordance with
applicable law, at any time sell to one or more banks
or other entities ("Participants") participating
interests in any Loan owing to such Bank, any Note held
by such Bank, any Commitment of such Bank or any other
interest of such Bank hereunder and under the other
Credit Documents. In the event of any such sale by a
Bank of a participating interest to a Participant, such
Bank's obligations under this Agreement to the other
parties to this Agreement shall remain unchanged, such
Bank shall remain solely responsible for the perfor-
mance thereof, such Bank shall remain the holder of any
such Note for all purposes under this Agreement and the
other Credit Documents, and the Company and the Agent
shall continue to deal solely and directly with such
Bank in connection with such Bank's rights and obliga-
tions under this Agreement and the other Credit Docu-
ments. The Company agrees that if amounts outstanding
under this Agreement and the Notes are due or unpaid,
or shall have been declared or shall have become due
and payable upon the occurrence of an Event of Default,
each Participant shall be deemed to have the right of
setoff in respect of its participating interest in
amounts owing under this Agreement and any Note to the
same extent as if the amount of its participating
interest were owing directly to it as a Bank under this
Agreement or any Note, provided that, in purchasing
such participating interest, such Participant shall be
deemed to have agreed to share with the Banks the
proceeds thereof as provided in subsection 10.7(a) as
fully as if it were a Bank hereunder. The Company also
agrees that each Participant shall be entitled to the
benefits of subsections 2.18, 2.19, 2.21 with respect
to its participation in the Commitments and the Loans
outstanding from time to time as if it was a Bank;
provided that, in the case of subsection 2.19, such
Participant shall have complied with the requirements
of said subsection and provided, further, that no
Participant shall be entitled to receive any greater
amount pursuant to any such subsection than the
transferor Bank would have been entitled to receive in
respect of the amount of the participation transferred
by such transferor Bank to such Participant had no such
transfer occurred. Each participating interest under
this Agreement sold by a Bank to a Participant after
the Closing Date shall be under terms providing that
such Participant's rights to consent or withhold
consent in respect of actions by such selling Bank
under this Agreement shall be limited to such actions
that, pursuant to subsection 10.1, require the consent
of all the Banks.
(c) Any Bank may, in the ordinary course of
its commercial banking business and in accordance with
applicable law, at any time and from time to time
assign to any Bank or any affiliate thereof or, with
the consent of the Administrative Agent (which shall
not be unreasonably withheld), to an additional bank or
financial institutions ("an Assignee") all or any part
of its rights and obligations under this Agreement and
the Notes pursuant to an Assignment and Acceptance,
substantially in the form of Exhibit H, executed by
such Assignee, such assigning Bank (and, in the case of
an Assignee that is not then a Bank or an affiliate
thereof, by the Administrative Agent) and delivered to
the Administrative Agent for its acceptance and
recording in the Register. Upon such execution, de-
livery, acceptance and recording, from and after the
effective date determined pursuant to such Assignment
and Acceptance, (x) the Assignee thereunder shall be a
party hereto and, to the extent provided in such
Assignment and Acceptance, have the rights and obliga-
tions of a Bank hereunder with a Commitment as set
forth therein, and (y) the assigning Bank thereunder
shall, to the extent provided in such Assignment and
Acceptance, be released from its obligations under this
Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an
assigning Bank's rights and obligations under this
Agreement, such assigning Bank shall cease to be a
party hereto).
(d) The Administrative Agent shall maintain
at its address referred to in subsection 10.2 a copy of
each Assignment and Acceptance delivered to it and a
register (the "Register") for the recordation of the
names and addresses of the Banks and the Commitment of,
and principal amount of the Loans owing to, each Bank
from time to time. The entries in the Register shall
be conclusive, in the absence of manifest error, and
the Company, the Administrative Agent and the Banks may
treat each Person whose name is recorded in the Regis-
ter as the owner of the Loan recorded therein for all
purposes of this Agreement. The Register shall be
available for inspection by the Company or any Bank at
any reasonable time and from time to time upon
reasonable prior notice.
(e) Upon its receipt of an Assignment and
Acceptance executed by an assigning Bank and an
Assignee (and, in the case of an Assignee that is not
then a Bank or an affiliate thereof, by the Admini-
strative Agent) together with payment to the Admini-
strative Agent of a registration and processing fee of
$2,500, the Administrative Agent shall (i) promptly
accept such Assignment and Acceptance and (ii) on the
effective date determined pursuant thereto record the
information contained therein in the Register and give
notice of such acceptance and recordation to the Banks
and the Company. On or prior to such effective date,
the Company, at its own expense, shall execute and
deliver to the Administrative Agent (in exchange for
the Revolving Credit Note or Swing Line Note of the
assigning Bank) a new Revolving Credit Note or Swing
Line Note, as the case may be, to the order of such
Assignee in an amount equal to the Commitment assumed
by it pursuant to such Assignment and Acceptance and,
if the assigning Bank has retained a Commitment
hereunder, a new Revolving Credit Note to the order of
the assigning Bank in an amount equal to the Commitment
retained by it hereunder. Such new Notes shall be
dated the Closing Date or the Termination Date, as the
case may be, and shall otherwise be in the form of the
Note replaced thereby. The Notes surrendered by an
assigning Bank shall be returned by the Administrative
Agent to the Company marked "cancelled". If prior to
such assignment the assigning Bank holds a Swing Line
Loan Participation Certificate, then the Administrative
Agent shall notify the Swing Line Banks of the proposed
purchase. On the effective date of such purchase, the
Swing Line Banks shall deliver to the Administrative
Agent, for delivery to the Assignee upon the Admini-
strative Agent's receipt of the assigning Bank's Swing
Line Loan Participation Certificate, a Swing Line Loan
Participation Certificate dated the date of the
Certificate surrendered by the assigning Bank and in
the same Swing Line Participation Amount as the
surrendered Certificate. The Administrative Agent
shall return such surrendered Certificate to the Swing
Line Banks.
(f) The Company authorizes each Bank to
disclose to any Participant or Assignee (each, a
"Transferee") and any prospective Transferee any and
all financial information in such Bank's possession
concerning the Company and its Affiliates which has
been delivered to such Bank by or on behalf of the
Company pursuant to this Agreement or which has been
delivered to such Bank by or on behalf of the Company
in connection with such Bank's credit evaluation of the
Company and its Affiliates prior to becoming a party to
this Agreement so long as each such prospective
Transferee shall execute a confidentiality agreement
containing provisions substantially similar to the
provisions contained in the next succeeding sentences
of this paragraph (f). The Administrative Agent and
each Bank shall hold nonpublic information obtained
pursuant to the requirements of this Agreement other
than information (i) that is, or generally becomes,
available to the public, (ii) that was or becomes
available to the Administrative Agent or any Bank on a
nonconfidential basis or (iii) that becomes available
to the Administrative Agent or any Bank from a Person
or other source that is not, to the best knowledge of
the Administrative Agent or such Bank, as the case may
be, otherwise bound by a confidentiality obligation to
the Company, in accordance with its customary proce-
dures for treatment of confidential information and in
accordance with safe and sound banking practices and in
any event, may make disclosure reasonably required by
any Governmental Authority or representative thereof
pursuant to legal process or as otherwise required by
law, order or regulation. Unless specifically prohi-
bited by applicable law, regulation, rule or court
order, the Administrative Agent and each Bank shall
notify the Company of any request by any Governmental
Authority or representative thereof (other than any
such request in connection with an examination of the
financial condition of the Administrative Agent or such
Bank by such Governmental Authority) for disclosure of
such information by the Administrative Agent or such
Bank so that any of them may seek an appropriate
protective order. Except as may be required by an
order of a court of competent jurisdiction and to the
extent set forth therein, neither the Administrative
Agent nor any Bank shall be obligated or required to
return any materials furnished by the Company. Nothing
in this paragraph (f) shall prohibit the Administrative
Agent or any Bank from disclosing nonpublic information
to its examiners, regulators and professional advisors.
(g) If, pursuant to this subsection, any
interest in this Agreement or any Note is transferred
to any Transferee which is organized under the laws of
any jurisdiction other than the United States or any
state thereof, the transferor Bank shall cause such
Transferee, concurrently with the effectiveness of such
transfer, (i) to represent to the transferor Bank (for
the benefit of the transferor Bank, the Administrative
Agent and the Company) that under applicable law and
treaties no taxes will be required to be withheld by
the Administrative Agent or the Company or the
transferor Bank with respect to any payments to be made
to such Transferee in respect of the Loans, (ii) to
furnish to the transferor Bank (and, in the case of any
Purchasing Bank registered in the Register, the
Administrative Agent and the Company) two copies of
each of (x) either United States Internal Revenue
Service Form 4224 or United States Internal Revenue
Service Form 1001 or successor applicable form, as the
case may be (wherein such Transferee claims entitlement
to complete exemption from United States federal
withholding tax on all payments hereunder), and (y)
either United States Internal Revenue Service Form W-8
or W-9 or successor applicable form, as the case may be
(wherein such Transferee claims entitlement to complete
exemption from United States federal backup withholding
tax on all payments hereunder), and (iii) to agree (for
the benefit of the transferor Bank, the Administrative
Agent and the Company) to provide the transferor Bank
(and, in the case of any Purchasing Bank registered in
the Register, the Administrative Agent and the Company)
a new Form 4224, Form 1001, Form W-8 or Form W-9 or
successor applicable form, as the case may be, duly
executed and completed by such Transferee, on or before
the date that any such form expires or becomes obsolete
or after the occurrence of any event (including, with-
out limitation, a change in such Transferee's lending
office) requiring a change in the most recent form
previously delivered by it to the Company and the
Administrative Agent in accordance with applicable
United States laws and regulations and amendments and
to comply from time to time with all applicable United
States laws and regulations with regard to such
withholding tax exemption.
(h) Nothing herein shall prohibit any Bank
from pledging or assigning any Note to any Federal
Reserve Bank in accordance with applicable law.
10.7 Adjustments; Set-off. (a) If any Bank
(a "benefitted Bank") shall at any time receive any
payment of all or part of its Loans or the Reimburse-
ment Obligations owing to it, or interest thereon, or
receive any collateral in respect thereof (whether
voluntarily or involuntarily, by set-off, pursuant to
events or proceedings of the nature referred to in
Section 8(h), or otherwise), in a greater proportion
than any such payment to or collateral received by any
other Bank, if any, in respect of such other Bank's
Loans or the Reimbursement Obligations owing to it, or
interest thereon, such benefitted Bank shall purchase
for cash from the other Banks a participating interest
in such portion of each such other Bank's Loan or the
Reimbursement Obligations owing to it, or shall provide
such other Banks with the benefits of any such collat-
eral, or the proceeds thereof, as shall be necessary to
cause such benefitted Bank to share the excess payment
or benefits of such collateral or proceeds ratably with
each of the Banks; provided, however, that if all or
any portion of such excess payment or benefits is
thereafter recovered from such benefitted Bank, such
purchase shall be rescinded, and the purchase price and
benefits returned, to the extent of such recovery, but
without interest. The Company agrees that each Bank so
purchasing a portion of another Bank's Loan may exer-
cise all rights of payment (including, without limita-
tion, rights of set-off) with respect to such portion
as fully as if such Bank were the direct holder of such
portion.
(b) In addition to any rights and remedies
of the Banks provided by law, each Bank shall have the
right, without prior notice to the Company, any such
notice being expressly waived by the Company to the
extent permitted by applicable law, upon any amount
becoming due and payable by the Company hereunder or
under the Notes or the other Credit Documents (whether
at the stated maturity, by acceleration or otherwise)
to set-off and appropriate and apply against such
amount any and all deposits (general or special, time
or demand, provisional or final), in any currency, and
any other credits, indebtedness or claims, in any
currency, in each case whether direct or indirect,
absolute or contingent, matured or unmatured, at any
time held or owing by such Bank or any branch or agency
thereof to or for the credit or the account of the
Company. Each Bank agrees promptly to notify the
Company and the Administrative Agent after any such
set-off and application made by such Bank, provided
that the failure to give such notice shall not affect
the validity of such set-off and application.
10.8 Counterparts. This Agreement may be
executed by one or more of the parties to this
Agreement on any number of separate counterparts
(including by telecopy), and all of said counterparts
taken together shall be deemed to constitute one and
the same instrument. A set of the copies of this
Agreement signed by all the parties shall be lodged
with the Company and the Administrative Agent.
10.9 Severability. Any provision of this
Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unen-
forceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other
jurisdiction.
10.10 Integration. This Agreement and the
other Credit Documents represent the agreement of the
Company, the Administrative Agent and the Banks with
respect to the subject matter hereof, and there are no
promises, undertakings, representations or warranties
by the Administrative Agent or any Bank relative to
subject matter hereof not expressly set forth or
referred to herein or in the other Credit Documents.
10.11 GOVERNING LAW. THIS AGREEMENT AND THE
NOTES AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND THE
NOTES AND THE OTHER CREDIT DOCUMENTS SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH,
THE LAW OF THE STATE OF NEW YORK.
10.12 Submission To Jurisdiction; Waivers.
The Company hereby irrevocably and unconditionally:
(a) submits for itself and its property in
any legal action or proceeding relating to this
Agreement and the other Credit Documents to which
it is a party, or for recognition and enforcement
of any judgement in respect thereof, to the non-
exclusive general jurisdiction of the Courts of
the State of New York, the courts of the United
States of America for the Southern District of
New York, and appellate courts from any thereof;
(b) consents that any such action or
proceeding may be brought in such courts and
waives any objection that it may now or hereafter
have to the venue of any such action or proceeding
in any such court or that such action or proceed-
ing was brought in an inconvenient court and
agrees not to plead or claim the same;
(c) agrees that service of process in any
such action or proceeding may be effected by
mailing a copy thereof by registered or certified
mail (or any substantially similar form of mail),
postage prepaid, to the Company at its address set
forth in subsection 10.2 or at such other address
of which the Administrative Agent shall have been
notified pursuant thereto;
(d) agrees that nothing herein shall affect
the right to effect service of process in any
other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not pro-
hibited by law, any right it may have to claim or
recover in any legal action or proceeding referred
to in this subsection any special, exemplary,
punitive or consequential damages.
10.13 Acknowledgements. The Company hereby
acknowledges that:
(a) it has been advised by counsel in the
negotiation, execution and delivery of this
Agreement and the Notes and the other Credit
Documents;
(b) none of the Agents, the Administrative
Agent, the Collateral Agent or any Bank has any
fiduciary relationship with or duty to the Company
arising out of or in connection with this Agree-
ment or any of the other Credit Documents, and the
relationship between the Agents, the Administra-
tive Agent, the Collateral Agent and the Banks, on
one hand, and the Company, on the other hand, in
connection herewith or therewith is solely that of
debtor and creditor; and
(c) no joint venture is created hereby or by
the other Credit Documents or otherwise exists by
virtue of the transactions contemplated hereby
among the Banks or among the Company and the
Banks.
10.14 WAIVERS OF JURY TRIAL. THE COMPANY,
THE AGENTS, THE ADMINISTRATIVE AGENT, THE COLLATERAL
AGENT AND THE BANKS HEREBY IRREVOCABLY AND UNCONDI-
TIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR THE NOTES OR
ANY OTHER CREDIT DOCUMENT AND FOR ANY COUNTERCLAIM
THEREIN.
IN WITNESS WHEREOF, the parties hereto have
caused this Agreement to be duly executed and delivered
by their proper and duly authorized officers as of the
day and year first above written.
ARROW ELECTRONICS, INC.
By: /s/ Robert E. Klatell
Title: Senior Vice President
CHEMICAL BANK,
as Administrative Agent, as Agent
and as a Bank
By: /s/ Robert K. Gaynor
Title: Vice President
BANKERS TRUST COMPANY, as Agent, as
Collateral Agent and as a Bank
By: /s/ June C. George
Title: Vice President
ABN AMRO BANK N.V.
By: /s/ William J. Van Nostrand
Title: Vice President
BANK HAPOALIM, B.M.
By: /s/ Conrad Wagner/Laura Raffa
Title: Vice Pres./Vice Pres.
BANK OF MONTREAL
By: /s/ Rene Encarnacion
Title: Director
THE BANK OF NEW YORK
By: /s/ Gianni W. Sellers
Title: Vice President
BHF--BANK
By: /s/ Ellen Dooley
Title: Vice President
By: /s/ Linda Pace
Title: Asst. Vice President
CREDIT LYONNAIS CAYMAN ISLAND
BRANCH
By: /s/ Mark Campellone
Title: Authorized Signature
CREDIT LYONNAIS NEW YORK
BRANCH
By: /s/ Mark Campellone
Title: Vice President
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ George Hibbard
Title: Vice President
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ James W. Peterson
Title: Vice President
THE LONG-TERM CREDIT BANK OF JAPAN,
LIMITED, NEW YORK BRANCH
By: /s/ Jay Shankar
Title: Vice President
NATIONAL WESTMINSTER BANK USA
By: /s/ Stephen Ramerini
Title: Vice President
NATIONSBANK OF NORTH CAROLINA, N.A.
By: /s/ Scott A. Jackson
Title: Vice President
THE NIPPON CREDIT BANK, LTD., NEW
YORK BRANCH
By: /s/ Tozo Satoh
Title: Deputy General Manager
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Sarah McClintock
Title: Vice President
SHAWMUT BANK, N.A.
By: /s/ Olaperi Onipede
Title: Vice President
UNITED JERSEY BANK
By: /s/ Bruce A. Gray
Title: Vice President<PAGE>
AMENDMENT
TO THE CREDIT AGREEMENT DD. AS OF APRIL 14, 1993 RELATING TO A
SENIOR TERM LOAN IN THE AMOUNT OF DM 50,000,000.00
IN FAVOUR OF
ARROW ELECTRONICS GMBH, DREIEICH
<PG$PCN>
This amendment (hereinafter the "Amendment") is made as of the 28th day of
January, 1994 by and among Arrow Electronics GmbH (hereinafter "Arrow"),
Berliner Handels- und Frankfurter Bank (hereinafter "the Agent"), National
Westminster Bank AG, Schweizeriache Kreditanstalt (Deutschland) AG, and
Berliner Handels- und Frankfurter Bank (hereinafter individually and
collectively "the Banks").
WHEREAS, pursuant to a credit agreement dd. April 14, 1993 (hereinafter the
"Agreement"), between the parties thereto the Banks named thereto have agreed
to make available to the Borrower a senior term loan of DM 50,000,000.00
(Deutsche Mark fifty million) upon and subject to the terms and conditions
thereof.
WHEREAS, the Borrower holds 55% of the interest in Spoerle Electronic
Handelsgesellschaft mbH & Co. and Spoerle GmbH, Dreieich (hereinafter
collectively referred to as "Spoerle"), and
WHEREAS, the Borrower has the target to increase its interest in Spoerle by 15%
to 70%, and
WHEREAS, the Borrower has the target to partially finance the increase in its
interest in Spoerle by way of an increase in the existing senior term loan of
DM 50,000,000.00 provided under the Agreement by DM 25,000,000.00 to DM
75,000,000.00, and
WHEREAS, the Borrower desires to restructure the repayment structure under the
Agreement.
NOW, therefore, the Borrower, the Agent, and the Banks hereby agree as follows:
1. DEFINITIONS
1.1 Terms defined in the Agreement shall, unless otherwise defined herein,
have the same meaning in the Amendment.
2. AMENDMENTS
2.1 With effect from the date of this Amendment the Agreement shall be
amended as follows:
2.1.1 Section II, para 4 shall be amended and read as follows:
"The Banks hereby make available to the Borrower a Term Loan in
the maximum aggregate principal amount of DM 75.000.000,00
(Deutsche Mark seventyfive million) which shall be used (i) to
refinance all existing bank indebtedness of the Borrower and
(ii) to partially finance the acquisition by the Borrower of the
additional interest of 15% in Spoerle.
- 2 -
<PG$PCN>
2.1.2 Section V, Para 9.1 shall be amended and read as follows:
The Borrower shall repay the Term Loan by the following
installments:
DM 5.000.000 on April 21, 1994
DM 7.500.000 on April 21, 1995
DM 7.500.000 on April 21, 1996
DM 12.500.000 on April 21, 1997
DM 12.500.000 on April 21, 1998
DM 15.000.000 on April 21, 1999
DM 15.000.000 on April 21, 2000
2.1.3 Section VIII, para 19.1 shall be amended and read as follows:
Subordinated Payment Guarantee (the "Guarantee") in the amount
of DM 75.000.000,00 to be provided by Arrow Electronics, Inc.,
Melville/New York (the "Guarantor") in form and substance as per
Exhibit IV of the Agreement, duly signed and executed.
3. FEES
The Borrower shall pay to the Agent for the accounts of the Banks an
amendment fee in the amount specified in the letter dated January 5, 1994
from the Agent to the Borrower.
4. CONDITION PRECEDENT
4.1. Notwithstanding anything to the contrary herein contained, it shall be
a condition precedent to the Amendments herein that the representations
and warranties of the Borrower contained in Section IX, para 20.6.1,
20.6.2 and 20.6.3 of the Agreement are true and as of the date of this
Amendment are repeated thereon.
4.2. A Guarantee in the amount of DM 74,000,000.00 in form and substance as
per Exhibit IV of the Agreement, duly signed and executed.
6. MAINTENANCE OF THE CREDIT AGREEMENT
Subject to the provisions hereof the provisions of the Agreement as amended
hereby shall remain in full force and effect and all references to the
Agreement in this Amendment shall, unless the context otherwise requires,
from the date of this Amendment be deemed to be references to the Agreement
as amended hereby.
7. JURISDICTION, GOVERNING LAW, AND PLACE OF PERFORMANCE
This Amendment shall be governed by and construed in accordance with the law
of the Federal Republic of Germany. Place of performance and place of
jurisdiction shall be Frankfurt/Main, Federal Republic of Germany.
- 3 -
<PG$PCN>
- 3 -
IN WITNESS WHEREOF, THE UNDERSIGNED HAVE CAUSED THIS AMENDMENT TO BE EXECUTED
BY THEIR RESPECTIVE DULY AUTHORIZED OFFICERS AS OF THE 28TH DAY OF JANUARY,
1994.
/s/ Robert E. Klatell
................................. .......................................
on behalf of on behalf of
Arrow Electronics Gmbh, Dreieich Berliner Handels- und Frankfurter Bank,
Frankfurt/Main
as the Agent
........................................
on behalf of
Berliner Handels- und Frankfurter Bank,
Frankfurt/Main, for a commitment of
DM 37.500.00,00
.........................................
on behalf of
National Westminster Bank AG,
Frankfurt/Main, for a commitment of
DM 18.750.000,00
..........................................
on behalf of
Schweizerische Kreditanstalt
(Deutschland) AG, Frankfurt/Main,
for a commitment of DM 18.750.000,00
SUPPLEMENT NO. 2 TO THE CAPSTONE ELECTRONICS PROFIT-SHARING PLAN
SPECIAL PROVISIONS RELATED TO THE ACQUISITION OF
CERTAIN ASSETS OF ZEUS COMPONENTS, INC.
BY ARROW ELECTRONICS, INC.
In connection with the acquisition by Arrow Electronics, Inc. of certain
assets of Zeus Components, Inc. (the "Acquisition"), the Plan is hereby amended
in the following respects:
S2.1 In the case of an individual who becomes employed by an Employer or
Affiliate on or about May 19, 1993 in connection with the Acquisition (a "Zeus
Transferee"), service with Zeus Components, Inc. shall be treated for purposes
of Section 2.1 as though it were service with an Employer or Affiliate. For
this purpose, any service measured in terms of elapsed time shall be converted
to Hours of Service on the basis that one month equals 190 Hours, one week
equals 45 Hours and one day equals 10 Hours.
IN WITNESS WHEREOF, Capstone Electronics, Inc. has caused its duly
authorized officer to execute this amendment on this 24th day of August, 1993.
CAPSTONE ELECTRONICS, INC.
By: /s/ Robert E. Klatell
--------------------------
Title: Vice President
ATTEST:
By: /s/ -------------------------
SUPPLEMENT NO. 3 TO THE ARROW ELECTRONICS STOCK OWNERSHIP PLAN
SPECIAL PROVISIONS RELATED TO THE ACQUISITION OF
CERTAIN ASSETS OF ZEUS COMPONENTS, INC.
BY ARROW ELECTRONICS, INC.
In connection with the acquisition by the Company of certain assets of
Zeus Components, Inc. (the "Acquisition"), the Plan is hereby amended in the
following respects:
S3.1 In the case of an individual who becomes employed by an Employer or
Affiliate on or about May 19, 1993 in connection with the Acquisition (a "Zeus
Transferee"), service with Zeus Components, Inc. shall be treated for purposes
of Section 2.1 as though it were service with an Employer or Affiliate. For
this purpose, any service measured in terms of elapsed time shall be converted
to Hours of Service on the basis that one month equals 190 Hours, one week
equals 45 Hours and one day equals 10 Hours.
IN WITNESS WHEREOF, Capstone Electronics, Inc. has caused its duly
authorized officer to execute this amendment on this 24th day of August, 1993.
ARROW ELECTRONICS, INC.
By: /s/ Robert E. Klatell
--------------------------
Title:
ATTEST:
By: /s/
-------------------------
SUPPLEMENT NO. 3 TO THE ARROW ELECTRONICS SAVINGS PLAN
SPECIAL PROVISIONS RELATED TO THE ACQUISITION OF
CERTAIN ASSETS OF ZEUS COMPONENTS, INC.
BY ARROW ELECTRONICS, INC.
In connection with the acquisition by the Company of certain assets of
Zeus Components, Inc. (the "Acquisition"), the Plan is hereby amended in the
following respects:
S3.1 In the case of an individual who becomes employed by an Employer or
Affiliate on or about May 19, 1993 in connection with the Acquisition (a "Zeus
Transferee"), service with Zeus Components, Inc. shall be treated for purposes
of Section 2.1 as though it were service with an Employer or Affiliate. For
this purpose, any service measured in terms of elapsed time shall be converted
to Hours of Service on the basis that one month equals 190 Hours, one week
equals 45 Hours and one day equals 10 Hours.
S3.2 A Zeus Transferee who, taking account of Section S3.1, satisfies the
eligibility requirements set forth in Section 2.1 on May 19, 1993 shall become
a Member on such date.
IN WITNESS WHEREOF, Arrow Electronics, Inc. has caused its duly
authorized officer to execute this amendment on this 24th day of August, 1993.
ARROW ELECTRONICS, INC.
By: /s/ Robert E. Klatell
--------------------------
Title:
ATTEST:
By: /s/
-------------------------
DATED 2ND AUGUST 1993
ARROW ELECTRONICS (UK) LIMITED
- and -
NATIONAL WESTMINSTER BANK PLC
-----------------------------------
AMENDMENT AND RESTATEMENT AGREEMENT
relating to a Facilities Agreement
dated 28th February 1992
-----------------------------------
WILDE SAPTE
---
LONDON
<PG$PCN>
THIS AGREEMENT is made the 2nd day of August 1993
BETWEEN:
(1) ARROW ELECTRONICS (UK) LIMITED registered in England under number
2395760 and whose registered office is at St Martin's Way, Cambridge
Road, Bedford, MK42 OLF (the "Company"); and
(2) NATIONAL WESTMINSTER BANK PLC of 41 Lothbury, London EC2P 2BP acting
through certain of its branches (the "Bank").
WHEREAS:
(A) Pursuant to a facilities agreement (the "Facilities Agreement") dated
28th February 1992 and made between (1) the Company and (2) the Bank,
the Bank has made a term loan facility and overdraft and ancillary
facilities available to the Company upon the terms and conditions
thereof.
(B) The parties hereto have agreed to enter into this Agreement to amend
and vary certain provisions of the Facilities Agreement, and to restate
the Facilities Agreement as so amended and varied.
NOW IT IS HEREBY AGREED as follows:
1. INTERPRETATION
1.1 Definitions
Words and expressions defined in the form of Facilities Agreement set
out in the Schedule hereto shall have the same meanings when used
herein. In addition, the following expressions shall have the
following meanings (except where the context requires otherwise):
"Act" means the Companies Act 1985;
"Certified Copy" means, in relation to any document, a copy of each
document bearing the endorsement "Certified a true, complete and
accurate copy of the original, which has not been amended, altered,
changed or supplemented otherwise than by each document, a certified
copy of which is attached hereto" signed and dated by a duly authorised
officer for the Company or other body in question;
"New Security Documents" means the Techdis Debenture, the Techdis
Guarantee, the MMD Debenture and the MMD Guarantee; and
"Techdis Financial Information" means (i) the report addressed to the
Bank dated 30th July 1993 in the agreed form on the group prepared by
Messrs. Ernst & Young and (ii) the performance earn-out and cashflow
projections supplied by the Company to the Bank relating to Techdis.
- 1 -
<PG$PCN>
1.2 Interpretation
Clauses 1.2 and 1.3 of the Facilities Agreement shall be deemed to be
incorporated, mutatis mutandis, herein.
2. AMENDMENT
It is hereby agreed that as and from the date upon which the Bank gives
notice to the Company that the conditions precedent set out in Clause
3.1 below are satisfied, the Facilities Agreement shall be amended so
as to be in the form set out in the Schedule hereto and shall take
effect in such form.
3. CONDITIONS PRECEDENT AND CONDITIONS SUBSEQUENT
3.1 The amendments referred to in Clause 2 above are subject to the
following conditions being satisfied on or prior to 2nd August 1993:
(a) the Bank shall have received all of the following in form and
substance satisfactory to the Bank:
(i) Certified Copies of the Certificate of Incorporation
and Memorandum and Articles of Association of each of
the Company, Techdis and MMD;
(ii) Certified Copies of board resolutions of the Company
approving and authorising the execution, delivery and
performance of this Agreement on the terms and
conditions hereof and thereof and authorising a person
or persons to sign or otherwise attest the due
execution of such documents and any other documents to
be executed or delivered pursuant hereto or thereto
together with a certificate of a duly authorised
officer of such company setting out the names and
signatures of the persons authorised to sign such
documents on behalf of such company;
(iii) a certificate of the Company addressed to the Bank and
signed by a director of the Company stating that the
execution by it of this Agreement and the performance
by it of its obligations hereunder are within its
corporate powers, have been duly approved by all
necessary corporate action and will not cause any limit
or restriction on any of its powers (whether imposed by
law, decree, rule, regulation, its Memorandum or
Articles of Association, agreement or otherwise) or on
the right or ability of its directors to exercise such
powers, to be exceeded or breached;
(iv) confirmation from each Charging Group Company (other
than Techdis and MMD) that its Grantee shall remain in
full force and effect;
(v) a Certified Copy of the Techdis Acquisition Agreement;
(vi) the fee referred to in Clause 4.1; and
- 2 -
<PG$PCN>
(vii) a letter from Arrow addressed to the Bank in the agreed
form regarding the working capital requirements of the
Company;
(b) no Default has occurred and is continuing; and
(c) the representations and warranties made pursuant to Clause 5
below are true and accurate in all material respects as at the
date they are made.
3.2 The Company hereby undertakes that by 5.00 pm (London time) on 1st
September 1993 (or such later date as the Bank may agree) it shall have
delivered to the Bank, in form and substance satisfactory to the Bank
all of the following:
(i) a certificate of each of Techdis and MMD addressed to the Bank
and signed by a director of each of the companies stating that
the execution by it of each of the New Security Documents to
which it is a party and the performance by it of its
obligations thereunder are within its corporate powers, have
been duly approved by all necessary corporate action and will
not cause any limit or restriction on any of its powers
(whether imposed by law, decree, rule, regulation, its
Memorandum or Articles of Association, agreement or otherwise)
or on the right or ability of its directors to exercise such
powers, to be exceeded or breached;
(ii) a Certified Copy of the minutes of a meeting of the board of
directors of each of Techdis and MMD approving and authorizing
the execution, delivery and performance of each of the New
Security Documents to which it is a party on the terms and
conditions thereof subject, where applicable, always to the
provisions of Sections 151 to 158 of the Act and showing due
consideration by all the directors of each of Techdis and MMD
of the obligations and liabilities arising thereunder or the
making of all declarations of interests as may be required in
connection with any of the New Security Documents and
authorizing any of the directors whose names and specimen
signatures are set out therein to sign or otherwise duly attest
the execution of such documents and any other documents to be
executed or delivered pursuant thereto;
(iii) a Certified Copy of each of the statutory declarations made in
the prescribed form by all of the directors of each of the
companies referred to in Column A below as required by Section
155(6) of the Act as specified opposite each such company in
Column B below:
<TABLE>
<CAPTION>
Column A Column B
-------- --------
<S> <C>
MMD Form 155(6)(a)
Techdis Form 155(6)(B)
</TABLE>
together with a Certified Copy of each statutory report by each
such company's auditors required under Section 156(4) of the
Act;
- 3 -
<PG$PCN>
iv) a letter, in substantially the form set out in the Annex
attached hereto addressed to the Bank from the Auditors for
each of Techdis and MMD;
(v) a Certified Copy of the relevant extracts of the register of
directors of each of Techdis and MMD showing all the directors
of each company; and
(vi) (1) the Techdis Debenture duly executed by Techdis;
(2) the Techdis Guarantee duly executed by Techdis;
(3) the MMD Debenture duly executed by MMD; and
(4) the MMD Guarantee duly executed by MMD.
3.3 The Company hereby agrees that a breach of Clause 3.2 shall constitute
a Default under Clause 15.1(b) of the form of Facilities Agreement set
out in the Schedule hereto, entitling the Bank to exercise any of its
rights under Clause 15.1 of the same, provided that, where the breach
arises because of circumstances outside the reasonable control of the
Company but is capable of remedy, the Bank may (but shall not be obliged
to) upon request by the Company extend the period of 10 Business Days
specified for remedying any such breach in such Clause 15.1(b).
4. FEE AND EXPENSES
4.1 In consideration of the Bank entering into this Agreement, the Company
shall on the date hereof pay to the Bank for the account of the Bank an
arrangement fee of L.135,000
4.2 The Company shall pay on demand all reasonable expenses (including, but
not limited to, legal, valuation and accounting fees) and any VAT
thereon incurred by the Bank in connection with the negotiation,
preparation and execution of any of this Agreement, the New Security
Documents and the other documents contemplated hereby or thereby now or
at any time hereafter.
5. REPRESENTATIONS AND WARRANTIES
5.1 On the date hereof, the Company shall be deemed to represent and warrant
to the Bank in the terms of Clause 12.1 of the form of Facilities
Agreement set out in the Schedule hereto.
5.2 In addition the Company hereby represents and warrants to the Bank that
all information prepared by the Company for inclusion in the Techdis
Financial Information, or prepared by the Company and supplied to Messrs
Ernst & Young for the purpose of compiling the Techdis Financial
Information, was at 30th July 1993, in the case of factual information,
true and correct in all material respects and, in the case of
projections fair and reasonable and without prejudice to the generality
of the foregoing:
(i) the forecasts contained in the Techdis Financial Information
- 4 -
<PG$PCN>
have been diligently prepared and the assumptions upon which
they are based as to the future prospects of the business of
Techdis have been carefully considered and are honestly
believed to be reasonable having regard to the information
available and to the market conditions prevailing at the time
of their preparation and that the company has made all
reasonable enquiries so as to ascertain (so far as possible)
all such information and market conditions which are relevant
to their preparation; and
(ii) save as disclosed in the Techdis Financial Information there is
no fact or matter known to the Company concerning the business
or the affairs of Techdis or relating to the Techdis Financial
Information which is or might be material for disclosure to a
lender contemplating granting facilities to the Company of the
kind provided for by this Agreement.
6. LIMITATION
Save as expressly amended by this Agreement, the Facilities Agreement
remains in full force and effect.
7. LAW
This Agreement shall be governed by and construed in accordance with
English law.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be duly
executed the day and year first above written.
- 5 -
<PG$PCN>
ANNEX
NET ASSETS LETTER
To: National Westminster Bank Plc
41 Lothbury
London EC2P 2BP
Attention: [ ]
[Date]
Dear Sirs,
* [___________________] (the "Company")
1. This report is given in connection with the proposed arrangement whereby
the Company will give financial assistance for the acquisition of [its
own shares] [the shares in its holding company], particulars of which
are given in the attached copy of the statutory declaration made this
day by the directors pursuant to Section 155(6) of the Companies Act
1985 (the "Act"). The purpose of this report is solely to assist the
Bank in considering whether the proposed arrangement is permitted under
Section 155(2) of the Act.
2. We have examined the accounting records of the Company and made such
further enquiries to the extent that we consider necessary for the
purpose of this report. We have not carried out an audit and
accordingly (otherwise than as stated in paragraphs 3 and 4 of this
letter) express no opinion in this report on the state of the Company's
affairs.
3. At the date of this report the aggregate of the Company's assets as
stated in its accounting records exceeds the aggregate of its
liabilities as similarly stated.
In our opinion, based on our examination of the accounting records
together with such further enquiries as we consider necessary, the
giving of such financial assistance would not as at the date of this
report reduce the net assets of the Company.
Yours faithfully
Signed . . . . . . . . . . . . .
Dated . . . . . . . . . . . . .
(Same date as statutory declaration of directors)
- 6 -
<PG$PCN>
SIGNED by R.E. Klatell )
for and on behalf of )
ARROW ELECTRONICS (UK) LIMITED ) /s/ R.E. Klatell
in the presence of:- )
SIGNED by P.A.S.C. Harmer )
for and on behalf of )
NATIONAL WESTMINSTER BANK Plc ) /s/ P.B.S.C. Harmer
in the presence of:- )
James Johnson
Queensbridge House
Governor Thomas Street
London EC4 3BD
- 7 -
<PG$PCN>
SCHEDULE
DATED 28th February 1992
ARROW ELECTRONICS (UK) LIMITED
- and -
NATIONAL WESTMINSTER BANK Plc
--------------------
FACILITIES AGREEMENT
--------------------
WILDE SAPTE
London
<PG$PCN>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
CLAUSE TITLE PAGES
- ------ ----- -----
<S> <C> <C>
1. INTERPRETATION 1
2. FACILITIES 11
3. PURPOSE 11
4. CONDITIONS PRECEDENT 12
5. AVAILABILITY AND DRAWINGS UNDER THE FACILITIES 12
6. INTEREST 17
7. REPAYMENT 20
8. PREPAYMENT OF THE ACQUISITION FACILITIES 21
9. CHANGE IN CIRCUMSTANCES 22
10. PAYMENTS 24
11. SECURITY 26
12. REPRESENTATIONS AND WARRANTIES 26
13. UNDERTAKINGS 30
14. FEES 37
15. DEFAULT 37
16. SET-OFF 42
17. SEVERABILITY, WAIVERS, REMEDIES CUMULATIVE 42
18. NOTICES 42
19. ASSIGNMENTS 44
20. COSTS AND EXPENSES 45
21. CURRENCY INDEMNITY 46
22. PUBLICITY 47
23. LAW 47
SCHEDULE 1 DRAWDOWN NOTICE 48
SCHEDULE 2 MANDATORY LIQUID ASSET COSTS FORMULA 49
SCHEDULE 3 DEFINITIONS FOR FINANCIAL COVENANTS 51
SCHEDULE 4 SECURITY DOCUMENTS 55
SCHEDULE 5 THE GROUP 56
</TABLE>
<PG$PCN>
THIS AGREEMENT is made the 28th day of February 1992
BETWEEN:-
(1) ARROW ELECTRONICS (UK) LIMITED registered in England under number
2395760 and whose registered office is at St. Martins Way, Cambridge
Road, Bedford MK42 OLF (the "Company"); and
(2) NATIONAL WESTMINSTER BANK Plc of 41 Lothbury, London EC2P 2BP acting
through certain of its branches ("the Bank").
WHEREAS:-
The Bank has agreed, at the request of the Company, to make the Facilities
available to the Company upon the terms and conditions set forth below.
NOW IT IS HEREBY AGREED as follows:-
1. INTERPRETATION
1.1 In this Agreement (which expression shall include the Schedules hereto)
the following expressions shall have the following meanings (except
where the context otherwise requires) namely:-
"Accounts" means at any particular time the most recent directors' report
and consolidated audited accounts of the Company and its Subsidiaries
delivered to the Bank pursuant to Clause 13.1;
"Acquisition Agreement" means the agreement (in the agreed form) dated
28th February 1992 for the acquisition, inter alia, of the entire
issued share capital of Jermyn and made between, inter alia, (1) Lex
Service PLC (Reg. No. 229121) and (2) the Company together with any
documents and agreements ancillary thereto, whether or not referred to
therein;
"Acquisition Documents" means the Acquisition Agreement and the
Disclosure Letter;
"Acquisition Facility" means the term loan facility available to the
Company hereunder referred to in Clause 2(i);
"Acquisition Facility Limit" means L.5,000,000;
"Acquisition Facilities" means both the Acquisition Facility and the New
Acquisition Facility;
"Acquisition Loan" means the aggregate principal Sterling amount drawn
down and outstanding under the Acquisition Facility from time to time;
"Arrow" means Arrow Electronics, Inc., a corporation incorporated in the
State of New York, U.S.A.;
"Arrow Inc Indebtedness" means the aggregate obligations and liabilities
(whether present, future, actual and/or contingent) of Arrow and its
subsidiaries (incorporated in the USA) for the payment or repayment of
money incurred in respect of:
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(i) monies borrowed or raised;
(ii) any bond, note, loan stock, debenture or similar
instrument;
(iii) acceptance credit, bill discounting, note purchase,
factoring facilities or documentary credit facilities;
and
(iv) counter-indemnities, guarantees or other assurances
against financial loss in respect of the liability or
obligation of any person falling, within any of (i) to
(iii) above;
PROVIDED ALWAYS THAT there shall be no double-counting;
"Associated Company" has the meaning ascribed thereto by Section 416 of
the Income and Corporation Taxes Act 1988 and such expression shall
include "Associated Undertaking" as defined in Section 20 of Schedule 4A
to the Companies Act 1985;
"Auditors" means Messrs. Ernst & Young or such other firm of accountants
of similar standing whose appointment as auditors of the Company shall
have been previously approved by the Bank, acting reasonably;
"Axiom" means Axiom Electronics Limited, a company incorporated in
England and Wales and registered under number 952393;
"Bank Guarantee" means any guarantee, bond, indemnity, letter of credit,
documentary or other credit, or any other instrument of suretyship or
payment issued, undertaking, made or to be made, as the case may be, by
the Bank under the Working Capital Facility;
"Base Rate" means the Bank's published base rate from time to time;
"Business Day" means any day, except Saturdays and Sundays, on which
banks generally are open for business in the City of London of the type
contemplated by this Agreement;
"Capital Expenditure" has the meaning set out in Schedule 3;
"Cash Flow" has the meaning set out in Schedule 3;
"Charging Group" means those Group Companies which are so designated in
Schedule 5 and such additional subsidiaries as the Bank may agree in
writing from time to time can be designated as part of the Charging
Group;
"Charging Group Company" means each company in the Charging Group;
"Commitment Period" means the period from and including the date hereof
to but excluding the date falling one month before the Final Repayment
Date:
"Completion" means the initial completion of the purchase by the Company
of Jermyn in accordance with the terms of the Acquisition Agreement;
"Corporation Tax" means corporation tax chargeable in the context of
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a scheme of Taxation applied to United Kingdom resident companies
generally at the rate applicable to such companies (disregarding the
provisions of Section 13 of the Income and Corporation Taxes Act 1988
concerning the small companies' rate) or Tax of a similar nature enacted
in addition to or in substitution for corporation tax;
"Debenture" means the debenture, in the Bank's standard form (as varied
form time to time) granted by each Charging Group Company to the Bank;
"Default" means any of the events specified in Clause 15;
"Deferred Consideration" has the meaning set out in Schedule 3;
"Depreciation" has the meaning set out in Schedule 3;
"Disclosure Letter" means the disclosure letter form the Vendor to,
inter alios, the Company dated 28th February 1992 relating to the
Acquisition Agreement;
"Drawdown Date" means the date being a Business Day, on which a Drawing
is to be made pursuant to a Drawdown Notice;
"Drawdown Notice" means a notice for drawings under the New Acquisition
Facility and the Working Capital Facility substantially in the form of
the notice set out in Schedule 1;
"Drawing" means any and each drawing made under the Acquisition
Facility, the New Acquisition Facility or the Working Capital Facility
pursuant to Clause 5 and thereafter the principal amount of each such
Drawing form time to time outstanding;
"EBIT" has the meaning set out in Schedule 3;
"EDI" means EDI Electronics Distribution International BV, a corporation
incorporated in the Netherlands;
"Electronics" means RR Electronics Limited, a company incorporated in
England and Wales and registered under number 282397;
"Eligible Receivables" means any of any debts, monies and liabilities
due and payable to the Company which fulfil the following criteria:-
(i) is a trade debt required to be paid in full within 60 days of
the date upon which the invoice relating thereto is originally
dispatched;
(ii) is not owed by an Associated Company of the Company or any
Subsidiary thereof or by any Group Company or any Subsidiary
thereof save for arms length transactions on normal commercial
terms for the business in question between any Group Company,
Associated Company of the Company or any Subsidiary of any such
company;
(iii) is free and clear of liens and set-offs created by the Company
and discounts (other than discounts in the ordinary course of
trade);
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(iv) which is evidenced by invoices;
(v) is not, so far as the Company is then aware, subject to any
dispute, counterclaim or defence;
(vi) is unconditional and not dependent on any performance by the
Company; and
(vii) neither the debtor nor the receivable due from such debtor is
the subject of bona fide legal proceedings with any Group
Company which are not vexatious or frivolous;
"Encumbrance" meand any mortgage, charge, assignment by way of security,
pledge, lien, hypothecation or other security interest of any kind
whatsoever;
"Existing Facility" means the facilities made available by the Bank to,
inter alios, the Company pursuant to the Existing Facility Agreement;
"Existing Facility Agreement" means an agreement dated 31st July 1989 as
amended by a letter dated 28th March 1991 made between the Bank and,
inter alios, the Company;
"Existing Security" means the guarantees and debentures executed prior
to 28th February 1992 by the Company, Electronics and Axiom, the
Existing Subordination Deed and all other documents constituting
security for the obligations and liabilities of the Company and all
other Group Companies under the Existing Facility Agreement;
"Existing Subordination Deed" means the deed of subordination dated 31st
July 1989 execute by, inter alios, the Company, Arrow UK Inc. and the
Bank;
"Facilities" means the Acquisition Facilities and the Working Capital
Facility;
"Facility Documents" means this Agreement and the Security Documents;
"FFE Contracts" means any and all forward foreign exchange contracts (in
the Bank's standard form) entered into, or to be entered into, as the
case may be, by the Company with the Bank under the Working Capital
Facility;
"FFE Nominal Amount" means at any time and in relation to the Company,
the nominal Sterling value (as certified by the Bank) of all FFE
Contracts then outstanding in respect of the Company;
"Final Repayment Date" means in relation to all Drawings (including
pursuant to the Overdraft Facility and all Bank Guarantees and FFE
Contracts) made pursuant to the Working Capital Facility and also under
the Acquisition Facilities, 31st December 1998;
"Finance Leases" has the meaning set out in Schedule 3;
"Financial Information" means the report addressed to the Bank dated
10th January 1992 together with a supplementary report dated 27th
February 1992 in the agreed form on the Group prepared by Messrs.
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Ernst & Young;
"Financial Year" in relation to a company has the meaning ascribed to
such expression by Section 223 of the Companies Act 1985;
"First Drawing" has the meaning set out in Clause 5.2.1(a);
"Fourth Drawing" has the meaning set out in Clause 5.2.1(d);
"GAAP" means accounting principles generally accepted in the United
Kingdom consistently applied and consistent with the Reference
Accounts;
"Group" means the Company and Techdis and their respective
Subsidiaries together with all the Subsidiaries of the Company from
time to time during the Security Period;
"Group Company" means each company in the Group;
"Group Dormant Company" means each and any Group Company which is or
becomes, at any time, and remains a dormant company within the meaning
of such expression in accordance with Section 250 of the Companies Act
1985 and to which the Bank agrees in writing to be designated as such
(such agreement not to be unreasonably withheld or delayed);
"Guarantee" means the guarantee in the Bank's standard form (as varied
from time to time) granted by each Charging Group Company to the Bank;
"Indebtedness" has the meaning set out in Schedule 3;
"Instalment" has the meaning set out in Clause 7.1.1;
"Instalment Repayment Date" has the meaning set out in Clause 7.1.1;
"Interest Date" means the last day of each Interest Period;
"Interest Period" means in relation to any Drawing a period of 1, 3 or
6 months or such other period as the Bank may agree and:-
(a) the first Interest Period shall commence on the relevant
Drawdown Date;
(b) each subsequent Interest Period shall commence on the day
following the last day of the immediately preceding Interest
Period;
(c) an Interest Period which would otherwise end on a day which is
not a business Day shall be extended to the next Business Day
unless that next Business Day falls in the next calendar month
when the Interest Period shall end on the immediately
preceding Business Day;
(d) if any Interest Period commences on the last Business Day in a
month or if there is no corresponding day in the month in
which it is to end then it shall end on the last Business Day
in such month;
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(e) if an Interest Period is extended or shortened by the
application of the foregoing, the following Interest Period
shall (without prejudice to the application of the foregoing)
end on the day on which it would have ended if the preceding
Interest Period had not been so extended or shortened; and
(f) any amount to be repaid under Clause 7 shall have a final
Interest Period expiring on the relevant Repayment Date or
Final Repayment Date, as the case may be;
"Interest Rate Protection Contracts" means all and each of the
interest rate protection contracts entered into by the Company and the
Bank;
"Jermyn" means Jermyn Holdings Limited, a company incorporated in
England and Wales and registered under number 1369015;
"LIBOR" means the percentage rate per annum (rounded up, if necessary
to the nearest 1/16th of one per cent) at which the Bank offers
Sterling deposits in an amount comparable to the relevant Drawing for
a period equal to such Interest Period to prime banks in the London
inter-bank market at or about 11.00 a.m. (London time) on the first
day of such Interest Period;
"Loan" means the aggregate principal amount drawn down and outstanding
under the Facilities from time to time including utilisations under
the Overdraft Facility;
"Management Accounts" means the management accounts to be provided by
the Company to the Bank pursuant to Clause 13.1(c);
"Mandatory Liquid Asset Costs" means the additional cost to the Bank
of compliance with the relative reserve asset ratio required by the
Bank of England from time to time, expressed as a rate per cent per
annum calculated on the basis of the application of the formula set
out in Schedule 2;
"Margin" means one and a half per cent (1.5%) per annum;
"MMD" means Microprocessor and Memory Distribution Limited, a company
incorporated in England and Wales and registered under number 1920668;
"MMD Debenture" means the mortgage debenture in the Bank's standard
form granted, or to be granted, by MMD in favour of the Bank;
"MMD Guarantee" means the unlimited composite cross-guarantee in the
Bank's standard form granted, or to be granted, by MMD in favour of
the Bank;
"Net Working Capital" has the meaning set out in Schedule 3;
"New Acquisition Facility" means the term loan facility to be made
available to the Company hereunder, subject to the New Acquisition
Facility Limit, referred to in Clause 2(ii);
"New Acquisition Facility Limit" means L.6,000,000;
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"New Acquisition Loan" means the aggregate principal Sterling amount
drawn down and outstanding under the New Acquisition Facility from
time to time;
"New Security Documents" means the Techdis Debenture, the Techdis
Guarantee, the MMD Debenture and the MMD Guarantee;
"Overdraft Facility" means the overdraft and ancillary facilities,
forming part of the Working Capital Facility, as described in Clause
5.3;
"Permitted Encumbrance" means any Encumbrance:-
(i) being a lien arising by operation of law as a result of
transactions undertaken bona fide in the ordinary course of
business;
(ii) being a lien over goods and documents of title thereto arising
in the ordinary course of letter of credit transactions;
(iii) arising by way of retention of title to goods by the supplier
of those goods where such retention of title is permitted by
the Company;
(iv) over or affecting any asset acquired by a Group Company after
the date hereof and subject to which such asset is acquired,
provided that:-
(a) such Encumbrance was not created at the request of
that Group Company in contemplation of the
acquisition of such asset by that Group Company;
(b) the amount, actual or contingent, thereby secured has
not been increased in contemplation of, or since the
date of, the acquisition of such asset by that Group
Company; and
(c) such Encumbrance shall be discharged within 12 months
of such acquisition and except where the amount,
actual or contingent, thereby secured does not exceed
L.300,000 until such discharge the person or persons
in whose favour the Encumbrance has been created
shall enter into such form of subordination and
priority agreement as the Bank shall require;
(v) over or affecting any assets of any company which becomes a
Charging Group Company after the date hereof, where such
Encumbrance is created prior to the date on which such company
becomes a Group Company, provided that:-
(a) such Encumbrance was not created at the request of
any Group Company in contemplation of such company
becoming a Group Company and such company was not
acquired with the assistance of the Working Capital
Facility;
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(b) the amount thereby secured, actual or contingent, has
not been increased at the request of such company, or
any Group Company in contemplation of, or since the
date of such company becoming a Group Company; and
(c) such Encumbrance shall be discharged within 12
months of such acquisition and except where the
amount, actual or contingent, thereby secured does
not exceed L.300,000 until such discharge the person
or persons in whose favour the Encumbrance has been
created shall enter into such form of subordination
and priority agreement as the Bank shall require;
(iv) being a lien arising by operation of law in the ordinary
course of trading where the amount payable in respect of the
lien is either not yet due for payment or is being contested
in good faith;
(vii) which comprises the Existing Security;
(viii) which comprises security created pursuant to a Security
Document hereunder;
"Potential Default" means an event which with the giving of notice
and/or lapse of time and/or the satisfaction of any other condition
would be a Default;
"Qualifying Bank" means an institution which is, for the time being,
recognised by the United Kingdom Inland Revenue as carrying on through
its lending office situated in the United Kingdom for the purposes
hereof a bona fide banking business in the United Kingdom for the
purposes of Section 349(3) of the Income and Corporation Taxes Act
1988 and which makes loans from such lending office situated in the
United Kingdom;
"Reference Accounts" means the audited consolidated accounts of Jermyn
and its Subsidiaries for the period ended 29th December 1991 which
comprise the English element of the Completion Balance Sheets (as
defined in the Acquisition Agreement) and of the Company and its
Subsidiaries for the period ended 31st December 1991;
"Revolving Credit Facility" means the revolving credit facility,
forming part of the Working Capital Facility, as described in Clause
5.3.2;
"Second Drawing" has the meaning set out in Clause 5.2.1(b);
"Security Documents" means the documents listed in schedule 4, the New
Security Documents and any other documents entered into at any time by
way of security for the obligations of the Company hereunder;
"Security Period" means the period starting from the date of this
Agreement and ending on the date when all monies and liabilities
(whether present, future, actual or contingent) owing under any of the
Facility Documents have been paid or, as the case may be, discharged in
full and the Bank has no further obligations hereunder or thereunder;
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"Shares Charge" means a charge dated 20th March 1992 in favour of the
Bank given by EDI over the entire issued share capital of the Company
as security for the obligations of the Company hereunder;
"Sterling" "Pounds" and "L." means the lawful currency for the time
being of the United Kingdom;
"Sterling Equivalent" means, in relation to an amount in US Dollars on
the day on which the calculation falls to be made, the amount of
Sterling which could be purchased with such amount of US Dollars on
the basis of the Bank's spot buying rate for Sterling against US
Dollars at or about 11.00 a.m. on the second Business Day immediately
prior to that date;
"Subsidiary" has the meaning ascribed to it by Section 736 of the
Companies Act 1985;
"Tangible Net Worth" has the meaning set out in Schedule 3;
"Tax" includes all present and future taxes, charges, imposts, duties,
levies, deductions, withholdings or fees of any kind whatsoever
payable at the instance of or imposed by any statutory, governmental,
international, state, federal, provincial, local or municipal
authority, agency, body or department whatsoever or any central bank
or monetary agency, in each case whether in the United Kingdom or
elsewhere, together with any penalties, additions, fines, surcharges
or interest relating thereto and "Taxes" and "Taxation" shall be
construed accordingly;
"Techdis" means Techdis Limited, a company incorporated in England and
Wales and registered under number 2058603;
"Techdis Acquisition Agreement" means the agreement dated 2nd July
1993 for the acquisition, inter alia, of the entire issued share
capital of Techdis and made between, inter alios, (1) the persons
whose names and addresses are set out therein and (2) the Company
together with any documents and agreements ancillary thereto, whether
or not referred to therein;
"Techdis Debenture" means the mortgage debenture in the Bank's
standard form granted, or to be granted, by Techdis in favour of the
Bank;
"Techdis Guarantee" means the unlimited composite cross-guarantee in
the Bank's standard form granted, or to be granted, by Techdis in
favour of the Bank;
"Techdis Shares" means the shares in Techdis acquired by the Company
pursuant to the Techdis Acquisition Agreement;
"Third Drawing" has the meaning set out in Clause 5.2.1(c);
"Total Debt" has the meaning set out in Schedule 3;
"Total Financing Costs" has the meaning set out in Schedule 3;
"Total Interest Costs" has the meaning set out in Schedule 3;
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"US Dollars", "US$", or "$" means the lawful currency for the time
being of the U.S.A.;
"U.S.A" means the United States of America;
"VAT" means value added tax as provided for in the Value Added Tax Act
1983 (and legislation, whether delegated or otherwise) supplemental
thereto and any similar or turnover Tax replacing or introduced in
addition to any of the same;
"Working Capital Available Amount" means, subject to the terms of this
Agreement, that amount which at any time represents the Working
Capital Facility Limit less the aggregate of all Drawings made and
outstanding under the Revolving Credit Facility and outstandings
utilised under the Overdraft Facility and those Drawings to
be made in respect of which a Drawdown Notice under the Working
Capital Facility has been issued to, and received by, the Bank, and
also all counter-indemnity obligations of the Company incurred under
the Working Capital Facility and 20 per cent. or such other percentage
amount as the Bank acting reasonably may determine of the FFE Nominal
Amount. (For these purposes, all US Dollar amounts shall be computed
on the basis of their Sterling Equivalent);
"Working Capital Facility" means the facilities to be made available
by the Bank hereunder, subject to the Working Capital Facility Limit,
the terms and conditions of which are set out in this Agreement;
"Working Capital Facility Liabilities" means, at any time, the
aggregate of (i) the principal amount of all outstanding Drawings made
by the Company under the Working Capital Facility or the subject of a
Drawdown Notice issued to, and received by, the Bank under the
Working Capital Facility, whether made under the Revolving Credit
Facility, the Overdraft Facility, a Bank Guarantee, FFE Contracts
(together with 20 per cent. or such other percentage amount as the
Bank acting reasonably may determine of the FFE Nominal Amount) or any
other banking facilities, and (ii) the sum of all other liabilities
whether actual or contingent of the Company to the Bank under the
Working Capital Facility from time to time (excluding interest
accruing but not yet due), in each case as certified by the Bank, such
certificate, in the absence of manifest error, to be binding on the
Company. (For these purposes all US Dollar amounts shall be computed
on the basis of their Sterling Equivalent); and
"Working Capital Facility Limit" means L.5,000,000.
1.2 Clause headings and the table of contents are inserted for convenience
of reference only and shall not affect the construction of this
Agreement.
1.3 In this Agreement, unless the context otherwise requires:-
(a) references to Clauses and Schedules are to be construed as
references to the Clauses of and Schedules to this Agreement
as amended from time to time and references to Clauses shall,
unless otherwise specifically stated, be construed as
references to the Clauses in the Clause in which the reference
appears and references to this Agreement include its Schedules
as amended from time to time;
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(b) references to (or to any specified provision of) this
Agreement or any other document shall be construed as
references to this Agreement, that provision or that document
as in force for the time being and as amended from time to
time;
(c) references to any statue, order or regulation shall be
construed as references to such statute, order or regulation
as amended, re-enacted or consolidated from time to time;
(d) references to any person shall be construed as references to
that person or that person's assigns or successors in title,
in whole or in part;
(f) references to the singular include the plural and vice versa.
2. FACILITIES
Upon and subject to the terms and conditions of this Agreement, the
Bank agrees to make available to the Company:-
(i) the Acquisition Facility in a maximum principal amount of up
to the Acquisition Facility Limit;
(ii) the New Acquisition Facility in a maximum principal amount of
up to the New Acquisition Facility Limit as more particularly
described in Clause 5.2; and
(iii) the Working Capital Facility in an aggregate maximum principal
amount of up to the Working Capital Facility Limit as more
particularly described in Clause 5.3.
3. PURPOSE
3.1 The purpose of the Acquisition Facility is to assist the Company to:-
(i) finance its acquisition of Jermyn under the terms of the
Acquisition Agreement; and
(ii) repay the Existing Facility.
3.2 The purpose of the New Acquisition Facility is to assist the Company
to refinance the purchase of the Techdis Shares and to enable the
Company to make certain earn-out payments pursuant to the terms of the
Techdis Acquisition Agreement.
3.3 The purpose of the Working Capital Facility is to assist the Company's
general working capital requirements.
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4. CONDITIONS PRECEDENT
All conditions precedent have been satisfied.
5. AVAILABILITY AND DRAWINGS UNDER THE FACILITIES
5.1 Availability and Drawings under the Acquisition Facility
The Acquisition Loan has been drawn down.
5.2 Availability and Drawings under the New Acquisition Facility
5.2.1 Subject to the other terms hereof, the Company may make up to four (4)
Drawings under the New Acquisition Facility in such amounts which in
aggregate do not exceed the New Acquisition Facility Limit, such
that:-
(a) the first Drawing shall be of an amount not exceeding
L.3,000,000 (the "First Drawing");
(b) the second Drawing shall be of an amount not exceeding
L.1,200,000 and shall be made no earlier than 1st July 1994
(the "Second Drawing");
(c) the third Drawing shall be of an amount not exceeding
L.1,800,000 and shall be made no earlier than 1st January 1995
(the "Third Drawing"); and
(d) the fourth Drawing may only be made where the ratio of the
amount of additional share capital in the Company subscribed
and paid for by Arrow and/or EDI and used to pay earnout
payments under the Techdis Acquisition Agreement (as referred
to in Clause 5.2.7(c) to the Second and Third Drawings is
greater than 5:6 and shall be of an amount not exceeding such
amount as would, when taken with the Second Drawing and the
Third Drawing, reduce the relevant ration to 5:6 (the "Fourth
Drawing") PROVIDED THAT at no time shall the aggregate of the
Second, Third and Fourth Drawings exceed the sum of
L.3,000,000.
5.2.2 The Company shall give the Bank notice of its intention to borrow a
Drawing under the New Acquisition Facility in the form of a Drawdown
Notice.
5.2.3 Once given, a Drawdown Notice served in respect of the New Acquisition
Facility shall be irrevocable and shall oblige the Company to borrow
in accordance with its terms.
5.2.4 A Drawdown Notice served in respect of the New Acquisition Facility
shall be delivered to the Bank not later than 10.00 a.m. (London time)
one Business Day before the proposed Drawdown Date (or within such
shorter period as the Bank may allow).
5.2.5 Any part of the New Acquisition Facility undrawn at the close of
business on the last Business Day in July 1995 shall be cancelled and
shall not be available for borrowing by the Company unless there
exists, at such date, a dispute relating to any earn-out payment or
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payments due under the Techdis Acquisition Agreement as referred to in
clause 3.4 of the same in which case such date shall be extended to
such later date as may be agreed by the Bank.
5.2.6 If any Drawing under the New Acquisition Facility is not made in full
on the relative Drawdown Date the Company will on demand pay to Bank
such amount as the Bank may certify (by a certificate prepared, and
having the same effect, as described in Clause 8.3) as necessary to
compensate it for any losses or costs on account of funds borrowed or
contracted for in order to fund such Drawing.
5.2.7 Notwithstanding any other provisions of this Agreement, no Drawdown
Notice in respect of the New Acquisition Facility may be served and no
Drawing may be made:-
(a) if a Default or Potential Default has occurred and is
continuing unremedied and/or unwaived or if a Default would
occur on any Drawing being made under the New Acquisition
Facility; or
(b) unless the representations and warranties set out in Clause 12
are, or will be, true and accurate on the date on which the
relative Drawdown Notice is served and on the relative
Drawdown Date; or
(c) in respect of the Second and Third Drawings only, the Bank is
satisfied that the proceeds of the relevant Drawing are to be
used to pay an earn-out payment under the Techdis Acquisition
Agreement and that on or before such time Arrow and/or EDI
shall have subscribed and paid for an additional amount of
share capital in the Company in an amount of, in respect of
the Second Drawing at least 5/6 of such Drawing and, in
respect of the Third Drawing at least 5/6 of the Second and
Third Drawings, and that in each case the proceeds of such
subscription shall have been used or will be used
simultaneously with the making of such Drawing to pay the said
earn-out payments; or
(d) if the making of such Drawing would cause the New Acquisition
Loan to exceed the New Acquisition Facility Limit.
5.3 Availability and Drawings under the Working Capital Facility
5.3.1 Utilisation
Subject to the other terms of this Agreement, the Bank hereby agrees
to make the Working Capital Facility available to the Company during
the Commitment Period on a revolving basis to be utilised on any
Business Day by way of:-
(i) the Revolving Credit Facility in accordance with Clause 5.3.2;
(ii) the Overdraft Facility in accordance with Clause 5.3.3;
(iii) the issue of Bank Guarantees in accordance with Clause 5.3.4;
(iv) the entering into of FFE Contracts, subject to the
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availability of the relevant currencies, in accordance with
Clause 5.3.6; and
(v) such other banking facilities as the Bank and the Company may
agree;
PROVIDED THAT at no time shall the Working Capital Facility
Liabilities exceed the Working Capital Facility Limit and PROVIDED
FURTHER THAT the Working Facility Liabilities shall not at any time
exceed that amount which represents the aggregate of fifty (50) per
cent of Eligible Receivables.
5.3.2 Revolving Credit Facility
5.3.2.1 Subject to the other terms of this Agreement (and in particular without
limitation Clauses 4 and 5.3.1), Drawings may be made by the Company
under the Revolving Credit Facility at any time during the Commitment
Period by giving a Drawdown Notice in accordance with Clause 5.3.2.3.
5.3.2.2 Drawings shall be in minimum amounts of L.100,000 and integral
multiples of L.100,000 or, if less, the undrawn balance available
under the Working Capital Facility and shall only be made on a
Business Day.
5.3.2.3 Subject to:-
(a) no Default or Potential Default having occurred and continuing
unremedied and unwaived or occurring as a result of the making
of the relevant Drawing;
(b) the representations and warranties set out in Clause 12 being
true and accurate on the date on which the relevant Drawdown
Notice is served and on the relevant Drawdown Date, subject to
any matter, fact or circumstance disclosed pursuant to Clause
12.3; and
(c) the Bank having received the relevant Drawdown Notice from the
Company at least 2 Business Days (or such shorter period as
the Bank may allow) before the proposed Drawdown Date
(provided that no notice period shall be required if the
Drawing is made for the purpose of meeting a demand for
repayment of the Overdraft Facility);
the Company may make the relevant Drawing PROVIDED ALWAYS THAT:-
(i) the relevant Drawing when aggregated with the Working Capital
Facility Liabilities shall not exceed the Working Capital
Facility Limit;
(ii) the relevant Drawing may be made only on a Business Day; and
(iii) the relevant Drawdown Notice once given to the Bank shall not
be revocable and the Company shall be obliged to borrow in
accordance with such notice.
5.3.2.4 If the relevant Drawing is not made in full on the relevant Drawdown
Date the Company will on demand pay to the Bank such amount as the
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<PG$PCN>
Bank may certify (by a certificate prepared, and having the same
effect, as described in Clause 8.3) as necessary to compensate it for
any losses or costs on account of funds borrowed of contracted for in
order to fund the relevant Drawing.
5.3.3 Overdraft Facility
The Company may utilise the Working Capital Facility by way of
borrowing on overdraft under the Overdraft Facility. Overdrafts may
be denominated in Sterling or US Dollars and will be provided on the
Company's Sterling or Dollar accounts respectively held with the Bank.
Notwithstanding the provisions of Clause 15 all amounts advanced to
the Company by way of overdraft shall be repayable on demand and
subject to the Bank's usual terms and conditions for such facilities.
Any such overdraft will be made available on the basis that, subject
to renegotiation, it shall only be available for the ensuing 12 month
period the first such period commencing on the date hereof PROVIDED
THAT at no time shall the Bank be obliged to make advances under the
Overdraft Facility or make other banking facilities available if the
making of any of the same would result in the Working Capital Facility
Liabilities exceeding the Working Capital Facility Limit.
5.3.4 Bank Guarantees
5.3.4.1 The Bank shall not be obliged to issue any Bank Guarantee under the
Working Capital Facility unless the Bank has received a Drawdown
Notice requesting the Bank to issue a Bank Guarantee:-
(i) in respect of letters of credit or bills of exchange, at least
5 Business Days (or such other period as agreed between the
Bank and the Company) prior to the proposed issue; and
(ii) in respect of any other instrument at least 10 Business Days
prior to the proposed issue
and subject to:-
(a) the Bank approving the form and purpose of the proposed Bank
Guarantee including the maximum liability and maturity thereof;
(c) no Default or Potential Default having occurred and continuing
unremedied and unwaived or occurring as a result of the issue
of the Bank Guarantee; and
(d) the representations and warranties set out in Clause 12 being
true and accurate on the date on which the request is served
and on the date of issue of the Bank Guarantee subject to any
matter, fact or circumstance disclosed pursuant to Clause
12.3;
then the Bank shall issue a Bank Guarantee PROVIDED THAT the issue of
such Bank Guarantee shall not result in the maximum liability
thereunder leading to a breach of the Working Capital Facility Limit
when aggregated with the other outstanding Working Capital Facility
Liabilities.
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5.3.4.2 No Bank Guarantee will be issued under which a claim could be made on
the Bank on or after the Final Repayment Date.
5.3.5 Counter-Indemnity
5.3.5.1 In consideration of the Bank making available the Working Capital
Facility, the Company hereby unconditionally and irrevocably agrees
and undertakes to the Bank as follows:--
(a) it will at all times indemnify the Bank and keep the Bank
indemnified from and against all actions, suits, proceedings,
claims, demands, liabilities, damages, costs, expenses,
losses and charges whatsoever in relation to each Bank
Guarantee issued for its account and it will pay to the Bank
on demand the amount of all payments made (whether directly or
by way of set-off, counterclaim or otherwise howsoever) and
all losses, costs and expenses suffered or incurred from time
to time by the Bank under or by reason or in consequence of
any Bank Guarantee and any of the aforesaid indemnities
relating thereto;
(b) it hereby irrevocably authorises the Bank to comply with the
terms of any demand served or purporting to be served on the
Bank pursuant to a bank Guarantee issued for its account
without any reference to or further authority from it and
without any enquiry by the Bank into the justification for
such demand or the validity thereof and hereby agrees that any
payment which the Bank shall make in accordance with such
demand or purported demand shall be binding on and be accepted
by the Company as conclusive and binding evidence that the
bank was liable to comply with the terms of such demand and
was liable to do so in the manner and for the amount in which
the Bank effected such compliance;
(c) the liability of the Company under this indemnity shall not be
discharged, lessened or impaired by any time being given or by
any thing being done or other circumstance whatsoever which,
but for this provision, would or might operate to exonerate or
discharge it; and
(d) the Company hereby agrees that the indemnity contained in this
Clause shall constitute and be a continuing security to the
Bank and that the said indemnity shall extend to each Bank
Guarantee as it may, from time to time, be varied, modified,
amended or extended.
5.3.5.2 The Company hereby agrees that it shall pay to the Bank interest (at
the rate then applicable to advances made by way of overdraft under
the Overdraft Facility) on the amount of each payment, loss, cost and
expense made, suffered or incurred from time to time by the Bank under
or by reason or in consequence of any Bank Guarantee in respect of the
Company and any of the aforesaid indemnities relating thereto from and
including the date upon which such payment, loss, cost or expense is
made, suffered or incurred as aforesaid up to and including the date
upon which payment or reimbursement of such amount is demanded from
the Company.
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5.3.6 FFE Contracts
5.3.6.1 The Bank shall not be obliged to enter into any FFE Contract with a
maturity of longer than 12 months or which would or may result in the
Bank incurring a loss or being under any liability or obligation
(actual or contingent) after the Final Repayment Date.
5.3.6.2 The Working Capital Available Amount shall be reduced by an amount
equal to 20 per cent. of the amount of each FFE Contract or such other
percentage as the Bank shall determine.
5.3.7 Secured Debt
For the avoidance of doubt it is hereby agreed that the obligations
and liabilities of the Company to the Bank under the Working Capital
Facility from time to time are secured pursuant to the terms of the
Security Documents.
5.3.8 Bank's Certificate Conclusive
The Bank's certificate as to the amount of the Working Capital
Facility Liabilities at any given time and any other figure under this
Clause 5 shall, in the absence of manifest error, be conclusive and
binding on the Company.
6. INTEREST
6.1 Interest Periods and Interest Rates
6.1.1 The Acquisition Facilities and the Revolving Credit Facility
The Company may by notice substantially in the form of a Drawdown
Notice (but with references to the Drawing and the payment
instructions omitted) received by the Bank not later than 10.00 a.m.
(London time) on the third Business Day preceding the first day of
each next succeeding Interest Period select the duration of such
Interest Period for each Drawing. Each Interest Period in respect of
each Drawing shall be for a period of 3 months' duration unless the
Company shall have otherwise notified the Bank PROVIDED THAT, in
respect of the New Acquisition Facility, if the New Acquisition Loan
is already outstanding, any subsequent Drawing shall have a first
Interest Period that expires on the same day as the Interest Period
then applicable to the New Acquisition Loan.
6.1.2 The Company shall pay interest on each Drawing under the Acquisition
Facilities and the Revolving Credit Facility to the Bank from the
Drawdown Date to the date on which that Drawing is repaid in full
(after as well as before judgment) and such interest shall be
calculated in respect of successive Interest Periods. Without
prejudice to the provisions of Clauses 6.2, 10.3, 10.4.1, 10.4.2 and
10.4.3, the rate of interest applicable to each Drawing under the
Acquisition Facilities and the Revolving Credit Facility for any
Interest Period (or part thereof) shall be the rate per annum
determined by the Bank to be the aggregate of:-
(i) the Margin;
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(ii) LIBOR; and
(iii) Mandatory Liquid Asset Costs.
6.1.3 Overdraft
Interest on all amounts outstanding by way of overdraft under the
Working Capital Facility shall accrue from day to day at the rate per
annum which is the greater of (a) six and a half per cent (6.5%) per
annum; and (b) the relevant Base Rate of the Bank for the time being
and from time to time plus the Margin. In the case of a US Dollar
overdraft all interest payable thereon shall be made in US Dollars.
6.1.4 Other Working Capital Facilities
(a) The Company shall pay commission on the maximum amount of the
aggregate of the Bank's actual and contingent liability under
each Bank Guarantee which constitutes a bond, guarantee or
similar commitment at the rate of 2 per cent. per annum which
shall be paid quarterly in advance.
(b) The Company shall pay fees to the Bank in respect of FFE
Contracts and Bank Guarantees constituting documentary credits
or other similar engagements in such amount as may be agreed
between the Bank and the Company from time to time in
accordance with the Bank's usual scale of charges.
6.2 If the Bank shall determine that, by reason of circumstances affecting
the London inter-bank market generally, reasonable and adequate means
do not exist for determining under Clause 6.1.2 the rate of interest
applicable to the Drawings comprising part or all of the Loan:--
(i) the Bank shall promptly notify the Company in writing of such
event;
(ii) the Bank and the Company shall discuss an alternative basis
for making and continuing the Drawings comprising part or all
of the Loan during subsequent Interest Periods (either for an
alternative period or periods or by obtaining Sterling funds
in another market or markets) or as the case may be for
calculating the rate of interest applicable to the Drawings
comprising part or all of the Loan, in either case on the
basis that the net return to the Bank shall be the same as it
would have been had such circumstances not occurred;
(iii) subject to paragraph (iv) below, unless the Bank and the
Company shall have agreed upon such alternative basis within
thirty (30) days of the date of service of the notice referred
to in clause 6.2(i) the Company shall pay interest from the
relevant Interest Date at a rate equal to the Margin plus such
amount as is certified by the Bank as being the cost to the
Bank of continuing to make the Drawings comprising part or all
of the Loan available, which certificate shall, save for
manifest error, be conclusive evidence of such interest and,
so long as there shall continue to be no agreement upon such
alternative basis, the Company shall be entitled to prepay the
Drawings comprising
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<PG$PCN>
part or all of the Loan on the last day of an Interest Period
upon 30 days' written notice from the Company to the Bank;
(iv) if within 30 days of the date of service of the notice
referred to in Clause 6.2(i) the Bank and the Company shall
agree upon such an alternative basis, then such basis shall be
effective in respect of the Drawings comprising part or all of
the Loan from (and, if applicable, retroactive to) the
beginning of the Interest Period in respect of the Loan
beginning on or after the date of service of such notice by
the Bank to the expiry of the first Interest Period which
expires after such circumstances no longer exist.
6.3 Default Interest
6.3.1 If the Company does not pay any sum due and payable under any of the
Facilities on the due date the Company shall pay interest on such sum
(or, as the case may be, the amount thereof for the time being due and
unpaid) from such date to the date of actual payment in full (after as
well as before judgment), calculated by reference to successive
interest periods (each of such duration as the Bank may from time to
time select and the first beginning on such due date) ("interest
periods") at the percentage rate per annum determined by the Bank to
be the aggregate of:--
(i) 2 per cent. per annum;
(ii) the Margin;
(iii) LIBOR; and
(iv) Mandatory Liquid Asset Costs.
6.3.2 So long as the default continues, such rate shall be recalculated in
accordance with the provisions of this Clause at the end of each such
interest period (the amount of unpaid interest accrued during such
preceding interest period in respect of such sum being added to the
sum in default and bearing interest accordingly).
6.3.3 If the Company does not pay any sum due and payable under the Working
Capital Facility (other than the Revolving Credit Facility), it shall
pay interest on such sum (or, as the case may be, the amount thereof
for the time being due and unpaid) from such date to the date of
actual payment in full (after as well as before judgment), at a rate
equal to 2 per cent. above the rates referred to in Clauses 6.1.3 and
6.1.4 as the case may be.
6.4 The Bank's Determination
The determination by the Bank of any interest payable for any period
or part thereof shall, save for manifest error, be conclusive. The
Bank will notify the Company of the rate of interest payable for any
interest period, Interest Period or part thereof (and, in the case of
additional interest payable under Clause 6.3, of the amount of such
additional interest).
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6.5 Calculation and Payment of Interest
Interest on the Loan or, as the case may require, other amounts due
from the Company under this Agreement, at the rates determined as
aforesaid shall:--
(a) accrue from day to day;
(b) be calculated on the basis of the actual number of days
elapsed, and (i) a 365 day year or (ii) in respect of a sum
due in US Dollars a 360 day year; and
(c) except as otherwise provided in this Agreement be paid by the
Company in arrear on each Interest Date and, if an Interest
Period exceeds 6 months, every 6 months in arrear.
7. REPAYMENT
7.1 The Acquisition Facilities
7.1.1 Subject to the terms of this Agreement, the Company shall repay the
Acquisition Loan and the First Drawing by payment to the Bank on the
dates set out in Column A below (each date being an "Instalment
Repayment Date") of the Sterling amount (together with any amount
payable on such Instalment Repayment Date pursuant to Clause 7.1.2,
and "Instalment") set out in Column B below opposite the relevant
Instalment Repayment Date.
<TABLE>
<CAPTION>
Column A Column B
-------- --------
<S> <C>
L.
30 June 1994 600,000
31 December 1994 900,000
30 June 1995 700,000
31 December 1995 700,000
30 June 1996 700,000
31 December 1996 700,000
30 June 1997 850,000
31 December 1997 850,000
30 June 1998 1,000,000
31 December 1998 (the "Final Repayment Date") 1,000,000
</TABLE>
7.1.2 The Company shall repay each of the Second, Third and Fourth Drawings
(as the case may be) by repaying such Drawing in equal instalments on
each of the Instalment Repayment Dates occurring after the Drawdown
Date of Such Drawing.
7.1.3 The Company shall repay the Acquisition Facilities in accordance with
the provisions of this Clause 7.1 so that the Acquisition Facilities
are repaid in full on or before the Final Repayment Date.
7.1.4 Any amounts repaid or prepaid may not be reborrowed.
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7.2 The Working Capital Facility
7.2.1 Each Drawing made pursuant to the Revolving Credit Facility shall,
subject to the other terms hereof, be repaid in full on the Interest
Date relating to such Drawing.
7.2.2 All Drawings will be repaid on or before the Final Repayment Date.
7.2.3 If all or part of an existing Drawing is to be repaid from the
proceeds of all or part of a new Drawing, then the amount to be repaid
by the Company shall be set-off against the amount of the new Drawing
and the person to whom the smaller amount is to be paid shall pay to
the other party a sum equal to the difference between the two amounts.
7.2.4 On giving not less than 10 days' prior irrevocable written notice to
the Bank, the Company may cancel all or part of the Revolving Credit
Facility (but if in part in minimum amounts of L.100,000 and multiples
of L.100,000). Amounts so cancelled shall cease to be available for
borrowing hereunder and the Working Capital Available Amount and
Working Capital Facility Limit will be reduced accordingly. The
Company shall not cancel all or part of the Revolving Credit Facility
if such cancellation would result in the Working Capital Facility
Liabilities being greater than the Working Capital Facility Limit.
7.3 All amounts due under the Working Capital Facility (other than in
respect of the Revolving Credit Facility) shall be repaid on or before
the Final Repayment Date whether outstanding by way of overdraft under
the Overdraft Facility or otherwise and including all payments, if
any, to be made of cash collateral equal to the Bank's maximum
liability (actual or contingent) in respect of the Bank Guarantees and
the FFE Contracts.
7.4 All repayments of a Drawing shall be made in the currency of such
Drawing.
7.5 Any part of the Working Capital Facility not utilised as at the close
of business on the last day of the Commitment Period shall be
automatically canceled at that time.
8. PREPAYMENT OF THE ACQUISITION FACILITIES
8.1 The Company may prepay all or any part of the Acquisition Loan and the
New Acquisition Loan (the amount of any partial prepayment being an
integral multiple of L.100,000) on an Interest Date provided that the
Bank shall have received not less than 10 days' prior irrevocable
written notice of the Company's intention to make such prepayment
specifying the amount to be prepaid. Notice of intended prepayment
having been given, it shall be obligatory for the prepayment to be
made in accordance with the notice. No amount prepaid may be redrawn.
8.2 Any amount prepaid pursuant to this Clause shall be applied in and
towards the discharge of the Installments outstanding at the date of
such prepayment such that the amount prepaid shall be applied first,
consecutively in respect of the next two Instalments falling after
each prepayment date and second, pro rata to the remaining
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Instalments PROVIDED THAT if pursuant to this Clause a prepayment is
applied, consecutively, against the next two Instalments in full, a
repayment must be made in respect of the next Instalment on the
relevant Instalment Repayment Date specified in Clause 7.1.1, before
prepayments may be applied to the then immediately succeeding two
Instalments.
8.3 If any repayment or prepayment is made otherwise than on an Interest
Date (or an Instalment Repayment Date, as the case may be) relative to
the amount paid, the Company shall pay to the Bank on demand such
additional amount as the Bank may certify as necessary to compensate
the Bank for any loss or expense on account of funds borrowed,
contracted for or utilised to fund the amounts so repaid or prepaid
beyond the above date. Any certificate issued by the Bank pursuant to
this Clause (or under Clauses 5.2.6, or 5.3.2.4) shall state the
amount and show the calculation of any such loss or expense after
giving credit for any incidental saving effected by the Bank in
mitigation thereof, and shall be conclusive save in the case of
manifest error.
8.4 The Company may not prepay all or any part of the Acquisition Loan or
the New Acquisition Loan except in accordance with the express terms
of this Agreement.
9. CHANGE IN CIRCUMSTANCES
9.1 If the introduction of, or any change in, any applicable law, statute,
rule or regulation or any change in the interpretation thereof by any
regulatory or other authority charged with the administration thereof
or by any court shall make it unlawful for the Bank to advance or
leave outstanding the Loan or otherwise to maintain or give effect to
its obligations under this Agreement the Bank shall notify the Company
of such illegality and the Bank's obligations under this Agreement
shall be forthwith cancelled and the Company shall, within such period
(if any) as may be allowed by law or forthwith if no such period is
allowed, prepay to the Bank the Loan. Any such prepayment shall be
subject to Clause 8.3. Without prejudice to the Bank's rights under
this Clause 9.1 the Bank will use reasonable endeavours to mitigate the
effect of such illegality and in particular (without prejudice to the
generality of the foregoing) shall consider in consultation with the
Company continuing the Loan through another office or transferring the
Facilities to one or more of its affiliates or other financial
institutions.
9.2 If the introduction, abolition, withdrawal of, or any change in:--
(a) any applicable law, regulation, practice or concession; or
(b) any official directive or regulatory requirement or request
(whether or not having the force of law) of the Bank of
England, the European Community, or of any other governmental,
monetary or other authority (whether in the United Kingdom or
elsewhere)
or any change in the interpretation (or introduction of any
interpretation) or application thereof shall:--
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(i) subject the Bank to any Tax, or increase the amount of any Tax
in connection with it having agreed to make available and
maintaining the Loan or any part thereof or in connection with
this Agreement or any of the Security Documents or any
document or transaction contemplated herein or therein or any
part thereof other than Corporation Tax on the Bank's overall
net income; or
(ii) change the basis of Taxation of the Bank in respect of
payments of principal, interest or any other payment due or to
become due in connection with the Facilities or any part
thereof or in connection with this Agreement or any of the
Security Documents or any document or transaction contemplated
herein or therein or any part thereof (or the treatment for
Taxation purposes of such payments); or
(iii) change the basis on which the Bank is treated for Taxation
purposes in respect of any principal, interest or other
amounts paid by the Bank on, or otherwise in respect of,
deposits from third parties used to effect or maintain the
Loan or any part thereof or in connection with this Agreement
or any of the Security Documents or any document or
transaction contemplated herein or therein; or
(iv) impose, modify or deem applicable any reserve, cash ratio,
special deposit, capital adequacy, and/or liquidity
requirement or any other analogous requirement, or require the
making of any special deposits, against or in respect of any
assets or liabilities of, deposits with or for the account of,
or loans by, the Bank for which the Bank is not entitled to be
fully compensated under Clause 6.1.2; or
(v) change the manner in which the Bank allocates capital
resources to its obligations under the Facilities so that it
is unable to obtain the rate of return on its overall capital
which it would have been able to obtain but for its entering
into and/or performing its obligations and/or assuming or
maintaining its commitment under this Agreement; or
(vi) impose on the Bank any other condition directly affecting its
participation in the Facilities;
and the result of any of the foregoing is either to increase the cost
to the Bank of making available or maintaining the Loan or any part
thereof or to reduce the amount of any payment received or receivable
by the Bank or to reduce its return from the Facilities, then and in
any such case:--
(w) the Bank shall promptly notify the Company;
(x) subject to the Bank taking the steps referred to in (y) below,
the Company shall pay from time to time to the Bank on demand
all amounts which the Bank certifies (in a certificate which
shall set out in reasonable detail so far as is practicable
the basis of the computation of such amounts) is necessary to
compensate the Bank for the additional cost or reduction;
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(y) without prejudice to the foregoing, the Bank confirms that, if
it notifies the Company as aforesaid, it will take such steps
as it considers reasonable to reduce or avoid the additional
cost or reduction and, if the Company so requests, the Bank
shall consult the Company with a view to finding a means of
reducing or avoiding the additional cost or reduction and, in
particular, shall consider continuing the Loan through another
office or, upon the written request of the Company, shall use
all reasonable endeavours to assign the whole of its rights and
obligations under this Agreement to another financial
institution acceptable to the Company PROVIDED THAT the Bank
shall not be obliged to continue such negotiations for a
period of longer than 30 days; and
(z) the Company, at any time after receipt of such notification as
is referred to in (w) above, so long as the circumstances
giving rise to such additional cost or, as is the case may be,
reduction continue, shall be entitled on giving not less than
10 days' notice to the Bank (which shall be irrevocable) to
prepay the Loan or any part thereof. Any such prepayment shall
be subject to the provisions of Clause 8.
9.3 The certificate or notification of the Bank as to any of the matters
referred to in Clauses 9.1 and 9.2 above shall, save for any manifest
error, be conclusive and binding on the Company.
10. PAYMENTS
10.1 All payments to be made by the Company under this Agreement shall be
made in immediately available funds during normal banking hours on the
day in question to the Bank not later than 12.00 noon (London time) on
such day.
10.2 If, but for this Clause, any sum would become due for payment under
this Agreement on a day which is not a Business Day, such payment
shall be made on the next succeeding Business Day unless that next
Business Day falls in the next calendar month when payment shall be
made on the immediately preceding Business Day and interest shall be
adjusted accordingly.
10.3 The Company shall indemnify the Bank on demand against any loss or
expense (including, but not limited to any loss of the Margin or any
other loss or expense sustained or incurred or to be sustained or
incurred by the Bank in liquidating or employing deposits required or
contracted for to effect or maintain the Loan or any part thereof)
which the Bank may sustain or incur as a consequence of (i) a default
by the Company in the payment on the due date of any sum due under
this Agreement or (ii) the repayment of the Loan pursuant to Clause
15.
10.4.1 All sums payable to the Bank pursuant to or in connection with this
Agreement and the Security Documents, or any document contemplated by
or entered into pursuant hereto or thereto, shall be paid in full
without any set-off or counterclaim whatsoever and free and clear of
all deductions or withholdings whatsoever save only as may be required
by law.
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10.4.2 If any deduction or withholding is required by law in respect of any
payment due to the Bank pursuant to or in connection with this
Agreement and the Security Documents, or any document contemplated by
or entered into pursuant hereto or thereto, the Company shall:--
(a) ensure or procure that the deduction or withholding is made
and that it does not exceed the minimum legal requirement
therefor;
(b) pay, or procure the payment of, the full amount deducted or
withheld to the relevant Taxation or other authority in
accordance with the applicable law;
(c) (i) if the payment is to be made by the Company, increase
the payment in respect of which the deduction or
withholding is required so that the net amount
received by the Bank after the deduction or
withholding (and after taking account of any Tax
liability which arises as a consequence of the
increase) shall be equal to the amount which
the Bank would have entitled to receive in the
absence of any requirement to make a deduction or
withholding; or
(ii) if the payment is to be made by any person other than
the Company, pay directly to the Bank such sum (a
"compensating sum") as will, after taking into
account any Tax liability of the Bank in respect of
the compensating sum, enable the Bank to receive, on
the due date for payment, a net sum equal to the sum
which the Bank would have received in the absence of
any obligation to make a deduction or withholding;
and
(d) within 30 days of receipt deliver to the Bank appropriate
receipts evidencing the deduction or withholding which has
been made or procure the delivery of such receipts.
10.4.3 If the Bank determines, in its absolute discretion, that it has
received, realised, utilised and retained a Tax benefit by reason of
any deduction or withholding in respect of which the Company has made
an increased payment or paid a compensating sum under this Clause
10.4, the Bank shall, provided it has received all amounts which are
then due and payable by the Company and any other person under any of
the provisions of this Agreement and the Security Documents, pay to
the Company (to the extent that the Bank can do so without prejudicing
the amount of such benefit, or repayment and the right of the Bank to
obtain any other benefit relief or allowance which may be available to
it) such amount, if any, as the Bank in its absolute discretion shall
determine will leave the Bank in no worse position than the Bank would
have been in if the deduction or withholding had not been required
PROVIDED THAT:--
(1) the Bank shall have an absolute discretion as to the time at
which and the order and manner in which it realises or
utilises any Tax benefit and shall not be obliged to arrange
its business and tax affairs in any particular way in order to
be eligible for any credit or refund or similar benefit;
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(2) the Bank shall not be obliged to disclose any information
regarding its business, tax affairs or tax computations;
(3) if the Bank has made a payment to the Company pursuant to this
Clause 10.4.3 on account of any Tax benefit and it
subsequently transpires that the Bank did not receive that Tax
benefit, or received a lesser Tax benefit, the Company shall
on demand pay to the Bank such sum as the Bank may determine
as being necessary to restore the after-tax position of the
Bank to that which it would have been had no adjustment or the
correct adjustment (as the case may require) under this
proviso (3) been made. Any sums payable by the Company to the
Bank under this proviso (3) shall be subject to the
provisions of Clause 20.5;
(4) the Bank shall not be obliged to make any payment under this
Clause 10.4 if, by doing so, it would contravene the terms of
any applicable law or any notice, direction or requirement of
any governmental or regulatory authority (whether or not
having the force of law).
10.5 If the Company is required to make an increased payment under Clause
10.4.2 above (but only so long as such requirement exists), subject to
giving to the Bank not less than 10 days' prior written notice (which
shall be irrevocable) the Company may prepay the Loan or any part
thereof together with accrued interest thereon. Any such prepayment
shall be subject to the provisions of Clause 8.3.
11. SECURITY
11.1 The obligations of the Company under this Agreement shall be secured
by the interests and rights conferred on the Bank under the Security
Documents.
11.2 It is hereby agreed that all obligations and liabilities of the
Company to the Bank incurred under or in connection with the Interest
Rate Protection Contracts shall be treated, for all purposes, as
obligations and liabilities incurred under this Agreement and that,
for the avoidance of doubt, the Company's obligations and liabilities
under the Interest Rate Protection Contracts shall be secured pursuant
to the terms of the Security Documents.
12. REPRESENTATIONS AND WARRANTIES
12.1 The Company acknowledges that the Bank has entered into this Agreement
in full reliance on the following statements and hereby represents and
warrants to the Bank that:--
(a) each Group Company is a private limited company duly
incorporated and validly existing under the laws of England
and each of them possesses the capacity to sue and be sued in
its own name and has the power to carry on its business as now
being conducted and to own its property and other assets;
(b) each Group Company has or will have the power to execute,
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<PG$PCN>
deliver and perform its obligations under each of the Facility
Documents, the Acquisition Documents, and the Techdis
Acquisition Agreement and any other document or instrument
executed, delivered or to be executed or delivered by it under
any of such documents; all necessary corporate; shareholder
and other action has been taken or will be taken to authorise
the execution, delivery and performance of the same and no
limitation on its powers to borrow, to guarantee and to grant
security will be exceeded as a result of the transactions
contemplated by such documents;
(c) the Facility Documents, the Acquisition Documents, the Techdis
Acquisition Agreement and any other document or instrument
executed or delivered or to be executed or delivered by any
Group Company thereunder constitute or, as the case may be,
will constitute valid and legally binding obligations of the
Group Companies which are party thereto and, in the case of
the Acquisition Agreement of Arrow;
(d) the execution and delivery of the Facility Documents, the
Acquisition Documents, the Techdis Acquisition Agreement and
any other document or instrument executed or delivered or to
be executed or delivered thereunder by any Group Company (as
applicable), and the performance of obligations thereunder,
and compliance with the provisions thereof, will not (i)
contravene any existing applicable law, statute, rule or
regulation or any judgment, decree or permit to which any
of the same are subject, (ii) conflict with, or result in any
breach of any of the terms of, or constitute a default under,
any agreement or other instrument to which any Group Company
is a party or is subject or by which it or any of its property
is bound, (iii) contravene or conflict with any provision of
the Memorandum and Articles of Association of any Group
Company;
(e) all licenses, consents and authorisations as are or may be
necessary to enable each Group Company to carry on its
business at the date hereof and to perform its obligations
under the Facility Documents (other than the New Security
Documents, where this representation and warranty is given
before the same have been duly executed and delivered), the
Acquisition Agreement and the Techdis Acquisition Agreement
and to fulfil the transactions contemplated thereby are in
full force and effect;
(f) no Group Company has taken any corporate action nor is any
Group Company aware that any steps have been taken or legal
proceedings started or threatened in writing against any Group
Company for winding-up, dissolution or re-organisation or for
the appointment of a receiver, administrative receiver,
administrator, trustee or similar officer of it or of all or
any material part of its assets (for the purposes of this
representation and warranty "material" shall mean the
aggregate amount of all claims arising under actions of the
type referred to in this Clause 12.1(f) which such amount
shall not exceed 5 per cent. of the consolidated net assets of
the Group as shown by the latest Accounts;
-27-
<PG$PCN>
(g) no Group Company is in breach of or default under any
agreement to which it is a party or which is binding on it or
any of its assets to an extent or in a manner which would be
likely to have a material adverse effect on the consolidated
financial condition of the Group taken as a whole;
(h) no legal action, litigation, or administrative proceeding is
taking place or has been threatened in writing against any
Group Company and, so far as the Company is aware, no such
legal action, litigation or administrative proceeding is
pending or threatened;
(i) Schedule 5 contains a true and complete list of all Group
Companies all of which are beneficially owned (directly or
indirectly) by the Company;
(j) other than Permitted Encumbrances, no Encumbrance exists over
all or any of the present or future revenues or assets of any
Group Company;
(k) the Reference Accounts were, save as specified therein,
prepared in accordance with accounting principles generally
accepted in the United Kingdom consistently applied and give a
true and fair view of the state of affairs of the Company and
its Subsidiaries and Jermyn and its Subsidiaries as at the
date to which they are made up and as at such date there were
no material liabilities of the Company and its Subsidiaries or
Jermyn and its Subsidiaries which were not disclosed by or
shown as being provided for in such accounts which ought to
have been disclosed and (other than as disclosed in the
Financial Information) since such date there has been no
material adverse change in the consolidated financial
condition or business of the Group taken as a whole;
(l) all information prepared by the Company for inclusion in the
Financial Information, or prepared by the Company and supplied
to Messrs Ernst & Young for the purpose of compiling the
Financial Information, was at 10th January 1992, in the case
of factual information, true and correct in all material
respects and, in the case of projections fair and reasonable
and without prejudice to the generality of the foregoing:--
(i) the forecasts contained in the Financial Information
have been diligently prepared and the assumptions
upon which they are based as to the future prospects
of the business of the Group have been carefully
considered and are honestly believed to be reasonable
having regard to the information available and to the
market conditions prevailing at the time of their
preparation and that the Company has made all
reasonable enquiries so as to ascertain (so far as
possible) all such information and market conditions
which are relevant to their preparation; and
(ii) save as disclosed in the Financial Information there
is no fact or matter known to the Company concerning
the business or the affairs of the Group or relating
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<PG$PCN>
to the Financial Information which is or might be
material for disclosure to a lender contemplating
granting facilities to the Company of the kind
provided for in this Agreement and on the terms of
this Agreement;
(m) the Accounts have been prepared in accordance with GAAP and
give a true and fair view of the state of affairs of the Group
as at the date to which they are made up and as at such date
there were no material liabilities of any Group Company not
disclosed in the Accounts which ought to have been disclosed
and (other than as disclosed in the Financial Information)
since such date there has been no material adverse change in
the financial condition or prospects of the Group;
(n) the copies of the Memorandum and Articles of Association and
Certificate of Incorporation of each Group Company and of the
resolutions of the boards of each of those companies certified
by their respective duly authorised officers produced to the
Bank on or prior to 2nd August 1993 are true up to date and
complete copies;
(o) save pursuant to the Shares Charge, none of the share capital
of any Group Company is under option or mortgaged or charged
or otherwise unencumbered;
(p) (a) no Encumbrances save for Permitted Encumbrances will
exist over any assets of any Group Company (save
pursuant to the Security Documents); and
(b) no Group Company will have any Indebtedness
outstanding (save under this Agreement, or otherwise
permitted under Clause 13.4(f));
(q) Arrow, EDI and any other Subsidiary of Arrow, between them,
beneficially own at least 75% of the issued share capital of
the Company; and
(r) Arrow beneficially owns at least 51% of the issued share
capital of EDI.
12.2 The representations and warranties set out in Clause 12.1(a) through
(o) inclusive shall survive the execution of this Agreement and the
making of the Drawing of the New Acquisition Facility and subject to
Clause 12.3 shall be deemed to be repeated by the Company on each
Drawdown Date and on each Interest Date as if made with reference to
the facts and circumstances existing at that time save that:--
(a) the representation and warranty contained in Clause 12.1(h)
shall, when repeated on each Interest Date and Drawdown Date,
be qualified by the addition at the end of the words "which
would be likely to have a material adverse affect on the
financial condition of the Group taken as a whole";
(b) without prejudice to the rights of the Bank in respect of the
period prior thereto, if at any time after 2nd August 1993 it
transpires that any of such representations and warranties
-29-
<PG$PCN>
are incorrect as at the date hereof or such Drawdown Date, the
representations and warranties contained in sub-Clauses (i),
(l) and (n) shall not be repeated on each Interest Date or
Drawdown Date;
(c) the representation and warranty contained in Clause 12.1(k)
shall not be given until the first Drawdown Date after the
Reference Accounts are finalised and dated.
12.3 The Company may, before each Drawdown Date save in respect of a
Drawing, to be made under the New Acquisition Facility or each
Interest Date, disclose to the Bank in writing such facts and
circumstances as the Company considers relevant to qualify any such
representation and warranty save in respect of the representations and
warranties repeated at Clause 12.1 (h), (i) and (j). Thereafter on
each occasion when such representation and warranty is deemed to be
repeated, it shall be deemed to be qualified by such disclosure, and
the Company shall be deemed to make a further representation and
warranty, to be repeated on each Drawdown Date and each Interest Date
with reference to the facts and circumstances existing at that time,
that such disclosed facts and circumstances are true and subsisting
respectively and it is expressly agreed such disclosure shall only
affect the provisions of Clause 15.1(c).
13. UNDERTAKINGS
13.1 During the Security Period the Company undertakes with the Bank to:--
(a) inform the Bank of nay occurrence (including without
limitation any third party claim or liability) of which it
becomes aware which would or would be likely to affect
adversely its ability to perform its obligations under the
Facility Documents and of any Default or Potential Default,
promptly upon becoming aware thereof, and will from time to
time, if so requested by the Bank, confirm to the Bank in
writing that, save as otherwise stated in such confirmation,
no such occurrence or Default or Potential Default has
occurred and is continuing;
(b) as soon as the same became available, but in any event within
120 days after the end of each of its Financial Years, deliver
to the Bank 2 prints of its Accounts for such Financial Year
together with the Auditor's report thereon and a copy of the
management letter (if any) addressed by the Auditors to the
directors in connection with the auditing of such Accounts
together with 2 prints of the audited accounts of each Group
Company in the form that is required to be registered with the
Registrar of Companies;
(c) provide the Bank as soon as available (and, in any event
within 30 days of the end of each month with monthly
management accounts (incorporating profit and loss accounts,
balance sheets and cash flow summaries) relating to the Group
in a form satisfactory to the Bank together with revised cash
flow forecasts showing the position for the balance of each
then current Financial Year in a form satisfactory to the Bank
and in a form which can be compared with the projections
-30-
<PG$PCN>
provided to the Bank under Clause 13.1(d) below together with
a commentary on significant variances against such projections
provided to the Bank;
(d) (i) prior to the end of each Financial Year deliver to the
Bank copies of such budgetary information as is then available
in such form as then prepared and (ii) as soon as the
following is available but in any event no later than 60 days
after the commencement of each successive financial year,
deliver to the Bank 2 copies of a projected consolidated
profit and loss account, balance sheet and cash flow statement
(including details of cash disbursements), and a projected
consolidated statement of the source and application of funds
for the Group for that Financial Year, which shall be broken
down to show the consolidated position of the Group as at the
end of each month;
(e) maintain the accounting reference date of each member of the
Group at 31st December;
(f) furnish to the Bank such information about the business,
financial condition, operations and prospects of any Group
Company as the Bank may from time to time reasonably require;
(g) promptly inform the Bank of:--
(i) any acquisition of beneficial ownership of common
stock in Arrow amounting (whether by one transaction
or a series of transaction) to 5% or more of the then
issued common stock of Arrow; or
(ii) any acquisition of 5% or more of the then issued
common stock of Arrow by any beneficial owner of 5%
or more of the then issued common stock of Arrow; or
(iii) any change in the beneficial ownership of any common
stock in Arrow relevant to the provisions of Clause
15.1(r);
in any such case of which it or any of its directors are
aware, promptly after becoming so aware.
13.2 Except as the Bank may otherwise agree in writing, the Company hereby
undertakes with the Bank that during the Security Period:--
(a) the ratio of EBIT to Total Interest Costs in respect of the
period of the relative Financial Year to date ending on each
date referred to in Column A below shall not be less than the
ratio set out in Column B below opposite such periods.
<TABLE>
<CAPTION>
Column A Column B
-------- --------
<S> <C>
30th September 1993 2.75:1
31st December 1993 3.40:1
31st March 1994 4.00:1
30th June 1994 4.50:1
30th September 1994 5.00:1
31st December 1994 5.30:1
</TABLE>
-31-
<PG$PCN>
<TABLE>
<S> <C>
31st March 1995 5.50:1
30th June 1995 5.60:1
30th September 1995 5.80:1
31st December 1995 6.00:1
each 31st March, 30th June,
30th September and 31st December
thereafter 6.20:1
</TABLE>
(b) the Tangible Net Worth of the Group for each of the Financial
Years ending on the dates listed in Column A below shall not
at any time during such Financial Year be less than the amount
set out opposite the relevant date in Column B below:
<TABLE>
<CAPTION>
Column A Column B
-------- --------
<S> <C>
31st December 1993 L.21,000,000
31st December 1994 L.30,000,000
31st December 1995 L.34,500,000
31st December 1996 L.34,500,000
31st December 1997 L.34,500,000
</TABLE>
(c) the Capital Expenditure for the Group in each of the Financial
Years ending on the dates listed in Column A below will not
exceed the figure stated in Column B below:
<TABLE>
<CAPTION>
Column A Column B
-------- --------
<S> <C>
31st December 1993 L.1,000,000
31st December 1994 L.1,800,000
31st December 1995 L.1,400,000
31st December 1996 L.1,400,000
31st December 1997 L.1,400,000
</TABLE>
(d) the ratio for Cash flow to Total Financing Costs in respect of
the period of the relative Financial Year to date ending on
each 31st December, 31st March, 30th June and 30th September
and commencing on 30th June 1994 shall not be less than 1:1;
(e) it will seek to procure (so far as the Company is able to do)
that the Auditors will at the Company's cost on the adoption
of the Accounts for each Financial Year give a certificate in
a form satisfactory to the Bank certifying that the Company is
not in breach of the financial covenants set out in Clauses
13.2 (a), (b), (c) and (d) for the period or at the year end
in respect of which the Accounts are made up.
13.3 During the Security Period, the Company shall itself and (where
applicable) shall procure that each of the other members of the Group
shall, save with the prior written consent of the Bank (such consent
not to be unreasonably withheld or delayed):--
(a) do all things within its control necessary to maintain its
corporate existence;
(b) ensure that it has the right and is duly qualified to conduct
its business as it is conducted in all applicable
jurisdictions, and will use its reasonable endeavours to
-32-
<PG$PCN>
obtain and maintain all rights necessary for the conduct of
its business;
(c) carry on its business in a prudent manner, taking into account
the type of business involved and its usual practice;
(d) ensure that its assets are kept in good and substantial repair
and that it complies with any contractual obligations relating
to repair of such assets, subject to the provisions of the
Security Documents;
(e) at all times comply substantially with all laws and
regulations of significant effect to it in respect of the
conduct of the Group's business and obtain and maintain in
full force and effect all governmental and other regulatory
consents, licenses and approvals required for the conduct of
any part of the Group's business and notify the Bank in
writing promptly upon its learning of any violation by any
Group Company of any law, statute, regulation or ordinance of
any government entity, or of any agent thereof, applicable to
any Group Company which violation in any respect would or is
likely materially and adversely to affect the Group's business
or the security constituted by any of the Security Documents;
(f) effect and maintain insurance over and in respect of its
business and assets (including insurance against the loss of
profits) against such risks and in such amounts as the Bank
may from time to time require, and, in any event, against such
risks and for such amounts as is normal for a business of the
type being carried on by the relevant Group Company, and, on
demand, produce to the Bank receipts for the last premiums
payable in respect of such insurances;
(g) apply the proceeds of insurances (i) insofar as they represent
the destruction of a capital asset either in replacement
thereof or in the purchase of a capital asset of a similar
nature or purpose or in prepayment of first, the Acquisition
Loan, second, the New Acquisition Loan, and third, the Working
Capital Facility Liabilities and (ii) insofar as they
represent damage to any asset in repair or replacement of that
asset or in the purchase of a capital asset of a similar
nature or purpose or in prepayment of first, the Acquisition
Loan, second, the New Acquisition Loan, and third, the Working
Capital Facility Liabilities;
(h) promptly after the same are instituted and served upon the
relevant Group Company or, to its knowledge, threatened,
provide details to the Bank of any litigation, arbitration or
administrative proceedings which affect any Group Company and
which involve liability or potential liability (other than
costs) in aggregate in excess of L.100,000;
(i) permit the Bank and any person (being an accountant, auditor,
solicitor, valuer or other professional advisor to the Bank,
or an officer or employee of any subsidiary of the Bank
authorised by the Bank) to have, at all reasonable times
during normal business hours and on reasonable notice subject
-33-
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to such persons being bound by similar codes of
confidentiality to that owed by a bank to its customer, access
to the premises and accounting books and other financial
records of any Group Company, to make extracts from and take
copies of any such books or records, and to discuss any matter
with its officers;
(j) promptly upon registration of any transfer of any shares in
the Company, inform the Bank of such transfer, and promptly
inform the Bank of any change in the beneficial ownership of
any such shares, of which the Company or its directors become
aware;
(k) procure that any company which becomes a Group Company, and
which is not a Group Dormant Company, executes such guarantees
and charges (if appropriate in substantially the form of the
Guarantee and the Debenture) in favour of the Bank as the Bank
may lawfully require;
(l) take all necessary Steps to ensure that no payment of
principal, interest or other sums made to the Bank under this
Agreement or the Security Documents is made in breach of the
provisions of any applicable law including, in particular
Sections 151-158 (inclusive) of the Companies Act 1985;
(m) pay and discharge all Taxes and governmental charges prior to
the date on which the same become overdue unless, and only to
the extent that, such Taxes and charges shall be contested in
good faith by appropriate proceedings, pending determination
of which payment may lawfully be withheld, and there shall be
set aside adequate reserves with respect to any such Taxes or
charges so contested in accordance with GAAP;
(n) procure that all Indebtedness (other than Indebtedness arising
in the ordinary course of trading) of any Group Company to
Arrow or any Subsidiary of Arrow other than a Group Company is
subordinated to the Indebtedness owing to the Bank hereunder
in terms satisfactory to the Bank;
(o) within 90 days after the date hereof the Company and all other
Group Companies or its Subsidiaries shall (where appropriate)
have opened all necessary accounts with the Bank and maintain
all of the Group's UK transmission banking business with the
Bank; and
(p) procure that (i) the Group Dormant Companies shall not all
together own, beneficially or legally, any property or assets
whose aggregate value exceeds L.5,000 in total, and that (ii)
no Group Dormant Company shall carry on any business or
trading or other activity unless (x) in the case of (i) such
Group Dormant Companies as shall be necessary to ensure the
remaining Group Dormant Companies comply with (i) and, in the
case of (ii) that Group Dormant Company, have first executed
and delivered to the Bank a Guarantee and Debenture
substantially in the form of the Guarantee and the Debenture,
and (y) the condition in Clause 13.3(l) in relation to the
Company has been satisfied in relation to that Group Dormant
Company mutatis mutandis.
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13.4 During the Security Period the Company shall not, and shall procure
that no Group Company will, without the prior written consent of the
Bank (such consent not to be unreasonably withheld or delayed):--
(a) make any change in its business as presently conducted, which
would result in a substantial change in the business carried
on by the Group as a whole, or carry on any other business
which is substantial in relation to the business of the Group
as presently conducted;
(b) sell, transfer, lease or otherwise dispose of all or part of
its assets, other than:--
(i) sales of stock made in the ordinary course of trading
on normal credit terms taking into account the type
of business involved and the Company's usual
practice;
(ii) disposals by one Group Company to another Group
Company provided that the Group Company receiving the
asset:--
(a) is a wholly owned Subsidiary of the Company
incorporated in England;
(b) has net assets both before and after
receiving the asset; and
(c) is a Charging Group Company;
(iii) disposals of assets for market value on an arms-
length basis for consideration payable on normal
commercial terms where the consideration does not
exceed L.200,000 for each individual asset;
(c) sell or otherwise dispose of any asset on terms whereby such
asset is or may be leased to or re-acquired on credit terms by
itself or any other Group Company;
(d) acquire any asset which costs more than L.10,000 otherwise
than in the ordinary course and for the purposes of its
business (other than the acquisition of Techdis under the
Techdis Acquisition Agreement);
(e) enter or contract to enter into any hire purchase, conditional
sale or leasing agreement in respect of any asset, where the
consideration payable (or where the market value of the asset)
exceeds L.50,000;
(f) incur or permit to subsist any Indebtedness which when
aggregated with the Indebtedness of other members of the Group
from time to time will exceed L.750,000 other than:--
(i) pursuant to this Agreement;
(ii) as subordinated under a subordination agreement
entered into pursuant to Clause 13.3(n); and
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<PG$PCN>
(iii) Indebtedness owed by one Group Company to another
Group Company provided that both Group Companies are
wholly owned subsidiaries (direct or indirect) of the
Company, and have guaranteed the obligations of the
Company to the Bank under this Agreement supported by
mortgage debentures or such other security as the
Bank may require;
(g) create or permit to subsist any Encumbrance, other than
Permitted Encumbrances;
(h) pay any fees or commissions to any person other than on arms-
length terms, and for the purposes of carrying on its
business;
(i) make any loans or give any credit (other than normal trade
credit) to any person, or give any guarantee or indemnity in
respect of the obligations of any person other than:-
(i) pursuant to this Agreement;
(ii) the making of loans or giving of credit to any
Charging Group Company;
(iii) loans to employees of any Charging Group Company;
(j) incorporate or acquire any Subsidiary which is not a
subsidiary immediately after Completion (other than Techdis
and MMD);
(k) agree to any variation or amendment of:-
(i) the Acquisition Documents and the Techdis Acquisition
Agreement (other than of an administrative nature);
(ii) the Memorandum and Articles of Association of the
Company or any other Group Company;
(l) declare or pay any dividend or other distribution in respect
of the share capital of any class in the Company or any other
Group Company unless payable to another Group Company in the
UK;
(m) redeem or purchase any shares in the capital of the Company or
any other Group Company, or reduce the share capital of the
Company or any other Group Company;
(n) merge or consolidate with any other person;
(o) cease to be resident in the United Kingdom or transfer in
whole or in part the business or trade of the Company and each
Group Company to a person who is not resident in the United
Kingdom; and
(p) use or purport to use or apply any asset of any Group Company
for any purpose which shall cause any Group Company to be in
breach of s.151 of the Companies Act 1985.
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<PG$PCN>
14. FEES
14.1 The company shall pay to the Bank a monitoring fee payable in advance
and in respect of the twelve month period following such payment in
the amounts set out below on each anniversary hereof falling in the
years set out below.
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1993 L.10,000
1994 L.20,000
1995 L.20,000
1996 L.20,000
1997 L.20,000
1998 L.20,000
</TABLE>
14.2 The Company shall pay to the Bank a fee of three quarters of one per
cent (0.75%) per annum on (i) the difference between the Working
Capital Facility Limit and the Working Capital Facility Liabilities;
and (ii) the difference between the New Acquisition Facility Limit and
the New Acquisition Loan. Such fee shall be payable quarterly in
arrears and on the Final Repayment Date, the first such payment to be
made three months from the date hereof.
14.3 All fees are exclusive of any VAT thereon which, if chargeable, shall
be paid by the Company.
15. DEFAULT
15.1 Without prejudice to the Bank's rights under Clause 7 (Repayment) if:-
(a) any amount due and payable under this Agreement is not paid on
the due date save that if the relevant payment is not received
on the due date resulting either (i) from a technical failure
in the CHAPS or other banking transmission system used for the
payment of sums hereunder, or (ii) the inadvertent failure by
the Company to make such relevant payment on the due date
therefor, then there shall not be a Default hereunder until 3
Business Days including the original date for payment have
elapsed PROVIDED THAT the Bank shall, in the case of the
circumstances set out in Clause 15.1(a)(ii), be satisfied that
such failure was inadvertent; or
(b) the Company or any Charging Group Company is in breach of or
fails to comply in full with any provision of, or undertakings
on its part contained in, any of this Agreement and the
Security Documents, other than an obligation of the type
referred to in Clause 15.1(a) which, in any case, in the
Bank's opinion has or will have a material adverse effect on
the ability of the Company or any Charging Group Company to
perform its obligations hereunder or under the Security
Documents and, if capable of remedy, is not remedied within 10
Business Days of such breach or failure; or
- 37 -
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(c) any representation, warranty or statement made to the Bank in
this Agreement, the Security Documents or any certificate or
document delivered by the Company or any Charging Group
Company pursuant hereto or thereto is or proves to be
incorrect, in the case of statements of fact, or not fair and
reasonable, in the case of views, opinions, projections or
forecasts, in each case when made or deemed to be repeated, in
a manner which in the Bank's reasonable opinion has or will
have a material adverse effect on the ability of the Company
or any Charging Group Company to perform its obligations
hereunder or under the Security Documents; or
(d) any Indebtedness of any Group Company (other than as
subordinated under a subordination agreement entered into
pursuant to Clause 13.3(n)) is not paid within 5 Business Days
after the due date or upon the expiry of any applicable grace
period or is declared to be or otherwise becomes due and
payable prior to its specified maturity date or any creditor or
creditors of any Group Company becomes entitled to declare any
Indebtedness of any Group Company due and payable prior to its
specified maturity date or any such Indebtedness to a creditor
or creditors of any Group Company becomes capable of being
declared due and payable prior to its stated maturity as a
result of a default which is analogous to those set out in
this Clause 15; or
(e) a creditor attaches or takes possession of, or a distress,
execution, sequestration or other process is levied or
enforced upon or sued out against, the whole or any part of
the undertakings, assets, rights or revenues of any Group
Company and is not discharged within 10 Business Days; or
(f) the whole or any material part (for the purposes of this
Clause 15.1(f) "material" shall mean a value of the assets of
the Group in aggregate of L.100,000 calculated by reference to
the latest Accounts delivered to the Bank as varied, if
relevant, by the management accounts delivered to the Bank
pursuant to Clause 13.1(c)) of the security granted under the
Security Documents fails or ceases to have full force and
effect or to be continuing or is terminated (or purported to
be terminated) or disputed or becomes the subject of a bona
fide dispute, in jeopardy, invalid or unenforceable; or
(g) any Group Company suspends payment to its debts or is unable
or admits inability to pay its debts as they fall due or
commences negotiations with one or more of its creditors with
a view to the general readjustment or rescheduling of all or
part of its Indebtedness or proposes, or enters into any
composition or other arrangement for the benefit of its
creditors generally or any class of creditors or proceedings
are commenced in relation to any member of the Group under any
law, regulation or procedure relating to reconstruction or
readjustments of debts; or
(h) any Group Company takes any action, or any legal proceedings
which are not of a vexatious or frivolous nature are started
or other steps which are not of a vexatious or frivolous
- 38 -
<PG$PCN>
nature are taken for (i) such company to be adjudicated or
found bankrupt or insolvent (ii) the winding-up or dissolution
of such company or (iii) the appointment of a liquidator or
trustee or of a receiver, administrative receiver, or similar
officer of such company or the whole or any part of its
undertakings, assets, rights or revenues in respect of which
the relevant Group Company has not commenced legal proceedings
to discharge the same within 5 Business Days of becoming aware
of such proceedings or steps other than pursuant to a solvent
member's voluntary liquidation or a solvent scheme of
arrangement or reconstruction, the terms of which have in each
case been previously approved by the Bank (such consent not to
be unreasonably withheld or delayed); or
(i) an application is made to the Court for an administration
order under the Insolvency Act 1986 in relation to any Group
Company; or
(j) any event or proceeding is taken with respect to any Group
Company in any jurisdiction to which it is subject which has
an effect substantially similar to any of the events mentioned
in Clauses 15.1 (g), (h) or (i); or
(k) any Group Company suspends or ceases or threatens to suspend
or cease to carry on its business other than as a result of
the transfer by one Group Company to another Group Company
(the recipient fulfilling the conditions set out in Clause
13.4(b)(ii)(a) through (c) inclusive of the whole or a
substantial part of its business; or
(l) any encumbrancer takes possession of or a receiver is
appointed of all or any part of the property and assets of any
Charging Group Company provided always that the amount of all
claims by all such encumbrances only, shall not exceed in
aggregate L.100,000 (calculated by reference to the latest
Accounts delivered to the Bank as varied, if relevant, by the
management accounts delivered to the Bank pursuant to Clause
13.1(c) of the Charging Group taken as a whole; or
(m) any license, authorisation, consent or approval at any time
necessary to enable any Group Company to conduct its business
shall be avoided, withheld or materially modified or shall
fail to remain in full force and effect, or the terms upon
which the same have been granted are not for the time being
complied with and the result or effect of any such event or
occurrence is such as materially to prejudice, in the Bank's
reasonable opinion, its interests under the Facility
Documents; or
(n) at any time there occurs a change in the financial condition
or prospects of the Group taken as a whole, which event, in
the Bank's reasonable opinion, has or could be expected to
have a material adverse effect on the ability of the Company
to perform its obligations hereunder; or
(o) (i) any of Arrow, EDI, or any subsidiary or Arrow or EDI
accounting for at least 10% of Arrow's tangible net
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worth calculated in accordance with generally
accepted accounting principles used in the U.S.A.,
shall voluntarily commence any proceeding or file any
petition seeking relief under Title 11 of the United
States Code or any other Federal or state bankruptcy,
insolvency, liquidation or similar law; or
(ii) any of Arrow, EDI and any subsidiary of Arrow or EDI
other than a Group Company shall (i) consent to the
institution of, or fail to contravene in a timely and
appropriate manner, any such proceeding or the filing
of any such petition as mentioned in sub-paragraph
(i) above, (ii) apply for or consent to the
appointment of a receiver, trustee, custodian,
sequestrator or similar official for itself or for a
substantial part of its property or assets, (iii)
file an answer admitting the material allegations of
a petition filed against it in any such proceedings,
(iv) make a general assignment for the benefit of
creditors, (v) become unable, admit in writing its
inability or fail generally to pay its debts as they
become due, or (vi) take corporate or other action
for the purpose of effecting any of the foregoing; or
(iii) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed in a court of
competent jurisdiction seeking (i) relief in respect
of any of Arrow, EDI and any subsidiary of Arrow or
EDI other than a Group Company, or a substantial part
of the property or assets of any of Arrow, EDI and
any subsidiary of Arrow or EDI under Title 11 of the
United States Code or any other Federal or state
bankruptcy, insolvency, receivership or similar law,
(ii) the appointment of a receiver, trustee,
custodian, sequestrator or similar official for any
of Arrow, EDI and any subsidiary of Arrow or EDI
other than a Group Company or for a substantial part
of the property of any of Arrow or EDI; and the
relevant company has not commenced legal proceedings
in order to dismiss or unstay such proceeding or
petition within 10 days of becoming aware of the same
or there shall be entered an order or decree
approving or ordering any of the foregoing; or
(iv) any event occurs or proceeding is taken with respect
to any of Arrow, EDI and any subsidiary of Arrow or
EDI other than a Group Company in any jurisdiction to
which such company is subject which has an effect
equivalent or similar to any of the events mentioned
in paragraphs (i) to (iii) above; or
(p) all or any part of the property or undertakings of any Group
Company is compulsorily acquired by or by the order of any
local or other governmental authority and as a result the
business of the Group taken as a whole is materially adversely
affected; or
(q) whilst it remains the immediate holding company of the
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<PG$PCN>
Company, EDI ceases to be a wholly-owned subsidiary of Arrow,
or the Company ceases to be a Subsidiary of EDI, in each case
other than by way of transfer of the whole or any part of the
share capital of EDI or the Company to another Subsidiary of
Arrow provided always that security shall be granted to the
Bank in substantially the same form as the Bank's security at
the date hereof and a subordination agreement as the Bank
considers necessary shall be entered into by the Company and
that Subsidiary other than pursuant to a solvent members'
voluntary liquidation or a solvent scheme of arrangement or
reconstruction, in any such case carried out with the prior
written consent of the Bank (such consent not to be
unreasonably withheld or delayed), where the resulting entity
forthwith gives a guarantee and debenture or such other
security as the Bank shall require to the Bank in such form as
the Bank shall require; or
(r) the common stock of Arrow ceases permanently to be dealt in or
is suspended for a period exceeding 5 Business Days on a
recognised stock exchange; or any person or persons acting
together acquire common stock in Arrow which, when aggregated
with common stock already owned by any of them, entitles such
person or persons to exercise or control the exercise of 50%
or more of the votes exercisable at shareholders' meetings of
Arrow; or
(s) any event occurs or proceeding is taken with respect to any
holding company of the Company other than Arrow or any
Subsidiary of Arrow to which Clause 15.1(o) applies in any
jurisdiction which such holding company is subject which has
an effect equivalent or similar to any of the events mentioned
in Clause 15.1(g), (h) or (i); or
(t) the facts or circumstances revealed by any disclosure under
Clause 12.3 are such that in the opinion of the Bank (acting
reasonably), they would or would be likely to prejudice
materially the ability of the Company to meet its obligations
under this Agreement or any of the Security Documents PROVIDED
THAT for the avoidance of doubt, such opinion may be formed by
the Bank at any time after the disclosure under Clause 12.3
has been made, whether before or at the time of or after any
repetition or repetitions under Clause 12 of the relevant
representation and warranty; or
(v) any Arrow Inc Indebtedness in excess of, in aggregate US
$5,000,000:
(i) is declared to be or otherwise becomes due and
payable prior to its specified maturity and is not
discharged within 10 Business Days; or
(ii) is not paid when due or within any applicable grace
period;
or any creditor or creditors of Arrow or any of its
subsidiaries (incorporated in the USA) exercise any right they
may have to preclude Arrow or any of its subsidiaries
(incorporated in the USA) from extending credit or making
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advances to the Company;
then such event shall constitute a Default and at any time
when any Default remains unremedied (save in the case of a
Default by any Group Company, except for the Company, when a
Default shall only occur if such Default shall, in the opinion
of the Bank, be such that such Group Company or the Company is
unable to meet its obligations under this Agreement or the
Security Documents) the Bank may, by notice to the Company,
cancel the Facilities and require the Company immediately to
repay the Loan together with accrued interest thereon and
immediately to pay all other sums payable under the Facility
Documents, whereupon the same shall become immediately due and
payable.
15.2 If a Default has occurred then the Bank shall be entitled, but not
obliged, to appoint any firm of chartered accountants, to undertake
such investigations in the Company as it requires. Clause 20.2 shall,
mutatis mutandis, apply to the costs incurred as a result of the
implementation of the provisions of this Clause 15.2.
16. SET-OFF
The Company authorizes the Bank to apply any credit balance on any
account of the Company with the Bank in satisfaction of any sum due
and payable by the Company to the Bank and for this purpose the Bank
is authorized to purchase with the money standing to the credit of any
such account such other currencies as may be necessary to effect such
application.
17. SEVERABILITY, WAIVERS, REMEDIES CUMULATIVE
17.1 If at any time any provision hereof is or becomes illegal, invalid or
unenforceable in any respect under the law of any jurisdiction neither
the legality, validity or enforceability of the remaining provisions
hereof nor the legality, validity or enforceability of such provision
under the law of any other jurisdiction shall in any way be affected
or impaired thereby.
17.2 No failure to exercise, nor any delay in exercising, any right or
remedy hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any right or remedy prevent any further
or other exercise thereof or the exercise of any other right or
remedy. The rights and remedies herein provided are cumulative and not
exclusive of any rights or remedies provided by law.
18. NOTICES
18.1 Each communication to be made hereunder shall be made in writing and
may be made by letter or facsimile, and each communication by the Bank
hereunder shall be copied to Arrow at the address set out in Clause
18.3(C) PROVIDED THAT inadvertent failure to send such copy
communication or for Arrow to receive the same shall not invalidate
the service of any communication hereunder AND PROVIDED FURTHER THAT
each communication to the Bank shall be delivered to all addresses
(A1), (A2) and (A3) save for communications pursuant to Clause 13.1
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which shall be sent only to the Bank addressee at the address set out
in (A2).
18.2 Any communication or document to be made or delivered by one person
to another pursuant to this Agreement shall (unless the one has by 15
days' written notice to the other specified another address) be made
or delivered to that other person at the address given in Clause 18.3.
18.3 The addresses referred to in Clause 18.2 above are:-
(A1) for notices to the Bank:-
National Westminster Bank Plc
Corporate Banking Group
National Westminster House
Trinity Gardens
9-11 Bromham Road
Bedford MK40 2UQ
Attention: George Derbyshire
Facsimile: 0234 272503
(A2) National Westminster Bank Plc
Acquisition Finance
135 Bishopsgate
London EC2M 3UR
Attention: P.A.S.C. Harmer
Facsimile: 071 375 5464
(A3) National Westminster Bank Plc
Group Treasury Settlement
Level 6
King's Cross House
200 Pentonville Road
London N1 9HL
Attention: Manager, Commercial Loans
Facsimile: 071 239 8257
(B1) for notices to the Company:-
Arrow Electronics (UK) Limited
St. Martins Business Centre
Cambridge Road
Bedford MK42 OLF
Attention: Managing Director
Facsimile: 0234 211434
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<PG$PCN>
(B2) Arrow Electronics (UK) Limited
Unit 11
Vestry Road Industrial Estate
Sevenoaks
Kent TN14 5EU
Attention: Alistair Oag
Facsimile: 0732 740394
(C) for copies to Arrow:-
Arrow Electronics, Inc.
25 Hub Drive
Melville
New York
USA
Attention: R.E. Klatell
Facsimile: 0101 516 391 1683
18.4 Any notice to the Company shall be deemed to have been given:-
(a) if sent by facsimile transmission, on the Business Day on
which transmitted or if it is transmitted on a day which is
not a Business Day or after 5.30 p.m. on any Business Day, on
the next following Business Day;
(b) in the case of a written notice lodged by hand at the time of
actual delivery or if it is delivered on a day which is not a
Business Day or after 5.30 p.m. on any Business Day, on the
next following Business Day;
(c) if posted, on the second Business Day following the day on
which it was properly despatched by first class mail postage
prepaid.
18.5 Any notice to the Bank shall be deemed to have been given only on
actual receipt by each of the addressees referred to in (A1), (A2) and
(A3) above.
19. ASSIGNMENTS
19.1 This agreement shall be binding upon and enure to the benefit of the
parties hereto and their respective successors and assigns.
19.2 The Company may not assign or transfer all or any of its rights,
benefits and obligations hereunder without the prior written consent
of the Bank.
19.3 The Bank may assign or transfer any of its rights and obligations
under this Agreement to any Qualifying Bank and the Company shall
enter into such documents as the Bank shall require to effect or
perfect any such transfer or novate any of the Bank's obligations to
the transferee.
19.4 The Bank may, after it has informed the Company, disclose to a
proposed assignee, transferee or other person proposing to enter into
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<PG$PCN>
a contract with the Bank regarding this Agreement such information in
the possession of the Bank relating to the Company, including, without
limitation, this Agreement, the Security Documents and any of the
Financial Information, as it sees fit provided that it shall require
any proposed assignee or transferee to enter into a confidentiality
undertaking acceptable to the Bank and the Company (acting
reasonably).
20. COSTS AND EXPENSES
20.1 The Company undertakes on demand, to reimburse the Bank all out-of-
pocket costs and expenses (including legal, audit and valuation fees)
reasonably incurred by it in the review, negotiation,.preparation and
execution of the Facility Documents, the Acquisition Agreement, the
Techdis Acquisition Agreement and any other documents incidental
hereto or thereto.
20.2 The Company shall from time to time on demand reimburse the Bank for
all costs and expenses (including legal fees) incurred in or in
connection with the preservation and/or enforcement of any of the
rights of the Bank under the Facility Documents or in connection with
any proposed amendment to any of the Facility Documents or any request
for a consent or waiver hereunder or thereunder.
20.3 All stamp, documentary, registration or other like duties or Taxes,
including any penalties, additions, fines, surcharges or interest
relating thereto, which are imposed or chargeable on or in connection
with any of the Facility Documents shall be paid by the Company.
20.4 (a) Subject to Clause (b) below, any VAT payable in respect of any
supply for VAT purposes made pursuant to or in connection with
any of the Facility Documents or any transaction or document
contemplated herein or therein made by the Bank shall be paid
on demand to the Bank by the Company and the Bank shall issue
or procure the issue of a VAT invoice in respect of each such
payment.
(b) All payments made by the Company under this Agreement and the
Security Documents are calculated without regard to VAT. If
any such payment constitutes the whole or any part of the
consideration for a taxable or deemed taxable supply (whether
that supply is taxable pursuant to the exercise of an option
or otherwise) by the Bank, the amount of that payment shall be
increased by an amount equal to the amount of VAT which is
chargeable in respect of the taxable supply in question.
(c) No payment or other consideration to be made or furnished by
the Bank to the Company pursuant to or in connection with this
Agreement or the Security Documents or any transaction or
document contemplated herein or therein may be increased or
added to by reference to (or as a result of any increase in
the rate of) VAT which shall be or may become chargeable in
respect of the taxable supply in question.
20.5 If the Bank makes a payment or suffers a loss in respect of which it
is entitled to be indemnified or reimbursed by the Company pursuant to
any provision of any of the Facility Documents and the Bank is
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<PG$PCN>
advised by the Bank's auditors that:-
(i) the loss or payment is not or is unlikely to be deductible or
wholly deductible in computing the profits of the Bank for the
purposes of Tax whilst the payment to be made by way of
indemnity or reimbursement (for the purpose of this Clause
20.5, the "Payment") by the Company will or is likely to be
taxable or partly taxable in the Bank's hands; or
(ii) the Payment is or is likely to be taxable or partly taxable in
the Bank's hands in any accounting period of the Bank earlier
than the accounting period in which the loss or payment is or
is likely to be deductible;
then:-
the Payment shall be increased to an amount ("the grossed-up Payment")
which is certified by the Bank's auditors as being equal, after taking
into account any Tax liability likely to be suffered or incurred by
the Bank in respect of the grossed-up Payment, to the amount that
would have been received by the Bank if the Payment by the Company had
not been taxable PROVIDED THAT if it is subsequently certified by the
Bank's auditors that any payment by the Company to the Bank under this
Clause 20.5 by way of grossed-up Payment was calculated on an
incorrect basis, such adjustment shall be made as between the Bank and
the Company as the Bank's auditors may certify to be necessary to
restore the after-tax position of the Bank to that which it would have
been if no such adjustment had been necessary.
21. CURRENCY INDEMNITY
Any payment or payments made to or for the account of or received by
the Bank in respect of any monies or liabilities due, arising or
incurred by the Company to the Bank in a currency (the "Currency of
Payment") other than the currency in which the payment should have
been made pursuant to this Agreement (the "Currency of Obligation") in
whatever circumstances (including, without limitation, as a result of
a judgment against the Company) and for whatever reason shall only
constitute a discharge to the Company to the extent of the Currency of
Obligation amount which the Bank is able on the date or dates of
receipt of such payment or payments (or if not a Business Day on the
next succeeding Business Day) to purchase with the Currency of Payment
amount in the London foreign exchange market. If the amount of the
Currency of Obligation which the Bank is so able to purchase falls
short of the amount originally due to the Bank under this Agreement,
then the Company shall indemnify and hold the Bank harmless against
any loss or damage arising as a result thereof by paying to the Bank
that amount in the Currency of Obligation certified by the Bank as
necessary so to indemnify it (and, for the avoidance of doubt, the
provisions of this Clause 21 shall apply to any monies payable
pursuant to this Clause 21). It is hereby declared that this indemnity
shall constitute a separate and independent obligation from the other
obligations contained in this Agreement, shall give rise to a separate
and independent cause of action, shall apply irrespective of any
indulgence granted from time to time and shall continue in full force
and effect notwithstanding any judgment or order for a liquidated sum
or sums in respect of
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amounts due under this Agreement or under any such judgment or order.
The certificate of the Bank as to the amount of any such loss or
damage shall, in the absence of manifest error, be conclusive and
binding on the Company.
22. PUBLICITY
22.1 The Company agrees that it will not issue any press release or other
publicity material relating to the transactions contemplated by this
Agreement and the Techdis Acquisition Agreement which refers to the
Bank without obtaining the Bank's consent to the manner and context in
which the reference is made.
22.2 If so requested by the Bank the Company agrees that any such press
release or publicity material will refer to the fact that the Bank has
provided the Facility for the purposes of the transaction contemplated
by the Techdis Acquisition Agreement.
22.3 The costs of any publicity material in relation to this Clause shall,
mutatis mutandis, be subject to the provisions of Clause 22.
22.4 The Bank may not issue any press release or other publicity material
relating to the transaction contemplated by this Agreement and the
Techdis Acquisition Agreement which refers to the Company without
obtaining the Company's consent to the manner and context in which the
reference is made.
23. LAW
This Agreement shall be governed by and construed in accordance with
English law.
IN WITNESS whereof the parties hereto have caused this Agreement to be duly
executed the day and year first written above.
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Dated 17th August 1993
(1) OCEAN INFORMATION HOLDINGS LIMITED
and
(2) ARROW ELECTRONICS, INC.
SHARE SALE AGREEMENT
relating to the sale and purchase of
the whole of the issued share capital of
COMPONENTS AGENT (B.V.I.) LIMITED
STEPHENSON HARWOOD & LO
1802 Edinburgh Tower, The Landmark
15 Queen's Road Central, Hong Kong
<PAGE>
SHARE SALE AGREEMENT
DATED 17th August 1993
PARTIES
(1) OCEAN INFORMATION HOLDINGS LIMITED a company incorporated in Bermuda
whose registered office is at Clarendon House, Church Street,
Hamilton, HM11, Bermuda (the "Vendor"); and
(2) ARROW ELECTRONICS, INC a company incorporated in the State of New
York, U.S.A. whose principal executive office is at 25 Hub Drive,
Melville, New York, 11747, U.S.A. (the "Purchaser").
PRELIMINARY
(A) Components Agent (B.V.I.) Limited is a private company incorporated in
the British Virgin Islands which has six wholly owned subsidiaries;
four in Hong Kong, one in Singapore and one in Malaysia.
(B) The Vendor has agreed to sell and the Purchaser has agreed to purchase
the Shares on the terms and conditions of this Agreement and in
particular on the basis of the representations warranties agreements
and indemnities hereinafter mentioned.
IT IS AGREED as follows:-
1. INTERPRETATION
1.1 In this Agreement, unless the context otherwise requires, the
following words and expressions have the following meanings:-
Accounts the audited accounts of the
Company and of each of its
Subsidiaries (except
Components Agent Taiwan
Limited) for the last two
accounting periods (save in
respect of Components Agent
China Limited which shall be
for the last accounting
period only) which ended on
the Balance Sheet Date
comprising in each case the
audited balance sheets, the
audited profit and loss
accounts and all notes,
reports and other documents
annexed thereto, and the
audited consolidated accounts
of the Company for the
financial period ending on
the Balance Sheet Date
comprising the audited
consolidated balance sheet
and the audited consolidated
profit and loss account, and
the Management Accounts,
copies of which have been
supplied to the Purchaser
- 1 -
<PAGE>
"business day" means a day on which banks
are open for business in
Hong Kong
Balance Sheet Date 31st March 1993
Company Components Agent (B.V.I.)
Limited, a company
incorporated in the British
Virgin Islands, whose
registered office is at
Craigmuir Chambers, P 0 Box
71, Road Town Tortola,
British Virgin Islands
particulars of which are set
out in Part I of the First
Schedule
Completion completion of the sale and
purchase of the Shares in
accordance with Clause 5
Completion Date the date of this Agreement
Deed of Indemnity the deed in the form set out
in the Fifth Schedule
Disclosure Letter the letter of even date
herewith from the Vendor to
the Purchaser (including the
documents referred to in the
annexures to such letter)
disclosing certain exceptions
to the Warranties
Earnest Money the sum of HK$7,727,000
being equivalent (using the
rate of exchange prevailing
on 16th June 1993) to the sum
of US$1,000,000 paid by the
Purchaser to the Vendor
Group the Company and the
Subsidiaries
HK$ Hong Kong dollars
Intellectual Property patents, trade marks,
service marks, registered
designs applications for any
of the foregoing, design
rights, copyright or
inventions and the benefit of
any and all licences in
connection with any of the
foregoing
Listing Rules the rules governing the
listing of securities on The
Stock Exchange of Hong Kong
Limited
Management Accounts the unaudited balance sheets
of the Company and each of
the Subsidiaries (except
Components Agent Korea
Limited and Components Agent
Taiwan Limited) as at the
Management Accounts Date and
the unaudited profit and loss
accounts of the Company and
each of the Subsidiaries as
at the Management Accounts
Date
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<PAGE>
Management Accounts Date 30th June 1993, except in
the case of Components Agent
Korea Limited which shall be
31st March 1993
Option Agreement two agreements of even date
made between, firstly, (1)
the Company and (2) TMC Fund
Company Limited and,
secondly, (1) the Company and
(2) Tam Hing Sang relating to
deferred shares in Components
Agent Limited in the agreed
terms
Mr. Tam Tam Hing Sang
Mr. Tsang Tsang Man Chung
Purchaser's Solicitors Stephenson Harwood & Lo of
18th Floor, Edinburgh Tower,
The Landmark, 15 Queen's Road
Central, Hong Kong
Purchaser's Charge over Shares a charge of even date made
between (1) the Purchaser and
(2) the Vendor in the agreed
terms
Purchaser's Deed of Indemnity an indemnity of even date
made between (1) the
Purchaser, (2) the Vendor and
(3) Ocean Office Automation
Limited in the agreed terms
Premises the property owned by the
Companies details of which
are set out in the Fourth
Schedule
Shares the 8,200 shares of US$1.00
each in the capital of the
Company comprising the whole
of its issued share capital
Subsidiaries the wholly owned
subsidiaries of the Company
particulars of which are set
out in Part II of the First
Schedule
subsidiary the meaning prescribed by
Section 2 of the Companies
Ordinance (Chapter 32)
Taxation the meaning given in the
Fifth Schedule
Territory Hong Kong, the People's
Republic of China, Singapore,
Malaysia, the Republic of
China (Taiwan) and the
Republic of South Korea
Vendor's Solicitors Woo, Kwan, Lee & Lo of Room
2718, Jardine House,
1 Connaught Place, Central,
Hong Kong
Warranties the warranties
representations and
- 3 -
<PAGE>
undertakings set out in Clause 4.1 and the Second Schedule
1.2 References in this Agreement to statutory provisions shall where the
context so admits be construed as references to those provisions as
respectively amended consolidated extended or re-enacted from time to
time and shall where the context so admits be construed as including
references to the corresponding provisions of any earlier legislation
directly or indirectly amended consolidated extended or replaced
thereby or re-enacted and shall include any orders regulations
instruments or other subordinate legislation made under the relevant
statute. Except as may be otherwise expressly provided herein, all
accounting and other terms and expressions used in financial reporting
not specifically defined in this Agreement shall be construed in
accordance with generally accepted Hong Kong accounting principles and
practices.
1.3 For the purposes of this Agreement:-
1.3.1 "agreed terms" means in relation to any document such document
in the terms agreed between the parties and for the purposes
of identification signed on their behalf by the Purchaser's
Solicitors and the Vendors' Solicitors;
1.3.2 any reference to a Clause sub-clause or Schedule (other than a
Schedule to a statutory provision) is a reference to a Clause
or sub-clause of or a Schedule to this Agreement and the
Schedules form part of and are deemed to be incorporated into
this Agreement and references to "this Agreement" are to be
construed accordingly;
1.3.3 "disclosed" means fully and fairly disclosed elsewhere in this
Agreement (including the Schedules) and/or in the Disclosure
Letter; and
1.3.4 where any statement is qualified by the expression "so far as
the Vendor is aware" or when reference is made to the Vendor's
knowledge that statement shall be deemed to include an
additional statement that it has been made after due and
careful enquiry by the Vendor amongst the directors, officers,
and employees of the Vendor and its subsidiaries (including
the Group).
1.4 The headings used in this Agreement are inserted for convenience only
and shall be ignored in construing this Agreement.
1.5 In this Agreement words connoting the singular number shall be deemed
to include the plural number and vice versa, words connoting any
gender shall be deemed to include all genders and words connoting
natural persons shall be deemed to include bodies corporate or
unincorporate.
2. SALE OF SHARES
2.1 Subject to the terms and conditions hereof and for the consideration
referred to in Clause 3, on and with effect from the Completion Date,
the Vendor shall sell as beneficial owner and the Purchaser shall
purchase the Shares free from any charges liens encumbrances equities
- 4 -
<PAGE>
and claims whatsoever, and together with all rights attaching or
accruing thereto and all dividends and distributions declared made or
paid on or after the Completion Date.
2.2 The Vendor hereby warrants that no dividends bonuses or distributions
have been paid, declared or made in respect of any shares or stock of
the Company or any of the Subsidiaries since the Balance Sheet Date.
3. CONSIDERATION
3.1 The aggregate consideration for the sale and purchase of the Shares
shall be the sum of HK$170,000,000 of which the sum of HK$162,273,000
(being the aggregate purchase price for the Shares less the Earnest
Money) shall be paid on Completion by a banker's draft in favour of
the Vendor and the Earnest Money (excluding interest thereon) shall be
released to the Vendor.
3.2 Upon Completion, all interest accrued on the Earnest Money shall be
paid within two business days by the Vendor to the Purchaser's
Solicitors in the lawful currency of the United States of America.
3.3 The Vendor's Solicitors are hereby irrevocably authorised and
instructed to hold the Earnest Money and all interest accrued thereon
on the terms and conditions stated in this Agreement and to deal with
the same as and when provided for in this Agreement.
4. WARRANTIES
4.1 Save as disclosed and subject to Clause 4.2 below, the Vendor hereby
represents warrants and undertakes to the Purchaser as at the date
hereof (to the intent that the provisions of this Clause shall
continue to have full force and effect notwithstanding Completion) in
the terms set out in the Second Schedule and acknowledges that the
Purchaser in entering into this Agreement is relying on such
representations and warranties and undertakings and on the indemnities
to be given in the Deed of Indemnity.
4.2 The Warranties are given subject only to :-
(a) the matters disclosed;
the limitation on the Vendor's liability set out in the Third
Schedule; and
(c) any act or omission to act after execution of this Agreement
carried out at the written request of or with the prior
approval in writing of the Purchaser.
4.3 Other than as disclosed no other information relating to the Company
or the Subsidiaries of which the Purchaser has knowledge (actual or
constructive), including in connection with any due diligence
investigation by the Purchaser, shall prejudice any claim made by the
Purchaser under the Warranties.
4.4 Each of the Warranties set out in each sub-paragraph of the Second
Schedule shall be separate and independent and save as expressly
- 5 -
<PAGE>
provided shall not be limited by reference to any other sub-paragraph
or anything in this Agreement.
4.5 Where as a result of any breach of any of the Warranties the net
assets of the Company are diminished or are less than they would have
been had there been no such breach, or any payment is made or required
to be made by the Purchaser, the Purchaser shall be entitled to elect
that the amount of such diminution or shortfall or payment, together
with any reasonable costs and expenses incurred in connection
therewith, shall be taken to be the loss suffered by the Purchaser by
reason of such breach. If in respect of or in connection with any
breach of any of the Warranties any sum payable to the Purchaser by
the Vendor pursuant to this Agreement by way of compensation is
subject to Taxation in Hong Kong, then such further amount shall be
paid to the Purchaser by the Vendor so as to secure that the net
amount received by the Purchaser is equal to the amount of the
compensation due to it as aforesaid.
4.6 The amount of any successful claim against the Vendor under the
Warranties or the Deed of Indemnity shall be deemed to constitute a
reduction in the purchase consideration payable for the Shares.
4.7 The Purchaser has full power to enter into and perform this Agreement
and the Deed of Indemnity respectively and this Agreement constitutes
and the Deed of Indemnity will, when executed, constitute legally
valid and binding obligations on the Purchaser enforceable against it
in accordance with its terms, and the Purchaser has obtained all
necessary consents, approvals and has made or will make any necessary
filings with any regulatory authorities in connection with the sale of
the Shares.
5. COMPLETION
5.1 Completion shall take place at the offices of the Vendor's Solicitors
on the Completion Date immediately upon the signing of this Agreement
or at such other place and time as shall be mutually agreed when the
events set out in Clauses 5.2 and 5.3 shall take place.
5.2 The Vendor shall:-
5.2.1 cause to be delivered to the Purchaser duly executed
instrument(s) of transfer of the Shares in favour of the
Purchaser (or as it in writing directs) accompanied by the
relative share certificate(s) for all of the Shares and
together with certified copy board resolutions of the Vendor
approving the execution and performance of this Agreement and
such transfers;
5.2.2 deliver to the Purchaser the Deed of Indemnity executed by the
Vendor, the Company and the Subsidiaries (other than in
Singapore and Malaysia) together with certified copy board
resolutions of their respective boards of directors approving
such executions and the performance of the Deed of Indemnity;
5.2.3 deliver to the Purchaser written resignations of Mr. Tsang
- 6 -
<PAGE>
Man Chung and Mr. Andrew Leung as directors of the Company and
each relevant Subsidiary with an acknowledgment under seal
signed by each of them that he has no claim against the
relevant company for compensation for loss of office or
otherwise howsoever (except only for any accrued remuneration
and expenses remaining to be reimbursed, details of which are
set out in the Disclosure Letter);
5.2.4 procure the passing of Board resolutions of the Company and
the Subsidiaries incorporated in Hong Kong revoking the
authority of Mr. Tsang in respect of the operation of all bank
accounts and shall hand to the Purchaser certified copies of
such resolutions;
5.2.5 cause to be delivered to the Purchaser the Certificate of
Incorporation the seal and the statutory books of each member
of the Group;
5.2.6 deliver to the Purchaser a certified copy of a letter
addressed to the Vendor whereby Mr. Tsang, who holds in excess
of 50% of the voting rights exercisable at general meetings of
the Vendor, irrevocably approves the transaction contemplated
by this Agreement; and
5.2.7 deliver to the Purchaser the Option Agreements, executed by
Mr. Tam and Ocean (B.V.I.) Limited in relation to the deferred
shares in Components Agent Limited.
5.3 The Purchaser shall : -
5.3.1 deliver to the Vendor the Purchaser's Deed of Indemnity and
the Purchaser's Charge over Shares, together with all
documents referred to therein;
5.3.2 deliver to the Vendor certified copy board resolutions
approving the execution and performance of this Agreement and
the documents referred to in Clause 5.3.1.
5.4 For the avoidance of doubt, in relation to any company within the
Group which is incorporated outside Hong Kong, all documents which are
required to be delivered to the Purchaser by the Vendor shall be
collected by the Purchaser at the relevant company's registered office
located in its place of incorporation.
5.5 At Completion the Earnest Money and interest thereon shall be released
in accordance with Clause 3.1.
6. COMPETITION AND CONFIDENTIALITY
6.1 The Vendor hereby undertakes to the Purchaser:-
6.1.1 not within the Territory during the period of three years
after Completion to carry on or be engaged directly or
indirectly and whether as principal, shareholder, partner,
employee, agent or otherwise (except as a shareholder in a
public listed company holding not more than five per cent.
- 7 -
<PAGE>
of the issued share capital, of any class, of such public
company) in :-
(a) the business of distributing electronic components
(as defined below) relating to computer,
telecommunications, consumer and industrial products;
or
(b) taking on any agency for the sale of electronic
components (as defined below) relating to computer,
telecommunications, consumer and industrial products,
((a) and (b) together being the "Group Business")
For the purpose of this Clause 6.1, "electronic components"
shall consist of the following:-
(i) semiconductors (including, without limitation,
integrated circuits, microprocessors and memory
devices);
(ii) passive devices (including, without limitation,
resistors and capacitors); and
(iii) electromechanical devices (including, without
limitation, connectors, fuses, relays and switches).
Provided that this restriction shall not prevent the Vendor
from:-
(i) carrying on the business of any of the design,
manufacturing, sale, distribution, trading and/or the
taking of any agency for the sale of personal
computer systems and equipment, personal computer
components (including, without limitation,
motherboards, add-on cards, power supplies and
casings), telecommunication equipments and
engineering systems, and computer peripherals
(including, without limitation, monitor, keyboards,
hard disc drive, floppy disc drive, printer and
mouse); and
(ii) selling, trading and distributing products
manufactured by the Vendor or its subsidiaries; and
(iii) selling electronic components originally and bona
fide intended to be acquired for the purpose of
incorporating into products manufactured by the
Vendor or any of its subsidiaries which components
are excess to their manufacturing requirements; and
(iv) carrying on the business of selling, distributing or
taking on any agency for the sale of computer
products (including, without limitation, add-on
cards) manufactured by persons other than the Vendor.
- 8 -
<PAGE>
6.1.2 not during the period of three years after Completion either
on its own account or on behalf of any other person firm or
company directly or indirectly solicit or endeavour to
solicit, in competition with the Group Business, the custom of
any person, firm or company who has been a client of any
member of the Group as at the date hereof for the purpose of
carrying on the Group Business except in connection with
carrying out the matters set out in the proviso numbered (i) -
(iv) in Clause 6.1.1;
6.1.3 not within the period of three years after Completion directly
or indirectly to solicit or endeavour to entice away from any
member of the Group any person who was employed by any member
of the Group at any time during the period of one year
immediately prior to Completion;
6.1.4 not at any time after Completion to carry on or be concerned
engaged or interested as aforesaid in any business under the
name or style of "Components Agent" or "Components Assembly &
Sales" any similar names which might reasonably be expected to
have any connection with the Company; and
6.1.5 not within a period of three years after Completion to employ
any person who is at the Completion Date employed by the Group
and whose job title is "Assistant Manager" or higher.
The above restrictions are considered reasonable by the parties hereto
but in the event that any such restriction shall be found to be
invalid but would be valid if some part thereof were deleted or the
period of application or the area or the extent of the business
affected were reduced such restriction shall apply with such
modification as may be necessary to make it valid and effective.
6.2 The Vendor hereby agrees with the Purchaser that it will not at any
time hereafter use for its own purposes or divulge or cause or enable
any person to become aware of any confidential information of any
nature whatsoever directly or indirectly concerning the business
affairs, finances, suppliers, clients, trade processes or contractual
or other arrangements of the Company or the Subsidiaries which is in
the possession or knowledge of the Vendor, its subsidiaries or any of
its or their directors, officers or employees as at Completion (except
where such disclosure is required by law and/or regulations applicable
to it).
6.3 The Purchaser hereby agrees with the Vendor that it will procure that
no member of the Group will at any time hereafter use for its own
purposes or divulge or cause or enable any person to become aware of
any confidential information of any nature whatsoever directly or
indirectly concerning the business affairs, finances, suppliers,
clients, trade processes or contractual or other arrangements of the
Vendor or any of its subsidiaries (other than any member of the Group)
which is in the possession or knowledge of any member of the Group or
of any director, officer or employee of any member of the Group as at
Completion (except where such disclosure is required by law and/or
- 9 -
<PAGE>
regulations applicable to such member of the Group).
7. WAIVER
No waiver by any party of any breach by the other party of any
provision hereof shall be deemed to be a waiver of any subsequent
breach of that or any other provision hereof and any forbearance or
delay by any party in exercising any of its rights hereunder shall not
be construed as a waiver thereof.
8. SUCCESSORS AND ASSIGNS
The parties hereto agree that the benefit of any provision in this
Agreement may not be assigned by the Purchaser and its successors in
title without the consent of any of the other parties hereto save that
no such consent shall be required in relation to any assignment by the
Purchaser of the benefit of the Purchaser under this Agreement to any
direct or indirect wholly-owned subsidiary of the Purchaser provided
that such direct or indirectly wholly-owned subsidiary shall at all
times while it has the benefit of this Agreement remain a wholly-owned
subsidiary of the Purchaser and the Purchaser shall not be entitled to
assign the benefit of any provision of this Agreement until Ocean is
reasonably satisfied that all the Purchaser's obligations and
liabilities under the Deed of Indemnity have been discharged in full
and further provided that the position of the Vendor shall not be
prejudiced in any respect on or after such assignment as compared with
the position of the Vendor before such assignment.
9. NON-MERGER ON COMPLETION
This Agreement shall notwithstanding Completion remain in full force
and effect as regards any of the provisions remaining to be performed
or carried into effect and (without prejudice to the generality of the
foregoing) as regards all undertakings, warranties, representations
and indemnities.
10. TIME TO BE OF THE ESSENCE
Time shall be of the essence as regards any date or period mentioned
in this Agreement and any date or period substituted for the same
by agreement of the parties hereto or otherwise.
11. ANNOUNCEMENTS
No announcement or circular in connection with this Agreement or any
matter arising therefrom shall be made or issued by or on behalf of
any of the parties hereto without the prior written approval of the
other party, such approval not to be unreasonably withheld or delayed,
provided:-
(i) that in the case of any announcement or circular required by
the Stock Exchange or under the laws of Hong Kong to be issued
by the Vendor, the Purchaser shall be given such opportunity
to review the same as the circumstances may reasonably permit;
and
(ii) that in the case of any announcement or circular required by the
- 10 -
<PAGE>
regulatory authorities of the New York Stock Exchange or under
the laws of the United States to be issued by the Purchaser,
the Vendor shall be given such opportunity to review the same
as the circumstances may reasonably permit.
12. FURTHER ASSURANCE
Subject to Completion, each party agrees with and undertakes to the
other that at any time and from time to time upon the written request
of the other party, such party will promptly and duly execute and
deliver any and all such further instruments and documents and do or
procure to be done all and any such acts or things as the other party
may reasonably require for the purpose of obtaining the full benefits
of this Agreement and, in the case of the Purchaser, of the rights and
ownership of the Shares herein granted.
13. ILLEGALITY AND UNENFORCEABILITY
The illegality invalidity or unenforceability of any part of this
Agreement shall not affect the legality validity or enforceability of
any other part of this Agreement.
14. DOCUMENTS CONSTITUTING AGREEMENT
This Agreement and the Disclosure Letter, the Option Agreement, the
Purchaser's Deed of Indemnity and the Purchaser's Charge over Shares
together with any documents referred to herein constitute the whole
agreement between the parties hereto and no variation thereof shall be
effective unless made in writing signed by or by the duly authorised
representatives of both of the parties hereto.
15. COSTS AND EXPENSES AND STAMP DUTY
15.1 Each party will pay its own costs and expenses in relation to the
preparation, execution and carrying into effect of this Agreement.
15.2 If any stamp duty is payable in connection with the transfer of the
Shares contemplated by this Agreement (or in relation to the Option
Agreement or the transfer of the non-voting deferred shares as
contemplated in the Option Agreement) such stamp duty shall be paid by
the Vendor as to one half and the Purchaser as to the other half.
16. EXECUTION AND COUNTERPARTS
This Agreement may be executed in one or more counterparts each of
which shall be binding on each party by whom or on whose behalf it is
so executed, but which together shall constitute a single instrument.
For the avoidance of doubt, this Agreement shall not be binding on any
party hereto unless and until it shall have been executed by or on
behalf of all persons expressed to be party hereto.
17. LAW AND JURISDICTION
17.1 This Agreement shall be construed and take effect in all
respects in accordance with the laws of Hong Kong.
- 11 -
<PAGE>
17.2 The parties irrevocably agree that the courts of Hong Kong are to have
jurisdiction to settle any disputes which may arise out of or in
connection with this Agreement and that accordingly any suit, action
or proceedings (together hereinafter referred to as "proceedings")
arising out of or in connection with this Agreement may be brought in
such courts.
17.3 Each of the parties hereby irrevocably waives any objection which it
may have now or hereafter to the laying of the venue of any
proceedings in any such court as is referred to in Clause 17.2 or
Clause 17.4 and any claims that any such proceedings have been brought
in an inconvenient forum and further irrevocably agrees that a
judgment in any proceedings brought in the courts of Hong Kong shall
be conclusive and binding upon such party and may be enforced in the
courts of any other jurisdiction.
17.4 Nothing contained in Clause 17.2 or elsewhere in this Agreement shall
limit the right of either party to take proceedings against the other
party hereto in any other court of competent jurisdiction, nor shall
the taking of proceedings by any party in one or more jurisdictions
preclude the taking of proceedings by such party in any other
jurisdiction, whether concurrently or not.
17.5 The Vendor hereby appoints Ocean Office Automation Limited as its
agent for service of process, or such other agent with an office in
Hong Kong as the Vendor may notify to the Purchaser for the purpose.
17.6 The Purchaser hereby appoints the Purchaser's Solicitors as its agent
for service of process, or such other agent with an office in Hong
Kong as the Purchaser may notify to the Vendor for the purpose.
18. NOTICES
18.1 Any notice under this Agreement shall be in writing and signed (or, in
the case of a notice served by facsimile, despatched with the correct
answerback) by or on behalf of the party giving it and may be served
by leaving it at or sending it by facsimile or prepaid registered post
to:-
18.1.1 in the case of the Vendor, Mr. Francis Li at 4th and 5th
Floors, Kader Industrial Building, 22 Kai Cheung Road, Kowloon
Bay, Kowloon, Hong Kong. Fax : (852) 799 2398;
18.1.2 in the case of the Purchaser, Mr. Robert E. Klatell at Arrow
Electronics, Inc. of 25 Hub Drive, Melville, New York, 11747,
U.S.A. Fax : (516) 391 1683
or to such other office or address as the relevant party may hereafter
specify to the other party hereto by notice in writing expressed to be
for the purposes of this sub-clause 18.1.
18.2 In the case of such a notice which is served by telex or prepaid
registered post the same shall be deemed (in the absence of proof to
the contrary) to have been received:-
18.2.1 in the case of facsimile, 12 hours after the time of
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<PAGE>
despatch;
18.2.2 in the case of prepaid registered post, 48 hours (or 120 hours
if to another country) from the date of posting.
AS WITNESS the hands of the parties hereto or their duly authorised
representatives the day and year first before written.
- 13 -
CONFORMED COPY
DATED 2nd July 1993
BARING BROTHERS (GUERNSEY) LIMITED
(AS TRUSTEE) AND OTHERS
- and -
ARROW ELECTRONICS (UK) LIMITED
AGREEMENT
for the acquisition of shares in
TECHDIS LIMITED
Herbert Smith,
Exchange House,
Primrose Street,
London EC2A 2HS.
Tel: 071-374 8000
Telex: 886633
Fax: 071-496 0043
Ref: 182/C1O7/30372681
AG30372681060493
<PAGE>
THIS AGREEMENT is made on 2nd July 1993
BETWEEN:
(1) THE PERSONS whose names and addresses are set out in Schedule 1 (the
"VENDORS" and severally a "VENDOR"); and
(2) ARROW ELECTRONICS (UK) LIMITED a company incorporated in England and
Wales (registered number 2395760) and whose registered office is at
Turnpike Road, Cressex Estate, High Wycombe, Buckinghamshire (the
"PURCHASER")
RECITALS:
A. Techdis Limited (the "COMPANY") was incorporated in England on 25th
September 1986 under the Companies Act 1985 with registered number
2058603 and is a private company limited by shares. Further details
of the Company, its authorised and issued share capital and the names
of its present directors and secretary are set out in Part I of
Schedule 2.
B. The companies named in Part II of Schedule 2 (the "SUBSIDIARIES") are
the only subsidiaries of the Company. Further details of the
Subsidiaries, their authorised and issued share capitals and the names
of their present directors and of their secretaries are set out in
Part II of Schedule 2.
IT IS AGREED as follows:-
1. INTERPRETATION
1.1 In this Agreement and in the Schedules the following definitions are
used:-
"ACCOUNTS" means the audited
consolidated balance sheet
of the Company and the
Subsidiaries as at 31st
December 1992
1
<PAGE>
and the audited consolidated
profit and loss account of
the Company and the
Subsidiaries in respect of
the accounting reference
period of the Company and the
Subsidiaries ended on 31st
December 1992;
"ACCOUNTS DATE" means 31st December 1990,
31st December 1991 or 31st
December 1992, as the case
may be;
"APPROPRIATE PRORATION" in relation to any of the
Vendors, means that
proportion which the amount
of the consideration
receivable by him under
Clause 3.2(A) bears to the
total amount of the
consideration receivable by
the Vendors under Clause
3.2(A) as set out in column 4
of Schedule 1;
"ASSIGNMENT" means the assignment of the
Debt and the Guarantee in
accordance with Clause 2.3;
"ASSOCIATED COMPANY" in relation to any body
corporate means any of its
holding companies or
subsidiaries or any other
subsidiary of any such
holding company;
"BUSINESS DAY" means a day (not being a
Saturday) on which banks are
open for general banking
business in the City of
London;
"COMPANIES ACT" means the Companies Act
1985;
"COMPLETION" means completion of the sale
and purchase of the Shares
and the Assignment in
accordance with Clause 4;
2
<PAGE>
"DEBT" means the sum of L.750,000
owed by the Company to the
Institutional Vendors under a
loan agreement dated 10th
September 1990 as amended;
"DEED OF RELEASE" means the deed of release in
the agreed terms from
Barclays Private Bank and
Trust Limited in respect of
the floating charges dated
1st December 1986 and 10th
September 1990 given in its
favour by the Company and
MMD;
"DISCLOSED SCHEME" means:-
(A) The MMD Money Purchase
Group Scheme; and
(B) The MMD Executive Pension
Scheme,
as constituted by trust deeds
dated 15th May 1987 and
7th August 1986 respectively;
"DISCLOSURE LETTER" means the letter in the
agreed terms from the
Vendors' Solicitors to the
Purchaser's Solicitors
delivered immediately prior
to the making of this
Agreement;
"ENVIRONMENTAL LAW" means the Environmental
Protection Act 1990, the
Water Resources Act 1991, the
Water Industry Act 1991, the
Control of Pollution
(Amendment) Act 1989, the
Control of Pollution Act
1974, the Clean Air Acts, the
Alkali etc. Act 1906 and any
other laws directives and
regulations whether
statutory, at common law, in
equity or otherwise relating
to
3
<PAGE>
the environment (which shall
have the same meaning it
bears in the Environmental
Protection Act 1990)
including but not limited to
any law relating to waste or
contamination or pollution of
air or water (including
ground water and underground
waters) or soil or any other
aspect of protection of the
environment but not including
the Planning Acts;
"ESCROW ACCOUNT" means the earmarked
interest-bearing deposit
account of the Vendors'
Solicitors referred to in
Schedule 5;
"FINAL DATE" means the final date for
determination in accordance
with Clause 3.4(B) of the
amount of the payment
referred to in Clause 3.2(B);
"GROUP" means the Company and the
Subsidiaries;
"GUARANTEE" means the guarantee of the
Debt given by MMD to the
Institutional Vendors under a
guarantee and charge dated
10th September 1990;
"INSTITUTIONAL VENDORS" means the Vendors whose
names are set out in Part II
of Schedule 1;
"INTELLECTUAL PROPERTY RIGHTS" means all inventions,
patents, registered designs,
design rights and copyrights,
know-how and trademarks
(whether registered or not)
and the goodwill therein and
applications for any of the
same and all rights of a
similar nature throughout the
world;
4
<PAGE>
"LIABILITIES DEED" means the liabilities deed
in the agreed terms entered
into pursuant to this
Agreement;
"MANAGEMENT ACCOUNTS" means the management
accounts of the Group as
prepared by the directors of
the Company in respect of
each calendar month;
"MMD" means Microprocessor and
Memory Distribution Limited,
further details of which are
set out in Part II of
Schedule 2;
"PBIT" in respect of any period
specified in Clause 3.2,
means the consolidated net
profits of the Company (after
all operating costs but
before interest and taxation)
on its ordinary activities
before taking into account:-
(i) any increase or
reduction in the
aggregate costs of the
Group, as compared with
those costs which it
would have incurred had
the Purchaser not
acquired the Shares and
received the assignment
of the Debt, which
arises as a result of
any integration of
administrative functions
of the Company and/or
the Subsidiaries with
those of the Purchaser
and its Associated
Companies;
(ii) any exceptional and
extraordinary items as
those terms are defined
in UK Statements of
Standard
5
<PAGE>
Accounting Practice and Financial
Reporting Standards;
(iii) any excess of the annual audit fee of
the Group above L.12,000, exclusive of
value added tax (as that figure is
adjusted to take account of any
increase in the UK General Index of
Retail Prices for all items published
by the Central Statistical Office
between May 1993 and the month in
which the relevant audit fee is
agreed);
(iv) any changes in the accounting policies
of the Company or any of the
Subsidiaries from those policies of
the Purchaser and its subsidiaries
used at the date of this Agreement
which are required to be made in
accordance with any applicable law
or UK Standards of Standard Accounting
Practice or Financial Reporting
Standards; and
(v) any matter in respect of which any
deduction in respect of a relevant
claim is made, or is entitled to be
made by the Purchaser, pursuant to
Clause 3.2 (D) or paragraph 4.3 of
Schedule 5, to the extent of such
deduction
"PBIT RETURN" in respect of any period specified in Clause
3.2, means the fraction, expressed as a
percentage, obtained by dividing PBIT for
such period expressed
6
<PAGE>
on an annualized basis by Working Capital
Employed;
"PLANNING ACTS" means the Town and Country Planning Acts or
any other enactment for the time being in
force relating to the use, development and
enjoyment of land and buildings;
"PREVIOUS ACCOUNTS" means the audited consolidated balance sheets
of the Company and the Subsidiaries as at the
end of each of the two accounting reference
periods ended on 31st December 1990 and 31st
December 1991 respectively and the audited
consolidated profit and loss accounts of the
Company and the Subsidiaries for those two
periods;
"PROPERTIES" means the leasehold properties listed in
Schedule 4;
"PURCHASER'S SOLICITORS" means Herbert Smith of Exchange House,
Primrose Street, London EC2A 2HS;
"RELEVANT CLAIM" means a claim in respect of any of the
Warranties or under the Liabilities Deed or a
claim for indemnity under Clause 9.10;
"RTPA" means the Restrictive Trade Practices Act
1976;
"SHARES" means the 56,667 U.S. Dollar Preference
Shares of $1 each, the 10,000 issued "A"
Ordinary Shares of L.1 each, the 47,143 issued
"B" Ordinary Shares of L.1 each, the 9,524
issued Deferred Shares of L.1
7
<PAGE>
each and the 600,000 issued Non-Voting
Redeemable Preference Shares of L.1 each in
the capital of the Company;
"SIDE LETTER" the letter in the agreed form from the
Purchaser to the Vendors relating to the
conduct of business of the Group in respect
of the period from the date of this Agreement
to 31st December 1994;
"SVA" means Schroder Venture Advisers of 20
Southampton Street, London WC2E 7QG;
"TAXATION" OR "TAX" means taxation or tax as defined in the
Liabilities Deed;
"TAXES ACT" means the Income and Corporation Taxes Act
1988;
"VENDORS' AGENTS" means each of (i) SVA, (representing Baring
Brothers (Guernsey) Limited as trustee of
Schroder UK Venture Fund 1), (ii) SUMIT
Equity Ventures Ltd (representing STF
Management Limited as general partner of
Sharp Technology Fund I Limited Partnership
and Sharp Technology Fund II Limited
Partnership) and (iii) Michael Regent
(representing the other Vendors) further
details of whom are set out in Clause 11.1;
"VENDORS' SOLICITORS" means Clifford Chance of 200 Aldersgate
Street London EC1A 4JJ;
"WARRANTIES" means the warranties contained in Schedule 3;
and
8
<PAGE>
"WORKING CAPITAL EMPLOYED" in respect of any period specified in Clause
3.2, means the aggregate of the net stock in
trade plus net trade debtors less trade
creditors of all members of the Group based
on the average of the respective month end
positions during the relevant period as shown
in the relevant audited and/or Management
Accounts used as specified in Clause 1.2.
1.2 For the purposes of Clause 1.1 PBIT shall be calculated by reference to
the audited consolidated accounts of the Company and the Subsidiaries or
their respective underlying businesses for the accounting reference
period ending 31st December 1994 and/or the Management Accounts for the
periods from 1st July 1993 to 31st December 1993 and from 1st January
1994 to 30th June 1994, as the case may be, all of which accounts shall
be prepared in accordance with UK Statements of Standard Accounting
Practice and Financial Reporting Standards and using accounting bases
and policies consistent with those used by the Purchaser and its
subsidiaries for the relevant period (such audited consolidated accounts
to be prepared as soon as practicable, and in any event not later than
120 days, after the end of the relevant accounting reference period).
1.3 In this Agreement, words and expressions defined in the Companies Act
shall bear the same meanings as in that Act.
1.4 In this Agreement, save where the context otherwise requires:-
(A) a reference to a statute or statutory provision shall include a
reference:-
(1) to that statute or provision as from time to time
consolidated, modified, re-enacted or replaced by any
statute or statutory provision;
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(2) to any repealed statute or statutory provision which it
re-enacts (with or without modification); and
(3) any subordinate legislation made under the relevant statute;
(B) words in the singular shall include the plural, and vice versa;
(C) the masculine gender shall include the feminine and neuter and
vice versa;
(D) a reference to a person shall include a reference to a firm, a
body corporate, an unincorporated association or to a person's
executors or administrators;
(E) a reference to a Clause or Schedule (other than to a schedule to
a statutory provision) shall be a reference to a Clause or
Schedule (as the case may be) of or to this Agreement;
(F) if a period of time is specified and dates from a given day or
the day of an act or event, it shall be calculated exclusive of
that day;
(G) references to writing shall include any modes of reproducing
words in a legible and non-transitory form;
(H) a reference to a balance sheet or profit and loss account shall
include a reference to any note forming part of it;
(I) where any of the Warranties is qualified by the state of
knowledge or awareness of the Vendors or by the expression "so
far as the Vendors are aware" or any similar expression, that
Warranty shall be deemed to include an additional statement that
it has been made after due and careful enquiry;
(J) references to documents "in the agreed terms" shall be to
documents agreed between the parties, annexed to this Agreement
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and initialled for identification by the Vendors' Solicitors and
the Purchaser's Solicitors; and
(K) the headings in this Agreement are for convenience only and shall
not affect the interpretation of any provision of this Agreement.
1.5 The designations adopted in the recitals and introductory statements
preceding this Clause apply throughout this Agreement and the Schedules.
2. SALE AND PURCHASE AND ASSIGNMENT
2.1 Each of the Vendors whose name is set out in Part I of Schedule I as
beneficial owner and each of the Institutional Vendors whose name is set
out in Part II of Schedule I as trustee with full power to transfer
legal and beneficial title shall sell or procure to be sold and the
Purchaser shall purchase the number of Shares set opposite that Vendor's
name in column (2) of Schedule 1.
2.2 Save, for the avoidance of doubt, in respect of the right to receive any
interest to (and including) 30th June 1993, each of the Institutional
Vendors shall hereby assign absolutely, or procure the absolute
assignment of, their respective interests in the Debt (as set opposite
that Vendor's name in column (2) of Schedule 1) and the Guarantee to the
Purchaser and the Purchaser shall accept such absolute assignment.
2.3 (A) The Shares shall be sold and the respective interests in the Debt
shall be assigned free from any option, charge, lien, equity,
encumbrance, rights of pre-emption or any other third party
rights and together with all rights attached to them at the date
of this Agreement (other than in the case of the Shares the right
of the Vendors to receive the dividend referred to in paragraph
1.3(A)(i) of Schedule 3) or subsequently becoming attached to
them.
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(B) The Purchaser hereby irrevocably and unconditionally agrees and
undertakes to each of the Vendors to procure the due payment in
full of the interim dividend referred to in paragraph 1.3(A)(i)
of Schedule 3 and declared by the Company on the date hereof on
1st July 1993, together with the associated tax credit.
2.4 The Vendors waive and agree to procure the waiver of any restrictions on
transfer (including pre-emption rights) and/or assignment which may
exist in relation to the Shares or the Debt, whether arising under the
articles of association of the Company, or under any agreement or
instrument to which the Vendors are parties or by which the Vendors are
bound or otherwise.
2.5 The Purchaser shall not be obliged to complete the purchase of any of
the Shares or the Assignment unless the Vendors complete the sale of all
the Shares and the Assignment of the entire Debt simultaneously, but
completion of the purchase of some of the Shares and/or the assignment
of part of the Debt will not affect the rights of the Purchaser with
respect to the purchase and/or assignment of the remainder thereof.
3. CONSIDERATION
3.1 Subject to adjustment in accordance with the provisions of this
Agreement and the Liabilities Deed, the consideration for the sale of
the Shares and the Assignment shall be the aggregate of:-
(A) the payment at Completion to each of the Vendors of the sum(s)
set opposite his name in column (3) of Schedule 1; and
(B) subject to Clause 3.2(E), the payment to the Vendors of such
further sum (if any) as shall be calculated in accordance with
Clause 3.2(A),
which shall be apportioned as to L.600,000 to the Non-Voting Redeemable
Preference Shares, as to L.56,667 to the "A" Ordinary Shares, the "B"
Ordinary Shares and the Deferred Shares, as to L.750,000 for the
Assignment and as to L.4,593,333 and the consideration referred to in
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Clause 3.1(B) to the U.S. Dollar Preference Shares, all as specified in
more detail in Schedule 1;
3.2 (A) Subject to adjustment in accordance with Clause 3.3, the
aggregate additional consideration, if any, payable by the
Purchaser to the Vendors pursuant to Clause 3.1(B) shall be the
aggregate of:-
(i) L.2.50 for each L.1 by which PBIT for the period from 1st
July 1993 to 31st December 1994 (inclusive) exceeds
L.1,600,000 but does not exceed L.3,000,000; and
(ii) L.1.3333 for each L.1 by which PBIT for that period exceeds
L.3,000,000 but does not exceed L.4,500,000,
subject to a maximum payment by the Purchaser to the Vendors of
L.5,500,000.
(B) Subject to any deduction made by the Purchaser pursuant to Clause
3.2(D) or paragraph 4.3 of Schedule 5 the additional
consideration payable pursuant to Clause 3.2(A) (less the
aggregate amount of any payments to the Vendors from the Escrow
Account pursuant to paragraphs 4.2(A) or (C) of Schedule 7
exclusive of any interest comprised therein) shall be paid to the
Vendors by telegraphic transfer or banker's draft in accordance
with the instructions of the Vendors' Solicitors on the fifth
business day after the date of agreement or final determination
in accordance with Clause 3.4(B) of PBIT for the period to 31st
December 1994.
(C) Subject to any deduction made by the Purchaser pursuant to Clause
3.2(D), the Purchaser shall make payments on account to the
Vendors in respect of its liability under Clause 3.2(A) as
follows:-
(i) in respect of the period from 1st July 1993 to 31st
December 1993 (inclusive) an amount equal to L.2.50 for
each L.1 by which PBIT for that period exceeds L.533,000 but
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does not exceed L.1,000,000 and L.1.3333 for each L.1 by
which such PBIT exceeds L.1,000,000 and does not exceed
L.1,500,000; and
(ii) in respect of the period from 1st July 1993 to 30th June
1994 (inclusive) an amount equal to L.2.50 for each L.1 by
which PBIT for that period exceeds L.1,066,000 but does not
exceed L.2,000,000 and L1.3333 for each L.1 by which such
PBIT exceeds L.2,000,000 and does not exceed L.3,000,000,
less any payment made pursuant to sub--Clause (i) above,
in each case subject to adjustment in accordance with Clause 3.3.
The aforementioned payments shall be made to the Vendors by
telegraphic transfer or banker's draft into the Escrow Account in
accordance with the instructions of the Vendors' Solicitors on
the fifth business day after the date of agreement or final
determination in accordance with Clause 3.4(B) of the amounts
payable under this Clause 3.2(C) and the provisions of Schedule 5
shall apply accordingly.
(D) On or prior to each of the payment dates referred to in Clauses
3.2(B) and 3.2(C) the Purchaser shall notify the Vendors'
Solicitors and the Vendors' Agents in writing of its bona fide
estimate of the aggregate amount of all relevant claims (if any)
in accordance with Clauses 5 and 6 up to such date (including
reasonable details of the calculation of such amount) and a sum
equal to that aggregate amount (less any amounts deducted from
any previous payment pursuant to this Clause 3.2(D)) shall be
deducted from the amount then due and payable to the Vendors.
Without prejudice to Clauses 6.5, 6.7 and 6.8, where it is agreed
or subsequently determined by a court of competent jurisdiction
(whether at the instigation of any of the Vendors' Agents or the
Purchaser) that any amount is not payable by the Vendors to the
Purchaser pursuant to a relevant claim the Purchaser shall pay to
the Vendors on the fifth business day after the date of such
agreement or final determination as aforesaid a sum equal to the
amount of any deduction in respect of any such amount so not
payable by the Vendors which was made
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<PAGE>
pursuant to this Clause 3.2(D) together with interest at the rate
of 10 per cent. per annum from (but excluding) the later of the
date on which the deduction was made (or, where the amount is not
payable by reason of the Purchaser having recovered a
corresponding amount from any third party, the day of the
relevant recovery from such third party) to (and including) the
date of payment of such sum by the Purchaser.
(E) Where any of the Vendors who is a director or employee of the
Company or any of the Subsidiaries at the date of this Agreement
ceases (otherwise than by reason of death, ill health or other
similar incapacity or termination of his employment by the
Company without cause, including by reason of redundancy) to be a
director or employee as aforesaid prior to any payment date
referred to in Clauses 3.2(B) or (C) that Vendor shall forfeit
his appropriate proportion of any amount payable to the Vendors
by the Purchaser under Clauses 3.2(B) or (C) on any such payment
date after the time when he has so ceased to be a director or
employee as aforesaid, which unpaid amount shall be retained by
the Purchaser for its own benefit.
3.3 The payments to be made by the Purchaser pursuant to Clauses 3.2(B) and
Clause 3.2(C) shall be adjusted by multiplying the amounts which would
otherwise be payable in respect of the relevant period of six, twelve
and eighteen months respectively by the Multiplier set out in column (2)
below opposite the corresponding PBIT Return set out in column (1)
below:-
(1) (2)
PBIT Return Multiplier
----------- ----------
[S] [C]
75% 115%
55% 110%
45% 105%
35% 100%
25% 90%
20% 80%
15% 65%
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provided that if the actual PBIT Return is not a percentage shown in
column (1) above the Multiplier to be applied for the purposes of this
Clause shall be such percentage which on a straight line basis is in the
same pro rata position between the two corresponding percentages set out
in column (2) above as the actual PBIT Return occupies in relation to
the two percentages closest to the actual PBIT Return set out in column
(1) above and provided further that this Clause 3.3 shall not apply to
the extent that it would result in an aggregate amount in excess of
L.5,500,000 becoming payable to the Vendors under Clause 3.2.
3.4 (A) Subject to the matters referred to in paragraphs (i) to (v) of
the definition of PBIT in Clause 1.1, all amounts payable to the
Vendors by the Purchaser under Clause 3.2(B) and (C) shall be
determined from the accounts prepared in accordance with Clause
1.2 and at the time of making each such payment the Purchaser
shall deliver to the Vendors' Solicitors and the Vendors' Agents
a notice (the "Payment Notice") setting out in reasonable detail
the calculation of the relevant payment. In the absence of any
notice received from any Vendors' Agent on behalf of the Vendors
he represents (a "Dispute Notice") within 30 days after delivery
of the Payment Notice such Payment Notice shall be conclusive
evidence of the relevant amount payable under Clause 3.2(B) or
(C), as the case may be. If a Dispute Notice is served within
such 30 day period the relevant Vendors' Agent and the Purchaser
acting in good faith shall endeavour to agree the relevant amount
payable provided that should agreement not be reached as
aforesaid within 30 days after service of the Dispute Notice the
dispute shall be determined in accordance with Clause 3.4(B).
(B) In the absence of any agreement between the Vendors and the
Purchaser in accordance with Clause 3.4(A) the relevant amount
payable under Clauses 3.2(B) or (C) which is in dispute shall be
determined by an independent accountant chosen by agreement
between the Purchaser and the relevant Vendors' Agent or, in the
absence of such agreement within seven days after the end of the
30 day period referred to in Clause 3.4(A), to be appointed by
the President for the time being of the Institute of Chartered
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<PAGE>
Accountants in England and Wales on the application of either the
Purchaser or such Vendors' Agent. Any such calculation made by
such independent accountant (which be shall be instructed to give
in reasonable detail and within 30 days of his appointment) shall
(save in the case of manifest error) be final and binding on all
concerned and in performing the functions hereunder such
independent accountant shall act as an expert and not as an
arbitrator. The costs of such independent accountant shall be
borne by the Vendors and/or the Purchaser in the proportions
determined by the independent accountant.
3.5 If either:-
(A) the provision of L.30,000 in respect of the debtor Microtech
Securities; or
(B) the provision of L.16,908 in respect of the debtor Frazer Nash,
in each case made in the Management Accounts for May 1993 proves (in
accordance with the Company's accounting policies specified in Clause
1.2) to have been an over-provision the Purchaser shall on the fifth
business day after the same has been proved pay to the Vendors by way of
additional consideration for the purchase of the Shares a sum equal to
such part of the provision as was not required to have been made and
such over-provision shall not be taken into account for the purposes of
the calculation of PBIT.
4. COMPLETION
4.1 "Completion shall take place at the offices of the Purchaser's
Solicitors immediately following the signing of this Agreement.
4.2 At Completion:-
(A) the Vendors shall deliver or cause to be delivered to the
Purchaser or the Purchaser's Solicitors:-
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(1) (i) a duly executed transfer to the Purchaser or its
nominee of the number of the Shares sold by each
Vendor (other than the U.S. Dollar Preference
Shares); and
(ii) all of the U.S. Dollar Preference Shares,
together in each case with definitive share certificates
for them in the names of the relevant transferors;
(2) any power of attorney under which any document is executed
on behalf of a Vendor;
(3) (in the case of a corporate Vendor only) evidence to the
Purchaser's satisfaction of the authority of any person
executing the Agreement on its behalf;
(4) any waivers, consents or other documents required to vest
in the Purchaser the full beneficial ownership of the
Shares and to enable the Purchaser to procure them to be
registered in the name of the Purchaser or its nominee;
(5) the Liabilities Deed duly executed by the Vendors;
(6) the certificates of incorporation, common seals, all
statutory and minute books (which shall be written up to,
but not including, the date of Completion) and share and
loan stock certificate books of the Company and each of the
Subsidiaries together with all unused share and loan stock
certificate forms;
(7) definitive certificates in respect of all the shares and
loan stock beneficially owned by the Company or any of the
Subsidiaries in each of the Subsidiaries together with duly
executed transfers in blank in respect of all shares and
loan stock in the Subsidiaries not registered in the name
of the Company or of another of the Subsidiaries;
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<PAGE>
(8) all deeds and documents relating to the title of the
Company or any of the Subsidiaries to each of the
Properties;
(9) the written resignations in the agreed terms of all
directors of the Company and each of the Subsidiaries
(other than any director or secretary whom the Purchaser
may wish to remain in office) executed as a deed;
(10) a certificate of non-crystallisation from the chargee in
respect of each charge to which any of the assets or
undertaking of the Company or any of the Subsidiaries is
subject at Completion and which will remain in force after
Completion together with evidence satisfactory to the
Purchaser (including the executed Deed of Release) that any
other charge over the assets or undertaking of any member
of the Group has been released or discharged;
(11) service agreements in the agreed terms signed by Mr.
Michael Raymond Regent, Mr. Roger Paul Banks, Mr. Robert
James Doe, Mr. Leslie Billing and Mr. Nicholas Harwood; and
(12) notices of resignation of the existing auditors of the
Company and each of the Subsidiaries containing statements
as specified in section 394 of the Companies Act 1985.
(B) the Vendors shall procure that the following business is
transacted at meetings of the directors of the Company and each
of the Subsidiaries:-
(1) the directors of the Company shall approve the transfers of
the Shares (other than the U.S. Dollar Preference Shares)
for registration and the entry of the transferees of such
Shares in the register of members of the Company subject
only to the transfers of such Shares being subsequently
presented duly stamped;
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(2) the situation of the registered office of the Company and
each of the Subsidiaries shall be changed to that nominated
by the Purchaser;
(3) all existing mandates for the operation of the bank
accounts of the Company and each of the Subsidiaries shall
be revoked and new mandates issued giving authority to
those persons nominated by the Purchaser;
(4) the Liabilities Deed shall be approved and executed as a
deed by the Company and each of the Subsidiaries;
(5) service agreements in the agreed terms with Mr. Michael
Raymond Regent, Mr. Roger Paul Banks, Mr. Robert James Doe,
Mr. Leslie Billing and Mr. Nicholas Harwood shall be
approved and signed by the Company;
(6) any person nominated by the Purchaser for appointment as a
director or the secretary of the Company or any of the
Subsidiaries shall be so appointed; and
(7) Ernst & Young shall be appointed to replace the existing
auditors of the Company;
(C) the Purchaser shall deliver to the Vendors' Solicitors (who are
hereby irrevocably authorised to receive the same and whose
receipt shall be a valid discharge of the Purchaser's obligations
under Clause 3.1(A)) a bankers' draft in favour of the Vendors'
Solicitors as aforesaid for the total of the amounts shown in
column (3) of Schedule 1.
5. WARRANTIES
5.1 The Vendors severally warrant and represent to the Purchaser in the
terms of the Warranties. The liability of the Vendors in respect of
relevant claims shall be as provided in Clause 6.2.
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5.2 The Vendors acknowledge that, in entering into this Agreement, the
Purchaser has relied upon prior representations by the Vendors in the
terms of the Warranties but upon no other representations or warranties,
whether oral or in writing, and that the Warranties were made by the
Vendors immediately prior to the execution of this Agreement with the
intention of inducing the Purchaser to enter into this Agreement.
5.3 The Vendors shall not (in the event of any claim being made against any
of them in connection with the sale of the Shares to the Purchaser) make
any claim against the Company or any of the Subsidiaries or against any
director or employee of the Company or any of the Subsidiaries on whom
any of them may have relied before agreeing to any term of this
Agreement or of the Liabilities Deed or authorising any statement in the
Disclosure Letter, but so that this shall not preclude any Vendor from
claiming against any such person who is no longer a director or employee
as aforesaid or against any other Vendor under any right of contribution
or indemnity to which he may be entitled.
5.4 Each of the Warranties shall be construed as a separate warranty and is
given subject to the matters which are fairly disclosed in the
Disclosure Letter but (save as expressly provided to the contrary) shall
not be otherwise limited or restricted by reference to or inference from
the terms of any other Warranty or any other term of this Agreement.
5.5 Each of the Vendors agrees he shall as soon as reasonably practicable
after becoming aware of the same disclose to the Purchaser any matter or
thing which arises or becomes known to him after the date of this
Agreement which is inconsistent with any of the Warranties or which in
his reasonable opinion might render any of them misleading.
5.6 The Purchaser shall be entitled to claim that any of the Warranties is
or was untrue or misleading or has or had been breached even if the
Purchaser could have discovered (but did not discover) on or before
Completion that the Warranty in question was untrue or misleading or
21
<PAGE>
had been breached and Completion shall not in any way constitute a
waiver of any of the Purchaser's rights.
5.7 The rights and remedies of the Purchaser in respect of a breach of any
of the Warranties shall not be affected by Completion, subject to Clause
5.6 by any investigation made by or on behalf of the Purchaser into the
affairs of the Company or any of the Subsidiaries, by the giving of any
time or other indulgence by the Purchaser to any person, by the
Purchaser rescinding or not rescinding this Agreement, or by any other
cause whatsoever except a specific waiver or release by the Purchaser in
writing provided that any such waiver or release shall not prejudice or
affect any remaining rights or remedies of the Purchaser.
6. LIMITATION ON LIABILITY
6.1 Relevant claims shall only be made by serving written notice on the
Vendors on or before any due date for payment under Clause 3.2(B) or
(C), which notice shall identify the subject matter and the basis of the
relevant claim in reasonable detail.
6.2 (A) Subject to Clause 6.2(B), the liability of each of the Vendors in
respect of any relevant claim shall not exceed his appropriate
proportion of such claim and the aggregate liability of all the
Vendors in respect of all relevant claims shall not exceed the
aggregate consideration payable under Clause 3.2(A).
(B) The Vendors' liability in respect of relevant claims as provided
in Clause 6.2(A) shall be satisfied solely by deduction from
amounts payable to the Vendors under Clause 3.2 and paragraph 4
of Schedule 5 as provided in Clause 3.2(D) and paragraph 4.3 of
Schedule 5 and for the avoidance of doubt no Vendor shall be
obliged to repay to the Purchaser any amount previously paid to
him pursuant to Clause 3.2 or paragraph 4.2 of Schedule 5 to
satisfy any relevant claim.
6.3 Save in respect of relevant claims under the Liabilities Deed, to which
this Clause 6.3 shall not apply, no liability shall attach to
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<PAGE>
the Vendors in respect of relevant claims unless the aggregate amount of
the liability of the Vendors in respect of all such relevant claims
shall exceed L.50,000, in which case only the excess shall be payable,
and no relevant claim shall be made unless the individual claim exceeds
L.10,000. For the avoidance of doubt, any liability of the Vendors in
respect of the Warranties set out in paragraphs 6.4 and 8.3 of Schedule
3 shall, to the extent that such liability is also the subject of the
indemnities contained in Clause 2.2 of the Liabilities Deed, be treated
as a relevant claim under the Liabilities Deed.
6.4 The Vendors shall not be liable in respect of a relevant claim:-
(A) if it would not have arisen but for anything voluntarily done or
omitted to be done after Completion by the Purchaser, the Company
or any of the Subsidiaries or any of their respective agents,
assignees or other successors in title at any time when the
Purchaser was aware of the existence or potential existence of
such claim;
(B) to the extent that it arises or is increased as a result only of:-
(1) an increase in rates of taxation after the Accounts Date; or
(2) the passing of any legislation, or making of any
subordinate legislation, with retrospective effect; or
(C) to the extent that it:-
(1) is provided for, or included as a liability, in the
Accounts or, for the period from 1st January 1993 to 31st
May 1993, in the Management Accounts ; or
(2) is a liability for taxation arising out of the ordinary
course of business of the Company or any of the
Subsidiaries after the Accounts Date.
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<PAGE>
6.5 (A) Subject to Clause 6.5(B), where, after a relevant claim has been
satisfied by the Vendors by means of a deduction under Clause
3.2(D), the Purchaser, the Company or any of the Subsidiaries
shall recover from some other person an amount (the "third party
recovery") in respect of any matter or event which gave rise to
the relevant claim the Purchaser shall pay to the Vendors on the
fifth business day following such recovery an amount equal to the
lesser of (i) the amount so recovered (less all reasonable costs
and expenses of the recovery properly incurred by the Purchaser)
and (ii) the amount deducted from any payments to the Vendors
pursuant to Clause 3.2(D) in respect of that relevant claim
provided that where case (ii) applies the Vendors shall be paid
from such recovery their reasonable costs and expenses incurred
in pursuing such recovery if the Purchaser's costs as aforesaid
have been met from such recovery and provided further that,
subject to Clause 6.6, the Purchaser shall not be under any
obligation to seek, or to procure that the Company or any of the
Subsidiaries shall seek, recovery from any other person.
(B) Where a third party recovery is received after the Final Date the
Vendors shall be entitled to be paid all or part of the proceeds
of any such recovery in accordance with Clause 6.5(A) only if at
the Final Date and at the date of the relevant recovery such
claim was being pursued against the relevant third party by the
Vendors in accordance with Clause 6.6.
6.6 The Purchaser in respect of any relevant claim (other than a claim in
respect of taxation under the Liabilities Deed, to which Clause 6 of
that Deed shall apply) shall, upon being indemnified to its reasonable
satisfaction against any costs, claims, losses, liabilities or expenses
which it may thereby suffer or incur, take such action as the Vendors'
Agents or any of them may reasonably require to avoid, resist, contest
or compromise any claim or matter which gives or may give rise to a
relevant claim.
6.7 Where, after any relevant claim(s) under Clause 2.1 of the Liabilities
Deed has been satisfied by the Vendors but before the Final Date, it is
agreed or determined in accordance with Clause 3.4(B) (at the
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<PAGE>
request and at the expense of the Vendors) that a provision for taxation
in the Accounts is an overprovision ("Overprovision") then the Purchaser
shall pay to the Vendors on the fifth business day following such
agreement or determination an amount equal to the lesser of (i) the
amount of the Overprovision and (ii) the amount deducted from any
payments to the Vendors pursuant to Clause 3.2(D) in respect of such
relevant claim(s).
6.8 Where, after any relevant claim(s) under clause 2.1 of the Liabilities
Deed has been satisfied by the Vendors but before the Final Date, it is
agreed or determined in accordance with Clause 3.4(B) (at the request
and at the expense of the Vendors) that an amount of taxation paid by
the Company or a relevant Subsidiary will result in a corresponding tax
relief (as defined in the Liabilities Deed) which will result in the
reduction in the amount of any payment of taxation by the Company or the
relevant Subsidiary, then the Purchaser shall pay to the Vendors on the
fifth business day following the date on which the relevant payment of
taxation would otherwise have been made an amount equal to the lesser of
(i) the amount by which the payment of taxation is reduced by the tax
relief (as certified by the auditors) and (ii) the amount deducted from
any payments to the Vendors pursuant to Clause 3.2(D) in respect of such
relevant claim(s).
7. CONFIDENTIALITY AND ANNOUNCEMENTS
7.1 Each of the Vendors covenants with the Purchaser that, save with the
prior written consent of the Purchaser, or, in the case of the Vendors
listed in Part I of Schedule 1, in accordance with his service agreement
with MMD he shall not at any time disclose or use, for his own benefit
or that of any person any confidential information which he possesses
concerning the business or affairs of the Company or any of the
Subsidiaries or of any person having dealings with the Company or any of
the Subsidiaries or concerning this Agreement or its subject matter.
7.2 Each of the parties covenants with the others that he shall not at any
time make any public announcement which refers to any terms of this
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Agreement provided that nothing in this Clause 7.2 shall prevent the
Purchaser from supplying to its holding companies, or prevent such
companies from publishing or disclosing, any such information required
to be published or disclosed in accordance with any relevant legal
requirement provided that the Institutional Vendors may notify their
investors thereof but shall request them to keep such information
confidential subject to any relevant legal requirement to the contrary.
7.3 The restrictions entered into by the Vendors in Clause 7.1 are given to
the Purchaser for itself and as trustee for the Company and each of the
Subsidiaries and each of the Vendors agrees that he will at the request
and cost of the Purchaser enter into a further agreement with the
Company and each of the Subsidiaries whereby he will accept a
restriction corresponding to the restriction in this Agreement. The
Purchaser declares that insofar as these restrictions relates to the
Company and the Subsidiaries it holds the benefit of them as trustee.
In exercising any right as trustee hereunder the Purchaser shall be
entitled to limit the action it takes to such action as it may, in its
absolute discretion, consider reasonable.
8. POST-COMPLETION ARRANGEMENTS
8.1 The Purchaser shall use its reasonable endeavors to procure that its
managing director shall be available to meet P. Smitham Esq. on behalf
of the Vendors at a mutually convenient time, once per month between
Completion and 31st December 1994 and once thereafter following the
preparation of the Management Accounts for December 1994, for the
purposes of discussing the activities of the Company and the
Subsidiaries and, so far as relevant, the activities of the Purchaser
and its subsidiaries by reference to the Vendors' entitlement to the
payments of additional consideration provided for in Clause 3.2 which
meeting shall be scheduled for such period as the Vendors may reasonably
require and which does not interfere unduly with the duties and
responsibilities of such managing director. The Purchaser recognises
that thereafter P. Smitham Esq shall be entitled to communicate the
results of such meetings to each of the Vendors or any of them.
26
<PAGE>
8.2 The Purchaser shall supply to SVA one copy of each set of Management
Accounts of the Company and the Subsidiaries which are prepared in
respect of any period up to and including 31st December 1994 as soon as
practicable following their preparation (and in any event with 30 days
of the end of the appropriate calendar month to which they relate) and
SVA may supply copies thereof to the other Vendors' Agents.
9. MISCELLANEOUS
9.1 Where in this Agreement any liability is undertaken by two or more
persons the liability of each of them shall be several.
9.2 No party may assign any of its rights or obligations under this
Agreement or the Liabilities Deed save that the Purchaser may assign any
of its rights and obligations under this Agreement, and the Purchaser or
any member of the Group may assign any of their respective rights and
obligations under the Liabilities Deed, to Arrow Electronics Inc. or any
of its Associated Companies provided that in the case of an assignment
of obligations to which the Vendors have not given their prior written
consent the Purchaser or the relevant member of the Group shall remain
jointly liable with the assignee to the Vendors in respect of such
obligations. This Agreement shall be binding on and enure for the
benefit of the parties' successors and personal representatives.
9.3 In relation to its subject matter this Agreement, together with the
documents in the agreed terms, represents the entire understanding and
constitutes the whole agreement, and supersedes any previous agreement,
between the parties and, save as provided in this Agreement, no party
has relied on any representation made by any other party who is not a
party to this Agreement.
9.4 So far as it remains to be performed this Agreement shall continue in
full force and effect notwithstanding Completion.
27
<PAGE>
9.5 Each of the Vendors shall after Completion execute all such other deeds
and documents and do all such things as the Purchaser may reasonably
require for perfecting the transactions intended to be effected under or
pursuant to this Agreement and the documents in the agreed terms and for
vesting in the Purchaser the full benefit of the Shares, the Debt and
the Guarantee.
9.6 Whenever this Agreement or the Liabilities Deed provide for:-
(A) any matter to be agreed between the Purchaser and the Vendors or
the Vendors' Agents the Purchaser shall be required to deal
solely with the relevant Vendors' Agents treat any representation
by a Vendors' Agent that any matter has been agreed by the
Vendors represented by him as having been, for all purposes in
connection with this Agreement, so agreed and as binding on such
Vendor in relation thereto and the Purchaser shall not be
required to ascertain whether the respective Vendor or any other
Vendors have been consulted by the relevant Vendors' Agent;
(B) any payment to be made by the Purchaser to the Vendors, such
payment shall be made to the Vendors' Solicitor and shall be
received by the Vendors' Solicitors on behalf of all the Vendors
in their appropriate proportions and the Purchaser shall be
entitled to deal solely with the Vendors' Solicitors in that
regard and shall not be concerned with the application of any
such payment.
9.7 To the extent that any provision of this Agreement or of any of the
other agreements between two or more of the parties in the agreed terms
constitutes a restriction or an information provision within the meaning
of the RTPA so as to make the Agreement, or any such document in the
agreed terms, registrable under the Act, no such provision shall come
into effect until such time as particulars of this Agreement and the
documents in the agreed terms have been furnished to the Director
General of Fair Trading in accordance with the RTPA, which the parties
agree shall be done as soon as practicable after the signing of this
Agreement.
28
<PAGE>
9.8 No variation to this Agreement or to any part hereof (including, for the
avoidance of doubt, in relation to the rights of the Vendors in terms of
the receipt of additional consideration under Clause 3) shall be valid
unless it is in writing and signed by or on behalf of each of the
Vendors' Agents and the Purchaser.
9.9 The Purchaser hereby agrees to indemnify each of the Vendors on demand
against any claims, liabilities, losses, costs and expenses to the
Vendors or to their investors arising in respect of the Reorganisation
(as defined in the Liabilities Deed) or in respect of the purchase of
the Shares by the Purchaser and the Assignment to the Purchaser
excluding any claim, cost, liability, loss or expense which would have
arisen had the Reorganisation not taken place.
9.10 The Vendors hereby agree to pay to the Purchaser on demand an amount
equal to the amount of all claims, liabilities, losses, costs and
expenses other than those referred to under Clause 3 of the Liabilities
Deed which the Purchaser or any member of the Group may suffer or incur
arising out of or in respect of the payment of any dividends (including,
without limitation, the dividend to be paid on 1st July 1993) by the
Company or out of or in respect of the redemption of any shares by the
Company up to the date of this Agreement or any other action as a result
of which the relevant funds were paid to the Company which enabled such
dividend to be paid or such redemption to be made, as the case may be,
provided that this Clause 9.10 shall not entitle the Purchaser to
recover from the Vendors any part of such dividend, such redemption
monies or such relevant funds.
9.11 This Agreement may be executed in two or more counterparts of all which
shall take effect as a single document.
10. COSTS
The parties shall pay their own costs in connection with the preparation
and negotiation of this Agreement and the documents in the agreed terms.
29
<PAGE>
11. NOTICES
11.1 A notice, approval, consent or other communication in connection with
this Agreement:
(A) must be in writing; and
(B) must be left at the address of the addressee, or sent by prepaid
ordinary post (airmail if posted to or from a place outside the
United Kingdom) to the address of the addressee or sent by telex
or facsimile to the telex or facsimile number of the addressee
which is specified in this Clause or if the addressee notifies
another address or telex or facsimile number in England and Wales
then to that address or telex or facsimile number. In addition,
a copy of every notice, approval, consent or other communication
in respect of this Agreement or the Liabilities Deed shall be
sent to SVA at the address set out in Clause 1.1, marked for the
attention of the Partnership Secretary.
The address, telex number and facsimile number of each party for
the purposes of this Agreement and the Liabilities Deed is:
VENDORS' AGENTS
SVA
Address: 20 Southampton Street,
London WC2E 7QG
Telex: LONDON 885029
Facsimile: 071-497-2174
Marked for the attention of the Partnership Secretary
SUMIT Equity Ventures Ltd
Address: Edmund House,
12 Newhall Street,
Birmingham B3 3EJ
Fax: 021-233-4628
Marked for the attention of L. Bury Esq.,
30
<PAGE>
Michael R. Regent
Address: Wynchwood Park Corner,
Nettlebed,
Oxfordshire
PURCHASER
Address: St. Martin's Business Centre,
Cambridge Road,
Bedford, MK42 OLF
Fax: 0234 211434
Marked for the attention of the Managing Director
with a copy by Fax to Arrow Electronics Inc., 25 Hub Drive,
Melville, New York 11747, USA for the attention of R.E. Klatell
Esq, Senior Vice-President (fax No. 0101 516 391 1683) or such
other address and/or fax as the relevant party may notify to the
other from time to time.
11.2 A notice, approval, consent or other communication shall take effect
from the time it is received (or, if earlier, the time it is deemed to
be received in accordance with Clause 11.3) unless a later time is
specified in it.
11.3 A letter, telex or facsimile is deemed to be received:
(A) in the case of a posted letter, unless actually received earlier,
on the third (seventh, if posted by airmail to or from a place
outside the United Kingdom) day after posting;
(B) in the case of a telex, on receipt by the sender of the
answerback code of the addressee after transmission of the telex;
and
(C) in the case of facsimile, on production of a transmission report
from the machine from which the facsimile was sent which
indicates that the facsimile was sent in its entirety to the
facsimile number of the recipient.
31
<PAGE>
12. GOVERNING LAW, JURISDICTION AND SERVICE OF PROCESS
12.1 This Agreement shall be governed by, and construed in accordance with,
English law.
12.2 Each party irrevocably and unconditionally submits to the non-exclusive
jurisdiction of the English Courts for determining any dispute
concerning this Agreement or the transactions contemplated by this
Agreement. Each party waives any right that it may have to object to an
action being brought in those Courts, to claim that the action has been
brought in an inconvenient forum, or to claim that those Courts do not
have jurisdiction.
12.3 Without preventing any other mode of service, any document in an action
(including, but not limited to, any writ of summons or other originating
process or any third or other party notice) may be served on any party
by being delivered to or left for that party at its address for service
of notices under Clause ii.
IN WITNESS of which the parties have executed this Agreement on the date first
mentioned above.
32
SHAREHOLDERS AGREEMENT
SHAREHOLDERS AGREEMENT (the "Agreement"), dated as of October 10,
1991 by and between EDI Electronics Distribution International B.V., a
corporation organized and existing under the laws of The Netherlands ("EDI")
and the signatories of this Agreement (which signatories (other than EDI) are
hereinafter referred to individually as a "Shareholder" and collectively as the
"Shareholders"). Except as otherwise indicated, capitalized terms used herein
shall have the meanings ascribed thereto in Section 5 hereof.
W I T N E S S E T H
WHEREAS, Silverstar Ltd. S.p.A. ("Silverstar"), is a duly
organized and existing corporation under the laws of Italy;
WHEREAS, the authorized capital stock of Silverstar consists of
56,000 common shares, par value Lit 100,000 per share (the "Common Shares"),
all of which Common Shares are issued and outstanding;
WHEREAS, pursuant to a Share Purchase Agreement of even date
herewith (the "Share Purchase Agreement") Arrow has agreed to purchase from
Aquarius Investments Ltd. and to contribute to EDI 28,000 Common Shares (the
"Purchased Shares"), representing 50% of the issued and outstanding Common
Shares;
WHEREAS, EDI and the Shareholders deem it necessary to make
certain provisions for the regulation of Silverstar's affairs and the rights of
EDI and the Shareholders;
NOW, THEREFORE, in consideration of the premises and the
covenants hereinafter set forth, the parties hereto agree as follows:
<PAGE>
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1. Purchase and Sale of Common Shares owned by Shareholders.
(a) Preemptive Rights. (i) Except for the sale or transfer of
Common Shares (A) to another Shareholder or (B) pursuant to a Family Transfer
(each of (A) and (B), an "Exempt Shareholder Transfer") no Shareholder or any
person to whom such Shareholder has transferred any interest in Common Shares
in accordance with the terms hereof (a "Transferee"), as the case may be, will
sell or otherwise transfer any interest in Common Shares without complying with
the terms of this Section l(a). At least 30 days prior to the date of any
proposed sale or transfer other than an Exempt Shareholder Transfer, any
Shareholder desiring to sell or transfer any or all of the Common Shares held
by such Shareholder (the "Offeror") pursuant to a bona fide offer from a
prospective purchaser (the "Purchaser") will deliver a written notice (the
"Sale Notice") to EDI and the other Shareholders. The Sale Notice will
disclose in reasonable detail the identity of the Purchaser and the terms and
conditions of the proposed transfer, including the number of Common Shares to
be transferred (the "Offered Shares") and the price per share at which the
Offered Shares are to be sold to the Purchaser (the "Offered Price"). Such
Sale Notice shall constitute an offer by the Offeror to sell the Offered Shares
to EDI (or, if EDI declines to purchase, the other Shareholders) at a price
(the "EDI Purchase Price") equal to the lower of the Silverstar Formula Price
and the Offered Price.
(ii) Upon receipt of such Sale Notice from the Offeror,
EDI, or at the election of EDI, EDI's nominee, shall be entitled to accept such
offer and to purchase all of the Offered Shares at the EDI Purchase Price and
upon terms and conditions no less favorable than those set forth in the Sale
Notice. EDI or its nominee, as the case may be, shall have 30 days after
receipt of the Sale Notice (the "Initial Offering Period") in which to give
counter-notice to the Offeror, at the Offeror's address stated in the Sale
Notice, of EDI's, or its nominee's, acceptance of such offer.
(iii) In each such offer, if EDI (or its nominee) does not
within the Initial Offering Period elect to accept such offer and purchase all
of the Offered Shares, EDI shall give notice to such effect to the Offeror and
the other Shareholders, whereupon each of the other Shareholders shall have the
right during a period of 15 days following receipt of such notice from
<PAGE>
-3-
EDI (the "Subsequent Offering Period") to purchase all of the Offered Shares at
the EDI Purchase Price and upon terms and conditions no less favorable than
those set forth in the Sale Notice by giving counter-notice to the Offeror, at
the Offeror's address stated in the Sales Notice of its acceptance of such
offer. In the event that more than one Shareholder elects to accept such
offer, the Offered Shares shall be allocated among the accepting Shareholders
as they may agree or, failing such agreement, pro rata on the basis of their
respective holdings of Common Shares.
(iv) In each such offer, if neither EDI nor its nominee
within the Initial Offering Period, nor any other Shareholders within the
Subsequent Offering Period, accepts such offer and agrees to purchase all of
the Offered Shares, the Offeror shall have the election, exercisable by giving
notice within ten days after the end of the Subsequent Offering Period to EDI
and such Shareholders as have accepted such offer to treat none of such
acceptances as being effective, in which case such offer shall be deemed to
have been duly rejected and such Offeror shall have the right to dispose of the
Offered Shares in accordance with Section 1(a)(v).
(v) Any Offered Shares not duly accepted as hereinabove
provided may then be transferred by the Offeror to the Purchaser at a price not
less than the Offered Price and upon terms no more favorable to the Purchaser
than those stated in the Sale Notice within the next six months following the
end of the Subsequent Offering Period, provided, however, that prior to any
such transfer, the Purchaser shall deliver to EDI and the Shareholders a
written unconditional agreement to be bound by the terms of this Agreement.
Any Offered Shares not so sold, transferred or otherwise disposed of within
such six-month period shall again in all respects become subject to the
provisions of this Section 1(a) and no subsequent sale, transfer or other
disposition thereof shall be made without again giving the notice and option
to EDI and complying with the other terms and conditions of this Section 1(a).
(vi) In the event of an Exempt Shareholder Transfer, the
restrictions contained in this Agreement will continue to apply to the
transferred Common Shares after any such transfer and, except for sales or
transfers of Common Shares to a Shareholder, prior to the consummation of such
Exempt Shareholder Transfer, the Transferee shall agree with EDI in writing to
be bound by the provisions of this Agreement.
<PAGE>
-4-
(b) Call Rights. (i) EDI shall have the right, exerciseable in
its discretion following the occurrence of an event (a "Call Event") specified
in Section 1(b)(ii), to purchase from the Shareholders and their respective
(direct or indirect) Transferees, at the purchase price specified herein for
such Call Event, all Common Shares owned by them at the time of such notice
(the "Call Shares"). The right of EDI to purchase the Call Shares pursuant to
a Call Event shall be exercisable by written notice (the "Call Notice") to the
Shareholders and their respective Transferees not less than 30 days prior to a
proposed purchase. A Call Notice with respect to a Call Event specified in
Section 1(b)(ii)(A), (B) or (C) shall be given within 60 days of the relevant
Call Event.
(ii) The right of EDI to purchase the Call Shares shall
be exerciseable:
(A) at the Silverstar Formula Price in the event of the
death or permanent disability (as determined in good faith by
Silverstar's Board of Directors) of both Giorgio Ghezzi ("Ghezzi") and
Germano Fanelli ("Fanelli");
(B) at the Silverstar Formula Price minus 15% if either
Ghezzi or Fanelli voluntarily terminates his work relationship with
Silverstar prior to the expiration of the full term as specified in his
letter agreement with Silverstar dated as of the date hereof (including
any amendments or supplements hereto) or is terminated by Silverstar for
Cause; provided that, with respect to the employee who triggers this
Call Event, EDI shall purchase such employee's Common Shares at the
Silverstar Formula Price minus 30%;
(C) at the Silverstar Formula Price if, pursuant to
Section 3(c) hereof, EDI is entitled to designate five or more of
Silverstar's directors;
(D) at the Silverstar Formula Price plus 30% at any time
from the fourth anniversary of the date hereof to the fifth anniversary
of the date hereof;
<PAGE>
-5-
(E) at the Silverstar Formula Price plus 15% at any time
from the fifth anniversary of the date hereof to the sixth anniversary
of the date hereof; and
(F) at the Silverstar Formula Price at any time after
the sixth anniversary of the date hereof.
(iii) In the event that EDI shall have the right to
purchase the Call Shares pursuant to more than one Call Event, EDI, in its sole
discretion, shall determine the Call Event pursuant to which it shall exercise
its right to purchase the Call Shares.
(c) Put Rights. Upon the expiration of the full term of
Ghezzi's work relationship with Silverstar as specified in Ghezzi's letter
agreement with Silverstar dated the date hereof (including any extension
thereof pursuant to any amendments or supplements thereto) or upon the earlier
termination by EDI of Ghezzi's work relationship with Silverstar in breach of
such agreement, each Shareholder (except Fanelli) and each direct or indirect
transferee of any Shareholder (other than Fanelli) pursuant to an Exempt
Shareholder Transfer shall have the right to require EDI to purchase all Common
Shares then owned by him at the Silverstar Formula Price. Upon the expiration
of the full term of Fanelli's work relationship with Silverstar as specified in
Fanelli's letter agreement with Silverstar dated the date hereof (including any
extension thereof pursuant to any amendments or supplements thereto) or upon
the earlier termination by EDI of Fanelli's work relationship with Silverstar
in breach of such agreement (each of such events and each of the corresponding
events with respect to Ghezzi, a "Put Event"), Fanelli and each transferee of
Fanelli pursuant to an Exempt Shareholder Transfer shall have the right to
require EDI to purchase all Common Shares then owned by him at the Silverstar
Formula Price. The right of each Shareholder to require EDI to purchase all
Common Shares owned by him (the "Put Shares") shall be exercisable by written
notice to EDI (the "Put Notice") not more than 60 days following the applicable
Put Event.
(d) Consummation of Purchase. Any purchase by EDI of Offered
Shares, Call Shares or Put Shares, as the case may be, and any purchase by a
Shareholder of Offered Shares, pursuant to this Section 1 shall be effected by
delivery by the selling Shareholder or any
<PAGE>
-6-
Transferee, as the case may be, of the certificate or certificates representing
such Offered Shares, Call Shares or Put Shares (properly endorsed for transfer)
to EDI or the purchasing Shareholder, as the case may be, on a date (the
"Transfer Date") mutually-agreed upon by EDI and such Shareholder or
Transferee, as the case may be, provided, however, that the Transfer Date shall
not be on a date more than 90 days following the Sale Notice, Call Notice or
Put Notice. As of the Transfer Date, title to such Offered Shares, Call Shares
or Put Shares, as the case may be, shall be deemed transferred to EDI, or such
purchasing Shareholder, as the case may be, upon tender by EDI, or such
purchasing Shareholder, as the case may be, of the purchase price therefor
(which, in the case of Call Shares, shall be the purchase price in effect on
the date of the Call Notice), in the form provided by Section 1(e), to such
Shareholder or Transferee, as the case maybe. EDI, each Shareholder and each
Transferee agrees to take all actions necessary or advisable in order to
consummate the sale of Common Shares to EDI, or such purchasing Shareholder, as
the case may be, as contemplated hereby.
(e) Form of Purchase Price. (i) The purchase price to be paid
by EDI for any Offered Shares, Call Shares or Put Shares, as the case may be,
to be purchased pursuant to this Section 1 shall be paid, in EDI's sole
discretion, in (A) cash, by certified check or cashier's check or by wire
transfer to an account designated by the Shareholder or Transferee, as the case
may be, (B) shares of EDI Stock, which shares of EDI Stock shall be valued at
the EDI Value per Share or (C) shares of Arrow Stock, which shares of Arrow
Stock shall be valued at the Arrow Value per Share. In the event that EDI
elects to pay such purchase price in shares of EDI Stock, a mutually agreed
upon portion of such shares of EDI Stock (which portion shall not exceed 50%)
shall be exchanged for shares of Arrow Stock at a rate of exchange equal to the
EDI Value per Share at the time of the exchange divided by the Arrow Value per
Share at the time of the exchange. Notwithstanding anything to the contrary
contained in this Section 1(e), EDI shall not, without the consent of the
Shareholder or Transferee, as the case may be, pay such purchase price in
shares of EDI Stock if such shares of EDI Stock are not then listed on a
securities exchange or traded on an organized trading market. The purchase
price to be paid by a purchasing Shareholder for any Offered Shares to be
purchased pursuant to this Section 1 shall be paid in cash, by certified or
cashier's check or by wire
<PAGE>
-7-
transfer to an account designated by the selling Shareholder or Transferee, as
the case may be.
(ii) If requested to do so by the selling Shareholder or
Transferee, as the case may be, Arrow will file a registration statement (the
"Registration Statement") under the U.S. Securities Act of 1933, as amended
(the "Act"), covering the resale by such Shareholder or Transferee, as the case
may be, of the shares of Arrow Stock received by such Shareholder or
Transferee, as the case may be, pursuant to Section 1(e)(i) hereof (the
"Purchase Shares"). Arrow shall use its best efforts to cause the Registration
Statement to become effective and to remain effective until the earlier of (A)
the sale by such Shareholder or Transferee, as the case may be, of all of the
Purchase Shares and (B) such time as such Shareholder or Transferee, as the
case may be, is able to sell the Purchase Shares without registration under the
Act pursuant to Rule 144 or pursuant to another available exemption which will
permit the purchaser in such sale transaction to acquire freely transferable
shares.
(iii) If requested to do so by the selling Shareholder or
Transferee, as the case may be, and, at such time, EDI Stock is listed on a
securities exchange or traded in an organized trading market, EDI will use its
reasonable efforts to take such action as is necessary under applicable law
relating to sales of securities to permit the resale by such Shareholder or
Transferee, as the case may be, of the shares of EDI Stock received by such
Shareholder or Transferee, as the case may be, pursuant to Section 1(e)(i)
hereof, provided that, EDI shall not be required to take any such action which,
in the reasonable opinion of EDI, is burdensome or expensive.
(f) Purchase of EDI Shares; EDI Shareholders Agreement. (i) At
such time as (A) EDI exercises its right to purchase the Call Shares pursuant
to Section 1(b) or (B) Ghezzi or Fanelli or any of their respective Transferees
exercises his right to require EDI to purchase the Put Shares pursuant to
Section 1(c), EDI shall also have the right and the obligation to purchase (or
to cause an affiliate to purchase), at a price equal to the EDI Value per Share
multiplied by the number of EDI shares all of the shares of EDI Stock held at
such time by the person from whom EDI is purchasing Call Shares or Put Shares,
as the case may be, provided that, in a case of a purchase of Put Shares, such
purchase of EDI Stock shall be at the option of Ghezzi or Fanelli or
<PAGE>
-8-
such Transferee, as the case may be, and provided further that, EDI shall not
be obligated to make such purchase (but shall continue to have the right to
make such purchase) if at such time EDI Stock is listed on a securities
exchange or traded in an organized trading market. The consideration for any
such purchase shall be paid, in the sole discretion of EDI, either in cash or
shares of Arrow stock, and the provisions of Sections 1(d) and 1(e) shall apply
to such purchase, mutatis mutandus.
(ii) The terms set forth in Section 1(f)(i) shall be
incorporated in the EDI Shareholders Agreement referred to in Section 1(d)(i)
of the Share Purchase Agreement, following which incorporation the terms of
such EDI Shareholders Agreement shall for all purposes supersede the terms of
this Section 1(f).
(g) Notwithstanding anything to the contrary contained in
this Agreement, the purchase price to be paid by EDI for any Offered Shares,
Call Shares or Put Shares pursuant to Section 1(e) or for shares of EDI Stock
pursuant to Section 1(f), as the case may be, shall be reduced by an amount
equal to any indemnification payment owed to Arrow and EDI pursuant to Section
6(a)(iv) of the Share Purchase Agreement, but only to the extent such
indemnification payment has not previously been recovered through a reduction
in the amount of one or more Installments (as defined in the Share Purchase
Agreement).
In the event that following any such reduction in any purchase price
payment, Silverstar receives reimbursement from Quality Technologies Italia
S.p.A. in respect of any losses, damages or costs incurred by Silverstar in
connection with the litigation commenced by Trinova S.p.A. referred to in List
4 to the Share Purchase Agreement and as to which an indemnification payment
was owed to Arrow and EDI pursuant to Section 6(a)(iv) of the Share Purchase
Agreement, EDI shall make a further purchase price payment in an amount equal
to the lesser of any such reduction and any such amount as has actually been
received by Silverstar, without interest.
2. Purchase and Sale of Common Shares Owned by EDI.
(a) Preemptive Rights. (i) Except for the sale or transfer of
Common Shares to an affiliate (as defined in Rule 12b-2 under the Securities
Exchange Act
<PAGE>
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of 1934, as amended) (an "Exempt EDI Transfer"), EDI will not sell or otherwise
transfer any interest in Common Shares without complying with the terms of this
Section 2(a). At least 30 days prior to making any sale or transfer pursuant
to a bona fide offer from a prospective purchaser (the "EDI Share Purchaser"),
other than pursuant to an Exempt EDI Transfer, EDI will deliver a written
notice (the "EDI Sale Notice") to the Shareholders (the "Offerees"). The EDI
Sale Notice will disclose in reasonable detail the identity of the prospective
purchaser and the terms and conditions of the proposed transfer including the
number of Common Shares to be transferred (the "EDI Offered Shares") and the
price per share at which the EDI offered Shares are to be sold to the EDI Share
Purchaser (the "EDI Offered Price"). Such EDI Sale Notice shall constitute an
offer to sell the EDI Offered Shares at the EDI Offered Price.
(ii) Upon receipt of such EDI Sale Notice from EDI, each
Offeree shall be entitled to accept such offer and purchase the EDI Offered
Shares at the EDI Offered Price and upon terms no less favorable than those
stated in such EDI Sale Notice, in the case of each Offeree up to that number
of the EDI Offered Shares equal to the product of (A) a fraction, the numerator
of which is the number of Common Shares held by such Offeree and the
denominator of which is the number of Common Shares held by all Offerees, and
(B) the number of EDI Offered Shares (such number hereinafter referred to as
the "Participation Securities" with respect to such Offeree). The Offerees
shall have thirty days after the EDI Sale Notice is received in which to give
counter-notice to EDI, at EDI's address stated in the EDI Sale Notice, of such
Offeree's acceptance of such offer (such acceptance by an Offeree being
referred to as an "Initial Acceptance"). An Initial Acceptance by an Offeree
may be of all or part of his Participation Securities. Any Offeree may elect
in his counter-notice to purchase, in addition to his Participation Securities,
the balance (or the balance up to a maximum stated number) of any EDI Offered
Shares which are not accepted by the other Offerees (such acceptance being
referred to as an "Additional Acceptance"). If the number of EDI Offered
Shares that the Offerees elect to purchase in their Initial Acceptances plus
the number of EDI Offered Shares that the Offerees elect to purchase in their
Additional Acceptances exceeds the number of EDI Offered Shares, the number of
EDI Offered Shares to be purchased in the aggregate by the Offerees shall be
reduced to the extent of the excess attributable to the Additional
<PAGE>
-10-
Acceptances with such reduction in the number of EDI Offered Shares to be
purchased in the aggregate by the Offerees to be allocated among the Offerees
in proportion to the number of EDI Offered Shares each Offeree has elected to
purchase pursuant to such Offeree's Additional Acceptance.
(iii) In each such offer, if the Initial Acceptances and
Additional Acceptances of all Offerees do not aggregate a total number of EDI
Offered Shares which is equal to or greater than 100% of the number of EDI
Offered Shares, EDI shall have the election, exercisable by giving notice
within ten days after the end of the offering period to such Offerees as have
accepted offers to treat none of such acceptances as being effective, in which
case such offers shall be deemed to have been duly rejected, and EDI shall be
free to dispose of the EDI Offered Shares in accordance with Section 2(a)(v).
(iv) Any purchase by the Offerees of EDI Offered Shares
pursuant to this Section 2(a) shall be effected by delivery by EDI of the
certificate or certificates representing such EDI Offered Shares (properly
endorsed for transfer) to the Offeree on a date (the "EDI Transfer Date")
mutually-agreed upon by EDI and such Offeree, provided, however, that the EDI
Transfer Date shall not be on a date more than 90 days following the EDI Sale
Notice. As of the EDI Transfer Date, title to such EDI Offered Shares shall
be deemed transferred to such Offeree upon tender by such Offeree of the
purchase price to EDI, in cash, by certified or cashier's check or by wire
transfer to an account designated by EDI. EDI and each Shareholder agrees to
take all actions necessary or advisable in order to consummate the sale of
Common Shares to the Shareholders as contemplated hereby.
(v) Any EDI Offered Shares not duly accepted as
hereinabove provided may then be transferred by EDI to the EDI Share Purchaser
at the EDI Offered Price and upon terms not more favorable to the EDI Share
Purchaser than those stated in the EDI Sale Notice, at any time within the next
six months following the end of the offering period, provided, however, that
prior to any such transfer, the EDI Share Purchaser shall deliver to
the Shareholders a written unconditional agreement to be bound by the terms of
this Agreement. Any EDI Offered Shares not so sold transferred or otherwise
disposed of within such six-month period shall again in all respects become
subject to the provisions of this
<PAGE>
-11-
Section 2(a) and no subsequent sale, transfer or other disposition thereof
shall be made without again giving the notice and option to the Shareholders
and complying with the other terms and conditions of this Section 2(a).
(b) Sale of the Company (Drag Along). For so long as EDI holds
at least 50% of the outstanding Common Shares, if EDI desires to cause the sale
to a prospective purchaser (the "Company Purchaser"), whether pursuant to a
merger or otherwise, of all of the outstanding Common Shares pursuant to a bona
fide offer from the Company Purchaser, EDI shall notify the Shareholders and
their respective transferees (collectively, the "Notified Shareholders"), in
writing, of such offer and its terms and conditions. Each Notified
Shareholder, within 15 days of the receipt of such notice (or such longer
period of time as EDI shall designate in such notice) shall cause all of his
Common Shares to be sold to the Company Purchaser on the same terms and
conditions as the Common Shares being sold by EDI to the Company Purchaser
unless the Notified Shareholders, individually or in the aggregate, elect to
purchase (on the same terms and conditions) all Common Shares held by EDI.
(c) Right to Sell (Tag Along). If, at any time, pursuant to a
bona fide offer by a prospective purchaser (the "Buyer") EDI desires to cause
the sale of such number of Common Shares so that after giving effect to the
transaction EDI would not own at least 49% of the outstanding Common Shares,
EDI shall (i) prior to the acceptance by EDI of such offer, give notice to the
Buyer of the provisions of this Section 2(c), (ii) (A) require, pursuant to the
terms of any agreement, instrument or other document effecting such sale to the
Buyer, that the Buyer offer to purchase all of the Common Shares held by the
Shareholders and their respective transferees, or (B) condition its acceptance
of such offer on the receipt of an agreement of the Buyer to offer to purchase
all of the Common Shares held by the Shareholders or their respective
Transferees in each case under this clause (ii) on the same terms and
conditions as are applicable to the sale of the Common Shares by EDI to the
Buyer, and (iii) notify the Shareholders or their respective Transferees
(collectively, the "Tag Along Shareholders"), in writing, of such offer and its
terms and conditions. Each Tag Along Shareholder, within the Tag Along Notice
Period (as defined below) shall, at the option of such Tag Along Shareholder,
cause all of his Common Shares to
<PAGE>
-12-
be sold to the Buyer on the terms and conditions set forth in such notice. As
used herein, the term "Tag Along Notice Period" shall mean 30 days after the
receipt of the notice described in clause (i) above (or such longer period of
time as EDI shall designate in such notice).
3. Election of Board of Directors of Silverstar.
(a) Subject to Section 3(b) and 3(c) hereof, during the term of
this Agreement each of the parties hereto agrees that, in all elections of
directors of Silverstar, such party will vote all Common Shares owned by him
(i) for the maintaining of the number of directors equal to five and (ii) for
the election of a slate of directors so that at all times two directors shall
be designated by EDI, two directors shall be designated jointly by the
Shareholders and one director shall be designated by EDI from a list of three
persons proposed jointly by the Shareholders.
(b) Notwithstanding anything to the contrary contained in
Section 3(a), if at any time EDI holds:
(i) 55% or more of the outstanding Common Shares, EDI
shall designate three of the five directors of Silverstar;
(ii) 75% or more of the outstanding Common Shares, EDI
shall designate four of the five directors of Silverstar; and
(iii) 95% or more of the outstanding Common Shares, EDI
shall designate all of the five directors of Silverstar.
(c) Notwithstanding anything to the contrary contained in
Sections 3(a) or 3(b) hereof, in the event that (i) Silverstar's results fail
to meet the operating targets established by the Board of Directors of EDI for
eight consecutive quarters or (ii) Silverstar incurs net losses, after payment
of interest, for eight consecutive quarters, each of the parties hereto agrees
that such party shall vote all Common Shares owned by him so that Silverstar's
Board of Directors shall be increased to seven directors and EDI shall
designate the two additional directors.
<PAGE>
-13-
(d) Audited Financial Statements. Each of the parties hereto
agrees to take such actions as are necessary or advisable to cause Silverstar
to prepare annual audited financial statements in accordance with Italian
generally accepted accounting principles consistently applied, which statements
shall also be prepared in accordance with United States generally accepted
accounting principles consistently applied to the extent required under United
States securities laws.
4. Liquidation of Silverstar; Issuance of Additional Common
Shares. Each of the parties hereto agrees that a 2/3 vote (in the case of (i)
below, at the extraordinary shareholders meeting in first and second call) of
the outstanding Common Shares shall be required to approve (i) the liquidation,
dissolution or winding up of Silverstar or (ii) the issuance of additional
Common Shares if the sole purpose of such issuance is to dilute the interest of
the Shareholders in Silverstar. This Section 4 shall not be construed, in any
way, to require such 2/3 vote, or otherwise restrict or prohibit the issuance
of additional Common Shares, if such additional Common Shares are issued when
appropriate, necessary or for any other valid business purpose, as determined
in good faith by Silverstar's Board of Directors. The parties hereto agree to
amend the Silverstar by-laws to provide for such 2/3 votes.
5. Definitions. For the purposes of this Agreement, the
following terms shall have the meanings set forth below:
"Arrow Stock" shall mean the common stock, par value $1.00 per
share, of Arrow Electronics Inc., a New York corporation ("Arrow").
"Arrow Value per Share" shall mean the average closing price on
the New York Stock Exchange of one share of Arrow Stock, as published in The
Wall Street Journal, for the 10 day trading period ending two days before the
delivery of shares of Arrow Stock (but not less than Arrow's book value per
share, as computed in accordance with United States generally accepted
accounting principles consistent with Arrow's audited financial statements)
converted into the currency of the EDI Purchase Price in the case of any
Offered Shares or into Italian Lira in the case of Call Shares or Put Shares at
an exchange rate equal to the average currency exchange rate, as published in
The Wall Street Journal for the 20 business day period ending two days before
the delivery of shares of Arrow Stock.
<PAGE>
-14-
"Cause" shall mean the commission by Ghezzi or Fanelli of a felony or
other crime involving moral turpitude, the commission by Ghezzi or Fanelli of
any other act performed other than pursuant to his technical or professional
duties to Silverstar which has a material adverse effect on the Silverstar's
reputation, the violation by Ghezzi or Fanelli of any agreement with
Silverstar, the commission by Ghezzi or Fanelli of any other act which is a
breach of his fiduciary duty of loyalty to Silverstar or the repeated failure
of the Ghezzi or Fanelli to otherwise perform his duties to Silverstar.
"EDI Stock" shall mean the common stock, nominal value NLG 1,000 per
share, of EDI.
"EDI Value per Share" shall mean EDI's book value per share, as
computed in accordance with Dutch generally accepted accounting principles
consistent with EDI's audited financial statements (the "EDI Book Value"), if
EDI shares are not listed on a securities exchange or, if EDI shares are listed
on a securities exchange, the average closing price on such exchange for the
10-day trading period ending two days before the date of delivery of shares of
EDI Stock (but not less than the EDI Book Value) in either case converted into
the currency of the EDI Purchase Price in the case of any Offered Shares or
into Italian Lira in the case of Call Shares or Put Shares or any shares of EDI
Stock to be purchased pursuant to Section 1(f) at an exchange rate equal to the
average currency exchange rate, as published in The Wall Street Journal for the
20 business day period ending two days before the delivery of shares of EDI
Stock.
"Family Transfer" shall mean a transfer by a Shareholder or any
transferee, direct or indirect, of a Shareholder pursuant to a Family Transfer
of Common Shares (a) pursuant to applicable laws of descent and distribution or
(b) among the transferor's family group and which, in each case, satisfies the
requirements set forth in Section 1(a)(vi) hereof. A transferor's "family
group" means (i) such transferor's spouse and descendants (whether natural or
adopted), and/or any person related by blood or adoption to either the
transferor, the transferor's spouse or another member of the family group, (ii)
any trust whose primary beneficiary is a member of the family group and (iii)
any company all of whose securities are owned by one or more members of the
family group.
<PAGE>
-15-
"Silverstar Formula Price" shall mean the product of (a) 10
multiplied by (b) the average of the Silverstar Profits (net of any losses) for
the two full fiscal years prior to the purchase, divided by the number of
Common Shares outstanding on the date of purchase (but not less than
Silverstar's book value per share, as computed in accordance with Italian
generally accepted accounting principles consistent with Silverstar's audited
financial statements, excluding net goodwill (after amortization) relating to
the acquisition of Celdis Componenti S.r.L., at the time of computation). For
purposes hereof, "Silverstar Profits" shall mean the net after-tax profits of
Silverstar as computed on a basis consistent with that used in the preparation
of the pro forma financial statements referred to in Section 2(f) of the Share
Purchase Agreement.
6. Miscellaneous.
(a) Severability. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition of invalidity, without invalidating the
remainder of this Agreement.
(b) Counterparts. This Agreement may be executed in two or more
counterparts, any one of which need not contain the signatures of more than one
party, but all such counterparts taken together will constitute one and the
same Agreement.
(c) Descriptive Headings. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part of
this Agreement.
(d) Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York (excluding the
conflicts of laws principles thereof) including all matters of construction,
validity and performance.
(e) Arbitration. Any dispute arising in connection with this
Agreement shall be decided by arbitration. The arbitration panel shall be
composed of three members of the American Arbitration Association, one chosen
by EDI, one chosen by the Shareholders and one chosen by those appointed by EDI
and the
<PAGE>
-16-
Shareholders. If either EDI or the Shareholders fails to appoint its
arbitrator within 14 calendar days after receipt of notice of appointment by
the other of its arbitrator, or if the two arbitrators first chosen fail to
appoint the third, then the third arbitrator shall be appointed in accordance
with the applicable rules of the American Arbitration Association. The
arbitration shall be conducted in accordance with the applicable rules of the
American Arbitration Association and shall be held in New York City as promptly
as possible at such time and place as the arbitrators may determine and in any
event within 30 days of the appointment of the third arbitrator. The decision
of a majority of the arbitrators shall be final and binding upon EDI and the
Shareholders. The expense of the arbitration shall be paid as the arbitrators
may determine.
(f) Notices. All notices, demands or other communications to be
given or delivered under or by reason of the provisions of this Agreement will
be in writing and will be deemed to have been given when delivered personally
or mailed by certified or registered mail, return receipt requested and postage
prepaid, to the recipient. Such notices, demands and other communications will
be sent to each Shareholder at the address indicated on Schedule I hereto and
to EDI at the address indicated below:
EDI Electronics Distribution
International B.V.
c/o TMF Nederland B.V.
Emmaplein 5
1075 AW Amsterdam
The Netherlands
Attention: Robert val der Voort
with copies to:
Arrow Electronics Inc.
25 Hub Drive
Melville, NY 11747
Attention: Robert E. Klatell, Esq.
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, New York 10004
Attention: Howard S. Kelberg, Esq.
<PAGE>
-17-
(g) Effectiveness. The effectiveness of this Agreement shall
commence, and is contingent upon, the occurrence of the Closing pursuant to the
Share Purchase Agreement and if for any reason the Closing does not occur
pursuant to the Share Purchase Agreement this Agreement shall be null and void
and of no force and effect.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
EDI ELECTRONICS DISTRIBUTION
INTERNATIONAL B.V.
By /s/ Stefanie L. Roth
------------------------------
Title: Attorney-in-fact
THE SHAREHOLDERS:
/s/ Giorgio Ghezzi
---------------------------------
Giorgio Ghezzi
/s/ Germano Fanelli
---------------------------------
Germano Fanelli
/s/ Renzo Ghezzi
---------------------------------
Renzo Ghezzi Attorney-in-fact
[LOGO] EMPLOYMENT AGREEMENT
ARROW ELECTRONICS, INC. Position: VP, Semiconductor Marketing
25 Hub Drive Start Date: 04/01/93
Melville, NY 11747 End Date: 03/31/94
EMPLOYEE NAME: Jan Salsgiver
Address: 250 E. 87th Street, Apt 29D
New York, NY 10128
YOU HAVE PROVEN TO BE A VALUABLE MEMBER OF ARROW'S MANAGEMENT AND A SIGNIFICANT
CONTRIBUTOR TO ARROWS SUCCESS. AS A RESULT, ARROW WISHES TO PROVIDE FOR YOUR
CONTINUED EMPLOYMENT UNDER THE TERMS OF THIS AGREEMENT AND YOU WISH TO ACCEPT
THE SAME.
1. EMPLOYMENT PERIOD. You will be employed by Arrow for the period beginning
with the Start Date set forth above and ending with the End Date set forth above
(the "Employment Period"). From and after the End Date, this agreement and the
Employment Period will continue from month to month for 90 days and may only be
terminated by you or Arrow giving the other at least thirty days' prior written
notice. On the 91st day after the End date, this agreement will be of no
further force or effect (except for those provisions which, by their terms,
survive termination) and your employment will be subject only to the terms and
conditions of Arrow's Employee Handbook.
2. POSITION. You shall initially be employed in the position set forth above,
with the duties and responsibilities customarily associated with that position.
From time to time Arrow may determine that it is in Arrow's best interest to
add to, subtract from, or otherwise change your duties and responsibilities,
or change or eliminate your title. If you do not wish to accept any such
modification, and Arrow does not elect to continue you in your existing
position, you may terminate the Employment Period by giving Arrow at least 60
days prior written notice.
3. BEST EFFORTS. You shall devote all of your business time and attention to
your duties as an employee of Arrow. You shall use your best efforts,
energies, and skills to advance the business of Arrow, to further and improve
its relations with suppliers, customers and others, and to keep available to
Arrow the services of its employees. You shall perform your duties in
compliance with all laws and Arrow's ethical standards.
4. COMPENSATION. Your compensation will be pursuant to Arrow's standard
programs in effect from time to time. Arrow reserves the right, however, its
sole discretion, to impose employee furlough, salary reduction, and similar
cost reduction programs which reduce your targeted cash compensation by an
amount not to exceed 15% (provided that any such program is not discriminatory
and treats you the same as other Arrow employees holding similar positions).
You shall be eligible to participate in any and all employee benefit plans made
available from time to time to Arrow employees generally.
5. REASONS FOR TERMINATION. The Employment Period shall terminate before the
End Date only if one of the following occurs: (a) your death, disability, or
legal incompetence; (b) the issuance by Arrow of a notice terminating your
employment "for cause", (which, for these purposes, means breach of any term of
this agreement or any other duty to Arrow, dishonesty, fraud, or failures to
abide by the published ethical standards, conflict of interest, or other
policies of Arrow, but does not mean simply a failure to attain financial
targets); or (c) the passage of 60 days following ARROW's receipt of notice
from you terminating your employment because you do not agree to specific
changes in your duties and responsibilities (if, during such period of 60 days,
Arrow has not elected to continue you in your current position).
6. EXTENDED PERIOD. In order to protect Arrow from undue harm and disruption
to its business, and to provide adequate time for Arrow to arrange for your
replacement and the orderly transfer of your responsibilities, you grant to
Arrow the right and option to continue your employment for a period of up to 6
months following the termination of the Employment Period (the "Extended
Period"), except in the case of termination of the Employment Period in
accordance with clause (c) of paragraph 5 above. During the Extended Period
the terms of this agreement shall remain in full force, and Arrow shall pay you
your base salary, auto allowance, and two-thirds of your targeted incentive
compensation (all prorated appropriately) and shall extend to you all of the
benefits provided by Arrow to employees generally. In order to exercise such
right and option, Arrow must give you notice of its intention to do so,
including notice of the length of the Extended Period, within 15 days of
Arrow's receipt of notice from you terminating any month-to-month continuation
of the Employment Period.
7. CONFIDENTIAL INFORMATION. During the course of your employment, you will
learn various Arrow proprietary or confidential information (including the
identity of customers and employees; marketing information and strategies;
sales training techniques and programs; acquisition and divestiture
opportunities and discussions; and data processing and management information
systems, programs, and practices). You shall use such information only in
connection with the performance of your duties to Arrow and agree not to copy,
disclose, or otherwise use such information or contest its confidential or
proprietary nature. You agree to return any and all written documents
containing such information to Arrow upon termination of your employment.
8. NO HIRING. During your employment and for 12 months thereafter, you agree
not to employ or retain, have any other person or firm employ or retain, or
otherwise participate in the employment or retention of, any person who was an
employee or consultant of Arrow at any time during the 12 months preceding such
employment or retention.
<PAGE>
9. NON-COMPETITION. In the event that (a) Arrow terminates your employment
for cause or (b) you sever your relationship with Arrow prior to the end of
the Employment Period or any Extended Period for a reason other than an
unacceptable change of responsibilities, you agree that for a period of 12
months after such termination or severance you will not, in any market in which
you were employed or for which you were responsible during the 12 months prior
to your termination, be employed by, own, manage, operate, or control, or
participate, directly or indirectly, in the ownership, management, operation,
or control of, or be connected with (whether as a director, officer, employee,
partner, consultant, or otherwise), any business which competes with Arrow in
the distribution of electronic parts, components, or systems. This provision
does not apply in the event of any other termination of this agreement.
10. SPECIFIC PERFORMANCE AND INJUNCTIVE RELIEF. You acknowledge that Arrow
will be irreparably damaged if the provisions of this agreement are not
specifically enforced, that monetary damages will not provide an adequate
remedy to Arrow, and that Arrow is entitled to an injunction (preliminary,
temporary, or final) restraining any violation of this agreement (without any
bond or other security being required), or any other appropriate decree of
specific performance. Such remedies are not exclusive and shall be in addition
to any other remedy which Arrow may have.
11. SEVERABILITY AND REFORMATION. The provisions of paragraph 7 through 10
of this agreement constitute independent and separable covenants which shall
survive termination or expiration of the Employment Period and any Extended
Period. Any paragraph, phrase, or other provision of this agreement that is
determined by a court of competent jurisdiction to be overly broad in scope,
duration, or area of applicability or in conflict with any applicable statute
or rule shall be deemed, if possible, to be modified or altered so that it is
not overly broad or in conflict or, if not possible, to be omitted from this
agreement. The invalidity of any portion hereof shall not affect the validity
of the remaining portions.
12. GENERAL. This agreement, together with the agreement the form of which
Arrow's Board of Directors approved as of February 26, 1988, constitutes our
full understanding relating to your employment with Arrow. This agreement is
made in, governed by, and is to be construed and enforced in accordance with
the internal laws of the State of New York, without giving effect to principles
of conflicts of law. You agree that any legal action or proceeding brought by
you under or in connection with this agreement into your employment shall be
initiated and maintained only in a state or federal court in Nassau or Suffolk
County, New York. In the event of a conflict between the terms hereof and the
provisions of Arrow's Employee Handbook, the terms hereof shall control;
otherwise, the provisions of the Employee Handbook shall remain applicable to
your employment relationship. This agreement may not be superseded, amended,
or modified except in a writing signed by both parties.
IN WITNESS WHEREOF THE PARTIES HAVE EXECUTED THIS AGREEMENT THIS
17th day of March, 1993
/s/ Jan M. Salsgiver
- ---------------------------------------------
Employee
ARROW ELECTRONICS, INC.
By: /s/ Stephen P. Kaufman
----------------------------------
Stephen P. Kaufman, President
THIRD AMENDMENT TO SUBORDINATION AGREEMENT
THIRD AMENDMENT, dated as of April 12, 1993 (this "Third Amendment"),
among BERLINER HANDELS -- UND FRANKFURTER BANK ("BHF"), NATIONAL WESTMINSTER
BANK AG and SCHWEIZERISCHE KREDITANSTALT (DEUTSCHLAND) AG, each a bank organized
under the laws of the Federal Republic of Germany (collectively, the
"Subordinated Creditor"), ARROW ELECTRONICS, INC., a New York corporation (the
"Obligor"), and BANKERS TRUST COMPANY, a New York corporation, as collateral
agent (in such capacity, the "Collateral Agent"), to the Subordination
Agreement, dated as of September 27, 1991 (as from time to time amended,
supplemented or otherwise modified, the "Subordination Agreement"), made by BHF
and the Obligor in favor of the Banks (as hereinafter defined), the Purchasers
(as hereinafter defined) and the Collateral Agent.
W I T N E S S E T H :
WHEREAS, the Obligor is the borrower party to the Credit Agreement,
dated as of September 27, 1991 (as from time to time amended, supplemented or
otherwise modified, the "Credit Agreement"), with the financial institutions
named as lenders therein (the "Banks") and the Co-Agents named therein,
Chemical Bank (as successor by merger to Manufacturers Hanover Trust Company),
as Administrative Agent, and Bankers Trust Company (as successor in interest to
BT Commercial Corporation);
WHEREAS Arrow Electronics GmbH, a German corporation ("Arrow GmbH"),
is a direct subsidiary of the Obligor;
WHEREAS, Arrow GmbH has entered into a certain Credit Agreement,
dated April 14, 1993 (the "Arrow GmbH Credit Agreement"), among the
Subordinated Creditor, Arrow GmbH and BHF, as agent, as the same may from time
to time be amended, supplemented or otherwise modified, and the Arrow GmbH
Credit Agreement is to replace the Loan Agreement, dated January 16, 1990,
between BHF and Arrow GmbH, as amended by a Loan Agreement, dated January 27,
1993, between BHF and Arrow GmbH;
WHEREAS, in connection with the Arrow GmbH Credit Agreement, the
Obligor has entered into a certain Guaranty, dated April 14, 1993, amending the
existing Subordinated Guaranty (as defined in the Subordinated Agreement); and
WHEREAS, the Subordinated Creditor and the Obligor are grantor
parties to the Subordination Agreement, in favor of the Banks, the Purchasers
and the Collateral Agent;
<PAGE>
2
NOW THEREFORE, in consideration of the premises and mutual agreements
contained herein, the parties hereto hereby agree as follows:
1. Defined Terms. Terms defined in the Subordination Agreement are
used herein with the meanings set forth in the Subordination Agreement unless
otherwise defined herein.
2. Amendment to Preamble and Recitals. (a) The preamble to the
Subordination Agreement is hereby amended by deleting therefrom "(the
"Subordinated Creditor")".
(b) The recitals of the Subordination Agreement are hereby amended
by deleting therefrom the fourth paragraph and substituting, in its place, the
following paragraph:
"WHEREAS, Berliner Handels -- Und Frankfurter Bank and Arrow GmbH are
parties to the loan Agreement, dated January 16, 1990, as amended by the
Loan Agreement, dated January 27, 1993, between Arrow GmbH and Berliner
Handels -- Und Frankfurter Bank, and as replaced by the Credit Agreement,
dated April 14, 1993, among Berliner Handels -- Und Frankfurter Bank,
National Westminster Bank AG, and Schweizerische Kreditanstalt
(Deutschland) AG (collectively, the "Subordinated Creditor") and Berliner
Handels -- Und Frankfurter Bank, as Agent, (such Loan Agreements and such
Credit Agreement, as from time to time amended, supplemented or otherwise
modified, being hereinafter referred to collectively as the "Arrow GmbH
Loan Agreement");"; and
(c) The recitals of the Subordination Agreement are hereby further
amended by deleting therefrom the seventh paragraph and substituting, in its
place, the following paragraph:
"WHEREAS, the Arrow GmbH Loans are guaranteed by the Obligor pursuant
to a Guaranty, dated January 16, 1990, as amended by a Guaranty, dated
January 27, 1993 and as further amended by a Guaranty dated April 14,
1993 (the "Subordinated Guaranty"), made by the Obligor in favor of the
Subordinated Creditor;".
3. Global Amendment to Subordination Agreement. From and after the
Third Amendment Effective Date, the capitalized term "Subordinated Creditor" in
each place such capitalized term appears in the Subordination Agreement shall
be deemed to mean Berliner Handels -- Und Frankfurter Bank, National
Westminster Bank AG and Schweizerische Kreditanstalt (Deutschland) AG, each a
bank organized under the laws of the Federal Republic of Germany.
4. Representations and Warranties. (a) The representations and
warranties of the Subordinated Creditor and the Obligor contained in Section 10
of the Subordination Agreement are hereby incorporated herein by reference,
provided that each reference therein to the Agreement shall be deemed to be a
<PAGE>
3
reference to this Third Amendment and to the Subordination Agreement as amended
by this Third Amendment.
(b) The Subordinated Creditor and the Obligor hereby represent and
warrant that the representations and warranties described in paragraph (a)
above are true and correct on and as of the date hereof as if made on and as of
such date.
5. Conditions to Effectiveness. This Third Amendment shall become
effective (the date of effectiveness, the "Third Amendment Effective Date")
upon the execution and delivery of counterparts hereof by the parties hereto.
6. Continuing Effect. Except as expressly amended, waived or
modified hereby, the Subordination Agreement shall continue to be and shall
remain in full force and effect in accordance with its terms. Any reference to
the "Subordination Agreement" in the Credit Agreement, the Note Purchase
Agreement or any of the documents executed in connection with either thereof
shall be deemed to be a reference to the Subordination Agreement as amended by
this Third Amendment.
7. Counterparts. This Third Amendment may be executed in any
number of counterparts by the parties hereto, each of which counterparts when
so executed shall be an original, but all counterparts taken together shall
constitute one and the same instrument.
<PAGE>
4
8. GOVERNING LAW. THIS THIRD AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
IN WITNESS WHEREOF, the parties hereto have caused this Third
Amendment to Subordination Agreement to be duly executed and delivered by their
proper and duly authorized officers as of the day and year first above written.
BERLINER HANDELS -- UND FRANKFURTER
BANK
By: /s/
-------------------------------
Title: EVP VP
-----------------------------
NATIONAL WESTMINSTER BANK AG
By: /s/ B.A.
-------------------------------
Title:
-----------------------------
SCHWEIZERISCHE KREDITANSTALT
(DEUTSCHLAND) AG
By: /s/
-------------------------------
Title:
-----------------------------
ARROW ELECTRONICS, INC.
By: /s/
-------------------------------
Title: Senior V.P.
Accepted and agreed to by:
BANKERS TRUST COMPANY,
as Collateral Agent
By:
--------------------------------
Title:
FOURTH AMENDMENT TO SUBORDINATION AGREEMENT
FOURTH AMENDMENT, dated as of January 28, 1994 (this "Fourth
Amendment"), among BERLINER HANDELS -- UND FRANKFURTER BANK ("BHF"), NATIONAL
WESTMINSTER BANK AG and SCHWEIZERISCHE KREDITANSTALT (DEUTSCHLAND) AG, each a
bank organized under the laws of the Federal Republic of Germany (collectively,
the "Subordinated Creditor"), ARROW ELECTRONICS, INC., a New York corporation
(the "Obligor"), and BANKERS TRUST COMPANY, a New York corporation, as
collateral agent (in such capacity, the "Collateral Agent"), to the
Subordination Agreement, dated as of September 27, 1991 (as from time to time
amended, supplemented or otherwise modified, the "Subordination Agreement"),
made by BHF and the obligor in favor of the Banks (as hereinafter defined), the
Purchasers (as defined in the Subordination Agreement) and the Collateral
Agent.
W I T N E S S E T H:
WHEREAS, the Obligor is the borrower party to the Credit Agreement,
dated as of September 27, 1991 (as from time to time amended, supplemented or
otherwise modified, the "Existing Credit Agreement"), with the financial
institutions named as lenders therein, the Co-Agents named therein, Chemical
Bank, as administrative agent (the "Administrative Agent"), and the Collateral
Agent;
WHEREAS, the Existing Credit Agreement is concurrently herewith being
amended and restated by the Amended and Restated Credit Agreement, dated as of
January 28, 1994 (the "Amended and Restated Credit Agreement"), among the
Obligor, the several banks and financial institutions named therein (the
"Banks"), Bankers Trust Company and Chemical Bank, as agents, the Collateral
Agent and the Administrative Agent;
WHEREAS Arrow Electronics GmbH, a German corporation ("Arrow GmbH"),
is an indirect subsidiary of the Obligor;
WHEREAS, Arrow GmbH is entering into a certain Amendment, dated as of
January 28, 1994 (the "Arrow Amendment") to the Credit Agreement, dated April
14, 1993 (the "Arrow GmbH Credit Agreement"), among the Subordinated Creditor,
Arrow GmbH and BHF, as agent, as the same may from time to time be amended,
supplemented or otherwise modified;
WHEREAS, pursuant to the Arrow Amendment, the amount available under
the Arrow GmbH Credit Agreement will be increased to DM75,000,000;
<PAGE>
2
WHEREAS, in connection with the Arrow Amendment, the Obligor is
entering into a certain Guaranty, dated January 28, 1994, amending the existing
Subordinated Guaranty (as defined in the Subordination Agreement); and
WHEREAS, the Subordinated Creditor and the Obligor are grantor
parties to the Subordination Agreement, in favor of the Banks, the Purchasers
and the Collateral Agent;
NOW THEREFORE, in consideration of the premises and mutual agreements
contained herein, the parties hereto hereby agree as follows:
1. Defined Terms. Terms defined in the Subordination Agreement are
used herein with the meanings set forth in the Subordination Agreement unless
otherwise defined herein.
2. Amendment to Recitals. (a) The recitals of the Subordination
Agreement are hereby further amended by deleting therefrom the seventh
paragraph and substituting, in its place, the following paragraph:
"WHEREAS, the Arrow GmbH Loans are guaranteed by the Obligor pursuant
to a Guaranty, dated January 16, 1990, as amended by a Guaranty, dated
January 27, 1993, as amended by a Guaranty, dated April 14, 1993, and as
further amended by a Guaranty, dated January 28, 1994 (the "Subordinated
Guaranty"), made by the Obligor in favor of the Subordinated Creditor;".
(b) The recitals of the Subordination Agreement are hereby further
amended by deleting from the fifth paragraph thereof the amount
"DM50,000,000" and substituting, in its place, the amount "DM75,000,000".
3. Amendment of Section 10 (Representations and Warranties).
Subsection 10(a) of the Subordination Agreement is hereby amended by deleting
from paragraph (i) thereof the amount "DM50,000,000", and substituting, in its
place, the amount "DM75,000,000".
4. Representations and Warranties. (a) The representations and
warranties of the Subordinated Creditor and the Obligor contained in Section 10
of the Subordination Agreement are hereby incorporated herein by reference,
provided that each reference therein to the Agreement shall be deemed to be a
reference to this Fourth Amendment and to the Subordination Agreement as
amended by this Fourth Amendment.
(b) The Subordinated Creditor and the Obligor hereby represent
and warrant that the representations and warranties described in paragraph (a)
above are true and correct on and as of the date hereof as if made on and as of
such date.
<PAGE>
3
5. Acknowledgement. Each of the Subordinated Creditor and the
Obligor acknowledge and confirm that any reference in the Subordination
Agreement to the Credit Agreement shall be deemed to be a reference to the
Existing Credit Agreement as amended and restated by the Amended and Restated
Credit Agreement.
6. Conditions to Effectiveness. This Fourth Amendment shall become
effective (the date of effectiveness, the "Fourth Amendment Effective Date")
upon the execution and delivery of counterparts hereof by the parties hereto.
7. Continuing Effect. Except as expressly amended or modified
hereby, the Subordination Agreement shall continue to be and shall remain in
full force and effect in accordance with its terms. Any reference to the
"Subordination Agreement" in the Credit Agreement, the Note Purchase Agreement
or any of the documents executed in connection with either thereof shall be
deemed to be a reference to the Subordination Agreement as amended by this
Fourth Amendment.
8. Counterparts. This Fourth Amendment may be executed in any
number of counterparts by the parties hereto, each of which counterparts when
so executed shall be an original, but all counterparts taken together shall
constitute one and the same instrument.
<PAGE>
4
9. GOVERNING LAW. THIS FOURTH AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
IN WITNESS WHEREOF, the parties hereto have caused this Fourth
Amendment to Subordination Agreement to be duly executed and delivered by their
proper and duly authorized officers as of the day and year first above written.
BERLINER HANDELS -- UND FRANKFURTER
BANK
By:
-------------------------------
Title:
-----------------------------
NATIONAL WESTMINSTER BANK AG
By:
-------------------------------
Title:
-----------------------------
SCHWEIZERISCHE KREDITANSTALT
(DEUTSCHLAND) AG
By:
-------------------------------
Title:
-----------------------------
ARROW ELECTRONICS, INC.
By:
-------------------------------
Title:
Accepted and agreed to by:
BANKERS TRUST COMPANY,
as Collateral Agent
By:
-------------------------------
Title:
CREDIT AGREEMENT
relating to a
Senior Term Loan
in the maximum aggregate principal amount of
DM 50,000,000.00
arranged by
Berliner Handels- und Frankfurt Bank, Frankfurt am Main
in favour of
Arrow Electronics GmbH, Dreieich
the "Borrower"
provided by
Berliner Handels- und Frankfurter Bank, Frankfurt am Main
National Westminster Bank AG, Frankfurt am Main
Schweizerische Kreditanstalt (Deutschland) AG, Frankfurt am Main
the "Banks"
Berliner Handels- und Frankfurter Bank, Frankfurt am Main
the "Agent"
<PAGE>
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section I - INTRODUCTION 1-5
1. Definitions 1-4
2. Conditions Precedent 5
Section II - THE TERM LOAN 5
Section III - GENERAL LENDING PROVISIONS 6/7
5. Drawing 6
6. Interest Periods 7
Section IV - INTEREST AND FEES 7/8
7. Interest 7
8. Fees 8
8.1 Arrangement Fee 8
8.2 Agency Fee 8
Section V - REPAYMENT AND PREPAYMENT 8/9
9. Repayment 8
10. Optional Prepayment 9
Section VI - CHANGE OF CIRCUMSTANCES 9/10
Section VII - PAYMENTS 10/11
Section VIII - COLLATERAL 11
Section IX - AFFIRMATIVE COVENANTS 12-14
Section X - NEGATIVE COVENANTS 14-16
Section XI - EVENTS OF DEFAULT 16/17
Section XII - AGENCY 17-21
Section XIII - MISCELLANEOUS 22/23
30. Costs
31. Assignments
32. Amendments and Waiver
33. Partial Invalidity
34. Confidentiality
35. Jurisdiction and Governing Law
36. BHF-BANK's General Business Conditions
APPENDIX: Exhibit I: General Business Conditions
Exhibit II: Form of a Notice of Drawing
Exhibit III: Form of a Notice of Interest Period Selection
Exhibit IV: Form of the Subordinated Guarantee
Exhibit V: Assignment Agreement
Exhibit VI: Confirmation to the Assignment Agreement
</TABLE>
<PAGE>
This credit agreement (hereinafter referred to as "Agreement") is made the 14th
day of April, 1993 between
Arrow Electronics GmbH, Dreieich (hereinafter referred to as 'Borrower'),
Berliner Handels- und Frankfurter Bank, National Westminster Bank AG and
Schweizerische Kreditanstalt (Deutschland) AG (hereinafter collectively
referred to as "Banks" and each individually a "Bank"), and
Berliner Handels- und Frankfurter Bank as agent for the Banks (in this capacity
hereinafter referred to as "Agent").
WHEREAS, the Borrower holds 55% of the Interest in Spoerle Electronic
Handelsgesellschaft mbH & Co. and Spoerle GmbH, Dreieich (hereinafter
collectively referred to as "Spoerle"), and
WHEREAS, the Borrower has the target to refinance all of its current
outstandings totalling DM 50,000,000.00 under the term loan agreement dd.
January 16, 1990 and the interim loan agreement dd. January 27, 1993, and
WHEREAS, in order to realize the abovementioned target, the Borrower has
requested the Banks to make available a new term loan (hereinafter referred to
as "Term Loan") in the maximum aggregate principal amount of DM 50,000,000.00.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements contained in this Agreement, the Borrower, the Agent and the Banks
hereby agree as follows:
I. Introduction
1. Definitions:
In this Agreement and the Exhibits hereto, the following terms shall have
the respective meanings set forth below:
"AGBs" shall mean the General Business Conditions of Berliner Handels-
und Frankfurter Bank, Frankfurt am Main (see Exhibit 1).
"Agreement" shall mean this credit agreement between the Borrower and the
Agent and the Banks dd. April 14, 1993.
"Agent" shall mean Berliner Handels- und Frankfurter Bank, Frankfurt am
Main.
"Banking Day" shall mean a day on which banks are open for business in
Frankfurt am Main and London.
"Banks" shall mean Berliner Handels- und Frankfurter Bank, Frankfurt am
Main, National Westminster Bank AG, Frankfurt am Main, and Schweizerische
Kreditanstalt (Deutschland) AG, Frankfurt am Main.
<PAGE>
- 2 -
"Borrower" shall mean Arrow Electronics GmbH, Dreieich.
"Business Plan" shall mean the projection of the Borrower dd. 3/9/1993
for fiscal years 1993 through 1997.
"Cash" shall mean the available cash balances in any bank account held
in the name of the Borrower.
"Commitment" in relation to a Bank shall mean the obligation of such
Bank to contribute to the Term Loan up to the aggregate principal amount
set underneath its name on the signature page.
"Deutsche Mark" or "DM" shall mean the lawful currency of the Federal
Republic of Germany or any succeeding political entity thereof.
"Distribution" shall mean (i) the declaration or payment of any
dividend on or in respect of any equity or similar interest in any
Person, or (ii) the redemption or other retirement of any equity of any
Person, directly or indirectly, or (iii) the return of capital by any
Person to its shareholders as such.
"Drawing" shall mean the amount of borrowing made available by the
Banks to the Borrower under the Term Loan.
"Earnings Before Interest and Taxes" shall mean for any period the sum
of the following in each such period: (i) Net Income, after eliminating
therefrom all extraordinary items of income and expenses, plus (ii) tax
expense, and (iii) Interest Expense of the Borrower.
"Event of Default" shall mean any event as specified in Section XI.
"Excess Cash" shall mean the aggregate of
(i) Operating Cash Flow, minus (i) the Borrower's Interest Expenses,
minus (ii) the Borrower's taxes, minus (iii) any repayments
according to Section V of this Agreement;
(ii) the proceeds of any disposal (net of related costs, expenses, taxes
and duties properly incurred and relating directly to the disposal
thereof) of any property or other assets of the Borrower;
(iii) any other money raised by the Borrower other than (a) in the
ordinary course of trading or (b) to the extent not in (a) above,
in the ordinary course of business of the Borrower where such
amount is equal to or less than DM 250,000.00 (or its equivalent in
any other currency) in respect of any single transaction and no
more than DM 1,000,000.00 in any Fiscal Year or (c) borrowings
which are not prohibited by Section X.
"Expenditures" shall mean any capital expenditures the Borrower makes,
assumes, or incurs for the purchase, improvement, or acquisition of fixed
assets in any Fiscal Year;
"Fiscal Year" shall mean the period from January 1 through and
including December 31 for each accounting year of the Borrower or any
other accounting period which the Borrower deems to be its accounting
year.
<PAGE>
- 3 -
"Indebtedness" shall mean as to any Person (i) all obligations of such
Person for borrowed money, (ii) all obligations of such Person evidenced
by bonds, debentures, notes or other similar instruments, except trade
accounts payable arising in the ordinary course of business, and (iii)
all Indebtedness of others guaranteed by such Person.
"Intangible Assets" shall mean balance sheet items which lack physical
substance, including but not limited to copyrights, patents, trademarks,
goodwill, computer programs, franchises, licenses and import and export
permits.
"Interest" shall mean the interest in the share capital of Borrower
and/or the Borrower's interest, directly or indirectly, in its
Subsidiaries.
"Interest Expense" shall mean for any period the aggregate expenses of
the Borrower in such period for interest, commitment fees, other
financing fees, including guarantee fees, and similar expenses on
Indebtedness.
"Leverage ratio" shall mean the ratio of Total Bank Debt to Net Worth
of the Borrower.
"LIBOR" (London Interbank Offered Rate) relating to each Interest
Period shall mean the rate per annum determined by the Agent to be equal
to the arithmetic mean (rounded upwards, if necessary, to the nearest
whole multiple of one sixteenth of one percent) of the respective rates
as quoted by the British Bankers Association (at present) on Telerate
Screen Page No. 3750 at or about 11:00 a.m. (London time) on the second
Banking Day prior to the commencement of such Interest Period. The
details of such calculation based on Telerate Screen Page No. 3750 shall
be transmitted by the Agent to the Borrower and each Bank immediately
upon fixing of the applicable rate for each Interest Period. Such
determination shall, absent manifest error, be final, conclusive and
binding. Should for any reason whatsoever the quotation by the British
Bankers Association not be available, the interest relating to such
Interest Period shall be determined by the Agent (which determination
shall be conclusive and binding on the Borrower) as being the arithmetic
mean (rounded upwards to the nearest whole multiple of one sixteenth of
one percent) of the rates per annum at which the Agent is being offered
like amounts for like periods by prime banks in the London Interbank
Eurocurrency market at or about 11:00 a.m. (London time) on the second
Banking Day prior to the commencement of such Interest Period.
"Minimum Net Worth" shall mean Net Worth (excluding any minority
interest) as set out under Section IX, para 20.4.
"Net Income" shall mean for any period, the net income (or net
deficit), after deduction of all expenses, including depreciation and
amortization, taxes and other proper charges.
"Net Worth" shall mean Total Assets less Total Liabilities (excluding
minority interests) of the Borrower determined in accordance with
generally accepted accounting principles of the United States and any
applicable laws.
<PAGE>
- 4 -
"Notice of Drawing" shall mean a notice in the form of Exhibit 2 duly
completed and signed by the Borrower.
"Notice of Interest Period Selection" shall mean a notice in the form
of Exhibit ... duly completed and signed by the Borrower.
"Operating Cash Flow" shall mean for any Fiscal Year the aggregate of
the Subsidiaries Net Income, plus (i) depreciation and amortization,
plus/minus (ii) changes in working capital, plus/minus (iii) any
extraordinary items of income and expenses, minus (iv) Expenditures, and
minus (v) any minority interest, all calculated based upon the Borrower's
consolidated financial statements required to be delivered to the Agent
under Section IX., para 20.1.3.
"Person" shall mean any natural person, corporation, partnership, firm,
association, government, governmental agency or any other juridical
entity, whether acting in an individual, fiduciary or other capacity.
"Reference Date" shall mean the date at which any Fiscal Year of the
Borrower is ended.
"Reinvestments" shall mean (i) any Expenditures and/or (ii) any
investments of the Borrower in any Person or Persons in connection with
Distributions.
"Security Document" shall mean each document as referred to in Section
VIII (see Exhibits 4 through 6).
"Subsidiary" shall mean, as to the Borrower, any or all other companies
of which more than 50% of the equity or similar interest having ordinary
voting power (irrespective of whether or not at the time equity of any
other class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency) is at the
time directly or indirectly owned by the Borrower and/or one or more of
its Subsidiaries.
"Term Loan Maturity Date" shall mean April 21, 2000.
"Total Bank Debt" shall mean all bank Indebtedness of the Borrower.
"Total Debt Service" shall mean all Interest Expenses and principal
repayments the Borrower incurs from Indebtedness.
2. Nature of the Banks' Obligations and Rights:
2.1. The obligations of each Bank hereunder are several.
2.2. The failure by a Bank to perform its obligations hereunder shall
not affect the obligations of the Borrower towards any other party
hereto nor shall any such other party be liable for the failure by
such Bank to perform its obligations hereunder.
<PAGE>
- 5 -
3. Conditions Precedent:
Save as the Banks may otherwise agree with the Borrower the obligations of
the Banks hereunder are subject to the condition that the Agent shall have
received on or before April 14, 1993 free of expense all of the following
in form and substance satisfactory to it:
3.1. Certified true copies of a notarial deed recording the
(a) "Abtretungsvertrag" and "Kaufvertrag" concerning 40% of the
Interest in Spoerle formerly held by Carlo Giersch,
(b) "Abtretungsvertrag" and "Kaufvertrag" concerning 15% of the
Interest in Spoerle formerly held by Carlo Giersch.
3.2. Subordinated Payment guarantee (the "Guarantee") in the amount of
DM 50,000,000.00 in a form and substance satisfactory to the Banks
to be issued by Arrow Electronics, Inc., Melville/NY (the
"Guarantor") as per Exhibit 4, duly signed and executed.
3.3. Duly executed statement of assignment regarding as per Exhibit 5.
3.4. Duly executed statement from Mr. Carlo Giersch concerning his
consent to the assignment as per Exhibit 6.
3.5. Certificate of the Borrower and the Guarantor setting out the name
and specimen signatures of the persons authorized to sign on behalf
of the Borrower and Guarantor, this Agreement, the Guarantee and
any documents to be delivered and statements to be given by the
Borrower or Guarantor hereunder and thereunder.
3.6. A legal opinion of an inhouse counsel of the Guarantor in form and
substance satisfactory to the Agent, confirming that the Guarantee
constitutes a valid existing obligation enforceable in accordance
with its terms and that all consents, licences, approvals,
registrations necessary have been obtained or effected and are in
full force and effect.
3.7. True copy of the latest excerpt from the Commercial Register
("Handelsregister") of the Borrower and Spoerle.
3.8. The Business Plan dd. 3/9/1993.
3.9. Evidence satisfactory to the Agent that the Borrower is in
compliance with Section IX, para 20.4.
II. Term Loan
4. The Banks hereby make available to the Borrower a Term Loan in the maximum
aggregate principal amount of DM 50,000,000.00 (Deutsche Mark fifty
million) which shall be used to refinance all existing bank indebtedness
of the Borrower in a total amount of DM 50,000,000.00.
<PAGE>
- 6 -
III. General Lending Provisions
5. Drawing:
5.1. The total amount of the Term Loan shall be utilized in one single
Drawing from the sources of the Eurocurrency market an April 21,
1993 and any amount not drawn on that date shall reduce the amount
of the Term Loan accordingly.
5.2. Notice of Drawing:
The Borrower shall give the Notice of Drawing by letter or telefax
to be received by the Agent not later than three Banking Days
(until 12.00 noon Frankfurt time) before the date on which the
Drawing is to be made, specifying the date of Drawing, the amount,
and Interest Period. Such notice shall be irrevocable and binding
on the Borrower and shall oblige the Borrower to borrow such amount
on the stated date. The Agent shall promptly notify each Bank of
the proposed Drawing, of each Bank's proportionate share thereof
and of the other matters covered by the Notice of Drawing.
5.3. Disbursement of Funds:
Not later than 10.00 A.M. (Frankfurt time) on the drawing date
specified in the Notice of Drawing each Bank shall make available
its pro-rata share of such Drawing requested to be made on such
date. Unless the Agent shall have been notified by any Bank prior
to the date of Drawing that such Bank does not intend to make
available to the Agent its portion of the Drawing to be made on
such date, the Agent may assume that such Bank has made such amount
available to the Agent on such date of Drawing and the Agent may,
in reliance upon such assumption, make available the amount of the
Drawing to be provided by such Bank. If such amount is not in fact
made available to the Agent by such Bank and the Agent has made
such amount available to the Borrower, the Agent shall be entitled
to recover such corresponding amount on demand from such Bank. If
such Bank does not pay such amount forthwith upon the Agent's
demand therefor, the Agent may promptly notify the Borrower which
shall immediately (but in any event not later than five Banking
Days after such demand) pay such amount to the Agent. The Agent
shall also be entitled to recover from such Bank or the Borrower,
as the case may be, a) interest on such amount in respect of each
day from the date such amount was made available by the Agent to
the Borrower to the date such amount is recovered by the Agent, at
a rate per annum equal to the overnight Interbank Offered Rate
(calculated on the basis of actual number of days elapsed and a
year of 360 days) and b) any losses incurred by the Agent as a
result of the failure of such Bank from its obligation to fulfil
its commitment hereunder without prejudice to any rights the
Borrower may have against any Bank as a result of any default by
such Bank hereunder.
5.4. The Drawing under the Term Loan shall be funded by the Banks on the
basis of their respective pro-rata share in the Term Loan
commitment.
<PAGE>
- 7 -
6. Interest Periods:
Each Interest Period for the Term Loan shall be of a duration of one,
three or six months as selected by the Borrower by written notice or
telefax to the Agent in the form of Exhibit 3 at least three Banking Days
(until 12.00 noon Frankfurt time) prior to the beginning of each Interest
Period, provided that:
6.1. if the Borrower fails to select the duration of an Interest Period
in accordance with the above provision, such Interest Period shall
be for a period of three months;
6.2. the first Interest Period shall commence on the date of the Drawing
and end upon expiry of one, three or six months, as the Borrower
may have selected, thereafter;
6.3. each subsequent Interest Period shall commence on the expiry of the
preceding Interest Period and end upon expiry of one, three or six
months, provided, however, that the last Interest Period does not
exceed the Term Loan Maturity Date;
6.4. if an Interest Period would otherwise end on a day which is not a
Banking Day, such Interest Period shall end on the next Banking Day
in the same calendar month, or, if none, on the immediately
preceding Banking Day;
6.5. if an Interest Period commences on the last Banking Day in a
calendar month and/or if there is no numerically corresponding day
in the calendar month one, three or six months, as the case may be,
after the commencement of such Interest Period, that Interest
Period shall end on the last Banking Day in that calendar month;
6.6. if an Interest Period would overrun a repayment date, such Interest
Period shall - for the amount of repayment - be of such shorter
duration as shall be necessary for such repayment date to be the
last day of such Interest Period.
IV. Interest and Fees
7. Interest:
7.1. The Borrower shall pay interest on the Drawing under the
Term Loan in accordance with the following paragraphs:
7.1.1. The interest rate for each Interest Period shall be
determined by the Agent two Banking Days prior to such
Interest Period and shall be based on LIBOR with an initial
interest margin of 3/4% p.a.
The initial interest margin is subject to the following
adjustments:
- provided that the Leverage ratio - as determined by the
Agent - equals or is less than .75 : 1 on December 31,
1994, the margin shall be 5/8% p.a. in calendar year
1995, and
<PAGE>
- 8 -
- provided that the Leverage ratio - as determined by the
Agent - equals or in less than .50 : 1 on December 31,
1995, the margin shall be 1/2% p.a. in calendar year 1996
and thereafter.
7.1.2. The aforesaid "step-down" margins shall only be adjusted
upon the Agent's receipt of the latest audited Fiscal Year
statement of the Borrower and shall be applicable for the
Interest Periods following the receipt of such Fiscal Year
statement.
7.1.3. Beginning with the first Interest Period following April
21, 1998 the interest margin then in place shall be
increased by 1/8% p.a. for the remaining lifetime of the
loan.
7.1.4. Interest shall be payable on the last day of each Interest
Period and calculated on the basis of the actual number of
days elapsed and a year of 360 days.
8. Fees:
8.1 Arrangement Fee:
The Borrower shall pay to the Agent for its own account an
arrangement fee in the amount and in the manner specified in the
mandate letter dd. January 28, 1993 from the Agent to the
Borrower.
8.2 Agency Fee:
The Borrower shall pay to the Agent for its account an agency fee
in the amount and in the manner specified in the mandate letter
dd. January 28, 1993 from the Agent to the Borrower.
V. Repayment and Prepayment
9. Repayment:
9.1 Borrower shall repay the Term Loan by the following installments:
DM 5,000,000.00 on April 21, 1994
DM 5,000,000.00 on April 21, 1995
DM 5,000,000.00 on April 21, 1996
DM 7,500,000.00 on April 21, 1997
DM 7,500,000.00 on April 21, 1998
DM 10,000,000.00 on April 21, 1999
DM 10,000,000.00 on April 21, 2000
9.2 All outstanding amounts under the Term Loan shall mature and
become due and payable in full on the Term Loan Maturity Date.
9.3 Repayments shall be made together with accrued interest thereon.
<PAGE>
- 9 -
10. Optional Prepayments:
10.1 The Borrower shall have the right, upon at least five Banking Days
prior written notice to the Agent, to prepay the Term Loan in full
or in part, with minimum amounts of DM 1,000,000.00 and integral
multiples of DM 500,000.00. Such notice of prepayment shall be
irrevocable and binding on the Borrower and shall oblige the
Borrower to make such prepayment on the date specified therein.
10.2 Prepayments shall be made together with accrued interest thereon
at the end of any Interest Period and shall be applied to the two
next following installments. Any prepayments exceeding the amount
of the two installments shall be applied pro-rata among the
remaining maturities,
10.3 Prepayments shall only be permitted by means of Excess Cash and/or
Cash.
10.4 Any amounts prepaid under the Term Loan shall not be reborrowed
hereunder.
10.5 A full prepayment through a bank refinancing, e.g. in connection
with further acquisitions of Interest in Spoerle, shall be
permitted provided that the Banks shall be asked to arrange such
refinancing at terms and conditions reasonably satisfactory to the
Banks. Otherwise, the Borrower agrees to pay a loan breakage fee
of 1/2% flat on the then outstanding amount under the Term Loan,
payable to the Agent for distribution among the Banks according to
their respective share in the Term Loan.
VI. Change of Circumstances
11. Upon the Agent determining (which determination - save in case of manifest
error - shall be conclusive and binding on the Borrower) and notifying the
Borrower that:
11.1 deposits in Deutsche Mark in the ordinary course of business are
not available to the Banks in the London Interbank Currency Market
in sufficient amounts at the relevant time with respect to any
Interest Period; or
11.2 by reason of any change in any law, regulation, treaty or
directive (whether or not having the force of law) or the
interpretation or application thereof by any authority charged
with the administration or application thereof (including but not
limited to any reserve, deposit or similar requirements) and for
compliance by the Banks with any request from or requirement of
any central bank or other fiscal, monetary or other governmental
authority, it has or shall become unlawful or materially
impracticable to the Banks to perform any or all of its
obligations under this Agreement, in particular to make, fund or
maintain any borrowing out of the Eurocurrency market; and/or the
costs to the Banks of making, funding or maintaining any of the
borrowings is increased; and/or as a result of the aforesaid the
amount of principal, interest or other amounts payable to the
Banks under this Agreement is re-
<PAGE>
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duced; and/or the Banks make any payment or forego any interest or
other return on or calculated by reference to the gross amount of
any sum receivable by it from the Borrower hereunder;
then, in any such event at the Banks option
11.3 upon demand from time to time the Borrower shall pay to the Banks
such amount as shall compensate the Banks for such increased
costs, reduction, payment or foregone interest or other return,
provided that the Banks certificate setting out details on the
event giving rise to such compensation, the amount thereof and the
manner in which it has been calculated shall (save in the case of
manifest error) be conclusive; and/or
11.4 the Banks may terminate their obligations under this Agreement
whereupon the Borrower will prepay forthwith (or if permitted by
law on the next following interest payment date or interest
payment dates) the Drawing together with all interest accrued
thereon and all other amounts payable to the Banks hereunder.
VII. Payments
12. All payments to be made by the Borrower shall be made in Deutsche Marks on
the relevant day to such account with such financial institution as the
Agent may have notified to the Borrower.
13. All payments to be made by the Borrower hereunder shall be made without
set-off or counterclaim and free and clear of and without deduction for or
on account of any present or future taxes of any nature now or hereafter
imposed unless the Borrower is compelled by law to make payment subject to
such tax. In such event the Borrower shall pay to the Agent such
additional amounts as may be necessary to ensure that the Agent and the
Banks, respectively, receive a net amount equal to the full amount which
the Agent and Banks would have received had payment not been made subject
to such tax. The Borrower shall provide the Agent with the receipt
evidencing the payment of such tax. The Borrower shall indemnify each
Bank against any losses or costs incurred by it by reason of any failure
by the Borrower to make payment of tax or by reason of such increased
payment not being made on the due date for such payment.
14. Whenever any payment hereunder shall become due on a day which is not a
Banking Day the due date thereof shall be extended to the next succeeding
Banking Day, unless such succeeding Banking Day falls in the next calendar
month in which event such due date shall be the next preceding Banking
Day. Interest shall be adjusted accordingly.
15. If the Borrower fails to pay when due any amount hereunder on the due
date, this amount becomes overdue and shall be treated as an overdraft on
a current account and shall bear interest thereon equal to the Agent's
prime rate plus two percentage points.
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16. Subject to payments being made to the Agent as provided herein, the
Agent shall make available
16.1 to the Borrower on the relevant due date, all sums so received by
the Agent from the Banks in respect of the Drawing to the Borrower
by crediting such account of the Borrower at such bank as the
Borrower may designate to the Agent; and
16.2 to each Bank on the relevant due date, its pro-rata share (if any)
of any payments so received by the Agent from the Borrower by
crediting such account of that Bank at such bank as that Bank may
from time to time designate to the Agent.
17. If any sum is made available to the Agent later than the time required,
the Agent shall make payment to the Borrower as provided above as soon as
practicable thereafter.
18. Where an amount is to be paid hereunder to the Agent for the account of
another person, the Agent shall not be obliged to make the same available
to that other person until it has been able to establish that it has
actually received such amount, but if it does so and it proves to be the
case that it had not actually received the amount it paid out, then (i)
the person to whom such amount was so made available shall on request
refund the same to the Agent, and (ii) the person by whom such amount
should have been made available to the Agent shall on request pay to the
Agent an amount sufficient to indemnify the Agent against any costs or
losses it may have suffered or incurred by reason of its having paid out
the amount in question prior to its receiving the same.
VIII. Collateral
19. The obligations of the Borrower under this Agreement shall be secured by
the following collateral as set out in Exhibits 4 through 6 in favour of
the Agent and the Banks, and the Agent for the benefit of the Banks, as
the case may be:
19.1 The Guarantee
19.2 An assignment of (i) all present and future claims and rights of
the Borrower against Spoerle with regard to Distributions, (ii)
all present and future claims of the Borrower against Spoerle with
regard to repayment claims arising from Distributions retained on
the non-permanent capital account with Spoerle, and (iii) all
present and future claims with regard to compensation claims of
the Borrower in case the Borrower ceases to be a shareholder of
Spoerle.
The securing of the Banks claims under this Agreement shall not affect the
Banks additional rights according to Article 14 and 15 of the AGBs.
<PAGE>
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IX. Affirmative Covenants
20. The Borrower agrees that, as long as any amounts are outstanding under
this Agreement or the Banks have any commitment to lend pursuant to this
Agreement, the Borrower shall:
20.1 furnish the Agent:
20.1.1 as soon as available and in any event within 60 days after
the end of each fiscal quarter beginning with the quarter
ending March 31, 1993 with a consolidated balance sheet of
the Guarantor, and the respective profit and loss account
for such quarter;
20.1.2 as soon as available and in any event within 120 days after
the close of each of the Guarantor's Fiscal Year, with an
audited consolidated annual balance sheet, including the
respective profit and loss account for such year and a
statement of changes in the financial position of the
Guarantor, made out in accordance with generally accepted
accounting principles in the United States and in
compliance with any applicable laws, in each case certified
by an independent certified public accountant of
internationally recognized standing reasonably acceptable
to the Agent;
20.1.3 an soon as available and in any event within 150 days after
close of each of the Borrower's Fiscal Year, with an
audited consolidated annual balance sheet, including the
respective profit and loss account for such year and a
statement of changes in the financial position of the
Borrower, made out in accordance with generally accepted
accounting principles in the United States and in
compliance with any applicable laws, in each case certified
by an independent certified public accountant of
internationally recognized standing reasonably acceptable
to the Agent;
20.1.4 as soon as available but not later than within 150 days
after the close of each of Spoerle's Fiscal Year, with an
audited consolidated annual balance sheet, including the
respective profit and loss account for such year and a
statement of changes in the financial position of Spoerle,
made out in accordance with generally accepted accounting
principles in the United States and in compliance with any
applicable laws, in each case certified by an independent
certified public accountant of internationally recognized
standing reasonably acceptable to the Agent;
20.1.5 as soon as available but not later than by the end of the
first quarter of each Fiscal Year with its annual budget
proposal for the subsequent Fiscal Year;
20.1.6 as soon as possible but not later than within 150 days
after the close of each of the Borrower's Fiscal Year with
a statement of the Chief Financial officer of the Borrower
which, in reasonable detail, demonstrates compliance with
the required Negative Covenants under Section X;
<PAGE>
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20.1.7 upon reasonable request by the Agent with other information
regarding the business, affairs or condition (financial or
otherwise) of the Borrower and all of its Subsidiaries, and
permit upon reasonable request, the Agent to inspect the
properties of the Borrower and any of its Subsidiaries and
to have the books or records of the Borrower and any of its
Subsidiaries inspected, audited, and examined by an
independent accounting firm to take extracts therefrom;
20.2 maintain such insurances as are normally maintained by companies
carrying on similar business in the place of its incorporation,
and duly pay all premiums and other moneys necessary for effecting
and keeping up such insurances as and when they become due;
20.3 give notice to the Banks in the event of the relocation of its
present corporate headquarters or the present corporate
headquarters of Spoerle;
20.4 maintain a Minimum Net Worth of DM 45,000,000.00 without taking
into account minority interests, if any;
20.5 notify the Agent promptly after becoming aware of the occurrence
of each Event of Default or each event which, with the giving of
notice or the lapse of time, or both, or the fulfilment of any
other condition would or might constitute an Event of Default
setting forth details of such Event of Default or event and the
action which the Borrower has taken or has caused to be taken or
proposes to take with respect thereto;
20.6 make the following representations and warranties to the Agent and
the Banks which shall be deemed to be continuing representations
and warranties until the Term Loan Maturity Date:
20.6.1 no event has occurred which constitutes or which, with the
giving of notice or the lapse of time, or both, or the
fulfilment of any other condition, would constitute an
Event of Default under this Agreement or a default under or
in respect of any loan agreement, contract or instrument
relating to borrowings to which the Borrower is a party,
aggregating at least DM 100,000.00, by which it is bound or
to which it or any of its assets may be subject to;
20.6.2 no litigation, arbitration or administrative proceedings
are presently pending or, to the best knowledge of the
Borrower, claimed against the Borrower which, if adversely
determined, would have a material adverse effect on the
business, assets or financial condition of the Borrower and
its Subsidiaries - taken as a whole - or on its ability to
perform its obligations under this Agreement;
20.6.3 no material adverse change has occurred in the financial
condition of the Borrower and its Subsidiaries - taken as a
whole - from that set forth in the Borrower's audited
consolidated balance sheet and profit and loss account for
Fiscal Year 1991;
<PAGE>
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20.7 advise the Agent with full particulars of any respect in which any
of the aforesaid representations and warranties cannot at any time
be renewed and save as stated by such advice it shall be deemed to
have renewed each of the following representations and warranties
at the beginning of each Interest Period;
20.8 undertake that the Banks obligations hereunder will at all times
constitute direct, unconditional, unsubordinated and general
obligations of, and will rank at all times at least pari passu
with all other present and future unsecured obligations issued,
created or assumed by the Borrower.
X. Negative Covenants
21. The Borrower agrees that as long as the Banks have any commitment to lend
under this Agreement, or as long as any amounts are outstanding under this
Agreement, the Borrower shall not:
Earnings Before Interest and Taxes (=EBIT) to Total Debt Service ratio:
21.1 permit that on any Reference Date and during the respective period
set forth below (to be determined at the end of each fiscal
quarter) the ratio of EBIT to Total Debt Service to be less than:
from the date of this Agreement through December 31, 1993 2.00 to 1
January 1, 1994 through December 31, 1994 2.25 to 1
January 1, 1995 through April 21, 2000 2.50 to 1
Leverage ratio:
21.2 permit that the Leverage ratio on any Reference Date and during
the respective period set forth below (to be determined at the end
of each fiscal quarter) exceed the ratio provided for such period
as hereinafter specified:
from the date of this Agreement through December 31, 1993 1.25 to 1
from January 1, 1994 through December 31, 1995 1.00 to 1
from January 1, 1995 through April 21, 2000 .75 to 1
21.3 permit that Minimum Net Worth on any Fiscal Year end to be less
than the amounts specified in Section IX, para 20.4;
21.4 allow any of its Subsidiaries to take any business actions, other
than in the ordinary course of business, which would have a
material adverse effect on the Borrower's financial condition
and/or the Borrower's ability to perform any of its obligations
under this Agreement;
21.5 incur or permit to exist outstanding any Indebtedness to any
Person, except Indebtedness of the Borrower incurred under this
Agreement and in the ordinary course of business with its trade
creditors which is not incurred through the borrowing of money or
the obtaining of credit through grace periods ("Zahlungsziele")
exceeding 60 days;
<PAGE>
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21.6 make, assume or incur, any Expenditures if by reason thereof the
aggregate of all such Expenditures would exceed the amount of
depreciation or an amount of not more than DM 200,000.00 in any
Fiscal Year. Such Expenditure shall be the sum of total leasing
costs plus total purchases of fixed assets for the Fiscal Year;
21.7 sell, assign, lease or otherwise dispose of (whether in one
transaction or in a series of transactions), all or substantially
all of its assets to any Person, without the prior written consent
of the Agent;
21.8 grant loans to any of its Subsidiaries or other Arrow Electronics,
Inc. group companies in Europe, except for (i) grace periods
resulting from trading receivables in the ordinary course of
business and (ii) loans funded out of Excess Cash and/or Cash;
21.9 grant loans to the Guarantor and/or any other Person which is not
associated with it or in which it is not a shareholder;
21.10 permit the stated balance in its share of unpaid Distributions
held in the non-permanent capital account of Spoerle to be less
than DM 20,000,000.00, without the prior written consent of the
Banks;
21.11 make Distributions, except to Electronics Distribution
International B.V., Nieuwegein/Netherland for Reinvestments in its
Subsidiaries in Europe;
21.12 undertake that, so long as any amount payable by the Borrower
hereunder shall remain unpaid, the Borrower shall not (except with
the Banks prior written consent), create or permit or subsist any
lien, security interest or other charge or encumbrance, or any
other type of preferential arrangement of any kind (hereinafter
the "encumbrance"), in respect of the whole or any part of the
Borrowers' present or future undertakings, property, assets or
revenues to secure any Indebtedness, whether present or future,
contingent or otherwise, other than:
21.12.1 any encumbrance which has been disclosed to the Banks in
writing prior to the execution hereof and secures only
Indebtedness outstanding at the date hereof;
21.12.2 encumbrance arising solely by operation of law and the
ordinary ordinary course of business or contained in any
contract for the purchase or the sale of goods or surplus
entered into in the ordinary course of business of the
company creating the same;
21.12.3 any encumbrance over or in relation to any fixed asset
and created for the purposes of financing the cost of
acquisition of such asset, where the amount secured by
such encumbrance does not exceed the cost of such
acquisition; and
<PAGE>
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21.12.4 any other encumbrances which in the aggregate for the
Borrower secure Indebtedness the principal amount of
which shall not exceed DM 1,000,000.00 of the
Borrowers' consolidated tangible net worth, unless
the Borrower ensures that such encumbrance shall
secure equally and ratably, to the Banks
satisfaction, the Borrowers' obligations to the Banks
hereunder.
XI. Events of Default
22. Upon the occurrence of any of the following events:
22.1 the Borrower fails to pay when due any interest and/or
principal amount due from it hereunder at the time and in the
manner specified herein and such failure to pay continues for
a period of ten Banking Days after the due date, or the
Borrower fails to pay when due any other amounts due from it
hereunder at the time and in the manner specified herein and
such failure to pay continues for a period of thirty Banking
Days after the due date; or
22.2 the Borrower fails to perform or to observe or violates any of
its obligations hereunder other than an obligation to make a
payment in particular the Borrower fails to comply with any of
its covenants contained in Section IX and Section X hereof and
such failure shall continue for 10 Banking Days; or
22.3 any statement made in this Agreement or any Exhibit thereto or
any document or instrument delivered or furnished pursuant to
this Agreement, or otherwise in connection with the
transactions contemplated hereby or any report, certificate,
financial statement or other instrument furnished in
connection with this Agreement, shall prove to have been false
or incorrect in any material respect when made and such false
or incorrect statement shall not be corrected within 10
Banking Days; or
22.4 the Borrower fails to pay when due or within any applicable
period of grace any principal, interest or any other amount
payable exceeding DM 100,000.00 or fails to observe and/or to
perform, and/or violates any obligations, representations or
warranties under any agreement or instrument other than this
Agreement, except for any amount disputed by the Borrower in
good faith; or
22.5 any change in the controlling Interest of the Borrower, except
for the transfer of the Interest of the Borrower within the
Arrow Electronics, Inc. Group; or
22.6 any reduction in the present 55% Interest of the Borrower in
Spoerle; or
22.7 the occurrence of substantial changes in the nature of the
Borrower's business and/or of that of its Subsidiaries carried
out at or from the date of this Agreement; or
<PAGE>
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22.8 any change of the Borrower's and/or its Subsidiaries' Articles
of Association has been made which has a material adverse
effect on the Borrower's ability to fulfil its obligations
under and in connection with this Agreement;
then, or at any time thereafter, in any such event and in addition to,
without limitation to, any of the Banks rights granted herein or
hereunder or under the AGBs (in particular Article 19 thereof) the
Agent may take either or both of the following actions:
(i) by written notice to the Borrower declare any principal amount
then still outstanding hereunder immediately due and payable,
whereupon the same shall become immediately due and payable by
the Borrower together with all interest accrued thereon and
any other amounts payable hereunder;
(ii) by written notice to the Borrower declare that this Agreement
shall be cancelled, whereupon the same shall be cancelled and
the Commitments of each Bank shall immediately be reduced to
nil.
The Borrower shall fully indemnify the Agent and the Banks for and
against any expenses (including but not limited to legal fees),
losses, damages or liabilities which the Agent or the Banks may incur
or sustain as a consequence of the occurrence of any Event of Default.
XII. Agency
23. Appointment of the Agent:
23.1 Each Bank irrevocably appoints the Agent to act as its agent
for the purposes of this Agreement and authorizes the Agent to
take any actions on its behalf and to exercise such rights,
powers and discretions hereunder as are specifically delegated
to the Agent by the terms hereof, together with such rights,
powers and discretions as the Agent considers reasonably
incidental thereto. The Agent shall have only those duties
and responsibilities which are expressly specified in this
Agreement. In connection with its rights, powers and
discretions under this Agreement, the Agent shall act solely
as the agent of each of the Banks, and the Agent shall not
assume, and shall not be deemed to have assumed, any
obligations to, or fiduciary relationship with, the Banks
other than those for which specific provision is made by this
Agreement or any obligations to, or fiduciary relationship
with, the Borrower.
23.2 In relation to the Security Documents entered into by the
Agent and/or the Banks, as the case may be, securing the
obligations of the Borrower under this Agreement, each of the
Banks hereby appoints the Agent as its agent to act in its
name and on its behalf for the purpose of taking all steps
necessary to create, perfect, administer and exercise its
respective rights under such Security Documents and the Agent
hereby agrees to act in such capacity.
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23.2.1 Each of the Banks hereby acknowledges and agrees that:
23.2.1.1 it shall not have any independent power to
enforce the security to be created or
evidenced by the Security Documents or any of
them or to exercise any rights, remedies,
discretions or powers or to grant any
consents or releases under or pursuant to the
Security Documents or any of them or
otherwise have direct recourse to the
security created or evidenced by the Security
Documents or any of them except through the
Agent; and
23.2.2.2 the Agent shall not be required to take any
action or proceedings under or in relation to
any of the Security Documents or to exercise
any of the rights, powers or discretions
conferred on it by any of the Security
Documents other than upon the instructions of
the Banks; and
23.2.2.3 the Agent shall not take any actions to
enforce the security created or evidenced by
the Security Documents unless or until it
shall have received instructions from the
Banks directing it to do so, whereupon the
Agent shall, to the extent that it is legally
entitled to do so, take action to enforce
such security in the manner (and only in the
manner) directed by the Banks.
23.3 In the event of a realization of securities all amounts so
received by the Agent pursuant to the terms and conditions of
the Security Documents shall (except as otherwise provided
herein) be applied in the following order of priority:
23.3.1 first, in or towards payment of any amount then due
to the Agent under Section XV, para 30;
23.3.2 second, in or toward payment of any amount due to the
Agent and the Banks pro-rata to their share in the
aggregate Drawing under the Term Loan.
23.4 In acting as agent of the Banks for the purpose of this
Agreement the Agent shall be exempted from the restrictions
otherwise imposed upon it by the provisions of Section 181 of
the German Civil Code ("Burgerliches Gesetzbuch").
24. Agent's Rights:
The Agent may
24.1 assume that none of the events mentioned in Section XI. has
occurred and that the Borrower is not in breach of or in
default under its obligations hereunder unless it has actual
knowledge or actual notice to the contrary;
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24.2 assume that each Bank's funding office is that identified at
the date hereof in Exhibit . until it has received from such
Bank a notice designating some other office of such Bank as
its funding office and act upon any such notice until the same
is superseded by a further such notice;
24.3 engage and pay for the advice or services of any lawyers,
accountants, surveyors or other experts whose advice or
services may to it deem necessary, expedient or desirable in
connection with this Agreement, the transaction contemplated
therein or the Security Documents and rely upon any advice so
obtained;
24.4 rely as to any matters of fact which might reasonably be
expected to be within the knowledge of the Borrower upon a
certificate signed by or on behalf of the Borrower;
25.5 rely upon any communication or document believed by it to be
genuine;
24.6 refrain from exercising any right, power or discretion vested
in it under this Agreement or the Security Documents unless
and until instructed by the Banks as to whether or not such
right, power or discretion is to be exercised and, if it is to
be exercised, as to the manner in which it should be
exercised; and
24.7 refrain from acting in accordance with any instructions of the
Banks to begin any legal action or proceeding arising out of
or in connection with this Agreement or the Security Documents
until it shall have been indemnified and/or secured to its
satisfaction against any and all costs, claims, expenses
(including legal fees) and liabilities which it will or may
expend or incur in complying with such instructions.
25. Agent's Duties:
The Agent shall
25.1 promptly inform each Bank of the contents of any notice or
document received by it from the Borrower hereunder;
25.2 promptly notify each Bank of the occurrence of any of those
events mentioned in Section XI or any default by the Borrower
in the due performance of its obligations under this Agreement
of which the Agent has actual knowledge or actual notice;
25.3 subject to the foregoing provisions of this Section, act in
accordance with any instructions given to it by the Banks; and
25.4 if so instructed by the Banks, refrain from exercising a
right, power or discretion vested in it under this Agreement.
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26. Exoneration of Agent:
26.1 Notwithstanding anything to the contrary expressed or
implied herein, the Agent shall not:
26.1.1 be bound to enquire as to the occurrence or otherwise
of any of those events mentioned in Section XI, as to
the performance by the Borrower of its obligations
hereunder or as to any breach of or default by the
Borrower of or under its obligations hereunder;
26.1.2 be bound to account to any Bank for any amount or the
profit element of any amount received by it or them
for its or their own account;
26.1.3 be bound to disclose to any other person any
information relating to the Borrower if such
disclosure would or might in its opinion constitute a
breach of any law or regulation or be otherwise
actionable at the suit of any person; or
26.1.4 be under any obligations other than those for which
express provision is made herein.
26.2 The Agent shall not have any responsibility for the accuracy
and/or completeness of any information in connection with the
transactions contemplated by this Agreement and the Security
Documents or for the legality, validity, effectiveness,
adequacy or enforceability of this Agreement or the Security
Documents, or any document delivered pursuant hereto and
neither the Agent nor any of its respective directors,
officers or employees shall be under any liability as a result
of taking or omitting to take any action in relation to this
Agreement or the Security Documents, or any such other
document save in the case of gross negligence or wilful
misconduct.
27. Indemnity to Agent:
To the extent that (i) the Borrower is obliged by this Agreement to
indemnify the Agent but does not do so (but without in any way
affecting or limiting any such obligation, in respect of which the
Banks shall be subrogated to the Agent's rights to the extent of their
respective payments to the Agent under this paragraph) or (ii) the
Borrower is not obliged to do so, each Bank shall indemnify the Agent
in the proportion borne by its outstandings under the Term Loan (or,
if no Drawing is then outstanding, in the proportion borne by its
Commitment to the total Commitments) at the time any such instructions
are given, against any and all costs, claims, expenses (including
legal fees) and liabilities which the Agent may incur in complying
with any instructions received by it from the Banks other than those
arising from its own gross negligence or wilful misconduct in
complying with those instructions.
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28. Non-Reliance on the Agent:
28.1 It is understood and agreed by each Bank that it has itself
been, and will continue to be, solely responsible for making
its own independent appraisal of and investigations into the
financial condition, creditworthiness, condition, affairs,
status and nature of the Borrower and accordingly each Bank
confirms to the Agent that it has not relied, and will not
hereinafter rely on the Agent:
28.1.1 to check or enquire on its behalf into the adequacy,
accuracy or completeness of any information provided
by the Borrower in connection with this Agreement or
the Security Documents (whether or not such
information has been or is hereafter circulated to
such Bank by the Agent); or
28-1.2 to assess or keep under review on its behalf the
financial condition, creditworthiness, condition,
affairs, status or nature of the Borrower.
29. Termination of the Agency:
The Agent may resign its appointment hereunder. After the giving of
any notice of proposed termination, the Banks may in writing appoint,
on behalf of the Banks, a successor as Agent. If such successor has
not accepted in writing the appointment within a thirty (30) days
period after the notice of proposed termination, the Agent may within
a further thirty (30) days appoint, on behalf of the Banks, a
successor which shall be a reputable and experienced bank. Upon the
written acceptance (in such form as the Banks may approve) by the
successor of its appointment as Agent:
29.1 as regards the Borrower and each of the Banks, such successor
shall become bound by all the obligations of the Agent and
become entitled to all the rights, privileges, powers,
authorities and discretions of the Agent under the Agreement
or under the Security Documents;
29.2 the agency of the retiring Agent shall terminate but without
prejudice to any liabilities which the retiring Agent may have
incurred prior to the termination of its agency;
29.3 the retiring Agent shall be discharged from any further
liability or obligations under this Agreement and the Security
Documents; and
29.4 the provisions of this Agreement shall continue to be in
effect for the benefit of any retiring Agent in respect of any
actions taken or omitted to be taken by it or any event
occurring before the termination of its agency.
<PAGE>
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XIII. Miscellaneous
30. Costs:
Any reasonable costs and expenses (including but not limited to all
legal, accountants, and other out of pocket expenses) of the Agent
incurred in connection with the preparation, signing, carrying out,
administration, fulfilment and enforcement of this Agreement and the
Security Documents shall be borne by the Borrower.
31. Assignments:
The rights and claims of the Borrower under this Agreement shall not
be assignable by the Borrower without the prior written consent of the
Banks. Nor may any Bank sell, assign, transfer, grant participations
in, or otherwise dispose of all or any portion of their respective
Commitment, or of its right, title and interest therein or thereto or
to this Agreement.
32. Amendments and Waiver:
No amendment or waiver of any provision of this Agreement or any loan
document shall in any event be effective unless the same shall be in
writing and signed by the Banks.
No failure to exercise and no delay in exercising on the part of the
Agent and the Banks of any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise
of any right, power or privilege preclude any other right, power or
privilege. The rights and remedies herein provided are cumulative and
not exclusive of any rights or remedies provided by law.
33. Partial Invalidity:
If any of the provisions of this Agreement becomes invalid, illegal or
unenforceable in any respect under any applicable law, the validity,
legality and enforceability of the remaining provisions shall not in
any way be affected or impaired. Any deficiency in this Agreement
which might result from such invalidity or enforceability shall be
remedied by supplemental interpretation of this Agreement under due
consideration of the interests of the parties hereto.
34. Confidentiality:
The Borrower may from time to time designate certain documents or
other information delivered by it to the Agent or the Banks pursuant
to Section IX as confidential in nature, and the Agent and each Bank
agree that they will use their customary procedures to keep such
information confidential, it being understood that a) the Agent or any
Bank may disclose such information to any other Bank with prior
written consent of the Borrower which consent shall not be
unreasonably withheld, and b) the Agent and each Bank has the right
and may have the obligation, to disclose such information: (i) to any
banking or other regulatory or examining authorities or to other
governmental agencies; (ii) pursuant to subpoena or other legal
process; (iii) the Agent's or such Bank's independent auditors and
counsel and (iv) otherwise as may be required by law.
<PAGE>
- 23 -
35. Jurisdiction and Governing Law:
This Agreement and the rights and obligations of the parties hereunder
shall be construed in accordance with and governed by the law of the
Federal Republic of Germany.
Place of performance and place of jurisdiction shall be Frankfurt am
Main, Federal Republic of Germany.
36. General Business Conditions:
In addition to the foregoing provisions the AGBs shall apply.
In witness whereof, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of April 14, 1993.
<PAGE>
- 24 -
<TABLE>
<S> <C>
/s/ /s/
- ----------------------------- ------------------------------------
on behalf of on behalf of
Arrow Electronics GmbH, Dreieich Berliner Handels- und
Frankfurter Bank, Frankfurt
as agent
/s/
-----------------------------
on behalf of
Berliner Handels - und
Frankfurter Bank
for a commitment of DM 25,000,000.00
/s/
-----------------------------
on behalf of
National Westminster
Bank AG
for a commitment of
DM 12,500,000.00
/s/
-----------------------------
on behalf of
Schweizerische
Kreditanstalt
(Deutschland) AG
for a commitment of
DM 12,500,000.00
</TABLE>
