<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 21, 1995
REGISTRATION NO. 33-61385
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
------------------------
KENT ELECTRONICS CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
TEXAS 74-1763541
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
7433 HARWIN DRIVE STEPHEN J. CHAPKO
HOUSTON, TEXAS 77036 7433 HARWIN DRIVE
(713) 780-7770 HOUSTON, TEXAS 77036
(Address, including zip code, and (713) 780-7770
telephone number, including area code, (Name, address, including zip code, and
of registrant's principal executive telephone number, including area code,
offices) of agent for service)
</TABLE>
Copies to:
<TABLE>
<S> <C>
GENE G. LEWIS L. PROCTOR THOMAS
LIDDELL, SAPP, ZIVLEY, HILL & LABOON, BAKER & BOTTS, L.L.P.
L.L.P. ONE SHELL PLAZA
TEXAS COMMERCE TOWER 910 LOUISIANA
600 TRAVIS HOUSTON, TEXAS 77002
HOUSTON, TEXAS 77002 (713) 229-1234
(713) 226-1200
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
------------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE> 2
***************************************************************************
* *
* INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A *
* REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED *
* WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT *
* BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE *
* REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT *
* CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY *
* NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH *
* SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO *
* REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH *
* STATE. *
* *
***************************************************************************
SUBJECT TO COMPLETION, DATED AUGUST 21, 1995
PROSPECTUS
2,000,000 SHARES
LOGO
KENT ELECTRONICS CORPORATION
COMMON STOCK
------------------
All 2,000,000 shares of common stock, no par value (the "Common Stock"),
offered hereby are being offered by Kent Electronics Corporation (the
"Company"). The Common Stock is traded on the New York Stock Exchange under the
symbol "KNT." The last reported sale price of the Common Stock on the New York
Stock Exchange on August 18, 1995 was $39.00 per share. See "Price Range of
Common Stock."
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
-----------------------------------------------------------------------------------------------
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
-----------------------------------------------------------------------------------------------
Per Share $ $ $
-----------------------------------------------------------------------------------------------
Total(3) $ $ $
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
</TABLE>
(1) For information regarding indemnification of the Underwriters, see
"Underwriting."
(2) Before deducting expenses estimated at $400,000, payable by the Company.
(3) The Company has granted the Underwriters a 30-day option to purchase up
to 300,000 additional shares of Common Stock solely to cover
over-allotments, if any. See "Underwriting." If such option is exercised
in full, the total Price to Public, Underwriting Discounts and
Commissions, and Proceeds to Company will be $ , $ and
$ , respectively.
------------------
The shares of Common Stock are being offered by the several Underwriters
named herein, subject to prior sale, when, as and if accepted by them and
subject to certain conditions. It is expected that certificates for the shares
of Common Stock offered hereby will be available for delivery on or about
September , 1995 at the office of Smith Barney Inc., 388 Greenwich Street, New
York, New York 10013.
------------------
SMITH BARNEY INC. MERRILL LYNCH & CO.
September , 1995
<PAGE> 3
K*TEC--
CUSTOM ELECTRONICS MANUFACTURING
[PHOTO]
K*TEC contract manufacturing facility.
<TABLE>
<S> <C> <C>
[PHOTO] [PHOTO] [PHOTO]
Assorted electronic Automated, high technology Specially fabricated
interconnect assemblies. manufacturing equipment electronic product.
</TABLE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and consolidated financial
statements, including the notes thereto, included elsewhere or incorporated by
reference in this Prospectus. The Company's fiscal year ends on the Saturday
closest to the end of March of each year resulting in either a 52- or 53-week
year. References to fiscal years by date refer to the fiscal year ending in that
calendar year; for example, "fiscal 1996" ends March 30, 1996.
THE COMPANY
Kent Electronics Corporation is a leading national specialty distributor of
electronic products and a manufacturer of custom-made electronic assemblies. The
Company, through its Kent Components Distribution division, distributes
electronic connectors, electronic wire and cable, and other passive and
electromechanical products and interconnect assemblies used in assembling and
manufacturing electronic products. The Company, through its wholly owned
subsidiary K*TEC Electronics Corporation ("K*TEC"), also manufactures
custom-made electronic interconnect assemblies, battery power packs and other
sub-assemblies that are built to customers' specifications. Through Kent
Datacomm ("Datacomm"), the Company distributes a broad range of premise wiring
products, such as fiber optic cables, patch panels and enclosures, and local
area network ("LAN") and wide area network ("WAN") equipment, such as modems,
hubs, bridges and routers, directly to commercial end-users and professionals
who install and service voice and data communications networks.
The Company has concentrated its efforts on certain market niches and has
not attempted to be a broad-line distributor. Moreover, it has followed a
strategy of distributing the products of a selected group of leading suppliers.
The Company believes that these factors provide its marketing personnel with the
advantage of greater familiarity with the products they sell. The Company is
increasingly focused on providing materials management services, such as bar
coded auto replenishment, in-plant stores, and electronic data interchange
("EDI") capabilities, that reduce its customers' total acquisition costs. In
response to customer needs and market opportunities, the Company regularly
reviews the possibility of adding other products and services to its
distribution network to provide customers with an entire materials management
solution. K*TEC concentrates on developing long-term relationships with a select
group of original equipment manufacturers ("OEMs") desiring to lower their total
production cost through outsourcing.
The Company's customers are primarily industrial users and OEMs involved in
a wide range of industries, including the data communication/collection,
computer, industrial/capital goods and medical industries.
The Company maintains its primary distribution facility in Houston, Texas,
with sales offices in 17 states, some of which maintain a limited amount of
local inventory and provide selected services to support specific customer
needs. The Company operates manufacturing facilities in Houston and Dallas,
Texas and the San Jose, California area. The Company's principal executive
offices are located at 7433 Harwin Drive, Houston, Texas 77036; telephone number
(713) 780-7770.
3
<PAGE> 5
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company................. 2,000,000 shares(1)
Common Stock to be Outstanding after the Offering... 11,828,420 shares(1)(2)
Use of Proceeds..................................... To finance the construction of new
facilities, and for working capital
requirements and general corporate
purposes. See "Use of Proceeds."
New York Stock Exchange Symbol...................... KNT
</TABLE>
---------------
(1) Assumes that the Underwriters' over-allotment option is not exercised.
(2) As of July 27, 1995, does not include 1,186,020 shares reserved for issuance
upon the exercise of outstanding stock options.
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THIRTEEN
FISCAL YEAR ENDED WEEKS ENDED
------------------------------------------------------ -----------------
MARCH 30, MARCH 28, APRIL 3, APRIL 2, APRIL 1, JULY 2, JULY 1,
1991 1992 1993 1994 1995 1994 1995
--------- --------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING STATEMENT DATA:
Net sales................. $71,013 $94,695 $154,677 $192,887 $253,484 $56,527 $77,585
Gross profit.............. 20,493 26,489 42,270 50,648 64,877 14,524 19,973
Selling, general and
administrative
expenses............... 14,790 18,563 30,806 36,012 43,917 10,070 12,675
Earnings before income
taxes.................. 6,026 9,166 12,162 15,379 22,075 4,604 7,798
Net earnings.............. 3,776 5,769 7,723 9,535 13,386 2,831 4,679
Earnings per share........ $ .63 $ .69 $ .80 $ .96 $ 1.32 $ .28 $ .45
Weighted average shares... 6,002 8,420 9,675 9,881 10,138 10,013 10,306
</TABLE>
<TABLE>
<CAPTION>
JULY 1, 1995
---------------------------
ACTUAL AS ADJUSTED(1)
-------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Total assets..................................................... $142,383 $216,283
Long-term debt, less current maturities.......................... -- --
Stockholders' equity............................................. 113,809 187,709
</TABLE>
---------------
(1) As adjusted to give effect to the sale of 2,000,000 shares of Common Stock
offered by the Company hereby at an assumed offering price of $39.00 per
share and the application of the estimated net proceeds thereof.
4
<PAGE> 6
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Common Stock offered
hereby, assuming an offering price of $39.00 per share, are estimated to be
$73,900,000 ($85,045,000 if the Underwriters' over-allotment option is exercised
in full), after deducting estimated underwriting discounts and commissions and
expenses of the offering payable by the Company.
The net proceeds will be used primarily for the construction of new
facilities and development and implementation of new information systems. The
remainder of the net proceeds will be used to fund increases in working capital
and for general corporate purposes. The Company is currently constructing the
first phase of a new manufacturing facility, scheduled for completion in Fall
1995, and plans to commence construction of the second phase of the
manufacturing facility and a new distribution facility within the next twelve
months. The currently estimated aggregate cost of construction of such
facilities is $45 million. See "Business -- New Facilities." In addition, within
the next two years, the Company plans to complete the implementation of new
information systems at an estimated aggregate cost of $13 million for hardware,
software and consulting expenses.
The Company believes that it receives a competitive advantage from and its
success depends on, among other things, substantial financial strength and
flexibility. In addition, the Company from time to time considers acquisitions
of complementary businesses or assets. Although there are no current agreements
or understandings with respect to any such acquisitions, the Company desires to
be able to respond to opportunities as they arise. Until the net proceeds of the
offering are utilized, they will be invested in short-term instruments.
5
<PAGE> 7
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is listed on the New York Stock Exchange and
trades under the symbol "KNT." The following table presents the high and low
closing prices for the Common Stock for each of the last two calendar years and
for a portion of the current year, as reported by the New York Stock Exchange
and as adjusted to reflect a three-for-two stock split to shareholders of record
on February 15, 1995 effected on March 1, 1995 as a 50% stock dividend.
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
1993
First Quarter............................................ $18.25 $16.00
Second Quarter........................................... 18.17 13.92
Third Quarter............................................ 17.25 13.67
Fourth Quarter........................................... 19.09 17.17
1994
First Quarter............................................ $21.17 $17.83
Second Quarter........................................... 21.33 17.83
Third Quarter............................................ 24.33 20.33
Fourth Quarter........................................... 26.67 22.83
1995
First Quarter............................................ $30.75 $25.84
Second Quarter........................................... 37.75 28.13
Third Quarter (through August 18)........................ 41.88 37.50
</TABLE>
As of July 1, 1995, the Common Stock was held by 1,106 holders of record.
The number of record holders may not be representative of the number of
beneficial holders because many shares are held by depositaries, brokers, or
other nominees.
DIVIDEND POLICY
Historically, the Company has reinvested earnings available to Common Stock
in its business and, accordingly, has not paid any cash dividends on its Common
Stock. Although the Company intends to continue to invest future earnings in its
business, it may determine at some future date that payment of cash dividends on
Common Stock would be desirable. The payment of any such dividends would depend,
among other things, upon the earnings and financial condition of the Company.
6
<PAGE> 8
CAPITALIZATION
The following table sets forth the capitalization of the Company as of July
1, 1995 and as adjusted to reflect the sale by the Company of the 2,000,000
shares of Common Stock offered hereby at an assumed offering price of $39.00 per
share and the application of the estimated net proceeds thereof.
<TABLE>
<CAPTION>
JULY 1, 1995
------------------------
ACTUAL AS ADJUSTED
-------- -----------
<S> <C> <C>
(IN THOUSANDS)
Long-term debt, less current maturities....................... $ -- $ --
Stockholders' equity
Preferred stock, $1.00 par value, 2,000,000 shares
authorized, none issued.................................. -- --
Common stock, no par value, 30,000,000 shares authorized,
9,812,818 shares issued and outstanding (11,812,818
shares as adjusted)...................................... 34,836 34,856
Additional paid-in capital.................................... 25,451 99,331
Retained earnings............................................. 53,522 53,522
-------- --------
Total stockholders' equity............................... 113,809 187,709
-------- --------
Total capitalization.......................................... $113,809 $ 187,709
======== ========
</TABLE>
7
<PAGE> 9
SELECTED CONSOLIDATED FINANCIAL DATA
The following table summarizes selected consolidated financial data of the
Company for each year of the five-year period ended April 1, 1995, and the
unaudited consolidated financial data for the thirteen weeks ended July 2, 1994
and July 1, 1995, and should be read in conjunction with the "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Consolidated Financial Statements included elsewhere herein.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THIRTEEN WEEKS ENDED
------------------------------------------------------ -------------------------
MARCH 30, MARCH 28, APRIL 3, APRIL 2, APRIL 1, JULY 2, JULY 1,
1991 1992 1993 1994 1995 1994 1995
--------- --------- -------- -------- -------- -------- --------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING STATEMENT DATA:
Net sales............................ $71,013 $94,695 $154,677 $192,887 $253,484 $ 56,527 $ 77,585
Gross profit......................... 20,493 26,489 42,270 50,648 64,877 14,524 19,973
Selling, general and administrative
expenses........................... 14,790 18,563 30,806 36,012 43,917 10,070 12,675
Earnings before income taxes......... 6,026 9,166 12,162 15,379 22,075 4,604 7,798
Income taxes......................... 2,250 3,397 4,439 5,844 8,689 1,773 3,119
Net earnings......................... 3,776 5,769 7,723 9,535 13,386 2,831 4,679
Earnings per share................... $ .63 $ .69 $ .80 $ .96 $ 1.32 $ .28 $ .45
Weighted average shares.............. 6,002 8,420 9,675 9,881 10,138 10,013 10,306
</TABLE>
<TABLE>
<CAPTION>
JULY 1, 1995
-------------------------
MARCH 30, MARCH 28, APRIL 3, APRIL 2, APRIL 1, AS
1991 1992 1993 1994 1995 ACTUAL ADJUSTED(1)
--------- --------- -------- -------- -------- -------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets......................... $35,868 $84,581 $ 98,390 $114,507 $133,890 $142,383 $216,283
Long-term debt, less current
maturities......................... 733 -- -- -- -- -- --
Stockholders' equity................. 28,106 71,592 81,695 92,519 108,800 113,809 187,709
</TABLE>
---------------
(1) As adjusted to give effect to the sale of 2,000,000 shares of Common Stock
offered by the Company hereby at an assumed offering price of $39.00 per
share and the application of the estimated net proceeds thereof.
8
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
CORPORATE OVERVIEW
The Company's net sales have increased rapidly as a result of increased
demand and the expansion of the electronic components industry. In addition, as
suppliers of electronic components have reduced their sales to lower-volume
customers, more customers have increasingly relied on distributors. K*TEC has
benefitted from a growing trend by many OEMs toward focusing on their core
competencies and outsourcing the manufacturing of certain assemblies and
subassemblies. The growth in sales, coupled with the Company's continued focus
on cost containment, has contributed to the significant increase in
profitability. To take advantage of these trends, the Company is expanding its
manufacturing and distribution capacity by the addition of its new facilities in
Sugar Land, Texas. See "Use of Proceeds" and "Business -- New Facilities."
RESULTS OF OPERATIONS
The following table presents, as a percentage of sales, certain selected
consolidated financial data for each of the periods indicated.
<TABLE>
<CAPTION>
THIRTEEN WEEKS
FISCAL YEAR ENDED ENDED
---------------------------------- -------------------
APRIL 3, APRIL 2, APRIL 1, JULY 2, JULY 1,
1993 1994 1995 1994 1995
-------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Manufacturing.................................... 33.2% 34.4% 38.0% 37.9% 40.3%
Distribution..................................... 66.8 65.6 62.0 62.1 59.7
----- ----- ----- ----- -----
Net sales........................................ 100.0 100.0 100.0 100.0 100.0
Cost of sales.................................... 72.7 73.7 74.4 74.3 74.3
----- ----- ----- ----- -----
Gross profit..................................... 27.3 26.3 25.6 25.7 25.7
Selling, general and administrative expenses..... 19.9 18.7 17.3 17.8 16.3
----- ----- ----- ----- -----
Operating profit................................. 7.4 7.6 8.3 7.9 9.4
Other income (expense)
Interest expense............................... -- -- -- -- --
Other -- net (principally interest and dividend
income)..................................... 0.5 0.4 0.4 0.2 0.7
----- ----- ----- ----- -----
Earnings before income taxes..................... 7.9 8.0 8.7 8.1 10.1
Income taxes..................................... 2.9 3.0 3.4 3.1 4.0
----- ----- ----- ----- -----
Net earnings..................................... 5.0% 5.0% 5.3% 5.0% 6.1%
===== ===== ===== ===== =====
</TABLE>
COMPARISON OF THIRTEEN WEEKS ENDED JULY 1, 1995 AND JULY 2, 1994
Net sales for the thirteen weeks ended July 1, 1995 increased $21,058,000,
or 37.3%, when compared to the same period of the prior year. The sales increase
was attributable to increased demand from existing customers and an expanding
customer base.
Gross profit increased $5,449,000, or 37.5%, compared to the corresponding
period a year ago. Gross profit as a percentage of sales for the period was
25.7%, remaining the same as the corresponding period of the previous year.
Although gross margins have stabilized, highly competitive conditions continue
in the electronics and personal computer industries. The increase in gross
profit was primarily due to increased sales.
Selling, general and administrative ("SG&A") expenses increased $2,605,000,
or 25.9%, compared to the same period last year. However, as a percentage of
sales, such expenses declined to 16.3% from 17.8% in the prior year period. The
decline as a percentage of sales reflects the Company's continued focus on cost
containment to reduce such expenses as a percentage of sales. The increase in
SG&A expenses was primarily due to the expenses necessary to support the growth
in the Company's existing operations.
9
<PAGE> 11
Other-net consists principally of interest and dividend income generated by
cash, cash equivalents and trading securities. The increase in interest and
dividend income is due primarily to higher interest rates and a reduction of
unrealized losses on trading securities.
Net earnings increased $1,848,000, or 65.3%, compared to the corresponding
period a year ago. The additional profit from the increased sales and the
Company's continued focus on cost containment were the primary reasons for the
improved profitability.
COMPARISON OF FISCAL YEAR 1995 WITH FISCAL YEAR 1994
Net sales for the fiscal year ended April 1, 1995 increased $60,596,687, or
31.4%, compared to the prior year. The sales increase reflected internal growth,
primarily from increased demand from existing customers and an expanded customer
base.
Gross profit increased $14,229,197, or 28.1%, when compared to the prior
year. Gross profit as a percentage of sales decreased to 25.6% from 26.3% in the
previous year. The decline in the gross profit percentage was primarily due to
the highly competitive conditions in the electronics and personal computer
industries, creating downward pressure on margins. The increase in gross profit
was primarily due to increased sales, partially offset by a slight decline in
the gross profit percentage.
SG&A expenses increased $7,904,923, or 22.0%, when compared to the
preceding year. As a percentage of sales, such expenses decreased to 17.3% from
18.7% in the previous year. The decline as a percentage of sales reflected the
Company's continued focus on cost containment to reduce such expenses as a
percentage of sales. The increase in SG&A expenses was primarily due to the
expenses necessary to support the growth of the Company's existing operations.
Other-net consists principally of interest and dividend income generated by
cash, cash equivalents and trading securities. The increase in interest and
dividend income was due to the Company shifting a portion of available funds
into a higher yielding taxable investment vehicle from a tax-exempt municipal
money market fund and higher interest rates.
The Company's effective tax rate increased due to an increase in operating
income and taxable interest and dividend income. The increase in operating
income, along with the increase in taxable interest and dividend income,
subjected the Company to a higher graduated federal income tax rate.
Net earnings increased $3,851,048, or 40.4%, when compared to the prior
year. The improved profitability was primarily due to the incremental profit
associated with the increase in sales volume.
COMPARISON OF FISCAL YEAR 1994 WITH FISCAL YEAR 1993
Net sales for the fiscal year ended April 2, 1994 increased $38,210,145, or
24.7%, when compared to the prior year. The sales increase was attributable to
increased demand from existing customers and an expanding customer base.
Gross profit increased $8,377,901, or 19.8%, compared to the preceding
year. Gross profit as a percentage of sales decreased to 26.3% from 27.3% in the
previous year. The decline in gross profit percentage was primarily due to the
highly competitive conditions in the electronics and personal computer
industries, creating a downward pressure on margins. The increase in gross
profit was primarily due to increased sales, partially offset by a slight
decline in the gross profit percentage.
SG&A expenses increased $5,206,121, or 16.9%, when compared to the prior
fiscal year. However, as a percentage of sales, such expenses declined to 18.7%
from 19.9% in the preceding year. The decline as a percentage of sales reflected
the Company's continued focus on cost containment. The increase in SG&A expenses
was primarily due to the expenses necessary to support the growth in the
Company's existing operations.
Other-net consisted principally of interest and dividend income generated
by cash, cash equivalents and short-term investments. The increase in interest
and dividend income was primarily due to the Company
10
<PAGE> 12
shifting a greater portion of its available funds from a tax-exempt to a taxable
investment vehicle which provided an increased yield. The increase in interest
and dividend income was also due to an increase in funds available for
investing.
The Company's effective tax rate increased in fiscal year 1994 due to an
increase in federal income tax rates and a decline in the amount of tax-free
interest and dividend income. The decrease in tax-free interest and dividend
income made a greater portion of the Company's income subject to income taxes.
Net earnings increased $1,811,871, or 23.5%, when compared to the prior
year. The additional profit from the increased sales was the primary factor for
the improved profitability.
LIQUIDITY AND CAPITAL RESOURCES
Working capital at July 1, 1995 was $69,475,000, an increase of $3,156,000
from April 1, 1995. Included in the Company's working capital at July 1, 1995
are investments of $27,712,000. The Company's investment strategy is low-risk
and short-term, keeping the funds readily available to meet capital requirements
as they arise in the normal course of business. The Company's primary investment
vehicle is a managed fund consisting primarily of taxable, high quality
corporate debt instruments, and is compatible with the Company's stated
investment strategy.
The Company intends to apply its capital resources to expand its business
by establishing or acquiring similar distribution and manufacturing operations
in geographic areas that are attractive to the Company, by acquiring new
facilities and by enlarging or improving existing facilities. In addition to the
capital required to purchase existing businesses or to fund start-up operations,
the expansion of the Company's operations at both new and existing locations
will require greater levels of capital to finance the purchase of additional
equipment, increased levels of inventory and greater accounts receivable.
The Company is currently expanding its manufacturing capacity by building a
new facility on a recently purchased 66-acre parcel of land in Sugar Land,
Texas. Facility construction and equipment will require capital expenditures in
this fiscal year, currently estimated at $14 million, of which approximately $2
million has been spent, with the remainder of the project to be completed in
this fiscal year. Management believes that current resources, along with funds
generated from operations, should be sufficient to meet its current capital
requirements and those anticipated this fiscal year. With this offering,
management believes that the Company will have adequate capital to construct
additional new manufacturing and distribution facilities and implement new
information systems. See "Use of Proceeds" and "Business -- New Facilities."
11
<PAGE> 13
BUSINESS
GENERAL
The Company is a leading national specialty distributor of electronic
products and a manufacturer of custom-made electronic assemblies. The Company,
through its Components division, distributes electronic connectors, electronic
wire and cable, and other passive and electromechanical products and
interconnect assemblies used in assembling and manufacturing electronic
products. The Company, through its wholly owned subsidiary K*TEC, also
manufactures custom-made electronic interconnect assemblies, battery power
packs and other subassemblies that are built to customers' specifications.
Through Datacomm, the Company distributes a broad range of premise wiring
products, such as fiber optic cables, patch panels and enclosures, and LAN and
WAN equipment, such as modems, hubs, bridges and routers, directly to
commercial end-users and professionals who install and service voice and data
communications networks.
The Company has concentrated its efforts on certain market niches and has
not attempted to be a broad-line distributor. Moreover, it has followed a
strategy of distributing the products of a selected group of leading suppliers.
The Company believes that these factors provide its marketing personnel with the
advantage of greater familiarity with the products they sell. The Company is
increasingly focused on providing materials management services, such as bar
coded auto replenishment, in-plant stores, and EDI capabilities, that reduce its
customers' total acquisition costs. In response to customer needs and market
opportunities, the Company regularly reviews the possibility of adding other
products and services to its distribution network to provide customers with an
entire materials management solution. K*TEC concentrates on developing long-term
relationships with a select group of OEMs desiring to lower their total
production cost through outsourcing.
The Company's customers are primarily industrial users and OEMs involved in
a wide range of industries, including the data communication/collection,
computer, industrial/capital goods and medical industries.
The Company maintains its primary distribution facility in Houston, Texas,
with sales offices in 17 states, some of which maintain a limited amount of
local inventory and provide selected services to support specific customer
needs. The Company operates manufacturing facilities in Houston and Dallas,
Texas and the San Jose, California area.
DISTRIBUTION
GENERAL. The principal focus of the Company's distribution business,
conducted through its Components division, is to provide its industrial and OEM
customers with rapid and reliable deliveries of specialty wiring and connector
products and other passive and electromechanical products and assembled parts as
well as a wide variety of materials management services. The Company utilizes a
computerized inventory control system to assist in the marketing of its products
and coordinate purchases from suppliers with sales to customers. The Company's
computer system provides detailed on-line information regarding the availability
of the Company's entire stock of inventory located at its stocking facilities as
well as on-line access to the inventories of most of the Company's major
suppliers. Through the Company's integrated real-time information system,
customers' orders can readily be tracked through the entire process of entering
the order, reserving products to fill the order, ordering components from
suppliers, if necessary, and shipping products to customers on scheduled dates.
The Company is thus able to provide the type of distributor service required by
its OEM customers that have adopted the "just-in-time" method of inventory
procurement. The "just-in-time" method is utilized in an effort to operate more
efficiently and profitably by relying on scheduled deliveries of such components
at the time they are needed in the production process and thereby reducing
inventories of components.
The principal products the Company distributes consist of connectors,
receptacles and sockets, which collectively accounted for approximately 19%, 20%
and 20% of the Company's total sales in its fiscal years ended in 1995, 1994 and
1993, respectively, and other electronic connecting components, such as cable
and wiring products, which accounted for approximately 8%, 8% and 9% of the
Company's total sales in such years. In addition, the Company distributes
capacitors, resistors and electromechanical parts.
12
<PAGE> 14
As is customary in the electronic distribution industry, the Company
primarily operates under short-term contracts with its suppliers. In the
Company's past experience, such contracts have typically been renewed from year
to year. In the year ended April 1, 1995, the Company's purchases from AMP
Incorporated represented approximately 24% of its total purchases. Although the
Company believes that it may be able to obtain competitive products of
comparable quality from other suppliers, the loss of such supplier could have an
adverse impact on the Company's operations.
AFTERMARKET OPERATIONS. Datacomm serves the voice and data communications
after-market. Through a focused sales effort, Datacomm offers a broad range of
premise wiring products and LAN and WAN equipment to commercial end-users and
professionals who install or service voice and data communications networks.
Through such a marketing approach, the Company believes it is able to
participate directly in the large and rapidly growing market for connection
devices, reflecting the increasing use of microcomputers in LANs and WANs and
the continued growth in networking and cabling needs of minicomputer and
mainframe users. Datacomm can provide customers with immediate off-the-shelf
delivery of voice and data communications wiring products. The Company, through
Datacomm, is an authorized distributor of AMP, AT&T, Belden, Cabletron and other
LAN and WAN products. Datacomm serves numerous industries, including financial,
government, airline, medical, media, food, manufacturing and aerospace.
MANUFACTURING
K*TEC manufactures a wide variety of wiring harnesses, cable assemblies,
other subassemblies and custom battery power packs, all of which are built to
the specifications of individual customers. The Company has developed innovative
material requirements planning (MRP) relationships with a select group of OEMs
in the data processing, telecommunications, medical instrumentation and energy
industries. These relationships are supported by sophisticated in-house product
design and technical support capabilities. K*TEC support teams work closely with
K*TEC's customers through all stages of product planning and production to apply
the latest design and production technology. K*TEC's computer systems have a
computer aided design capability that allows its engineers to be on-line with an
OEM's engineer when developing and changing product designs.
K*TEC's quality control standards provide another means of serving the
needs of the Company's just-in-time customers, since an important aspect of the
just-in-time method is that OEMs rely on suppliers to assure quality control for
subassemblies rather than providing such quality control themselves. The Company
believes that K*TEC's adherence to strict quality control standards and
investment in state-of-the-art production facilities and equipment have
attracted and retained important customers who have established extremely rigid
product quality standards.
Substantially all of the Company's manufacturing business is contract
manufacturing. The contract manufacturing business is generally characterized by
close working relationships with a select group of customers. Sales of K*TEC's
products represented approximately 38%, 34% and 33% of the Company's total sales
for the fiscal years ended in 1995, 1994 and 1993, respectively. The Company
believes that its profit margins from sales of manufactured products is
generally greater than its profit margin on sales of distributed products.
MARKETING
The Company's sales representatives undergo continuous training and attend
classes in order to enhance both their technical expertise and sales techniques.
Sales associates are compensated primarily on a commission basis. The Company
uses direct mailings of brochures and catalogs as well as advertising in trade
journals in the marketing of its products.
The Company has concentrated its efforts in certain market niches in which
it only distributes the products of a select group of leading suppliers. In
addition, because sales personnel specialize within related product groupings,
they are able to develop a high degree of technical expertise.
13
<PAGE> 15
COMPETITION
The Company faces substantial competition from a large number of
distributors, suppliers and manufacturers, some of which are larger, have
greater financial resources, broader name recognition, and may, in some
instances, have lower costs than the Company.
The Company's manufacturing operations encounter competition from both
domestically manufactured products and products manufactured outside the United
States. Such foreign-manufactured products are often sold at prices below the
Company's prices for comparable products. The Company's products are not
protected from competition by virtue of any proprietary rights such as trade
secrets or patents. The Company competes by providing its customers with
reliable, rapid delivery of products that are priced at competitive levels and
meet strict quality control standards.
EMPLOYEES
At July 1, 1995, the Company employed 1,036 persons, all on a full time
basis. The Company's employees are not subject to any collective bargaining
agreement. In addition to its employees, the Company uses other workers on a
contract basis, as its needs require.
TRADEMARKS
The Company has registered a number of trademarks and service marks
relating to the operation of its business. These have been of value to the
Company in the past and are expected to be of value in the future. The loss of a
single trademark or service mark other than "KE Kent Electronics" or "K*TEC
Electronics," in the opinion of management, would not have a material adverse
effect on the conduct of its business.
PROPERTIES
The Company's headquarters are located in a 66,000 square foot office
facility in Houston, Texas, of which approximately 56,000 square feet are
presently used by the Company. The Company also owns a 2.7 acre tract of vacant
land adjacent to the office facility. In nearby facilities, the Company uses
approximately 15,000 square feet of space for office purposes and approximately
156,000 square feet for distribution and manufacturing operations. The Company
owns a 10.8 acre tract of vacant land adjoining these Houston facilities. The
Company maintains distribution and manufacturing facilities and sales offices in
21 other cities under leases expiring at various times through the year 2000.
Most of the leases are subject to renewal at the option of the Company for a
term at least equal to the initial term, but at a newly determined rental rate.
NEW FACILITIES
In March 1995, the Company purchased a 66-acre parcel of land and acquired
a four-year option to purchase an adjacent 30 acres in Sugar Land, Texas.
Currently, the Company is constructing in two phases a K*TEC manufacturing,
warehouse and administrative facility at its Sugar Land location. The Company
estimates the first phase of this project, consisting of approximately 250,000
square feet, will be completed during Fall 1995. Construction of the second
phase of this project, also consisting of approximately 250,000 square feet, is
planned to begin within the next 12 months and is anticipated to take 6 months
to complete. In addition to the K*TEC manufacturing facility, the Company is
currently designing a new distribution facility of approximately 263,000 square
feet that will also be located at its Sugar Land location. Construction is
planned to begin within this fiscal year, and the Company estimates the
distribution facility will be complete 18 to 24 months after construction
begins.
LEGAL PROCEEDINGS
The Company is engaged in litigation occurring in the normal course of
business. In the opinion of management, based upon advice of counsel, the
ultimate outcome of these lawsuits will not have a material impact on the
Company's consolidated financial statements.
14
<PAGE> 16
MANAGEMENT
The following table sets forth certain information regarding the directors
and executive officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Morrie K. Abramson................... 60 Chairman of the Board, Chief
Executive Officer and President
Randy J. Corporron................... 38 Executive Vice President
Larry D. Olson....................... 38 Executive Vice President
Mark A. Zerbe........................ 34 Executive Vice President
Stephen J. Chapko.................... 41 Vice President, Treasurer and
Secretary
Barbara Alberto...................... 49 Vice President
Keith K. Ayers....................... 57 Vice President
Rodney J. Corporron.................. 38 Vice President
Duane Davis.......................... 60 Vice President
Cathy L. Felts....................... 43 Vice President
William H. Fountain.................. 39 Vice President
Max S. Levit......................... 60 Director
David Siegel......................... 69 Director
Richard C. Webb...................... 62 Director
Alvin L. Zimmerman................... 52 Director
</TABLE>
Mr. Abramson, a co-founder of the Company, has served as Chief Executive
Officer and a director since 1973 and Chairman of the Board since 1977. He has
been in the electronics distribution business since 1956. Mr. Abramson has also
been Chairman of the Board of K*TEC, the Company's wholly owned manufacturing
subsidiary, since its incorporation in 1983.
Mr. Randy Corporron has been Executive Vice President of Manufacturing
Services since January 1994, and was previously Vice President of the Company
since August 1987. Since July 1989, he has served as President of K*TEC. He
joined the Company in 1982 as General Manager of K*TEC.
Mr. Olson became Executive Vice President of Sales -- Distribution in
January 1994, and was previously Vice President since January 1992 after the
Company's acquisition of Shelley-Ragon, Inc. Since February 1991, he had been
President of Shelley-Ragon, Inc. Prior to that time he held various positions
with Shelley-Ragon since joining in June 1979.
Mr. Zerbe joined the Company as a sales representative in 1985. In May
1988, he was appointed Vice President of the Company and in January 1994 he
became Executive Vice President of Operations -- Distribution.
Mr. Chapko has been Vice President and Treasurer since July 1989 and
Secretary since June 1993. He joined the Company as Assistant Treasurer in April
1987.
Ms. Alberto joined the Company's credit department in 1978. In August 1987,
she was appointed Vice President and she oversees credit administration.
Mr. Ayers joined the Company in 1976 as a purchasing agent. Since then, he
has served in various capacities, including manager of the management
information systems. Mr. Ayers currently serves as Vice President and has
responsibilities for training, special projects and administrative matters.
Mr. Rodney Corporron directs and coordinates the multi-plant manufacturing
operations and was appointed Vice President of the Company and General Manager
of K*TEC in July 1989. Prior to such time, he served the Company in a number of
capacities since 1974.
Mr. Davis became a Vice President of the Company in June 1993. He joined
the Company in 1988 as the director of management information systems.
15
<PAGE> 17
Ms. Felts became a Vice President of the Company in June 1993. She joined
the Company in 1986 as a purchasing manager for K*TEC.
Mr. Fountain has been Vice President since August 1987 and is responsible
for product management in the distribution operations. He joined the Company in
1980 as a purchasing agent.
Mr. Levit, President of Grocers Supply Company, Inc. since January 1992,
has served as a director of the Company since April 1995. Mr. Levit also serves
on the Board of M.D. Anderson Hospital and The University of Texas -- Houston
Health Science Center.
Mr. Siegel has served as a director of the Company since September 1990,
and has been in the electronics distribution business since 1954. Mr. Siegel is
Vice President, director and the founder of Great American Electronics, a
distribution company serving industrial distributors. He is also a director of
Nu Horizon Electronics, Micronetics and Surge Components.
Mr. Webb, a founder of Harris Webb & Garrison, a Houston-based investment
banking and brokerage firm, has served as a director of the Company since June
1986. He has been involved in the investment banking business since 1960, and
was a founder of Lovett Underwood Neuhaus & Webb, Inc., a subsidiary of Kemper
Securities.
Mr. Zimmerman has served as a director of the Company since June 1986. As a
judge he presided over the 309th Family District Court and the 269th Civil
District Court of Harris County, Texas from 1980 to 1984. Since 1984, he has
been a shareholder, officer and director in the law firm of Zimmerman, Flaum,
Axelrad, Meyer & Wise, P.C. and its predecessor firms.
16
<PAGE> 18
DESCRIPTION OF CAPITAL STOCK
COMMON STOCK
The Company is authorized to issue 30,000,000 shares of Common Stock,
without par value. Holders of Common Stock are entitled to one vote per share on
all matters on which they are entitled to vote. Because holders of Common Stock
do not have cumulative voting rights, holders of a majority of the shares voting
for the election of directors can elect all of the members of the Board of
Directors. Except as required by Texas law for certain extraordinary
transactions and as set forth below under "Charter and Bylaw Provisions," a
majority vote is also sufficient for other actions that require the vote or
concurrence of shareholders. The Common Stock is not redeemable and has no
conversion or preemptive rights. All of the outstanding shares of Common Stock
are, and all of the shares offered hereby will be, when issued and paid for,
fully paid and nonassessable. In the event of the liquidation or dissolution of
the Company, subject to the rights of the holders of any outstanding shares of
the Company Preferred Stock, the holders of Common Stock are entitled to share
pro rata in any balance of the corporate assets available for distribution to
them. The Company may pay dividends when and as declared by the Board of
Directors from funds legally available therefor. See "Dividend Policy."
PREFERRED STOCK
The Board of Directors is authorized to issue up to 2,000,000 shares of
Preferred Stock, par value $1.00 per share. No shares of Preferred Stock are
currently outstanding. The Company's Board of Directors is authorized to divide
the Preferred Stock into series and, with respect to each series, to determine
the dividend rights, dividend rate, conversion rights, voting rights, redemption
rights and terms, liquidation preferences, sinking fund provisions, the number
of shares constituting the series and the designation of such series. The Board
of Directors could, without shareholder approval, issue Preferred Stock with
voting rights and other rights that could adversely affect the voting power of
holders of Common Stock and could be used to prevent a hostile takeover of the
Company. The Board has set the terms and conditions of a series of Preferred
Stock consisting of 200,000 shares designated as Series A Preferred Stock in
connection with the adoption of a stockholder rights plan. See "Description of
Capital Stock -- Stockholder Rights Plan." Except in connection with the
possible triggering of such plan, the Company has no present plans to issue any
shares of Preferred Stock.
CHARTER AND BYLAW PROVISIONS
The Company's charter has a "fair price" provision relating to certain
business combinations, including certain mergers, consolidations, asset and
stock conveyances, liquidations and reclassifications. The "fair price"
provision provides that, except in certain circumstances, any such business
combination between the Company and an interested shareholder (defined generally
as a person or entity that owns or has owned within the past two years, directly
or indirectly, 10% or more of the Company's outstanding voting stock) must be
approved by the affirmative vote of the holders of 80% of the outstanding voting
stock of the Company, unless certain pricing and procedural requirements
regarding the business combination are satisfied. For instance, one such
requirement is that the aggregate consideration to be paid for each share of
Common Stock must be at least equal to the highest per share price paid by the
interested shareholder to acquire any share of Common Stock during a specified
period. Additionally, the higher voting requirements do not apply to
transactions approved by a majority of the "continuing directors." Generally, a
director is deemed to be a continuing director if he was a director on May 15,
1987, or was appointed by a majority of other continuing directors or elected by
the shareholders after having been recommended by a majority of the other
continuing directors. The "fair price" provision could make it more difficult
for a third party to acquire control of the Company.
The Board of Directors of the Company is classified into three classes of
directors who serve staggered three-year terms. Newly created directorships or
vacancies on the Board may only be filled by a majority vote of directors then
in office and directors may be removed during their term only for cause and only
by the affirmative vote of two-thirds of all shares of voting stock. The Bylaws
also require that the provisions described above may not be further amended,
altered, changed or appealed, nor may the number of directors
17
<PAGE> 19
be increased, without either the affirmative vote of 80% of the shares of
capital stock of the Company entitled to vote generally in the election of
directors or the approval of a majority of directors in office. These provisions
may have the effect of discouraging hostile or unsolicited takeover attempts or
proxy contests or, alternatively, may encourage persons considering such actions
to negotiate with the existing Board.
STOCKHOLDER RIGHTS PLAN
The Board of Directors has created certain rights (the "Rights") and
authorized the issuance of one Right for each outstanding share of Common Stock
to stockholders of record at the close of business on May 24, 1990 (the "Record
Date"). In addition, the related Rights Agreement provides for the issuance of
one Right for each share of Common Stock issued after adoption of the Rights
Agreement. Each Right entitles the registered holder to purchase from the
Company one one-hundredth of a share of Series A Preferred Stock, $1.00 par
value per share, of the Company (the "Preferred Stock") at a price of $26.67 per
one one-hundredth of a share (subject to adjustment), payable in cash. The
description and terms of the Rights are set forth in a Rights Agreement between
the Company and Ameritrust Company National Association, as Rights Agent.
Although the Rights are not intended to prevent a takeover of the Company
at a full and fair price, they have certain anti-takeover effects. They may
deter an attempt to acquire the Company in a manner which seeks to deprive the
Company's shareholders of the full and fair value of their investment and may
deter attempts by significant shareholders to take advantage of the Company and
its shareholders through certain self-dealing transactions. The Rights may cause
substantial dilution to a person or group that acquires or attempts to acquire
the Company without the Rights being redeemed. Accordingly, the Rights should
encourage any potential acquiror to seek to negotiate with the Board of
Directors. Unless the approval is first obtained from the Board of Directors,
or, in limited circumstances, the shareholders of the Company, the Rights may
deter transactions, including tender offers, which the majority of shareholders
may believe are beneficial to them. Under the Rights Agreement, one Right will
also be issued with each share of Common Stock offered hereby.
18
<PAGE> 20
UNDERWRITING
Upon the terms and subject to the conditions in the Underwriting Agreement
dated the date hereof, each of the underwriters named below (the
"Underwriters"), has severally agreed to purchase, and the Company has agreed to
sell to such Underwriter, the number of shares of Common Stock set forth
opposite the name of such Underwriter.
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
---- ---------
<S> <C>
Smith Barney Inc..................................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.........................................
---------
Total................................................... 2,000,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares are subject to
approval of certain legal matters by counsel and to certain other conditions.
The Underwriters are obligated to take and pay for all shares of Common Stock
offered hereby (other than those covered by the over-allotment option described
below) if any such shares are taken.
The Underwriters, for whom Smith Barney Inc. and Merrill Lynch, Pierce,
Fenner & Smith Incorporated are acting as Representatives, propose to offer part
of the shares directly to the public at the public offering price set forth on
the cover page of this Prospectus and part of the shares to certain dealers at a
price which represents a concession not in excess of $ per share under
the public offering price. The Underwriters may allow, and such dealers may
reallow, a concession not in excess of $ per share to certain other
dealers.
The Company and each of its executive officers and directors have agreed
that, for a period of 90 days from the date of this Prospectus, they will not,
without the prior written consent of Smith Barney Inc., offer, sell, contract to
sell, or otherwise dispose of any shares of Common Stock or any securities
convertible into, or exercisable or exchangeable for, Common Stock, except in
the case of the Company, pursuant to the exercise of outstanding options to
purchase Common Stock.
The Company has granted to the Underwriters an option, exercisable for 30
days from the date of this Prospectus, to purchase up to 300,000 additional
shares of Common Stock at the price to the public set forth on the cover page of
this Prospectus minus the underwriting discounts and commissions. The
Underwriters may exercise such option solely for the purpose of covering
over-allotments, if any, in connection with the offering of the shares offered
hereby. To the extent such option is exercised, each Underwriter will be
obligated, subject to certain conditions, to purchase approximately the same
percentage of such additional shares as the number of shares set forth opposite
each Underwriter's name in the preceding table bears to the total number of
shares listed in such table.
The Company and the Underwriters have agreed to indemnify each other
against certain liabilities, including liabilities under the Securities Act of
1933, as amended (the "Securities Act").
19
<PAGE> 21
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered hereby
will be passed upon for the Company by Liddell, Sapp, Zivley, Hill & LaBoon,
L.L.P., Houston, Texas. Certain legal matters will be passed upon for the
Underwriters by Baker & Botts, L.L.P., Houston, Texas.
EXPERTS
The consolidated financial statements of the Company included in the
Company's Annual Report on Form 10-K for the year ended April 1, 1995 have been
audited by Grant Thornton LLP, independent certified public accountants, as
indicated in its report thereto and are included herein in reliance upon the
authority of such firm as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files reports and other information with the Securities and Exchange
Commission ("SEC"). The reports and other information filed by the Company with
the SEC can be inspected and copied at the public reference facilities
maintained by the SEC at Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the following regional offices of the SEC: 14th Floor, Seven World
Trade Center, New York, New York 10048, and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such material may be obtained from the SEC
upon payment of the charges prescribed by the SEC. In addition, such reports and
other information may be inspected at the offices of the New York Stock
Exchange, Inc., 20 Broad Street, New York, New York 10005.
The Company has filed with the SEC a registration statement on Form S-3
(the "Registration Statement") under the Securities Act with respect to the
shares of Common Stock offered hereby. This Prospectus does not contain all the
information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information with respect to the Company and the
Common Stock, reference is made to the Registration Statement and the exhibits
and schedules filed as a part thereof. Statements made in this Prospectus as to
the contents of any contract or any other document referred to are not
necessarily complete, and, in each instance, reference is made to the copy of
such contract or document filed as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference. The
Registration Statement, including exhibits and schedules thereto, may be
inspected without charge at the public reference facilities maintained by the
SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549 and at the SEC's Regional Offices at 14th Floor, Seven World Trade Center,
New York, New York 10048, and 500 West Madison Street, Suite 1400, Chicago,
Illinois 60621. Copies of the Registration Statement and the exhibits and
schedules thereto may be obtained from the SEC at such offices upon payment of
the charges prescribed by the SEC.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, filed by the Company with the SEC under the
Exchange Act, are incorporated in this Prospectus by reference:
(a) The Company's Annual Report on Form 10-K for the fiscal year ended
April 1, 1995;
(b) The Company's Quarterly Report on Form 10-Q for the quarter ended
July 1, 1995;
(c) The description of the Company's Common Stock contained in a
registration statement on Form 8-A filed on May 20, 1986 under
Section 12 of the Exchange Act; and
(d) The description of the Rights contained in a registration
statement on Form 8-A filed on June 18, 1990 under Section 12 of
the Exchange Act.
20
<PAGE> 22
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the shares offered hereby shall be deemed to
be incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, on the written or oral request of any such person, a
copy of any or all of the documents incorporated herein by reference (other than
exhibits to such documents which are not specifically incorporated by reference
in such documents). Written requests for such copies should be directed to Mr.
Stephen J. Chapko, Secretary, 7433 Harwin Drive, Houston, Texas 77036, telephone
number (713) 780-7770.
21
<PAGE> 23
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---
<S> <C>
Report of Independent Certified Public Accountants..................................... F-2
Consolidated Balance Sheets -- April 2, 1994, April 1, 1995 and July 1, 1995........... F-3
Consolidated Statements of Earnings for the Fiscal Years Ended April 3, 1993, April 2,
1994 and April 1, 1995 and for the Thirteen Weeks Ended July 2, 1994 and July 1,
1995................................................................................. F-4
Consolidated Statement of Stockholders' Equity for the Fiscal Years Ended April 3,
1993, April 2, 1994 and April 1, 1995 and for the Thirteen Weeks Ended July 1,
1995................................................................................. F-5
Consolidated Statements of Cash Flows for the Fiscal Years Ended April 3, 1993, April
2, 1994 and April 1, 1995 and for the Thirteen Weeks Ended July 2, 1994 and July 1,
1995................................................................................. F-6
Notes to Consolidated Financial Statements............................................. F-7
</TABLE>
F-1
<PAGE> 24
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Kent Electronics Corporation
We have audited the consolidated balance sheets of Kent Electronics
Corporation and Subsidiaries as of April 2, 1994 and April 1, 1995, and the
related consolidated statements of earnings, cash flows and stockholders' equity
for each of the three years in the period ended April 1, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Kent
Electronics Corporation and Subsidiaries as of April 2, 1994 and April 1, 1995,
and the consolidated results of their operations and cash flows for each of the
three years in the period ended April 1, 1995, in conformity with generally
accepted accounting principles.
GRANT THORNTON LLP
Houston, Texas
May 8, 1995
F-2
<PAGE> 25
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
APRIL 2, APRIL 1, JULY 1,
1994 1995 1995
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents (including temporary investments of
$9,826,122 at April 2, 1994, $6,395,425 at April 1, 1995
and $10,804,648 at July 1, 1995)........................... $ 11,382,179 $ 4,434,457 $ 5,429,428
Trading securities, net...................................... -- 16,832,467 16,906,865
Short-term investments, net.................................. 15,184,179 -- --
Accounts receivable, net..................................... 26,038,081 33,963,810 34,712,572
Inventories
Materials and purchased products........................... 19,985,035 30,080,372 34,660,776
Work in process............................................ 3,214,825 3,039,140 3,277,516
------------ ------------ ------------
23,199,860 33,119,512 37,938,292
Prepaid expenses and other................................... 2,070,197 2,778,348 2,533,379
------------ ------------ ------------
Total current assets.................................. 77,874,496 91,128,594 97,520,536
PROPERTY AND EQUIPMENT
Land......................................................... 2,558,983 7,089,838 7,110,629
Buildings.................................................... 6,558,289 6,697,207 8,668,736
Equipment, furniture and fixtures............................ 21,053,980 26,205,888 27,073,053
Leasehold improvements....................................... 1,254,485 1,362,806 1,458,602
------------ ------------ ------------
31,425,737 41,355,739 44,311,020
Less accumulated depreciation and amortization............. (10,284,224) (13,620,455) (14,402,310)
------------ ------------ ------------
21,141,513 27,735,284 29,908,710
DEFERRED INCOME TAXES.......................................... 1,270,000 838,000 813,000
OTHER ASSETS................................................... 689,339 1,022,244 1,063,986
COST IN EXCESS OF NET ASSETS ACQUIRED, less accumulated
amortization of $1,264,634 at April 2, 1994, $1,629,122 at
April 1, 1995 and $1,720,373 at July 1, 1995................. 13,531,347 13,166,859 13,075,608
------------ ------------ ------------
$114,506,695 $133,890,981 $142,381,840
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable............................................. $ 16,389,611 $ 15,479,278 $ 17,160,067
Accrued compensation......................................... 2,521,902 4,579,595 3,660,694
Other accrued liabilities.................................... 2,020,416 3,057,149 4,010,017
Income taxes................................................. 1,055,758 1,694,148 3,214,218
------------ ------------ ------------
Total current liabilities............................. 21,987,687 24,810,170 28,044,996
LONG-TERM LIABILITIES.......................................... -- 281,205 528,274
COMMITMENTS.................................................... -- -- --
STOCKHOLDERS' EQUITY
Preferred stock, $1 par value; authorized 2,000,000 shares;
none issued................................................ -- -- --
Common stock, no par value; authorized 30,000,000 shares;
issued and outstanding 9,687,559 shares at April 2, 1994,
9,804,743 shares at April 1, 1995 and 9,812,818 shares at
July 1, 1995............................................... 32,702,560 34,742,597 34,835,485
Additional paid-in capital................................... 24,359,507 25,213,946 25,450,884
Retained earnings............................................ 35,456,941 48,843,063 53,522,201
------------ ------------ ------------
92,519,008 108,799,606 113,808,570
------------ ------------ ------------
$114,506,695 $133,890,981 $142,381,840
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE> 26
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THIRTEEN WEEKS ENDED
------------------------------------------ -------------------------
APRIL 3, APRIL 2, APRIL 1, JULY 2, JULY 1,
1993 1994 1995 1994 1995
------------ ------------ ------------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales.................... $154,676,910 $192,887,055 $253,483,742 $56,527,264 $77,585,215
Cost of sales................ 112,406,481 142,238,725 188,606,215 42,003,520 57,611,607
------------ ------------ ------------ ----------- -----------
Gross profit....... 42,270,429 50,648,330 64,877,527 14,523,744 19,973,608
Selling, general and
administrative expenses.... 30,806,047 36,012,168 43,917,091 10,070,281 12,675,117
------------ ------------ ------------ ----------- -----------
Operating profit... 11,464,382 14,636,162 20,960,436 4,453,463 7,298,491
Other income (expense)
Interest expense........... (15,000) (15,000) (18,000) (4,500) (4,667)
Other-net (principally
interest and dividend
income)................. 712,821 757,912 1,132,686 154,965 504,714
------------ ------------ ------------ ----------- -----------
Earnings before
income taxes..... 12,162,203 15,379,074 22,075,122 4,603,928 7,798,538
Income taxes................. 4,439,000 5,844,000 8,689,000 1,773,000 3,119,400
------------ ------------ ------------ ----------- -----------
Net earnings....... $ 7,723,203 $ 9,535,074 $ 13,386,122 $ 2,830,928 $ 4,679,138
============ ============ ============ =========== ===========
Earnings per share........... $ .80 $ .96 $ 1.32 $ 0.28 $ 0.45
============ ============ ============ =========== ===========
Weighted average shares...... 9,675,300 9,881,000 10,137,500 10,013,400 10,306,200
============ ============ ============ =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE> 27
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
------------------------- PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS
--------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance at March 28, 1992............... 9,414,583 $30,180,661 $23,212,580 $18,198,664
Common stock issued upon exercise of
employee stock options, including
tax effect............................ 209,601 1,855,008 -- --
Amortization of unearned compensation
related to stock option plans......... -- -- 524,473 --
Net earnings for the year............... -- -- -- 7,723,203
--------- ----------- ----------- -----------
Balance at April 3, 1993................ 9,624,184 32,035,669 23,737,053 25,921,867
Common stock issued upon exercise of
employee stock options, including tax
effect................................ 63,375 666,891 -- --
Amortization of unearned compensation
related to stock option plans......... -- -- 622,454 --
Net earnings for the year............... -- -- -- 9,535,074
--------- ----------- ----------- -----------
Balance at April 2, 1994................ 9,687,559 32,702,560 24,359,507 35,456,941
Common stock issued upon exercise of
employee stock options, including tax
effect................................ 117,601 2,040,037 -- --
Common stock split fractional shares.... (417) -- (16,325) --
Amortization of unearned compensation
related to stock option plans......... -- -- 870,764 --
Net earnings for the year............... -- -- -- 13,386,122
--------- ----------- ----------- -----------
Balance at April 1, 1995................ 9,804,743 34,742,597 25,213,946 48,843,063
Common stock issued upon exercise of
employee stock options (unaudited).... 8,075 92,888 -- --
Amortization of unearned compensation
related to stock option plans
(unaudited)........................... -- -- 236,938 --
Net earnings for the period
(unaudited)........................... -- -- -- 4,679,138
--------- ----------- ----------- -----------
Balance at July 1, 1995 (unaudited)..... 9,812,818 $34,835,485 $25,450,884 $53,522,201
========= =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-5
<PAGE> 28
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THIRTEEN WEEKS ENDED
---------------------------------------- -------------------------
APRIL 3, APRIL 2, APRIL 1, JULY 2, JULY 1,
1993 1994 1995 1994 1995
----------- ------------ ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities
Net earnings..................................... $ 7,723,203 $ 9,535,074 $13,386,122 $ 2,830,928 $ 4,679,138
Adjustments to reconcile net earnings to net cash
provided by operating activities
Depreciation and amortization.................. 2,833,955 3,202,761 3,806,652 911,432 907,301
Provision for losses on accounts receivable.... 224,165 334,691 163,171 50,001 73,031
(Gain) loss on sale of property, plant and
equipment.................................... 74 6,688 (268) -- 2,781
Stock option expense........................... 524,473 622,454 870,764 200,199 236,938
Provision for unrealized losses (gains) on
trading securities........................... -- -- 224,684 -- (74,398)
Provision for unrealized losses on short-term
investments.................................. -- 77,300 -- 135,406 --
Net purchases of trading securities............ -- -- (1,872,972) -- --
Change in assets and liabilities
(Increase) decrease in accounts receivable... (4,846,791) (4,212,860) (8,088,900) 1,673,124 (821,793)
Increase in inventories...................... (3,407,722) (5,819,343) (9,919,652) (5,412,327) (4,818,780)
(Increase) decrease in prepaid expenses and
other..................................... (251,743) (375,091) (708,151) 212,425 244,969
(Increase) decrease in other assets.......... 25,935 3,942 (421,951) (18,040) (54,669)
Decrease in deferred income taxes............ 488,228 812,000 432,000 25,000 25,000
Increase (decrease) in accounts payable...... 3,241,812 4,514,425 (910,333) (1,457,286) 1,680,789
Increase (decrease) in accrued
compensation.............................. (348,604) 288,398 2,057,693 (143,417) (918,901)
Increase (decrease) in other accrued
liabilities............................... (121,368) 399,723 1,036,733 553,400 952,868
Increase in income taxes..................... 682,122 89,495 638,390 1,100,024 1,520,070
Increase in long-term liabilities............ -- -- 281,205 -- 247,069
----------- ------------ ----------- ----------- -----------
Net cash provided by operating
activities.............................. 6,767,739 9,479,657 975,187 660,869 3,881,413
Cash flows from investing activities
Capital expenditures............................. (9,191,249) (5,751,781) (9,960,471) (1,138,566) (2,986,458)
Net (purchases) sales of short-term
investments.................................... -- (15,261,479) -- 124,552 --
Proceeds from sale of property and equipment..... 890 16,223 13,850 -- 7,128
Additional Shelley-Ragon acquisition costs....... (98,038) -- -- -- --
----------- ------------ ----------- ----------- -----------
Net cash used by investing activities..... (9,288,397) (20,997,037) (9,946,621) (1,014,014) (2,979,330)
Cash flows from financing activities
Issuance of common stock......................... 1,112,132 365,167 1,526,037 136,056 92,888
Payment for fractional shares.................... -- -- (16,325) -- --
Tax effect of common stock issued upon exercise
of employee stock options...................... 742,876 301,724 514,000 -- --
----------- ------------ ----------- ----------- -----------
Net cash provided by financing
activities.............................. 1,855,008 666,891 2,023,712 136,056 92,888
----------- ------------ ----------- ----------- -----------
Net (decrease) increase in cash.................... (665,650) (10,850,489) (6,947,722) (217,089) 994,971
Cash and cash equivalents at beginning of period... 22,898,318 22,232,668 11,382,179 11,382,179 4,434,457
----------- ------------ ----------- ----------- -----------
Cash and cash equivalents at end of period......... $22,232,668 $ 11,382,179 $ 4,434,457 $11,165,090 $ 5,429,428
=========== ============ =========== =========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest.................................. $ 15,000 $ 15,000 $ 18,000 $ -- $ --
Income taxes.............................. $ 1,062,118 $ 4,813,667 $ 7,713,610 $ 647,976 $ 1,574,329
</TABLE>
In 1993, additional Shelley-Ragon acquisition costs of $98,038 were paid and
non-cash adjustments of $286,131, $155,404, $81,635 and $31,110 were made to
income taxes payable, inventory, property and equipment, and accrued
liabilities, respectively.
The accompanying notes are an integral part of these statements.
F-6
<PAGE> 29
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF JULY 1, 1995 AND RELATING TO THE
THIRTEEN WEEKS ENDED JULY 2, 1994 AND JULY 1, 1995 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies:
Principles of Consolidation
Kent Electronics Corporation consolidates its accounts with those of its
wholly-owned subsidiaries. All material intercompany transactions have been
eliminated.
Fiscal Year
The Company's fiscal year ends on the Saturday closest to the end of March.
The fiscal year ended April 3, 1993 consisted of 53 weeks. The fiscal years
ended April 2, 1994 and April 1, 1995 both consisted of 52 weeks.
Cash and Cash Equivalents
The Company's presentation of cash includes cash equivalents. Cash
equivalents are defined as short-term investments with maturity dates at
purchase of ninety days or less.
Cash equivalents at April 2, 1994, April 1, 1995 and July 1, 1995 include
approximately $3,874,000, $1,118,000 and $1,380,000, respectively, invested in
an institutional money market fund managed by a company holding approximately 4%
of the Company's common stock.
Securities purchased under agreements to resell (reverse repurchase
agreements) result from transactions that are collateralized by negotiable
securities and are carried at the amounts at which the securities will
subsequently be resold. It is the policy of the Company not to take possession
of securities purchased under agreements to resell. At April 2, 1994, agreements
to resell securities in the amount of $3,552,000 with a four-day maturity were
outstanding.
Trading Securities and Short-Term Investments
In 1995, the Company adopted Statement of Financial Accounting Standards
(SFAS) No. 115, Accounting for Certain Investments in Debt and Equity
Securities. This statement established standards of financial accounting and
reporting for investments in equity securities that have a readily determinable
fair value and for all investments in debt securities. The Company has
classified all investment securities as trading securities which are measured at
fair value in the financial statements with unrealized gains and losses included
in earnings. Net unrealized holding losses on trading securities of $224,700 for
the fiscal year ended April 1, 1995 and net unrealized holding gains of $74,400
for the thirteen weeks ended July 1, 1995 are included in net earnings as
indicated in the following table:
<TABLE>
<S> <C>
Net unrealized loss on trading securities at April 2, 1994................ $ 77,300
Increase in unrealized loss included in earnings during year.............. 224,700
--------
Net unrealized loss on trading securities at April 1, 1995................ 302,000
Decrease in unrealized loss included in earnings during quarter........... (74,400)
--------
Net unrealized loss on trading securities at July 1, 1995................. $227,600
========
</TABLE>
In 1994, under the Company's previous policy, short-term investments were
carried at the lower of their aggregate cost or market.
F-7
<PAGE> 30
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF JULY 1, 1995 AND RELATING TO THE
THIRTEEN WEEKS ENDED JULY 2, 1994 AND JULY 1, 1995 IS UNAUDITED)
Trading securities include an investment in an institutional mutual fund
managed by a company holding approximately 4% of the Company's common stock and
U.S. Treasury Notes maturing in December 1996.
Accounts Receivable
The Company's allowance for doubtful accounts was $955,000 at April 2,
1994, $979,000 at April 1, 1995 and $1,052,000 at July 1, 1995.
Inventories
Inventories are valued at the lower of cost (first-in, first-out) or
market.
Property and Equipment
Property and equipment are stated at cost.
Depreciation and amortization are provided using the straight-line method
over the estimated useful lives of the related assets.
Leasehold improvements are amortized over the life of the lease or the
service life of the improvements, whichever is shorter.
Costs in Excess of Net Assets Acquired
Costs in excess of net assets acquired represents the excess of the
purchase price over the value of net assets acquired for previous acquisitions,
and is being amortized on a straight-line basis over 40 years. On an ongoing
basis, management reviews the valuation and amortization of the cost in excess
of net assets. As part of this review, the Company considers the current and
future levels of net income generated by the related acquisition to determine
that no impairment has occurred.
Reclassifications
Certain accounts in the fiscal 1993 and 1994 financial statements have been
reclassified to conform with the fiscal 1995 presentation.
Interim Financial Information
Financial information as of July 1, 1995 and for the thirteen weeks ended
July 2, 1994 and July 1, 1995, included herein, is unaudited. Such information
includes all adjustments (consisting only of normal recurring adjustments) which
are, in the opinion of management, necessary for a fair statement of the
financial information for the interim periods. The results of operations for the
thirteen weeks ended July 1, 1995 are not necessarily indicative of the results
for the full fiscal year.
2. INCOME TAXES
The Company accounts for income taxes using the liability method. Under the
liability method, deferred tax assets and liabilities are determined based on
the difference between the financial statement and tax bases of assets and
liabilities as measured by the enacted tax rates which will be in effect when
these differences reverse. Deferred tax expense is the result of changes in
deferred tax assets and liabilities.
F-8
<PAGE> 31
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF JULY 1, 1995 AND RELATING TO THE
THIRTEEN WEEKS ENDED JULY 2, 1994 AND JULY 1, 1995 IS UNAUDITED)
The provision for income taxes consisted of the following:
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
FISCAL YEARS ENDED -----------------------
------------------------------------ JULY 2, JULY 1,
1993 1994 1995 1994 1995
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Currently payable............ $2,115,000 $4,978,000 $8,308,000 $1,748,000 $3,094,000
Tax reduction for exercise of
stock options credited to
stockholders' equity....... 743,000 302,000 514,000 -- --
Deferred..................... 1,581,000 564,000 (133,000) 25,000 25,000
---------- ---------- ---------- ---------- ----------
Total.............. $4,439,000 $5,844,000 $8,689,000 $1,773,000 $3,119,000
========== ========== ========== ========== ==========
</TABLE>
A reconciliation of income taxes computed at the statutory Federal income
tax rate and income taxes reported in the consolidated statements of earnings
follows:
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
FISCAL YEARS ENDED -----------------------
------------------------------------ JULY 2, JULY 1,
1993 1994 1995 1994 1995
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Tax at statutory rate........ $4,135,000 $5,229,000 $7,726,000 $1,565,000 $2,729,000
Increases (reductions)
State income taxes, net of
Federal tax effect...... 374,000 482,000 742,000 150,000 254,000
Tax free income............ (206,000) (119,000) (47,000) (9,000) (4,000)
Other -- net............... 136,000 252,000 268,000 67,000 140,000
---------- ---------- ---------- ---------- ----------
Income taxes as
reported......... $4,439,000 $5,844,000 $8,689,000 $1,773,000 $3,119,000
========== ========== ========== ========== ==========
</TABLE>
F-9
<PAGE> 32
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF JULY 1, 1995 AND RELATING TO THE
THIRTEEN WEEKS ENDED JULY 2, 1994 AND JULY 1, 1995 IS UNAUDITED)
Deferred tax assets and liabilities at April 2, 1994 and April 1, 1995
consist of the following:
<TABLE>
<CAPTION>
1994 1995
----------- -----------
<S> <C> <C>
CURRENT DEFERRED ASSET
Allowance for doubtful accounts........................... $ 347,000 $ 392,000
Capitalization of additional inventory costs.............. 347,000 672,000
Accrued expenses not currently deductible, net of
reversals.............................................. 179,000 320,000
Net operating losses...................................... 330,000 330,000
Other..................................................... 59,000 157,000
----------- -----------
$ 1,262,000 $ 1,871,000
=========== ===========
LONG-TERM DEFERRED ASSET
Depreciation.............................................. $(1,264,000) $(1,763,000)
Fixed asset bases difference.............................. 670,000 697,000
Deductible acquisition costs.............................. (50,000) (48,000)
Stock compensation........................................ 494,000 861,000
Net operating losses...................................... 1,420,000 1,091,000
----------- -----------
$ 1,270,000 $ 838,000
=========== ===========
</TABLE>
Acquired net operating losses were approximately $4,058,000 at April 1,
1995, expire in various amounts through 2003, and are subject to annual usage
limitations.
3. COMMITMENTS
The Company conducts a portion of its operations in leased office,
warehouse, and manufacturing facilities and leases transportation equipment.
Rent expense for 1993, 1994 and 1995 was approximately $1,565,000, $1,472,000
and $1,695,000, respectively. For the thirteen weeks ended July 2, 1994 and July
1, 1995, rent expense was approximately $409,000 and $402,000, respectively.
The following is a schedule by years of minimum future rentals as of April
1, 1995:
<TABLE>
<CAPTION>
FISCAL YEARS
ENDING IN AMOUNT
------------- ----------
<S> <C>
1996........................................................... $1,543,000
1997........................................................... 1,231,000
1998........................................................... 936,000
1999........................................................... 476,000
2000........................................................... 184,000
Thereafter....................................................... 3,000
----------
Total minimum future rentals..................................... $4,373,000
==========
</TABLE>
The Company has instituted a self-insurance program for employees' major
medical coverages. Claims under the self-insurance program are insured for
amounts greater than $50,000 per employee. The aggregate annual amount
self-insured varies based on participant levels and was limited to approximately
$2,000,000 as
F-10
<PAGE> 33
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF JULY 1, 1995 AND RELATING TO THE
THIRTEEN WEEKS ENDED JULY 2, 1994 AND JULY 1, 1995 IS UNAUDITED)
of April 1, 1995. Claims are accrued as incurred and the total expense under the
program was approximately $1,051,000, $1,258,000 and $2,121,000 in 1993, 1994
and 1995, respectively. For the thirteen weeks ended July 2, 1994 and July 1,
1995, total expense was approximately $509,000 and $550,000, respectively.
The Company is engaged in litigation occurring in the normal course of
business. In the opinion of management, based upon advice of counsel, the
ultimate outcome of these lawsuits will not have a material impact on the
Company's consolidated financial statements.
4. SALES TO MAJOR CUSTOMERS
No customer accounted for as much as 10% of net sales in 1993 or 1994.
Sales to two customers represented 11.2% and 10.3% of net sales in 1995. For the
thirteen weeks ended July 2, 1994, one customer represented 10.3% of net sales.
Sales to two customers represented 12.8% and 12.2% of net sales for the thirteen
weeks ended July 1, 1995.
5. STOCKHOLDERS' EQUITY
Fair Price Provision
The Company has adopted a fair price provision relating to certain business
combinations. The fair price provision provides that, except in certain
circumstances, a business combination between the Company and an interested
shareholder must be approved by the affirmative vote of the holders of 80% of
the outstanding voting stock, unless certain pricing and procedural requirements
regarding the business combination are satisfied.
Stockholder Rights Plan
The Company has adopted a stockholder rights plan, declaring a distribution
of one equity purchase right on each outstanding share of the Company's common
stock. Upon the occurrence of certain events, each right would entitle the
holder to purchase, at a price of $26.67, one one-hundredth of a share of the
Company's Series A Preferred Stock. Additionally, under certain circumstances,
the holder of rights may be entitled to purchase either the Company's common
stock or securities of an acquiring entity at half of market value.
Stock Split
The Company's Common Stock was split three-for-two to stockholders of
record on February 15, 1995, and was effected as a 50% stock dividend. All
issued and outstanding shares, stock option data and earnings per share amounts
in the consolidated financial statements have been restated to give effect to
the stock split.
F-11
<PAGE> 34
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF JULY 1, 1995 AND RELATING TO THE
THIRTEEN WEEKS ENDED JULY 2, 1994 AND JULY 1, 1995 IS UNAUDITED)
6. BENEFIT PLANS
Stock Options
At April 1, 1995 and July 1, 1995, the Company had non-qualified stock
option plans which allow for the grant of 2,887,500 and 2,981,250 common shares
for options, respectively, of which 1,079,879 and 1,054,254, respectively, are
available for future grants. Options granted under the plans have a maximum term
of 15 years and are exercisable under the terms of the respective option
agreements. Under some plans, options may be granted with exercise prices of
less than the stock's market value at the date of grant.
<TABLE>
<CAPTION>
NUMBER OF OPTION PRICE
SHARES RANGE
UNDER OPTION PER SHARE
------------ ---------------
<S> <C> <C>
Outstanding at March 28, 1992.......................... 663,450 $ 3.75 - $14.50
Granted.............................................. 188,625 6.92 - 17.59
Exercised............................................ (209,601) 3.75 - 10.67
Lapsed/forfeited..................................... (12,000) 7.33 - 11.33
------------ ---------------
Outstanding at April 3, 1993........................... 630,474 4.00 - 17.59
Granted.............................................. 614,250 7.17 - 19.25
Exercised............................................ (63,375) 4.00 - 14.50
Lapsed/forfeited..................................... (23,300) 4.09 - 17.17
------------ ---------------
Outstanding at April 2, 1994........................... 1,158,049 4.67 - 19.25
Granted.............................................. 71,625 18.25 - 27.75
Exercised............................................ (117,601) 4.67 - 17.59
Lapsed/forfeited..................................... (21,751) 13.92 - 13.92
------------ ---------------
Outstanding at April 1, 1995........................... 1,090,322 6.87 - 27.75
Granted.............................................. 122,875 29.38 - 37.75
Exercised............................................ (8,075) 6.87 - 14.50
Lapsed/forfeited..................................... (3,500) 13.92 - 13.92
------------ ---------------
Outstanding at July 1, 1995............................ 1,201,622 $ 6.92 - $37.75
============ ===============
</TABLE>
At April 1, 1995 and July 1, 1995, options to acquire 179,072 and 284,747
shares, respectively, were exercisable.
Tax-Deferred Savings and Retirement Plan and Trust
The Company sponsors a Tax-Deferred Savings and Retirement Plan (the Plan)
covering substantially all employees. Under the Plan, a participating employee
may allocate up to 12% of salary, and the Company makes matching contributions
of up to 3% thereof. Additionally, the Company may elect to make additional
contributions at its option. Such contributions accrue to employee accounts
regardless of whether they have elected to participate in the salary deferral
option of the Plan. The Company contributed approximately $469,000, $514,000 and
$639,000 to the Plan in fiscal years ended April 3, 1993, April 2, 1994 and
April 1, 1995, respectively. The Company contributed approximately $169,000 and
$212,000 to the Plan for the thirteen weeks ended July 2, 1994 and July 1, 1995,
respectively.
The Company has a deferred compensation plan for a select group of
management or highly compensated employees of the Company. Each year a
participant may elect to defer from 3% to 25% of his or her compensation. The
Company will match the participant compensation amount, limited to 50% of the
first 6%
F-12
<PAGE> 35
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF JULY 1, 1995 AND RELATING TO THE
THIRTEEN WEEKS ENDED JULY 2, 1994 AND JULY 1, 1995 IS UNAUDITED)
of compensation deferred. Participants become vested in the Company matching
contributions at the rate of 10% per plan year or vest fully at age 60. At April
1, 1995 and July 1, 1995, the Company had accrued $281,000 and $528,000,
respectively, for participant and Company contributions which are recorded as
long-term liabilities on the Balance Sheet.
In fiscal 1995, the Company adopted a spousal salary continuation plan. In
the event of the death of the Chief Executive Officer (CEO), the plan provides
for the payment of 60% of the CEO's monthly base salary for 180 consecutive
months to a designated beneficiary. The Company has purchased life insurance
with the intent to fund this obligation.
7. EARNINGS PER SHARE
Earnings per share are based upon the weighted average number of common
shares outstanding during each period. Options are included in periods where
they have a dilutive effect.
8. QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of unaudited quarterly financial data for fiscal
years 1993, 1994 and 1995:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Year ended April 3, 1993
Net sales......................................... $34,524 $37,011 $39,216 $43,926
Gross profit...................................... 9,485 10,134 10,756 11,895
Net earnings...................................... 1,846 1,907 1,937 2,033
Earnings per share................................ .19 .20 .20 .21
Year ended April 2, 1994
Net sales......................................... $43,245 $46,914 $49,238 $53,490
Gross profit...................................... 11,532 12,434 12,935 13,747
Net earnings...................................... 2,073 2,293 2,509 2,660
Earnings per share................................ .21 .23 .25 .27
Year ended April 1, 1995
Net sales......................................... $56,527 $60,335 $64,462 $72,160
Gross profit...................................... 14,524 15,440 16,480 18,433
Net earnings...................................... 2,831 3,215 3,466 3,874
Earnings per share................................ .28 .32 .34 .38
</TABLE>
F-13
<PAGE> 36
KENT ELECTRONICS--
ELECTRONIC COMPONENTS DISTRIBUTION
[PHOTO]
Kent distribution center.
<TABLE>
<S> <C> <C>
[PHOTO] [PHOTO] [PHOTO]
Order tracking through The Company's specialized
integrated real-time inventories supplied by Sales representatives
information technology. leading manufacturers. undergo continuous training.
</TABLE>
<PAGE> 37
<TABLE>
<S> <C>
----------------------------------------------- -----------------------------------------------
----------------------------------------------- -----------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON 2,000,000 SHARES
HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED
IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER
CONTAINED HEREIN, AND, IF GIVEN OR MADE, SUCH KENT ELECTRONICS
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED CORPORATION
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY
ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN COMMON STOCK
THOSE TO WHICH IT RELATES OR AN OFFER TO SELL, OR
A SOLICITATION OF AN OFFER TO BUY, THOSE TO WHICH IT
RELATES IN ANY STATE TO ANY PERSON TO WHOM IT IS
NOT LAWFUL TO MAKE SUCH OFFER IN SUCH STATE. THE
DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT
IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO ITS DATE.
------------------ [LOGO] [LOGO]
TABLE OF CONTENTS
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Use of Proceeds....................... 5
Price Range of Common Stock........... 6
Dividend Policy....................... 6
Capitalization........................ 7
Selected Consolidated Financial
Data................................ 8 ------------
Management's Discussion and Analysis
of Financial Condition and Results PROSPECTUS
of Operations....................... 9
Business.............................. 12 , 1995
Management............................ 15
Description of Capital Stock.......... 17 ------------
Underwriting.......................... 19
Legal Matters......................... 20
Experts............................... 20
Available Information................. 20
Incorporation of Certain Documents by
Reference........................... 20 SMITH BARNEY INC.
Index to Consolidated Financial
Statements.......................... F-1 MERRILL LYNCH & CO.
----------------------------------------------- -----------------------------------------------
----------------------------------------------- -----------------------------------------------
</TABLE>
<PAGE> 38
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses payable by the Company in connection with the
offering described in this Registration Statement are as follows:
<TABLE>
<S> <C>
SEC registration fee.............................................. $ 31,476
NYSE filing fee................................................... 8,050
NASD fee.......................................................... 9,628
Blue sky fees and expenses........................................ 10,000
Printing expenses................................................. 80,000
Accounting fees and expenses...................................... 60,000
Legal fees and expenses........................................... 175,000
Miscellaneous expenses............................................ 25,846
--------
Total................................................... $400,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 6.10 of the Amended and Restated Bylaws of the Company provides for
indemnification of present and former officers and directors of the Company to
the maximum extent permissible under applicable provisions of the Texas Business
Corporation Act and expressly authorizes the Company to purchase insurance on
behalf of its directors, officers and employees. The Company has purchased a
directors and officers liability insurance policy which provides for insurance
of the directors and officers of the Company against certain liabilities they
may incur in their capacities as such.
Reference is made to the form of Underwriting Agreement filed as Exhibit
1.1 to the Registration Statement for certain provisions regarding the
indemnification of officers and directors of the Company by the Underwriters.
ITEM 16. EXHIBITS.
<TABLE>
<S> <C> <C>
1.1* -- Form of Underwriting Agreement.
3.1 -- Articles of Incorporation of Kent Electronics Corporation, including amendments
thereto filed through July 2, 1987. Incorporated by reference to Exhibit 3.1 to
the Company's Annual Report on Form 10-K for the Fiscal Year Ended April 2,
1988.
3.2 -- Articles of Amendment to Articles of Incorporation of Kent Electronics
Corporation. Incorporated by reference to Exhibit 3.2 to the Company's
Registration Statement on Form S-1 (Registration No. 33-24018) filed with the
Securities and Exchange Commission ("SEC") on August 26, 1988.
3.3 -- Certificate of Designation, Preferences and Rights of Series A Preferred Stock.
Incorporated by reference to Exhibit 3.3 to the Company's Annual Report on Form
10-K for the Fiscal Year Ended March 30, 1991 (the "1991 Form 10-K").
3.4 -- Articles of Amendment to Articles of Incorporation of Kent Electronics
Corporation. Incorporated by reference to Exhibit 3.4 to 1991 Form 10-K.
3.5 -- Bylaws of Kent Electronics Corporation. Incorporated by reference to Exhibit 3.4
to the Company's Registration Statement on Form S-1 (Registration No. 33-5371)
filed with the SEC on May 2, 1986.
3.6 -- Amendments to Bylaws of Kent Electronics Corporation. Incorporated by reference
to Exhibit 3.4 to the Company's Annual Report on Form 10-K for the Fiscal Year
Ended March 31, 1990.
3.7 -- Amendments to Bylaws of Kent Electronics Corporation. Incorporated by reference
to Exhibit 3.7 to 1991 Form 10-K.
</TABLE>
II-1
<PAGE> 39
<TABLE>
<S> <C> <C>
3.8 -- Amendments to Bylaws of Kent Electronics Corporation. Incorporated by reference
to Exhibit 3.8 to the Company's Annual Report on Form 10-K for the Fiscal Year
Ended March 28, 1992 (the "1992 Form 10-K").
4.1 -- Specimen stock certificate for the Common Stock of Kent Electronics Corporation.
Incorporated by reference to Exhibit 4.1 to the Company's Registration Statement
on Form S-2 (Registration No. 33-40066) filed with the SEC on April 19, 1991
(the "1991 Registration Statement").
4.2 -- Rights Agreement dated as of May 14, 1990 between Kent Electronics Corporation
and Ameritrust Company National Association. Incorporated by reference to
Exhibit 4 to the Company's Current Report on Form 8-K dated May 14, 1990.
4.3 -- First Amendment to Rights Agreement dated as of May 14, 1990 between Kent
Electronics Corporation and Ameritrust Company National Association.
Incorporated by reference to Exhibit 4.3 to 1992 Form 10-K.
5.1** -- Opinion of Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P.
23.1* -- Consent of Grant Thornton LLP.
23.2** -- Consent of Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P. (included as part of
Exhibit 5.1).
24.1** -- Power of Attorney (included on signature page of this Registration Statement).
</TABLE>
---------------
* Filed herewith.
** Previously filed.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the Company's
annual report pursuant to section 13(a) or section 15(d) of the Exchange Act
that is incorporated by reference in the registration statement shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described under Item 15 above, or
otherwise, the registrant has been advised that, in the opinion of the SEC, such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-2
<PAGE> 40
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Houston, the State of Texas, on August 21, 1995.
KENT ELECTRONICS CORPORATION
By: /s/ MORRIE K. ABRAMSON
-----------------------------------
(Morrie K. Abramson, Chairman of the
Board, Chief Executive Officer and
President)
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ MORRIE K. ABRAMSON Chairman of the Board, Chief August 21, 1995
------------------------------------------ Executive Officer and President
Morrie K. Abramson (Principal Executive Officer)
/s/ STEPHEN J. CHAPKO Vice President, Treasurer and August 21, 1995
------------------------------------------ Secretary (Principal Financial
Stephen J. Chapko Officer and Principal
Accounting Officer)
* Director August 21, 1995
------------------------------------------
Max S. Levit
* Director August 21, 1995
------------------------------------------
David Siegel
* Director August 21, 1995
------------------------------------------
Richard C. Webb
* Director August 21, 1995
------------------------------------------
Alvin L. Zimmerman
* By: /s/ MORRIE K. ABRAMSON
------------------------------------------
Morrie K. Abramson, Attorney-in-Fact
</TABLE>
II-3
<PAGE> 41
EXHIBIT INDEX
<TABLE>
<S> <C>
1.1* -- Form of Underwriting Agreement
3.1 -- Articles of Incorporation of Kent Electronics Corporation, including amendments
thereto filed through July 2, 1987. Incorporated by reference to Exhibit 3.1 to
the Company's Annual Report on Form 10-K for the Fiscal Year Ended April 2,
1988.
3.2 -- Articles of Amendment to Articles of Incorporation of Kent Electronics
Corporation. Incorporated by reference to Exhibit 3.2 to the Company's
Registration Statement on Form S-1 (Registration No. 33-24018) filed with the
Securities and Exchange Commission ("SEC") on August 26, 1988.
3.3 -- Certificate of Designation, Preferences and Rights of Series A Preferred Stock.
Incorporated by reference to Exhibit 3.3 to the Company's Annual Report on Form
10-K for the Fiscal Year Ended March 30, 1991 (the "1991 Form 10-K").
3.4 -- Articles of Amendment to Articles of Incorporation of Kent Electronics
Corporation. Incorporated by reference to Exhibit 3.4 to 1991 Form 10-K.
3.5 -- Bylaws of Kent Electronics Corporation. Incorporated by reference to Exhibit 3.4
to the Company's Registration Statement on Form S-1 (Registration No. 33-5371)
filed with the SEC on May 2, 1986.
3.6 -- Amendments to Bylaws of Kent Electronics Corporation. Incorporated by reference
to Exhibit 3.4 to the Company's Annual Report on Form 10-K for the Fiscal Year
Ended March 31, 1990.
3.7 -- Amendments to Bylaws of Kent Electronics Corporation. Incorporated by reference
to Exhibit 3.7 to 1991 Form 10-K.
3.8 -- Amendments to Bylaws of Kent Electronics Corporation. Incorporated by reference
to Exhibit 3.8 to the Company's Annual Report on Form 10-K for the Fiscal Year
Ended March 28, 1992 (the "1992 Form 10-K").
4.1 -- Specimen stock certificate for the Common Stock of Kent Electronics Corporation.
Incorporated by reference to Exhibit 4.1 to the Company's Registration Statement
on Form S-2 (Registration No. 33-40066) filed with the SEC on April 19, 1991
(the "1991 Registration Statement").
4.2 -- Rights Agreement dated as of May 14, 1990 between Kent Electronics Corporation
and Ameritrust Company National Association. Incorporated by reference to
Exhibit 4 to the Company's Current Report on Form 8-K dated May 14, 1990.
4.3 -- First Amendment to Rights Agreement dated as of May 14, 1990 between Kent
Electronics Corporation and Ameritrust Company National Association.
Incorporated by reference to Exhibit 4.3 to 1992 Form 10-K.
5.1** -- Opinion of Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P.
23.1* -- Consent of Grant Thornton LLP.
23.2** -- Consent of Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P. (included as part of
Exhibit 5.1).
24.1** -- Power of Attorney (included on signature page of this Registration Statement).
</TABLE>
---------------
* Filed herewith.
** Previously Filed.
<PAGE> 1
EXHIBIT 1.1
2,300,000 Shares
KENT ELECTRONICS CORPORATION
Common Stock
UNDERWRITING AGREEMENT
September __, 1995
SMITH BARNEY INC.
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
As Representatives of the Several Underwriters
c/o SMITH BARNEY INC.
388 Greenwich Street
New York, New York 10013
Dear Sirs:
Kent Electronics Corporation, a Texas corporation (the "Company"),
proposes to issue and sell an aggregate of 2,000,000 shares (the "Firm Shares")
of its common stock, no par value (the "Common Stock"), to the several
Underwriters named in Schedule I hereto (the "Underwriters"). The Company also
proposes to sell to the Underwriters, upon the terms and subject to the
conditions set forth in Section 2 hereof, up to an additional 300,000 shares
(the "Additional Shares") of Common Stock. The Firm Shares and the Additional
Shares are hereinafter collectively referred to as the "Shares".
The Company wishes to confirm as follows its agreement with you (the
"Representatives") and the other several Underwriters on whose behalf you are
acting, in connection with the several purchases of the Shares by the
Underwriters.
1. Registration Statement and Prospectus. The Company has
prepared and filed with the Securities and Exchange Commission (the
"Commission") in accordance with the provisions of the Securities Act of 1933,
as amended, and the rules and regulations of the Commission thereunder
(collectively, the "Act"), a registration statement on Form S-3 (Registration
No. 33-61385) under the Act (the "registration statement"), including a
prospectus subject to completion relating to the Shares. The term
"Registration Statement" as used in this Agreement means the registration
statement (including all financial schedules and exhibits), as amended at the
time it becomes effective, or, if the registration statement became effective
prior to the execution of this Agreement, as supplemented or amended
- 1 -
<PAGE> 2
prior to the execution of this Agreement. If it is contemplated, at the time
this Agreement is executed, that a post-effective amendment to the registration
statement will be filed and must be declared effective before the offering of
the Shares may commence, the term "Registration Statement" as used in this
Agreement means the registration statement as amended by said post-effective
amendment. The term "Prospectus" as used in this Agreement means the
prospectus in the form included in the Registration Statement, or, if the
prospectus included in the Registration Statement omits information in reliance
on Rule 430A under the Act and such information is included in a prospectus
filed with the Commission pursuant to Rule 424(b) under the Act, the term
"Prospectus" as used in this Agreement means the prospectus in the form
included in the Registration Statement as supplemented by the addition of the
Rule 430A information contained in the prospectus filed with the Commission
pursuant to Rule 424(b). The term "Prepricing Prospectus" as used in this
Agreement means the prospectus subject to completion in the form included in
the registration statement at the time of the initial filing of the
registration statement with the Commission, and as such prospectus shall have
been amended from time to time prior to the date of the Prospectus. Any
reference in this Agreement to the registration statement, the Registration
Statement, any Prepricing Prospectus or the Prospectus shall be deemed to refer
to and include the documents incorporated by reference therein pursuant to Item
12 of Form S-3 under the Act, as of the date of the registration statement, the
Registration Statement, such Prepricing Prospectus or the Prospectus, as the
case may be, and any reference to any amendment or supplement to the
registration statement, the Registration Statement, any Prepricing Prospectus
or the Prospectus shall be deemed to refer to and include any documents filed
after such date under the Securities Exchange Act of 1934, as amended, and the
rules and regulations of the Commission thereunder (collectively, the "Exchange
Act"), which, upon filing, are incorporated by reference therein, as required
by paragraph (b) of Item 12 of Form S-3. As used herein, the term
"Incorporated Documents" means the documents which at the time are incorporated
by reference in the registration statement, the Registration Statement, any
Prepricing Prospectus, the Prospectus, or any amendment or supplement thereto.
2. Agreements to Sell and Purchase. The Company hereby agrees,
upon the terms and subject to all the conditions set forth herein, to issue and
sell to each Underwriter and, upon the basis of the representations, warranties
and agreements of the Company herein contained and upon the terms and subject
to all the conditions set forth herein, each Underwriter agrees, severally and
not jointly, to purchase from the Company, at a purchase price of $______ per
Share (the "purchase price per share"), the number of Firm Shares set forth
opposite the name of such Underwriter in Schedule I hereto (or such number of
Firm Shares increased as set forth in Section 10 hereof).
The Company also hereby agrees, upon the terms and subject to all the
conditions set forth herein, to sell to the Underwriters, and, upon the basis
of the representations, warranties and agreements of the Company herein
contained and subject to all the terms and conditions set forth herein, the
Underwriters shall have the right to purchase from the Company, at the purchase
price per share, pursuant to an option (the "over-allotment
- 2 -
<PAGE> 3
option") which may be exercised at any time and from time to time prior to 9:00
P.M., New York City time, on the 30th day after the date of the Prospectus (or,
if such 30th day shall be a Saturday or Sunday or a holiday, on the next
business day thereafter when the New York Stock Exchange is open for trading),
up to an aggregate of 300,000 Additional Shares. Additional Shares may be
purchased only for the purpose of covering over-allotments made in connection
with the offering of the Firm Shares. Upon any exercise of the over-allotment
option, each Underwriter, severally and not jointly, agrees to purchase from
the Company the number of Additional Shares (subject to such adjustments as you
may determine in order to avoid fractional shares) which bears the same
proportion to the aggregate number of Additional Shares to be purchased by the
Underwriters as the number of Firm Shares set forth opposite the name of such
Underwriter in Schedule I hereto (or such number of Firm Shares increased as
set forth in Section 10 hereof) bears to the aggregate number of Firm Shares.
3. Terms of Public Offering. The Company has been advised by you
that the Underwriters propose to make a public offering of their respective
portions of the Shares as soon after the Registration Statement and this
Agreement have become effective as in your judgment is advisable and initially
to offer the Shares upon the terms set forth in the Prospectus.
4. Delivery of the Shares and Payment Therefor. Delivery to the
Underwriters of and payment for the Firm Shares shall be made at the office of
Smith Barney Inc., 388 Greenwich Street, New York, NY 10013, at 10:00 A.M., New
York City time, on September ___, 1995 (the "Closing Date"). The place of
closing for the Firm Shares and the Closing Date may be varied by agreement
between you and the Company.
Delivery to the Underwriters of and payment for any Additional Shares
to be purchased by the Underwriters shall be made at the aforementioned office
of Smith Barney Inc. at such time on such date (the "Option Closing Date"),
which may be the same as the Closing Date but shall in no event be earlier than
the Closing Date nor earlier than two nor later than ten business days after
the giving of the notice hereinafter referred to, as shall be specified in a
written notice from you on behalf of the Underwriters to the Company of the
Underwriters' determination to purchase a number, specified in such notice, of
Additional Shares. The place of closing for any Additional Shares and the
Option Closing Date for such Shares may be varied by agreement between you and
the Company.
Certificates for the Firm Shares and for any Additional Shares to be
purchased hereunder shall be registered in such names and in such denominations
as you shall request prior to 9:30 A.M., New York City time, on the second
business day preceding the Closing Date or any Option Closing Date, as the case
may be. Such certificates shall be made available to you in New York City for
inspection and packaging not later than 9:30 A.M., New York City time, on the
business day next preceding the Closing Date or the Option Closing Date, as the
case may be. The certificates evidencing the Firm Shares and any
- 3 -
<PAGE> 4
Additional Shares to be purchased hereunder shall be delivered to you on the
Closing Date or the Option Closing Date, as the case may be, against payment of
the purchase price therefor by certified or official bank check or checks
payable in New York Clearing House (next day) funds to the order of the
Company.
5. Agreements of the Company. The Company agrees with the
several Underwriters as follows:
(a) If, at the time this Agreement is executed and
delivered, it is necessary for the Registration Statement or a post-effective
amendment thereto to be declared effective before the offering of the Shares
may commence, the Company will endeavor to cause the Registration Statement or
such post-effective amendment to become effective as soon as possible and will
advise you promptly and, if requested by you, will confirm such advice in
writing, when the Registration Statement or such post-effective amendment has
become effective.
(b) The Company will advise you promptly and, if
requested by you, will confirm such advice in writing: (i) of any request by
the Commission for amendment of or a supplement to the Registration Statement,
any Prepricing Prospectus or the Prospectus or for additional information; (ii)
of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of the suspension of
qualification of the Shares for offering or sale in any jurisdiction or the
initiation of any proceeding for such purpose; and (iii) within the period of
time referred to in paragraph (f) below, of any change in the Company's
condition (financial or other), business, prospects, properties, net worth or
results of operations, or of the happening of any event, which makes any
statement of a material fact made in the Registration Statement or the
Prospectus (as then amended or supplemented) untrue or which requires the
making of any additions to or changes in the Registration Statement or the
Prospectus (as then amended or supplemented) in order to state a material fact
required by the Act to be stated therein or necessary in order to make the
statements therein not misleading, or of the necessity to amend or supplement
the Prospectus (as then amended or supplemented) to comply with the Act or any
other law. If at any time the Commission shall issue any stop order suspending
the effectiveness of the Registration Statement, the Company will make every
reasonable effort to obtain the withdrawal of such order at the earliest
possible time.
(c) The Company will furnish to you, without charge (i)
three EDGAR versions of the registration statement as originally filed with the
Commission and of each amendment thereto, including financial statements and
all exhibits to the registration statement, (ii) three manually signed copies
of the registration statement corresponding to the EDGAR version filed with the
Commission and of each amendment thereto, including financial statements and
all exhibits to the registration statement, (iii) such number of conformed
copies of the registration statement as originally filed and of each amendment
thereto, but without exhibits, as you may request, (iv) such number of copies
of the
- 4 -
<PAGE> 5
Incorporated Documents, without exhibits, as you may reasonably request, and
(v) three copies of the exhibits to the Incorporated Documents.
(d) The Company will not file any amendment to the
Registration Statement or make any amendment or supplement to the Prospectus
or, prior to the end of the period of time referred to in the first sentence in
paragraph (f) below, file any document which, upon filing becomes an
Incorporated Document, of which you shall not previously have been advised or
to which, after you shall have received a copy of the document proposed to be
filed, you shall reasonably object.
(e) Prior to the execution and delivery of this
Agreement, the Company has delivered to you, without charge, in such quantities
as you have requested, copies of each form of the Prepricing Prospectus. The
Company consents to the use, in accordance with the provisions of the Act and
with the securities or Blue Sky laws of the jurisdictions in which the Shares
are offered by the several Underwriters and by dealers, prior to the date of
the Prospectus, of each Prepricing Prospectus so furnished by the Company.
(f) As soon after the execution and delivery of this
Agreement as possible and thereafter from time to time for such period as in
the opinion of counsel for the Underwriters a prospectus is required by the Act
to be delivered in connection with sales by any Underwriter or dealer, the
Company will expeditiously deliver to each Underwriter and each dealer, without
charge, as many copies of the Prospectus (and of any amendment or supplement
thereto) as you may request. The Company consents to the use of the Prospectus
(and of any amendment or supplement thereto) in accordance with the provisions
of the Act and with the securities or Blue Sky laws of the jurisdictions in
which the Shares are offered by the several Underwriters and by all dealers to
whom Shares may be sold, both in connection with the offering and sale of the
Shares and for such period of time thereafter as the Prospectus is required by
the Act to be delivered in connection with sales by any Underwriter or dealer.
If during such period of time any event shall occur that in the judgment of the
Company or in the opinion of counsel for the Underwriters is required to be set
forth in the Prospectus (as then amended or supplemented) or should be set
forth therein in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if it is necessary
to supplement or amend the Prospectus (or to file under the Exchange Act any
document which, upon filing, becomes an Incorporated Document) in order to
comply with the Act or any other law, the Company will forthwith prepare and,
subject to the provisions of paragraph (d) above, file with the Commission an
appropriate supplement or amendment thereto (or to such document), and will
expeditiously furnish to the Underwriters and dealers a reasonable number of
copies thereof. In the event that the Company and you, as Representatives of
the several Underwriters, agree that the Prospectus should be amended or
supplemented, the Company, if requested by you, will promptly issue a press
release announcing or disclosing the matters to be covered by the proposed
amendment or supplement. Each Underwriter agrees that upon the receipt of any
supplement or amendment to a Prospectus, it will not deliver a
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<PAGE> 6
Prospectus other than as supplemented or amended.
(g) The Company will cooperate with you and with counsel
for the Underwriters in connection with the registration or qualification of
the Shares for offering and sale by the several Underwriters and by dealers
under the securities or Blue Sky laws of such jurisdictions as you may
designate and will file such consents to service of process or other documents
necessary or appropriate in order to effect such registration or qualification;
provided that in no event shall the Company be obligated to qualify to do
business in any jurisdiction where it is not now so qualified or to take any
action which would subject it to service of process in suits, other than those
arising out of the offering or sale of the Shares, in any jurisdiction where it
is not now so subject.
(h) The Company will make generally available to its
security holders a consolidated earnings statement (in form complying with the
provisions of Rule 158 under the Act), which need not be audited, covering a
twelve-month period commencing after the effective date of the Registration
Statement and ending not later than 15 months thereafter, as soon as
practicable after the end of such period, which consolidated earnings statement
shall satisfy the provisions of Section 11(a) of the Act.
(i) During the period of five years hereafter, the
Company will furnish to you (i) as soon as available, a copy of each report of
the Company mailed to stockholders or filed with the Commission, and (ii) from
time to time such other information concerning the Company as you may
reasonably request.
(j) If this Agreement shall terminate or shall be
terminated after execution pursuant to any provisions hereof (otherwise than
pursuant to the second paragraph of Section 10 hereof or by notice given by you
terminating this Agreement pursuant to Section 10 or Section 11 hereof) or if
this Agreement shall be terminated by the Underwriters because of any failure
or refusal on the part of the Company to comply with the terms or fulfill any
of the conditions of this Agreement, the Company agrees to reimburse the
Representatives for all out-of-pocket expenses (including fees and expenses of
counsel for the Underwriters) reasonably incurred by you in connection
herewith.
(k) The Company will apply the net proceeds from the sale
of the Shares substantially in accordance with the description set forth in the
Prospectus.
(l) If Rule 430A of the Act is employed, the Company will
timely file the Prospectus pursuant to Rule 424(b) under the Act and will
advise you of the time and manner of such filing.
(m) Except as provided in this Agreement, the Company
will not (i) offer, sell, contract to sell or otherwise dispose of any shares
of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock, except pursuant to
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<PAGE> 7
outstanding options to purchase Common Stock under the Amended and Restated
1987 Kent Electronics Corporation Stock Option Plan, (ii) file or effect a
registration statement under the Act (other than in connection with the
registration of securities pursuant to an employee stock option, stock
purchase, dividend reinvestment plan or similar plan or pursuant to a merger,
exchange offer or a transaction of the type specified in Rule 145(a) under the
Act) registering shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock, or (iii) grant any options or
warrants to purchase Common Stock, except for the grant of options to purchase
Common Stock under the Amended and Restated 1987 Kent Electronics Corporation
Stock Option Plan, for a period of 90 days after the date of the Prospectus,
without the prior written consent of Smith Barney Inc.
(n) The Company has furnished to you agreements signed by
each of its current executive officers and directors, whereby each executive
officer and director has agreed that he or she will not sell, offer to sell,
solicit an offer to buy, contract to sell, grant any option to purchase, or
otherwise transfer or dispose of, any shares of Common Stock, or any securities
convertible into or exercisable or exchangeable for Common Stock, for a period
of 90 days after the date of the Prospectus, without the prior written consent
of Smith Barney Inc.
(o) Except as stated in this Agreement and in the
Prepricing Prospectus and the Prospectus, the Company has not taken, nor will
it take, directly or indirectly, any action designed to or that might
reasonably be expected to cause or result in stabilization or manipulation of
the price of the Common Stock to facilitate the sale or resale of the Shares.
(p) The Company will use its best efforts to have the
shares of Common Stock which it agrees to sell under this Agreement listed,
subject to notice of issuance, on the New York Stock Exchange on or before the
Closing Date.
6. Representations and Warranties of the Company. The Company
represents and warrants to each Underwriter that:
(a) Each Prepricing Prospectus included as part of the
registration statement as originally filed or as part of any amendment or
supplement thereto, or filed pursuant to Rule 424 under the Act, complied when
so filed in all material respects with the provisions of the Act and did not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading. The
Commission has not issued any order preventing or suspending the use of any
Prepricing Prospectus.
(b) The Company and the offering of the Shares
contemplated by this Agreement meet the requirements for using Form S-3 under
the Act. The registration statement in the form in which it became or becomes
effective and also in such form as it
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<PAGE> 8
may be when any post-effective amendment thereto shall become effective and the
Prospectus and any supplement or amendment thereto, when filed with the
Commission under Rule 424(b) under the Act, complied or will comply in all
material respects with the provisions of the Act and did not or will not at any
such times contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except that this representation and warranty does not
apply to statements in or omissions from the registration statement or the
prospectus made in reliance upon and in conformity with information relating to
any Underwriter furnished to the Company in writing by or on behalf of any
Underwriter through you expressly for use therein.
(c) The Incorporated Documents heretofore filed, when
they were filed (or, if any amendment with respect to any such document was
filed, when such amendment was filed), conformed in all material respects with
the requirements of the Exchange Act, any further Incorporated Documents so
filed will, when they are filed, conform in all material respects with the
requirements of the Exchange Act; no such document when it was filed (or, if an
amendment with respect to any such document was filed, when such amendment was
filed), contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein not misleading; and no such further document, when it is
filed, will contain an untrue statement of a material fact or will omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein not misleading.
(d) All the outstanding shares of Common Stock have been
duly authorized and validly issued, are fully paid and nonassessable and are
free of any preemptive or similar rights; the Shares have been duly authorized
and, when issued and delivered to the Underwriters against payment therefor in
accordance with the terms hereof, will be validly issued, fully paid and
nonassessable and free of any preemptive or similar rights; and the capital
stock of the Company conforms to the description thereof in the Registration
Statement and the Prospectus.
(e) The Company is a corporation duly organized and
validly existing in good standing under the laws of the State of Texas with
full corporate power and authority to own, lease and operate its properties and
to conduct its business as described in the Registration Statement and the
Prospectus, and is duly registered and qualified to conduct its business and is
in good standing in each jurisdiction or place where the nature of its
properties or the conduct of its business requires such registration or
qualification, except where the failure so to register or qualify does not have
a material adverse effect on the condition (financial or other), business,
properties, net worth or results of operations of the Company and the
Subsidiaries (as hereinafter defined) taken as a whole (a "Material Adverse
Effect").
(f) All of the Company's subsidiaries that are
"significant subsidiaries" (as
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<PAGE> 9
defined in Regulation S-X) (collectively, the "Subsidiaries") are listed in an
exhibit to the Company's Annual Report on Form 10-K, which is incorporated by
reference into the Registration Statement. Each Subsidiary is a corporation
duly organized, validly existing and in good standing in the jurisdiction of
its incorporation, with full corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Registration Statement and the Prospectus, and is duly registered and qualified
to conduct its business and is in good standing in each jurisdiction or place
where the nature of its properties or the conduct of its business requires such
registration or qualification, except where the failure so to register or
qualify does not have a Material Adverse Effect; all the outstanding shares of
capital stock of each of the Subsidiaries have been duly authorized and validly
issued, are fully paid and nonassessable, and are owned by the Company
directly, or indirectly through one of the other Subsidiaries, free and clear
of any lien, adverse claim, security interest, equity or other encumbrance.
(g) There are no legal or governmental proceedings
pending or, to the knowledge of the Company, threatened, against the Company or
any of the Subsidiaries, or to which the Company or any of the Subsidiaries, or
to which any of their respective properties is subject, that are required to be
described in the Registration Statement or the Prospectus but are not described
as required, and there are no agreements, contracts, indentures, leases or
other instruments that are required to be described in the Registration
Statement or the Prospectus or to be filed as an exhibit to the Registration
Statement or any Incorporated Document that are not described or filed as
required by the Act or the Exchange Act.
(h) Neither the Company nor any of the Subsidiaries is in
violation of its certificate or articles of incorporation or by-laws, or other
organizational documents, or of any law, ordinance, administrative or
governmental rule or regulation applicable to the Company or any of the
Subsidiaries or of any decree of any court or governmental agency or body
having jurisdiction over the Company or any of the Subsidiaries, or in default
in any material respect in the performance of any obligation, agreement or
condition contained in any bond, debenture, note or any other evidence of
indebtedness or in any material agreement, indenture, lease or other instrument
to which the Company or any of the Subsidiaries is a party or by which any of
them or any of their respective properties may be bound, which violation or
default would, singly or in the aggregate, have a Material Adverse Effect.
(i) Neither the issuance and sale of the Shares, the
execution, delivery or performance of this Agreement by the Company nor the
consummation by the Company of the transactions contemplated hereby (i)
requires any consent, approval, authorization or other order of or registration
or filing with, any court, regulatory body, administrative agency or other
governmental body, agency or official (except such as may be required for the
registration of the Shares under the Act and the Exchange Act and compliance
with the securities or Blue Sky laws of various jurisdictions, all of which
have been or will be effected
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<PAGE> 10
in accordance with this Agreement and except for consents, approvals,
authorizations, orders, registrations or filings outside the United States
which are required under the securities laws of any such foreign jurisdiction)
or conflicts or will conflict with or constitutes or will constitute a breach
of, or a default under, the certificate or articles of incorporation or
by-laws, or other organizational documents, of the Company or any of the
Subsidiaries, (ii) conflicts or will conflict with or constitutes or will
constitute a breach of, or a default under, any agreement, indenture, lease or
other instrument to which the Company or any of the Subsidiaries is a party or
by which any of them or any of their respective properties may be bound, which
conflict, breach or default would, singly or in the aggregate, have a Material
Adverse Effect, (iii) violates or will violate any statute, law, regulation or
filing or judgment, injunction, order or decree applicable to the Company or
any of the Subsidiaries or any of their respective properties, which violation
would, singly or in the aggregate, have a Material Adverse Effect, or (iv) will
result in the creation or imposition of any lien, charge or encumbrance upon
any property or assets of the Company or any of the Subsidiaries pursuant to
the terms of any agreement or instrument to which any of them is a party or by
which any of them may be bound or to which any of the property or assets of any
of them is subject, which lien, charge or encumbrance would, singly or in the
aggregate, have a Material Adverse Effect.
(j) The accountants, Grant Thornton LLP, who have
certified or shall certify the financial statements included or incorporated by
reference in the Registration Statement and the Prospectus (or any amendment or
supplement thereto) are independent public accountants as required by the Act.
(k) The financial statements, together with related
schedules and notes, included or incorporated by reference in the Registration
Statement and the Prospectus (and any amendment or supplement thereto), present
fairly the consolidated financial position, results of operations and changes
in financial position of the Company and the Subsidiaries on the basis stated
in the Registration Statement at the respective dates or for the respective
periods to which they apply; such statements and related schedules and notes
have been prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved, except as disclosed
therein; and the other financial and statistical information and data included
or incorporated by reference in the Registration Statement and the Prospectus
(and any amendment or supplement thereto) are accurately presented and prepared
on a basis consistent with such financial statements and the books and records
of the Company and the Subsidiaries.
(l) The execution and delivery of, and the performance by
the Company of its obligations under, this Agreement have been duly and validly
authorized by the Company, and this Agreement has been duly executed and
delivered by the Company and constitutes the valid and legally binding
agreement of the Company, enforceable against the Company in accordance with
its terms, except as (i) rights to indemnity and contribution hereunder may be
limited by federal or state securities laws and (ii) enforceability may be
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<PAGE> 11
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws now or hereafter in effect relating to creditors' rights generally
and general principles of equity (regardless of whether such enforcement is
considered in a proceeding in equity or at law).
(m) Except as disclosed in the Registration Statement and
the Prospectus (or any amendment or supplement thereto), subsequent to the
respective dates as of which such information is given in the Registration
Statement and the Prospectus (or any amendment or supplement thereto), neither
the Company nor any of the Subsidiaries has incurred any liability or
obligation, direct or contingent, or entered into any transaction, not in the
ordinary course of business, that is material to the Company and the
Subsidiaries taken as a whole, and there has not been any change in the capital
stock (other than any change in capital stock relating to the exercise of
outstanding options), or material increase in the short-term debt or long-term
debt, of the Company or any of the Subsidiaries, or any material adverse
change, or any development involving or which may reasonably be expected to
involve, a prospective material adverse change, in the condition (financial or
other), business, net worth or results of operations of the Company and the
Subsidiaries taken as a whole.
(n) Each of the Company and the Subsidiaries has good and
marketable title to all property (real and personal) described in the
Prospectus as being owned by it, free and clear of all liens, claims, security
interests or other encumbrances except such as are described in the
Registration Statement and the Prospectus or in a document filed as an exhibit
to the Registration Statement and all the property described in the Prospectus
as being held under lease by each of the Company and the Subsidiaries is held
by it under valid, subsisting and enforceable leases.
(o) The Company has not distributed and, prior to the
later to occur of (i) the Closing Date and (ii) completion of the distribution
of the Shares, will not distribute any offering material in connection with the
offering and sale of the Shares other than the Registration Statement, the
Prepricing Prospectus, the Prospectus or other materials, if any, permitted by
the Act.
(p) The Company and each of the Subsidiaries has such
permits, licenses, franchises and authorizations of governmental or regulatory
authorities ("permits") as are necessary to own its respective properties and
to conduct its business in the manner described in the Prospectus, subject to
such qualifications as may be set forth in the Prospectus; the Company and each
of the Subsidiaries has fulfilled and performed all its material obligations
with respect to such permits and no event has occurred which allows, or after
notice or lapse of time would allow, revocation or termination thereof or
results in any other material impairment of the rights of the holder of any
such permit, subject in each case to such qualification as may be set forth in
the Prospectus; and, except as described in the Prospectus, none of such
permits contains any restriction that is materially burdensome to the Company
or any of the Subsidiaries.
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<PAGE> 12
(q) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific authorization;
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(r) To the Company's knowledge, neither the Company nor
any of its Subsidiaries nor any employee or agent of the Company or any
Subsidiary has made any payment of funds of the Company or any Subsidiary or
received or retained any funds in violation of any law, rule or regulation,
which payment, receipt or retention of funds is of a character required to be
disclosed in the Prospectus.
(s) The Company and each of the Subsidiaries have filed
all tax returns required to be filed, which returns, to the Company's
knowledge, are complete and correct, and neither the Company nor any Subsidiary
is in default in the payment of any taxes which were payable pursuant to said
returns or any assessments with respect thereto.
(t) No holder of any security of the Company has any
right to require registration of shares of Common Stock or any other security
of the Company because of the filing of the registration statement or
consummation of the transactions contemplated by this Agreement.
(u) The Company and the Subsidiaries own or possess all
patents, trademarks, trademark registrations, service marks, service mark
registrations, trade names, copyrights, licenses, inventions, trade secrets and
rights described in the Prospectus as being owned by them or any of them or
necessary for the conduct of their respective businesses, and the Company is
not aware of any claim to the contrary or any challenge by any other person to
the rights of the Company and the Subsidiaries with respect to the foregoing.
(v) The Company has complied with all provisions of
Florida Statutes, Section 517.075, relating to issuers doing business with
Cuba.
(w) The Company is not an "investment company" as that
term is defined in the Investment Company Act of 1940, as amended (the
"Investment Company Act"), or subject to regulation under the Investment
Company Act.
7. Indemnification and Contribution. (a) The Company agrees to
indemnify and hold harmless each of you and each other Underwriter and each
person, if any, who controls any Underwriter within the meaning of Section 15
of the Act or Section 20 of the Exchange Act from and against any and all
losses, claims, damages, liabilities and expenses (including
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<PAGE> 13
reasonable costs of investigation) arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained in any
Prepricing Prospectus or in the Registration Statement or the Prospectus or in
any amendment or supplement thereto, or arising out of or based upon any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities or expenses arise
out of or are based upon any untrue statement or omission or alleged untrue
statement or omission which has been made therein or omitted therefrom in
reliance upon and in conformity with the information relating to such
Underwriter furnished in writing to the Company by or on behalf of any
Underwriter through you expressly for use in connection therewith; provided,
however, that the indemnification contained in this paragraph (a) with respect
to any Prepricing Prospectus shall not inure to the benefit of any Underwriter
(or to the benefit of any person controlling such Underwriter) on account of
any such loss, claim, damage, liability or expense arising from the sale of the
Shares by such Underwriter to any person if a copy of the Prospectus shall not
have been delivered or sent to such person within the time required by the Act,
and the untrue statement or alleged untrue statement or omission or alleged
omission of a material fact contained in such Prepricing Prospectus was
corrected in the Prospectus, provided that the Company has delivered the
Prospectus to the several Underwriters in requisite quantity on a timely basis
to permit such delivery or sending. The foregoing indemnity agreement shall be
in addition to any liability which the Company may otherwise have.
(b) If any action, suit or proceeding shall be brought against any
Underwriter or any person controlling any Underwriter in respect of which
indemnity may be sought against the Company, such Underwriter or such
controlling person shall promptly notify the Company and the Company shall
assume the defense thereof, including the employment of counsel and payment of
all reasonable fees and expenses. Such Underwriter or any such controlling
person shall have the right to employ separate counsel in any such action, suit
or proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Underwriter or such
controlling person unless (i) the Company has agreed in writing to pay such
fees and expenses, (ii) the Company has failed to assume the defense and employ
counsel, or (iii) the named parties to any such action, suit or proceeding
(including any impleaded parties) include both such Underwriter or such
controlling person and the Company and such Underwriter or such controlling
person shall have been advised by its counsel that representation of such
indemnified party and the Company by the same counsel would be inappropriate
under applicable standards of professional conduct (whether or not such
representation by the same counsel has been proposed) due to actual or
potential differing interests between them (in which case the Company shall not
have the right to assume the defense of such action, suit or proceeding on
behalf of such Underwriter or such controlling person). It is understood,
however, that the Company shall, in connection with any one such action, suit
or proceeding or separate but substantially similar or related actions, suits
or proceedings in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable
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<PAGE> 14
fees and expenses of only one separate firm of attorneys (in addition to any
local counsel) at any time for all such Underwriters and controlling persons
not having actual or potential differing interests with you or among
themselves, which firm shall be designated in writing by Smith Barney Inc., and
that all such reasonable fees and expenses shall be reimbursed as they are
incurred. The Company shall not be liable for any settlement of any such
action, suit or proceeding effected without its written consent, but if settled
with such written consent, or if there be a final judgment for the plaintiff in
any such action, suit or proceeding, the Company agrees to indemnify and hold
harmless any Underwriter and any such controlling person from and against any
loss, claim, damage, liability or expense by reason of such settlement or
judgment, to the extent provided in paragraph (a) above.
(c) Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, its directors, its officers who sign
the Registration Statement, and any person who controls the Company within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act, to the same
extent as the foregoing indemnity from the Company to each Underwriter, but
only with respect to information relating to such Underwriter furnished in
writing by or on behalf of such Underwriter through you expressly for use in
the Registration Statement, the Prospectus or any Prepricing Prospectus, or any
amendment or supplement thereto. If any action, suit or proceeding shall be
brought against the Company, any of its directors, any such officer, or any
such controlling person based on the Registration Statement, the Prospectus or
any Prepricing Prospectus, or any amendment or supplement thereto, and in
respect of which indemnity may be sought against any Underwriter pursuant to
this paragraph (c), such Underwriter shall have the rights and duties given to
the Company by paragraph (b) above (except that if the Company shall have
assumed the defense thereof such Underwriter shall not be required to do so,
but may employ separate counsel therein and participate in the defense thereof,
but the fees and expenses of such counsel shall be at such Underwriter's
expense), and the Company, its directors, any such officer, and any such
controlling person shall have the rights and duties given to the Underwriters
by paragraph (b) above. The foregoing indemnity agreement shall be in addition
to any liability which the Underwriters may otherwise have.
(d) If the indemnification provided for in this Section 7 is
unavailable to an indemnified party under paragraphs (a) or (c) hereof in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then an indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses (i) in
such proportion as is appropriate to reflect the relative benefits received by
the Company on the one hand and the Underwriters on the other hand from the
offering of the Shares, or (ii) if the allocation provided by clause (i) above
is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but also
the relative fault of the Company on the one hand and the Underwriters on the
other hand in connection with the statements or omissions that resulted in such
losses, claims, damages, liabilities or expenses, as well as any other relevant
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<PAGE> 15
equitable considerations. The relative benefits received by the Company on the
one hand and the Underwriters on the other hand shall be deemed to be in the
same proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company bear to the total underwriting discounts and
commissions received by the Underwriters, in each case as set forth in the
table on the cover page of the Prospectus. The relative fault of the Company
on the one hand and the Underwriters on the other hand shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company on the one hand or
by the Underwriters on the other hand and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
(e) The Company and the Underwriters agree that it would not be
just and equitable if contribution pursuant to this Section 7 were determined
by a pro rata allocation (even if the Underwriters were treated as one entity
for such purpose) or by any other method of allocation that does not take
account of the equitable considerations referred to in paragraph (d) above.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities and expenses referred to in paragraph (d) above
shall be deemed to include, subject to the limitations set forth above, any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating any claim or defending any such action, suit or
proceeding. Notwithstanding the provisions of this Section 7, no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price of the Shares underwritten by it and distributed to the public
exceeds the amount of any damages which such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute pursuant to
this Section 7 are several in proportion to the respective numbers of Firm
Shares set forth opposite their names in Schedule I hereto (or such numbers of
Firm Shares increased as set forth in Section 10 hereof) and not joint.
(f) No indemnifying party shall, without the prior written consent
of the indemnified party, effect any settlement of any pending or threatened
action, suit or proceeding in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such action, suit or proceeding.
(g) Any losses, claims, damages, liabilities or expenses for which
an indemnified party is entitled to indemnification or contribution under this
Section 7 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section
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<PAGE> 16
7 and the representations and warranties of the Company set forth in this
Agreement shall remain operative and in full force and effect, regardless of
(i) any investigation made by or on behalf of any Underwriter or any person
controlling any Underwriter, the Company, its directors or officers, or any
person controlling the Company, (ii) acceptance of any Shares and payment
therefor hereunder, and (iii) any termination of this Agreement. A successor
to any Underwriter or any person controlling any Underwriter, or to the
Company, its directors or officers, or any person controlling the Company,
shall be entitled to the benefits of the indemnity, contribution and
reimbursement agreements contained in this Section 7.
8. Conditions of Underwriters' Obligations. The several obligations
of the Underwriters to purchase the Firm Shares hereunder are subject to the
following conditions:
(a) If, at the time this Agreement is executed and
delivered, it is necessary for the registration statement or a post-effective
amendment thereto to be declared effective before the offering of the Shares
may commence, the registration statement or such post-effective amendment shall
have become effective not later than 5:30 P.M., New York City time, on the date
hereof, or at such later date and time as shall be consented to in writing by
you, and all filings, if any, required by Rules 424 and 430A under the Act
shall have been timely made; no stop order suspending the effectiveness of the
registration statement shall have been issued and no proceeding for that
purpose shall have been instituted or, to the knowledge of the Company or any
Underwriter, threatened by the Commission, and any request of the Commission
for additional information (to be included in the registration statement or the
prospectus or otherwise) shall have been complied with to your satisfaction.
(b) Subsequent to the effective date of this Agreement,
there shall not have occurred (i) any change, or any development involving a
prospective change, in or affecting the condition (financial or other),
business, properties, net worth, or results of operations of the Company or the
Subsidiaries not disclosed in the Prospectus, which in your opinion, as
Representatives of the several Underwriters, would materially, adversely affect
the market for the Shares, or (ii) any event or development relating to or
involving the Company or any officer or director of the Company which makes any
statement made in the Prospectus untrue or which, in the opinion of the Company
and its counsel or the Underwriters and their counsel, requires the making of
any addition to or change in the Prospectus in order to state a material fact
required by the Act or any other law to be stated therein or necessary in order
to make the statements therein not misleading, if amending or supplementing the
Prospectus to reflect such event or development would, in your opinion, as
Representatives of the several Underwriters, adversely affect the market for
the Shares.
(c) You shall have received on the Closing Date, an
opinion of Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P., counsel for the
Company, dated the Closing Date and addressed to you, as Representatives of the
several Underwriters, to the effect that:
- 16 -
<PAGE> 17
(i) The Company is a corporation duly incorporated and
validly existing in good standing under the laws of the State of Texas with
full corporate power and authority to own, lease and operate its properties and
to conduct its business as described in the Registration Statement and the
Prospectus (and any amendment or supplement thereto), and is duly registered
and qualified to conduct its business and is in good standing in each
jurisdiction or place where the nature of its properties or the conduct of its
business requires such registration or qualification, except where the failure
so to register or qualify does not have a Material Adverse Effect;
(ii) Each of the Subsidiaries is a corporation duly
organized and validly existing in good standing under the laws of the
jurisdiction of its organization, with full corporate power and authority to
own, lease, and operate its properties and to conduct its business as described
in the Registration Statement and the Prospectus (and any amendment or
supplement thereto); and all the outstanding shares of capital stock of each of
the Subsidiaries have been duly authorized and validly issued, are fully paid
and nonassessable, and are owned by the Company directly, or indirectly through
one of the other Subsidiaries, free and clear of any perfected security
interest, or, to the best knowledge of such counsel after reasonable inquiry,
any other security interest, lien, adverse claim, equity or other encumbrance;
(iii) The authorized and outstanding capital stock of the
Company is as set forth under the caption "Capitalization" in the Prospectus;
and the authorized capital stock of the Company conforms in all material
respects as to legal matters to the description thereof contained in the
Prospectus under the caption "Description of Capital Stock";
(iv) All the shares of capital stock of the Company
outstanding prior to the issuance of the Shares have been duly authorized and
validly issued, and, to the best knowledge of such counsel, are fully paid
and nonassessable;
(v) The Shares have been duly authorized and, when issued
and delivered to the Underwriters against payment therefor in accordance with
the terms hereof, will be validly issued, fully paid and nonassessable and free
of any preemptive, or to the best knowledge of such counsel after reasonable
inquiry, similar rights that entitle or will entitle any person to acquire any
Shares upon the issuance thereof by the Company;
(vi) The form of certificates for the Shares conforms to
the requirements of the Texas Business Corporation Act;
(vii) To the best knowledge of such counsel after
reasonable inquiry, except as set forth in the Registration Statement or the
Incorporated Documents, there are no outstanding options, warrants or other
rights calling for the issuance of, nor any commitment, plan or arrangement to
issue, any shares of capital stock of the Company or any security convertible
into or exchangeable or exercisable for capital stock of the
- 17 -
<PAGE> 18
Company;
(viii) To the best knowledge of such counsel after
reasonable inquiry, except as described in the Prospectus, there is no holder
of any security of the Company or any other person who has the right,
contractual or otherwise, to cause the Company to sell or otherwise issue to
them, or to permit them to underwrite the sale of, the Shares or the right to
have any Common Stock or other securities of the Company included in the
registration statement or the right, as a result of the filing of the
registration statement, to require registration under the Act of any shares of
Common Stock or other securities of the Company.
(ix) The Registration Statement and all post-effective
amendments, if any, have become effective under the Act and, to the best
knowledge of such counsel after reasonable inquiry, no stop order suspending
the effectiveness of the Registration Statement has been issued and no
proceedings for that purpose are pending before or contemplated by the
Commission; and any required filing of the Prospectus pursuant to Rule 424(b)
has been made in accordance with Rule 424(b);
(x) The Company has corporate power and authority to
enter into this Agreement and to issue, sell and deliver the Shares to the
Underwriters as provided herein, and this Agreement has been duly authorized,
executed and delivered by the Company and is a valid, legal and binding
agreement of the Company, enforceable against the Company in accordance with
its terms, except as enforcement of rights to indemnity and contribution
hereunder may be limited by Federal or state securities laws or principles of
public policy and subject to the qualification that the enforceability of the
Company's obligations hereunder may be limited by bankruptcy, fraudulent
conveyance, insolvency, reorganization, moratorium, and other laws relating to
or affecting creditors' rights generally, and by general equitable principles;
(xi) Neither the Company nor any of the Subsidiaries is in
violation of its respective certificate or articles of incorporation or
by-laws, or other organizational documents, or to the best knowledge of such
counsel after reasonable inquiry, is in default in the performance of any
material obligation, agreement or condition contained in any bond, debenture,
note or other evidence of indebtedness, except as may be disclosed in the
Prospectus;
(xii) Neither the offer, sale or delivery of the Shares,
the execution, delivery or performance of this Agreement, compliance by the
Company with the provisions hereof nor consummation by the Company of the
transactions contemplated hereby (a) conflicts or will conflict with or
constitutes or will constitute a breach of, or a default under, the certificate
or articles of incorporation or by-laws, or other organizational documents, of
the Company or any of the Subsidiaries or any agreement, indenture, lease or
other instrument to which the Company or any of the Subsidiaries is a party or
by which any of them or any
- 18 -
<PAGE> 19
of their respective properties is bound that is an exhibit to the Registration
Statement or to any Incorporated Document, or is known to such counsel after
reasonable inquiry, or (b) will result in the creation or imposition of any
lien, charge or encumbrance upon any property or assets of the Company or any
of the Subsidiaries, which lien, charge or encumbrance would, singly or in the
aggregate, have a Material Adverse Effect, nor will any such action result in
any violation of any existing law, regulation, ruling (assuming compliance with
all applicable state and foreign securities and Blue Sky laws), judgment,
injunction, order or decree known to such counsel after reasonable inquiry,
applicable to the Company, the Subsidiaries or any of their respective
properties, which violation would, singly or in the aggregate, have a Material
Adverse Effect;
(xiii) No consent, approval, authorization or other order
of, or registration or filing with, any court, regulatory body, administrative
agency or other governmental body, agency, or official is required on the part
of the Company (except as have been obtained under the Act and the Exchange Act
or such as may be required under state and foreign securities or Blue Sky laws
governing the purchase and distribution of the Shares) for the valid issuance
and sale of the Shares to the Underwriters as contemplated by this Agreement;
(xiv) The Registration Statement and the Prospectus and any
supplements or amendments thereto (except for the financial statements and the
notes thereto and the schedules and other financial and statistical data
included therein, as to which such counsel need not express any opinion) comply
as to form in all material respects with the requirements of the Act; and each
of the Incorporated Documents (except for the financial statements and the
notes thereto and the schedules and other financial and statistical data
included therein, as to which counsel need not express any opinion) complies as
to form in all material respects with the Exchange Act and the rules and
regulations of the Commission thereunder;
(xv) To the best knowledge of such counsel after
reasonable inquiry, (A) other than as described or contemplated in the
Prospectus (or any supplement thereto), there are no legal or governmental
proceedings pending or threatened against the Company or any of the
Subsidiaries, or to which the Company or any of the Subsidiaries, or any of
their property, is subject, which are required to be described in the
Registration Statement or Prospectus (or any amendment or supplement thereto)
and (B) there are no agreements, contracts, indentures, leases or other
instruments, that are required to be described in the Registration Statement or
the Prospectus (or any amendment or supplement thereto) or to be filed as an
exhibit to the Registration Statement or any Incorporated Document that are not
described or filed as required, as the case may be;
(xvi) To the best knowledge of such counsel after
reasonable inquiry, neither the Company nor any of the Subsidiaries is in
violation of any law, ordinance, administrative or governmental rule or
regulation applicable to the Company or any of the Subsidiaries or of any
decree of any court or governmental agency or body having jurisdiction over the
Company or any of the Subsidiaries;
- 19 -
<PAGE> 20
(xvii) The statements in the Registration Statement and
Prospectus, insofar as they are descriptions of contracts, agreements or other
legal documents, or refer to statements of law or legal conclusions, are
accurate and present fairly the information required to be shown;
(xviii) The Company is not an "investment company" as such
term is defined in the Investment Company Act; and
(xix) Although counsel has not undertaken, except as
otherwise indicated in their opinion, to determine independently, and does not
assume any responsibility for, the accuracy or completeness of the statements
in the Registration Statement, such counsel has participated in the preparation
of the Registration Statement and the Prospectus, including review and
discussion of the contents thereof (including review and discussion of the
contents of all Incorporated Documents), and nothing has come to the attention
of such counsel that has caused them to believe that the Registration Statement
(including the Incorporated Documents) at the time the Registration Statement
became effective, or the Prospectus, as of its date and as of the Closing Date
or the Option Closing Date, as the case may be, contained an untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or that any
amendment or supplement to the Prospectus, as of its respective date, and as of
the Closing Date or the Option Closing Date, as the case may be, contained any
untrue statement of a material fact or omitted to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading (it being understood
that such counsel need express no opinion with respect to the financial
statements and the notes thereto and the schedules and other financial and
statistical data included in the Registration Statement or the Prospectus or
any Incorporated Document).
In rendering their opinion as aforesaid, counsel may rely upon an
opinion or opinions, each dated the Closing Date, of other counsel retained by
them or the Company as to laws of any jurisdiction other than the United States
or the State of Texas, provided that (1) each such local counsel is acceptable
to the Representatives, (2) such reliance is expressly authorized by each
opinion so relied upon and a copy of each such opinion is delivered to the
Representatives and is, in form and substance satisfactory to them and their
counsel, and (3) counsel shall state in their opinion that they believe that
they and the Underwriters are justified in relying thereon.
(d) You shall have received on the Closing Date an opinion of
Baker & Botts, L.L.P., counsel for the Underwriters, dated the Closing Date and
addressed to you, as Representatives of the several Underwriters, with respect
to the matters referred to in clauses (v), (ix), (x), (xiv) and (xix) of the
foregoing paragraph (c) and such other related matters as you may request.
- 20 -
<PAGE> 21
(e) You shall have received letters addressed to you, as
Representatives of the several Underwriters, and dated the date hereof and the
Closing Date from Grant Thornton LLP, independent certified public accountants,
substantially in the forms heretofore approved by you.
(f)(i) No stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that purpose shall have
been taken or, to the knowledge of the Company, shall be contemplated by the
Commission at or prior to the Closing Date; (ii) there shall not have been any
change in the capital stock of the Company nor any material increase in the
short-term or long-term debt of the Company (other than in the ordinary course
of business) from that set forth or contemplated in the Registration Statement
or the Prospectus (or any amendment or supplement thereto); (iii) there shall
not have been, since the respective dates as of which information is given in
the Registration Statement and the Prospectus (or any amendment or supplement
thereto), except as may otherwise be stated in the Registration Statement and
Prospectus (or any amendment or supplement thereto), any material adverse
change in the condition (financial or other), business, prospects, properties,
net worth or results of operations of the Company and the Subsidiaries taken as
a whole; (iv) the Company and the Subsidiaries shall not have any liabilities
or obligations, direct or contingent (whether or not in the ordinary course of
business), that are material to the Company and the Subsidiaries, taken as a
whole, other than those reflected in the Registration Statement or the
Prospectus (or any amendment or supplement thereto); and (v) all the
representations and warranties of the Company contained in this Agreement shall
be true and correct on and as of the date hereof and on and as of the Closing
Date as if made on and as of the Closing Date, and you shall have received a
certificate, dated the Closing Date and signed by the chief executive officer
and the chief financial officer of the Company (or such other officers as are
acceptable to you), to the effect set forth in this Section 8(f) and in Section
8(g) hereof.
(g) The Company shall not have failed at or prior to the Closing
Date to have performed or complied with any of its agreements herein contained
and required to be performed or complied with by it hereunder at or prior to
the Closing Date.
(h) Prior to the Closing Date the Shares shall have been listed,
subject to notice of issuance, on the New York Stock Exchange.
(i) The Company shall have furnished or caused to be furnished to
you such further certificates and documents as you shall have reasonably
requested.
All such opinions, certificates, letters and other documents will be
in compliance with the provisions hereof only if they are satisfactory in form
and substance to you and your counsel.
Any certificate or document signed by any officer of the Company and
delivered to
- 21 -
<PAGE> 22
you, as Representatives of the Underwriters, or to counsel for the
Underwriters, shall be deemed a representation and warranty by the Company to
each Underwriter as to the statements made therein.
The several obligations of the Underwriters to purchase Additional
Shares hereunder are subject to the satisfaction on and as of any Option
Closing Date of the conditions set forth in this Section 8, except that, if any
Option Closing Date is other than the Closing Date, the certificates, opinions
and letters referred to in paragraphs (c) through (f) shall be dated the Option
Closing Date in question and the opinions called for by paragraphs (c) and (d)
shall be revised to reflect the sale of Additional Shares.
9. Expenses. The Company agrees to pay the following costs and
expenses and all other costs and expenses incident to the performance by it of
its obligations hereunder: (i) the preparation, printing or reproduction, and
filing with the Commission of the registration statement (including financial
statements and exhibits thereto), each Prepricing Prospectus, the Prospectus,
and each amendment or supplement to any of them; (ii) the printing (or
reproduction) and delivery (including postage, air freight charges and charges
for counting and packaging) of such copies of the registration statement, each
Prepricing Prospectus, the Prospectus, the Incorporated Documents, and all
amendments or supplements to any of them, as may be reasonably requested for
use in connection with the offering and sale of the Shares; (iii) the
preparation, printing, authentication, issuance and delivery of certificates
for the Shares, including any stamp taxes in connection with the original
issuance and sale of the Shares; (iv) the printing (or reproduction) and
delivery of this Agreement, the preliminary and supplemental Blue Sky Memoranda
and all other agreements or documents printed (or reproduced) and delivered in
connection with the offering of the Shares; (v) the listing of the Shares on
the New York Stock Exchange; (vi) the registration or qualification of the
Shares for offer and sale under the securities or Blue Sky laws of the several
states as provided in Section 5(g) hereof (including the reasonable fees,
expenses and disbursements of counsel for the Underwriters relating to the
preparation, printing or reproduction, and delivery of the preliminary and
supplemental Blue Sky Memoranda and such registration and qualification); (vii)
the filing fees and the fees and expenses of counsel for the Underwriters in
connection with any filings required to be made with the National Association
of Securities Dealers, Inc.; (viii) the transportation and other expenses
incurred by or on behalf of Company representatives in connection with
presentations to prospective purchasers of the Shares; and (ix) the fees and
expenses of the Company's accountants and the fees and expenses of counsel
(including local and special counsel) for the Company.
10. Effective Date of Agreement. This Agreement shall
become effective: (i) upon the execution and delivery hereof by the parties
hereto; or (ii) if, at the time this Agreement is executed and delivered, it is
necessary for the registration statement or a post-effective amendment thereto
to be declared effective before the offering of the Shares may commence, when
notification of the effectiveness of the registration statement or such
- 22 -
<PAGE> 23
post-effective amendment has been given by the Commission. Until such time as
this Agreement shall have become effective, it may be terminated by the
Company, by notifying you, or by you, as Representatives of the several
Underwriters, by notifying the Company.
If any one or more of the Underwriters shall fail or refuse to
purchase Shares which it or they are obligated to purchase hereunder on the
Closing Date, and the aggregate number of Shares which such defaulting
Underwriter or Underwriters are obligated but fail or refuse to purchase is not
more than one-tenth of the aggregate number of Shares which the Underwriters
are obligated to purchase on the Closing Date, each non-defaulting Underwriter
shall be obligated, severally, in the proportion which the number of Firm
Shares set forth opposite its name in Schedule I hereto bears to the aggregate
number of Firm Shares set forth opposite the names of all non-defaulting
Underwriters or in such other proportion as you may specify in accordance with
Section 20 of the Master Agreement Among Underwriters of Smith Barney Inc., to
purchase the Shares which such defaulting Underwriter or Underwriters are
obligated, but fail or refuse, to purchase. If any one or more of the
Underwriters shall fail or refuse to purchase Shares which it or they are
obligated to purchase on the Closing Date and the aggregate number of Shares
with respect to which such default occurs is more than one-tenth of the
aggregate number of Shares which the Underwriters are obligated to purchase on
the Closing Date and arrangements satisfactory to you and the Company for the
purchase of such Shares by one or more non- defaulting Underwriters or other
party or parties approved by you and the Company are not made within 36 hours
after such default, this Agreement will terminate without liability on the part
of any non-defaulting Underwriter or the Company. In any such case which does
not result in termination of this Agreement, either you or the Company shall
have the right to postpone the Closing Date, but in no event for longer than
seven days, in order that the required changes, if any, in the Registration
Statement and the Prospectus or any other documents or arrangements may be
effected. Any action taken under this paragraph shall not relieve any
defaulting Underwriter from liability in respect of any such default of any
such Underwriter under this Agreement. The term "Underwriter" as used in this
Agreement includes, for all purposes of this Agreement, any party not listed in
Schedule I hereto who, with your approval and the approval of the Company,
purchases Shares which a defaulting Underwriter is obligated, but fails or
refuses, to purchase.
Any notice under this Section 10 may be given by telegram, telecopy or
telephone but shall be subsequently confirmed by letter.
11. Termination of Agreement. This Agreement shall be subject to
termination in your absolute discretion, without liability on the part of any
Underwriter to the Company by notice to the Company, if prior to the Closing
Date or any Option Closing Date (if different from the Closing Date and then
only as to the Additional Shares), as the case may be, (i) trading in
securities generally on the New York Stock Exchange, the American Stock
Exchange or the Nasdaq National Market shall have been suspended or materially
limited, (ii) a general moratorium on commercial banking activities in New York
or Texas shall have
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<PAGE> 24
been declared by either federal or state authorities, or (iii) there shall have
occurred any outbreak or escalation of hostilities or other international or
domestic calamity, crisis or change in political, financial or economic
conditions, the effect of which on the financial markets of the United States
is such as to make it, in your judgment, impracticable or inadvisable to
commence or continue the offering of the Shares at the offering price to the
public set forth on the cover page of the Prospectus or to enforce contracts
for the resale of the Shares by the Underwriters. Notice of such termination
may be given to the Company by telegram, telecopy or telephone and shall be
subsequently confirmed by letter.
12. Information Furnished by the Underwriters. The statements set
forth in the last paragraph on the cover page, the stabilization legend on the
inside front cover, and the statements in the first and third paragraphs under
the caption "Underwriting" in any Prepricing Prospectus and in the Prospectus,
constitute the only information furnished by or on behalf of the Underwriters
through you as such information is referred to in Sections 6(b) and 7 hereof.
13. Miscellaneous. Except as otherwise provided in Sections 5, 10
and 11 hereof, notice given pursuant to any provision of this Agreement shall
be in writing and shall be delivered (i) if to the Company, at the office of
the Company at 7433 Harwin Drive, Houston, Texas 77036-2015, Attention: Mr.
Morrie K. Abramson, Chairman of the Board, Chief Executive Officer and
President; or (ii) if to you, as Representatives of the several Underwriters,
care of Smith Barney Inc., 388 Greenwich Street, New York, New York 10013,
Attention: Manager, Investment Banking Division.
This Agreement has been and is made solely for the benefit of the
several Underwriters, the Company, its directors and officers, and the other
controlling persons referred to in Section 7 hereof and their respective
successors and assigns, to the extent provided herein, and no other person
shall acquire or have any right under or by virtue of this Agreement. Neither
the term "successor" nor the term "successors and assigns" as used in this
Agreement shall include a purchaser from any Underwriter of any of the Shares
in his status as such purchaser.
14. Applicable Law; Counterparts. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York
applicable to contracts made and to be performed within the State of New York.
This Agreement may be signed in various counterparts which together
constitute one and the same instrument. If signed in counterparts, this
Agreement shall not become effective unless at least one counterpart hereof
shall have been executed and delivered on behalf of each party hereto.
- 24 -
<PAGE> 25
Please confirm that the foregoing correctly sets forth the agreement
between the Company and the several Underwriters.
Very truly yours,
KENT ELECTRONICS CORPORATION
By: ______________________________
Name: ________________________
Title: _______________________
Confirmed as of the date first
above mentioned on behalf of
themselves and the other several
Underwriters named in Schedule I
hereto.
SMITH BARNEY INC.
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
As Representatives of the Several Underwriters
By SMITH BARNEY INC.
By: ___________________________________
Name: _____________________________
Title: ____________________________
- 25 -
<PAGE> 26
SCHEDULE I
KENT ELECTRONICS CORPORATION
<TABLE>
<CAPTION>
Number of
Underwriter Firm Shares
----------- -----------
<S> <C>
Smith Barney Inc..........................................................................
Merrill Lynch, Pierce, Fenner & Smith Incorporated .......................................
-----------
Total..... 2,000,000
</TABLE>
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<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our reports dated May 8, 1995, accompanying the
consolidated financial statements of Kent Electronics Corporation and
Subsidiaries contained in the Registration Statement and Prospectus and
accompanying the financial statements and schedule included in the Annual
Report on Form 10-K for the year ended April 1, 1995, which is incorporated by
reference in the Registration Statement and Prospectus. We consent to the use
and incorporation by reference of the aforementioned reports in the
Registration Statement and Prospectus, and to the use of our name as it appears
under the caption "Experts".
GRANT THORNTON LLP
Houston, Texas
August 21, 1995
