-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Qx1IzyxdDRbTByf7mJxYNFpjyZtlJVXvCHEFstdMju1g+o6/vRt996QXb1m9d9pY ZmHHsoKs9w6JVCP0n4fRQw== 0000950130-96-001992.txt : 19960529 0000950130-96-001992.hdr.sgml : 19960529 ACCESSION NUMBER: 0000950130-96-001992 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960229 FILED AS OF DATE: 19960528 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: NU HORIZONS ELECTRONICS CORP CENTRAL INDEX KEY: 0000718074 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-ELECTRONIC PARTS & EQUIPMENT, NEC [5065] IRS NUMBER: 112621097 STATE OF INCORPORATION: DE FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-08798 FILM NUMBER: 96572945 BUSINESS ADDRESS: STREET 1: 6000 NEW HORIZONS BLVD CITY: AMITYVILLE STATE: NY ZIP: 11701 BUSINESS PHONE: 5162266000 MAIL ADDRESS: STREET 2: 6000 NEW HORIZONS BLVD CITY: AMITYVILLE STATE: NY ZIP: 11701 10-K 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ANNUAL REPORT ON FORM 10K Pursuant Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended Commission file number February 29, 1996 1-8798 - ---------------------------------- -------------------------- Nu Horizons Electronics Corp. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 11-2621097 -------------------------------- ---------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 6000 New Horizons Blvd., Amityville, New York 11701 - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (516) 226-6000 - ------------------------------------------------------------------------------- (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: None - -------------------------------------------------------------------------------- (Title of class) Securities registered pursuant to Section 12(g) of the Act: Name of each exchange on Title of each class which registered Common Stock Par Value $.0066 Per Share NASDAQ National Market System - ----------------------------------------- ---------------------------------- - -------------------------------------------------------------------------------- (Title of class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO ___ ___ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K [X] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of May 17, 1996. Common Stock - Par Value $.0066 8,676,049 ------------------------------- ------------------ Class Outstanding Shares Aggregate Market Value of Non-Affiliate Stock at May 17, 1996 - --------------------------------------------------------------- approximately $129,598,000 -------------------------- NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES TABLE OF CONTENTS
PART I: Item 1. Business Pages 3 - 7 Item 2. Properties Pages 7 - 8 Item 3. Legal Proceedings Page 8 Item 4. Submission of Matters to a Vote of Security Holders Page 8 PART II: Item 5. Market for the Registrant's Common Equity and Related Page 8 Stockholder Matters Item 6. Selected Financial Data Page 9 Item 7. Management's Discussion and Analysis of Financial Pages 10 - 13 Condition and Results of Operations Item 8. Financial Statements and Supplementary Data Pages F1 - F19 Item 9. Changes in and Disagreements with Accountants on Page 14 Accounting and Financial Disclosures PART III: Item 10. Directors and Executive Officers of the Company Pages 14 - 16 Item 11. Executive Compensation Pages 16 - 25 Item 12. Security Ownership of Certain Beneficial Owners and Page 26 Management Item 13. Certain Relationships and Related Transactions Page 26 PART IV: Item 14. Exhibits, Financial Statement Schedules, and Reports Pages 27 - 33 on Form 8-K Signatures Page 34 Exhibit Index
Page 2 PART I. ITEM 1. BUSINESS: GENERAL: Nu Horizons Electronics Corp. (the "Company") and its wholly-owned subsidiaries, NIC Components Corp. ("NIC") and Nu Horizons/Merit Electronics Corp. ("NUM"), are engaged in the distribution of high technology active and passive electronic components. Nu Horizons International Corp. ("International"), another wholly-owned subsidiary, is an export distributor of electronic components. Nu Visions Manufacturing, Inc. ("NUV") located in Springfield, Massachusetts, another wholly-owned subsidiary of the Company, is a contract assembler of circuit boards, harnesses and related electromechanical devices for various OEM's. All references herein to the Company shall, unless the context otherwise requires, be deemed to refer to the Company and its subsidiaries. Active components distributed by the Company, principally to original equipment manufacturers (OEM's) in the United States, include mainly commercial semiconductor products such as memory chips, microprocessors, digital and linear circuits, microwave, RF and fiberoptic components, transistors and diodes. Passive components distributed by NIC, principally to OEM's and other distributors nationally, consist of a high technology line of chip and leaded components including capacitors, resistors and related networks. The active and passive components distributed by the Company are utilized by the electronics industry and other industries in the manufacture of sophisticated electronic products including: industrial instrumentation, computers and peripheral equipment, consumer electronics, telephone and telecommunications equipment, satellite communications equipment, cellular communications equipment, medical equipment, automotive electronics, and audio and video electronic equipment. Manufacturers of electronic components augment their marketing programs through the use of independent distributors and contract assemblers such as the Company, upon which the Company believes they rely to a considerable extent to market their products. Distributors and assemblers, such as the Company, offer their customers the convenience of diverse inventories and rapid delivery, design and technical assistance, and the availability of product in smaller quantities than generally available from manufacturers. Generally, companies engaged in the distribution of active and passive electronic components, such as the Company, are required to maintain a relatively significant investment in inventories and accounts receivable. To meet these requirements, the Company, and other companies in the industry, typically depend on internally generated funds as well as external borrowings. Effective April 1, 1994, the Company acquired, through a newly formed subsidiary, Nu Horizons/Merit Electronics Corp. ("NUM"), substantially all of the assets and certain liabilities of Merit Electronics Corp., located in San Jose, California ("Merit"). NUM is engaged in the distribution of active electronic components in the Northern California marketplace and provides the Company with a base of operations for the remainder of the West Coast. Management's policy is to manage, maintain and control all inventories from its principal headquarters and stocking facilities on Long Island, New York and San Jose, California. As additional franchise line opportunities become available to the Company, the need for branch level inventories may be necessary and desirable in order to better serve the specific needs of local markets. Page 3 ITEM 1. BUSINESS (Continued): Semiconductor Products (Active Components): The Company is a distributor of a broad range of semiconductor products to commercial and military OEM's principally in the United States. The Company is a franchised distributor of active components for approximately fifty-five product lines, the most significant of which are SGS-Thomson Microelectronics and Toshiba. Other significant franchised product lines include Allegro, Cirrus Logic, Crystal, Elantec, Exar, Exel, Microelectronics, Integrated Circuit Systems, International Rectifier, Maxim Integrated Products, NEC, Silicon Systems, Standard Microsystems Corporation, Supertex, Inc., Watkins Johnson, and Xilinx. The Company's franchise agreements authorize it to sell all or part of the product line of a manufacturer on a non-exclusive basis. Under these agreements, each manufacturer will grant credits for any subsequent price reduction by such manufacturer and inventory return privileges whereby the Company can return to each such manufacturer for credit or exchange a percentage ranging from 5% to 20% of the inventory purchased from said manufacturer during a semi-annual period. The franchise agreements generally may be cancelled by either party upon written notice. The Company anticipates, in the future, entering into additional franchise agreements and increasing its inventory levels in accordance with business demands. Passive Components and Relationship with Nippon: NIC is the exclusive outlet in North America for Nippon Industries Co. Ltd.'s (Japan) brand of passive components and does not foresee any change in this relationship. While the Company does not have a written agreement with Nippon in this regard, it believes that a formal written agreement is not material to its ongoing business relationship with Nippon. Due to certain market situations, NIC, with Nippon's assent, has also established several manufacturing associations with U.S. and Taiwan based companies. NIC intends to continue to give Nippon priority however, in acquiring its products whenever the technology and pricing are commensurate with the North American market's requirements. Contract Assembly: As discussed above, the Company's core business is the distribution of active components to OEM's and passive components to OEM's and distributors nationally in the United States. Those components are then placed on printed circuit boards by the OEM's themselves or are contracted for placement to outside contract assembly companies (domestically or offshore). The Company believes that the latter (outside contract assembly) is becoming more prevalent nationally, especially among small to midsize OEM's With a view towards maximizing the Company's current customer base as well as offering new customers additional services, the Company decided, in 1991, that contract circuit board assembly was a natural extension to its business, since 80% of the components found on most printed circuit boards can be provided through the Company's active and NIC's passive products. Page 4 ITEM 1. BUSINESS (Continued): Contract Assembly (continued): In August 1991, the Company formed a new subsidiary, Nu Visions Manufacturing, Inc. (NUV), a Massachusetts corporation, for the purpose of providing contract through hole and surface mount circuit board assembly services. NUV began doing business in September 1991 and was moved to a new facility in mid-February 1992. In order to expand and enhance this part of the business, the Company has acquired approximately $2,000,000 of automated circuit board assembly equipment. Sales and Marketing: Management's strategy for long-term success has been to focus the Company's sales and marketing efforts towards the following industry segments: industrial, telecom/datacom, medical instrumentation, microwave and RF, fiberoptic, consumer electronics, security and protection devices, office equipment, computers and computer peripherals, factory automation and robotics both domestically and abroad. In order to help achieve these goals, the Company may enter into new franchise agreements for a broad base of commodity semiconductor products including those used in the key niche industries referred to above. As of February 29, 1996 the Company had approximately 13,000 customers. All sales are made through customers' purchase orders. Semiconductors are sold primarily via telephone by the Company's in-house staff of approximately 90 salespersons, and by a field sales force of approximately 100 salespersons. The Company maintains branch sales facilities located as follows: EAST COAST ---------- Massachusetts - Boston New York - Amityville (Long Island) and Rochester New Jersey - Mt. Laurel (Philadelphia) and Pine Brook Ohio - Cleveland Maryland - Columbia North Carolina - Raleigh Georgia - Atlanta Alabama - Huntsville Florida - Ft. Lauderdale and Orlando MIDWEST ------- Minnesota - Minneapolis Texas - Austin and Dallas WEST COAST ---------- California - Irvine, Los Angeles, San Diego and San Jose NIC's passive components are marketed through the services of a national network of approximately 20 independent sales representative organizations, employing over 200 salespersons, as well as through NIC's in-house sales and engineering personnel. The independent representative organizations do not represent competing product lines but sell other related products. Commissions to such organizations are generally equivalent to 5% of all sales in a representative's exclusive territory. Page 5 ITEM 1. BUSINESS (Continued): Sales and Marketing (Continued): NIC has developed a national network of approximately 75 regional distributor locations which market passive components on a non- exclusive basis. Approximately 35 of the regional distributors have entered into agreements with NIC whereby they are required to purchase from NIC a prescribed initial inventory. These distributors are protected by NIC against price reductions and are granted certain inventory return and other privileges. Due to the efforts of NIC and its distributors, NIC's passive components have been tested and "designed in" as a prime source of qualified product by over 7,000 OEM's in the United States. Nu Visions' contract manufacturing facilities are marketed through the services of several East Coast independent sales representatives as well as the Company's field sales force. No single customer accounted for more than 2% of the Company's consolidated sales for the year ended February 29, 1996. The Company's sales practice is to require payment within thirty days of delivery. Source of Supply: The Company inventories an extensive stock of active and passive components; however, if the Company's customers order products for which the Company does not maintain inventory, the Company's marketing strategy is to obtain such products from its franchise manufacturers, or, if a product is unobtainable, to identify and recommend satisfactory interchangeable alternative components. For this purpose, the Company devotes considerable efforts to familiarizing itself with component product movement throughout the industry, as well as to constant monitoring of its own inventories. As of February 29, 1996, there were two manufacturers that represented more than 10% of the Company's inventory, on a consolidated basis. These two suppliers, SGS-Thomson and Xilinx, respectively, accounted for 14% and 11% of total inventory. Electronic components distributed by the Company generally are presently readily available; however, from time to time the electronics industry has experienced shortages or surplus of certain electronic products. For the year ended February 29, 1996, the Company purchased inventory from two suppliers, SGS-Thomson and Toshiba, that were each in excess of 10% of the Company's total purchases. Purchases from these suppliers aggregated approximately $33,505,000 for the fiscal year. Competition and Regulation: The Company competes with many companies that distribute semiconductor and passive electronic components and to a lesser extent companies which manufacture such products and sell them directly to OEM's and other distributors. Many of these companies have substantially greater assets and possess greater financial and personnel resources than those of the Company. In addition, certain of these companies possess independent franchise agreements to carry semiconductor product lines which the Company does not carry, but which it may desire to have. Competition is based primarily upon inventory availability, quality of service, knowledge of product and price. The Company believes that it derives an advantage in the distribution of passive electronic components from the distribution of those components under its own label. Page 6 ITEM 1. BUSINESS (Continued): Competition and Regulation (Continued): The Company's competitive ability to price its imported active and passive components could be adversely affected by increases in tariffs, duties, changes in the United States' trade treaties with Japan, Taiwan or other foreign countries, transportation strikes and the adoption of Federal laws containing import restrictions. In addition, the cost of the Company's imports could be subject to governmental controls and international currency fluctuations. Because imports are paid for with U.S. dollars, the decline in value of United States currency as against foreign currencies would cause increases in the dollar prices of the Company's imports from Japan and other foreign countries. Although the Company has not experienced any material adverse effect to date in its ability to compete or maintain its profit margins as a result of any of the foregoing factors, no assurance can be given that such factors will not have a material adverse effect in the future. Backlog: The Company defines backlog as orders, believed to be firm, received from customers and scheduled for shipment no later than 60 days for active components and later than 90 days for passive components from the date of the order. As of May 1, 1996, the Company's backlog was approximately $30,000,000 as compared to a backlog of approximately $22,000,000 at May 1, 1995. Employees: As of February 29, 1996, the Company employed approximately 400 persons: 10 in management, 232 in sales and sales support, 17 in product and purchasing, 14 in accounting and finance, 31 in operations, 67 in manufacturing, and 30 in shipping, receiving and warehousing. The Company believes that its employee relations are satisfactory. ITEM 2. PROPERTIES In September 1985, the Company moved its corporate headquarters to a 20,000 square foot building located in Amityville, New York, which serves as its executive offices and distribution center. The building was financed through an Industrial Revenue Bond with interest at a percentage of the bank's prime rate. As of February 29, 1996, the Company's outstanding mortgage indebtedness in respect of this property was $398,276. In October 1991, the Company leased approximately 10,400 square feet of manufacturing and office space in Springfield, Massachusetts for its Nu Visions Manufacturing, Inc. subsidiary which was subsequently increased to 14,400 square feet. The lease term is from February 17, 1992 to February 16, 2002 at an annual base rental of $100,850 subject to annual consumer price index increases not to exceed 2% annually. The lease includes buy out provisions at the end of the fifth and sixth years. Page 7 ITEM 2. PROPERTIES (Continued): On May 1, 1996, the Company leased approximately 25,000 square feet of warehouse and office space in San Jose, California for its Nu Horizons/Merit subsidiary. This facility will serve as the Company's West Coast regional sales and distribution headquarters. The lease term is from May 1, 1996 to April 30, 2001 at an annual base rental of $225,000. The Company also leases space for seventeen (17) branch sales offices which range in size from 1,000 square feet to 5,000 square feet, with lease terms that expire between September 1996 and January 2002. Annual rentals range from $9,300 to $48,000 with aggregate rentals approximating $362,000. ITEM 3. LEGAL PROCEEDINGS: No material legal proceeding is pending to which the Company is a party or to which any of its property is or may be subject. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS: No matters were submitted during the fourth quarter of the fiscal year ended February 29, 1996 to a vote of security holders through the solicitation of proxies or otherwise. PART II. ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS: (a) The Company's common stock is traded on the NASDAQ National Market System under the symbol "NUHC". The following table sets forth, for the periods indicated, the high and low closing prices for the Company's common stock, as reported by the NASDAQ National Market System.
HIGH LOW ------ ------ FISCAL YEAR 1995: First Quarter $10.75 $ 8.25 Second Quarter 8.75 5.75 Third Quarter 9.75 6.13 Fourth Quarter 9.50 6.88 FISCAL YEAR 1996: First Quarter 9.38 6.50 Second Quarter 11.50 7.13 Third Quarter 17.25 10.50 Fourth Quarter 18.88 13.00 FISCAL YEAR 1997: First Quarter (Through May 17, 1996) 16.63 14.50
(b) As of May 17, 1996, the Company's common stock was owned by approximately 4,500 holders of record. (c) The Company has never paid a cash dividend on its common stock. In addition, the Company's revolving credit line agreement prohibits, without the bank's consent, the payment of cash dividends. Page 8 ITEM 6. SELECTED FINANCIAL DATA:
FOR THE FOR THE FOR THE FOR THE FOR THE YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED FEBRUARY FEBRUARY FEBRUARY FEBRUARY FEBRUARY 29, 1996 28, 1995 28, 1994 28, 1993 29, 1992 -------------------------------------------------------------------------- INCOME STATEMENT DATA: Net sales $202,803,184 $130,251,554 $92,418,038 $60,507,620 $42,187,636 Gross profit on sales 48,201,148 30,913,305 24,950,478 15,390,022 10,715,954 Gross profit percentage 23.8% 23.7% 27.0% 25.4% 25.4% Income before provision for income taxes 15,799,592 7,444,147 8,549,534 2,564,335 495,559 Net income 9,396,301 4,421,823 5,044,225 1,489,658 296,816 Earnings per common share: Primary $ 1.14 $ .56 $ .65 $ .20 $ .04 Fully diluted $ .97 $ .52 $ .65 $ .19 $ .04 FEBRUARY FEBRUARY FEBRUARY FEBRUARY FEBRUARY 29, 1996 28, 1995 28, 1994 28, 1993 29, 1992 --------------------------------------------------------------------- BALANCE SHEET DATA: Working capital $57,954,434 $36,328,941 $23,792,512 $17,523,791 $12,465,363 Total assets 75,459,586 51,972,606 37,448,040 26,083,687 17,849,628 Long-term debt 27,094,030 20,580,613 9,339,195 8,079,590 4,279,514 Shareholders' equity 37,617,703 22,541,916 18,051,985 12,679,681 10,887,624
Page 9 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS: Fiscal Year 1996 versus 1995 Introduction: Nu Horizons Electronics Corp. (the "Company") and its wholly-owned subsidiaries, Nu Horizons/Merit Electronics Corp. ("Merit"), NIC Components Corp. ("NIC") and Nu Horizons International Corp. ("International"), are engaged in the distribution of high technology active and passive electronic components to a wide variety of original equipment manufacturers ("OEM's") of electronic products. Active components distributed by the Company include semiconductor products such as memory chips, microprocessors, digital and linear circuits, microwave/RF and fiberoptic components, transistors and diodes. Passive components distributed by NIC, principally to OEM's and other distributors nationally, consist of a high technology line of chip and leaded components including capacitors, resistors and related networks. Nu Visions Manufacturing, Inc. ("NUV") located in Springfield, Massachusetts, another subsidiary of the Company, is a contract assembler of circuit boards, harnesses and related electromechanical devices for various OEM's. The financial information presented herein includes: (i) Balance sheets as of February 29, 1996 and February 28, 1995; (ii) Statements of income for the twelve month periods ended February 29, 1996 and February 28, 1995 and 1994 (iii) Statements of cash flows for the twelve month periods ended February 29, 1996 and February 28, 1995 and 1994; (iv) Consolidated changes in stockholder's equity for the twelve month periods ended February 29, 1996 and February 28, 1995 and 1994. Results of Operations: Net sales for the year ended February 29, 1996 aggregated $202,803,184 as compared to $130,251,554 for the year ended February 28, 1995, an increase of 56%. Management attributes the increase in sales for the period to the following reasons: Approximately $3,303,000 or 4.6% of the overall increase resulted from incremental sales at the Nu Visions Manufacturing subsidiary. Approximately $12,807,000 or 17.6% of the overall increase resulted from incremental sales relative to the newer California segment of the distribution business which the Company owned for ten months during fiscal 1995. The balance of the overall increase, approximately $56,441,000 or 77.8%, resulted from incremental sales generated, by the East Coast core distribution business and NIC passive component business as a whole, through greater market penetration and continued economic strength in the electronic component industry. Gross profit margin as a percentage of net sales was 23.8% for the year ended February 29, 1996 as compared to 23.7% for the year ended February 28, 1995. Management attributes the relative stabilization of profit margins during these periods primarily to a settling effect in the marketplace subsequent to the downward adjustment in calendar 1994. Although the Company expects that these conditions will continue, as long as current market trends prevail, no assurances can be given in this regard. Page 10 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued): Fiscal Year 1996 versus 1995 (Continued) Results of Operations (continued): Operating expenses increased by $8,283,222 to $30,377,380 for the year ended February 29, 1996 from $22,094,158 for the year ended February 28, 1995, an increase of approximately 37%. As a percentage of net sales, operating expenses declined from 17% in fiscal 1995 to 15% in fiscal 1996, as sales grew more rapidly than operating expenses. The dollar increase in operating expenses was due to increases in the following expense categories: Approximately $7,319,000 or approximately 88% of the increases were for personnel related costs - commissions, salaries, travel and fringe benefits. These increases were required to produce the increased sales which were achieved during the past fiscal year. The remaining increase of approximately $964,000 or approximately 12% of the total increment is a result of increases in various other operating costs to support the increase in net sales for the period. Interest expense increased by $639,698 from $1,387,019 for the year ended February 28, 1995 to $2,026,717 for the year ended February 29, 1996. This increase was primarily due to higher average borrowings resulting from an increase in the Company's inventory and accounts receivable required to support the 56% increase in sales volume mentioned above. See the liquidity and capital resources discussion below.
INTEREST COSTS FOR THE FISCAL YEARS ENDED ---------------------- February February 29, 1996 28, 1995 ---------- ---------- Revolving Bank Credit $ 916,226 $ 716,707 Sub. Convert. Notes 1,110,491 670,312 ---------- ---------- Total Interest Expense $2,026,717 $1,387,019 ========== ==========
Net income for the year ended February 29, 1996 was $9,396,301 or $.97 per share, fully diluted, as compared to $4,421,823 or $.52 per share fully diluted, for the year ended February 28, 1995. The increase in earnings is primarily due to increased sales volume net of higher operating expenses. Liquidity and Capital Resources: The Company ended its 1996 fiscal year with working capital and cash aggregating approximately $57,954,000 and $874,000, respectively at February 29, 1996 as compared to approximately $36,329,000 and $499,000 respectively, at February 28, 1995. The Company's current ratio at February 29, 1996 was 6.4:1. The Company believes that its financial position at February 29, 1996 will enable it to take advantage of any new opportunities that may arise. On April 8, 1996, subsequent to the balance sheet date, the Company entered into a new amended and restated unsecured revolving line of credit, which currently provides for maximum borrowings of $25,000,000 at the bank's prime rate, through April 8, 2000. At February 29, 1996, $17,300,000 was outstanding under this line of credit as compared to $4,400,000 at February 28, 1995. Page 11 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS: Fiscal Year 1995 versus 1994 Results of Operations (continued): Net sales for the year ended February 28, 1995 aggregated $130,251,554 as compared to $92,418,038 for the year ended February 28, 1994, an increase of 41%. Management attributes the increase in sales for the period to the following reasons: Approximately $13,845,000 or 37% of the overall increase resulted from the inception of distribution operations, as of April 1, 1994, of the new "NUM" subsidiary located in San Jose, California. Approximately $1,328,000 or 3% of the overall increase resulted from incremental sales increases achieved at the Nu Visions Manufacturing subsidiary. The balance of the increase, approximately $22,661,000 or 60% of the overall increase, resulted from incremental sales generated by the core distribution business through greater market penetration and continuing economic strength in the electronic industry. Gross profit margin as a percentage of net sales was 23.7% for the year ended February 28, 1995 as compared to 27% for the year ended February 28, 1994. Management attributes this lower profit margin primarily to a downward correction in selling prices in the marketplace during the period ended February 28, 1995 and a greater volume of larger orders at lower gross profit margins. Operating expenses increased $6,185,668 to $22,094,158 for the year ended February 28, 1995 from $ 15,908,490 for the year ended February 28, 1994, an increase of approximately 39%. As a percentage of net sales, operating expenses declined from 17.2% in fiscal 1994 to 16.9% in fiscal 1995. The dollar increase in operating expenses was due to increases in the following expense categories: Approximately $5,540,000 or approximately 90% of the increases were for personnel related costs - commissions, salaries, travel, fringe benefits and the addition of the San Jose California distribution facility and sales branches in Dallas, Texas, Austin, Texas and Edina, Minnesota. These increases were required to produce the increased sales which were achieved during the past fiscal year. The remaining increase of approximately $645,000 or approximately 10% of the total increment is a result of increases in various other operating costs to support the increase in net sales for the period. Interest expense increased $850,428 from $536,591 for the year ended February 28, 1994 to $1,387,019 for the year ended February 28, 1995. This increase was primarily due to higher average borrowings resulting from an increase in the Company's inventory, accounts receivable resulting from the increase in sales volume and debt incurred in connection with the Merit acquisition, as well as higher interest rates during the period. Net income for the year ended February 28, 1995 was $4,421,823 or $.52 per share, fully diluted, as compared to $5,044,225 or $.65 per share, fully diluted, for the year ended February 28, 1994. The decrease in earnings is primarily due to lower gross profit margins and higher operating expenses, partially offset by the increase in sales volume. Page 12 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued): Fiscal Year 1996 versus 1995 (Continued) Liquidity and Capital Resources (continued): In a private placement completed on August 31, 1994, the Company issued $15 million principal amount of Subordinated Convertible Notes, which are due in $5,000,000 increments on August 31, 2000, 2001 and 2002. The notes are subordinate in right of payment to all existing and future senior indebtedness of the Company. The notes bear interest at 8.25%, payable quarterly on November 15, February 15, May 15 and August 15. The notes are convertible into shares of common stock at a conversion price of $9.00 per share. The cost of issuing these notes was $521,565 and is being amortized over the life of the notes. As of February 29, 1996, $6,000,000 of the notes have been converted into 666,666 shares of common stock and $9,000,000 principal amount of subordinated convertible notes remained outstanding. On April 19, 1996, subsequent to the balance sheet date $1,491,003 of the notes were converted into $165,667 shares of common stock and $7,508,997 principal amount of subordinated convertible notes remain outstanding as of May 17, 1996. The Company has experienced an overall shortfall in operating cash flow over the last eight fiscal quarters primarily due to the approximate fifty-six percent increase in sales for the current fiscal year and the approximately forty-one percent increase in sales in fiscal 1995. As a result of this sales growth the Company has been required to finance increased levels of accounts receivable and inventory which exceed the amounts that can be supported by operating cash flows. The short fall in operating cash flow has been supplemented through the issuance of the subordinated convertible notes and the utilization of the unsecured bank credit line as described above. While the Company cannot predict that growth will continue at the same rate experienced over the last two fiscal years, management is planning for substantial growth over the ensuing twelve month period which more than likely will result in a continued shortfall in operating cash flow. The Company anticipates that its capital resources provided by its bank line of credit will be sufficient to meet its financing requirements during that period. Inflationary Impact: Since the inception of operations, inflation has not significantly affected the operating results of the Company. However, inflation and changing interest rates have had a significant effect on the economy in general and therefore could affect the operating results of the Company in the future. Page 13 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Independent Auditors' Report To The Board of Directors Nu Horizons Electronics Corp. Amityville, New York We have audited the accompanying consolidated financial statements of Nu Horizons Electronics Corp. and subsidiaries. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated 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 audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Nu Horizons Electronics Corp. and subsidiaries at February 29, 1996 and February 28, 1995, and the results of their operations and their cash flows for each of the three years in the period ended February 29, 1996 in conformity with generally accepted accounting principles. /s/ LAZAR, LEVINE, & COMPANY LLP ---------------------------------- LAZAR, LEVINE & COMPANY LLP New York, New York May 16, 1996 Page F-1 NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES ---------------------------------------------- CONSOLIDATED BALANCE SHEETS --------------------------- -ASSETS- FEBRUARY FEBRUARY 29, 1996 28, 1995 ----------------------- CURRENT ASSETS: Cash (including time deposits) $ 874,267 $ 498,919 Accounts receivable-net of allowance for doubtful accounts of $1,509,802 and $898,359 for 1996 and 1995, respectively 30,005,182 20,786,943 Inventories 36,808,915 22,255,545 Prepaid expenses and other current assets 1,013,923 1,637,611 ----------- ----------- TOTAL CURRENT ASSETS 68,702,287 45,179,018 PROPERTY, PLANT AND EQUIPMENT - NET (Notes 4 and 7) 3,439,804 3,141,054 OTHER ASSETS Cost in excess of net assets acquired-net 2,066,180 2,223,104 Other assets (Note 5) 1,251,315 1,429,430 ----------- ----------- $75,459,586 $51,972,606 =========== =========== -LIABILITIES AND SHAREHOLDERS' EQUITY- -------------------------------------- CURRENT LIABILITIES: $ 7,898,757 $ 6,286,579 Accounts payable 2,254,878 2,201,006 Accrued expenses 373,930 311,063 Current portion of long-term debt (Note 7) 220,288 7,743 Income taxes (Note 10) - 43,686 Other current liabilities ----------- ----------- 10,747,853 8,850,077 TOTAL CURRENT LIABILITIES ----------- ----------- LONG TERM LIABILITIES: 115,577 585,209 Deferred income taxes (Note 10) 17,300,000 4,400,000 Revolving credit line (Note 6) 678,453 595,404 Long-term debt (Note 7) 9,000,000 15,000,000 Subordinated convertible notes (Note 8) ----------- ----------- 27,094,030 20,580,613 TOTAL LONG-TERM LIABILITIES ----------- ----------- COMMITMENTS AND CONTINGENCIES (Notes 6, 11, 12 and 13) SHAREHOLDERS' EQUITY (Note 9): Preferred stock, $1 par value, 1,000,000 shares authorized; none issued or outstanding - - Common stock, $.0066 par value, 20,000,000 shares authorized; 8,423,137 and 7,732,051 shares issued and outstanding for 1996 and 1995, respectively 55,593 51,032 Additional paid-in capital 16,821,502 10,726,727 Retained earnings 21,160,458 11,764,157 ----------- ----------- 38,037,553 22,541,916 Less: loan to ESOP (Notes 7 and 11) 419,850 - ----------- ----------- 37,617,703 22,541,916 ----------- ----------- $75,459,586 $51,972,606 =========== =========== See notes to consolidated financial statements. Page F-2 NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES ---------------------------------------------- CONSOLIDATED STATEMENTS OF INCOME --------------------------------- FOR THE YEAR ENDED ----------------------------------------- FEBRUARY FEBRUARY FEBRUARY 29, 1996 28, 1995 28, 1994 ------------------------------------------ NET SALES $202,803,184 $130,251,554 $92,418,038 COSTS AND EXPENSES: Cost of sales (Note 13) 154,602,036 99,338,249 67,467,560 Operating expenses 30,377,380 22,094,158 15,908,490 Interest expense 2,026,717 1,387,019 536,591 Interest income (2,541) (12,019) (44,137) ------------ ----------- ----------- 187,003,592 122,807,407 83,868,504 ------------- ----------- ----------- INCOME BEFORE PROVISION FOR INCOME TAXES 15,799,592 7,444,147 8,549,534 Provision for income taxes (Note 10) 6,403,291 3,022,324 3,505,309 ------------ ----------- ----------- NET INCOME $ 9,396,301 $ 4,421,823 $ 5,044,225 ============ =========== =========== EARNINGS PER SHARE (Note 2i): Primary $ 1.14 $ .56 $ .65 ============ =========== =========== Fully diluted $ .97 $ .52 $ .65 ============ =========== =========== See notes to consolidated financial statements. Page F-3 NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES ---------------------------------------------- CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY ----------------------------------------------------------
COMMON STOCK ADDITIONAL TOTAL COMMO N DIVIDEND PAID-IN RETAINED LOAN TO SHAREHOLDERS' SHARES STOCK PAYABLE CAPITAL EARNINGS ESOP EQUITY --------- ------------- ----------- ----------- ----------- ---------- --------------- Balance at February 28, 1993 4,809,246 $48,092 $ 2,403 $10,471,496 $ 2,298,109 $(140,419) $12,679,681 Stock dividend distributed 240,319 2,403 (2,403) - - - - Exercise of stock options and warrants 113,670 930 - 227,396 - - 228,326 Repayment from ESOP - - - - - 99,753 99,753 Stock split 2,550,399 (515) - 515 - - - Net income - - - - 5,044,225 - 5,044,225 --------- ------- ---------- ----------- ----------- --------- ----------- Balance at February 28, 1994 7,713,634 50,910 - 10,699,407 7,342,334 (40,666) 18,051,985 Exercise of stock options 18,417 122 - 27,320 - - 27,442 Repayment from ESOP - - - - - 40,666 40,666 Net income - - - - 4,421,823 - 4,421,823 --------- ------- ---------- ----------- ----------- --------- ----------- Balance at February 28, 1995 7,732,051 51,032 - 10,726,727 11,764,157 - 22,541,916 Exercise of stock options 24,420 161 - 99,175 - - 99,336 Conversion of subordinated convertible notes 666,666 4,400 - 5,995,600 - - 6,000,000 Loan to ESOP - - - - - (559,800) (559,800) Repayment from ESOP - - - - - 139,950 139,950 Net income - - - - 9,396,301 - 9,396,301 --------- ------- ---------- ----------- ----------- --------- ----------- Balance at February 29, 1996 8,423,137 $55,593 $ - $16,821,502 $21,160,458 $(419,850) $37,617,703 ========= ======= ========== =========== =========== ========= ===========
See notes to consolidated financial statements Page F-4 NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES ---------------------------------------------- CONSOLIDATED STATEMENTS OF CASH FLOWS -------------------------------------
FOR THE YEAR ENDED -------------------------------------------------------------------------- FEBRUARY FEBRUARY FEBRUARY 29, 1996 28, 1995 28, 1994 ---------- --------- --------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS: Cash flows from operating activities: Cash received from customers $ 192,949,945 $ 125,991,043 $ 88,245,555 Cash paid to suppliers and employees (196,045,525) (124,980,742) (85,752,410) Interest received 2,541 18,991 47,037 Interest paid (2,026,717) (1,387,019) (536,591) Income taxes paid (6,034,790) (5,770,418) (1,744,114) ---------- ----------- ---------- Net cash provided by (used by) operating activities (11,154,546) (6,128,145) 259,477 ---------- ----------- ---------- Cash flows from investing activities: Capital expenditures (1,055,558) (602,746) (827,629) Purchase of stock for ESOP (559,800) - - Purchase of Merit Electronics - net of cash acquired - (5,753,022) - Net cash (used by) investing activities (1,615,358) (6,355,768) (827,629) ---------- ----------- ---------- Cash flows from financing activities: Borrowings under revolving credit line 65,000,000 66,090,000 20,050,000 Repayments under revolving credit line (52,100,000) (69,790,000) (18,550,000) Principal payments of long-term debt (413,884) (468,917) (355,164) Proceeds from exercise of employee stock options 99,336 27,442 228,326 Proceeds from long-term debt 559,800 - - Proceeds from subordinated debt - 15,000,000 - ---------- ----------- ---------- Net cash provided by financing activities 13,145,252 10,858,525 1,373,162 ---------- ----------- ---------- Net increase (decrease) in cash and cash equivalents 375,348 (1,625,388) 805,010 Cash and cash equivalents, beginning of year 498,919 2,124,307 1,319,297 ---------- ---------- ---------- Cash and cash equivalents, end of year $ 874,267 $ 498,919 2,124,307 ========== ========== ==========
See notes to consolidated financial statements. Page F-5 NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES ---------------------------------------------- CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) -------------------------------------------------
FOR THE YEAR ENDED ----------------------------------------------- FEBRUARY FEBRUARY FEBRUARY 29, 1996 28, 1995 28, 1994 ---------- ---------- ---------- RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Net income $ 9,396,301 $ 4,421,823 $ 5,044,225 ------------ ------------ ----------- Adjustments to reconcile net income to net cash provided by (used by) operating activities: Depreciation and amortization 1,169,816 886,235 535,794 Bad debts 635,000 442,500 409,000 Contribution to ESOP (compensation) 139,950 40,666 99,753 Changes in assets and liabilities: (Increase) in accounts receivable (9,853,239) (4,260,511) (4,172,483) (Increase) in inventories (14,553,370) (3,566,701) (6,239,178) (Increase) decrease in prepaid expenses and other current assets 623,688 (1,183,805) (193,494) (Increase) in other assets (77,969) (1,277,857) (71,353) Increase (decrease) in accounts payable and accrued expenses 1,666,050 (354,525) 3,105,867 Increase (decrease) in income taxes 212,545 (1,625,045) 1,255,853 Increase (decrease) in other current liabilities (43,686) 34,361 (19,848) Increase (decrease) in deferred taxes (469,632) 314,714 505,341 ------------ ------------ ----------- Total adjustments (20,550,847) (10,549,968) (4,784,748) ------------ ------------ ----------- Net cash provided by (used by) operating activities $(11,154,546) $ (6,128,145) $ 259,477 ============ ============ ===========
NON-CASH FINANCING ACTIVITIES: During the year ended February 29, 1996 the subordinated debt-holder (see Note 8) converted $6,000,000 of debt into 666,666 shares of the Company's common stock. See notes to consolidated financial statements. Page F-6 NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES ---------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ THREE YEARS ENDED FEBRUARY 29, 1996 ----------------------------------- 1. ORGANIZATION: Nu Horizons Electronics Corp. and its subsidiaries, NIC Components Corp., and Nu Horizons International Corp., were incorporated in the State of New York on October 22, 1982, November 8, 1982, and December 8, 1986, respectively. Nu Visions Manufacturing, Inc. was incorporated in the State of Massachusetts on August 9, 1991. On April 15, 1987, Nu Horizons Electronics Corp. was reincorporated in the State of Delaware. On April 18, 1994, Nu Horizons/Merit Electronics Corp. was incorporated in the State of Delaware, for the express purpose of acquiring the business of Merit Electronics, Inc. See Note 3 of these Notes for further information. All companies are wholesale distributors throughout the United States or export distributors of electronic components, except for Nu Visions Manufacturing, which is a contract assembler of circuit boards and various electromechanical devices. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: a. Principles of Consolidation: The consolidated financial statements include the accounts of Nu Horizons Electronics Corp., (the "Company") and its wholly-owned subsidiaries, NIC Components Corp. ("NIC"), Nu Horizons/Merit Electronics Corp. ("NUM"), Nu Visions Manufacturing, Inc. ("NUV") and Nu Horizons International Corp. ("International"). All material intercompany balances and transactions have been eliminated. b. Use of Estimates: In preparing financial statements in accordance with generally accepted accounting principles, management makes certain estimates and assumptions, where applicable, that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as reported amounts of revenues and expenses during the reporting period. While actual results could differ from those estimates, management does not expect such variances, if any, to have a material effect on the financial statements. c. Concentration of Credit Risk: Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and accounts receivable. The Company maintains, at times, deposits in federally insured financial institutions in excess of federally insured limits. Management attempts to monitor the soundness of the financial institution and believes the Company's risk is negligible. Concentrations with regard to accounts receivable are limited due to the Company's large customer base. d. Inventories: Inventories, which consist primarily of goods held for resale, are stated at the lower of cost (first-in, first-out method) or market. Page F-7 NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES ---------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ THREE YEARS ENDED FEBRUARY 29, 1996 ----------------------------------- 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued): e. Depreciation: Depreciation is provided using the straight-line method as follows: Building and improvements 25 years Transportation equipment 3 years Office equipment 5 years Furniture and fixtures 5 years Computer equipment 5 years Maintenance and repairs are charged to operations and major improvements are capitalized. Upon retirement, sale or other disposition, the associated cost and accumulated depreciation are eliminated from the accounts and any resulting gain or loss is included in operations. f. Income Taxes: The Company has elected to file a consolidated federal income tax return with its subsidiaries. Deferred income taxes are provided for on the timing differences for certain items which are treated differently for tax and financial reporting purposes. These items include depreciation of fixed assets, inventory capitalization valuations and the recognition of bad debt expense. International has elected under Section 995 of the Internal Revenue Code to be taxed as an "Interest Charge Disc". Based upon these rules, income taxes are paid when International distributes its income to the parent company. Until distributions are made, the parent company pays interest only on the deferred tax liabilities. International's untaxed income at February 29, 1996 approximates $2,600,000. The Company adopted SFAS No. 109, Accounting For Income Taxes ("SFAS 109"), for the year ended February 28, 1993. SFAS 109 requires use of the asset and liability approach of providing for income taxes and required implementation no later than for years beginning after December 15, 1992. Management of the Company believes that the adoption of SFAS No. 109 had no material effect on the financial statements. g. Goodwill: Costs in excess of net assets acquired (see Note 3) are being amortized on a straight-line basis over fifteen years. For the year ended February 29, 1996, amortization of goodwill aggregated $287,694. The Company periodically reviews the valuation and amortization of goodwill to determine possible impairment by comparing the carrying value to the undiscounted future cash flows of the related assets, in accordance with Statement of Financial Accounting Standards (SFAS) No. 121, Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to be Disposed of. h. Cash and Cash Equivalents: For purposes of the statements of cash flows, the Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Page F-8 NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES ---------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ THREE YEARS ENDED FEBRUARY 29, 1996 ----------------------------------- 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued): i. Earnings Per Common Share: Primary earnings per share has been computed on the basis of the weighted average number of common shares and common equivalent shares outstanding during each period presented. All shares held by the Employee Stock Ownership Plan (see Note 11) are included in outstanding shares. Fully diluted earnings per common share has been computed assuming conversion of all dilutive stock options and convertible debt. All per share amounts have been retroactively restated for all periods presented - see Note 9 regarding stock dividends and three for two stock split. The following average shares were used for the computation of primary and fully diluted earnings per share: 1996 1995 1994 ---------- --------- --------- Primary 8,236,249 7,847,677 7,774,440 Fully diluted 10,410,699 9,279,297 7,814,605 j. Reclassifications: Certain prior year information has been reclassified to conform to the current year's reporting presentation. k. Accounting Changes: As permitted by SFAS No. 123, Accounting for Stock-based Compensation, which becomes effective for the Company as of March 1, 1996, and which encourages companies to record expense for stock options and other stock- based employee compensation awards based on their fair value at date of grant, Nu Horizons will continue to apply its current accounting policy under Accounting Principles Board Opinion No. 25 and will include the necessary disclosures in its fiscal 1997 financial statements. 3. ACQUISITION: Effective April 1, 1994, Nu Horizons/Merit Electronics Corp., a newly formed subsidiary of the Company, acquired substantially all of the assets and assumed certain liabilities of Merit Electronics Corp., an electronic component distributor, located in San Jose, California. The $6,000,000 cost of the acquisition was paid in cash and was financed through a borrowing of the same amount under the Company's revolving line of credit (see Note 6). This acquisition was accounted for using the purchase method of accounting. The Company's consolidated statement of earnings did not include the revenues and expenses of Nu Horizons/Merit until April 1, 1994. The operations of Nu Horizons/Merit after April 1, 1994 are reflected for the fiscal years ended February 28, 1995 and February 29, 1996. The following pro forma results were developed assuming the acquisition had occurred at the beginning of the earliest period presented. Page F-9 NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES ---------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ THREE YEARS ENDED FEBRUARY 29, 1996 ----------------------------------- 3. ACQUISITION (continued): Pro Forma Year Ended - ------------------------- (Unaudited) February 28, 1995 February 28, 1994 - ------------------------- ------------------------ ----------------- Net sales $131,914,000 $107,507,000 Net earnings 4,426,000 5,484,000 Earnings per share $ .56 $ .71 This unaudited pro forma sales and earnings information is not necessarily indicative of the combined results that would have occurred had the acquisition taken place on March 1, 1993, nor are they necessarily indicative of results that may occur in the future. 4. PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment, which is reflected at cost, consists of the following: FEBRUARY FEBRUARY 29, 1996 28, 1995 ---------- ---------- Land $ 266,301 $ 266,301 Building and improvements 1,747,930 1,574,435 Furniture, fixtures and office equipment 2,037,183 1,512,926 Computer equipment 2,278,582 1,920,776 Assets held under capitalized leases 919,834 919,834 ---------- ---------- 7,249,830 6,194,272 Less: accumulated depreciation and amortization 3,810,026 3,053,218 ---------- ---------- $3,439,804 $3,141,054 ========== ========== Included in building and improvements is approximately $65,000 of the interest costs which were capitalized during the period of construction of the corporate headquarters. Depreciation expense including depreciation of capitalized leases for the years ended February 29, 1996 and February 28, 1995 and 1994 aggregated $756,808, $615,356 and $501,098, respectively. 5. OTHER ASSETS: Other assets as of February 29, 1996 and February 28, 1995 consists of the following: 1996 1995 ------ ------ Net cash surrender value - life insurance $ 793,537 $ 720,959 Debt issue costs - net 407,443 663,527 Other 50,335 44,944 --------- --------- $1,251,315 $1,429,430 ========= ========= Page F-10 NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES ---------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ THREE YEARS ENDED FEBRUARY 29, 1996 ----------------------------------- 6. REVOLVING CREDIT LINE: In February, 1988 the Company entered into an agreement with its bank, which as amended, provides for a $18,000,000 unsecured revolving line of credit at the bank's prime rate (8.25 % at February 29, 1996) with payments of interest only through May 1, 1997. Direct borrowings under lines of credit were $17,300,000 and $4,400,000 at February 29, 1996 and February 28, 1995, respectively. The credit agreement contains various covenants including a restriction on the payment of cash dividends without the bank's consent. The Company meets all of the required covenants. (See Note 16b) 7. LONG-TERM DEBT: Long-term debt consists of the following: FEBRUARY FEBRUARY 29, 1996 28, 1995 -------- -------- Mortgage payable to bank, due in quarterly installments of $26,552 plus interest at 88% of the bank's prime rate (7.26% at February 29, 1996) to December 1, 1999 $ 398,276 $ 504,483 Term loan payable to bank, due in monthly installments of $9,321 plus interest at the bank's prime rate to March 31, 2000 447,388 - Non-Compete Agreement due in annual installments - 14,500 Various capitalized equipment leases, interest rates ranging from 6.78% to 8.38%, maturing in 1997 and 1998. Gross lease obligations aggregate $172,089, $85,134 and $34,748, for each of the next three fiscal years, with interest thereon aggregating $85,252 206,719 387,484 -------- --------- 1,052,383 906,467 Less: current portion 373,930 311,063 -------- --------- $678,453 $595,404 ======== ========= The mortgage payable is collateralized by land, building, and substantially all furniture and fixtures. The term loan payable is secured by a pledge of the shares of the common stock of the Company purchased with the proceeds of the loans (See Note 11). Other equipment loans are secured by the specific equipment acquired. Long-term debt of the Company matures as follows: 1997 $373,930 1998 325,104 1999 246,157 2000 107,192 -------- $1,052,383 ========== Page F-11 NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES ---------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ THREE YEARS ENDED FEBRUARY 29, 1996 ----------------------------------- 8. SUBORDINATED CONVERTIBLE NOTES: In a private placement completed on August 31, 1994, the Company issued $15 million principal amount of Subordinated Convertible Notes, which are due in $5,000,000 increments on August 31, 2000, 2001 and 2002. The notes are subordinate in right of payment to all existing and future senior indebtedness of the Company. The notes bear interest at 8.25%, payable quarterly on November 30, February 28, May 31 and August 31. The notes are convertible into shares of common stock at a conversion price of $9.00 per share. The cost of issuing these notes was $521,565 and is being amortized over the life of the notes. As of February 29, 1996, $6,000,000 of the notes have been converted into 666,666 shares of common stock and $9,000,000 principal amount of subordinated convertible notes remained outstanding. (See Note 16a) 9. CAPITAL STOCK, OPTIONS AND WARRANTS: On September 16, 1992, the Board of Directors approved a 5% stock dividend payable on October 21, 1992 to shareholders of record on October 1, 1992. As a result of the stock dividend, 225,153 shares were distributed, common stock was increased by $2,251, additional paid-in capital was increased by $856,145 and retained earnings was decreased by $858,396. On March 9, 1993, the Board of Directors approved a 5% stock dividend payable on April 12, 1993 to shareholders of record on March 22, 1993. As a result of the stock dividend, 240,319 shares were distributed, common stock was increased by $2,403, additional paid-in capital was increased by $1,529,742 and retained earnings was decreased by $1,532,145. On September 7, 1993, the Company's Board of Directors, declared a three for two stock split of the common stock, to be distributed on September 30, 1993 to all holders of record at the close of business on September 20, 1993. As a result of the stock split, 2,550,399 shares were distributed. All shares and per share data for all periods presented have been restated to reflect this stock split. Page F-12 NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES ---------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ THREE YEARS ENDED FEBRUARY 29, 1996 ----------------------------------- 9. CAPITAL STOCK, OPTIONS AND WARRANTS (continued): A summary of activity with respect to stock options for the three years ended February 29, 1996 is as follows: TOTAL SHARES OPTION OPTION AVAILABLE FOR SHARES PRICES PRICE FUTURE GRANTS --------- ------------ ----------- ------------- Balance outstanding February 28, 1993 240,205 $ .90-$2.11 $ 344,438 269,167 Granted 37,500 5.41 202,875 Exercised (122,823) .90- 2.11 (195,966) -------- ------------ ---------- Balance outstanding February 28, 1994 154,882 .90- 5.41 351,347 241,376 ======== ============ ========== ========== Granted 580,950 7.25- 8.13 4,311,381 Exercised (18,417) .90- 2.11 (27,442) -------- ------------ ---------- Balance outstanding February 28, 1995 717,415 .90- 8.13 4,635,286 410,000 Granted 323,000 7.38- 14.50 3,013,320 Exercised (24,420) 2.11- 7.87 (99,336) Cancelled (23,023) 2.11- 7.88 (65,758) -------- ------------ ---------- Balance outstanding February 29, 1996 992,972 $ .90-$14.50 $7,483,512 90,000 ======== ============ ========== ========= Stock options granted to date under the Company's Key Employees Stock Incentive Plan and 1994 Stock Option Plan generally expire five years after date of grant and become exercisable in four equal annual installments commencing one year from date of grant. Stock options granted under the Company's Outside Director Stock Option Plan expire ten years after the date of grant and become exercisable in three equal annual installments on the date of grant and the succeeding two anniversaries thereof. 10. INCOME TAXES: The provision for income taxes is comprised of the following: FEBRUARY FEBRUARY FEBRUARY 29, 1996 28, 1995 28, 1994 ---------- ---------- ---------- Current: Federal $5,082,876 $2,436,377 $2,679,000 State and local 1,107,016 461,816 775,000 Deferred: Federal 178,923 120,704 45,309 State 34,476 3,427 6,000 ---------- ---------- ---------- $6,403,291 $3,022,324 $3,505,309 ========== ========== ========== Page F-13 NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES ---------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ THREE YEARS ENDED FEBRUARY 29, 1996 ----------------------------------- 10. INCOME TAXES (continued): The components of the net deferred income tax liability, pursuant to SFAS 109, as of February 29, 1996 and February 28, 1995 are as follows:
1996 1995 ---- ---- Deferred Tax Assets: Accounts Receivable $ 614,188 $ 364,588 Inventory 146,448 64,960 --------- ----------- Total Deferred Tax Assets 760,636 429,548 --------- ----------- Deferred Tax Liabilities: Fixed Assets (8,136) (256,293) Income of Interest Charge DISC (868,077) (758,464) --------- ----------- Total Deferred Tax Liabilities (876,213) (1,014,757) --------- --------- Net Deferred Tax Liabilities $(115,577) $ (585,209) ========= ===========
The following is a reconciliation of the maximum statutory federal tax rate to the Company's effective tax rate:
1996 1995 1994 ---- ---- ---- Statutory rate 35.0% 34.0% 34.0% State and local taxes 6.5 6.4 6.0 Other (1.0) .2 1.0 ---- --- ---- Effective tax rate 40.5% 40.6% 41.0% ===== ===== =====
11. EMPLOYEE BENEFIT PLANS: On January 13, 1987, the Company's Board of Directors approved the termination of the Company's pension plan and approved the adoption of an employee stock ownership plan (ESOP) to replace the terminated pension plan. The ESOP covers all eligible employees and contributions are determined by the Board of Directors. Contributions are in the form of cash which is utilized to acquire the Company's common stock for the benefit of participating employees. Contributions to the Plan for the years ended February 29, 1996, 1995 and 1994 aggregated $139,950, $40,666 and $99,753, respectively. In May 1988, the Company, on behalf of the ESOP, entered into an additional credit agreement with its bank which provides for a $2,000,000 revolving line of credit at the bank's prime rate until April 8, 2000. Direct borrowings under this line of credit are payable in forty-eight equal monthly installments commencing with the fiscal period subsequent to such borrowings. At February 29, 1996, the ESOP owned 360,810 shares at an average price of approximately $2.52 per share. At February 29, 1996, direct borrowings outstanding under the ESOP line of credit were $447,338. In January 1991, the Company also established a 401-K profit sharing plan to cover all eligible employees. The Company's contributions to the plan are discretionary, but may not exceed 1% of compensation. Contributions to the plan for the three years ended February 29, 1996 were $90,243, $61,519 and $46,611, respectively. Page F-14 NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES ---------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ THREE YEARS ENDED FEBRUARY 29, 1996 ----------------------------------- 12. COMMITMENTS: (a) The Company signed employment contracts (the "Contracts"), as amended, with three of its senior executives for a six year period expiring February 28, 2001. The Contracts specify a base salary of $200,000 for each officer, which shall be increased each year by the change in the consumer price index, and also entitles each of the officers to an annual bonus equal to 3.33% (10% in the aggregate) of the Company's consolidated earnings before income taxes. Benefits are also payable upon the occurrence of either a change in control of the Company, as defined, or the termination of the officer's employment, as defined. The contracts also provide for certain payments of the executive's salaries, performance bonuses and other benefits in the event of death or disability of the officer for the balance of the period covered by the agreement. (b) The Company leases certain office, warehouse and other properties which leases include various escalation clauses, renewal options, etc. Aggregate minimum rental commitments under noncancellable operating leases are as follows: Fiscal 1997 $661,443 Fiscal 1998 614,075 Fiscal 1999 571,462 Fiscal 2000 524,233 Fiscal 2001 445,924 Fiscal 2002 148,698 (i) Rent expense was $587,079, $450,201 and $262,985 for each of the three years in the period ending February 29, 1996. (i) This amount includes the last base rent lease commitment of $92,448 for the Nu Visions Manufacturing facility in Springfield, Massachusetts. The ten year lease contains buy out provisions at the end of the fifth and sixth years of $135,000 and $92,000, respectively. Alternatively, the Company could continue to occupy the premises through February 2002 at the base rental. (c) The Company has signed a four year consulting agreement with the former owner of Merit Electronics (see Note 3) which commenced on April 29, 1994. The agreement provides for the consultant to perform advisory services to Nu Horizons/Merit and to receive consulting fees of approximately $665,000 per annum. 13. MAJOR SUPPLIERS: For the year ended February 29, 1996 the Company purchased inventory from two suppliers that were each in excess of 10% of the Company's total purchases. Purchases from these suppliers aggregated approximately $33,505,000. For the year ended February 28, 1995 the Company purchased inventory from one supplier that was in excess of 10% of the Company's total purchases. Purchases from this supplier aggregated approximately $12,400,000. For the year ended February 28, 1994, the Company purchased inventory from two suppliers that were each in excess of 10% of the Company's total purchases. Purchases from these suppliers aggregated approximately $19,590,000. Page F-15 NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES ---------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ THREE YEARS ENDED FEBRUARY 29, 1996 ----------------------------------- 14. BUSINESS SEGMENT INFORMATION: The Company's operations have been classified into two business segments: Electronic component distribution and industrial contract manufacturing. The component distribution segment includes the resale of active and passive components to various original equipment manufacturers and distributors. The industrial contract manufacturing segment consists of a subsidiary which provides electronic circuit board and harness assembly services to original equipment manufacturers. This segment began operations in September 1991. Summarized financial information by business segment for fiscal 1996 and 1995 is as follows: 1996 1995 - -------------------------------------------------------------------------------- Net sales: Electronic Component Distribution $195,929,559 $126,680,968 Industrial Contract Manufacturing 6,873,625 3,570,586 - -------------------------------------------------------------------------------- $202,803,184 $130,251,554 - -------------------------------------------------------------------------------- Operating income (loss): Electronic Component Distribution $ 18,038,688 $ 9,614,776 Industrial Contract Manufacturing (214,920) (795,629) - -------------------------------------------------------------------------------- $ 17,823,769 $ 8,819,147 - -------------------------------------------------------------------------------- Total assets: Electronic Component Distribution $ 71,653,755 $ 49,879,311 Industrial Contract Manufacturing 3,805,831 2,093,295 - -------------------------------------------------------------------------------- $ 75,459,586 $ 51,972,606 - -------------------------------------------------------------------------------- Depreciation and amortization: Electronic Component Distribution $ 920,827 $ 649,591 Industrial Contract Manufacturing 248,989 236,644 - -------------------------------------------------------------------------------- $ 1,169,816 $ 886,235 - -------------------------------------------------------------------------------- Capital expenditures (including capital leases): Electronic Component Distribution $ 659,163 $ 874,722 Industrial Contract Manufacturing 396,395 10,016 - -------------------------------------------------------------------------------- $ 1,055,558 $ 884,738 - -------------------------------------------------------------------------------- Page F-16 NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES ---------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ THREE YEARS ENDED FEBRUARY 29, 1996 ----------------------------------- 15. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED): THREE MONTH PERIOD ENDED -------------------------------------------------- FEBRUARY NOVEMBER AUGUST MAY 29, 1996 30, 1995 31, 1995 31, 1995 ----------- ----------- ----------- ------------ NET SALES $52,928,682 $55,066,644 $50,091,805 $44,716,053 ----------- ----------- ----------- ----------- COST OF SALES 40,017,844 41,983,941 38,192,979 34,407,272 ----------- ----------- ----------- ----------- OTHER OPERATING EXPENSES 8,737,554 8,244,334 7,841,646 7,578,022 ----------- ----------- ----------- ----------- PROVISION FOR INCOME TAXES 1,648,131 2,004,226 1,651,272 1,099,662 ----------- ----------- ----------- ----------- NET INCOME $ 2,525,153 $ 2,834,143 $ 2,405,908 $ 1,631,097 =========== =========== =========== =========== PRIMARY EARNINGS $.29 $.34 $.30 $.21 PER SHARE ==== ==== ==== ==== WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 8,874,371 8,310,144 8,009,707 7,852,309 =========== =========== =========== =========== THREE MONTH PERIOD ENDED -------------------------------------------------- FEBRUARY NOVEMBER AUGUST MAY 28, 1995 30, 1994 31, 1994 31, 1994 ----------- ----------- ----------- ------------ NET SALES $37,150,707 $33,324,316 $31,014,574 $28,761,957 ----------- ----------- ----------- ----------- COST OF SALES 28,699,720 25,573,225 23,452,551 21,612,753 ----------- ----------- ----------- ----------- OTHER OPERATING EXPENSES 6,724,029 6,126,443 5,613,071 5,005,615 ----------- ----------- ----------- ----------- PROVISION FOR INCOME TAXES 678,276 664,892 799,232 879,924 ----------- ----------- ----------- ----------- NET INCOME $ 1,048,682 $ 959,756 $ 1,149,720 $ 1,263,665 =========== =========== =========== =========== PRIMARY EARNINGS $.13 $.12 $.15 $.16 PER SHARE ==== ==== ==== ==== WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 7,849,605 7,840,474 7,843,336 7,856,465 =========== =========== =========== =========== Page F-17 NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES ---------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ THREE YEARS ENDED FEBRUARY 29, 1996 ----------------------------------- 16. SUBSEQUENT EVENTS: (a) Conversion of Subordinated Convertible Notes - On April 19, 1996, subsequent to the balance sheet date, $1,491,003 of the notes were converted into 165,667 shares of common stock and $7,508,997 principal amount of subordinated convertible notes remained outstanding. (b) Revolving Credit Agreement - On April 8, 1996, subsequent to the balance sheet date, the Company entered into a new amended and restated unsecured revolving line of credit, which currently provides for maximum borrowings of $25,000,000 at the bank's prime rate through April 8, 2000. Page F-18 REPORT OF MANAGEMENT The management of Nu Horizons Electronics Corp. is responsible for the preparation of the consolidated financial statements in accordance with generally accepted accounting principles and for the integrity and objectivity of all the financial data included in this annual report. In preparing the financial statements, management makes informed judgements and estimates as to the expected effects of events and transactions currently being reported. To meet this responsibility, the Company maintains a system of internal accounting controls to provide reasonable assurance that assets are safeguarded, and that transactions are properly executed and recorded. The system includes policies and procedures, and reviews by officers of the Company. The Board of Directors, through its Audit Committee, is responsible for determining that management fulfills its responsibility with respect to the Company's financial statements and the system of internal accounting controls. The Audit Committee is composed solely of outside directors. The Committee meets periodically and, when appropriate, separately with representatives of the independent accountants and officers of the Company to monitor the activities of each. Lazar, Levine & Company LLP, the independent accountants, have been selected by the Board of Directors to examine the Company's financial statements. Their report appears herein. BY: /s/ PAUL DURANDO BY: /s/ ARTHUR NADATA --------------------------- --------------------------- Paul Durando Arthur Nadata Vice President, Finance President Page F-19 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES: The Company had no disagreements on accounting or financial disclosure matters with its accountants, nor did it change accountants, during the three year period ending February 29, 1996. PART III. ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY: NAME AGE POSITION ---- --- -------- Irving Lubman 57 Chief Executive Officer and Chairman of The Board Arthur Nadata 50 President, Treasurer and Director Richard S. Schuster 47 Vice-President, Secretary and Director Paul Durando 52 Vice President - Finance and Director Herbert M. Gardner 56 Director Harvey R. Blau 60 Director David Siegel 69 Director The Company's Certificate of Incorporation provides for a Board of Directors consisting of not less than three nor more than eleven directors, classified into three classes as nearly equal in number as possible, whose terms of office expire in successive years. The following table sets forth the directors of the Company.
Class I Class II Class III (To Serve Until the (To Serve Until the (To Serve Until the Annual Meeting of Annual Meeting of Annual Meeting of Stockholders in 1997) Stockholders in 1998) Stockholders in 1996) - ------------------------------- --------------------- --------------------- Paul Durando Harvey Blau (1) Irving Lubman Herbert Gardner (1) Richard S. Schuster Arthur Nadata David Siegel (1)
(1) Member of Compensation and Audit Committees All officers serve at the discretion of the Board. There are no family relationships among the directors and officers. Irving Lubman has been Chief Executive Officer and Chairman of the Board since October 1982. Mr. Lubman has been actively involved in electronic components distribution since 1957, when he joined Milgray Electronics Corp., holding the position of sales manager until 1968. From 1968 through October 1982, when he joined the Company, Mr. Lubman was corporate vice president of Diplomat Electronics Corp., also a distributor of electronic components. Arthur Nadata has been President, Treasurer and a Director since October 1982. Prior to joining the Company in October 1982, Mr. Nadata worked for eighteen years for Diplomat Electronics Corp. in various operational and sales positions of increasing responsibility, eventually becoming corporate vice president of sales and marketing. Page 14 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY (Continued): Richard S. Schuster has been Vice President, Secretary and a Director since October 1982. For the seven years prior to joining the Company in November 1982, Mr. Schuster served as manager of Capar Components Corp., an importer and distributor of passive components, and a wholly-owned subsidiary of Diplomat Electronics Corp. For the six years prior to 1975, Mr. Schuster was employed by International Components Corp., responsible for production, engineering and sales of imported semiconductor and passive components. Paul Durando has been Vice President, Finance since joining the Company in March 1991 and has been a Director since September 1994. Prior to joining the Company in March 1991, Mr. Durando served for six years as Executive Vice President of Sigma Quality Foods, Inc. From 1977 to 1984, he was Vice President, Operations of the Wechsler Coffee Corp. Mr. Durando was also associated with Deloitte Haskins & Sells for seven years. Herbert M. Gardner has been a Director of the Company since May 1984. For more than the past five years, Mr. Gardner has been Senior Vice President of Janney Montgomery Scott Inc., investment bankers and Underwriter of the Company's May 1984 public offering. Mr. Gardner is Chairman of the Board of Supreme Industries Inc. and Comtempri Homes Inc., Inc., a director of Transmedia Network, Inc., TGC Industries Inc., Shelter Components Corp., Hirsch International Corp. and the Western Transmedia Company, Inc. Harvey R. Blau has been a director of the Company since May 1984. Mr. Blau has been a practicing attorney in the State of New York since 1961, and is a member of the law firm of Blau, Kramer, Wactlar & Lieberman, P.C., Jericho, New York, counsel to the Company. Mr. Blau is Chairman of the Board of Griffon Corporation and Aeroflex Incorporated and is a Director of Reckson Associates Realty Corp. David Siegel has been a Director since September 1991. Mr. Siegel has been the President and a director of Quantech Electronics for the past five years. He is also on the boards of Kent Electronics, New England Micronetics and Surge Components. Mr. Siegel is one of the founders of Great American Electronics, a distribution company, and has been in the distribution business since 1954. Page 15 ITEM 11. EXECUTIVE COMPENSATION: The following table sets forth the compensation paid by the Company to its chief Executive Officer and each of the three remaining executive officers for the years ended February 29, 1996, 1995 and 1994. SUMMARY COMPENSATION TABLE Long Term Annual Compensation (1) Compensation ------------------------------- ------------ Name of Securities Principal and Fiscal Underlying All Other(2) Position Year Salary Bonus Options Compensation - ------------------------------------------------------------------------------- Irving Lubman 1996 $226,545 $586,608 50,000 $11,412 CEO, Chairman 1995 214,022 275,709 148,650 11,673 of the Board 1994 210,878 316,649 - 10,069 Arthur Nadata 1996 $226,545 $586,608 50,000 $17,497 President and 1995 214,022 275,709 148,650 9,464 Treasurer 1994 210,878 316,649 - 10,069 Richard Schuster 1996 $226,545 $586,608 50,000 $13,053 Vice President, 1995 214,022 275,709 148,650 12,249 Secretary and 1994 210,878 316,649 - 10,069 President, NIC Components Corp. Paul Durando 1996 $125,000 $45,198 20,000 $ 1,250 Vice President, 1995 115,000 10,000 10,000 850 Finance 1994 105,000 10,000 7,500 850 SUMMARY COMPENSATION TABLE - Footnotes (1) No Other Annual Compensation is shown because the amounts of perquisites and other non-cash benefits provided by the Company do not exceed the lesser of $50,000 or 10% of the total annual base salary and bonus disclosed in this table for the respective officer. (2) The amounts disclosed in this column include the Company's contributions on behalf of the named executive officer to the Company's 401(K) retirement plan in amounts equal to a maximum of 1% of the executive officer's annual salary. Page 16 ITEM 11. EXECUTIVE COMPENSATION (Continued): Employment Contracts The Company has signed employment contracts (the "Contracts"), as amended, with three of its senior executives for a six year period expiring February 28, 2001. The Contracts specify a base salary of $200,000 for each officer, which shall be increased each year by the change in the consumer price index, and also entitles each of the officers to an annual bonus equal to 3.33% (10% in the aggregate) of the Company's consolidated earnings before income taxes. Benefits are also payable upon the occurrence of either a change in control of the Company, as defined, or the termination of the officer's employment, as defined. In the event the employee terminates his employment within six months after a change in control of the Company, he will receive a lump sum payment equal to three quarters of the remaining compensation under his employment agreement. The contracts also provide for certain payments of the executive's salaries, performance bonuses and other benefits in the event of death or disability of the officer for the balance of the period covered by the agreement. The following table sets forth certain information with respect to stock options granted to the officers named in the Summary Compensation Table during the fiscal year ended February 29, 1996. OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
Potential Realizable Value % of at Assumed Total Annual Rates Options Exercise of Stock Price Options Granted to Price Expiration Appreciation for Granted(1) Employees ($ per share) Date Entire Term (2) (3) - ----------------------------------------------------------------------------------------- 5% 10% ------------------------ I. Lubman 50,000 17.1% 7.38 5/18/00 $102,000 $225,500 A. Nadata 50,000 17.1% 7.38 5/18/00 102,000 225,500 R. Schuster 50,000 17.1% 7.38 5/18/00 102,000 225,500 P. Durando 10,000 3.4% 7.38 5/18/00 20,400 45,100 P. Durando 10,000 3.4% 14.50 9/22/00 40,000 88,600
Page 17 ITEM 11. EXECUTIVE COMPENSATION (Continued): OPTIONS/SAR GRANTS IN LAST FISCAL YEAR - Footnotes (1) Options were granted for a term of five years, subject to earlier termination in certain events of termination of employment. Options become exercisable in four equal annual installments commencing one year from the date of grant. (2) These amounts represent assumed rates of appreciation which may not necessarily be achieved. The actual gains, if any, are dependent on the market value of the Company's stock at a future date as well as the option holder's continued employment throughout the vesting period. Appreciation reported is net of exercise price. (3) Potential Realizable Value is based on the assumed annual growth rates for the five-year option term. Annual growth of 5% results in a stock price of $9.42 per share and 10% results in a price of $11.89, per share for Messrs. Lubman, Nadata, Schuster and Durando on the shares granted at $7.38 and $18.51 and $23.36 respectively, for the options granted to Mr. Durando at $14.50. Actual gains, if any, on stock option exercises are dependent on the future performance of the stock as well as the option holder's continued employment throughout the vesting period. There can be no assurance that the amounts reflected in this table will be achieved. Appreciation reported is net of exercise price. The following table sets forth certain information as to each exercise of stock options during the fiscal year ended February 29, 1996 by the persons named in the Summary Compensation Table and the fiscal year end value of unexercised options: AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR-END OPTIONS/SAR VALUES Value of Number of Unexercised Unexercised In-the-Money Options/SARs Options/SARs Shares at FY End (2) at FY End -------------- ------------- Acquired on Value Exercisable/ Exercisable/ Exercise Realized (1) Unexercisable Unexercisable ----------- ------------ -------------- ------------- Irving Lubman - $ - 61,967 $ 668,884 161,488 1,323,157 Arthur Nadata - - 61,967 666,651 161,488 1,323,157 Richard Schuster - - 61,967 666,651 161,488 1,323,157 Paul Durando - - 6,250 57,681 31,250 190,131 1. Market value less exercise price, before payment of applicable federal or state taxes. 2. The share quantities in this column give effect to 5% stock dividends declared by the Company on September 16, 1992 and March 6, 1993 and a 3 for 2 stock split declared by the Company on September 7, 1993. Page 18 ITEM 11. EXECUTIVE COMPENSATION (Continued): Directors who are not employees of the Company receive a fee of $500 for each Board of Directors or Committee meeting attended. There were two meetings of the Board of Directors during the fiscal year ended February 29, 1996. Each director attended or participated in all of the meetings of the Board of Directors and the committees thereof on which he served. For the fiscal year ended February 29, 1996, there was one meeting of the Audit Committee. The Company's Audit Committee is involved in discussions with the Company's independent public accountants with respect to the scope and results of the Company's year-end audit, the Company's internal accounting controls and the professional services furnished by the independent auditors to the Company. During fiscal 1996, the Company had no standing Nominating Committee or any committee performing similar functions. Compensation Committee Interlocks and Insider Participation The Company's Compensation Committee consisted during fiscal 1996 of Messrs. Gardner (Chairman), Blau and Siegel. Mr. Gardner is Senior Vice President of Janney Montgomery Scott, Inc., investment bankers, which acted as placement agent in connection with the Company's $15 million private placement of convertible subordinated notes in August 1994. Mr. Blau is a partner in the law firm of Blau, Kramer, Wactlar & Lieberman, P.C. The Company has utilized, and anticipates that it will continue to utilize, the services of Blau, Kramer, Wactlar & Lieberman, P.C. as its general counsel. In accordance with rules promulgated by the Securities and Exchange Commission, the information included under the captions "Compensation Committee Report on Executive Compensation" and "Company Stock Performance" will not be deemed to be filed or to be proxy soliciting material or incorporated by reference in any prior or future filings by the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934. COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION The compensation of the Company's executive officers generally is determined by the Compensation Committee of the Board of Directors. Each member of the Compensation Committee is a Director who is not an employee of the Company or any of its affiliates. The following report with respect to certain compensation paid or awarded to the Company's executive officers during fiscal 1996 is furnished by the Compensation Committee. General Policies The Company's compensation programs are intended to enable the Company to attract, motivate, reward and retain management talent required to achieve aggressive corporate objectives in a rapidly changing industry, and thereby increase stockholder value. It is the Company's policy to provide incentives to its senior management to achieve both short-term and long-term objectives and to reward exceptional performance and contributions to the development of the Company's business. To attain these objectives, the Company's executive compensation program includes a competitive base salary, coupled with, with respect to certain executives, a substantial cash bonus which is "at risk" based on the Company's earnings. Many of the Company's employees, including its executive officers, also are eligible to be granted stock options periodically in order to more directly align their interests with the long-term financial interests of the Company's stockholders. Page 19 ITEM 11. EXECUTIVE COMPENSATION (Continued): Relationship of Compensation to Performance The Compensation Committee annually establishes, subject to any applicable employment agreements, the salaries which will be paid to the Company's executive officers during the coming year. In setting salaries, the Board of Directors takes into account several factors, including competitive compensation data, the extent to which an individual may participate in the stock option plan maintained by the Company and its affiliates, and qualitative factors bearing on an individuals's experience, responsibilities, management and leadership abilities, and job performance. Stock options are granted to key employees, including the Company's executive officers, by the Compensation Committee of the Board of Directors under the Plans. Among the Company's executive officers, the number of shares subject to to options granted to each individual generally depends upon his or her base salary and the level of that officer's management responsibility. During fiscal 1996, 10,000 options were granted to each outside director under the Company's Outside Director Stock Option Plan. Options to purchase 50,000 shares each were granted to Messrs. Lubman, Nadata and Schuster and options to purchase 20,000 shares were granted to Mr. Durando under the Company's Stock Option Plan. Bonuses were paid to three executive officers, as set forth in the Summary Compensation Table, pursuant to the terms of their employment agreements with the Company and on a discretionary basis to Paul Durando, the Company's Vice President, Finance and Director. This latter bonus was determined to be appropriate by the Compensation Committee in light of Mr. Durando's contributions to the Company's performance, his base salary level and the level of his management responsibilities. Compensation of Chief Executive Officer The Company has entered into an employment agreement with Irving Lubman, the Company's Chairman of the Board and Chief Executive Officer, pursuant to which Mr. Lubman receives a base salary of $200,000, adjusted for CPI index increases, and an incentive bonus equal to three and thirty-three one- hundreths percent (3.33%) of the Company's consolidated pre-tax earnings. In this way, Mr. Lubman's cash compensation is tied directly to the Company's profitability. In fiscal 1996, the Company granted Mr. Lubman options to purchase 50,000 shares of Common Stock at an exercise price of $7.38 per share, which represented the market price of the Common Stock on the date of grant. In this way, Mr. Lubman's interest are directly aligned with the interests of the Company's stockholders. Compliance with Section 16(a) of the Securities Exchange Act Section 16(a) of the Exchange Act requires the Company's executive officers, directors and persons who own more than ten percent of a registered class of the Company's equity securities ("Reporting Persons") to file reports of ownership and changes in ownership on Forms 3, 4 and 5 with the Securities and Exchange Commission (the "SEC") and the National Association of Securities Dealers (the "NASD"). These Reporting Persons are required by SEC regulation to furnish the Company with copies of all Forms 3, 4 and 5 they file with the SEC and NASD. Page 20 ITEM 11. EXECUTIVE COMPENSATION (Continued): Compliance with Section 16(a) of the Securities Exchange Act (continued) Based solely on the Company's review of the copies of the forms it has received, the Company believes that all Reporting Persons compiled on a timely basis with all filing requirements applicable to them with respect to transactions during fiscal year 1996, except that Irving Lubman, Chairman of the Board; Arthur Nadata, President, Treasurer and Director; Richard Schuster, Vice President, Secretary and Director and Paul Durando, Vice President, Finance and Director, each failed to timely file one Form 4 relating to the vesting of shares of Common Stock under the Company's Employee Stock Ownership Plan. COMPANY STOCK PERFORMANCE GRAPH The following Performance Graph compares the Company's cumulative total stockholder return on its Common Stock for a five year period (February 28, 1990 to February 29, 1996) with the cumulative total return of the NASDAQ Market Index (which includes the Company) and a peer group of companies selected by the Company for purposes of the comparison. Dividend reinvestment has been assumed and, with respect to companies in the Peer Group, the returns of each such company have been weighted to reflect relative stock market capitalization. COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN* AMONG NU HORIZONS ELECTRONICS CORP., NASDAQ MARKET INDEX AND PEER GROUP **
Nu Horizons NASDAQ Measurement Period Electronics Market (Fiscal Year Covered) Corp. Index Peer Group - ----------------------- ----------- ------- ---------- Measurement Pt. FYE 2/28/91 $ 100.00 $100.00 $100.00 FYE 2/29/92 $ 199.98 $110.51 $107.49 FYE 2/28/93 $ 412.07 $110.69 $152.18 FYE 2/28/94 $ 903.58 $141.04 $170.43 FYE 2/28/95 $ 763.59 $134.65 $163.44 FYE 2/29/96 $1,578.09 $185.93 $220.48
Assumes $100 Invested on February 28, 1990 in Nu Horizons Electronics Common Stock, NASDAQ market Index and Peer Group. Peer group includes All American Semiconductor, Arrow Electronics Inc., Avnet Inc., Bell Industries Inc., Bell Microproducts Inc., Jaco Electronics Inc., Kent Electronics Corp., Marshall Industries, Milgray Electronics Inc., Pioneer Standard Electronics, Premier Industrial Corp., Sterling Electronics Corp., Western Microtechnology and Wyle Laboratories Inc. * Total Return Assumes Reinvestment of Dividends ** Fiscal Year Ending February 28 and 29 Page 21 ITEM 11. EXECUTIVE COMPENSATION (Continued): Key Employees Stock Incentive Plan: The Company has a Key Employees Stock Incentive Plan ("Plan"), approved by the stockholders in 1984, as amended in September, 1987 which presently covers 712,765 shares of Common Stock. Options are currently outstanding for 332,972 shares and no shares are currently available for grant. The Plan is intended to provide an additional means of inducing executives and other "key salaried employees" of the Company (which is defined under Section 422A of the Internal Revenue Code) to join and remain with the Company by offering them a greater share of the Company's stock and a greater identification with the Company. The Board of Directors or a Committee which may be appointed and maintained by the Board shall have the power to administer the Plan. The Board or Committee shall have full power and authority: (i) to designate participants; (ii) to designate options or any portion thereof as Incentive Stock Options ("ISO"); (iii) to determine the terms and provisions of respective option agreements (which need not be identical) including, but not limited to, provisions concerning the time or times when and the extent to which the stock options ("Options") and Stock Appreciation Rights ("SARs") may be exercised and the nature and duration of restrictions as to transferability or constituting substantial risk forfeiture; (iv) to accelerate the right to an optionee to exercise in whole or in part any previously granted ISO including any options modified to qualify as ISO's; and (v) to interpret the provisions and supervise the administration of the Plan. The purchase price of each share subject to an Option or any portion thereof which has been designated by the Board or the Committee as an ISO shall not be less than 100% (or 110%, if at the time of grant the optionee owns more than 10% of the voting stock of the Company) in the case of options designated as ISO's or 85% in case of options not designated as incentive stock options, of the fair market value of such shares on the date the option is granted. In no event shall the option price be less than the par value of the stock. 1994 Stock Option Plan: In September 1994, the Company's stockholders approved the 1994 Stock Option plan (the "Plan"), under which key employees and officers of the company, its subsidiaries and affiliates may be granted options to purchase an aggregate of 600,000 shares of the Company's Common Stock. The plan is administered by the Compensation Committee, consisting of at least three members of the Board of Directors. The committee, subject to provisions in the Plan, will designate, in its discretion, which persons are to be granted options, the number of shares subject to each option, and the period of each option. Each recipient must be an employee of the Company at the time of grant and throughout the period ending on the day three months before the date of exercise. Under the terms of the Plan, the exercise price of the shares subject to each option granted will be not less than 85% nor more than 100% of the fair market value at the date of grant, or 110% of such fair market value for options granted to any employee or director who owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company. Adjustments will be made to the purchase price in the event of stock dividends, corporate reorganizations, or similar events. During fiscal 1996, 290,000 options were granted under the Plan at exercise prices of $7.38 and $14.50. As of May 17, 1996, no options to purchase shares under the 1994 Plan were exercisable and no options to purchase shares granted under the 1994 Plan have been exercised. Page 22 ITEM 11. EXECUTIVE COMPENSATION (Continued): 1994 Stock Option Plan: The Compensation Committee of the Board of Directors will have the responsibility and authority to administer and interpret the provisions of the Director Plan. The Compensation Committee shall appropriately adjust the number of shares for which awards may be granted pursuant to the 1994 Stock Option Plan in the event of reorganization, recapitalization, stock split, reverse stock split, stock dividend, exchange or combination of shares, merger, consolidation, rights offering or any change in capitalization. The Board may, from time to time, amend, suspend or terminate any or all of the provisions of the Plan, provided that, without the Participant's approval, no change may be made which would prevent an Incentive Stock Option granted under the Plan from qualifying as an Incentive Stock Option under Section 422A of the Internal Revenue Code (the "Code") or results in a modification" of the Incentive Stock Option under Section 425(h) of the Code or otherwise alter or impair any right theretofore granted to any Participant; and further provided that, without the consent and approval of the holders of a majority of the outstanding shares of Common Stock of the Company present at that meeting at which a quorum exists, neither the Board not the Committee may make any amendment which (i) changes the class of persons eligible for options; (ii) increases (except as provided under Section 1.6 of the 1994 Stock Option Plan) the total number of shares or other securities reserved for issuance under the 1994 Stock Option Plan; (iii) decreases the minimum option prices stated in Section 2.2 of the 1994 Stock Option (other than to change the manner of determining Fair Market Value to conform to any then applicable provision of the Code or any regulation thereunder); (iv) extends the expiration date of the 1994 Stock Option Plan, or the limit on the maximum term of Options; or (v) withdraws the administration of the 1994 Stock Option Plan from a committee consisting of three or more members, each of whom is a Disinterested Person. With the consent of the Participant affected thereby, the Committee may amend or modify any outstanding Option in any manner not inconsistent with the terms of the 1994 Stock Option Plan. Outside Director Stock Option Plan: In September 1994, the Company's stockholders approved the Outside Directors Stock Option Plan (the "Director Plan") which covers 150,000 shares of the Company's Common Stock. The primary purposes of the Director Plan are to attract and retain well-qualified persons for service as directors of the Company and to provide such outside directors with the opportunity to increase their proprietary interest in the Company's continued success and further align their interests with the interests of the stockholders of the Company through the grant of options to purchase shares of the Company's Common Stock. All directors of the Company who are not employees of the Company, of which there are presently three, are eligible to participate in the Director Plan. None of the non-employee directors are eligible to participate in any of the other compensation plans of the Company. The Board of Directors of the Company may amend the Director Plan from time to time in such manner as it may deem advisable. The provisions of the Director Plan relating to (i) which directors shall be granted Options; (ii) the amount of Shares subject to Options granted; (iii) the price at which Shares subject to Options may be purchased; and (iv) the timing of grants of Options shall not be amended more than once every six (6) months, other than to comport with changes in the Internal Revenue Code or the Employee Retirement Income Security Act of 1974, as amended. No amendment to the Director Plan shall adversely affect any outstanding Option, however, without the consent of the Optionee that holds such Option. Page 23 ITEM 11. EXECUTIVE COMPENSATION (Continued): Outside Director Stock Option Plan (continued): The Compensation Committee of the Board of Directors has the responsibility and authority to administer and interpret the provisions of the Director Plan. The Compensation Committee shall appropriately adjust the number of shares for which awards may be granted pursuant to the Director Plan in the event of reorganization, recapitalization, stock split, reverse stock split, stock dividend, exchange or combination of shares, merger, consolidation, rights offering, or any change in capitalization. Outside Director Stock Option Plan Under the Director Plan, each non-employee Director ("Outside Director") received options to purchase 10,000 shares of Common Stock at a price of $8.25 per share (the price of shares of Common Stock on June 1, 1994) and on the June 1 of each subsequent year each non-employee director has or will be granted options to purchase 10,000 shares of Common Stock at a price equal to the closing price of the Common Stock on a national securities exchange upon which the Company's stock is listed or the average of the mean between the last reported "bid" and "asked" prices if the Common Stock is not so listed for the five business days immediately preceding the date of grant. Options awarded to each outside director vest in three equal installments over a period of two years, subject to forfeiture under certain conditions and shall be exercisable by the Outside Director upon vesting. Summary of Fiscal 1996 Stock Option Grants: During fiscal 1996, the Company granted options to purchase 323,000 shares at prices ranging from $7.38 to $14.50 per share. Messrs. Lubman, Nadata and Schuster each received options to purchase 50,000 shares at a price of $7.38 per share. Mr. Durando received options to purchase 20,000 shares at exercise prices ranging from $7.38 to $14.50 per share. Employee Stock Ownership Plan: In January 1987, the Company adopted an Employee Stock Ownership Plan ("ESOP" or "Plan"), which covers substantially all of the Company's employees. The ESOP is managed by three Trustees, Messrs. Lubman, Nadata and Schuster (the "Trustees"), who vote the securities held by the Plan (other than securities of the Company which have been allocated to employees' accounts). The annual contributions to the Plan are to be in such amounts as the Board of Directors in its sole discretion shall determine. Each employee who participates in the Plan has a separate account and the annual contribution by the Company to an employee's account is not permitted to exceed the lesser of $30,000 (or such other limit as may be the maximum permissible pursuant to the provisions of Section 415 of the Internal Revenue Code and Regulations issued hereunder) or 25% of such employee's annual compensation, as defined under the Plan. No contributions are required of, nor shall any be accepted from, any employee. Page 24 ITEM 11. EXECUTIVE COMPENSATION (Continued): Employee Stock Ownership Plan (Continued): All contributions to the Plan are invested in the Company's securities (except for temporary investments), the Trustees having the right to purchase the Company's securities on behalf of employees. The Trustees are considered the stockholder for the purpose of exercising all owners' and stockholders' rights, with respect to the Company's securities held in the Plan, except for voting rights which insure to the benefit of each employee who can vote all shares held in his account, even if said shares are not vested. Vesting is based upon an employee's years of service, employees generally becoming fully vested after six years. Benefits are payable to employees at retirement or upon death, disability or termination of employment, with payments commencing no later than sixty days following the last day of the Plan year in which such event occurred. Subject to the right of the employee to demand payment in the form of the Company's Common Stock, all benefits are payable in cash or in Common Stock, at the discretion of the Trustees. The Trustees are empowered to borrow funds for the purpose of purchasing the Company's securities. The securities so purchased are required to be held in an acquisition indebtedness account, to be released and made available for reallocation as principal is repaid. In May, 1988 the Company, on behalf of the ESOP, entered into a revolving credit agreement with its bank which provides for a $2,000,000 revolving line of credit at a percentage of the bank's prime rate until April 8, 2000. Direct borrowings under this line of credit are payable in forty-eight equal monthly installments commencing with the fiscal period subsequent to such borrowings. At February 29, 1996 the ESOP owned 360,810 shares at an average price of approximately $2.52 per share. 401(k) Savings Plan The Company sponsors a retirement plan intended to be qualified under Section 401(k) of the Internal Revenue Code of 1986, as amended (the "Code"). All non-union employees over age 21 who have been employed by the Company for at least six months are eligible to participate in the plan. Employees may contribute to the plan on a tax deferred basis up to 15% of their total annual salary, but in no event more than the maximum permitted by the Code ($9,240 in calendar 1994). Company contributions are discretionary. For the plan year ended February 28, 1995, the Company has elected to make matching contributions at the rate of $.25 per dollar contributed by each employee up to a maximum of 1% of an employee's salary vesting at the cumulative rate of 20% per year of service starting one year after commencement of service and, accordingly, after five years of any employee's service with Company, matching contributions by the Company are fully vested. As of February 29, 1996 approximately 192 employees had elected to participate in the plan. For the fiscal year ended February 29, 1996, the Company contributed approximately $90,243 to the plan, of which $2,304 was a matching contribution for each of Mr. Lubman, Mr. Nadata and Mr. Schuster and $1,250 for Mr. Durando. Page 25 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT: The following table sets forth, as of May 17, 1996, certain information with regard to the record and beneficial ownership of the Company's Common Stock by (i) each shareholder owning of record or beneficially 5% or more of the Company's Common Stock, (ii) each director individually, and (iii) all officers and directors of the Company as a group: NAME SHARES PERCENT - ---------------------------------- ------------------- -------- Paul Durando 12,776 (1) (2) * David Siegel 37,098 (3) * Herbert M. Gardner 16,862 (4) * Harvey R. Blau 17,075 (4) * Irving Lubman 88,461 (5) (6) 1.0% Arthur Nadata 347,115 (5) (6) (7) 4.0% Richard S. Schuster 366,033 (5) (6) 4.2% All officers and directors as a group (7 persons) 885,420 10.3% NOTES: - ----- (*) Less than 1% of the Company's outstanding stock. (1) Includes options exercisable within 60 days for 9,375 shares of common stock under the Company's Key Employees Stock Option Plan and the 1994 Stock Option Plan. (2) Includes 3,401 shares of fully vested common stock owned through the Employee's Stock Ownership Plan, which include voting power. (3) Includes options exercisable within 60 days for 16,667 shares of common stock under the Company's Outside Director Stock Option Plan and 20,431 shares held by his wife as to which Mr. Siegel disclaims beneficial ownership. (4) Includes options exercisable within 60 days for 16,667 shares of common stock under the Company's Outside Director Stock Option Plan. (5) Includes options exercisable within 60 days for 61,825 shares of common stock under the Company's Key Employees Stock Option Plan and the 1994 Stock Option Plan. (6) Includes 13,592 shares of fully vested common stock owned through the Employees Stock Ownership Plan, which include voting power. These Officers are also Trustees of the Plan. (7) Includes 45,398 shares held by his children as to which Mr. Nadata disclaims beneficial ownership. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS: Harvey R. Blau, a Director of the Company, is a member of Blau, Kramer, Wactlar & Lieberman, P.C., general counsel to the Company. For the fiscal year ended February 29, 1996, the Company paid $71,945 in legal fees to Blau, Kramer, Wactlar & Lieberman, P.C. Page 26 PART IV. ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON FORM 8-K: (a) (1) The following consolidated financial statements of the registrant and its subsidiaries are filed as a part of this report: Page ---- Independent Auditors' Report F-1 Consolidated Balance Sheets as of February 29, 1996 and February 28, 1995 F-2 Consolidated Statements of Income for the three years in the period ended February 29, 1996 F-3 Consolidated Statements of Changes in Shareholders' Equity for the three years in the period ended February 29, 1996 F-4 Consolidated Statements of Cash Flows for the three years in the period ended February 29, 1996 F-5 Notes to Consolidated Financial Statements F-7 (a) (3) See exhibits required - Item (c) below (b) No reports were filed by the Company on Form 8-K during the last quarter of the fiscal year. (c) Exhibits EXHIBIT NUMBER DESCRIPTION -------------------------------------------------------------- 3.1 Certificate of Incorporation, as amended (Incorporated by Reference to Exhibit 3.1 to the Company's Annual Report on Form 10-K for the year ended February 29, 1988) 3.2 By-laws, as amended (Incorporated by Reference to Exhibit 3.2 to the Company's Annual Report on Form 10-K for the year ended February 29, 1988) 3.3 Certificate of Amendment to Certificate of Incorporation (Incorporated by Reference to Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q for the Quarter ended August 31, 1994) 4.1 Specimen Common Stock Certificate (Incorporated by Reference as Exhibit 4.1 to the Company's Registration Statement on Form S-1, Registration No. 2-89176). Page 27 PART IV. ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON FORM 8-K: (c) Exhibits (continued): EXHIBIT NUMBER DESCRIPTION ---------------------------------------------------------------------- 10.1 The Registrant's Key Employee Incentive Stock Option Plan, as amended (Incorporated by Reference to the Company's Registration statement on form S-8 Registration No. 33- 20661). 10.2 Agreement between the Company and Trustees relating to the Company's Employee Stock Ownership Plan (Incorporated by Reference to Exhibit 10.5 to the Company's Annual Report on Form 10-K for the year ended February 28, 1987) 10.3 Employment Agreements, as amended, between the Company and Messrs. Lubman, Nadata and Schuster. (Incorporated by Reference to Exhibit 10.7 to the Company's annual report on Form 10-K for the year ended February 28, 1994). 10.4 Amended and restated Revolving Credit Agreement with National Westminster Bank USA dated as of April 29, 1994 (Incorporated by Reference to Exhibit 10 to the Company's Report on Form 8- K dated April 29, 1994). 10.5 Asset Purchase Agreement dated April 29, 1994 between Nu Horizons/Merit Electronics Corp., Merit Electronics, Inc. and Robert G. Pipkin (Incorporated by Reference to Exhibit 2 to the Company's Report on Form 8-K dated April 29, 1994). 10.6 Note Agreement dated August 15, 1994 between the Company and Massachusetts Mutual Life Insurance Company (Incorporated by Reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended August 31, 1994). 10.7 Amendment No. 1 to Amended and Restated Revolving Credit Agreement dated as of August 24, 1994 between the Company and National Westminster Bank USA (Incorporated by Reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended August 31, 1994). 10.8 1994 Stock Option Plan (Incorporated by Reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended August 31, 1994). 10.9 Outside Director Stock Option Plan (Incorporated by Reference to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the quarter ended August 31, 1994). 10.10 Agreement dated September 22, 1995 between the Company and Paul Durando (Incorporated by Reference to Exhibit 10.13 to the Company's Quarterly Report on Form 10-Q for the quarter ended August 31, 1995). Page 28 PART IV. ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON FORM 8-K: (c) Exhibits (continued): EXHIBIT NUMBER DESCRIPTION ---------------------------------------------------------------------- 10.11 Amendment No. 2 to Amended and Restated Revolving Credit Agreement and Tenth Amendment to Revolving Credit and Term Loan Agreement dated as of November 29, 1995 between the Company and National Westminster Bank, USA (Incorporated by Reference to Exhibit 10.14 to the Company's Quarterly Report on Form 10Q for the quarter ended November 30, 1995). 10.12 Amendment No. 3 to Amended and Restated Revolving Credit Agreement and Eleventh Amendment to Revolving Credit and Term Loan Agreement dated as of November 30, 1995 between the Company and National Westminster Bank, USA (Incorporated by Reference to Exhibit 10.15 to the Company's Quarterly Report on Form 10Q for the quarter ended November 30, 1995). 10.13 Amendment No. 4 to Amended and Restated Revolving Credit Agreement and Twelfth Amendment to Revolving Credit and Term Loan Agreement dated as of April 8, 1996 between the Company and NatWest Bank N.A. (formerly known as National Westminster Bank, USA). 11. Statement re: Computation of Per Share Earnings (see Item 8 - Notes to Consolidated Financial Statements - Note 2i) 22. The following is a list of the Company's subsidiaries: State of Name Incorporation -------------------------------- ---------------- NIC Components Corp. New York Nu Horizons International Corp. New York Nu Visions Manufacturing, Inc. Massachusetts Nu Horizons/Merit Electronics Corp. Delaware 23. Accountant's Consent 27. Financial Data Schedule 99. Additional Exhibit Page 29 24. Accountants' Consent -------------------- We consent to the incorporation by reference in Registration Statement numbers 33-11032, 33-20661, 33-88952 and 33-88958 on Form S-8 of our opinion dated May 16, 1996 on the consolidated financial statements of Nu Horizons Electronics Corp. and subsidiaries included in the Corporation's annual report on Form 10-K for the fiscal year ended February 29, 1996. /s/ LAZAR, LEVINE & COMPANY LLP ------------------------------- LAZAR, LEVINE & COMPANY LLP Certified Public Accountants New York, New York May 24, 1996 Page 30 99. Additional Exhibit: ------------------ The following undertakings are incorporated by reference into the Company's Registration Statement on Form S-8 (Registration Nos. 33-11032, 33-20661, 33-88952 and 33-88958). (a) The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; Provided, however, that paragraphs (a) (1) (i) and (a) (1) (ii) do not apply if the registration statement is on Form S-3 or Form S-8, and the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by the registrant pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment 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. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (b) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to section 15(d) of the Securities Exchange Act of 1934) 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. Page 31 99. Additional Exhibit (Continued): ------------------ (f) (1) The undersigned registrant hereby undertakes to deliver or cause to be delivered with the prospectus to each employee to whom the prospectus is sent or given a copy of the registrant's annual report to stockholders for its last fiscal year, unless such employee otherwise has received a copy of such report, in which case the registrant shall state in the prospectus that it will promptly furnish, without charge, a copy of such report on written request of the employee. If the last fiscal year of the registrant has ended within 120 days prior to the use of the prospectus, the annual report for the fiscal year will be furnished to each such employee. (2) The undersigned registrant hereby undertakes to transmit or cause to be transmitted to all employees participating in the plan who do not otherwise receive such material as stockholders of the registrant, at the time and in the matter such material is sent to its stockholders, copies of all reports, proxy statements and other communications distributed to its stockholders generally. (3) Where interests in a plan are registered herewith, the undersigned registrant and plan hereby undertake to transmit or cause to be transmitted promptly, without charge, to any participant in the plan who makes a written request, a copy of the then latest annual report of the plan filed pursuant to section 15(d) of the Securities Exchange Act of 1934 (Form 11- K). If such report is filed separately on Form 11-K, such form shall be delivered upon written request. If such report is filed as a part of the registrant's annual report to stockholders delivered pursuant to paragraph (1) or (2) of this undertaking, additional delivery shall not be required. (4) If the registrant is a foreign private issuer, eligible to use Form 20-F, then the registrant shall undertake to deliver or cause to be delivered with the prospectus to each employee to whom the prospectus is sent or given, a copy of the registrant's latest filing on Form 20-F in lieu of the annual report to stockholders. (i) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the 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 act and will be governed by the final adjudication of such issue. Page 32 SCHEDULE II NU HORIZONS ELECTRONICS CORP. AND SUBSIDIARIES ---------------------------------------------- SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES Three Years Ended February 29, 1996 Additions Balance at charged to Balance at beginning costs and end of Description of period expenses Deductions (A) period - ----------- --------- ------------ --------------- ------------ Valuation account deducted in the balance sheet from the asset to which it applies: Allowance for doubtful accounts- accounts receivable 1996 $898,359 $635,000 $ 23,557 $1,509,802 ======== ======== ======== ========== 1995 $500,463 $442,500 $ 44,604 $ 898,359 ======== ======== ======== ========== 1994 $356,580 $409,000 $265,117 $ 500,463 ======== ======== ======== ========== (A) Accounts written off. Page 33 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. NU HORIZONS ELECTRONICS CORP. (Registrant) By:/s/ ARTHUR NADATA ------------------------ Arthur Nadata, President (Principal Operating Officer) By:/s/ PAUL DURANDO ------------------------ Paul Durando, Vice President, Finance (Principal Financial and Accounting Officer) Pursuant to the requirements of the Securities Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated: SIGNATURE CAPACITY DATE - ------------------------- ----------------------- ------------ By:/s/ IRVING LUBMAN Chairman of The Board, May 24, 1996 ---------------------- Irving Lubman Chief Executive Officer By:/s/ ARTHUR NADATA President, Treasurer and May 24, 1996 ---------------------- Arthur Nadata Director By:/s/ RICHARD SCHUSTER Vice President, Secretary May 24,1996 ---------------------- Richard Schuster and Director By:/s/ PAUL DURANDO Vice President, Finance May 24, 1996 ---------------------- Paul Durando and Director By:/s/ HERBERT M. GARDNER Director May 24, 1996 ---------------------- Herbert M. Gardner By:/s/ HARVEY R. BLAU Director May 24, 1996 ---------------------- Harvey R. Blau By:/s/ DAVID SIEGEL Director May 24, 1996 ---------------------- David Siegel Page 34 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------------- EXHIBIT INDEX to FORM 10-K FOR THE FISCAL YEAR ENDED FEBRUARY 29, 1996 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 --------------------- NU HORIZONS ELECTRONICS CORP. (Exact Name of Registrant as Specified in Its Charter) EXHIBIT NUMBER DESCRIPTION ---------------------------------------------------------------------- 10.13 Amendment No. 4 to Amended and Restated Revolving Credit Agreement and Twelfth Amendment to Revolving Credit and Term Loan Agreement dated as of April 8, 1996 between the Company, its subsidiaries and NatWest Bank, N.A. 11 Computation of Per Share Earnings 27 Financial Data Schedule EX-10.13 2 AMENDMENT NO. 4 TO RESTATED REVOLVING CREDIT EXHIBIT 10.13 FOURTH AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT ----------------------------------- FOURTH AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT dated as of April 8, 1996, by and among NU HORIZONS ELECTRONICS CORP., a Delaware corporation, NIC COMPONENTS CORP. and NU HORIZONS INTERNATIONAL CORP., each a New York corporation, NU VISIONS MANUFACTURING, INC., a Massachusetts corporation, and NU HORIZONS/MERIT ELECTRONICS CORP., a Delaware corporation, having their respective principal offices at 6000 New Horizons Boulevard, North Amityville, New York (collectively, the "Borrowers") and NATWEST BANK, N.A., formerly known as National Westminster Bank USA, a national banking association, having offices at 100 Jericho Quadrangle, Jericho, New York (the "Bank"). RECITALS The Borrowers and the Bank entered into an Amended and Restated Loan Agreement dated as of April 29, 1994 as amended by a First Amendment dated as of August 24, 1994, a Second Amendment dated as of November 29, 1995 and a Third Amendment dated as of January 10, 1996 (collectively, the "Loan Agreement"), under which certain financial accommodations were made available by the Bank to the Borrowers. Unless otherwise expressly provided herein, all capitalized terms used in this Fourth Amendment to Amended and Restated Loan Agreement shall have the respective meanings ascribed to such terms in the Loan Agreement. The Borrowers have requested that the Bank modify certain of the terms set forth in the Loan Agreement and the Bank is willing to comply with such request but only upon and subject to the following terms and conditions. NOW THEREFORE, in consideration of the premises and the mutual covenants and promises exchanged herein, the parties hereto mutually agree as follows: 1. The Amended and Restated Loan Agreement is hereby amended by the Borrowers and the Bank as follows: (a) Section 1.1 is hereby amended to add new definitions to read as follows: "`Agreed Rate' shall mean a rate of interest agreed to by the Borrowers and ----------- the Bank not more than three (3) Business Days prior to the first date of the Interest Period therefor. `Agreed Rate Loans' shall mean Revolving Credit Loans hereunder that bear ----------------- interest for the Interest Period applicable thereto at an Agreed Rate. `Fixed Rate Loan' shall mean any LIBOR Rate Loan or Agreed Rate Loan. --------------- `Fixed Rate Loans' shall mean collectively LIBOR Rate Loans and Agreed Rate ---------------- Loans. `Senior Liabilities' shall mean the Borrowers' total consolidated ------------------ liabilities less Subordinated Indebtedness." Section 1.1 is also amended by deleting the definitions of Interest Period, Margin, New Headquarters Premises and Termination Date and substituting the following therefor: "`Interest Period' shall mean with respect to any Fixed Rate Loan, the ---------------- period commencing on the date such loan is made and ending, as a Borrower may select, pursuant to Section 2.5 hereof on the numerically corresponding day in the (i) with respect to LIBOR Rate Loans, first, second, third or sixth calendar month thereafter and (ii) with respect to Agreed Rate Loans, first calendar month thereafter, except that each such Interest Period that commences on the last Business Day of a calendar month (or on any day for which there is no numerically corresponding day in the appropriate subsequent calendar month) shall end on the last Business Day of the appropriate subsequent calendar month; provided that: (a) no Interest Period may extend beyond the Termination Date; and (b) if an Interest Period would end on a day that is not a Business Day, such Interest Period shall be extended to the next Business Day unless such Business Day would fall in the next calendar month, in which event such Interest Period shall end on the immediately preceding Business Day. `Margin' means if the Borrowers' consolidated ratio of Senior Liabilities ------ to Capital Funds, as reflected in the financial statements delivered pursuant to Section 5.1 hereof, is (i) less than .50, 1.15% per annum; (ii) equal to or more than .5 but less than .80, 1.35% per annum; and (iii) equal to or more than .80 but less than .90, 1.50% per annum, provided, however, if the Borrowers fail to provide the relevant financial statements by the beginning of the corresponding Margin periods set forth in Section 2.8 hereof, the Margin shall be deemed to be 1.50% per annum until the delivery of the relevant financial statements. -2- `New Headquarters Premises' shall mean certain land located in Nassau ------------------------- County or Suffolk County, New York and the new corporate headquarters building located on or which the Company intends to construct on such land. `Termination Date' shall mean April 8, 2000 or, if such date is not a ---------------- Business Day, the Business Day next succeeding such date." (b) Section 2.1(a) is hereby deleted and the following is substituted therefor: "Subject to the terms and conditions hereof, the Bank agrees to make Revolving Credit Loans to each of the Borrowers and to issue Letters of Credit and to provide steamship guarantees and airway releases and to create Bankers Acceptances for the account of each of the Borrowers from time to time during the Commitment Period of which the aggregate principal amount of Revolving Credit Loans, Letters of Credit, Bankers Acceptances, steamship guarantees and airway releases at any one time outstanding as to the Borrowers collectively shall not exceed $25,000,000 as such amount may be reduced as provided in Section 2.12 hereof (the "Commitment"). During the Commitment Period each of the Borrowers may use the Commitment (i) for obtaining Revolving Credit Loans by borrowing, paying, prepaying in whole or in part and reborrowing on a revolving basis, all in accordance with the terms and conditions hereof and (ii) for obtaining the issuance of Letters of Credit, the creation of Bankers Acceptances and the providing of steamship guarantees and airway releases in accordance with the provisions of Section 2.2 hereof." (c) Section 2.4 is hereby deleted and the following is substituted therefor: "2.4 Interest. Interest on each Revolving Credit Loan shall be at a -------- per annum rate to be elected by each Borrower, in accordance with Section 2.5 hereof, and shall be one of the following: (a) a fluctuating rate equal to the Prime Rate, which interest rate shall change when and as the Prime Rate changes; (b) subject to the availability of funds, the Reserve Adjusted LIBOR Rate for Interest Periods selected by each Borrower plus the applicable Margin; or -3- (c) subject to the availability of funds, the Agreed Rate. Interest on each Revolving Credit Loan shall be payable monthly in arrears on the first day of each month, commencing on the first such day to occur after the pertinent loan is made, upon payment in full thereof and, with respect to Fixed Rate Loans, interest shall also be payable on the last day of each Interest Period applicable thereto. Whenever the unpaid principal balance of any Revolving Credit Loan shall become due and payable (whether at the stated maturity thereof, by acceleration or otherwise) interest shall thereafter be payable on demand at a rate per annum (computed daily) equal to 2% percent above the Prime Rate for Prime Rate Loans and the greater of 2% percent above the Prime Rate or 2% percent above the rate in effect at such maturity for Fixed Rate Loans; provided, however, that no interest payable hereunder shall be in excess of the rate permitted by applicable law. Interest on each Revolving Credit Loan shall be calculated on the basis of a year of 360 days for the actual number of days elapsed." (d) Section 2.5 is hereby deleted and the following is substituted therefor: "2.5 Procedure for Revolving Credit Borrowing. Each Borrower may borrow ---------------------------------------- under the Commitment during the Commitment Period on any Business Day by giving the Bank notice of a request for a Revolving Credit Loan hereunder setting forth the amount of the Revolving Credit Loan requested, which shall be in a minimum amount of $100,000 in the case of a Fixed Rate Loan or $25,000 in the case of a Prime Rate Loan, the date thereof and whether it is to be a LIBOR Rate Loan, a Prime Rate Loan or an Agreed Rate Loan. Requests for LIBOR Rate Loans shall be received by the Bank not later than 11:00 a.m. (New York City time) three (3) Business Days prior to the first day of the Interest Period for each such Revolving Credit Loan. Requests for Prime Rate Loans and Agreed Rate Loans may be made up to 1:00 p.m. (New York City time) on the date each such Revolving Credit Loan is to be made. Any request for a Revolving Credit Loan may be written or oral, but if oral, it shall be confirmed in writing sent by a Borrower to the Bank within two (2) Business Days thereafter." (e) Section 2.6 is hereby deleted and the following is substituted therefor: "2.6 Conversion and Renewals. Each of the Borrowers may elect from time ----------------------- to time to convert all or -4- a part of one type of Revolving Credit Loan into another type of Revolving Credit Loan or to renew all or part of a Revolving Credit Loan by giving the Bank notice at least one (1) Business Day before the conversion into a Prime Rate Loan and at least three (3) Business Days before the conversion into or renewal of a Fixed Rate Loan, specifying: (1) the renewal or conversion date; (2) the amount of the Revolving Credit Loan to be converted or renewed; (3) in the case of conversions, the type of Revolving Credit Loan to be converted into; and (4) in the case of renewals of or a conversion into LIBOR Rate Loans, the duration of the Interest Period applicable thereto; provided that (a) the minimum principal amount of each Revolving Credit Loan outstanding after a renewal or conversion to a Fixed Rate Loan shall be $100,000 or to a Prime Rate Loan shall be $25,000; and (b) Fixed Rate Loans can be converted only on the last day of the Interest Period of such Loan. All notices given under this Section 2.6 shall be irrevocable and shall be given not later than 11:00 a.m. (New York City time) on the day which is not less than the number of Business Days specified above for such notice. Any request for a conversion or a renewal under this Section 2.6 may be written or oral, but if oral, it shall be confirmed in writing sent by a Borrower to the Bank within two (2) Business Days thereafter. If any Borrower shall fail to give the Bank the notice as specified above for the renewal or conversion of a Fixed Rate Loan prior to the end of the Interest Period with respect thereto, such Fixed Rate Loan shall automatically be converted into a Prime Rate Loan on the last day of the Interest Period for such Revolving Credit Loan. Notwithstanding anything to the contrary contained above, if an Event of Default shall have occurred and be continuing, no Fixed Rate Loan may be continued into a subsequent Interest Period and no Prime Rate Loan may be converted into a Fixed Rate Loan." (f) Section 2.9 is hereby deleted and the following is substituted therefor: "2.9 Commitment Fee. As additional compensation for the Revolving Credit -------------- Commitment, the Borrowers agree to pay the Bank a commitment fee on the average daily unused portion of the Revolving Credit Commitment for the Commitment Period at the rate of, if the Borrower's consolidated ratio of liabilities to Capital Funds, as reflected in the financial statements delivered pursuant to Section 5.1 hereof, is (i) less than .80, .15 percent per annum and (ii) .80 or greater, .25 percent per annum. Any fee payable under this Section 2.9 which is not paid when due shall bear interest at a rate per annum equal to -5- 2% above the Prime Rate until paid, payable on demand. Such fee shall be computed on the basis of a 360 day year for the actual days elapsed and shall be payable monthly on the first day of each month during the Commitment Period and on the Termination Date. The "unused portion of the Revolving Credit Commitment" means, at any time, the Revolving Credit Commitment less the sum of (a) the unpaid principal balance of all Revolving Credit Loans, (b) Letters of Credit, (c) Bankers Acceptances, (d) steamship guarantees or (e) airway releases, then outstanding." (g) Section 2.10 is hereby deleted and the following is substituted therefor: "2.10 Requirements of Law. If any change in conditions or applicable ------------------- law, regulation or interpretation thereof (including any request, guideline or policy not having the force of law) by any authority charged with the administration or interpretation thereof occurs which: (a) subjects the Bank to any tax with respect to a Fixed Rate Loan, or (b) changes the basis of taxation of payments to the Bank of principal and/or interest and/or other fees and amounts payable hereunder, or (c) imposes, modifies or deems applicable any reserve or deposit requirements against any assets held by, deposits with or for the account of, or loans or commitments by, an office of the Bank, or (d) imposes upon the Bank any other condition with respect to a Fixed Rate Loan and the Bank determines that the result of any of the foregoing is to increase the cost to the Bank of making or maintaining a Fixed Rate Loan, or to reduce the amount of any payment (whether of principal, interest or otherwise) receivable by the Bank pursuant to the Revolving Credit Note or to require the Bank to make any payment on or calculated by reference to the gross amount of any sum received by it pursuant to the Revolving Credit Note, then the Bank shall promptly give notice to the Borrower of such event and determination and in any such case the Borrowers shall pay to the Bank, on demand, from time to time as specified by the Bank, such additional amount or amounts as will compensate and indemnify the Bank for such additional cost, reduction or payment. A certificate of the Bank as to the additional amounts payable pursuant to this Section 2.10 delivered to the Borrower, shall be -6- final, conclusive and binding on the Borrowers absent manifest error or bad faith. The protection of this Section shall be available to the Bank regardless of any possible contention of invalidity or inapplicability of the law, regulation or condition which has been imposed. The Bank shall furnish the Borrowers with a statement of the amount of any such loss or expense, and such statement by the Bank shall be final, conclusive and binding on the Borrowers in the absence of manifest error." (h) Section 2.12 is hereby deleted and the following is substituted therefor: "2.12 Termination or Reduction of Commitment. Subject to the -------------------------------------- indemnity agreement with respect to Fixed Rate Loans set forth in Section 2.15 hereof, the Borrowers shall have the right, upon not less than three (3) Business Days' irrevocable notice, to terminate the Commitment or, from time to time, to reduce the amount of the Commitment, provided that (a) any such reduction (i) shall be in the minimum amount of $1,000,000 or a multiple thereof, (ii) shall reduce permanently the amount of the Commitment then in effect, and (iii) shall be accompanied by prepayment of the Revolving Credit Loans outstanding, together with accrued interest on the amount so prepaid to the dates of each such prepayment, to the extent, if any, that the Revolving Credit Loans then outstanding exceed the amount of the Commitment as then reduced, and (b) any such termination of the Commitment shall be accompanied by prepayment in full of the Revolving Credit Loans outstanding, together with accrued interest thereon to the date of prepayment, and the payment of any unpaid commitment fee then accrued hereunder." (i) Section 2.13 is hereby deleted and the following is substituted therefor: "2.13 Prepayment. Subject to the indemnity agreement with respect to ---------- Fixed Rate Loans set forth in Section 2.15 hereof, the Borrowers may prepay any Revolving Credit Loan in whole or in part without premium or penalty together with interest accrued on the amount prepaid to the date of prepayment. Prepayments of Revolving Credit Loans may be reborrowed on a revolving basis as aforesaid." (j) Section 2.14(a) is hereby deleted and the following is substituted therefor: -7- "(a) All payments (including prepayments) to be made by the Borrowers on account of principal, interest and fees shall be made without setoff or counterclaim and shall be made to the Bank on the date of payment at the office of the Bank set forth in Section 10.12 hereof or at such other place as the Bank may from time to time designate in writing on or before 11:00 a.m. (New York City time), in each case in lawful money of the United States of America and in immediately available funds. If any payment hereunder (other than payments on Fixed Rate Loans) becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension. If any payment on a Fixed Rate Loan becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day unless the result of such extension would be to extend such payment into another calendar month in which event such payment shall be made on the immediately preceding Business Day." (k) Section 2.15 is hereby deleted and the following is substituted therefor: "2.15 Indemnity and Yield Protection. The Borrowers hereby agree to ------------------------------ indemnify the Bank against any loss or expense which the Bank may sustain or incur as a consequence of the following: (a) the failure of any Borrower to borrow a Fixed Rate Loan after agreement shall have been reached on the amount, interest rate and Interest Period thereof; (b) the receipt or recovery by the Bank, whether by voluntary prepayment, acceleration or otherwise, of all or any part of a Fixed Rate Loan prior to the last day of an Interest Period applicable thereto; or (c) the conversion, prior to the last day of an applicable Interest Period, of a Fixed Rate Loan into another type of Revolving Credit Loan. Without limiting the effect of the foregoing, the amount to be paid by the Borrowers to the Bank in order to so indemnify the Bank for any loss occasioned by any of the events described in the preceding paragraph, and as liquidated damages therefor, shall be equal to the excess, discounted to its present value as of the date paid to the Bank, of (i) the amount of interest which otherwise would have accrued on the principal amount so -8- received, recovered, converted or not borrowed during the period (the "Indemnity Period") commencing on the date of such receipt, recovery, conversion, or failure to borrow to the day of the applicable Interest Period for such Fixed Rate Loan at the rate of interest applicable to such Loan (or the rate of interest agreed to in the case of a failure to borrow) provided for herein (prior to default) over (ii) the amount of interest which would be earned by the Bank during the Indemnity Period if it invested the principal amount so received, recovered, converted or not borrowed at the rate per annum determined by the Bank as the rate it would bid in the London interbank market for a deposit of eurodollars in an amount approximately equal to such principal amount for a period of time comparable to the Indemnity Period. A certificate as to any additional amounts payable pursuant to this Section 2.15 setting forth the basis and method of determining such amounts shall be conclusive, absent manifest error, as to the determination by the Bank set forth therein if made reasonably and in good faith. The Borrowers shall pay any amounts so certified to it by the Bank within ten (10) days of receipt of any such certificate. For purposes of this Section 2.15, all references to the "Bank" shall be deemed to include any participant in the Revolving Credit Commitment and/or Revolving Credit Loans. The indemnities set forth herein shall survive payment in full of all Fixed Rate Loans and all other Revolving Credit Loans made pursuant to this Agreement." (l) Section 2.16 is hereby deleted and the following is substituted therefor: "2.16 Use of Proceeds. The proceeds of the Revolving Credit Loans may be --------------- used by the Borrowers for general corporate purposes provided that solely through February 28, 1997 up to an aggregate amount of $6,000,000 may be used to purchase the New Headquarters Premises provided, further, that no portion of the proceeds of any Revolving Credit Loan shall be used by any Borrower in any manner which might cause the borrowing or the application of such proceeds to violate Regulation G, Regulation U, Regulation T or Regulation X of the Board of Governors of the Federal Reserve System." (m) Section 3.2 is hereby amended by deleting "November 30, 1993" appearing therein and substituting "November 30, 1996" therefor. -9- (n) Section 6.1 is hereby deleted and the following is substituted therefor: "6.1 Quick Ratio. Maintain at all times a ratio of consolidated current ----------- assets composed of cash on hand or on deposit in banks and Eligible Investment Securities plus Eligible Accounts Receivable to consolidated current liabilities of at least (i) .85 to 1.0 from April 8, 1996 through February 28, 1998 and (ii) .95 to 1.0 from March 1, 1998 and at all times thereafter. Solely for purposes of calculating compliance with this Section, up to an aggregate of $6,000,000 of Revolving Credit Loans, the proceeds of which are used for the purchase of the New Headquarters Premises, shall be excluded from current liabilities until May 31, 1997." (o) Section 6.2 is hereby deleted and "[Reserved]" is substituted therefor. (p) Section 6.3 is hereby deleted and the following is substituted therefor: "6.3 Capital Funds; Senior Liabilities to Capital Funds Ratio. Maintain -------------------------------------------------------- at all times (i) as at the end of each fiscal quarter of each of the periods designated in the table set forth below Capital Funds in an amount not less than that set forth opposite each such period and (ii) as at the end of each fiscal quarter of each fiscal year a ratio of total consolidated Senior Liabilities to Capital Funds of not more than .90 to 1.0. Period Minimum Amount ------ -------------- 3/1/96 - 2/28/97 $38,000,000 plus the product of .60 times the Consolidated Net Income for the fiscal year ending 2/28/96 (the "`96 Base Amount") 3/1/97 - 2/28/98 `96 Base Amount plus the product of .75 times the Consolidated Net Income for the fiscal year ended 2/28/97 (the "`97 Base Amount") 3/1/98 - 2/28/99 `97 Base Amount plus the product of .75 times the Consolidated Net Income for the fiscal year ended 2/28/98 (the "`98 Base Amount") -10- 3/1/99 and thereafter `98 Base Amount plus the product of .75 times the Consolidated Net Income for the fiscal year ended 2/28/99" (q) Section 7.7 is hereby deleted and the following is substituted therefor: "7.7 Capital Expenditures. Expend in any fiscal year in the aggregate for -------------------- the Borrowers and all Subsidiaries an amount in excess of the greater of $1,750,000 or 25% of the aggregate of the prior fiscal year's net income plus depreciation for the acquisition of fixed assets (inclusive of rental payments under capitalized leases) provided; however, for the fiscal year ending February 28, 1997, such amount may be increased by up to $6,000,000 for the expenditures related to the purchase of the New Headquarters Premises. The foregoing expenditures made within the limitations of this Section 7.7 shall be inclusive of payments made on account of any deferred purchase price or on account of any purchase money indebtedness incurred to finance any such purchase price. (r) Exhibit A is hereby amended to conform to the amendment hereinabove set forth in paragraph 1(b) and, as amended, is set forth in its entirety in an attachment annexed hereto and make a part hereof. 2. It is expressly understood and agreed that all collateral security for the Revolving Credit Loans and other extensions of credit set forth in the Amended and Restated Loan Agreement prior to the amendment provided for herein is and shall continue to be collateral security for the Revolving Credit Loans and other extensions of credit provided in the Amended and Restated Loan Agreement as herein amended. Without limiting the generality of the foregoing, the Borrowers hereby absolutely and unconditionally confirm that (i) each document and instrument executed by the Borrowers pursuant to the Amended and Restated Loan Agreement continues in full force and effect, is ratified and confirmed and is and shall continue to be applicable to the Amended and Restated Loan Agreement (as herein amended), and (ii) the Amended and Restated Note is hereby ratified and confirmed and shall remain in full force and effect in accordance with its terms. The terms "Revolving Credit Note" and "Note" shall include any Amended and Restated Revolving Credit Note. 3. In order to induce the Bank to enter into this Fourth Amendment to Amended and Restated Loan Agreement, the Borrowers represent and warrant to the Bank that each of their representations and warranties made in the Amended and Restated -11- Loan Agreement is true and correct as of the date hereof except as otherwise set forth in writing(s) to which the Bank is a party. 4. No modification or waiver of any provisions of the Amended and Restated Loan Agreement or any other agreement or instrument made or issued pursuant thereto or contemplated thereby, nor consent to any departure by the Borrowers therefrom shall, in any event, be effective unless made in writing and signed by the Bank and the Borrowers, and then any such modification or waiver shall be effective only in the specific instance and for the purpose for which given unless otherwise specified therein. No notice to, or demand on, the Borrowers in any case shall, of itself, entitle them to any further notice or demand in similar or other circumstances. 5. The Borrowers agree to pay on demand, and the Bank may charge any deposit or loan accounts(s) of the Borrowers, for all expenses incurred by the Bank in connection with the negotiation, preparation and administration (including any future waiver or modification and legal counsel as to the rights and duties of the Bank) of this Fourth Amendment to Amended and Restated Loan Agreement. 6. The amendments set forth herein are limited precisely as written and shall not be deemed to (a) be a consent to or waiver of any other term or condition of the Amended and Restated Loan Agreement or of any of the documents referred to therein or (b) prejudice any right or rights which the Bank may now have or may have in the future under or in connection with the Amended and Restated Loan Agreement or any of the documents referred to therein. 7. This Fourth Amendment to Amended and Restated Loan Agreement is dated for convenience as of April 8, 1996 and shall be effective on the delivery of an executed counterpart hereof to the Borrowers. This Fourth Amendment to Amended and Restated Loan Agreement may be executed in counterparts, each of which shall constitute an original, and each of which taken together shall constitute one and the same agreement. -12- IN WITNESS WHEREOF, the parties hereto have caused this Fourth Amendment to Amended and Restated Loan Agreement to be duly executed and delivered by their duly authorized officers, all as of the day and year first above written. NU HORIZONS ELECTRONICS CORP. NIC COMPONENTS CORP. By:/s/ Paul Durando By:/s/ Paul Durando ---------------- ---------------- Paul Durando Paul Durando Vice President-Finance Vice President-Finance NU HORIZONS INTERNATIONAL CORP. NU VISIONS MANUFACTURING, INC. By:/s/ Paul Durando By:/s/ Paul Durando ---------------- ---------------- Paul Durando Paul Durando Vice President-Finance Vice President-Finance NU HORIZONS/ NATWEST BANK N.A. MERIT ELECTRONICS CORP. formerly known as National Westminster Bank USA By:/s/ Paul Durando By:/s/ Jeffrey B. Carstens ---------------- ----------------------- Paul Durando Jeffrey B. Carstens Vice President-Finance Vice President -13- STATE OF NEW YORK) :ss.: COUNTY OF NASSAU ) On the 8th day of April, 1996, before me personally came PAUL DURANDO, to me known, who, being by me duly sworn, did depose and say that he resides at c/o 6000 New Horizons Boulevard, North Amityville, New York; that he is the Vice President-Finance of NU HORIZONS ELECTRONICS CORP., the corporation described in and which executed the foregoing instrument; and that he signed his name thereto by order of the board of directors of said corporation. /s/ Dianne J. Judd --------------------- Notary Public STATE OF NEW YORK) :ss.: COUNTY OF NASSAU ) On the 8th day of April, 1996, before me personally came PAUL DURANDO, to me known, who, being by me duly sworn, did depose and say that he resides at c/o 6000 New Horizons Boulevard, North Amityville, New York; that he is the Vice President-Finance of NIC COMPONENTS CORP., the corporation described in and which executed the foregoing instrument; and that he signed his name thereto by order of the board of directors of said corporation. /s/ Dianne J. Judd --------------------- Notary Public STATE OF NEW YORK) :ss.: COUNTY OF NASSAU ) On the 8th day of April, 1996, before me personally came PAUL DURANDO, to me known, who, being by me duly sworn, did depose and say that he resides at c/o 6000 New Horizons Boulevard, North Amityville, New York; that he is the Vice President-Finance of NU HORIZONS INTERNATIONAL CORP., the corporation described in and which executed the foregoing instrument; and that he signed his name thereto by order of the board of directors of said corporation. /s/ Dianne J. Judd --------------------- Notary Public -14- STATE OF NEW YORK) :ss.: COUNTY OF NASSAU ) On the 8th day of April, 1996, before me personally came PAUL DURANDO, to me known, who, being by me duly sworn, did depose and say that he resides at c/o 6000 New Horizons Boulevard, North Amityville, New York; that he is the Vice President-Finance of NU VISIONS MANUFACTURING, INC., the corporation described in and which executed the foregoing instrument; and that he signed his name thereto by order of the board of directors of said corporation. /s/ Dianne J. Judd --------------------- Notary Public STATE OF NEW YORK) :ss.: COUNTY OF NASSAU ) On the 8th day of April, 1996, before me personally came PAUL DURANDO, to me known, who, being by me duly sworn, did depose and say that he resides at c/o 6000 New Horizons Boulevard, North Amityville, New York; that he is the Vice President-Finance of NU HORIZONS/MERIT ELECTRONICS CORP., the corporation described in and which executed the foregoing instrument; and that he signed his name thereto by order of the board of directors of said corporation. /s/ Dianne J. Judd --------------------- Notary Public STATE OF NEW YORK) :ss.: COUNTY OF NASSAU ) On the 8th day of April, 1996, before me personally came JEFFREY B. CARSTENS, to me known, who, being by me duly sworn, did depose and say that he resides at c/o 100 Jericho Quadrangle, Jericho, New York; that he is a Vice President of NATWEST BANK N.A., the banking institution described in and which executed the foregoing instrument; and that he signed his name thereto by authority of such banking institution. /s/ Dianne J. Judd --------------------- Notary Public -15- TWELFTH AMENDMENT TO REVOLVING CREDIT AND TERM LOAN AGREEMENT ----------------------- TWELFTH AMENDMENT TO REVOLVING CREDIT AND TERM LOAN AGREEMENT dated as of April 8, 1996, by and between NU HORIZONS ELECTRONICS CORP., a Delaware corporation having its executive offices at 6000 New Horizons Boulevard, North Amityville, New York (the "Company") and NATWEST BANK, N.A. formerly known as National Westminster Bank USA, a national banking association, having offices at 100 Jericho Quadrangle, Jericho, New York (the "Bank"). RECITALS -------- The Company and the Bank entered into a Revolving Credit and Term Loan Agreement dated as of May 26, 1988 (as amended by the First Amendment dated as of March 19, 1990, the Second Amendment dated as of February 28, 1991, the Third Amendment dated as of April 1, 1992, the Fourth Amendment dated as of April 8, 1992, a Fifth Amendment dated as of August 1, 1992, a Sixth Amendment dated as of October 1, 1992, a Seventh Amendment dated as of May 20, 1993, an Eighth Amendment dated as of January 14, 1994, a Ninth Amendment dated as of April 29, 1994, a Tenth Amendment dated as of November 29, 1995 and an Eleventh Amendment dated as of January 10, 1996 and as may be further amended, the "Loan Agreement"), pursuant to which certain financial accommodations were made available by the Bank to the Company. Unless otherwise expressly provided herein, all capitalized terms used in this Twelfth Amendment shall have the respective meanings ascribed to such terms in the Loan Agreement. The Company has requested that the Bank modify certain of the terms set forth in the Loan Agreement and the Bank is willing to comply with such request but only upon and subject to the following terms and conditions. NOW THEREFORE, in consideration of the premises and mutual covenants and promises exchanged herein, the parties hereto mutually agree as follows: 1. The Loan Agreement is hereby amended by the Company and the Bank as follows: (a) Section 1.1 is hereby amended to add new definitions to read as follows: "`Tenth Conversion Date' shall mean February 28, 1998. --------------------- `Eleventh Conversion Date' shall mean February 28, 1999. ------------------------ `Twelfth Conversion Date' shall mean February 29, 2000. ----------------------- `Senior Liabilities' shall mean the Borrowers' and the Guarantors' total ------------------ consolidated liabilities less Subordinated Indebtedness." Section 1.1 is also amended by deleting the definitions of Conversion Dates and New Headquarters Premises and substituting the following therefor: "`Conversion Dates' shall mean collectively the First Conversion Date, the ---------------- Second Conversion Date, the Third Conversion Date, the Fourth Conversion Date, the Fifth Conversion Date, the Sixth Conversion Date, the Seventh Conversion Date, the Eighth Conversion Date, the Ninth Conversion Date, the Tenth Conversion Date, the Eleventh Conversion Date and the Twelfth Conversion Date. `New Headquarters Premises' shall mean certain land located in Nassau or ------------------------- Suffolk County, New York and the new corporate headquarters building located on or which the Company intends to construct on such land." (b) The first portion of Section 2.1 is hereby amended to read as follows (in pertinent part): "2.1 Revolving Credit Loan: Subject to the terms and conditions of this --------------------- Agreement, and in reliance upon the representations and warranties hereinafter set forth, the Bank agrees to lend to the Company, prior to February 29, 2000 (the "Twelfth Conversion Date"), such amounts as the Company may request from time to time, which amounts may be borrowed, repaid and reborrowed (individually, a "Revolving Credit Loan" and collectively the "Revolving Credit Loans");...." (c) The second sentence of Section 2.2 is hereby amended to read as follows: "Such note shall be dated the date hereof, and be in the amount of the lesser of One Million Ninety-Four Thousand One Hundred Twelve and 30/100 ($1,094,112.30) Dollars or the amount advanced hereunder as the Revolving Credit Loans and shall mature on February 29, 2000, at which time said entire principal balance shall be due and payable." (d) Section 2.3 (b) (i) is hereby amended to read as follows: -2- "(i) on February 28, 1989 (the "First Conversion Date"), February 28, 1990 (the "Second Conversion Date"), February 28, 1991 (the "Third Conversion Date"), February 29, 1992 (the "Fourth Conversion Date"), February 28, 1993 (the "Fifth Conversion Date"), February 28, 1994 (the "Sixth Conversion Date"), February 28, 1995 (the "Seventh Conversion Date"), February 29, 1996 (the "Eighth Conversion Date"), February 28, 1997 (the "Ninth Conversion Date"), February 28, 1998 (the "Tenth Conversion Date") and February 28, 1999 (the "Eleventh Conversion Date") the outstanding principal of the Revolving Credit Note together with accrued interest on such dates shall be prepaid, and ...." (e) Section 2.6 is hereby amended to read as follows: "2.6 Reduction of the Commitment: The Commitment shall be reduced by the --------------------------- principal amounts outstanding under the Revolving Credit Note on the First Conversion Date, the Second Conversion Date, the Third Conversion Date, the Fourth Conversion Date, the Fifth Conversion Date, the Sixth Conversion Date, the Seventh Conversion Date, the Eighth Conversion Date, the Ninth Conversion Date, the Tenth Conversion Date and the Eleventh Conversion Date and such amounts shall not be reinstated." (f) Section 2.9 is hereby amended by the addition of the following at the conclusion thereof: "The Term Loan made on the Twelfth Conversion Date shall be payable in forty- eight (48) monthly installments commencing on the 31st day of March, 2000 and on the last day of each month thereafter to and including February 29, 2004, when any unpaid balance together with accrued interest shall be due and payable." (g) Section 3.1 is hereby amended by deleting "November 30, 1987" appearing therein and substituting "November 30, 1995" therefor. (h) Section 5.10(b) is hereby deleted and the following is substituted therefor: "(b) Capital Funds; Senior Liabilities to Capital Funds. Maintain at all -------------------------------------------------- times (y) as at the end of each fiscal quarter of each of the periods designated in the table set forth below Capital Funds in an amount not less than that set forth opposite each such period and (z) as at the end of each fiscal quarter of each fiscal year a ratio of total consolidated Senior Liabilities to Capital Funds of not more than .90 to 1.0. -3- Period Minimum Amount ------ -------------- 3/1/96 - 2/28/97 $38,000,000 plus the product of .60 times the Consolidated Net Income for the fiscal year ending 2/28/96 (the "`96 Base Amount") 3/1/97 - 2/28/98 `96 Base Amount plus the product of .75 times the Consolidated Net Income for the fiscal year ended 2/28/97 (the "`97 Base Amount") 3/1/98 - 2/28/99 `97 Base Amount plus the product of .75 times the Consolidated Net Income for the fiscal year ended 2/28/98 (the "`98 Base Amount") 3/1/99 and there- `98 Base Amount plus the product of .75 times the after Consolidated Net Income for the fiscal year ended 2/28/99" (i) Section 5.10(c) is hereby deleted and the following is substituted therefor: "(b) Quick Ratio. Maintain at all times a ratio of consolidated current ----------- assets composed of cash on hand or on deposit in banks and marketable Eligible Investment Securities plus Eligible Accounts Receivable to consolidated current liabilities of at least (i) .85 to 1.0 from , April 8, 1996 through February 28, 1998 and (ii) .95 to 1.0 from March 1, 1998 and at all times thereafter. Solely for purposes of calculating compliance with this Section, up to an aggregate of $6,000,000 of revolving credit loans to the Company under the Amended Restated Credit Agreement among the Company, certain other entities and the Bank dated as of April 29, 1994, the proceeds of which are used for the purchase of the New Headquarters Premises, shall be excluded from current liabilities until May 31, 1997." (j) Section 5.10 (f) is hereby deleted and "[Reserved]" is substituted therefor. (k) Section 6.16 is hereby deleted and the following is substituted therefor: "6.16 Capital Expenditures. Expend in any fiscal year in the aggregate -------------------- for the Company and its Subsidiaries an amount in excess of the greater of $1,750,000 or 25% of the aggregate of the prior fiscal -4- year's net income plus depreciation for the acquisition of fixed assets (inclusive of rental payments under capitalized leases) provided; however, for the fiscal year ending February 28, 1997, such amount may be increased by up to $6,000,000 for the expenditures related to the purchase of the New Headquarters Premises. The foregoing expenditures made within the limitations of this Section shall be inclusive of payments made on account of any deferred purchase price or on account of any purchase money indebtedness incurred to finance any such purchase price." (l) Exhibit A is hereby amended to conform to the amendment hereinabove set forth in paragraph 1(c) and, as amended, is set forth in its entirety in an attachment annexed hereto and make a part hereof. The Company acknowledges and agrees that an Event of Taxability has occurred and agrees to pay interest at the Taxable Rate in accordance with the provisions of the Loan Agreement. 2. It is expressly understood and agreed that all collateral security for the Loans and other extensions of credit set forth in the Loan Agreement prior to the amendments provided for herein is and shall continue to be collateral security for the Loans and other extensions of credit provided in the Loan Agreement as herein amended. Without limiting the generality of the foregoing, the Company hereby absolutely and unconditionally confirms that (i) each document and instrument executed by the Company pursuant to the Loan Agreement continues in full force and effect, is ratified and confirmed and is and shall continue to be applicable to the Loan Agreement (as herein amended) and (ii) the Notes are hereby ratified and confirmed and shall remain in full force and effect in accordance with their respective terms. Nonetheless, at the request of the Bank, the Company shall promptly execute and deliver replacement notes to evidence all indebtedness outstanding under the Loan Agreement as hereby amended. The term "Notes" shall include any such replacement notes. 3. In order to induce the Bank to enter into this Twelfth Amendment to Loan Agreement, the Company represents and warrants to the Bank that each of its representations and warranties made in the Loan Agreement is true and correct as of the date hereof except as otherwise set forth in writing(s) to which the Bank is a party. Notwithstanding the foregoing, to the extent that the representations and warranties contained in the Loan Agreement and in that certain amended and restated loan agreement dated as of April 29, 1994 among the Company, certain related corporations and the Bank (as previously amended and as may be amended from time to time, the "Restated Loan Agreement") differ, the representations and warranties contained in the Restated Loan Agreement shall control. -5- 4. No modifications or waiver or any provisions of the Loan Agreement or any other agreement or instrument made or issued pursuant thereto or contemplated thereby, nor consent to any departure by the Company therefore shall, in any event, be effective unless made in writing and signed by the Bank and the Company, and then any such modification or waiver shall be effective only in the specific instance and for the purpose for which given unless otherwise specified therein. No notice to, or demand on, the Company in any case shall, of itself, entitle it to any further notice or demand in similar or other circumstances. 5. The Company agrees to pay on demand, and the Bank may charge any deposit or loan account(s) of the Company, for all expenses incurred by the Bank in connection with the negotiation, preparation and administration (including any future waiver or modification and legal counsel as to the rights and duties of the Bank) of this Twelfth Amendment to Loan Agreement. 6. This amendment is limited precisely as written and shall not be deemed to (a) be a consent or waiver of any other term or condition of the Loan Agreement or of any of the documents referred to therein or (b) prejudice any right or rights which the Bank may now have or may have in the future under or in connection with the Loan Agreement or any of the documents referred to therein. 7. This Twelfth Amendment to Loan Agreement is dated for convenience of as April 8, 1996 and shall be effective on the delivery of an executed counterpart to the Company. This Twelfth Amendment to Loan Agreement may be executed in counterparts, each of which shall constitute an original, and each of which taken together shall constitute one and the same agreement. -6- IN WITNESS WHEREOF, the parties hereto have caused this Amendment to Loan Agreement to be duly executed and delivered by their duly authorized officers, all as of the day and year first above written. NU HORIZONS ELECTRONICS CORP. By:/s/ Paul Durando -------------------------- Paul Durando Vice President - Finance NATWEST BANK, N.A. formerly known as National Westminster Bank USA By:/s/ Jeffrey B. Carstens -------------------------- Jeffrey B. Carstens Vice President -7- STATE OF NEW YORK ) :ss.: COUNTY OF NASSAU ) On the 8th day of April, 1996, before me personally came PAUL DURANDO, to me known, who, being by me duly sworn, did depose and say that he resides at c/o 6000 New Horizons Boulevard, North Amityville, New York; that he is the Vice President-Finance of NU HORIZONS ELECTRONICS CORP., the corporation described in and which executed the foregoing instrument; and that he signed his name thereto by order of the board of directors of said corporation. /s/ Dianne J. Judd -------------------- Notary Public STATE OF NEW YORK ) :ss.: COUNTY OF NASSAU ) On this 8th day of April, 1996, before me personally came JEFFREY B. CARSTENS, to me known, who, being by me duly sworn, did depose and say that he resides at c/o 100 Jericho Quadrangle, Jericho, New York; that he is a Vice President of NATWEST BANK N.A., the banking institution described in and which executed the foregoing instrument; that he signed his name thereto by authority of such banking institution. /s/ Dianne J. Judd -------------------- Notary Public -8- The undersigned Guarantors acknowledge that there are no defenses or offsets to their respective Guaranties of the obligations under the Loan Agreement as amended by this Twelfth Amendment and hereby agree and consent to the foregoing Twelfth Amendment. NIC COMPONENTS CORP. Dated: April 8, 1996 By:/s/ Paul Durando ---------------------- Paul Durando Vice President-Finance NU HORIZONS INTERNATIONAL CORP. Dated: April 8, 1996 By:/s/ Paul Durando ---------------------- Paul Durando Vice President-Finance NU VISIONS MANUFACTURING, INC. Dated: April 8, 1996 By:/s/ Paul Durando ---------------------- Paul Durando Vice President-Finance NU HORIZONS/MERIT ELECTRONICS CORP. Dated: April 8, 1996 By:/s/ Paul Durando ------------------------- Paul Durando Vice President-Finance -9- STATE OF NEW YORK ) :ss.: COUNTY OF NASSAU ) On the 8th day of April, 1996, before me personally came PAUL DURANDO, to me known, who, being by me duly sworn, did depose and say that he resides at c/o 6000 New Horizons Boulevard, North Amityville, New York; that he is the Vice President-Finance of NIC COMPONENTS CORP., the corporation described in and which executed the foregoing instrument; and that he signed his name thereto by order of the board of directors of said corporation. /s/ Dianne J. Judd -------------------- Notary Public STATE OF NEW YORK) :ss.: COUNTY OF NASSAU ) On the 8th day of April, 1996, before me personally came PAUL DURANDO, to me known, who, being by me duly sworn, did depose and say that he resides at c/o 6000 New Horizons Boulevard, North Amityville, New York; that he is the Vice President-Finance of NU HORIZONS INTERNATIONAL CORP., the corporation described in and which executed the foregoing instrument; and that he signed his name thereto by order of the board of directors of said corporation. /s/ Dianne J. Judd -------------------- Notary Public -10- STATE OF NEW YORK) :ss.: COUNTY OF NASSAU ) On the 8th day of April, 1996, before me personally came PAUL DURANDO, to me known, who, being by me duly sworn, did depose and say that he resides at c/o 6000 New Horizons Boulevard, North Amityville, New York; that he is the Vice President-Finance of NU VISIONS MANUFACTURING, INC., the corporation described in and which executed the foregoing instrument; and that he signed his name thereto by order of the board of directors of said corporation. /s/ Dianne J. Judd ----------------------- Notary Public STATE OF NEW YORK) :ss.: COUNTY OF NASSAU ) On the 8th day of April, 1996, before me personally came PAUL DURANDO, to me known, who, being by me duly sworn, did depose and say that he resides at c/o 6000 New Horizons Boulevard, North Amityville, New York; that he is the Vice President-Finance of NU HORIZONS/MERIT ELECTRONICS CORP., the corporation described in and which executed the foregoing instrument; and that he signed his name thereto by order of the board of directors of said corporation. /s/ Dianne J. Judd ----------------------- Notary Public -11- EX-11 3 COMPUTATION OF PER SHARE EARNINGS NU HORIZONS ELECTRONICS CORP. EXHIBIT 11 COMPUTATION OF EARNINGS PER COMMON SHARE ---------------------------------------- (Unaudited)
FOR THE YEAR ENDED ------------------ FEBRUARY FEBRUARY FEBRUARY 29, 1996 28, 1995 28, 1994 ----------- ---------- ---------- PRIMARY EARNINGS: - ---------------- NET INCOME $ 9,396,301 $4,421,823 $5,044,225 =========== ========== ========== WEIGHTED AVERAGE SHARES: Common shares outstanding 7,903,839 7,728,549 7,657,025 Common share equivalents 332,410 119,128 117,415 =========== ========== ========== Weighted average number of common shares and common share equivalents outstanding 8,236,249 7,847,677 7,774,440 =========== ========== ========== PRIMARY EARNINGS PER COMMON SHARE: Net Income $1.14 $.56 $ .65 =========== ========== ========== FULLY DILUTED EARNINGS: - ------------------------------------- Net Income $ 9,396,301 $4,421,823 $5,044,225 Net (after tax) interest expense related to convertible debt 661,826 365,062 - ----------- ---------- ---------- NET INCOME AS ADJUSTED $10,058,127 $4,786,885 $5,044,225 =========== ========== ========== SHARES: Weighted average number of common shares and common share equivalents outstanding 8,236,249 7,847,677 7,774,440 Additional options not included above 660,562 598,287 40,165 Assuming Conversion of convertible debt 1,513,888 833,333 - ----------- ---------- ---------- Weighted average number of common shares outstanding as adjusted 10,410,699 9,279,297 7,814,605 =========== ========== ========== FULLY DILUTED EARNINGS PER COMMON SHARE $.97 $.52 $ .65 =========== ========== ==========
EX-27 4 ART. 5 FOR FDS OF REGULATION S-X
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED FEBRUARY 29, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH STATEMENTS. YEAR FEB-29-1996 MAR-1-1995 FEB-29-1996 874,267 0 31,514,984 1,509,802 36,808,915 68,702,287 7,249,830 3,810,026 75,459,586 10,747,853 0 0 0 55,593 37,562,110 75,459,586 202,803,184 202,803,184 154,602,036 154,602,036 30,377,380 635,000 2,026,717 15,799,592 6,403,291 9,396,301 0 0 0 9,396,301 1.14 .97
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