-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, Dwrx0OGNWsxuy4VG9tWXoFup9dj8kvGYrfdgvHopyHTfZWRcjOcQMdr3Q3/ptDRs 8s8Q3fuolTmF9D14CcSf/Q== 0000007536-94-000003.txt : 19940331 0000007536-94-000003.hdr.sgml : 19940331 ACCESSION NUMBER: 0000007536-94-000003 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 17 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ARROW ELECTRONICS INC CENTRAL INDEX KEY: 0000007536 STANDARD INDUSTRIAL CLASSIFICATION: 5065 IRS NUMBER: 111806155 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-04482 FILM NUMBER: 94518999 BUSINESS ADDRESS: STREET 1: 25 HUB DR CITY: MELVILLE STATE: NY ZIP: 11747 BUSINESS PHONE: 5163911300 10-K 1 FORM 10-K Form 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (Mark One) X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the fiscal year ended December 31, 1993 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from............to................. Commission file number 1-4482 ARROW ELECTRONICS, INC. (Exact name of registrant as specified in its charter) New York 11-1806155 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 25 Hub Drive Melville, New York 11747 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (516) 391-1300 Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange on Title of Each Class Which Registered Common Stock, $1 par value New York Stock Exchange Preferred Share Purchase Rights New York Stock Exchange 5-3/4% Convertible Subordinated Debentures due 2002 New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ] The aggregate market value of voting stock held by nonaffiliates of the registrant as of March 19, 1994 was $1,270,816,679. Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. Common Stock, $1 par value: 31,417,574 shares outstanding at March 9, 1994. The following documents are incorporated herein by reference: 1. Proxy Statement filed in connection with Annual Meeting of Shareholders to be held May 10, 1994 (incorporated in Part III). PART I Item 1. Business. Arrow Electronics, Inc. (the "company") is the world's largest distributor of electronic components and computer products to industrial and commercial customers. The company's electronics distribution networks, spanning North America, Europe, and the Pacific Rim, incorporate over 150 selling locations, ten primary distribution centers (four of which employ advanced automation), and 4,000 remote on-line terminals--all serving the needs of a diversified base of original equipment manufacturers (OEMs) and commercial customers worldwide. OEMs include manufacturers of computer and office products, industrial equipment (including machine tools, factory automation, and robotic equipment), telecommunications products, aircraft and aerospace equipment, and scientific and medical devices. Commercial customers are mainly value-added resellers (VARs) of computer systems. In 1993, the company acquired an additional 15% share in Spoerle Electronic, the largest electronics distributor in Germany, increasing its holdings to a majority interest. The company also acquired Zeus Components, Inc. a distributor of high-reliability electronic components and value-added services, Microprocessor & Memory Distribution Limited, a focused U.K. distributor of high- technology semiconductor products, and Components Agent Limited, one of the largest distributors in Hong Kong. In addition, in 1993 the company acquired Amitron S.A. and ATD Electronica S.A., distributors serving the Spanish and Portuguese markets, and CCI Electronique, a distributor serving the French marketplace. On February 28, 1992, the company acquired the electronics distribution businesses of Lex Service PLC ("Lex") in the U.K. and France (the "European businesses"), and Spoerle acquired the electronics distribution business of Lex in Germany. On September 27, 1991, the company acquired Lex Electronics Inc. and Almac Electronics Corporation, the North American electronics distribution businesses of Lex (the "North American businesses"), the third largest electronics distribution business in the United States. Early in 1994, the company acquired an additional 15% interest in Spoerle, bringing its holdings to 70%, and increased its holdings in Silverstar, the company's Italian affiliate, to a majority share. Additionally, the company acquired the electronic component distribution business of Field Oy, the largest distributor of electronic components in Finland, and TH:s Elektronik, a leading distributor in Sweden and Norway. For information with respect to these acquisitions, the company's results of operations, and other matters, see Item 6 (Selected Financial Data), Item 7 (Management's Discussion and Analysis of Financial Condition and Results of Operations), and Item 8 (Financial Statements) appearing elsewhere in this Annual Report. In North America, the company is organized into four product- specific sales and marketing groups: The Arrow/Schweber Electronics Group is the largest dedicated semiconductor distributor in the -2- world. Zeus Electronics is the only specialist distributor serving the military and high-reliability markets. Capstone Electronics focuses exclusively on the distribution of connectors, electromechanical, and passive components. And Arrow's Commercial Systems Group distributes commercial computer products and systems. Through its wholly-owned subsidiary, Arrow Electronics Distribution Group - Europe B. V., Arrow is the largest pan-European electronics distributor. The company's European strategy stresses two key elements: strong, locally-managed distributors to satisfy widely varying customer preferences and business practices; and an electronic backbone uniting Arrow's European partners with one another and with Arrow worldwide to leverage inventory investment and better meet the needs of customers in all of Europe's leading industrial electronics markets. In most of these markets, Arrow companies hold the number one position: Arrow Electronics (UK) Ltd. in Britain; Spoerle Electronic in Central Europe; Silverstar Ltd. S.p.A. in Italy; and Amitron-Arrow and ATD Electronica S.A. in Spain and Portugal. Arrow Electronique is the fourth largest electronics distributor in France, and Arrow's Nordic companies, Field Oy and TH:s Elektronik, are among the largest distributors in the markets of Finland, Norway, and Sweden. Arrow is the first American electronics distributor to be present in the Pacific Rim market. Arrow's Components Agent Limited (C.A.L.), headquartered in Hong Kong, is the region's leading multinational distributor, maintaining seven additional facilities in key cities in Singapore, Malaysia, the People's Republic of China, and South Korea; an additional Arrow company serves India. Within these dynamic markets, Arrow is benefiting from two important growth factors: the decision by many of Arrow's traditional North American customers to locate production facilities in the region and the surging demand for electronic products resulting from rising living standards and massive investments in infrastructure. The company distributes a broad range of electronic components, computer products, and related equipment manufactured by others. About 66% of the company's consolidated sales are of semiconductor products; industrial and commercial computer products, including microcomputer boards and systems, design systems, desktop computer systems, terminals, printers, disc drives, controllers, and communication control equipment account for about 24%; and the remaining 10% of sales are of passive, electromechanical, and connector products, principally capacitors, resistors, potentiometers, power supplies, relays, switches and connectors. Worldwide, the company maintains a $435 million inventory of more than 300,000 different electronic components and computer products at the company's primary distribution centers. Most manufacturers of electronic components and computer products rely on independent authorized distributors such as the company to augment their product marketing operations. As a stocking, marketing and financial intermediary, the distributor relieves its manufacturers of a portion of the costs and personnel associated with stocking and selling their products (including otherwise sizable investments in finished goods inventories and -3- accounts receivable), while providing geographically dispersed selling, order processing, and delivery capabilities. At the same time, the distributor offers a broad range of customers the convenience of diverse inventories and rapid or scheduled deliveries. The growth of the electronics distribution industry has been fostered by the many manufacturers who recognize their authorized distributors as essential extensions of their marketing organizations. The company and its affiliates serve approximately 125,000 industrial and commercial customers in North America, Europe, and the Pacific Rim. Industrial customers range from major original equipment manufacturers to small engineering firms, while commercial customers include value-added resellers, small systems integrators, and large end-users. Most of the company's customers require delivery of the products they have ordered on schedules that are generally not available on direct purchases from manufacturers, and frequently their orders are of insufficient size to be placed directly with manufacturers. No single customer accounted for more than 2% of the company's 1993 sales. The electronic components and other products offered by the company are sold by field sales representatives, who regularly call on customers in assigned market areas, and by telephone from the company's selling locations, from which inside sales personnel with access to pricing and stocking data provided by computer display terminals accept and process orders. Each of the company's North American selling locations, warehouses, and primary distribution centers is electronically linked to the business' central computer, which provides fully integrated, on-line, real-time data with respect to nationwide inventory levels and facilitates control of purchasing, shipping, and billing. The company's foreign operations utilize Arrow's Worldwide Stock Check System, which affords access to the company's on-line, real-time inventory system. Sales are managed and coordinated by regional sales managers and by product managers principally located at the company's headquarters in Melville, New York. Of the approximately 200 manufacturers whose products are sold by the company, the ten largest accounted for about 57% of the business' purchases during 1993. Intel Corporation accounted for approximately 18% of the business' purchases because of the market demand for microprocessors. No other supplier accounted for more than 9% of 1993 purchases. The company does not regard any one supplier of products to be essential to its operations and believes that many of the products presently sold by the company are available from other sources at competitive prices. Most of the company's purchases are pursuant to authorized distributor agreements which are typically cancelable by either party at any time or on short notice. Approximately 62% of the company's inventory consists of semiconductors. It is the policy of most manufacturers to protect authorized distributors, such as the company, against the potential write-down of such inventories due to technological change or manufacturers' price reductions. Under the terms of the related distributor agreements, and assuming the distributor complies with -4- certain conditions, such suppliers are required to credit the distributor for inventory losses incurred through reductions in manufacturers' list prices of the items. In addition, under the terms of many such agreements, the distributor has the right to return to the manufacturer for credit a defined portion of those inventory items purchased within a designated period of time. A manufacturer who elects to terminate a distributor agreement is generally required to purchase from the distributor the total amount of its products carried in inventory. While these industry practices do not wholly protect the company from inventory losses, management believes that they currently provide substantial protection from such losses. The company's business is extremely competitive, particularly with respect to prices, franchises, and, in certain instances, product availability. The company competes with several other large multinational, national, and numerous regional and local, distributors. As the world's largest electronics distributor, the company is greater in terms of financial resources and sales than most of its competitors. The company and its affiliates employ approximately 4,600 people worldwide. Executive Officers The following table sets forth the names and ages of, and the positions and offices with the company held by, each of the executive officers of the company. Name Age Position or Office Held John C. Waddell 56 Chairman of the Board Stephen P. Kaufman 52 President and Chief Executive Officer Robert E. Klatell 48 Senior Vice President, Chief Financial Officer, General Counsel, Secretary, and Treasurer Carlo Giersch 56 President and Chief Executive Officer of Spoerle Electronic Robert J. McInerney 48 Vice President; President, Commercial Systems Group Steven W. Menefee 49 Vice President; President, Arrow/Schweber Electronics Group Wesley S. Sagawa 46 Vice President; President, Capstone Electronics Corp. Jan Salsgiver 37 Vice President; President, Zeus Electronics Set forth below is a brief account of the business experience during the past five years of each executive officer of the company. John C. Waddell has been Chairman of the Board of the company for more than five years. Stephen P. Kaufman has been President and Chief Executive Officer of the company for more than five years. -5- Robert E. Klatell has been Senior Vice President and has served as General Counsel and Secretary of the company for more than five years. He has been Chief Financial Officer since January 1992 and Treasurer of the company since October 1990. Carlo Giersch has been President and Chief Executive Officer of Spoerle Electronic for more than five years. Robert J. McInerney has been a Vice President of the company for more than 5 years and President of the company's Commercial Systems Group since April 1989. Steven W. Menefee has been a Vice President of the company and President of the company's Arrow/Schweber Electronics Group since November 1990. For more than five years prior thereto, he was a Vice President of Avnet, Inc., principally an electronics distributor, and an executive of Avnet's Electronic Marketing Group. Wesley S. Sagawa has been a Vice President of the company for more than 5 years and President of Capstone Electronics Corp., the company's subsidiary which markets passive, electromechanical, and connector products, since January 1990. Jan Salsgiver has been a Vice President of the company since September 1993 and President of the company's Zeus Electronics since July 1993. For more than five years prior thereto, she held a variety of senior marketing positions in the company, the most recent of which was Vice President, Semiconductor Marketing of the Arrow/Schweber Electronics Group. Item 2. Properties. The company's executive office, located in Melville, New York, is owned by the company. The company occupies additional locations under leases due to expire on various dates to 2016. One additional facility is owned by the company, and another two facilities have been sold and leased back in connection with the financing thereof. Item 3. Legal Proceedings. Through a wholly-owned subsidiary, Schuylkill Metals Corporation, the company was previously engaged in the refining and selling of lead. In September 1988, the company sold its refining business. In mid-1986 the refining business ceased operations at its battery breaking facility in Plant City, Florida, which facility had been placed on the list of hazardous waste sites targeted for cleanup under the federal Super Fund Program. The Plant City site was not sold to the purchaser of the refining business, and the company remains subject to various environmental cleanup obligations at the site under federal and state law. During 1991, the company engaged in settlement negotiations with the EPA, resulting in the execution of a consent decree defining those obligations which was entered by a federal court in Florida and became effective on April 22, 1992. The consent decree requires the company to fund and implement remedial design and remedial action activity addressing environmental impacts to site soils and sediment, underlying ground -6- water, and wetland areas. The company, through its technical contractors, has begun implementation of these requirements. Between January 1, 1993 and the date of this report, a substantial amount of the work necessary to prepare the site for the planned remediation activities was completed, the plans for the treatment and discharge of ground water contemplated by the consent decree were finalized, the plans for the remediation and mitigation of the wetland areas were finalized and approved in principle by the relevant agencies, and the company began the bid process for certain of the contracts relating to the performance of the remediation activities (including a previously-agreed upon plan for treating soils and sediment). Such activities are expected to commence in mid-1994 and the company believes that a substantial part of such activities will be completed over the next three years. The extent of such remediation activities (including the estimated cost thereof and the time necessary to complete them) is subject to change based upon conditions actually encountered during remediation, and the EPA reserves the right to seek additional action if it subsequently finds further contamination or other conditions rendering the work insufficiently protective of human health or the environment. The company believes that the amount expected to be expended in any year to fund such activities will not have a material adverse impact on the company's liquidity, capital resources or results of operations. Item 4. Submission of Matters to a Vote of Security Holders. None. PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters. Market Information The company's common stock is listed on the New York Stock Exchange (trading symbol: "ARW"). The high and low sales prices during each quarter of 1993 and 1992 were as follows: Year High Low 1993: Fourth Quarter $42-1/4 $33-5/8 Third Quarter 43-1/8 34-5/8 Second Quarter 36-1/4 29-3/4 First Quarter 34-3/8 26-1/2 1992: Fourth Quarter $30-1/2 $22-1/8 Third Quarter 22-3/4 18-1/2 Second Quarter 19-1/2 15-1/8 First Quarter 18-1/2 14-3/8 Holders On March 9, 1994, there were approximately 4,000 shareholders of record of the company's common stock. -7- Dividend History and Restrictions The company has not paid cash dividends on its common stock during the past two years. While it is the intention of the Board of Directors to consider the payment of dividends on the common stock from time to time, the declaration of future dividends will be dependent upon the company's earnings, financial condition, and other relevant factors. The terms of the company's U.S. credit agreement, senior notes, and certain foreign debt (see Note 4 of the Notes to Consolidated Financial Statements) restrict the payment of cash dividends, limit long-term debt and short-term borrowings, and require that the ratio of earnings to interest expense, ratio of operating cash flow to interest expense, working capital, and net worth be maintained at certain designated levels. -8- Item 6. Selected Financial Data. The following table sets forth certain selected consolidated financial data and should be read in conjunction with the company's consolidated financial statements and related notes appearing elsewhere in this Annual Report. SELECTED FINANCIAL DATA (In thousands except per share data)
For the year: 1993(a) 1992 1991(b) 1990 1989 Sales $2,535,584 $1,621,535 $1,043,654 $970,944 $925,207 Operating income 181,542 103,781 34,399(c) 32,682 27,557 Equity in earnings of affiliated companies 1,673 6,550 5,657 6,395 5,466 Interest expense 24,987 30,061 29,145 28,972 29,809 Earnings before extraordinary charges 81,559 50,244 8,685 10,105 3,214 Extraordinary charges, net of income taxes - 5,424 - - - Net income $ 81,559 $ 44,820 $ 8,685 $ 10,105 $ 3,214 Per common share: Earnings (loss) before extraordinary charges(d) $ 2.62 $ 1.81 $ .28 $ .44 $ (.19) Extraordinary charges - (.21) - - - Net income (loss)(d) $ 2.62 $ 1.60 $ .28 $ .44 $ (.19) At year-end: Accounts receivable and inventories $ 798,037 $ 539,476 $ 506,496 $ 322,916 $333,578 Total assets 1,191,304 780,893 745,379 478,045 483,528 Long-term debt, including current portion 159,024 101,146 218,787 104,937 109,017 Subordinated debentures, including current portion 125,000 125,000 105,965 107,300 108,326 Total long-term debt and subordinated debentures 284,024 226,146 324,752 212,237 217,343 Shareholders' equity 457,015 351,220 225,836 151,172 149,977 (a) Includes results of Spoerle Electronic, which was accounted for under the equity method prior to January 1993 when Arrow increased its holdings to a majority interest (see Note 2 of the Notes to Consolidated Financial Statements). (b) Reflects the acquisition in September 1991 of the North American electronics distribution businesses of Lex Service PLC (see Note 2 of the Notes to Consolidated Financial Statements). (c) Includes special charges of $9.8 million reflecting expenses associated with the integration of the businesses acquired from Lex Service PLC. (d) After preferred stock dividends of $.9 million in 1993, $3.9 million in 1992, $4.6 million in 1991, $4.9 million in 1990, and $5.4 million in 1989.
-9- Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. For an understanding of the significant factors that influenced the company's performance during the past three years, the following discussion should be read in conjunction with the consolidated financial statements and other information appearing elsewhere in this report. Included in the 1993 consolidated results is Spoerle Electronic, which had been accounted for under the equity method prior to January 1993 when the company acquired an additional 15% share, increasing its holdings to a majority interest. The 1993 consolidated results also include the acquired businesses of Zeus Components, Inc., a distributor of high- reliability electronic components and value-added services, Microprocessor & Memory Distribution Limited, a focused U.K. distributor of high- technology semiconductor products, and Components Agent Limited, one of the largest distributors in Hong Kong. In addition, the 1993 results include Amitron-Arrow S.A. and ATD Electronica S.A., distributors serving the Spanish and Portuguese markets, and CCI Electronique, a distributor serving the French marketplace. On February 28, 1992, the company acquired the electronics distribution businesses of Lex Service PLC ("Lex") in the U.K. and France (the "European businesses"), and Spoerle Electronic acquired the electronics distribution business of Lex in Germany. On September 27, 1991, the company acquired Lex Electronics Inc. and Almac Electronics Corporation, the North American electronics distribution businesses of Lex (the "North American businesses"), the third largest electronics distribution business in the United States. See Note 2 of the Notes to Consolidated Financial Statements for information with respect to the 1993 and 1992 acquisitions and the pro forma effect of these transactions on the company's statement of operations. Sales In 1993, consolidated sales of $2.5 billion were 56% ahead of the 1992 sales of $1.6 billion. Excluding Spoerle, sales were $2.2 billion, an advance of 34% over the year-earlier period. This sales growth was principally due to increased activity levels in each of the company's distribution groups and, to a lesser extent, acquisitions in North America, Europe, and the Pacific Rim, offset in part by weaker currencies in Europe. Consolidated sales of $1.6 billion in 1992 were 55% higher than 1991 sales of $1 billion. This increase principally reflects the acquisitions of the North American and European businesses in September 1991 and February 1992, respectively, and increased North American sales. In 1991, consolidated sales of $1 billion were 7.5% higher than 1990 sales of $971 million. The increase in sales primarily reflects the inclusion of the North American businesses during the fourth quarter of 1991, which more than offset the 5% decrease in sales for the nine months ended September 30, 1991 principally resulting from declining sales of commercial computer products and related systems owing to soft market conditions. -10- Operating Income In 1993, the company's consolidated operating income increased to $181.5 million, compared with 1992 operating income of $103.8 million. The significant improvement in operating income reflects the impact of increased sales and the consolidation of Spoerle, offset in part by lower gross profit margins primarily reflecting proportionately higher sales of low-margin microprocessors. Excluding Spoerle, operating income was $146.2 million in 1993, and operating expenses as a percentage of sales were 12.4%, the lowest in the company's history. The company's 1992 consolidated operating income increased to $103.8 million, compared with operating income of $34.4 million in 1991. Operating income in 1991 included the recognition of approximately $9.8 million of costs associated with the integration of the North American businesses. The significant improvement in operating income in 1992 primarily reflected the impact of the company's acquisition of the North American businesses, improved gross profit margins reflecting a product mix now more heavily weighted to semiconductor products, and improved North American sales. The rapid and successful integration of the North American businesses resulted in the realization of sizable economies of scale which, when combined with increased sales, enabled the company to reduce operating expenses as a percentage of sales from 17.6% in 1991 to 14.7% in 1992, the then lowest level in the company's history. Such economies of scale principally resulted from reductions in personnel performing duplicative functions and the elimination of duplicative administrative facilities, selling and stocking locations, and computer and telecommunications equipment. In 1991, the company's consolidated operating income increased to $34.4 million, an advance of 5% over 1990. This improvement was principally the result of increased sales and reduced operating expenses as a percentage of sales in the fourth quarter of 1991. The improved fourth quarter operating results, combined with lower operating expenses through September 1991, more than offset the special charge of $9.8 million reflecting integration expenses associated with the North American businesses, the effect of a 5% decrease in sales through September 1991, and a decrease in the company's gross profit margin as a result of competitive pricing pressures in the commercial computer products and related systems markets. Interest In 1993, interest expense decreased to $25 million from $30.1 million in 1992. The decrease principally reflects the full-year effect of the retirement during 1992 of $46 million of the company's 13-3/4% subordinated debentures and the refinancing of the company's remaining high-yield debt with securities bearing lower interest rates, offset in part by the consolidation of Spoerle and borrowings associated with acquisitions. Interest expense of $30.1 million in 1992 increased by $.9 million from the 1991 level, reflecting the company's borrowings to finance the cash portion of the purchase price of the North American and European businesses, to pay fees and expenses relating to the acquisitions, to refinance existing credit facilities of the company, and to provide the company with working capital. Such increased borrowings were partially -11- offset by the company's redemption in May of $46 million of its 13-3/4% subordinated debentures with the proceeds from the public offering of 4.7 million shares of common stock and lower effective interest rates. In 1991, interest expense of $29.1 million increased $.1 million from 1990's level as the financing expense for the purchase of the North American businesses offset lower interest rates and reduced borrowings resulting from operating cash flow and improvements in asset management. Income Taxes In 1993, the company's effective tax rate was 40.7% compared with 37.4% in 1992. The higher effective tax rate reflects increased U.S. taxes as a result of higher statutory rates and the consolidation of Spoerle. The company recorded a provision for taxes at an effective tax rate of 37.4% in 1992 compared with 20.4% in 1991. The higher effective tax rate reflects the depletion of the company's remaining $5.8 million U.S. net operating loss carryforwards in 1991. The company's effective tax rate in 1991 was 20.4%, principally as a result of the utilization of the remaining $5.8 million of U.S. net operating loss carryforwards. Net Income Net income in 1993 was $81.6 million, an advance from $44.8 million in 1992 (after giving effect to extraordinary charges of 5.4 million reflecting the net unamortized discount and issuance expenses associated with the redemption of high-coupon subordinated debentures and other debt in 1992). The increase in net income is due principally to the increase in operating income and lower interest expense offset in part by higher taxes. The company recorded net income of $50.2 million in 1992, before extraordinary charges aggregating $5.4 million, compared with net income of $8.7 million in 1991. Including these charges, net income in 1992 was $44.8 million. Included in 1991's results was a special charge of $9.8 million ($6.5 million after taxes) associated with the integration of the acquired businesses. The improvement in net income was principally the result of the increase in operating income offset in part by the higher provision for income taxes. The company's net income in 1991 of $8.7 million decreased 14% from $10.1 million in 1990. The decrease in net income was principally the result of the $9.8 million special charge ($6.5 million after taxes) reflecting integration expenses associated with the North American businesses and the provision for income taxes. Excluding the special charge, net income was $15.2 million, an increase of 50% over 1990. Net income also included the company's equity in earnings of affiliated companies of $1.7 million in 1993, $6.6 million in 1992, and $5.7 million in 1991. The decrease in the company's equity in earnings of affiliated companies in 1993 was due to the consolidation of Spoerle. -12- In 1993, the earnings of Silverstar, the company's Italian affiliate, advanced as a result of significant sales growth offset in part by a weaker lira. The increase in the company's equity in earnings of affiliated companies in 1992 was the result of Silverstar's profitability. The decrease in 1991 was the result of lower earnings in Germany and a loss in Italy. Liquidity and Capital Resources The company maintains a high level of current assets, primarily accounts receivable and inventories. Consolidated current assets as a percentage of total assets were 73% in 1993 and 70% in 1992. Working capital increased in 1993 by $160 million, or 43%, compared with 1992, as a result of increased sales, the consolidation of Spoerle, and acquisitions. Working capital increased by $42 million in 1992, as a result of the acquisition of the European businesses and increased sales. The net amount of cash provided by operations in 1993 was $41.7 million, the principal element of which was the cash flow resulting from higher net earnings offset by increased working capital needs to support sales growth. The net amount of cash used by the company for investing activities in 1993 amounted to $111.7 million, including $87.9 million for various acquisitions. Cash flows from financing activities were $100.3 million, principally resulting from increased borrowings to finance the 1993 acquisitions in the U.S., Europe, and the Pacific Rim (see Notes 2 and 4 of the Notes to Consolidated Financial Statements for additional information regarding these acquisitions). In September 1993, the company completed the conversion of all of its outstanding series B $19.375 convertible exchangeable preferred stock, into 1,009,086 shares of its common stock. This conversion eliminated the company's obligation to pay $1.3 million of annual dividends. The net amount of cash provided by operating activities in 1992 was $71.5 million, attributable primarily to the higher net earnings of the company. The net amount of cash used by the company for investing activi- ties in 1992 amounted to $45.8 million, including $37.2 million for the acquisition of the European businesses. The aggregate cost of the company's acquisition of the electronics distribution businesses of Lex in the U.K. and France, and Spoerle's acquisition of the Lex electronics distribution business in Germany, was $52 million, of which $32 million was paid in cash and $20 million was paid in the form of a senior subordinated note due in June 1997. The company financed the cash portion of the purchase price through the sale of 66,196 shares of newly-created series B preferred stock and U.K. bank borrowings. In addition, a portion of the proceeds from the company's public offering of common stock and the issuance of the 5-3/4% convertible subordinated debentures was used to repay the senior subordinated note. The German business was purchased by Spoerle for cash (see Notes 2, 4, and 6 of the Notes to Consolidated Financial Statements for additional information regarding these acquisitions). The net amount of cash used for financing activities in 1992 was $23.9 million, principally reflecting the redemption of high-yield -13- subordinated debentures, repayment of long-term debt, and the payment of preferred stock dividends and financing fees, offset by the public offering of 4,703,500 shares of common stock and the 5-3/4% convertible subordinated debentures, the issuance of the senior secured notes, and U.K. bank borrowings. In September 1992, the company completed the conversion of all of its outstanding depositary shares, each representing one-tenth share of its $19.375 convertible exchangeable preferred stock, into 3,615,056 shares of its common stock. This conversion eliminated the company's obligation to pay $4.6 million of annual dividends relating to the depositary shares. Early in 1994, the company purchased an additional 15% share in Spoerle for approximately $23 million in cash. The company financed the acquisition through its U.S. credit agreement and German bank borrowings. Additionally, the company increased its holdings in Silverstar to a majority share and acquired the electronic component distribution business of Field Oy, the largest distributor of electronic components in Finland, and TH:s Elektronik, a leading distributor in Sweden and Norway. -14- Item 8. Financial Statements. REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS The Board of Directors and Shareholders Arrow Electronics, Inc. We have audited the accompanying consolidated balance sheet of Arrow Electronics, Inc. as of December 31, 1993 and 1992, and the related consolidated statements of operations, cash flows, and shareholders' equity for each of the three years in the period ended December 31, 1993. Our audits also included the financial statement schedules listed in the Index at Item 14(a). These financial statements and schedules are the responsibility of the company's management. Our responsibility is to express an opinion on these financial state- ments and schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Arrow Electronics, Inc. at December 31, 1993 and 1992, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1993, in conformity with generally accepted accounting princi- ples. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein. ERNST & YOUNG New York, New York February 24, 1994 -15- ARROW ELECTRONICS, INC. CONSOLIDATED BALANCE SHEET (Dollars in thousands) ASSETS
December 31, 1993 1992 Current assets: Cash and short-term investments................................... $ 60,730 $ 3,393 Accounts receivable, less allowance for doubtful accounts ($16,491 in 1993 and $8,268 in 1992)................... 363,084 240,740 Inventories....................................................... 434,953 298,736 Prepaid expenses and other assets................................. 10,841 5,890 Total current assets................................................ 869,608 548,759 Property, plant and equipment at cost Land.............................................................. 5,700 4,634 Buildings and improvements........................................ 33,709 27,745 Machinery and equipment........................................... 55,148 35,353 94,557 67,732 Less accumulated depreciation and amortization.................... 38,606 31,950 55,951 35,782 Investments in affiliated companies................................. 13,371 64,893 Cost in excess of net assets of companies acquired, less accumulated amortization ($13,514 in 1993 and $8,421 in 1992)................................................... 199,383 97,695 Other assets........................................................ 52,991 33,764 $1,191,304 $780,893 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable.................................................. $ 190,013 $120,995 Accrued expenses.................................................. 104,146 56,730 Accrued interest.................................................. 5,421 1,253 Short-term borrowings, including current maturities of long-term debt.................................................. 40,965 713 Total current liabilities........................................... 340,545 179,691 Long-term debt...................................................... 153,828 100,433 Deferred income taxes and other liabilities......................... 43,457 24,549 Subordinated debentures............................................. 125,000 125,000 Minority interest................................................... 71,459 - Shareholders' equity: Preferred stock, par value $1: Authorized--2,000,000 shares Issued--66,196 shares in 1992, $19.375 convertible exchangeable preferred stock.............. - 66 Common stock, par value $1: Authorized--60,000,000 shares Issued--31,298,335 shares in 1993 and 29,296,457 shares in 1992 31,298 29,296 Capital in excess of par value.................................... 310,203 285,510 Retained earnings................................................. 124,689 44,010 Foreign currency translation adjustment........................... (7,492) (6,518) 458,698 352,364 Less: Treasury shares (10,872 in 1993 and 14,222 in 1992) at cost 12 19 Unamortized employee stock awards........................... 1,671 1,125 Total shareholders' equity.......................................... 457,015 351,220 $1,191,304 $780,893
See accompanying notes. -16- ARROW ELECTRONICS, INC. CONSOLIDATED STATEMENT OF OPERATIONS (In thousands except per share data)
Years Ended December 31, 1993 1992 1991 Sales..............................................$2,535,584 $1,621,535 $1,043,654 Costs and expenses: Cost of products sold............................ 2,022,253 1,279,646 825,709 Selling, general and administrative expenses..... 314,323 225,835 174,094 Depreciation and amortization.................... 17,466 12,273 9,452 2,354,042 1,517,754 1,009,255 Operating income................................... 181,542 103,781 34,399 Equity in earnings of affiliated companies......... 1,673 6,550 5,657 Interest expense................................... 24,987 30,061 29,145 Earnings before income taxes, minority interest and extraordinary charges....................... 158,228 80,270 10,911 Provision for income taxes......................... 64,448 30,026 2,226 Earnings before minority interest and extraordinary charges........................ 93,780 50,244 8,685 Minority interest.................................. 12,221 - - Extraordinary charges.............................. - 5,424 - Net income.........................................$ 81,559 $ 44,820 $ 8,685 Net income used in per common share calculation (reflecting deduction of preferred stock dividends).......................$ 80,679 $ 40,917 $ 4,089 Per common share: Primary: Earnings before extraordinary charges..........$ 2.62 $ 1.81 $ .28 Extraordinary charges.......................... - (.21) - Net income.....................................$ 2.62 $ 1.60 $ .28 Fully diluted: Earnings before extraordinary charges..........$ 2.43 $ 1.73 $ .28 Extraordinary charges.......................... - (.19) - Net income.....................................$ 2.43 $ 1.54 $ .28 Average number of common shares and common share equivalents outstanding: Primary........................................ 30,766 25,547 14,484 Fully diluted.................................. 35,305 29,378 14,484
See accompanying notes. -17- ARROW ELECTRONICS, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (In thousands)
Years Ended December 31, 1993 1992 1991 Cash flows from operating activities: Net income.......................................$ 81,559 $ 44,820 $ 8,685 Adjustments to reconcile net income to net cash provided by (used for) operations: Minority interest in earnings................ 12,221 - - Extraordinary charges........................ - 5,424 - Special integration charge................... - - 9,850 Depreciation and amortization................ 19,898 14,692 12,690 Equity in undistributed earnings of affiliated companies....................... (1,673) 2,551 14 Deferred taxes............................... 4,722 14,100 1,305 Prepaid income taxes......................... - - (3,974) Change in assets and liabilities, net of effects of acquired businesses: Accounts receivable...................... (56,437) (3,276) (3,604) Inventories.............................. (53,079) 8,552 (60) Prepaid expenses and other assets........ 439 137 (159) Accounts payable......................... 28,827 8,133 2,002 Accrued expenses......................... (3,983) (15,737) (11,086) Accrued interest......................... 4,036 (4,594) 174 Other.................................... 5,158 (3,254) (1,719) Net cash provided by operating activities........ 41,688 71,548 14,118 Cash flows from investing activities: Acquisition of property, plant and equipment, net (16,817) (3,451) (3,781) Cash consideration paid for acquired businesses.. (87,875) (37,183) (111,706) Investment in and loans to affiliate............. (7,000) (9,949) - Proceeds from sale of property................... - 4,757 - Net cash used for investing activities...........(111,692) (45,826) (115,487) Cash flows from financing activities: Change in short-term borrowings ................. 16,860 (1,520) (201) Proceeds from long-term debt..................... 61,781 85,533 184,756 Proceeds from common stock offering.............. 17,705 66,394 - Proceeds from issuance of subordinated debentures........................ - 125,000 - Proceeds from preferred stock offering........... - 15,721 - Proceeds from exercise of stock options.......... 3,560 5,737 1,069 Proceeds from minority partners.................. 2,993 - - Repayment of long-term debt and subordinated debentures..................................... (694) (311,656) (72,121) Dividends paid................................... (880) (4,609) (4,596) Financing fees paid.............................. (1,041) (4,467) (6,859) Net cash provided by (used for) financing activities........................... 100,284 (23,867) 102,048 Net increase in cash and short-term investments........................... 30,280 1,855 679 Cash and short-term investments at beginning of year................................ 3,393 1,538 859 Cash and short-term investments from affiliate at beginning of year............................. 27,057 - - Cash and short-term investments at end of year.....$ 60,730 $ 3,393 $ 1,538 Supplemental disclosures of cash flow information: Cash paid during the year for: Income taxes...................................$ 44,114 $ 7,809 $ 3,532 Interest....................................... 19,835 31,461 26,872
See accompanying notes. -18- ARROW ELECTRONICS,INC. CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (In thousands)
Preferred Common Capital Foreign Unamortized Stock Stock in Excess Retained Currency Employee at Par at Par of Par Earnings Translation Treasury Stock Value Value Value (Deficit) Adjustment Shares Awards Total Balance at December 31, 1990 $237 $11,962 $136,624 $ (290) $ 3,614 $ (81) $ (894) $151,172 Issuance of common stock for acquisitions - 7,765 62,116 - - - - 69,881 Exercise of stock options - 182 821 - - 66 - 1,069 Restricted stock awards, net - 11 119 - - (3) (127) - Amortization of employee stock awards - - - - - - 388 388 Net income - - - 8,685 - - - 8,685 Preferred stock cash dividends - - - (4,596) - - - (4,596) Translation adjustments - - - - (763) - - (763) Balance at December 31, 1991 237 19,920 199,680 3,799 2,851 (18) (633) 225,836 Issuance of common stock - 4,704 61,690 - - - - 66,394 Issuance of preferred stock 66 - 15,655 - - - - 15,721 Conversion of preferred stock (237) 3,615 (3,698) - - - - (320) Exercise of stock options - 973 4,753 - - 11 - 5,737 Tax benefits related to exercise of stock options - - 6,615 - - - - 6,615 Restricted stock awards, net - 84 920 - - (12) (992) - Amortization of employee stock awards - - - - - - 500 500 Net income - - - 44,820 - - - 44,820 Preferred stock cash dividends - - - (4,609) - - - (4,609) Translation adjustments - - - - (9,369) - - (9,369) Other - - (105) - - - - (105) Balance at December 31, 1992 66 29,296 285,510 44,010 (6,518) (19) (1,125) 351,220 Issuance of common stock - 562 17,143 - - - - 17,705 Conversion of preferred stock (66) 1,009 (991) - - - - (48) Exercise of stock options - 383 3,164 - - 13 - 3,560 Tax benefits related to exercise of stock options - - 4,142 - - - - 4,142 Restricted stock awards, net - 48 1,235 - - (6) (1,277) - Amortization of employee stock awards - - - - - - 731 731 Net income - - - 81,559 - - - 81,559 Preferred stock cash dividends - - - (880) - - - (880) Translation adjustments - - - - (974) - - (974) Balance at December 31, 1993 $ - $31,298 $310,203 $124,689 $(7,492) $(12) $(1,671) $457,015
See accompanying notes. -19- ARROW ELECTRONICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1993, 1992, AND 1991 1. Summary of Significant Accounting Policies Principles of Consolidation The financial statements include the accounts of the company and its consolidated subsidiaries. The company's investments in its affiliated companies which are not majority-owned are accounted for using the equity method. All significant intercompany transactions are eliminat- ed. Basis of Presentation Certain prior year amounts have been reclassified to conform to the current year's presentation. Inventories Inventories are stated at the lower of cost or market. Cost is deter- mined on the first-in, first-out (FIFO) method. Property and Depreciation Depreciation is computed on the straight-line method for financial reporting purposes and on accelerated methods for tax reporting purpos- es. Leasehold improvements are amortized over the shorter of the term of the related lease or the life of the improvement. Cost in Excess of Net Assets of Companies Acquired The cost in excess of net assets of companies acquired is being amor- tized on a straight-line basis, principally over 40 years. Foreign Currency The assets and liabilities of foreign operations are translated at the exchange rates in effect at the balance sheet date, with the related translation gains or losses reported as a separate component of share- holders' equity. The results of foreign operations are translated at the weighted average exchange rates for the year. Gains or losses resulting from foreign currency transactions, other than transactions used to hedge the value of foreign investments, are included in the statement of operations. -20- ARROW ELECTRONICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED Income Taxes Effective January 1, 1991, the company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"), which requires that the accounting for income taxes be on the liability method. Deferred taxes reflect the tax consequences on future years of differences between the tax bases of assets and liabilities and their financial reporting amounts. Net Income Per Common Share Net income per common share is computed after deducting preferred stock dividends and is based upon the weighted average number of shares of common stock and common stock equivalents outstanding. The average number of common stock equivalents was 631,973, 885,137, and 552,128 for 1993, 1992, and 1991, respectively. Net income per common share on a fully diluted basis assumes that the convertible exchangeable preferred shares and the convertible subordi- nated debentures were converted to common stock at either the beginning of each period or the date of issuance. The dividends related to the convertible exchangeable preferred stock and the interest expense on the 5-3/4% convertible subordinated debentures, net of taxes, are eliminat- ed. The 9% convertible subordinated debentures are not assumed to be converted into common stock in 1992 as they would have been antidilutive. For 1991, the aforementioned adjustments were not required as they would have been antidilutive. Cash and Short-term Investments Short-term investments which have a maturity of ninety days or less at time of purchase are considered cash equivalents in the statement of cash flows. The carrying amount reported in the balance sheet for cash and short-term investments approximates its fair value. 2. Acquisitions of Electronics Distribution Businesses In January 1993, the company acquired an additional 15% share, for approximately $25,145,000, in Spoerle Electronic Handelsgessellschaft mbH and Co. and its general partner, Spoerle GmbH (collectively, "Spoerle") the largest distributor of electronic components in Germany, increasing its holdings to a 55% majority interest. In May 1993, the company acquired the high-reliability electronic component distribution and value-added service businesses of Zeus Components, Inc. ("Zeus"). In June 1993, the company acquired Microprocessor & Memory Distribution Limited ("MMD"), a U.K.-based electronics distributor which focuses on the distribution of high-technology semiconductor products. In August 1993, the company acquired Components Agent Limited, one of the largest electronics distributors in Hong Kong. During the third quarter of 1993 the company acquired a majority interest in Amitron S.A. and the ATD Group, electronics distributors serving the Spanish and Portuguese markets. In November 1993, the company augmented its French operations by acquiring CCI Electronique. The aggregate cost of the acquisitions was $87,875,000, including $4,757,000 for non-competition agreements. Each acquisition was accounted for as a purchase transaction beginning in the month of acquisition. -21- ARROW ELECTRONICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED The following summarizes the allocation of the aggregate consider- ation paid for the aforementioned acquisitions, except Spoerle, to the fair market value of the assets acquired and liabilities assumed by the company (in thousands): Current assets: Accounts receivable ..................$48,010 Inventories........................... 31,726 Other................................. 2,972 $ 82,708 Property, plant and equipment........... 3,876 Cost in excess of net assets of acquired businesses................... 50,797 Other assets............................ 9,113 146,494 Current liabilities: Accounts payable.....................$(30,412) Accrued expenses..................... (35,374) Other................................ (16,789) (82,575) Net consideration paid................. $ 63,919 In February 1992, the company acquired the electronics distribution businesses of Lex Service PLC ("Lex") in the U.K. and France, and Spoerle acquired the electronics distribution business of Lex in Germany. The aggregate cost of the acquisitions was $51,983,000, of which $31,983,000 was paid in cash and $20,000,000 was paid in the form of a 12% senior subordinated note due June 1997. The company financed the cash portion of the purchase price through the sale of 66,196 shares of newly-created series B preferred stock and bank borrowings in the U.K. The German business of Lex was purchased by Spoerle for cash of $14,800,000. The acquisitions of the European businesses of Lex are being accounted for as purchase transactions effective February 28, 1992. The following summarizes the allocation of the consideration paid for the electronics distribution businesses in the U.K. and France to the fair market value of the assets acquired and liabilities assumed by the company (in thousands): Current assets: Accounts receivable.................$ 27,479 Inventories......................... 17,947 Other............................... 1,662 $ 47,088 Property, plant and equipment......... 2,975 Cost in excess of net assets of acquired businesses.................. 21,065 Other assets......................... 3,150 74,278 Current liabilities: Accounts payable.....................$(10,397) Accrued expenses..................... (26,698) (37,095) Net consideration paid............... $ 37,183 -22- ARROW ELECTRONICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED In September 1991, the company acquired the North American electronics distribution businesses of Lex, consisting of Lex Electron- ics Inc. and Almac Electronics Corporation (collectively the "North American businesses"). The aggregate cost of the acquisition was $173,257,000, including $7,292,000 for a five-year non-competition agreement, and payment consisted of $111,706,000 of cash and 6,839,000 shares of the company's common stock valued at $61,551,000. The cash portion of the purchase price was financed under the company's U.S. credit agreement. The acquisition of the North American businesses has been accounted for as a purchase transaction effective September 27, 1991. In October 1991, the company acquired a 50% interest in Silverstar Ltd. S.p.A. ("Silverstar") in exchange for 926,000 shares of common stock valued at $8,330,000. Set forth below is the unaudited pro forma combined summary of operations for the years ended December 31, 1993 and 1992 as though each of the acquisitions had been made on January 1, 1992. 1993 1992 (In thousands except per share data) Sales..................................$2,658,000 $2,182,000 Operating income....................... 185,000 140,000 Earnings before extraordinary charges.. 83,000 51,000 Net income............................. 83,000 45,000 Per common share: Primary: Earnings before extraordinary charges............ 2.63 1.78 Net income......................... 2.63 1.57 Fully diluted: Earnings before extraordinary charges............ 2.44 1.70 Net income......................... 2.44 1.52 Average number of common shares and common share equivalents outstanding: Primary.............................. 30,994 26,109 Fully diluted........................ 35,533 30,045 The unaudited pro forma combined summary of operations has been prepared utilizing the historical financial statements of Arrow and the acquired businesses. The unaudited pro forma combined summary of operations does not reflect all sales attrition which may result from the combination of Zeus and MMD with Arrow's businesses or the sales attrition which may have resulted from the combination of the European businesses. It also does not reflect the full cost savings the company expects to achieve from the combination of the Zeus and MMD businesses with its own. -23- ARROW ELECTRONICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED The 1992 unaudited pro forma combined summary of operations does not reflect the cost savings achieved from the combination of the U.K. business of Lex with its own or any sales attrition which may have resulted from the combination. The cost savings achieved result principally from reductions in personnel performing duplicative functions and the elimination of duplicative administrative facilities, selling and stocking locations, and computer and telecommunications equipment. The unaudited pro forma combined summary of operations does not purport to be indicative of the results which actually would have been obtained if the acquisitions had been made at the beginning of 1992. The unaudited pro forma combined summary of operations includes the effects of the purchase price allocation adjustments, the additional interest expense on debt incurred in connection with the acquisitions as if the debt had been outstanding from the beginning of the periods presented, and the issuance of additional shares of the company's preferred stock. The purchase price allocation adjustments include the adjustment of the net assets acquired to fair market value and the estimated costs associated with the integration of the businesses. Such estimated costs include professional fees as well as real estate lease termination costs, costs associated with the elimination of certain redundant franchised lines, and severance and other expenses related to personnel performing duplicative functions, all of which are associated with facilities and personnel of the acquired businesses. Early in 1994, the company acquired an additional 15% interest in Spoerle, bringing its holdings to 70%, and increased its holdings in Silverstar to a majority share. Silverstar will be consolidated into the company's results in 1994. Additionally, the company acquired the electronic component distribution business of Field Oy, the largest distributor of electronic components in Finland, and TH:s Elektronik, a leading distributor in Sweden and Norway. 3. Investments in Affiliated Companies At December 31, 1993, the company had a 50% interest in Silverstar, the largest distributor of electronic components in Italy. Prior to 1993 when it increased its holdings to a 55% majority interest, the company had a 40% interest in Spoerle. The investment in Silverstar is account- ed for using the equity method as was the investment in Spoerle prior to 1993. For the year ended December 31, 1993, Silverstar recorded net sales of $158,546,000, gross profit of $46,111,000, income before taxes of $8,959,000 and net income of $4,000,000. For the year ended December 31, 1992, Spoerle and Silverstar recorded net sales of $487,179,000, gross profit of $135,200,000, income before income taxes of $32,185,000, and net income of $26,082,000. For the year ended December 31, 1991, Spoerle recorded net sales of $226,890,000, gross profit of $66,038,000, -24- ARROW ELECTRONICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED income before income taxes of $26,748,000, and net income of $20,466,000. Such results are exclusive of interest expense associated with financing the investment and purchase accounting adjustments (including amortization of costs assigned to identifiable assets, principally franchise agreements which are being amortized over 30 years, amortization over 40 years of costs in excess of the company's interest in net assets acquired, and related income taxes). A summary of Silverstar's balance sheet at December 31, 1993 and both affiliates' balance sheets at December 31, 1992, exclusive of the aforementioned adjustments, follows: 1993 1992 (In thousands) Current assets........................... $ 94,624 $194,232 Noncurrent assets........................ 4,854 25,946 Total assets ....................... $ 99,478 $220,178 Current liabilities..................... $ 78,836 $106,912 Noncurrent liabilities.................. 7,822 17,603 Equity.................................. 12,820 95,663 Total liabilities and equity....... $ 99,478 $220,178 The above amounts have been translated from deutsche marks and lira into U.S. dollars based on exchange rates in effect at the end of the respective year or during such year. 4. Long-Term Debt and Subordinated Debentures Long-term debt at December 31, 1993 and 1992 consisted of the following: 1993 1992 (In thousands) 8.29% senior notes due 2000.................... $ 75,000 $ 75,000 U.S. credit agreement due 1998................. 35,000 - Deutsche mark term loan due 2000............... 28,794 15,442 Pound sterling term loan due 1998.............. 18,596 7,573 Other obligations with various interest rates.. 1,634 3,131 159,024 101,146 Less installments due within one year......... 5,196 713 $ 153,828 $100,433 -25- ARROW ELECTRONICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED The senior notes are payable in three equal annual installments commenc- ing in 1998. The senior notes restrict the payment of cash dividends, limit long-term debt and short-term borrowings, and require net worth and the ratio of operating cash flow to interest expense be maintained at certain designated levels. The company's credit agreement with a group of banks (the "U.S. credit agreement") was amended in January 1994 to release all collater- al, to increase to $175,000,000 the amount of loans available, to reduce the borrowing rate, and to extend the maturity date to January 1998. At February 24, 1994, the company had outstanding borrowings of $30,500,000 under the U.S. credit agreement and unused borrowing capacity of $144,500,000. At the company's option, the interest rate for loans under the U.S. credit agreement is at the agent bank's prevailing prime rate (6% at December 31, 1993) or the U.S. dollar London Interbank Offered Rate ("LIBOR") (3.25% at December 31, 1993) plus .75%. The company pays the banks a commitment fee of .25% per annum on the aggregate unused portion of the U.S. credit agreement. The U.S. credit agreement restricts the payment of cash dividends, limits long-term debt and short-term borrowings, and requires that working capital, net worth, and the ratio of earnings to interest expense be maintained at certain designated levels. The company's wholly-owned German subsidiary has a 50,000,000 deutsche mark term loan from a group of German banks. The loan is payable in installments and bears interest at deutsche mark LIBOR (5.9375% at December 31, 1993) plus .75%. The loan is secured by an assignment of the subsidiary's interest in profit distributions from Spoerle and is guaranteed by the company. The obligations of the company under the guarantee are subordinated to the company's obliga- tions under the U.S. credit agreement and the senior notes. In January 1994, in connection with the acquisition of an addi- tional 15% interest in Spoerle, the company borrowed 25,000,000 deutsche marks from the German banks thereby increasing the loan balance to 75,000,000 deutsche marks. The company's wholly-owned U.K. subsidiary has a loan agreement with a British bank which, as amended in June 1993, includes a L8,000,000 term loan, payable in semi-annual installments from 1994 through 1998, and a revolving credit facility which provides for loans of up to L5,000,000. Borrowings under the loan agreement bear interest at sterling LIBOR (5.5% at December 31, 1993) plus 1.5% and are secured by the assets and common stock of the subsidiary. The loan agreement also requires that operating cash flow, as defined, and the ratio of earnings to interest expense be maintained by the subsidiary at certain designated levels. -26- ARROW ELECTRONICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED In April 1992, the company used the net proceeds of its common stock offering to redeem $46,000,000 of its 13-3/4% subordinated debentures and to repay approximately $13,000,000 of the company's 12% senior subordinated note issued to Lex in connection with the acquisi- tion of the European businesses. The redemption of the subordinated debentures resulted in an extraordinary charge of $4,039,000 ($2,424,000 after taxes), reflecting the net unamortized discount and issuance expenses of the subordinated debentures. In November 1992, the company issued $125,000,000 of 5-3/4% convertible subordinated debentures due in 2002. The debentures are convertible at any time prior to maturity, unless previously redeemed, into shares of the company's common stock, at a conversion price of $33.125. The debentures are not redeemable at the option of the company prior to October 1995. The net proceeds from the issuance of the debentures together with the proceeds from the private placement of the senior notes were used to redeem the balance of the 13-3/4% subordinated debentures, the 12% subordinated debentures, and the 9% convertible subordinated debentures, to repay the balance of the 12% senior subordi- nated note issued to Lex, to repay the then existing term loan under the U.S. credit agreement, and to provide the company with general working capital. The redemption of the subordinated debentures and repayment of the term loan resulted in an extraordinary charge of $4,925,000 ($3,000,000 after taxes). The charge resulted from the amortization of the net unamortized discount and issuance expenses. The aggregate annual maturities of long-term debt and subordinated debentures for each of the five years in the period ending December 31, 1998 are: 1994--$5,196,000; 1995--$5,053,000; 1996--$5,056,000; 1997-- $6,943,000; and 1998--$74,151,000. The carrying amounts of the company's U.S. credit agreement and foreign borrowings approximate their fair value. At December 31, 1993, the closing price of the 5-3/4% convertible subordinated debentures on the New York Stock Exchange was 140% of par. The estimated fair market value of the 8.29% senior notes at December 31, 1993 was 106% of par. 5. Income Taxes The provision for income taxes for 1993, 1992, and 1991 consisted of the following: 1993 1992 1991 (In thousands) Current Federal..................... $39,106 $14,080 $ 5,200 State....................... 9,432 3,744 1,000 Foreign..................... 9,376 - - 57,914 17,824 6,200 Deferred Federal..................... 2,760 9,869 (3,974) State....................... 552 2,333 - Foreign..................... 3,222 - - 6,534 12,202 (3,974) $64,448 $30,026 $ 2,226 -27- ARROW ELECTRONICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED The principal causes of the difference between the U.S. statutory and effective income tax rates for 1993, 1992, and 1991 are as follows: 1993 1992 1991 (In thousands) Provision at statutory rate... $55,380 $27,292 $ 3,710 State taxes, net of federal benefit..................... 6,490 4,011 660 Minority interest............. (4,277) - - Foreign tax rate differential 3,448 - - Effect of equity income and foreign loss................ (385) (1,199) (716) Amortization of goodwill...... 1,124 775 513 Other differences............. 2,960 176 208 Tax benefit of loss and credit carryforwards............... (292) (1,029) (2,149) Income tax provision.......... $64,448 $30,026 $ 2,226 For financial reporting purposes in 1993, income before income taxes attributable to the United States and foreign operations was $120,112,000 and $38,116,000, respectively. The significant components of the company's deferred tax assets are as follows: 1993 1992 (In thousands) Inventory reserves............ $ 4,913 $ 8,082 Acquired net operating loss carryforwards............... 2,931 3,662 Other......................... 1,927 1,192 $ 9,771 $12,936 At December 31, 1993, the company had approximately $7,000,000 of acquired U.S. net operating loss carryforwards available for tax return purposes which expire in the years 2001 through 2006. Such carry- forwards are subject to certain annual restrictions on the amount that can be utilized for tax return purposes. In France, the company had approximately $9,500,000 of net operating loss carryforwards, of which approximately $8,900,000 was acquired, which expire through 1997. In accordance with SFAS 109, the cost in excess of net assets of companies acquired has been adjusted by $24,600,000 in conjunction with various acquisitions to reflect the tax benefits of these net operating loss carryforwards and other differences in the tax and book bases of the assets and liabilities acquired. Included in other liabilities are deferred tax liabilities of $11,954,000 and $11,436,000 at December 31, 1993 and 1992, respectively. The deferred tax liabilities are princi- pally the result of the differences in the bases of the German assets and liabilities for tax and financial reporting purposes. -28- ARROW ELECTRONICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 6. Shareholders' Equity The company has 2,000,000 authorized shares of serial preferred stock with a par value of $1. In February 1992, the company issued 66,196 shares of newly-created series B $19.375 convertible exchangeable preferred stock (the "series B preferred stock") for approximately $15,721,000 to provide partial funding for the acquisition of the European electronics distribution businesses of Lex. In September 1993, the company completed the conversion of all of its outstanding series B preferred stock into 1,009,086 shares of its common stock. This conversion eliminated $1.3 million of annual dividends. In 1988, the company paid a dividend of one preferred share purchase right on each outstanding share of common stock. Each right, as amended, entitles a shareholder to purchase one one-hundredth of a share of a new series of preferred stock at an exercise price of $50 (the "exercise price"). The rights are exercisable only if a person or group acquired 20% or more of the company's common stock or announces a tender or exchange offer that will result in such person or group acquiring 30% or more of the company's common stock. Rights owned by the person acquiring such stock or transferees thereof will automatical- ly be void. Each other right will become a right to buy, at the exercise price, that number of shares of common stock having a market value of twice the exercise price. The rights, which do not have voting rights, expire on March 2, 1998 and may be redeemed by the company at a price of $.01 per right at any time until ten days after a 20% ownership position has been acquired. In the event that the company merges with, or transfers 50% or more of its consolidated assets or earning power to, any person or group after the rights become exercisable, holders of the rights may purchase, at the exercise price, a number of shares of common stock of the acquiring entity having a market value equal to twice the exercise price. 7. Employee Stock Plans Restricted Stock Plan Under the terms of the Arrow Electronics, Inc. Restricted Stock Plan (the "Plan"), a maximum of 1,330,000 shares of common stock may be awarded at the discretion of the Board of Directors to key employees of the company. The company believes that as many as 50 employees may be considered for awards under the Plan. Shares awarded under the Plan may not be sold, assigned, trans- ferred, pledged, hypothecated, or otherwise disposed of, except as provided in the Plan. Shares awarded become free of such restrictions over a four-year period. The company awarded 40,000 shares of common stock in early 1994 to 35 key employees in respect of 1993, 49,250 shares of common stock to 35 key employees during 1993 (including 39,750 shares of common stock in early 1993 to 31 key employees in respect of -29- ARROW ELECTRONICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 1992), 84,000 shares of common stock to 32 key employees during 1992 (including 63,000 shares awarded in early 1992 to 30 key employees in respect of 1991), and 11,000 shares of common stock to five key employ- ees during 1991. Forfeitures of shares awarded under the Plan were 7,625, 11,875, and 2,875 during 1993, 1992, and 1991, respectively. The aggregate market value of outstanding awards under the Plan at the respective dates of award is being amortized over a four-year period and the unamortized balance is included in shareholders' equity as unamor- tized employee stock awards. Stock Option Plan Under the terms of the Arrow Electronics, Inc. Stock Option Plan (the "Option Plan"), both nonqualified and incentive stock options were authorized for grant to key employees at prices determined by the Board of Directors in its discretion or, in the case of incentive stock options, prices equal to the fair market value of the shares at the dates of grant. Options currently outstanding have terms of ten years and become exercisable in equal annual installments over two or three- year periods from date of grant. In 1993, the shareholders of the company approved an increase in the number of shares of common stock authorized for stock options to an aggregate of 4,500,000 shares. The following information relates to the Option Plan: Year ended December 31, 1993 1992 1991 Options outstanding at beginning of year...... 989,755 1,532,504 1,503,780 Granted.................. 367,250 473,900 268,550 Exercised................ (392,934) (978,446) (202,225) Forfeited................ (36,337) (38,203) (37,601) Options outstanding at end of year............ 927,734 989,755 1,532,504 Prices per share of options outstanding....$3.63-39.75 $3.63-28.25 $3.63-14.63 Average price per share of options exercised... $9.06 $5.86 $5.29 Average price per share of options outstanding. $17.02 $9.73 $6.21 Exercisable options...... 715,170 665,821 1,145,599 Options available for future grant: Beginning of year.... 748,959 1,184,656 165,605 End of year.......... 1,918,046 748,959 1,184,656 Stock Ownership Plan The company maintains a noncontributory employee stock ownership plan which enables most North American employees to acquire shares of the company's common stock. Contributions, which are determined by the Board of Directors, are in the form of company common stock or cash which is used to purchase the company's common stock for the benefit of participating employees. Contributions to the plan for 1993, 1992, and 1991 aggregated $2,525,000, $2,360,000, and $1,550,000, respectively. -30- ARROW ELECTRONICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 8. Retirement Plan The company has a defined contribution plan for eligible employ- ees, which qualifies under Section 401(k) of the Internal Revenue Code. The company's contribution to the plan, which is based on a specified percentage of employee contributions, amounted to $2,286,000, $2,131,000, and $1,302,000 in 1993, 1992, and 1991, respectively. 9. Lease Commitments The company leases certain office, warehouse, and other property under noncancellable operating leases expiring at various dates through 2016. Rental expenses of noncancellable operating leases amounted to $16,375,000 in 1993, $12,943,000 in 1992, and $11,588,000 in 1991. Aggregate minimum rental commitments under all noncancellable operating leases approximate $69,922,000, exclusive of real estate taxes, insur- ance, and leases related to facilities closed in connection with the integration of the acquired businesses. Such commitments on an annual basis are: 1994-$15,012,000; 1995-$12,145,000; 1996-$9,858,000; 1997- $6,859,000; 1998-$5,539,000 and $20,509,000 thereafter. The company's obligations under capitalized leases are reflected as a component of deferred income taxes and other liabilities. 10. Segment and Geographic Information The company is engaged in one business segment, the distribution of electronic components, systems, and related products. The geographic distribution of consolidated sales, operating income, and identifiable assets for 1993 and 1992 are as follows (in thousands): Sales to Identifiable Unaffiliated Operating Assets at 1993 Customers Income (Loss) December 31, North America.... $1,890,615 $156,014 $ 717,566 Europe........... 600,935 40,153 367,102 Pacific Rim...... 44,034 1,706 57,416 Eliminations and Corporate.. - (16,331) 35,849 $2,535,584 $181,542 1,177,933 Investment in affiliated company 13,371 Total assets at December 31, 1993 $1,191,304 -31- ARROW ELECTRONICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED Sales to Identifiable Unaffiliated Operating Assets at 1992 Customers Income (Loss) December 31, North America.... $1,504,958 $116,007 $598,017 Europe........... 116,577 1,420 94,145 Pacific Rim...... - - - Eliminations and Corporate.. - (13,646) 23,838 $1,621,535 $103,781 716,000 Investments in affiliated companies 64,893 Total assets at December 31, 1992 $780,893 11. Quarterly Financial Data (Unaudited) A summary of the company's quarterly results of operations for 1993 and 1992 follows: First Second Third Fourth Quarter Quarter Quarter Quarter (In thousands except per share data) 1993: Sales.......................$551,391 $584,069 $697,825 $702,299 Gross profit................ 120,091 120,847 136,876 135,517 Net income.................. 17,982 19,114 21,734 22,729 Per common share:........... Primary .................. .59 .62 .69 .72 Fully diluted............. .55 .58 .64 .67 First Second Third Fourth Quarter Quarter Quarter Quarter (In thousands except per share data) 1992: Sales.......................$378,679 $382,041 $407,421 $453,394 Gross profit................ 78,930 82,706 87,038 93,215 Earnings before extraordinary charges..... 9,270 11,518 13,323 16,133 Net income.................. 9,270 9,094 13,323 13,133 Per common share: Earnings before extraordinary charges.... .38 .41 .47 .53 Extraordinary charges ..... - (.10) - (.10) Net income.................... .38 .31 .47 .43 -32- Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure. None. Part III Item 10. Directors and Executive Officers of the Registrant. See "Executive Officers" in the response to Item 1 above. In addition, the information set forth under the heading "Election of Directors" in the company's Proxy Statement filed in connection with the Annual Meeting of Shareholders scheduled to be held May 10, 1994 hereby is incorporated herein by reference. Item 11. Executive Compensation. The information set forth under the heading "Executive Compensation and Other Matters" in the company's Proxy Statement filed in connection with the Annual Meeting of Shareholders scheduled to be held May 10, 1994 hereby is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Manage- ment. The information on page 3 and under the heading "Election of Directors" in the company's Proxy Statement filed in connection with the Annual Meeting of Shareholders scheduled to be held May 10, 1994 hereby is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions. The information set forth under the heading "Executive Compensation and Other Matters" in the company's Proxy Statement filed in connection with the Annual Meeting of Shareholders scheduled to be held May 10, 1994 hereby is incorporated herein by reference. Part IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. (a)1. Financial Statements. The financial statements listed in the accompanying index to financial statements and financial statement schedules are filed as part of this annual report. 2. Financial Statement Schedules. The financial statement schedules listed in the accompanying index to financial statements and financial statement schedules are filed as part of this annual report. -33- All other schedules have been omitted since the required information is not present or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements, including the notes thereto. ARROW ELECTRONICS, INC. INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES (Item 14 (a)) Page Report of Ernst & Young, independent auditors 15 Consolidated balance sheet at December 31, 1993 and 1992 16 For the years ended December 31, 1993, 1992 and 1991: Consolidated statement of operations 17 Consolidated statement of cash flows 18 Consolidated statement of shareholders' equity 19 Notes to consolidated financial statements for the years ended December 31, 1993, 1992 and 1991 20 Consolidated schedules for the three years ended December 31, 1993: II - Amounts receivable from employees 45 VIII - Valuation and qualifying accounts 46 IX - Short-term borrowings 47 -34- 3. Exhibits. (2)(a) Restated Agreement of Purchase and Sale, dated as of September 20, 1987, between Ducommun Incorporated and Arrow Electronics, Inc. (incorporated by reference to Exhibit 2(b) to the company's Registration Statement on Form S-4, Commission File No. 33-17942). (b) Letter Agreement dated January 11, 1988 between Ducommun Incorporated and Arrow Electronics, Inc. (incorporated by reference to Exhibit 2(b) to the company's Current Report on Form 8-K dated January 21, 1988, Commission File No. 1-4482). (c) Acquisition Agreement, dated July 28, 1988, between Craig, Hochreiter & Co., Incorporated and Arrow Electronics, Inc., as amended and supplemented (incorporated by reference to Exhibit 2 to the company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1988, Commission File No. 1-4482). (d)(i) Acquisition Agreement, dated July 6, 1989, between Arrow Electronics (UK) Limited and Electrocomponents plc (incorporated by reference to Exhibit 2(d)(i) to the company's Annual Report on Form 10-K for the year ended December 31, 1989, Commission File No. 1-4482). (ii) English language translation of Acquisition Agreement, dated July 6, 1989, between Spoerle Electronic Handelsgesell- schaft mbH & Co. and Retron Manger Electronic GmbH and Eldi GmbH Electronik Distributor (incorporated by reference to Exhibit 2(d)(ii) to the company's Annual Report on Form 10-K for the year ended December 31, 1989, Commission File No. 1-4482). (iii) Umbrella Agreement, dated July 6, 1989, between Electrocomponents plc; Retron Elektronische Bauteile und Gerate Handelsgesellschaft mbH, Manger Elektronik GmbH, and Eldi GmbH Elektro- nik Distributor; Arrow Electronics, Inc.; Arrow Electronics (UK) Limited; and Spoerle Electronic Handelsgesellschaft GmbH & Co. (incorpo- rated by reference to Exhibit 2(d)(iii) to the company's Annual Report on Form 10-K for the year ended December 31, 1989, Commission File No. 1-4482). (e)(i) Agreement of Purchase and Sale, as amended, by and among Lex Service PLC, Lex Burlington Inc., and Arrow Electron- ics, Inc. (incorporated by reference to Exhibit 6(a) to the company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1991, Commission File No. 1-4482). (ii) Stockholders' Agreement dated as of September 27, 1991 by and among Arrow Electronics, Inc., Lex Service PLC, and Lex Burlington Inc. (incorporated by reference to Exhibit 2(e)(ii) to the company's Annual Report on Form 10-K for the year ended December 31, 1991, Commission File No. 1-4482). (iii) Amendment No. 1 dated as of February 28, 1992 to the Stockholders' Agreement in (2)(e)(ii) above (incorporated by reference to Exhibit 2(g)(iii) to the company's Annual Report on Form 10-K for the year ended December 31, 1991, Commission File No. 1-4482). -35- (iv) Amendment No. 2 dated as of July 30, 1992 to the Stockholders' Agreement in (2)(e)(ii) above (incorporated by reference to Exhibit 2(e)(iv) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482). (v) Amendment No. 3 dated as of February 1, 1993 to the Stockholders' Agreement in (2)(e)(ii) above (incorporated by reference to Exhibit 2(e)(v) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482). (vi) Registration Rights Agreement dated as of September 27, 1991 by and among Arrow Electronics, Inc., Lex Service PLC, and Lex Burlington Inc. (incorporated by reference to Exhibit 2(e)(iii) to the company's Annual Report on Form 10-K for the year ended December 31, 1991, Commission File No. 1-4482). (vii) Amendment No. 1 dated as of February 28, 1992 to the Registration Rights Agreement in (2)(e)(vi) above (incorporated by reference to Exhibit (2)(g)(iv) to the company's Annual Report on Form 10-K for the year ended December 31, 1991, Commission File No. 1-4482). (viii) Amendment No. 2 dated as of July 30, 1992 to the Registration Rights Agreement in (2)(e)(vi) above (incorporated by reference to Exhibit (2)(e)(viii) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482). (ix) Amendment No. 3 dated as of February 1, 1993 to the Registration Rights Agreement in (2)(e)(vi) above (incorporated by reference to Exhibit (2)(e)(ix) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482). (f)(i) Share Purchase Agreement dated as of October 10, 1991 among EDI Electronics Distribution International B.V., Aquarius Investments Ltd., Andromeda Investments Ltd., and the other persons named therein (incorporated by reference to Exhibit 2.2 to the company's Registration Statement on Form S-3, Registration No. 33-42176). (ii) Standstill Agreement dated as of October 10, 1991 among Arrow Electronics, Inc., Aquarius Investments Ltd., Andromeda Investments Ltd., and the other persons named therein (incorporated by reference to Exhibit 4.1 to the company's Registration Statement on Form S-3, Registration No. 33-42176). (iii) Shareholder's Agreement dated as of October 10, 1991 among EDI Electronics Distribution International B.V., Giorgio Ghezzi, Germano Fanelli, and Renzo Ghezzi. (g) Asset Purchase Agreement, dated as of February 12, 1993, between Zeus Components, Inc. and Arrow Electronics, Inc. (incorporated by reference to Exhibit 10(1) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482). (h) Agreement dated as of February 28, 1992 among Lex Service PLC, Arrow Electronics (UK) Limited, EDI Electronics Distribution International (France) SA, Arrow Electronics GmbH, and Arrow Electronics, Inc. (incorporated by reference to Exhibit 2(1) to the company's Current Report on Form 8-K, dated March 11, 1992, Commis- sion File No. 1-4482). -36- (i) Subscription Agreement dated February 7, 1992, between Arrow Electronics, Inc. and various purchasers, pertaining to the sale of the company's Series B $19.375 Convertible Exchangeable Preferred Stock (incorporated by reference to Exhibit 2(h) to the company's Annual Report on Form 10-K for the year ended December 31, 1991, Commission File No. 1-4482). (3) (a) Amended and Restated Certificate of Incorpo- ration of the company, as amended (incorporated by reference to Exhibit 4(1) to the company's Registration Statement on Form S-3, Registration No. 33-67890). (b) Certificate of Amendment of the Amended and Restated Certificate of Incorporation of the company dated as of August 24, 1993 (incorporated by reference to Exhibit 4(2) to the company's Registration Statement on Form S-3, Registration No. 33-67890). (c) By-Laws of the company, as amended (incorpo- rated by reference to Exhibit 3(b) to the company's Annual Report on Form 10-K for the year ended December 31, 1986, Commission File No. 1-4482). (4) (a) Indenture, including Debenture, dated as of November 25, 1992 between the company and the Bank of Montreal Trust Company, as Trustee, with respect to the company's 5-3/4% Convertible Subordinated Debentures due 2004 (incorporated by reference to Exhibit 4(a) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482). (b)(i) Rights Agreement dated as of March 2, 1988 between Arrow Electronics, Inc. and Manufacturers Hanover Trust Company, as Rights Agent, which includes as Exhibit A a Certificate of Amendment of the Restated Certificate of Incorporation for Arrow Electronics, Inc. for the Participating Preferred Stock, as Exhibit B a letter to share- holders describing the Rights and a summary of the provisions of the Rights Agreement and as Exhibit C the forms of Rights Certificate and Election to Exercise (incorporated by reference to Exhibit 1 to the company's Current Report on Form 8-K dated March 3, 1988, Commission File No. 1-4482). (ii) First Amendment, dated June 30, 1989, to the Rights Agreement in (4)(b)(i) above (incorporated by reference to Exhibit 4(b) to the Company's Current Report on Form 8-K dated June 30, 1989, Commission File No. 1-4482). (iii) Second Amendment, dated June 8, 1991, to the Rights Agreement in (4)(b)(i) above (incorporated by reference to Exhibit 4(i)(iii) to the company's Annual Report on Form 10-K for the year ended December 31, 1991, Commission File No. 1-4482). (iv) Third Amendment, dated July 19, 1991, to the Rights Agreement in (4)(b)(i) above (incorporated by reference to Exhibit 4(i)(iv) to the company's Annual Report on Form 10-K for the year ended December 31, 1991, Commission File No. 1-4482). (v) Fourth Amendment, dated August 26, 1991, to the Rights Agreement in (4)(b)(i) above (incorporated by reference to Exhibit 4(i)(v) to the company's Annual Report on Form 10-K for the year ended December 31, 1991, Commission File No. 1-4482). -37- (10)(a) Investment Management Agreement, dated as of September 28, 1981, between the company and Fayez Sarofim & Co. (incor- porated by reference to Exhibit 10(b)(ii) to the company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1981, Commission File No. 1-4482). (b)(i) Arrow Electronics Savings Plan, as amended and restated through January 1, 1989 (incorporated by reference to Exhibit 10(b)(i) to the company's Annual Report on Form 10-K for the year ended December 31, 1989, Commission File No. 1-4482). (ii) Amendment No. 1, dated December 7, 1989, to the Arrow Electronics Savings Plan in (10)(b)(i) above (incorporated by reference to Exhibit 10(b)(ii) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482). (iii) Amendment No. 2, dated January 18, 1990, to the Arrow Electronics Savings Plan in (10)(b)(i) above (incorporated by reference to Exhibit 10(b)(ii) to the company's Annual Report on Form 10-K for the year ended December 31, 1991, Commission File No. 1-4482). (iv) Amendment No. 3, dated February 21, 1992, to the Arrow Electronics Savings Plan in (10)(b)(i) above (incorporated by reference to Exhibit 10(b)(iv) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482). (v) Supplement, dated September 27, 1991, to the Arrow Electronics Savings Plan in (10)(b)(i) above (incorporated by reference to Exhibit 10(b)(v) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482). (vi) Supplement No. 3, dated August 24, 1993, to the Arrow Electronics Savings Plan in 10(b)(i) above. (vii) Arrow Electronics Stock Ownership Plan, as amended and restated through January 1, 1989 (incorporated by reference to Exhibit 10(b)(ii) to the company's Annual Report on Form 10-K for the year ended December 31, 1989, Commission File No. 1-4482). (viii) Amendment No. 1, dated November 29, 1989, to the Arrow Electronics Stock Ownership Plan in (10)(b)(vii) above (incor- porated by reference to Exhibit 10(b)(vii) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482). (ix) Amendment No. 2, dated December 7, 1989, to the Arrow Electronics Stock Ownership Plan in (10)(b)(vii) above (incor- porated by reference to Exhibit 10(b)(viii) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482). (x) Amendment No. 3, dated January 18, 1990, to the Arrow Electronics Stock Ownership Plan in (10)(b)(vii) above (incorporated by reference to Exhibit 10(b)(iv) to the company's Annual Report on Form 10-K for the year ended December 31, 1991, Commission File No. 1-4482). (xi) Amendment No. 4, dated December 31, 1992 to the Arrow Electronics Stock Ownership Plan in (10)(b)(vii) above (incor- porated by reference to Exhibit 10(b)(x) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482). -38- (xii) Supplement No. 1, dated September 8, 1992, to the Arrow Electronics Stock Ownership Plan in (10)(b)(vii) above (incor- porated by reference to Exhibit 10(b)(xi) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482). (xiii) Supplement No. 3, dated August 24, 1993, to the Arrow Electronics Stock Ownership Plan in (10)(b)(vii) above. (xiv) Capstone Electronics Corp. Profit-Sharing Plan, effective January 1, 1990 (incorporated by reference to Exhibit 10(b)(iii) to the company's Annual Report on Form 10-K for the year ended December 31, 1990, Commission File No. 1-4482). (xv) Supplement No. 1, dated September 8, 1992, to the Capstone Electronics Profit-Sharing Plan in (10)(b)(xiv) above (incorporated by reference to Exhibit 10(b)(xiii) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482). (xvi) Supplement No. 2, dated August 24, 1993, to the Capstone Electronics Profit Sharing Plan in (10)(b)(xiv) above. (c)(i) Employment Agreement, dated as of October 16, 1990, between the company and John C. Waddell (incorporated by reference to Exhibit 10(c)(i) to the company's Annual Report on Form 10-K for the year ended December 31, 1990, Commission File No. 1-4482). (ii) Employment Agreement, dated as of March 13, 1991, between the company and Stephen P. Kaufman (incorporated by reference to Exhibit 10(c)(ii) to the company's Annual Report on Form 10-K for the year ended December 31, 1990, Commission File No. 1-4482). (iii) Employment Agreement, dated as of March 13, 1991, between the company and Robert E. Klatell (incorporated by reference to Exhibit 10(c)(iii) to the company's Annual Report on Form 10-K for the year ended December 31, 1990, Commission File No. 1-4482). (iv) Form of agreement between the company and the employees parties to the Employment Agreements listed in 10(c)(i), (ii), and (iii) above providing extended separation benefits under certain circumstances (incorporated by reference to Exhibit 10(c)(iv) to the company's Annual Report on Form 10-K for the year ended December 31, 1988, Commission File No. 1-4482). (v) Form of Employment Agreement, dated as of April 1, 1989, between the company and Robert J. McInerney (incorporated by reference to Exhibit 10(c)(v) to the company's Annual Report on Form 10-K for the year ended December 31, 1989, Commission File No. 1-4482). (vi) Form of Employment Agreement, dated as of March 13, 1991, between the company and Steven W. Menefee (incorporated by reference to Exhibit 10(c)(vi) to the company's Annual Report on Form 10-K for the year ended December 31, 1990, Commission File No. 1-4482). (vii) Form of Employment Agreement, as amended and restated as of January 1, 1990, between the company and Wesley S. Sagawa (incorporated by reference to Exhibit 10(c)(vi) to the company's Annual Report on Form 10-K for the year ended December 31, 1989, Commission File No. 1-4482). -39- (viii) Form of Employment Agreement, dated as of October 27, 1988, between the company and William J. Smith (incorporated by reference to Exhibit 10(c)(v) to the company's Annual Report on Form 10-K for the year ended December 31, 1988, Commission File No. 1-4482). (ix) Employment Agreement, dated as of October 19, 1990, between the company and Don E. Burton (incorporated by reference to Exhibit 10(c)(ix) to the company's Annual Report on Form 10-K for the year ended December 31, 1990, Commission File No. 1-4482). (x) Employment Agreement, dated as of January 7, 1991, between the company and Betty Jane Scheihing (incorporated by reference to Exhibit 10(c)(xi) to the company's Annual Report on Form 10-K for the year ended December 31, 1990, Commission File No. 1-4482). (xi) Employment Agreement, dated as of January 7, 1991, between the company and John S. Smith (incorporated by reference to Exhibit 10(c)(xii) to the company's Annual Report on Form 10-K for the year ended December 31, 1990, Commission File No. 1-4482). (xii) Employment Agreement, dated as of March 17, 1993, between the company and Jan Salsgiver. (xiii) Form of agreement between the company and all corporate Vice Presidents, including the employees parties to the Employment Agreements listed in 10(c)(v)-(xii) above, providing extended separation benefits under certain circumstances (incorporated by reference to Exhibit 10(c)(ix) to the company's Annual Report on Form 10-K for the year ended December 31, 1988, Commission File No. 1-4482). (xiv) Form of agreement between the company and non-corporate officers providing extended separation benefits under certain circumstances (incorporated by reference to Exhibit 10(c)(x) to the company's Annual Report on Form 10-K for the year ended December 31, 1988, Commission File No. 1-4482). (xv) Unfunded Pension Plan for Selected Executives of Arrow Electronics, Inc. (incorporated by reference to Exhibit 10(c)(xv) to the company's Annual Report on Form 10-K for the year ended December 31, 1990, Commission File No. 1-4482). (xvi) English translation of the Service Agreement, dated January 19, 1993, between Spoerle Electronic and Carlo Giersch (incorporated by reference to Exhibit 10(f)(v) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482). (d)(i) Senior Note Purchase Agreement, dated as of December 29,1992, with respect to the company's 8.29% Senior Secured Notes due 2000 (incorporated by reference to Exhibit 10(d) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482). (ii) First Amendment, dated as of December 22, 1993, to the Senior Note Purchase Agreement in 10(d)(i) above. (e) Amended and Restated Credit Agreement dated as of January 28, 1994 among Arrow Electronics, Inc., the several Banks from time to time parties hereto, Bankers Trust Company and Chemical Bank, as agents. -40- (f)(i) English translation of the Agreement of Purchase and Sale, dated January 19, 1993, between Carlo Giersch and Arrow Electronics GmbH with respect to the purchase of an additional 15% interest in Spoerle Electronic (incorporated by reference to Exhibit 10(f)(i) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482). (ii) English translation of the Offer Agreement, with supplemental letters attached, dated January 19, 1993, between Arrow Electronics GmbH and Carlo Giersch with respect to the purchase of a second 15% interest in Spoerle Electronic (incorporated by reference to Exhibit 10(f)(ii) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482). (iii) English translation of the Partnership Agreement of Spoerle Electronic, dated January 19, 1993 (incorporated by reference to Exhibit 10(f)(iii) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482). (iv) English translation of the Articles of Spoerle GmbH, dated as of January 1, 1993 (incorporated by reference to Exhibit 10(f)(iv) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482). (g) Amendment and Restatement Agreement relating to a Facilities Agreement dated February 28, 1992, between Arrow Electronics (UK) Limited and National Westminster Bank PLC. (h)(i) Credit Agreement, dated April 14, 1993, between Berliner Handels- und Frankfurter Bank and Arrow Electronics GmbH. (ii) Amendment, dated January 28, 1994, to the Credit Agreement in (10)(h)(i) above. (iii) Guarantee, dated January 16, 1990, between Arrow Electronics, Inc. and Berliner Handels- und Frankfurter Bank (incorporated by reference to Exhibit 10(h)(ii) to the company's Annual Report on Form 10-K for the year ended December 31, 1989, Commission File No. 1-4482). (iv) Subordination Agreement, dated January 16, 1990, between Berliner Handels- und Frankfurter Bank, Arrow Electronics, Inc., and The First National Bank of Chicago (incorporated by reference to Exhibit 10(h)(iii) to the company's Annual Report on Form 10-K for the year ended December 31, 1989, Commission File No. 1-4482). (v) First Amendment, dated December 29, 1992, to the Subordination Agreement in (10)(h)(iv) above (incorporated by reference to Exhibit 10(h)(iv) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482). (vi) Second Amendment, dated January 26, 1993, to the Subordination Agreement in (10)(h)(iv) above (incorporated by reference to Exhibit 10(h)(v) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482). -41- (vii) Third Amendment, dated April 12, 1993, to the Subordination Agreement in (10)(h)(iv) above. (viii) Fourth Amendment, dated January 28, 1994, to the Subordination Agreement in (10)(h)(iv) above. (viv) Assignments, dated January 16, 1990, by Arrow Electronics GmbH in favor of Berliner Handels- und Frankfurter Bank (incorporated by reference to Exhibit 10(h)(iv) to the company's Annual Report on Form 10-K for the year ended December 31, 1989, Commission File No. 1-4482). (i)(i) Arrow Electronics, Inc. Stock Option Plan, as amended (incorporated by reference to Exhibit (27)(a) to the company's Registration Statement on Form S-8, Registration No. 33-66594). (ii) Form of Stock Option Agreement under (i)(i) above (incorporated by reference to Exhibit 10(k)(ii) to the company's Annual Report on Form 10-K for the year ended December 31, 1986, Commission File No. 1-4482). (iii) Form of Nonqualified Stock Option Agreement under (i)(i) above (incorporated by reference to Exhibit 10(k)(iv) to the company's Registration Statement on Form S-4, Registration No. 33-17942). (j)(i) Restricted Stock Plan of Arrow Electronics, Inc., as amended and restated (incorporated by reference to Exhibit 10(j)(i) to the company's Annual Report on Form 10-K for the year ended December 31, 1991, Commission File No. 1-4482). (ii) Form of Award Agreement under (j)(i) above (incorporated by reference to Exhibit 10(l)(iv) to the company's Registration Statement on Form S-4, Registration No. 33-17942). (k) Form of Indemnification Agreement between the company and each director (incorporated by reference to Exhibit 10(m) to the company's Annual Report on Form 10-K for the year ended December 31, 1986, Commission File No. 1-4482). (l) Share Purchase Agreement dated as of July 2, 1993 between Baring Brothers (Guernsey) Limited and Others and Arrow Electronics (UK) Limited. (m) Share Sale Agreement dated as of August 17, 1993 between Ocean Information Holdings Limited and Arrow Electronics, Inc. (11) Statement Re: Computation of Earnings Per Share. (22) List of Subsidiaries. (24) Consent of Ernst & Young (28) (i) Record of Decision, issued by the EPA on September 28, 1990, with respect to environmental clean-up in Plant City, Florida (incorporated by reference to Exhibit 28 to the company's Annual Report on Form 10-K for the year ended December 31, 1990, Commission File No. 1-4482). -42- (ii) Consent Decree lodged with the U.S. District Court for the Middle District of Florida, Tampa Division, on December 18, 1991, with respect to environmental clean-up in Plant City, Florida (incorporated by reference to Exhibit 28(ii) to the company's Annual Report on Form 10-K for the year ended December 31, 1991, Commission File No. 1-4482). (b) Reports on Form 8-K None. -43- CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statements (Forms S-8 No. 33-66594, No. 33-48252, No. 33-20428 and No. 2-78185) and in the related Prospectuses pertaining to the employee stock plans of Arrow Electronics, Inc., in Amendment No. 1 to the Registration Statement (Form S-3 No. 33-67890) and in the related Prospectus pertaining to the registration of 1,009,086 shares of Arrow Electronics, Inc. Common Stock, and in Amendment No. 1 to the Registra- tion Statement (Form S-3 No. 33-42176) and in the related Prospectus pertaining to the registration of up to 944,445 shares of Arrow Elec- tronics, Inc. Common Stock held by Aquarius Investments Ltd. and Andromeda Investments Ltd. of our report dated February 24, 1994 with respect to the consolidated financial statements and schedules of Arrow Electronics, Inc. included in this Annual Report on Form 10-K for the year ended December 31, 1993. ERNST & YOUNG New York, New York March 25, 1994 -44- ARROW ELECTRONICS, INC. SCHEDULE II - AMOUNTS RECEIVABLE FROM EMPLOYEES For the three years ended December 31, 1993
Deductions Balance at Amounts Balance beginning Amounts written at end of year Additions collected off of year 1993 John C. Waddell (1) $ 120,000 $ - $ - $ - $ 120,000 1992 John C. Waddell (1) 120,000 - - - 120,000 1991 John C. Waddell (1) 120,000 - - - 120,000 (1) Demand note bearing interest at 12% per annum. The obligation was satisfied in full in 1994.
-45- ARROW ELECTRONICS, INC. SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS For the three years ended December 31, 1993
Additions Balance at Balance beginning Charged Charged at end of year to income to other Write-offs of year Allowance for doubtful accounts 1993 $8,268,000 $10,769,000 $3,060,000(1) $ 5,606,000 $16,491,000 1992 $7,734,000 $12,081,000 $1,288,000(2) $12,835,000 $ 8,268,000 1991 $5,678,000 $ 4,677,000 $5,589,000(3) $ 8,210,000 $ 7,734,000 (1) Represents the allowance for doubtful accounts of the electronics distribution businesses acquired by the company in 1993 including Zeus Components, Inc., Microproces- sor & Memory Distribution Limited, Amitron-Arrow S.A., ATD Electronica S.A., CCI Electronique S.A., and Spoerle Electronic. (2) Represents the allowance for doubtful accounts of the European electronics distribution businesses acquired from Lex Service PLC in 1992. (3) Represents the allowance for doubtful accounts of the North American electronics distribution businesses acquired from Lex Service PLC in 1991.
-46- ARROW ELECTRONICS, INC. SCHEDULE IX - SHORT-TERM BORROWINGS For the three years ended December 31, 1993
Maximum Weighted amount Weighted average outstanding Average average interest at any amount interest Balance at rate at month-end outstanding rate end of end of during during during the year the year the year the year the year Short-term borrowings 1993 $35,769,000 6.61% $35,769,999 $19,666,000 7.82% 1992 $ - - $ 399,000 $ 114,000 8.23% 1991 $1,520,000 8.00% $ 1,790,000 $ 341,000 13.53% Short-term borrowings represent obligations payable under short-term lines of credit arrange- ments with various banks. Borrowings were arranged on an as needed basis at either the bank's prime lending rate or LIBOR plus various credit margins which vary from country to country in 1993, sterling LIBOR plus 2 1/4% in 1992, and sterling LIBOR plus 2% in 1991. The average amount outstanding during the year was computed by averaging the total month-end outstanding principal balances during the year. The weighted average interest rate for each year was computed by dividing the interest expense by the average amount outstanding. -47- SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized. ARROW ELECTRONICS, INC. By/s/ Stephen P. Kaufman Stephen P. Kaufman President March 30, 1994 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated: By/s/ Stephen P. Kaufman March 30, 1994 Stephen P. Kaufman, Principal Executive Officer and Director By/s/ Robert E. Klatell March 30, 1994 Robert E. Klatell, Senior Vice President, Principal Financial Officer, and Director By/s/ Paul J. Reilly March 30, 1994 Controller and Principal Accounting Officer By/s/ John C. Waddell March 30, 1994 John C. Waddell, Chairman of the Board of Directors By/s/ Thomas M. Davidson March 30, 1994 Thomas M. Davidson, Director By/s/ Daniel W. Duval March 30, 1994 Daniel W. Duval, Director By/s/ Carlo Giersch March 30, 1994 Carlo Giersch, Director By/s/ J. Spencer Gould March 30, 1994 J. Spencer Gould, Director By/s/ Lawrence R. Kem March 30, 1994 Lawrence R. Kem, Director By/s/ Steven W. Menefee March 30, 1994 Steven W. Menefee, Director By/s/ Richard S. Rosenbloom March 30, 1994 Richard S. Rosenbloom, Director -48-
EX-11 2 EXHIBIT 11 Exhibit 11 ARROW ELECTRONICS, INC. STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
Year Ended December 31, 1993 1992 1991 1990 1989 (In thousands except per share data) Primary Average shares of common stock outstanding 30,134 24,662 13,932 11,874 11,760 Net effect of dilutive stock options - based on the treasury method 632 885 552 52 - Total 30,766 25,547 14,484 11,926 11,760 Net income $ 81,559 $ 44,820 $ 8,685 $ 10,105 $ 3,214 Less preferred stock dividends (880) (3,903) (4,596) (4,899) (5,425) Total $ 80,679 $ 40,917 $ 4,089 $ 5,206 $ (2,211) Per share amount $ 2.62 $ 1.60 $ 0.28 $ 0.44 $ (0.19) Fully Diluted Average shares of common stock outstanding 30,134 24,662 13,932 11,874 11,760 Net effect of dilutive stock options - based on the treasury method 706 902 637 75 - Assumed conversion of 9% convertible subordi- nated debentures - - 851 862 862 Assumed conversion of 5-3/4% convertible sub- ordinated debentures 3,774 381 - - - Assumed conversion of preferred stock 691 3,433 3,615 3,879 4,268 Total 35,305 29,378 19,035 16,690 16,890 Net income $ 81,559 $ 44,820 $ 8,685 $ 10,105 $ 3,214 Add interest on 9% convertible subordi- nated debentures, net of income tax effect - - 1,649 2,700 2,700 Add interest on 5-3/4% convertible subordi- nated debentures, net of income tax effect 4,313 455 - - - Total $ 85,872 $ 45,275 $ 10,334 $ 12,805 $ 5,914 Per share amount $ 2.43 $ 1.54 $ 0.54(A)$ 0.77(A)$ 0.35(A) (A) This calculation is submitted in accordance with Regulation S-K Item 601(b)(11) although it is contrary to paragraph 40 of APB Opinion No. 15 because it produces an anti- dilutive result.
EX-22 3 EXHIBIT 22 SUBSIDIARY LISTING The Company: Arrow Electronics, Inc., a New York corporation Subsidiaries: Arrow Electronics International, Inc., A Virgin Islandscorporation Arrow Electronics Canada Ltd., a Canadian corporation Lex Electronics Ltd., a Canadian corporation Arrow Electronics Credit Corporation, a Delaware corporation Schuylkill Metals of Plant City, Inc., a Delaware corporation Arrow Electronics International Inc., a Delaware corporation Arrow Electronics (UK) Inc., a Delaware corporation Arrow/TEK Ltd., a Japanese joint venture (50% owned) Capstone Electronics Corp., a Delaware corporation High Tech Ad, Inc., a New York corporation Arrow-Field Oy, a Finnish company Arrow-TH:s Elektronik AB, a Swedish company ARROW Electronics Distribution Group - Europe B.V., a Dutch company and Subsidiaries which include (1): Arrow Electronics (UK) Limited, a British company RR Electronics Limited, a British company Axiom Electronics Limited, a British company Jermyn Holdings Limited, a British company and Subsidiaries Microprocessor & Memory Distribution Ltd., a British company EDI Electronics Distribution International (France) SA, a French company Arrow Electronique S.A., a French company Generim S.A., a French company Feutrier S.A., a French company CCI Electronique S.A., a French company Arrow Electronics GmbH, a German company (2) ARROW ATD Netherlands B.V., a Dutch company (3) ARROW Amitron Netherlands B.V., a Dutch company (4) (1) ARROW Electronics Distribution Group - Europe B.V. also owns 61% of the shares of Silverstar Ltd. S.p.A. (which owns other Italian subsidiaries). (2) Arrow Electronics GmbH owns a 70% interest in Spoerle Electronic Handelgesellschaft mbH (which owns subsidiaries in Germany, Holland, Belgium, Switzerland, and Austria). (3) ARROW ATD Netherlands B.V. owns 55% of the shares of ATD Electronica S.A.. (4) ARROW Amitron Netherlands B.V. owns 55% of the shares of Amitron-Arrow S.A.. Components Agent Limited, a British Virgin Islands company and Subsidiaries which include: Components Agent Limited, a Hong Kong company Components Agent China Limited, a Hong Kong company Components Agent Korea Limited, a Hong Kong company Components Agent Taiwan Limited, a Hong Kong company Components Assembly & Sales Pte Ltd, a Singapore company Casl. (M) Sdn. Berhad, a Malaysian company EX-10 4 1ST AMENDMENT TO SR. NOTES-EX10(D)(II) FIRST AMENDMENT TO SENIOR NOTE PURCHASE AGREEMENT Arrow Electronics, Inc. $75,000,000 8.29% Senior Secured Notes Due 2000 THIS FIRST AMENDMENT (the "Amendment") to those several Senior Note Purchase Agreements each dated as of December 29, 1992 (collectively referred to herein as the "Purchase Agreements" and individually as a "Purchase Agreement"), is made as of December 22, 1993, by and among ARROW ELECTRONICS INC., a New York corpo- ration (the "Company"), and the several Purchasers named in Schedule I hereto (hereinafter, together with their respective successors and assigns, collectively called the "Purchasers" and individually a "Purchaser"). Capitalized terms used herein without definition shall have the respective meanings ascribed to such terms in the Purchase Agreements, as hereby amended. WHEREAS, the Purchasers and the Company are parties to the Purchase Agreements, pursuant to which the Purchasers were issued, in the respective amounts set forth opposite their names on Schedule I thereto, $75,000,000 aggregate principal amount of the Company's 8.29% Senior Secured Notes Due 2000 (the "Senior Notes"); and WHEREAS, the Company and the Purchasers desire to amend the Purchase Agreements as provided herein, upon the terms and conditions set forth herein; NOW THEREFORE, in consideration of the terms and conditions contained herein and of other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Amendments to the Purchase Agreements. Subject to the satisfaction of the conditions specified in Section 3 hereof, the Purchase Agreements are hereby amended as follows: (A) Reference in the Purchase Agreements to "this Agreement" (and indirect references such as "hereunder", "hereby", "herein" and "hereof") shall be deemed to be references to the Purchase Agreement as amended hereby. (B) Section 8.01(j) of each Purchase Agreement shall be amended by adding the following phrase following subclause (y) of that Section: "plus (z) Guarantees by the Company of the Indebtedness of the Foreign Subsidiaries permitted pursuant to Section 8.08(iv)" (C) Section 8.04 of each Purchase Agreement shall be amended by deleting such section in its entirety and replacing it with the following: "Section 8.04. Restricted Payments. The Company will not, and will not permit any of its Subsidiaries to, make any Restricted Payments, except that the Company and its Subsidiaries may make Restricted Payments in an aggregate amount not to exceed the sum of (x) $50,000,000 plus (y) 45% of cumulative Consolidated Net Income from Operations from January 1, 1993 to the date of such Restricted Payment or, if such cumulative Consolidated Net Income from Operations is a deficit figure, then minus 100% of such deficit (provi- ded that Consolidated Finance Charges attributable to any Subsidiary shall not be deducted in the determination of Consolidated Net Income for purposes of calculating Consolidated Net Income from Operations to the extent that the net earnings of such Subsidiary have been excluded from the calculation of Consol- idated Net Income from Operations pursu- ant to clause (e) of the definition of such term), provided that the amount determined pursuant to this clause (y), if a negative number, shall not reduce the amount available pursuant to clause (x), plus (z) 100% of the Net Proceeds from sales of capital stock of the Company which is not mandatorily redeemable or otherwise subject to mandatory repurchase, retirement, call, put or other reacquisition (or accelera- tion of any thereof) prior to or on the maturity date of the Senior Notes. Without regard to the foregoing restric- tion, so long as no Default or Event of Default under subsection (a) or (b) of Section 9.01 has occurred and is continuing, the Company shall be permit- ted to (i) purchase the remaining capital stock not owned on the Closing Date by the Company of Spoerle GmbH, a German corporation, (ii) purchase the remaining capital interest not owned by the Company on the Closing Date of Spoerle Electronic Handelsgesellschaft mbH & Co., a German partnership, (iii) make any Investment in Silverstar S.p.A. Ltd., an Italian corporation ("Silverstar"), in an aggregate amount not to exceed $20,000,000, and there- after, purchase the remaining capital stock of Silverstar not owned by the -2- Company on the Closing Date, (iv) at any time, whether or not at such time any Consolidated Net Income from Operations is available under clause (y) above for Restricted Payments, redeem shares of its Series B convertible exchangeable preferred stock, provided that the amount of such payments made shall reduce, dollar for dollar, the amount of Consolidated Net Income from Operations that would otherwise be available for Restricted Payments pursuant to clause (y) of the preceding sentence, (v) pay regular dividends on the outstanding shares of such preferred stock, and (vi) make Investments up to an aggregate of $15,000,000 for the purpose of acquiring the assets or capital stock or ownership interest of any Person or Persons; provided, however, that the maximum amount of proceeds of any Indebtedness incurred by the Company and its Subsidiaries other than its Foreign Subsidiaries (excluding any Guarantees by the Company or any of its Subsidiaries of Indebtedness of Foreign Subsidiaries, so long as such Guarantees are permitted under clause (iii) of Section 8.08 ("Permitted Guarantees")), which may be applied to the purchases described in clauses (i), (ii) and (iii) of this sentence shall not exceed $50,000,000 in the aggregate in each of the first four fiscal years following the Closing Date, and provided, further, that Permitted Guarantees shall not constitute Restricted Payments hereunder but Guarantees permitted pursuant to Section 8.08(iv) shall constitute Restricted Payments hereunder." (D) Section 8.08 of each Purchase Agreement shall be amended by deleting such Section in its entirety and replacing it with the following: "Section 8.08. Limitation on Guarantees. The Company will not, and will not permit any of its Subsidiaries to, assume, guarantee, endorse, contingently agree to purchase or otherwise become liable upon the obligation of any Person except: (i) the Subsidiary Guarantees, (ii) Guarantees of purchase orders made in the ordinary course of business, (iii) Guarantees by the Company of contractual obligations of any Foreign Subsidiary, provided that such Guarantees are unsecured and are expressly subordinated (on terms substantially similar to those set forth in the Subordination Agreement included in the Security Documents) to the obligations of the Company under this Agreement, the Other Agreements and -3- the Senior Notes, (iv) other Guarantees by the Company or any of its Subsidiaries of contractual obligations of any Foreign Subsidiary which would not be permitted pursuant to subclause (iii) hereof, so long as, immediately after giving effect to any such Guarantee, the Company continues to be in compliance with Sections 8.01(j) and 8.04 and (v) Guarantees by Subsidiaries of the Company not otherwise prohibited under applicable provisions of this Agreement." (E) Section 8.12 of each Purchase Agreement shall be amended by deleting such Section in its entirety and replacing it with the following: "Section 8.12. Consolidated Total Debt. As of the last day of any quarterly or annual fiscal period during the periods set forth below, the Company will not permit Consolidated Total Debt to exceed the percentage of Total Consolidated Capitalization set forth below opposite such period: Period Percentage Closing Date through December 31, 1993 60% January 1, 1994 through December 31, 1995 55% January 1, 1996 and thereafter 50% provided, however, that the applicable percentage under this Section 8.12 shall be 50% at all times from and after the release of the Collateral pursuant to Section 8.15." 2. Representations and Warranties. In order to induce the Purchasers to enter into this Amendment, the Company represents and warrants to each Purchaser that: (A) The representations and warranties of the Company contained in the Purchase Agreements are true on and as of the date hereof to the same extent as if made on and as of the date hereof, except as set forth in the Schedules attached hereto and except to the extent that such representations and warranties specifically relate to an earlier date, in which case they are true as of such earlier date; and (B) The execution, delivery and performance by the Company of this Amendment is within its corporate powers and has been duly authorized by all necessary corporate action on the part of the Company; and this -4- Amendment constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as such enforcement may be affected by any applicable bankruptcy, insolvency, moratorium, reorganization or similar laws affecting the enforcement of creditors' rights generally or by general principles of equity. 3. Conditions Precedent. As provided in Section 1 above, the amendments set forth in Section 1 shall become and be effective upon the satisfaction of the following conditions: (A) All corporate and other proceedings taken or to be taken in connection with this Amendment and all documents incident hereto shall be satisfactory in form and substance to the Purchasers, and the Purchasers shall have received all such counterpart originals or certified or other copies of such documents as they may reasonably request. (B) The Company shall have duly executed a counterpart of this Amendment and delivered same to the Purchasers or their representatives. (C) The Purchasers shall have received evidence that the fees of special counsel to the Purchasers referred to in Section 6 hereof shall have been paid in full. 4. Effect of Amendment. It is hereby agreed that, except as specifically provided herein, this Amendment does not in any way affect or impair the terms, condi- tions and other provisions of the Purchase Agreements or the obligations of the Company thereunder, and all terms, conditions and other provisions of the Purchase Agreements, shall remain in full force and effect except to the extent specifically amended or modified pursuant to the provisions of this Amendment. 5. Counterparts. This Amendment may be executed in any number of counterparts, each of which shall be deemed an original, and all of which taken together shall be deemed to constitute one and the same instrument. 6. Costs and Expenses. As provided in Section 10.02 of the Purchase Agreements, the Company agrees to pay on demand all fees, costs and expenses incurred by the Purchasers in connection with the negotiation, prepara- tion, execution and delivery of this Amendment and all other documents executed pursuant to or in connection herewith, including, without limitation, the fees and disbursements of Sonnenschein Nath & Rosenthal, special counsel to the Purchasers, in connection herewith. -5- 7. Governing Law. THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE CHOICE OF LAW PRINCIPLES OF SUCH STATE). 8. Headings; Miscellaneous. Section headings are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purposes. -6- IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the day and year first written above. COMPANY: ARROW ELECTRONICS, INC. By: Name: Title: PURCHASERS: PRINCIPAL MUTUAL LIFE INSURANCE CO. By: Name: Title: By: Name: Title: TEACHERS INSURANCE & ANNUITY ASSOCIATION OF AMERICA By: Name: Title: CIGNA PROPERTY AND CASUALTY INSURANCE COMPANY By: CIGNA Investments, Inc. By:_____________________ Name: Title: CONNECTICUT GENERAL LIFE INSURANCE COMPANY By: CIGNA Investments, Inc. By:_____________________ Name: Title: LIFE INSURANCE COMPANY OF NORTH AMERICA By: CIGNA Investments, Inc. By: ____________________ Name: Title: LIFE INSURANCE COMPANY OF GEORGIA By: Investment Centre, Inc. its agent By: ____________________ Name: Title: SOUTHLAND LIFE INSURANCE COMPANY By: Investment Centre, Inc. its agent By: ______________________ Name: Title: PEERLESS INSURANCE COMPANY By: Investment Centre, Inc. its agent By: ____________________ Name: Title: CONSOLIDATED INSURANCE COMPANY Investment Centre, Inc. its agent By: ______________________ Name: Title: -7- EX-10 5 RESTATED US CREDIT AGR.-EX10(E) CONFORMED EXECUTION COPY AMENDED AND RESTATED CREDIT AGREEMENT among ARROW ELECTRONICS, INC., The Several Banks from Time to Time Parties Hereto, BANKERS TRUST COMPANY and CHEMICAL BANK, as Agents Dated as of January 28, 1994 TABLE OF CONTENTS Page SECTION 1. DEFINITIONS . . . . . . . . . . . . . . 3 1.1 Defined Terms . . . . . . . . . . . . . . 3 1.2 Other Definitional Provisions . . . . . . 20 1.3. Accounting Determinations . . . . . . . . 21 SECTION 2. AMOUNT AND TERMS OF COMMITMENTS . . . . 21 2.1 Revolving Credit Commitments. . . . . . . 21 2.2 Revolving Credit Notes. . . . . . . . . . 21 2.3 Procedure for Revolving Credit Borrowing . . . . . . . . . . . . . . . . 22 2.4 Swing Line Loans. . . . . . . . . . . . . 23 2.5 Swing Line Notes. . . . . . . . . . . . . 23 2.6 Procedure for Swing Line Borrowing. . . . 23 2.7 Allocating Swing Line Loans; Swing Line Loan Participations . . . . . . . . . . . 24 2.8 Commitment Fee. . . . . . . . . . . . . . 25 2.9 Termination or Reduction of Commitments . 26 2.10 Optional Prepayments . . . . . . . . . . 26 2.11 Conversion and Continuation Options. . . 27 2.12 Minimum Amounts and Number of Tranches . 27 2.13 Interest Rates and Payment Dates . . . . 28 2.14 Computation of Interest and Fees . . . . 28 2.15 Inability to Determine Interest Rate . . 29 2.16 Pro Rata Treatment and Payments. . . . . 29 2.17 Illegality . . . . . . . . . . . . . . . 30 2.18 Requirements of Law. . . . . . . . . . . 31 2.19 Taxes. . . . . . . . . . . . . . . . . . 32 2.20 Company's Options upon Claims for Increased Costs and Taxes. . . . . . . . 34 2.21 Indemnity. . . . . . . . . . . . . . . . 35 2.22 Determinations . . . . . . . . . . . . . 36 2.23 Change of Lending Office . . . . . . . . 36 SECTION 3. LETTERS OF CREDIT . . . . . . . . . . . 36 3.1 L/C Commitment. . . . . . . . . . . . . . 36 3.2 Procedure for Issuance of Letters of Credit. . . . . . . . . . . . . . . . . . 37 3.3 Fees, Commissions and Other Charges.. . . 37 3.4 L/C Participations. . . . . . . . . . . . 38 3.5 Reimbursement Obligation of the Company.. . . . . . . . . . . . . . . . . 39 3.6 Obligations Absolute. . . . . . . . . . . 40 3.7 Letter of Credit Payments.. . . . . . . . 40 3.8 Application.. . . . . . . . . . . . . . . 40 SECTION 4. REPRESENTATIONS AND WARRANTIES. . . . . 41 4.1 Financial Condition . . . . . . . . . . . 41 4.2 No Change . . . . . . . . . . . . . . . . 42 4.3 Corporate Existence; Compliance with Law . . . . . . . . . . . . . . . . . . . 42 4.4 Corporate Power; Authorization; Enforceable Obligations . . . . . . . . . 42 4.5 No Legal Bar. . . . . . . . . . . . . . . 43 4.6 No Material Litigation. . . . . . . . . . 43 4.7 No Default. . . . . . . . . . . . . . . . 43 4.8 Ownership of Property; Liens. . . . . . . 43 4.9 Intellectual Property . . . . . . . . . . 43 4.10 No Burdensome Restrictions . . . . . . . 44 4.11 Taxes. . . . . . . . . . . . . . . . . . 44 4.12 Federal Regulations. . . . . . . . . . . 44 4.13 ERISA. . . . . . . . . . . . . . . . . . 44 4.14 Investment Company Act; Other Regulations. . . . . . . . . . . . . . . 45 4.15 Subsidiaries . . . . . . . . . . . . . . 46 4.16 Existing Indebtedness. . . . . . . . . . 46 4.17 Accuracy and Completeness of Information. . . . . . . . . . . . . . . 46 4.18 Purpose of Loans . . . . . . . . . . . . 47 4.19 Senior Indebtedness. . . . . . . . . . . 47 4.20 Environmental Matters. . . . . . . . . . 47 SECTION 5. CONDITIONS PRECEDENT. . . . . . . . . . 48 5.1 Conditions to Closing Date. . . . . . . . 48 5.2 Conditions to Each Extension of Credit. . 51 SECTION 6. AFFIRMATIVE COVENANTS . . . . . . . . . 52 6.1 Financial Statements. . . . . . . . . . . 52 6.2 Certificates; Other Information . . . . . 54 6.3 Payment of Obligations. . . . . . . . . . 55 6.4 Conduct of Business and Maintenance of Existence . . . . . . . . . . . . . . . . 55 6.5 Maintenance of Property; Insurance. . . . 55 6.6 Inspection of Property; Books and Records; Discussions. . . . . . . . . . . 56 6.7 Notices . . . . . . . . . . . . . . . . . 56 6.8 Environmental Laws. . . . . . . . . . . . 57 6.9 Additional Subsidiary Guarantees. . . . . 57 SECTION 7. NEGATIVE COVENANTS. . . . . . . . . . . 58 7.1 Financial Condition Covenants . . . . . . 58 7.2 Limitation on Indebtedness of Domestic Subsidiaries. . . . . . . . . . . . . . . 58 7.3 Limitation on Liens . . . . . . . . . . . 58 7.4 Limitation on Fundamental Changes . . . . 59 7.5 Limitation on Restricted Payments . . . . 59 7.6 Limitation on Negative Pledge Clauses . . 60 7.7 Limitation on Optional Payments; Modifications of Debt Instruments . . . . 60 SECTION 8. EVENTS OF DEFAULT . . . . . . . . . . . 61 SECTION 9. THE ADMINISTRATIVE AGENT; THE AGENTS AND THE COLLATERAL AGENT. . . . . . . . 64 9.1 Appointment . . . . . . . . . . . . . . . 64 9.2 Delegation of Duties. . . . . . . . . . . 64 9.3 Exculpatory Provisions. . . . . . . . . . 64 9.4 Reliance by Administrative Agent. . . . . 65 9.5 Notice of Default . . . . . . . . . . . . 65 9.6 Non-Reliance on Administrative Agent and Other Banks . . . . . . . . . . . . . . . 66 9.7 Indemnification . . . . . . . . . . . . . 66 9.8 Administrative Agent in Its Individual Capacity. . . . . . . . . . . . . . . . . 67 9.9 Successor Administrative Agent. . . . . . 67 9.10 The Agents; The Collateral Agent . . . . 68 SECTION 10. MISCELLANEOUS. . . . . . . . . . . . . 68 10.1 Amendments and Waivers . . . . . . . . . 68 10.2 Notices. . . . . . . . . . . . . . . . . 69 10.3 No Waiver; Cumulative Remedies . . . . . 69 10.4 Survival of Representations and Warranties . . . . . . . . . . . . . . . 70 10.5 Payment of Expenses and Taxes. . . . . . 70 10.6 Successors and Assigns; Participations and Assignments. . . . . . . . . . . . . 71 10.7 Adjustments; Set-off . . . . . . . . . . 75 10.8 Counterparts . . . . . . . . . . . . . . 76 10.9 Severability . . . . . . . . . . . . . . 76 10.10 Integration . . . . . . . . . . . . . . 76 10.11 GOVERNING LAW . . . . . . . . . . . . . 76 10.12 Submission To Jurisdiction; Waivers . . 76 10.13 Acknowledgements. . . . . . . . . . . . 77 10.14 WAIVERS OF JURY TRIAL . . . . . . . . . 77 SCHEDULES I - Commitments 4.13 - Excluded ERISA Arrangements 4.15 - Subsidiaries 4.16 - Existing Indebtedness 4.20 - Environmental Matters EXHIBITS Exhibit A - Form of Revolving Credit Note Exhibit B - Form of Swing Line Note Exhibit C - Form of Consent and Confirmation Exhibit D - Form of Swing Line Loan Participation Certificate Exhibit E - Form of Borrowing Certificate Exhibit F-1 - Form of Opinion of Winthrop, Stimson, Putnam & Roberts Exhibit F-2 - Form of Opinion of Robert E. Klatell Exhibit G - Form of Certificate Pursuant to Subsection 6.2 Exhibit H - Form of Assignment and Acceptance AMENDED AND RESTATED CREDIT AGREEMENT, dated as of January 28, 1994, among ARROW ELECTRONICS, INC., a New York corporation (the "Company"), the several banks and other financial institutions from time to time parties to this Agreement (the "Banks"), BANKERS TRUST COMPANY, a New York corporation ("Bankers Trust"), and CHEMICAL BANK, a New York banking corpo- ration ("Chemical"), as agents for the Banks hereunder (in such capacity, the "Agents"), BANKERS TRUST COMPANY, as Collateral Agent (in such capacity, the "Collateral Agent") and CHEMICAL BANK, as administra- tive agent for the Lenders hereunder (in such capacity, the "Administrative Agent"). W I T N E S S E T H : WHEREAS, the Company, several banks and other financial institutions (including certain of the Banks) (the "Existing Banks"), Chemical, as administrative agent for the Existing Banks (in such capacity, the "Existing Administrative Agent"), the Collateral Agent and The First National Bank of Chicago, a national banking association ("FNBC"), and National Westminster Bank USA, a New York banking corporation, as co-agents for the Existing Banks, are parties to the Credit Agreement, dated as of September 27, 1991, (as the same has been amended, supplemented or otherwise modified through the date hereof, the "Existing Credit Agreement"); WHEREAS, the Collateral Agent and the Company are parties to the separate Collateral Account Agree- ments, each dated as of September 27, 1991, with each of FNBC, Chemical and Banco di Roma, New York Branch (as each of the same has been amended, supplemented or otherwise modified through the date hereof, collective- ly, the "Existing Collateral Account Agreements"); WHEREAS, the Company executed and delivered in favor of the Collateral Agent for the benefit of the Existing Banks a Collateral Assignment of Contracts, dated as of September 27, 1991 (as the same has been amended, supplemented or otherwise modified through the date hereof, the "Existing Collateral Assignment"); WHEREAS, the Company executed and delivered in favor of the Collateral Agent for the benefit of the Existing Banks a Security Agreement, dated as of September 27, 1991 (as the same has been amended, supplemented or otherwise modified through the date hereof, the "Existing Company Security Agreement"); WHEREAS, the Company executed and delivered in favor of the Collateral Agent for the benefit of the Existing Banks a Company Pledge Agreement, dated as of September 27, 1991 (as the same has been amended, supplemented or otherwise modified through the date hereof, the "Existing Company Pledge Agreement"); WHEREAS, each of Capstone Electronics, Corp., a Delaware corporation ("Capstone"), and Arrow Electronics International, Inc., a United States Virgin Island Corporation ("AEI"), executed and delivered in favor of the Collateral Agent for the benefit of the Existing Banks a Guarantee, dated as of September 27, 1991 (as the same has been amended, supplemented or otherwise modified through the date hereof, collective- ly, the "Existing Subsidiary Guarantees"); WHEREAS, each of Capstone and AEI executed and delivered in favor of the Collateral Agent for the benefit of the Existing Banks a Security Agreement, each dated as of September 27, 1991 (as the same has been amended, supplemented or otherwise modified through the date hereof, collectively the "Existing Subsidiary Security Agreements"); WHEREAS, each of Capstone and AEI executed and delivered in favor of the Collateral Agent for the benefit of the Existing Banks a Subsidiary Pledge Agreement, each dated as of September 27, 1991 (as the same has been amended, supplemented or otherwise modified through the date hereof, collectively the "Existing Subsidiary Pledge Agreements"); WHEREAS, the Company executed and delivered in favor of the Collateral Agent for the benefit of the Existing Banks an Indemnity Assignment, dated as of September 27, 1991 (as the same has been amended, supplemented or otherwise modified through the date hereof, the "Existing Indemnity Assignment"); WHEREAS, the Company and Berliner Handels - Und Frankfurter Bank, a German bank ("BHF"), executed and delivered in favor of the Collateral Agent, a Subordination Agreement, dated as of September 27, 1991 (as the same may be amended, supplemented or otherwise modified from time to time, the "Subordination Agreement") pursuant to which the guarantee obligations of the Company to BHF in respect of certain debt obligations of Arrow GmbH are subordinated to the Company's obligations under the Credit Agreement; WHEREAS, (i) the Company entered into several Note Purchase Agreements, dated as of December 29, 1992, pursuant to which the Purchasers party thereto (the "Purchasers") purchased Senior Notes of the Company (the "Senior Notes") and (ii) in connection therewith, (A) amendments were entered into by the Collateral Agent and the Company or one of its Sub- sidiaries, as the case may be, with respect to each of the Existing Collateral Account Agreements, the Exist- ing Collateral Assignment, the Existing Company Security Agreement, the Existing Company Pledge Agreement, the Existing Subsidiary Security Agreements, the Existing Subsidiary Pledge Agreements and the Existing Indemnity Assignment (collectively, as so amended, the "Existing Collateral Documents") and the Existing Subsidiary Guarantees in order to provide that the collateral held pursuant to the Existing Collateral Documents (the "Existing Collateral") would thereafter secure, and the Existing Subsidiary Guarantees would thereafter guarantee, equally and ratably, obligations owing in respect of the Senior Notes and obligations owing in respect of the Existing Credit Agreement and (B) the Company, the Collateral Agent, the Existing Banks and the Purchasers executed and delivered an Intercreditor Agreement, dated as of December 29, 1992 (as the same may have been amended, supplemented or otherwise modified through the date hereof, the "Intercreditor Agreement"), pursuant to which the Collateral Agent now holds the Existing Collateral and the Existing Subsidiary Guarantees; WHEREAS, on the Closing Date (as hereinafter defined), (i) all amounts owing under or in connection with the Existing Credit Agreement will be paid in full, (ii) all commitments and obligations of each Existing Bank that is not a Bank party to this Agree- ment (each, a "Retiring Bank") under the Existing Credit Agreement will terminate, (iii) the Existing Credit Agreement will be amended and restated in its entirety as set forth in this Agreement and (iv) the Company may then and thereafter make borrowings from the Banks under this Agreement in accordance with the Commitments hereunder; and WHEREAS, in connection with the amendment and restatement effected hereby, it is contemplated that the Existing Collateral will be released and the Existing Subsidiary Guarantees will remain in effect (as consented to and confirmed pursuant to this Agree- ment) and will continue to be held by the Collateral Agent subject to the Intercreditor Agreement; NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, the parties hereto hereby agree that, effective on the Closing Date, the Existing Credit Agreement shall be and hereby is amended and restated in its entirety to read as follows: SECTION 1. DEFINITIONS 1.1 Defined Terms. As used in this Agreement, the following terms shall have the following meanings: "ABR": for any day, a rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the greatest of (a) the Prime Rate in effect on such day, (b) the Base CD Rate in effect on such day plus 1% and (c) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. For purposes hereof: "Prime Rate" shall mean the rate of interest per annum publicly announced from time to time by the Administrative Agent as its prime rate in effect at its principal office in New York City (the Prime Rate not being intended to be the lowest rate of interest charged by Chemical in connection with extensions of credit to debtors); "Base CD Rate" shall mean the sum of (a) the product of (i) the Three-Month Secondary CD Rate and (ii) a fraction, the numerator of which is one and the denominator of which is one minus the C/D Reserve Percentage and (b) the C/D Assessment Rate; "Three-Month Secondary CD Rate" shall mean, for any day, the secondary market rate for three-month certificates of deposit reported as being in effect on such day (or, if such day shall not be a Business Day, the next preceding Business Day) by the Board of Governors of the Federal Reserve System (the "Board") through the public information telephone line of the Federal Reserve Bank of New York (which rate will, under the current practices of the Board, be published in Federal Reserve Statistical Release H.15(519) during the week following such day), or, if such rate shall not be so reported on such day or such next preceding Business Day, the average of the secondary market quotations for three-month certificates of deposit of major money center banks in New York City received at approximately 10:00 A.M., New York City time, on such day (or, if such day shall not be a Business Day, on the next preceding Business Day) by the Administrative Agent from three New York City negotiable certificate of deposit dealers of recognized standing selected by it; and "Federal Funds Effective Rate" shall mean, for any day, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for the day of such transactions received by the Administrative Agent from three federal funds brokers of recognized standing selected by it. If for any reason the Administra- tive Agent shall have determined (which determina- tion shall be conclusive absent manifest error) that it is unable to ascertain the Base CD Rate or the Federal Funds Effective Rate, or both, for any reason, including the inability or failure of the Administrative Agent to obtain sufficient quota- tions in accordance with the terms thereof, the ABR shall be determined without regard to clause (b) or (c), or both, of the first sentence of this definition, as appropriate, until the circum- stances giving rise to such inability no longer exist. Any change in the ABR due to a change in the Prime Rate, the Three-Month Secondary CD Rate or the Federal Funds Effective Rate shall be effective as of the opening of business on the effective day of such change in the Prime Rate, the Three-Month Secondary CD Rate or the Federal Funds Effective Rate, respectively. "ABR Loans": Loans the rate of interest applicable to which is based upon the ABR. "Adjusted Consolidated EBITDA": for any fiscal period, (a) the Consolidated Net Income of the Company and its Subsidiaries for such period, plus (b) to the extent deducted from earnings in determining Consolidated Net Income for such period, the sum, in each case for such period, of income taxes, interest expense, depreciation expense, amortization expense, including amortiza- tion of any goodwill or other intangibles, minus (c) to the extent included in determining Consoli- dated Net Income for such period, non-cash equity earnings of unconsolidated affiliated companies, plus (d) to the extent excluded in determining Consolidated Net Income for such period, cash distributions received by the Company from unconsolidated Affiliates, minus (e) an amount equal to the excess of the net income of Spoerle Electronic for such period over any cash distribu- tions received by the Company from Spoerle Electronic during such period, all as determined on a consolidated basis in accordance with GAAP. "Administrative Agent": as defined in the recitals hereof. "AEI": as defined in the recitals hereof. "Affected Bank": any Bank affected by the events described in subsection 2.17, 2.18 or 2.19, as the case may be, but only for the period during which such Bank shall be affected by such events. "Affiliate": as to any Person, (a) any other Person (other than a Subsidiary) which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person or (b) any Person who is a director or officer of the Company or any of its Subsidiaries. For purposes of this definition, "control" of a Person means the power, directly or indirectly, either to (i) vote 10% or more of the securities having ordinary voting power for the election of directors of such Person or (ii) direct or cause the direction of the management and policies of such Person, whether by contract or otherwise. "Agents": as defined in the recitals hereof (individually, each an "Agent"). "Aggregate Outstanding Extensions of Credit": as to any Bank at any time, an amount equal to the sum of (a) the aggregate principal amount of all Loans made by such Lender then outstanding and (b) such Bank's Commitment Percentage of the L/C Obligations then outstanding. "Agreement": this Amended and Restated Credit Agreement, as amended, supplemented or otherwise modified from time to time. "Allocable Share": as to any Assenting Bank at any time, a fraction, the numerator of which shall be the Commitment of such Assenting Bank then in effect and the denominator of which shall be the aggregate of the Commitments of all Assenting Banks then in effect. "Applicable Margin": for each Type of Loan, the rate per annum determined from time to time based upon the Ratings in effect by Moody's and S&P set forth under the relevant column heading below opposite such Ratings: Ratings Applicable Margin (in basis points) Eurodollar S&P/Moody's Loans ABR Loans A-/A3 45.00 0 or higher BBB+/Baa1 50.00 0 BBB/Baa2 56.25 0 BBB-/Baa3 62.50 0 BBB-/Ba1 75.00 0 BB+/Ba1 87.50 0 BB/Ba2 or lower 125.00 25.00 ; provided that, in the event that the Ratings of S&P and Moody's do not coincide, the Applicable Margin set forth above opposite the lower of such Ratings will apply (it being understood that when the Rating of S&P is BBB- and the Rating of Moody's is Ba1, the Applicable Margin will be 75 basis points for Eurodollar Loans); provided further, however, that as long as the Rating in effect of S&P is BBB-or higher and the Rating in effect of Moody's is Baa3 or higher, the Applicable Margin set forth above opposite the higher of such Ratings shall apply. Notwithstanding the foregoing, in the event that no Ratings or one Rating is in effect at such time of determination, the Applicable Margin will be determined in a manner to be mutually agreed upon by the Agents and the Company and consented to by the Required Banks. "Application": an application, in such form as the Issuing Bank may specify from time to time, requesting the Issuing Bank to open a Letter of Credit. "Assenting Bank": as defined in subsection 2.20(a). "Assignee": as defined in subsection 10.6(c). "Available Commitment": as to any Bank at any time, an amount equal to the excess, if any, of (a) the amount of such Bank's Commitment over (b) such Bank's Aggregate Outstanding Extensions of Credit. "Bankers Trust": as defined in the recitals hereof. "Banks": as defined in the recitals hereof. "Borrowing Date": any Business Day specified in a notice pursuant to subsection 2.3 or 2.6 as a date on which the Company requests the Banks to make Loans hereunder. "Business": as defined in subsection 4.20(b). "Business Day": a day other than a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to close. "Capital Stock": any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants, options or rights to purchase any of the foregoing. "Capitalization Documents": the collective reference to the Governing Documents of the Company and each of its Subsidiaries, the certificates of designation and other agreements governing the issuance of, or setting forth the terms of, any Capital Stock (including, without limitation, the Common Stock) issued or to be issued by the Company or any of its Subsidiaries and the Rights Agreement. "Capstone": as defined in the recitals hereof. "C/D Assessment Rate": for any day as applied to any ABR Loan, the net annual assessment rate (rounded upward to the nearest 1/100th of 1%) determined by Chemical to be payable on such day to the Federal Deposit Insurance Corporation or any successor ("FDIC") for FDIC's insuring time deposits made in Dollars at offices of Chemical in the United States. "C/D Reserve Percentage": for any day as applied to any ABR Loan, that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) (the "Board"), for determining the maximum reserve requirement for a Depositary Institution (as defined in Regulation D of the Board) in respect of new non-personal time deposits in Dollars having a maturity of 30 days or more. "Change in Control": one or more of the following events: (a) less than a majority of the members of the Company's board of directors shall be persons who either (i) were serving as directors on the Closing Date or (ii) were nominated as directors and approved by the vote of the majority of the directors who are directors referred to in clause (i) above or this clause (ii); or (b) the stockholders of the Company shall approve any plan or proposal for the liquidation or dissolution of the Company; or (c) a Person or group of Persons acting in concert (other than the direct or indirect beneficial owners of the Capital Stock of the Company as of the Closing Date) shall, as a result of a tender or exchange offer, open market purchases, privately negotiated purchases or otherwise, have become the direct or indirect beneficial owner (within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended from time to time) of securities of the Company representing 40% or more of the combined voting power of the outstanding voting securities for the election of directors or shall have the right to elect a majority of the board of directors of the Company. "Chemical": as defined in the recitals hereof. "Closing Date": the date on which the conditions precedent set forth in subsection 5.1 shall be satisfied. "Code": the Internal Revenue Code of 1986, as amended from time to time. "Commitment": as to any Bank, the obligation of such Bank to make Loans to and/or issue or participate in Letters of Credit issued on behalf of the Company hereunder in an aggregate principal and/or face amount at any one time outstanding not to exceed the amount set forth opposite such Bank's name on Schedule I, as such amount may be reduced from time to time in accordance with the provisions of this Agreement. "Commitment Fee Rate": a rate per annum determined from time to time based upon the Ratings in effect by Moody's and S&P set forth under the column below opposite such Ratings: Ratings Commitment Fee Rate S&P Moody's (in basis points) A-/A3 15.00 or higher BBB+/Baa1 18.75 BBB/Baa2 22.50 BBB-/Baa3 25.00 BBB-/Ba1 25.00 BB+/Ba1 31.25 BB/Ba2 37.50 or lower ; provided that, in the event that the Ratings of S&P and Moody's do not coincide, the Commitment Fee Rate set forth opposite the lower of such Ratings will apply (it being understood that when the Rating of S&P is BBB- and the Rating of Moody's is Ba1, the Commitment Fee Rate will be 25 basis points); provided further, however, that as long as the Rating in effect of S&P is BBB- or higher and the Rating in effect of Moody's is Baa3 or higher, the Commitment Fee Rate set forth above opposite the higher of such Ratings shall apply. Notwithstanding the foregoing, in the event that no Ratings or one Rating is in effect at such time of determination, the Commitment Fee Rate will be determined in a manner to be mutually agreed upon by the Agents and the Company and consented to by the Required Banks. "Commitment Letter": the commitment letter dated December 9, 1993 among the Company, Chemical and Bankers Trust, as amended, supplemented or otherwise modified from time to time. "Commitment Percentage": as to any Bank at any time, the percentage which such Bank's Commitment then constitutes of the aggregate Commitments (or, at any time after the Commitments shall have expired or terminated, the percentage which the aggregate principal amount of such Bank's Loans then outstanding (including, if applicable, such Bank's participating interest in Swing Line Loans pursuant to 2.7(c)) constitutes of the aggregate principal amount of the Loans then outstanding). "Commitment Period": the period from and including the date hereof to but not including the Termination Date or such earlier date on which the Commitments shall terminate as provided herein. "Commonly Controlled Entity": an entity, whether or not incorporated, which is under common control with the Company within the meaning of Section 4001 of ERISA or is part of a group which includes the Company and which is treated as a single employer under Section 414 of the Code. "Company": as defined in the recitals hereof. "Consent and Confirmation": the Consent and Confirmation to be executed and delivered by Capstone and AEI, substantially in the form of Exhibit C. "Consolidated Cash Interest Expense": for any period, (a) the amount which would, in conformity with GAAP, be set forth opposite the caption "interest expense" or any like caption on a consolidated income statement of the Company and its Subsidiaries minus (b) the amount of non-cash interest (including interest paid by the issuance of additional securities) included in such amount. "Consolidated Net Income": for any fiscal period, the consolidated net income (or loss) of the Company and its Subsidiaries, determined on a consolidated basis in accordance with GAAP. "Consolidated Net Worth": at a particular date, all amounts which would be included under shareholders' equity on a consolidated balance sheet of the Company and its Subsidiaries determined on a consolidated basis in accordance with GAAP. "Consolidated Total Capitalization": at a particular date, the sum of (a) Consolidated Net Worth plus (b) Consolidated Total Debt as at such date. "Consolidated Total Debt": all Indebtedness of the Company and its Subsidiaries (excluding Indebtedness of the Company owing to any of its Subsidiaries or Indebtedness of any Subsidiary of the Company owing to the Company or any other Subsidiary of the Company), as determined on a consolidated basis in accordance with GAAP. "Contractual Obligation": as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound. "Credit Documents": this Agreement, the Notes, the Applications, the Subsidiary Guarantees and the Subordination Agreement. "Default": any of the events specified in Section 8, whether or not any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied. "Dollars" and "$": dollars in lawful currency of the United States of America. "Domestic Subsidiary": as to any Person, a Subsidiary of such Person organized under the laws of the United States or a political subdivision thereof. "Environmental Laws": any and all applicable foreign, Federal, state, local or municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees, requirements of any Governmental Authority or other Requirements of Law (including, without limitation, common law) regulating, relating to or imposing liability or standards of conduct concerning protection of human health or the environment, as now or may at any time hereafter be in effect. "ERISA": the Employee Retirement Income Security Act of 1974, as amended from time to time. "Eurocurrency Reserve Requirements": for any day as applied to a Eurodollar Loan, the aggregate (without duplication) of the rates (expressed as a decimal fraction) of reserve requirements in effect on such day (including, without limitation, basic, supplemental, marginal and emergency reserves under any regulations of the Board of Governors of the Federal Reserve System or other Governmental Authority having jurisdiction with respect thereto) dealing with reserve requirements prescribed for eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of such Board) maintained by a member bank of such System. "Eurodollar Base Rate": with respect to each day during each Interest Period pertaining to a Eurodollar Loan, the rate per annum equal to the rate at which Chemical is offered Dollar deposits at or about 10:00 A.M., New York City time, two Business Days prior to the beginning of such Interest Period in the interbank eurodollar market where the eurodollar and foreign currency and exchange operations in respect of its Eurodollar Loans are then being conducted for delivery on the first day of such Interest Period for the number of days comprised therein and in an amount comparable to the amount of its Eurodollar Loan to be outstanding during such Interest Period. "Eurodollar Loans": Loans the rate of interest applicable to which is based upon the Eurodollar Rate. "Eurodollar Rate": with respect to each day during each Interest Period pertaining to a Eurodollar Loan, a rate per annum determined for such day in accordance with the following formula (rounded upward to the nearest 1/100th of 1%): Eurodollar Base Rate 1.00 - Eurocurrency Reserve Requirements "Event of Default": any of the events specified in Section 8, provided that any requirement for the giving of notice, the lapse of time, or both, or any other condition, has been satisfied. "Existing Collateral": as defined in the recitals hereof. "Existing Subsidiary Guarantees": as defined in the recitals hereof. "Fee Letters": the collective reference to (i) the fee letter, dated as of December 9, 1993 among Chemical, Bankers Trust and the Company and (ii) the fee letter, dated as of December 9, 1993, between Chemical and the Company, each as amended, supplemented or otherwise modified from time to time. "Financing Lease": any lease of property, real or personal, the obligations of the lessee in respect of which are required in accordance with GAAP to be capitalized on a balance sheet of the lessee. "GAAP": generally accepted accounting principles in the United States of America in effect from time to time. "Governmental Authority": any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Governing Documents": as to any Person, the certificate or articles of incorporation and by- laws or other organizational or governing documents of such Person. "Guarantee Obligation": as to any Person (the "guaranteeing person"), any obligation of (a) the guaranteeing person or (b) another Person (including, without limitation, any bank under any letter of credit) to induce the creation of which the guaranteeing person has issued a reimbursement, counterindemnity or similar obligation, in either case guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or other obligations (the "primary obligations") of any other third Person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, any obligation of the guaranteeing person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (1) for the purchase or payment of any such primary obligation or (2) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the owner of any such primary obligation against loss in respect thereof; provided, however, that the term Guarantee Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guarantee Obligation of any guaranteeing person shall be deemed to be the lower of (a) an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee Obligation is made and (b) the maximum amount for which such guaranteeing person may be liable pursuant to the terms of the instrument embodying such Guarantee Obligation, unless such primary obligation and the maximum amount for which such guaranteeing person may be liable are not stated or determinable, in which case the amount of such Guarantee Obligation shall be such guaranteeing person's maximum reasonably anticipated liability in respect thereof as determined by the Company in good faith. "Guarantor": any Person delivering a Subsidiary Guarantee pursuant to this Agreement. "Hazardous Materials": any hazardous materials, hazardous wastes, hazardous constituents, hazardous or toxic substances, including, without limitation, asbestos, gasoline and any other petroleum products (including crude oil or any fraction thereof), polychlorinated biphenyls and ureaformaldehyde insulation defined or regulated as such in or under any Environmental Law. "Hedging Agreements": (a) Interest Rate Agreements and (b) any swap, futures, forward or option agreements or other agreements or arrangements designed to limit or eliminate the risk and/or exposure of a Person to fluctuations in currency exchange rates. "Hedging Banks": any Bank or any of its subsidiaries or affiliates which from time to time enter into Hedging Agreements with the Company or any of its Subsidiaries. "Indebtedness": of any Person at any date, without duplication, (a) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services (other than current trade liabilities incurred in the ordinary course of business and payable in accordance with customary practices), (b) any other indebtedness of such Person which is evidenced by a note, bond, debenture or similar instrument, (c) all obligations of such Person under Financing Leases, (d) all obligations of such Person in respect of letters of credit, banker's acceptances or similar obligations issued or created for the account of such Person, (e) all liabilities arising under Hedging Agreements of such Person, (f) all Guarantee Obligations of such Person, and (g) all liabilities secured by any Lien on any property owned by such Person even though such Person has not assumed or otherwise become liable for the payment thereof. "Insolvency": with respect to any Multiemployer Plan, the condition that such Plan is insolvent within the meaning of Section 4245 of ERISA. "Insolvent": pertaining to a condition of Insolvency. "Intercompany Indebtedness": Indebtedness of the Company to any Domestic Subsidiary and Indebtedness of any Domestic Subsidiary to the Company or any other Subsidiary. "Intercreditor Agreement": as defined in the recitals hereof. "Interest Payment Date": (a) as to any ABR Loan, the last day of each March, June, September and December to occur while such Loan is outstanding, (b) as to any Eurodollar Loan having an Interest Period of three months or less, the last day of such Interest Period, and (c) as to any Eurodollar Loan having an Interest Period longer than three months or 90 days, respectively, each day which is three months or 90 days, respectively, or a whole multiple thereof, after the first day of such Interest Period and the last day of such Interest Period. "Interest Period": with respect to any Eurodollar Loan: (i) initially, the period commencing on the borrowing or conversion date, as the case may be, with respect to such Eurodollar Loan and ending one, two, three or six months thereafter, as selected by the Company in its notice of borrowing or notice of conversion, as the case may be, given with respect thereto; and (ii) thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such Eurodollar Loan and ending one, two, three or six months thereafter, as selected by the Company by irrevocable notice to the Administrative Agent not less than three Business Days prior to the last day of the then current Interest Period with respect thereto; provided that, all of the foregoing provisions relating to Interest Periods are subject to the following: (1) if any Interest Period would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Interest Period into another calendar month in which event such Interest Period shall end on the immediately preceding Business Day; (2) any Interest Period that would otherwise extend beyond the Termination Date shall end on the Termination Date; (3) any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of a calendar month; and (4) the Company shall select Interest Periods so as not to require a payment or prepayment of any Eurodollar Loan during an Interest Period for such Loan. "Interest Rate Agreement": any interest rate protection agreement, interest rate future, interest rate option, interest rate swap, interest rate cap or other interest rate hedge or arrangement under which the Company is a party or a beneficiary. "Issuing Bank": Chemical, in its capacity as issuer of any Letter of Credit. "L/C Commitment": $20,000,000. "L/C Fee Payment Date": the last day of each March, June, September, and December. "L/C Obligations": at any time, an amount equal to the sum of (a) the aggregate then undrawn and unexpired amount of the then outstanding Letters of Credit and (b) the aggregate amount of drawings under Letters of Credit which have not then been reimbursed pursuant to subsection 3.5(a). "L/C Participants": the collective reference to all the Banks other than the Issuing Bank. "Letters of Credit": as defined in subsection 3.1(a). "Lien": any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge or other security interest or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement and any Financing Lease having substantially the same economic effect as any of the foregoing). "Loan": any loan made by any Bank pursuant to this Agreement, including, without limitation, the Swing Line Loans. "Loan Parties": the Company and each Subsidiary of the Company which is a party to a Credit Document. "Majority Banks": at any time, Banks the Commitment Percentages of which aggregate more than 50%. "Material Adverse Effect": a material adverse effect on (a) the business, operations, property, condition (financial or otherwise) or prospects of the Company and its Subsidiaries taken as a whole, (b) the ability of the Company or Capstone to perform its obligations under this Agreement, the Notes or other Credit Documents or (c) the validity or enforceability of this Agreement, any of the Notes, any Application or any of the other Credit Documents or the rights or remedies of the Administrative Agent, the Collateral Agent, the Agents or the Banks hereunder or thereunder. "Materials of Environmental Concern": any gasoline or petroleum (including crude oil or any fraction thereof) or petroleum products or any hazardous or toxic substances, materials or wastes, defined or regulated as such in or under any Environmental Law, including, without limitation, asbestos, polychlorinated biphenyls and urea-formaldehyde insulation. "Minority Interests": the portion of the Voting Stock of any Subsidiary not owned, directly or indirectly, by the Company and/or by one or more Subsidiaries of the Company. "Moody's": Moody's Investors Service, Inc. "Multiemployer Plan": a Plan which is a multiemployer plan as defined in Section 4001(a)(3) of ERISA. "1992 Private Placement Notes": the $75,000,000 Senior Secured Notes issued by the Company, which are secured by the Existing Collateral pari passu with the Existing Banks, as any of the same may be amended, supplemented, endorsed or otherwise modified from time to time. "Non-Excluded Taxes": as defined in subsection 2.19. "Note Purchase Agreement": the Senior Note Purchase Agreement, dated as of December 29, 1992, among the Company and the respective financial institutions party thereto as purchasers, as the same may be amended, supplemented or otherwise modified from time to time. "Notes": the collective reference to the Revolving Credit Notes and the Swing Line Notes. "Participant": as defined in subsection 10.6(b). "Participating Creditor": as defined in the Intercreditor Agreement. "PBGC": the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA. "Person": an individual, partnership, corporation, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature. "Plan": at a particular time, any employee benefit plan which is covered by ERISA and in respect of which the Company or a Commonly Controlled Entity is (or, if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA. "Properties": as defined in subsection 4.20(a). "Ratings": the implied senior unsecured debt ratings of the Company in effect from time to time by Moody's, S&P or a similar rating agency. "Register": as defined in subsection 10.6(d). "Regulation U": Regulation U of the Board of Governors of the Federal Reserve System as in effect from time to time. "Reimbursement Obligation": the obligation of the Company to reimburse the Issuing Bank pursuant to subsection 3.5(a) for amounts drawn under Letters of Credit. "Reorganization": with respect to any Multiemployer Plan, the condition that such plan is in reorganization within the meaning of Section 4241 of ERISA. "Replacement Bank": as defined in subsection 2.20(b). "Reportable Event": any of the events set forth in Section 4043(b) of ERISA, other than those events as to which the thirty day notice period is waived under subsections .13, .14, .16, .18, .19 or .20 of PBGC Reg. Section 2615. "Required Banks": at any time, Banks the Commitment Percentages of which aggregate at least 66-2/3%. "Requirement of Law": as to any Person, the Certificate of Incorporation and By-Laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. "Responsible Officer": as to any Person, the chief executive officer, the chairman of the board, the president, the chief financial officer, the chief accounting officer, any senior vice president or the treasurer of such Person. "Restricted Payments": as defined in subsection 7.5. "Retiring Banks": as defined in the recitals hereof. "Revolving Credit Loans": as defined in subsection 2.1 and including, as to the Swing Line Banks, the Swing Line Loans. "Revolving Credit Note": as defined in subsection 2.2. "Rights Agreement": the Rights Agreement, dated as of March 2, 1988, between the Company and Chemical Bank, as successor by merger to Manufacturers Hanover Trust Company, as rights agent, as amended, supplemented or otherwise modified from time to time. "Single Employer Plan": any Plan which is covered by Title IV of ERISA, but which is not a Multiemployer Plan. "S&P": Standard & Poor's Corporation. "Spoerle Electronic": Spoerle Electronic Handelsgesellschaft MBH & Co., a German corporation. "Subordinated Debentures": the Company's 5- 3/4% Convertible Subordinated Debentures due 2002. "Subordinated Indebtedness": Indebtedness outstanding under the Subordinated Debentures or covered by the Subordination Agreement. "Subordination Agreement": as defined in the recitals hereof. "Subsidiary": as to any Person, a corporation, partnership or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of the Company. "Subsidiary Guarantee": each of the Existing Subsidiary Guarantees and each other Subsidiary Guarantee substantially similar in form to the Existing Guarantees to be executed and delivered from time to time by any other Domestic Subsidiary that accounts for more than 5% of Total Assets at any date, as the same may be amended, supplemented or otherwise modified from time to time. "Swing Line Banks": Chemical and Bankers Trust acting in their capacities as the swing line banks pursuant to Section 2. "Swing Line Limit": the amount of Revolving Credit Loans which a Swing Line Bank will make available on a swing line basis pursuant to subsection 2.4, not to exceed for each Swing Line Bank an aggregate principal amount at any one time outstanding of $7,500,000, or $15,000,000 in the aggregate for both Swing Line Banks. "Swing Line Loan Participation Certificate": a certificate substantially in the form of Exhibit D. "Swing Line Loans": as defined in subsection 2.4. "Swing Line Note": as defined in subsection 2.5. "Swing Line Participation Amount": as defined in subsection 2.7(c). "Termination Date": January 27, 1998. "Total Assets": at a particular date, the assets of the Company and its Subsidiaries, determined on a consolidated basis in accordance with GAAP. "Total Revenues": at a particular date, the revenues of the Company and its Subsidiaries, determined on a consolidated basis in accordance with GAAP. "Tranche": the collective reference to Eurodollar Loans the then current Interest Periods with respect to all of which begin on the same date and end on the same later date (whether or not such Loans shall originally have been made on the same day). "Transferee": as defined in subsection 10.6(f). "Type": as to any Loan, its nature as an ABR Loan or a Eurodollar Loan. "UCC": the Uniform Commercial Code as from time to time in effect in the relevant jurisdiction. "Uniform Customs": the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No. 500 as the same may be amended from time to time. "Voting Stock": the capital stock of any Person of any class or classes, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of members of the board of directors (or Persons performing similar functions) of such Person. 1.2 Other Definitional Provisions. (a) Unless otherwise specified therein, all terms defined in this Agreement shall have the defined meanings when used in the Notes or any certificate or other document made or delivered pursuant hereto. (b) As used herein and in the Notes, and any certificate or other document made or delivered pursu- ant hereto, accounting terms relating to the Company and its Subsidiaries not defined in subsection 1.1 and accounting terms partly defined in subsection 1.1, to the extent not defined, shall have the respective meanings given to them under GAAP. (c) The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, subsection, Schedule and Exhibit referen- ces are to this Agreement unless otherwise specified. (d) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. (e) The phrases "to the knowledge of the Company" and "of which any Subsidiary is aware" and phrases of similar import when used in this Agreement shall mean to the actual knowledge of a Responsible Officer of the Company or any such Subsidiary, as the case may be. 1.3. Accounting Determinations. Unless otherwise specified herein, all accounting determi- nations for purposes of calculating or determining compliance with the terms found in subsection 1.1 or the standards and covenants found in subsection 7.1 and otherwise to be made under this Agreement shall be made in accordance with GAAP applied on a basis consistent in all material respects with that used in preparing the financial statements delivered to the Administra- tive Agent on the Closing Date. If GAAP shall change from the basis used in preparing the financial state- ments delivered to the Administrative Agent on the Closing Date, the certificates required to be delivered pursuant to subsection 6.1 demonstrating compliance with the covenants contained herein shall set forth calculations setting forth the adjustments necessary to demonstrate how the Company is in compliance with the financial covenants based upon GAAP as in effect on the Closing Date. SECTION 2. AMOUNT AND TERMS OF COMMITMENTS 2.1 Revolving Credit Commitments. (a) Subject to the terms and conditions hereof, each Bank severally agrees to make revolving credit loans ("Revolving Credit Loans") to the Company from time to time during the Commitment Period in an aggregate principal amount at any one time outstanding which, when added to such Bank's Commitment Percentage of the then outstanding L/C Obligations, does not exceed the amount of such Bank's Commitment. During the Commit- ment Period the Company may use the Commitments by borrowing, prepaying the Revolving Credit Loans in whole or in part, and reborrowing, all in accordance with the terms and conditions hereof. (b) The Revolving Credit Loans may from time to time be (i) Eurodollar Loans, (ii) ABR Loans or (iii) a combination thereof, as determined by the Company and notified to the Administrative Agent in accordance with subsections 2.3 and 2.6, provided that no Revolving Credit Loan shall be made as a Eurodollar Loan after the day that is one month prior to the Termination Date. 2.2 Revolving Credit Notes. The Revolving Credit Loans made by each Bank shall be evidenced by a promissory note of the Company, substantially in the form of Exhibit A, with appropriate insertions as to payee, date and principal amount (a "Revolving Credit Note"), payable to the order of such Bank and in a principal amount equal to the lesser of (a) the amount of the initial Commitment of such Bank and (b) the aggregate unpaid principal amount of all Revolving Credit Loans made by such Bank, with interest thereon as prescribed by subsection 2.13. Each Bank is hereby authorized to, record the date, Type and amount of each Revolving Credit Loan made by such Bank, each continua- tion thereof, each conversion of all or a portion thereof to another Type pursuant to subsection 2.11, the date and amount of each payment or prepayment of principal thereof and, in the case of Eurodollar Loans, the length of each Interest Period and the Eurodollar Rate with respect thereto, on the schedules annexed to and constituting a part of its Revolving Credit Note, and any such recordation shall constitute prima facie evidence of the accuracy of the information so recorded, provided that the failure of any Bank to make any such recordation (or any error in such recordation) shall not affect the obligations of the Company here- under or under such Note. Each Revolving Credit Note shall (x) be dated the Closing Date, (y) be stated to mature on the Termination Date and (z) provide for the payment of interest in accordance with subsection 2.13. 2.3 Procedure for Revolving Credit Borrowing. The Company may borrow under the Commit- ments during the Commitment Period on any Business Day, provided that the Company shall give the Administrative Agent irrevocable notice (which notice must be received by the Administrative Agent prior to 12:00 Noon, New York City time, (a) three Business Days prior to the requested Borrowing Date, if all or any part of the requested Revolving Credit Loans are to be initially Eurodollar Loans, or (b) on the requested Borrowing Date, otherwise), specifying (i) the amount to be borrowed, (ii) the requested Borrowing Date, (iii) whether the borrowing is to be of Eurodollar Loans, ABR Loans or a combination thereof and (iv) if the borrow- ing is to be entirely or partly of Eurodollar Loans, the amount of such Type of Loan and the length of the initial Interest Period therefor. Each borrowing under the Commitments shall be in an amount equal to (x) in the case of ABR Loans, $100,000 or a whole multiple of $100,000 in excess thereof (or, if the then Available Commitments are less than $100,000, such lesser amount) and (y) in the case of Eurodollar Loans, $4,000,000 or a whole multiple of $100,000 in excess thereof. Upon receipt of any such notice from the Company, the Admin- istrative Agent shall promptly notify each Bank there- of. Each Bank will make the amount of its pro rata share (based on its Commitment Percentage) of each borrowing available to the Administrative Agent for the account of the Company at the office of the Administra- tive Agent specified in subsection 10.2 prior to 2:00 P.M., New York City time, on the Borrowing Date re- quested by the Company in funds immediately available to the Administrative Agent. Such borrowing will then be made available to the Company by the Administrative Agent crediting the account of the Company on the books of such office with the aggregate of the amounts made available to the Administrative Agent by the Banks and in like funds as received by the Administrative Agent. Revolving Credit Loans shall not be deemed to have been made until the Administrative Agent makes the proceeds of such Loans available to the Company in accordance with the preceding sentence. 2.4 Swing Line Loans. Subject to the terms and conditions hereof, each Swing Line Bank agrees to make loans to the Company on a swing line basis (col- lectively, the "Swing Line Loans": individually, a "Swing Line Loan") from time to time during the Commitment Period in an aggregate principal amount at any one time outstanding not to exceed the Swing Line Limit of such Swing Line Bank; provided, that (i) in no event may the Company have outstanding at any time Loans and L/C Obligations in an amount greater than the aggregate Commitments of all the Banks then in effect and (ii) in no event may the aggregate outstanding principal amount of Swing Line Loans and Revolving Credit Loans of any Swing Line Bank exceed the Commit- ment of such Swing Line Bank then in effect. All Swing Line Loans shall be made as ABR Loans and may not be converted into Eurodollar Loans. During the Commitment Period, the Company may borrow and prepay the Swing Line Loans, in whole or in part, all in accordance with the terms and conditions hereof. 2.5 Swing Line Notes. The Swing Line Loans made by each Swing Line Bank shall be evidenced by a promissory note of the Company, substantially in the form of Exhibit B (a "Swing Line Note"), with appropri- ate insertions as to date and principal amount, payable to the order of the applicable Swing Line Bank and in a principal amount equal to the lesser of (a) the amount of the initial Swing Line Limit of such Swing Line Bank and (b) the aggregate unpaid principal amount of all Swing Line Loans made by the Swing Line Bank, with interest thereon as prescribed by subsection 2.13. Each Swing Line Bank is hereby authorized to record the date and the amount of each Swing Line Loan made by such Swing Line Bank and the date and amount of each payment or prepayment of principal thereof, on the schedules annexed to and constituting a part of such Swing Line Note and any such recordation shall consti- tute prima facie evidence of the accuracy of the information so recorded, provided that the failure of either Swing Line Bank to make any such recordation (or any error in such recordation) shall not affect the obligations of the Company hereunder or under such Note. Each Swing Line Note shall (a) be dated the Closing Date, (b) be stated to mature on the Termina- tion Date and (c) provide for the payment of interest in accordance with subsection 2.13. 2.6 Procedure for Swing Line Borrowing. Subject to the Swing Line Limit, the Company may borrow Swing Line Loans during the Commitment Period on any Business Day prior to 2:00 P.M., New York City time. The Swing Line Banks may, subject to the terms and conditions hereof and in connection with the Company's cash management system, make available the full amount of all daily borrowing needs of the Company in the form of Swing Line Loans, without requiring that the Company give the Administrative Agent notice with respect to such borrowing and without giving each Bank prior notice of the proposed borrowing and its proportionate share thereof. On each Borrowing Date each Swing Line Bank shall make available to the Administrative Agent for the account of the Company at the office of the Administrative Agent specified in subsection 10.2 an amount in immediately available funds equal to the amount of the Swing Line Loan to be made by each such Swing Line Bank. The proceeds of the requested Swing Line Loans will then be made available to the Company by the Administrative Agent on such Borrowing Date by crediting the account of the Company on the books of such office with the aggregate amount made available to the Administrative Agent by the Swing Line Banks and in like funds received by the Administrative Agent. Swing Line Loans shall not be deemed to have been made until the Administrative Agent makes the proceeds of such Loans available to the Company in accordance with the preceding sentence. 2.7 Allocating Swing Line Loans; Swing Line Loan Participations. (a) The Swing Line Banks, at any time and from time to time in their sole and absolute discretion, may, on behalf of the Company (and the Company hereby irrevocably directs the Swing Line Banks to act on its behalf), on two Business Day's notice to each Bank given by the Swing Line Banks no later than 11:00 A.M., New York City time, on such Business Day, direct each Bank to make, and each Bank (including each Swing Line Bank in its capacity as a Bank having a Commitment) hereby agrees to make, a Revolving Credit Loan pursuant to subsection 2.1, in an amount equal to such Bank's Commitment Percentage of the aggregate amount of the Swing Line Loans outstanding on the date of such notice. Unless any of the events described in Section 8(h) shall have occurred (in which case the procedures of subsection 2.7(c) shall apply), each Bank shall make the amount of such Revolving Credit Loan available to the Administrative Agent at its office set forth in subsection 10.2 in immediately available funds, not later than 11:00 A.M., New York City time, one Business Day after the date of such notice. The proceeds of such Revolving Credit Loans shall be im- mediately applied by the Administrative Agent to repay the Swing Line Loans, pro rata according to the out- standing Swing Line Loans held by each Swing Line Bank. Effective on the day such Revolving Credit Loans are made, the portion of the Swing Line Loans so paid shall no longer be outstanding as Swing Line Loans, shall no longer be due under the Swing Line Notes and shall be due under the respective Revolving Credit Notes of the Banks in accordance with their respective Revolving Credit Commitment Percentages. The Company authorizes the Swing Line Banks to charge the Company's accounts with the Administrative Agent (up to the amount availa- ble in each such account) in order to immediately pay the amount of such Swing Line Loans to the extent amounts received from the Banks are not sufficient to repay in full such Swing Line Loans. (b) Notwithstanding anything herein to the contrary, the Swing Line Banks shall not make any Swing Line Loans if a Default or an Event of Default shall have occurred and be continuing or would result there- from. (c) If prior to the time a Revolving Credit Loan would have otherwise been made pursuant to sub- section 2.7(a), one of the events described in Section 8(h) shall have occurred, each Bank (other than the Swing Line Banks) shall, on the date such Revolving Credit Loan was to have been made pursuant to the notice referred to in subsection 2.7(a) (the "Refunding Date"), purchase an undivided participating interest in outstanding Swing Line Loans in an amount equal to (i) its Revolving Credit Commitment Percentage times (ii) the aggregate principal amount of Swing Line Loans then outstanding which were to have been repaid with Revolving Credit Loans (the "Swing Line Participation Amount"). On the Refunding Date, each Bank shall transfer to the Swing Line Banks, in immediately available funds, such Bank's Swing Line Participation Amount and upon receipt thereof the Swing Line Banks shall deliver to such Bank a Swing Line Loan Participa- tion Certificate dated the date of the Swing Line Banks' receipt of such funds and in an amount equal to the Swing Line Participation Amount. (d) Whenever, at any time after the Swing Line Banks have received from any Bank such Bank's Swing Line Participation Amount, the Swing Line Banks receive any payment on account of the Swing Line Loans, the Swing Line Banks will distribute to such Bank its Swing Line Participation Amount (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Bank's participa- ting interest was outstanding and funded); provided, however, that in the event that such payment received by the Swing Line Banks is required to be returned, such Bank will return to the Swing Line Banks any portion thereof previously distributed to it by the Swing Line Banks. (e) Each Bank's obligation to make Revolving Credit Loans pursuant to subsection 2.7(a) and to purchase participating interests pursuant to subsection 2.7(c) shall be absolute and unconditional and shall not be affected by any circumstance, including, without limitation, (i) any set-off, counterclaim, recoupment, defense or other right which such Bank or the Company may have against the Swing Line Banks, the Company or any other Person, as the case may be, for any reason whatsoever; (ii) the occurrence or continuance of a Default or an Event of Default; (iii) any adverse change in the condition (financial or otherwise) of the Company or any of its Subsidiaries; (iv) any breach of this Agreement or any other Credit Document by the Company, any of its Subsidiaries or any Bank; or (v) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. 2.8 Commitment Fee. (a) The Company agrees to pay to the Administrative Agent for the account of each Bank a commitment fee for the period from and including the first day of the Commitment Period to, but excluding, the Termination Date, computed at the Commitment Fee Rate on the average daily amount of the Available Commitment of such Bank during the period for which payment is made, payable quarterly in arrears on the last day of each March, June, September and December and on the Termination Date or such earlier date as the Commitments shall terminate as provided herein, commencing on the first of such dates to occur after the date hereof; it being understood that, for purposes of determining such commitment fee for each Bank other than the Swing Line Bank, but only if no Swing Line Loan Participation Certificate shall have been issued to such Bank, the aggregate principal amount of the Swing Line Loans then outstanding shall not be included in determining the Available Commitment of each such Bank. (b) The Company agrees to pay each of Chemical and Bankers Trust, for its own account, such other fees in the amounts and on the dates set forth respectively in the Fee Letters. 2.9 Termination or Reduction of Commitments. The Company shall have the right, upon not less than three Business Days' notice to the Administrative Agent, to terminate the Commitments or, from time to time, to reduce the amount of the Commitments. Any such reduction shall be in an amount equal to $5,000,000 or a whole multiple thereof and shall reduce permanently the Commitments then in effect and shall reduce the Commitments of the Banks pro rata in accordance with their respective Commitment Percenta- ges; provided that no such termination or reduction shall be permitted if, after giving effect thereto and to any prepayments of the Revolving Credit Loans and Swing Line Loans made on the effective date thereof, the aggregate principal amount of the Revolving Credit Loans and Swing Line Loans then outstanding, when added to the then outstanding L/C Obligations, would exceed the Commitments then in effect; and provided further that the Commitments may not be reduced to an amount less than $50,000,000 unless they are terminated in full. 2.10 Optional Prepayments. The Company may, at any time and from time to time prepay the Loans, in whole or in part, without premium or penalty (except for any and all amounts owing pursuant to subsection 2.21), provided, that the Company shall give to the Administrative Agent irrevocable notice of such pre- payment not later than (a) 10:00 A.M., New York City time, two Business Days before the date of prepayment (in the case of prepayment of Eurodollar Loans) or (b) 12:00 Noon, New York City time, on the date of pre- payment (in the case of prepayment of ABR Loans), specifying the date and amount of prepayment and whether the prepayment is of Eurodollar Loans, ABR Loans or a combination thereof, and, if a combination thereof, the amount allocable to each. In addition, the Company may at any time and from time to time, prepay the Swing Line Loans, in whole or in part, without premium or penalty, upon irrevocable notice (which notice must be received by the Administrative Agent not later than 2:00 P.M., New York City time, on the proposed date of prepayment) specifying the date and amount of prepayment. Upon receipt of any such notice the Administrative Agent shall promptly notify each Bank thereof, in the case of prepayments of Revolving Credit Loans, or the Swing Line Banks, in the case of prepayments of Swing Line Loans. If any such notice is given by the Company, the amount specified in such notice shall be due and payable on the date speci- fied therein, together with any amounts payable pursu- ant to subsection 2.21. Subject to subsection 2.12, partial prepayments shall be in an aggregate principal amount of $100,000 or a whole multiple of $50,000 in excess thereof. 2.11 Conversion and Continuation Options. (a) The Company may elect from time to time to convert Eurodollar Loans to ABR Loans, by giving the Adminis- trative Agent at least two Business Days' prior irrevo- cable notice of such election, provided that any such conversion of Eurodollar Loans may only be made on the last day of an Interest Period with respect thereto. The Company may elect from time to time to convert ABR Loans to Eurodollar Loans by giving the Administrative Agent at least three Business Days' prior irrevocable notice of such election. Any such notice of conversion to Eurodollar Loans shall specify the length of the initial Interest Period therefor. Upon receipt of any such notice the Administrative Agent shall promptly notify each Bank thereof. If the requested conversion of ABR Loans to Eurodollar Loans is not a Business Day, such conversion shall be on the next succeeding Busi- ness Day. All or any part of outstanding Eurodollar Loans and ABR Loans may be converted as provided here- in, provided that (i) no Loan may be converted into a Eurodollar Loan when any Event of Default has occurred and is continuing and the Administrative Agent has or the Majority Banks have determined that such a con- version is not appropriate, (ii) any such conversion may only be made if, after giving effect thereto, subsection 2.12 would not be contravened and (iii) no Loan may be converted into a Eurodollar Loan after the date that is one month or 30 days prior to the Termination Date. (b) Any Eurodollar Loans may be continued as such upon the expiration of the then current Interest Period with respect thereto by the Company giving notice to the Administrative Agent, in accordance with the applicable provisions of the term "Interest Period" set forth in subsection 1.1, of the length of the next Interest Period to be applicable to such Loans, provided that no Eurodollar Loan may be continued as such (i) when any Event of Default has occurred and is continuing and the Administrative Agent has or the Majority Banks have determined that such a continuation is not appropriate or (ii) if, after giving effect thereto, subsection 2.12 would be contravened or (iii) after the date that is one month or 30 days prior to the Termination Date and provided, further, that if the Company shall fail to give any required notice as described above in this paragraph or if such continua- tion is not permitted pursuant to the preceding proviso such Loans shall be automatically converted to ABR Loans on the last day of such then expiring Interest Period. 2.12 Minimum Amounts and Number of Tranches. All borrowings, conversions and continuations of Loans hereunder and all selections of Interest Periods here- under shall be in such amounts and be made pursuant to such elections so that, after giving effect thereto (i) the aggregate principal amount of the Loans comprising each Tranche shall be equal to $4,000,000 or a whole multiple of $100,000 in excess thereof and (ii) no more than ten Tranches shall be outstanding at any one time. 2.13 Interest Rates and Payment Dates. (a) Each Eurodollar Loan shall bear interest for each day during each Interest Period with respect thereto at a rate per annum equal to the Eurodollar Rate determined for such day plus the Applicable Margin. (b) Each ABR Loan shall bear interest at a rate per annum equal to the ABR plus the Applicable Margin. (c) If all or a portion of (i) the principal amount of any Loan, (ii) any interest payable thereon or (iii) any commitment fee payable hereunder shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), such overdue amount shall bear interest at a rate per annum which is (x) in the case of overdue principal, the rate that would other- wise be applicable thereto pursuant to the foregoing provisions of this subsection plus 2% or (y) in the case of overdue interest, fees or other amounts payable hereunder, the rate described in paragraph (b) of this subsection plus 2%, in each case from the date of such non-payment until such amount is paid in full (whether such payment is made before or after a judgment has been entered). (d) Interest shall be payable in arrears on each Interest Payment Date, provided that interest accruing pursuant to paragraph (c) of this subsection shall be payable from time to time on demand. 2.14 Computation of Interest and Fees. (a) Commitment fees, Letter of Credit commissions and, whenever it is calculated on the basis of ABR, interest shall be calculated on the basis of a 365- (or 366-, as the case may be) day year for the actual days elapsed; and, otherwise, interest shall be calculated on the basis of a 360-day year for the actual days elapsed. The Administrative Agent shall as soon as practicable notify the Company and the Banks of each determination of a Eurodollar Rate. Any change in the interest rate on a Loan resulting from a change in the ABR, the Eurocurrency Reserve Requirements, the C/D Assessment Rate, the C/D Reserve Percentage or a Rating shall become effective as of the opening of business on the day on which such change becomes effective. The Administrative Agent shall as soon as practicable notify the Company and the Banks of the effective date and the amount of each such change in interest rate. (b) Each determination of an interest rate by the Administrative Agent pursuant to any provision of this Agreement shall be conclusive and binding on the Company and the Banks in the absence of manifest error. The Administrative Agent shall, at the request of the Company, deliver to the Company a statement showing the quotations used by the Administrative Agent in determining any interest rate pursuant to subsection 2.13(a). 2.15 Inability to Determine Interest Rate. If prior to the first day of any Interest Period: (a) the Administrative Agent shall have determined (which determination shall be conclu- sive and binding upon the Company) that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Eurodollar Rate for such Interest Period, or (b) the Administrative Agent shall have received notice from the Majority Banks that the Eurodollar Rate determined or to be determined for such Interest Period will not adequately and fairly reflect the cost to such Banks (as conclusively certified by such Banks) of making or maintaining their affected Loans during such Interest Period, the Administrative Agent shall give telecopy or tele- phonic notice thereof to the Company and the Banks as soon as practicable thereafter. If such notice is given (x) any Eurodollar Loans, as the case may be, requested to be made on the first day of such Interest Period shall be made as ABR Loans, (y) any Loans that were to have been converted on the first day of such Interest Period to Eurodollar Loans shall be converted to or continued as ABR Loans and (z) any outstanding Eurodollar Loans shall be converted, on the first day of such Interest Period, to ABR Loans. Until such notice has been withdrawn by the Administrative Agent, no further Eurodollar Loans shall be made or continued as such, nor shall the Company have the right to convert ABR Loans to Eurodollar Loans. 2.16 Pro Rata Treatment and Payments. (a) Except as set forth in subsection 2.20, each borrowing by the Company from the Banks hereunder (other than Swing Line Loans), each payment by the Company on account of any commitment fee hereunder and any reduc- tion of the Commitments of the Banks shall be made pro rata according to the respective Commitment Percentages of the Banks. All borrowings of Swing Line Loans shall be made by and allocated to the Swing Line Banks ac- cording to their respective shares of the total Swing Line Limit. Except as set forth in subsection 2.20, each payment (including each prepayment) by the Company on account of principal of and interest on the Loans shall be made pro rata according to the respective outstanding principal amounts of the Loans then held by the Banks. All payments (including prepayments) to be made by the Company hereunder and under the Notes, whether on account of principal, interest, fees or otherwise, shall be made without set-off or counter- claim and shall be made prior to 2:00 P.M., New York City time, on the due date thereof to the Administra- tive Agent, for the account of the Banks, at the Administrative Agent's office specified in subsection 10.2, in Dollars and in immediately available funds. The Company shall be deemed to have discharged its obligation to make any payment to any Bank when it has made such payment to the Administrative Agent in accordance with the terms of this Agreement. The Administrative Agent shall distribute such payments to the Banks promptly upon receipt in like funds as re- ceived. If any payment hereunder (other than payments on the Eurodollar Loans) becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day, and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension. If any payment on a Eurodollar Loan becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day unless the result of such extension would be to extend such payment into another calendar month, in which event such payment shall be made on the immediately preceding Business Day. (b) Unless the Administrative Agent shall have been notified in writing by any Bank prior to a borrowing that such Bank will not make the amount that would constitute its Commitment Percentage of such borrowing available to the Administrative Agent, the Administrative Agent may assume that such Bank is making such amount available to the Administrative Agent, and the Administrative Agent may, in reliance upon such assumption, make available to the Company a corresponding amount. If such amount is not made available to the Administrative Agent by the required time on the Borrowing Date therefor, such Bank shall pay to the Administrative Agent, on demand, such amount with interest thereon at a rate equal to the daily average Federal Funds Effective Rate for the period until such Bank makes such amount immediately available to the Administrative Agent. A certificate of the Administrative Agent submitted to any Bank with respect to any amounts owing under this subsection shall be conclusive in the absence of manifest error. If such Bank's Commitment Percentage of such borrowing is not made available to the Administrative Agent by such Bank within three Business Days of such Borrowing Date, the Administrative Agent shall also be entitled to recover such amount with interest thereon at the rate per annum applicable to ABR Loans hereunder, on demand, from the Company. Nothing contained in this subsection 2.16(b) shall relieve any Bank which has failed to make available its Commitment Percentage of any borrowing hereunder from its obligation to do so in accordance with the terms hereof. 2.17 Illegality. Notwithstanding any other provision herein, if the adoption of or any change in any Requirement of Law or in the interpretation or application thereof shall make it unlawful for any Bank or any corporation controlling such Bank or from which such Bank obtains funding or credit to make or maintain Eurodollar Loans as contemplated by this Agreement, (a) the commitment of such Bank hereunder to make Euro- dollar Loans, continue Eurodollar Loans as such and convert ABR Loans to Eurodollar Loans shall forthwith be cancelled and (b) such Bank's Loans then outstanding as Eurodollar Loans, if any, shall be converted auto- matically to ABR Loans on the respective last days of the then current Interest Periods with respect to such Loans or within such earlier period as required by law. If any such conversion of a Eurodollar Loan occurs on a day which is not the last day of the then current Interest Period with respect thereto, the Company shall pay to such Bank such amounts, if any, as may be required pursuant to subsection 2.21. 2.18 Requirements of Law. (a) If the adoption of or any change in any Requirement of Law (other than the Certificate of Incorporation and By- Laws or other organizational or governing documents of the Banks) or in the interpretation or application thereof or compliance by any Bank with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the date hereof: (i) shall subject any Bank or any corporation controlling such Bank or from which such Bank obtains funding or credit to any tax of any kind whatsoever with respect to this Agree- ment, any Note, any Letter of Credit or any Eurodollar Loan made by it, or change the basis of taxation of payments to such Bank or such corpora- tion in respect thereof (except for Non-Excluded Taxes covered by subsection 2.19 (including taxes excluded under the first sentence of subsection 2.19(a)) and changes in the rate of tax on the overall net income of such Bank or such corpora- tion); (ii) shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of such Bank or any corporation controlling such Bank or from which such Bank obtains funding or credit which is not otherwise included in the determination of the Eurodollar Rate hereunder; or (iii) shall impose on such Bank or any corporation controlling such Bank or from which such Bank obtains funding or credit any other condition; and the result of any of the foregoing is to increase the cost to such Bank or such corporation, by an amount which such Bank or such corporation deems to be material, of making, converting into, continuing or maintaining Eurodollar Loans or issuing or participa- ting in Letters of Credit or to reduce any amount receivable hereunder in respect thereof, then, in any such case, the Company shall promptly pay such Bank, within five Business Days after its demand, any additional amounts necessary to compensate such Bank for such increased cost or reduced amount receivable, together with interest on each such amount from the date due until payment in full at a rate per annum equal to the ABR plus 2%. If any Bank becomes entitled to claim any additional amounts pursuant to this sub- section, it shall promptly notify the Company, through the Administrative Agent, of the event by reason of which it has become so entitled. A certificate as to any additional amounts payable pursuant to this sub- section submitted by such Bank, through the Administra- tive Agent, to the Company shall be conclusive in the absence of manifest error. This covenant shall survive the termination of this Agreement and the payment of the Notes and all other amounts payable hereunder. (b) If any Bank shall have determined that the adoption of or any change in any Requirement of Law regarding capital adequacy or in the interpretation or application thereof or compliance by such Bank or any corporation controlling such Bank or from which such Bank obtains funding or credit with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority made subsequent to the date hereof does or shall have the effect of reducing the rate of return on such Bank's or such corporation's capital as a conse- quence of its obligations hereunder or under any Letter of Credit to a level below that which such Bank or such corporation could have achieved but for such change or compliance (taking into consideration such Bank's or such corporation's policies with respect to capital adequacy) by an amount deemed by such Bank to be material, then from time to time, after submission by such Bank to the Company (with a copy to the Administrative Agent) of a written request therefore (which written request shall be conclusive in the absence of manifest error), the Company shall pay to such Bank such additional amount or amounts as will compensate such Bank for such reduction. 2.19 Taxes. (a) All payments made by the Company under this Agreement and the Notes shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority, excluding, in the case of the Administrative Agent and each Bank, (i) net income taxes, capital taxes, doing business taxes and franchise taxes imposed on the Administrative Agent or such Bank, as the case may be, as a result of a present or former connection between the jurisdiction of the government or taxing authority imposing such tax and the Administrative Agent or such Bank (excluding a connection arising solely from such Agent or such Bank having executed, delivered or performed its obligations or received a payment under, or enforced, this Agree- ment or the Notes) or any political subdivision or taxing authority thereof or therein, (ii) taxes required to be withheld because of a failure to deliver any certificate described in this subsection 2.19 or subsection 10.6 for any reason other than a change in any Requirement of Law after, in the case of this subsection 2.19 the date hereof or, in the case of subsection 10.6(g), the date of transfer and (iii) any and all United States withholding tax payable with respect to payments under this Agreement and the Notes other than such withholding taxes imposed as a result of any change in or amendment to the laws of the United States affecting taxation (including any regulation or ruling proposed or promulgated by a taxing authority thereof and any treaty provisions) or any change in the official application, enforcement or interpretation of such laws, regulations, rulings or treaties or any other action taken by a taxing authority or a court of competent jurisdiction, which change, amendment, application, enforcement, interpretation or action becomes effective after the date hereof (all such non-excluded taxes, levies, imposts, duties, charges, fees, deductions and withholdings being hereinafter called "Non-Excluded Taxes"). If any Taxes are required to be withheld from any amounts payable to either Agent or any Bank hereunder or under the Notes, the amounts so payable to such Agent or such Bank shall be increased to the extent necessary to yield to such Agent or such Bank (after payment of all Non-Excluded Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement and the Notes. Whenever any Non- Excluded Taxes are payable by the Company, as promptly as possible thereafter the Company shall send to the Administrative Agent for its own account or for the account of such Bank, as the case may be, a certified copy of an original official receipt received by the Company showing payment thereof. If the Company fails to pay any Non-Excluded Taxes when due to the appropri- ate taxing authority or fails to remit to the Admini- strative Agent the required receipts or other required documentary evidence, the Company shall indemnify the Administrative Agent and such Bank for any incremental taxes, interest or penalties that may become payable by the Administrative Agent or such Bank as a result of any such failure. The agreements in this subsection 2.19(a) shall survive the termination of this Agreement and the payment of the Loans and the Notes and all other amounts payable hereunder. (b) Each Bank that is not incorporated under the laws of the United States of America or a state thereof agrees that it will deliver to the Company and the Administrative Agent (i) two duly completed copies of United States Internal Revenue Service Form 1001 or 4224 or successor applicable form, as the case may be, and (ii) an Internal Revenue Service Form W-8 or W-9 or successor applicable form, as the case may be. Each such Bank also agrees to deliver to the Company and the Administrative Agent two further copies of the said Form 1001 or 4224 and Form W-8 or W-9, or successor applicable forms or other manner of certification, as the case may be, on or before the date that any such form expires or becomes obsolete or after the occur- rence of any event (including, without limitation, a change in such Bank's lending office) requiring a change in the most recent form previously delivered by it to the Company and the Administrative Agent, and such extensions or renewals thereof as may reasonably be requested by the Company or the Administrative Agent, unless in any such case an event (including, without limitation, any change in treaty, law or regu- lation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Bank from duly completing and delivering any such form with respect to it and such Bank so advises the Company and the Administrative Agent. Such Bank shall certify (i) in the case of a Form 1001 or 4224, that it is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes and (ii) in the case of a Form W-8 or W-9, that it is entitled to an exemption from United States backup withholding tax. (c) If any Bank is, in its sole opinion, able to apply for any tax credit, tax deduction or other reduction in tax (a "Tax Benefit") by reason of any increased amount paid by the Company under this subsection 2.19, such Bank will use reasonable efforts to obtain such Tax Benefit and, upon receipt thereof will pay to the Company such amount, not exceeding the increased amount paid by the Company, as it considers, in its sole opinion, to be equal to the net after-tax value to such Bank of the Tax Benefit or such part thereof allocable to such withholding or deduction, having regard to all of such Bank's dealings giving rise to similar credits and to the cost of obtaining the same, less any and all expenses incurred by such Bank in obtaining such Tax Benefit (including any and all professional fees incurred therewith); provided, however, that (i) no Bank shall be obligated by this subsection 2.19 to disclose to the Company any information regarding its tax affairs or computations, (ii) nothing in this subsection 2.19 shall interfere with the right of each Bank to arrange its tax affairs as it deems appropriate and (iii) nothing in this subsection 2.19 shall impose an obligation on a Bank to obtain any Tax Benefit if, in such Bank's sole opinion, to do so would (x) impose undue hardships, burdens or expenditures on such Bank or (y) increase such Bank's exposure to taxation by the jurisdiction in question. 2.20 Company's Options upon Claims for Increased Costs and Taxes. In the event that any Affected Bank shall decline to make Eurodollar Loans pursuant to subsection 2.17 or shall have notified the Company that it is entitled to claim compensation pursuant to subsection 2.18 or 2.19, the Company may exercise any one or both of the following options: (a) The Company may request one or more of the Banks which are not Affected Banks to take over all (but not part) of any Affected Banks's then outstanding Loans and to assume all (but not part) of any Affected Bank's Commitments, if any, and obligations hereunder. If one or more Banks shall so agree in writing (collectively, the "Assenting Banks"; individually, an "Assenting Bank") with respect to an Affected Bank, (i) the Commitments, if any, of each Assenting Bank and the obligations of such Assenting Bank under this Agreement shall be increased by its respective Allocable Share of the Commitments, if any, and of the obligations of such Affected Bank under this Agreement and (ii) each Assenting Bank shall make Loans to the Company, according to such Assenting Bank's respective Allocable Share, in an aggregate principal amount equal to the outstanding princi- pal amount of the Loans of such Affected Bank, on a date mutually acceptable to the Assenting Banks, such Affected Bank and the Company. The proceeds of such Loans, together with funds of the Company, shall be used to prepay the Loans of such Affected Bank, together with all interest accrued thereon and all other amounts owing to such Affected Bank hereunder (including any amounts payable pursuant to subsection 2.21 in connection with such prepay- ment), and, upon such assumption by the Assenting Bank and prepayment by the Company, such Affected Bank shall cease to be a "Bank" for purposes of this Agreement and shall no longer have any obligations or rights hereunder (other than any obligations or rights which according to this Agreement shall survive the termination of this Agreement). (b) The Company may designate a replacement bank (a "Replacement Bank") to assume the Commit- ments, if any, and the obligations of any such Affected Bank hereunder, and to purchase the outstanding Notes of such Affected Bank's and such Affected Bank's rights hereunder and with respect thereto, without recourse upon, or warranty by, or expense to, such Affected Bank (unless such Affected Bank agrees otherwise), for a purchase price equal to the outstanding principal amount of the Loans of such Affected Bank plus (i) all interest accrued and unpaid thereon and all other amounts owing to such Affected Bank hereunder and (ii) any amount which would be payable to such Affected Bank pursuant to subsection 2.21, and upon such assumption and purchase by the Replace- ment Bank, such Replacement Bank shall be deemed to be a "Bank" for purposes of this Agreement and such Affected Bank shall cease to be a "Bank" for purposes of this Agreement and shall no longer have any obligations or rights hereunder (other than any obligations or rights which according to this Agreement shall survive the termination of this Agreement). 2.21 Indemnity. The Company agrees to indemnify each Bank and to hold each Bank harmless from any loss or expense which such Bank may sustain or incur as a consequence of (a) default by the Company in payment when due of the principal amount of or interest on any Eurodollar Loan, (b) default by the Company in making a borrowing of, conversion into or continuation of Eurodollar Loans after the Company has given a notice requesting the same in accordance with the pro- visions of this Agreement, (c) default by the Company in making any prepayment of Eurodollar Loans after the Company has given a notice thereof in accordance with the provisions of this Agreement or (d) the making of a prepayment of Eurodollar Loans on a day which is not the last day of an Interest Period with respect there- to, including, without limitation, in each case, any such loss or expense arising from the reemployment of funds obtained by such Bank or from fees payable to terminate the deposits from which such funds were obtained. Calculation of all amounts payable to a Bank under this subsection 2.21 shall be made as though that Bank had actually funded its relevant Eurodollar Loan through the purchase of a eurodollar deposit bearing interest at the Eurodollar Rate in an amount equal to the amount of such Eurodollar Loan and having a maturity comparable to the Interest Period of such Eurodollar Loan and through the transfer of such Eurodollar deposit from an offshore office of that Bank to a domestic office of that Bank in the United States of America; provided, however, that each Bank may fund each of its Eurodollar Loans in any manner it sees fit and the foregoing assumption shall be utilized only for the calculation of amounts payable under this sub- section 2.21. This covenant shall survive the termina- tion of this Agreement and the payment of the Loans and the Notes and all other amounts payable hereunder. 2.22 Determinations. In making the determi- nations contemplated by Sections 2.18, 2.19 and 2.21, each Bank may make such estimates, assumptions, allocations and the like that such Bank in good faith determines to be appropriate. Upon request of the Company, each Bank shall furnish to the Company, at any time after demand for payment of an amount under sub- section 2.18(a) or 2.21, a certificate outlining in reasonable detail the computation of any amounts owing. Any certificate furnished by a Bank shall be binding and conclusive in the absence of manifest error. 2.23 Change of Lending Office. If an event occurs with respect to any Bank that makes operable the provisions of Section 2.17 or entitles such Bank to make a claim under subsection 2.18 or 2.19, such Bank shall, if requested in writing by the Company, to the extent not inconsistent with such Bank's internal policies, use reasonable efforts to designate another office or offices for the making and maintaining of its Loans the designation of which will eliminate such operability or reduce materially the amount such Bank is so entitled to claim, provided that such designation would not, in the sole discretion of such Bank, result in such Bank incurring any costs unless the Company has agreed to reimburse such Bank therefor. SECTION 3. LETTERS OF CREDIT 3.1 L/C Commitment. (a) Subject to the terms and conditions hereof, the Issuing Bank agrees to issue standby letters of credit ("Letters of Credit") for the account of the Company on any Business Day during the Commitment Period in such form as may be approved from time to time by the Issuing Bank; provided that the Issuing Bank shall have no obligation to issue any Letter of Credit if, after giving effect to such issuance, (i) the L/C Obligations would exceed the L/C Commitment or (ii) the Available Commitment would be less than zero. (b) Each Letter of Credit shall: (i) be denominated in Dollars and shall be a standby letter of credit issued to support obligations of the Company, contingent or other- wise, to provide credit support for workers' compensation, other insurance programs and other corporate purposes consistent with past practices (a "Letter of Credit") and, (ii) expire no later than the earlier of 365 days after its date of issuance and the Termina- tion Date. (c) Each Letter of Credit shall be subject to the Uniform Customs and, to the extent not incon- sistent therewith, the laws of the State of New York. (d) The Issuing Bank shall not at any time be obligated to issue any Letter of Credit hereunder if such issuance would conflict with, or cause the Issuing Bank or any L/C Participant to exceed any limits imposed by, any applicable Requirement of Law. 3.2 Procedure for Issuance of Letters of Credit. The Company may from time to time request that the Issuing Bank issue a Letter of Credit by delivering to the Issuing Bank at its address for notices speci- fied herein an Application therefor, completed to the satisfaction of the Issuing Bank, and such other certificates, documents and other papers and informa- tion as the Issuing Bank may reasonably request. Upon receipt of any Application, the Issuing Bank will process such Application and the certificates, docu- ments and other papers and information delivered to it in connection therewith in accordance with its custo- mary procedures and shall promptly issue the Letter of Credit requested thereby (but in no event shall the Issuing Bank be required to issue any Letter of Credit earlier than five Business Days after its receipt of the Application therefor and all such other certifi- cates, documents and other papers and information relating thereto) by issuing the original of such Letter of Credit to the beneficiary thereof or as otherwise may be agreed by the Issuing Bank and the Company. The Issuing Bank shall furnish a copy of such Letter of Credit to the Company and each Bank promptly following the issuance thereof. 3.3 Fees, Commissions and Other Charges. (a) The Company shall pay to the Administrative Agent a letter of credit commission with respect to each Letter of Credit, computed as follows: (i) such commission payable for the account of the Banks shall be computed at a rate equal to the then Applicable Margin for Eurodollar Loans on the daily average undrawn face amount of such Letter of Credit and shall be payable to the Administrative Agent for the account of the Banks (including the Issuing Bank) pro rata according to their Commitment Percentages; and (ii) such commission payable for the account of the Issuing Bank in its capacity as such shall be computed at a rate equal to 1/8 of 1% per annum on the daily average undrawn face amount of such Letter of Credit. Such commissions shall be payable in arrears on each L/C Fee Payment Date to occur after the date of issuance of each Letter of Credit and on the expiration date of such Letter of Credit and shall be nonrefund- able. (b) In addition to the foregoing fees and commissions, the Company shall pay or reimburse the Issuing Bank for such normal and customary costs and expenses as are incurred or charged by the Issuing Bank in issuing, effecting payment under, amending or other- wise administering any Letter of Credit. (c) The Administrative Agent shall, promptly following its receipt thereof, distribute to the Issuing Bank and the L/C Participants all fees and commissions received by the Administrative Agent for their respective accounts pursuant to this subsection. 3.4 L/C Participations. (a) The Issuing Bank irrevocably agrees to grant and hereby grants to each L/C Participant, and, to induce the Issuing Bank to issue Letters of Credit hereunder, each L/C Parti- cipant irrevocably agrees to accept and purchase and hereby accepts and purchases from the Issuing Bank, on the terms and conditions hereinafter stated, for such L/C Participant's own account and risk, an undivided interest equal to such L/C Participant's Commitment Percentage in the Issuing Bank's obligations and rights under each Letter of Credit issued hereunder and the amount of each draft paid by the Issuing Bank there- under. Each L/C Participant unconditionally and irrevocably agrees with the Issuing Bank that, if a draft is paid under any Letter of Credit for which the Issuing Bank is not reimbursed in full by the Company in accordance with the terms of this Agreement, such L/C Participant shall pay to the Issuing Bank upon demand at the Issuing Bank's address for notices specified herein an amount equal to such L/C Participant's Commitment Percentage of the amount of such draft, or any part thereof, which is not so reimbursed. (b) If any amount required to be paid by any L/C Participant to the Issuing Bank pursuant to sub- section 3.4(a) in respect of any unreimbursed portion of any payment made by the Issuing Bank under any Letter of Credit is paid to the Issuing Bank within three Business Days after the date such payment is due, such L/C Participant shall pay to the Issuing Bank on demand an amount equal to the product of (i) such amount, times (ii) the daily average Federal funds rate, as quoted by the Issuing Bank, during the period from and including the date such payment is required to the date on which such payment is immediately available to the Issuing Bank, times (iii) a fraction the numera- tor of which is the number of days that elapse during such period and the denominator of which is 360. If any such amount required to be paid by any L/C Parti- cipant pursuant to subsection 3.4(a) is not in fact made available to the Issuing Bank by such L/C Participant within three Business Days after the date such payment is due, the Issuing Bank shall be entitled to recover from such L/C Participant, on demand, such amount with interest thereon calculated from such due date at the rate per annum applicable to ABR Loans hereunder. A certificate of the Issuing Bank submitted to any L/C Participant with respect to any amounts owing under this subsection shall be conclusive in the absence of manifest error. (c) Whenever, at any time after the Issuing Bank has made payment under any Letter of Credit and has received from any L/C Participant its pro rata share of such payment in accordance with subsection 3.4(a), the Issuing Bank receives any payment related to such Letter of Credit (whether directly from the Company or otherwise, including by way of set-off or proceeds of collateral applied thereto by the Issuing Bank), or any payment of interest on account thereof, the Issuing Bank will distribute to such L/C Partici- pant its pro rata share thereof; provided, however, that in the event that any such payment received by the Issuing Bank shall be required to be returned by the Issuing Bank, such L/C Participant shall return to the Issuing Bank the portion thereof previously distributed by the Issuing Bank to it. 3.5 Reimbursement Obligation of the Company. (a) The Company agrees to reimburse the Issuing Bank on each date on which the Issuing Bank notifies the Company of the date and amount of a draft presented under any Letter of Credit and paid by the Issuing Bank for the amount of (i) such draft so paid and (ii) any taxes, fees, charges or other costs or expenses incurred by the Issuing Bank in connection with such payment. Each such payment shall be made to the Issuing Bank at its address for notices specified herein in lawful money of the United States of America and in immediately available funds. (b) Interest shall be payable on any and all amounts remaining unpaid by the Company under this subsection from the date such amounts become payable (whether at stated maturity, by acceleration or other- wise) until payment in full at the rate which would be payable on any outstanding ABR Loans which were then overdue. (c) Each drawing under any Letter of Credit shall constitute a request by the Company to the Administrative Agent for a borrowing pursuant to subsection 2.3 of ABR Loans in the amount of such drawing. The Borrowing Date with respect to such borrowing shall be the date of such drawing. 3.6 Obligations Absolute. Company's obligations under this Section 3 shall be absolute and unconditional under any and all circumstances and irrespective of any set-off, counterclaim or defense to payment which the Company may have or have had against the Issuing Bank or any beneficiary of a Letter of Credit. (b) The Company also agrees with the Issuing Bank that the Issuing Bank shall not be responsible for, and the Company's Reimbursement Obligations under subsection 3.5(a) shall not be affected by, among other things, (i) the validity or genuineness of documents or of any endorsements thereon, even though such documents shall in fact prove to be invalid, fraudulent or forged, or (ii) any dispute between or among the Company and any beneficiary of any Letter of Credit or any other party to which such Letter of Credit may be transferred or (iii) any claims whatsoever of the Company against any beneficiary of such Letter of Credit or any such transferee. (c) The Issuing Bank shall not be liable for any error, omission, interruption or delay in transmis- sion, dispatch or delivery of any message or advice, however transmitted, in connection with any Letter of Credit, except for errors or omissions caused by the Issuing Bank's gross negligence or willful misconduct. (d) The Company agrees that any action taken or omitted by the Issuing Bank under or in connection with any Letter of Credit or the related drafts or documents, if done in the absence of gross negligence of willful misconduct and in accordance with the standards of care specified in the Uniform Commercial Code of the State of New York, shall be binding on the Company and shall not result in any liability of the Issuing Bank to the Company. 3.7 Letter of Credit Payments. If any draft shall be presented for payment under any Letter of Credit, the Issuing Bank shall promptly notify the Company of the date and amount thereof. The responsi- bility of the Issuing Bank to the Company in connection with any draft presented for payment under any Letter of Credit shall, in addition to any payment obligation expressly provided for in such Letter of Credit, be limited to determining that the documents (including each draft) delivered under such Letter of Credit in connection with such presentment are in conformity with such Letter of Credit. 3.8 Application. To the extent that any provision of any Application related to any Letter of Credit is inconsistent with the provisions of this Section 3, the provisions of this Section 3 shall apply. SECTION 4. REPRESENTATIONS AND WARRANTIES To induce the Agents, the Administrative Agent and the Banks to enter into this Agreement and to make the Loans and issue or participate in the Letters of Credit, the Company hereby represents and warrants to each Agent, the Administrative Agent and each Bank that: 4.1 Financial Condition. The audited consolidated balance sheets of the Company and its consolidated Subsidiaries as at December 31, 1992 and the related consolidated statements of operations and of cash flows for the fiscal year ended on such date, reported on by Ernst & Young, copies of which have heretofore been furnished to each Bank, present fairly the consolidated financial condition of the Company and its consolidated Subsidiaries as at such date, and the consolidated results of their operations and their consolidated cash flows for the fiscal year then ended. The unaudited consolidated balance sheet of the Company and its consolidated Subsidiaries as at September 30, 1993 and the related unaudited consolidated statements of operations and of cash flows for the nine-month period ended on such date, certified by a Responsible Officer, copies of which have heretofore been furnished to each Bank, present fairly the consolidated financial condition of the Company and its consolidated Subsidiaries as at such date, and the consolidated results of their operations and their consolidated cash flows for the nine-month period then ended (subject to normal year-end audit adjustments). The unaudited consolidating balance sheet of the Company and its consolidated Subsidiaries by principal operating group as at September 30, 1993 and the related unaudited consolidating statements of operations for the nine- month period ended on such date, certified by a Responsible Officer, copies of which have heretofore been furnished to each Bank, present fairly the consolidating financial condition of the Company and its consolidated Subsidiaries by principal operating group as at such date, and the consolidating results of their operations for the nine-month period then ended (subject to normal year-end adjustments). All such financial statements, including the related schedules and notes thereto, have been prepared in accordance with GAAP applied consistently throughout the periods involved (except as approved by such accountants or Responsible Officer, as the case may be, and as disclosed therein). Neither the Company nor any of its consolidated Subsidiaries had, at the date of the most recent balance sheet referred to above, any material Guarantee Obligation, contingent liability or liability for taxes, or any long-term lease or unusual forward or long-term commitment, including, without limitation, any interest rate or foreign currency swap or exchange transaction, which is not reflected in the foregoing statements or referred to in the notes thereto. During the period from September 30, 1993 to and including the date hereof there has been no sale, transfer or other disposition by the Company or any of its consolidated Subsidiaries of any material part of its business or property and no purchase or other acquisition of any business or property (including any Capital Stock of any other Person) material in relation to the consoli- dated financial condition of the Company and its consolidated Subsidiaries at September 30, 1993 (except as otherwise disclosed in writing to the Banks prior to the Closing Date). 4.2 No Change. Since December 31, 1992 there has been no development or event which has had or could reasonably be expected to have a Material Adverse Effect. 4.3 Corporate Existence; Compliance with Law. Each of the Company and its Subsidiaries (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has the corporate power and authority, and the legal right, to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged, (c) is duly qualified as a foreign corporation and in good standing under the laws of each jurisdiction where its owner- ship, lease or operation of property or the conduct of its business requires such qualification, except where the failure to be duly qualified or in good standing could not reasonably be expected to have a Material Adverse Effect, and (d) is in compliance with all Requirements of Law except to the extent that the failure to comply therewith could not, in the aggre- gate, reasonably be expected to have a Material Adverse Effect. 4.4 Corporate Power; Authorization; Enforceable Obligations. The Company and each of its Subsidiaries has the corporate power and authority, and the legal right, to make, deliver and perform the Credit Documents to which it is a party and to borrow hereunder and has taken all necessary corporate action to authorize the borrowings on the terms and conditions of this Agreement, the Notes and the Applications and to authorize the execution, delivery and performance of the Credit Documents to which it is a party. No con- sent or authorization of, filing with, notice to or other act by or in respect of, any Governmental Authority or any other Person is required in connection with the borrowings hereunder or with the execution, delivery, performance, validity or enforceability of the Credit Documents to which it is a party. This Agreement has been, and each other Credit Document to which the Company or any of its Subsidiaries is a party will be, duly executed and delivered on behalf of the Company or such Subsidiary, as the case may be. This Agreement constitutes, and each other Credit Document to which it is a party when executed and delivered will constitute, a legal, valid and binding obligation of the Company or any of its Subsidiaries party thereto enforceable against the Company or such Subsidiary, as the case may be, in accordance with its terms, except as enforceability may be limited by applicable bank- ruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law). 4.5 No Legal Bar. The execution, delivery and performance of the Credit Documents to which the Company or any of its Subsidiaries is a party, the borrowings hereunder and the use of the proceeds thereof will not violate any Requirement of Law or Contractual Obligation of the Company or of any of its Subsidiaries (except for violations of Contractual Obligations which, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect) and will not result in, or require, the creation or imposition of any Lien on any of its or their respective properties or revenues pursuant to any such Requirement of Law or Contractual Obligation, except for the Liens expressly permitted by subsection 7.3. 4.6 No Material Litigation. No litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the know- ledge of the Company, threatened by or against the Company or any of its Subsidiaries or against any of its or their respective properties or revenues (a) with respect to any of the Credit Documents or any of the transactions contemplated hereby or thereby, or (b) which, if adversely determined, would have a Material Adverse Effect. 4.7 No Default. Neither the Company nor any of its Subsidiaries is in default under or with respect to any of its Contractual Obligations in any respect which could reasonably be expected to have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing. 4.8 Ownership of Property; Liens. Each of the Company and its Subsidiaries has good record and marketable title in fee simple to, or a valid leasehold interest in, all its real property, and good title to, or a valid leasehold interest in, all its other property, except where the failure to have such title or such leasehold interest, as the case may be, could not reasonably be expected to have a Material Adverse Effect, and none of such property is subject to any Lien except as permitted by subsection 7.3. 4.9 Intellectual Property. The Company and each of its Subsidiaries owns, or is licensed to use, all domestic and foreign trademarks, tradenames, copyrights, technology, know-how and processes neces- sary for the conduct of its business as currently conducted (the "Intellectual Property") except for those the failure to own or license which could not reasonably be expected to have a Material Adverse Effect. No claim has been asserted and is pending or, to the knowledge of the Company, has been threatened by any Person challenging or questioning the use of any such Intellectual Property or the validity or effectiveness of any such Intellectual Property which could reasonably be expected to have a Material Adverse Effect, nor does the Company know of any valid basis for any such claim. The use of such Intellectual Property by the Company and its Subsidiaries does not infringe on the rights of any Person, except for such claims and infringements that, in the aggregate, could not reasonably be expected to have a Material Adverse Effect. 4.10 No Burdensome Restrictions. No Requirement of Law or Contractual Obligation of the Company or any of its Subsidiaries has or could reasonably be expected to have a Material Adverse Effect. 4.11 Taxes. Each of the Company and its consolidated Subsidiaries has filed or caused to be filed all tax returns which, to the knowledge of the Company, are required to be filed and has paid all taxes shown to be due and payable on said returns or on any assessments made against it or any of its property and all other taxes, fees or other charges imposed on it or any of its property by any Governmental Authority (other than any unfiled tax returns for taxes, and unpaid taxes, fees and other charges, (a) the amount or validity of which are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of the Company or its consolidated Subsidiaries, as the case may be, or (b) which in each case, individually or in the aggregate, would not cause the Company and its consolidated Subsidiaries to have a liability in excess of $2,500,000); no notice of tax Lien has been filed, and, to the knowledge of the Company, no claim is being asserted by any taxing authority, with respect to any such tax, fee or other charge except for claims the amount or validity of which are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of the Company or its consolidated Subsidiaries, as the case may be, and claims for amounts which, in the aggregate, do not exceed $5,000,000. 4.12 Federal Regulations. No part of the proceeds of any Loans will be used for "purchasing" or "carrying" any "margin stock" within the respective meanings of each of the quoted terms under Regulation U of the Board of Governors of the Federal Reserve System as now and from time to time hereafter in effect or for any purpose which violates the provisions of the regulations of such Board of Governors. If requested by any Bank or the Administrative Agent, the Company will furnish to the Administrative Agent and each Bank a statement to the foregoing effect in conformity with the requirements of FR Form U-1 referred to in said Regulation U. 4.13 ERISA. Each Plan which is intended to be qualified under Section 401(a) (or 403(a) as appropriate) of the Code and each related trust agree- ment, annuity contract or other funding instrument which is intended to be tax-exempt under Section 501(a) of the Code is so qualified and tax-exempt and has been so qualified and tax-exempt during the period from its adoption to date. No event has occurred in connection with which the Company or any Commonly Controlled Entity or any Plan, directly or indirectly, could reasonably be expected to be subject to any material liability under ERISA, the Code or any other law, regulation or governmental order or under any agree- ment, instrument, statute, rule of law or regulation pursuant to or under which the Company or a Subsidiary has agreed to indemnify or is required to indemnify any person against liability incurred under, or for a violation or failure to satisfy the requirements of, any such statute, regulation or order. No Reportable Event has occurred during the five-year period prior to the date on which this representation is made or deemed made with respect to any Plan, and each Plan has complied in all material respects with the applicable provisions of ERISA and the Code. The present value of all accrued benefits under each Single Employer Plan maintained by the Company or any Commonly Controlled Entity or for which the Company or any Commonly Controlled Entity has or could have any liability (based on those assumptions used to fund the Plans) did not, as of the last annual valuation date prior to the date on which this representation is made or deemed made, exceed the value of the assets of such Plan allocable to such accrued benefits. Neither the Company nor any Commonly Controlled Entity has had a complete or partial withdrawal from any Multiemployer Plan, and neither the Company nor any Commonly Controlled Entity could reasonably be expected to become subject to any liability under ERISA if the Company or any such Commonly Controlled Entity were to withdraw completely from all Multiemployer Plans as of the valuation date most closely preceding the date on which this representation is made or deemed made. No such Multiemployer Plan is in Reorganization or Insolvent. The present value (determined using actu- arial and other assumptions which are reasonable in respect of the benefits provided and the employees participating) of the unfunded liability of the Company and each Commonly Controlled Entity for benefits under all unfunded retirement or severance plans, programs, policies or other arrangements (including, without limitation, post retirement benefits to be provided to their current and former employees under Plans which are welfare benefit plans (as defined in Section 3(1) of ERISA)), whether or not funded does not, in the aggregate, exceed $5,000,000 (excluding those arrangements set forth on Schedule 4.13). 4.14 Investment Company Act; Other Regulations. Neither the Company nor any Subsidiary of the Company is an "investment company", or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. Neither the Company nor any Subsidiary of the Company is subject to regulation under any Federal or State statute or regulation which limits its ability to incur Indebtedness. 4.15 Subsidiaries. On the Closing Date, the only Subsidiaries of the Company, and the only material partnerships or joint ventures in which the Company or any Subsidiary has an interest, are those set forth on Schedule 4.15. On the Closing Date, the Company owns the percentage of the issued and outstanding Capital Stock or other evidences of the ownership of each Subsidiary, partnership or joint venture set forth on Schedule 4.15 as set forth on such Schedule. On the Closing Date, except as set forth on Schedule 4.15, no such Subsidiary, partnership or joint venture has issued any securities convertible into shares of its Capital Stock. The outstanding stock and securities (or other evidence of ownership) of such Subsidiaries, partnerships or joint ventures owned by the Company and its Subsidiaries are owned by the Company and its Subsidiaries free and clear of all Liens, warrants, options or rights of others of any kind whatsoever except for Liens permitted by subsection 7.3. 4.16 Existing Indebtedness. Schedule 4.16 lists all Indebtedness of the Company and its Subsi- diaries outstanding on the Closing Date and all credit facilities in effect or committed on the Closing Date under which the Company or any of its Subsidiaries could obtain extensions of credit. 4.17 Accuracy and Completeness of Information. No document furnished or statement made in writing to the Banks by the Company in connection with the negotiation, preparation or execution of this Agreement or any of the other Credit Documents contains any untrue statement of a material fact, or omits to state any such material fact necessary in order to make the statements contained therein not misleading, in either case which has not been corrected, supplemented or remedied by subsequent documents furnished or state- ments made in writing to the Banks. All other written information, reports and other papers and data with respect to the Company and its Subsidiaries (other than financial statements), furnished to the Banks by the Company, or on behalf of the Company, were (a) in the case of those not prepared for delivery to the Banks, to the Company's knowledge, at the time the same were so furnished, complete and correct in all material respects for the purposes for which the same were prepared and (b) in the case of those prepared for delivery to the Banks, to the Company's knowledge, complete and correct in all material respects, or have been subsequently supplemented by other information, reports or other papers or data, to the extent necessary to give the Banks a true and accurate knowledge of the subject matter in all material respects, it being understood that financial pro- jections as to future events are not to be viewed as facts and that actual results may differ from projected results. No fact is known to the Company or any of its Subsidiaries which has had or could reasonably be expected to have a Material Adverse Effect, which has not been set forth in the financial statements referred to in subsection 4.1 (or otherwise disclosed in writing to the Banks prior to the Closing Date). 4.18 Purpose of Loans. The proceeds of the Loans shall be used by the Company for working capital purposes in the ordinary course of business and for general corporate purposes of the Company and, to the extent permitted hereunder, its Subsidiaries. 4.19 Senior Indebtedness. The principal of and interest on the Loans and the Notes are and will continue to be within the definition of "Senior Indebtedness" or any similar term under the Subordinated Debentures. 4.20 Environmental Matters. Except as set forth on Schedule 4.20 or insofar as there is no reasonable likelihood of a Material Adverse Effect arising from any combination of facts or circumstances inconsistent with any of the following: (a) The facilities and properties owned or operated by the Company or any of its Subsidiaries (the "Properties") do not contain, and to the best knowledge of the Company or its Subsidiaries, have not previously contained, any Materials of Envi- ronmental Concern in amounts or concentrations which (i) constitute or constituted a violation of, or (ii) could reasonably be expected to give rise to liability under, any Environmental Law. (b) The Properties and all operations at the Properties are in compliance with all applicable Environmental Laws, and there is no contamination at, under or about the Properties or violation of any Environmental Law with respect to the Proper- ties or the business operated by the Company or any of its Subsidiaries (the "Business") which could materially interfere with the continued operation of the Properties. (c) Neither the Company nor any of its Subsidiaries has received any notice of violation, alleged violation, non-compliance, liability or potential liability regarding environmental matters or compliance with Environmental Laws with regard to any of the Properties or the Business, nor does the Company or any of its Subsidiaries have knowledge or reason to believe that any such notice will be received or is being threatened. (d) To the best knowledge of the Company or any of its Subsidiaries, Materials of Environ- mental Concern have not been transported or disposed of from the Properties in violation of, or in a manner or to a location which could reasonably be expected to give rise to liability under, any Environmental Law, nor have any Materials of Environmental Concern been generated, treated, stored or disposed of at, on or under any of the Properties in violation of, or in a manner that could reasonably be expected to give rise to liability under, any applicable Environmental Law. (e) No judicial proceeding or governmental or administrative action is pending or, to the knowledge of the Company or any of its Subsidi- aries, threatened, under any Environmental Law to which the Company or any Subsidiary is or will be named as a party with respect to the Properties or the Business, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements outstanding under any Environmental Law with respect to the Properties or the Business. (f) There has been no release or threat of release of Materials of Environmental Concern at or from the Properties, or arising from or related to the operations of the Company or any Subsidiary in connection with the Properties or otherwise in connection with the Business, in violation of or in amounts or in a manner that could reasonably give rise to liability under Environmental Laws. SECTION 5. CONDITIONS PRECEDENT 5.1 Conditions to Closing Date. The occurrence of the Closing Date, and the agreement of each Bank to make the initial extension of credit requested to be made by it on or after the Closing Date, shall be subject to the satisfaction, on or prior to the Closing Date, of the following conditions precedent: (a) Credit Documents. The Administrative Agent shall have received (i) this Agreement, executed and delivered by a duly authorized officer of the Company, with a counterpart for each Bank, (ii) for the account of each Bank, a Revolving Credit Note conforming to the require- ments hereof and executed by a duly authorized officer of the Company, (iii) for the account of each Swing Line Bank, a Swing Line Note conforming to the requirements hereof and executed by a duly authorized officer of the Company and (iv) each Subsidiary Guarantee, together with the related Consent and Confirmation, executed and delivered by a duly authorized officer of the Guarantor party thereto, with a counterpart or a conformed copy for each Bank. (b) Borrowing Certificate. The Administra- tive Agent shall have received with a counterpart for each Bank, a certificate of the Company, dated the Closing Date, substantially in the form of Exhibit E, with appropriate insertions and attach- ments, satisfactory in form and substance to the Administrative Agent, executed by the President or any Vice President and the Secretary or any Assistant Secretary of the Company. (c) Corporate Proceedings of the Company. The Administrative Agent shall have received, with a counterpart for each Bank, a copy of the resolu- tions, in form and substance satisfactory to the Administrative Agent, of the Board of Directors of the Company authorizing (i) the execution, deli- very and performance of this Agreement, the Notes and the other Credit Documents to which it is a party and (ii) the borrowings contemplated here- under, certified by the Secretary or an Assistant Secretary of the Company as of the Closing Date, which certificate shall be in form and substance satisfactory to the Administrative Agent and shall state that the resolutions thereby certified have not been amended, modified, revoked or rescinded. (d) Company Incumbency Certificate. The Administrative Agent shall have received, with a counterpart for each Bank, a Certificate of the Company, dated the Closing Date, as to the incumbency and signature of the officers of the Company executing any Credit Document satisfactory in form and substance to the Administrative Agent, executed by the President or any Vice President and the Secretary or any Assistant Secretary of the Company. (e) Corporate Proceedings of Subsidiaries. The Administrative Agent shall have received, with a counterpart for each Bank, a copy of the resolu- tions, in form and substance satisfactory to the Administrative Agent, of the Board of Directors of each Subsidiary of the Company which is a party to a Credit Document authorizing the execution, delivery and performance of the Credit Documents to which it is a party certified by the Secretary or an Assistant Secretary of each such Subsidiary as of the Closing Date, which certificate shall be in form and substance satisfactory to the Admini- strative Agent and shall state that the resolu- tions thereby certified have not been amended, modified, revoked or rescinded. (f) Subsidiary Incumbency Certificates. The Administrative Agent shall have received, with a counterpart for each Bank, a certificate of each Subsidiary of the Company which is a party to a Credit Document, dated the Closing Date, as to the incumbency and signature of the officers of such Subsidiaries executing any Credit Document, satisfactory in form and substance to the Admini- strative Agent, executed by the President or any Vice President and the Secretary or any Assistant Secretary of each such Subsidiary. (g) Corporate Documents. The Administrative Agent shall have received, with a counterpart for each Bank, true and complete copies of the certi- ficate of incorporation and by-laws of the Company and each Subsidiary which is a party to a Credit Document, certified as of a date not more than 30 days prior to the Closing Date by the Secretary of State of the jurisdiction of incorporation and as of the Closing Date by the Secretary or an Assis- tant Secretary of the Company or such Subsidiary, as the case may be, and in the case of the by- laws, as of the Closing Date as complete and correct copies thereof by the Secretary or an Assistant Secretary of the Company or such Subsidiary, as the case may be. (h) Certificate as to Conditions for Release of Existing Security Interests Under Section 8.15 of Note Purchase Agreement. The Administrative Agent shall have received a certificate of the Company, dated the Closing Date, with a counter- part for the Collateral Agent and each Bank, stating that: (i) no Default or Event of Default (each as defined in the Note Purchase Agreement) has occurred and is continuing, (ii) the ratio of Consolidated Operating Cash Flow (as defined in the Note Purchase Agreement) to Consolidated Finance Charges (as defined in the Note Purchase Agreement) for the period consisting of the four most recently ended full fiscal quarters is greater than 2.0 to 1.0, (iii) the ratio of Consolidated Total Debt (as defined in the Note Purchase Agreement) to Total Consolidated Capitalization (as defined in the Note Purchase Agreement) does not exceed 50%, (iv) the Company is in compliance with Sections 8.10 and 8.11 of the Note Purchase Agreement, measured in each case as of the last day of the most recently ended fiscal quarter as if the release had been effective prior thereto, and (v) the 1992 Private Placement Notes, as an unsecured issue, has obtained a rating designation of "2" or better from the National Association of Insurance Commissioners and such rating has not been subsequently withdrawn, which certificate shall be satisfactory otherwise in form and substance to the Administrative Agent and executed by the President or any Vice President and the Secretary or any Assistant Secretary of the Company. (i) Rating of the 1992 Private Placement Notes. The Administrative Agent shall have received, with a counterpart for each Bank, a copy of the report of the National Association of Insurance Commissioners referred to in item (h)(v) of this subsection 5.1. (j) Termination of Existing Security Interests. The Administrative Agent shall have received, with a counterpart for the Collateral Agent and each Bank, written instructions signed by each Participating Creditor party to the Intercreditor Agreement, (i) irrevocably instructing the Collateral Agent, pursuant to Section 7.3 of the Intercreditor Agreement, to release all Existing Collateral held by the Collateral Agent pursuant to the Intercreditor Agreement and (ii) authorizing the Collateral Agent and each Guarantor to execute and deliver a Consent and Confirmation relating to its respective Subsidiary Guarantee. (k) Release of Existing Collateral. The Administrative Agent shall have received evidence that the Collateral Agent has released the Existing Collateral as contemplated by paragraph (j) of this subsection 5.1. (l) Fees and Expenses. The Administrative Agent shall have received (i) the fees to be received on the Closing Date referred to in subsection 2.8(b) and (ii) payment for all expenses to be paid on the Closing Date pursuant to this Agreement and the Commitment Letter. (m) Legal Opinions. The Administrative Agent shall have received, with a counterpart for each Bank, the following executed legal opinions: (i) the executed legal opinion of Winthrop, Stimson, Putnam & Roberts, counsel to the Company, substantially in the form of Exhibit F-1, with such other changes therein as shall be requested or approved by the Administrative Agent; and (ii) the executed legal opinion of Robert E. Klatell, general counsel of the Company, substantially in the form of Exhibit F-2, with such other changes therein as shall be requested or approved by the Administra- tive Agent. Each such legal opinion shall cover such other matters incident to the transactions contemplated by this Agreement and the other Credit Documents as the Administrative Agent may reasonably require; (n) No Material Litigation. No litigation, inquiry, injunction or restraining order shall be pending, entered or threatened (including any proposed statute, rule or regulation) which in the reasonable judgment of any Bank could have a Material Adverse Effect. (o) Payment of Amounts under Existing Credit Agreement. All principal of and interest on the Loans (as defined in the Existing Credit Agree- ment) and all other amounts owing under or in connection with the Existing Credit Agreement shall have been paid in full. (p) Additional Matters. All corporate and other proceedings, and all documents, instruments and other legal matters in connection with the transactions contemplated by this Agreement and the other Credit Documents shall be reasonably satisfactory in form and substance to the Admin- istrative Agent. 5.2 Conditions to Each Extension of Credit. The agreement of each Bank to make any extension of credit requested to be made by it on any date (inclu- ding, without limitation, its initial extension of credit) is subject to the satisfaction of the following conditions precedent: (a) Representations and Warranties. Each of the representations and warranties made by the Company and its Subsidiaries in or pursuant to the Credit Documents shall be true and correct in all material respects on and as of such date as if made on and as of such date. (b) No Default. No Default or Event of Default shall have occurred and be continuing on such date or after giving effect to the Loans requested to be made on such date. Each borrowing by and Letter of Credit issued on behalf of the Company hereunder shall constitute a representa- tion and warranty by the Company as of the date of such Loan and/or Letter of Credit that the conditions contained in this subsection 5.2 have been satisfied. SECTION 6. AFFIRMATIVE COVENANTS The Company hereby agrees that, so long as the Commitments remain in effect, any Note or any Letter of Credit remains outstanding and unpaid or any other amount is owing to any Bank, any Agent or the Administrative Agent hereunder, the Company shall and (except in the case of delivery of financial informa- tion, reports and notices) shall cause each of its Subsidiaries to: 6.1 Financial Statements. Furnish to each Bank: (a) as soon as available, but in any event within 120 days after the end of each fiscal year of the Company, a copy of the audited consolidated balance sheet of the Company and its consolidated Subsidiaries as at the end of such year and the related consolidated statements of operations and shareholders equity and of cash flows for such year, setting forth in each case in comparative form the figures for the previous year, reported on without a "going concern" or like qualification or exception, or qualification arising out of the scope of the audit, by Ernst & Young or other independent certified public accountants of nationally recognized standing reasonably acceptable to the Majority Banks; (b) as soon as available, but in any event within 120 days after the end of each fiscal year of the Company, the unaudited consolidating balance sheet of the Company and its consolidated Subsidiaries by principal operating group as at the end of such year and the related unaudited consolidating statements of operations of the Company and its consolidated Subsidiaries by principal operating group for such year, setting forth in each case in comparative form the figures for the previous year, certified pursuant to subsection 6.2(b) by a Responsible Officer as fairly presenting the consolidating financial condition and results of operations of the Company and its consolidated Subsidiaries by principal operating group; (c) as soon as available, but in any event within 60 days after the end of each of the first three quarterly periods of each fiscal year of the Company, the unaudited consolidated balance sheet of the Company and its consolidated Subsidiaries as at the end of such quarter and the related unaudited consolidated statements of operations and shareholders' equity and of cash flows of the Company and its consolidated Subsidiaries for such quarter and the portion of the fiscal year through the end of such quarter, setting forth in each case in comparative form the figures for such quarter of the previous year, certified by a Responsible Officer as fairly presenting in all material respects when considered in relation to the consolidated financial statements of the Company and its consolidated Subsidiaries (subject to normal year-end audit adjustments); provided that the Company may in lieu of furnishing such unaudited consolidated balance sheet furnish to each Bank its Form 10-Q filed with the Securities and Exchange Commission or any successor or analogous Governmental Authority for the relevant quarterly period; and (d) as soon as available, but in any event within 60 days after the end of each of the first three quarterly periods of each fiscal year of the Company, the unaudited consolidating balance sheet of the Company and its consolidated Subsidiaries by principal operating group as at the end of such quarter and the related unaudited consolidating statements of operations of the Company and its consolidated Subsidiaries by principal operating group for such quarter and the portion of the fiscal year through the end of such quarter, in the case of the unaudited consolidating balance sheet setting forth in comparative form the figures for the previous year (but not the corresponding figures for such quarter of the previous year) and in the case of the statements of operations setting forth in comparative form the figures for such quarter of the previous year, certified by a Responsible Officer as fairly presenting the consolidating financial condition and results of operations of the Company and its consolidated Subsidiaries by principal operating group (subject to normal year-end audit adjust- ments); the financial statements to be furnished pursuant to this subsection 6.1 fairly present the consolidated (or consolidating by principal operating group, as appropriate) financial posi- tion and results of operations of the Company and its consolidated Subsidiaries in accordance with GAAP (subject to in the case of subsections 6.1(c) and (d), normal year-end audit adjustments and the absence of complete footnotes) applied consistent- ly throughout the periods reflected therein and with prior periods (except as approved by such accountants or Responsible Officer, as the case may be, and disclosed therein). 6.2 Certificates; Other Information. Furnish to each Bank: (a) concurrently with the delivery of the financial statements referred to in subsection 6.1(a), a certificate of the independent certified public accountants reporting on such financial statements stating that in making the examination necessary therefor no knowledge was obtained of any Default or Event of Default, except as specified in such certificate; (b) concurrently with the delivery of the financial statements referred to in subsections 6.1(a) and 6.1(b), a certificate of a Responsible Officer substantially in the form of Exhibit G; (c) concurrently with the delivery of the financial statements referred to in subsection 6.1(c), a certificate of a Responsible Officer stating that, to the best of such Officer's knowledge, the Company has observed and performed all of its covenants and other agreements contained in the Credit Agreement, the Notes and the other Credit Documents to which it is a party to be observed or performed by it, and that such Officer has obtained no knowledge of any Default or Event of Default except as specified therein; (d) as soon as delivered, a copy of the letter, addressed to the Company, of the certified public accountants who prepared the financial statements referred to in subsection 6.1(a) for such fiscal year and otherwise referred to as a "management letter"; (e) not later than 60 days after the end of each fiscal year of the Company beginning with the fiscal year of the Company ending on December 31, 1993, a copy of (i) the projections by the Company of the operating budget and cash flow budget of the Company and its Subsidiaries by principal operating group for the immediately succeeding fiscal year on a quarterly basis and for each of the next succeeding fiscal years to the Termina- tion Date on an annual basis and (ii) the projected consolidated balance sheet of the Company and its consolidated Subsidiaries by principal operating group as at the last day of such succeeding fiscal quarter and year, as applicable, such projections and projected consolidated balance sheet to be accompanied by a certificate of a Responsible Officer to the effect that such projections and projected consolidated balance sheet have been prepared in good faith in accordance with the Company's normal accounting procedures based upon assumptions which were reasonable at the time such projections and balance sheet are furnished to the Banks and that, to such Officer's knowledge, they are correct and not misleading in any material respect; (f) within five days after the same are sent, copies of all financial statements and reports which the Company sends to its stock- holders generally, and within five days after the same are filed, copies of all financial statements and reports which the Company or any of its Subsi- diaries may make to, or file with, the Securities and Exchange Commission or any successor or analogous Governmental Authority; and (g) promptly, such additional documents, instruments, legal opinions or financial and other information as the Administrative Agent or any Bank may from time to time reasonably request. 6.3 Payment of Obligations. Pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all its obligations of whatever nature, including, without limitation, all obligations in respect of taxes, except where the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of the Company or its Subsidiaries, as the case may be, or where the failure to pay, discharge or otherwise satisfy could not reasonably be expected to have a Material Adverse Effect. 6.4 Conduct of Business and Maintenance of Existence. Continue to engage in business of the same general type as now conducted by it and preserve, renew and keep in full force and effect its corporate existence and take all reasonable action to maintain all rights, privileges and franchises necessary or desirable in the normal conduct of its business except as otherwise permitted pursuant to subsection 7.4; comply with all Contractual Obligations and Require- ments of Law except to the extent that failure to comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect. 6.5 Maintenance of Property; Insurance. Keep all property useful and necessary in its business in good working order and condition, except where the failure to do so could not reasonably be expected to have a Material Adverse Effect; maintain with finan- cially sound and reputable insurance companies insurance on all its property in at least such amounts and against at least such risks (but including in any event public liability, product liability and business interruption) as are usually insured against in the same general area by companies engaged in the same or a similar business; and furnish to each Bank, upon written request, full information as to the insurance carried. 6.6 Inspection of Property; Books and Records; Discussions. Keep proper books of records and account in which the entries are, in all material respects, full, true and correct in conformity with sound business practice and all Requirements of Law shall be made of all dealings and transactions in relation to its business and activities; and, upon reasonable notice under the circumstances, permit representatives of the Administrative Agent or any Bank to visit and inspect any of its properties and examine and make abstracts from any of its books and records at any reasonable time and as often as may reasonably be desired and to discuss the business, operations, properties and financial and other condition of the Company and its Subsidiaries with officers and employ- ees of the Company and its Subsidiaries and with its independent certified public accountants. 6.7 Notices. Promptly, after the Company becomes aware thereof, give notice to the Administra- tive Agent and each Bank of: (a) the occurrence of any Default or Event of Default; (b) any (i) default or event of default under any Contractual Obligation of the Company or any of its Subsidiaries or (ii) litigation, investigation or proceeding which may exist at any time between the Company or any of its Subsidi- aries and any Governmental Authority, which in either case, if not cured or if adversely determined, as the case may be, could reasonably be expected to have a Material Adverse Effect or cause a Default or an Event of Default; (c) any litigation or proceeding affecting the Company or any of its Subsidiaries (i) in which the amount involved is $5,000,000 or more and not covered by insurance or (ii) in which injunctive or similar relief is sought which could reasonably be expected to have a Material Adverse Effect; (d) the following events: (i) the occur- rence or expected occurrence of any Reportable Event with respect to any Plan, a failure to make any required contribution to a Plan, the creation of any Lien in favor of the PBGC or a Plan or any withdrawal from, or the termination, Reorganiza- tion or Insolvency of, any Multiemployer Plan or (ii) the institution of proceedings or the taking of any other action by the PBGC or the Company or any Commonly Controlled Entity or any Multi- employer Plan with respect to the withdrawal from, or the terminating (other than a standard termina- tion under Section 4041(b) of ERISA), Reorganiza- tion or Insolvency of, any Plan; (e) any change, development or event involving a prospective change, which has had or could reasonably be expected to have a Material Adverse Effect; and Each notice pursuant to this subsection shall be accompanied by a statement of a Responsible Officer setting forth details of the occurrence referred to therein and stating what action the Company proposes to take with respect thereto. 6.8 Environmental Laws. (a) Comply with, and take all reasonable efforts to ensure compliance by all tenants and subtenants, if any, in all material respects with, all applicable Environmental Laws and obtain and comply with and maintain, and undertake all reasonable efforts to ensure that all tenants and subtenants obtain and comply in all material respects with and maintain, any and all licenses, approvals, notifications, registrations or permits required by applicable Environmental Laws. (b) Conduct and complete all investigations, studies, sampling and testing, and all remedial, removal and other actions required under Environmental Laws and promptly comply in all material respects with all lawful orders and directives of all Governmental Authorities regarding Environmental Laws except to the extent that the same are being contested in good faith by appropriate proceedings and the pendency of such proceedings could not reasonably be expected to have a Material Adverse Effect. (c) Defend, indemnify and hold harmless the Administrative Agent and the Banks and their respective employees, agents, officers and directors, from and against any claims, demands, penalties, fines, liabili- ties, settlements, damages, costs and expenses of whatever kind or nature known or unknown, contingent or otherwise, arising out of, or in any way relating to the violation of, noncompliance with or liability under, any Environmental Law applicable to the operations of the Company or the Properties, or any orders, requirements or demands of Governmental Authorities related thereto, including, without limitation, attorney's and consultant's fees, investi- gation and laboratory fees, response costs, court costs and litigation expenses, except to the extent that any of the foregoing arise out of the gross negligence or willful misconduct of the party seeking indemnification therefor. This indemnity shall survive the termination of this Agreement and the payment of the Loans and the Notes and all other amounts payable hereunder. 6.9 Additional Subsidiary Guarantees. In the event that any Domestic Subsidiary which is not a Guarantor shall account for more than 5% of Total Assets at any date, take all actions necessary to cause such Domestic Subsidiary to execute and deliver a Subsidiary Guarantee within 60 days of the occurrence of such event. SECTION 7. NEGATIVE COVENANTS The Company hereby agrees that, so long as the Commitments remain in effect, any Note or any Letter of Credit remains outstanding and unpaid or any other amount is owing to any Bank, any Agent or the Administrative Agent hereunder: 7.1 Financial Condition Covenants. The Company shall not: (a) Maintenance of Indebtedness. Permit Consolidated Total Debt at any time to exceed an amount equal to 55% of Consolidated Total Capitalization. (b) Maintenance of Net Worth. Permit Consolidated Net Worth at any time to be less than an amount equal to the sum of $350,000,000 plus 40% of cumulative Consolidated Net Income for the fiscal quarter commencing October 1, 1993 and for each fiscal quarter thereafter (without subtrac- tion for any fiscal quarter during which Consolidated Net Income is a negative number). (c) Interest Coverage. Permit for any period of four consecutive fiscal quarters at any time the ratio of Adjusted Consolidated EBITDA to Consolidated Cash Interest Expense to be less than 3.0 to 1.0. 7.2 Limitation on Indebtedness of Domestic Subsidiaries. The Company shall not permit any of its Domestic Subsidiaries to, and the Domestic Subsidiaries shall not, directly or indirectly, create, incur, assume or suffer to exist any Indebtedness, except (a) Indebtedness in an aggregate amount not to exceed 10% of Consolidated Net Worth and (b) any Intercompany Indebtedness. 7.3 Limitation on Liens. The Company shall not, and shall not permit any of its Domestic Subsidi- aries to, directly or indirectly, create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, except for: (a) Liens for taxes not yet due or which are being contested in good faith by appropriate proceedings, provided that adequate reserves with respect thereto are maintained on the books of the Company or its Domestic Subsidiaries, as the case may be, in conformity with GAAP; (b) carriers', warehousemen's, mechanics', materialmen's, repairmen's or other like Liens arising in the ordinary course of business which are not overdue for a period of more than 60 days or which are being contested in good faith by appropriate proceedings; (c) pledges or deposits in connection with workers' compensation, unemployment insurance and other social security legislation and deposits securing liability to insurance carriers under insurance or self-insurance arrangements; (d) deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obliga- tions of a like nature incurred in the ordinary course of business; (e) easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business which, in the aggregate, are not substantial in amount and which do not in any case materially detract from the value of the property subject thereto or material- ly interfere with the ordinary conduct of the business of the Company or such Domestic Subsidi- ary; and (f) Liens (not otherwise permitted here- under) which secure obligations not exceeding (as to the Company and all Domestic Subsidiaries) $25,000,000 in aggregate amount at any time outstanding. 7.4 Limitation on Fundamental Changes. The Company (a) shall not, and shall not permit any of its Domestic Subsidiaries to, directly or indirectly, enter into any merger, consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer or otherwise dispose of, all or substantially all of its property, business or assets and (b) shall not, and shall not permit any of its Subsidiaries, to make any material change in its present method of conducting business, except: (i) any Subsidiary may be merged or consolidated with or into the Company (provided that the Company shall be the continuing or surviving corporation) or with or into any one or more wholly owned Domestic Subsidiaries or Capstone; and (ii) any Subsidiary may sell, lease, transfer or otherwise dispose of any or all of its assets (upon voluntary liquidation or otherwise) to the Company or any other wholly owned Domestic Subsidiary or Capstone. 7.5 Limitation on Restricted Payments. The Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly declare or pay any dividend (other than dividends payable solely in common stock of the Company) on, or make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, defea- defeasance, retirement or other acquisition of, any shares of any class of Capital Stock of the Company, any Subordinated Indebtedness or any warrants or options or rights to purchase any such Stock, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obli- gations of the Company or any Subsidiary (such declarations, payments, setting apart, purchases, redemptions, defeasances, retirements, acquisitions and distributions being herein called "Restricted Pay- ments"), except that, so long as no Default or Event of Default has occurred and is continuing or would result therefrom, the Company may declare and make Restricted Payments in a cumulative aggregate amount from the date of this Agreement not exceeding $20,000,000 plus 30% of cumulative Consolidated Net Income from and including October 1, 1993. 7.6 Limitation on Negative Pledge Clauses. The Company shall not, and shall not permit any of its Domestic Subsidiaries to, directly or indirectly enter into with any Person other than the Banks pursuant hereto any agreement, other than (a) this Agreement, (b) the Capitalization Documents and (c) any industrial revenue bonds, purchase money mortgages or Financing Leases permitted by this Agreement (in which cases, any prohibition or limitation shall only be effective against the assets financed thereby), which prohibits or limits the ability of the Company or any of its Domestic Subsidiaries to create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired. 7.7 Limitation on Optional Payments; Modifications of Debt Instruments. The Company shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, (a) make any optional payment or prepayment on or redemption (including, without limitation, by making payments to a sinking or analogous fund) or repurchase of any Subordinated Indebtedness except for repurchases of Subordinated Indebtedness permitted by subsection 7.5 or (b) amend, modify or change, or consent or agree to any amendment, modification or change to any of the terms of any Subordinated Indebtedness or any agreement which sets forth the terms of any Subordinated Indebtedness, except amendments, modifications or changes which would not (directly or indirectly) increase the amount of any payment of principal thereof, increase the interest rate or premium payable thereon, increase the amount of fees or any other amounts payable with respect thereto, shorten the scheduled amortization or average weighted life thereof, shorten the date for payment of interest thereon, shorten the final maturity thereof or modify the subordination provisions thereof. SECTION 8. EVENTS OF DEFAULT If any of the following events shall occur and be continuing: (a) The Company shall fail to pay any principal of any Note or any Reimbursement Obli- gation when due (whether at the stated maturity, by acceleration or otherwise) in accordance with the terms thereof or hereof; or the Company shall fail to pay any interest on any Note or any fee or any other amount payable hereunder, within five days after any such interest or other amount becomes due in accordance with the terms thereof or hereof; or (b) Any representation or warranty made or deemed made by the Company or any Subsidiary herein or in any other Credit Document or which is contained in any certificate, document or finan- cial or other statement furnished by it at any time under or in connection with this Agreement or any such other Credit Document shall prove to have been incorrect in any material respect on or as of the date made or deemed made; or default in the observance or performance of any agreement contained in Section 7 and, with respect to subsections 7.2 and 7.3, such default shall continue unremedied for a period of 30 days; or (d) The Company or any Subsidiary shall default in the observance or performance of any other agreement contained in this Agreement or any other Credit Document (other than as provided in paragraphs (a) through (c) of this Section), and such default shall continue unremedied for a period of 30 days after the Company has knowledge thereof; or (e) Any of the Credit Documents shall cease, for any reason, to be in full force and effect, or the Company shall so assert in writing; or (f) The subordination provisions applicable to any Subordinated Indebtedness, for any reason, cease to be in full force and effect, or any Person shall so assert to the Company in writing and the Company shall not promptly contest such assertion; or (g) The Company or any of its consolidated Subsidiaries shall (i) default in any payment of principal of or interest of any Indebtedness (other than the Notes) or in the payment of any Guarantee Obligation, in either case with an outstanding principal amount in excess of $5,000,000 when due beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness or Guarantee Obligation was created; or (ii) default in the observance or performance of any other agreement or condition relating to any such Indebtedness or Guarantee Obligation or contained in any instrument or agreement evidencing, securing or relating there- to, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Indebtedness or beneficiary or beneficiaries of such Guarantee Obligation (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to become due prior to its stated maturity or such Guarantee Obligation to become payable; or (h) (i) The Company or any Subsidiary that accounts for more than 5% of Total Assets at any date shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudi- cate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding- up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or the Company or any such Subsidiary shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against the Company or any such Subsidiary any case, proceeding or other action of a nature referred to in clause (i) above which (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undis- missed, undischarged or unbonded for a period of 60 days; or (iii) there shall be commenced against the Company or any such Subsidiary any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of an order for any such relief which shall not have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry thereof; or (i) (i) Any Person shall engage in any "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302 of ERISA), whether or not waived, shall exist with respect to any Plan or any Lien in favor of the PBGC or a Plan shall arise on the assets of the Company or any Commonly Controlled Entity, (iii) a Reportable Event shall occur with respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate, any Single Employer Plan, which Re- portable Event or commencement of proceedings or appointment of a trustee is, in the reasonable opinion of the Required Banks, likely to result in the termination of such Plan for purposes of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for purposes of Title IV of ERISA, (v) the Company or any Commonly Controlled Entity shall, or in the reasonable opinion of the Required Banks is likely to, incur any liability in connection with a withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan or (vi) any other event or condition shall occur or exist with respect to a Plan; and in each case in clauses (i) through (vi) above, such event or condition, together with all other such events or conditions, if any, could reasonably be expect- ed to subject the Company to any tax, penalty or other liabilities in the aggregate material in relation to the business, operations, property or financial or other condition of the Company; or (j) One or more judgments or decrees shall be entered against the Company or any of its Subsidiaries involving in the aggregate a liability (not paid or fully covered by insurance) of $5,000,000 or more, and all such judgments or decrees shall not have been vacated, discharged, stayed or bonded pending appeal within 60 days from the entry thereof; or for any reason, to be in full force and effect or any Guarantor shall so assert; or (l) A Change in Control shall occur; then, and in any such event, (A) if such event is an Event of Default specified in clause (i) or (ii) of paragraph (h) above with respect to the Company, automatically the Commitments shall immediately terminate and the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement (including, without limitation, all amounts of L/C Obligations, whether or not the bene- ficiaries of the then outstanding Letters of Credit shall have presented the documents required thereunder) and the Notes shall immediately become due and payable, and (B) if such event is any other Event of Default, either or both of the following actions may be taken: (i) with the consent of the Required Banks, the Administrative Agent may, or upon the request of the Required Banks, the Administrative Agent shall, by notice to the Company declare the Commitments to be terminated forthwith, whereupon the Commitments shall immediately terminate; and (ii) with the consent of the Required Banks, the Administrative Agent may, or upon the request of the Required Banks, the Administrative Agent shall, by notice to the Company, declare the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement (including, without limitation, all amounts of L/C Obligations, whether or not the beneficiaries of the then outstand- ing Letters of Credit shall have presented the docu- ments required thereunder)and the Notes to be due and payable forthwith, whereupon the same shall immediately become due and payable. After all Letters of Credit shall have expired or been fully drawn upon, all Reimbursement Obligations shall have been satisfied and all other obligations of the Company hereunder and under the Notes shall have been paid in full, the excess, if any, of the amount so paid by the Company in respect of outstanding Letters of Credit over the amount required to satisfy the Reimbursement Obliga- tions in respect thereof and all other obligations of the Company in respect thereof, shall be returned to the Company. Except as expressly provided above in this Section, presentment, demand, protest and all other notices of any kind are hereby expressly waived. SECTION 9. THE ADMINISTRATIVE AGENT; THE AGENTS AND THE COLLATERAL AGENT 9.1 Appointment. Each Bank hereby irrevocably designates and appoints Chemical as the Administrative Agent of such Bank under this Agreement and the other Credit Documents, and each such Bank irrevocably authorizes Chemical, as the Administrative Agent for such Bank, to take such action on its behalf under the provisions of this Agreement and the other Credit Documents and to exercise such powers and perform such duties as are expressly delegated to the Administrative Agent by the terms of this Agreement and the other Credit Documents, together with such other powers as are reasonably incidental thereto. Notwith- standing any provision to the contrary elsewhere in this Agreement, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Bank, and no implied covenants, functions, re- sponsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Credit Document or otherwise exist against the Administrative Agent. 9.2 Delegation of Duties. The Administra- tive Agent may execute any of its duties under this Agreement and the other Credit Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of any agents or attorneys in-fact selected by it with reasonable care. 9.3 Exculpatory Provisions. Neither the Administrative Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement or any other Credit Document (except for its or such Person's own gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Banks for any recitals, statements, representations or warranties made by the Company or any officer thereof contained in this Agreement or any other Credit Document or in any certificate, report, statement or other document referred to or provided for in, or received by the Administrative Agent under or in connection with, this Agreement or any other Credit Document or for the value, validity, effectiveness, genuineness, enforce- ability or sufficiency of this Agreement or the Notes or any other Credit Document or for any failure of the Company to perform its obligations hereunder or there- under. The Administrative Agent shall not be under any obligation to any Bank to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Credit Document, or to inspect the properties, books or records of the Company. 9.4 Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any Note, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, coun- sel to the Company), independent accountants and other experts selected by the Administrative Agent. The Administrative Agent may deem and treat the payee of any Note as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Administrative Agent. The Administrative Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Credit Document unless it shall first receive such advice or concur- rence of the Required Banks as it deems appropriate or it shall first be indemnified to its satisfaction by the Banks against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected from liability to the Banks in acting, or in refraining from acting, under this Agreement and the Notes and the other Credit Documents in accordance with a request of the Required Banks, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Banks and all future holders of the Notes. 9.5 Notice of Default. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless the Administrative Agent has received notice from a Bank or the Company referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default". In the event that the Administrative Agent receives such a notice, the Administrative Agent shall give notice thereof to the Banks. The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Banks; provided that unless and until the Administrative Agent shall have received such direc- tions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Banks. 9.6 Non-Reliance on Administrative Agent and Other Banks. Each Bank expressly acknowledges that neither the Administrative Agent nor any of its officers, directors, employees, agents, attorneys-in- fact or Affiliates has made any representations or warranties to it and that no act by the Administrative Agent hereinafter taken, including any review of the affairs of the Company, shall be deemed to constitute any representation or warranty by the Administrative Agent to any Bank. Each Bank represents to the Administrative Agent that it has, independently and without reliance upon the Administrative Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and credit- worthiness of the Company and made its own decision to make its Loans hereunder and enter into this Agreement and the other Credit Documents to which it is or will be a party. Each Bank also represents that it will, independently and without reliance upon the Admini- strative Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Credit Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Company and its Subsidiaries. Except for notices, reports and other documents expressly required to be furnished to the Banks by the Administrative Agent hereunder, the Administrative Agent shall not have any duty or responsibility to provide any Bank with any credit or other information concerning the business, operations, property, condition (financial or other- wise), prospects or creditworthiness of the Company and its Subsidiaries which may come into the possession of the Administrative Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates. 9.7 Indemnification. The Banks agree to indemnify the Administrative Agent in its capacity as such (to the extent not reimbursed by the Company and without limiting the obligation of the Company to do so), ratably according to their respective Commitment Percentages in effect on the date on which indemnifi- cation is sought under this subsection (or, if indem- nification is sought after the date upon which the Commitments shall have terminated and the Loans shall have been paid in full, ratably in accordance with their Commitment Percentages immediately prior to such date), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following the payment of the Notes) be imposed on, incurred by or asserted against the Administrative Agent in any way relating to or arising out of this Agreement, any of the other Credit Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by the Administrative Agent under or in connection with any of the foregoing; provided that no Bank shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from the Administra- tive Agent's gross negligence or willful misconduct. The agreements in this subsection shall survive the payment of the Notes and all other amounts payable hereunder. 9.8 Administrative Agent in Its Individual Capacity. The Administrative Agent and its Affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Company and any of its Subsidiaries as though the Administrative Agent were not the Administrative Agent hereunder and under the other Credit Documents. With respect to its Loans made or renewed by it and any Note issued to it and with respect to any Letter of Credit issued or participated in by it, the Administrative Agent shall have the same rights and powers under this Agreement and the other Credit Documents as any Bank and may exercise the same as though it were not the Admini- strative Agent, and the terms "Bank" and "Banks" shall include the Administrative Agent in its individual capacity. 9.9 Successor Administrative Agent. The Administrative Agent may resign as Administrative Agent upon 10 days' notice to the Banks; provided that any such resignation shall not be effective until a successor agent has been appointed and approved in accordance with this subsection 9.9, and such successor agent has accepted its appointment. If the Administra- tive Agent shall resign as Administrative Agent under this Agreement and the other Credit Documents, then the Required Banks shall appoint from among the Banks a successor administrative agent for the Banks, which successor agent shall be approved by the Company (which approval shall not be unreasonably withheld), whereupon such successor administrative agent shall succeed to the rights, powers and duties of the Administrative Agent, and the term "Administrative Agent" shall mean such successor agent effective upon such appointment and approval, and the former Administrative Agent's rights, powers and duties as Administrative Agent shall be terminated, without any other or further act or deed on the part of such former Administrative Agent or any of the parties to this Agreement or any holders of the Notes. After any retiring Administrative Agent's resignation as Administrative Agent, the provisions of this subsection shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement and the other Credit Documents. 9.10 The Agents; The Collateral Agent. (a) Each Bank hereby irrevocably designates and appoints Bankers Trust and Chemical as Agents under this Agreement and the Credit Documents. Each Bank acknowledges that the Agents, in such capacity, shall have no duties or responsibilities, and shall incur no liabilities, under this Agreement or the other Credit Documents. (b) Each Bank (including each Hedging Bank) acknowledges and confirms that Bankers Trust is Collateral Agent under the Intercreditor Agreement and in such capacity shall have such duties, responsibili- ties, liabilities, rights and indemnities as are provided for in the Intercreditor Agreement. SECTION 10. MISCELLANEOUS 10.1 Amendments and Waivers. Neither this Agreement, any Note or any other Credit Document, nor any terms hereof or thereof may be amended, supple- mented or modified except in accordance with the provisions of this subsection. The Majority Banks may, or, with the written consent of the Majority Banks, the Administrative Agent may, from time to time, (a) enter into with the Company written amendments, supplements or modifications hereto and to the Notes and the other Credit Documents for the purpose of adding any provi- sions to this Agreement, the Notes or the other Credit Documents or changing in any manner the rights of the Banks or of the Company hereunder or thereunder or (b) waive, on such terms and conditions as the Majority Banks or the Administrative Agent, as the case may be, may specify in such instrument, any of the requirements of this Agreement, the Notes or the other Credit Documents or any Default or Event of Default and its consequences; provided, however, that no such waiver and no such amendment, supplement or modification shall (a) reduce the amount or extend the scheduled date of maturity of any Note or of any installment thereof, or reduce the stated rate of any interest or fee payable hereunder or extend the scheduled date of any payment thereof or increase the aggregate amount or extend the expiration date of any Bank's Commitment, in each case without the consent of each Bank affected thereby, or (b) amend, modify or waive any provision of this subsection or reduce the percentage specified in the definition of Required Banks or Majority Banks, or consent to the assignment or transfer by the Company of any of its rights and obligations under this Agreement and the other Credit Documents or amend, modify or waive subsection 10.6(a), or release any Subsidiary from its Subsidiary Guarantee, or increase the Swing Line Limit to more than $15,000,000 in the aggregate, in each case without the written consent of all the Banks, or (c) amend, modify or waive any provision of Section 9 without the written consent of the then Administrative Agent. Any such waiver and any such amendment, supplement or modification shall apply equally to each of the Banks and shall be binding upon the Company, the Banks, the Agents, the Administrative Agent and all future holders of the Notes. In the case of any waiver, the Company, the Banks and the Admini- strative Agent shall be restored to their former position and rights hereunder and under the outstanding Notes and any other Credit Documents, and any Default or Event of Default waived shall be deemed to be cured and not continuing; but no such waiver shall extend to any subsequent or other Default or Event of Default, or impair any right consequent thereon. 10.2 Notices. All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by telecopy), and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when deliv- ered by hand, or five days after being deposited in the mail, postage prepaid, or, in the case of telecopy notice, when received, addressed as follows in the case of the Company and the Administrative Agent, and as set forth in Schedule I in the case of the other parties hereto, or to such other address as may be hereafter notified by the respective parties hereto and any future holders of the Notes: The Company: Arrow Electronics, Inc. 25 Hub Drive Melville, New York 11747 Attention: Robert E. Klatell Telecopy: (516) 391-1683 The Administrative Agent: Chemical Bank 270 Park Avenue New York, New York 10017 Attention: W. Marc Lane Telecopy: (212) 972-9073 The Collateral Agent: As provided in the Intercreditor Agreement ; provided that any notice, request or demand to or upon the Administrative Agent or the Banks pursuant to subsection 2.3, 2.6, 2.9, 2.10, 2.11 or 2.16 shall not be effective until received. 10.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of the Administrative Agent or any Bank, any right, remedy, power or privilege hereunder or under the other Credit Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privi- lege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law. 10.4 Survival of Representations and Warranties. All representations and warranties made hereunder, in the other Credit Documents and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement and the Notes and the making of the Loans hereunder. 10.5 Payment of Expenses and Taxes. The Company agrees (a) to pay or reimburse the Admini- strative Agent for all its out-of-pocket costs and expenses incurred in connection with the development, preparation and execution of, and any amendment, supplement or modification to, this Agreement, the Notes and the other Credit Documents and any other documents prepared in connection herewith or therewith, and the consummation and administration of the trans- actions contemplated hereby and thereby, including, without limitation, the fees and disbursements of counsel to the Administrative Agent, (b) to pay or reimburse each Bank and the Administrative Agent for all its costs and expenses incurred in connection with the enforcement or preservation of any rights under this Agreement, the Notes, the other Credit Documents and any such other documents upon the occurrence of an Event of Default, including, without limitation, the fees and disbursements of counsel to the Administrative Agent and to the several Banks, and (c) to pay, indem- nify, and hold each Bank and the Administrative Agent harmless from, any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay in paying, stamp, excise and other taxes, if any, which may be payable or determined to be payable in connection with the execution and delivery of, or consummation or administration of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement, the Notes, the other Credit Documents and any such other documents, and (d) to pay, indemnify, and hold each Bank and the Administrative Agent harmless from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement, the Notes, the other Credit Documents and any such other documents, including, without limitation, any of the foregoing relating to the violation of, noncompliance with or liability under, any Environmental Law applica- ble to the operations of the Company, any of its Subsidiaries or any of the Properties (it being understood that costs and expenses incurred in connection with the enforcement or preservation of rights under this Agreement, the Notes and the other Credit Documents shall be paid or reimbursed in accordance with clause (b) above rather than this clause (d)) (all the foregoing in this clause (d), collectively, the "indemnified liabilities"), provided, that the Company shall have no obligation hereunder to the Agent or any Bank with respect to indemnified liabilities arising from (i) the gross negligence or willful misconduct of the Administrative Agent or any such Bank or (ii) legal proceedings commenced against the Administrative Agent or any such Bank by any security holder or creditor thereof arising out of and based upon rights afforded any such security holder or creditor solely in its capacity as such. Any payments required to be made by the Company under this sub- section 10.5 shall be made within 30 days of the demand therefor. The agreements in this subsection shall survive repayment of the Notes and all other amounts payable hereunder. 10.6 Successors and Assigns; Participations and Assignments. (a) This Agreement shall be binding upon and inure to the benefit of the Company, the Banks, the Administrative Agent, all future holders of the Notes and their respective successors and assigns, except that the Company may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of each Bank. (b) Any Bank may, in the ordinary course of its commercial banking business and in accordance with applicable law, at any time sell to one or more banks or other entities ("Participants") participating interests in any Loan owing to such Bank, any Note held by such Bank, any Commitment of such Bank or any other interest of such Bank hereunder and under the other Credit Documents. In the event of any such sale by a Bank of a participating interest to a Participant, such Bank's obligations under this Agreement to the other parties to this Agreement shall remain unchanged, such Bank shall remain solely responsible for the perfor- mance thereof, such Bank shall remain the holder of any such Note for all purposes under this Agreement and the other Credit Documents, and the Company and the Agent shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obliga- tions under this Agreement and the other Credit Docu- ments. The Company agrees that if amounts outstanding under this Agreement and the Notes are due or unpaid, or shall have been declared or shall have become due and payable upon the occurrence of an Event of Default, each Participant shall be deemed to have the right of setoff in respect of its participating interest in amounts owing under this Agreement and any Note to the same extent as if the amount of its participating interest were owing directly to it as a Bank under this Agreement or any Note, provided that, in purchasing such participating interest, such Participant shall be deemed to have agreed to share with the Banks the proceeds thereof as provided in subsection 10.7(a) as fully as if it were a Bank hereunder. The Company also agrees that each Participant shall be entitled to the benefits of subsections 2.18, 2.19, 2.21 with respect to its participation in the Commitments and the Loans outstanding from time to time as if it was a Bank; provided that, in the case of subsection 2.19, such Participant shall have complied with the requirements of said subsection and provided, further, that no Participant shall be entitled to receive any greater amount pursuant to any such subsection than the transferor Bank would have been entitled to receive in respect of the amount of the participation transferred by such transferor Bank to such Participant had no such transfer occurred. Each participating interest under this Agreement sold by a Bank to a Participant after the Closing Date shall be under terms providing that such Participant's rights to consent or withhold consent in respect of actions by such selling Bank under this Agreement shall be limited to such actions that, pursuant to subsection 10.1, require the consent of all the Banks. (c) Any Bank may, in the ordinary course of its commercial banking business and in accordance with applicable law, at any time and from time to time assign to any Bank or any affiliate thereof or, with the consent of the Administrative Agent (which shall not be unreasonably withheld), to an additional bank or financial institutions ("an Assignee") all or any part of its rights and obligations under this Agreement and the Notes pursuant to an Assignment and Acceptance, substantially in the form of Exhibit H, executed by such Assignee, such assigning Bank (and, in the case of an Assignee that is not then a Bank or an affiliate thereof, by the Administrative Agent) and delivered to the Administrative Agent for its acceptance and recording in the Register. Upon such execution, de- livery, acceptance and recording, from and after the effective date determined pursuant to such Assignment and Acceptance, (x) the Assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obliga- tions of a Bank hereunder with a Commitment as set forth therein, and (y) the assigning Bank thereunder shall, to the extent provided in such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all or the remaining portion of an assigning Bank's rights and obligations under this Agreement, such assigning Bank shall cease to be a party hereto). (d) The Administrative Agent shall maintain at its address referred to in subsection 10.2 a copy of each Assignment and Acceptance delivered to it and a register (the "Register") for the recordation of the names and addresses of the Banks and the Commitment of, and principal amount of the Loans owing to, each Bank from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and the Company, the Administrative Agent and the Banks may treat each Person whose name is recorded in the Regis- ter as the owner of the Loan recorded therein for all purposes of this Agreement. The Register shall be available for inspection by the Company or any Bank at any reasonable time and from time to time upon reasonable prior notice. (e) Upon its receipt of an Assignment and Acceptance executed by an assigning Bank and an Assignee (and, in the case of an Assignee that is not then a Bank or an affiliate thereof, by the Admini- strative Agent) together with payment to the Admini- strative Agent of a registration and processing fee of $2,500, the Administrative Agent shall (i) promptly accept such Assignment and Acceptance and (ii) on the effective date determined pursuant thereto record the information contained therein in the Register and give notice of such acceptance and recordation to the Banks and the Company. On or prior to such effective date, the Company, at its own expense, shall execute and deliver to the Administrative Agent (in exchange for the Revolving Credit Note or Swing Line Note of the assigning Bank) a new Revolving Credit Note or Swing Line Note, as the case may be, to the order of such Assignee in an amount equal to the Commitment assumed by it pursuant to such Assignment and Acceptance and, if the assigning Bank has retained a Commitment hereunder, a new Revolving Credit Note to the order of the assigning Bank in an amount equal to the Commitment retained by it hereunder. Such new Notes shall be dated the Closing Date or the Termination Date, as the case may be, and shall otherwise be in the form of the Note replaced thereby. The Notes surrendered by an assigning Bank shall be returned by the Administrative Agent to the Company marked "cancelled". If prior to such assignment the assigning Bank holds a Swing Line Loan Participation Certificate, then the Administrative Agent shall notify the Swing Line Banks of the proposed purchase. On the effective date of such purchase, the Swing Line Banks shall deliver to the Administrative Agent, for delivery to the Assignee upon the Admini- strative Agent's receipt of the assigning Bank's Swing Line Loan Participation Certificate, a Swing Line Loan Participation Certificate dated the date of the Certificate surrendered by the assigning Bank and in the same Swing Line Participation Amount as the surrendered Certificate. The Administrative Agent shall return such surrendered Certificate to the Swing Line Banks. (f) The Company authorizes each Bank to disclose to any Participant or Assignee (each, a "Transferee") and any prospective Transferee any and all financial information in such Bank's possession concerning the Company and its Affiliates which has been delivered to such Bank by or on behalf of the Company pursuant to this Agreement or which has been delivered to such Bank by or on behalf of the Company in connection with such Bank's credit evaluation of the Company and its Affiliates prior to becoming a party to this Agreement so long as each such prospective Transferee shall execute a confidentiality agreement containing provisions substantially similar to the provisions contained in the next succeeding sentences of this paragraph (f). The Administrative Agent and each Bank shall hold nonpublic information obtained pursuant to the requirements of this Agreement other than information (i) that is, or generally becomes, available to the public, (ii) that was or becomes available to the Administrative Agent or any Bank on a nonconfidential basis or (iii) that becomes available to the Administrative Agent or any Bank from a Person or other source that is not, to the best knowledge of the Administrative Agent or such Bank, as the case may be, otherwise bound by a confidentiality obligation to the Company, in accordance with its customary proce- dures for treatment of confidential information and in accordance with safe and sound banking practices and in any event, may make disclosure reasonably required by any Governmental Authority or representative thereof pursuant to legal process or as otherwise required by law, order or regulation. Unless specifically prohi- bited by applicable law, regulation, rule or court order, the Administrative Agent and each Bank shall notify the Company of any request by any Governmental Authority or representative thereof (other than any such request in connection with an examination of the financial condition of the Administrative Agent or such Bank by such Governmental Authority) for disclosure of such information by the Administrative Agent or such Bank so that any of them may seek an appropriate protective order. Except as may be required by an order of a court of competent jurisdiction and to the extent set forth therein, neither the Administrative Agent nor any Bank shall be obligated or required to return any materials furnished by the Company. Nothing in this paragraph (f) shall prohibit the Administrative Agent or any Bank from disclosing nonpublic information to its examiners, regulators and professional advisors. (g) If, pursuant to this subsection, any interest in this Agreement or any Note is transferred to any Transferee which is organized under the laws of any jurisdiction other than the United States or any state thereof, the transferor Bank shall cause such Transferee, concurrently with the effectiveness of such transfer, (i) to represent to the transferor Bank (for the benefit of the transferor Bank, the Administrative Agent and the Company) that under applicable law and treaties no taxes will be required to be withheld by the Administrative Agent or the Company or the transferor Bank with respect to any payments to be made to such Transferee in respect of the Loans, (ii) to furnish to the transferor Bank (and, in the case of any Purchasing Bank registered in the Register, the Administrative Agent and the Company) two copies of each of (x) either United States Internal Revenue Service Form 4224 or United States Internal Revenue Service Form 1001 or successor applicable form, as the case may be (wherein such Transferee claims entitlement to complete exemption from United States federal withholding tax on all payments hereunder), and (y) either United States Internal Revenue Service Form W-8 or W-9 or successor applicable form, as the case may be (wherein such Transferee claims entitlement to complete exemption from United States federal backup withholding tax on all payments hereunder), and (iii) to agree (for the benefit of the transferor Bank, the Administrative Agent and the Company) to provide the transferor Bank (and, in the case of any Purchasing Bank registered in the Register, the Administrative Agent and the Company) a new Form 4224, Form 1001, Form W-8 or Form W-9 or successor applicable form, as the case may be, duly executed and completed by such Transferee, on or before the date that any such form expires or becomes obsolete or after the occurrence of any event (including, with- out limitation, a change in such Transferee's lending office) requiring a change in the most recent form previously delivered by it to the Company and the Administrative Agent in accordance with applicable United States laws and regulations and amendments and to comply from time to time with all applicable United States laws and regulations with regard to such withholding tax exemption. (h) Nothing herein shall prohibit any Bank from pledging or assigning any Note to any Federal Reserve Bank in accordance with applicable law. 10.7 Adjustments; Set-off. (a) If any Bank (a "benefitted Bank") shall at any time receive any payment of all or part of its Loans or the Reimburse- ment Obligations owing to it, or interest thereon, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by set-off, pursuant to events or proceedings of the nature referred to in Section 8(h), or otherwise), in a greater proportion than any such payment to or collateral received by any other Bank, if any, in respect of such other Bank's Loans or the Reimbursement Obligations owing to it, or interest thereon, such benefitted Bank shall purchase for cash from the other Banks a participating interest in such portion of each such other Bank's Loan or the Reimbursement Obligations owing to it, or shall provide such other Banks with the benefits of any such collat- eral, or the proceeds thereof, as shall be necessary to cause such benefitted Bank to share the excess payment or benefits of such collateral or proceeds ratably with each of the Banks; provided, however, that if all or any portion of such excess payment or benefits is thereafter recovered from such benefitted Bank, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest. The Company agrees that each Bank so purchasing a portion of another Bank's Loan may exer- cise all rights of payment (including, without limita- tion, rights of set-off) with respect to such portion as fully as if such Bank were the direct holder of such portion. (b) In addition to any rights and remedies of the Banks provided by law, each Bank shall have the right, without prior notice to the Company, any such notice being expressly waived by the Company to the extent permitted by applicable law, upon any amount becoming due and payable by the Company hereunder or under the Notes or the other Credit Documents (whether at the stated maturity, by acceleration or otherwise) to set-off and appropriate and apply against such amount any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by such Bank or any branch or agency thereof to or for the credit or the account of the Company. Each Bank agrees promptly to notify the Company and the Administrative Agent after any such set-off and application made by such Bank, provided that the failure to give such notice shall not affect the validity of such set-off and application. 10.8 Counterparts. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts (including by telecopy), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. A set of the copies of this Agreement signed by all the parties shall be lodged with the Company and the Administrative Agent. 10.9 Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unen- forceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 10.10 Integration. This Agreement and the other Credit Documents represent the agreement of the Company, the Administrative Agent and the Banks with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by the Administrative Agent or any Bank relative to subject matter hereof not expressly set forth or referred to herein or in the other Credit Documents. 10.11 GOVERNING LAW. THIS AGREEMENT AND THE NOTES AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND THE NOTES AND THE OTHER CREDIT DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 10.12 Submission To Jurisdiction; Waivers. The Company hereby irrevocably and unconditionally: (a) submits for itself and its property in any legal action or proceeding relating to this Agreement and the other Credit Documents to which it is a party, or for recognition and enforcement of any judgement in respect thereof, to the non- exclusive general jurisdiction of the Courts of the State of New York, the courts of the United States of America for the Southern District of New York, and appellate courts from any thereof; (b) consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceed- ing was brought in an inconvenient court and agrees not to plead or claim the same; (c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to the Company at its address set forth in subsection 10.2 or at such other address of which the Administrative Agent shall have been notified pursuant thereto; (d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and (e) waives, to the maximum extent not pro- hibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this subsection any special, exemplary, punitive or consequential damages. 10.13 Acknowledgements. The Company hereby acknowledges that: (a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the Notes and the other Credit Documents; (b) none of the Agents, the Administrative Agent, the Collateral Agent or any Bank has any fiduciary relationship with or duty to the Company arising out of or in connection with this Agree- ment or any of the other Credit Documents, and the relationship between the Agents, the Administra- tive Agent, the Collateral Agent and the Banks, on one hand, and the Company, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and (c) no joint venture is created hereby or by the other Credit Documents or otherwise exists by virtue of the transactions contemplated hereby among the Banks or among the Company and the Banks. 10.14 WAIVERS OF JURY TRIAL. THE COMPANY, THE AGENTS, THE ADMINISTRATIVE AGENT, THE COLLATERAL AGENT AND THE BANKS HEREBY IRREVOCABLY AND UNCONDI- TIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR THE NOTES OR ANY OTHER CREDIT DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. ARROW ELECTRONICS, INC. By: /s/ Robert E. Klatell Title: Senior Vice President CHEMICAL BANK, as Administrative Agent, as Agent and as a Bank By: /s/ Robert K. Gaynor Title: Vice President BANKERS TRUST COMPANY, as Agent, as Collateral Agent and as a Bank By: /s/ June C. George Title: Vice President ABN AMRO BANK N.V. By: /s/ William J. Van Nostrand Title: Vice President BANK HAPOALIM, B.M. By: /s/ Conrad Wagner/Laura Raffa Title: Vice Pres./Vice Pres. BANK OF MONTREAL By: /s/ Rene Encarnacion Title: Director THE BANK OF NEW YORK By: /s/ Gianni W. Sellers Title: Vice President BHF--BANK By: /s/ Ellen Dooley Title: Vice President By: /s/ Linda Pace Title: Asst. Vice President CREDIT LYONNAIS CAYMAN ISLAND BRANCH By: /s/ Mark Campellone Title: Authorized Signature CREDIT LYONNAIS NEW YORK BRANCH By: /s/ Mark Campellone Title: Vice President THE FIRST NATIONAL BANK OF BOSTON By: /s/ George Hibbard Title: Vice President THE FIRST NATIONAL BANK OF CHICAGO By: /s/ James W. Peterson Title: Vice President THE LONG-TERM CREDIT BANK OF JAPAN, LIMITED, NEW YORK BRANCH By: /s/ Jay Shankar Title: Vice President NATIONAL WESTMINSTER BANK USA By: /s/ Stephen Ramerini Title: Vice President NATIONSBANK OF NORTH CAROLINA, N.A. By: /s/ Scott A. Jackson Title: Vice President THE NIPPON CREDIT BANK, LTD., NEW YORK BRANCH By: /s/ Tozo Satoh Title: Deputy General Manager PNC BANK, NATIONAL ASSOCIATION By: /s/ Sarah McClintock Title: Vice President SHAWMUT BANK, N.A. By: /s/ Olaperi Onipede Title: Vice President UNITED JERSEY BANK By: /s/ Bruce A. Gray Title: Vice President EX-10 6 AMENDMENT TO BHF-EX10(H)(II) AMENDMENT TO THE CREDIT AGREEMENT DD. AS OF APRIL 14, 1993 RELATING TO A SENIOR TERM LOAN IN THE AMOUNT OF DM 50,000,000.00 IN FAVOUR OF ARROW ELECTRONICS GMBH, DREIEICH This amendment (hereinafter the "Amendment") is made as of the 28th day of January, 1994 by and among Arrow Electronics GmbH (hereinafter "Arrow"), Berliner Handels- und Frankfurter Bank (hereinafter "the Agent"), National Westminster Bank AG, Schweizeriache Kreditanstalt (Deutschland) AG, and Berliner Handels- und Frankfurter Bank (hereinafter individually and collectively "the Banks"). WHEREAS, pursuant to a credit agreement dd. April 14, 1993 (hereinafter the "Agreement"), between the parties thereto the Banks named thereto have agreed to make available to the Borrower a senior term loan of DM 50,000,000.00 (Deutsche Mark fifty million) upon and subject to the terms and conditions thereof. WHEREAS, the Borrower holds 55% of the interest in Spoerle Electronic Handelsgesellschaft mbH & Co. and Spoerle GmbH, Dreieich (hereinafter collectively referred to as "Spoerle"), and WHEREAS, the Borrower has the target to increase its interest in Spoerle by 15% to 70%, and WHEREAS, the Borrower has the target to partially finance the increase in its interest in Spoerle by way of an increase in the existing senior term loan of DM 50,000,000.00 provided under the Agreement by DM 25,000,000.00 to DM 75,000,000.00, and WHEREAS, the Borrower desires to restructure the repayment structure under the Agreement. NOW, therefore, the Borrower, the Agent, and the Banks hereby agree as follows: 1. DEFINITIONS 1.1 Terms defined in the Agreement shall, unless otherwise defined herein, have the same meaning in the Amendment. 2. AMENDMENTS 2.1 With effect from the date of this Amendment the Agreement shall be amended as follows: 2.1.1 Section II, para 4 shall be amended and read as follows: "The Banks hereby make available to the Borrower a Term Loan in the maximum aggregate principal amount of DM 75.000.000,00 (Deutsche Mark seventyfive million) which shall be used (i) to refinance all existing bank indebtedness of the Borrower and (ii) to partially finance the acquisition by the Borrower of the additional interest of 15% in Spoerle. - 2 - 2.1.2 Section V, Para 9.1 shall be amended and read as follows: The Borrower shall repay the Term Loan by the following installments: DM 5.000.000 on April 21, 1994 DM 7.500.000 on April 21, 1995 DM 7.500.000 on April 21, 1996 DM 12.500.000 on April 21, 1997 DM 12.500.000 on April 21, 1998 DM 15.000.000 on April 21, 1999 DM 15.000.000 on April 21, 2000 2.1.3 Section VIII, para 19.1 shall be amended and read as follows: Subordinated Payment Guarantee (the "Guarantee") in the amount of DM 75.000.000,00 to be provided by Arrow Electronics, Inc., Melville/New York (the "Guarantor") in form and substance as per Exhibit IV of the Agreement, duly signed and executed. 3. FEES The Borrower shall pay to the Agent for the accounts of the Banks an amendment fee in the amount specified in the letter dated January 5, 1994 from the Agent to the Borrower. 4. CONDITION PRECEDENT 4.1. Notwithstanding anything to the contrary herein contained, it shall be a condition precedent to the Amendments herein that the representations and warranties of the Borrower contained in Section IX, para 20.6.1, 20.6.2 and 20.6.3 of the Agreement are true and as of the date of this Amendment are repeated thereon. 4.2. A Guarantee in the amount of DM 74,000,000.00 in form and substance as per Exhibit IV of the Agreement, duly signed and executed. 6. MAINTENANCE OF THE CREDIT AGREEMENT Subject to the provisions hereof the provisions of the Agreement as amended hereby shall remain in full force and effect and all references to the Agreement in this Amendment shall, unless the context otherwise requires, from the date of this Amendment be deemed to be references to the Agreement as amended hereby. 7. JURISDICTION, GOVERNING LAW, AND PLACE OF PERFORMANCE This Amendment shall be governed by and construed in accordance with the law of the Federal Republic of Germany. Place of performance and place of jurisdiction shall be Frankfurt/Main, Federal Republic of Germany. - 3 - - 3 - IN WITNESS WHEREOF, THE UNDERSIGNED HAVE CAUSED THIS AMENDMENT TO BE EXECUTED BY THEIR RESPECTIVE DULY AUTHORIZED OFFICERS AS OF THE 28TH DAY OF JANUARY, 1994. /s/ Robert E. Klatell ................................. ....................................... on behalf of on behalf of Arrow Electronics Gmbh, Dreieich Berliner Handels- und Frankfurter Bank, Frankfurt/Main as the Agent ........................................ on behalf of Berliner Handels- und Frankfurter Bank, Frankfurt/Main, for a commitment of DM 37.500.00,00 ......................................... on behalf of National Westminster Bank AG, Frankfurt/Main, for a commitment of DM 18.750.000,00 .......................................... on behalf of Schweizerische Kreditanstalt (Deutschland) AG, Frankfurt/Main, for a commitment of DM 18.750.000,00 EX-10 7 CAPSTONE PROFIT SHARING-EX10(B)(XVI) SUPPLEMENT NO. 2 TO THE CAPSTONE ELECTRONICS PROFIT-SHARING PLAN SPECIAL PROVISIONS RELATED TO THE ACQUISITION OF CERTAIN ASSETS OF ZEUS COMPONENTS, INC. BY ARROW ELECTRONICS, INC. In connection with the acquisition by Arrow Electronics, Inc. of certain assets of Zeus Components, Inc. (the "Acquisition"), the Plan is hereby amended in the following respects: S2.1 In the case of an individual who becomes employed by an Employer or Affiliate on or about May 19, 1993 in connection with the Acquisition (a "Zeus Transferee"), service with Zeus Components, Inc. shall be treated for purposes of Section 2.1 as though it were service with an Employer or Affiliate. For this purpose, any service measured in terms of elapsed time shall be converted to Hours of Service on the basis that one month equals 190 Hours, one week equals 45 Hours and one day equals 10 Hours. IN WITNESS WHEREOF, Capstone Electronics, Inc. has caused its duly authorized officer to execute this amendment on this 24th day of August, 1993. CAPSTONE ELECTRONICS, INC. By: /s/ Robert E. Klatell -------------------------- Title: Vice President ATTEST: By: /s/ ------------------------- EX-10 8 SUPPL. TO STOCK OWNERSHIP-EX10(B)(XIII) SUPPLEMENT NO. 3 TO THE ARROW ELECTRONICS STOCK OWNERSHIP PLAN SPECIAL PROVISIONS RELATED TO THE ACQUISITION OF CERTAIN ASSETS OF ZEUS COMPONENTS, INC. BY ARROW ELECTRONICS, INC. In connection with the acquisition by the Company of certain assets of Zeus Components, Inc. (the "Acquisition"), the Plan is hereby amended in the following respects: S3.1 In the case of an individual who becomes employed by an Employer or Affiliate on or about May 19, 1993 in connection with the Acquisition (a "Zeus Transferee"), service with Zeus Components, Inc. shall be treated for purposes of Section 2.1 as though it were service with an Employer or Affiliate. For this purpose, any service measured in terms of elapsed time shall be converted to Hours of Service on the basis that one month equals 190 Hours, one week equals 45 Hours and one day equals 10 Hours. IN WITNESS WHEREOF, Capstone Electronics, Inc. has caused its duly authorized officer to execute this amendment on this 24th day of August, 1993. ARROW ELECTRONICS, INC. By: /s/ Robert E. Klatell -------------------------- Title: ATTEST: By: /s/ ------------------------- EX-10 9 SUPPL. TO ARROW SAVINGS PLAN-EX10(B)(VI) SUPPLEMENT NO. 3 TO THE ARROW ELECTRONICS SAVINGS PLAN SPECIAL PROVISIONS RELATED TO THE ACQUISITION OF CERTAIN ASSETS OF ZEUS COMPONENTS, INC. BY ARROW ELECTRONICS, INC. In connection with the acquisition by the Company of certain assets of Zeus Components, Inc. (the "Acquisition"), the Plan is hereby amended in the following respects: S3.1 In the case of an individual who becomes employed by an Employer or Affiliate on or about May 19, 1993 in connection with the Acquisition (a "Zeus Transferee"), service with Zeus Components, Inc. shall be treated for purposes of Section 2.1 as though it were service with an Employer or Affiliate. For this purpose, any service measured in terms of elapsed time shall be converted to Hours of Service on the basis that one month equals 190 Hours, one week equals 45 Hours and one day equals 10 Hours. S3.2 A Zeus Transferee who, taking account of Section S3.1, satisfies the eligibility requirements set forth in Section 2.1 on May 19, 1993 shall become a Member on such date. IN WITNESS WHEREOF, Arrow Electronics, Inc. has caused its duly authorized officer to execute this amendment on this 24th day of August, 1993. ARROW ELECTRONICS, INC. By: /s/ Robert E. Klatell -------------------------- Title: ATTEST: By: /s/ ------------------------- EX-10 10 AMENDED UK CREDIT AGR.-EX10(G) DATED 2ND AUGUST 1993 ARROW ELECTRONICS (UK) LIMITED - and - NATIONAL WESTMINSTER BANK PLC ----------------------------------- AMENDMENT AND RESTATEMENT AGREEMENT relating to a Facilities Agreement dated 28th February 1992 ----------------------------------- WILDE SAPTE --- LONDON THIS AGREEMENT is made the 2nd day of August 1993 BETWEEN: (1) ARROW ELECTRONICS (UK) LIMITED registered in England under number 2395760 and whose registered office is at St Martin's Way, Cambridge Road, Bedford, MK42 OLF (the "Company"); and (2) NATIONAL WESTMINSTER BANK PLC of 41 Lothbury, London EC2P 2BP acting through certain of its branches (the "Bank"). WHEREAS: (A) Pursuant to a facilities agreement (the "Facilities Agreement") dated 28th February 1992 and made between (1) the Company and (2) the Bank, the Bank has made a term loan facility and overdraft and ancillary facilities available to the Company upon the terms and conditions thereof. (B) The parties hereto have agreed to enter into this Agreement to amend and vary certain provisions of the Facilities Agreement, and to restate the Facilities Agreement as so amended and varied. NOW IT IS HEREBY AGREED as follows: 1. INTERPRETATION 1.1 Definitions Words and expressions defined in the form of Facilities Agreement set out in the Schedule hereto shall have the same meanings when used herein. In addition, the following expressions shall have the following meanings (except where the context requires otherwise): "Act" means the Companies Act 1985; "Certified Copy" means, in relation to any document, a copy of each document bearing the endorsement "Certified a true, complete and accurate copy of the original, which has not been amended, altered, changed or supplemented otherwise than by each document, a certified copy of which is attached hereto" signed and dated by a duly authorised officer for the Company or other body in question; "New Security Documents" means the Techdis Debenture, the Techdis Guarantee, the MMD Debenture and the MMD Guarantee; and "Techdis Financial Information" means (i) the report addressed to the Bank dated 30th July 1993 in the agreed form on the group prepared by Messrs. Ernst & Young and (ii) the performance earn-out and cashflow projections supplied by the Company to the Bank relating to Techdis. - 1 - 1.2 Interpretation Clauses 1.2 and 1.3 of the Facilities Agreement shall be deemed to be incorporated, mutatis mutandis, herein. 2. AMENDMENT It is hereby agreed that as and from the date upon which the Bank gives notice to the Company that the conditions precedent set out in Clause 3.1 below are satisfied, the Facilities Agreement shall be amended so as to be in the form set out in the Schedule hereto and shall take effect in such form. 3. CONDITIONS PRECEDENT AND CONDITIONS SUBSEQUENT 3.1 The amendments referred to in Clause 2 above are subject to the following conditions being satisfied on or prior to 2nd August 1993: (a) the Bank shall have received all of the following in form and substance satisfactory to the Bank: (i) Certified Copies of the Certificate of Incorporation and Memorandum and Articles of Association of each of the Company, Techdis and MMD; (ii) Certified Copies of board resolutions of the Company approving and authorising the execution, delivery and performance of this Agreement on the terms and conditions hereof and thereof and authorising a person or persons to sign or otherwise attest the due execution of such documents and any other documents to be executed or delivered pursuant hereto or thereto together with a certificate of a duly authorised officer of such company setting out the names and signatures of the persons authorised to sign such documents on behalf of such company; (iii) a certificate of the Company addressed to the Bank and signed by a director of the Company stating that the execution by it of this Agreement and the performance by it of its obligations hereunder are within its corporate powers, have been duly approved by all necessary corporate action and will not cause any limit or restriction on any of its powers (whether imposed by law, decree, rule, regulation, its Memorandum or Articles of Association, agreement or otherwise) or on the right or ability of its directors to exercise such powers, to be exceeded or breached; (iv) confirmation from each Charging Group Company (other than Techdis and MMD) that its Grantee shall remain in full force and effect; (v) a Certified Copy of the Techdis Acquisition Agreement; (vi) the fee referred to in Clause 4.1; and - 2 - (vii) a letter from Arrow addressed to the Bank in the agreed form regarding the working capital requirements of the Company; (b) no Default has occurred and is continuing; and (c) the representations and warranties made pursuant to Clause 5 below are true and accurate in all material respects as at the date they are made. 3.2 The Company hereby undertakes that by 5.00 pm (London time) on 1st September 1993 (or such later date as the Bank may agree) it shall have delivered to the Bank, in form and substance satisfactory to the Bank all of the following: (i) a certificate of each of Techdis and MMD addressed to the Bank and signed by a director of each of the companies stating that the execution by it of each of the New Security Documents to which it is a party and the performance by it of its obligations thereunder are within its corporate powers, have been duly approved by all necessary corporate action and will not cause any limit or restriction on any of its powers (whether imposed by law, decree, rule, regulation, its Memorandum or Articles of Association, agreement or otherwise) or on the right or ability of its directors to exercise such powers, to be exceeded or breached; (ii) a Certified Copy of the minutes of a meeting of the board of directors of each of Techdis and MMD approving and authorizing the execution, delivery and performance of each of the New Security Documents to which it is a party on the terms and conditions thereof subject, where applicable, always to the provisions of Sections 151 to 158 of the Act and showing due consideration by all the directors of each of Techdis and MMD of the obligations and liabilities arising thereunder or the making of all declarations of interests as may be required in connection with any of the New Security Documents and authorizing any of the directors whose names and specimen signatures are set out therein to sign or otherwise duly attest the execution of such documents and any other documents to be executed or delivered pursuant thereto; (iii) a Certified Copy of each of the statutory declarations made in the prescribed form by all of the directors of each of the companies referred to in Column A below as required by Section 155(6) of the Act as specified opposite each such company in Column B below:
Column A Column B -------- -------- MMD Form 155(6)(a) Techdis Form 155(6)(B)
together with a Certified Copy of each statutory report by each such company's auditors required under Section 156(4) of the Act; - 3 - iv) a letter, in substantially the form set out in the Annex attached hereto addressed to the Bank from the Auditors for each of Techdis and MMD; (v) a Certified Copy of the relevant extracts of the register of directors of each of Techdis and MMD showing all the directors of each company; and (vi) (1) the Techdis Debenture duly executed by Techdis; (2) the Techdis Guarantee duly executed by Techdis; (3) the MMD Debenture duly executed by MMD; and (4) the MMD Guarantee duly executed by MMD. 3.3 The Company hereby agrees that a breach of Clause 3.2 shall constitute a Default under Clause 15.1(b) of the form of Facilities Agreement set out in the Schedule hereto, entitling the Bank to exercise any of its rights under Clause 15.1 of the same, provided that, where the breach arises because of circumstances outside the reasonable control of the Company but is capable of remedy, the Bank may (but shall not be obliged to) upon request by the Company extend the period of 10 Business Days specified for remedying any such breach in such Clause 15.1(b). 4. FEE AND EXPENSES 4.1 In consideration of the Bank entering into this Agreement, the Company shall on the date hereof pay to the Bank for the account of the Bank an arrangement fee of L.135,000 4.2 The Company shall pay on demand all reasonable expenses (including, but not limited to, legal, valuation and accounting fees) and any VAT thereon incurred by the Bank in connection with the negotiation, preparation and execution of any of this Agreement, the New Security Documents and the other documents contemplated hereby or thereby now or at any time hereafter. 5. REPRESENTATIONS AND WARRANTIES 5.1 On the date hereof, the Company shall be deemed to represent and warrant to the Bank in the terms of Clause 12.1 of the form of Facilities Agreement set out in the Schedule hereto. 5.2 In addition the Company hereby represents and warrants to the Bank that all information prepared by the Company for inclusion in the Techdis Financial Information, or prepared by the Company and supplied to Messrs Ernst & Young for the purpose of compiling the Techdis Financial Information, was at 30th July 1993, in the case of factual information, true and correct in all material respects and, in the case of projections fair and reasonable and without prejudice to the generality of the foregoing: (i) the forecasts contained in the Techdis Financial Information - 4 - have been diligently prepared and the assumptions upon which they are based as to the future prospects of the business of Techdis have been carefully considered and are honestly believed to be reasonable having regard to the information available and to the market conditions prevailing at the time of their preparation and that the company has made all reasonable enquiries so as to ascertain (so far as possible) all such information and market conditions which are relevant to their preparation; and (ii) save as disclosed in the Techdis Financial Information there is no fact or matter known to the Company concerning the business or the affairs of Techdis or relating to the Techdis Financial Information which is or might be material for disclosure to a lender contemplating granting facilities to the Company of the kind provided for by this Agreement. 6. LIMITATION Save as expressly amended by this Agreement, the Facilities Agreement remains in full force and effect. 7. LAW This Agreement shall be governed by and construed in accordance with English law. IN WITNESS WHEREOF the parties hereto have caused this Agreement to be duly executed the day and year first above written. - 5 - ANNEX NET ASSETS LETTER To: National Westminster Bank Plc 41 Lothbury London EC2P 2BP Attention: [ ] [Date] Dear Sirs, * [___________________] (the "Company") 1. This report is given in connection with the proposed arrangement whereby the Company will give financial assistance for the acquisition of [its own shares] [the shares in its holding company], particulars of which are given in the attached copy of the statutory declaration made this day by the directors pursuant to Section 155(6) of the Companies Act 1985 (the "Act"). The purpose of this report is solely to assist the Bank in considering whether the proposed arrangement is permitted under Section 155(2) of the Act. 2. We have examined the accounting records of the Company and made such further enquiries to the extent that we consider necessary for the purpose of this report. We have not carried out an audit and accordingly (otherwise than as stated in paragraphs 3 and 4 of this letter) express no opinion in this report on the state of the Company's affairs. 3. At the date of this report the aggregate of the Company's assets as stated in its accounting records exceeds the aggregate of its liabilities as similarly stated. In our opinion, based on our examination of the accounting records together with such further enquiries as we consider necessary, the giving of such financial assistance would not as at the date of this report reduce the net assets of the Company. Yours faithfully Signed . . . . . . . . . . . . . Dated . . . . . . . . . . . . . (Same date as statutory declaration of directors) - 6 - SIGNED by R.E. Klatell ) for and on behalf of ) ARROW ELECTRONICS (UK) LIMITED ) /s/ R.E. Klatell in the presence of:- ) SIGNED by P.A.S.C. Harmer ) for and on behalf of ) NATIONAL WESTMINSTER BANK Plc ) /s/ P.B.S.C. Harmer in the presence of:- ) James Johnson Queensbridge House Governor Thomas Street London EC4 3BD - 7 - SCHEDULE DATED 28th February 1992 ARROW ELECTRONICS (UK) LIMITED - and - NATIONAL WESTMINSTER BANK Plc -------------------- FACILITIES AGREEMENT -------------------- WILDE SAPTE London TABLE OF CONTENTS
CLAUSE TITLE PAGES - ------ ----- ----- 1. INTERPRETATION 1 2. FACILITIES 11 3. PURPOSE 11 4. CONDITIONS PRECEDENT 12 5. AVAILABILITY AND DRAWINGS UNDER THE FACILITIES 12 6. INTEREST 17 7. REPAYMENT 20 8. PREPAYMENT OF THE ACQUISITION FACILITIES 21 9. CHANGE IN CIRCUMSTANCES 22 10. PAYMENTS 24 11. SECURITY 26 12. REPRESENTATIONS AND WARRANTIES 26 13. UNDERTAKINGS 30 14. FEES 37 15. DEFAULT 37 16. SET-OFF 42 17. SEVERABILITY, WAIVERS, REMEDIES CUMULATIVE 42 18. NOTICES 42 19. ASSIGNMENTS 44 20. COSTS AND EXPENSES 45 21. CURRENCY INDEMNITY 46 22. PUBLICITY 47 23. LAW 47 SCHEDULE 1 DRAWDOWN NOTICE 48 SCHEDULE 2 MANDATORY LIQUID ASSET COSTS FORMULA 49 SCHEDULE 3 DEFINITIONS FOR FINANCIAL COVENANTS 51 SCHEDULE 4 SECURITY DOCUMENTS 55 SCHEDULE 5 THE GROUP 56
THIS AGREEMENT is made the 28th day of February 1992 BETWEEN:- (1) ARROW ELECTRONICS (UK) LIMITED registered in England under number 2395760 and whose registered office is at St. Martins Way, Cambridge Road, Bedford MK42 OLF (the "Company"); and (2) NATIONAL WESTMINSTER BANK Plc of 41 Lothbury, London EC2P 2BP acting through certain of its branches ("the Bank"). WHEREAS:- The Bank has agreed, at the request of the Company, to make the Facilities available to the Company upon the terms and conditions set forth below. NOW IT IS HEREBY AGREED as follows:- 1. INTERPRETATION 1.1 In this Agreement (which expression shall include the Schedules hereto) the following expressions shall have the following meanings (except where the context otherwise requires) namely:- "Accounts" means at any particular time the most recent directors' report and consolidated audited accounts of the Company and its Subsidiaries delivered to the Bank pursuant to Clause 13.1; "Acquisition Agreement" means the agreement (in the agreed form) dated 28th February 1992 for the acquisition, inter alia, of the entire issued share capital of Jermyn and made between, inter alia, (1) Lex Service PLC (Reg. No. 229121) and (2) the Company together with any documents and agreements ancillary thereto, whether or not referred to therein; "Acquisition Documents" means the Acquisition Agreement and the Disclosure Letter; "Acquisition Facility" means the term loan facility available to the Company hereunder referred to in Clause 2(i); "Acquisition Facility Limit" means L.5,000,000; "Acquisition Facilities" means both the Acquisition Facility and the New Acquisition Facility; "Acquisition Loan" means the aggregate principal Sterling amount drawn down and outstanding under the Acquisition Facility from time to time; "Arrow" means Arrow Electronics, Inc., a corporation incorporated in the State of New York, U.S.A.; "Arrow Inc Indebtedness" means the aggregate obligations and liabilities (whether present, future, actual and/or contingent) of Arrow and its subsidiaries (incorporated in the USA) for the payment or repayment of money incurred in respect of: - 1 - (i) monies borrowed or raised; (ii) any bond, note, loan stock, debenture or similar instrument; (iii) acceptance credit, bill discounting, note purchase, factoring facilities or documentary credit facilities; and (iv) counter-indemnities, guarantees or other assurances against financial loss in respect of the liability or obligation of any person falling, within any of (i) to (iii) above; PROVIDED ALWAYS THAT there shall be no double-counting; "Associated Company" has the meaning ascribed thereto by Section 416 of the Income and Corporation Taxes Act 1988 and such expression shall include "Associated Undertaking" as defined in Section 20 of Schedule 4A to the Companies Act 1985; "Auditors" means Messrs. Ernst & Young or such other firm of accountants of similar standing whose appointment as auditors of the Company shall have been previously approved by the Bank, acting reasonably; "Axiom" means Axiom Electronics Limited, a company incorporated in England and Wales and registered under number 952393; "Bank Guarantee" means any guarantee, bond, indemnity, letter of credit, documentary or other credit, or any other instrument of suretyship or payment issued, undertaking, made or to be made, as the case may be, by the Bank under the Working Capital Facility; "Base Rate" means the Bank's published base rate from time to time; "Business Day" means any day, except Saturdays and Sundays, on which banks generally are open for business in the City of London of the type contemplated by this Agreement; "Capital Expenditure" has the meaning set out in Schedule 3; "Cash Flow" has the meaning set out in Schedule 3; "Charging Group" means those Group Companies which are so designated in Schedule 5 and such additional subsidiaries as the Bank may agree in writing from time to time can be designated as part of the Charging Group; "Charging Group Company" means each company in the Charging Group; "Commitment Period" means the period from and including the date hereof to but excluding the date falling one month before the Final Repayment Date: "Completion" means the initial completion of the purchase by the Company of Jermyn in accordance with the terms of the Acquisition Agreement; "Corporation Tax" means corporation tax chargeable in the context of - 2 - a scheme of Taxation applied to United Kingdom resident companies generally at the rate applicable to such companies (disregarding the provisions of Section 13 of the Income and Corporation Taxes Act 1988 concerning the small companies' rate) or Tax of a similar nature enacted in addition to or in substitution for corporation tax; "Debenture" means the debenture, in the Bank's standard form (as varied form time to time) granted by each Charging Group Company to the Bank; "Default" means any of the events specified in Clause 15; "Deferred Consideration" has the meaning set out in Schedule 3; "Depreciation" has the meaning set out in Schedule 3; "Disclosure Letter" means the disclosure letter form the Vendor to, inter alios, the Company dated 28th February 1992 relating to the Acquisition Agreement; "Drawdown Date" means the date being a Business Day, on which a Drawing is to be made pursuant to a Drawdown Notice; "Drawdown Notice" means a notice for drawings under the New Acquisition Facility and the Working Capital Facility substantially in the form of the notice set out in Schedule 1; "Drawing" means any and each drawing made under the Acquisition Facility, the New Acquisition Facility or the Working Capital Facility pursuant to Clause 5 and thereafter the principal amount of each such Drawing form time to time outstanding; "EBIT" has the meaning set out in Schedule 3; "EDI" means EDI Electronics Distribution International BV, a corporation incorporated in the Netherlands; "Electronics" means RR Electronics Limited, a company incorporated in England and Wales and registered under number 282397; "Eligible Receivables" means any of any debts, monies and liabilities due and payable to the Company which fulfil the following criteria:- (i) is a trade debt required to be paid in full within 60 days of the date upon which the invoice relating thereto is originally dispatched; (ii) is not owed by an Associated Company of the Company or any Subsidiary thereof or by any Group Company or any Subsidiary thereof save for arms length transactions on normal commercial terms for the business in question between any Group Company, Associated Company of the Company or any Subsidiary of any such company; (iii) is free and clear of liens and set-offs created by the Company and discounts (other than discounts in the ordinary course of trade); - 3 - (iv) which is evidenced by invoices; (v) is not, so far as the Company is then aware, subject to any dispute, counterclaim or defence; (vi) is unconditional and not dependent on any performance by the Company; and (vii) neither the debtor nor the receivable due from such debtor is the subject of bona fide legal proceedings with any Group Company which are not vexatious or frivolous; "Encumbrance" meand any mortgage, charge, assignment by way of security, pledge, lien, hypothecation or other security interest of any kind whatsoever; "Existing Facility" means the facilities made available by the Bank to, inter alios, the Company pursuant to the Existing Facility Agreement; "Existing Facility Agreement" means an agreement dated 31st July 1989 as amended by a letter dated 28th March 1991 made between the Bank and, inter alios, the Company; "Existing Security" means the guarantees and debentures executed prior to 28th February 1992 by the Company, Electronics and Axiom, the Existing Subordination Deed and all other documents constituting security for the obligations and liabilities of the Company and all other Group Companies under the Existing Facility Agreement; "Existing Subordination Deed" means the deed of subordination dated 31st July 1989 execute by, inter alios, the Company, Arrow UK Inc. and the Bank; "Facilities" means the Acquisition Facilities and the Working Capital Facility; "Facility Documents" means this Agreement and the Security Documents; "FFE Contracts" means any and all forward foreign exchange contracts (in the Bank's standard form) entered into, or to be entered into, as the case may be, by the Company with the Bank under the Working Capital Facility; "FFE Nominal Amount" means at any time and in relation to the Company, the nominal Sterling value (as certified by the Bank) of all FFE Contracts then outstanding in respect of the Company; "Final Repayment Date" means in relation to all Drawings (including pursuant to the Overdraft Facility and all Bank Guarantees and FFE Contracts) made pursuant to the Working Capital Facility and also under the Acquisition Facilities, 31st December 1998; "Finance Leases" has the meaning set out in Schedule 3; "Financial Information" means the report addressed to the Bank dated 10th January 1992 together with a supplementary report dated 27th February 1992 in the agreed form on the Group prepared by Messrs. - 4 - Ernst & Young; "Financial Year" in relation to a company has the meaning ascribed to such expression by Section 223 of the Companies Act 1985; "First Drawing" has the meaning set out in Clause 5.2.1(a); "Fourth Drawing" has the meaning set out in Clause 5.2.1(d); "GAAP" means accounting principles generally accepted in the United Kingdom consistently applied and consistent with the Reference Accounts; "Group" means the Company and Techdis and their respective Subsidiaries together with all the Subsidiaries of the Company from time to time during the Security Period; "Group Company" means each company in the Group; "Group Dormant Company" means each and any Group Company which is or becomes, at any time, and remains a dormant company within the meaning of such expression in accordance with Section 250 of the Companies Act 1985 and to which the Bank agrees in writing to be designated as such (such agreement not to be unreasonably withheld or delayed); "Guarantee" means the guarantee in the Bank's standard form (as varied from time to time) granted by each Charging Group Company to the Bank; "Indebtedness" has the meaning set out in Schedule 3; "Instalment" has the meaning set out in Clause 7.1.1; "Instalment Repayment Date" has the meaning set out in Clause 7.1.1; "Interest Date" means the last day of each Interest Period; "Interest Period" means in relation to any Drawing a period of 1, 3 or 6 months or such other period as the Bank may agree and:- (a) the first Interest Period shall commence on the relevant Drawdown Date; (b) each subsequent Interest Period shall commence on the day following the last day of the immediately preceding Interest Period; (c) an Interest Period which would otherwise end on a day which is not a business Day shall be extended to the next Business Day unless that next Business Day falls in the next calendar month when the Interest Period shall end on the immediately preceding Business Day; (d) if any Interest Period commences on the last Business Day in a month or if there is no corresponding day in the month in which it is to end then it shall end on the last Business Day in such month; - 5 - (e) if an Interest Period is extended or shortened by the application of the foregoing, the following Interest Period shall (without prejudice to the application of the foregoing) end on the day on which it would have ended if the preceding Interest Period had not been so extended or shortened; and (f) any amount to be repaid under Clause 7 shall have a final Interest Period expiring on the relevant Repayment Date or Final Repayment Date, as the case may be; "Interest Rate Protection Contracts" means all and each of the interest rate protection contracts entered into by the Company and the Bank; "Jermyn" means Jermyn Holdings Limited, a company incorporated in England and Wales and registered under number 1369015; "LIBOR" means the percentage rate per annum (rounded up, if necessary to the nearest 1/16th of one per cent) at which the Bank offers Sterling deposits in an amount comparable to the relevant Drawing for a period equal to such Interest Period to prime banks in the London inter-bank market at or about 11.00 a.m. (London time) on the first day of such Interest Period; "Loan" means the aggregate principal amount drawn down and outstanding under the Facilities from time to time including utilisations under the Overdraft Facility; "Management Accounts" means the management accounts to be provided by the Company to the Bank pursuant to Clause 13.1(c); "Mandatory Liquid Asset Costs" means the additional cost to the Bank of compliance with the relative reserve asset ratio required by the Bank of England from time to time, expressed as a rate per cent per annum calculated on the basis of the application of the formula set out in Schedule 2; "Margin" means one and a half per cent (1.5%) per annum; "MMD" means Microprocessor and Memory Distribution Limited, a company incorporated in England and Wales and registered under number 1920668; "MMD Debenture" means the mortgage debenture in the Bank's standard form granted, or to be granted, by MMD in favour of the Bank; "MMD Guarantee" means the unlimited composite cross-guarantee in the Bank's standard form granted, or to be granted, by MMD in favour of the Bank; "Net Working Capital" has the meaning set out in Schedule 3; "New Acquisition Facility" means the term loan facility to be made available to the Company hereunder, subject to the New Acquisition Facility Limit, referred to in Clause 2(ii); "New Acquisition Facility Limit" means L.6,000,000; - 6 - "New Acquisition Loan" means the aggregate principal Sterling amount drawn down and outstanding under the New Acquisition Facility from time to time; "New Security Documents" means the Techdis Debenture, the Techdis Guarantee, the MMD Debenture and the MMD Guarantee; "Overdraft Facility" means the overdraft and ancillary facilities, forming part of the Working Capital Facility, as described in Clause 5.3; "Permitted Encumbrance" means any Encumbrance:- (i) being a lien arising by operation of law as a result of transactions undertaken bona fide in the ordinary course of business; (ii) being a lien over goods and documents of title thereto arising in the ordinary course of letter of credit transactions; (iii) arising by way of retention of title to goods by the supplier of those goods where such retention of title is permitted by the Company; (iv) over or affecting any asset acquired by a Group Company after the date hereof and subject to which such asset is acquired, provided that:- (a) such Encumbrance was not created at the request of that Group Company in contemplation of the acquisition of such asset by that Group Company; (b) the amount, actual or contingent, thereby secured has not been increased in contemplation of, or since the date of, the acquisition of such asset by that Group Company; and (c) such Encumbrance shall be discharged within 12 months of such acquisition and except where the amount, actual or contingent, thereby secured does not exceed L.300,000 until such discharge the person or persons in whose favour the Encumbrance has been created shall enter into such form of subordination and priority agreement as the Bank shall require; (v) over or affecting any assets of any company which becomes a Charging Group Company after the date hereof, where such Encumbrance is created prior to the date on which such company becomes a Group Company, provided that:- (a) such Encumbrance was not created at the request of any Group Company in contemplation of such company becoming a Group Company and such company was not acquired with the assistance of the Working Capital Facility; - 7 - (b) the amount thereby secured, actual or contingent, has not been increased at the request of such company, or any Group Company in contemplation of, or since the date of such company becoming a Group Company; and (c) such Encumbrance shall be discharged within 12 months of such acquisition and except where the amount, actual or contingent, thereby secured does not exceed L.300,000 until such discharge the person or persons in whose favour the Encumbrance has been created shall enter into such form of subordination and priority agreement as the Bank shall require; (iv) being a lien arising by operation of law in the ordinary course of trading where the amount payable in respect of the lien is either not yet due for payment or is being contested in good faith; (vii) which comprises the Existing Security; (viii) which comprises security created pursuant to a Security Document hereunder; "Potential Default" means an event which with the giving of notice and/or lapse of time and/or the satisfaction of any other condition would be a Default; "Qualifying Bank" means an institution which is, for the time being, recognised by the United Kingdom Inland Revenue as carrying on through its lending office situated in the United Kingdom for the purposes hereof a bona fide banking business in the United Kingdom for the purposes of Section 349(3) of the Income and Corporation Taxes Act 1988 and which makes loans from such lending office situated in the United Kingdom; "Reference Accounts" means the audited consolidated accounts of Jermyn and its Subsidiaries for the period ended 29th December 1991 which comprise the English element of the Completion Balance Sheets (as defined in the Acquisition Agreement) and of the Company and its Subsidiaries for the period ended 31st December 1991; "Revolving Credit Facility" means the revolving credit facility, forming part of the Working Capital Facility, as described in Clause 5.3.2; "Second Drawing" has the meaning set out in Clause 5.2.1(b); "Security Documents" means the documents listed in schedule 4, the New Security Documents and any other documents entered into at any time by way of security for the obligations of the Company hereunder; "Security Period" means the period starting from the date of this Agreement and ending on the date when all monies and liabilities (whether present, future, actual or contingent) owing under any of the Facility Documents have been paid or, as the case may be, discharged in full and the Bank has no further obligations hereunder or thereunder; - 8 - "Shares Charge" means a charge dated 20th March 1992 in favour of the Bank given by EDI over the entire issued share capital of the Company as security for the obligations of the Company hereunder; "Sterling" "Pounds" and "L." means the lawful currency for the time being of the United Kingdom; "Sterling Equivalent" means, in relation to an amount in US Dollars on the day on which the calculation falls to be made, the amount of Sterling which could be purchased with such amount of US Dollars on the basis of the Bank's spot buying rate for Sterling against US Dollars at or about 11.00 a.m. on the second Business Day immediately prior to that date; "Subsidiary" has the meaning ascribed to it by Section 736 of the Companies Act 1985; "Tangible Net Worth" has the meaning set out in Schedule 3; "Tax" includes all present and future taxes, charges, imposts, duties, levies, deductions, withholdings or fees of any kind whatsoever payable at the instance of or imposed by any statutory, governmental, international, state, federal, provincial, local or municipal authority, agency, body or department whatsoever or any central bank or monetary agency, in each case whether in the United Kingdom or elsewhere, together with any penalties, additions, fines, surcharges or interest relating thereto and "Taxes" and "Taxation" shall be construed accordingly; "Techdis" means Techdis Limited, a company incorporated in England and Wales and registered under number 2058603; "Techdis Acquisition Agreement" means the agreement dated 2nd July 1993 for the acquisition, inter alia, of the entire issued share capital of Techdis and made between, inter alios, (1) the persons whose names and addresses are set out therein and (2) the Company together with any documents and agreements ancillary thereto, whether or not referred to therein; "Techdis Debenture" means the mortgage debenture in the Bank's standard form granted, or to be granted, by Techdis in favour of the Bank; "Techdis Guarantee" means the unlimited composite cross-guarantee in the Bank's standard form granted, or to be granted, by Techdis in favour of the Bank; "Techdis Shares" means the shares in Techdis acquired by the Company pursuant to the Techdis Acquisition Agreement; "Third Drawing" has the meaning set out in Clause 5.2.1(c); "Total Debt" has the meaning set out in Schedule 3; "Total Financing Costs" has the meaning set out in Schedule 3; "Total Interest Costs" has the meaning set out in Schedule 3; - 9 - "US Dollars", "US$", or "$" means the lawful currency for the time being of the U.S.A.; "U.S.A" means the United States of America; "VAT" means value added tax as provided for in the Value Added Tax Act 1983 (and legislation, whether delegated or otherwise) supplemental thereto and any similar or turnover Tax replacing or introduced in addition to any of the same; "Working Capital Available Amount" means, subject to the terms of this Agreement, that amount which at any time represents the Working Capital Facility Limit less the aggregate of all Drawings made and outstanding under the Revolving Credit Facility and outstandings utilised under the Overdraft Facility and those Drawings to be made in respect of which a Drawdown Notice under the Working Capital Facility has been issued to, and received by, the Bank, and also all counter-indemnity obligations of the Company incurred under the Working Capital Facility and 20 per cent. or such other percentage amount as the Bank acting reasonably may determine of the FFE Nominal Amount. (For these purposes, all US Dollar amounts shall be computed on the basis of their Sterling Equivalent); "Working Capital Facility" means the facilities to be made available by the Bank hereunder, subject to the Working Capital Facility Limit, the terms and conditions of which are set out in this Agreement; "Working Capital Facility Liabilities" means, at any time, the aggregate of (i) the principal amount of all outstanding Drawings made by the Company under the Working Capital Facility or the subject of a Drawdown Notice issued to, and received by, the Bank under the Working Capital Facility, whether made under the Revolving Credit Facility, the Overdraft Facility, a Bank Guarantee, FFE Contracts (together with 20 per cent. or such other percentage amount as the Bank acting reasonably may determine of the FFE Nominal Amount) or any other banking facilities, and (ii) the sum of all other liabilities whether actual or contingent of the Company to the Bank under the Working Capital Facility from time to time (excluding interest accruing but not yet due), in each case as certified by the Bank, such certificate, in the absence of manifest error, to be binding on the Company. (For these purposes all US Dollar amounts shall be computed on the basis of their Sterling Equivalent); and "Working Capital Facility Limit" means L.5,000,000. 1.2 Clause headings and the table of contents are inserted for convenience of reference only and shall not affect the construction of this Agreement. 1.3 In this Agreement, unless the context otherwise requires:- (a) references to Clauses and Schedules are to be construed as references to the Clauses of and Schedules to this Agreement as amended from time to time and references to Clauses shall, unless otherwise specifically stated, be construed as references to the Clauses in the Clause in which the reference appears and references to this Agreement include its Schedules as amended from time to time; - 10 - (b) references to (or to any specified provision of) this Agreement or any other document shall be construed as references to this Agreement, that provision or that document as in force for the time being and as amended from time to time; (c) references to any statue, order or regulation shall be construed as references to such statute, order or regulation as amended, re-enacted or consolidated from time to time; (d) references to any person shall be construed as references to that person or that person's assigns or successors in title, in whole or in part; (f) references to the singular include the plural and vice versa. 2. FACILITIES Upon and subject to the terms and conditions of this Agreement, the Bank agrees to make available to the Company:- (i) the Acquisition Facility in a maximum principal amount of up to the Acquisition Facility Limit; (ii) the New Acquisition Facility in a maximum principal amount of up to the New Acquisition Facility Limit as more particularly described in Clause 5.2; and (iii) the Working Capital Facility in an aggregate maximum principal amount of up to the Working Capital Facility Limit as more particularly described in Clause 5.3. 3. PURPOSE 3.1 The purpose of the Acquisition Facility is to assist the Company to:- (i) finance its acquisition of Jermyn under the terms of the Acquisition Agreement; and (ii) repay the Existing Facility. 3.2 The purpose of the New Acquisition Facility is to assist the Company to refinance the purchase of the Techdis Shares and to enable the Company to make certain earn-out payments pursuant to the terms of the Techdis Acquisition Agreement. 3.3 The purpose of the Working Capital Facility is to assist the Company's general working capital requirements. - 11 - 4. CONDITIONS PRECEDENT All conditions precedent have been satisfied. 5. AVAILABILITY AND DRAWINGS UNDER THE FACILITIES 5.1 Availability and Drawings under the Acquisition Facility The Acquisition Loan has been drawn down. 5.2 Availability and Drawings under the New Acquisition Facility 5.2.1 Subject to the other terms hereof, the Company may make up to four (4) Drawings under the New Acquisition Facility in such amounts which in aggregate do not exceed the New Acquisition Facility Limit, such that:- (a) the first Drawing shall be of an amount not exceeding L.3,000,000 (the "First Drawing"); (b) the second Drawing shall be of an amount not exceeding L.1,200,000 and shall be made no earlier than 1st July 1994 (the "Second Drawing"); (c) the third Drawing shall be of an amount not exceeding L.1,800,000 and shall be made no earlier than 1st January 1995 (the "Third Drawing"); and (d) the fourth Drawing may only be made where the ratio of the amount of additional share capital in the Company subscribed and paid for by Arrow and/or EDI and used to pay earnout payments under the Techdis Acquisition Agreement (as referred to in Clause 5.2.7(c) to the Second and Third Drawings is greater than 5:6 and shall be of an amount not exceeding such amount as would, when taken with the Second Drawing and the Third Drawing, reduce the relevant ration to 5:6 (the "Fourth Drawing") PROVIDED THAT at no time shall the aggregate of the Second, Third and Fourth Drawings exceed the sum of L.3,000,000. 5.2.2 The Company shall give the Bank notice of its intention to borrow a Drawing under the New Acquisition Facility in the form of a Drawdown Notice. 5.2.3 Once given, a Drawdown Notice served in respect of the New Acquisition Facility shall be irrevocable and shall oblige the Company to borrow in accordance with its terms. 5.2.4 A Drawdown Notice served in respect of the New Acquisition Facility shall be delivered to the Bank not later than 10.00 a.m. (London time) one Business Day before the proposed Drawdown Date (or within such shorter period as the Bank may allow). 5.2.5 Any part of the New Acquisition Facility undrawn at the close of business on the last Business Day in July 1995 shall be cancelled and shall not be available for borrowing by the Company unless there exists, at such date, a dispute relating to any earn-out payment or - 12 - payments due under the Techdis Acquisition Agreement as referred to in clause 3.4 of the same in which case such date shall be extended to such later date as may be agreed by the Bank. 5.2.6 If any Drawing under the New Acquisition Facility is not made in full on the relative Drawdown Date the Company will on demand pay to Bank such amount as the Bank may certify (by a certificate prepared, and having the same effect, as described in Clause 8.3) as necessary to compensate it for any losses or costs on account of funds borrowed or contracted for in order to fund such Drawing. 5.2.7 Notwithstanding any other provisions of this Agreement, no Drawdown Notice in respect of the New Acquisition Facility may be served and no Drawing may be made:- (a) if a Default or Potential Default has occurred and is continuing unremedied and/or unwaived or if a Default would occur on any Drawing being made under the New Acquisition Facility; or (b) unless the representations and warranties set out in Clause 12 are, or will be, true and accurate on the date on which the relative Drawdown Notice is served and on the relative Drawdown Date; or (c) in respect of the Second and Third Drawings only, the Bank is satisfied that the proceeds of the relevant Drawing are to be used to pay an earn-out payment under the Techdis Acquisition Agreement and that on or before such time Arrow and/or EDI shall have subscribed and paid for an additional amount of share capital in the Company in an amount of, in respect of the Second Drawing at least 5/6 of such Drawing and, in respect of the Third Drawing at least 5/6 of the Second and Third Drawings, and that in each case the proceeds of such subscription shall have been used or will be used simultaneously with the making of such Drawing to pay the said earn-out payments; or (d) if the making of such Drawing would cause the New Acquisition Loan to exceed the New Acquisition Facility Limit. 5.3 Availability and Drawings under the Working Capital Facility 5.3.1 Utilisation Subject to the other terms of this Agreement, the Bank hereby agrees to make the Working Capital Facility available to the Company during the Commitment Period on a revolving basis to be utilised on any Business Day by way of:- (i) the Revolving Credit Facility in accordance with Clause 5.3.2; (ii) the Overdraft Facility in accordance with Clause 5.3.3; (iii) the issue of Bank Guarantees in accordance with Clause 5.3.4; (iv) the entering into of FFE Contracts, subject to the - 13 - availability of the relevant currencies, in accordance with Clause 5.3.6; and (v) such other banking facilities as the Bank and the Company may agree; PROVIDED THAT at no time shall the Working Capital Facility Liabilities exceed the Working Capital Facility Limit and PROVIDED FURTHER THAT the Working Facility Liabilities shall not at any time exceed that amount which represents the aggregate of fifty (50) per cent of Eligible Receivables. 5.3.2 Revolving Credit Facility 5.3.2.1 Subject to the other terms of this Agreement (and in particular without limitation Clauses 4 and 5.3.1), Drawings may be made by the Company under the Revolving Credit Facility at any time during the Commitment Period by giving a Drawdown Notice in accordance with Clause 5.3.2.3. 5.3.2.2 Drawings shall be in minimum amounts of L.100,000 and integral multiples of L.100,000 or, if less, the undrawn balance available under the Working Capital Facility and shall only be made on a Business Day. 5.3.2.3 Subject to:- (a) no Default or Potential Default having occurred and continuing unremedied and unwaived or occurring as a result of the making of the relevant Drawing; (b) the representations and warranties set out in Clause 12 being true and accurate on the date on which the relevant Drawdown Notice is served and on the relevant Drawdown Date, subject to any matter, fact or circumstance disclosed pursuant to Clause 12.3; and (c) the Bank having received the relevant Drawdown Notice from the Company at least 2 Business Days (or such shorter period as the Bank may allow) before the proposed Drawdown Date (provided that no notice period shall be required if the Drawing is made for the purpose of meeting a demand for repayment of the Overdraft Facility); the Company may make the relevant Drawing PROVIDED ALWAYS THAT:- (i) the relevant Drawing when aggregated with the Working Capital Facility Liabilities shall not exceed the Working Capital Facility Limit; (ii) the relevant Drawing may be made only on a Business Day; and (iii) the relevant Drawdown Notice once given to the Bank shall not be revocable and the Company shall be obliged to borrow in accordance with such notice. 5.3.2.4 If the relevant Drawing is not made in full on the relevant Drawdown Date the Company will on demand pay to the Bank such amount as the - 14 - Bank may certify (by a certificate prepared, and having the same effect, as described in Clause 8.3) as necessary to compensate it for any losses or costs on account of funds borrowed of contracted for in order to fund the relevant Drawing. 5.3.3 Overdraft Facility The Company may utilise the Working Capital Facility by way of borrowing on overdraft under the Overdraft Facility. Overdrafts may be denominated in Sterling or US Dollars and will be provided on the Company's Sterling or Dollar accounts respectively held with the Bank. Notwithstanding the provisions of Clause 15 all amounts advanced to the Company by way of overdraft shall be repayable on demand and subject to the Bank's usual terms and conditions for such facilities. Any such overdraft will be made available on the basis that, subject to renegotiation, it shall only be available for the ensuing 12 month period the first such period commencing on the date hereof PROVIDED THAT at no time shall the Bank be obliged to make advances under the Overdraft Facility or make other banking facilities available if the making of any of the same would result in the Working Capital Facility Liabilities exceeding the Working Capital Facility Limit. 5.3.4 Bank Guarantees 5.3.4.1 The Bank shall not be obliged to issue any Bank Guarantee under the Working Capital Facility unless the Bank has received a Drawdown Notice requesting the Bank to issue a Bank Guarantee:- (i) in respect of letters of credit or bills of exchange, at least 5 Business Days (or such other period as agreed between the Bank and the Company) prior to the proposed issue; and (ii) in respect of any other instrument at least 10 Business Days prior to the proposed issue and subject to:- (a) the Bank approving the form and purpose of the proposed Bank Guarantee including the maximum liability and maturity thereof; (c) no Default or Potential Default having occurred and continuing unremedied and unwaived or occurring as a result of the issue of the Bank Guarantee; and (d) the representations and warranties set out in Clause 12 being true and accurate on the date on which the request is served and on the date of issue of the Bank Guarantee subject to any matter, fact or circumstance disclosed pursuant to Clause 12.3; then the Bank shall issue a Bank Guarantee PROVIDED THAT the issue of such Bank Guarantee shall not result in the maximum liability thereunder leading to a breach of the Working Capital Facility Limit when aggregated with the other outstanding Working Capital Facility Liabilities. - 15 - 5.3.4.2 No Bank Guarantee will be issued under which a claim could be made on the Bank on or after the Final Repayment Date. 5.3.5 Counter-Indemnity 5.3.5.1 In consideration of the Bank making available the Working Capital Facility, the Company hereby unconditionally and irrevocably agrees and undertakes to the Bank as follows:-- (a) it will at all times indemnify the Bank and keep the Bank indemnified from and against all actions, suits, proceedings, claims, demands, liabilities, damages, costs, expenses, losses and charges whatsoever in relation to each Bank Guarantee issued for its account and it will pay to the Bank on demand the amount of all payments made (whether directly or by way of set-off, counterclaim or otherwise howsoever) and all losses, costs and expenses suffered or incurred from time to time by the Bank under or by reason or in consequence of any Bank Guarantee and any of the aforesaid indemnities relating thereto; (b) it hereby irrevocably authorises the Bank to comply with the terms of any demand served or purporting to be served on the Bank pursuant to a bank Guarantee issued for its account without any reference to or further authority from it and without any enquiry by the Bank into the justification for such demand or the validity thereof and hereby agrees that any payment which the Bank shall make in accordance with such demand or purported demand shall be binding on and be accepted by the Company as conclusive and binding evidence that the bank was liable to comply with the terms of such demand and was liable to do so in the manner and for the amount in which the Bank effected such compliance; (c) the liability of the Company under this indemnity shall not be discharged, lessened or impaired by any time being given or by any thing being done or other circumstance whatsoever which, but for this provision, would or might operate to exonerate or discharge it; and (d) the Company hereby agrees that the indemnity contained in this Clause shall constitute and be a continuing security to the Bank and that the said indemnity shall extend to each Bank Guarantee as it may, from time to time, be varied, modified, amended or extended. 5.3.5.2 The Company hereby agrees that it shall pay to the Bank interest (at the rate then applicable to advances made by way of overdraft under the Overdraft Facility) on the amount of each payment, loss, cost and expense made, suffered or incurred from time to time by the Bank under or by reason or in consequence of any Bank Guarantee in respect of the Company and any of the aforesaid indemnities relating thereto from and including the date upon which such payment, loss, cost or expense is made, suffered or incurred as aforesaid up to and including the date upon which payment or reimbursement of such amount is demanded from the Company. - 16 - 5.3.6 FFE Contracts 5.3.6.1 The Bank shall not be obliged to enter into any FFE Contract with a maturity of longer than 12 months or which would or may result in the Bank incurring a loss or being under any liability or obligation (actual or contingent) after the Final Repayment Date. 5.3.6.2 The Working Capital Available Amount shall be reduced by an amount equal to 20 per cent. of the amount of each FFE Contract or such other percentage as the Bank shall determine. 5.3.7 Secured Debt For the avoidance of doubt it is hereby agreed that the obligations and liabilities of the Company to the Bank under the Working Capital Facility from time to time are secured pursuant to the terms of the Security Documents. 5.3.8 Bank's Certificate Conclusive The Bank's certificate as to the amount of the Working Capital Facility Liabilities at any given time and any other figure under this Clause 5 shall, in the absence of manifest error, be conclusive and binding on the Company. 6. INTEREST 6.1 Interest Periods and Interest Rates 6.1.1 The Acquisition Facilities and the Revolving Credit Facility The Company may by notice substantially in the form of a Drawdown Notice (but with references to the Drawing and the payment instructions omitted) received by the Bank not later than 10.00 a.m. (London time) on the third Business Day preceding the first day of each next succeeding Interest Period select the duration of such Interest Period for each Drawing. Each Interest Period in respect of each Drawing shall be for a period of 3 months' duration unless the Company shall have otherwise notified the Bank PROVIDED THAT, in respect of the New Acquisition Facility, if the New Acquisition Loan is already outstanding, any subsequent Drawing shall have a first Interest Period that expires on the same day as the Interest Period then applicable to the New Acquisition Loan. 6.1.2 The Company shall pay interest on each Drawing under the Acquisition Facilities and the Revolving Credit Facility to the Bank from the Drawdown Date to the date on which that Drawing is repaid in full (after as well as before judgment) and such interest shall be calculated in respect of successive Interest Periods. Without prejudice to the provisions of Clauses 6.2, 10.3, 10.4.1, 10.4.2 and 10.4.3, the rate of interest applicable to each Drawing under the Acquisition Facilities and the Revolving Credit Facility for any Interest Period (or part thereof) shall be the rate per annum determined by the Bank to be the aggregate of:- (i) the Margin; - 17 - (ii) LIBOR; and (iii) Mandatory Liquid Asset Costs. 6.1.3 Overdraft Interest on all amounts outstanding by way of overdraft under the Working Capital Facility shall accrue from day to day at the rate per annum which is the greater of (a) six and a half per cent (6.5%) per annum; and (b) the relevant Base Rate of the Bank for the time being and from time to time plus the Margin. In the case of a US Dollar overdraft all interest payable thereon shall be made in US Dollars. 6.1.4 Other Working Capital Facilities (a) The Company shall pay commission on the maximum amount of the aggregate of the Bank's actual and contingent liability under each Bank Guarantee which constitutes a bond, guarantee or similar commitment at the rate of 2 per cent. per annum which shall be paid quarterly in advance. (b) The Company shall pay fees to the Bank in respect of FFE Contracts and Bank Guarantees constituting documentary credits or other similar engagements in such amount as may be agreed between the Bank and the Company from time to time in accordance with the Bank's usual scale of charges. 6.2 If the Bank shall determine that, by reason of circumstances affecting the London inter-bank market generally, reasonable and adequate means do not exist for determining under Clause 6.1.2 the rate of interest applicable to the Drawings comprising part or all of the Loan:-- (i) the Bank shall promptly notify the Company in writing of such event; (ii) the Bank and the Company shall discuss an alternative basis for making and continuing the Drawings comprising part or all of the Loan during subsequent Interest Periods (either for an alternative period or periods or by obtaining Sterling funds in another market or markets) or as the case may be for calculating the rate of interest applicable to the Drawings comprising part or all of the Loan, in either case on the basis that the net return to the Bank shall be the same as it would have been had such circumstances not occurred; (iii) subject to paragraph (iv) below, unless the Bank and the Company shall have agreed upon such alternative basis within thirty (30) days of the date of service of the notice referred to in clause 6.2(i) the Company shall pay interest from the relevant Interest Date at a rate equal to the Margin plus such amount as is certified by the Bank as being the cost to the Bank of continuing to make the Drawings comprising part or all of the Loan available, which certificate shall, save for manifest error, be conclusive evidence of such interest and, so long as there shall continue to be no agreement upon such alternative basis, the Company shall be entitled to prepay the Drawings comprising - 18 - part or all of the Loan on the last day of an Interest Period upon 30 days' written notice from the Company to the Bank; (iv) if within 30 days of the date of service of the notice referred to in Clause 6.2(i) the Bank and the Company shall agree upon such an alternative basis, then such basis shall be effective in respect of the Drawings comprising part or all of the Loan from (and, if applicable, retroactive to) the beginning of the Interest Period in respect of the Loan beginning on or after the date of service of such notice by the Bank to the expiry of the first Interest Period which expires after such circumstances no longer exist. 6.3 Default Interest 6.3.1 If the Company does not pay any sum due and payable under any of the Facilities on the due date the Company shall pay interest on such sum (or, as the case may be, the amount thereof for the time being due and unpaid) from such date to the date of actual payment in full (after as well as before judgment), calculated by reference to successive interest periods (each of such duration as the Bank may from time to time select and the first beginning on such due date) ("interest periods") at the percentage rate per annum determined by the Bank to be the aggregate of:-- (i) 2 per cent. per annum; (ii) the Margin; (iii) LIBOR; and (iv) Mandatory Liquid Asset Costs. 6.3.2 So long as the default continues, such rate shall be recalculated in accordance with the provisions of this Clause at the end of each such interest period (the amount of unpaid interest accrued during such preceding interest period in respect of such sum being added to the sum in default and bearing interest accordingly). 6.3.3 If the Company does not pay any sum due and payable under the Working Capital Facility (other than the Revolving Credit Facility), it shall pay interest on such sum (or, as the case may be, the amount thereof for the time being due and unpaid) from such date to the date of actual payment in full (after as well as before judgment), at a rate equal to 2 per cent. above the rates referred to in Clauses 6.1.3 and 6.1.4 as the case may be. 6.4 The Bank's Determination The determination by the Bank of any interest payable for any period or part thereof shall, save for manifest error, be conclusive. The Bank will notify the Company of the rate of interest payable for any interest period, Interest Period or part thereof (and, in the case of additional interest payable under Clause 6.3, of the amount of such additional interest). - 19 - 6.5 Calculation and Payment of Interest Interest on the Loan or, as the case may require, other amounts due from the Company under this Agreement, at the rates determined as aforesaid shall:-- (a) accrue from day to day; (b) be calculated on the basis of the actual number of days elapsed, and (i) a 365 day year or (ii) in respect of a sum due in US Dollars a 360 day year; and (c) except as otherwise provided in this Agreement be paid by the Company in arrear on each Interest Date and, if an Interest Period exceeds 6 months, every 6 months in arrear. 7. REPAYMENT 7.1 The Acquisition Facilities 7.1.1 Subject to the terms of this Agreement, the Company shall repay the Acquisition Loan and the First Drawing by payment to the Bank on the dates set out in Column A below (each date being an "Instalment Repayment Date") of the Sterling amount (together with any amount payable on such Instalment Repayment Date pursuant to Clause 7.1.2, and "Instalment") set out in Column B below opposite the relevant Instalment Repayment Date.
Column A Column B -------- -------- L. 30 June 1994 600,000 31 December 1994 900,000 30 June 1995 700,000 31 December 1995 700,000 30 June 1996 700,000 31 December 1996 700,000 30 June 1997 850,000 31 December 1997 850,000 30 June 1998 1,000,000 31 December 1998 (the "Final Repayment Date") 1,000,000
7.1.2 The Company shall repay each of the Second, Third and Fourth Drawings (as the case may be) by repaying such Drawing in equal instalments on each of the Instalment Repayment Dates occurring after the Drawdown Date of Such Drawing. 7.1.3 The Company shall repay the Acquisition Facilities in accordance with the provisions of this Clause 7.1 so that the Acquisition Facilities are repaid in full on or before the Final Repayment Date. 7.1.4 Any amounts repaid or prepaid may not be reborrowed. - 20 - 7.2 The Working Capital Facility 7.2.1 Each Drawing made pursuant to the Revolving Credit Facility shall, subject to the other terms hereof, be repaid in full on the Interest Date relating to such Drawing. 7.2.2 All Drawings will be repaid on or before the Final Repayment Date. 7.2.3 If all or part of an existing Drawing is to be repaid from the proceeds of all or part of a new Drawing, then the amount to be repaid by the Company shall be set-off against the amount of the new Drawing and the person to whom the smaller amount is to be paid shall pay to the other party a sum equal to the difference between the two amounts. 7.2.4 On giving not less than 10 days' prior irrevocable written notice to the Bank, the Company may cancel all or part of the Revolving Credit Facility (but if in part in minimum amounts of L.100,000 and multiples of L.100,000). Amounts so cancelled shall cease to be available for borrowing hereunder and the Working Capital Available Amount and Working Capital Facility Limit will be reduced accordingly. The Company shall not cancel all or part of the Revolving Credit Facility if such cancellation would result in the Working Capital Facility Liabilities being greater than the Working Capital Facility Limit. 7.3 All amounts due under the Working Capital Facility (other than in respect of the Revolving Credit Facility) shall be repaid on or before the Final Repayment Date whether outstanding by way of overdraft under the Overdraft Facility or otherwise and including all payments, if any, to be made of cash collateral equal to the Bank's maximum liability (actual or contingent) in respect of the Bank Guarantees and the FFE Contracts. 7.4 All repayments of a Drawing shall be made in the currency of such Drawing. 7.5 Any part of the Working Capital Facility not utilised as at the close of business on the last day of the Commitment Period shall be automatically canceled at that time. 8. PREPAYMENT OF THE ACQUISITION FACILITIES 8.1 The Company may prepay all or any part of the Acquisition Loan and the New Acquisition Loan (the amount of any partial prepayment being an integral multiple of L.100,000) on an Interest Date provided that the Bank shall have received not less than 10 days' prior irrevocable written notice of the Company's intention to make such prepayment specifying the amount to be prepaid. Notice of intended prepayment having been given, it shall be obligatory for the prepayment to be made in accordance with the notice. No amount prepaid may be redrawn. 8.2 Any amount prepaid pursuant to this Clause shall be applied in and towards the discharge of the Installments outstanding at the date of such prepayment such that the amount prepaid shall be applied first, consecutively in respect of the next two Instalments falling after each prepayment date and second, pro rata to the remaining - 21 - Instalments PROVIDED THAT if pursuant to this Clause a prepayment is applied, consecutively, against the next two Instalments in full, a repayment must be made in respect of the next Instalment on the relevant Instalment Repayment Date specified in Clause 7.1.1, before prepayments may be applied to the then immediately succeeding two Instalments. 8.3 If any repayment or prepayment is made otherwise than on an Interest Date (or an Instalment Repayment Date, as the case may be) relative to the amount paid, the Company shall pay to the Bank on demand such additional amount as the Bank may certify as necessary to compensate the Bank for any loss or expense on account of funds borrowed, contracted for or utilised to fund the amounts so repaid or prepaid beyond the above date. Any certificate issued by the Bank pursuant to this Clause (or under Clauses 5.2.6, or 5.3.2.4) shall state the amount and show the calculation of any such loss or expense after giving credit for any incidental saving effected by the Bank in mitigation thereof, and shall be conclusive save in the case of manifest error. 8.4 The Company may not prepay all or any part of the Acquisition Loan or the New Acquisition Loan except in accordance with the express terms of this Agreement. 9. CHANGE IN CIRCUMSTANCES 9.1 If the introduction of, or any change in, any applicable law, statute, rule or regulation or any change in the interpretation thereof by any regulatory or other authority charged with the administration thereof or by any court shall make it unlawful for the Bank to advance or leave outstanding the Loan or otherwise to maintain or give effect to its obligations under this Agreement the Bank shall notify the Company of such illegality and the Bank's obligations under this Agreement shall be forthwith cancelled and the Company shall, within such period (if any) as may be allowed by law or forthwith if no such period is allowed, prepay to the Bank the Loan. Any such prepayment shall be subject to Clause 8.3. Without prejudice to the Bank's rights under this Clause 9.1 the Bank will use reasonable endeavours to mitigate the effect of such illegality and in particular (without prejudice to the generality of the foregoing) shall consider in consultation with the Company continuing the Loan through another office or transferring the Facilities to one or more of its affiliates or other financial institutions. 9.2 If the introduction, abolition, withdrawal of, or any change in:-- (a) any applicable law, regulation, practice or concession; or (b) any official directive or regulatory requirement or request (whether or not having the force of law) of the Bank of England, the European Community, or of any other governmental, monetary or other authority (whether in the United Kingdom or elsewhere) or any change in the interpretation (or introduction of any interpretation) or application thereof shall:-- - 22 - (i) subject the Bank to any Tax, or increase the amount of any Tax in connection with it having agreed to make available and maintaining the Loan or any part thereof or in connection with this Agreement or any of the Security Documents or any document or transaction contemplated herein or therein or any part thereof other than Corporation Tax on the Bank's overall net income; or (ii) change the basis of Taxation of the Bank in respect of payments of principal, interest or any other payment due or to become due in connection with the Facilities or any part thereof or in connection with this Agreement or any of the Security Documents or any document or transaction contemplated herein or therein or any part thereof (or the treatment for Taxation purposes of such payments); or (iii) change the basis on which the Bank is treated for Taxation purposes in respect of any principal, interest or other amounts paid by the Bank on, or otherwise in respect of, deposits from third parties used to effect or maintain the Loan or any part thereof or in connection with this Agreement or any of the Security Documents or any document or transaction contemplated herein or therein; or (iv) impose, modify or deem applicable any reserve, cash ratio, special deposit, capital adequacy, and/or liquidity requirement or any other analogous requirement, or require the making of any special deposits, against or in respect of any assets or liabilities of, deposits with or for the account of, or loans by, the Bank for which the Bank is not entitled to be fully compensated under Clause 6.1.2; or (v) change the manner in which the Bank allocates capital resources to its obligations under the Facilities so that it is unable to obtain the rate of return on its overall capital which it would have been able to obtain but for its entering into and/or performing its obligations and/or assuming or maintaining its commitment under this Agreement; or (vi) impose on the Bank any other condition directly affecting its participation in the Facilities; and the result of any of the foregoing is either to increase the cost to the Bank of making available or maintaining the Loan or any part thereof or to reduce the amount of any payment received or receivable by the Bank or to reduce its return from the Facilities, then and in any such case:-- (w) the Bank shall promptly notify the Company; (x) subject to the Bank taking the steps referred to in (y) below, the Company shall pay from time to time to the Bank on demand all amounts which the Bank certifies (in a certificate which shall set out in reasonable detail so far as is practicable the basis of the computation of such amounts) is necessary to compensate the Bank for the additional cost or reduction; - 23 - (y) without prejudice to the foregoing, the Bank confirms that, if it notifies the Company as aforesaid, it will take such steps as it considers reasonable to reduce or avoid the additional cost or reduction and, if the Company so requests, the Bank shall consult the Company with a view to finding a means of reducing or avoiding the additional cost or reduction and, in particular, shall consider continuing the Loan through another office or, upon the written request of the Company, shall use all reasonable endeavours to assign the whole of its rights and obligations under this Agreement to another financial institution acceptable to the Company PROVIDED THAT the Bank shall not be obliged to continue such negotiations for a period of longer than 30 days; and (z) the Company, at any time after receipt of such notification as is referred to in (w) above, so long as the circumstances giving rise to such additional cost or, as is the case may be, reduction continue, shall be entitled on giving not less than 10 days' notice to the Bank (which shall be irrevocable) to prepay the Loan or any part thereof. Any such prepayment shall be subject to the provisions of Clause 8. 9.3 The certificate or notification of the Bank as to any of the matters referred to in Clauses 9.1 and 9.2 above shall, save for any manifest error, be conclusive and binding on the Company. 10. PAYMENTS 10.1 All payments to be made by the Company under this Agreement shall be made in immediately available funds during normal banking hours on the day in question to the Bank not later than 12.00 noon (London time) on such day. 10.2 If, but for this Clause, any sum would become due for payment under this Agreement on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day unless that next Business Day falls in the next calendar month when payment shall be made on the immediately preceding Business Day and interest shall be adjusted accordingly. 10.3 The Company shall indemnify the Bank on demand against any loss or expense (including, but not limited to any loss of the Margin or any other loss or expense sustained or incurred or to be sustained or incurred by the Bank in liquidating or employing deposits required or contracted for to effect or maintain the Loan or any part thereof) which the Bank may sustain or incur as a consequence of (i) a default by the Company in the payment on the due date of any sum due under this Agreement or (ii) the repayment of the Loan pursuant to Clause 15. 10.4.1 All sums payable to the Bank pursuant to or in connection with this Agreement and the Security Documents, or any document contemplated by or entered into pursuant hereto or thereto, shall be paid in full without any set-off or counterclaim whatsoever and free and clear of all deductions or withholdings whatsoever save only as may be required by law. - 24 - 10.4.2 If any deduction or withholding is required by law in respect of any payment due to the Bank pursuant to or in connection with this Agreement and the Security Documents, or any document contemplated by or entered into pursuant hereto or thereto, the Company shall:-- (a) ensure or procure that the deduction or withholding is made and that it does not exceed the minimum legal requirement therefor; (b) pay, or procure the payment of, the full amount deducted or withheld to the relevant Taxation or other authority in accordance with the applicable law; (c) (i) if the payment is to be made by the Company, increase the payment in respect of which the deduction or withholding is required so that the net amount received by the Bank after the deduction or withholding (and after taking account of any Tax liability which arises as a consequence of the increase) shall be equal to the amount which the Bank would have entitled to receive in the absence of any requirement to make a deduction or withholding; or (ii) if the payment is to be made by any person other than the Company, pay directly to the Bank such sum (a "compensating sum") as will, after taking into account any Tax liability of the Bank in respect of the compensating sum, enable the Bank to receive, on the due date for payment, a net sum equal to the sum which the Bank would have received in the absence of any obligation to make a deduction or withholding; and (d) within 30 days of receipt deliver to the Bank appropriate receipts evidencing the deduction or withholding which has been made or procure the delivery of such receipts. 10.4.3 If the Bank determines, in its absolute discretion, that it has received, realised, utilised and retained a Tax benefit by reason of any deduction or withholding in respect of which the Company has made an increased payment or paid a compensating sum under this Clause 10.4, the Bank shall, provided it has received all amounts which are then due and payable by the Company and any other person under any of the provisions of this Agreement and the Security Documents, pay to the Company (to the extent that the Bank can do so without prejudicing the amount of such benefit, or repayment and the right of the Bank to obtain any other benefit relief or allowance which may be available to it) such amount, if any, as the Bank in its absolute discretion shall determine will leave the Bank in no worse position than the Bank would have been in if the deduction or withholding had not been required PROVIDED THAT:-- (1) the Bank shall have an absolute discretion as to the time at which and the order and manner in which it realises or utilises any Tax benefit and shall not be obliged to arrange its business and tax affairs in any particular way in order to be eligible for any credit or refund or similar benefit; - 25 - (2) the Bank shall not be obliged to disclose any information regarding its business, tax affairs or tax computations; (3) if the Bank has made a payment to the Company pursuant to this Clause 10.4.3 on account of any Tax benefit and it subsequently transpires that the Bank did not receive that Tax benefit, or received a lesser Tax benefit, the Company shall on demand pay to the Bank such sum as the Bank may determine as being necessary to restore the after-tax position of the Bank to that which it would have been had no adjustment or the correct adjustment (as the case may require) under this proviso (3) been made. Any sums payable by the Company to the Bank under this proviso (3) shall be subject to the provisions of Clause 20.5; (4) the Bank shall not be obliged to make any payment under this Clause 10.4 if, by doing so, it would contravene the terms of any applicable law or any notice, direction or requirement of any governmental or regulatory authority (whether or not having the force of law). 10.5 If the Company is required to make an increased payment under Clause 10.4.2 above (but only so long as such requirement exists), subject to giving to the Bank not less than 10 days' prior written notice (which shall be irrevocable) the Company may prepay the Loan or any part thereof together with accrued interest thereon. Any such prepayment shall be subject to the provisions of Clause 8.3. 11. SECURITY 11.1 The obligations of the Company under this Agreement shall be secured by the interests and rights conferred on the Bank under the Security Documents. 11.2 It is hereby agreed that all obligations and liabilities of the Company to the Bank incurred under or in connection with the Interest Rate Protection Contracts shall be treated, for all purposes, as obligations and liabilities incurred under this Agreement and that, for the avoidance of doubt, the Company's obligations and liabilities under the Interest Rate Protection Contracts shall be secured pursuant to the terms of the Security Documents. 12. REPRESENTATIONS AND WARRANTIES 12.1 The Company acknowledges that the Bank has entered into this Agreement in full reliance on the following statements and hereby represents and warrants to the Bank that:-- (a) each Group Company is a private limited company duly incorporated and validly existing under the laws of England and each of them possesses the capacity to sue and be sued in its own name and has the power to carry on its business as now being conducted and to own its property and other assets; (b) each Group Company has or will have the power to execute, - 26 - deliver and perform its obligations under each of the Facility Documents, the Acquisition Documents, and the Techdis Acquisition Agreement and any other document or instrument executed, delivered or to be executed or delivered by it under any of such documents; all necessary corporate; shareholder and other action has been taken or will be taken to authorise the execution, delivery and performance of the same and no limitation on its powers to borrow, to guarantee and to grant security will be exceeded as a result of the transactions contemplated by such documents; (c) the Facility Documents, the Acquisition Documents, the Techdis Acquisition Agreement and any other document or instrument executed or delivered or to be executed or delivered by any Group Company thereunder constitute or, as the case may be, will constitute valid and legally binding obligations of the Group Companies which are party thereto and, in the case of the Acquisition Agreement of Arrow; (d) the execution and delivery of the Facility Documents, the Acquisition Documents, the Techdis Acquisition Agreement and any other document or instrument executed or delivered or to be executed or delivered thereunder by any Group Company (as applicable), and the performance of obligations thereunder, and compliance with the provisions thereof, will not (i) contravene any existing applicable law, statute, rule or regulation or any judgment, decree or permit to which any of the same are subject, (ii) conflict with, or result in any breach of any of the terms of, or constitute a default under, any agreement or other instrument to which any Group Company is a party or is subject or by which it or any of its property is bound, (iii) contravene or conflict with any provision of the Memorandum and Articles of Association of any Group Company; (e) all licenses, consents and authorisations as are or may be necessary to enable each Group Company to carry on its business at the date hereof and to perform its obligations under the Facility Documents (other than the New Security Documents, where this representation and warranty is given before the same have been duly executed and delivered), the Acquisition Agreement and the Techdis Acquisition Agreement and to fulfil the transactions contemplated thereby are in full force and effect; (f) no Group Company has taken any corporate action nor is any Group Company aware that any steps have been taken or legal proceedings started or threatened in writing against any Group Company for winding-up, dissolution or re-organisation or for the appointment of a receiver, administrative receiver, administrator, trustee or similar officer of it or of all or any material part of its assets (for the purposes of this representation and warranty "material" shall mean the aggregate amount of all claims arising under actions of the type referred to in this Clause 12.1(f) which such amount shall not exceed 5 per cent. of the consolidated net assets of the Group as shown by the latest Accounts; -27- (g) no Group Company is in breach of or default under any agreement to which it is a party or which is binding on it or any of its assets to an extent or in a manner which would be likely to have a material adverse effect on the consolidated financial condition of the Group taken as a whole; (h) no legal action, litigation, or administrative proceeding is taking place or has been threatened in writing against any Group Company and, so far as the Company is aware, no such legal action, litigation or administrative proceeding is pending or threatened; (i) Schedule 5 contains a true and complete list of all Group Companies all of which are beneficially owned (directly or indirectly) by the Company; (j) other than Permitted Encumbrances, no Encumbrance exists over all or any of the present or future revenues or assets of any Group Company; (k) the Reference Accounts were, save as specified therein, prepared in accordance with accounting principles generally accepted in the United Kingdom consistently applied and give a true and fair view of the state of affairs of the Company and its Subsidiaries and Jermyn and its Subsidiaries as at the date to which they are made up and as at such date there were no material liabilities of the Company and its Subsidiaries or Jermyn and its Subsidiaries which were not disclosed by or shown as being provided for in such accounts which ought to have been disclosed and (other than as disclosed in the Financial Information) since such date there has been no material adverse change in the consolidated financial condition or business of the Group taken as a whole; (l) all information prepared by the Company for inclusion in the Financial Information, or prepared by the Company and supplied to Messrs Ernst & Young for the purpose of compiling the Financial Information, was at 10th January 1992, in the case of factual information, true and correct in all material respects and, in the case of projections fair and reasonable and without prejudice to the generality of the foregoing:-- (i) the forecasts contained in the Financial Information have been diligently prepared and the assumptions upon which they are based as to the future prospects of the business of the Group have been carefully considered and are honestly believed to be reasonable having regard to the information available and to the market conditions prevailing at the time of their preparation and that the Company has made all reasonable enquiries so as to ascertain (so far as possible) all such information and market conditions which are relevant to their preparation; and (ii) save as disclosed in the Financial Information there is no fact or matter known to the Company concerning the business or the affairs of the Group or relating -28- to the Financial Information which is or might be material for disclosure to a lender contemplating granting facilities to the Company of the kind provided for in this Agreement and on the terms of this Agreement; (m) the Accounts have been prepared in accordance with GAAP and give a true and fair view of the state of affairs of the Group as at the date to which they are made up and as at such date there were no material liabilities of any Group Company not disclosed in the Accounts which ought to have been disclosed and (other than as disclosed in the Financial Information) since such date there has been no material adverse change in the financial condition or prospects of the Group; (n) the copies of the Memorandum and Articles of Association and Certificate of Incorporation of each Group Company and of the resolutions of the boards of each of those companies certified by their respective duly authorised officers produced to the Bank on or prior to 2nd August 1993 are true up to date and complete copies; (o) save pursuant to the Shares Charge, none of the share capital of any Group Company is under option or mortgaged or charged or otherwise unencumbered; (p) (a) no Encumbrances save for Permitted Encumbrances will exist over any assets of any Group Company (save pursuant to the Security Documents); and (b) no Group Company will have any Indebtedness outstanding (save under this Agreement, or otherwise permitted under Clause 13.4(f)); (q) Arrow, EDI and any other Subsidiary of Arrow, between them, beneficially own at least 75% of the issued share capital of the Company; and (r) Arrow beneficially owns at least 51% of the issued share capital of EDI. 12.2 The representations and warranties set out in Clause 12.1(a) through (o) inclusive shall survive the execution of this Agreement and the making of the Drawing of the New Acquisition Facility and subject to Clause 12.3 shall be deemed to be repeated by the Company on each Drawdown Date and on each Interest Date as if made with reference to the facts and circumstances existing at that time save that:-- (a) the representation and warranty contained in Clause 12.1(h) shall, when repeated on each Interest Date and Drawdown Date, be qualified by the addition at the end of the words "which would be likely to have a material adverse affect on the financial condition of the Group taken as a whole"; (b) without prejudice to the rights of the Bank in respect of the period prior thereto, if at any time after 2nd August 1993 it transpires that any of such representations and warranties -29- are incorrect as at the date hereof or such Drawdown Date, the representations and warranties contained in sub-Clauses (i), (l) and (n) shall not be repeated on each Interest Date or Drawdown Date; (c) the representation and warranty contained in Clause 12.1(k) shall not be given until the first Drawdown Date after the Reference Accounts are finalised and dated. 12.3 The Company may, before each Drawdown Date save in respect of a Drawing, to be made under the New Acquisition Facility or each Interest Date, disclose to the Bank in writing such facts and circumstances as the Company considers relevant to qualify any such representation and warranty save in respect of the representations and warranties repeated at Clause 12.1 (h), (i) and (j). Thereafter on each occasion when such representation and warranty is deemed to be repeated, it shall be deemed to be qualified by such disclosure, and the Company shall be deemed to make a further representation and warranty, to be repeated on each Drawdown Date and each Interest Date with reference to the facts and circumstances existing at that time, that such disclosed facts and circumstances are true and subsisting respectively and it is expressly agreed such disclosure shall only affect the provisions of Clause 15.1(c). 13. UNDERTAKINGS 13.1 During the Security Period the Company undertakes with the Bank to:-- (a) inform the Bank of nay occurrence (including without limitation any third party claim or liability) of which it becomes aware which would or would be likely to affect adversely its ability to perform its obligations under the Facility Documents and of any Default or Potential Default, promptly upon becoming aware thereof, and will from time to time, if so requested by the Bank, confirm to the Bank in writing that, save as otherwise stated in such confirmation, no such occurrence or Default or Potential Default has occurred and is continuing; (b) as soon as the same became available, but in any event within 120 days after the end of each of its Financial Years, deliver to the Bank 2 prints of its Accounts for such Financial Year together with the Auditor's report thereon and a copy of the management letter (if any) addressed by the Auditors to the directors in connection with the auditing of such Accounts together with 2 prints of the audited accounts of each Group Company in the form that is required to be registered with the Registrar of Companies; (c) provide the Bank as soon as available (and, in any event within 30 days of the end of each month with monthly management accounts (incorporating profit and loss accounts, balance sheets and cash flow summaries) relating to the Group in a form satisfactory to the Bank together with revised cash flow forecasts showing the position for the balance of each then current Financial Year in a form satisfactory to the Bank and in a form which can be compared with the projections -30- provided to the Bank under Clause 13.1(d) below together with a commentary on significant variances against such projections provided to the Bank; (d) (i) prior to the end of each Financial Year deliver to the Bank copies of such budgetary information as is then available in such form as then prepared and (ii) as soon as the following is available but in any event no later than 60 days after the commencement of each successive financial year, deliver to the Bank 2 copies of a projected consolidated profit and loss account, balance sheet and cash flow statement (including details of cash disbursements), and a projected consolidated statement of the source and application of funds for the Group for that Financial Year, which shall be broken down to show the consolidated position of the Group as at the end of each month; (e) maintain the accounting reference date of each member of the Group at 31st December; (f) furnish to the Bank such information about the business, financial condition, operations and prospects of any Group Company as the Bank may from time to time reasonably require; (g) promptly inform the Bank of:-- (i) any acquisition of beneficial ownership of common stock in Arrow amounting (whether by one transaction or a series of transaction) to 5% or more of the then issued common stock of Arrow; or (ii) any acquisition of 5% or more of the then issued common stock of Arrow by any beneficial owner of 5% or more of the then issued common stock of Arrow; or (iii) any change in the beneficial ownership of any common stock in Arrow relevant to the provisions of Clause 15.1(r); in any such case of which it or any of its directors are aware, promptly after becoming so aware. 13.2 Except as the Bank may otherwise agree in writing, the Company hereby undertakes with the Bank that during the Security Period:-- (a) the ratio of EBIT to Total Interest Costs in respect of the period of the relative Financial Year to date ending on each date referred to in Column A below shall not be less than the ratio set out in Column B below opposite such periods.
Column A Column B -------- -------- 30th September 1993 2.75:1 31st December 1993 3.40:1 31st March 1994 4.00:1 30th June 1994 4.50:1 30th September 1994 5.00:1 31st December 1994 5.30:1
-31- 31st March 1995 5.50:1 30th June 1995 5.60:1 30th September 1995 5.80:1 31st December 1995 6.00:1 each 31st March, 30th June, 30th September and 31st December thereafter 6.20:1
(b) the Tangible Net Worth of the Group for each of the Financial Years ending on the dates listed in Column A below shall not at any time during such Financial Year be less than the amount set out opposite the relevant date in Column B below:
Column A Column B -------- -------- 31st December 1993 L.21,000,000 31st December 1994 L.30,000,000 31st December 1995 L.34,500,000 31st December 1996 L.34,500,000 31st December 1997 L.34,500,000
(c) the Capital Expenditure for the Group in each of the Financial Years ending on the dates listed in Column A below will not exceed the figure stated in Column B below:
Column A Column B -------- -------- 31st December 1993 L.1,000,000 31st December 1994 L.1,800,000 31st December 1995 L.1,400,000 31st December 1996 L.1,400,000 31st December 1997 L.1,400,000
(d) the ratio for Cash flow to Total Financing Costs in respect of the period of the relative Financial Year to date ending on each 31st December, 31st March, 30th June and 30th September and commencing on 30th June 1994 shall not be less than 1:1; (e) it will seek to procure (so far as the Company is able to do) that the Auditors will at the Company's cost on the adoption of the Accounts for each Financial Year give a certificate in a form satisfactory to the Bank certifying that the Company is not in breach of the financial covenants set out in Clauses 13.2 (a), (b), (c) and (d) for the period or at the year end in respect of which the Accounts are made up. 13.3 During the Security Period, the Company shall itself and (where applicable) shall procure that each of the other members of the Group shall, save with the prior written consent of the Bank (such consent not to be unreasonably withheld or delayed):-- (a) do all things within its control necessary to maintain its corporate existence; (b) ensure that it has the right and is duly qualified to conduct its business as it is conducted in all applicable jurisdictions, and will use its reasonable endeavours to -32- obtain and maintain all rights necessary for the conduct of its business; (c) carry on its business in a prudent manner, taking into account the type of business involved and its usual practice; (d) ensure that its assets are kept in good and substantial repair and that it complies with any contractual obligations relating to repair of such assets, subject to the provisions of the Security Documents; (e) at all times comply substantially with all laws and regulations of significant effect to it in respect of the conduct of the Group's business and obtain and maintain in full force and effect all governmental and other regulatory consents, licenses and approvals required for the conduct of any part of the Group's business and notify the Bank in writing promptly upon its learning of any violation by any Group Company of any law, statute, regulation or ordinance of any government entity, or of any agent thereof, applicable to any Group Company which violation in any respect would or is likely materially and adversely to affect the Group's business or the security constituted by any of the Security Documents; (f) effect and maintain insurance over and in respect of its business and assets (including insurance against the loss of profits) against such risks and in such amounts as the Bank may from time to time require, and, in any event, against such risks and for such amounts as is normal for a business of the type being carried on by the relevant Group Company, and, on demand, produce to the Bank receipts for the last premiums payable in respect of such insurances; (g) apply the proceeds of insurances (i) insofar as they represent the destruction of a capital asset either in replacement thereof or in the purchase of a capital asset of a similar nature or purpose or in prepayment of first, the Acquisition Loan, second, the New Acquisition Loan, and third, the Working Capital Facility Liabilities and (ii) insofar as they represent damage to any asset in repair or replacement of that asset or in the purchase of a capital asset of a similar nature or purpose or in prepayment of first, the Acquisition Loan, second, the New Acquisition Loan, and third, the Working Capital Facility Liabilities; (h) promptly after the same are instituted and served upon the relevant Group Company or, to its knowledge, threatened, provide details to the Bank of any litigation, arbitration or administrative proceedings which affect any Group Company and which involve liability or potential liability (other than costs) in aggregate in excess of L.100,000; (i) permit the Bank and any person (being an accountant, auditor, solicitor, valuer or other professional advisor to the Bank, or an officer or employee of any subsidiary of the Bank authorised by the Bank) to have, at all reasonable times during normal business hours and on reasonable notice subject -33- to such persons being bound by similar codes of confidentiality to that owed by a bank to its customer, access to the premises and accounting books and other financial records of any Group Company, to make extracts from and take copies of any such books or records, and to discuss any matter with its officers; (j) promptly upon registration of any transfer of any shares in the Company, inform the Bank of such transfer, and promptly inform the Bank of any change in the beneficial ownership of any such shares, of which the Company or its directors become aware; (k) procure that any company which becomes a Group Company, and which is not a Group Dormant Company, executes such guarantees and charges (if appropriate in substantially the form of the Guarantee and the Debenture) in favour of the Bank as the Bank may lawfully require; (l) take all necessary Steps to ensure that no payment of principal, interest or other sums made to the Bank under this Agreement or the Security Documents is made in breach of the provisions of any applicable law including, in particular Sections 151-158 (inclusive) of the Companies Act 1985; (m) pay and discharge all Taxes and governmental charges prior to the date on which the same become overdue unless, and only to the extent that, such Taxes and charges shall be contested in good faith by appropriate proceedings, pending determination of which payment may lawfully be withheld, and there shall be set aside adequate reserves with respect to any such Taxes or charges so contested in accordance with GAAP; (n) procure that all Indebtedness (other than Indebtedness arising in the ordinary course of trading) of any Group Company to Arrow or any Subsidiary of Arrow other than a Group Company is subordinated to the Indebtedness owing to the Bank hereunder in terms satisfactory to the Bank; (o) within 90 days after the date hereof the Company and all other Group Companies or its Subsidiaries shall (where appropriate) have opened all necessary accounts with the Bank and maintain all of the Group's UK transmission banking business with the Bank; and (p) procure that (i) the Group Dormant Companies shall not all together own, beneficially or legally, any property or assets whose aggregate value exceeds L.5,000 in total, and that (ii) no Group Dormant Company shall carry on any business or trading or other activity unless (x) in the case of (i) such Group Dormant Companies as shall be necessary to ensure the remaining Group Dormant Companies comply with (i) and, in the case of (ii) that Group Dormant Company, have first executed and delivered to the Bank a Guarantee and Debenture substantially in the form of the Guarantee and the Debenture, and (y) the condition in Clause 13.3(l) in relation to the Company has been satisfied in relation to that Group Dormant Company mutatis mutandis. -34- 13.4 During the Security Period the Company shall not, and shall procure that no Group Company will, without the prior written consent of the Bank (such consent not to be unreasonably withheld or delayed):-- (a) make any change in its business as presently conducted, which would result in a substantial change in the business carried on by the Group as a whole, or carry on any other business which is substantial in relation to the business of the Group as presently conducted; (b) sell, transfer, lease or otherwise dispose of all or part of its assets, other than:-- (i) sales of stock made in the ordinary course of trading on normal credit terms taking into account the type of business involved and the Company's usual practice; (ii) disposals by one Group Company to another Group Company provided that the Group Company receiving the asset:-- (a) is a wholly owned Subsidiary of the Company incorporated in England; (b) has net assets both before and after receiving the asset; and (c) is a Charging Group Company; (iii) disposals of assets for market value on an arms- length basis for consideration payable on normal commercial terms where the consideration does not exceed L.200,000 for each individual asset; (c) sell or otherwise dispose of any asset on terms whereby such asset is or may be leased to or re-acquired on credit terms by itself or any other Group Company; (d) acquire any asset which costs more than L.10,000 otherwise than in the ordinary course and for the purposes of its business (other than the acquisition of Techdis under the Techdis Acquisition Agreement); (e) enter or contract to enter into any hire purchase, conditional sale or leasing agreement in respect of any asset, where the consideration payable (or where the market value of the asset) exceeds L.50,000; (f) incur or permit to subsist any Indebtedness which when aggregated with the Indebtedness of other members of the Group from time to time will exceed L.750,000 other than:-- (i) pursuant to this Agreement; (ii) as subordinated under a subordination agreement entered into pursuant to Clause 13.3(n); and -35- (iii) Indebtedness owed by one Group Company to another Group Company provided that both Group Companies are wholly owned subsidiaries (direct or indirect) of the Company, and have guaranteed the obligations of the Company to the Bank under this Agreement supported by mortgage debentures or such other security as the Bank may require; (g) create or permit to subsist any Encumbrance, other than Permitted Encumbrances; (h) pay any fees or commissions to any person other than on arms- length terms, and for the purposes of carrying on its business; (i) make any loans or give any credit (other than normal trade credit) to any person, or give any guarantee or indemnity in respect of the obligations of any person other than:- (i) pursuant to this Agreement; (ii) the making of loans or giving of credit to any Charging Group Company; (iii) loans to employees of any Charging Group Company; (j) incorporate or acquire any Subsidiary which is not a subsidiary immediately after Completion (other than Techdis and MMD); (k) agree to any variation or amendment of:- (i) the Acquisition Documents and the Techdis Acquisition Agreement (other than of an administrative nature); (ii) the Memorandum and Articles of Association of the Company or any other Group Company; (l) declare or pay any dividend or other distribution in respect of the share capital of any class in the Company or any other Group Company unless payable to another Group Company in the UK; (m) redeem or purchase any shares in the capital of the Company or any other Group Company, or reduce the share capital of the Company or any other Group Company; (n) merge or consolidate with any other person; (o) cease to be resident in the United Kingdom or transfer in whole or in part the business or trade of the Company and each Group Company to a person who is not resident in the United Kingdom; and (p) use or purport to use or apply any asset of any Group Company for any purpose which shall cause any Group Company to be in breach of s.151 of the Companies Act 1985. -36- 14. FEES 14.1 The company shall pay to the Bank a monitoring fee payable in advance and in respect of the twelve month period following such payment in the amounts set out below on each anniversary hereof falling in the years set out below.
Year Amount ---- ------ 1993 L.10,000 1994 L.20,000 1995 L.20,000 1996 L.20,000 1997 L.20,000 1998 L.20,000
14.2 The Company shall pay to the Bank a fee of three quarters of one per cent (0.75%) per annum on (i) the difference between the Working Capital Facility Limit and the Working Capital Facility Liabilities; and (ii) the difference between the New Acquisition Facility Limit and the New Acquisition Loan. Such fee shall be payable quarterly in arrears and on the Final Repayment Date, the first such payment to be made three months from the date hereof. 14.3 All fees are exclusive of any VAT thereon which, if chargeable, shall be paid by the Company. 15. DEFAULT 15.1 Without prejudice to the Bank's rights under Clause 7 (Repayment) if:- (a) any amount due and payable under this Agreement is not paid on the due date save that if the relevant payment is not received on the due date resulting either (i) from a technical failure in the CHAPS or other banking transmission system used for the payment of sums hereunder, or (ii) the inadvertent failure by the Company to make such relevant payment on the due date therefor, then there shall not be a Default hereunder until 3 Business Days including the original date for payment have elapsed PROVIDED THAT the Bank shall, in the case of the circumstances set out in Clause 15.1(a)(ii), be satisfied that such failure was inadvertent; or (b) the Company or any Charging Group Company is in breach of or fails to comply in full with any provision of, or undertakings on its part contained in, any of this Agreement and the Security Documents, other than an obligation of the type referred to in Clause 15.1(a) which, in any case, in the Bank's opinion has or will have a material adverse effect on the ability of the Company or any Charging Group Company to perform its obligations hereunder or under the Security Documents and, if capable of remedy, is not remedied within 10 Business Days of such breach or failure; or - 37 - (c) any representation, warranty or statement made to the Bank in this Agreement, the Security Documents or any certificate or document delivered by the Company or any Charging Group Company pursuant hereto or thereto is or proves to be incorrect, in the case of statements of fact, or not fair and reasonable, in the case of views, opinions, projections or forecasts, in each case when made or deemed to be repeated, in a manner which in the Bank's reasonable opinion has or will have a material adverse effect on the ability of the Company or any Charging Group Company to perform its obligations hereunder or under the Security Documents; or (d) any Indebtedness of any Group Company (other than as subordinated under a subordination agreement entered into pursuant to Clause 13.3(n)) is not paid within 5 Business Days after the due date or upon the expiry of any applicable grace period or is declared to be or otherwise becomes due and payable prior to its specified maturity date or any creditor or creditors of any Group Company becomes entitled to declare any Indebtedness of any Group Company due and payable prior to its specified maturity date or any such Indebtedness to a creditor or creditors of any Group Company becomes capable of being declared due and payable prior to its stated maturity as a result of a default which is analogous to those set out in this Clause 15; or (e) a creditor attaches or takes possession of, or a distress, execution, sequestration or other process is levied or enforced upon or sued out against, the whole or any part of the undertakings, assets, rights or revenues of any Group Company and is not discharged within 10 Business Days; or (f) the whole or any material part (for the purposes of this Clause 15.1(f) "material" shall mean a value of the assets of the Group in aggregate of L.100,000 calculated by reference to the latest Accounts delivered to the Bank as varied, if relevant, by the management accounts delivered to the Bank pursuant to Clause 13.1(c)) of the security granted under the Security Documents fails or ceases to have full force and effect or to be continuing or is terminated (or purported to be terminated) or disputed or becomes the subject of a bona fide dispute, in jeopardy, invalid or unenforceable; or (g) any Group Company suspends payment to its debts or is unable or admits inability to pay its debts as they fall due or commences negotiations with one or more of its creditors with a view to the general readjustment or rescheduling of all or part of its Indebtedness or proposes, or enters into any composition or other arrangement for the benefit of its creditors generally or any class of creditors or proceedings are commenced in relation to any member of the Group under any law, regulation or procedure relating to reconstruction or readjustments of debts; or (h) any Group Company takes any action, or any legal proceedings which are not of a vexatious or frivolous nature are started or other steps which are not of a vexatious or frivolous - 38 - nature are taken for (i) such company to be adjudicated or found bankrupt or insolvent (ii) the winding-up or dissolution of such company or (iii) the appointment of a liquidator or trustee or of a receiver, administrative receiver, or similar officer of such company or the whole or any part of its undertakings, assets, rights or revenues in respect of which the relevant Group Company has not commenced legal proceedings to discharge the same within 5 Business Days of becoming aware of such proceedings or steps other than pursuant to a solvent member's voluntary liquidation or a solvent scheme of arrangement or reconstruction, the terms of which have in each case been previously approved by the Bank (such consent not to be unreasonably withheld or delayed); or (i) an application is made to the Court for an administration order under the Insolvency Act 1986 in relation to any Group Company; or (j) any event or proceeding is taken with respect to any Group Company in any jurisdiction to which it is subject which has an effect substantially similar to any of the events mentioned in Clauses 15.1 (g), (h) or (i); or (k) any Group Company suspends or ceases or threatens to suspend or cease to carry on its business other than as a result of the transfer by one Group Company to another Group Company (the recipient fulfilling the conditions set out in Clause 13.4(b)(ii)(a) through (c) inclusive of the whole or a substantial part of its business; or (l) any encumbrancer takes possession of or a receiver is appointed of all or any part of the property and assets of any Charging Group Company provided always that the amount of all claims by all such encumbrances only, shall not exceed in aggregate L.100,000 (calculated by reference to the latest Accounts delivered to the Bank as varied, if relevant, by the management accounts delivered to the Bank pursuant to Clause 13.1(c) of the Charging Group taken as a whole; or (m) any license, authorisation, consent or approval at any time necessary to enable any Group Company to conduct its business shall be avoided, withheld or materially modified or shall fail to remain in full force and effect, or the terms upon which the same have been granted are not for the time being complied with and the result or effect of any such event or occurrence is such as materially to prejudice, in the Bank's reasonable opinion, its interests under the Facility Documents; or (n) at any time there occurs a change in the financial condition or prospects of the Group taken as a whole, which event, in the Bank's reasonable opinion, has or could be expected to have a material adverse effect on the ability of the Company to perform its obligations hereunder; or (o) (i) any of Arrow, EDI, or any subsidiary or Arrow or EDI accounting for at least 10% of Arrow's tangible net - 39 - worth calculated in accordance with generally accepted accounting principles used in the U.S.A., shall voluntarily commence any proceeding or file any petition seeking relief under Title 11 of the United States Code or any other Federal or state bankruptcy, insolvency, liquidation or similar law; or (ii) any of Arrow, EDI and any subsidiary of Arrow or EDI other than a Group Company shall (i) consent to the institution of, or fail to contravene in a timely and appropriate manner, any such proceeding or the filing of any such petition as mentioned in sub-paragraph (i) above, (ii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator or similar official for itself or for a substantial part of its property or assets, (iii) file an answer admitting the material allegations of a petition filed against it in any such proceedings, (iv) make a general assignment for the benefit of creditors, (v) become unable, admit in writing its inability or fail generally to pay its debts as they become due, or (vi) take corporate or other action for the purpose of effecting any of the foregoing; or (iii) an involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (i) relief in respect of any of Arrow, EDI and any subsidiary of Arrow or EDI other than a Group Company, or a substantial part of the property or assets of any of Arrow, EDI and any subsidiary of Arrow or EDI under Title 11 of the United States Code or any other Federal or state bankruptcy, insolvency, receivership or similar law, (ii) the appointment of a receiver, trustee, custodian, sequestrator or similar official for any of Arrow, EDI and any subsidiary of Arrow or EDI other than a Group Company or for a substantial part of the property of any of Arrow or EDI; and the relevant company has not commenced legal proceedings in order to dismiss or unstay such proceeding or petition within 10 days of becoming aware of the same or there shall be entered an order or decree approving or ordering any of the foregoing; or (iv) any event occurs or proceeding is taken with respect to any of Arrow, EDI and any subsidiary of Arrow or EDI other than a Group Company in any jurisdiction to which such company is subject which has an effect equivalent or similar to any of the events mentioned in paragraphs (i) to (iii) above; or (p) all or any part of the property or undertakings of any Group Company is compulsorily acquired by or by the order of any local or other governmental authority and as a result the business of the Group taken as a whole is materially adversely affected; or (q) whilst it remains the immediate holding company of the - 40 - Company, EDI ceases to be a wholly-owned subsidiary of Arrow, or the Company ceases to be a Subsidiary of EDI, in each case other than by way of transfer of the whole or any part of the share capital of EDI or the Company to another Subsidiary of Arrow provided always that security shall be granted to the Bank in substantially the same form as the Bank's security at the date hereof and a subordination agreement as the Bank considers necessary shall be entered into by the Company and that Subsidiary other than pursuant to a solvent members' voluntary liquidation or a solvent scheme of arrangement or reconstruction, in any such case carried out with the prior written consent of the Bank (such consent not to be unreasonably withheld or delayed), where the resulting entity forthwith gives a guarantee and debenture or such other security as the Bank shall require to the Bank in such form as the Bank shall require; or (r) the common stock of Arrow ceases permanently to be dealt in or is suspended for a period exceeding 5 Business Days on a recognised stock exchange; or any person or persons acting together acquire common stock in Arrow which, when aggregated with common stock already owned by any of them, entitles such person or persons to exercise or control the exercise of 50% or more of the votes exercisable at shareholders' meetings of Arrow; or (s) any event occurs or proceeding is taken with respect to any holding company of the Company other than Arrow or any Subsidiary of Arrow to which Clause 15.1(o) applies in any jurisdiction which such holding company is subject which has an effect equivalent or similar to any of the events mentioned in Clause 15.1(g), (h) or (i); or (t) the facts or circumstances revealed by any disclosure under Clause 12.3 are such that in the opinion of the Bank (acting reasonably), they would or would be likely to prejudice materially the ability of the Company to meet its obligations under this Agreement or any of the Security Documents PROVIDED THAT for the avoidance of doubt, such opinion may be formed by the Bank at any time after the disclosure under Clause 12.3 has been made, whether before or at the time of or after any repetition or repetitions under Clause 12 of the relevant representation and warranty; or (v) any Arrow Inc Indebtedness in excess of, in aggregate US $5,000,000: (i) is declared to be or otherwise becomes due and payable prior to its specified maturity and is not discharged within 10 Business Days; or (ii) is not paid when due or within any applicable grace period; or any creditor or creditors of Arrow or any of its subsidiaries (incorporated in the USA) exercise any right they may have to preclude Arrow or any of its subsidiaries (incorporated in the USA) from extending credit or making - 41 - advances to the Company; then such event shall constitute a Default and at any time when any Default remains unremedied (save in the case of a Default by any Group Company, except for the Company, when a Default shall only occur if such Default shall, in the opinion of the Bank, be such that such Group Company or the Company is unable to meet its obligations under this Agreement or the Security Documents) the Bank may, by notice to the Company, cancel the Facilities and require the Company immediately to repay the Loan together with accrued interest thereon and immediately to pay all other sums payable under the Facility Documents, whereupon the same shall become immediately due and payable. 15.2 If a Default has occurred then the Bank shall be entitled, but not obliged, to appoint any firm of chartered accountants, to undertake such investigations in the Company as it requires. Clause 20.2 shall, mutatis mutandis, apply to the costs incurred as a result of the implementation of the provisions of this Clause 15.2. 16. SET-OFF The Company authorizes the Bank to apply any credit balance on any account of the Company with the Bank in satisfaction of any sum due and payable by the Company to the Bank and for this purpose the Bank is authorized to purchase with the money standing to the credit of any such account such other currencies as may be necessary to effect such application. 17. SEVERABILITY, WAIVERS, REMEDIES CUMULATIVE 17.1 If at any time any provision hereof is or becomes illegal, invalid or unenforceable in any respect under the law of any jurisdiction neither the legality, validity or enforceability of the remaining provisions hereof nor the legality, validity or enforceability of such provision under the law of any other jurisdiction shall in any way be affected or impaired thereby. 17.2 No failure to exercise, nor any delay in exercising, any right or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right or remedy prevent any further or other exercise thereof or the exercise of any other right or remedy. The rights and remedies herein provided are cumulative and not exclusive of any rights or remedies provided by law. 18. NOTICES 18.1 Each communication to be made hereunder shall be made in writing and may be made by letter or facsimile, and each communication by the Bank hereunder shall be copied to Arrow at the address set out in Clause 18.3(C) PROVIDED THAT inadvertent failure to send such copy communication or for Arrow to receive the same shall not invalidate the service of any communication hereunder AND PROVIDED FURTHER THAT each communication to the Bank shall be delivered to all addresses (A1), (A2) and (A3) save for communications pursuant to Clause 13.1 - 42 - which shall be sent only to the Bank addressee at the address set out in (A2). 18.2 Any communication or document to be made or delivered by one person to another pursuant to this Agreement shall (unless the one has by 15 days' written notice to the other specified another address) be made or delivered to that other person at the address given in Clause 18.3. 18.3 The addresses referred to in Clause 18.2 above are:- (A1) for notices to the Bank:- National Westminster Bank Plc Corporate Banking Group National Westminster House Trinity Gardens 9-11 Bromham Road Bedford MK40 2UQ Attention: George Derbyshire Facsimile: 0234 272503 (A2) National Westminster Bank Plc Acquisition Finance 135 Bishopsgate London EC2M 3UR Attention: P.A.S.C. Harmer Facsimile: 071 375 5464 (A3) National Westminster Bank Plc Group Treasury Settlement Level 6 King's Cross House 200 Pentonville Road London N1 9HL Attention: Manager, Commercial Loans Facsimile: 071 239 8257 (B1) for notices to the Company:- Arrow Electronics (UK) Limited St. Martins Business Centre Cambridge Road Bedford MK42 OLF Attention: Managing Director Facsimile: 0234 211434 - 43 - (B2) Arrow Electronics (UK) Limited Unit 11 Vestry Road Industrial Estate Sevenoaks Kent TN14 5EU Attention: Alistair Oag Facsimile: 0732 740394 (C) for copies to Arrow:- Arrow Electronics, Inc. 25 Hub Drive Melville New York USA Attention: R.E. Klatell Facsimile: 0101 516 391 1683 18.4 Any notice to the Company shall be deemed to have been given:- (a) if sent by facsimile transmission, on the Business Day on which transmitted or if it is transmitted on a day which is not a Business Day or after 5.30 p.m. on any Business Day, on the next following Business Day; (b) in the case of a written notice lodged by hand at the time of actual delivery or if it is delivered on a day which is not a Business Day or after 5.30 p.m. on any Business Day, on the next following Business Day; (c) if posted, on the second Business Day following the day on which it was properly despatched by first class mail postage prepaid. 18.5 Any notice to the Bank shall be deemed to have been given only on actual receipt by each of the addressees referred to in (A1), (A2) and (A3) above. 19. ASSIGNMENTS 19.1 This agreement shall be binding upon and enure to the benefit of the parties hereto and their respective successors and assigns. 19.2 The Company may not assign or transfer all or any of its rights, benefits and obligations hereunder without the prior written consent of the Bank. 19.3 The Bank may assign or transfer any of its rights and obligations under this Agreement to any Qualifying Bank and the Company shall enter into such documents as the Bank shall require to effect or perfect any such transfer or novate any of the Bank's obligations to the transferee. 19.4 The Bank may, after it has informed the Company, disclose to a proposed assignee, transferee or other person proposing to enter into - 44 - a contract with the Bank regarding this Agreement such information in the possession of the Bank relating to the Company, including, without limitation, this Agreement, the Security Documents and any of the Financial Information, as it sees fit provided that it shall require any proposed assignee or transferee to enter into a confidentiality undertaking acceptable to the Bank and the Company (acting reasonably). 20. COSTS AND EXPENSES 20.1 The Company undertakes on demand, to reimburse the Bank all out-of- pocket costs and expenses (including legal, audit and valuation fees) reasonably incurred by it in the review, negotiation,.preparation and execution of the Facility Documents, the Acquisition Agreement, the Techdis Acquisition Agreement and any other documents incidental hereto or thereto. 20.2 The Company shall from time to time on demand reimburse the Bank for all costs and expenses (including legal fees) incurred in or in connection with the preservation and/or enforcement of any of the rights of the Bank under the Facility Documents or in connection with any proposed amendment to any of the Facility Documents or any request for a consent or waiver hereunder or thereunder. 20.3 All stamp, documentary, registration or other like duties or Taxes, including any penalties, additions, fines, surcharges or interest relating thereto, which are imposed or chargeable on or in connection with any of the Facility Documents shall be paid by the Company. 20.4 (a) Subject to Clause (b) below, any VAT payable in respect of any supply for VAT purposes made pursuant to or in connection with any of the Facility Documents or any transaction or document contemplated herein or therein made by the Bank shall be paid on demand to the Bank by the Company and the Bank shall issue or procure the issue of a VAT invoice in respect of each such payment. (b) All payments made by the Company under this Agreement and the Security Documents are calculated without regard to VAT. If any such payment constitutes the whole or any part of the consideration for a taxable or deemed taxable supply (whether that supply is taxable pursuant to the exercise of an option or otherwise) by the Bank, the amount of that payment shall be increased by an amount equal to the amount of VAT which is chargeable in respect of the taxable supply in question. (c) No payment or other consideration to be made or furnished by the Bank to the Company pursuant to or in connection with this Agreement or the Security Documents or any transaction or document contemplated herein or therein may be increased or added to by reference to (or as a result of any increase in the rate of) VAT which shall be or may become chargeable in respect of the taxable supply in question. 20.5 If the Bank makes a payment or suffers a loss in respect of which it is entitled to be indemnified or reimbursed by the Company pursuant to any provision of any of the Facility Documents and the Bank is - 45 - advised by the Bank's auditors that:- (i) the loss or payment is not or is unlikely to be deductible or wholly deductible in computing the profits of the Bank for the purposes of Tax whilst the payment to be made by way of indemnity or reimbursement (for the purpose of this Clause 20.5, the "Payment") by the Company will or is likely to be taxable or partly taxable in the Bank's hands; or (ii) the Payment is or is likely to be taxable or partly taxable in the Bank's hands in any accounting period of the Bank earlier than the accounting period in which the loss or payment is or is likely to be deductible; then:- the Payment shall be increased to an amount ("the grossed-up Payment") which is certified by the Bank's auditors as being equal, after taking into account any Tax liability likely to be suffered or incurred by the Bank in respect of the grossed-up Payment, to the amount that would have been received by the Bank if the Payment by the Company had not been taxable PROVIDED THAT if it is subsequently certified by the Bank's auditors that any payment by the Company to the Bank under this Clause 20.5 by way of grossed-up Payment was calculated on an incorrect basis, such adjustment shall be made as between the Bank and the Company as the Bank's auditors may certify to be necessary to restore the after-tax position of the Bank to that which it would have been if no such adjustment had been necessary. 21. CURRENCY INDEMNITY Any payment or payments made to or for the account of or received by the Bank in respect of any monies or liabilities due, arising or incurred by the Company to the Bank in a currency (the "Currency of Payment") other than the currency in which the payment should have been made pursuant to this Agreement (the "Currency of Obligation") in whatever circumstances (including, without limitation, as a result of a judgment against the Company) and for whatever reason shall only constitute a discharge to the Company to the extent of the Currency of Obligation amount which the Bank is able on the date or dates of receipt of such payment or payments (or if not a Business Day on the next succeeding Business Day) to purchase with the Currency of Payment amount in the London foreign exchange market. If the amount of the Currency of Obligation which the Bank is so able to purchase falls short of the amount originally due to the Bank under this Agreement, then the Company shall indemnify and hold the Bank harmless against any loss or damage arising as a result thereof by paying to the Bank that amount in the Currency of Obligation certified by the Bank as necessary so to indemnify it (and, for the avoidance of doubt, the provisions of this Clause 21 shall apply to any monies payable pursuant to this Clause 21). It is hereby declared that this indemnity shall constitute a separate and independent obligation from the other obligations contained in this Agreement, shall give rise to a separate and independent cause of action, shall apply irrespective of any indulgence granted from time to time and shall continue in full force and effect notwithstanding any judgment or order for a liquidated sum or sums in respect of - 46 - amounts due under this Agreement or under any such judgment or order. The certificate of the Bank as to the amount of any such loss or damage shall, in the absence of manifest error, be conclusive and binding on the Company. 22. PUBLICITY 22.1 The Company agrees that it will not issue any press release or other publicity material relating to the transactions contemplated by this Agreement and the Techdis Acquisition Agreement which refers to the Bank without obtaining the Bank's consent to the manner and context in which the reference is made. 22.2 If so requested by the Bank the Company agrees that any such press release or publicity material will refer to the fact that the Bank has provided the Facility for the purposes of the transaction contemplated by the Techdis Acquisition Agreement. 22.3 The costs of any publicity material in relation to this Clause shall, mutatis mutandis, be subject to the provisions of Clause 22. 22.4 The Bank may not issue any press release or other publicity material relating to the transaction contemplated by this Agreement and the Techdis Acquisition Agreement which refers to the Company without obtaining the Company's consent to the manner and context in which the reference is made. 23. LAW This Agreement shall be governed by and construed in accordance with English law. IN WITNESS whereof the parties hereto have caused this Agreement to be duly executed the day and year first written above. - 47 - EX-10 11 SHARE SALE AGR.-EX10(M) Dated 17th August 1993 (1) OCEAN INFORMATION HOLDINGS LIMITED and (2) ARROW ELECTRONICS, INC. SHARE SALE AGREEMENT relating to the sale and purchase of the whole of the issued share capital of COMPONENTS AGENT (B.V.I.) LIMITED STEPHENSON HARWOOD & LO 1802 Edinburgh Tower, The Landmark 15 Queen's Road Central, Hong Kong SHARE SALE AGREEMENT DATED 17th August 1993 PARTIES (1) OCEAN INFORMATION HOLDINGS LIMITED a company incorporated in Bermuda whose registered office is at Clarendon House, Church Street, Hamilton, HM11, Bermuda (the "Vendor"); and (2) ARROW ELECTRONICS, INC a company incorporated in the State of New York, U.S.A. whose principal executive office is at 25 Hub Drive, Melville, New York, 11747, U.S.A. (the "Purchaser"). PRELIMINARY (A) Components Agent (B.V.I.) Limited is a private company incorporated in the British Virgin Islands which has six wholly owned subsidiaries; four in Hong Kong, one in Singapore and one in Malaysia. (B) The Vendor has agreed to sell and the Purchaser has agreed to purchase the Shares on the terms and conditions of this Agreement and in particular on the basis of the representations warranties agreements and indemnities hereinafter mentioned. IT IS AGREED as follows:- 1. INTERPRETATION 1.1 In this Agreement, unless the context otherwise requires, the following words and expressions have the following meanings:- Accounts the audited accounts of the Company and of each of its Subsidiaries (except Components Agent Taiwan Limited) for the last two accounting periods (save in respect of Components Agent China Limited which shall be for the last accounting period only) which ended on the Balance Sheet Date comprising in each case the audited balance sheets, the audited profit and loss accounts and all notes, reports and other documents annexed thereto, and the audited consolidated accounts of the Company for the financial period ending on the Balance Sheet Date comprising the audited consolidated balance sheet and the audited consolidated profit and loss account, and the Management Accounts, copies of which have been supplied to the Purchaser - 1 - "business day" means a day on which banks are open for business in Hong Kong Balance Sheet Date 31st March 1993 Company Components Agent (B.V.I.) Limited, a company incorporated in the British Virgin Islands, whose registered office is at Craigmuir Chambers, P 0 Box 71, Road Town Tortola, British Virgin Islands particulars of which are set out in Part I of the First Schedule Completion completion of the sale and purchase of the Shares in accordance with Clause 5 Completion Date the date of this Agreement Deed of Indemnity the deed in the form set out in the Fifth Schedule Disclosure Letter the letter of even date herewith from the Vendor to the Purchaser (including the documents referred to in the annexures to such letter) disclosing certain exceptions to the Warranties Earnest Money the sum of HK$7,727,000 being equivalent (using the rate of exchange prevailing on 16th June 1993) to the sum of US$1,000,000 paid by the Purchaser to the Vendor Group the Company and the Subsidiaries HK$ Hong Kong dollars Intellectual Property patents, trade marks, service marks, registered designs applications for any of the foregoing, design rights, copyright or inventions and the benefit of any and all licences in connection with any of the foregoing Listing Rules the rules governing the listing of securities on The Stock Exchange of Hong Kong Limited Management Accounts the unaudited balance sheets of the Company and each of the Subsidiaries (except Components Agent Korea Limited and Components Agent Taiwan Limited) as at the Management Accounts Date and the unaudited profit and loss accounts of the Company and each of the Subsidiaries as at the Management Accounts Date - 2 - Management Accounts Date 30th June 1993, except in the case of Components Agent Korea Limited which shall be 31st March 1993 Option Agreement two agreements of even date made between, firstly, (1) the Company and (2) TMC Fund Company Limited and, secondly, (1) the Company and (2) Tam Hing Sang relating to deferred shares in Components Agent Limited in the agreed terms Mr. Tam Tam Hing Sang Mr. Tsang Tsang Man Chung Purchaser's Solicitors Stephenson Harwood & Lo of 18th Floor, Edinburgh Tower, The Landmark, 15 Queen's Road Central, Hong Kong Purchaser's Charge over Shares a charge of even date made between (1) the Purchaser and (2) the Vendor in the agreed terms Purchaser's Deed of Indemnity an indemnity of even date made between (1) the Purchaser, (2) the Vendor and (3) Ocean Office Automation Limited in the agreed terms Premises the property owned by the Companies details of which are set out in the Fourth Schedule Shares the 8,200 shares of US$1.00 each in the capital of the Company comprising the whole of its issued share capital Subsidiaries the wholly owned subsidiaries of the Company particulars of which are set out in Part II of the First Schedule subsidiary the meaning prescribed by Section 2 of the Companies Ordinance (Chapter 32) Taxation the meaning given in the Fifth Schedule Territory Hong Kong, the People's Republic of China, Singapore, Malaysia, the Republic of China (Taiwan) and the Republic of South Korea Vendor's Solicitors Woo, Kwan, Lee & Lo of Room 2718, Jardine House, 1 Connaught Place, Central, Hong Kong Warranties the warranties representations and - 3 - undertakings set out in Clause 4.1 and the Second Schedule 1.2 References in this Agreement to statutory provisions shall where the context so admits be construed as references to those provisions as respectively amended consolidated extended or re-enacted from time to time and shall where the context so admits be construed as including references to the corresponding provisions of any earlier legislation directly or indirectly amended consolidated extended or replaced thereby or re-enacted and shall include any orders regulations instruments or other subordinate legislation made under the relevant statute. Except as may be otherwise expressly provided herein, all accounting and other terms and expressions used in financial reporting not specifically defined in this Agreement shall be construed in accordance with generally accepted Hong Kong accounting principles and practices. 1.3 For the purposes of this Agreement:- 1.3.1 "agreed terms" means in relation to any document such document in the terms agreed between the parties and for the purposes of identification signed on their behalf by the Purchaser's Solicitors and the Vendors' Solicitors; 1.3.2 any reference to a Clause sub-clause or Schedule (other than a Schedule to a statutory provision) is a reference to a Clause or sub-clause of or a Schedule to this Agreement and the Schedules form part of and are deemed to be incorporated into this Agreement and references to "this Agreement" are to be construed accordingly; 1.3.3 "disclosed" means fully and fairly disclosed elsewhere in this Agreement (including the Schedules) and/or in the Disclosure Letter; and 1.3.4 where any statement is qualified by the expression "so far as the Vendor is aware" or when reference is made to the Vendor's knowledge that statement shall be deemed to include an additional statement that it has been made after due and careful enquiry by the Vendor amongst the directors, officers, and employees of the Vendor and its subsidiaries (including the Group). 1.4 The headings used in this Agreement are inserted for convenience only and shall be ignored in construing this Agreement. 1.5 In this Agreement words connoting the singular number shall be deemed to include the plural number and vice versa, words connoting any gender shall be deemed to include all genders and words connoting natural persons shall be deemed to include bodies corporate or unincorporate. 2. SALE OF SHARES 2.1 Subject to the terms and conditions hereof and for the consideration referred to in Clause 3, on and with effect from the Completion Date, the Vendor shall sell as beneficial owner and the Purchaser shall purchase the Shares free from any charges liens encumbrances equities - 4 - and claims whatsoever, and together with all rights attaching or accruing thereto and all dividends and distributions declared made or paid on or after the Completion Date. 2.2 The Vendor hereby warrants that no dividends bonuses or distributions have been paid, declared or made in respect of any shares or stock of the Company or any of the Subsidiaries since the Balance Sheet Date. 3. CONSIDERATION 3.1 The aggregate consideration for the sale and purchase of the Shares shall be the sum of HK$170,000,000 of which the sum of HK$162,273,000 (being the aggregate purchase price for the Shares less the Earnest Money) shall be paid on Completion by a banker's draft in favour of the Vendor and the Earnest Money (excluding interest thereon) shall be released to the Vendor. 3.2 Upon Completion, all interest accrued on the Earnest Money shall be paid within two business days by the Vendor to the Purchaser's Solicitors in the lawful currency of the United States of America. 3.3 The Vendor's Solicitors are hereby irrevocably authorised and instructed to hold the Earnest Money and all interest accrued thereon on the terms and conditions stated in this Agreement and to deal with the same as and when provided for in this Agreement. 4. WARRANTIES 4.1 Save as disclosed and subject to Clause 4.2 below, the Vendor hereby represents warrants and undertakes to the Purchaser as at the date hereof (to the intent that the provisions of this Clause shall continue to have full force and effect notwithstanding Completion) in the terms set out in the Second Schedule and acknowledges that the Purchaser in entering into this Agreement is relying on such representations and warranties and undertakings and on the indemnities to be given in the Deed of Indemnity. 4.2 The Warranties are given subject only to :- (a) the matters disclosed; the limitation on the Vendor's liability set out in the Third Schedule; and (c) any act or omission to act after execution of this Agreement carried out at the written request of or with the prior approval in writing of the Purchaser. 4.3 Other than as disclosed no other information relating to the Company or the Subsidiaries of which the Purchaser has knowledge (actual or constructive), including in connection with any due diligence investigation by the Purchaser, shall prejudice any claim made by the Purchaser under the Warranties. 4.4 Each of the Warranties set out in each sub-paragraph of the Second Schedule shall be separate and independent and save as expressly - 5 - provided shall not be limited by reference to any other sub-paragraph or anything in this Agreement. 4.5 Where as a result of any breach of any of the Warranties the net assets of the Company are diminished or are less than they would have been had there been no such breach, or any payment is made or required to be made by the Purchaser, the Purchaser shall be entitled to elect that the amount of such diminution or shortfall or payment, together with any reasonable costs and expenses incurred in connection therewith, shall be taken to be the loss suffered by the Purchaser by reason of such breach. If in respect of or in connection with any breach of any of the Warranties any sum payable to the Purchaser by the Vendor pursuant to this Agreement by way of compensation is subject to Taxation in Hong Kong, then such further amount shall be paid to the Purchaser by the Vendor so as to secure that the net amount received by the Purchaser is equal to the amount of the compensation due to it as aforesaid. 4.6 The amount of any successful claim against the Vendor under the Warranties or the Deed of Indemnity shall be deemed to constitute a reduction in the purchase consideration payable for the Shares. 4.7 The Purchaser has full power to enter into and perform this Agreement and the Deed of Indemnity respectively and this Agreement constitutes and the Deed of Indemnity will, when executed, constitute legally valid and binding obligations on the Purchaser enforceable against it in accordance with its terms, and the Purchaser has obtained all necessary consents, approvals and has made or will make any necessary filings with any regulatory authorities in connection with the sale of the Shares. 5. COMPLETION 5.1 Completion shall take place at the offices of the Vendor's Solicitors on the Completion Date immediately upon the signing of this Agreement or at such other place and time as shall be mutually agreed when the events set out in Clauses 5.2 and 5.3 shall take place. 5.2 The Vendor shall:- 5.2.1 cause to be delivered to the Purchaser duly executed instrument(s) of transfer of the Shares in favour of the Purchaser (or as it in writing directs) accompanied by the relative share certificate(s) for all of the Shares and together with certified copy board resolutions of the Vendor approving the execution and performance of this Agreement and such transfers; 5.2.2 deliver to the Purchaser the Deed of Indemnity executed by the Vendor, the Company and the Subsidiaries (other than in Singapore and Malaysia) together with certified copy board resolutions of their respective boards of directors approving such executions and the performance of the Deed of Indemnity; 5.2.3 deliver to the Purchaser written resignations of Mr. Tsang - 6 - Man Chung and Mr. Andrew Leung as directors of the Company and each relevant Subsidiary with an acknowledgment under seal signed by each of them that he has no claim against the relevant company for compensation for loss of office or otherwise howsoever (except only for any accrued remuneration and expenses remaining to be reimbursed, details of which are set out in the Disclosure Letter); 5.2.4 procure the passing of Board resolutions of the Company and the Subsidiaries incorporated in Hong Kong revoking the authority of Mr. Tsang in respect of the operation of all bank accounts and shall hand to the Purchaser certified copies of such resolutions; 5.2.5 cause to be delivered to the Purchaser the Certificate of Incorporation the seal and the statutory books of each member of the Group; 5.2.6 deliver to the Purchaser a certified copy of a letter addressed to the Vendor whereby Mr. Tsang, who holds in excess of 50% of the voting rights exercisable at general meetings of the Vendor, irrevocably approves the transaction contemplated by this Agreement; and 5.2.7 deliver to the Purchaser the Option Agreements, executed by Mr. Tam and Ocean (B.V.I.) Limited in relation to the deferred shares in Components Agent Limited. 5.3 The Purchaser shall : - 5.3.1 deliver to the Vendor the Purchaser's Deed of Indemnity and the Purchaser's Charge over Shares, together with all documents referred to therein; 5.3.2 deliver to the Vendor certified copy board resolutions approving the execution and performance of this Agreement and the documents referred to in Clause 5.3.1. 5.4 For the avoidance of doubt, in relation to any company within the Group which is incorporated outside Hong Kong, all documents which are required to be delivered to the Purchaser by the Vendor shall be collected by the Purchaser at the relevant company's registered office located in its place of incorporation. 5.5 At Completion the Earnest Money and interest thereon shall be released in accordance with Clause 3.1. 6. COMPETITION AND CONFIDENTIALITY 6.1 The Vendor hereby undertakes to the Purchaser:- 6.1.1 not within the Territory during the period of three years after Completion to carry on or be engaged directly or indirectly and whether as principal, shareholder, partner, employee, agent or otherwise (except as a shareholder in a public listed company holding not more than five per cent. - 7 - of the issued share capital, of any class, of such public company) in :- (a) the business of distributing electronic components (as defined below) relating to computer, telecommunications, consumer and industrial products; or (b) taking on any agency for the sale of electronic components (as defined below) relating to computer, telecommunications, consumer and industrial products, ((a) and (b) together being the "Group Business") For the purpose of this Clause 6.1, "electronic components" shall consist of the following:- (i) semiconductors (including, without limitation, integrated circuits, microprocessors and memory devices); (ii) passive devices (including, without limitation, resistors and capacitors); and (iii) electromechanical devices (including, without limitation, connectors, fuses, relays and switches). Provided that this restriction shall not prevent the Vendor from:- (i) carrying on the business of any of the design, manufacturing, sale, distribution, trading and/or the taking of any agency for the sale of personal computer systems and equipment, personal computer components (including, without limitation, motherboards, add-on cards, power supplies and casings), telecommunication equipments and engineering systems, and computer peripherals (including, without limitation, monitor, keyboards, hard disc drive, floppy disc drive, printer and mouse); and (ii) selling, trading and distributing products manufactured by the Vendor or its subsidiaries; and (iii) selling electronic components originally and bona fide intended to be acquired for the purpose of incorporating into products manufactured by the Vendor or any of its subsidiaries which components are excess to their manufacturing requirements; and (iv) carrying on the business of selling, distributing or taking on any agency for the sale of computer products (including, without limitation, add-on cards) manufactured by persons other than the Vendor. - 8 - 6.1.2 not during the period of three years after Completion either on its own account or on behalf of any other person firm or company directly or indirectly solicit or endeavour to solicit, in competition with the Group Business, the custom of any person, firm or company who has been a client of any member of the Group as at the date hereof for the purpose of carrying on the Group Business except in connection with carrying out the matters set out in the proviso numbered (i) - (iv) in Clause 6.1.1; 6.1.3 not within the period of three years after Completion directly or indirectly to solicit or endeavour to entice away from any member of the Group any person who was employed by any member of the Group at any time during the period of one year immediately prior to Completion; 6.1.4 not at any time after Completion to carry on or be concerned engaged or interested as aforesaid in any business under the name or style of "Components Agent" or "Components Assembly & Sales" any similar names which might reasonably be expected to have any connection with the Company; and 6.1.5 not within a period of three years after Completion to employ any person who is at the Completion Date employed by the Group and whose job title is "Assistant Manager" or higher. The above restrictions are considered reasonable by the parties hereto but in the event that any such restriction shall be found to be invalid but would be valid if some part thereof were deleted or the period of application or the area or the extent of the business affected were reduced such restriction shall apply with such modification as may be necessary to make it valid and effective. 6.2 The Vendor hereby agrees with the Purchaser that it will not at any time hereafter use for its own purposes or divulge or cause or enable any person to become aware of any confidential information of any nature whatsoever directly or indirectly concerning the business affairs, finances, suppliers, clients, trade processes or contractual or other arrangements of the Company or the Subsidiaries which is in the possession or knowledge of the Vendor, its subsidiaries or any of its or their directors, officers or employees as at Completion (except where such disclosure is required by law and/or regulations applicable to it). 6.3 The Purchaser hereby agrees with the Vendor that it will procure that no member of the Group will at any time hereafter use for its own purposes or divulge or cause or enable any person to become aware of any confidential information of any nature whatsoever directly or indirectly concerning the business affairs, finances, suppliers, clients, trade processes or contractual or other arrangements of the Vendor or any of its subsidiaries (other than any member of the Group) which is in the possession or knowledge of any member of the Group or of any director, officer or employee of any member of the Group as at Completion (except where such disclosure is required by law and/or - 9 - regulations applicable to such member of the Group). 7. WAIVER No waiver by any party of any breach by the other party of any provision hereof shall be deemed to be a waiver of any subsequent breach of that or any other provision hereof and any forbearance or delay by any party in exercising any of its rights hereunder shall not be construed as a waiver thereof. 8. SUCCESSORS AND ASSIGNS The parties hereto agree that the benefit of any provision in this Agreement may not be assigned by the Purchaser and its successors in title without the consent of any of the other parties hereto save that no such consent shall be required in relation to any assignment by the Purchaser of the benefit of the Purchaser under this Agreement to any direct or indirect wholly-owned subsidiary of the Purchaser provided that such direct or indirectly wholly-owned subsidiary shall at all times while it has the benefit of this Agreement remain a wholly-owned subsidiary of the Purchaser and the Purchaser shall not be entitled to assign the benefit of any provision of this Agreement until Ocean is reasonably satisfied that all the Purchaser's obligations and liabilities under the Deed of Indemnity have been discharged in full and further provided that the position of the Vendor shall not be prejudiced in any respect on or after such assignment as compared with the position of the Vendor before such assignment. 9. NON-MERGER ON COMPLETION This Agreement shall notwithstanding Completion remain in full force and effect as regards any of the provisions remaining to be performed or carried into effect and (without prejudice to the generality of the foregoing) as regards all undertakings, warranties, representations and indemnities. 10. TIME TO BE OF THE ESSENCE Time shall be of the essence as regards any date or period mentioned in this Agreement and any date or period substituted for the same by agreement of the parties hereto or otherwise. 11. ANNOUNCEMENTS No announcement or circular in connection with this Agreement or any matter arising therefrom shall be made or issued by or on behalf of any of the parties hereto without the prior written approval of the other party, such approval not to be unreasonably withheld or delayed, provided:- (i) that in the case of any announcement or circular required by the Stock Exchange or under the laws of Hong Kong to be issued by the Vendor, the Purchaser shall be given such opportunity to review the same as the circumstances may reasonably permit; and (ii) that in the case of any announcement or circular required by the - 10 - regulatory authorities of the New York Stock Exchange or under the laws of the United States to be issued by the Purchaser, the Vendor shall be given such opportunity to review the same as the circumstances may reasonably permit. 12. FURTHER ASSURANCE Subject to Completion, each party agrees with and undertakes to the other that at any time and from time to time upon the written request of the other party, such party will promptly and duly execute and deliver any and all such further instruments and documents and do or procure to be done all and any such acts or things as the other party may reasonably require for the purpose of obtaining the full benefits of this Agreement and, in the case of the Purchaser, of the rights and ownership of the Shares herein granted. 13. ILLEGALITY AND UNENFORCEABILITY The illegality invalidity or unenforceability of any part of this Agreement shall not affect the legality validity or enforceability of any other part of this Agreement. 14. DOCUMENTS CONSTITUTING AGREEMENT This Agreement and the Disclosure Letter, the Option Agreement, the Purchaser's Deed of Indemnity and the Purchaser's Charge over Shares together with any documents referred to herein constitute the whole agreement between the parties hereto and no variation thereof shall be effective unless made in writing signed by or by the duly authorised representatives of both of the parties hereto. 15. COSTS AND EXPENSES AND STAMP DUTY 15.1 Each party will pay its own costs and expenses in relation to the preparation, execution and carrying into effect of this Agreement. 15.2 If any stamp duty is payable in connection with the transfer of the Shares contemplated by this Agreement (or in relation to the Option Agreement or the transfer of the non-voting deferred shares as contemplated in the Option Agreement) such stamp duty shall be paid by the Vendor as to one half and the Purchaser as to the other half. 16. EXECUTION AND COUNTERPARTS This Agreement may be executed in one or more counterparts each of which shall be binding on each party by whom or on whose behalf it is so executed, but which together shall constitute a single instrument. For the avoidance of doubt, this Agreement shall not be binding on any party hereto unless and until it shall have been executed by or on behalf of all persons expressed to be party hereto. 17. LAW AND JURISDICTION 17.1 This Agreement shall be construed and take effect in all respects in accordance with the laws of Hong Kong. - 11 - 17.2 The parties irrevocably agree that the courts of Hong Kong are to have jurisdiction to settle any disputes which may arise out of or in connection with this Agreement and that accordingly any suit, action or proceedings (together hereinafter referred to as "proceedings") arising out of or in connection with this Agreement may be brought in such courts. 17.3 Each of the parties hereby irrevocably waives any objection which it may have now or hereafter to the laying of the venue of any proceedings in any such court as is referred to in Clause 17.2 or Clause 17.4 and any claims that any such proceedings have been brought in an inconvenient forum and further irrevocably agrees that a judgment in any proceedings brought in the courts of Hong Kong shall be conclusive and binding upon such party and may be enforced in the courts of any other jurisdiction. 17.4 Nothing contained in Clause 17.2 or elsewhere in this Agreement shall limit the right of either party to take proceedings against the other party hereto in any other court of competent jurisdiction, nor shall the taking of proceedings by any party in one or more jurisdictions preclude the taking of proceedings by such party in any other jurisdiction, whether concurrently or not. 17.5 The Vendor hereby appoints Ocean Office Automation Limited as its agent for service of process, or such other agent with an office in Hong Kong as the Vendor may notify to the Purchaser for the purpose. 17.6 The Purchaser hereby appoints the Purchaser's Solicitors as its agent for service of process, or such other agent with an office in Hong Kong as the Purchaser may notify to the Vendor for the purpose. 18. NOTICES 18.1 Any notice under this Agreement shall be in writing and signed (or, in the case of a notice served by facsimile, despatched with the correct answerback) by or on behalf of the party giving it and may be served by leaving it at or sending it by facsimile or prepaid registered post to:- 18.1.1 in the case of the Vendor, Mr. Francis Li at 4th and 5th Floors, Kader Industrial Building, 22 Kai Cheung Road, Kowloon Bay, Kowloon, Hong Kong. Fax : (852) 799 2398; 18.1.2 in the case of the Purchaser, Mr. Robert E. Klatell at Arrow Electronics, Inc. of 25 Hub Drive, Melville, New York, 11747, U.S.A. Fax : (516) 391 1683 or to such other office or address as the relevant party may hereafter specify to the other party hereto by notice in writing expressed to be for the purposes of this sub-clause 18.1. 18.2 In the case of such a notice which is served by telex or prepaid registered post the same shall be deemed (in the absence of proof to the contrary) to have been received:- 18.2.1 in the case of facsimile, 12 hours after the time of - 12 - despatch; 18.2.2 in the case of prepaid registered post, 48 hours (or 120 hours if to another country) from the date of posting. AS WITNESS the hands of the parties hereto or their duly authorised representatives the day and year first before written. - 13 - EX-10 12 MMD PURCHASE AGR.-EX10(L) CONFORMED COPY DATED 2nd July 1993 BARING BROTHERS (GUERNSEY) LIMITED (AS TRUSTEE) AND OTHERS - and - ARROW ELECTRONICS (UK) LIMITED AGREEMENT for the acquisition of shares in TECHDIS LIMITED Herbert Smith, Exchange House, Primrose Street, London EC2A 2HS. Tel: 071-374 8000 Telex: 886633 Fax: 071-496 0043 Ref: 182/C1O7/30372681 AG30372681060493 THIS AGREEMENT is made on 2nd July 1993 BETWEEN: (1) THE PERSONS whose names and addresses are set out in Schedule 1 (the "VENDORS" and severally a "VENDOR"); and (2) ARROW ELECTRONICS (UK) LIMITED a company incorporated in England and Wales (registered number 2395760) and whose registered office is at Turnpike Road, Cressex Estate, High Wycombe, Buckinghamshire (the "PURCHASER") RECITALS: A. Techdis Limited (the "COMPANY") was incorporated in England on 25th September 1986 under the Companies Act 1985 with registered number 2058603 and is a private company limited by shares. Further details of the Company, its authorised and issued share capital and the names of its present directors and secretary are set out in Part I of Schedule 2. B. The companies named in Part II of Schedule 2 (the "SUBSIDIARIES") are the only subsidiaries of the Company. Further details of the Subsidiaries, their authorised and issued share capitals and the names of their present directors and of their secretaries are set out in Part II of Schedule 2. IT IS AGREED as follows:- 1. INTERPRETATION 1.1 In this Agreement and in the Schedules the following definitions are used:- "ACCOUNTS" means the audited consolidated balance sheet of the Company and the Subsidiaries as at 31st December 1992 1 and the audited consolidated profit and loss account of the Company and the Subsidiaries in respect of the accounting reference period of the Company and the Subsidiaries ended on 31st December 1992; "ACCOUNTS DATE" means 31st December 1990, 31st December 1991 or 31st December 1992, as the case may be; "APPROPRIATE PRORATION" in relation to any of the Vendors, means that proportion which the amount of the consideration receivable by him under Clause 3.2(A) bears to the total amount of the consideration receivable by the Vendors under Clause 3.2(A) as set out in column 4 of Schedule 1; "ASSIGNMENT" means the assignment of the Debt and the Guarantee in accordance with Clause 2.3; "ASSOCIATED COMPANY" in relation to any body corporate means any of its holding companies or subsidiaries or any other subsidiary of any such holding company; "BUSINESS DAY" means a day (not being a Saturday) on which banks are open for general banking business in the City of London; "COMPANIES ACT" means the Companies Act 1985; "COMPLETION" means completion of the sale and purchase of the Shares and the Assignment in accordance with Clause 4; 2 "DEBT" means the sum of L.750,000 owed by the Company to the Institutional Vendors under a loan agreement dated 10th September 1990 as amended; "DEED OF RELEASE" means the deed of release in the agreed terms from Barclays Private Bank and Trust Limited in respect of the floating charges dated 1st December 1986 and 10th September 1990 given in its favour by the Company and MMD; "DISCLOSED SCHEME" means:- (A) The MMD Money Purchase Group Scheme; and (B) The MMD Executive Pension Scheme, as constituted by trust deeds dated 15th May 1987 and 7th August 1986 respectively; "DISCLOSURE LETTER" means the letter in the agreed terms from the Vendors' Solicitors to the Purchaser's Solicitors delivered immediately prior to the making of this Agreement; "ENVIRONMENTAL LAW" means the Environmental Protection Act 1990, the Water Resources Act 1991, the Water Industry Act 1991, the Control of Pollution (Amendment) Act 1989, the Control of Pollution Act 1974, the Clean Air Acts, the Alkali etc. Act 1906 and any other laws directives and regulations whether statutory, at common law, in equity or otherwise relating to 3 the environment (which shall have the same meaning it bears in the Environmental Protection Act 1990) including but not limited to any law relating to waste or contamination or pollution of air or water (including ground water and underground waters) or soil or any other aspect of protection of the environment but not including the Planning Acts; "ESCROW ACCOUNT" means the earmarked interest-bearing deposit account of the Vendors' Solicitors referred to in Schedule 5; "FINAL DATE" means the final date for determination in accordance with Clause 3.4(B) of the amount of the payment referred to in Clause 3.2(B); "GROUP" means the Company and the Subsidiaries; "GUARANTEE" means the guarantee of the Debt given by MMD to the Institutional Vendors under a guarantee and charge dated 10th September 1990; "INSTITUTIONAL VENDORS" means the Vendors whose names are set out in Part II of Schedule 1; "INTELLECTUAL PROPERTY RIGHTS" means all inventions, patents, registered designs, design rights and copyrights, know-how and trademarks (whether registered or not) and the goodwill therein and applications for any of the same and all rights of a similar nature throughout the world; 4 "LIABILITIES DEED" means the liabilities deed in the agreed terms entered into pursuant to this Agreement; "MANAGEMENT ACCOUNTS" means the management accounts of the Group as prepared by the directors of the Company in respect of each calendar month; "MMD" means Microprocessor and Memory Distribution Limited, further details of which are set out in Part II of Schedule 2; "PBIT" in respect of any period specified in Clause 3.2, means the consolidated net profits of the Company (after all operating costs but before interest and taxation) on its ordinary activities before taking into account:- (i) any increase or reduction in the aggregate costs of the Group, as compared with those costs which it would have incurred had the Purchaser not acquired the Shares and received the assignment of the Debt, which arises as a result of any integration of administrative functions of the Company and/or the Subsidiaries with those of the Purchaser and its Associated Companies; (ii) any exceptional and extraordinary items as those terms are defined in UK Statements of Standard 5 Accounting Practice and Financial Reporting Standards; (iii) any excess of the annual audit fee of the Group above L.12,000, exclusive of value added tax (as that figure is adjusted to take account of any increase in the UK General Index of Retail Prices for all items published by the Central Statistical Office between May 1993 and the month in which the relevant audit fee is agreed); (iv) any changes in the accounting policies of the Company or any of the Subsidiaries from those policies of the Purchaser and its subsidiaries used at the date of this Agreement which are required to be made in accordance with any applicable law or UK Standards of Standard Accounting Practice or Financial Reporting Standards; and (v) any matter in respect of which any deduction in respect of a relevant claim is made, or is entitled to be made by the Purchaser, pursuant to Clause 3.2 (D) or paragraph 4.3 of Schedule 5, to the extent of such deduction "PBIT RETURN" in respect of any period specified in Clause 3.2, means the fraction, expressed as a percentage, obtained by dividing PBIT for such period expressed 6 on an annualized basis by Working Capital Employed; "PLANNING ACTS" means the Town and Country Planning Acts or any other enactment for the time being in force relating to the use, development and enjoyment of land and buildings; "PREVIOUS ACCOUNTS" means the audited consolidated balance sheets of the Company and the Subsidiaries as at the end of each of the two accounting reference periods ended on 31st December 1990 and 31st December 1991 respectively and the audited consolidated profit and loss accounts of the Company and the Subsidiaries for those two periods; "PROPERTIES" means the leasehold properties listed in Schedule 4; "PURCHASER'S SOLICITORS" means Herbert Smith of Exchange House, Primrose Street, London EC2A 2HS; "RELEVANT CLAIM" means a claim in respect of any of the Warranties or under the Liabilities Deed or a claim for indemnity under Clause 9.10; "RTPA" means the Restrictive Trade Practices Act 1976; "SHARES" means the 56,667 U.S. Dollar Preference Shares of $1 each, the 10,000 issued "A" Ordinary Shares of L.1 each, the 47,143 issued "B" Ordinary Shares of L.1 each, the 9,524 issued Deferred Shares of L.1 7 each and the 600,000 issued Non-Voting Redeemable Preference Shares of L.1 each in the capital of the Company; "SIDE LETTER" the letter in the agreed form from the Purchaser to the Vendors relating to the conduct of business of the Group in respect of the period from the date of this Agreement to 31st December 1994; "SVA" means Schroder Venture Advisers of 20 Southampton Street, London WC2E 7QG; "TAXATION" OR "TAX" means taxation or tax as defined in the Liabilities Deed; "TAXES ACT" means the Income and Corporation Taxes Act 1988; "VENDORS' AGENTS" means each of (i) SVA, (representing Baring Brothers (Guernsey) Limited as trustee of Schroder UK Venture Fund 1), (ii) SUMIT Equity Ventures Ltd (representing STF Management Limited as general partner of Sharp Technology Fund I Limited Partnership and Sharp Technology Fund II Limited Partnership) and (iii) Michael Regent (representing the other Vendors) further details of whom are set out in Clause 11.1; "VENDORS' SOLICITORS" means Clifford Chance of 200 Aldersgate Street London EC1A 4JJ; "WARRANTIES" means the warranties contained in Schedule 3; and 8 "WORKING CAPITAL EMPLOYED" in respect of any period specified in Clause 3.2, means the aggregate of the net stock in trade plus net trade debtors less trade creditors of all members of the Group based on the average of the respective month end positions during the relevant period as shown in the relevant audited and/or Management Accounts used as specified in Clause 1.2. 1.2 For the purposes of Clause 1.1 PBIT shall be calculated by reference to the audited consolidated accounts of the Company and the Subsidiaries or their respective underlying businesses for the accounting reference period ending 31st December 1994 and/or the Management Accounts for the periods from 1st July 1993 to 31st December 1993 and from 1st January 1994 to 30th June 1994, as the case may be, all of which accounts shall be prepared in accordance with UK Statements of Standard Accounting Practice and Financial Reporting Standards and using accounting bases and policies consistent with those used by the Purchaser and its subsidiaries for the relevant period (such audited consolidated accounts to be prepared as soon as practicable, and in any event not later than 120 days, after the end of the relevant accounting reference period). 1.3 In this Agreement, words and expressions defined in the Companies Act shall bear the same meanings as in that Act. 1.4 In this Agreement, save where the context otherwise requires:- (A) a reference to a statute or statutory provision shall include a reference:- (1) to that statute or provision as from time to time consolidated, modified, re-enacted or replaced by any statute or statutory provision; 9 (2) to any repealed statute or statutory provision which it re-enacts (with or without modification); and (3) any subordinate legislation made under the relevant statute; (B) words in the singular shall include the plural, and vice versa; (C) the masculine gender shall include the feminine and neuter and vice versa; (D) a reference to a person shall include a reference to a firm, a body corporate, an unincorporated association or to a person's executors or administrators; (E) a reference to a Clause or Schedule (other than to a schedule to a statutory provision) shall be a reference to a Clause or Schedule (as the case may be) of or to this Agreement; (F) if a period of time is specified and dates from a given day or the day of an act or event, it shall be calculated exclusive of that day; (G) references to writing shall include any modes of reproducing words in a legible and non-transitory form; (H) a reference to a balance sheet or profit and loss account shall include a reference to any note forming part of it; (I) where any of the Warranties is qualified by the state of knowledge or awareness of the Vendors or by the expression "so far as the Vendors are aware" or any similar expression, that Warranty shall be deemed to include an additional statement that it has been made after due and careful enquiry; (J) references to documents "in the agreed terms" shall be to documents agreed between the parties, annexed to this Agreement 10 and initialled for identification by the Vendors' Solicitors and the Purchaser's Solicitors; and (K) the headings in this Agreement are for convenience only and shall not affect the interpretation of any provision of this Agreement. 1.5 The designations adopted in the recitals and introductory statements preceding this Clause apply throughout this Agreement and the Schedules. 2. SALE AND PURCHASE AND ASSIGNMENT 2.1 Each of the Vendors whose name is set out in Part I of Schedule I as beneficial owner and each of the Institutional Vendors whose name is set out in Part II of Schedule I as trustee with full power to transfer legal and beneficial title shall sell or procure to be sold and the Purchaser shall purchase the number of Shares set opposite that Vendor's name in column (2) of Schedule 1. 2.2 Save, for the avoidance of doubt, in respect of the right to receive any interest to (and including) 30th June 1993, each of the Institutional Vendors shall hereby assign absolutely, or procure the absolute assignment of, their respective interests in the Debt (as set opposite that Vendor's name in column (2) of Schedule 1) and the Guarantee to the Purchaser and the Purchaser shall accept such absolute assignment. 2.3 (A) The Shares shall be sold and the respective interests in the Debt shall be assigned free from any option, charge, lien, equity, encumbrance, rights of pre-emption or any other third party rights and together with all rights attached to them at the date of this Agreement (other than in the case of the Shares the right of the Vendors to receive the dividend referred to in paragraph 1.3(A)(i) of Schedule 3) or subsequently becoming attached to them. 11 (B) The Purchaser hereby irrevocably and unconditionally agrees and undertakes to each of the Vendors to procure the due payment in full of the interim dividend referred to in paragraph 1.3(A)(i) of Schedule 3 and declared by the Company on the date hereof on 1st July 1993, together with the associated tax credit. 2.4 The Vendors waive and agree to procure the waiver of any restrictions on transfer (including pre-emption rights) and/or assignment which may exist in relation to the Shares or the Debt, whether arising under the articles of association of the Company, or under any agreement or instrument to which the Vendors are parties or by which the Vendors are bound or otherwise. 2.5 The Purchaser shall not be obliged to complete the purchase of any of the Shares or the Assignment unless the Vendors complete the sale of all the Shares and the Assignment of the entire Debt simultaneously, but completion of the purchase of some of the Shares and/or the assignment of part of the Debt will not affect the rights of the Purchaser with respect to the purchase and/or assignment of the remainder thereof. 3. CONSIDERATION 3.1 Subject to adjustment in accordance with the provisions of this Agreement and the Liabilities Deed, the consideration for the sale of the Shares and the Assignment shall be the aggregate of:- (A) the payment at Completion to each of the Vendors of the sum(s) set opposite his name in column (3) of Schedule 1; and (B) subject to Clause 3.2(E), the payment to the Vendors of such further sum (if any) as shall be calculated in accordance with Clause 3.2(A), which shall be apportioned as to L.600,000 to the Non-Voting Redeemable Preference Shares, as to L.56,667 to the "A" Ordinary Shares, the "B" Ordinary Shares and the Deferred Shares, as to L.750,000 for the Assignment and as to L.4,593,333 and the consideration referred to in 12 Clause 3.1(B) to the U.S. Dollar Preference Shares, all as specified in more detail in Schedule 1; 3.2 (A) Subject to adjustment in accordance with Clause 3.3, the aggregate additional consideration, if any, payable by the Purchaser to the Vendors pursuant to Clause 3.1(B) shall be the aggregate of:- (i) L.2.50 for each L.1 by which PBIT for the period from 1st July 1993 to 31st December 1994 (inclusive) exceeds L.1,600,000 but does not exceed L.3,000,000; and (ii) L.1.3333 for each L.1 by which PBIT for that period exceeds L.3,000,000 but does not exceed L.4,500,000, subject to a maximum payment by the Purchaser to the Vendors of L.5,500,000. (B) Subject to any deduction made by the Purchaser pursuant to Clause 3.2(D) or paragraph 4.3 of Schedule 5 the additional consideration payable pursuant to Clause 3.2(A) (less the aggregate amount of any payments to the Vendors from the Escrow Account pursuant to paragraphs 4.2(A) or (C) of Schedule 7 exclusive of any interest comprised therein) shall be paid to the Vendors by telegraphic transfer or banker's draft in accordance with the instructions of the Vendors' Solicitors on the fifth business day after the date of agreement or final determination in accordance with Clause 3.4(B) of PBIT for the period to 31st December 1994. (C) Subject to any deduction made by the Purchaser pursuant to Clause 3.2(D), the Purchaser shall make payments on account to the Vendors in respect of its liability under Clause 3.2(A) as follows:- (i) in respect of the period from 1st July 1993 to 31st December 1993 (inclusive) an amount equal to L.2.50 for each L.1 by which PBIT for that period exceeds L.533,000 but 13 does not exceed L.1,000,000 and L.1.3333 for each L.1 by which such PBIT exceeds L.1,000,000 and does not exceed L.1,500,000; and (ii) in respect of the period from 1st July 1993 to 30th June 1994 (inclusive) an amount equal to L.2.50 for each L.1 by which PBIT for that period exceeds L.1,066,000 but does not exceed L.2,000,000 and L1.3333 for each L.1 by which such PBIT exceeds L.2,000,000 and does not exceed L.3,000,000, less any payment made pursuant to sub--Clause (i) above, in each case subject to adjustment in accordance with Clause 3.3. The aforementioned payments shall be made to the Vendors by telegraphic transfer or banker's draft into the Escrow Account in accordance with the instructions of the Vendors' Solicitors on the fifth business day after the date of agreement or final determination in accordance with Clause 3.4(B) of the amounts payable under this Clause 3.2(C) and the provisions of Schedule 5 shall apply accordingly. (D) On or prior to each of the payment dates referred to in Clauses 3.2(B) and 3.2(C) the Purchaser shall notify the Vendors' Solicitors and the Vendors' Agents in writing of its bona fide estimate of the aggregate amount of all relevant claims (if any) in accordance with Clauses 5 and 6 up to such date (including reasonable details of the calculation of such amount) and a sum equal to that aggregate amount (less any amounts deducted from any previous payment pursuant to this Clause 3.2(D)) shall be deducted from the amount then due and payable to the Vendors. Without prejudice to Clauses 6.5, 6.7 and 6.8, where it is agreed or subsequently determined by a court of competent jurisdiction (whether at the instigation of any of the Vendors' Agents or the Purchaser) that any amount is not payable by the Vendors to the Purchaser pursuant to a relevant claim the Purchaser shall pay to the Vendors on the fifth business day after the date of such agreement or final determination as aforesaid a sum equal to the amount of any deduction in respect of any such amount so not payable by the Vendors which was made 14 pursuant to this Clause 3.2(D) together with interest at the rate of 10 per cent. per annum from (but excluding) the later of the date on which the deduction was made (or, where the amount is not payable by reason of the Purchaser having recovered a corresponding amount from any third party, the day of the relevant recovery from such third party) to (and including) the date of payment of such sum by the Purchaser. (E) Where any of the Vendors who is a director or employee of the Company or any of the Subsidiaries at the date of this Agreement ceases (otherwise than by reason of death, ill health or other similar incapacity or termination of his employment by the Company without cause, including by reason of redundancy) to be a director or employee as aforesaid prior to any payment date referred to in Clauses 3.2(B) or (C) that Vendor shall forfeit his appropriate proportion of any amount payable to the Vendors by the Purchaser under Clauses 3.2(B) or (C) on any such payment date after the time when he has so ceased to be a director or employee as aforesaid, which unpaid amount shall be retained by the Purchaser for its own benefit. 3.3 The payments to be made by the Purchaser pursuant to Clauses 3.2(B) and Clause 3.2(C) shall be adjusted by multiplying the amounts which would otherwise be payable in respect of the relevant period of six, twelve and eighteen months respectively by the Multiplier set out in column (2) below opposite the corresponding PBIT Return set out in column (1) below:- (1) (2) PBIT Return Multiplier ----------- ---------- [S] [C] 75% 115% 55% 110% 45% 105% 35% 100% 25% 90% 20% 80% 15% 65% 15 provided that if the actual PBIT Return is not a percentage shown in column (1) above the Multiplier to be applied for the purposes of this Clause shall be such percentage which on a straight line basis is in the same pro rata position between the two corresponding percentages set out in column (2) above as the actual PBIT Return occupies in relation to the two percentages closest to the actual PBIT Return set out in column (1) above and provided further that this Clause 3.3 shall not apply to the extent that it would result in an aggregate amount in excess of L.5,500,000 becoming payable to the Vendors under Clause 3.2. 3.4 (A) Subject to the matters referred to in paragraphs (i) to (v) of the definition of PBIT in Clause 1.1, all amounts payable to the Vendors by the Purchaser under Clause 3.2(B) and (C) shall be determined from the accounts prepared in accordance with Clause 1.2 and at the time of making each such payment the Purchaser shall deliver to the Vendors' Solicitors and the Vendors' Agents a notice (the "Payment Notice") setting out in reasonable detail the calculation of the relevant payment. In the absence of any notice received from any Vendors' Agent on behalf of the Vendors he represents (a "Dispute Notice") within 30 days after delivery of the Payment Notice such Payment Notice shall be conclusive evidence of the relevant amount payable under Clause 3.2(B) or (C), as the case may be. If a Dispute Notice is served within such 30 day period the relevant Vendors' Agent and the Purchaser acting in good faith shall endeavour to agree the relevant amount payable provided that should agreement not be reached as aforesaid within 30 days after service of the Dispute Notice the dispute shall be determined in accordance with Clause 3.4(B). (B) In the absence of any agreement between the Vendors and the Purchaser in accordance with Clause 3.4(A) the relevant amount payable under Clauses 3.2(B) or (C) which is in dispute shall be determined by an independent accountant chosen by agreement between the Purchaser and the relevant Vendors' Agent or, in the absence of such agreement within seven days after the end of the 30 day period referred to in Clause 3.4(A), to be appointed by the President for the time being of the Institute of Chartered 16 Accountants in England and Wales on the application of either the Purchaser or such Vendors' Agent. Any such calculation made by such independent accountant (which be shall be instructed to give in reasonable detail and within 30 days of his appointment) shall (save in the case of manifest error) be final and binding on all concerned and in performing the functions hereunder such independent accountant shall act as an expert and not as an arbitrator. The costs of such independent accountant shall be borne by the Vendors and/or the Purchaser in the proportions determined by the independent accountant. 3.5 If either:- (A) the provision of L.30,000 in respect of the debtor Microtech Securities; or (B) the provision of L.16,908 in respect of the debtor Frazer Nash, in each case made in the Management Accounts for May 1993 proves (in accordance with the Company's accounting policies specified in Clause 1.2) to have been an over-provision the Purchaser shall on the fifth business day after the same has been proved pay to the Vendors by way of additional consideration for the purchase of the Shares a sum equal to such part of the provision as was not required to have been made and such over-provision shall not be taken into account for the purposes of the calculation of PBIT. 4. COMPLETION 4.1 "Completion shall take place at the offices of the Purchaser's Solicitors immediately following the signing of this Agreement. 4.2 At Completion:- (A) the Vendors shall deliver or cause to be delivered to the Purchaser or the Purchaser's Solicitors:- 17 (1) (i) a duly executed transfer to the Purchaser or its nominee of the number of the Shares sold by each Vendor (other than the U.S. Dollar Preference Shares); and (ii) all of the U.S. Dollar Preference Shares, together in each case with definitive share certificates for them in the names of the relevant transferors; (2) any power of attorney under which any document is executed on behalf of a Vendor; (3) (in the case of a corporate Vendor only) evidence to the Purchaser's satisfaction of the authority of any person executing the Agreement on its behalf; (4) any waivers, consents or other documents required to vest in the Purchaser the full beneficial ownership of the Shares and to enable the Purchaser to procure them to be registered in the name of the Purchaser or its nominee; (5) the Liabilities Deed duly executed by the Vendors; (6) the certificates of incorporation, common seals, all statutory and minute books (which shall be written up to, but not including, the date of Completion) and share and loan stock certificate books of the Company and each of the Subsidiaries together with all unused share and loan stock certificate forms; (7) definitive certificates in respect of all the shares and loan stock beneficially owned by the Company or any of the Subsidiaries in each of the Subsidiaries together with duly executed transfers in blank in respect of all shares and loan stock in the Subsidiaries not registered in the name of the Company or of another of the Subsidiaries; 18 (8) all deeds and documents relating to the title of the Company or any of the Subsidiaries to each of the Properties; (9) the written resignations in the agreed terms of all directors of the Company and each of the Subsidiaries (other than any director or secretary whom the Purchaser may wish to remain in office) executed as a deed; (10) a certificate of non-crystallisation from the chargee in respect of each charge to which any of the assets or undertaking of the Company or any of the Subsidiaries is subject at Completion and which will remain in force after Completion together with evidence satisfactory to the Purchaser (including the executed Deed of Release) that any other charge over the assets or undertaking of any member of the Group has been released or discharged; (11) service agreements in the agreed terms signed by Mr. Michael Raymond Regent, Mr. Roger Paul Banks, Mr. Robert James Doe, Mr. Leslie Billing and Mr. Nicholas Harwood; and (12) notices of resignation of the existing auditors of the Company and each of the Subsidiaries containing statements as specified in section 394 of the Companies Act 1985. (B) the Vendors shall procure that the following business is transacted at meetings of the directors of the Company and each of the Subsidiaries:- (1) the directors of the Company shall approve the transfers of the Shares (other than the U.S. Dollar Preference Shares) for registration and the entry of the transferees of such Shares in the register of members of the Company subject only to the transfers of such Shares being subsequently presented duly stamped; 19 (2) the situation of the registered office of the Company and each of the Subsidiaries shall be changed to that nominated by the Purchaser; (3) all existing mandates for the operation of the bank accounts of the Company and each of the Subsidiaries shall be revoked and new mandates issued giving authority to those persons nominated by the Purchaser; (4) the Liabilities Deed shall be approved and executed as a deed by the Company and each of the Subsidiaries; (5) service agreements in the agreed terms with Mr. Michael Raymond Regent, Mr. Roger Paul Banks, Mr. Robert James Doe, Mr. Leslie Billing and Mr. Nicholas Harwood shall be approved and signed by the Company; (6) any person nominated by the Purchaser for appointment as a director or the secretary of the Company or any of the Subsidiaries shall be so appointed; and (7) Ernst & Young shall be appointed to replace the existing auditors of the Company; (C) the Purchaser shall deliver to the Vendors' Solicitors (who are hereby irrevocably authorised to receive the same and whose receipt shall be a valid discharge of the Purchaser's obligations under Clause 3.1(A)) a bankers' draft in favour of the Vendors' Solicitors as aforesaid for the total of the amounts shown in column (3) of Schedule 1. 5. WARRANTIES 5.1 The Vendors severally warrant and represent to the Purchaser in the terms of the Warranties. The liability of the Vendors in respect of relevant claims shall be as provided in Clause 6.2. 20 5.2 The Vendors acknowledge that, in entering into this Agreement, the Purchaser has relied upon prior representations by the Vendors in the terms of the Warranties but upon no other representations or warranties, whether oral or in writing, and that the Warranties were made by the Vendors immediately prior to the execution of this Agreement with the intention of inducing the Purchaser to enter into this Agreement. 5.3 The Vendors shall not (in the event of any claim being made against any of them in connection with the sale of the Shares to the Purchaser) make any claim against the Company or any of the Subsidiaries or against any director or employee of the Company or any of the Subsidiaries on whom any of them may have relied before agreeing to any term of this Agreement or of the Liabilities Deed or authorising any statement in the Disclosure Letter, but so that this shall not preclude any Vendor from claiming against any such person who is no longer a director or employee as aforesaid or against any other Vendor under any right of contribution or indemnity to which he may be entitled. 5.4 Each of the Warranties shall be construed as a separate warranty and is given subject to the matters which are fairly disclosed in the Disclosure Letter but (save as expressly provided to the contrary) shall not be otherwise limited or restricted by reference to or inference from the terms of any other Warranty or any other term of this Agreement. 5.5 Each of the Vendors agrees he shall as soon as reasonably practicable after becoming aware of the same disclose to the Purchaser any matter or thing which arises or becomes known to him after the date of this Agreement which is inconsistent with any of the Warranties or which in his reasonable opinion might render any of them misleading. 5.6 The Purchaser shall be entitled to claim that any of the Warranties is or was untrue or misleading or has or had been breached even if the Purchaser could have discovered (but did not discover) on or before Completion that the Warranty in question was untrue or misleading or 21 had been breached and Completion shall not in any way constitute a waiver of any of the Purchaser's rights. 5.7 The rights and remedies of the Purchaser in respect of a breach of any of the Warranties shall not be affected by Completion, subject to Clause 5.6 by any investigation made by or on behalf of the Purchaser into the affairs of the Company or any of the Subsidiaries, by the giving of any time or other indulgence by the Purchaser to any person, by the Purchaser rescinding or not rescinding this Agreement, or by any other cause whatsoever except a specific waiver or release by the Purchaser in writing provided that any such waiver or release shall not prejudice or affect any remaining rights or remedies of the Purchaser. 6. LIMITATION ON LIABILITY 6.1 Relevant claims shall only be made by serving written notice on the Vendors on or before any due date for payment under Clause 3.2(B) or (C), which notice shall identify the subject matter and the basis of the relevant claim in reasonable detail. 6.2 (A) Subject to Clause 6.2(B), the liability of each of the Vendors in respect of any relevant claim shall not exceed his appropriate proportion of such claim and the aggregate liability of all the Vendors in respect of all relevant claims shall not exceed the aggregate consideration payable under Clause 3.2(A). (B) The Vendors' liability in respect of relevant claims as provided in Clause 6.2(A) shall be satisfied solely by deduction from amounts payable to the Vendors under Clause 3.2 and paragraph 4 of Schedule 5 as provided in Clause 3.2(D) and paragraph 4.3 of Schedule 5 and for the avoidance of doubt no Vendor shall be obliged to repay to the Purchaser any amount previously paid to him pursuant to Clause 3.2 or paragraph 4.2 of Schedule 5 to satisfy any relevant claim. 6.3 Save in respect of relevant claims under the Liabilities Deed, to which this Clause 6.3 shall not apply, no liability shall attach to 22 the Vendors in respect of relevant claims unless the aggregate amount of the liability of the Vendors in respect of all such relevant claims shall exceed L.50,000, in which case only the excess shall be payable, and no relevant claim shall be made unless the individual claim exceeds L.10,000. For the avoidance of doubt, any liability of the Vendors in respect of the Warranties set out in paragraphs 6.4 and 8.3 of Schedule 3 shall, to the extent that such liability is also the subject of the indemnities contained in Clause 2.2 of the Liabilities Deed, be treated as a relevant claim under the Liabilities Deed. 6.4 The Vendors shall not be liable in respect of a relevant claim:- (A) if it would not have arisen but for anything voluntarily done or omitted to be done after Completion by the Purchaser, the Company or any of the Subsidiaries or any of their respective agents, assignees or other successors in title at any time when the Purchaser was aware of the existence or potential existence of such claim; (B) to the extent that it arises or is increased as a result only of:- (1) an increase in rates of taxation after the Accounts Date; or (2) the passing of any legislation, or making of any subordinate legislation, with retrospective effect; or (C) to the extent that it:- (1) is provided for, or included as a liability, in the Accounts or, for the period from 1st January 1993 to 31st May 1993, in the Management Accounts ; or (2) is a liability for taxation arising out of the ordinary course of business of the Company or any of the Subsidiaries after the Accounts Date. 23 6.5 (A) Subject to Clause 6.5(B), where, after a relevant claim has been satisfied by the Vendors by means of a deduction under Clause 3.2(D), the Purchaser, the Company or any of the Subsidiaries shall recover from some other person an amount (the "third party recovery") in respect of any matter or event which gave rise to the relevant claim the Purchaser shall pay to the Vendors on the fifth business day following such recovery an amount equal to the lesser of (i) the amount so recovered (less all reasonable costs and expenses of the recovery properly incurred by the Purchaser) and (ii) the amount deducted from any payments to the Vendors pursuant to Clause 3.2(D) in respect of that relevant claim provided that where case (ii) applies the Vendors shall be paid from such recovery their reasonable costs and expenses incurred in pursuing such recovery if the Purchaser's costs as aforesaid have been met from such recovery and provided further that, subject to Clause 6.6, the Purchaser shall not be under any obligation to seek, or to procure that the Company or any of the Subsidiaries shall seek, recovery from any other person. (B) Where a third party recovery is received after the Final Date the Vendors shall be entitled to be paid all or part of the proceeds of any such recovery in accordance with Clause 6.5(A) only if at the Final Date and at the date of the relevant recovery such claim was being pursued against the relevant third party by the Vendors in accordance with Clause 6.6. 6.6 The Purchaser in respect of any relevant claim (other than a claim in respect of taxation under the Liabilities Deed, to which Clause 6 of that Deed shall apply) shall, upon being indemnified to its reasonable satisfaction against any costs, claims, losses, liabilities or expenses which it may thereby suffer or incur, take such action as the Vendors' Agents or any of them may reasonably require to avoid, resist, contest or compromise any claim or matter which gives or may give rise to a relevant claim. 6.7 Where, after any relevant claim(s) under Clause 2.1 of the Liabilities Deed has been satisfied by the Vendors but before the Final Date, it is agreed or determined in accordance with Clause 3.4(B) (at the 24 request and at the expense of the Vendors) that a provision for taxation in the Accounts is an overprovision ("Overprovision") then the Purchaser shall pay to the Vendors on the fifth business day following such agreement or determination an amount equal to the lesser of (i) the amount of the Overprovision and (ii) the amount deducted from any payments to the Vendors pursuant to Clause 3.2(D) in respect of such relevant claim(s). 6.8 Where, after any relevant claim(s) under clause 2.1 of the Liabilities Deed has been satisfied by the Vendors but before the Final Date, it is agreed or determined in accordance with Clause 3.4(B) (at the request and at the expense of the Vendors) that an amount of taxation paid by the Company or a relevant Subsidiary will result in a corresponding tax relief (as defined in the Liabilities Deed) which will result in the reduction in the amount of any payment of taxation by the Company or the relevant Subsidiary, then the Purchaser shall pay to the Vendors on the fifth business day following the date on which the relevant payment of taxation would otherwise have been made an amount equal to the lesser of (i) the amount by which the payment of taxation is reduced by the tax relief (as certified by the auditors) and (ii) the amount deducted from any payments to the Vendors pursuant to Clause 3.2(D) in respect of such relevant claim(s). 7. CONFIDENTIALITY AND ANNOUNCEMENTS 7.1 Each of the Vendors covenants with the Purchaser that, save with the prior written consent of the Purchaser, or, in the case of the Vendors listed in Part I of Schedule 1, in accordance with his service agreement with MMD he shall not at any time disclose or use, for his own benefit or that of any person any confidential information which he possesses concerning the business or affairs of the Company or any of the Subsidiaries or of any person having dealings with the Company or any of the Subsidiaries or concerning this Agreement or its subject matter. 7.2 Each of the parties covenants with the others that he shall not at any time make any public announcement which refers to any terms of this 25 Agreement provided that nothing in this Clause 7.2 shall prevent the Purchaser from supplying to its holding companies, or prevent such companies from publishing or disclosing, any such information required to be published or disclosed in accordance with any relevant legal requirement provided that the Institutional Vendors may notify their investors thereof but shall request them to keep such information confidential subject to any relevant legal requirement to the contrary. 7.3 The restrictions entered into by the Vendors in Clause 7.1 are given to the Purchaser for itself and as trustee for the Company and each of the Subsidiaries and each of the Vendors agrees that he will at the request and cost of the Purchaser enter into a further agreement with the Company and each of the Subsidiaries whereby he will accept a restriction corresponding to the restriction in this Agreement. The Purchaser declares that insofar as these restrictions relates to the Company and the Subsidiaries it holds the benefit of them as trustee. In exercising any right as trustee hereunder the Purchaser shall be entitled to limit the action it takes to such action as it may, in its absolute discretion, consider reasonable. 8. POST-COMPLETION ARRANGEMENTS 8.1 The Purchaser shall use its reasonable endeavors to procure that its managing director shall be available to meet P. Smitham Esq. on behalf of the Vendors at a mutually convenient time, once per month between Completion and 31st December 1994 and once thereafter following the preparation of the Management Accounts for December 1994, for the purposes of discussing the activities of the Company and the Subsidiaries and, so far as relevant, the activities of the Purchaser and its subsidiaries by reference to the Vendors' entitlement to the payments of additional consideration provided for in Clause 3.2 which meeting shall be scheduled for such period as the Vendors may reasonably require and which does not interfere unduly with the duties and responsibilities of such managing director. The Purchaser recognises that thereafter P. Smitham Esq shall be entitled to communicate the results of such meetings to each of the Vendors or any of them. 26 8.2 The Purchaser shall supply to SVA one copy of each set of Management Accounts of the Company and the Subsidiaries which are prepared in respect of any period up to and including 31st December 1994 as soon as practicable following their preparation (and in any event with 30 days of the end of the appropriate calendar month to which they relate) and SVA may supply copies thereof to the other Vendors' Agents. 9. MISCELLANEOUS 9.1 Where in this Agreement any liability is undertaken by two or more persons the liability of each of them shall be several. 9.2 No party may assign any of its rights or obligations under this Agreement or the Liabilities Deed save that the Purchaser may assign any of its rights and obligations under this Agreement, and the Purchaser or any member of the Group may assign any of their respective rights and obligations under the Liabilities Deed, to Arrow Electronics Inc. or any of its Associated Companies provided that in the case of an assignment of obligations to which the Vendors have not given their prior written consent the Purchaser or the relevant member of the Group shall remain jointly liable with the assignee to the Vendors in respect of such obligations. This Agreement shall be binding on and enure for the benefit of the parties' successors and personal representatives. 9.3 In relation to its subject matter this Agreement, together with the documents in the agreed terms, represents the entire understanding and constitutes the whole agreement, and supersedes any previous agreement, between the parties and, save as provided in this Agreement, no party has relied on any representation made by any other party who is not a party to this Agreement. 9.4 So far as it remains to be performed this Agreement shall continue in full force and effect notwithstanding Completion. 27 9.5 Each of the Vendors shall after Completion execute all such other deeds and documents and do all such things as the Purchaser may reasonably require for perfecting the transactions intended to be effected under or pursuant to this Agreement and the documents in the agreed terms and for vesting in the Purchaser the full benefit of the Shares, the Debt and the Guarantee. 9.6 Whenever this Agreement or the Liabilities Deed provide for:- (A) any matter to be agreed between the Purchaser and the Vendors or the Vendors' Agents the Purchaser shall be required to deal solely with the relevant Vendors' Agents treat any representation by a Vendors' Agent that any matter has been agreed by the Vendors represented by him as having been, for all purposes in connection with this Agreement, so agreed and as binding on such Vendor in relation thereto and the Purchaser shall not be required to ascertain whether the respective Vendor or any other Vendors have been consulted by the relevant Vendors' Agent; (B) any payment to be made by the Purchaser to the Vendors, such payment shall be made to the Vendors' Solicitor and shall be received by the Vendors' Solicitors on behalf of all the Vendors in their appropriate proportions and the Purchaser shall be entitled to deal solely with the Vendors' Solicitors in that regard and shall not be concerned with the application of any such payment. 9.7 To the extent that any provision of this Agreement or of any of the other agreements between two or more of the parties in the agreed terms constitutes a restriction or an information provision within the meaning of the RTPA so as to make the Agreement, or any such document in the agreed terms, registrable under the Act, no such provision shall come into effect until such time as particulars of this Agreement and the documents in the agreed terms have been furnished to the Director General of Fair Trading in accordance with the RTPA, which the parties agree shall be done as soon as practicable after the signing of this Agreement. 28 9.8 No variation to this Agreement or to any part hereof (including, for the avoidance of doubt, in relation to the rights of the Vendors in terms of the receipt of additional consideration under Clause 3) shall be valid unless it is in writing and signed by or on behalf of each of the Vendors' Agents and the Purchaser. 9.9 The Purchaser hereby agrees to indemnify each of the Vendors on demand against any claims, liabilities, losses, costs and expenses to the Vendors or to their investors arising in respect of the Reorganisation (as defined in the Liabilities Deed) or in respect of the purchase of the Shares by the Purchaser and the Assignment to the Purchaser excluding any claim, cost, liability, loss or expense which would have arisen had the Reorganisation not taken place. 9.10 The Vendors hereby agree to pay to the Purchaser on demand an amount equal to the amount of all claims, liabilities, losses, costs and expenses other than those referred to under Clause 3 of the Liabilities Deed which the Purchaser or any member of the Group may suffer or incur arising out of or in respect of the payment of any dividends (including, without limitation, the dividend to be paid on 1st July 1993) by the Company or out of or in respect of the redemption of any shares by the Company up to the date of this Agreement or any other action as a result of which the relevant funds were paid to the Company which enabled such dividend to be paid or such redemption to be made, as the case may be, provided that this Clause 9.10 shall not entitle the Purchaser to recover from the Vendors any part of such dividend, such redemption monies or such relevant funds. 9.11 This Agreement may be executed in two or more counterparts of all which shall take effect as a single document. 10. COSTS The parties shall pay their own costs in connection with the preparation and negotiation of this Agreement and the documents in the agreed terms. 29 11. NOTICES 11.1 A notice, approval, consent or other communication in connection with this Agreement: (A) must be in writing; and (B) must be left at the address of the addressee, or sent by prepaid ordinary post (airmail if posted to or from a place outside the United Kingdom) to the address of the addressee or sent by telex or facsimile to the telex or facsimile number of the addressee which is specified in this Clause or if the addressee notifies another address or telex or facsimile number in England and Wales then to that address or telex or facsimile number. In addition, a copy of every notice, approval, consent or other communication in respect of this Agreement or the Liabilities Deed shall be sent to SVA at the address set out in Clause 1.1, marked for the attention of the Partnership Secretary. The address, telex number and facsimile number of each party for the purposes of this Agreement and the Liabilities Deed is: VENDORS' AGENTS SVA Address: 20 Southampton Street, London WC2E 7QG Telex: LONDON 885029 Facsimile: 071-497-2174 Marked for the attention of the Partnership Secretary SUMIT Equity Ventures Ltd Address: Edmund House, 12 Newhall Street, Birmingham B3 3EJ Fax: 021-233-4628 Marked for the attention of L. Bury Esq., 30 Michael R. Regent Address: Wynchwood Park Corner, Nettlebed, Oxfordshire PURCHASER Address: St. Martin's Business Centre, Cambridge Road, Bedford, MK42 OLF Fax: 0234 211434 Marked for the attention of the Managing Director with a copy by Fax to Arrow Electronics Inc., 25 Hub Drive, Melville, New York 11747, USA for the attention of R.E. Klatell Esq, Senior Vice-President (fax No. 0101 516 391 1683) or such other address and/or fax as the relevant party may notify to the other from time to time. 11.2 A notice, approval, consent or other communication shall take effect from the time it is received (or, if earlier, the time it is deemed to be received in accordance with Clause 11.3) unless a later time is specified in it. 11.3 A letter, telex or facsimile is deemed to be received: (A) in the case of a posted letter, unless actually received earlier, on the third (seventh, if posted by airmail to or from a place outside the United Kingdom) day after posting; (B) in the case of a telex, on receipt by the sender of the answerback code of the addressee after transmission of the telex; and (C) in the case of facsimile, on production of a transmission report from the machine from which the facsimile was sent which indicates that the facsimile was sent in its entirety to the facsimile number of the recipient. 31 12. GOVERNING LAW, JURISDICTION AND SERVICE OF PROCESS 12.1 This Agreement shall be governed by, and construed in accordance with, English law. 12.2 Each party irrevocably and unconditionally submits to the non-exclusive jurisdiction of the English Courts for determining any dispute concerning this Agreement or the transactions contemplated by this Agreement. Each party waives any right that it may have to object to an action being brought in those Courts, to claim that the action has been brought in an inconvenient forum, or to claim that those Courts do not have jurisdiction. 12.3 Without preventing any other mode of service, any document in an action (including, but not limited to, any writ of summons or other originating process or any third or other party notice) may be served on any party by being delivered to or left for that party at its address for service of notices under Clause ii. IN WITNESS of which the parties have executed this Agreement on the date first mentioned above. 32 EX-2 13 SILVERSTAR SHARE.AGR.-EX2(F)(III) SHAREHOLDERS AGREEMENT SHAREHOLDERS AGREEMENT (the "Agreement"), dated as of October 10, 1991 by and between EDI Electronics Distribution International B.V., a corporation organized and existing under the laws of The Netherlands ("EDI") and the signatories of this Agreement (which signatories (other than EDI) are hereinafter referred to individually as a "Shareholder" and collectively as the "Shareholders"). Except as otherwise indicated, capitalized terms used herein shall have the meanings ascribed thereto in Section 5 hereof. W I T N E S S E T H WHEREAS, Silverstar Ltd. S.p.A. ("Silverstar"), is a duly organized and existing corporation under the laws of Italy; WHEREAS, the authorized capital stock of Silverstar consists of 56,000 common shares, par value Lit 100,000 per share (the "Common Shares"), all of which Common Shares are issued and outstanding; WHEREAS, pursuant to a Share Purchase Agreement of even date herewith (the "Share Purchase Agreement") Arrow has agreed to purchase from Aquarius Investments Ltd. and to contribute to EDI 28,000 Common Shares (the "Purchased Shares"), representing 50% of the issued and outstanding Common Shares; WHEREAS, EDI and the Shareholders deem it necessary to make certain provisions for the regulation of Silverstar's affairs and the rights of EDI and the Shareholders; NOW, THEREFORE, in consideration of the premises and the covenants hereinafter set forth, the parties hereto agree as follows: -2- 1. Purchase and Sale of Common Shares owned by Shareholders. (a) Preemptive Rights. (i) Except for the sale or transfer of Common Shares (A) to another Shareholder or (B) pursuant to a Family Transfer (each of (A) and (B), an "Exempt Shareholder Transfer") no Shareholder or any person to whom such Shareholder has transferred any interest in Common Shares in accordance with the terms hereof (a "Transferee"), as the case may be, will sell or otherwise transfer any interest in Common Shares without complying with the terms of this Section l(a). At least 30 days prior to the date of any proposed sale or transfer other than an Exempt Shareholder Transfer, any Shareholder desiring to sell or transfer any or all of the Common Shares held by such Shareholder (the "Offeror") pursuant to a bona fide offer from a prospective purchaser (the "Purchaser") will deliver a written notice (the "Sale Notice") to EDI and the other Shareholders. The Sale Notice will disclose in reasonable detail the identity of the Purchaser and the terms and conditions of the proposed transfer, including the number of Common Shares to be transferred (the "Offered Shares") and the price per share at which the Offered Shares are to be sold to the Purchaser (the "Offered Price"). Such Sale Notice shall constitute an offer by the Offeror to sell the Offered Shares to EDI (or, if EDI declines to purchase, the other Shareholders) at a price (the "EDI Purchase Price") equal to the lower of the Silverstar Formula Price and the Offered Price. (ii) Upon receipt of such Sale Notice from the Offeror, EDI, or at the election of EDI, EDI's nominee, shall be entitled to accept such offer and to purchase all of the Offered Shares at the EDI Purchase Price and upon terms and conditions no less favorable than those set forth in the Sale Notice. EDI or its nominee, as the case may be, shall have 30 days after receipt of the Sale Notice (the "Initial Offering Period") in which to give counter-notice to the Offeror, at the Offeror's address stated in the Sale Notice, of EDI's, or its nominee's, acceptance of such offer. (iii) In each such offer, if EDI (or its nominee) does not within the Initial Offering Period elect to accept such offer and purchase all of the Offered Shares, EDI shall give notice to such effect to the Offeror and the other Shareholders, whereupon each of the other Shareholders shall have the right during a period of 15 days following receipt of such notice from -3- EDI (the "Subsequent Offering Period") to purchase all of the Offered Shares at the EDI Purchase Price and upon terms and conditions no less favorable than those set forth in the Sale Notice by giving counter-notice to the Offeror, at the Offeror's address stated in the Sales Notice of its acceptance of such offer. In the event that more than one Shareholder elects to accept such offer, the Offered Shares shall be allocated among the accepting Shareholders as they may agree or, failing such agreement, pro rata on the basis of their respective holdings of Common Shares. (iv) In each such offer, if neither EDI nor its nominee within the Initial Offering Period, nor any other Shareholders within the Subsequent Offering Period, accepts such offer and agrees to purchase all of the Offered Shares, the Offeror shall have the election, exercisable by giving notice within ten days after the end of the Subsequent Offering Period to EDI and such Shareholders as have accepted such offer to treat none of such acceptances as being effective, in which case such offer shall be deemed to have been duly rejected and such Offeror shall have the right to dispose of the Offered Shares in accordance with Section 1(a)(v). (v) Any Offered Shares not duly accepted as hereinabove provided may then be transferred by the Offeror to the Purchaser at a price not less than the Offered Price and upon terms no more favorable to the Purchaser than those stated in the Sale Notice within the next six months following the end of the Subsequent Offering Period, provided, however, that prior to any such transfer, the Purchaser shall deliver to EDI and the Shareholders a written unconditional agreement to be bound by the terms of this Agreement. Any Offered Shares not so sold, transferred or otherwise disposed of within such six-month period shall again in all respects become subject to the provisions of this Section 1(a) and no subsequent sale, transfer or other disposition thereof shall be made without again giving the notice and option to EDI and complying with the other terms and conditions of this Section 1(a). (vi) In the event of an Exempt Shareholder Transfer, the restrictions contained in this Agreement will continue to apply to the transferred Common Shares after any such transfer and, except for sales or transfers of Common Shares to a Shareholder, prior to the consummation of such Exempt Shareholder Transfer, the Transferee shall agree with EDI in writing to be bound by the provisions of this Agreement. -4- (b) Call Rights. (i) EDI shall have the right, exerciseable in its discretion following the occurrence of an event (a "Call Event") specified in Section 1(b)(ii), to purchase from the Shareholders and their respective (direct or indirect) Transferees, at the purchase price specified herein for such Call Event, all Common Shares owned by them at the time of such notice (the "Call Shares"). The right of EDI to purchase the Call Shares pursuant to a Call Event shall be exercisable by written notice (the "Call Notice") to the Shareholders and their respective Transferees not less than 30 days prior to a proposed purchase. A Call Notice with respect to a Call Event specified in Section 1(b)(ii)(A), (B) or (C) shall be given within 60 days of the relevant Call Event. (ii) The right of EDI to purchase the Call Shares shall be exerciseable: (A) at the Silverstar Formula Price in the event of the death or permanent disability (as determined in good faith by Silverstar's Board of Directors) of both Giorgio Ghezzi ("Ghezzi") and Germano Fanelli ("Fanelli"); (B) at the Silverstar Formula Price minus 15% if either Ghezzi or Fanelli voluntarily terminates his work relationship with Silverstar prior to the expiration of the full term as specified in his letter agreement with Silverstar dated as of the date hereof (including any amendments or supplements hereto) or is terminated by Silverstar for Cause; provided that, with respect to the employee who triggers this Call Event, EDI shall purchase such employee's Common Shares at the Silverstar Formula Price minus 30%; (C) at the Silverstar Formula Price if, pursuant to Section 3(c) hereof, EDI is entitled to designate five or more of Silverstar's directors; (D) at the Silverstar Formula Price plus 30% at any time from the fourth anniversary of the date hereof to the fifth anniversary of the date hereof; -5- (E) at the Silverstar Formula Price plus 15% at any time from the fifth anniversary of the date hereof to the sixth anniversary of the date hereof; and (F) at the Silverstar Formula Price at any time after the sixth anniversary of the date hereof. (iii) In the event that EDI shall have the right to purchase the Call Shares pursuant to more than one Call Event, EDI, in its sole discretion, shall determine the Call Event pursuant to which it shall exercise its right to purchase the Call Shares. (c) Put Rights. Upon the expiration of the full term of Ghezzi's work relationship with Silverstar as specified in Ghezzi's letter agreement with Silverstar dated the date hereof (including any extension thereof pursuant to any amendments or supplements thereto) or upon the earlier termination by EDI of Ghezzi's work relationship with Silverstar in breach of such agreement, each Shareholder (except Fanelli) and each direct or indirect transferee of any Shareholder (other than Fanelli) pursuant to an Exempt Shareholder Transfer shall have the right to require EDI to purchase all Common Shares then owned by him at the Silverstar Formula Price. Upon the expiration of the full term of Fanelli's work relationship with Silverstar as specified in Fanelli's letter agreement with Silverstar dated the date hereof (including any extension thereof pursuant to any amendments or supplements thereto) or upon the earlier termination by EDI of Fanelli's work relationship with Silverstar in breach of such agreement (each of such events and each of the corresponding events with respect to Ghezzi, a "Put Event"), Fanelli and each transferee of Fanelli pursuant to an Exempt Shareholder Transfer shall have the right to require EDI to purchase all Common Shares then owned by him at the Silverstar Formula Price. The right of each Shareholder to require EDI to purchase all Common Shares owned by him (the "Put Shares") shall be exercisable by written notice to EDI (the "Put Notice") not more than 60 days following the applicable Put Event. (d) Consummation of Purchase. Any purchase by EDI of Offered Shares, Call Shares or Put Shares, as the case may be, and any purchase by a Shareholder of Offered Shares, pursuant to this Section 1 shall be effected by delivery by the selling Shareholder or any -6- Transferee, as the case may be, of the certificate or certificates representing such Offered Shares, Call Shares or Put Shares (properly endorsed for transfer) to EDI or the purchasing Shareholder, as the case may be, on a date (the "Transfer Date") mutually-agreed upon by EDI and such Shareholder or Transferee, as the case may be, provided, however, that the Transfer Date shall not be on a date more than 90 days following the Sale Notice, Call Notice or Put Notice. As of the Transfer Date, title to such Offered Shares, Call Shares or Put Shares, as the case may be, shall be deemed transferred to EDI, or such purchasing Shareholder, as the case may be, upon tender by EDI, or such purchasing Shareholder, as the case may be, of the purchase price therefor (which, in the case of Call Shares, shall be the purchase price in effect on the date of the Call Notice), in the form provided by Section 1(e), to such Shareholder or Transferee, as the case maybe. EDI, each Shareholder and each Transferee agrees to take all actions necessary or advisable in order to consummate the sale of Common Shares to EDI, or such purchasing Shareholder, as the case may be, as contemplated hereby. (e) Form of Purchase Price. (i) The purchase price to be paid by EDI for any Offered Shares, Call Shares or Put Shares, as the case may be, to be purchased pursuant to this Section 1 shall be paid, in EDI's sole discretion, in (A) cash, by certified check or cashier's check or by wire transfer to an account designated by the Shareholder or Transferee, as the case may be, (B) shares of EDI Stock, which shares of EDI Stock shall be valued at the EDI Value per Share or (C) shares of Arrow Stock, which shares of Arrow Stock shall be valued at the Arrow Value per Share. In the event that EDI elects to pay such purchase price in shares of EDI Stock, a mutually agreed upon portion of such shares of EDI Stock (which portion shall not exceed 50%) shall be exchanged for shares of Arrow Stock at a rate of exchange equal to the EDI Value per Share at the time of the exchange divided by the Arrow Value per Share at the time of the exchange. Notwithstanding anything to the contrary contained in this Section 1(e), EDI shall not, without the consent of the Shareholder or Transferee, as the case may be, pay such purchase price in shares of EDI Stock if such shares of EDI Stock are not then listed on a securities exchange or traded on an organized trading market. The purchase price to be paid by a purchasing Shareholder for any Offered Shares to be purchased pursuant to this Section 1 shall be paid in cash, by certified or cashier's check or by wire -7- transfer to an account designated by the selling Shareholder or Transferee, as the case may be. (ii) If requested to do so by the selling Shareholder or Transferee, as the case may be, Arrow will file a registration statement (the "Registration Statement") under the U.S. Securities Act of 1933, as amended (the "Act"), covering the resale by such Shareholder or Transferee, as the case may be, of the shares of Arrow Stock received by such Shareholder or Transferee, as the case may be, pursuant to Section 1(e)(i) hereof (the "Purchase Shares"). Arrow shall use its best efforts to cause the Registration Statement to become effective and to remain effective until the earlier of (A) the sale by such Shareholder or Transferee, as the case may be, of all of the Purchase Shares and (B) such time as such Shareholder or Transferee, as the case may be, is able to sell the Purchase Shares without registration under the Act pursuant to Rule 144 or pursuant to another available exemption which will permit the purchaser in such sale transaction to acquire freely transferable shares. (iii) If requested to do so by the selling Shareholder or Transferee, as the case may be, and, at such time, EDI Stock is listed on a securities exchange or traded in an organized trading market, EDI will use its reasonable efforts to take such action as is necessary under applicable law relating to sales of securities to permit the resale by such Shareholder or Transferee, as the case may be, of the shares of EDI Stock received by such Shareholder or Transferee, as the case may be, pursuant to Section 1(e)(i) hereof, provided that, EDI shall not be required to take any such action which, in the reasonable opinion of EDI, is burdensome or expensive. (f) Purchase of EDI Shares; EDI Shareholders Agreement. (i) At such time as (A) EDI exercises its right to purchase the Call Shares pursuant to Section 1(b) or (B) Ghezzi or Fanelli or any of their respective Transferees exercises his right to require EDI to purchase the Put Shares pursuant to Section 1(c), EDI shall also have the right and the obligation to purchase (or to cause an affiliate to purchase), at a price equal to the EDI Value per Share multiplied by the number of EDI shares all of the shares of EDI Stock held at such time by the person from whom EDI is purchasing Call Shares or Put Shares, as the case may be, provided that, in a case of a purchase of Put Shares, such purchase of EDI Stock shall be at the option of Ghezzi or Fanelli or -8- such Transferee, as the case may be, and provided further that, EDI shall not be obligated to make such purchase (but shall continue to have the right to make such purchase) if at such time EDI Stock is listed on a securities exchange or traded in an organized trading market. The consideration for any such purchase shall be paid, in the sole discretion of EDI, either in cash or shares of Arrow stock, and the provisions of Sections 1(d) and 1(e) shall apply to such purchase, mutatis mutandus. (ii) The terms set forth in Section 1(f)(i) shall be incorporated in the EDI Shareholders Agreement referred to in Section 1(d)(i) of the Share Purchase Agreement, following which incorporation the terms of such EDI Shareholders Agreement shall for all purposes supersede the terms of this Section 1(f). (g) Notwithstanding anything to the contrary contained in this Agreement, the purchase price to be paid by EDI for any Offered Shares, Call Shares or Put Shares pursuant to Section 1(e) or for shares of EDI Stock pursuant to Section 1(f), as the case may be, shall be reduced by an amount equal to any indemnification payment owed to Arrow and EDI pursuant to Section 6(a)(iv) of the Share Purchase Agreement, but only to the extent such indemnification payment has not previously been recovered through a reduction in the amount of one or more Installments (as defined in the Share Purchase Agreement). In the event that following any such reduction in any purchase price payment, Silverstar receives reimbursement from Quality Technologies Italia S.p.A. in respect of any losses, damages or costs incurred by Silverstar in connection with the litigation commenced by Trinova S.p.A. referred to in List 4 to the Share Purchase Agreement and as to which an indemnification payment was owed to Arrow and EDI pursuant to Section 6(a)(iv) of the Share Purchase Agreement, EDI shall make a further purchase price payment in an amount equal to the lesser of any such reduction and any such amount as has actually been received by Silverstar, without interest. 2. Purchase and Sale of Common Shares Owned by EDI. (a) Preemptive Rights. (i) Except for the sale or transfer of Common Shares to an affiliate (as defined in Rule 12b-2 under the Securities Exchange Act -9- of 1934, as amended) (an "Exempt EDI Transfer"), EDI will not sell or otherwise transfer any interest in Common Shares without complying with the terms of this Section 2(a). At least 30 days prior to making any sale or transfer pursuant to a bona fide offer from a prospective purchaser (the "EDI Share Purchaser"), other than pursuant to an Exempt EDI Transfer, EDI will deliver a written notice (the "EDI Sale Notice") to the Shareholders (the "Offerees"). The EDI Sale Notice will disclose in reasonable detail the identity of the prospective purchaser and the terms and conditions of the proposed transfer including the number of Common Shares to be transferred (the "EDI Offered Shares") and the price per share at which the EDI offered Shares are to be sold to the EDI Share Purchaser (the "EDI Offered Price"). Such EDI Sale Notice shall constitute an offer to sell the EDI Offered Shares at the EDI Offered Price. (ii) Upon receipt of such EDI Sale Notice from EDI, each Offeree shall be entitled to accept such offer and purchase the EDI Offered Shares at the EDI Offered Price and upon terms no less favorable than those stated in such EDI Sale Notice, in the case of each Offeree up to that number of the EDI Offered Shares equal to the product of (A) a fraction, the numerator of which is the number of Common Shares held by such Offeree and the denominator of which is the number of Common Shares held by all Offerees, and (B) the number of EDI Offered Shares (such number hereinafter referred to as the "Participation Securities" with respect to such Offeree). The Offerees shall have thirty days after the EDI Sale Notice is received in which to give counter-notice to EDI, at EDI's address stated in the EDI Sale Notice, of such Offeree's acceptance of such offer (such acceptance by an Offeree being referred to as an "Initial Acceptance"). An Initial Acceptance by an Offeree may be of all or part of his Participation Securities. Any Offeree may elect in his counter-notice to purchase, in addition to his Participation Securities, the balance (or the balance up to a maximum stated number) of any EDI Offered Shares which are not accepted by the other Offerees (such acceptance being referred to as an "Additional Acceptance"). If the number of EDI Offered Shares that the Offerees elect to purchase in their Initial Acceptances plus the number of EDI Offered Shares that the Offerees elect to purchase in their Additional Acceptances exceeds the number of EDI Offered Shares, the number of EDI Offered Shares to be purchased in the aggregate by the Offerees shall be reduced to the extent of the excess attributable to the Additional -10- Acceptances with such reduction in the number of EDI Offered Shares to be purchased in the aggregate by the Offerees to be allocated among the Offerees in proportion to the number of EDI Offered Shares each Offeree has elected to purchase pursuant to such Offeree's Additional Acceptance. (iii) In each such offer, if the Initial Acceptances and Additional Acceptances of all Offerees do not aggregate a total number of EDI Offered Shares which is equal to or greater than 100% of the number of EDI Offered Shares, EDI shall have the election, exercisable by giving notice within ten days after the end of the offering period to such Offerees as have accepted offers to treat none of such acceptances as being effective, in which case such offers shall be deemed to have been duly rejected, and EDI shall be free to dispose of the EDI Offered Shares in accordance with Section 2(a)(v). (iv) Any purchase by the Offerees of EDI Offered Shares pursuant to this Section 2(a) shall be effected by delivery by EDI of the certificate or certificates representing such EDI Offered Shares (properly endorsed for transfer) to the Offeree on a date (the "EDI Transfer Date") mutually-agreed upon by EDI and such Offeree, provided, however, that the EDI Transfer Date shall not be on a date more than 90 days following the EDI Sale Notice. As of the EDI Transfer Date, title to such EDI Offered Shares shall be deemed transferred to such Offeree upon tender by such Offeree of the purchase price to EDI, in cash, by certified or cashier's check or by wire transfer to an account designated by EDI. EDI and each Shareholder agrees to take all actions necessary or advisable in order to consummate the sale of Common Shares to the Shareholders as contemplated hereby. (v) Any EDI Offered Shares not duly accepted as hereinabove provided may then be transferred by EDI to the EDI Share Purchaser at the EDI Offered Price and upon terms not more favorable to the EDI Share Purchaser than those stated in the EDI Sale Notice, at any time within the next six months following the end of the offering period, provided, however, that prior to any such transfer, the EDI Share Purchaser shall deliver to the Shareholders a written unconditional agreement to be bound by the terms of this Agreement. Any EDI Offered Shares not so sold transferred or otherwise disposed of within such six-month period shall again in all respects become subject to the provisions of this -11- Section 2(a) and no subsequent sale, transfer or other disposition thereof shall be made without again giving the notice and option to the Shareholders and complying with the other terms and conditions of this Section 2(a). (b) Sale of the Company (Drag Along). For so long as EDI holds at least 50% of the outstanding Common Shares, if EDI desires to cause the sale to a prospective purchaser (the "Company Purchaser"), whether pursuant to a merger or otherwise, of all of the outstanding Common Shares pursuant to a bona fide offer from the Company Purchaser, EDI shall notify the Shareholders and their respective transferees (collectively, the "Notified Shareholders"), in writing, of such offer and its terms and conditions. Each Notified Shareholder, within 15 days of the receipt of such notice (or such longer period of time as EDI shall designate in such notice) shall cause all of his Common Shares to be sold to the Company Purchaser on the same terms and conditions as the Common Shares being sold by EDI to the Company Purchaser unless the Notified Shareholders, individually or in the aggregate, elect to purchase (on the same terms and conditions) all Common Shares held by EDI. (c) Right to Sell (Tag Along). If, at any time, pursuant to a bona fide offer by a prospective purchaser (the "Buyer") EDI desires to cause the sale of such number of Common Shares so that after giving effect to the transaction EDI would not own at least 49% of the outstanding Common Shares, EDI shall (i) prior to the acceptance by EDI of such offer, give notice to the Buyer of the provisions of this Section 2(c), (ii) (A) require, pursuant to the terms of any agreement, instrument or other document effecting such sale to the Buyer, that the Buyer offer to purchase all of the Common Shares held by the Shareholders and their respective transferees, or (B) condition its acceptance of such offer on the receipt of an agreement of the Buyer to offer to purchase all of the Common Shares held by the Shareholders or their respective Transferees in each case under this clause (ii) on the same terms and conditions as are applicable to the sale of the Common Shares by EDI to the Buyer, and (iii) notify the Shareholders or their respective Transferees (collectively, the "Tag Along Shareholders"), in writing, of such offer and its terms and conditions. Each Tag Along Shareholder, within the Tag Along Notice Period (as defined below) shall, at the option of such Tag Along Shareholder, cause all of his Common Shares to -12- be sold to the Buyer on the terms and conditions set forth in such notice. As used herein, the term "Tag Along Notice Period" shall mean 30 days after the receipt of the notice described in clause (i) above (or such longer period of time as EDI shall designate in such notice). 3. Election of Board of Directors of Silverstar. (a) Subject to Section 3(b) and 3(c) hereof, during the term of this Agreement each of the parties hereto agrees that, in all elections of directors of Silverstar, such party will vote all Common Shares owned by him (i) for the maintaining of the number of directors equal to five and (ii) for the election of a slate of directors so that at all times two directors shall be designated by EDI, two directors shall be designated jointly by the Shareholders and one director shall be designated by EDI from a list of three persons proposed jointly by the Shareholders. (b) Notwithstanding anything to the contrary contained in Section 3(a), if at any time EDI holds: (i) 55% or more of the outstanding Common Shares, EDI shall designate three of the five directors of Silverstar; (ii) 75% or more of the outstanding Common Shares, EDI shall designate four of the five directors of Silverstar; and (iii) 95% or more of the outstanding Common Shares, EDI shall designate all of the five directors of Silverstar. (c) Notwithstanding anything to the contrary contained in Sections 3(a) or 3(b) hereof, in the event that (i) Silverstar's results fail to meet the operating targets established by the Board of Directors of EDI for eight consecutive quarters or (ii) Silverstar incurs net losses, after payment of interest, for eight consecutive quarters, each of the parties hereto agrees that such party shall vote all Common Shares owned by him so that Silverstar's Board of Directors shall be increased to seven directors and EDI shall designate the two additional directors. -13- (d) Audited Financial Statements. Each of the parties hereto agrees to take such actions as are necessary or advisable to cause Silverstar to prepare annual audited financial statements in accordance with Italian generally accepted accounting principles consistently applied, which statements shall also be prepared in accordance with United States generally accepted accounting principles consistently applied to the extent required under United States securities laws. 4. Liquidation of Silverstar; Issuance of Additional Common Shares. Each of the parties hereto agrees that a 2/3 vote (in the case of (i) below, at the extraordinary shareholders meeting in first and second call) of the outstanding Common Shares shall be required to approve (i) the liquidation, dissolution or winding up of Silverstar or (ii) the issuance of additional Common Shares if the sole purpose of such issuance is to dilute the interest of the Shareholders in Silverstar. This Section 4 shall not be construed, in any way, to require such 2/3 vote, or otherwise restrict or prohibit the issuance of additional Common Shares, if such additional Common Shares are issued when appropriate, necessary or for any other valid business purpose, as determined in good faith by Silverstar's Board of Directors. The parties hereto agree to amend the Silverstar by-laws to provide for such 2/3 votes. 5. Definitions. For the purposes of this Agreement, the following terms shall have the meanings set forth below: "Arrow Stock" shall mean the common stock, par value $1.00 per share, of Arrow Electronics Inc., a New York corporation ("Arrow"). "Arrow Value per Share" shall mean the average closing price on the New York Stock Exchange of one share of Arrow Stock, as published in The Wall Street Journal, for the 10 day trading period ending two days before the delivery of shares of Arrow Stock (but not less than Arrow's book value per share, as computed in accordance with United States generally accepted accounting principles consistent with Arrow's audited financial statements) converted into the currency of the EDI Purchase Price in the case of any Offered Shares or into Italian Lira in the case of Call Shares or Put Shares at an exchange rate equal to the average currency exchange rate, as published in The Wall Street Journal for the 20 business day period ending two days before the delivery of shares of Arrow Stock. -14- "Cause" shall mean the commission by Ghezzi or Fanelli of a felony or other crime involving moral turpitude, the commission by Ghezzi or Fanelli of any other act performed other than pursuant to his technical or professional duties to Silverstar which has a material adverse effect on the Silverstar's reputation, the violation by Ghezzi or Fanelli of any agreement with Silverstar, the commission by Ghezzi or Fanelli of any other act which is a breach of his fiduciary duty of loyalty to Silverstar or the repeated failure of the Ghezzi or Fanelli to otherwise perform his duties to Silverstar. "EDI Stock" shall mean the common stock, nominal value NLG 1,000 per share, of EDI. "EDI Value per Share" shall mean EDI's book value per share, as computed in accordance with Dutch generally accepted accounting principles consistent with EDI's audited financial statements (the "EDI Book Value"), if EDI shares are not listed on a securities exchange or, if EDI shares are listed on a securities exchange, the average closing price on such exchange for the 10-day trading period ending two days before the date of delivery of shares of EDI Stock (but not less than the EDI Book Value) in either case converted into the currency of the EDI Purchase Price in the case of any Offered Shares or into Italian Lira in the case of Call Shares or Put Shares or any shares of EDI Stock to be purchased pursuant to Section 1(f) at an exchange rate equal to the average currency exchange rate, as published in The Wall Street Journal for the 20 business day period ending two days before the delivery of shares of EDI Stock. "Family Transfer" shall mean a transfer by a Shareholder or any transferee, direct or indirect, of a Shareholder pursuant to a Family Transfer of Common Shares (a) pursuant to applicable laws of descent and distribution or (b) among the transferor's family group and which, in each case, satisfies the requirements set forth in Section 1(a)(vi) hereof. A transferor's "family group" means (i) such transferor's spouse and descendants (whether natural or adopted), and/or any person related by blood or adoption to either the transferor, the transferor's spouse or another member of the family group, (ii) any trust whose primary beneficiary is a member of the family group and (iii) any company all of whose securities are owned by one or more members of the family group. -15- "Silverstar Formula Price" shall mean the product of (a) 10 multiplied by (b) the average of the Silverstar Profits (net of any losses) for the two full fiscal years prior to the purchase, divided by the number of Common Shares outstanding on the date of purchase (but not less than Silverstar's book value per share, as computed in accordance with Italian generally accepted accounting principles consistent with Silverstar's audited financial statements, excluding net goodwill (after amortization) relating to the acquisition of Celdis Componenti S.r.L., at the time of computation). For purposes hereof, "Silverstar Profits" shall mean the net after-tax profits of Silverstar as computed on a basis consistent with that used in the preparation of the pro forma financial statements referred to in Section 2(f) of the Share Purchase Agreement. 6. Miscellaneous. (a) Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition of invalidity, without invalidating the remainder of this Agreement. (b) Counterparts. This Agreement may be executed in two or more counterparts, any one of which need not contain the signatures of more than one party, but all such counterparts taken together will constitute one and the same Agreement. (c) Descriptive Headings. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement. (d) Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York (excluding the conflicts of laws principles thereof) including all matters of construction, validity and performance. (e) Arbitration. Any dispute arising in connection with this Agreement shall be decided by arbitration. The arbitration panel shall be composed of three members of the American Arbitration Association, one chosen by EDI, one chosen by the Shareholders and one chosen by those appointed by EDI and the -16- Shareholders. If either EDI or the Shareholders fails to appoint its arbitrator within 14 calendar days after receipt of notice of appointment by the other of its arbitrator, or if the two arbitrators first chosen fail to appoint the third, then the third arbitrator shall be appointed in accordance with the applicable rules of the American Arbitration Association. The arbitration shall be conducted in accordance with the applicable rules of the American Arbitration Association and shall be held in New York City as promptly as possible at such time and place as the arbitrators may determine and in any event within 30 days of the appointment of the third arbitrator. The decision of a majority of the arbitrators shall be final and binding upon EDI and the Shareholders. The expense of the arbitration shall be paid as the arbitrators may determine. (f) Notices. All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement will be in writing and will be deemed to have been given when delivered personally or mailed by certified or registered mail, return receipt requested and postage prepaid, to the recipient. Such notices, demands and other communications will be sent to each Shareholder at the address indicated on Schedule I hereto and to EDI at the address indicated below: EDI Electronics Distribution International B.V. c/o TMF Nederland B.V. Emmaplein 5 1075 AW Amsterdam The Netherlands Attention: Robert val der Voort with copies to: Arrow Electronics Inc. 25 Hub Drive Melville, NY 11747 Attention: Robert E. Klatell, Esq. Winthrop, Stimson, Putnam & Roberts One Battery Park Plaza New York, New York 10004 Attention: Howard S. Kelberg, Esq. -17- (g) Effectiveness. The effectiveness of this Agreement shall commence, and is contingent upon, the occurrence of the Closing pursuant to the Share Purchase Agreement and if for any reason the Closing does not occur pursuant to the Share Purchase Agreement this Agreement shall be null and void and of no force and effect. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first above written. EDI ELECTRONICS DISTRIBUTION INTERNATIONAL B.V. By /s/ Stefanie L. Roth ------------------------------ Title: Attorney-in-fact THE SHAREHOLDERS: /s/ Giorgio Ghezzi --------------------------------- Giorgio Ghezzi /s/ Germano Fanelli --------------------------------- Germano Fanelli /s/ Renzo Ghezzi --------------------------------- Renzo Ghezzi Attorney-in-fact EX-10 14 SALSGIVER EMPLOY.AGR.-EX10(C)(XII) [LOGO] EMPLOYMENT AGREEMENT ARROW ELECTRONICS, INC. Position: VP, Semiconductor Marketing 25 Hub Drive Start Date: 04/01/93 Melville, NY 11747 End Date: 03/31/94 EMPLOYEE NAME: Jan Salsgiver Address: 250 E. 87th Street, Apt 29D New York, NY 10128 YOU HAVE PROVEN TO BE A VALUABLE MEMBER OF ARROW'S MANAGEMENT AND A SIGNIFICANT CONTRIBUTOR TO ARROWS SUCCESS. AS A RESULT, ARROW WISHES TO PROVIDE FOR YOUR CONTINUED EMPLOYMENT UNDER THE TERMS OF THIS AGREEMENT AND YOU WISH TO ACCEPT THE SAME. 1. EMPLOYMENT PERIOD. You will be employed by Arrow for the period beginning with the Start Date set forth above and ending with the End Date set forth above (the "Employment Period"). From and after the End Date, this agreement and the Employment Period will continue from month to month for 90 days and may only be terminated by you or Arrow giving the other at least thirty days' prior written notice. On the 91st day after the End date, this agreement will be of no further force or effect (except for those provisions which, by their terms, survive termination) and your employment will be subject only to the terms and conditions of Arrow's Employee Handbook. 2. POSITION. You shall initially be employed in the position set forth above, with the duties and responsibilities customarily associated with that position. From time to time Arrow may determine that it is in Arrow's best interest to add to, subtract from, or otherwise change your duties and responsibilities, or change or eliminate your title. If you do not wish to accept any such modification, and Arrow does not elect to continue you in your existing position, you may terminate the Employment Period by giving Arrow at least 60 days prior written notice. 3. BEST EFFORTS. You shall devote all of your business time and attention to your duties as an employee of Arrow. You shall use your best efforts, energies, and skills to advance the business of Arrow, to further and improve its relations with suppliers, customers and others, and to keep available to Arrow the services of its employees. You shall perform your duties in compliance with all laws and Arrow's ethical standards. 4. COMPENSATION. Your compensation will be pursuant to Arrow's standard programs in effect from time to time. Arrow reserves the right, however, its sole discretion, to impose employee furlough, salary reduction, and similar cost reduction programs which reduce your targeted cash compensation by an amount not to exceed 15% (provided that any such program is not discriminatory and treats you the same as other Arrow employees holding similar positions). You shall be eligible to participate in any and all employee benefit plans made available from time to time to Arrow employees generally. 5. REASONS FOR TERMINATION. The Employment Period shall terminate before the End Date only if one of the following occurs: (a) your death, disability, or legal incompetence; (b) the issuance by Arrow of a notice terminating your employment "for cause", (which, for these purposes, means breach of any term of this agreement or any other duty to Arrow, dishonesty, fraud, or failures to abide by the published ethical standards, conflict of interest, or other policies of Arrow, but does not mean simply a failure to attain financial targets); or (c) the passage of 60 days following ARROW's receipt of notice from you terminating your employment because you do not agree to specific changes in your duties and responsibilities (if, during such period of 60 days, Arrow has not elected to continue you in your current position). 6. EXTENDED PERIOD. In order to protect Arrow from undue harm and disruption to its business, and to provide adequate time for Arrow to arrange for your replacement and the orderly transfer of your responsibilities, you grant to Arrow the right and option to continue your employment for a period of up to 6 months following the termination of the Employment Period (the "Extended Period"), except in the case of termination of the Employment Period in accordance with clause (c) of paragraph 5 above. During the Extended Period the terms of this agreement shall remain in full force, and Arrow shall pay you your base salary, auto allowance, and two-thirds of your targeted incentive compensation (all prorated appropriately) and shall extend to you all of the benefits provided by Arrow to employees generally. In order to exercise such right and option, Arrow must give you notice of its intention to do so, including notice of the length of the Extended Period, within 15 days of Arrow's receipt of notice from you terminating any month-to-month continuation of the Employment Period. 7. CONFIDENTIAL INFORMATION. During the course of your employment, you will learn various Arrow proprietary or confidential information (including the identity of customers and employees; marketing information and strategies; sales training techniques and programs; acquisition and divestiture opportunities and discussions; and data processing and management information systems, programs, and practices). You shall use such information only in connection with the performance of your duties to Arrow and agree not to copy, disclose, or otherwise use such information or contest its confidential or proprietary nature. You agree to return any and all written documents containing such information to Arrow upon termination of your employment. 8. NO HIRING. During your employment and for 12 months thereafter, you agree not to employ or retain, have any other person or firm employ or retain, or otherwise participate in the employment or retention of, any person who was an employee or consultant of Arrow at any time during the 12 months preceding such employment or retention. 9. NON-COMPETITION. In the event that (a) Arrow terminates your employment for cause or (b) you sever your relationship with Arrow prior to the end of the Employment Period or any Extended Period for a reason other than an unacceptable change of responsibilities, you agree that for a period of 12 months after such termination or severance you will not, in any market in which you were employed or for which you were responsible during the 12 months prior to your termination, be employed by, own, manage, operate, or control, or participate, directly or indirectly, in the ownership, management, operation, or control of, or be connected with (whether as a director, officer, employee, partner, consultant, or otherwise), any business which competes with Arrow in the distribution of electronic parts, components, or systems. This provision does not apply in the event of any other termination of this agreement. 10. SPECIFIC PERFORMANCE AND INJUNCTIVE RELIEF. You acknowledge that Arrow will be irreparably damaged if the provisions of this agreement are not specifically enforced, that monetary damages will not provide an adequate remedy to Arrow, and that Arrow is entitled to an injunction (preliminary, temporary, or final) restraining any violation of this agreement (without any bond or other security being required), or any other appropriate decree of specific performance. Such remedies are not exclusive and shall be in addition to any other remedy which Arrow may have. 11. SEVERABILITY AND REFORMATION. The provisions of paragraph 7 through 10 of this agreement constitute independent and separable covenants which shall survive termination or expiration of the Employment Period and any Extended Period. Any paragraph, phrase, or other provision of this agreement that is determined by a court of competent jurisdiction to be overly broad in scope, duration, or area of applicability or in conflict with any applicable statute or rule shall be deemed, if possible, to be modified or altered so that it is not overly broad or in conflict or, if not possible, to be omitted from this agreement. The invalidity of any portion hereof shall not affect the validity of the remaining portions. 12. GENERAL. This agreement, together with the agreement the form of which Arrow's Board of Directors approved as of February 26, 1988, constitutes our full understanding relating to your employment with Arrow. This agreement is made in, governed by, and is to be construed and enforced in accordance with the internal laws of the State of New York, without giving effect to principles of conflicts of law. You agree that any legal action or proceeding brought by you under or in connection with this agreement into your employment shall be initiated and maintained only in a state or federal court in Nassau or Suffolk County, New York. In the event of a conflict between the terms hereof and the provisions of Arrow's Employee Handbook, the terms hereof shall control; otherwise, the provisions of the Employee Handbook shall remain applicable to your employment relationship. This agreement may not be superseded, amended, or modified except in a writing signed by both parties. IN WITNESS WHEREOF THE PARTIES HAVE EXECUTED THIS AGREEMENT THIS 17th day of March, 1993 /s/ Jan M. Salsgiver - --------------------------------------------- Employee ARROW ELECTRONICS, INC. By: /s/ Stephen P. Kaufman ---------------------------------- Stephen P. Kaufman, President EX-10 15 3RD AMEND. TO SUBORD.AGR.-EX10(H)(VII) THIRD AMENDMENT TO SUBORDINATION AGREEMENT THIRD AMENDMENT, dated as of April 12, 1993 (this "Third Amendment"), among BERLINER HANDELS -- UND FRANKFURTER BANK ("BHF"), NATIONAL WESTMINSTER BANK AG and SCHWEIZERISCHE KREDITANSTALT (DEUTSCHLAND) AG, each a bank organized under the laws of the Federal Republic of Germany (collectively, the "Subordinated Creditor"), ARROW ELECTRONICS, INC., a New York corporation (the "Obligor"), and BANKERS TRUST COMPANY, a New York corporation, as collateral agent (in such capacity, the "Collateral Agent"), to the Subordination Agreement, dated as of September 27, 1991 (as from time to time amended, supplemented or otherwise modified, the "Subordination Agreement"), made by BHF and the Obligor in favor of the Banks (as hereinafter defined), the Purchasers (as hereinafter defined) and the Collateral Agent. W I T N E S S E T H : WHEREAS, the Obligor is the borrower party to the Credit Agreement, dated as of September 27, 1991 (as from time to time amended, supplemented or otherwise modified, the "Credit Agreement"), with the financial institutions named as lenders therein (the "Banks") and the Co-Agents named therein, Chemical Bank (as successor by merger to Manufacturers Hanover Trust Company), as Administrative Agent, and Bankers Trust Company (as successor in interest to BT Commercial Corporation); WHEREAS Arrow Electronics GmbH, a German corporation ("Arrow GmbH"), is a direct subsidiary of the Obligor; WHEREAS, Arrow GmbH has entered into a certain Credit Agreement, dated April 14, 1993 (the "Arrow GmbH Credit Agreement"), among the Subordinated Creditor, Arrow GmbH and BHF, as agent, as the same may from time to time be amended, supplemented or otherwise modified, and the Arrow GmbH Credit Agreement is to replace the Loan Agreement, dated January 16, 1990, between BHF and Arrow GmbH, as amended by a Loan Agreement, dated January 27, 1993, between BHF and Arrow GmbH; WHEREAS, in connection with the Arrow GmbH Credit Agreement, the Obligor has entered into a certain Guaranty, dated April 14, 1993, amending the existing Subordinated Guaranty (as defined in the Subordinated Agreement); and WHEREAS, the Subordinated Creditor and the Obligor are grantor parties to the Subordination Agreement, in favor of the Banks, the Purchasers and the Collateral Agent; 2 NOW THEREFORE, in consideration of the premises and mutual agreements contained herein, the parties hereto hereby agree as follows: 1. Defined Terms. Terms defined in the Subordination Agreement are used herein with the meanings set forth in the Subordination Agreement unless otherwise defined herein. 2. Amendment to Preamble and Recitals. (a) The preamble to the Subordination Agreement is hereby amended by deleting therefrom "(the "Subordinated Creditor")". (b) The recitals of the Subordination Agreement are hereby amended by deleting therefrom the fourth paragraph and substituting, in its place, the following paragraph: "WHEREAS, Berliner Handels -- Und Frankfurter Bank and Arrow GmbH are parties to the loan Agreement, dated January 16, 1990, as amended by the Loan Agreement, dated January 27, 1993, between Arrow GmbH and Berliner Handels -- Und Frankfurter Bank, and as replaced by the Credit Agreement, dated April 14, 1993, among Berliner Handels -- Und Frankfurter Bank, National Westminster Bank AG, and Schweizerische Kreditanstalt (Deutschland) AG (collectively, the "Subordinated Creditor") and Berliner Handels -- Und Frankfurter Bank, as Agent, (such Loan Agreements and such Credit Agreement, as from time to time amended, supplemented or otherwise modified, being hereinafter referred to collectively as the "Arrow GmbH Loan Agreement");"; and (c) The recitals of the Subordination Agreement are hereby further amended by deleting therefrom the seventh paragraph and substituting, in its place, the following paragraph: "WHEREAS, the Arrow GmbH Loans are guaranteed by the Obligor pursuant to a Guaranty, dated January 16, 1990, as amended by a Guaranty, dated January 27, 1993 and as further amended by a Guaranty dated April 14, 1993 (the "Subordinated Guaranty"), made by the Obligor in favor of the Subordinated Creditor;". 3. Global Amendment to Subordination Agreement. From and after the Third Amendment Effective Date, the capitalized term "Subordinated Creditor" in each place such capitalized term appears in the Subordination Agreement shall be deemed to mean Berliner Handels -- Und Frankfurter Bank, National Westminster Bank AG and Schweizerische Kreditanstalt (Deutschland) AG, each a bank organized under the laws of the Federal Republic of Germany. 4. Representations and Warranties. (a) The representations and warranties of the Subordinated Creditor and the Obligor contained in Section 10 of the Subordination Agreement are hereby incorporated herein by reference, provided that each reference therein to the Agreement shall be deemed to be a 3 reference to this Third Amendment and to the Subordination Agreement as amended by this Third Amendment. (b) The Subordinated Creditor and the Obligor hereby represent and warrant that the representations and warranties described in paragraph (a) above are true and correct on and as of the date hereof as if made on and as of such date. 5. Conditions to Effectiveness. This Third Amendment shall become effective (the date of effectiveness, the "Third Amendment Effective Date") upon the execution and delivery of counterparts hereof by the parties hereto. 6. Continuing Effect. Except as expressly amended, waived or modified hereby, the Subordination Agreement shall continue to be and shall remain in full force and effect in accordance with its terms. Any reference to the "Subordination Agreement" in the Credit Agreement, the Note Purchase Agreement or any of the documents executed in connection with either thereof shall be deemed to be a reference to the Subordination Agreement as amended by this Third Amendment. 7. Counterparts. This Third Amendment may be executed in any number of counterparts by the parties hereto, each of which counterparts when so executed shall be an original, but all counterparts taken together shall constitute one and the same instrument. 4 8. GOVERNING LAW. THIS THIRD AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment to Subordination Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. BERLINER HANDELS -- UND FRANKFURTER BANK By: /s/ ------------------------------- Title: EVP VP ----------------------------- NATIONAL WESTMINSTER BANK AG By: /s/ B.A. ------------------------------- Title: ----------------------------- SCHWEIZERISCHE KREDITANSTALT (DEUTSCHLAND) AG By: /s/ ------------------------------- Title: ----------------------------- ARROW ELECTRONICS, INC. By: /s/ ------------------------------- Title: Senior V.P. Accepted and agreed to by: BANKERS TRUST COMPANY, as Collateral Agent By: -------------------------------- Title: EX-10 16 4TH AMEND. TO SUB.AGR.-EX10(H)(VIII) FOURTH AMENDMENT TO SUBORDINATION AGREEMENT FOURTH AMENDMENT, dated as of January 28, 1994 (this "Fourth Amendment"), among BERLINER HANDELS -- UND FRANKFURTER BANK ("BHF"), NATIONAL WESTMINSTER BANK AG and SCHWEIZERISCHE KREDITANSTALT (DEUTSCHLAND) AG, each a bank organized under the laws of the Federal Republic of Germany (collectively, the "Subordinated Creditor"), ARROW ELECTRONICS, INC., a New York corporation (the "Obligor"), and BANKERS TRUST COMPANY, a New York corporation, as collateral agent (in such capacity, the "Collateral Agent"), to the Subordination Agreement, dated as of September 27, 1991 (as from time to time amended, supplemented or otherwise modified, the "Subordination Agreement"), made by BHF and the obligor in favor of the Banks (as hereinafter defined), the Purchasers (as defined in the Subordination Agreement) and the Collateral Agent. W I T N E S S E T H: WHEREAS, the Obligor is the borrower party to the Credit Agreement, dated as of September 27, 1991 (as from time to time amended, supplemented or otherwise modified, the "Existing Credit Agreement"), with the financial institutions named as lenders therein, the Co-Agents named therein, Chemical Bank, as administrative agent (the "Administrative Agent"), and the Collateral Agent; WHEREAS, the Existing Credit Agreement is concurrently herewith being amended and restated by the Amended and Restated Credit Agreement, dated as of January 28, 1994 (the "Amended and Restated Credit Agreement"), among the Obligor, the several banks and financial institutions named therein (the "Banks"), Bankers Trust Company and Chemical Bank, as agents, the Collateral Agent and the Administrative Agent; WHEREAS Arrow Electronics GmbH, a German corporation ("Arrow GmbH"), is an indirect subsidiary of the Obligor; WHEREAS, Arrow GmbH is entering into a certain Amendment, dated as of January 28, 1994 (the "Arrow Amendment") to the Credit Agreement, dated April 14, 1993 (the "Arrow GmbH Credit Agreement"), among the Subordinated Creditor, Arrow GmbH and BHF, as agent, as the same may from time to time be amended, supplemented or otherwise modified; WHEREAS, pursuant to the Arrow Amendment, the amount available under the Arrow GmbH Credit Agreement will be increased to DM75,000,000; 2 WHEREAS, in connection with the Arrow Amendment, the Obligor is entering into a certain Guaranty, dated January 28, 1994, amending the existing Subordinated Guaranty (as defined in the Subordination Agreement); and WHEREAS, the Subordinated Creditor and the Obligor are grantor parties to the Subordination Agreement, in favor of the Banks, the Purchasers and the Collateral Agent; NOW THEREFORE, in consideration of the premises and mutual agreements contained herein, the parties hereto hereby agree as follows: 1. Defined Terms. Terms defined in the Subordination Agreement are used herein with the meanings set forth in the Subordination Agreement unless otherwise defined herein. 2. Amendment to Recitals. (a) The recitals of the Subordination Agreement are hereby further amended by deleting therefrom the seventh paragraph and substituting, in its place, the following paragraph: "WHEREAS, the Arrow GmbH Loans are guaranteed by the Obligor pursuant to a Guaranty, dated January 16, 1990, as amended by a Guaranty, dated January 27, 1993, as amended by a Guaranty, dated April 14, 1993, and as further amended by a Guaranty, dated January 28, 1994 (the "Subordinated Guaranty"), made by the Obligor in favor of the Subordinated Creditor;". (b) The recitals of the Subordination Agreement are hereby further amended by deleting from the fifth paragraph thereof the amount "DM50,000,000" and substituting, in its place, the amount "DM75,000,000". 3. Amendment of Section 10 (Representations and Warranties). Subsection 10(a) of the Subordination Agreement is hereby amended by deleting from paragraph (i) thereof the amount "DM50,000,000", and substituting, in its place, the amount "DM75,000,000". 4. Representations and Warranties. (a) The representations and warranties of the Subordinated Creditor and the Obligor contained in Section 10 of the Subordination Agreement are hereby incorporated herein by reference, provided that each reference therein to the Agreement shall be deemed to be a reference to this Fourth Amendment and to the Subordination Agreement as amended by this Fourth Amendment. (b) The Subordinated Creditor and the Obligor hereby represent and warrant that the representations and warranties described in paragraph (a) above are true and correct on and as of the date hereof as if made on and as of such date. 3 5. Acknowledgement. Each of the Subordinated Creditor and the Obligor acknowledge and confirm that any reference in the Subordination Agreement to the Credit Agreement shall be deemed to be a reference to the Existing Credit Agreement as amended and restated by the Amended and Restated Credit Agreement. 6. Conditions to Effectiveness. This Fourth Amendment shall become effective (the date of effectiveness, the "Fourth Amendment Effective Date") upon the execution and delivery of counterparts hereof by the parties hereto. 7. Continuing Effect. Except as expressly amended or modified hereby, the Subordination Agreement shall continue to be and shall remain in full force and effect in accordance with its terms. Any reference to the "Subordination Agreement" in the Credit Agreement, the Note Purchase Agreement or any of the documents executed in connection with either thereof shall be deemed to be a reference to the Subordination Agreement as amended by this Fourth Amendment. 8. Counterparts. This Fourth Amendment may be executed in any number of counterparts by the parties hereto, each of which counterparts when so executed shall be an original, but all counterparts taken together shall constitute one and the same instrument. 4 9. GOVERNING LAW. THIS FOURTH AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. IN WITNESS WHEREOF, the parties hereto have caused this Fourth Amendment to Subordination Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written. BERLINER HANDELS -- UND FRANKFURTER BANK By: ------------------------------- Title: ----------------------------- NATIONAL WESTMINSTER BANK AG By: ------------------------------- Title: ----------------------------- SCHWEIZERISCHE KREDITANSTALT (DEUTSCHLAND) AG By: ------------------------------- Title: ----------------------------- ARROW ELECTRONICS, INC. By: ------------------------------- Title: Accepted and agreed to by: BANKERS TRUST COMPANY, as Collateral Agent By: ------------------------------- Title: EX-10 17 BHF CREDIT AGR.-EX10(H)(I) CREDIT AGREEMENT relating to a Senior Term Loan in the maximum aggregate principal amount of DM 50,000,000.00 arranged by Berliner Handels- und Frankfurt Bank, Frankfurt am Main in favour of Arrow Electronics GmbH, Dreieich the "Borrower" provided by Berliner Handels- und Frankfurter Bank, Frankfurt am Main National Westminster Bank AG, Frankfurt am Main Schweizerische Kreditanstalt (Deutschland) AG, Frankfurt am Main the "Banks" Berliner Handels- und Frankfurter Bank, Frankfurt am Main the "Agent" INDEX
Page ---- Section I - INTRODUCTION 1-5 1. Definitions 1-4 2. Conditions Precedent 5 Section II - THE TERM LOAN 5 Section III - GENERAL LENDING PROVISIONS 6/7 5. Drawing 6 6. Interest Periods 7 Section IV - INTEREST AND FEES 7/8 7. Interest 7 8. Fees 8 8.1 Arrangement Fee 8 8.2 Agency Fee 8 Section V - REPAYMENT AND PREPAYMENT 8/9 9. Repayment 8 10. Optional Prepayment 9 Section VI - CHANGE OF CIRCUMSTANCES 9/10 Section VII - PAYMENTS 10/11 Section VIII - COLLATERAL 11 Section IX - AFFIRMATIVE COVENANTS 12-14 Section X - NEGATIVE COVENANTS 14-16 Section XI - EVENTS OF DEFAULT 16/17 Section XII - AGENCY 17-21 Section XIII - MISCELLANEOUS 22/23 30. Costs 31. Assignments 32. Amendments and Waiver 33. Partial Invalidity 34. Confidentiality 35. Jurisdiction and Governing Law 36. BHF-BANK's General Business Conditions APPENDIX: Exhibit I: General Business Conditions Exhibit II: Form of a Notice of Drawing Exhibit III: Form of a Notice of Interest Period Selection Exhibit IV: Form of the Subordinated Guarantee Exhibit V: Assignment Agreement Exhibit VI: Confirmation to the Assignment Agreement
This credit agreement (hereinafter referred to as "Agreement") is made the 14th day of April, 1993 between Arrow Electronics GmbH, Dreieich (hereinafter referred to as 'Borrower'), Berliner Handels- und Frankfurter Bank, National Westminster Bank AG and Schweizerische Kreditanstalt (Deutschland) AG (hereinafter collectively referred to as "Banks" and each individually a "Bank"), and Berliner Handels- und Frankfurter Bank as agent for the Banks (in this capacity hereinafter referred to as "Agent"). WHEREAS, the Borrower holds 55% of the Interest in Spoerle Electronic Handelsgesellschaft mbH & Co. and Spoerle GmbH, Dreieich (hereinafter collectively referred to as "Spoerle"), and WHEREAS, the Borrower has the target to refinance all of its current outstandings totalling DM 50,000,000.00 under the term loan agreement dd. January 16, 1990 and the interim loan agreement dd. January 27, 1993, and WHEREAS, in order to realize the abovementioned target, the Borrower has requested the Banks to make available a new term loan (hereinafter referred to as "Term Loan") in the maximum aggregate principal amount of DM 50,000,000.00. NOW, THEREFORE, in consideration of the mutual promises, covenants and agreements contained in this Agreement, the Borrower, the Agent and the Banks hereby agree as follows: I. Introduction 1. Definitions: In this Agreement and the Exhibits hereto, the following terms shall have the respective meanings set forth below: "AGBs" shall mean the General Business Conditions of Berliner Handels- und Frankfurter Bank, Frankfurt am Main (see Exhibit 1). "Agreement" shall mean this credit agreement between the Borrower and the Agent and the Banks dd. April 14, 1993. "Agent" shall mean Berliner Handels- und Frankfurter Bank, Frankfurt am Main. "Banking Day" shall mean a day on which banks are open for business in Frankfurt am Main and London. "Banks" shall mean Berliner Handels- und Frankfurter Bank, Frankfurt am Main, National Westminster Bank AG, Frankfurt am Main, and Schweizerische Kreditanstalt (Deutschland) AG, Frankfurt am Main. - 2 - "Borrower" shall mean Arrow Electronics GmbH, Dreieich. "Business Plan" shall mean the projection of the Borrower dd. 3/9/1993 for fiscal years 1993 through 1997. "Cash" shall mean the available cash balances in any bank account held in the name of the Borrower. "Commitment" in relation to a Bank shall mean the obligation of such Bank to contribute to the Term Loan up to the aggregate principal amount set underneath its name on the signature page. "Deutsche Mark" or "DM" shall mean the lawful currency of the Federal Republic of Germany or any succeeding political entity thereof. "Distribution" shall mean (i) the declaration or payment of any dividend on or in respect of any equity or similar interest in any Person, or (ii) the redemption or other retirement of any equity of any Person, directly or indirectly, or (iii) the return of capital by any Person to its shareholders as such. "Drawing" shall mean the amount of borrowing made available by the Banks to the Borrower under the Term Loan. "Earnings Before Interest and Taxes" shall mean for any period the sum of the following in each such period: (i) Net Income, after eliminating therefrom all extraordinary items of income and expenses, plus (ii) tax expense, and (iii) Interest Expense of the Borrower. "Event of Default" shall mean any event as specified in Section XI. "Excess Cash" shall mean the aggregate of (i) Operating Cash Flow, minus (i) the Borrower's Interest Expenses, minus (ii) the Borrower's taxes, minus (iii) any repayments according to Section V of this Agreement; (ii) the proceeds of any disposal (net of related costs, expenses, taxes and duties properly incurred and relating directly to the disposal thereof) of any property or other assets of the Borrower; (iii) any other money raised by the Borrower other than (a) in the ordinary course of trading or (b) to the extent not in (a) above, in the ordinary course of business of the Borrower where such amount is equal to or less than DM 250,000.00 (or its equivalent in any other currency) in respect of any single transaction and no more than DM 1,000,000.00 in any Fiscal Year or (c) borrowings which are not prohibited by Section X. "Expenditures" shall mean any capital expenditures the Borrower makes, assumes, or incurs for the purchase, improvement, or acquisition of fixed assets in any Fiscal Year; "Fiscal Year" shall mean the period from January 1 through and including December 31 for each accounting year of the Borrower or any other accounting period which the Borrower deems to be its accounting year. - 3 - "Indebtedness" shall mean as to any Person (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, except trade accounts payable arising in the ordinary course of business, and (iii) all Indebtedness of others guaranteed by such Person. "Intangible Assets" shall mean balance sheet items which lack physical substance, including but not limited to copyrights, patents, trademarks, goodwill, computer programs, franchises, licenses and import and export permits. "Interest" shall mean the interest in the share capital of Borrower and/or the Borrower's interest, directly or indirectly, in its Subsidiaries. "Interest Expense" shall mean for any period the aggregate expenses of the Borrower in such period for interest, commitment fees, other financing fees, including guarantee fees, and similar expenses on Indebtedness. "Leverage ratio" shall mean the ratio of Total Bank Debt to Net Worth of the Borrower. "LIBOR" (London Interbank Offered Rate) relating to each Interest Period shall mean the rate per annum determined by the Agent to be equal to the arithmetic mean (rounded upwards, if necessary, to the nearest whole multiple of one sixteenth of one percent) of the respective rates as quoted by the British Bankers Association (at present) on Telerate Screen Page No. 3750 at or about 11:00 a.m. (London time) on the second Banking Day prior to the commencement of such Interest Period. The details of such calculation based on Telerate Screen Page No. 3750 shall be transmitted by the Agent to the Borrower and each Bank immediately upon fixing of the applicable rate for each Interest Period. Such determination shall, absent manifest error, be final, conclusive and binding. Should for any reason whatsoever the quotation by the British Bankers Association not be available, the interest relating to such Interest Period shall be determined by the Agent (which determination shall be conclusive and binding on the Borrower) as being the arithmetic mean (rounded upwards to the nearest whole multiple of one sixteenth of one percent) of the rates per annum at which the Agent is being offered like amounts for like periods by prime banks in the London Interbank Eurocurrency market at or about 11:00 a.m. (London time) on the second Banking Day prior to the commencement of such Interest Period. "Minimum Net Worth" shall mean Net Worth (excluding any minority interest) as set out under Section IX, para 20.4. "Net Income" shall mean for any period, the net income (or net deficit), after deduction of all expenses, including depreciation and amortization, taxes and other proper charges. "Net Worth" shall mean Total Assets less Total Liabilities (excluding minority interests) of the Borrower determined in accordance with generally accepted accounting principles of the United States and any applicable laws. - 4 - "Notice of Drawing" shall mean a notice in the form of Exhibit 2 duly completed and signed by the Borrower. "Notice of Interest Period Selection" shall mean a notice in the form of Exhibit ... duly completed and signed by the Borrower. "Operating Cash Flow" shall mean for any Fiscal Year the aggregate of the Subsidiaries Net Income, plus (i) depreciation and amortization, plus/minus (ii) changes in working capital, plus/minus (iii) any extraordinary items of income and expenses, minus (iv) Expenditures, and minus (v) any minority interest, all calculated based upon the Borrower's consolidated financial statements required to be delivered to the Agent under Section IX., para 20.1.3. "Person" shall mean any natural person, corporation, partnership, firm, association, government, governmental agency or any other juridical entity, whether acting in an individual, fiduciary or other capacity. "Reference Date" shall mean the date at which any Fiscal Year of the Borrower is ended. "Reinvestments" shall mean (i) any Expenditures and/or (ii) any investments of the Borrower in any Person or Persons in connection with Distributions. "Security Document" shall mean each document as referred to in Section VIII (see Exhibits 4 through 6). "Subsidiary" shall mean, as to the Borrower, any or all other companies of which more than 50% of the equity or similar interest having ordinary voting power (irrespective of whether or not at the time equity of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned by the Borrower and/or one or more of its Subsidiaries. "Term Loan Maturity Date" shall mean April 21, 2000. "Total Bank Debt" shall mean all bank Indebtedness of the Borrower. "Total Debt Service" shall mean all Interest Expenses and principal repayments the Borrower incurs from Indebtedness. 2. Nature of the Banks' Obligations and Rights: 2.1. The obligations of each Bank hereunder are several. 2.2. The failure by a Bank to perform its obligations hereunder shall not affect the obligations of the Borrower towards any other party hereto nor shall any such other party be liable for the failure by such Bank to perform its obligations hereunder. - 5 - 3. Conditions Precedent: Save as the Banks may otherwise agree with the Borrower the obligations of the Banks hereunder are subject to the condition that the Agent shall have received on or before April 14, 1993 free of expense all of the following in form and substance satisfactory to it: 3.1. Certified true copies of a notarial deed recording the (a) "Abtretungsvertrag" and "Kaufvertrag" concerning 40% of the Interest in Spoerle formerly held by Carlo Giersch, (b) "Abtretungsvertrag" and "Kaufvertrag" concerning 15% of the Interest in Spoerle formerly held by Carlo Giersch. 3.2. Subordinated Payment guarantee (the "Guarantee") in the amount of DM 50,000,000.00 in a form and substance satisfactory to the Banks to be issued by Arrow Electronics, Inc., Melville/NY (the "Guarantor") as per Exhibit 4, duly signed and executed. 3.3. Duly executed statement of assignment regarding as per Exhibit 5. 3.4. Duly executed statement from Mr. Carlo Giersch concerning his consent to the assignment as per Exhibit 6. 3.5. Certificate of the Borrower and the Guarantor setting out the name and specimen signatures of the persons authorized to sign on behalf of the Borrower and Guarantor, this Agreement, the Guarantee and any documents to be delivered and statements to be given by the Borrower or Guarantor hereunder and thereunder. 3.6. A legal opinion of an inhouse counsel of the Guarantor in form and substance satisfactory to the Agent, confirming that the Guarantee constitutes a valid existing obligation enforceable in accordance with its terms and that all consents, licences, approvals, registrations necessary have been obtained or effected and are in full force and effect. 3.7. True copy of the latest excerpt from the Commercial Register ("Handelsregister") of the Borrower and Spoerle. 3.8. The Business Plan dd. 3/9/1993. 3.9. Evidence satisfactory to the Agent that the Borrower is in compliance with Section IX, para 20.4. II. Term Loan 4. The Banks hereby make available to the Borrower a Term Loan in the maximum aggregate principal amount of DM 50,000,000.00 (Deutsche Mark fifty million) which shall be used to refinance all existing bank indebtedness of the Borrower in a total amount of DM 50,000,000.00. - 6 - III. General Lending Provisions 5. Drawing: 5.1. The total amount of the Term Loan shall be utilized in one single Drawing from the sources of the Eurocurrency market an April 21, 1993 and any amount not drawn on that date shall reduce the amount of the Term Loan accordingly. 5.2. Notice of Drawing: The Borrower shall give the Notice of Drawing by letter or telefax to be received by the Agent not later than three Banking Days (until 12.00 noon Frankfurt time) before the date on which the Drawing is to be made, specifying the date of Drawing, the amount, and Interest Period. Such notice shall be irrevocable and binding on the Borrower and shall oblige the Borrower to borrow such amount on the stated date. The Agent shall promptly notify each Bank of the proposed Drawing, of each Bank's proportionate share thereof and of the other matters covered by the Notice of Drawing. 5.3. Disbursement of Funds: Not later than 10.00 A.M. (Frankfurt time) on the drawing date specified in the Notice of Drawing each Bank shall make available its pro-rata share of such Drawing requested to be made on such date. Unless the Agent shall have been notified by any Bank prior to the date of Drawing that such Bank does not intend to make available to the Agent its portion of the Drawing to be made on such date, the Agent may assume that such Bank has made such amount available to the Agent on such date of Drawing and the Agent may, in reliance upon such assumption, make available the amount of the Drawing to be provided by such Bank. If such amount is not in fact made available to the Agent by such Bank and the Agent has made such amount available to the Borrower, the Agent shall be entitled to recover such corresponding amount on demand from such Bank. If such Bank does not pay such amount forthwith upon the Agent's demand therefor, the Agent may promptly notify the Borrower which shall immediately (but in any event not later than five Banking Days after such demand) pay such amount to the Agent. The Agent shall also be entitled to recover from such Bank or the Borrower, as the case may be, a) interest on such amount in respect of each day from the date such amount was made available by the Agent to the Borrower to the date such amount is recovered by the Agent, at a rate per annum equal to the overnight Interbank Offered Rate (calculated on the basis of actual number of days elapsed and a year of 360 days) and b) any losses incurred by the Agent as a result of the failure of such Bank from its obligation to fulfil its commitment hereunder without prejudice to any rights the Borrower may have against any Bank as a result of any default by such Bank hereunder. 5.4. The Drawing under the Term Loan shall be funded by the Banks on the basis of their respective pro-rata share in the Term Loan commitment. - 7 - 6. Interest Periods: Each Interest Period for the Term Loan shall be of a duration of one, three or six months as selected by the Borrower by written notice or telefax to the Agent in the form of Exhibit 3 at least three Banking Days (until 12.00 noon Frankfurt time) prior to the beginning of each Interest Period, provided that: 6.1. if the Borrower fails to select the duration of an Interest Period in accordance with the above provision, such Interest Period shall be for a period of three months; 6.2. the first Interest Period shall commence on the date of the Drawing and end upon expiry of one, three or six months, as the Borrower may have selected, thereafter; 6.3. each subsequent Interest Period shall commence on the expiry of the preceding Interest Period and end upon expiry of one, three or six months, provided, however, that the last Interest Period does not exceed the Term Loan Maturity Date; 6.4. if an Interest Period would otherwise end on a day which is not a Banking Day, such Interest Period shall end on the next Banking Day in the same calendar month, or, if none, on the immediately preceding Banking Day; 6.5. if an Interest Period commences on the last Banking Day in a calendar month and/or if there is no numerically corresponding day in the calendar month one, three or six months, as the case may be, after the commencement of such Interest Period, that Interest Period shall end on the last Banking Day in that calendar month; 6.6. if an Interest Period would overrun a repayment date, such Interest Period shall - for the amount of repayment - be of such shorter duration as shall be necessary for such repayment date to be the last day of such Interest Period. IV. Interest and Fees 7. Interest: 7.1. The Borrower shall pay interest on the Drawing under the Term Loan in accordance with the following paragraphs: 7.1.1. The interest rate for each Interest Period shall be determined by the Agent two Banking Days prior to such Interest Period and shall be based on LIBOR with an initial interest margin of 3/4% p.a. The initial interest margin is subject to the following adjustments: - provided that the Leverage ratio - as determined by the Agent - equals or is less than .75 : 1 on December 31, 1994, the margin shall be 5/8% p.a. in calendar year 1995, and - 8 - - provided that the Leverage ratio - as determined by the Agent - equals or in less than .50 : 1 on December 31, 1995, the margin shall be 1/2% p.a. in calendar year 1996 and thereafter. 7.1.2. The aforesaid "step-down" margins shall only be adjusted upon the Agent's receipt of the latest audited Fiscal Year statement of the Borrower and shall be applicable for the Interest Periods following the receipt of such Fiscal Year statement. 7.1.3. Beginning with the first Interest Period following April 21, 1998 the interest margin then in place shall be increased by 1/8% p.a. for the remaining lifetime of the loan. 7.1.4. Interest shall be payable on the last day of each Interest Period and calculated on the basis of the actual number of days elapsed and a year of 360 days. 8. Fees: 8.1 Arrangement Fee: The Borrower shall pay to the Agent for its own account an arrangement fee in the amount and in the manner specified in the mandate letter dd. January 28, 1993 from the Agent to the Borrower. 8.2 Agency Fee: The Borrower shall pay to the Agent for its account an agency fee in the amount and in the manner specified in the mandate letter dd. January 28, 1993 from the Agent to the Borrower. V. Repayment and Prepayment 9. Repayment: 9.1 Borrower shall repay the Term Loan by the following installments: DM 5,000,000.00 on April 21, 1994 DM 5,000,000.00 on April 21, 1995 DM 5,000,000.00 on April 21, 1996 DM 7,500,000.00 on April 21, 1997 DM 7,500,000.00 on April 21, 1998 DM 10,000,000.00 on April 21, 1999 DM 10,000,000.00 on April 21, 2000 9.2 All outstanding amounts under the Term Loan shall mature and become due and payable in full on the Term Loan Maturity Date. 9.3 Repayments shall be made together with accrued interest thereon. - 9 - 10. Optional Prepayments: 10.1 The Borrower shall have the right, upon at least five Banking Days prior written notice to the Agent, to prepay the Term Loan in full or in part, with minimum amounts of DM 1,000,000.00 and integral multiples of DM 500,000.00. Such notice of prepayment shall be irrevocable and binding on the Borrower and shall oblige the Borrower to make such prepayment on the date specified therein. 10.2 Prepayments shall be made together with accrued interest thereon at the end of any Interest Period and shall be applied to the two next following installments. Any prepayments exceeding the amount of the two installments shall be applied pro-rata among the remaining maturities, 10.3 Prepayments shall only be permitted by means of Excess Cash and/or Cash. 10.4 Any amounts prepaid under the Term Loan shall not be reborrowed hereunder. 10.5 A full prepayment through a bank refinancing, e.g. in connection with further acquisitions of Interest in Spoerle, shall be permitted provided that the Banks shall be asked to arrange such refinancing at terms and conditions reasonably satisfactory to the Banks. Otherwise, the Borrower agrees to pay a loan breakage fee of 1/2% flat on the then outstanding amount under the Term Loan, payable to the Agent for distribution among the Banks according to their respective share in the Term Loan. VI. Change of Circumstances 11. Upon the Agent determining (which determination - save in case of manifest error - shall be conclusive and binding on the Borrower) and notifying the Borrower that: 11.1 deposits in Deutsche Mark in the ordinary course of business are not available to the Banks in the London Interbank Currency Market in sufficient amounts at the relevant time with respect to any Interest Period; or 11.2 by reason of any change in any law, regulation, treaty or directive (whether or not having the force of law) or the interpretation or application thereof by any authority charged with the administration or application thereof (including but not limited to any reserve, deposit or similar requirements) and for compliance by the Banks with any request from or requirement of any central bank or other fiscal, monetary or other governmental authority, it has or shall become unlawful or materially impracticable to the Banks to perform any or all of its obligations under this Agreement, in particular to make, fund or maintain any borrowing out of the Eurocurrency market; and/or the costs to the Banks of making, funding or maintaining any of the borrowings is increased; and/or as a result of the aforesaid the amount of principal, interest or other amounts payable to the Banks under this Agreement is re- - 10 - duced; and/or the Banks make any payment or forego any interest or other return on or calculated by reference to the gross amount of any sum receivable by it from the Borrower hereunder; then, in any such event at the Banks option 11.3 upon demand from time to time the Borrower shall pay to the Banks such amount as shall compensate the Banks for such increased costs, reduction, payment or foregone interest or other return, provided that the Banks certificate setting out details on the event giving rise to such compensation, the amount thereof and the manner in which it has been calculated shall (save in the case of manifest error) be conclusive; and/or 11.4 the Banks may terminate their obligations under this Agreement whereupon the Borrower will prepay forthwith (or if permitted by law on the next following interest payment date or interest payment dates) the Drawing together with all interest accrued thereon and all other amounts payable to the Banks hereunder. VII. Payments 12. All payments to be made by the Borrower shall be made in Deutsche Marks on the relevant day to such account with such financial institution as the Agent may have notified to the Borrower. 13. All payments to be made by the Borrower hereunder shall be made without set-off or counterclaim and free and clear of and without deduction for or on account of any present or future taxes of any nature now or hereafter imposed unless the Borrower is compelled by law to make payment subject to such tax. In such event the Borrower shall pay to the Agent such additional amounts as may be necessary to ensure that the Agent and the Banks, respectively, receive a net amount equal to the full amount which the Agent and Banks would have received had payment not been made subject to such tax. The Borrower shall provide the Agent with the receipt evidencing the payment of such tax. The Borrower shall indemnify each Bank against any losses or costs incurred by it by reason of any failure by the Borrower to make payment of tax or by reason of such increased payment not being made on the due date for such payment. 14. Whenever any payment hereunder shall become due on a day which is not a Banking Day the due date thereof shall be extended to the next succeeding Banking Day, unless such succeeding Banking Day falls in the next calendar month in which event such due date shall be the next preceding Banking Day. Interest shall be adjusted accordingly. 15. If the Borrower fails to pay when due any amount hereunder on the due date, this amount becomes overdue and shall be treated as an overdraft on a current account and shall bear interest thereon equal to the Agent's prime rate plus two percentage points. - 11 - 16. Subject to payments being made to the Agent as provided herein, the Agent shall make available 16.1 to the Borrower on the relevant due date, all sums so received by the Agent from the Banks in respect of the Drawing to the Borrower by crediting such account of the Borrower at such bank as the Borrower may designate to the Agent; and 16.2 to each Bank on the relevant due date, its pro-rata share (if any) of any payments so received by the Agent from the Borrower by crediting such account of that Bank at such bank as that Bank may from time to time designate to the Agent. 17. If any sum is made available to the Agent later than the time required, the Agent shall make payment to the Borrower as provided above as soon as practicable thereafter. 18. Where an amount is to be paid hereunder to the Agent for the account of another person, the Agent shall not be obliged to make the same available to that other person until it has been able to establish that it has actually received such amount, but if it does so and it proves to be the case that it had not actually received the amount it paid out, then (i) the person to whom such amount was so made available shall on request refund the same to the Agent, and (ii) the person by whom such amount should have been made available to the Agent shall on request pay to the Agent an amount sufficient to indemnify the Agent against any costs or losses it may have suffered or incurred by reason of its having paid out the amount in question prior to its receiving the same. VIII. Collateral 19. The obligations of the Borrower under this Agreement shall be secured by the following collateral as set out in Exhibits 4 through 6 in favour of the Agent and the Banks, and the Agent for the benefit of the Banks, as the case may be: 19.1 The Guarantee 19.2 An assignment of (i) all present and future claims and rights of the Borrower against Spoerle with regard to Distributions, (ii) all present and future claims of the Borrower against Spoerle with regard to repayment claims arising from Distributions retained on the non-permanent capital account with Spoerle, and (iii) all present and future claims with regard to compensation claims of the Borrower in case the Borrower ceases to be a shareholder of Spoerle. The securing of the Banks claims under this Agreement shall not affect the Banks additional rights according to Article 14 and 15 of the AGBs. - 12 - IX. Affirmative Covenants 20. The Borrower agrees that, as long as any amounts are outstanding under this Agreement or the Banks have any commitment to lend pursuant to this Agreement, the Borrower shall: 20.1 furnish the Agent: 20.1.1 as soon as available and in any event within 60 days after the end of each fiscal quarter beginning with the quarter ending March 31, 1993 with a consolidated balance sheet of the Guarantor, and the respective profit and loss account for such quarter; 20.1.2 as soon as available and in any event within 120 days after the close of each of the Guarantor's Fiscal Year, with an audited consolidated annual balance sheet, including the respective profit and loss account for such year and a statement of changes in the financial position of the Guarantor, made out in accordance with generally accepted accounting principles in the United States and in compliance with any applicable laws, in each case certified by an independent certified public accountant of internationally recognized standing reasonably acceptable to the Agent; 20.1.3 an soon as available and in any event within 150 days after close of each of the Borrower's Fiscal Year, with an audited consolidated annual balance sheet, including the respective profit and loss account for such year and a statement of changes in the financial position of the Borrower, made out in accordance with generally accepted accounting principles in the United States and in compliance with any applicable laws, in each case certified by an independent certified public accountant of internationally recognized standing reasonably acceptable to the Agent; 20.1.4 as soon as available but not later than within 150 days after the close of each of Spoerle's Fiscal Year, with an audited consolidated annual balance sheet, including the respective profit and loss account for such year and a statement of changes in the financial position of Spoerle, made out in accordance with generally accepted accounting principles in the United States and in compliance with any applicable laws, in each case certified by an independent certified public accountant of internationally recognized standing reasonably acceptable to the Agent; 20.1.5 as soon as available but not later than by the end of the first quarter of each Fiscal Year with its annual budget proposal for the subsequent Fiscal Year; 20.1.6 as soon as possible but not later than within 150 days after the close of each of the Borrower's Fiscal Year with a statement of the Chief Financial officer of the Borrower which, in reasonable detail, demonstrates compliance with the required Negative Covenants under Section X; - 13 - 20.1.7 upon reasonable request by the Agent with other information regarding the business, affairs or condition (financial or otherwise) of the Borrower and all of its Subsidiaries, and permit upon reasonable request, the Agent to inspect the properties of the Borrower and any of its Subsidiaries and to have the books or records of the Borrower and any of its Subsidiaries inspected, audited, and examined by an independent accounting firm to take extracts therefrom; 20.2 maintain such insurances as are normally maintained by companies carrying on similar business in the place of its incorporation, and duly pay all premiums and other moneys necessary for effecting and keeping up such insurances as and when they become due; 20.3 give notice to the Banks in the event of the relocation of its present corporate headquarters or the present corporate headquarters of Spoerle; 20.4 maintain a Minimum Net Worth of DM 45,000,000.00 without taking into account minority interests, if any; 20.5 notify the Agent promptly after becoming aware of the occurrence of each Event of Default or each event which, with the giving of notice or the lapse of time, or both, or the fulfilment of any other condition would or might constitute an Event of Default setting forth details of such Event of Default or event and the action which the Borrower has taken or has caused to be taken or proposes to take with respect thereto; 20.6 make the following representations and warranties to the Agent and the Banks which shall be deemed to be continuing representations and warranties until the Term Loan Maturity Date: 20.6.1 no event has occurred which constitutes or which, with the giving of notice or the lapse of time, or both, or the fulfilment of any other condition, would constitute an Event of Default under this Agreement or a default under or in respect of any loan agreement, contract or instrument relating to borrowings to which the Borrower is a party, aggregating at least DM 100,000.00, by which it is bound or to which it or any of its assets may be subject to; 20.6.2 no litigation, arbitration or administrative proceedings are presently pending or, to the best knowledge of the Borrower, claimed against the Borrower which, if adversely determined, would have a material adverse effect on the business, assets or financial condition of the Borrower and its Subsidiaries - taken as a whole - or on its ability to perform its obligations under this Agreement; 20.6.3 no material adverse change has occurred in the financial condition of the Borrower and its Subsidiaries - taken as a whole - from that set forth in the Borrower's audited consolidated balance sheet and profit and loss account for Fiscal Year 1991; - 14 - 20.7 advise the Agent with full particulars of any respect in which any of the aforesaid representations and warranties cannot at any time be renewed and save as stated by such advice it shall be deemed to have renewed each of the following representations and warranties at the beginning of each Interest Period; 20.8 undertake that the Banks obligations hereunder will at all times constitute direct, unconditional, unsubordinated and general obligations of, and will rank at all times at least pari passu with all other present and future unsecured obligations issued, created or assumed by the Borrower. X. Negative Covenants 21. The Borrower agrees that as long as the Banks have any commitment to lend under this Agreement, or as long as any amounts are outstanding under this Agreement, the Borrower shall not: Earnings Before Interest and Taxes (=EBIT) to Total Debt Service ratio: 21.1 permit that on any Reference Date and during the respective period set forth below (to be determined at the end of each fiscal quarter) the ratio of EBIT to Total Debt Service to be less than: from the date of this Agreement through December 31, 1993 2.00 to 1 January 1, 1994 through December 31, 1994 2.25 to 1 January 1, 1995 through April 21, 2000 2.50 to 1 Leverage ratio: 21.2 permit that the Leverage ratio on any Reference Date and during the respective period set forth below (to be determined at the end of each fiscal quarter) exceed the ratio provided for such period as hereinafter specified: from the date of this Agreement through December 31, 1993 1.25 to 1 from January 1, 1994 through December 31, 1995 1.00 to 1 from January 1, 1995 through April 21, 2000 .75 to 1 21.3 permit that Minimum Net Worth on any Fiscal Year end to be less than the amounts specified in Section IX, para 20.4; 21.4 allow any of its Subsidiaries to take any business actions, other than in the ordinary course of business, which would have a material adverse effect on the Borrower's financial condition and/or the Borrower's ability to perform any of its obligations under this Agreement; 21.5 incur or permit to exist outstanding any Indebtedness to any Person, except Indebtedness of the Borrower incurred under this Agreement and in the ordinary course of business with its trade creditors which is not incurred through the borrowing of money or the obtaining of credit through grace periods ("Zahlungsziele") exceeding 60 days; - 15 - 21.6 make, assume or incur, any Expenditures if by reason thereof the aggregate of all such Expenditures would exceed the amount of depreciation or an amount of not more than DM 200,000.00 in any Fiscal Year. Such Expenditure shall be the sum of total leasing costs plus total purchases of fixed assets for the Fiscal Year; 21.7 sell, assign, lease or otherwise dispose of (whether in one transaction or in a series of transactions), all or substantially all of its assets to any Person, without the prior written consent of the Agent; 21.8 grant loans to any of its Subsidiaries or other Arrow Electronics, Inc. group companies in Europe, except for (i) grace periods resulting from trading receivables in the ordinary course of business and (ii) loans funded out of Excess Cash and/or Cash; 21.9 grant loans to the Guarantor and/or any other Person which is not associated with it or in which it is not a shareholder; 21.10 permit the stated balance in its share of unpaid Distributions held in the non-permanent capital account of Spoerle to be less than DM 20,000,000.00, without the prior written consent of the Banks; 21.11 make Distributions, except to Electronics Distribution International B.V., Nieuwegein/Netherland for Reinvestments in its Subsidiaries in Europe; 21.12 undertake that, so long as any amount payable by the Borrower hereunder shall remain unpaid, the Borrower shall not (except with the Banks prior written consent), create or permit or subsist any lien, security interest or other charge or encumbrance, or any other type of preferential arrangement of any kind (hereinafter the "encumbrance"), in respect of the whole or any part of the Borrowers' present or future undertakings, property, assets or revenues to secure any Indebtedness, whether present or future, contingent or otherwise, other than: 21.12.1 any encumbrance which has been disclosed to the Banks in writing prior to the execution hereof and secures only Indebtedness outstanding at the date hereof; 21.12.2 encumbrance arising solely by operation of law and the ordinary ordinary course of business or contained in any contract for the purchase or the sale of goods or surplus entered into in the ordinary course of business of the company creating the same; 21.12.3 any encumbrance over or in relation to any fixed asset and created for the purposes of financing the cost of acquisition of such asset, where the amount secured by such encumbrance does not exceed the cost of such acquisition; and - 16 - 21.12.4 any other encumbrances which in the aggregate for the Borrower secure Indebtedness the principal amount of which shall not exceed DM 1,000,000.00 of the Borrowers' consolidated tangible net worth, unless the Borrower ensures that such encumbrance shall secure equally and ratably, to the Banks satisfaction, the Borrowers' obligations to the Banks hereunder. XI. Events of Default 22. Upon the occurrence of any of the following events: 22.1 the Borrower fails to pay when due any interest and/or principal amount due from it hereunder at the time and in the manner specified herein and such failure to pay continues for a period of ten Banking Days after the due date, or the Borrower fails to pay when due any other amounts due from it hereunder at the time and in the manner specified herein and such failure to pay continues for a period of thirty Banking Days after the due date; or 22.2 the Borrower fails to perform or to observe or violates any of its obligations hereunder other than an obligation to make a payment in particular the Borrower fails to comply with any of its covenants contained in Section IX and Section X hereof and such failure shall continue for 10 Banking Days; or 22.3 any statement made in this Agreement or any Exhibit thereto or any document or instrument delivered or furnished pursuant to this Agreement, or otherwise in connection with the transactions contemplated hereby or any report, certificate, financial statement or other instrument furnished in connection with this Agreement, shall prove to have been false or incorrect in any material respect when made and such false or incorrect statement shall not be corrected within 10 Banking Days; or 22.4 the Borrower fails to pay when due or within any applicable period of grace any principal, interest or any other amount payable exceeding DM 100,000.00 or fails to observe and/or to perform, and/or violates any obligations, representations or warranties under any agreement or instrument other than this Agreement, except for any amount disputed by the Borrower in good faith; or 22.5 any change in the controlling Interest of the Borrower, except for the transfer of the Interest of the Borrower within the Arrow Electronics, Inc. Group; or 22.6 any reduction in the present 55% Interest of the Borrower in Spoerle; or 22.7 the occurrence of substantial changes in the nature of the Borrower's business and/or of that of its Subsidiaries carried out at or from the date of this Agreement; or - 17 - 22.8 any change of the Borrower's and/or its Subsidiaries' Articles of Association has been made which has a material adverse effect on the Borrower's ability to fulfil its obligations under and in connection with this Agreement; then, or at any time thereafter, in any such event and in addition to, without limitation to, any of the Banks rights granted herein or hereunder or under the AGBs (in particular Article 19 thereof) the Agent may take either or both of the following actions: (i) by written notice to the Borrower declare any principal amount then still outstanding hereunder immediately due and payable, whereupon the same shall become immediately due and payable by the Borrower together with all interest accrued thereon and any other amounts payable hereunder; (ii) by written notice to the Borrower declare that this Agreement shall be cancelled, whereupon the same shall be cancelled and the Commitments of each Bank shall immediately be reduced to nil. The Borrower shall fully indemnify the Agent and the Banks for and against any expenses (including but not limited to legal fees), losses, damages or liabilities which the Agent or the Banks may incur or sustain as a consequence of the occurrence of any Event of Default. XII. Agency 23. Appointment of the Agent: 23.1 Each Bank irrevocably appoints the Agent to act as its agent for the purposes of this Agreement and authorizes the Agent to take any actions on its behalf and to exercise such rights, powers and discretions hereunder as are specifically delegated to the Agent by the terms hereof, together with such rights, powers and discretions as the Agent considers reasonably incidental thereto. The Agent shall have only those duties and responsibilities which are expressly specified in this Agreement. In connection with its rights, powers and discretions under this Agreement, the Agent shall act solely as the agent of each of the Banks, and the Agent shall not assume, and shall not be deemed to have assumed, any obligations to, or fiduciary relationship with, the Banks other than those for which specific provision is made by this Agreement or any obligations to, or fiduciary relationship with, the Borrower. 23.2 In relation to the Security Documents entered into by the Agent and/or the Banks, as the case may be, securing the obligations of the Borrower under this Agreement, each of the Banks hereby appoints the Agent as its agent to act in its name and on its behalf for the purpose of taking all steps necessary to create, perfect, administer and exercise its respective rights under such Security Documents and the Agent hereby agrees to act in such capacity. - 18 - 23.2.1 Each of the Banks hereby acknowledges and agrees that: 23.2.1.1 it shall not have any independent power to enforce the security to be created or evidenced by the Security Documents or any of them or to exercise any rights, remedies, discretions or powers or to grant any consents or releases under or pursuant to the Security Documents or any of them or otherwise have direct recourse to the security created or evidenced by the Security Documents or any of them except through the Agent; and 23.2.2.2 the Agent shall not be required to take any action or proceedings under or in relation to any of the Security Documents or to exercise any of the rights, powers or discretions conferred on it by any of the Security Documents other than upon the instructions of the Banks; and 23.2.2.3 the Agent shall not take any actions to enforce the security created or evidenced by the Security Documents unless or until it shall have received instructions from the Banks directing it to do so, whereupon the Agent shall, to the extent that it is legally entitled to do so, take action to enforce such security in the manner (and only in the manner) directed by the Banks. 23.3 In the event of a realization of securities all amounts so received by the Agent pursuant to the terms and conditions of the Security Documents shall (except as otherwise provided herein) be applied in the following order of priority: 23.3.1 first, in or towards payment of any amount then due to the Agent under Section XV, para 30; 23.3.2 second, in or toward payment of any amount due to the Agent and the Banks pro-rata to their share in the aggregate Drawing under the Term Loan. 23.4 In acting as agent of the Banks for the purpose of this Agreement the Agent shall be exempted from the restrictions otherwise imposed upon it by the provisions of Section 181 of the German Civil Code ("Burgerliches Gesetzbuch"). 24. Agent's Rights: The Agent may 24.1 assume that none of the events mentioned in Section XI. has occurred and that the Borrower is not in breach of or in default under its obligations hereunder unless it has actual knowledge or actual notice to the contrary; - 19 - 24.2 assume that each Bank's funding office is that identified at the date hereof in Exhibit . until it has received from such Bank a notice designating some other office of such Bank as its funding office and act upon any such notice until the same is superseded by a further such notice; 24.3 engage and pay for the advice or services of any lawyers, accountants, surveyors or other experts whose advice or services may to it deem necessary, expedient or desirable in connection with this Agreement, the transaction contemplated therein or the Security Documents and rely upon any advice so obtained; 24.4 rely as to any matters of fact which might reasonably be expected to be within the knowledge of the Borrower upon a certificate signed by or on behalf of the Borrower; 25.5 rely upon any communication or document believed by it to be genuine; 24.6 refrain from exercising any right, power or discretion vested in it under this Agreement or the Security Documents unless and until instructed by the Banks as to whether or not such right, power or discretion is to be exercised and, if it is to be exercised, as to the manner in which it should be exercised; and 24.7 refrain from acting in accordance with any instructions of the Banks to begin any legal action or proceeding arising out of or in connection with this Agreement or the Security Documents until it shall have been indemnified and/or secured to its satisfaction against any and all costs, claims, expenses (including legal fees) and liabilities which it will or may expend or incur in complying with such instructions. 25. Agent's Duties: The Agent shall 25.1 promptly inform each Bank of the contents of any notice or document received by it from the Borrower hereunder; 25.2 promptly notify each Bank of the occurrence of any of those events mentioned in Section XI or any default by the Borrower in the due performance of its obligations under this Agreement of which the Agent has actual knowledge or actual notice; 25.3 subject to the foregoing provisions of this Section, act in accordance with any instructions given to it by the Banks; and 25.4 if so instructed by the Banks, refrain from exercising a right, power or discretion vested in it under this Agreement. - 20 - 26. Exoneration of Agent: 26.1 Notwithstanding anything to the contrary expressed or implied herein, the Agent shall not: 26.1.1 be bound to enquire as to the occurrence or otherwise of any of those events mentioned in Section XI, as to the performance by the Borrower of its obligations hereunder or as to any breach of or default by the Borrower of or under its obligations hereunder; 26.1.2 be bound to account to any Bank for any amount or the profit element of any amount received by it or them for its or their own account; 26.1.3 be bound to disclose to any other person any information relating to the Borrower if such disclosure would or might in its opinion constitute a breach of any law or regulation or be otherwise actionable at the suit of any person; or 26.1.4 be under any obligations other than those for which express provision is made herein. 26.2 The Agent shall not have any responsibility for the accuracy and/or completeness of any information in connection with the transactions contemplated by this Agreement and the Security Documents or for the legality, validity, effectiveness, adequacy or enforceability of this Agreement or the Security Documents, or any document delivered pursuant hereto and neither the Agent nor any of its respective directors, officers or employees shall be under any liability as a result of taking or omitting to take any action in relation to this Agreement or the Security Documents, or any such other document save in the case of gross negligence or wilful misconduct. 27. Indemnity to Agent: To the extent that (i) the Borrower is obliged by this Agreement to indemnify the Agent but does not do so (but without in any way affecting or limiting any such obligation, in respect of which the Banks shall be subrogated to the Agent's rights to the extent of their respective payments to the Agent under this paragraph) or (ii) the Borrower is not obliged to do so, each Bank shall indemnify the Agent in the proportion borne by its outstandings under the Term Loan (or, if no Drawing is then outstanding, in the proportion borne by its Commitment to the total Commitments) at the time any such instructions are given, against any and all costs, claims, expenses (including legal fees) and liabilities which the Agent may incur in complying with any instructions received by it from the Banks other than those arising from its own gross negligence or wilful misconduct in complying with those instructions. - 21 - 28. Non-Reliance on the Agent: 28.1 It is understood and agreed by each Bank that it has itself been, and will continue to be, solely responsible for making its own independent appraisal of and investigations into the financial condition, creditworthiness, condition, affairs, status and nature of the Borrower and accordingly each Bank confirms to the Agent that it has not relied, and will not hereinafter rely on the Agent: 28.1.1 to check or enquire on its behalf into the adequacy, accuracy or completeness of any information provided by the Borrower in connection with this Agreement or the Security Documents (whether or not such information has been or is hereafter circulated to such Bank by the Agent); or 28-1.2 to assess or keep under review on its behalf the financial condition, creditworthiness, condition, affairs, status or nature of the Borrower. 29. Termination of the Agency: The Agent may resign its appointment hereunder. After the giving of any notice of proposed termination, the Banks may in writing appoint, on behalf of the Banks, a successor as Agent. If such successor has not accepted in writing the appointment within a thirty (30) days period after the notice of proposed termination, the Agent may within a further thirty (30) days appoint, on behalf of the Banks, a successor which shall be a reputable and experienced bank. Upon the written acceptance (in such form as the Banks may approve) by the successor of its appointment as Agent: 29.1 as regards the Borrower and each of the Banks, such successor shall become bound by all the obligations of the Agent and become entitled to all the rights, privileges, powers, authorities and discretions of the Agent under the Agreement or under the Security Documents; 29.2 the agency of the retiring Agent shall terminate but without prejudice to any liabilities which the retiring Agent may have incurred prior to the termination of its agency; 29.3 the retiring Agent shall be discharged from any further liability or obligations under this Agreement and the Security Documents; and 29.4 the provisions of this Agreement shall continue to be in effect for the benefit of any retiring Agent in respect of any actions taken or omitted to be taken by it or any event occurring before the termination of its agency. - 22 - XIII. Miscellaneous 30. Costs: Any reasonable costs and expenses (including but not limited to all legal, accountants, and other out of pocket expenses) of the Agent incurred in connection with the preparation, signing, carrying out, administration, fulfilment and enforcement of this Agreement and the Security Documents shall be borne by the Borrower. 31. Assignments: The rights and claims of the Borrower under this Agreement shall not be assignable by the Borrower without the prior written consent of the Banks. Nor may any Bank sell, assign, transfer, grant participations in, or otherwise dispose of all or any portion of their respective Commitment, or of its right, title and interest therein or thereto or to this Agreement. 32. Amendments and Waiver: No amendment or waiver of any provision of this Agreement or any loan document shall in any event be effective unless the same shall be in writing and signed by the Banks. No failure to exercise and no delay in exercising on the part of the Agent and the Banks of any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege preclude any other right, power or privilege. The rights and remedies herein provided are cumulative and not exclusive of any rights or remedies provided by law. 33. Partial Invalidity: If any of the provisions of this Agreement becomes invalid, illegal or unenforceable in any respect under any applicable law, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired. Any deficiency in this Agreement which might result from such invalidity or enforceability shall be remedied by supplemental interpretation of this Agreement under due consideration of the interests of the parties hereto. 34. Confidentiality: The Borrower may from time to time designate certain documents or other information delivered by it to the Agent or the Banks pursuant to Section IX as confidential in nature, and the Agent and each Bank agree that they will use their customary procedures to keep such information confidential, it being understood that a) the Agent or any Bank may disclose such information to any other Bank with prior written consent of the Borrower which consent shall not be unreasonably withheld, and b) the Agent and each Bank has the right and may have the obligation, to disclose such information: (i) to any banking or other regulatory or examining authorities or to other governmental agencies; (ii) pursuant to subpoena or other legal process; (iii) the Agent's or such Bank's independent auditors and counsel and (iv) otherwise as may be required by law. - 23 - 35. Jurisdiction and Governing Law: This Agreement and the rights and obligations of the parties hereunder shall be construed in accordance with and governed by the law of the Federal Republic of Germany. Place of performance and place of jurisdiction shall be Frankfurt am Main, Federal Republic of Germany. 36. General Business Conditions: In addition to the foregoing provisions the AGBs shall apply. In witness whereof, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of April 14, 1993. - 24 - /s/ /s/ - ----------------------------- ------------------------------------ on behalf of on behalf of Arrow Electronics GmbH, Dreieich Berliner Handels- und Frankfurter Bank, Frankfurt as agent /s/ ----------------------------- on behalf of Berliner Handels - und Frankfurter Bank for a commitment of DM 25,000,000.00 /s/ ----------------------------- on behalf of National Westminster Bank AG for a commitment of DM 12,500,000.00 /s/ ----------------------------- on behalf of Schweizerische Kreditanstalt (Deutschland) AG for a commitment of DM 12,500,000.00
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