<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
GATES/FA DISTRIBUTING, INC.
---------------------------
(Name of Issuer)
Common Stock, Par Value $0.01
-----------------------------
(Title of Class of Securities)
302387-10-5
-------------------------------------
(CUSIP Number of Class of Securities)
Robert E. Klatell
Senior Vice President and Chief Financial Officer
Arrow Electronics, Inc.
25 Hub Drive
Melville, New York 11747
(516) 391-1300
--------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
With a copy to:
Howard S. Kelberg, Esq.
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, New York 10004-1490
(212) 858-1000
June 24, 1994
-----------------------------
(Date of Event which Requires
Filing of this Statement)
If the filing person has previously filed a statement on
Schedule 13G to report the acquisition which is the subject of
this Schedule 13D, and is filing this schedule because of Rule
13d-1(b)(3) or (4), check the following box: / /
Check the following box if a fee is being paid with this
Statement: /x/
Exhibit Index on Page 15
Page 1 of 88 Pages
<PAGE> 2
SCHEDULE 13D
---------------------
CUSIP No. 302387-10-5
---------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON S.S. OR
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Arrow Electronics, Inc.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER (a) / /
OF A GROUP (b) / /
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
Not Applicable
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED / /
PURSUANT TO ITEMS 2(d) OR 2(e)
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
New York
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
1,257,066 (1)
NUMBER OF ------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY
OWNED 1,835,791
BY ------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 1,257,066 (1)
PERSON ------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
0
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,092,857
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES / /
- --------------------------------------------------------------------------------
--------------------
1. Beneficial ownership of 1,257,063 shares of Common Stock
is being reported solely as a result of the Stock Option
Agreement described in Item 4 of this Statement. The
option granted pursuant to such Stock Option Agreement is
not currently exercisable. Arrow Electronics, Inc.
expressly disclaims beneficial ownership of such shares.
See Item 5 hereof.
Page 2 of 88 Pages
<PAGE> 3
13 PERCENT OF CLASS REPRESENTED BY AMOUNT ON ROW (11)
40.8%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
CO
- --------------------------------------------------------------------------------
--------------------
2. Based upon the 6,316,901 shares represented by Gates/FA
Distributing, Inc. to be outstanding as of June 24, 1994
pursuant to the Merger Agreement described in Item 4 of
this Statement, plus the 1,257,063 shares obtainable by
Arrow Electronics, Inc. upon the exercise of the stock
option described in Item 4 were such stock option
presently exercisable.
Page 3 of 88 Pages
<PAGE> 4
Item 1. Security and Issuer.
-------------------
The class of equity securities to which this Statement relates is the
common stock, $.01 par value per share (the "Common Stock"), of Gates/FA
Distributing, Inc., a Delaware corporation (the "Company"), which has its
principal executive offices at 39 Pelham Ridge Drive, Greenville, South
Carolina 29615.
Item 2. Identity and Background.
-----------------------
This statement is being filed by Arrow Electronics, Inc., a New York
corporation ("Arrow"), which conducts its principal business and maintains its
principal office at 25 Hub Drive, Melville, New York 11747. Arrow is a public
corporation which is the world's largest industrial distributor of electronic
components and computer products.
The name, business address, present principal occupation or employment
and citizenship of each executive officer and director of Arrow are set forth
in Schedule A hereto which is incorporated herein by reference.
During the past five years, neither Arrow nor, to the best of its
knowledge, any of Arrow's executive officers or directors (i) has been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or (ii) was a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and, as a result of such
proceeding, was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to,
federal or state securities laws or finding any violation with respect to such
laws.
Item 3. Source and Amount of Funds or Other Consideration.
-------------------------------------------------
The Proxies and the Stock Option Agreement (as such terms are defined
in Item 4 of this Statement) were entered into in connection with the Merger
Agreement (as such term is defined in Item 4 of this Statement). Certain terms
of the Proxies and the Stock Option Agreement are summarized in Item 4 of this
Statement. If the Stock Option Agreement became exercisable and Arrow were to
exercise the Company Option thereunder, the funds required to purchase the
shares of Common Stock issuable upon such exercise would be $28,283,917. It is
currently anticipated that such funds would be derived from working capital.
No funds were or will be used in connection with the Proxies.
Page 4 of 88 Pages
<PAGE> 5
Item 4. Purpose of Transaction.
----------------------
The Merger Agreement. On June 24, 1994, Arrow, the Company and AFG
Acquisition Company, a Delaware corporation and a wholly owned subsidiary of
Arrow ("Sub"), entered into an Agreement and Plan of Merger dated as of June
24, 1994 (the "Merger Agreement"), pursuant to which, among other things, Sub
will be merged with and into the Company, which will be the surviving
corporation (the "Merger"), and the Company will become a wholly owned
subsidiary of Arrow.
Upon consummation of the Merger, each issued and outstanding share of
Common Stock (other than shares, if any, owned by the Company as treasury stock
and shares owned by Arrow, Sub or any wholly owned subsidiary of Arrow, which
will be canceled), will be converted into the right to receive the number of
shares of common stock, $1.00 par value per share, of Arrow ("Arrow Common
Stock"), including the corresponding number of Arrow Rights (as defined below),
equal to $22.50 divided by the average closing price on the New York Stock
Exchange, Inc. (the "NYSE") of one share of Arrow Common Stock over the twenty
day trading period ending two trading days before the closing date (the "Arrow
Stock Price").
Upon consummation of the Merger, all shares of Common Stock will no
longer be outstanding and will automatically be canceled and retired and will
cease to exist, and each holder of a certificate representing any shares of
Common Stock will cease to have any rights with respect thereto, except the
right to receive the shares of Arrow Common Stock to be issued in consideration
therefor upon the surrender of such certificate, without interest. Fractional
shares of Arrow Common Stock will not be issuable in connection with the
Merger. Company stockholders otherwise entitled to a fractional share will be
paid the value of such fraction in cash, determined with reference to the Arrow
Stock Price.
All references to Arrow Common Stock include the associated rights
(the "Arrow Rights") to purchase shares of Participating Preferred Stock of
Arrow pursuant to a Rights Agreement dated as of March 2, 1988, as amended,
between Arrow and Chemical Bank (formerly Manufacturers Hanover Trust Company),
as Rights Agent.
As a result of the Merger, the Common Stock will be eligible for
termination of registration pursuant to Section 12(g)(4) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). In addition, as a
result of the Merger, the Common Stock will be eligible to cease to be
authorized to be quoted on the National Association of Securities Dealers
Automated Quotation System where it is quoted under the symbol "GAFA".
Page 5 of 88 Pages
<PAGE> 6
Consummation of the Merger is subject to a number of conditions
including, among others, the approval of the Merger Agreement by the requisite
vote of the Company's stockholders. The Merger Agreement may be terminated in
certain circumstances. A copy of the Merger Agreement is attached hereto as
Exhibit 1 and is incorporated herein by reference. The description of the
Merger Agreement herein is qualified in its entirety by reference to the full
text thereof.
The Proxies. Cheyenne Software, Inc. and Dennis Gates, which
respectively hold approximately 1,348,290 and 487,501 shares (approximately
21.3% and 7.7%, respectively) of the Company's Common Stock, have pursuant to
separate Irrevocable Proxies (the "Proxies") granted to Arrow irrevocable
proxies to vote the shares of the Company's Common Stock that they currently
own or subsequently acquire at any meeting of the Company to consider any
proposal (the "Proposal") involving the sale, whether by merger, stock sale,
asset sale or other means, of all or any substantial portion of the businesses
and assets of the Company for or against the Proposal. In addition, the
Proxies provide that the stockholders may not sell, assign, transfer or
otherwise convey any of their shares of the Company's Common Stock. The
Proxies were received by Arrow on June 24, 1994. Accordingly, Arrow may be
deemed to be the beneficial owner of approximately an aggregate of 1,835,791
shares (approximately 29%) of the Company's outstanding Common Stock pursuant
to the Proxies with respect to the right to vote on the Proposal. The Proxies
terminate on the later to occur of the date on which the Merger Agreement
terminates and the date on which the Stock Option Agreement terminates, but in
no event later than June 24, 1995.
The Proxies are attached hereto as Exhibit 2 and are incorporated
herein by reference. The description of the Proxies herein is qualified in its
entirety by reference to the full text thereof.
The Stock Option Agreement. On June 24, 1994, Arrow and the Company
entered into a Stock Option Agreement dated as of June 24, 1994 (the "Stock
Option Agreement"). Pursuant to the Stock Option Agreement, Arrow has the
right (the "Company Option"), under certain circumstances, to acquire, subject
to adjustment in certain circumstances, up to 1,257,063 shares of authorized
but unissued shares of Common Stock (the "Company Shares") (constituting
approximately 19.9% of the outstanding shares of Common Stock prior to giving
effect to such issuance and approximately 16.6% after giving effect to such
issuance) at a price of $22.50 per share, subject to adjustment (the "Exercise
Price"). The Exercise Price is payable in cash.
Page 6 of 88 Pages
<PAGE> 7
The Stock Option Agreement was received by Arrow on June 24, 1994.
Accordingly, Arrow may be deemed to be the beneficial owner of approximately an
aggregate of 1,257,063 shares of the Company's Common Stock (approximately
19.9% of the outstanding shares of Common Stock prior to giving effect to such
issuance and approximately 16.6% after giving effect to such issuance) pursuant
to the Stock Option Agreement.
The Stock Option Agreement is exercisable by Arrow, in whole or in
part, at any time or from time to time after any event occurs which would
permit Arrow to terminate the Merger Agreement and recover the liquidated
damages and out-of-pocket expenses described in the Merger Agreement
(regardless of whether the Merger Agreement has actually terminated as a
result thereof). The Company Option will terminate upon the earlier of:
(i) the effective time of the Merger; (ii) the termination of the Merger
Agreement pursuant to its terms (other than a termination in connection with
which Arrow is entitled to the payment of the liquidated damages and
out-of-pocket expenses); or (iii) 180 days following any termination of the
Merger Agreement in connection with which Arrow is entitled to the payment of
the liquidated damages and out-of-pocket expenses (or, if at the expiration of
such 180-day period the Company Option cannot be exercised by reason of any
applicable judgment, decree, order, law or regulation, 10 business days after
such impediment to exercise shall have been removed or shall have become final
and not subject to appeal, but in no event later than June 24, 1996).
Notwithstanding the foregoing, the Company Option may not be exercised if
Arrow is in material breach of any of its representations, warranties,
covenants or agreements contained in the Stock Option Agreement or in the
Merger Agreement.
Under the terms of the Stock Option Agreement, at any time during
which the Company Option is exercisable (the "Repurchase Period"), upon demand
by Arrow, Arrow has the right to sell to the Company (or any successor entity
thereof) and the Company (or such successor entity) will be obligated to
repurchase from Arrow (the "Put"), and upon demand, subject to certain
limitations, the Company (or any successor entity thereof) has the right to
repurchase from Arrow and Arrow will be obligated to sell to the Company (or
such successor entity) (the "Call"), all or any portion of the Company Option,
at the price set forth in subparagraph (i) below, or, at any time prior to June
24, 1996, all or any portion of the Company Shares purchased by Arrow pursuant
thereto, at the price set forth in subparagraph (ii) below:
(i) the difference between the "Market/Tender Offer Price"
for shares of Common Stock as of the date (the "Notice Date") notice
of exercise of the Put or the Call
Page 7 of 88 Pages
<PAGE> 8
is given and the Exercise Price, multiplied by the number of Company
Shares purchasable pursuant to the Company Option, or portion thereof,
but only if the Market/Tender Offer Price exceeds the Exercise Price.
The "Market/Tender Offer Price" means the higher of (A) the price per
share offered as of the Notice Date pursuant to any tender or exchange
offer or other Takeover Proposal (as defined in the Merger Agreement)
which was made prior to the Notice Date and not terminated or
withdrawn as of the Notice Date (the "Tender Price") or (B) the
average of the high and low bid prices of shares of Common Stock on
NASDAQ for the ten trading days immediately preceding the Notice Date,
or if on any of such ten trading days Common Stock shall not be quoted
in the NASDAQ System, the average of the high and low bid prices on
such day in the domestic over-the-counter market as reported by the
National Quotation Bureau, Incorporated, or any similar successor
organization.
(ii) the Exercise Price paid by Arrow for Company
Shares acquired pursuant to the Company Option plus the difference
between the Market/Tender Offer Price and the Exercise Price, but
only if the Market/Tender Offer Price is greater than the Exercise
Price, multiplied by the number of Company Shares so purchased. For
purposes of this clause (ii), the Tender Price shall be the highest
price per share offered pursuant to a tender or exchange offer or
other Takeover Proposal during the Repurchase Period.
Notwithstanding anything in the Stock Option Agreement to the
contrary, the maximum amount payable to Arrow pursuant to the Put and/or the
Call will not exceed $10,056,504 plus the amount of the aggregate Exercise
Price paid by Arrow for any Company Shares purchased pursuant to the Company
Option. In addition, the Call will not be exercisable by the Company (or any
successor entity thereof) unless the difference between the Market/Tender Offer
Price and the Exercise Price as of the Notice Date is greater than $8.00.
The Company Shares purchased upon exercise of the Company Option may
be resold by Arrow pursuant to registration rights pursuant to the Stock Option
Agreement.
The Stock Option Agreement is attached hereto as Exhibit 3 and is
incorporated herein by reference. The description of the Stock Option
Agreement herein is qualified in its entirety by reference to the full text
thereof.
Except as set forth in this item 6 and as otherwise contemplated by
the Merger Agreement, neither Arrow nor, to
Page 8 of 88 Pages
<PAGE> 9
the best of its knowledge, any of Arrow's executive officers or directors, has
any other present plans or proposals which would result in or relate to any of
the actions described in paragraphs (a) through (j) of Item 4 of Schedule 13D
under the Exchange Act.
Item 5. Interest in Securities of the Issuer.
------------------------------------
(a) The Company's representations in the Merger Agreement state
that 6,316,901 shares of the Company's Common Stock were issued and outstanding
on June 24, 1994. As described under Item 4 of this Statement, Arrow may be
deemed to be the beneficial owner of an aggregate of approximately 1,835,791
shares of the Company's Common Stock covered by the Proxies with respect to the
right to vote on the Proposal, and an aggregate of approximately 1,257,063
shares of the Company's Common Stock pursuant to the Stock Option Agreement. In
addition, Arrow holds 3 shares of the Company's Common Stock of record.
Accordingly, Arrow may be deemed to be the beneficial owner of approximately
3,092,857 shares (approximately 40.8 % of the outstanding shares of Common
Stock after giving effect to the issuance of shares pursuant to the Stock
Option Agreement) of the Company's Common Stock in the aggregate. Because the
Company Option pursuant to the Stock Option Agreement is not presently
exercisable, Arrow expressly disclaims beneficial ownership of any of the
Company Shares subject to the Stock Option Agreement.
Except as set forth in this Item 5(a), neither Arrow nor, to the best
of its knowledge, any of Arrow's executive officers or directors owns any
shares of the Company's Common Stock.
(b) Pursuant to the Proxies, under the circumstances described
in Item 4, Arrow would have the sole power to vote or to direct the vote of
approximately 1,835,791 shares of the Company's Common Stock for or against any
Proposal. Arrow has no other voting rights with respect to the shares covered
by the Proxies.
Pursuant to the Stock Option Agreement, under the circumstances
described in Item 4 and subject to the Put and the Call, Arrow would have the
sole power to vote or to direct the vote, and the sole power to dispose or to
direct the disposition of, approximately 1,257,063 shares of the Company's
Common Stock upon purchase by Arrow of such shares pursuant to the Stock Option
Agreement.
Arrow has sole voting and dispositive power with respect to the 3
shares of the Company's Common Stock that it holds of record.
Page 9 of 88 Pages
<PAGE> 10
(c) Neither Arrow nor, to the best of its knowledge, any of Arrow's
executive officers or directors has effected any transactions in shares of
the Company's Common Stock during the past 60 days.
Item 6. Contracts, Arrangements, Understandings or Relationships With Respect
---------------------------------------------------------------------
to Securities of the Issuer.
---------------------------
Except as described in this Statement, Arrow has no contracts,
arrangements, understandings or relationships (legal or otherwise) with any
person with respect to any securities of the Company.
Item 7. Material to be Filed as Exhibits.
--------------------------------
Exhibit 1: Agreement and Plan of Merger dated as of June 24, 1994
among Arrow Electronics, Inc., Gates/FA Distributing, Inc.
and AFG Acquisition Company.
Exhibit 2: Irrevocable Proxies dated as of June 24, 1994.
Exhibit 3: Stock Option Agreement dated as of June 24, 1994.
Page 10 of 88 Pages
<PAGE> 11
SIGNATURE
After reasonable inquiry and to the best of my knowledge
and belief, I certify that the information set forth in this Statement is true,
complete and correct. Date: June 30, 1994
ARROW ELECTRONICS, INC.
By: /s/ Robert E. Klatell
-----------------------------
Name: Robert E. Klatell
Title: Senior Vice President and
Chief Financial Officer
Page 11 of 88 Pages
<PAGE> 12
SCHEDULE A
The following information sets forth the name, citizenship,
business address and present principal occupation of each of the directors and
executive officers of Arrow. If no address is given, the director's or
officer's business address is that of Arrow Electronics, Inc., 25 Hub Drive,
Melville, New York 11747. Each of the directors and executive officers of
Arrow is a citizen of the United States.
<TABLE>
<CAPTION>
Name and Business Present Principal Occupation
----------------- ----------------------------
Directors of Arrow
------------------
<S> <C>
Daniel W. Duval President and Chief Executive
Robbins & Myers, Inc. Officer of Robbins & Myers, Inc.
1400 Kettering Towers
Dayton, OH 45423
Carlo Giersch President and Chief Executive
Spoerle Electronic Officer of Spoerle Electronic
Max-Planck-Str. 1-3
6072 Dreieich 1
Frankfurt, Germany
J. Spencer Gould Retired
P.O. Box 1289
Manchester Center
Vermont 05255-1289
Stephen P. Kaufman Chairman and Chief Executive
Officer of Arrow
Lawrence R. Kem General Partner of Rudolph Stone
Rudolph Stone Associates
Associates
7670 North Port
Washington Rd.
Milwaukee, WI 53217
Robert E. Klatell Senior Vice President, Chief Financial Officer, General
Counsel, Secretary, and Treasurer of Arrow
Steven W. Menefee Vice President of Arrow; President of Arrow/Schweber
Electronics Group
Karen Gordon Mills President of MMP Group, Inc.
925 Park Avenue
New York, N.Y. 10028
</TABLE>
Page 12 of 88 Pages
<PAGE> 13
<TABLE>
<CAPTION>
Name and Business Present Principal Occupation
----------------- ----------------------------
<S> <C>
Anne Pol President of Shipping & Weighing Systems Division of
One Parrot Drive Pitney Bowes, Inc.
MS 27-0
Shelton, CT 06484-4075
Richard S. Rosenbloom David Sarnoff Professor of Business Administration at
Harvard Business School Harvard Business School
Morgan Hall
Soldiers Field
Boston, Mass. 02163
John C. Waddell Vice Chairman of Arrow
</TABLE>
Page 13 of 88 Pages
<PAGE> 14
<TABLE>
<CAPTION>
Name and Business Present Principal Occupation
----------------- ----------------------------
Executive Officers Of Arrow Who Are Not Directors
-------------------------------------------------
<S> <C>
Robert J. McInerney Vice President; President, Commercial Systems Group
Wesley S. Sagawa Vice President; President, Capstone Electronics Corp.
Jan Salsgiver Vice President; President, Zeus Electronics
</TABLE>
Page 14 of 88 Pages
<PAGE> 15
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Document
- ------ --------
<S> <C>
1 Agreement and Plan of Merger dated as of June 24, 1994 among Arrow Electronics, Inc., Gates/FA Distributing,
Inc. and AFG Acquisition Company.
2 Irrevocable Proxies dated as of June 24, 1994.
3 Stock Option Agreement dated as of June 24, 1994.
</TABLE>
Page 15 of 88 Pages
<PAGE> 1
EXHIBIT 1
___________________________________________________________
AGREEMENT AND PLAN OF MERGER
By and Among
Arrow Electronics, Inc.
AFG Acquisition Company
and
Gates/FA Distributing, Inc.
Dated as of June 24, 1994
___________________________________________________________
Page 16 of 88 Pages
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE 1
THE MERGER
<S> <C> <C>
1.1 Effective Time of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Effects of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
</TABLE>
ARTICLE 2
CONVERSION OF SECURITIES
<TABLE>
<S> <C> <C>
2.1 Conversion of Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . 3
(a) Capital Stock of Sub . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(b) Cancellation of Treasury Stock and Parent-Owned
Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(c) Conversion Ratio for the Company Common Stock . . . . . . . . . . . . . . 3
2.2 Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(a) Exchange Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(b) Exchange Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(c) Distribution with Respect to Unexchanged Shares . . . . . . . . . . . . . 5
(d) No Further Ownership Rights in the Company
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(e) No Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(f) Termination of Exchange Fund . . . . . . . . . . . . . . . . . . . . . . . 6
(g) No Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
</TABLE>
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
<TABLE>
<S> <C> <C>
3.1 Corporate Organization and Authority of the Company . . . . . . . . . . . . . 7
3.2 Subsidiaries and Equity Investments . . . . . . . . . . . . . . . . . . . . . 8
3.3 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.4 No Violation; Consents and Approvals . . . . . . . . . . . . . . . . . . . . . 9
3.5 SEC Reports and Financial Statements of the Company . . . . . . . . . . . . . 10
3.6 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . 10
3.7 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.8 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.9 Title to Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
-i-
Page 17 of 88 Pages
<PAGE> 3
<TABLE>
<S> <C> <C>
3.10 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.11 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.12 Employee Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.13 No Material Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.14 Absence of Change or Event . . . . . . . . . . . . . . . . . . . . . . . . 15
3.15 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.16 Compliance With Law and Other Instruments . . . . . . . . . . . . . . . . . 17
3.17 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.18 Affiliate Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.19 Customers and Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.20 Absence of Questionable Payments . . . . . . . . . . . . . . . . . . . . . 23
3.21 Information Supplied. . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.22 Opinion of Financial Advisor. . . . . . . . . . . . . . . . . . . . . . . . 24
3.23 Vote Required. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.24 Accounting Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.25 Company Not an Interested Shareholder or a
30% Shareholder. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.26 Section 203 of the DGCL Not Applicable . . . . . . . . . . . . . . . . . . 25
3.27 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
</TABLE>
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
<TABLE>
<S> <C> <C>
4.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.2 Corporate Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.3 No Violation; Consents and Approvals . . . . . . . . . . . . . . . . . . . . 26
4.4 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.5 SEC Reports and Financial Statements of Parent . . . . . . . . . . . . . . . 27
4.6 Information Supplied . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
</TABLE>
ARTICLE 5
CERTAIN COVENANTS AND AGREEMENTS
OF THE COMPANY AND PARENT
<TABLE>
<S> <C> <C>
5.1 Conduct of the Company's Business Prior to the
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.2 Conduct of Parent's Business Prior to the Closing
Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.3 Preparation of S-4 and the Proxy Statement. . . . . . . . . . . . . . . . . 30
5.4 Letter of the Company's Accountants. . . . . . . . . . . . . . . . . . . . . 30
5.5 Legal Conditions to Merger. . . . . . . . . . . . . . . . . . . . . . . . . 30
5.6 Affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.7 Stock Exchange Listing. . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.8 Stockholders' Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.9 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.10 Broker's and Finder's Fees . . . . . . . . . . . . . . . . . . . . . . . . 32
5.11 Access to Information and Confidentiality . . . . . . . . . . . . . . . . . 33
5.12 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.13 Additional Agreements; Best Efforts . . . . . . . . . . . . . . . . . . . . 35
5.14 No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
</TABLE>
-ii-
Page 18 of 88 Pages
<PAGE> 4
<TABLE>
<S> <C> <C>
5.15 Advice of Changes; SEC Filings . . . . . . . . . . . . . . . . . . . . . . . . 35
5.16 Press Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.17 Company Option Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.18 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
</TABLE>
ARTICLE 6
CONDITIONS PRECEDENT
<TABLE>
<S> <C> <C>
6.1 Conditions to Each Party's Obligation to Effect
the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(a) Stockholder Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(b) NYSE Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(c) Other Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(d) S-4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(e) No Injunctions or Restraints . . . . . . . . . . . . . . . . . . . . . . . 38
(f) No Governmental Actions . . . . . . . . . . . . . . . . . . . . . . . . . 38
(g) Pooling Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(h) Tax Free Reorganization . . . . . . . . . . . . . . . . . . . . . . . . . 38
6.2 Conditions to Obligations of Parent and Sub . . . . . . . . . . . . . . . . . . 38
(a) Representations and Warranties; Performance of
Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(b) Tax Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(c) No Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
(d) Consents Under Agreements . . . . . . . . . . . . . . . . . . . . . . . . 39
(e) Letter from Company Affiliates . . . . . . . . . . . . . . . . . . . . . . 39
(f) Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . 39
(g) No Amendments to Resolutions . . . . . . . . . . . . . . . . . . . . . . . 39
6.3 Conditions to Obligations of the Company . . . . . . . . . . . . . . . . . . . 40
(a) Representations and Warranties; Performance of
Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(b) Tax Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
(c) Consents Under Agreements . . . . . . . . . . . . . . . . . . . . . . . . 40
(d) No Amendments to Resolutions . . . . . . . . . . . . . . . . . . . . . . . 40
</TABLE>
ARTICLE 7
TERMINATION AND AMENDMENT
<TABLE>
<S> <C> <C>
7.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.3 Extension; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.4 Amendment and Modification . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
</TABLE>
ARTICLE 8
GENERAL PROVISIONS
<TABLE>
<S> <C> <C>
8.1 Nonsurvival of Representations, Warranties and
Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
</TABLE>
-iii-
Page 19 of 88 Pages
<PAGE> 5
<TABLE>
<S> <C> <C>
8.3 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
8.4 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
8.5 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
8.6 Entire Agreement; No Third Party Beneficiaries;
Rights of Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
8.7 No Remedy in Certain Circumstances . . . . . . . . . . . . . . . . . . . . . . 45
8.8 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
8.9 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
</TABLE>
Exhibit 5.6 Affiliate Agreement
-iv-
Page 20 of 88 Pages
<PAGE> 6
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of June 24, 1994, by
and among Arrow Electronics, Inc., a New York corporation ("Parent"), AFG
Acquisition Company, a Delaware corporation and a wholly owned subsidiary of
Parent ("Sub"), and Gates/FA Distributing, Inc., a Delaware corporation (the
"Company").
WHEREAS, the respective Boards of Directors of Parent, Sub and
the Company deem it advisable and in the best interests of their respective
stockholders to consummate, and have approved, the business combination
transaction provided for herein in which Sub would merge with and into the
Company and the Company would become a wholly owned subsidiary of Parent (the
"Merger");
WHEREAS, for Federal income tax purposes, it is intended that
the Merger qualify as a reorganization under the provisions of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, for accounting purposes, it is intended that the
Merger shall be accounted for as a pooling of interests;
WHEREAS, concurrently with the execution of this Agreement and
as an inducement to Parent and Sub to enter into this Agreement, (i) the
Company and Parent have entered into a stock option agreement dated the date
hereof (the "Option Agreement") providing for the purchase by Parent of
newly-issued shares of the Company's Common Stock, (ii) each of Cheyenne
Software, Inc. and Dennis Gates has on the date hereof granted to Parent an
irrevocable proxy to vote the shares of the Company's Common Stock owned by
such stockholders, respectively, to approve the Merger; and
WHEREAS, Parent, Sub and the Company desire to make certain
representations, warranties and agreements in connection with the Merger and
also to prescribe various conditions to the Merger.
Page 21 of 88 Pages
<PAGE> 7
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set forth
herein, the parties hereto agree as follows:
ARTICLE 1
THE MERGER
1.1 Effective Time of the Merger. Subject to the provisions
of this Agreement, a certificate of merger (the "Certificate of Merger") shall
be duly prepared, executed and acknowledged by the Surviving Corporation (as
defined in Section 1.3) and thereafter delivered to the office of the Secretary
of State of the State of Delaware, for filing and thereafter recorded, as
provided in the Delaware General Corporation Law (the "DGCL"), as soon as
practicable on or after the Closing Date (as defined in Section 1.2). The
Merger shall become effective upon the filing of the Certificate of Merger with
the office of the Secretary of State of the State of Delaware or at such time
thereafter as is provided in the Certificate of Merger (the "Effective Time").
1.2 Closing. The closing of the Merger (the "Closing")
will take place at the offices of Winthrop, Stimson, Putnam & Roberts, One
Battery Park Plaza, New York, New York, at 10:00 A.M. (local time) on a date to
be specified by Parent and the Company, which shall be no later than the second
business day after satisfaction or waiver of the latest to occur of the
conditions set forth in Article 6 (other than Sections 6.2(a)(i) and 6.3(a)(i)
and the delivery of the officer's certificates referred to in Sections 6.2(a)
and 6.3(a)) (the "Closing Date") or at such other place, time and date as may
be agreed upon in writing by Parent and the Company.
1.3 Effects of the Merger. (a) At the Effective Time (i)
the separate existence of Sub shall cease and Sub shall be merged with and into
the Company (Sub and the Company are sometimes referred to herein as the
"Constituent Corporations" and the Company is sometimes referred to herein as
the "Surviving Corporation"), (ii) the Certificate of Incorporation of the
Company as in effect immediately prior to the Effective Time shall be the
Certificate of Incorporation of the Surviving Corporation and (iii) the By-laws
of the Company as in effect immediately prior to the Effective Time shall be
the By-laws of the Surviving Corporation.
(b) The Merger shall have the effects set forth in Sections
259 and 261 of the DGCL.
-2-
Page 22 of 88 Pages
<PAGE> 8
ARTICLE 2
CONVERSION OF SECURITIES
2.1 Conversion of Capital Stock. As of the Effective Time,
by virtue of the Merger and without any further action on the part of the
holder of any shares of Common Stock, par value $.01 per share, of the Company
(the "Company Common Stock") or capital stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share
of the capital stock of Sub shall be converted into and become one fully paid
and nonassessable share of Common Stock, par value $.01 per share, of the
Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned Stock.
All shares of the Company Common Stock that are owned by the Company as
treasury stock and any shares of the Company Common Stock owned by Parent, Sub
or any wholly owned Subsidiary of the Company or Parent shall be canceled and
retired and shall cease to exist and no stock of Parent or other consideration
shall be delivered in exchange therefor. All shares of Common Stock, par value
$1.00 per share, of Parent (the "Parent Common Stock"), if any, owned by the
Company shall remain unaffected by the Merger. As used in this Agreement, the
word "Subsidiary" means, with respect to any party, any corporation or other
organization, whether incorporated or unincorporated, of which (i) such party
or any other Subsidiary of such party is a general partner (excluding
partnerships, the general partnership interests of which held by such party or
any Subsidiary of such party do not have a majority of the voting interest in
such partnership) or (ii) at least a majority of the securities or other
interests having by their terms ordinary voting power to elect a majority of
the Board of Directors or others performing similar functions with respect to
such corporation or other organization is directly or indirectly owned or
controlled by such party or by any one or more of its Subsidiaries, or by such
party and one or more of its Subsidiaries.
(c) Conversion Ratio for the Company Common Stock. Subject
to Section 2.2(e), each issued and outstanding share of the Company Common
Stock (other than shares to be canceled in accordance with Section 2.1(b))
shall be converted into the right to receive the number (the "Conversion
Ratio") of shares of Parent Common Stock equal to a fraction the numerator of
which is $22.50 and the denominator of which is the average closing price on
the New York Stock Exchange, Inc. (the "NYSE") of one share of Parent Common
Stock over the twenty-day trading period ending two trading days before the
Closing Date (the "Parent Stock Price"). Each share of the Parent Common Stock
issued pursuant to the Merger shall entitle the holder thereof to the
corresponding number of rights (the "Parent Rights") to purchase shares of
Participating Preferred Stock of Parent pursuant to the Rights Agreement dated
as of March 2, 1988, as amended, between Parent
-3-
Page 23 of 88 Pages
<PAGE> 9
and Chemical Bank (formerly Manufacturers Hanover Trust Company), as Rights
Agent (the "Parent Rights Agreement"). All references in this Agreement to the
Parent Common Stock to be received pursuant to the Merger shall be deemed to
include the Parent Rights. All such shares of the Company Common Stock, when
so converted, shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each holder of a certificate
representing any such shares shall cease to have any rights with respect
thereto, except the right to receive the shares of the Parent Common Stock and
any cash in lieu of fractional shares of the Parent Common Stock to be issued
or paid in consideration therefor upon the surrender of such certificate in
accordance with Section 2.2, without interest.
2.2 Exchange of Certificates.
(a) Exchange Agent. As of the Effective Time, Parent
shall deposit with Chemical Bank or such other bank or trust company designated
by Parent (and reasonably acceptable to the Company) (the "Exchange Agent"),
for the benefit of the holders of shares of the Company Common Stock, for
exchange in accordance with this Article 2, through the Exchange Agent,
certificates representing the shares of the Parent Common Stock (such shares of
the Parent Common Stock, together with any dividends or distributions with
respect thereto, being hereinafter referred to as the "Exchange Fund") issuable
pursuant to Section 2.1 in exchange for outstanding shares of the Company
Common Stock.
(b) Exchange Procedures. As soon as reasonably
practicable after the Effective Time, the Exchange Agent shall mail to each
holder of record of a certificate or certificates which immediately prior to
the Effective Time represented outstanding shares of the Company Common Stock
(the "Certificates") whose shares where converted pursuant to Section 2.1 into
the right to receive shares of the Parent Common Stock (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such
other provisions as Parent and the Company may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for certificates representing shares of the Parent Common Stock. Upon
surrender of a Certificate for cancellation to the Exchange Agent or to such
other agent or agents as may be appointed by Parent and Sub, together with such
letter of transmittal, duly executed, the holder of such Certificate shall be
entitled to receive in exchange therefor a certificate representing that number
of whole shares of the Parent Common Stock which such holder has the right to
receive pursuant to the provisions of this Article 2 (and the dividends or
distributions and cash in lieu of fractional shares as contemplated by Sections
2.2(c) and 2.2(e), respectively), and the Certificate so surrendered shall
forthwith be canceled. In the event of a transfer of ownership of the Company
Common Stock
-4-
Page 24 of 88 Pages
<PAGE> 10
which is not registered in the transfer records of the Company, a certificate
representing the proper number of shares of the Parent Common Stock may be
issued to a transferee if the Certificate representing the Company Common Stock
is presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and by evidence that any applicable stock
transfer taxes have been paid. Until surrendered as contemplated by this
Section 2.2, each Certificate shall be deemed at any time after the Effective
Time to represent only the right to receive upon such surrender the certificate
representing shares of the Parent Common Stock and cash in lieu of any
fractional shares of the Parent Common Stock as contemplated by this Section
2.2.
(c) Distribution with Respect to Unexchanged Shares. No
dividends or other distributions declared or made after the Effective Time with
respect to the Parent Common Stock with a record date after the Effective Time
shall be paid to the holder of any unsurrendered Certificate with respect to
the shares of the Parent Common Stock represented thereby and no cash payment
in lieu of fractional shares shall be paid to any such holder pursuant to
Section 2.2(e) until the holder of record of such Certificate shall surrender
such Certificate. Subject to the effect of applicable laws, following
surrender of any such Certificate, there shall be paid to the record holder of
the certificates representing whole shares of the Parent Common Stock issued in
exchange therefor, without interest, (i) at the time of such surrender, the
amount (to the extent such amount has been determined in accordance with
Section 2.2(e)) of any cash payable in lieu of a fractional share of the Parent
Common Stock to which such holder is entitled pursuant to Section 2.2(e) and
the amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole shares of the Parent
Common Stock, and (ii) at the appropriate payment date, the amount of dividends
or other distributions with a record date after the Effective Time but prior to
surrender and a payment date subsequent to surrender payable with respect to
such whole shares of the Parent Common Stock.
(d) No Further Ownership Rights in the Company Common
Stock. All shares of the Parent Common Stock issued upon the surrender for
exchange of shares of the Company Common Stock in accordance with the terms
hereof (including any cash paid pursuant to Section 2.2(c) or 2.2(e)) shall be
deemed to have been issued in full satisfaction of all rights pertaining to
such shares of the Company Common Stock, subject, however, to the Surviving
Corporation's obligation to pay any dividends or make any other distributions
with a record date prior to the Effective Time which may have been declared or
made by the Company on such shares of the Company Common Stock in accordance
with the terms of this Agreement or prior to the date hereof and which remain
unpaid at the Effective Time, and there shall be no further registration of
transfers on the stock transfer books of the Surviving Corporation of the
shares of the Company Common Stock
-5-
Page 25 of 88 Pages
<PAGE> 11
which were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation for any
reason, they shall be canceled and exchanged as provided in this Article 2.
(e) No Fractional Shares. No certificates or scrip
representing fractional shares of the Parent Common Stock shall be issued upon
the surrender for exchange of Certificates, and such fractional share interests
will not entitle the owner thereof to vote or to enjoy any other rights of a
stockholder of Parent. All fractional shares of the Parent Common Stock that a
holder of the Company Common Stock would otherwise be entitled to receive as a
result of the Merger shall be aggregated and if a fractional share results from
such aggregation, such holder shall be entitled to receive, in lieu thereof, an
amount in cash determined by multiplying the Parent Stock Price by the fraction
of a share of the Parent Common Stock to which such holder would otherwise have
been entitled. The Surviving Corporation shall timely make available to the
Exchange Agent any cash necessary to make payments in lieu of fractional shares
as aforesaid. Alternatively, Parent shall have the option of instructing the
Exchange Agent to aggregate all fractional shares of the Parent Common Stock,
sell such shares in the public market and distribute to holders of the Company
Common Stock a pro rata portion of the proceeds of such sale. No such cash in
lieu of fractional shares of the Parent Common Stock shall be paid to any
holder of the Company Common Stock until Certificates representing such Company
Common Stock are surrendered and exchanged in accordance with Section 2.2(b).
(f) Termination of Exchange Fund. Any portion of the
Exchange Fund and any cash in lieu of fractional shares of the Parent Common
Stock made available to the Exchange Agent which remains undistributed to the
stockholders of the Company for six months after the Effective Time shall be
delivered to Parent, upon demand, and any stockholders of the Company who have
not theretofore complied with this Article 2 shall thereafter look only to
Parent for payment of their claim for the Parent Common Stock, any cash in lieu
of fractional shares of the Parent Common Stock and any dividends or
distributions with respect to the Parent Common Stock.
(g) No Liability. Neither Parent nor the Company shall
be liable to any holder of shares of the Company Common Stock or the Parent
Common Stock, as the case may be, for such shares (or dividends or
distributions with respect thereto) or cash in lieu of fractional shares of the
Parent Common Stock delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
-6-
Page 26 of 88 Pages
<PAGE> 12
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub as
follows:
3.1 Corporate Organization and Authority of the Company.
The Company is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware and has full corporate power
and authority to own, lease and operate its properties and to carry on its
business as now being conducted, and, except as disclosed in the Company's
Disclosure Memorandum furnished to Parent on the date hereof (the "Disclosure
Memorandum") with specific reference to this Section, is duly licensed or
qualified and in good standing as a foreign corporation in each jurisdiction in
which the nature of the activities conducted by it or the character of the
properties owned, leased or operated by it requires it to be so licensed or so
qualified, except where the failure to be so licensed or so qualified would not
have a Material Adverse Effect on the Company. As used in this Agreement, the
term "Material Adverse Effect" means, with respect to any party, a material
adverse effect on the financial condition, assets, liabilities (contingent or
otherwise), results of operation, business or business prospects of such party
and its Subsidiaries, if any, taken as a whole. For purposes of this
Agreement, with respect to the Company, a Material Adverse Effect shall not
include a material adverse effect on the financial condition, assets,
liabilities (contingent or otherwise), results of operation, business or
business prospects of the Company (i) as a result of the proposed acquisition
of the Company by Parent and the impact thereof on the operating performance of
the Company pursuant to the terms of this Agreement or (ii) that is disclosed
in the Company SEC Documents (as defined in Section 3.5) or in the Disclosure
Memorandum. The Company has heretofore delivered to Parent complete and
correct copies of its Amended and Restated Certificate of Incorporation, as
amended, and Amended and Restated Bylaws, as amended, as currently in effect.
The Company has full corporate power and authority to enter into this Agreement
and, subject to approval of this Agreement by the stockholders of the Company
in accordance with the applicable provisions of the DGCL, to consummate the
transactions contemplated hereby. The execution, delivery and performance by
the Company of this Agreement have been duly authorized by all requisite
corporate action on the part of the Company, subject to such approval of this
Agreement by the stockholders of the Company in accordance with the applicable
provisions of the DGCL. This Agreement has been duly executed and delivered by
the Company, and (assuming due execution and delivery by Parent and Sub) this
Agreement constitutes a valid and binding obligation of the Company,
enforceable in accordance with its terms, except as enforcement may be limited
by bankruptcy, insolvency or other
-7-
Page 27 of 88 Pages
<PAGE> 13
similar laws affecting the enforcement of creditors' rights generally, and
except that the availability of equitable remedies, including specific
performance, is subject to the discretion of the court before which any
proceeding therefor may be brought, and except as indemnification may be
limited by public policy.
3.2 Subsidiaries and Equity Investments. The Company has
no direct or indirect Subsidiary. Except as disclosed in the Disclosure
Memorandum with specific reference to this Section, the Company does not own,
directly or indirectly, any capital stock or other equity securities of any
corporation or have any direct or indirect equity or ownership interest,
including interests in partnerships and joint ventures, in any business or
entity.
3.3 Capitalization. As of the date hereof, the
authorized capital stock of the Company consists of 20,000,000 shares of the
Company Common Stock and 10,000,000 shares of Preferred Stock, par value $.01
per share (the "Company Preferred Stock"). As of the date hereof, (i)
6,316,901 shares of the Company Common Stock are issued and outstanding, and
129,665, 58,423, 25,000 and 18,300 shares of the Company Common Stock are
reserved for issuance pursuant to the Company's 1985 Amended and Restated
Incentive Stock Option Plan, the Company's 1987 Stock Option Plan, the
Company's 1993 Stock Option Plan for Outside Directors and the three stock
options dated December 17, 1992 granted to certain directors of the Company
(collectively, the "Company Option Plans"), respectively, (ii) no shares of the
Company Common Stock are reflected on the books and records of the Company as
treasury shares, (iii) no shares of the Company Preferred Stock are issued or
outstanding, and (iv) no notes, bonds, debentures or other indebtedness having
the right to vote (or convertible into or exchangeable for securities having
the right to vote) ("Voting Debt") of the Company are issued or outstanding.
All such issued and outstanding shares of the Company Common Stock have been,
and any shares of the Company Common Stock which may be issued pursuant to the
Company Option Plans will be, validly issued, fully paid and nonassessable and
not subject to preemptive rights. Except for (a) the rights created pursuant
to this Agreement and the Option Agreement, (b) the rights outstanding on the
date hereof created pursuant to the Company Option Plans to purchase in the
aggregate 231,388 shares of the Company Common Stock and (c) the issued and
outstanding shares of the Company Common Stock set forth herein, as of the date
hereof, there are no (i) outstanding shares of capital stock or Voting Debt of
the Company, (ii) outstanding options, warrants, calls, subscriptions or other
rights of any kind to acquire, or agreements or commitments in effect to which
the Company is a party or by which the Company is bound obligating the Company
to issue or sell, or cause to be issued or sold, any additional shares of
capital stock or any Voting Debt of the Company, or (iii) outstanding
securities convertible into or exchangeable for, or which otherwise confer on
the holder thereof
-8-
Page 28 of 88 Pages
<PAGE> 14
any right to acquire, any such additional shares or Voting Debt. The Company
is not committed to issue any such option, warrant, call, subscription, right
or security, and after the Effective Time, there will be no such option,
warrant, call, subscription, right, agreement, commitment or security. There
are no contracts, commitments or agreements relating to voting, purchase or
sale of the Company's capital stock or Voting Debt (including, without
limitation, any redemption by the Company thereof) (i) between or among the
Company and any of its stockholders and (ii) to the best of the Company's
knowledge, between or among any of the Company's stockholders.
3.4 No Violation; Consents and Approvals. Except as
disclosed in the Disclosure Memorandum with specific reference to this Section,
neither the Company nor any of its properties or assets is subject to or bound
by any provision of:
(a) any law, statute, rule, regulation, ordinance or judicial
or administrative decision;
(b) its Amended and Restated Certificate of Incorporation, as
amended, Amended and Restated Bylaws, as amended, or similar
organizational document;
(c) any (i) credit or loan agreement, mortgage, deed of
trust, note, bond, indenture, license, concession, franchise, permit,
trust, custodianship or other restriction, (ii) instrument,
obligation, contract or agreement (including, without limitation, any
lease or any plan, fund or arrangement contemplated by Section
3.12(a)), other than those contemplated by clause (i), which, in the
case of this clause (ii), individually involves the payment or receipt
by the Company of in excess of $15,000 or (iii) instruments,
obligations, contracts or agreements (including, without limitation,
leases or plans, funds or arrangements contemplated by Section
3.12(a)), other than those contemplated by clause (i), which, in the
case of this clause (iii), collectively involve the payment or receipt
by the Company of in excess of $150,000; or
(d) any judgment, order, writ, injunction or decree;
that would restrict, prohibit or prevent, or would be violated or breached by,
or would result in the creation of any Encumbrance (as defined in Section 3.9)
as a result of, or under which there would be a material default (with or
without notice or lapse of time, or both) or right of termination, cancellation
or acceleration of any obligation or the loss of a material benefit as a result
of, the execution, delivery and performance by the Company of this Agreement
and the consummation of the transactions contemplated hereby. Except as
disclosed in the Disclosure Memorandum with specific reference to this Section,
no consent, order, approval or authorization of, or declaration, notice,
registration or filing with, any court, administrative
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agency or commission or other governmental authority or instrumentality (each a
"Governmental Entity"), individual, corporation, partnership, trust or
unincorporated organization (together with Governmental Entities, each a
"Person") is required by or with respect to the Company in connection with the
execution, delivery and performance by the Company of this Agreement and the
consummation of the transactions contemplated hereby.
3.5 SEC Reports and Financial Statements of the Company. The
Company has filed with the Securities and Exchange Commission (the "SEC"), and
has heretofore provided to Parent true and complete copies of, all forms,
reports, schedules, statements and other documents required to be filed by it
since January 1, 1989 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") or the Securities Act of 1933, as amended (the "Securities
Act") (as such documents have been amended since the time of their filing,
collectively, the "Company SEC Documents"), except, with respect to any period
prior to January 1, 1992, for failures to file which, individually or in the
aggregate, are not reasonably likely to have a Material Adverse Effect on the
Company. Except as disclosed in the Disclosure Memorandum with specific
reference to this Section, the Company SEC Documents, including without
limitation any financial statements and schedules included therein, at the time
filed or, if subsequently amended, as so amended, (i) did not contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading and (ii)
complied in all material respects with the applicable requirements of the
Exchange Act and the Securities Act, as the case may be, and the applicable
rules and regulations of the SEC thereunder. Except as disclosed in the
Disclosure Memorandum with specific reference to this Section, the financial
statements of the Company included in the Company SEC Documents comply as to
form in all material respects with applicable accounting requirements and with
the published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles ("GAAP")
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto or, in the case of the unaudited statements, as
permitted by Form 10-Q of the SEC) and fairly present (subject, in the case of
the unaudited statements, to customary year-end audit adjustments) the
financial position of the Company as at the dates thereof and the results of
its operations and cash flows.
3.6 Absence of Undisclosed Liabilities. Except as and to the
extent set forth in the Company's Annual Report on Form 10-K for the year ended
June 30, 1993, or as disclosed in the Form 10-Q for the nine month period ended
March 31, 1994, or as disclosed in the Disclosure Memorandum with specific
reference to this Section, as of March 31, 1994, the Company had no
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liabilities or obligations of any nature, whether or not accrued, contingent or
otherwise, that would be required by GAAP to be reflected on the balance sheet
of the Company (including the notes thereto) as of such date. Since March 31,
1994, the Company has not incurred any liabilities or obligations of any
nature, whether or not accrued, contingent or otherwise, not in the ordinary
course of business or which would have, individually or in the aggregate, a
Material Adverse Effect on the Company.
3.7 Inventory. Except as disclosed in the Disclosure
Memorandum with specific reference to this Section, the inventories of the
Company are in good condition, conform in all respects with applicable
specifications and warranties of the manufacturer thereof, are not obsolete and
are saleable in the ordinary course of business and at values not less than the
book value amounts thereof. The value of all items of slow-moving (which for
purposes hereof shall mean items where the quantity on hand exceeds the actual
sales thereof by the Company during the preceding twelve months), excessive,
redundant, or obsolete inventory and of inventory of below standard quality or
which cannot be returned to the manufacturer thereof under the applicable
distribution agreement has been written down to net realizable value or
adequate reserves have been provided therefor, and since March 31, 1994, has
been accrued on the books of the Company in the ordinary course of business
consistent with past practices in accordance with GAAP.
3.8 Accounts Receivable. The accounts receivable disclosed
in the Company SEC Documents as of March 31, 1994, and all accounts receivable
created since that date through the Closing Date, represent and will represent
valid obligations owing to the Company and are fully collectible by the
Company, subject to the reserve for doubtful accounts disclosed in such Company
SEC Documents and, with respect to accounts receivable created since such date,
any subsequently filed Company SEC Documents, or as accrued on the books of the
Company in the ordinary course of business consistent with past practices in
accordance with GAAP since the last filed Company SEC Documents.
3.9 Title to Property.
(a) Except as disclosed in the Disclosure Memorandum with
specific reference to this Section, the Company has good and valid title to all
of its properties, assets and other rights that do not constitute real
property, free and clear of all Encumbrances. Except as disclosed in the
Disclosure Memorandum with specific reference to this Section, the Company
owns, has valid leasehold interests in or valid contractual rights to use, all
of the assets, tangible and intangible, used by, or necessary for the conduct
of the business of, the Company.
(b) The machinery, tools, equipment and other tangible
physical assets of the Company (other than items of inventory) are in good
working order, normal wear and tear excepted, are
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being used or are useful in the business of the Company at its present level of
activity and are in an operating condition sufficient to conduct the business
of the Company as now being conducted.
(c) The Disclosure Memorandum sets forth with specific
reference to this Section each and every parcel of real property or interest
in real estate owned, held under a lease or used by, or necessary for the
conduct of the business of, the Company (the "Real Property").
(d) Except as disclosed in the Disclosure Memorandum with
specific reference to Section 3.9(c), the Company:
(i) owns and has good and marketable title in fee simple
to the Real Property designated as "owned property" in the Disclosure
Memorandum free and clear of all pledges, liens, charges, encumbrances,
easements, defects, security interests, claims, options and
restrictions of every kind ("Encumbrances"), except (A) minor
imperfections of title, none of which, individually or in the aggregate,
materially detracts from the value of or impairs the use of the
affected property or impairs the operations of the Company and (B)
liens for current taxes not yet due and payable;
(ii) with respect to the Real Property designated as
"leased property" in the Disclosure Memorandum, is in peaceful and
undisturbed possession of the space and/or estate under each lease
under which it is a tenant, and there are no material defaults by it
as tenant thereunder; and
(iii) has good and valid rights of ingress and egress to
and from all the Real Property from and to the public street systems
for all usual street, road and utility purposes.
(e) Except as disclosed in the Disclosure Memorandum with
specific reference to this Section, all of the buildings, structures,
improvements and fixtures used by or useful in the business of the Company,
owned or leased by the Company, are in a good state of repair, maintenance and
operating condition and, except as so disclosed and, except for normal wear and
tear, there are no defects with respect thereto which would impair the
day-to-day use of any such buildings, structures, improvements or fixtures or
which would subject the Company to liability under applicable law.
3.10 Intellectual Property. Except as disclosed in the
Disclosure Memorandum with specific reference to this Section, the Company owns
or has valid rights to use all patents, patent rights, trademarks, trademark
rights, trade names, trade name rights, copyrights, service marks, trade
secrets, applications for trademarks and for service marks, know-how and
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other proprietary rights and information used or held for use in connection
with the business of the Company as currently conducted or as contemplated to
be conducted, and to the best knowledge of the Company, there is no assertion
or claim challenging the validity of any of the foregoing which, individually
or in the aggregate, could have a Material Adverse Effect on the Company.
Except as disclosed in the Disclosure Memorandum with specific reference to
this Section, the conduct of the business of the Company as currently conducted
does not conflict in any way with any patent, patent right, license, trademark,
trademark right, trade name, trade name right, service mark or copyright of any
third party that, individually or in the aggregate, could have a Material
Adverse Effect on the Company. Except as disclosed in the Disclosure
Memorandum with specific reference to this Section, to the best knowledge of
the Company, there are no infringements of any proprietary rights owned by the
Company which, individually or in the aggregate, could have a Material Adverse
Effect on the Company.
3.11 Tax Matters. The Company (or any predecessor) and any
consolidated, combined, unitary, affiliated or aggregate group for Tax purposes
of which the Company (or any predecessor) is or has been a member (a
"Consolidated Group") has, to the best of the Company's knowledge, timely filed
all Tax Returns required to be filed by it, has paid all Taxes shown on any Tax
Return to be due and has provided adequate reserves in its financial statements
for any Taxes that have not been paid, whether or not shown as being due on any
Tax Returns. Except as disclosed in the Disclosure Memorandum with specific
reference to this Section and to the Company's best knowledge, (i) no material
claim for unpaid Taxes has become a lien against the property of the Company or
is being asserted against the Company, (ii) no audit of any Tax Return of the
Company is being conducted by a Tax authority, and (iii) no extension of the
statute of limitations on the assessment of any Taxes has been granted by the
Company and is currently in effect. As used herein, "Taxes" shall mean all
taxes of any kind, including, without limitation, those on or measured by or
referred to as income, gross receipts, sales, use, ad valorem, franchise,
profits, license, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, value added, property or windfall profits taxes, customs,
duties or similar fees, assessments or charges of any kind whatsoever, together
with any interest and any penalties, additions to tax or additional amounts
imposed by any governmental authority, domestic or foreign. As used herein,
"Tax Return" shall mean any return, report or statement required to be filed
with any governmental authority with respect to Taxes.
3.12 Employee Matters. (a) With respect to each employee
benefit plan (including, without limitation, any "employee benefit plan" as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), and any material bonus, pension, profit sharing,
deferred compensation, incentive compensation, stock ownership,
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stock purchase, stock option, phantom stock, retirement, vacation, severance,
disability, death benefit, hospitalization, insurance or other plan,
arrangement or understanding (whether or not legally binding) (all the
foregoing being herein called the "Benefit Plans"), maintained or contributed
to by the Company, the Company has made available to Parent a true and correct
copy of (i) the most recent annual report (Form 5500) filed with the Internal
Revenue Service, (ii) such Benefit Plan, (iii) each trust agreement and group
annuity contract, if any, relating to such Benefit Plan and (iv) the most
recent actuarial report or valuation relating to a Benefit Plan subject to
Title IV of ERISA, if any.
(b) With respect to the Benefit Plans, individually and in
the aggregate, no event has occurred, and to the Company's best knowledge,
there exists no condition or set of circumstances, other than as disclosed in
the Disclosure Memorandum with specific reference to this Section, in
connection with which the Company could be subject to any liability that is
reasonably likely to have a Material Adverse Effect on the Company (except
liability for benefits claims and funding obligations payable in the ordinary
course), under ERISA, the Code or any other applicable law.
(c) Except as set forth in the Disclosure Memorandum with
specific reference to this Section, with respect to the Benefit Plans,
individually and in the aggregate, there are no funded benefit obligations for
which contributions have not been made or properly accrued and there are no
unfunded benefit obligations which have not been accounted for by reserves, or
otherwise properly footnoted in accordance with GAAP, on the financial
statements of the Company, which obligations could have a Material Adverse
Effect on the Company.
(d) Except as set forth in the Disclosure Memorandum with
specific reference to this Section, and except as described in Section 5.17
hereof, the Company is not a party to any oral or written (i) consulting
agreement not terminable on 60 days or less notice or union or collective
bargaining agreement, (ii) agreement with any director, executive officer or
key employee of the Company the benefits of which are contingent, or the terms
of which are materially altered, upon the occurrence of a transaction involving
the Company of the nature contemplated by this Agreement, or agreement with
respect to any executive officer of the Company providing any term of
employment or compensation guarantee extending for a period longer than one
year, or (iii) agreement or plan, including any stock option plan, stock
appreciation right plan, restricted stock plan or stock purchase plan, any of
the benefits of which will be increased, or the vesting of the benefits of
which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits of which
will be calculated on the basis of any of the transactions contemplated by this
Agreement.
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3.13 No Material Change. Since March 31, 1994, there have
been no events, changes or occurrences which have had, or are reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on the
Company.
3.14 Absence of Change or Event. Except as contemplated by
this Agreement or the Option Agreement or as disclosed in the Disclosure
Memorandum with specific reference to this Section, since March 31, 1994, the
Company has conducted its business only in the ordinary course and has not:
(a) incurred any obligation or liability, absolute,
accrued, contingent or otherwise, whether due or to become due, except
liabilities or obligations incurred in the ordinary course of business
and consistent with prior practice;
(b) mortgaged, pledged or subjected to lien,
restriction or any other Encumbrance any of the property, businesses
or assets, tangible or intangible, of the Company, except for liens
arising in the ordinary course of business and consistent with prior
practice (i) to secure debt incurred for the purpose of financing all
or part of the purchase price or the cost of construction or
improvement of the equipment or other property subject to such liens,
provided that (A) the principal amount of any debt secured by such
lien does not exceed 100% of such purchase price or cost, (B) such
lien does not extend to or cover any other property other than such
item of property and any improvements on such item and (C) the
incurrence of such debt was in the ordinary course of business and
consistent with prior practice and (ii) pursuant to the terms of the
Amended and Restated Loan and Security Agreement dated as of October
27, 1993 between the Company and Transamerica Business Credit
Corporation, as amended through the date hereof (the "Credit
Agreement");
(c) sold, transferred, leased or loaned to others or
otherwise disposed of any of its assets (or committed to do any of the
foregoing), including the payment of any loans owed to any affiliate,
except for inventory sold to customers or returned to vendors in the
ordinary course of business and consistent with prior practice, or
canceled, waived, released or otherwise compromised any debt or claim,
or any right of significant value, except in the ordinary course of
business and consistent with prior practice;
(d) suffered any damage, destruction or loss
(whether or not covered by insurance) which has had or is reasonably
likely to have a Material Adverse Effect on the Company;
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<PAGE> 21
(e) made or committed to make any capital
expenditures or capital additions or betterments in excess of an
aggregate of $200,000;
(f) encountered any labor union organizing activity,
had any actual or threatened employee strikes, or any work stoppages,
slow-downs or lock-outs related to any labor union organizing activity
or any actual or threatened employee strikes;
(g) instituted any litigation, action or proceeding
before any court, governmental body or arbitration tribunal relating
to it or its property, except for litigation, actions or proceedings
instituted in the ordinary course of business and consistent with
prior practice;
(h) split, combined or reclassified any of its
capital stock, or declared or paid any dividend or made any other
payment or distribution in respect of its capital stock, or directly
or indirectly redeemed, purchased or otherwise acquired any of its
capital stock;
(i) acquired, or agreed to acquire, by merging or
consolidating with, or by purchasing a substantial equity interest in
or a substantial portion of the assets of, or by any other manner, any
business or any corporation, partnership, association or other
business organization or division thereof, or otherwise acquired, or
agreed to acquire, any assets which are material, individually or in
the aggregate, to the Company, except for purchases of inventory in
the ordinary course of business and consistent with prior practice;
(j) increased, or agreed or promised to increase,
the compensation of any officer, employee or agent of the Company,
directly or indirectly, including by means of any bonus, pension plan,
profit sharing, deferred compensation, savings, insurance, retirement,
or any other employee benefit plan, except in the ordinary course of
business and consistent with prior practice;
(k) increased promotional or advertising
expenditures except in the ordinary course of business and consistent
with prior practice or otherwise changed its policies or practices
with respect thereto;
(l) made or changed any election concerning Taxes or
Tax Returns, changed an annual accounting period, adopted or changed
any accounting method, filed any amended Tax Return or extended the
applicable statute of limitations for any taxable period; or
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<PAGE> 22
(m) received notification of an examination, audit
or pending assessment with respect to Taxes, entered into any closing
agreement with respect to Taxes, settled or compromised any Tax claim
or assessment or surrendered any right to claim a refund of Taxes or
obtained or entered into any Tax ruling, agreement, contract,
understanding, arrangement or plan except, solely with respect to the
period from the date hereof through the Closing Date, if (i) such
event or the subject matter thereof has not had or is not reasonably
likely to have, individually and in the aggregate, a Material Adverse
Effect on the Company and (ii) the Company has fully reserved against
such event or the subject matter thereof.
3.15 Litigation. Except as specifically disclosed in the
Company SEC Documents filed prior to the date hereof, there is no (i)
outstanding consent, order, judgment, writ, injunction, award or decree of any
Governmental Entity or arbitration tribunal against or involving the Company or
any of its properties or assets, (ii) action, suit, claim, counterclaim,
litigation, arbitration, dispute or proceeding pending or, to the Company's
best knowledge, threatened against or involving the Company or any of its
properties or assets or (iii) to the Company's best knowledge, investigation or
audit pending or threatened against or relating to the Company or any of its
properties or assets or any of its officers or directors (in their capacities
as such) (collectively, "Proceedings") which are, individually or in the
aggregate, reasonably likely to have a Material Adverse Effect on the Company,
or would restrict, prohibit or prevent the consummation of the transactions
contemplated hereby. To the Company's best knowledge, there is no basis for
any Proceeding which, if commenced, would be reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on the Company, or
would restrict, prohibit or prevent the consummation of the transactions
contemplated hereby.
3.16 Compliance With Law and Other Instruments. (a) Except
as disclosed in the Disclosure Memorandum with specific reference to this
Section, the Company and its properties, assets, operations and activities,
have complied and are in compliance in all respects with all applicable
federal, state and local laws, rules, regulations, ordinances, orders,
judgments and decrees including, without limitation, health and safety statutes
and regulations and all Environmental Laws, including, without limitation, all
restrictions, conditions, standards, limitations, prohibitions, requirements,
obligations, schedules and timetables contained in the Environmental Laws or
contained in any regulation, code, plan, order, decree, judgment, injunction,
notice or demand letter issued, entered, promulgated or approved thereunder,
except, with respect to laws, rules, regulations, ordinances, orders, judgments
and decrees other than those relating to Environmental Laws, the Foreign
Corrupt Practices Act and applicable criminal statutes, where the failure
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to have complied or be in compliance is not, individually or in the aggregate,
reasonably likely to have a Material Adverse Effect on the Company, or that
would restrict, prohibit or prevent the consummation of the transactions
contemplated hereby. The Company is not in violation of or in default under
any terms or provisions of (i) its Amended and Restated Certificate of
Incorporation, as amended, or Amended and Restated By-laws, as amended (ii) any
credit or loan agreement (including, without limitation, the Credit Agreement
and the Loan Agreement dated June 19, 1992 between the Company and The Citizens
and Southern National Bank of South Carolina), mortgage or security agreement,
deed of trust, note, bond or indenture, (iii) the Lease Agreement dated October
25, 1993 between the Company and Holmes Road Associates or the Equipment Lease
Agreement dated November 1, 1989 between the Company and CLG, Inc., as amended,
modified or supplemented through the date hereof or (iv) any other instrument,
obligation, contract or agreement to which it is subject or by which it is
bound, except, in the case of clause (iv), for violations or defaults which are
not, individually or in the aggregate, reasonably likely to have a Material
Adverse Effect on the Company. Notwithstanding anything to the contrary
contained in this Section 3.16, with respect to any representation and warranty
given with respect to Environmental Laws or related matters which is limited to
events, occurrences or circumstances which, individually or in the aggregate,
are reasonably likely to have a Material Adverse Effect on the Company
(including, without limitation, the representations and warranties contained in
subsections (a) and (e) through (k) hereof), such limitations (or words of
similar import) shall be applicable solely with respect to the period from the
date hereof through the Closing Date.
(b) The Disclosure Memorandum sets forth with specific
reference to this Section, as of the date hereof and as of the Closing Date:
(i) all federal, state, local and foreign governmental licenses, permits,
consents, approvals and other authorizations ("Permits") of the business of the
Company; and (ii) all reports of inspection of the Company and its properties
under all applicable federal, state and local health and safety laws, rules,
regulations and ordinances. The Company has heretofore delivered to Parent
complete and correct copies of all of the foregoing.
(c) Except as disclosed in the Disclosure Memorandum with
specific reference to this Section, the Company has obtained all Permits that
are (i) required under all federal, state and local laws, rules, regulations,
ordinances, orders, judgments and decrees, including, without limitation, the
Environmental Laws, for the ownership, use and operation of each property,
facility or location owned, operated or leased by the Company (the "Property")
or (ii) otherwise necessary in the conduct of the business of the Company,
except for failures to obtain Permits (other than those that would result in
the imposition of criminal sanctions) which are not, individually or in the
aggregate,
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reasonably likely to have a Material Adverse Effect on the Company. Except as
disclosed in the Disclosure Memorandum with specific reference to this Section,
all such Permits are in effect, no appeal nor any other action is pending to
revoke any such Permit, and the Company is in full compliance with all terms
and conditions of all such Permits, except for failures to be in compliance
which are not, individually or in the aggregate, reasonably likely to have a
Material Adverse Effect on the Company.
(d) The Company has heretofore delivered to Parent true and
complete copies of all environmental studies in the Company's possession
relating to the Property or any other property or facility previously owned,
operated or leased by the Company.
(e) Except as disclosed in the Disclosure Memorandum with
specific reference to this Section, there is no civil, criminal or
administrative action, suit, demand, claim, hearing, notice of violation,
investigation, proceeding, notice or demand letter pending relating to the
Company or the Property (or any other property or facility formerly owned,
operated or leased by the Company) or, to the Company's best knowledge,
threatened relating to the Company or the Property (or any other such property
of facility) and relating in any way to the Environmental Laws or any
regulation, code, plan, order, decree, judgment, injunction, notice or demand
letter issued, entered, promulgated or approved thereunder, except for such
actions, suits, demands, claims, hearings, notices of violation, proceedings,
notices or demand letters which are not, individually or in the aggregate,
reasonably likely to have a Material Adverse Effect on the Company.
(f) Except as disclosed in the Disclosure Memorandum with
specific reference to this Section, the Company has not, and to the Company's
best knowledge, no other Person has, Released, placed, stored, buried or dumped
any Hazardous Substances, Oils, Pollutants or Contaminants or any other wastes
produced by, or resulting from, any business, commercial, or industrial
activities, operations, or processes, on, beneath, or adjacent to the Property
(or any other property or facility formerly owned, operated or leased by the
Company) except for inventories of such substances to be used, and wastes
generated therefrom, in the ordinary course of business of the Company (which
inventories and wastes, if any, were and are stored or disposed of in
accordance with applicable laws and regulations and in a manner such that there
has been no Release of any such substances into the environment), except where
such remediations of Hazardous Substances, Oils, Pollutants or Contaminants are
not, individually or in the aggregate, reasonably likely to have a Material
Adverse Effect on the Company.
(g) Except as disclosed in the Disclosure Memorandum with
specific reference to this Section, no Release or Cleanup
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occurred at the Property (or any other property or facility formerly owned,
operated or leased by the Company) which could result in the assertion or
creation of a lien on the Property by any Governmental Entity with respect
thereto, nor has any such assertion of a lien been made by any Governmental
Entity with respect thereto, except for such Releases, Cleanups or assertions
of liens which are not, individually or in the aggregate, reasonably likely to
have a Material Adverse Effect on the Company.
(h) Except as disclosed in the Disclosure Memorandum with
specific reference to this Section, no employee of the Company in the course of
his or her employment with the Company has been exposed to any Hazardous
Substances, Oils, Pollutants or Contaminants or any other substance, generated,
produced or used by the Company which could give rise to any claim against the
Company, except for such claims which are not, individually or in the
aggregate, reasonably likely to have a Material Adverse Effect on the Company.
(i) Except as disclosed in the Disclosure Memorandum with
specific reference to this Section, the Company has not received any notice or
order from any Governmental Entity or private or public entity advising it that
the Company is responsible for or potentially responsible for Cleanup or paying
for the cost of Cleanup of any Hazardous Substances, Oils, Pollutants or
Contaminants or any other waste or substance, and the Company has not entered
into any agreements concerning such Cleanup, nor is the Company aware of any
facts which might reasonably give rise to such notice, order or agreement,
except for such notices, orders or agreements which are not, individually or in
the aggregate, reasonably likely to have a Material Adverse Effect on the
Company.
(j) Except as disclosed in the Disclosure Memorandum with
specific reference to this Section, and except for such items which are not,
individually or in the aggregate, reasonably likely to have a Material Adverse
Effect on the Company, the Property does not contain any: (i) underground
storage tanks; (ii) asbestos; (iii) equipment using PCBs; (iv) underground
injection wells; or (v) septic tanks in which process wastewater or any
Hazardous Substances, Oils, Pollutants or Contaminants have been disposed.
(k) Except as disclosed in the Disclosure Memorandum with
specific reference to this Section, with regard to the Company and the Property
(or any other property or facility formerly owned, operated or leased by the
Company), and except where the following are not, individually or in the
aggregate, reasonably likely to have a Material Adverse Effect on the Company,
there are no past or present or, to the Company's best knowledge, future
events, conditions, circumstances, activities, practices, incidents, actions or
plans which may interfere with or prevent compliance or continued compliance
with the
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Environmental Laws as in effect on the date hereof or with any regulation,
code, plan, order, decree, judgment, injunction, notice or demand letter
issued, entered, promulgated or approved thereunder, or which may give rise to
any common law or legal liability under the Environmental Laws, or otherwise
form the basis of any claim, action, demand, suit, proceeding, hearing, notice
of violation, study or investigation, based on or related to the manufacture,
generation, processing, distribution, use, treatment, storage, place of
disposal, transport or handling, or the Release or threatened Release into the
indoor or outdoor environment by the Company or a present or former facility of
the Company, of any Hazardous Substances, Oils, Pollutants or Contaminants.
(l) The Company has not entered into any agreement that may
require it to pay to, reimburse, guaranty, pledge, defend, indemnify or hold
harmless any person for or against Environmental Liabilities and Costs.
(m) The following terms shall be defined as follows:
"Cleanup" means all actions required to: (1) cleanup, remove, treat
or remediate Hazardous Substances, Oils, Pollutants or Contaminants in
the indoor or outdoor environment; (2) prevent the Release of
Hazardous Substances, Oils, Pollutants or Contaminants so that they do
not migrate, endanger or threaten to endanger public health or welfare
or the indoor or outdoor environment; (3) perform pre-remedial studies
and investigations and post-remedial monitoring and care; or (4)
respond to any government requests for information or documents in any
way relating to cleanup, removal, treatment or remediation or
potential cleanup, removal, treatment or remediation of Hazardous
Substances, Oils, Pollutants or Contaminants in the indoor or outdoor
environment.
"Environmental Laws" means all foreign, federal, state and local laws,
regulations, rules and ordinances relating to pollution or protection
of the environment, including, without limitation, laws relating to
Releases or threatened Releases of Hazardous Substances, Oils,
Pollutants or Contaminants into the indoor or outdoor environment
(including, without limitation, ambient air, surface water,
groundwater, land, surface and subsurface strata) or otherwise
relating to the manufacture, processing, distribution, use, treatment,
storage, Release, transport or handling of Hazardous Substances, Oils,
Pollutants or Contaminants, and all laws and regulations with regard
to recordkeeping, notification, disclosure and reporting requirements
respecting Hazardous Substances, Oils, Pollutants or Contaminants.
"Environmental Liabilities and Costs" means all liabilities,
obligations, responsibilities, obligations to conduct
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Cleanup, losses, damages, deficiencies, punitive damages,
consequential damages, treble damages, costs and expenses (including,
without limitation, all fees, disbursements and expenses of counsel,
expert and consulting fees and costs of investigations and feasibility
studies and responding to government requests for information or
documents), fines, penalties, restitution and monetary sanctions,
interest, direct or indirect, known or unknown, absolute or
contingent, past, present or future, resulting from any claim or
demand, by any Person, whether based in contract, tort, implied or
express warranty, strict liability, joint and several liability,
criminal or civil statute, including any Environmental Law, or arising
from environmental, health or safety conditions, involving the Release
or threatened Release of Hazardous Substances, Oils, Pollutants or
Contaminants into the environment, as a result of past or present
ownership, leasing or operation of any properties, owned, leased or
operated by the Company, including, without limitation, any of the
foregoing incurred in connection with the conduct of any Cleanup.
"Hazardous Substances, Oils, Pollutants or Contaminants" means all
substances defined as such in the National Oil and Hazardous
Substances Pollution Contingency Plan, 40 C.F.R. Section 300.5, or
defined as such by, or regulated as such under, any Environmental Law.
"Release" means, when used as a noun, any release, spill, emission,
discharge, leaking, pumping, injection, deposit, disposal, discharge,
dispersal, leaching or migration into the indoor or outdoor
environment (including, without limitation, ambient air, surface
water, groundwater, and surface or subsurface strata) or into or out
of any property, including the movement of Hazardous Substances, Oils,
Pollutants or Contaminants through or in the air, soil, surface water,
groundwater or property, and when used as a verb, the occurrence of
any Release.
3.17 Insurance. Except as disclosed in the Disclosure
Memorandum with specific reference to this Section, the insurance policies in
force with respect to the business and properties of the Company are in full
force and effect, all premiums with respect thereto covering all periods up to
and including the Closing Date have been paid, and no notice of cancellation or
termination has been received with respect to any such policy. Such policies
are sufficient for material compliance with all requirements of law and all
agreements to which the Company is a party; are valid, outstanding and
enforceable policies; and provide adequate insurance coverage for the assets
and operations of the Company.
3.18 Affiliate Interests. (a) Except as disclosed by the
Company SEC Documents and except for services provided by the Company's
directors and executive officers in their capacities as
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such since the date of the Company's most recent Proxy Statement filed pursuant
to the Exchange Act and the compensation paid therefor, the Disclosure
Memorandum sets forth all amounts paid (or deemed for accounting purposes to
have been paid) and services provided by the Company to, or received by the
Company from, any affiliate of the Company since December 31, 1991 and all such
amounts currently owed by the Company to, or to the Company by, any affiliate
of the Company. For purposes of this Agreement, the term "affiliate" shall
have the meaning ascribed thereto in Rule 405 of the Securities Act.
(b) Each contract, agreement, plan or arrangement between the
Company, on the one hand, and any affiliate of the Company or affiliate
thereof, on the other hand ("Affiliate Agreements") is disclosed in the
Disclosure Memorandum with specific reference to this Section or Section
3.18(a). Except as disclosed in the Disclosure Memorandum with specific
reference to this Section or Section 3.18(a), each of the transactions
described in Section 3.18(a) and each of the Affiliate Agreements was entered
into in the ordinary course of business and on commercially reasonable terms
and conditions.
3.19 Customers and Suppliers. Except as set forth in the
Disclosure Memorandum with specific reference to this Section, no customer or
customers which, individually or in the aggregate, accounted for more than 5%
of the Company's gross revenues during the 12 month period preceding the date
hereof, and no supplier or suppliers which, individually or in the aggregate,
accounted for more than 5% of the Company's cost of goods sold during the 12
month period preceding the date hereof, has canceled or otherwise terminated,
or made any written threat to the Company to cancel or otherwise terminate, for
any reason, including without limitation the consummation of the transactions
contemplated hereby, its relationship with the Company, or has at any time on
or after March 31, 1994 decreased materially its services or supplies to the
Company in the case of any such supplier, or its usage of the services or
products of the Company. Except as set forth in the Disclosure Memorandum with
specific reference to this Section, to the Company's best knowledge, no such
supplier or customer intends to cancel or otherwise terminate its relationship
with the Company or to decrease materially its services or supplies to the
Company or its usage of the services or products of the Company, as the case
may be.
3.20 Absence of Questionable Payments. Neither the Company
nor any director, officer, agent, employee or other Person acting on behalf of
the Company, has used, or authorized the use of, any corporate or other funds
for unlawful contributions, payments, gifts, or entertainment, or made any
unlawful expenditures relating to political activity to government officials or
others or established or maintained any unlawful or unrecorded funds in
violation of Section 30A of the Exchange Act. Neither the Company nor any
current director,
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officer, agent, employee or other Person acting on behalf of the Company, has
accepted or received any unlawful contributions, payments, gifts, or
expenditures.
3.21 Information Supplied. None of the information supplied
or to be supplied by the Company for inclusion or incorporation by reference in
(i) the registration statement on Form S-4 to be filed with the SEC by Parent
in connection with the issuance of shares of the Parent Common Stock in the
Merger (the "S-4") will, at the time the S-4 becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading, (ii) the proxy statement in definitive form
relating to the meeting of the Company's stockholders to be held in connection
with the Merger (the "Proxy Statement") will, at the date first mailed to
stockholders, contain any untrue statement of a material fact or omit to state
any material fact necessary to make the statements therein, in light of
circumstances under which they are made, not misleading and (iii) the Proxy
Statement or any amendment thereof or supplement thereto will, at the time of
the meeting of Company stockholders to be held in connection with the Merger,
contain any untrue statement of a material fact, or omit to state any material
fact necessary to correct any statement in any earlier communication with
respect to the solicitation of any proxy for such meeting of stockholders. The
Proxy Statement will comply as to form in all material respects with the
provisions of the Exchange Act and the rules and regulations thereunder.
3.22 Opinion of Financial Advisor. The Company has received
the opinion of The Robinson-Humphrey Company, Inc., dated the date hereof, to
the effect that, as of such date, the consideration to be received in the
Merger by the Company's stockholders is fair to the Company's stockholders from
a financial point of view, a copy of which opinion has been delivered to
Parent.
3.23 Vote Required. The affirmative vote of the holders of a
majority of the outstanding shares of the Company Common Stock is the only vote
of the holders of any class or series of the Company's capital stock necessary
to approve this Agreement and the transactions contemplated hereby.
3.24 Accounting Matters. Neither the Company nor any of its
affiliates has through the date of this Agreement taken or agreed to take any
action that (without giving effect to any action taken or agreed to be taken by
Parent or any of its affiliates) would prevent Parent from accounting for the
business combination to be effected by the Merger as a pooling of interests.
3.25 Company Not an Interested Shareholder or a 30%
Shareholder. As of the date hereof, neither the Company nor any of its
affiliates is an "interested shareholder" of Parent as
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such term is defined in Section 912 of the New York Business Corporation Law or
a "30% Shareholder" of Parent as such term is defined in Article TENTH of
Parents' Restated Certificate of Incorporation.
3.26 Section 203 of the DGCL Not Applicable. The provisions
of Section 203 of the DGCL will not, prior to the termination of this
Agreement, apply to this Agreement, the Option Agreement, the Merger or the
other transactions contemplated hereby.
3.27 Disclosure. (a) No representation or warranty by the
Company in this Agreement, including the Disclosure Memorandum, contains or
will contain any untrue statement of a material fact or omits or will omit to
state any material fact necessary, in light of the circumstances under which it
was made, to make the statements herein or therein not misleading. There is no
fact known to the Company which has or could have a Material Adverse Effect on
the Company, which has not been set forth in this Agreement, including the
Disclosure Memorandum.
(b) The Company has made available or caused to be made
available to Parent complete and correct copies of all agreements, instruments
and documents set forth in the Disclosure Memorandum or underlying a disclosure
set forth in the Disclosure Memorandum.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant to the Company as follows:
4.1 Organization. Parent is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of New York. Sub is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware.
4.2 Corporate Authority. Each of Parent and Sub has full
corporate power and authority to enter into this Agreement and to consummate
the transactions contemplated hereby. The execution, delivery and performance
by each of Parent and Sub of this Agreement have been duly authorized by all
requisite corporate action on the part of Parent and Sub, respectively. This
Agreement has been duly executed and delivered by each of Parent and Sub, and
(assuming due execution and delivery by the Company) this Agreement constitutes
a valid and binding obligation of Parent and Sub, enforceable in accordance
with its terms, except as enforcement may be limited by bankruptcy, insolvency
or other similar laws affecting the enforcement of creditors' rights generally,
and except that the availability of
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equitable remedies, including specific performance, is subject to the
discretion of the court before which any proceeding therefor may be brought,
and except as indemnification may be limited by public policy.
4.3 No Violation; Consents and Approvals. Except as
disclosed in Parent's Disclosure Memorandum furnished to the Company on the
date hereof (the "Parent Disclosure Memorandum"), neither Parent, Sub nor any
of their respective properties or assets, is subject to or bound by any
provision of:
(a) any law, statute, rule, regulation, ordinance or
judicial or administrative decision;
(b) any articles or certificate of incorporation or
by-laws;
(c) any (i) credit or loan agreement, mortgage, deed of
trust, note, bond, indenture, license, concession, franchise, permit,
trust, custodianship, other restriction, (ii) instrument, obligation,
contract or agreement (including, without limitation, any lease),
other than those contemplated by clause (i), which, in the case of
this clause (ii), individually involves the payment or receipt by
Parent of in excess of $50,000 or (iii) instruments, obligations,
contracts or agreements (including, without limitation, leases) other
than those contemplated by clause (i), which in the case of this
clause (iii), collectively involve the payment or receipt by Parent of
in excess of $500,000; or
(d) any judgment, order, writ, injunction or decree;
that would restrict, prohibit or prevent, or would be violated or breached by,
or under which there would be a material default (with or without notice or
lapse of time, or both) as a result of, the execution, delivery and performance
by each of Parent and Sub of this Agreement and the consummation of the
transactions contemplated hereby. Except as disclosed in the Parent Disclosure
Memorandum, no consent, order, approval or authorization of, or declaration,
notice, registration or filing with, any Person is required by or with respect
to the execution, delivery and performance by Parent and Sub of this Agreement
and the consummation of the transactions contemplated hereby.
4.4 Capitalization. As of the date hereof, the
authorized capital stock of Parent consists of 60,000,000 shares of the Parent
Common Stock and 2,000,000 shares of Preferred Stock, par value $1.00 per share
(the "Parent Preferred Stock"). At the close of business on June 3, 1994, (i)
31,506,174 shares of the Parent Common Stock were issued and outstanding,
2,682,641 shares of the Parent Common Stock were reserved for issuance pursuant
to Parent's Stock Option Plan (the "Parent Option Plan"), and 3,773,625 shares
of the Parent Common Stock
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were reserved for issuance pursuant to Parent's Convertible Subordinated
Debentures (the "Convertible Debentures"), (ii) 11,247 shares of the Parent
Common Stock were reflected on the books and records of Parent as treasury
shares, (iii) no shares of the Parent Preferred Stock were issued or
outstanding and (iv) other than the Convertible Debentures, no Voting Debt of
Parent was issued or outstanding. All such issued and outstanding shares of
the Parent Common Stock have been, and any shares of the Parent Common Stock
which may be issued pursuant to the Parent Option Plan or the Convertible
Debentures will be, validly issued, fully paid and nonassessable and not
subject to preemptive rights. All shares of the Parent Common Stock which are
to be issued pursuant to the Merger will be, when issued in accordance with the
terms hereof, validly issued, fully paid and nonassessable. Except for (a) the
rights created pursuant to this Agreement, (b) the rights created pursuant to
the Parent Option Plan to purchase 2,682,641 shares of the Parent Common Stock,
the rights created pursuant to the Convertible Debentures to purchase 3,773,625
shares of the Parent Common Stock and the Parent Rights created pursuant to the
Parent Rights Agreement to purchase 315,061.74 shares of the Parent Preferred
Stock and (c) the issued and outstanding shares of the Parent Common Stock and
the Convertible Debentures set forth herein (except for changes since June 3,
1994 resulting from the exercise of the rights created pursuant to the Parent
Option Plan and the Convertible Debentures), as of the date hereof, there are
no (i) outstanding shares of capital stock or Voting Debt of Parent, (ii)
outstanding options, warrants, calls, subscriptions or other rights of any kind
to acquire, or agreements or commitments in effect to which Parent is a party
or by which Parent is bound obligating Parent to issue or sell, or cause to be
issued or sold, any additional shares of capital stock or any Voting Debt of
Parent or (iii) outstanding securities convertible or exchangeable for, or
which otherwise confer on the holder thereof any right to acquire, any such
additional shares or Voting Debt. Except as contemplated by this Agreement, as
of the date hereof, Parent is not committed to issue any such option, warrant,
call, subscription, right or security.
4.5 SEC Reports and Financial Statements of Parent. Parent
has filed with the SEC, and has heretofore provided to the Company true and
complete copies of, all forms, reports, schedules, statements and other
documents required to be filed by it since January 1, 1989 under the Exchange
Act or the Securities Act (as such documents have been amended since the time
of their filing, collectively, the "Parent SEC Documents"). The Parent SEC
Documents, including without limitation any financial statements and schedules
included therein, at the time filed or, if subsequently amended, as so amended,
(i) did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading and (ii) complied in all material respects with the applicable
requirements of the Exchange Act and
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the Securities Act, as the case may be, and the applicable rules and
regulations of the SEC thereunder. The financial statements of Parent included
in the Parent SEC Documents comply as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance with GAAP
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto or, in the case of the unaudited statements, as
permitted by Form 10-Q of the SEC) and fairly present (subject, in the case of
the unaudited statements, to customary year-end audit adjustments) the
consolidated financial position of the Company and its consolidated
Subsidiaries as at the dates thereof and the consolidated results of their
operations and cash flows.
4.6 Information Supplied. None of the information supplied
or to be supplied by Parent for inclusion or incorporation by reference in the
S-4 will, at the time the S-4 becomes effective under the Securities Act, at
the time of the meeting of the Company stockholders to be held in connection
with the Merger or at the Closing Date, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading.
ARTICLE 5
CERTAIN COVENANTS AND AGREEMENTS
OF THE COMPANY AND PARENT
5.1 Conduct of the Company's Business Prior to the Closing
Date. The Company agrees that, between the date hereof and the Closing Date:
(a) Except as contemplated by this Agreement, as disclosed in
the Disclosure Memorandum with specific reference to this Section or as
permitted by the prior written consent of Parent, the Company shall operate its
business only in the usual, regular and ordinary course consistent with prior
practice and not:
(i) take any action of the nature referred to in
Section 3.14, except as permitted therein;
(ii) issue, deliver or sell, or authorize or
propose the issuance, delivery or sale of, any shares of its capital
stock (except pursuant to, and in accordance with the terms of, the
rights outstanding on the date hereof created pursuant to the Company
Option Plans) or any Voting Debt, or any securities convertible into
or exchangeable for, or any rights, warrants, calls, subscriptions or
options to acquire, any shares of its capital stock or any Voting
Debt;
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(iii) change the Company's banking or safe deposit
arrangements;
(iv) modify or amend, or authorize or propose to modify
or amend, the Company's Amended and Restated Certificate of
Incorporation, as amended, or Amended and Restated Bylaws, as amended;
or
(v) take any action that would or is reasonably
likely to result in any of the Company's representations and
warranties set forth in this Agreement not to be true as of the date
made (to the extent so limited) or in any of the conditions to the
Merger set forth in Article 6 not being satisfied.
(b) The Company shall preserve the business organization of
the Company intact and shall use its best efforts to keep available to Parent
the services of the present officers and employees of the Company and to
preserve for Parent the good will of the Company's suppliers, customers, and
others having business relations with the Company. Except with the prior
written consent of Parent (not to be unreasonably withheld), the Company shall
not terminate or cause to be terminated any distribution agreement to which it
is a party.
(c) The Company shall maintain in force the insurance
policies referred to in Section 3.17 or insurance policies providing the same
or substantially similar coverage; provided, however, that the Company will
notify Parent prior to the expiration of any of such insurance policies.
(d) The Company shall diligently pursue its rights with
respect to the matters listed in the Disclosure Memorandum with respect to
Sections 3.14 and 3.15.
(e) Except as contemplated by this Agreement or permitted
by the prior written consent of Parent, no plan, fund, or arrangement referred
to in Section 3.12 has been or will be:
(i) terminated by the Company;
(ii) amended (except as expressly required by law) in any
manner which would directly or indirectly increase the benefits
accrued, or which may be accrued, by any participant thereunder; or
(iii) amended in any manner which would materially
increase the cost to Parent of maintaining such plan, fund, or
arrangement.
5.2 Conduct of Parent's Business Prior to the Closing Date.
Parent agrees that, between the date hereof and the Closing Date, except as
contemplated by this Agreement or permitted by the prior written consent of the
Company, Parent
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shall (a) conduct its business and the business of its Subsidiaries on a
consolidated basis in a manner designed in its reasonable judgment to enhance
the long-term value of the Parent Common Stock and to the extent consistent
therewith, use its best efforts to preserve the goodwill of Parents' and its
Subsidiaries' suppliers, customers and others having business relations with
Parent and its Subsidiaries and (b) not take any action that would or is
reasonably likely to result in any of Parent's or Sub's representations and
warranties set forth in this Agreement not to be true as of the date made (to
the extent so limited) or in any of the conditions of the Merger set forth in
Article 6 not being satisfied.
5.3 Preparation of S-4 and the Proxy Statement. The Company
shall promptly prepare and file with the SEC the Proxy Statement and Parent
shall promptly prepare and file with the SEC the S-4, in which the Proxy
Statement will be included as a prospectus. Parent shall use its best efforts
to have the S-4 declared effective under the Securities Act as promptly as
practicable after such filing. Parent shall also take any action (other than
qualifying to do business in any jurisdiction in which it is not now so
qualified) required to be taken under any applicable state securities laws in
connection with the issuance of the Parent Common Stock in the Merger and the
Company shall furnish all information concerning the Company and the holders of
the Company Common Stock as may be reasonably requested in connection with any
such action.
5.4 Letter of the Company's Accountants. The Company shall
use its best efforts to cause to be delivered to the Company and to Parent a
letter of KPMG Peat Marwick, the Company's independent auditors, dated a date
within two business days before the date on which the S-4 shall become
effective and addressed to the Company and to Parent, in form and substance
reasonably satisfactory to the Company and to Parent and customary in scope and
substance for letters delivered by independent public accountants in connection
with registration statements similar to the S-4.
5.5 Legal Conditions to Merger. Each of the Company, Parent
and Sub will take all reasonable actions necessary to comply promptly with all
legal requirements which may be imposed on itself with respect to the Merger
(which actions shall include, without limitation, furnishing all information
required in connection with approvals of or filing with any Governmental
Entity) and will promptly cooperate with each other and furnish information to
each other in connection with any such requirements imposed upon any of them or
any of their Subsidiaries in connection with the Merger. Each of the Company,
Parent and Sub will, and will cause its Subsidiaries to, take all reasonable
actions necessary to obtain (and will cooperate with each other in obtaining)
any consent, authorization, order or approval of, or any exemption by, any
Governmental Entity or other public or private third party, required to be
obtained or
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made by Parent, the Company or any of their Subsidiaries in connection with the
Merger or the taking of any action contemplated thereby or by this Agreement.
5.6 Affiliates. Prior to the Closing Date the Company shall
deliver to Parent a letter identifying all Persons (including, without
limitation, Cheyenne Software, Inc., Dennis Gates and the Company's other
directors) who are, at the time this Agreement is submitted for approval to the
stockholders of the Company, "affiliates" of the Company for purposes of Rule
145 under the Securities Act. The Company shall use its best efforts to cause
each such Person to deliver to Parent on or prior to the Closing Date a written
agreement, substantially in the form attached as Exhibit 5.6 hereto. Parent
shall promptly prepare and file with the SEC a registration statement on Form
S-3 (the "S-3") with respect to the sale of shares of Parent Common Stock
received by Cheyenne Software, Inc. and Dennis Gates in connection with the
Merger, and shall use its best efforts to have the S-3 declared effective under
the Securities Act as promptly as practicable after such filing. Parent shall
maintain the effectiveness under the Securities Act of the S-3 for a period of
two years.
5.7 Stock Exchange Listing. Parent shall use its best
efforts to cause the shares of Parent Common Stock to be issued in the Merger,
and such other shares of Parent Common Stock to be issued pursuant to the
Parent Options (as defined in Section 5.17), to be approved for listing on the
NYSE and any other national securities exchange on which shares of Parent
Common Stock may at such time be listed, subject to official notice of
issuance, prior to the Closing Date.
5.8 Stockholders' Meeting. The Company shall call a
meeting of its stockholders to be held as promptly as practicable for the
purpose of voting upon the adoption of this Agreement and related matters. The
Company will, through its Board of Directors, unanimously recommend to its
stockholders approval of such matters and will coordinate and cooperate with
Parent with respect to the timing of such meeting and shall use its best
efforts to hold such meeting as soon as practicable after the S-4 is declared
effective; provided, however, that the Board of Directors shall not be
obligated to recommend approval of this Agreement, the Merger, and related
matters to its stockholders if the Board of Directors of the Company, acting
with the advice of the Company's counsel and financial advisors, determines
that such recommendation would be contrary to their legal obligations under the
DGCL as directors of the Company.
5.9 Fees and Expenses. (a) Except as set forth in Section
5.9(b), whether or not the Merger is consummated, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expense (it being agreed that
the out-of-pocket costs and expenses incurred by the Company in connection with
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this Agreement and the transactions contemplated hereby (including, without
limitation, the fees and expenses of its advisors, accountants and legal
counsel) shall not exceed $2,000,000), and, in connection therewith, each of
Parent and the Company shall pay, with its own funds and not with funds
provided by the other party, any and all property or transfer taxes imposed on
such party resulting from the Merger, except that expenses incurred in
connection with the Proxy Statement and the S-4 shall be shared equally by
Parent and the Company.
(b) In the event that (i) either Parent or the Company
shall terminate this Agreement pursuant to Section 7.1(e), (ii) either Parent
or the Company shall terminate this Agreement pursuant to Section 7.1(f)(ii)
following a failure of the stockholders of the Company to approve this
Agreement and, prior to the time of the meeting of the Company's stockholders,
there shall have been (A) a Trigger Event with respect to the Company or (B) a
Takeover Proposal (as defined in Section 5.14) with respect to the Company
which at the time of the meeting of the Company's stockholders shall not have
been (x) rejected by the Company and (y) withdrawn by the third party, or (iii)
Parent shall terminate this Agreement pursuant to Section 7.1(c), due in whole
or in part to any failure by the Company to use its best efforts to perform and
comply with all agreements and conditions required by this Agreement to be
performed or complied with by the Company prior to or on the Closing Date or
any failure by the Company's affiliates to take any actions required to be
taken hereby, and prior thereto there shall have been (A) a Trigger Event with
respect to the Company or (B) a Takeover Proposal with respect to the Company
which shall not have been (x) rejected by the Company and (y) withdrawn by the
third party, then the Company shall reimburse Parent for all of the
out-of-pocket costs and expenses incurred by Parent in connection with this
Agreement and the transactions contemplated hereby (including, without
limitation, the fees and expenses of its advisors, accountants and legal
counsel) up to a maximum amount of $1,000,000, and, in addition, the Company
shall promptly pay to Parent the sum of $4,000,000, as liquidated damages and
not as a penalty. As used herein, a "Trigger Event" shall occur if any Person
acquires securities representing 10% or more, or commences a tender or exchange
offer following the successful consummation of which the offeror and its
affiliates would beneficially own securities representing 25% or more, of the
voting power of the Company.
5.10 Broker's and Finder's Fees. Each of Parent, Sub and the
Company represents, as to itself, its Subsidiaries, and its affiliates, that no
agent, broker, investment banker, financial advisor or other firm or person is
or will be entitled to any broker's or finder's fee or any other commission or
similar fee in connection with any of the transactions contemplated by this
Agreement, except The Robinson-Humphrey Company, Inc. whose fees and expenses
will be paid by the Company in accordance with the Company's agreement with
such firm (copies of which have been delivered by the Company to Parent prior
to
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the date of this Agreement), and each of Parent and the Company respectively
agrees to indemnify and hold the other harmless from and against any and all
claims, liabilities or obligations with respect to any other fees, commissions
or expenses asserted by any person on the basis of any act or statement alleged
to have been made by such party or its affiliate.
5.11 Access to Information and Confidentiality. The Company
agrees that Parent and Sub may conduct such reasonable investigation with
respect to the business, business prospects, assets, liabilities (contingent or
otherwise), results of operations, employees and financial condition of the
Company as will permit Parent and Sub to evaluate their interest in the
transactions contemplated by this Agreement. Parent and Sub agree that the
Company may conduct such reasonable investigation with respect to the business,
business prospects, assets, liabilities (contingent or otherwise), results of
operations, employees and financial condition of Parent and Sub as will permit
the Company to evaluate its interest in the transactions contemplated by this
Agreement. Each of the Company, Parent and Sub will hold and will cause their
respective representatives to hold in strict confidence, unless compelled to
disclose by judicial or administrative process, or, in the opinion of its
counsel, by other requirements of law, all documents and information concerning
the Company furnished to Parent and Sub and all documents and information
concerning Parent and Sub furnished to the Company in connection with the
transactions contemplated by this Agreement (except to the extent that such
information can be shown to have been (a) previously known by Parent or Sub
prior to its disclosure to Parent or Sub by the Company, (b) previously known
by the Company prior to its disclosure to the Company by Parent and Sub, (c) in
the public domain through no fault of the Company or Parent or Sub or (d) later
lawfully acquired by the Company or Parent or Sub from other sources that are
not under an obligation of confidentiality) and will not release or disclose
such information to any other Person, except in connection with this Agreement
to its lenders, auditors, attorneys, financial advisors and other consultants
and advisors.
5.12 Indemnification. (a) Each of the Constituent
Corporations shall, and from and after the Effective Time Parent and the
Surviving Corporation shall, indemnify, defend and hold harmless each person
who is now, or has been at any time prior to the date hereof or who becomes
prior to the Effective Time, an officer, director or employee of such
Constituent Corporation (the "Indemnified Parties") against (i) all losses,
claims, damages, costs, expenses, liabilities or judgments or amounts that are
paid in settlement with the approval of the indemnifying party (which approval
shall not be unreasonably withheld) of or in connection with any claim, action,
suit, proceeding or investigation based in whole or in part on or arising in
whole or in part out of the fact that such person is or was a director, officer
or employee of such Constituent Corporation, whether
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pertaining to any matter existing or occurring at or prior to the Effective
Time and whether reasserted or claimed prior to, or at or after, the Effective
Time ("Indemnified Liabilities") and (ii) all Indemnified Liabilities based in
whole or in part on, or arising in whole or in part out of, or pertaining to
this Agreement or the transactions contemplated hereby, in each case to the
full extent a corporation is permitted under the DGCL to indemnify its own
directors, officers and employees, as the case may be (and each of the
Constituent Corporations, Parent and the Surviving Corporation, as the case may
be, will pay expenses in advance of the final disposition of any such action or
proceeding to each Indemnified Party to the full extent permitted by law).
Without limiting the foregoing, in the event any such claim, action, suit,
proceeding or investigation is brought against any Indemnified Party (whether
arising before or after the Effective Time), (i) the Indemnified Parties may
retain counsel satisfactory to them and such Constituent Corporation (or them,
Parent and the Surviving Corporation after the Effective Time); (ii) such
Constituent Corporation (or after the Effective Time, Parent and the Surviving
Corporation) shall pay all reasonable fees and expenses of such counsel for the
Indemnified Parties promptly as statements therefor are received; and (iii)
such Constituent Corporation (or after the Effective Time, Parent and the
Surviving Corporation) will use all reasonable efforts to assist in the
vigorous defense of any such matter, provided that neither such Constituent
Corporation nor Parent or the Surviving Corporation shall be liable for any
settlement of any claim effected without its written consent, which consent,
however, shall not be unreasonably withheld. Any Indemnified Party wishing to
claim indemnification under this Section 5.12, upon learning of any such claim,
action, suit, proceeding or investigation, shall notify the Constituent
Corporation (or after the Effective Time, Parent or the Surviving Corporation)
(but the failure so to notify a party shall not relieve such party from any
liability which it may have under this Section 5.12 except to the extent such
failure prejudices such party). The Indemnified Parties as a group may retain
only one law firm to represent them with respect to each such matter unless
there is, under applicable standards of professional conduct, a conflict on any
significant issue between the positions of any two or more Indemnified Parties,
in which case they may retain such number of law firms as is necessary to
address such conflict.
(b) The provisions of this Section 5.12 are intended to be
for the benefit of, and shall be enforceable by, each Indemnified Party, his
heirs and his representatives.
(c) If Parent shall consolidate with or merge into any other
Person and shall not be the continuing or surviving Person of such
consolidation or merger or shall transfer all or substantially all of its
assets to any Person then, and in each case, proper provision shall be made so
that successors and assigns of Parent shall assume the obligations of Parent
set forth in this Section 5.12.
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5.13 Additional Agreements; Best Efforts. Subject to the
terms and conditions of this Agreement, each of the parties hereto agrees to
use best efforts to take, or cause to be taken, all action and, to do or cause
to be done all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement and the Option Agreement, subject to the appropriate vote of
stockholders of the Company described in Section 5.8, including cooperation
fully with the other party, including by provision of information and making
all necessary filings in connection with, among other things, any approvals
required from Governmental Entities. In case at any time after the Effective
Time any further action is necessary or desirable to carry out the purposes of
this Agreement, the proper officers and directors of each party to this
Agreement shall take all such necessary action.
5.14 No Solicitation. The Company shall not, nor shall it
authorize or permit any of its officers, directors or employees or any
investment banker, financial advisor, attorney, accountant or other
representative retained by it to, (a) solicit, initiate or encourage (including
by way of furnishing information), or take any other action to facilitate, any
inquiries or the making of any proposal which constitutes, or may reasonably be
expected to lead to, any Takeover Proposal (as hereinafter defined), or (b)
agree to or endorse any Takeover Proposal. Notwithstanding the immediately
preceding sentence, if the Company shall not have breached the covenant
provided by clause (a) of the immediately preceding sentence and a Takeover
Proposal shall occur, then, to the extent necessary in the written opinion of
legal counsel to the Company or its Board of Directors consistent with the
fiduciary obligations of the Company's Board of Directors, the Company and its
officers, directors, employees, investment bankers, financial advisors,
attorneys, accountants and other representatives retained by it may furnish
information and take other action to facilitate such Takeover Proposal. The
Company shall promptly advise Parent orally and in writing of any such
inquiries or Takeover Proposals. As used in this Agreement, "Takeover
Proposal" shall mean any tender or exchange offer, proposal for a merger,
consolidation or other business combination involving the Company and made by a
Person other than Parent or any of its Subsidiaries or any proposal or offer to
acquire in any manner a substantial equity interest in, or a substantial
portion of the assets of, the Company other than the transactions contemplated
by this Agreement or the Option Agreement.
5.15 Advice of Changes; SEC Filings. Each party shall confer
on a regular and frequent basis with the other, report on operational matters
and promptly advise the other of any change or event having, or which, insofar
as can reasonably be foreseen, could have, a Material Adverse Effect on such
party and its Subsidiaries taken as a whole. Each party shall promptly provide
the other (or its counsel) copies of all filings made by such
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party with any state or Federal Governmental Entity in connection with this
Agreement, the Option Agreement and the transactions contemplated hereby and
thereby.
5.16 Press Releases. Prior to the Effective Time, the
Company and Parent shall consult with each other as to the form and substance
of any press release or other public disclosure related to this Agreement or
any of the transactions contemplated hereby; provided, however, that nothing in
this Section 5.16 shall be deemed to prohibit any party from making any
disclosure which its legal counsel deems necessary or advisable in order to
satisfy such disclosure obligations under applicable laws or regulations.
5.17 Company Option Plans.
(a) At the Effective Time, each unexpired and unexercised
option to purchase shares of Company Common Stock (each a "Company Option")
under the Company Option Plans shall be deemed to be automatically converted
into an option (a "Parent Option") to purchase the number of shares of Parent
Common Stock equal to the number of shares of Company Common Stock that could
have been purchased under such Company Option multiplied by the Conversion
Ratio (with the resulting number of shares rounded down to the nearest whole
share), at a price per share of Parent Common Stock equal to the exercise price
of such Company Option divided by the Conversion Ratio and the result thereof
rounded up to the nearest whole cent provided, however, that, in case any
Company Option intended to qualify as an incentive stock option under Section
422 of the Code (or a predecessor thereto) is deemed converted into a Parent
Option as provided above, the option price, the number of shares of Parent
Common Stock purchasable pursuant to such Parent Option and the terms and
conditions of such Parent Option shall be determined in order to comply with
Section 424(a) of the Code. Such Parent Option shall otherwise be subject to
the same terms and conditions as the Company Option, provided, that there shall
be no accelerated exercisability of any Company Option solely as a result of
consummation of the Merger. The date of grant of the substituted Parent Option
shall be the date on which the corresponding Company Option was granted. The
Board of Directors of the Company shall take such actions as are necessary or
advisable to effect the transactions contemplated by this Section 5.17.
(b) At the Effective Time, Parent shall (i) assume all of the
Company's obligations with respect to Company Options as contemplated by
Section 5.17(a) above, (ii) reserve for issuance the number of shares of Parent
Common Stock that will become subject to Parent Options pursuant to this
Section 5.17, (iii) from and after the Effective Time, upon exercise of the
Parent Options in accordance with the terms thereof, make available for
issuance all shares of Parent Common Stock covered thereby, and (iv) as soon as
practicable after the Effective Time, issue to
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each holder of an outstanding Company Option a document evidencing the
foregoing assumption by Parent.
(c) The Company's Company Stock Purchase Plan shall be
terminated effective as of the Effective Time.
(d) Within a reasonable period of time after the Effective
Time, Parent shall file a registration statement covering the shares of Parent
Common Stock issuable upon the exercise of Company Options (converted to Parent
Options pursuant to this Section 5.17) and shall use its best efforts to cause
the offer and sale of such shares to be registered under the Securities Act,
and to maintain such registration in effect until the exercise or termination
of the Company Options. Parent shall also use its best efforts to cause such
shares of Parent Common Stock to be authorized for listing on the NYSE and
shall make all necessary blue sky law filings in connection therewith.
5.18 Employee Benefits. Following the Effective Time, for
purposes of participation and vesting under Parent's employee benefit plans
(other than stock option or other plans involving the potential issuance of
Parent Common Stock), the service of employees of the Company prior to the
Effective Time shall be treated as service with Parent in such employee benefit
plans.
ARTICLE 6
CONDITIONS PRECEDENT
6.1 Conditions to Each Party's Obligation to Effect the
Merger. The obligation of each party to effect the Merger shall be subject to
the satisfaction prior to the Closing Date of the following conditions:
(a) Stockholder Approval. This Agreement shall have been
adopted by the affirmative vote of the holders of a majority of the outstanding
shares of the Company Common Stock entitled to vote on the Merger.
(b) NYSE Listing. The shares of the Parent Common Stock
issuable to the Company's stockholders pursuant to this Agreement and such
other shares required to be reserved for issuance in connection with the Merger
shall have been authorized for listing on the NYSE upon official notice of
issuance.
(c) Other Approvals. All authorizations, consents,
orders or approvals of, or declarations or filings with, or expirations or
terminations of waiting periods imposed by, any Governmental Entity the failure
to obtain which would have a Material Adverse Effect on the Surviving
Corporation shall have been filed, occurred or been obtained. Parent shall
have received all state securities or "Blue Sky" permits and other
authorizations necessary to issue the Parent Common Stock in
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exchange for the Company Common Stock and to consummate the Merger.
(d) S-4. The S-4 shall have become effective under the
Securities Act and shall not be the subject of any stop order or proceedings
seeking a stop order.
(e) No Injunctions or Restraints. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal restraint or prohibition (an
"Injunction") preventing the consummation of the Merger shall be in effect.
(f) No Governmental Actions. No investigation by any
Governmental Entity shall have been commenced, and no action, suit or
proceeding by any Governmental Entity shall have been threatened, against
Parent, Sub, the Company or any Subsidiary thereof or any of the principals,
officers or directors of any of them, seeking to restrain, prevent or change
the transactions contemplated hereby or questioning the legality or validity of
any such transactions or seeking damages in connection with any such
transactions.
(g) Pooling Letter. Parent and the Company shall have
received a letter from each of KPMG Peat Marwick and Ernst & Young, dated the
date of the Proxy Statement and confirmed in writing at the Effective Time and
addressed to Parent and the Company, stating that the Merger will qualify as a
pooling of interests transaction under Opinion 16 of the Accounting Principles
Board.
(h) Tax Free Reorganization. Each of the Company and
Parent shall have received a certificate, in form and substance satisfactory to
the Company or Parent, as the case may be, from each stockholder of the Company
that owns 5% or more of the outstanding Company Common Stock representing that
such stockholder has no plan or intention to sell, exchange, or otherwise
dispose of (i) shares of Parent Common Stock received in the Merger, (ii)
shares of Parent Common Stock held by such stockholder prior to the Effective
Time, or (iii) except as provided in the Merger Agreement, shares of Company
Common Stock held by such stockholder prior to the Effective Time.
6.2 Conditions to Obligations of Parent and Sub. The
obligations of Parent and Sub to effect the Merger are subject to the
satisfaction of the following conditions, unless waived by Parent and Sub:
(a) Representations and Warranties; Performance of
Obligations. Except as otherwise contemplated or permitted by this Agreement,
(i) the representations and warranties of the Company contained in this
Agreement or in any certificate or document delivered to Parent pursuant hereto
shall be deemed to have been made again at and as of the Closing Date and shall
then
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be true in all respects and (ii) the Company shall have performed and complied
with all agreements and conditions required by this Agreement to be performed
or complied with by the Company prior to or on the Closing Date, and Parent
shall have been furnished with a certificate of an appropriate officer of the
Company, dated the Closing Date, certifying to the effect of clauses (i) and
(ii) hereof.
(b) Tax Opinion. The opinion, based on appropriate
representations of the Company and Parent, of Winthrop, Stimson, Putnam &
Roberts, counsel to Parent, in form and substance satisfactory to such counsel,
to the effect that the Merger will be treated for Federal income tax purposes
as a reorganization within the meaning of Section 368(a) of the Code, and that
Parent, Sub and the Company will each be a party to that reorganization within
the meaning of Section 368(b) of the Code, dated on or about the date of and
referred to in the Proxy Statement as first mailed to stockholders of the
Company, shall not have been withdrawn or modified in any material respect.
(c) No Actions. No action, suit or proceeding before any
court or governmental or regulatory authority shall be pending (other than
those referred to in Section 6.1(f)), against Parent, Sub, the Company, any
Subsidiary thereof or any of the principals, officers or directors of any of
them, seeking to restrain, prevent or change the transactions contemplated
hereby or questioning the legality or validity of any such transactions or
seeking damages in connection with any such transactions.
(d) Consents Under Agreements. The Company shall have
obtained the consent or approval of each Person (other than the Governmental
Entities referred to in Section 6.1(c)) whose consent or approval shall be
required in order to permit the succession by the Surviving Corporation
pursuant to the Merger to any obligation, right or interest of the Company
under any loan or credit agreement, note, mortgage, indenture, lease or other
agreement or instrument, except those for which failure to obtain such consents
and approvals would not, individually or in the aggregate, have a Material
Adverse Effect on the Company or restrict, prohibit or prevent the consummation
of the transactions contemplated hereby.
(e) Letter from Company Affiliates. Parent shall have
received from each Person named in the letter referred to in Section 5.6, an
executed copy of an agreement substantially in a form of Exhibit 5.6 hereto.
(f) Material Adverse Change. Since the date hereof,
there shall not have been any events, changes or occurrences which have had, or
are reasonably likely to have individually or in the aggregate, a Material
Adverse Effect on the Company.
(g) No Amendments to Resolutions. Neither the Board of
Directors of the Company nor any committee thereof shall have
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amended, modified, rescinded or repealed the resolutions adopted by the Board
of Directors on June 24, 1994 (accurate and complete copies of which have been
provided to Parent) and shall not have adopted any other resolutions in
connection with this Agreement and the transactions contemplated hereby
inconsistent with such resolutions.
6.3 Conditions to Obligations of the Company. The
obligation of the Company to effect the Merger is subject to satisfaction of
the following conditions, unless waived by the Company:
(a) Representations and Warranties; Performance of
Obligations. Except as otherwise contemplated or permitted by this Agreement,
(i) the representations and warranties of Parent and Sub contained in this
Agreement or in any certificate or document delivered to the Company pursuant
hereto shall be deemed to have been made again at and as of the Closing Date
and shall then be true in all respects and (ii) Parent and Sub shall have
performed and complied with all agreements and conditions required by this
Agreement to be performed or complied with by them prior to or on the Closing
Date, and the Company shall have been furnished a certificate of an appropriate
officer of Parent, dated the Closing Date, certifying to the effect of clauses
(i) and (ii) hereof.
(b) Tax Opinion. The opinion, based on appropriate
representations of the Company and Parent, of Alston & Bird, counsel to the
Company, in form and substance satisfactory to such counsel, to the effect that
the Merger will be treated for Federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code, and that Parent, Sub and the
Company will each be a party to that reorganization within the meaning of
Section 368(b) of the Code, dated on or about the date of and referred to in
the Proxy Statement as first mailed to stockholders of the Company, shall not
have been withdrawn or modified in any material respect.
(c) Consents Under Agreements. Parent shall have
obtained the consent or approval of each Person (other than the Governmental
Entities referred to in Section 6.1(c)) whose consent or approval shall be
required in connection with the transactions contemplated hereby under any loan
or credit agreement, note, mortgage, indenture, lease or other agreement or
instrument, except those for which failure to obtain such consents and
approvals would not, individually or in the aggregate, have a Material Adverse
Effect on Parent and its Subsidiaries taken as a whole or restrict, prohibit or
prevent the consummation of the transactions contemplated hereby.
(d) No Amendments to Resolutions. Neither the Board of
Directors of Parent nor any committee thereof shall have amended, modified,
rescinded or repealed the resolutions adopted by the Board of Directors on June
24, 1994 (accurate and complete copies of which have been provided to the
Company) and shall not
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have adopted any other resolutions in connection with this Agreement and the
transactions contemplated hereby inconsistent with such resolutions.
ARTICLE 7
TERMINATION AND AMENDMENT
7.1 Termination. At any time prior to the Effective
Time, whether before or after approval of the matters presented in connection
with the Merger by the stockholders of the Company or Sub, this Agreement may
be terminated:
(a) by mutual consent of Parent and the Company;
(b) by either Parent or the Company, if, without fault of the
terminating party, the Closing shall not have occurred on or before
November 15, 1994 (or such later date as may be agreed upon in writing
by the parties hereto);
(c) by Parent, if the Company shall breach any of its
representations, warranties or obligations hereunder and such breach
shall not have been cured or waived and the Company shall not have
provided reasonable assurance that such breach will be cured on or
before the Closing Date;
(d) by the Company, if Parent or Sub shall breach any of
their respective representations, warranties or obligations hereunder
and such breach shall not have been cured or waived and Parent shall
not have provided reasonable assurance that such breach will be cured
on or before the Closing Date;
(e) by either Parent or the Company if a Trigger Event or
Takeover Proposal shall have occurred and the Board of Directors of
the Company in connection therewith, after consultation with its legal
counsel, withdraws or modifies its approval and recommendation of this
Agreement and the transactions contemplated hereby after determining
that to cause the Company to proceed with the transactions
contemplated hereby would violate the Board of Directors' fiduciary
duty to the stockholders of the Company;
(f) by either Parent or the Company if (i) any permanent
Injunction or other order of a court or other competent authority
preventing the consummation of the Merger shall have became final and
nonappealable or (ii) if any required approval of the stockholders of
the Company shall not have been obtained by reason of the failure to
obtain the required vote upon a vote held at a duly held meeting of
stockholders or at any adjournment thereof;
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(g) by the Company, in the event (i) of the acquisition, by
any person or group of persons (other than persons or groups of
persons who (A) acquired shares of Parent Common Stock pursuant to any
merger of Parent in which Parent was the surviving corporation or any
acquisition by Parent of all or substantially all of the capital stock
or assets of another person or (B) disclose their beneficial ownership
of shares of Parent Common Stock on Schedule 13G under the Exchange
Act), of beneficial ownership of 30% or more of the outstanding shares
of Parent Common Stock (the terms "person," "group" and "beneficial
ownership" having the meanings ascribed thereto in Section 13(d) of
the Exchange Act and the regulations promulgated thereunder), or (ii)
the Board of Directors of Parent accepts or publicly recommends
acceptance of an offer from a third party to acquire 50% or more of
the outstanding shares of Parent Common Stock or of Parent's
consolidated assets;
(h) by Parent, if the Parent Stock Price shall be less than
$30.00 or greater than $42.00; or
(i) by the Company, if the Parent Stock Price shall be less
than $25.00 or greater than $42.00.
In the event of any change in the outstanding number of shares
of Parent Common Stock by reason of stock dividends, stock splits,
recapitalizations or combinations of shares into a smaller number of shares,
the prices of the Parent Common Stock set forth in clauses (h) and (i) of this
Section 7.1 shall be adjusted appropriately.
7.2 Effect of Termination. In the event of termination
of this Agreement by either Parent or the Company as provided in Section 7.1,
(a) this Agreement shall forthwith become void and there shall be no liability
or obligation on the part of Parent, Sub or the Company or their respective
officers or directors except (i) with respect to Section 5.9, 5.10, 5.11 and
5.12, (ii) to the extent that such termination results from the willful breach
by a party hereto of any of its representations, warranties, covenants or
agreements set forth in this Agreement except as provided in Section 8.7 and
(iii) this Section 7.2 shall survive such termination and (b) the letter
agreement dated March 4, 1994 between Parent and the Company, as amended on
April 18, 1994, shall thereafter revive and remain in full force and effect
according to the terms thereof.
7.3 Extension; Waiver. At any time prior to the
Effective Time, the parties hereto, by action duly taken, may, to the extent
legally allowed, (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (iii) waive compliance with any of the
agreements or conditions contained herein. Any
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agreement on the part of a party hereto to any such extension or waiver shall
be valid only if set forth in a written instrument signed on behalf of such
party.
7.4 Amendment and Modification. This Agreement may be
amended by the parties hereto, by action taken or authorized by their
respective Boards of Directors, at any time before or after adoption of the
Agreement by the stockholders of the Company, but after any such adoption, no
amendment shall be made which by law requires further approval by such
stockholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
ARTICLE 8
GENERAL PROVISIONS
8.1 Nonsurvival of Representations, Warranties and
Agreements. None of the representations, warranties and agreements in this
Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Effective Time, except for the agreements contained in Section 2.1,
2.2, the last sentence of Section 5.6, 5.12, 5.17 and the last sentence of
Section 7.4 and Article 8, and the agreements of the "affiliates" of the
Company delivered pursuant to Section 5.6.
8.2 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given upon receipt
of: hand delivery, overnight courier, certified or registered mail, return
receipt requested, or telecopy transmission with confirmation of receipt:
(i) If to the Company, to:
Gates/FA Distributing, Inc.
39 Pelham Ridge Drive
Greenville, South Carolina 29615
Telecopier: (803) 627-2180
Telephone: (803) 234-0736
Attention: Philip D. Ellett
(with a copy to)
Alston & Bird
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309
Telecopier: (404)881-7777
Telephone: (404)881-7000
Attention: Bryan E. Davis, Esq.
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(ii) If to Parent, to
Arrow Electronics, Inc.
25 Hub Drive
Melville, New York 11747
Telecopier: (516) 391-1683
Telephone: (516) 391-1830
Attention: Robert E. Klatell
(with a copy to)
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, New York 10004
Telecopier: (212) 858-1500
Telephone: (212) 858-1000
Attention: Howard S. Kelberg, Esq.
Such names and addresses may be changed by written notice to each person listed
above.
8.3 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to any applicable provisions relating to conflicts of laws.
8.4 Interpretation. When a reference is made in this
Agreement to Sections, such reference shall be to a Section of this Agreement
unless otherwise indicated. The table of contents and headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement. Whenever the words "include",
"includes" or "including" are used in this Agreement, they shall be deemed to
be followed by the words "without limitation". The phrase "made available" in
this Agreement shall mean that the information referred to has been made
available if requested by the party to whom such information is to be made
available. The phrases "the date of this Agreement", "the date hereof", and
terms of similar import, unless the context otherwise requires, shall be deemed
to refer to June 24, 1994.
8.5 Counterparts. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when two or more counterparts have been signed by
each of the parties and delivered to the other parties, it being understood
that all parties need not sign the same counterpart.
8.6 Entire Agreement; No Third Party Beneficiaries;
Rights of Ownership. This Agreement (including the documents and the
instruments referred to herein, including the Option Agreement) (a) constitutes
the entire agreement and supersedes all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof and
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(b) except as otherwise contemplated by Sections 2.1, 2.2 and 5.12 (which
covenants shall be enforceable by the persons affected thereby following the
Effective Time), is not intended to confer upon any person other than the
parties hereto any rights or remedies hereunder. The parties hereby
acknowledge that, except as otherwise specifically provided in the Option
Agreement or as hereafter agreed to in writing, no party shall have the right
to acquire or shall be deemed to have acquired shares of common stock of the
other party pursuant to the Merger until consummation thereof.
8.7 No Remedy in Certain Circumstances. Each party agrees
that, should any court or other competent authority hold any provision of this
Agreement or the Option Agreement or part hereof or thereof to be null, void or
unenforceable, or order any party to take any action inconsistent herewith or
not to take any action required herein, the other party shall not be entitled
to specific performance of such provision or part hereof or thereof or to any
other remedy, including but not limited to money damages, for breach hereof or
thereof or of any other provision of this Agreement or the Option Agreement or
part hereof or thereof as a result of such holding or order.
8.8 Severability. Any term or provision of this Agreement
which is invalid or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or affecting the validity or enforceability of
any of the terms or provisions of this Agreement in any other jurisdiction. If
any provision of this Agreement is so broad as to be unenforceable, the
provision shall be interpreted to be only so be broad as is enforceable.
8.9 Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties, except that Sub may assign, in its sole
discretion, any or all of its rights, interests and obligations hereunder to
Parent or to any direct or indirect wholly owned Subsidiary of Parent. Subject
to the preceding sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors
and assigns.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
ARROW ELECTRONICS, INC.
By: /s/ Robert E. Klatell
--------------------------------
Name: Robert E. Klatell
Title: Senior Vice President and
Chief Financial Officer
AFG ACQUISITION COMPANY
By: /s/ Robert E. Klatell
--------------------------------
Name: Robert E. Klatell
Title: Senior Vice President,
Treasurer and Secretary
GATES/FA DISTRIBUTING, INC.
By: /s/ Philip D. Ellett
-------------------------------
Name: Philip D. Ellett
Title: President and Chief Executive Officer
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<PAGE> 52
EXHIBIT 5.6
[Name]
[Address]
Gentlemen:
The undersigned, a holder of shares of Common Stock, par value
$.01 per share (the "Company Common Stock"), of Gates/FA Distributing, Inc., a
Delaware corporation (the "Company"), is entitled to receive in connection with
the merger (the "Merger") of the Company with AFG Acquisition Company, a
Delaware corporation ("Sub"), shares of Common Stock, par value $1 per share
(the "Parent Common Stock"), of Arrow Electronics, Inc., a New York corporation
("Parent"). The undersigned acknowledges that the undersigned may be deemed to
be an "affiliate" of the Company for purposes of Rule 145 ("Rule 145")
promulgated under the Securities Act of 1933, as amended (the "Act") and for
purposes of "pooling-of-interests" accounting treatment, although nothing
contained herein should be construed as an admission of such fact.
If in fact the undersigned were an affiliate of the Company
under the Act, the undersigned's ability to sell, assign or transfer the Parent
Common Stock received by it in exchange for any shares of Company Common Stock
pursuant to the Merger may be restricted unless such transaction is registered
under the Act or an exemption from such registration is available. The
undersigned understands that such exemptions are limited and the undersigned
has obtained advice of counsel as to the nature and conditions of such
exemptions, including information with respect to the applicability to the sale
of the Parent Common Stock of Rules 144 and 145(d) promulgated under the Act.
The undersigned hereby represents to and covenants with Parent
that it will not sell, assign or transfer any of the shares of Parent Common
Stock received by it in exchange for shares of Company Common Stock pursuant to
the Merger except (i) pursuant to an effective Registration Statement under the
Act, or (ii) in a transaction which, in the opinion of independent counsel
reasonably satisfactory to Parent (the reasonable fees of which counsel will be
paid by Parent) or as described in a "no-action" or interpretive letter from
the Staff of the Securities and Exchange Commission (the "Commission"), is not
required to be registered under the Act.
The undersigned further represents to and covenants with
Parent that it has not, within the preceding 30 days, sold, transferred to
otherwise disposed of any shares of Company Common Stock held by it and that it
will not sell, transfer or otherwise dispose of any shares of Parent Common
Stock received by it in the Merger until after such time as results covering at
least 30 days of combined operations of Parent and the Company have been
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<PAGE> 53
published by Parent, in the form of a quarterly earnings report, an effective
registration statement filed with the Commission, a report to the Commission on
Form 10-K, 10-Q, or 8-K, or any other public filing or announcement which
includes such combined results of operations.
In the event of a sale or other disposition pursuant to Rule
145, the undersigned will supply Parent with evidence of compliance with such
Rule, in the form of a letter in the form of Exhibit A hereto and the opinion
of counsel referred to above. The undersigned understands that Parent may
instruct its transfer agent to withhold the transfer of any securities disposed
of by it but that upon receipt of such letter the transfer agent shall
effectuate the transfer of the shares indicated as sold in the letter.
The undersigned acknowledges and agrees that appropriate
legends will be placed on certificates representing the Parent Common Stock
received by the undersigned in the Merger or held by a transferee thereof,
which legends will be removed by delivery of substitute certificates upon the
registration of such Parent Common Stock under the Act or the receipt of an
opinion in form and substance reasonably satisfactory to Parent from
independent counsel reasonably satisfactory to Parent (the reasonable fees of
which counsel will be paid by Parent) to the effect that such legends are no
longer required for purposes of the Act.
The undersigned acknowledges that (i) it has carefully read
this letter and understands the requirements hereof and the limitations imposed
upon the distribution, sale, transfer or other disposition of shares of Parent
Common Stock and (ii) the receipt by Parent of this letter is an inducement and
a condition to Parent's obligations to consummate the Merger.
Very truly yours,
_____________________________
Name:
Date: _________________
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<PAGE> 54
EXHIBIT A
To Exhibit 5.6
[Name]
[Address]
Gentlemen:
On _______________, I sold ____________ shares of capital
stock ("Capital Stock") of Arrow Electronics, Inc. (the "Company") received by
me in connection with the merger of AFG Acquisition Company, a subsidiary of
the Company, with and into Gates/FA Distributing, Inc.
Based upon the most recent report or statement filed by the
Company with the Securities and Exchange Commission, the shares of Capital
Stock sold by me were within the prescribed limitations set forth in paragraph
(e) of Rule 144 promulgated under the Securities Act of 1933, as amended (the
"Act").
I hereby represent that the above-described shares of Capital
Stock were sold in "brokers' transactions" within the meaning of Section 4(4)
of the Act or in transactions directly with a "market maker" as that term is
defined in Section (3)(a)(38) of the Securities Exchange Act of 1934, as
amended. I further represent that I have not solicited or arranged for the
solicitation of orders to buy the above-described shares of Capital Stock, and
that I have not made any payment in connection with the offer or sale of such
shares to any person other than to the broker who executed the order in respect
of such sale.
Very truly yours,
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<PAGE> 1
EXHIBIT 2
IRREVOCABLE PROXY
In consideration of the negotiations and discussions which
have occurred to date between Arrow Electronics, Inc., a New York corporation
("Parent"), and Gates/FA Distributing, Inc., a Delaware corporation
("Company"), and as an inducement to Parent and AFG Acquisition Company, a
Delaware corporation and a wholly owned subsidiary of Parent ("Sub"), to enter
into the Agreement and Plan of Merger dated as of the date hereof among Parent,
Sub and the Company (the "Merger Agreement"), the undersigned hereby
irrevocably appoints Stephen P. Kaufman, Robert E. Klatell and John C. Waddell
and each of them, or any other designee of Parent, the attorneys and proxies of
the undersigned, with full power of substitution, to vote all of the shares of
Common Stock, par value $.01 per share, of the Company now owned or hereafter
acquired by the undersigned (the "Shares") which the undersigned is entitled to
vote at any meeting (whether annual or special and whether or not an adjourned
meeting) of the Company or otherwise on any proposal involving the merger,
consolidation, sale of assets, business combination or other transaction
resulting in a change in control of the Company in such manner as each such
attorney and proxy or his designee shall in his sole discretion deem proper.
This Proxy is coupled with an interest and is irrevocable. On the date hereof,
the Company granted Parent an option to purchase certain shares of the
Company's Common Stock pursuant to a Stock Option Agreement of even date
herewith (the "Option Agreement"). This Proxy shall
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<PAGE> 2
terminate on the date which is the later to occur of the date the Option
Agreement terminates pursuant to Section 2 thereof or the date the Merger
Agreement terminates pursuant to Section 7.1 thereof, but in no event later
than June 24, 1995.
This Proxy shall be governed by and construed and enforced in
accordance with the internal laws of the State of Delaware.
All authority herein conferred shall survive the death or
incapacity of the undersigned and any obligation of the undersigned hereunder
shall be binding upon the heirs, personal representatives, successors and
assigns of the undersigned.
The undersigned further agrees that he will not sell, assign,
transfer or otherwise convey any of the Shares prior to the termination of this
Proxy.
/s/ Dennis Gates
----------------------------------
Name: Dennis Gates
Dated: June 24, 1994
Page 71 of 88 Pages
<PAGE> 3
IRREVOCABLE PROXY
In consideration of the negotiations and discussions which
have occurred to date between Arrow Electronics, Inc., a New York corporation
("Parent"), and Gates/FA Distributing, Inc., a Delaware corporation
("Company"), and as an inducement to Parent and AFG Acquisition Company, a
Delaware corporation and a wholly owned subsidiary of Parent ("Sub"), to enter
into the Agreement and Plan of Merger dated as of the date hereof among Parent,
Sub and the Company (the "Merger Agreement"), the undersigned hereby
irrevocably appoints Stephen P. Kaufman, Robert E. Klatell and John C. Waddell
and each of them, or any other designee of Parent, the attorneys and proxies of
the undersigned, with full power of substitution, to vote all of the shares of
Common Stock, par value $.01 per share, of the Company now owned or hereafter
acquired by the undersigned (the "Shares") which the undersigned is entitled to
vote at any meeting (whether annual or special and whether or not an adjourned
meeting) of the Company or otherwise on any proposal involving the merger,
consolidation, sale of assets, business combination or other transaction
resulting in a change in control of the Company in such manner as each such
attorney and proxy or his designee shall in his sole discretion deem proper.
This Proxy is coupled with an interest and is irrevocable. On the date hereof,
the Company granted Parent an option to purchase certain shares of the
Company's Common Stock pursuant to a Stock Option Agreement of even date
herewith (the "Option Agreement"). This Proxy shall
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<PAGE> 4
terminate on the date which is the later to occur of the date the Option
Agreement terminates pursuant to Section 2 thereof or the date the Merger
Agreement terminates pursuant to Section 7.1 thereof, but in no event later
than June 24, 1995.
This Proxy shall be governed by and construed and enforced in
accordance with the internal laws of the State of Delaware.
All authority herein conferred shall and any obligation of
the undersigned hereunder shall be binding upon the successors and assigns of
the undersigned.
The undersigned further agrees that he will not sell, assign,
transfer or otherwise convey any of the Shares prior to the termination of this
Proxy.
CHEYENNE SOFTWARE, INC.
By: /s/ ReiJane Huai
-------------------------------
Name: ReiJane Huai
Title: President
Dated: June 24, 1994
Page 73 of 88 Pages
<PAGE> 1
EXHIBIT 3
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT (the "Agreement"), dated as of June 24,
1994, by and between Arrow Electronics, Inc., a New York corporation
("Parent"), and Gates/FA Distributing, Inc., a Delaware corporation (the
"Company").
WHEREAS, concurrently with the execution and delivery of this
Agreement, the Company, Parent and AFG Acquisition Company, a Delaware
corporation ("Sub"), are entering into an Agreement and Plan of Merger, dated
as of the date hereof (the "Merger Agreement"), which provides that, among
other things, upon the terms and subject to the conditions thereof, Sub will be
merged with and into the Company (the "Merger"), with the Company continuing as
the surviving corporation; and
WHEREAS, as a condition and inducement to Parent's willingness
to enter into the Merger Agreement, Parent has required that the Company agree,
and the Company has so agreed, to grant to Parent an option with respect to
certain shares of the Company's common stock on the terms and subject to the
conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants and agreements set forth herein and in the Merger Agreement,
the parties hereto agree as follows:
1. Grant of Option. The Company hereby grants Parent an
irrevocable option (the "Company Option") to purchase up to 1,257,063 shares
(the "Company Shares") of common stock, par value $.01 per share, of the
Company (the "Company Common Stock") in the manner set forth below at a price
(the "Exercise Price") of $22.50 per Company Share, payable in cash.
Capitalized terms used herein but not defined herein shall have the meanings
set forth in the Merger Agreement.
2. Exercise of Option. The Company Option may be
exercised by Parent, in whole or in part, at any time or from time to time
after the occurrence of any of the events described in clauses (i), (ii) and
(iii) of Section 5.9(b) of the Merger Agreement (regardless of whether the
Merger Agreement has actually terminated as a result thereof). In the event
Parent wishes to exercise the Company Option, Parent shall deliver to the
Company a written notice (an "Exercise Notice") specifying the total number of
Company Shares it wishes to purchase. Each closing of a purchase of Company
Shares (a "Closing") shall occur at a place, on a date and at a time designated
by Parent in an
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<PAGE> 2
Exercise Notice delivered at least two business days prior to the date of the
Closing. The Company Option shall terminate upon the earlier of: (i) the
Effective Time; (ii) the termination of the Merger Agreement pursuant to
Section 7.1 thereof (other than a termination in connection with which Parent
is entitled to the payment specified in Section 5.9(b) thereof); or (iii) 180
days following any termination of the Merger Agreement in connection with which
Parent is entitled to the payment specified in Section 5.9(b) thereof (or if,
at the expiration of such 180 day period, the Company Option cannot be
exercised by reason of any applicable judgment, decree, order, law or
regulation, ten business days after such impediment to exercise shall have been
removed or shall have become final and not subject to appeal, but in no event
under this clause (iii) later than June 24, 1996). Notwithstanding the
foregoing, the Company Option may not be exercised if Parent is in material
breach of any of its representations, warranties, covenants or agreements
contained in this Agreement or in the Merger Agreement.
3. Conditions to Closing. The obligation of the Company
to issue the Company Shares to Parent hereunder is subject to the conditions
that (i) all waiting periods, if any, under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations promulgated
thereunder ("HSR Act"), applicable to the issuance of the Company Shares
hereunder shall have expired or have been terminated; (ii) all consents,
approvals, orders or authorizations of, or registrations, declarations or
filings with, any Federal, state or local administrative agency or commission
or other Federal state or local governmental authority or instrumentality, if
any, required in connection with the issuance of the Company Shares hereunder
shall have been obtained or made, as the case may be; and (iii) no preliminary
or permanent injunction or other order by any court of competent jurisdiction
prohibiting or otherwise restraining such issuance shall be in effect.
4. Closing. At any Closing, (a) the Company will
deliver to Parent a single certificate in definitive form representing the
number of the Company Shares designated by Parent in its Exercise Notice, such
certificate to be registered in the name of Parent and to bear the legend set
forth in Section 13, and (b) Parent will deliver to the Company the aggregate
price for the Company Shares so designated and being purchased by wire transfer
of immediately available funds or certified check or bank check. At any
Closing at which Parent is exercising the Company Option in part, Parent shall
present and surrender this Agreement to the Company, and the Company shall
deliver to Parent an executed new agreement with the same terms as this
Agreement evidencing the right to purchase the balance of the shares of Company
Common Stock purchasable hereunder.
5. Representations and Warranties of the Company. The
Company represents and warrants to Parent that (a) the Company is a corporation
duly incorporated, validly existing and
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<PAGE> 3
in good standing under the laws of the State of Delaware and has the corporate
power and authority to enter into this Agreement and to carry out its
obligations hereunder, (b) the execution and delivery of this Agreement by the
Company and the consummation by the Company of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of the Company and no other corporate proceedings on the part of the Company
are necessary to authorize this Agreement or any of the transactions
contemplated hereby, (c) this Agreement has been duly executed and delivered by
the Company and constitutes a valid and binding obligation of the Company, and,
assuming this Agreement constitutes a valid and binding obligation of Parent,
is enforceable against the Company in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' rights generally, and except that the
availability of equitable remedies, including specific performance, is subject
to the discretion of the court before which any proceeding therefor may be
brought, and except as indemnification may be limited by public policy, (d) the
Company has taken all necessary corporate action to authorize and reserve for
issuance and to permit it to issue, upon exercise of the Company Option, and at
all times from the date hereof through the expiration of the Company Option
will have reserved, 1,257,063 unissued Company Shares, all of which, upon their
issuance and delivery in accordance with the terms of this Agreement, will be
validly issued, fully paid and nonassessable, (e) upon delivery of the Company
Shares to Parent upon the exercise of the Company Option, Parent will acquire
the Company Shares free and clear of all claims, liens, charges, encumbrances
and security interests of any nature whatsoever, (f) except as described in
Section 3.1 or 3.4 of the Merger Agreement, the execution and delivery of this
Agreement by the Company does not, and the performance of this Agreement by the
Company will not, conflict with, or result in any violation of, or material
default (with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancellation or acceleration of any obligation or
the loss of a material benefit under, or the creation of a lien, pledge,
security interest or other encumbrance on assets pursuant to (any such
conflict, violation, default, right of termination, cancellation or
acceleration, loss or creation, a "Violation"), (A) any provision of the
Amended or Restated Certificate of Incorporation, as amended, or Amended and
Restated By-laws, as amended, of the Company or (B) any provisions of any loan
or credit agreement, note, mortgage, indenture, lease, benefit plan or other
agreement, obligation, instrument, permit, concession, franchise, license or
(C) any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to the Company or its properties or assets, which Violation, in the
case of each of clauses (B) and (C), would have a Material Adverse Effect on
the Company and (g) except as described in Section 3.1 or 3.4 of the Merger
Agreement and Section 3(i) of this Agreement, the execution and delivery of
this Agreement by the Company does not, and the performance of this Agreement
by the Company will not,
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<PAGE> 4
require any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority.
6. Representations and Warranties of Parent. Parent
represents and warrants to the Company that (a) Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York and has the corporate power and authority to enter into this Agreement
and to carry out its obligations hereunder, (b) the execution and delivery of
this Agreement by Parent and the consummation by Parent of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Parent and no other corporate proceedings on the part of Parent
are necessary to authorize this Agreement or any of the transactions
contemplated hereby, (c) this Agreement has been duly executed and delivered by
Parent and constitutes a valid and binding obligation of Parent, and, assuming
this Agreement constitutes a valid and binding obligation of the Company, is
enforceable against Parent in accordance with its terms, except as enforcement
may be limited by bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights generally, and except that the availability of
equitable remedies, including specific performance, is subject to the
discretion of the court before which any proceeding therefor may be brought,
and except as indemnification may be limited by public policy, (d) except as
described in Section 4.2 or 4.3 of the Merger Agreement, the execution and
delivery of this Agreement by Parent does not, and the performance of this
Agreement by Parent will not, result in any Violation pursuant to, (A) any
provision of the Certificate of Incorporation or By-laws of Parent, (B) any
provisions of any loan or credit agreement, note, mortgage, indenture, lease,
Benefit Plan or other agreement, obligation, instrument, permit, concession,
franchise, license or (C) any judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to Parent or its properties or assets, which
Violation, in the case of each of clauses (B) and (C), would have a Material
Adverse Effect on Parent and its Subsidiaries taken as a whole, (e) except as
described in Section 4.2 or 4.3 of the Merger Agreement and Section 3(i) of
this Agreement, the execution and delivery of this Agreement by Parent does
not, and the performance of this Agreement by Parent will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any governmental or regulatory authority and (f) any Company Shares
acquired upon exercise of the Company Option will not be, and the Company
Option is not being, acquired by Parent with a view to the public distribution
thereof.
7. Certain Repurchases.
(a) Put and Call. At any time during which the Company
Option is exercisable pursuant to Section 2 (the "Repurchase Period"), upon
demand by Parent, Parent shall have the right to sell to the Company (or any
successor entity
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<PAGE> 5
thereof) and the Company (or such successor entity) shall be obligated to
repurchase from Parent (the "Put"), and upon demand by the Company, subject to
Section 7(d) hereof, the Company (or any successor entity thereof) shall have
the right to repurchase from Parent and Parent shall be obligated to sell to
the Company (or such successor entity) (the "Call") all or any portion of the
Company Option, at the price set forth in subparagraph (i) below, or, at any
time prior to June 24, 1996, all or any portion of the Company Shares purchased
by Parent pursuant thereto with respect to which Parent or any affiliate
thereof has beneficial ownership, at a price set forth in subparagraph (ii)
below:
(i) the difference between the
"Market/Tender Offer Price" for shares of Company Common Stock as of
the date (the "Notice Date") notice of exercise of the Put or Call, as
the case may be, is given to the other party (defined as the higher of
(A) the price per share offered as of the Notice Date pursuant to any
tender or exchange offer or other Takeover Proposal which was made
prior to the Notice Date and not terminated or withdrawn as of the
Notice Date (the "Tender Price") or (B) the average of the high and
low bid prices of shares of the Company Common Stock on NASDAQ for the
ten trading days immediately preceding the Notice Date, or if on any
of such ten trading days the Company Common Stock shall not be quoted
in the NASDAQ System, the average of the high and low bid prices on
such day in the domestic over-the-counter market as reported by the
National Quotation Bureau, Incorporated, or any similar successor
organization (the "Market Price")), and the Exercise Price, multiplied
by the number of Company Shares purchasable pursuant to the Company
Option (or portion thereof with respect to which Parent or the Company
is exercising its rights under this Section 7), but only if the
Market/Tender Offer Price is greater than the Exercise Price;
(ii) the Exercise Price paid by Parent for
the Company Shares acquired pursuant to the Company Option plus the
difference between the Market/Tender Offer Price and the Exercise
Price, but only if the Market/Tender Offer Price is greater than the
Exercise Price, multiplied by the number of Company Shares so
purchased. For purposes of this clause (ii), the Tender Price shall
be the highest price per share offered pursuant to a tender or
exchange offer or other Takeover Proposal during the Repurchase
Period.
(b) Payment and Redelivery of Company Option or Shares.
In the event Parent or the Company exercises its rights under this Section 7,
the Company shall, within ten business days of the Notice Date, pay the
required amount to Parent in immediately available funds and Parent shall
surrender to the Company the Company Option or the certificates evidencing the
Company Shares purchased by Parent pursuant thereto, and Parent shall warrant
that it owns such shares and that such shares are
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<PAGE> 6
then free and clear of all liens, claims, charges and encumbrances of any kind
or nature whatsoever.
(c) Limitation on Repurchase Price. Notwithstanding anything
to the contrary provided in this Section 7, the maximum amount payable to
Parent pursuant to the Put and/or the Call shall not exceed $10,056,504 plus
the amount of the aggregate Exercise Price paid by Parent for any shares of
Company Common Stock acquired pursuant to the Company Option.
(d) Limitation on Call. The Call shall not be exercisable by
the Company (or any successor entity thereof) unless the difference between the
Market/Tender Offer Price and the Exercise Price as of the Notice Date with
respect to such Call is greater than $8.00.
8. Voting of Shares. Following the date hereof and
prior to the Expiration Date (as defined in Section 9(b)), Parent shall vote
any shares of Company Common Stock acquired pursuant to this Agreement
("Restricted Shares") on each matter submitted to a vote of stockholders of the
Company for and against such matter in the same proportion as the vote of all
other stockholders of the Company are voted (whether by proxy or otherwise) for
and against such matter.
9. Restrictions on Certain Actions.
(a) Restrictions. Other than pursuant to the Merger
Agreement, following the date hereof and prior to the Expiration Date, without
the prior written consent of the Company, Parent shall not, nor shall Parent
permit its affiliates to, directly or indirectly, alone or in concert or
conjunction with any other Person or Group (as defined in Section 9(b)), (i) in
any manner acquire, agree to acquire or make any proposal to acquire, any
securities of, equity interest in, or any material property of, the Company
(other than pursuant to this Agreement or the Merger Agreement), (ii) except at
the specific written request of the Company, propose to enter into any merger
or business combination involving the Company or to purchase a material portion
of the assets of the Company, (iii) make or in any way participate in any
"solicitation" of "proxies" (as such terms are used in Regulation 14A
promulgated under the Exchange Act) to vote, or seek to advise or influence any
Person with respect to the voting of, any voting securities of the Company,
(iv) form, join or in any way participate in a Group with respect to any voting
securities of the Company, (v) seek to control or influence the management,
Board of Directors or policies of the Company, (vi) disclose any intention,
plan or arrangement inconsistent with the foregoing, (vii) advise, assist or
encourage any other Person in connection with the foregoing or (viii) request
the Company (or its directors, officers, employees or agents) to amend or waive
any provisions of this Section 9, or take any action which may require the
Company to make a public announcement regarding the possibility of a business
combination or merger with such party.
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The Company shall not adopt any Rights Agreement in any manner which would
cause Parent, if Parent has complied with its obligations under this Agreement,
to become an "Acquiring Person" under such Rights Agreement solely by reason of
the beneficial ownership of the shares purchasable hereunder.
(b) Certain Definitions. For purposes of this Agreement,
(i) the term "Person" shall mean any corporation, partnership, individual,
trust, unincorporated association or other entity or Group (within the meaning
of Section 13(d)(3) of the Exchange Act), (ii) the term "Expiration Date" with
respect to any obligation or restriction imposed on one party shall mean the
earlier to occur of (A) the third anniversary of the date hereof or (B) such
time as the other party shall have suffered a Change of Control and (iii) a
"Change of Control" with respect to one party shall be deemed to have occurred
whenever (A) there shall be consummated (1) any consolidation or merger of such
party in which such party is not the continuing or surviving corporation, or
pursuant to which shares of such party's common stock would be converted in
whole or in part into cash, other securities or other property, other than a
merger of such person in which the holders of such party's common stock
immediately prior to the merger have substantially the same proportionate
ownership of common stock of the surviving corporation immediately after the
merger, or (2) any sale, lease, exchange or transfer (in one transaction or a
series of related transactions) of all or substantially all the assets of such
party, or (B) the stockholders of such party shall approve any plan or proposal
for the liquidation or dissolution of such party, or (C) any party, other than
such party or a subsidiary thereof or any employee benefit plan sponsored by
such party or a subsidiary thereof or a corporation owned, directly or
indirectly, by the stockholders of such party in substantially the same
proportions as their ownership of stock of such party, shall become the
beneficial owner of securities of such party representing 25% or more of the
combined voting power of then outstanding securities ordinarily (and apart from
rights accruing in special circumstances) having the right to vote in the
election of directors, as a result of a tender or exchange offer, open market
purchases, privately negotiated purchases or otherwise, or (D) at any time
during the period commencing on the date of this Agreement and ending on the
Expiration Date, individuals who at the date hereof constituted the Board of
Directors of such party shall cease for any reason to constitute at least a
majority thereof, unless the election or the nomination for election by such
party's stockholders of each new director during the period commencing on the
date of this Agreement and ending on the Expiration Date was approved by a vote
of at least two-thirds of the directors then still in office who were directors
at the date hereof, or (E) any other event shall occur with respect to such
party that would be required to be reported in response to Item 6(e) (or any
successor provision) of Schedule 14A of Regulation 14A promulgated under the
Exchange Act.
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10. Restrictions on Transfer.
(a) Restrictions on Transfer. Prior to the Expiration
Date, Parent shall not, directly or indirectly, by operation of law or
otherwise, sell, assign, pledge, or otherwise dispose of or transfer any
Restricted Shares beneficially owned by Parent, other than (i) pursuant to
Section 7, or (ii) in accordance with Section 10(b) or 11.
(b) Permitted Sales. Following the termination of the
Merger Agreement, Parent shall be permitted to sell any Restricted Shares
beneficially owned by it if such sale is made pursuant to a tender or exchange
offer that has been approved or recommended, or otherwise determined to be fair
and in the best interests of the stockholders of the Company, by a majority of
the members of the Board of Directors of the Company (which majority shall
include a majority of directors who were directors prior to the announcement of
such tender or exchange offer).
11. Registration Rights. (a) Following the termination
of the Merger Agreement, Parent may by written notice (the "Registration
Notice") to the Company request the Company to register under the Securities
Act all or any part of the Restricted Shares beneficially owned by Parent (the
"Registrable Securities") pursuant to a bona fide firm commitment underwritten
public offering in which Parent and the underwriters shall effect as wide a
distribution of such Registrable Securities as is reasonably practicable and
shall use their best efforts to prevent any Person (including any Group) and
its affiliates from purchasing through such offering Restricted Shares
representing more than 1% of the outstanding shares of Common Stock of the
Company on a fully diluted basis (a "Permitted Offering"). The Registration
Notice shall include a certificate executed by Parent and its proposed managing
underwriter, which underwriter shall be an investment banking firm of
nationally recognized standing (the "Manager"), stating that (i) they have a
good faith intention to commence promptly a Permitted Offering and (ii) the
Manager in good faith believes that, based on the then prevailing market
conditions, it will be able to sell the Registrable Securities at a per share
price equal to at least 80% of the Fair Market Value of such shares. For
purposes of this Section 11, the term "Fair Market Value" shall mean the per
share average of the closing sale prices of the Company's Common Stock on the
Nasdaq National Market System for the ten trading days immediately preceding
the date of the Registration Notice. The Company (and/or any Person designated
by the Company) shall thereupon have the option exercisable by written notice
delivered to Parent within ten business days after the receipt of the
Registration Notice, irrevocably to agree to purchase all or any part of the
Registrable Securities for cash at a price (the "Option Price") equal to the
product of (i) the number of Registrable Securities and (ii) the Fair Market
Value of such shares. Any such purchase of Registrable Securities by the
Company hereunder shall take place at a closing to be held at the
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<PAGE> 9
principal executive offices of the Company or its counsel at any reasonable
date and time designated by the Company and/or such designee in such notice
within 20 business days after delivery of such notice. Any payment for the
shares to be purchased shall be made by delivery at the time of such closing of
the Option Price in immediately available funds.
(b) If the Company does not elect to exercise its option to
purchase pursuant to Section 11(a) with respect to all Registrable Securities,
it shall use its best efforts to effect, as promptly as practicable, the
registration under the Securities Act of the unpurchased Registrable
Securities; provided, however, that (i) Parent shall not be entitled to more
than an aggregate of two effective registration statements hereunder and (ii)
the Company will not be required to file any such registration statement during
any period of time (not to exceed 40 days after such request in the case of
clause (A) below or 90 days in the case of clauses (B) and (C) below) when (A)
the Company is in possession of material non-public information which it
reasonably believes would be detrimental to be disclosed at such time and, in
the written opinion of counsel to the Company, such information would have to
be disclosed if a registration statement were filed at that time; (B) the
Company is required under the Securities Act to include audited financial
statements for any period in such registration statement and such financial
statements are not yet available for inclusion in such registration statement;
or (C) the Company determines, in its reasonable judgment, that such
registration would interfere with any financing, acquisition or other material
transaction involving the Company or any of its affiliates. If consummation of
the sale of any Registrable Securities pursuant to a registration hereunder
does not occur within 120 days after the filing with the SEC of the initial
registration statement, the provisions of this Section 11 shall again be
applicable to any proposed registration; provided, however, that Parent shall
not be entitled to request more than two registrations pursuant to this Section
11. The Company shall use its best efforts to cause any Registrable Securities
registered pursuant to this Section 11 to be qualified for sale under the
securities or Blue Sky laws of such jurisdictions as Parent may reasonably
request and shall continue such registration or qualification in effect in such
jurisdiction; provided, however, that the Company shall not be required to
qualify to do business in, or consent to general service of process in, any
jurisdiction by reason of this provision.
(c) The registration rights set forth in this Section 11 are
subject to the condition that Parent shall provide the Company with such
information with respect to Parent's Registrable Securities, the plans for the
distribution thereof, and such other information with respect to Parent as, in
the reasonable judgment of counsel for the Company, is necessary to enable the
Company to include in such registration statement all
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<PAGE> 10
material facts required to be disclosed with respect to a registration
thereunder.
(d) If the Company's securities of the same type as the
Registrable Securities are then authorized for quotation or trading or listing
on the New York Stock Exchange, Nasdaq National Market System, or any other
securities exchange or automated quotations system, the Company, upon the
request of Parent, shall promptly file an application, if required, to
authorize for quotation, trading or listing the shares of Registrable
Securities on such exchange or system and will use its reasonable efforts to
obtain approval, if required, of such quotation, trading or listing as soon as
practicable.
(e) A registration effected under this Section 11 shall be
effected at the Company's expense, except for underwriting discounts and
commissions and the fees and the expenses of counsel to Parent, and the Company
shall provide to the underwriters such documentation (including certificates,
opinions of counsel and "comfort" letters from auditors) as are customary in
connection with underwritten public offerings as such underwriters may
reasonably require. In connection with any such registration, the parties
agree (i) to indemnify each other and the underwriters in the customary manner
and (ii) to enter into an underwriting agreement in form and substance
customary to transactions of this type with the Manager and the other
underwriters participating in such offering.
12. Adjustment Upon Changes in Capitalization. (a) In
the event of any change in Company Common Stock by reason of stock dividends,
splitups, mergers (other than the Merger), recapitalizations, combinations,
exchange of shares or the like, the type and number of shares or securities
subject to the Company Option, and the purchase price per share provided in
Section 1, shall be adjusted appropriately, and proper provision shall be made
in the agreements governing such transaction so that Parent shall receive, upon
exercise of the Company Option, the number and class of shares or other
securities or property that Parent would have received in respect of the
Company Common Stock if the Company Option had been exercised immediately prior
to such event or the record date therefor, as applicable.
(b) In the event that the Company shall enter in an
agreement: (i) to consolidate with or merge into any person, other than Parent
or one of its Subsidiaries, and shall not be the continuing or surviving
corporation of such consolidation or merger; (ii) to permit any person, other
than Parent or one of its Subsidiaries, to merge into the Company and the
Company shall be the continuing or surviving corporation, but, in connection
with such merger, the then-outstanding shares of Company Common Stock shall be
changed into or exchanged for stock or other securities of the Company or any
other person or cash or any other property or the outstanding shares of Company
Common Stock immediately prior to such merger shall after such merger
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<PAGE> 11
represent less than 50% of the outstanding shares and share equivalents of the
merged company; or (iii) to sell or otherwise transfer all or substantially all
of its assets to any person, other than Parent or one of its Subsidiaries,
then, and in each such case, the agreement governing such transaction shall
make proper provisions so that upon the consummation of any such transaction
and upon the terms and conditions set forth herein, Parent shall receive for
each Company Share with respect to which the Company Option has not been
exercised an amount of consideration in the form of and equal to the per share
amount of consideration that would be received by the holder of one share of
Company Common Stock less the Exercise Price (and, in the event of an election
or similar arrangement with respect to the type of consideration to be received
by the holders of Company Common Stock, subject to the foregoing, proper
provision shall be made so that the holder of the Company Option would have the
same election or similar rights as would the holder of the number of shares of
Company Common Stock for which the Company Option is then exercisable).
13. Restrictive Legends. Each certificate representing
shares of Company Common Stock issued to Parent hereunder shall include a
legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE
REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE. SUCH SECURITIES ARE ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH IN THE STOCK OPTION
AGREEMENT, DATED AS OF JUNE 24, 1994, A COPY OF WHICH MAY BE OBTAINED
FROM THE ISSUER.
14. Binding Effect; No Assignment. This Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns. Except as expressly provided for
in this Agreement, neither this Agreement nor the rights or the obligations of
either party hereto are assignable, except by operation of law, or with the
written consent of the other party. Nothing contained in this Agreement,
express or implied, is intended to confer upon any person other than the
parties hereto and their respective permitted assigns any rights or remedies of
any nature whatsoever by reason of this Agreement. Any Restricted Shares sold
by Parent in compliance with the provisions of Section 11 shall, upon
consummation of such sale, be free of the restrictions imposed with respect to
such shares by this Agreement, unless and until Parent shall repurchase or
otherwise become the beneficial owner of such shares, and any transferee of
such shares shall not be entitled to the rights of Parent. Certificates
representing shares sold in a registered public offering pursuant to Section 11
shall not be required to bear the legend set forth in Section 13.
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<PAGE> 12
15. Specific Performance. The parties recognize and
agree that if for any reason any of the provisions of this Agreement are not
performed in accordance with their specific terms or are otherwise breached,
immediate and irreparable harm or injury would be caused for which money
damages would not be an adequate remedy. Accordingly, each party agrees that,
in addition to other remedies, the other party shall be entitled to an
injunction restraining any violation or threatened violation of the provisions
of this Agreement. In the event that any action should be brought in equity to
enforce the provisions of this Agreement, neither party will allege, and each
party hereby waives the defense, that there is adequate remedy at law.
16. Entire Agreement. This Agreement and the Merger
Agreement (including the Disclosure Memorandum relating thereto) constitute the
entire agreement among the parties with respect to the subject matter hereof
and supersede all other prior agreements and understandings, both written and
oral, among the parties or any of them with respect to the subject matter
hereof.
17. Further Assurances. Each party will execute and
deliver all such further documents and instruments and take all such further
action as may be necessary in order to consummate the transactions contemplated
hereby.
18. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
the other provisions of this Agreement, which shall remain in full force and
effect. In the event any court or other competent authority holds any
provision of this Agreement to be null, void or unenforceable, the parties
hereto shall negotiate in good faith the execution and delivery of an amendment
to this Agreement in order, as nearly as possible, to effectuate, to the extent
permitted by law, the intent of the parties hereto with respect to such
provision. Each party agrees that, should any court or other competent
authority hold any provision of this Agreement or part hereof to be null, void
or unenforceable, or order any party to take any action inconsistent herewith,
or not take any action required herein, the other party shall not be entitled
to specific performance of such provision or part hereof or to any other
remedy, including but not limited to money damages, for breach hereof or of any
other provision of this Agreement or part hereof as the result of such holding
or order.
19. Notices. Any notice or communication required or
permitted hereunder shall be in writing and either delivered personally,
telegraphed or telecopied or sent by certified or registered mail, postage
prepaid, and shall be deemed to be given, dated and received when so delivered
personally, telegraphed or telecopied or, if mailed, five business days after
the date of mailing to the following address or telecopy number, or to such
other address or addresses as such person may subsequently designate by notice
given hereunder.
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Page 85 of 88 Pages
<PAGE> 13
(a) if to Parent, to:
Arrow Electronics, Inc.
25 Hub Drive
Melville, New York 11747
Attention: Robert E. Klatell
Telecopy: (516) 391-1683
Telephone: (516) 391-1830
with a copy to:
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, New York 10004
Attention: Howard S. Kelberg, Esq.
Telecopy: (212) 858-1500
Telephone: (212) 858-1000
and
(b) if to the Company, to:
Gates/FA Distributing, Inc.
39 Pelham Ridge Drive
Greenville, South Carolina 29615
Attention: Philip D. Ellett
Telecopy: (803) 627-2180
Telephone: (803) 234-0736
with a copy to:
Alston & Bird
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Attention: Bryan E. Davis, Esq.
Telecopy: 404-881-7777
Telephone: 404-881-7000
20. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware applicable
to agreements made and to be performed entirely within such State without
regard to any applicable conflicts of law rules.
21. Descriptive Headings. The descriptive headings
herein are inserted for convenience of reference only and are not intended to
be part of or to affect the meaning or interpretation of this Agreement.
22. Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed to be an original, but all
of which, taken together, shall constitute one and the same instrument.
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Page 86 of 88 Pages
<PAGE> 14
23. Expenses. Except as otherwise expressly provided
herein or in the Merger Agreement, all costs and expenses incurred in
connection with the transactions contemplated by this Agreement shall be paid
by the party incurring such expenses.
24. Amendments; Waiver. This Agreement may be amended by
the parties hereto and the terms and conditions hereof may be waived only by an
instrument in writing signed on behalf of each of the parties hereto, or, in
the case of a waiver, by an instrument signed on behalf of the party waiving
compliance.
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Page 87 of 88 Pages
<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective duly authorized officers as of the
date first above written.
ARROW ELECTRONICS, INC.
By: /s/ Robert E. Klatell
------------------------------
Name: Robert E. Klatell
Title: Senior Vice President
and Chief Financial
Officer
GATES/FA DISTRIBUTING, INC.
By: /s/ Philip D. Ellett
------------------------------
Name: Philip D. Ellett
Title: President and Chief
Executive Officer
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