<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
ANTHEM ELECTRONICS, INC.
--------------------------------
(Name of Issuer)
Common Stock, Par Value $.125
--------------------------------
(Title of Class of Securities)
036732-10-5
--------------------------------
(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
September 21, 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 74 Pages
<PAGE> 2
SCHEDULE 13D
- -----------------------------------------------------------------
CUSIP No. 036732-10-5
- -------------------------------------------------------------------------------
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 OF A GROUP (a) / /
(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
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
NUMBER OF 7 SOLE VOTING POWER
SHARES 2,451,462(1)
BENEFICALLY ------------------------------------------------------
OWNED 8 SHARED VOTING POWER
BY 495,515(2)
EACH ------------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON 2,451,462(1)
WITH ------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
----------------------------------------------------------------
</TABLE>
- --------------------
(1) Beneficial ownership of 2,451,427 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.
(2) Beneficial ownership of 131,126 shares of Common Stock is being reported
solely as a result of certain stock options to purchase shares held by the
grantors of the Proxies described in Item 4 of this Statement. Such stock
options have not been exercised. Arrow Electronics, Inc. expressly
disclaims beneficial ownership of such shares. See Item 5 hereof.
Page 2 of 74 Pages
<PAGE> 3
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,946,977
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES / /
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT ON ROW (11)
19.8(3)
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
CO
- --------------------------------------------------------------------------------
- --------------------
(3) Based upon the 12,318,727 shares represented by the Company to be
outstanding as of September 21, 1994 pursuant to the Merger Agreement
described in Item 4 of this Statement, plus (i) the 2,451,427 shares
obtainable by Arrow Electronics, Inc. upon the exercise of the stock option
described in Item 4 were such stock option presently exercisable and (ii)
the 131,126 shares obtainable by the grantors of certain proxies upon the
exercise of certain stock options held by such grantors described in Item 4
were such stock options exercised.
Page 3 of 74 Pages
<PAGE> 4
Item 1. Security and Issuer.
-------------------
The class of equity securities to which this Statement relates is
the common stock, $.125 par value per share (the "Common Stock"), of Anthem
Electronics, Inc., a Delaware corporation (the "Company"), which has its
principal executive offices at 1160 Ridder Park Drive, San Jose, California
95131.
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
$84,990,974. It is currently anticipated that such funds would be derived from
working capital and available unsecured lines of credit. No funds were or
will be used in connection with the Proxies.
Page 4 of 74 Pages
<PAGE> 5
Item 4. Purpose of Transaction.
----------------------
The Merger Agreement. On September 21, 1994, Arrow, the Company
and MTA Acquisition Company, a Delaware corporation and a wholly owned
subsidiary of Arrow ("Sub"), entered into an Agreement and Plan of Merger dated
as of September 21, 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 .875 (the
"Conversion Ratio") shares of common stock, $1.00 par value per share, of Arrow
("Arrow Common Stock"); provided, however, that (i) if 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 on (and including) the
trading day immediately preceding the two trading days before the closing date
of the Merger (the "Arrow Stock Price") is not greater than $41.625 and not
less than $37.625, there shall be no adjustment to the Conversion Ratio, (ii)
if the Arrow Stock Price is greater than $41.625, the Conversion Ratio shall be
adjusted to equal the product of (x) .875 and (y) a fraction the numerator of
which is equal to the sum of (1) $41.625 and (2) one-half (1/2) of the
difference between the Arrow Stock Price and $41.625 and the denominator of
which is the Arrow Stock Price and (iii) if the Arrow Stock Price is less than
$37.625, the Conversion Ratio shall be adjusted to equal the product of (x)
.875 and (y) a fraction the numerator of which is equal to the sum of (1) the
Arrow Stock Price and (2) one-half (1/2) of the difference between $37.625 and
the Arrow Stock Price and the denominator of which is 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.
Page 5 of 74 Pages
<PAGE> 6
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 listed on the NYSE where it is quoted under the symbol "ATM".
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 and Arrow's shareholders. 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. Certain directors and officers of the Company who
collectively are the beneficial owners of approximately 495,515 shares
(approximately 4%) 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 September 21, 1994. Accordingly, Arrow may be deemed to be the beneficial
owner of approximately an aggregate of 495,515 shares (approximately 4%) of the
Company's outstanding Common Stock pursuant to the Proxies with respect to the
right to vote on the Proposal. Of such shares, 131,126 shares are deemed to be
beneficially owned by such directors and officers (and therefore by Arrow)
pursuant to stock options to purchase such shares which are exercisable within
60 days. The Proxies terminate on the earlier to occur of the effective time
of the Merger pursuant to the Merger Agreement and the date on which the Merger
Agreement terminates in accordance with the terms thereof.
Page 6 of 74 Pages
<PAGE> 7
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 September 21, 1994, Arrow and the
Company entered into a Stock Option Agreement dated as of September 21, 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 2,451,427 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 $34.67 per share, subject to adjustment
(the "Exercise Price"). The Exercise Price is payable in cash.
The Stock Option Agreement was received by Arrow on September 21,
1994. Accordingly, Arrow may be deemed to be the beneficial owner of
approximately an aggregate of 2,451,427 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 fees and expenses described in the Merger Agreement.
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 fees and 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 fees and 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 September 21, 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.
Page 7 of 74 Pages
<PAGE> 8
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 by the Company, the Company
(or any successor entity thereof) has the right to repurchase from Arrow and
Arrow 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 September 21, 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, as the case may be, 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 closing prices of shares of Common
Stock on the NYSE for the ten trading days immediately preceding the Notice
Date.
(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 the foregoing, the Call shall not be exercisable by
the Company (or any successor entity thereof) unless substantially concurrently
therewith the Company has consummated the transaction contemplated by a
Takeover Proposal or the stockholders of the Company have transferred their
shares of Company Common Stock pursuant to a tender or exchange offer or other
Takeover Proposal.
Page 8 of 74 Pages
<PAGE> 9
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 4 and as otherwise contemplated by
the Merger Agreement, neither Arrow nor, to 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 12,318,727 shares of the Company's Common Stock were issued and
outstanding on September 21, 1994. As described under Item 4 of this
Statement, Arrow may be deemed to be the beneficial owner of an aggregate of
approximately 495,515 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 2,451,427 shares of the Company's Common Stock pursuant to the
Stock Option Agreement. In addition, Arrow holds 35 shares of the Company's
Common Stock of record. Accordingly, Arrow may be deemed to be the beneficial
owner of approximately 2,946,977 shares (approximately 19.8% of the outstanding
shares of Common Stock after giving effect to the issuance of shares pursuant
to the Stock Option Agreement and the issuance of 131,126 shares covered by the
Proxies) 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. In addition, because voting rights will
not attach to such shares until their issuance, Arrow expressly disclaims
beneficial ownership of the 131,126 shares deemed to be beneficially owned by
the grantors of the Proxies pursuant to stock options to purchase such shares
exercisable within 60 days, which shares would be covered by the Proxies if
such stock options were exercised and such shares issued pursuant thereto.
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.
Page 9 of 74 Pages
<PAGE> 10
(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 495,515 shares of the Company's Common Stock for or against any
Proposal (assuming exercise of the stock options held by the grantors of such
Proxies to purchase 131,126 shares and the issuance of such shares pursuant
thereto). 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 2,451,427 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 35
shares of the Company's Common Stock that it holds of record.
(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 September
21, 1994 among Arrow Electronics, Inc., Anthem
Electronics, Inc. and MTA Acquisition Company.
Exhibit 2: Irrevocable Proxies dated as of September 21, 1994.
Exhibit 3: Stock Option Agreement dated as of September 21,
1994.
Page 10 of 74 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: September 28, 1994
ARROW ELECTRONICS, INC.
By: /s/ Robert E. Klatell
-----------------------------
Name: Robert E. Klatell
Title: Senior Vice President and
Chief Financial Officer
Pages 11 of 74 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 Officer of Robbins & Myers,
Robbins & Myers, Inc. Inc.
1400 Kettering Towers
Dayton, OH 45423
Carlo Giersch President and Chief Executive Officer of Spoerle
Spoerle Electronic 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 Associates
Rudolph Stone
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.
MMP Group, Inc.
925 Park Avenue
New York, NY 10028
</TABLE>
Page 12 of 74 Pages
<PAGE> 13
<TABLE>
<CAPTION>
Name and Business Present Principal Occupation
- ----------------- ----------------------------
<S> <C>
Anne Pol President of Shipping & Weighing Systems Division of
Pitney Bowes, Inc. Pitney Bowes, Inc.
One Parrot Drive
MS 27-00
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 74 Pages
<PAGE> 14
<TABLE>
<CAPTION>
Name and Business Present Principal Occupation
----------------- ----------------------------
Executive Officers Of Arrow Who Are Not Directors
-------------------------------------------------
<S> <C>
Philip D. Ellett Vice President; President,
Gates/Arrow Distributing
Wesley S. Sagawa Vice President; President,
Capstone Electronics Corp.
Jan Salsgiver Vice President; President,
Zeus Electronics
</TABLE>
Page 14 of 74 Pages
<PAGE> 15
EXHIBIT INDEX
Exhibit
Number Document
- ------ --------
1 Agreement and Plan of Merger dated as of September 21, 1994
among Arrow Electronics, Inc., Anthem Electronics, Inc. and MTA
Acquisition Company.
2 Irrevocable Proxies dated as of September 21, 1994.
3 Stock Option Agreement dated as of September 21, 1994.
Page 15 of 74 Pages
<PAGE> 1
EXHIBIT 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
ARROW ELECTRONICS, INC.
MTA ACQUISITION COMPANY
AND
ANTHEM ELECTRONICS, INC.
DATED AS OF SEPTEMBER 21, 1994
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Page 16 of 74 Pages
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C> <C>
ARTICLE 1
THE MERGER
1.1 Effective Time of the Merger................................................... 1
1.2 Closing........................................................................ 1
1.3 Effects of the Merger.......................................................... 1
ARTICLE 2
CONVERSION OF SECURITIES
2.1 Conversion of Capital Stock.................................................... 2
(a) Capital Stock of Sub..................................................... 2
(b) Cancellation of Treasury Stock and Parent-Owned Stock.................... 2
(c) Conversion Ratio for the Company Common Stock............................ 2
2.2 Exchange of Certificates....................................................... 3
(a) Exchange Agent........................................................... 3
(b) Exchange Procedures...................................................... 3
(c) Distribution with Respect to Unexchanged Shares.......................... 4
(d) No Further Ownership Rights in the Company Common Stock.................. 4
(e) No Fractional Shares..................................................... 4
(f) Termination of Exchange Fund............................................. 5
(g) No Liability............................................................. 5
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3.1 Corporate Organization and Authority of the Company............................ 5
3.2 Subsidiaries and Equity Investments............................................ 6
3.3 Capitalization................................................................. 6
3.4 No Violation; Consents and Approvals........................................... 6
3.5 SEC Reports and Financial Statements of the Company............................ 7
3.6 Absence of Undisclosed Liabilities............................................. 8
3.7 Inventory...................................................................... 8
3.8 Accounts Receivable............................................................ 8
3.9 Title to Property.............................................................. 8
3.10 Intellectual Property.......................................................... 9
3.11 Tax Matters.................................................................... 9
3.12 Employee Matters............................................................... 10
3.13 No Material Change............................................................. 11
3.14 Absence of Change or Event..................................................... 11
3.15 Litigation..................................................................... 12
3.16 Compliance With Law and Other Instruments...................................... 12
3.17 Insurance...................................................................... 15
</TABLE>
i
Page 17 of 74 Pages
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
3.18 Affiliate Interests............................................................ 15
3.19 Customers and Suppliers........................................................ 16
3.20 Absence of Questionable Payments............................................... 16
3.21 Information Supplied........................................................... 16
3.22 Opinion of Financial Advisor................................................... 17
3.23 Vote Required.................................................................. 17
3.24 Accounting Matters............................................................. 17
3.25 Company Not an Interested Shareholder or a 30% Shareholder..................... 17
3.26 Section 203 of the DGCL Not Applicable......................................... 17
3.27 Disclosure..................................................................... 17
3.28 The Company's Best Knowledge................................................... 17
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
4.1 Organization................................................................... 17
4.2 Corporate Authority............................................................ 17
4.3 No Violation; Consents and Approvals........................................... 18
4.4 Capitalization................................................................. 18
4.5 SEC Reports and Financial Statements of Parent................................. 19
4.6 No Material Change............................................................. 19
4.7 Litigation..................................................................... 19
4.8 Absence of Questionable Payments............................................... 20
4.9 Information Supplied........................................................... 20
4.10 Opinion of Financial Advisor................................................... 20
4.11 Vote Required.................................................................. 20
4.12 Accounting Matters............................................................. 20
4.13 Disclosure..................................................................... 20
4.14 Parent's Best Knowledge........................................................ 20
ARTICLE 5
CERTAIN COVENANTS AND AGREEMENTS
OF THE COMPANY AND PARENT
5.1 Conduct of the Company's Business Prior to the Closing Date.................... 21
5.2 Conduct of Parent's Business Prior to the Closing Date......................... 21
5.3 Preparation of S-4 and the Proxy Statement..................................... 22
5.4 Letter of the Company's and Parent's Accountants............................... 22
5.5 Legal Conditions to Merger..................................................... 22
5.6 Affiliates..................................................................... 22
5.7 Stock Exchange Listing......................................................... 22
5.8 Stockholders' Meetings......................................................... 23
5.9 Fees and Expenses.............................................................. 23
5.10 Broker's and Finder's Fees..................................................... 24
</TABLE>
ii
Page 18 of 74 Pages
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C> <C>
5.11 Access to Information and Confidentiality...................................... 24
5.12 Indemnification................................................................ 25
5.13 Additional Agreements; Best Efforts............................................ 26
5.14 No Solicitation................................................................ 26
5.15 Advice of Changes; SEC Filings................................................. 26
5.16 Press Releases................................................................. 27
5.17 Company Option Plans........................................................... 27
5.18 Employment Agreements.......................................................... 27
5.19 Parent Director Designation.................................................... 27
ARTICLE 6
CONDITIONS PRECEDENT
6.1 Conditions to Each Party's Obligation to Effect the Merger..................... 28
(a) Stockholder Approval..................................................... 28
(b) NYSE Listing............................................................. 28
(c) Other Approvals.......................................................... 28
(d) S-4...................................................................... 28
(e) No Injunctions or Restraints............................................. 28
(f) No Governmental Actions.................................................. 28
(g) Pooling Letter........................................................... 28
6.2 Conditions to Obligations of Parent and Sub.................................... 28
(a) Representations and Warranties; Performance of Obligations............... 28
(b) Tax Opinion.............................................................. 29
(c) No Actions............................................................... 29
(d) Consents Under Agreements................................................ 29
(e) Letter from Company Affiliates........................................... 29
(f) Material Adverse Change.................................................. 29
(g) No Amendments to Resolutions............................................. 29
6.3 Conditions to Obligations of the Company....................................... 29
(a) Representations and Warranties; Performance of Obligations............... 29
(b) Tax Opinion.............................................................. 29
(c) Consents Under Agreements................................................ 30
(d) Material Adverse Change.................................................. 30
(e) No Amendments to Resolutions............................................. 30
ARTICLE 7
TERMINATION AND AMENDMENT
7.1 Termination.................................................................... 30
7.2 Effect of Termination.......................................................... 31
7.3 Extension; Waiver.............................................................. 31
7.4 Amendment and Modification..................................................... 31
</TABLE>
iii
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<PAGE> 5
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
ARTICLE 8
GENERAL PROVISIONS
8.1 Nonsurvival of Representations, Warranties and Agreements...................... 31
8.2 Notices........................................................................ 32
8.3 Governing Law.................................................................. 32
8.4 Interpretation................................................................. 32
8.5 Counterparts................................................................... 32
8.6 Entire Agreement; No Third Party Beneficiaries; Rights of Ownership............ 33
8.7 No Remedy in Certain Circumstances............................................. 33
8.8 Severability................................................................... 33
8.9 Assignment..................................................................... 33
Exhibit 5.6 Affiliate Agreement
Schedule A Proxies
</TABLE>
iv
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<PAGE> 6
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of September 21, 1994, by and among
Arrow Electronics, Inc., a New York corporation ("Parent" ), MTA Acquisition
Company, a Delaware corporation and a wholly owned subsidiary of Parent
("Sub" ), and Anthem Electronics, 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 the directors and officers of the
Company named on Schedule A hereto has on the date hereof granted to Parent an
irrevocable proxy to vote the shares of the Company's Common Stock owned by such
person 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.
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 third 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
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<PAGE> 7
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 Sub as in effect immediately prior to the
Effective Time shall be the Certificate of Incorporation of the Surviving
Corporation, except that the name of the Surviving Corporation as provided in
such Certificate of Incorporation shall be "Anthem Electronics, Inc." and (iii)
the By-laws of Sub 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 this Agreement, the
Certificate of Merger and the applicable provisions of the DGCL. Without
limiting the generality of the foregoing, at and after the Effective Time, the
Surviving Corporation shall possess all the rights, privileges, powers,
immunities and franchises, of a public as well as of a private nature, and be
subject to all the restrictions, disabilities and duties of each of the
Constituent Corporations; and all and singular rights, privileges, powers,
immunities and franchises of each of the Constituent Corporations, and all
property, real, personal and mixed, and all debts due to either of the
Constituent Corporations on whatever account, including subscriptions to shares
and all other choses in action, and all and every other interest of or belonging
to or due to each of the Constituent Corporations, shall be taken and deemed to
be transferred to and vested in the Surviving Corporation, and all property,
rights, privileges, powers and franchises, and all and every other interest
shall be thereafter as effectually the property of the Surviving Corporation as
they were of the Constituent Corporations, and the title to any real estate
vested by deed or otherwise, in either of the Constituent Corporations, shall
not revert or be in any way impaired; but all rights of creditors and all liens
upon any property of either of the Constituent Corporations shall be preserved
unimpaired, and all debts, liabilities and duties of the Constituent
Corporations shall thenceforth attach to the Surviving Corporation, and may be
enforced against it to the same extent as if said debts and liabilities had been
incurred by it.
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 $.125 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 $.125 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
2
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<PAGE> 8
accordance with Section 2.1(b)) shall be converted into the right to receive
.875 (the "Conversion Ratio" ) shares of Parent Common Stock; provided, however,
that (i) if 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 on (and including) the trading day immediately preceding the two trading
days before the Closing Date (the "Parent Stock Price" ) is not greater than
$41.625 and not less than $37.625, there shall be no adjustment to the
Conversion Ratio, (ii) if the Parent Stock Price is greater than $41.625, the
Conversion Ratio shall be adjusted to equal the product of (x) .875 and (y) a
fraction the numerator of which is equal to the sum of (1) $41.625 and (2) one-
half (1/2) of the difference between the Parent Stock Price and $41.625 and the
denominator of which is the Parent Stock Price and (iii) if the Parent Stock
Price is less than $37.625, the Conversion Ratio shall be adjusted to equal the
product of (x) .875 and (y) a fraction the numerator of which is equal to the
sum of (1) the Parent Stock Price and (2) one-half (1/2) of the difference
between $37.625 and the Parent Stock Price and the denominator of which is 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 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 which is not registered in the
transfer records of the Company, a
3
Page 23 of 74 Pages
<PAGE> 9
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 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
4
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<PAGE> 10
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.
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, (a) 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 merger of the Company with Sub 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 and (b) with respect to Parent, 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 Parent (i) as a result of the proposed merger
of the Company with Sub and the impact thereof on the operating performance of
Parent pursuant to the terms of this Agreement or (ii) that is disclosed in the
Parent SEC Documents (as defined in Section 4.5) or in the Parent Disclosure
Memorandum (as defined in Section 4.1). The Company has heretofore delivered to
Parent complete and correct copies of its Certificate of Incorporation and
Bylaws, 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
5
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<PAGE> 11
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 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 where such capital
stock, equity securities or any direct or indirect equity or ownership interests
has a fair market value on the date hereof of $10,000 individually or $250,000
in the aggregate.
3.3 Capitalization. As of the date hereof, the authorized capital stock of
the Company consists of 30,000,000 shares of the Company Common Stock and
500,000 shares of Preferred Stock, par value $.125 per share. As of the date
hereof, 12,318,727 shares of the Company Common Stock are issued and
outstanding, and 714,533 shares of the Company Common Stock are reserved for
issuance in the aggregate pursuant to the Company's Incentive Stock Option Plan
and the Company's Non-Qualified Stock Option Plan (collectively, the "Company
Option Plans" ) and 14,656 shares of the Company Common Stock are reserved for
issuance under the Company's Non-employee Director Stock Bonus Plan (the "Stock
Bonus Plan" ). 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 and the Stock Bonus Plan will be, validly
issued, fully paid and nonassessable and not subject to preemptive rights.
Except as disclosed in the Disclosure Memorandum with specific reference to this
Section, and 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 and the Stock Bonus Plan to purchase or
receive, or to obtain the benefit of any increase in value with respect to, in
the aggregate 748,689 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 any 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, (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 granting any rights to
obtain any benefit measured by the value of the Company's capital stock
(including without limitation, stock appreciation rights granted under the
Company Option Plans) or (iii) outstanding securities convertible into or
exchangeable for, or which otherwise confer on the holder thereof 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, except for the proxies set forth on Schedule
A.
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;
6
Page 26 of 74 Pages
<PAGE> 12
(b) any articles or certificate of incorporation, bylaws, or similar
organizational document;
(c) any (i) credit or loan agreement, mortgage, deed of trust, note,
bond, indenture, license, concession, franchise, permit, trust,
custodianship, other restriction, (ii) instrument, lease, obligation,
contract or agreement (including, without limitation, 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 on an annual basis of in
excess of $50,000 or (iii) instruments, obligations, contracts or
agreements (including, without limitation, 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 $500,000; or
(d) any judgment, order, writ, injunction or decree;
that would impair, prohibit or prevent, or would be violated or breached by, or
would result in the creation of any Encumbrance 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 material
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 in the case of any municipal,
county or township law, statute, rule, regulation, ordinance, administrative
decision, license or permit ("Local Law or Permit" ), where such event or
occurrence is not, individually or in the aggregate, reasonably likely to have a
Material Adverse Effect on the Company. Except as disclosed in the Disclosure
Memorandum with specific reference to this Section and other than (i) the filing
of the Certificate of Merger as provided in Section 1.1, (ii) the filing with
the Securities and Exchange Commission (the "SEC" ) and the NYSE of the Proxy
Statement and the S-4 (each as defined in Section 3.21), (iii) such consents,
orders, approvals, authorizations, registrations, declarations and filings as
may be required under applicable state securities laws and the securities laws
of any foreign country, (iv) such filings as may be required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act" ) and (v) such local consents, orders, approvals, authorizations,
registrations, declarations and filings which, if not obtained or made, would
not, individually or in the aggregate, reasonably be likely to have a Material
Adverse Effect on the Company and that would not impair, prohibit or prevent the
consummation of the transactions contemplated hereby, no consent, order,
approval or authorization of, or declaration, notice, registration or filing
with, any court, administrative 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 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 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
7
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<PAGE> 13
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 December
31, 1993, or as disclosed in the Form 10-Q for the six month period ended June
30, 1994, or as disclosed in the Disclosure Memorandum with specific reference
to this Section, as of June 30, 1994, the Company had no 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 June 30, 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. The inventories of the Company disclosed in the Company SEC
Documents as of June 30, 1994 and in any subsequently filed Company SEC
Documents are stated consistently with the audited financial statements of the
Company, such presentation appropriately reflects current industry practice
which is supported historically by cost reductions received from vendors and is
appropriate based upon the relationship with the Company's vendors, and due
provision was made to provide for all slow-moving, obsolete, or unusable
inventories to their estimated useful or scrap values and such inventory
reserves are adequate to provide for such slow-moving, obsolete or unusable
inventory and inventory shrinkage. Since June 30, 1994, due provision was made
on the books of the Company in the ordinary course of business consistent with
past practices to provide for all slow-moving, obsolete, or unusable inventories
to their estimated useful or scrap values and such inventory reserves are
adequate to provide for such slow-moving, obsolete or unusable inventory and
inventory shrinkage.
3.8 Accounts Receivable. The accounts receivable disclosed in the Company
SEC Documents as of June 30, 1994, and, with respect to accounts receivable
created since such date, disclosed in 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, represent and will represent bona fide claims
against debtors for sales and other charges, are not subject to discount except
for normal cash and immaterial trade discounts, and the amount carried for
doubtful accounts and allowances disclosed in each of such Company SEC Documents
or accrued on such books is sufficient to provide for any losses which may be
sustained on realization of the receivables.
3.9 Title to Property.
(a) 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 for such Encumbrances securing indebtedness that is not, in
the aggregate, greater than $500,000. 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, except
for normal wear and tear and except for such machinery, tools, equipment and
other tangible physical assets that do not, in the aggregate,
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have a fair market value greater than $500,000, 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 materially impair the day-to-day use of
any such buildings, structures, improvements or fixtures or which would subject
the Company to material 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 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
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Disclosure Memorandum (or promptly disclosed to Parent in the event of changes
in circumstances between the date hereof and the Closing Date which have
occurred in the ordinary course of business and, individually or in the
aggregate, do not have a Material Adverse Effect on the Company) with specific
reference to this Section and to the Company's best knowledge, (i) no material
claim for unpaid Taxes that are due and payable 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, stock purchase, stock
option, phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, employee-related 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 or 5.18
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
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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.
3.13 No Material Change. Since June 30, 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 June 30, 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 its 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 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 (i) the principal amount of any debt secured by
such lien does not exceed 100% of such purchase price or cost, (ii) such
lien does not extend to or cover any other property other than such item of
property and any improvements on such item and (iii) the incurrence of such
debt was in the ordinary course of business and consistent with prior
practice;
(c) except in the ordinary course of business and consistent with
prior practice, 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;
(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;
(e) made or committed to make any capital expenditures or capital
additions or betterments in excess of an aggregate of $350,000;
(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;
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(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) except in the ordinary course of business and consistent with
prior practice, increased promotional or advertising expenditures 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 or adopted or changed any accounting
method; or
(m) except in the ordinary course of business and consistent with
prior practice, filed any amended Tax Return or extended the applicable
statute of limitations for any taxable period, 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.
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 is, individually or in the aggregate, reasonably likely to
have a Material Adverse Effect on the Company, or would impair, prohibit or
prevent the consummation of the transactions contemplated hereby. To the
Company's best knowledge, there are no existing facts or circumstances which
could form a 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 impair, prohibit or prevent the consummation of the
transactions contemplated hereby.
3.16 Compliance With Law and Other Instruments. (a) To the Company's best
knowledge, 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 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 impair, 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 articles or
certificate of incorporation, bylaws or similar organizational document, (ii)
any credit or loan agreement, mortgage or security agreement, deed of trust,
note, bond or indenture, or (iii) any other instrument, obligation, contract or
agreement to which it is subject or by which it is bound, except, in the case of
clauses (ii) and (iii), 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
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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 (d) through
(j) 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) To the Company's best knowledge, except as disclosed in the Disclosure
Memorandum with specific reference to this Section, (i) the Company has obtained
all Permits that are (A) 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 (B) 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, reasonably likely to have a Material Adverse Effect on the
Company and (ii) 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.
(c) To the Company's best knowledge, 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.
(d) 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, or to the Company's best
knowledge, 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.
(e) Neither the Company nor, to the Company's best knowledge, any 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 Releases, placement,
storage, burial or dumping 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.
(f) To the Company's best knowledge, except as disclosed in the Disclosure
Memorandum with specific reference to this Section, no Release or Cleanup
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.
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(g) To the Company's best knowledge, 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.
(h) 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.
(i) To the Company's best knowledge, 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.
(j) To the Company's best knowledge, 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, present or future events, conditions, circumstances,
activities, practices, incidents, actions or plans which may interfere with or
prevent compliance or continued compliance with the 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.
(k) 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.
(l) 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.
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"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 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 or the Company's Subsidiary, 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. sec. 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 such 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
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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, as of the date hereof, no
customer which individually accounted for more than 1% of the Company's gross
revenues during the 12 month period preceding the date hereof, and no supplier
of the Company, has canceled or otherwise terminated, or made any written threat
to the Company to cancel or otherwise terminate, its relationship with the
Company, or has at any time on or after June 30, 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 in the case of any such
customer, and 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. From and after the date
hereof, no customer which individually accounted for more than 5% of the
Company's gross revenues during the 12 month period preceding the Closing Date,
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, and to the Company's best knowledge, no such customer intends to
cancel or otherwise terminate its relationship with the Company or to decrease
materially its usage of the services or products of the Company. The Company has
not knowingly breached, so as to provide a benefit to the Company that was not
intended by the parties, any agreement with, or engaged in any fraudulent
conduct with respect to, any customer or supplier of the Company.
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,
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 or at the Effective Time, 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 joint proxy statement in
definitive form relating to the meetings of the Company's and Parent's
respective 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 meetings of the Company's and
Parent's respective 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 communica-
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tion with respect to the solicitation of any proxy for such meetings 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
Lehman Brothers, dated the date hereof, to the effect that, as of such date,
from a financial point of view, the Conversion Ratio to be offered to the
stockholders of the Company in the proposed Merger is fair to such stockholders,
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 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. 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 could have a Material Adverse Effect on the Company, which has not
been set forth in the Company SEC Documents or in this Agreement, including the
Disclosure Memorandum.
3.28 The Company's Best Knowledge. The term "the Company's best knowledge"
or words of similar import shall mean the best knowledge of any of the Company's
Chief Executive Officer, Chief Financial Officer, Distribution Business Unit
President, Vice President and Controller and Senior Vice President of Sales.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant to the Company as follows:
4.1 Organization. Each of Parent and Sub is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation 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 Parent's Disclosure Memorandum furnished
to the Company on the date hereof (the "Parent 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 Parent.
4.2 Corporate Authority. Each of Parent and Sub has full corporate power
and authority to enter into this Agreement and, subject to approval of this
Agreement and the issuance of the Parent
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Common Stock pursuant to the Merger (collectively, the "Parent Vote Matter" ) by
the stockholders of Parent in accordance with NYSE listing requirements, 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, subject to approval of the Parent Vote Matter by the stockholders
of Parent in accordance with NYSE listing requirements. 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 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 the
Parent Disclosure Memorandum with specific reference to this Section, 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, lease, obligation,
contract or agreement, 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
impair, 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 in the case of any Local Law or
Permit, where such event or occurrence is not, individually or in the
aggregate, reasonably likely to have a Material Adverse Effect on Parent.
Except as disclosed in the Parent Disclosure Memorandum with specific
reference to this Section and other than (i) the filing of the Certificate
of Merger as provided in Section 1.1, (ii) the filing with the SEC and the
NYSE of the Proxy Statement and the S-4, (iii) such consents, orders,
approvals, authorizations, registrations, declarations and filings as may
be required under applicable state securities laws and the securities laws
of any foreign country, (iv) such filings as may be required under the HSR
Act and (v) such local consents, orders, approvals, authorizations,
registrations, declarations and filings which, if not obtained or made,
would not, individually or in the aggregate, reasonably be likely to have a
Material Adverse Effect on Parent and that would not impair, prohibit or
prevent the consummation of the transactions contemplated hereby, 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 September 16, 1994, (i) 35,266,176 shares
of the Parent Common Stock were issued and outstanding, 1,420,404 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 were reserved for issuance pursuant to Parent's Convertible Subordinated
Debentures (the "Convertible Deben-
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tures" ), (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 1,420,404
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 352,661.76 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 September 16, 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 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 No Material Change. Since June 30, 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 Parent.
4.7 Litigation. Except as specifically disclosed in the Parent 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 Parent, Parent's Subsidiaries or any
of their respective properties or assets, (ii) action, suit, claim,
counterclaim, litigation, arbitration, dispute or proceeding pending or, to
Parent's best knowledge, threatened against or
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involving Parent, Parent's Subsidiaries or any of their respective properties or
assets or (iii) to Parent's best knowledge, investigation or audit pending or
threatened against or relating to Parent, Parent's Subsidiaries or any of their
respective properties or assets or any of their respective officers or directors
(in their capacities as such) (collectively, "Parent Proceedings" ) which is,
individually or in the aggregate, reasonably likely to have a Material Adverse
Effect on Parent, or would impair, prohibit or prevent the consummation of the
transactions contemplated hereby. To Parent's best knowledge, there are no
existing facts or circumstances which could form a basis for any Parent
Proceeding which, if commenced, would be reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on Parent, or would impair,
prohibit or prevent the consummation of the transactions contemplated hereby.
4.8 Absence of Questionable Payments. Neither Parent or Parent's
Subsidiaries nor any director, officer, agent, employee or other Person acting
on behalf of Parent or Parent's Subsidiaries, 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 Parent
or Parent's Subsidiaries nor any current director, officer, agent, employee or
other Person acting on behalf of Parent or Parent's Subsidiaries, has accepted
or received any unlawful contributions, payments, gifts, or expenditures.
4.9 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 Effective Time, 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.
4.10 Opinion of Financial Advisor. Parent has received the opinion of
Morgan Stanley & Co. Incorporated, dated the date hereof, to the effect that, as
of such date, the Conversion Ratio is fair, from a financial point of view, to
Parent and to the holders of the Parent Common Stock, a copy of which opinion
has been delivered to the Company.
4.11 Vote Required. The affirmative vote of the holders of a majority of
the votes cast by holders of the outstanding shares of Parent Common Stock is
the only vote of the holders of any class or series of Parent's capital stock
necessary to approve the Parent Vote Matter, provided that the total votes cast
thereon by such holders represent a majority of all votes entitled to be cast
with respect thereto.
4.12 Accounting Matters. Neither Parent 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 the Company
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.
4.13 Disclosure. No representation or warranty by Parent in this
Agreement, including the Parent 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 Parent which could have a Material Adverse Effect on Parent, which has not
been set forth in the Parent SEC Documents or in this Agreement, including the
Parent Disclosure Memorandum.
4.14 Parent's Best Knowledge. The term "Parent's best knowledge" or words
of similar import shall mean the best knowledge of any of Parent's Chief
Executive Officer, Chief Financial Officer, Assistant General Counsel,
Controller and the President of the Arrow/Schweber Electronics Group.
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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;
(iii) change the Company's banking or safe deposit arrangements
without ten days prior written notice thereof to Parent;
(iv) modify or amend, or authorize or propose to modify or amend, the
Company's certificate or articles of incorporation, bylaws or similar
organizational documents; or
(v) take or permit any affiliate thereof to 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 to 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 Section 3.14(g) and
the Proceedings contemplated by Section 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
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prior written consent of the Company, Parent 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. Each of the Company and
Parent 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 and the Company shall use
their respective best efforts to (i) have the S-4 declared effective under the
Securities Act as promptly as practicable after such filing and (ii) cause the
Proxy Statement to be mailed to the respective stockholders of Parent and the
Company at the earliest practicable date. Parent shall also take any action
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 and Parent's Accountants. (a) The Company
shall use its best efforts to cause to be delivered to the Company and to Parent
a letter of Price Waterhouse LLP, the Company's independent accountants, 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.
(b) Parent shall use its best efforts to cause to be delivered to Parent
and the Company a letter of Ernst & Young LLP, Parent's independent accountants,
dated a date within two business days before the date on which the S-4 shall
become effective and addressed to Parent and the Company, in form and substance
reasonably satisfactory to Parent and the Company 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 made
by Parent, the Company or any of their respective 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 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.
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
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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' Meetings. Each of the Company and Parent 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, the Parent Vote Matter
and related matters, as the case may be. The Company and Parent will, through
their respective Boards of Directors, unanimously recommend to their respective
stockholders approval of such matters and will coordinate and cooperate with
each other with respect to the timing of such meetings and shall use their
respective best efforts to hold such meetings on the same day and as soon as
practicable after the S-4 is declared effective and to solicit proxies in favor
of the adoption of this Agreement, the Parent Vote Matter and related matters,
as the case may be, and shall take all other action necessary or advisable to
secure the vote or consent of stockholders required to effect the Merger;
provided, however, that neither Board of Directors shall be obligated to
recommend approval of this Agreement, the Parent Vote Matter or related matters,
as the case may be, to its stockholders if such Board of Directors, acting with
the advice of its counsel and financial advisors, determines that such
recommendation would not be consistent with the fiduciary obligations of such
Board of Directors, to the extent necessary in the written opinion of legal
counsel to such Board of Directors.
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, 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
printing the Proxy Statement and the S-4, registration and filing fees incurred
in connection with the S-4 and the Proxy Statement, and fees, costs and expenses
associated with compliance with applicable state securities laws in connection
with the Merger 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 $2,500,000, and, in
addition, the Company shall promptly pay to Parent the sum of $9,000,000;
provided, however, that with respect to Section 5.9(b)(ii)(A) and Section
5.9(b)(iii)(A), a Trigger Event shall not be deemed to include the acquisition
by any Person of securities representing 10% or more of the Company if such
Person has acquired such securities not with the purpose nor with the effect of
changing or influencing the control of the Company, nor in connection with or as
a participant in any transaction having such purpose or effect, including
without limitation not in connection with such Person (i) making any public
announcement with respect to the voting of such shares at any meeting to
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consider any merger, consolidation, sale of substantial assets or other business
combination or extraordinary transaction involving the Company, (ii) making, or
in any way participating in, any "solicitation" of "proxies" (as such terms are
defined or used in Regulation 14A under the Exchange Act) to vote any voting
securities of the Company (including, without limitation, any such solicitation
subject to Rule 14a-11 under the Exchange Act) or seeking to advise or influence
any Person with respect to the voting of any voting securities of the Company,
(iii) forming, joining or in any way participating in any "group" within the
meaning of Section 13(d)(3) of the Exchange Act with respect to any voting
securities of the Company or (iv) otherwise acting, alone or in concert with
others, to seek control of the Company or to seek to control or influence the
management or policies of the Company. The Company's obligation to make the
$9,000,000 payment pursuant to this Section 5.9(b) is in lieu of damages or any
other payment that the Company might otherwise be obligated to pay Parent as a
result of any termination for which payment is due under this Section. The
Company and Parent agree that, in view of the nature of the issues likely to
arise in the event of such a termination, it would be impracticable or extremely
difficult to fix the actual damages resulting from such termination and proving
actual damages, causation and foreseeability in the case of such termination
would be costly, inconvenient and difficult. In requiring the Company to make
the payment as set forth herein, it is the intent of the parties to provide, as
of the date of this Agreement, for a liquidated amount of damages to be paid by
the Company to the Parent. Such liquidated amount shall be deemed full and
adequate damages for such termination and is not intended by either party to be
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 (i) Lehman Brothers, 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 the date of this Agreement) and
(ii) Morgan Stanley & Co., whose fees and expenses will be paid by Parent in
accordance with Parent's agreement with such firm (copies of which have been
delivered by Parent to the Company prior to 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
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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 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, the Option Agreement or the transactions
contemplated hereby, in each case to the full extent such corporation is
permitted under the DGCL, the Certificate of Incorporation or Bylaws of the
Company or any indemnification agreement to which the Company is a party, in
each case as in effect on the date hereof, 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. Parent and the
Surviving Corporation shall use their best efforts to cause to be maintained in
effect for at least two years from the Effective Time, for the benefit of the
Indemnified Parties, the current policies of directors' and officers' liability
insurance maintained by the Company (provided that Parent and the Surviving
Corporation may substitute therefor policies containing terms and conditions no
less advantageous than the policies then maintained by Parent with respect to
its directors and officers, so long as no lapse in coverage occurs as a result
of such substitution) with respect to all matters occurring prior to and
including the Effective Time, including, without limitation, the transactions
contemplated hereby. Parent and the Surviving Corporation shall, as of the
Effective Time, assume all obligations of the Company to its officers, directors
or employees under any indemnification agreement in effect on the date hereof to
which the Company is a party.
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(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.
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 votes of the respective
stockholders of the Company and Parent 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, and shall not 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, or a written expression
of interest that can reasonably be expected to lead to 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 in connection
therewith information and take such other actions as are consistent with the
fiduciary obligations of the Company's Board of Directors, and such actions
shall not be considered a breach of this Section 5.14 or any other provision of
this Agreement; provided, however, that the Company shall not, and shall not
permit any of its officers, directors, employees or other representatives to,
agree to or endorse any Takeover Proposal unless the Company shall have
terminated this Agreement pursuant to Section 7.1(e) and paid to Parent all
amounts payable to Parent pursuant to Section 5.9. The Company shall promptly
advise Parent orally and in writing of any 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 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.
Each party shall promptly provide the other (or its counsel) copies of all
filings made by such party with any state or Federal Governmental Entity in
connection with this Agreement, the Option Agreement and the transactions
contemplated hereby and thereby.
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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 or any
other provision of this Agreement 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. 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 each holder of an outstanding Company Option a document
evidencing the foregoing assumption by Parent.
(c) The Stock Bonus Plan shall be terminated effective as of the Effective
Time; and the Company's outstanding repurchase rights with respect to the shares
of Company Common Stock purchased or purchasable under Company Options granted
under the automatic grant program for non-employee directors shall terminate as
of the Effective Time.
(d) As promptly as practicable 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 Employment Agreements. Parent shall, as of or prior to the Effective
Time, enter into employment agreements with such persons as may be designated by
Parent, on such terms and conditions as are mutually agreeable to Parent, the
Company and the employees party thereto, which employment agreements will be in
full force and effect as of the Closing Date.
5.19 Parent Director Designation. Parent shall take such actions as are
necessary or appropriate to cause Robert S. Throop to be nominated for election
as a director of Parent at the first meeting of Parent's Board of Directors
following the Effective Time.
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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. The Parent Vote Matter
shall have been adopted by the affirmative vote of the holders of a majority of
the votes cast by holders of the outstanding shares of Parent Common Stock,
provided that the total votes cast thereon by such holders represent a majority
of all votes entitled to be cast with respect thereto.
(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, including, without
limitation, such approvals, waivers and consents as may be required under the
Securities Act and the HSR Act, 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 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 Price Waterhouse LLP and Ernst & Young LLP, 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.
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 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
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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 of Winthrop, Stimson, Putnam & Roberts,
counsel to Parent, based on appropriate representations of the Company and
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 or the Company's Subsidiary 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 impair, 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 amended, modified, rescinded or
repealed the resolutions adopted by the Board of Directors on September 20, 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 of Brobeck, Phleger & Harrison, counsel to
the Company, based on appropriate representations of the Company and 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
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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 impair, prohibit or prevent the consummation of the
transactions contemplated hereby.
(d) 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 Parent.
(e) 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 September 20, 1994
(accurate and complete copies of which have been provided to the Company) and
shall not 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
February 15, 1995 (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 not be
consistent with 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 or Parent
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 $32.00; or
(i) by the Company, if the Parent Stock Price shall be less than
$32.00.
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, 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.
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 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 Parent or 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, 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.
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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:
Anthem Electronics, Inc.
1160 Ridder Park Drive
San Jose, California 95131
Telecopier: (408) 441-4506
Telephone: (408) 452-2249
Attention: Robert S. Throop
(with a copy to)
Brobeck, Phleger & Harrison
Two Embarcadero Place
2200 Geng Road
Palo Alto, California 94303
Telecopier: (415) 496-2885
Telephone: (415) 424-0160
Attention: Edward M. Leonard, Esq.
(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
September 21, 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
32
Page 52 of 74 Pages
<PAGE> 38
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 (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.
33
Page 53 of 74 Pages
<PAGE> 39
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
------------------------------------
Robert E. Klatell
Senior Vice President and Chief
Financial Officer
MTA ACQUISITION COMPANY
By: /s/ Robert E. Klatell
------------------------------------
Robert E. Klatell
Senior Vice President, Treasurer
and Secretary
ANTHEM ELECTRONICS, INC.
By: /s/ Robert S. Throop
------------------------------------
Robert S. Throop
Chairman and Chief Executive Officer
34
Page 54 of 74 Pages
<PAGE> 40
EXHIBIT 5.6
Arrow Electronics, Inc.
25 Hub Drive
Melville, New York 11747
Gentlemen:
The undersigned, a holder of shares of Common Stock, par value $.125 per
share (the "Company Common Stock"), of Anthem Electronics, Inc., a Delaware
corporation (the "Company"), is entitled to receive in connection with the
merger (the "Merger") of the Company with MTA 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 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,
within the 30 days immediately preceding the closing of the Merger, it has not
sold, transferred or otherwise disposed of, and will not sell, transfer or
otherwise dispose 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 post-merger combined operations of Parent and the Company have
been 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, if applicable, 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
Page 55 of 74 Pages
<PAGE> 41
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 extent 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:
Page 56 of 74 Pages
<PAGE> 42
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 MTA Acquisition Company, a subsidiary of the Company, with and into
Anthem Electronics, 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,
Page 57 of 74 Pages
<PAGE> 43
SCHEDULE A
PROXIES
Robert S. Throop
John J. Powers
Alan R. McMillan
Neil J. Hynes
Robert G. Teal
Peyton L. Gannaway
Page 58 of 74 Pages
<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
Anthem Electronics, Inc., a Delaware corporation ("Company"), and as an
inducement to Parent and MTA 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
$.125 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 terminate on the date which is the earlier to occur of the Effective
Time of the Merger under the Merger Agreement or the date the Merger Agreement
terminates pursuant to Section 7.1 thereof.
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/ Alan R. McMillan
--------------------------------------
Name: Alan R. McMillan
Dated: September 21, 1994
Page 59 of 74 Pages
<PAGE> 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
Anthem Electronics, Inc., a Delaware corporation ("Company"), and as an
inducement to Parent and MTA 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
$.125 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 terminate on the date which is the earlier to occur of the Effective
Time of the Merger under the Merger Agreement or the date the Merger Agreement
terminates pursuant to Section 7.1 thereof.
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/ Robert G. Teal
--------------------------------------
Name: Robert G. Teal
Dated: September 21, 1994
Page 60 of 74 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
Anthem Electronics, Inc., a Delaware corporation ("Company"), and as an
inducement to Parent and MTA 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
$.125 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 terminate on the date which is the earlier to occur of the Effective
Time of the Merger under the Merger Agreement or the date the Merger Agreement
terminates pursuant to Section 7.1 thereof.
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/ Neil J. Hynes
--------------------------------------
Name: Neil J. Hynes
Dated: September 21, 1994
Page 61 of 74 Pages
<PAGE> 4
IRREVOCABLE PROXY
In consideration of the negotiations and discussions which have occurred to
date between Arrow Electronics, Inc., a New York corporation ("Parent"), and
Anthem Electronics, Inc., a Delaware corporation ("Company"), and as an
inducement to Parent and MTA 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
$.125 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 terminate on the date which is the earlier to occur of the Effective
Time of the Merger under the Merger Agreement or the date the Merger Agreement
terminates pursuant to Section 7.1 thereof.
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/ Peyton Gannaway
--------------------------------------
Name: Peyton Gannaway
Dated: September 21, 1994
Page 62 of 74 Pages
<PAGE> 5
IRREVOCABLE PROXY
In consideration of the negotiations and discussions which have occurred to
date between Arrow Electronics, Inc., a New York corporation ("Parent"), and
Anthem Electronics, Inc., a Delaware corporation ("Company"), and as an
inducement to Parent and MTA 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
$.125 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 terminate on the date which is the earlier to occur of the Effective
Time of the Merger under the Merger Agreement or the date the Merger Agreement
terminates pursuant to Section 7.1 thereof.
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/ John J. Powers
--------------------------------------
Name: John J. Powers
Dated: September 21, 1994
Page 63 of 74 Pages
<PAGE> 6
IRREVOCABLE PROXY
In consideration of the negotiations and discussions which have occurred to
date between Arrow Electronics, Inc., a New York corporation ("Parent"), and
Anthem Electronics, Inc., a Delaware corporation ("Company"), and as an
inducement to Parent and MTA 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
$.125 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 terminate on the date which is the earlier to occur of the Effective
Time of the Merger under the Merger Agreement or the date the Merger Agreement
terminates pursuant to Section 7.1 thereof.
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/ Robert S. Throop
--------------------------------------
Name: Robert S. Throop
Dated: September 21, 1994
Page 64 of 74 Pages
<PAGE> 1
EXHIBIT 3
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT (the "Agreement"), dated as of September 21, 1994,
by and between Arrow Electronics, Inc., a New York corporation ("Parent"), and
Anthem Electronics, Inc., a Delaware corporation (the "Company").
WHEREAS, concurrently with the execution and delivery of this Agreement,
the Company, Parent and MTA 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 2,451,427 shares (the "Company Shares")
of common stock, par value $.125 per share, of the Company (the "Company Common
Stock") in the manner set forth below at a price (the "Exercise Price") of
$34.67 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. 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 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
September 21, 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
1
Page 65 of 74 Pages
<PAGE> 2
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 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, 2,451,427 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 Certificate of Incorporation
or By-laws 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, the execution and
delivery of this Agreement by the Company does not, and the performance of this
Agreement by the Company will not, require any consent, approval, authorization
or permit of, or filing with or notification to, any governmental or regulatory
authority.
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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, (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 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(c) 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 September 21, 1996, all or any portion of the Company Shares
purchased by Parent pursuant thereto, 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 closing prices of shares of the Company Common Stock on the NYSE for
the ten trading days immediately preceding the Notice Date, (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
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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 then free and clear of all liens, claims, charges and
encumbrances of any kind or nature whatsoever.
(c) Limitation on Call. The Call shall not be exercisable by the Company
(or any successor entity thereof) unless substantially concurrently therewith
the Company has consummated the transaction contemplated by a Takeover Proposal
or the stockholders of the Company have transferred their shares of Company
Common Stock pursuant to a tender or exchange offer or other Takeover Proposal.
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. 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
4
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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.
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 NYSE for the ten trading days immediately
preceding the date of the Registration Notice. The Company (and/or any Person
designated by the Company) shall
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<PAGE> 6
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 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 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
6
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<PAGE> 7
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 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 SEPTEMBER 21, 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
7
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<PAGE> 8
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.
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.
(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
8
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<PAGE> 9
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:
Anthem Electronics, Inc.
1160 Ridder Park Drive
San Jose, California 95131
Attention: Robert S. Throop
Telecopy: (408) 441-4506
Telephone: (408) 452-2249
with a copy to:
Brobeck, Phleger & Harrison
Two Embarcadero Place
2200 Geng Road
Palo Alto, California 94303
Attention: Edward M. Leonard, Esq.
Telecopy: (415) 496-2885
Telephone: (415) 424-0160
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.
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.
9
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<PAGE> 10
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
------------------------------------
Robert E. Klatell
Senior Vice President and
Chief Financial Officer
ANTHEM ELECTRONICS, INC.
By: /s/ Robert S. Throop
------------------------------------
Robert S. Throop
Chairman and Chief Executive Officer
10
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