<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 20, 1994.
REGISTRATION NO. 33-54413
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT
NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ARROW ELECTRONICS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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NEW YORK 5065 11-1806155
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
ORGANIZATION)
</TABLE>
25 HUB DRIVE, MELVILLE, NEW YORK 11747, (516) 391-1300
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA
CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES TO:
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<S> <C>
HOWARD S. KELBERG, ESQ. BRYAN E. DAVIS, ESQ.
WINTHROP, STIMSON, PUTNAM & ROBERTS ALSTON & BIRD
ONE BATTERY PARK PLAZA ONE ATLANTIC CENTER
NEW YORK, NEW YORK 10004-1490 1201 WEST PEACHTREE STREET
(212) 858-1000 ATLANTA, GEORGIA 30309-3424
(404) 881-7000
</TABLE>
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after this Registration Statement becomes
effective and all other conditions to the merger (the "Merger") of AFG
Acquisition Company, a Delaware corporation and a wholly owned subsidiary of
Arrow Electronics, Inc. ("Arrow"), with and into Gates/FA Distributing, Inc., a
Delaware corporation (the "Company"), pursuant to the Merger Agreement described
in the enclosed Proxy Statement/Prospectus have been satisfied or waived.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
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<PAGE> 2
ARROW ELECTRONICS, INC.
Cross Reference Sheet Pursuant to Rule 404(a) of the Securities Act of 1933
and Item 501(b) of Regulation S-K, showing the Location or Heading in the Proxy
Statement/Prospectus of the Information Required by Part I of Form S-4.
<TABLE>
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LOCATION OR HEADING IN PROXY
S-4 ITEM NUMBER AND CAPTION STATEMENT/PROSPECTUS
----------------------------------------------- -----------------------------------------
<S> <C> <C> <C>
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement
and Outside Front Cover Page of
Prospectus............................... Facing page of Registration Statement;
Cross Reference Sheet; Cover Page of
Prospectus
2. Inside Front and Outside Back Cover Pages
of Prospectus............................ Available Information; Incorporation of
Certain Documents by Reference; Table of
Contents
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information............ Summary; Comparative Per Share Data;
Comparative Market Price Data
4. Terms of the Transaction................. Summary; The Merger; The Merger
Agreement; The Stock Option Agreement;
Comparison of Rights of Holders of
Company Common Stock and Arrow Common
Stock; Exhibit A; Exhibit C
5. Pro Forma Financial Information.......... Pro Forma Financial Information
6. Material Contacts with the Company Being
Acquired................................. Summary; The Merger
7. Additional Information Required for
Reoffering by Persons and Parties Deemed
to be Underwriters....................... Not Applicable
8. Interests of Named Experts and Counsel... Not Applicable
9. Disclosure of Commission Position on
Indemnification for Securities
Act Liabilities.......................... Comparison of Rights of Holders of
Company Common Stock and Arrow Common
Stock
B. INFORMATION ABOUT THE REGISTRANT
10. Information With Respect to S-3
Registrants.............................. Available Information; Incorporation of
Certain Documents by Reference
11. Incorporation of Certain Information by
Reference................................ Incorporation of Certain Documents by
Reference
12. Information With Respect to S-2 or S-3
Registrants.............................. Not Applicable
13. Incorporation of Certain Information by
Reference................................ Not Applicable
14. Information With Respect to Registrants
Other Than S-3 or S-2 Registrants........ Not Applicable
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<TABLE>
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LOCATION OR HEADING IN PROXY
S-4 ITEM NUMBER AND CAPTION STATEMENT/PROSPECTUS
----------------------------------------------- -----------------------------------------
<S> <C> <C> <C>
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information With Respect to S-3
Companies................................ Available Information; Incorporation of
Certain Documents by Reference; Recent
Developments
16. Information With Respect to S-2 or S-3
Companies................................ Not Applicable
17. Information With Respect to Companies
Other Than S-2 or S-3 Companies.......... Not Applicable
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or
Authorizations are to be Solicited....... Incorporation of Certain Documents by
Reference; Summary; Special Meeting; The
Merger; The Merger Agreement;
The Stock Option Agreement
19. Information if Proxies, Consents or
Authorizations are not to be Solicited,
or in an Exchange Offer.................. Not Applicable
</TABLE>
<PAGE> 4
[GATES/FA LETTERHEAD]
July 20, 1994
Dear Stockholder:
You are cordially invited to attend a special meeting of stockholders (the
"Special Meeting") of Gates/FA Distributing, Inc. (the "Company") to be held at
the Greenville -- Spartanburg Airport Marriott, 1 Parkway East, Greenville,
South Carolina 29615, at 10:00 a.m., local time, on August 29, 1994.
At this important meeting, you will be asked to consider and vote upon the
approval and adoption of a merger agreement (the "Merger Agreement") which
provides for the merger of the Company with AFG Acquisition Company ("Sub"), a
wholly owned subsidiary of Arrow Electronics, Inc. ("Arrow"), with the result
that the Company will become a wholly owned subsidiary of Arrow. If the proposed
merger (the "Merger") is consummated, each outstanding share of the Company's
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 shares of Arrow
common stock, including the corresponding number of Arrow Rights (as defined
below), having a value equal to $22.50. The value of each share of Arrow common
stock will equal the average closing price on the New York Stock Exchange, Inc.
of one share of Arrow common stock over the twenty-day trading period ending two
trading days before the closing date of the Merger. The "Arrow Rights" are
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.
The affirmative vote of the holders of a majority of the shares of the
Company's common stock entitled to vote at the Special Meeting is required for
the approval of the Merger Agreement.
Enclosed are the (i) Notice of Special Meeting, (ii) Proxy
Statement/Prospectus, and (iii) Proxy for the Special Meeting. The Proxy
Statement/Prospectus describes in more detail the Merger Agreement and the
proposed Merger, including a description of the conditions to consummation of
the Merger and the effects of the Merger on the rights of the Company's
stockholders. It also describes other information pertaining to Arrow and the
Company. Please give this information your careful attention.
The Board of Directors has unanimously approved and adopted the Merger
Agreement and consummation of the transactions contemplated therein, and
unanimously recommends that you vote FOR approval of the Merger Agreement and
consummation of the transactions contemplated therein.
In view of the importance of the action to be taken, we urge you to
complete, sign and date the enclosed Proxy and to return it promptly in the
enclosed envelope, whether or not you plan to attend the Special Meeting (if you
attend the Special Meeting, you may vote in person, even if you previously
returned your Proxy).
We look forward to seeing you at the Special Meeting.
Sincerely,
/s/ Philip D. Ellett
Philip D. Ellett
President and Chief Executive Officer
<PAGE> 5
[GATES/FA LETTERHEAD]
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 29, 1994
Dear Stockholder:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders (the "Special
Meeting") of Gates/FA Distributing, Inc. (the "Company") will be held at the
Greenville -- Spartanburg Airport Marriott, 1 Parkway East, Greenville, South
Carolina 29615, commencing at 10:00 a.m., local time, and at any adjournment or
postponement thereof, for the following purposes:
1. To consider and vote upon a proposal to approve and adopt an
Agreement and Plan of Merger (the "Merger Agreement"), which provides for
the merger (the "Merger") into the Company of AFG Acquisition Company, a
newly formed Delaware corporation that is wholly owned by Arrow
Electronics, Inc., a New York corporation, on the terms and subject to the
conditions set forth in the Merger Agreement, which is attached to and
described in the enclosed Proxy Statement/Prospectus;
2. To adjourn the Special Meeting if necessary to solicit additional
proxies voting in favor of the Merger or if the conditions to the Merger
have not been satisfied or waived; and
3. To transact such other business incidental to the conduct of the
Special Meeting as may properly come before the meeting.
The Board of Directors has fixed the close of business on July 18, 1994, as
the record date for the determination of stockholders entitled to notice of and
to vote at the Special Meeting or any adjournment thereof.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ Cynthia L. Armstrong
CYNTHIA L. ARMSTRONG,
Secretary
July 20, 1994
YOU ARE CORDIALLY INVITED TO ATTEND THIS MEETING. IT IS IMPORTANT THAT YOUR
SHARES BE REPRESENTED REGARDLESS OF THE NUMBER YOU OWN. EVEN IF YOU PLAN TO BE
PRESENT, YOU ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY
PROMPTLY IN THE ENVELOPE PROVIDED. IF YOU ATTEND THIS MEETING, YOU MAY VOTE
EITHER IN PERSON OR BY YOUR PROXY. ANY PROXY GIVEN MAY BE REVOKED BY YOU IN
WRITING OR IN PERSON AT ANY TIME PRIOR TO ITS EXERCISE.
YOU SHOULD NOT SEND ANY STOCK CERTIFICATES WITH YOUR PROXY CARDS.
<PAGE> 6
GATES/FA DISTRIBUTING, INC.
AND
ARROW ELECTRONICS, INC.
----------------------------------------------------------------------------
GATES/FA DISTRIBUTING, INC. PROXY STATEMENT
ARROW ELECTRONICS, INC. PROSPECTUS
----------------------------------------------------------------------------
This Proxy Statement/Prospectus is being furnished to holders of common
stock, par value $.01 per share ("Company Common Stock"), of Gates/FA
Distributing, Inc., a Delaware corporation whose principal offices are 39 Pelham
Ridge Drive, Greenville, South Carolina 29615 (the "Company"), in connection
with the solicitation of proxies by the Company's Board of Directors for use at
the Special Meeting of Company stockholders (the "Special Meeting") to be held
on August 29, 1994 at the Greenville -- Spartanburg Airport Marriott, 1 Parkway
East, Greenville, South Carolina 29615, commencing at 10:00 a.m., local time,
and at any adjournment or postponement thereof.
This Proxy Statement/Prospectus constitutes a prospectus of Arrow
Electronics, Inc., a New York corporation ("Arrow"), with respect to the shares
of common stock, $1.00 par value per share ("Arrow Common Stock"), to be issued
pursuant to the Merger (as defined herein) in exchange for outstanding shares of
Company Common Stock.
------------------------
THE SECURITIES TO WHICH THIS PROXY STATEMENT/PROSPECTUS RELATES HAVE NOT
BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION
OR BY ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------------
This Proxy Statement/Prospectus and the accompanying form of proxy are
first being mailed to stockholders of the Company on or about July 21, 1994.
------------------------
The date of this Proxy Statement/Prospectus is July 20, 1994.
<PAGE> 7
INTRODUCTION
SPECIAL MEETING OF COMPANY STOCKHOLDERS
At the Special Meeting, stockholders of record of the Company as of the
close of business on July 18, 1994 will consider and vote upon a proposal to
approve and adopt the Agreement and Plan of Merger (the "Merger Agreement")
dated as of June 24, 1994 by and among Arrow, AFG Acquisition Company, a
Delaware corporation and a wholly owned subsidiary of Arrow ("Sub"), and the
Company, pursuant to which, among other things, Sub will be merged with and into
the Company (the "Merger"), which will be the surviving corporation (the
"Surviving Corporation"), and the Company will become a wholly owned subsidiary
of Arrow.
CONVERSION OF COMPANY COMMON STOCK
INTO ARROW COMMON STOCK
Upon consummation of the Merger, each issued and outstanding share of
Company 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
shares of Arrow Common Stock, including the corresponding number of Arrow Rights
(as defined below), having a value equal to $22.50. The value of each share of
Arrow Common Stock will equal the average closing price on the New York Stock
Exchange, Inc. (the "NYSE") of one share of Arrow Common Stock over the
twenty-day trading period ending two trading days before the closing date of the
Merger (the "Arrow Stock Price").
Upon consummation of the Merger, all shares of Company Common Stock 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 shares
of Company Common Stock shall 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 as described under "THE
MERGER AGREEMENT -- No Fractional Shares."
In this Proxy Statement/Prospectus, unless the context otherwise requires,
all references to Arrow Common Stock include the associated rights (the "Arrow
Rights") to purchase shares of Participating Preferred Stock of Arrow (the
"Arrow Participating Preferred Stock") 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 (the "Rights Agreement").
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROXY STATEMENT/PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROXY
STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF
AN OFFER TO PURCHASE, THE SECURITIES OFFERED BY THIS PROXY STATEMENT/PROSPECTUS,
OR THE SOLICITATION OF A PROXY, IN ANY JURISDICTION OR FROM ANY PERSON TO WHOM
OR FROM WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER, SOLICITATION OF AN OFFER OR
PROXY SOLICITATION IN SUCH JURISDICTION. THE DELIVERY OF THIS PROXY
STATEMENT/PROSPECTUS SHALL NOT, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE INFORMATION SET FORTH HEREIN OR
INCORPORATED BY REFERENCE HEREIN OR IN THE AFFAIRS OF ARROW OR THE COMPANY OR
ANY OF THEIR RESPECTIVE SUBSIDIARIES SINCE THE DATE OF THIS PROXY
STATEMENT/PROSPECTUS. HOWEVER, IF ANY MATERIAL CHANGE OCCURS DURING THE PERIOD
THAT THIS PROXY STATEMENT/PROSPECTUS IS REQUIRED TO BE DELIVERED, THIS PROXY
STATEMENT/PROSPECTUS WILL BE AMENDED AND SUPPLEMENTED ACCORDINGLY. IN THIS PROXY
STATEMENT/PROSPECTUS, ALL INFORMATION CONCERNING THE COMPANY HAS BEEN SUPPLIED
BY THE COMPANY, AND ALL INFORMATION CONCERNING ARROW HAS BEEN SUPPLIED BY ARROW.
2
<PAGE> 8
AVAILABLE INFORMATION
Each of Arrow and the Company is subject to the informational requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission ("SEC"). Copies of such reports, proxy
statements and other information are available for inspection and copying at the
public reference facilities maintained by the SEC at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549 and at certain of the Regional
Offices of the SEC located at 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511; and 7 World Trade Center, New York, New York 10048. Copies
of such material can be obtained at prescribed rates from the Public Reference
Section of the SEC, Judiciary Square, 450 Fifth Street, N.W., Washington, D.C.
20549. In addition, material filed by Arrow can be inspected at the offices of
the NYSE, 20 Broad Street, New York, New York 10005, on which Arrow Common Stock
and the Arrow Rights are listed. Material filed by the Company can be inspected
at the offices of the National Association of Securities Dealers, Inc., Reports
Section, 1735 K Street N.W., Washington, D.C. 20006.
Arrow has filed with the SEC a Registration Statement on Form S-4 (together
with any amendments thereto, the "Registration Statement") with respect to the
registration under the Securities Act of 1933, as amended (the "Securities
Act"), of the securities to be issued pursuant to the Merger Agreement. This
Proxy Statement/Prospectus does not contain all information set forth in the
Registration Statement, certain portions of which have been omitted pursuant to
the rules and regulations of the SEC, and to which portions reference is hereby
made for further information with respect to Arrow and the Company and the
securities offered hereby. Such additional information may be obtained from the
SEC's principal office in Washington, D.C. Statements contained in this Proxy
Statement/Prospectus or in any document incorporated by reference in this Proxy
Statement/Prospectus as to the contents of any contract or other document
referred to herein or therein are not necessarily complete, and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement or such other document, each such
statement being qualified in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES CERTAIN DOCUMENTS BY REFERENCE
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE
AVAILABLE UPON REQUEST FROM, IN THE CASE OF THE COMPANY, OFFICE OF THE
SECRETARY, GATES/FA DISTRIBUTING, INC., 39 PELHAM RIDGE DRIVE, GREENVILLE, SOUTH
CAROLINA 29615, TELEPHONE NUMBER (803) 234-0736, AND IN THE CASE OF ARROW,
OFFICE OF THE SECRETARY, ARROW ELECTRONICS, INC., 25 HUB DRIVE, MELVILLE, NEW
YORK 11747, TELEPHONE NUMBER (516) 391-1300. IN ORDER TO ENSURE TIMELY DELIVERY
OF THESE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY AUGUST 22, 1994.
Arrow and the Company hereby undertake to provide without charge to each
person, including any beneficial owner, to whom a copy of this Proxy
Statement/Prospectus has been delivered, upon the written or oral request of any
such person, a copy of any and all the documents referred to below which have
been or may be incorporated by reference herein, other than exhibits to such
documents, unless such exhibits are specifically incorporated by reference.
Requests for such documents should be directed to the offices indicated above.
The following documents, which have been filed with the SEC pursuant to the
Exchange Act, are hereby incorporated by reference herein:
(1) Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1993 (the "Company's 1993 10-K");
3
<PAGE> 9
(2) Company's Quarterly Reports on Form 10-Q for the quarters ended
September 30, 1993 (as amended by Form 10-Q/A dated January 12, 1994),
December 31, 1993 and March 31, 1994 (the "Company's 1994 Third Quarter
10-Q");
(3) Company's Current Report on Form 8-K dated May 12, 1994;
(4) Arrow's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993 ("Arrow's 1993 10-K"); and
(5) Arrow's Quarterly Report on Form 10-Q for the quarter ended March
31, 1994 ("Arrow's 1994 First Quarter 10-Q").
The information with regard to Arrow's capital stock contained in Arrow's
Registration Statement pursuant to the Exchange Act, including any amendment or
report filed for the purpose of updating such information, is hereby
incorporated by reference herein.
The information relating to Arrow and the Company contained in this Proxy
Statement/Prospectus does not purport to be comprehensive and should be read
together with the information in the documents incorporated by reference.
All documents filed by the Company and Arrow pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date hereof and prior to the
date of the Special Meeting shall be deemed to be incorporated by reference
herein and to be a part hereof from the date of filing of such documents. All
information appearing in this Proxy Statement/Prospectus is qualified in its
entirety by the information and financial statements (including notes thereto)
appearing in the documents incorporated by reference herein.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Proxy Statement/Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which is deemed to
be incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Proxy Statement/Prospectus.
4
<PAGE> 10
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
INTRODUCTION.......................................................................... 2
AVAILABLE INFORMATION................................................................. 3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE....................................... 3
SUMMARY............................................................................... 7
CERTAIN SIGNIFICANT CONSIDERATIONS.................................................... 12
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA....................................... 13
PRO FORMA FINANCIAL INFORMATION....................................................... 15
COMPARATIVE PER SHARE DATA............................................................ 22
COMPARATIVE MARKET PRICE DATA......................................................... 23
SPECIAL MEETING....................................................................... 23
General............................................................................. 23
Purpose of Meeting.................................................................. 24
Date, Place and Time; Record Date................................................... 24
Voting Rights....................................................................... 24
Proxies............................................................................. 24
THE MERGER............................................................................ 25
Background; Recommendations of the Company Board of Directors and Reasons for
the Merger....................................................................... 25
Opinion of Financial Advisor........................................................ 28
Interests of Certain Persons in the Merger.......................................... 31
Certain Federal Income Tax Consequences of the Merger............................... 31
Accounting Treatment................................................................ 32
Regulatory Filings and Approvals.................................................... 32
Restrictions on Sales by Affiliates................................................. 32
Listing on Stock Exchange........................................................... 33
No Dissenters' Rights............................................................... 33
THE MERGER AGREEMENT.................................................................. 33
The Merger.......................................................................... 33
Closing; Effective Time............................................................. 34
Exchange of Stock Certificates...................................................... 34
No Fractional Shares................................................................ 35
Representations and Warranties...................................................... 35
Covenants........................................................................... 37
No Solicitation of Transactions..................................................... 37
Indemnification..................................................................... 38
Company Stock Options............................................................... 38
Conditions.......................................................................... 38
Amendments, Termination and Waivers................................................. 39
Expenses............................................................................ 40
THE STOCK OPTION AGREEMENT............................................................ 41
General............................................................................. 41
Certain Repurchases................................................................. 41
Registration Rights................................................................. 42
COMPARISON OF RIGHTS OF HOLDERS OF COMPANY COMMON STOCK AND
ARROW COMMON STOCK.................................................................. 43
General............................................................................. 43
</TABLE>
5
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<TABLE>
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PAGE
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<S> <C>
Business Combinations............................................................... 43
Appraisal Rights.................................................................... 43
State Takeover Legislation.......................................................... 44
Stockholder Rights Plans............................................................ 45
Amendments to Certificate of Incorporation.......................................... 45
Amendments to By-laws............................................................... 45
Preemptive Rights................................................................... 46
Dividend Sources.................................................................... 46
Duration of Proxies................................................................. 46
Stockholder Action.................................................................. 46
Special Stockholder Meetings........................................................ 47
Cumulative Voting................................................................... 47
Removal of Directors................................................................ 47
Vacancies on the Board.............................................................. 48
Indemnification of Directors........................................................ 48
Limitation of Personal Liability of Directors....................................... 50
RECENT DEVELOPMENTS................................................................... 50
LEGAL OPINION......................................................................... 51
EXPERTS............................................................................... 51
SOLICITATION OF PROXIES............................................................... 51
PROPOSALS BY COMPANY STOCKHOLDERS..................................................... 52
EXHIBIT A -- AGREEMENT AND PLAN OF MERGER............................................. A-1
EXHIBIT B -- OPINION OF THE ROBINSON-HUMPHREY COMPANY, INC............................ B-1
EXHIBIT C -- STOCK OPTION AGREEMENT................................................... C-1
</TABLE>
6
<PAGE> 12
SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement/Prospectus. The following summary is qualified in its
entirety by the detailed information appearing elsewhere in this Proxy
Statement/Prospectus and the Exhibits hereto or incorporated by reference
herein. Capitalized terms used and not otherwise defined in this summary have
the meanings ascribed to them elsewhere in this Proxy Statement/Prospectus.
Stockholders are urged to read this Proxy Statement/Prospectus and the Exhibits
hereto in their entirety.
THE PARTIES
The Company. The Company is a leading national wholesale distributor of
microcomputers, networking products, mass storage products, Unix products and
computer peripheral equipment. The Company emphasizes sales to value added
resellers ("VARs"), provides toll-free technical support and customer service
and offers customized system integration services to its customers. The Company
distributes over 8,500 products from more than 135 microcomputer hardware and
software manufacturers.
The principal executive office of the Company is located at 39 Pelham Ridge
Drive, Greenville, South Carolina 29615, and the telephone number is (803)
234-0736.
Arrow. Arrow is the world's largest distributor of electronic components
and computer products to industrial and commercial customers.
The principal executive office of Arrow is located at 25 Hub Drive,
Melville, New York 11747, and the telephone number is (516) 391-1300.
SPECIAL MEETING
Purpose. At the Special Meeting and any adjournment or postponement
thereof, the stockholders of the Company will be asked to consider and vote upon
(i) a proposal to approve and adopt the Merger Agreement providing for, among
other things, the Merger and (ii) such other business incidental to the conduct
of the Special Meeting as may properly be brought before the Special Meeting.
Time, Date and Place. The Special Meeting is scheduled to be held at 10:00
a.m., local time, on August 29, 1994 at the Greenville -- Spartanburg Airport
Marriott, 1 Parkway East, Greenville, South Carolina 29615, and at any
adjournment or postponement thereof.
Record Date; Shares Entitled to Vote. The Board of Directors of the
Company (the "Company Board") has fixed the close of business on July 18, 1994
as the record date (the "Record Date") for the determination of holders of
Company Common Stock entitled to notice of and to vote at the Special Meeting.
On the Record Date, there were 6,316,151 shares of Company Common Stock
outstanding and entitled to vote.
Required Vote. Under Delaware law and the Company's Amended and Restated
Certificate of Incorporation, as amended, the affirmative vote of the holders of
a majority of the outstanding shares of Company Common Stock (with each share
entitled to one vote) is required to approve and adopt the Merger Agreement and
the terms of the Merger. Each of Cheyenne Software, Inc. ("Cheyenne") and Dennis
Gates ("Gates"), which collectively are the beneficial owners of approximately
29% of the outstanding shares of the Company Common Stock, has granted to Arrow
an irrevocable proxy with respect to the vote to approve and adopt the Merger
Agreement. Arrow intends to vote such proxies in favor of approval and adoption
of the Merger Agreement. See "SPECIAL MEETING -- Voting Rights."
7
<PAGE> 13
THE MERGER
General. At the Effective Time (as defined below) of the Merger, Sub will
be merged with and into the Company, which will be the Surviving Corporation,
and the Company will become a wholly owned subsidiary of Arrow.
Effective Time. After all the conditions set forth in the Merger Agreement
have been fulfilled or waived, the Merger will become effective at such time
(the "Effective Time") as a copy of the Certificate of Merger is delivered to
the Delaware Secretary of State for filing and is filed by the Delaware
Secretary of State, or at such later time as is provided in the Certificate of
Merger. Delivery of the Certificate of Merger to the Delaware Secretary of State
for filing thereby will be made as soon as practicable after the closing. See
"THE MERGER AGREEMENT -- Closing; Effective Time."
Conversion of Shares. At the Effective Time, each then outstanding share
of Company Common Stock (other than shares owned by the Company as treasury
stock and shares held by Arrow, Sub or any wholly owned subsidiary of Arrow,
which will be canceled) will be converted into the right to receive the number
of shares of Arrow Common Stock equal to a fraction, the numerator of which is
$22.50 and the denominator of which is the average closing price on the NYSE of
one share of Arrow Common Stock over the twenty-day trading period ending two
trading days before the closing date (the "Conversion Ratio"). See "THE MERGER
AGREEMENT -- The Merger."
No fractional shares of Arrow Common Stock will be issued pursuant to the
Merger, and holders of Company Common Stock will receive a cash payment in lieu
of fractional shares of Arrow Common Stock. See "THE MERGER AGREEMENT -- No
Fractional Shares."
The shares of Arrow Common Stock to be issued pursuant to the Merger will
have been registered under the Securities Act and, as such, will be freely
transferable except for shares issued to any person who may be deemed to be an
affiliate of the Company. See "THE MERGER -- Restrictions on Sales by
Affiliates."
Operations After the Merger. At the Effective Time of the Merger, Sub will
be merged with and into the Company, and the Company will thereafter continue
its business operations as a wholly owned subsidiary of Arrow.
Recommendations of the Company Board of Directors; Reasons for the
Merger. The Company Board unanimously approved the Merger Agreement and the
terms of the Merger and determined to recommend that Company stockholders vote
FOR approval and adoption of the Merger Agreement and the terms of the Merger.
See "THE MERGER -- Background; Recommendations of the Company Board of Directors
and Reasons for the Merger" for additional information with respect to the
Company Board's recommendation and the reasons therefor.
Security Ownership of Management and Certain Other Persons. As of June 24,
1994, the Company's directors (excluding Gates), executive officers and their
affiliates as a group held shares representing less than 1% of the votes
entitled to be cast by the Company Common Stock. Each of the directors and
executive officers of the Company has advised the Company that he intends to
vote or direct the vote of all the outstanding shares of Company Common Stock
over which he has voting control in favor of approval and adoption of the Merger
Agreement. Additionally, each of Cheyenne and Gates, which collectively are the
beneficial owners of approximately 29% of the outstanding shares of the Company
Common Stock, has granted to Arrow an irrevocable proxy with respect to the vote
to approve and adopt the Merger Agreement. Arrow intends to vote such proxies in
favor of approval and adoption of the Merger Agreement. See "SPECIAL MEETING --
Voting Rights."
Opinion of Financial Advisor. The Robinson-Humphrey Company, Inc.
("Robinson-Humphrey") has delivered to the Company Board a written opinion dated
July 20, 1994 to the effect that, as of the date of such opinion, the
consideration in the Merger was fair, from a financial point of
8
<PAGE> 14
view, to the holders of Company Common Stock. The written opinion of
Robinson-Humphrey dated July 20, 1994 is attached to this Proxy
Statement/Prospectus as Exhibit B and should be read in its entirety.
For additional information concerning the matters considered and
assumptions made by Robinson-Humphrey in reaching its opinion and the fee
received by it, see "THE MERGER -- Opinion of Financial Advisor" and Exhibit B
hereto.
Conditions to the Merger. In addition to the approval and adoption of the
Merger Agreement and the terms of the Merger by the stockholders of the Company,
the obligations of the parties to effect the Merger are subject to the
fulfillment or waiver, at or prior to the Effective Time, of certain conditions
specified in the Merger Agreement, including, among others, (i) the receipt of
approval for listing on the NYSE, upon official notice of issuance, of the Arrow
Common Stock to be issued pursuant to the Merger; (ii) the absence of any
injunction prohibiting consummation of the Merger; (iii) the absence of any
governmental investigation, action or proceeding seeking to restrain, prevent or
change the Merger or questioning the legality thereof or seeking damages in
connection therewith; (iv) the receipt by the respective parties and
confirmation at the Effective Time of accountants' letters with respect to the
qualification of the Merger as a pooling-of-interests; (v) the receipt by the
respective parties of certain certificates from each beneficial owner of 5% or
more of the outstanding shares of Company Common Stock; (vi) the receipt by the
respective parties of certain satisfactory opinions of tax counsel; and (vii)
the receipt of the consents required to permit Arrow and the Company to
consummate the transaction. See "THE MERGER AGREEMENT -- Conditions."
The obligation of Arrow to effect the Merger is subject to additional
conditions, including (i) the absence of any action or proceeding (other than
those referred to in (iii) of the preceding paragraph) seeking to restrain the
Merger or questioning the legality thereof or seeking damages in connection
therewith; (ii) the receipt of certain letters from persons who may be deemed to
be affiliates of the Company under Rule 145 of the Securities Act (the
"Affiliate Agreements"); and (iii) the absence of any events, changes or
occurrences since June 24, 1994 which have, or are reasonably likely to have,
individually or in the aggregate, a material adverse effect on the financial
condition, results of operations, business or business prospects of the Company
taken as a whole ("Material Adverse Effect"). Notwithstanding the foregoing, as
used herein, Material Adverse Effect shall not include a material adverse effect
(i) which results from the proposed acquisition of the Company by Arrow and the
impact thereof on the operating performance of the Company pursuant to the terms
of the Merger Agreement; or (ii) is disclosed either in certain documents filed
by the Company with the SEC or in the disclosure memorandum furnished by the
Company to Arrow pursuant to the Merger Agreement.
The consummation of the Merger is also conditioned upon the receipt of all
required governmental authorizations, consents, orders and approvals, including
expiration or termination of the relevant waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"). The Company and Arrow have filed the requisite notices under the HSR Act.
Neither Arrow nor the Company is aware of any additional regulatory approvals
required to consummate the Merger.
Rights to Terminate, Amend or Waive Conditions. The Merger Agreement may
be terminated at any time prior to the Effective Time by mutual consent of Arrow
and the Company and by either Arrow or the Company if, without fault of the
terminating party, the Merger has not been consummated on or before November 15,
1994 (or such later date as the parties may agree to in writing), or in certain
other situations, including (i) the failure to obtain the requisite stockholder
vote; (ii) the withdrawal or modification of the Company Board's approval of the
Merger Agreement and the terms of the Merger after the occurrence of certain
events and the Company Board's determination that to proceed with the Merger
would violate the Company Board's fiduciary duties;
9
<PAGE> 15
or (iii) the issuance of a final and nonappealable order, judgment or decree
preventing the consummation of the Merger.
The Merger Agreement may be terminated by Arrow prior to the Effective Time
if (i) the Company breaches any of its representations, warranties or
obligations under the Merger Agreement and such breach is not cured or waived
and the Company fails to provide reasonable assurance that such breach will be
cured by the Closing Date; or (ii) the Arrow Stock Price is less than $30 or
greater than $42. The Merger Agreement may be terminated by the Company prior to
the Effective Time if (i) Arrow or Sub breaches any of their respective
representations, warranties or obligations under the Merger Agreement and such
breach is not cured or waived and Arrow fails to provide reasonable assurance
that such breach will be cured by the Closing Date; (ii) the Arrow Stock Price
is less than $25 or greater than $42; or (iii) any person or group of persons
(excluding certain specified persons or groups of persons) acquires 30% of the
outstanding shares of Arrow Common Stock or Arrow's Board of Directors accepts
an offer to acquire 50% or more of the outstanding shares of Arrow Common Stock
or of Arrow's consolidated assets.
In certain events, if Arrow or the Company terminates the Merger Agreement,
the Company must pay Arrow liquidated damages of $4,000,000, plus out-of-pocket
fees and expenses incurred by Arrow in connection with the Merger Agreement and
the transactions contemplated thereby (including without limitation, the fees
and expenses of its advisors, accountants and legal counsel) up to a maximum
amount of $1,000,000. See "THE MERGER AGREEMENT -- Amendments, Termination and
Waivers."
The Merger Agreement may be amended at any time before or after its
approval by the stockholders of the Company by written agreement executed by
Arrow, Sub and the Company, except that after approval of the Merger Agreement
by the stockholders of the Company, no such amendment, modification or
supplement may be made which by law requires the further approval of the
Company's stockholders without such further approval. See "THE MERGER
AGREEMENT -- Conditions," and "-- Amendments, Termination and Waivers." Any
amendment to the Merger Agreement must be authorized by the Boards of Directors
of the respective parties. Such directors will exercise their fiduciary duties
in determining whether any such amendment is in the best interests of the
stockholders and, in the case of the Company, exercise their business judgment
in determining whether stockholder approval of such amendment is required or
desirable in light of the nature of the amendment.
The conditions to each of the parties' obligations to consummate the
Merger, other than the obtaining of stockholder approval, may be waived by such
party. Neither Arrow, Sub nor the Company presently intends to waive any
condition to its obligations to consummate the Merger. However, each of the
parties reserves the right to waive any condition in the future. Any
determination to waive a condition would depend upon the facts and circumstances
existing at the time of such waiver and would be made by such party's Board of
Directors, exercising its fiduciary duties to such party and its stockholders.
The Merger Agreement does not require that any waiver be approved by the
stockholders, even if such waiver may be deemed by some stockholders to be
adverse to their interests. In the event the Merger is approved by Company
stockholders, the Company stockholders may not independently determine not to
exchange their shares upon the occurrence of an event some stockholders may deem
adverse to their interests, including, without limitation, in the event of a
material decline in Arrow's earnings or stock price. However, Arrow has the
right to determine not to effect the Merger if there occurs after June 24, 1994
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.
For additional information concerning the rights to terminate, amend or
waive conditions, see "THE MERGER -- Amendments, Termination and Waivers."
10
<PAGE> 16
No Dissenters' Rights. Holders of Company Common Stock are not entitled to
dissenters' rights under the Delaware General Corporation Law in connection with
the Merger. See "THE MERGER -- No Dissenters' Rights."
Certain Federal Income Tax Consequences. The Merger is intended to
qualify, for Federal income tax purposes, as a tax-free "reorganization" under
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code")
and, accordingly, no taxable gain or loss will be recognized by the stockholders
of the Company in the Merger, except that cash received by holders of Company
Common Stock in lieu of fractional shares may give rise to taxable income. See
"THE MERGER -- Certain Federal Income Tax Consequences of the Merger." Each
Company stockholder is urged to consult such holder's own tax adviser to
determine the specific tax consequences of the Merger to such holder.
Accounting Treatment. Arrow and the Company believe that the Merger will
qualify as a "pooling-of-interests" for accounting purposes. It is a condition
precedent to consummation of the Merger that Ernst & Young, independent auditors
for Arrow, and KPMG Peat Marwick, independent auditors for the Company, issue
opinions to each of Arrow and the Company, respectively, that the Merger
qualifies as a "pooling-of-interests" for accounting purposes. See "THE
MERGER -- Accounting Treatment."
Exchange of Stock Certificates. As of the Effective Time, the
certificates, which prior to the Merger represented shares of Company Common
Stock, will be deemed, for all corporate purposes, to evidence the number of
shares of Arrow Common Stock into which they have been converted pursuant to the
Merger Agreement. Holders of certificates, which prior to the Effective Time
represented shares of Company Common Stock, will not be entitled to receive any
payment of dividends on, or other distributions with respect to, their shares
unless such certificates have been exchanged for certificates representing
shares of Arrow Common Stock. As soon as practicable after the Merger is
effective, the Exchange Agent will send transmittal instructions to each Company
stockholder of record at the Effective Time, advising the stockholder of the
procedure for exchanging certificates for Arrow certificates. Cash will be paid
to Company stockholders in lieu of fractional shares. See "THE MERGER
AGREEMENT -- No Fractional Shares." Certificates should not be surrendered until
the letter of transmittal and such instructions are received. See "THE MERGER
AGREEMENT -- Exchange of Stock Certificates."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Company Stock Options. At the Effective Time, each unexpired and
unexercised option to purchase shares of Company Common Stock (each a "Company
Stock Option") will be assumed by Arrow and thereafter will be deemed to
constitute an option (each an "Arrow Option") to acquire such number of shares
of Arrow Common Stock as the holder of such Company Stock Option would have been
entitled to receive pursuant to the Merger had such holder exercised such
Company Stock Option immediately prior to the Effective Time.
Indemnification. From and after the Effective Time, Arrow and the
Surviving Corporation shall indemnify the present and former officers and
directors of the Company against certain liabilities including, without
limitation, liabilities arising out of or pertaining to the transactions
contemplated by the Merger Agreement.
Severance Agreement with Chief Financial Officer. The Company expects to
enter into an agreement with William T. Mauldin, the Company's Chief Financial
Officer, pursuant to which Mr. Mauldin would receive a termination payment from
the Company if the Company terminates his employment in certain circumstances
following the Effective Time.
11
<PAGE> 17
Affiliate Registration Rights. The shares of Arrow Common Stock received
in connection with the Merger by Cheyenne and Gates, affiliates of the Company,
will be subject to resale restrictions imposed by Rule 145 under the Securities
Act. To eliminate certain of these restrictions, pursuant to the Merger
Agreement Arrow has prepared and filed with the SEC a registration statement on
Form S-3 with respect to the sale of such shares of Arrow Common Stock to be
received by Cheyenne and Gates.
For a detailed description of these arrangements, see "THE
MERGER -- Interests of Certain Persons in the Merger."
CERTAIN OTHER TRANSACTIONS
Stock Option Agreement. Arrow and the Company have entered into a Stock
Option Agreement dated as of June 24, 1994 (the "Stock Option Agreement"),
pursuant to which Arrow has the right, under certain circumstances, to acquire
up to 1,257,063 shares of authorized and unissued Company Common Stock (or
approximately 19.9% of the outstanding Company Common Stock prior to such
issuance) at a price per share of $22.50. See "THE STOCK OPTION AGREEMENT."
Proxies. Each of Cheyenne and Gates has granted to Arrow an irrevocable
proxy to vote the shares of Company Common Stock held by them in connection with
adoption of the Merger Agreement. Arrow intends to vote such proxies in favor of
adoption of the Merger Agreement. See "SPECIAL MEETING -- Voting Rights."
Comparison of Stockholder Rights. See "COMPARISON OF RIGHTS OF HOLDERS OF
COMPANY COMMON STOCK AND ARROW COMMON STOCK" for a summary of the material
differences between the rights of holders of Arrow Common Stock and Company
Common Stock.
CERTAIN SIGNIFICANT CONSIDERATIONS
In connection with a determination to approve and adopt the Merger
Agreement and the terms of the Merger, stockholders of the Company should
consider that the relative stock prices of Arrow Common Stock and Company Common
Stock may vary from the prices as of the date on which the stockholders vote on
the Merger or the date hereof due to changes in the business, operations or
prospects of Arrow or the Company, market assessments of the likelihood that the
Merger will be consummated and the timing thereof, the effect of any conditions
or restrictions imposed or proposed by regulatory agencies on the combined
companies following consummation of the Merger, general market and economic
conditions or other factors.
12
<PAGE> 18
SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA
The tables below present selected consolidated historical data of Arrow and
the Company.
ARROW SUMMARY FINANCIAL INFORMATION
The summary financial information of Arrow set forth below has been derived
from and should be read in conjunction with the audited financial statements and
other financial information contained in Arrow's 1993 10-K and with the
unaudited financial statements contained in Arrow's 1994 First Quarter 10-Q,
which are incorporated by reference in this Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------------------------------- ---------------------
1989 1990 1991(B) 1992 1993(A) 1993 1994
-------- -------- ---------- ---------- ---------- -------- ----------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Sales.............................. $925,207 $970,944 $1,043,654 $1,621,535 $2,535,584 $551,391 $ 820,783
Operating income................... 27,557 32,682 34,399(c) 103,781 181,542 42,592 58,415
Equity in earnings of affiliated
companies........................ 5,466 6,395 5,657 6,550 1,673 300 --
Interest expense................... 29,809 28,972 29,145 30,061 24,987 6,928 9,021
Earnings before extraordinary
charges.......................... 3,214 10,105 8,685 50,244 81,559 17,982 25,261
Extraordinary charges, net of
income taxes..................... -- -- -- 5,424 -- -- --
-------- -------- ---------- ---------- ---------- -------- ----------
Net income......................... $ 3,214 $ 10,105 $ 8,685 $ 44,820 $ 81,559 $ 17,982 $ 25,261
========= ========= ========== ========== ========== ========= ==========
Per common share
Earnings (loss) before
extraordinary charges(d)....... $ (.19) $ .44 $ .28 $ 1.81 $ 2.62 $ .59 $ .79
Extraordinary charges............ -- -- -- (.21) -- -- --
-------- -------- ---------- ---------- ---------- -------- ----------
Net income (loss)(d)............... $ (.19) $ .44 $ .28 $ 1.60 $ 2.62 $ .59 $ .79
========= ========= ========== ========== ========== ========= ==========
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31, AT MARCH 31,
---------------------------------------------------------- ---------------------
1989 1990 1991 1992 1993 1993 1994
-------- -------- ---------- ---------- ---------- -------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Accounts receivable and
inventories...................... $333,578 $322,916 $ 506,496 $ 539,476 $ 798,037 $640,381 $ 948,887
Total assets....................... 483,528 478,045 745,379 780,893 1,191,304 957,550 1,369,090
Long-term debt, including current
portion.......................... 109,017 104,937 218,787 101,146 159,024 150,881 178,785
Subordinated debentures, including
current portion.................. 108,326 107,300 105,965 125,000 125,000 125,000 125,000
Total long-term debt and
subordinated debentures.......... 217,343 212,237 324,752 226,146 284,024 275,881 303,785
Shareholders' equity............... 149,977 151,172 225,836 351,220 457,015 375,544 484,799
</TABLE>
- ---------------
(a) Includes results of Spoerle Electronic, which was accounted for under the
equity method prior to January 1993 when Arrow increased its holdings to a
majority interest.
(b) Reflects the acquisition in September 1991 of the North American
electronics distribution businesses of Lex Service PLC.
(c) Includes special charges of $9.8 million reflecting expenses associated
with the integration of the business acquired from Lex Service PLC.
(d) After preferred stock dividends of $5.4 million in 1989, $4.9 million in
1990, $4.6 million in 1991, $3.9 million in 1992, and $.9 million in 1993.
13
<PAGE> 19
COMPANY SUMMARY FINANCIAL INFORMATION
The summary financial information of the Company set forth below has been
derived from and should be read in conjunction with the audited financial
statements and other financial information contained in the Company's 1993 10-K
and with the unaudited financial statements contained in the Company's 1994
Third Quarter 10-Q, which are incorporated by reference in this Proxy
Statement/Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEARS ENDED JUNE 30, MARCH 31,
--------------------------------------------------- -------------------
1989(A) 1990 1991 1992 1993 1993 1994
------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Sales...................................... $98,625 $166,490 $170,392 $231,556 $307,348 $220,278 $306,361
Operating income........................... 1,457 2,927 4,116 6,921 11,386 7,660 11,684
Interest expense........................... 1,450 2,840 2,425 2,136 1,785 1,227 2,145
Other income (expense)..................... (6) 23 1 (35) 67 -- --
------- -------- -------- -------- -------- -------- --------
Income before income taxes, extraordinary
credit, and cumulative effect of change
in accounting principle.................. 1 110 1,692 4,750 9,668 6,433 9,539
Income (loss) before extraordinary credit
and cumulative effect of change in
accounting principles.................... (82) (194) 933 2,770 5,770 3,829 5,685
Extraordinary credit(b).................... 83 132 101 -- -- -- --
Cumulative effect of change in accounting
principle(d)............................. -- -- -- -- 400 400 --
------- -------- -------- -------- -------- -------- --------
Net income (loss).......................... $ 1 $ (62) $ 1,034 $ 2,770 $ 6,170 $ 4,229 $ 5,685
======== ========= ========= ========= ========= ========= =========
Per common share:
Income (loss) per share before
extraordinary credit and cumulative
effect of change in accounting
principle................................ $ (.02) $ (.04) $ .20 $ .57 $ .92 $ .62 $ .88
Extraordinary credit(b).................... .02 .03 .02 -- -- -- --
Cumulative effect of change in accounting
principle(d)............................. -- -- -- -- .07 .07 --
------- -------- -------- -------- -------- -------- --------
Net income (loss) per share(c)............. $ -- $ (.01) $ .22 $ .57 $ .99 $ .69 $ .88
======== ========= ========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
AT JUNE 30, AT MARCH 31,
--------------------------------------------------- -------------------
1989 1990 1991 1992 1993 1993 1994
------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Accounts receivable and inventories........ $37,320 $ 36,239 $ 40,391 $ 55,125 $ 88,421 $ 83,868 $107,734
Total assets............................... 51,407 49,397 53,157 67,930 100,413 92,738 123,212
Long-term debt and note payable to a
bank(e).................................. 18,365 18,786 20,215 16,481 25,697 21,578 36,335
Shareholders' equity....................... 15,157 15,120 16,154 27,148 34,871 32,520 40,710
</TABLE>
- ---------------
(a) Effective March 1, 1989, the Company acquired Gates Distributing, Inc.
(b) The extraordinary credit represents utilization of financial statement net
operating loss carryforwards.
(c) Net income per share for the fiscal year ended June 30, 1989 was less than
$.01.
(d) Effective July 1, 1992, the Company adopted FASB Statement 109, "Accounting
for Income Taxes."
(e) Note payable to a bank was classified as a current liability at June 30,
1989 and 1990 in the amounts of $17,956,000 and $18,714,000, respectively.
14
<PAGE> 20
PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma combined financial statements give effect
to the Merger of the Company and Arrow pursuant to the Merger Agreement. These
pro forma combined financial statements have been prepared utilizing the
historical financial statements of Arrow and the Company and should be read in
conjunction with such historical financial statements and accompanying notes.
Arrow's fiscal year ends December 31 and the Company's fiscal year ends June 30.
In the pro forma combined statements of operations, the Company's financial data
for all periods presented is consistent with the fiscal year end of Arrow and,
therefore, all of the information concerning the Company included in the pro
forma combined financial statements is unaudited. The Arrow balance sheet at
March 31,1994 and related statement of operations for the three months ended
March 31, 1994 and 1993 included in the pro forma combined financial statements
are unaudited.
The pro forma combined financial statements do not reflect any sales
attrition which may result from the Merger, the substantial cost savings Arrow
expects to achieve from the Merger, and integration expenses to be incurred in
connection with the Merger which relate to facilities and personnel and,
therefore, will be charged to current operations. Accordingly, the pro forma
combined financial statements do not purport to be indicative of the results
which actually would have been obtained if the Merger had been effected on the
date or dates indicated or the results which may be obtained in the future.
The pro forma combined financial statements are based on the
pooling-of-interests method of accounting. The pro forma combined balance sheet
assumes a March 31, 1994 merger date. The pro forma combined statement of
operations assumes that the Merger had occurred on January 1 for each of the
years ended December 31, 1993, 1992 and 1991, and for the three months ended
March 31, 1994 and 1993.
15
<PAGE> 21
ARROW ELECTRONICS, INC.
WITH
GATES/FA DISTRIBUTING, INC.
PRO FORMA COMBINED BALANCE SHEET
MARCH 31, 1994
ASSETS
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
----------------------- COMBINED
ARROW COMPANY COMPANIES
---------- -------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Current assets:
Cash...................................................................... $ 54,748 $ 2 $ 54,750
Accounts receivable, net.................................................. 478,635 53,850 532,485
Inventories............................................................... 470,252 53,884 524,136
Prepaid expenses and other current assets................................. 14,603 1,070 15,673
---------- -------- ----------
Total current assets................................................ 1,018,238 108,806 1,127,044
Property and Equipment:
Land...................................................................... 5,700 -- 5,700
Buildings and improvements................................................ 35,251 1,862 37,113
Machinery and equipment................................................... 59,261 4,566 63,827
---------- -------- ----------
100,212 6,428 106,640
Less accumulated depreciation............................................. 41,216 2,512 43,728
---------- -------- ----------
58,996 3,916 62,912
Investment in net assets of acquired businesses............................. 19,180 -- 19,180
Costs in excess of net assets acquired, less amortization................... 229,622 10,059 239,681
Other assets................................................................ 43,054 431 43,485
---------- -------- ----------
$1,369,090 $123,212 $1,492,302
========== ========= ==========
</TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<S> <C> <C> <C>
Current liabilities:
Accounts payable.......................................................... $ 253,986 $ 42,117 $ 296,103
Accrued expenses.......................................................... 133,772 4,004 137,776
Accrued interest.......................................................... 6,820 -- 6,820
Short-term borrowings, including current
maturities of long-term debt............................................ 62,881 110 62,991
---------- -------- ----------
Total current liabilities........................................... 457,459 46,231 503,690
---------- -------- ----------
Long-term debt.............................................................. 172,272 36,225 208,497
Deferred income taxes....................................................... 14,011 46 14,057
Other long-term liabilities................................................. 35,099 -- 35,099
Minority interest........................................................... 80,450 -- 80,450
Subordinated debentures..................................................... 125,000 -- 125,000
Shareholders' equity:
Preferred stock........................................................... -- -- --
Common stock.............................................................. 31,477 63 31,540
Additional paid-in capital................................................ 315,145 26,195 341,340
Retained earnings......................................................... 149,950 14,452 164,402
Foreign currency translation adjustment................................... (8,623) -- (8,623)
---------- -------- ----------
487,949 40,710 528,659
Less: Treasury shares, at cost............................................ 12 -- 12
Unamortized employee stock awards................................... 3,138 -- 3,138
---------- -------- ----------
3,150 -- 3,150
---------- -------- ----------
Total shareholders' equity.......................................... 484,799 40,710 525,509
---------- -------- ----------
$1,369,090 $123,212 $1,492,302
========== ========= ==========
</TABLE>
16
<PAGE> 22
ARROW ELECTRONICS, INC.
WITH
GATES/FA DISTRIBUTING, INC.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1994
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
--------------------- COMBINED
ARROW COMPANY COMPANIES
--------- -------- ---------
(IN THOUSANDS EXCEPT PER SHARE
DATA)
<S> <C> <C> <C>
Sales................................................... $ 820,783 $113,229 $934,012
--------- -------- ---------
Costs and expenses:
Cost of products sold................................. 660,420 103,495 763,915
Selling, general and administrative expenses.......... 96,482 4,825 101,307
Depreciation and amortization......................... 5,466 291 5,757
--------- -------- ---------
762,368 108,611 870,979
--------- -------- ---------
Operating income........................................ 58,415 4,618 63,033
Equity in earnings of affiliated companies.............. -- -- --
Interest expense........................................ 9,021 777 9,798
--------- -------- ---------
Earnings before income taxes and minority interest...... 49,394 3,841 53,235
Provision for income taxes.............................. 19,890 1,549 21,439
--------- -------- ---------
Earnings before minority interest....................... 29,504 2,292 31,796
Minority interest....................................... 4,243 -- 4,243
--------- -------- ---------
Net income.............................................. $ 25,261 $ 2,292 $ 27,553
========= ========= =========
Per common share:
Primary............................................... $ .79 $ .36 $ .77
========= ========= =========
Fully diluted......................................... $ .74 $ .36 $ .71
========= ========= =========
Average number of common shares and common share
equivalents outstanding:
Primary............................................... 31,898 6,442 35,887
========= ========= =========
Fully diluted......................................... 35,672 6,444 39,661
========= ========= =========
</TABLE>
17
<PAGE> 23
ARROW ELECTRONICS, INC.
WITH
GATES/FA DISTRIBUTING, INC.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1993
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
-------------------- COMBINED
ARROW COMPANY COMPANIES
-------- ------- ---------
(IN THOUSANDS EXCEPT PER SHARE
DATA)
<S> <C> <C> <C>
Sales................................................... $551,391 $81,879 $633,270
-------- ------- ---------
Costs and expenses:
Cost of products sold................................. 431,300 74,344 505,644
Selling, general and administrative expenses.......... 74,171 4,054 78,225
Depreciation and amortization......................... 3,328 250 3,578
-------- ------- ---------
508,799 78,648 587,447
-------- ------- ---------
Operating income........................................ 42,592 3,231 45,823
Equity in earnings of affiliated companies.............. 300 -- 300
Interest expense........................................ 6,928 466 7,394
-------- ------- ---------
Earnings before income taxes and minority interest...... 35,964 2,765 38,729
Provision for income taxes.............................. 14,036 1,111 15,147
-------- ------- ---------
Earnings before minority interest....................... 21,928 1,654 23,582
Minority interest....................................... 3,946 -- 3,946
-------- ------- ---------
Net income.............................................. $ 17,982 $1,654 $ 19,636
========= ========= =========
Net income used in per common share calculation
(reflecting deduction of preferred stock dividends)... $ 17,661 $1,654 $ 19,315
========= ========= =========
Per common share:
Primary............................................... $ .59 $ .26 $ .57
========= ========= =========
Fully diluted......................................... $ .55 $ .26 $ .54
========= ========= =========
Average number of common shares and common share
equivalents outstanding:
Primary............................................... 29,995 6,334 33,984
========= ========= =========
Fully diluted......................................... 34,778 6,345 38,767
========= ========= =========
</TABLE>
18
<PAGE> 24
ARROW ELECTRONICS, INC.
WITH
GATES/FA DISTRIBUTING, INC.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
----------------------- COMBINED
ARROW COMPANY COMPANIES
---------- -------- ----------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Sales................................................ $2,535,584 $362,079 $2,897,663
---------- -------- ----------
Costs and expenses:
Cost of products sold.............................. 2,022,253 329,197 2,351,450
Selling, general and administrative expenses....... 314,323 17,553 331,876
Depreciation and amortization...................... 17,466 841 18,307
---------- -------- ----------
2,354,042 347,591 2,701,633
---------- -------- ----------
Operating income..................................... 181,542 14,488 196,030
Equity in earnings of affiliated companies........... 1,673 -- 1,673
Interest expense..................................... 24,987 2,792 27,779
---------- -------- ----------
Earnings before income taxes and minority interest... 158,228 11,696 169,924
Provision for income taxes........................... 64,448 4,709 69,157
---------- -------- ----------
Earnings before minority interest.................... 93,780 6,987 100,767
Minority interest.................................... 12,221 -- 12,221
---------- -------- ----------
Net income........................................... $ 81,559 $ 6,987 $ 88,546
========== ========= ==========
Net income used in per common share calculation
(reflecting deduction of preferred stock
dividends)......................................... $ 80,679 $ 6,987 $ 87,666
========== ========= ==========
Per common share:
Primary............................................ $ 2.62 $ 1.10 $ 2.52
========== ========= ==========
Fully diluted...................................... $ 2.43 $ 1.09 $ 2.37
========== ========= ==========
Average number of common shares and common share
equivalents outstanding:
Primary......................................... 30,766 6,375 34,755
========== ========= ==========
Fully diluted................................... 35,305 6,390 39,294
========== ========= ==========
</TABLE>
19
<PAGE> 25
ARROW ELECTRONICS, INC.
WITH
GATES/FA DISTRIBUTING, INC.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1992
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
----------------------- COMBINED
ARROW COMPANY COMPANIES
---------- -------- ----------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Sales................................................ $1,621,535 $263,136 $1,884,671
---------- -------- ----------
Costs and expenses:
Cost of products sold.............................. 1,279,646 238,075 1,517,721
Selling, general and administrative expenses....... 225,835 15,944 241,779
Depreciation and amortization...................... 12,273 826 13,099
---------- -------- ----------
1,517,754 254,845 1,772,599
---------- -------- ----------
Operating income..................................... 103,781 8,291 112,072
Equity in earnings of affiliated companies........... 6,550 -- 6,550
Interest expense..................................... 30,061 1,812 31,873
---------- -------- ----------
Earnings before income taxes, extraordinary charges
and cumulative effect of change in accounting
principle.......................................... 80,270 6,479 86,749
Provision for income taxes........................... 30,026 2,671 32,697
---------- -------- ----------
Earnings before extraordinary charges and cumulative
effect of change in accounting principle........... 50,244 3,808 54,052
Extraordinary charges................................ 5,424 -- 5,424
Cumulative effect of change in accounting
principle.......................................... -- 400 400
---------- -------- ----------
Net income........................................... $ 44,820 $ 4,208 $ 49,028
========== ========= ==========
Net income used in per common share calculation
(reflecting deduction of preferred stock
dividends)......................................... $ 40,917 $ 4,208 $ 45,125
========== ========= ==========
Per common share:
Primary:
Earnings before extraordinary charges and
cumulative effect of change in accounting
principle..................................... $ 1.81 $ .68 $ 1.70
Extraordinary charges........................... (.21) -- (.18)
Cumulative effect of change in accounting
principle..................................... -- .07 .01
---------- -------- ----------
Net income...................................... $ 1.60 $ .75 $ 1.53
========== ========= ==========
Fully diluted:
Earnings before extraordinary charges and
cumulative effect of change in accounting
principle..................................... $ 1.73 $ .68 $ 1.64
Extraordinary charges........................... (.19) -- (.16)
Cumulative effect of change in accounting
principle..................................... -- .07 .01
---------- -------- ----------
Net income...................................... $ 1.54 $ .75 $ 1.49
========== ========= ==========
Average number of common shares and common share
equivalents outstanding:
Primary............................................ 25,547 5,572 29,536
========== ========= ==========
Fully diluted...................................... 29,378 5,578 33,367
========== ========= ==========
</TABLE>
20
<PAGE> 26
ARROW ELECTRONICS, INC.
WITH
GATES/FA DISTRIBUTING, INC.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1991
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
----------------------- COMBINED
ARROW COMPANY COMPANIES
---------- -------- ----------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Sales................................................ $1,043,654 $194,875 $1,238,529
---------- -------- ----------
Costs and expenses:
Cost of products sold.............................. 825,709 175,000 1,000,709
Selling, general and administrative expenses....... 174,094 13,623 187,717
Depreciation and amortization...................... 9,452 801 10,253
---------- -------- ----------
1,009,255 189,424 1,198,679
---------- -------- ----------
Operating income..................................... 34,399 5,451 39,850
Equity in earnings of affiliated companies........... 5,657 -- 5,657
Interest expense..................................... 29,145 2,286 31,431
---------- -------- ----------
Earnings before income taxes and extraordinary
credit............................................. 10,911 3,165 14,076
Provision for income taxes........................... 2,226 1,367 3,593
---------- -------- ----------
Earnings before extraordinary credit................. 8,685 1,798 10,483
Extraordinary credit................................. -- 101 101
---------- -------- ----------
Net income........................................... $ 8,685 $ 1,899 $ 10,584
========== ========= ==========
Net income used in per common share calculation
(reflecting deduction of preferred stock
dividends)......................................... $ 4,089 $ 1,899 $ 5,988
========== ========= ==========
Per common share:
Primary:
Earnings before extraordinary credit............ $ .28 $ .39 $ .31
Extraordinary credit............................ -- .02 .01
---------- -------- ----------
Net income...................................... $ .28 $ .41 $ .32
========== ========= ==========
Fully diluted:
Earnings before extraordinary credit............ $ .28 $ .38 $ .31
Extraordinary credit............................ -- .02 .01
---------- -------- ----------
Net income...................................... $ .28 $ .40 $ .32
========== ========= ==========
Average number of common shares and common share
equivalents outstanding:
Primary............................................ 14,484 4,667 18,473
========== ========= ==========
Fully diluted...................................... 14,484 4,690 18,473
========== ========= ==========
</TABLE>
21
<PAGE> 27
COMPARATIVE PER SHARE DATA
Set forth below are net income, cash dividends declared and book value per
common share data of Arrow and the Company on an historical basis, and on a pro
forma per share basis for Arrow, and an equivalent pro forma per share basis for
the Company. The Arrow pro forma combined data was derived by combining
historical financial information of Arrow and the Company after giving effect to
the Merger under the pooling-of-interests method of accounting. The per share
equivalent pro forma data for the Company was calculated by multiplying the
Arrow pro forma combined data by the conversion ratio of the Company Common
Stock pursuant to the Merger, assuming an Arrow Stock Price of $35 5/8 (the
closing price of one share of Arrow Common Stock on the NYSE on the last trading
day prior to the date of this Proxy Statement/Prospectus). Arrow's fiscal year
ends December 31 and the Company's fiscal year ends June 30. In the Company
Historical Per Common Share data set forth below, the Company's financial data
for all periods presented is consistent with the fiscal year end of Arrow and,
therefore, all of the information concerning the Company included in the Company
Historical Per Common Share data set forth below is unaudited.
The information set forth below should be read in conjunction with the
respective audited and unaudited financial statements of Arrow and the Company
incorporated by reference in this Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
---------------------------- ------------------
1991 1992 1993 1993 1994
------ ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
ARROW HISTORICAL PER COMMON SHARE:
Primary earnings before
extraordinary charges..................... $ .28 $ 1.81 $ 2.62 $ .59 $ .79
Cash dividends declared..................... -- -- -- -- --
Book value (end of period).................. $ 8.50 $ 11.45 $ 14.60 $ 12.23 $ 15.40
ARROW PRO FORMA (UNAUDITED) COMBINED PER PRO
FORMA ARROW COMMON SHARE:
Earnings.................................... $ .32 $ 1.53 $ 2.52 $ .57 $ .77
Cash dividends declared..................... -- -- -- -- --
Book value (end of period).................. $ 7.81 $ 10.98 $ 14.06 $ 11.75 $ 14.82
</TABLE>
<TABLE>
<CAPTION>
TWELVE MONTHS THREE MONTHS ENDED
ENDED DECEMBER 31, MARCH 31,
---------------------------- ------------------
1991 1992 1993 1993 1994
------ ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
COMPANY HISTORICAL PER COMMON SHARE:
Primary earnings before extraordinary credit
and cumulative effect of change in
accounting principle...................... $ .39 $ .68 $ 1.10 $ .26 $ .36
Cash dividends declared..................... -- -- -- -- --
Book value (end of period).................. $ 3.74 $ 4.84 $ 6.08 $ 5.19 $ 6.45
EQUIVALENT COMPANY PRO FORMA PER SHARE DATA:
Earnings.................................... $ .20 $ .96 $ 1.59 $ .36 $ .49
Cash dividends declared..................... -- -- -- -- --
Book value (end of period).................. $ 4.92 $ 6.92 $ 8.86 $ 7.40 $ 9.34
</TABLE>
22
<PAGE> 28
COMPARATIVE MARKET PRICE DATA
The Arrow Common Stock is traded on the NYSE and the Company Common Stock
is quoted on the NASDAQ National Market System ("NASDAQ"). The following table
sets forth, for the calendar periods indicated, the high and low sales prices of
Arrow Common Stock as reported on the NYSE Composite Tape and the high and low
sales prices of Company Common Stock as reported on NASDAQ.
<TABLE>
<CAPTION>
ARROW COMPANY
COMMON STOCK COMMON STOCK
------------- -------------
HIGH LOW HIGH LOW
---- ---- ---- ----
<S> <C> <C> <C> <C>
1992:
First Quarter......................................... 18 1/2 14 3/8 11 1/4 6
Second Quarter........................................ 19 1/2 15 1/8 10 3/4 6 1/8
Third Quarter......................................... 22 3/4 18 1/2 8 1/2 6 1/2
Fourth Quarter........................................ 30 1/2 22 1/8 10 1/8 7
1993:
First Quarter......................................... 34 3/8 26 1/2 13 1/2 8 3/4
Second Quarter........................................ 36 1/4 29 3/4 15 3/4 11 5/8
Third Quarter......................................... 43 1/8 34 5/8 21 1/2 13
Fourth Quarter........................................ 42 1/4 33 5/8 22 3/8 15 7/8
1994:
First Quarter......................................... 43 5/8 36 1/8 23 18 5/8
Second Quarter........................................ 41 1/8 33 5/8 21 14
Third Quarter (through July 19)....................... 37 1/8 35 1/2 21 5/8 20 3/4
</TABLE>
On February 7, 1994, the last full trading day prior to public announcement
by the Company that it was considering strategic alternatives which could result
in the sale of the Company, the last sale price of Company Common Stock, as
reported by NASDAQ, was $19 3/4. On June 24, 1994, the last full trading day
prior to the public announcement of the execution and delivery of the Merger
Agreement, the last reported sale price of Arrow Common Stock, as reported on
the NYSE Composite Tape, was $34 7/8 and the last sale price of Company Common
Stock, as reported by NASDAQ, was $18.00. On July 19, 1994, the most recent
practicable date prior to the printing of this Proxy Statement/Prospectus, the
last reported sale price of Arrow Common Stock was $35 5/8, and the last sale
price of Company Common Stock was $21 1/2.
Each issued and outstanding share of Company 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) will be converted pursuant
to the Merger into the right to receive shares of Arrow Common Stock having a
value, based on the Arrow Stock Price, equal to $22.50.
SPECIAL MEETING
GENERAL
This Proxy Statement/Prospectus is provided to the stockholders of the
Company in connection with the Special Meeting to be held on the date, at the
time, in the location, and to consider the matters, set forth below under
"SPECIAL MEETING". The Company Board is soliciting proxies hereby for use at the
Special Meeting and forms of proxy are being provided with this Proxy
Statement/Prospectus. Information about executing or revoking a proxy is
provided below under "Proxies."
This Proxy Statement/Prospectus and the accompanying forms of proxy are
first being mailed to the stockholders of the Company on or about July 21, 1994.
23
<PAGE> 29
PURPOSE OF MEETING
At the Special Meeting, the stockholders of the Company will be asked to
consider and vote upon (i) a proposal to approve and adopt the Merger Agreement
and the terms of the Merger contemplated thereby; and (ii) such other business
incidental to the conduct of the Special Meeting as may properly be brought
before the Special Meeting. A copy of the Merger Agreement is attached to this
Proxy Statement/Prospectus as Exhibit A.
The Company Board unanimously approved the Merger Agreement and the terms
of the Merger and recommends that the Company stockholders vote FOR approval and
adoption of the Merger Agreement and the terms of the Merger.
DATE, PLACE AND TIME; RECORD DATE
The Special Meeting is scheduled to be held at 10:00 a.m., local time, on
August 29, 1994 at the Greenville -- Spartanburg Airport Marriott, 1 Parkway
East, Greenville, South Carolina 29615, and at any adjournment or postponement
thereof.
The Company Board has fixed the close of business on July 18, 1994 as the
Record Date for the determination of holders of Company Common Stock entitled to
notice of, and to vote at, the Special Meeting. As of the Record Date, there
were 6,316,151 shares of Company Common Stock outstanding and entitled to vote
(held by approximately 297 holders of record).
VOTING RIGHTS
The presence, in person or by properly executed proxy, of the holders of a
majority of the outstanding shares of Company Common Stock entitled to vote is
necessary to constitute a quorum at the Special Meeting. Under the Company's
Amended and Restated Certificate of Incorporation, as amended (the "Company
Certificate of Incorporation") and the Delaware General Corporation Law (the
"DGCL"), the affirmative vote of the holders of a majority of the outstanding
shares of Company Common Stock (with each share entitled to one vote) is
required to adopt and approve the Merger Agreement and the terms of the Merger.
Abstentions will be counted, but "broker non-votes" will not be so counted, as
shares present for purposes of determining a quorum. Both an "abstention" and a
"broker non-vote" will have the same effect as a vote against the proposal to
approve and adopt the Merger Agreement and the terms of the Merger contemplated
thereby.
As of June 24, 1994, the Company's directors (excluding Gates), executive
officers and their affiliates as a group held shares representing less than 1%
of the votes entitled to be cast by the Company Common Stock. Each of the
directors and executive officers of the Company has advised the Company that he
intends to vote or direct the vote of all the outstanding shares of Company
Common Stock over which he has voting control in favor of approval and adoption
of the Merger Agreement.
Each of Cheyenne and Gates, which collectively are the beneficial owners of
approximately 29% of the outstanding shares of Company Common Stock, has granted
to Arrow an irrevocable proxy with respect to the vote to approve and adopt the
Merger Agreement. Arrow intends to vote such proxies in favor of approval and
adoption of the Merger Agreement.
Upon the occurrence of certain events, Arrow has the right to purchase from
the Company pursuant to the Stock Option Agreement 1,257,063 shares of Company
Common Stock. See "THE STOCK OPTION AGREEMENT."
PROXIES
Shares of Company Common Stock represented by properly executed proxies
received by the Company prior to or at the Special Meeting, and not revoked,
will be voted at the Special Meeting in accordance with the instructions
specified in the proxies. If no instructions are specified in such
24
<PAGE> 30
proxies, shares will be voted FOR approval and adoption of the Merger Agreement
and the terms of the Merger.
If any other matters are properly presented at the Special Meeting for
consideration, including, among other things, consideration of a motion to
adjourn the Special Meeting to another time and/or place (including, without
limitation, for the purpose of soliciting additional proxies or because the
conditions to the Merger have not been satisfied or waived), the persons named
in the enclosed form of proxy and acting thereunder will have discretion to vote
on such matters in accordance with their best judgment. In this regard, an
adjournment will require the affirmative vote of a majority of the shares
present at the session of the Special Meeting to be adjourned. A proxy granting
authority to vote upon such business incidental to the conduct of the Special
Meeting as may properly come before the Special Meeting will constitute
authority to vote in favor of one or more adjournments of the Special Meeting.
Any Company stockholder who executes and returns a proxy has the power to
revoke such proxy at any time before it is voted by filing with the Secretary of
the Company written notice of such revocation or a duly executed proxy bearing a
later date, or by attending and voting in person at the Special Meeting.
Attendance at the Special Meeting will not in and of itself constitute
revocation of a proxy. Any written notice of revocation or subsequent proxy
should be sent so as to be delivered to Gates/FA Distributing, Inc., 39 Pelham
Ridge Drive, Greenville, South Carolina 29615, Attention: Secretary, or hand
delivered to the Secretary of the Company, at or before the taking of the vote
at the Special Meeting.
COMPANY STOCKHOLDERS SHOULD NOT SEND ANY STOCK
CERTIFICATES WITH THEIR PROXY CARDS.
THE MERGER
BACKGROUND; RECOMMENDATIONS OF THE COMPANY BOARD OF DIRECTORS AND
REASONS FOR THE MERGER
Background. In mid-December 1993, Philip D. Ellett, the Company's
President and Chief Executive Officer, received a telephone call from the Chief
Executive Officer of another company (the "Original Interested Party") in the
Company's industry regarding the level of interest the Company had in
considering a possible business combination. On December 22, 1993, Mr. Ellett
convened a meeting of the Company's Board of Directors to discuss the expression
of interest. After discussion of the expression of interest, the Board concluded
that in order to properly inform itself as to the expression of interest and
other possibilities that might exist for the Company, it would be advisable to
retain a financial advisor and gave Mr. Ellett authority to retain The Robinson-
Humphrey Company, Inc. ("Robinson-Humphrey").
On December 30, 1993, the Board of Directors met to discuss the expression
of interest and to hear a report from Robinson-Humphrey with respect to the
expression of interest, industry trends and valuations in general of companies
in the Company's industry. At this meeting, the Board of Directors appointed a
committee comprised of Mr. Ellett, Charles A. Luther and Eli Oxenhorn (the
"Special Committee") to discuss further with the Original Interested Party a
possible business combination and consider other alternatives that might be
available to the Company with other companies.
On February 3, 1994, at a regularly scheduled Board of Directors meeting,
Mr. Ellett and a representative of Robinson-Humphrey discussed the preliminary
and informal discussions that had taken place in January with the Original
Interested Party. A representative of Robinson-Humphrey also gave a report
concerning other companies that Robinson-Humphrey believed might be interested
in engaging in a business combination transaction with the Company. At this
meeting, the Board of Directors authorized the Special Committee and
Robinson-Humphrey to contact a limited
25
<PAGE> 31
group of companies that might be candidates for a possible business combination
transaction with the Company.
On February 8, 1994, the Company issued a press release which stated that
it was in the process of considering a variety of strategic alternatives, the
purpose of which was to enhance the Company's business. The press release noted
that the Company had retained Robinson-Humphrey as its financial advisor to
assist it in the analysis of such alternatives. The press release also noted
that although the Board of Directors had not made a decision to sell the
Company, one of the alternatives under consideration was a possible sale of the
Company.
During February and into mid-March 1994, Robinson-Humphrey contacted 11
companies and Mr. Ellett and a representative of Robinson-Humphrey had informal
and preliminary discussions with five companies, including Arrow. The meeting
with Arrow took place on February 22, 1994 at Arrow's headquarters in New York
and involved Mr. Ellett and a representative of Robinson-Humphrey and Steven P.
Kaufman, the Chairman and Chief Executive Officer of Arrow, and Robert E.
Klatell, Arrow's Senior Vice President and Chief Financial Officer. During this
period, representatives of Robinson-Humphrey learned that the Original
Interested Party might not be interested any longer in acquiring the Company in
its entirety, but might be interested in acquiring a minority interest in the
Company.
On March 5, 1994, Stephen P. Kaufman and Paul J. Reilly, the Controller of
Arrow, met at the Company's headquarters in Greenville with Mr. Ellett and
several officers of the Company. The purpose of the meeting was to provide the
Arrow executives with an overview of the Company from operational and financial
perspectives.
On March 14, 1994, the Special Committee met to discuss the situation
concerning interest by possible acquirers of the Company. A representative of
Robinson-Humphrey reported on the status of the various contacts that had been
made and the results of discussions that had taken place involving
Robinson-Humphrey and Mr. Ellett and various parties.
During March and into mid-April 1994, the Company and Robinson-Humphrey had
informal discussions with Arrow and certain other interested parties. On March
22 and 23, 1994, the Original Interested Party conducted due diligence at the
Company's headquarters. On April 11, 1994, the Original Interested Party orally
communicated to the Company that it was not interested in continuing a dialogue
regarding a possible business combination.
During the week of April 11, 1994, discussions between Robinson-Humphrey
and Mr. Ellett and representatives of Arrow became more focused and the parties
discussed the preparation of documents and the conduct of due diligence. On
April 18, 1994, the Company agreed with Arrow to limit, until May 18, 1994, its
discussions with interested parties other than up to three parties with whom the
Company had already had discussions concerning a possible business combination
transaction. During the week of April 18, 1994, Winthrop, Stimson, Putnam &
Roberts ("Winthrop Stimson"), legal counsel for Arrow, produced draft documents
relating to a proposed transaction. During the week of April 25, 1994,
representatives of Winthrop Stimson conducted legal due diligence at the
Company's headquarters.
On May 3, 1994, the Special Committee met with Stephen P. Kaufman and
Robert E. Klatell in New York to discuss a possible business combination between
Arrow and the Company. Messrs. Kaufman and Klatell stated that Arrow might be
interested in acquiring the Company in a stock transaction and also noted that
if such a transaction were to occur that various transaction protection devices
would be required by Arrow. On May 4, 1994, representatives of Alston & Bird,
legal counsel for the Company, met at Winthrop Stimson's offices in New York to
discuss drafts of documents that had been previously produced.
On May 24, 1994, the Company held a regularly scheduled Board of Directors
meeting at which the situation with Arrow was discussed. Mr. Ellett also
reviewed the discussions that were taking place concerning the possible
termination of the Company's relationship with ScanSource, Inc.
26
<PAGE> 32
("ScanSource"), an entity in which the Company has an investment and to which it
provides certain warehousing and other services, and the possible modification
of the non-competition provisions with ScanSource. Mr. Ellett also reviewed the
discussions that had taken place with Arrow regarding ScanSource. See "RECENT
DEVELOPMENTS."
On June 15, 1994, representatives from Alston & Bird and Morrison, Cohen,
Singer & Weinstein ("Morrison Cohen"), counsel for Cheyenne and Gates, met at
Winthrop Stimson's offices in New York to discuss documents that had been
produced in connection with a proposed merger involving the Company and Arrow.
On June 16, 1994, the Special Committee met in New York with Robert
Klatell. Also present were representatives of Winthrop Stimson, Alston & Bird
and Morrison Cohen. The purpose of the meeting was to discuss business issues,
including transaction protection devices, contained in the documents relating to
the proposed transaction.
On June 22, 1994, the Special Committee met by telephone with Robert
Klatell to discuss the economic terms of the proposed transaction. The parties
noted the significant decline in the Company's stock price, along with the stock
prices of other companies in the computer products distribution industry, during
the last several trading days. During this meeting, the parties agreed, subject
to approval of their respective Boards of Directors and final negotiation of the
terms of the transaction documents, on the financial terms of the transaction
protection devices and a purchase price of $22.50 per share.
On June 23, 1994, in response to unusual trading activity in the Company
Common Stock, the Company issued a press release stating that it was engaged in
discussions regarding a possible sale of the Company to a third party.
The Company's Board of Directors met on the morning of June 24, 1994 and
approved the proposed Merger in principle and delegated to the Special Committee
authority to discuss with Mr. Klatell any possible improvements that could be
made to the agreement. During the meeting, the Special Committee reported to the
Board that the Original Interested Party had expressed interest during the last
few business days in acquiring the Company, but that the proposed purchase
prices ranged from $18.25 to $19.50 per share in cash. At the meeting, the Board
of Directors received a written fairness opinion dated June 24, 1994 from
Robinson-Humphrey with respect to the Merger. The June 24, 1994 opinion was
substantially identical to the opinion attached as Exhibit B to this Proxy
Statement/Prospectus and which is incorporated by reference herein.
Following the meeting, the Special Committee held a telephone meeting with
Robert Klatell at which the price of $22.50 was accepted. The Merger Agreement
was executed late in the afternoon on June 24, 1994 and a public announcement of
the execution and delivery of the Merger Agreement was made prior to opening of
business on June 27, 1994.
Recommendation of the Company Board of Directors and Reasons for the
Merger. On June 24, 1994, the Company Board approved unanimously the Merger
Agreement and determined unanimously that the Merger is advisable and fair and
in the best interests of the Company and the Company's stockholders.
Accordingly, the Company Board has recommended that the holders of Company
Common Stock vote FOR approval of the Merger and the Merger Agreement. In
reaching its decision to approve the Merger Agreement, the Company Board
considered the following material factors:
1. The financial terms of the Merger. In this regard, the Company
Board was of the view that the price offered by Arrow represented a premium
over the then current stock price and the Company's stock price unaffected
by acquisition speculation;
2. The Company Board's knowledge of the business, operations,
properties, assets, financial condition and operating results of the
Company;
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3. The Company Board's judgments as to the Company's future prospects
which the Company Board thought would be improved by the combination with
Arrow;
4. Information concerning the business, financial condition and
prospects of Arrow, based on public information concerning Arrow and based
on the Company Board's discussions with and information provided by members
of the Special Committee and Robinson-Humphrey. In this regard, and because
Company stockholders will receive Arrow Common Stock in the Merger, the
Company Board was of the view that Company stockholders will have the
opportunity to participate in the growth and the appreciation of the
combined companies yet retain the liquidity of holding public company
securities;
5. The non-financial terms of the Merger, including the terms and
conditions of the Merger Agreement and the Stock Option Agreement, and the
treatment of the Merger as a pooling-of-interests for accounting purposes
and as a tax-free reorganization for federal income tax purposes;
6. The legal advice provided by the Company's legal counsel concerning
the terms of the Merger Agreement and the Stock Option Agreement; and
7. The opinion rendered by Robinson-Humphrey as to the fairness, from
a financial point of view, of the consideration to be received by holders
of Company Common Stock.
In view of the variety of factors considered in connection with its
evaluation of the Merger, the Company Board did not find it practicable to and
did not quantify or otherwise assign relative weights to the specific factors
considered in reaching its determination or give prominence to any specific
factor or group of factors. In addition, individual members of the Company Board
may have given different weights to different factors.
OPINION OF FINANCIAL ADVISOR
Robinson-Humphrey has acted as financial advisor to the Company in
connection with the Merger and assisted the Company in negotiations with respect
to the Merger. Robinson-Humphrey is a nationally recognized investment banking
firm with extensive knowledge of the wholesale microcomputer distribution
industry, and has extensive experience in evaluating transactions such as those
contemplated by the Merger Agreement. As part of its investment banking
business, Robinson-Humphrey is engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, secondary distributions of listed and unlisted securities,
private placements and valuations for estate, corporate and other purposes. At
the meeting of the Company Board held on June 24, 1994, Robinson-Humphrey orally
and in writing advised the Company Board that as of such date, the consideration
in the Merger was fair, from a financial point of view, to the holders of
Company Common Stock. Robinson-Humphrey's June 24, 1994 opinion was
substantially identical to the opinion set forth as Exhibit B hereto and which
is incorporated by reference herein.
In arriving at its opinion dated the date of this Proxy
Statement/Prospectus, Robinson-Humphrey reviewed certain publicly available
financial and other information concerning the Company and Arrow and Arrow's
subsidiaries. Robinson-Humphrey also reviewed material prepared in connection
with the Merger, including, among other things, the following: the Merger
Agreement; this Proxy Statement/Prospectus and the Registration Statement of
which it is a part; stock ownership profiles of the Company and Arrow; trading
histories, operating results, and valuation multiples of the Company, Arrow and
other companies that Robinson-Humphrey deemed comparable to the Company and/or
Arrow; and recent merger transactions that Robinson-Humphrey deemed relevant.
Robinson-Humphrey also met with the management of each of Arrow and the Company
to discuss the foregoing as well as other matters Robinson-Humphrey believed
relevant to its inquiry, including current and future business prospects of
Arrow and the Company.
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In arriving at such opinion, Robinson-Humphrey also took into account its
assessment of general economic, market and financial conditions and its
experience in similar transactions, as well as its experience in securities
valuation and its knowledge of the wholesale microcomputer distribution industry
generally.
In conducting its review and in arriving at such opinion, Robinson-Humphrey
relied upon and assumed the accuracy and completeness of the financial and other
information provided to it or that was publicly available and did not attempt
independently to verify the same. Robinson-Humphrey did not make or obtain any
evaluation or appraisals of the properties or assets of the Company or Arrow.
Robinson-Humphrey assumed that the financial forecasts of the Company which
Robinson-Humphrey examined were reasonably prepared on bases reflecting the best
currently available estimates and good faith judgments of Company management.
With respect to the financial forecasts of Arrow, Robinson-Humphrey assumed that
they were reasonably prepared by independent research analysts with guidance
from Arrow management on bases reflecting the best currently available estimates
and judgments as to the future financial performances of Arrow.
Robinson-Humphrey's opinion is limited to the fairness, from a financial point
of view, to the stockholders of the Company of the consideration in the Merger
and does not address the Company's underlying business decision to merge with
Arrow.
In rendering such opinion, Robinson-Humphrey has noted that the Merger is
conditioned upon receipt of letters from Ernst & Young and KPMG Peat Marwick to
the effect that the Merger will qualify for pooling-of-interests accounting
treatment, and opinions of counsel to the effect that the Merger constitutes a
tax-free reorganization under the Code. Robinson-Humphrey's opinions were
necessarily based upon conditions as they existed and could be evaluated on the
dates of such opinions.
In connection with rendering its fairness opinions to the Company Board,
Robinson-Humphrey performed a variety of financial analyses. However, the
preparation of a fairness opinion involves determinations as to the most
appropriate and relevant methods of financial analysis and the application of
those methods to the particular circumstances, and, therefore, such opinions are
not readily susceptible to summary description. The foregoing is a summary of
certain portions of Robinson-Humphrey's opinion dated the date of this Proxy
Statement/Prospectus and is subject to, and qualified in its entirety by, the
full text thereof set forth in Exhibit B hereto, which should be read in its
entirety by the Company's stockholders.
Valuation Methodologies
In connection with its opinion on the transaction and delivery of that
opinion to the Company Board on June 24, 1994, Robinson-Humphrey performed a
number of detailed valuation analyses with respect to the Company, which
included principally the three following analyses: (i) a comparable company
trading and valuation analysis; (ii) an analysis of comparable prices, premiums,
and terms of recent transactions involving distribution companies; and (iii) a
discounted cash flow analysis. The valuation methods discussed in this summary
are substantially the same as those Robinson-Humphrey used in connection with
its written opinion dated the date of this Proxy Statement/Prospectus.
Comparable Company Analysis. In performing its comparable company
analysis, Robinson-Humphrey analyzed the trading of the Company Common Stock
relating to a peer group of 23 other publicly traded electronics and
microcomputer distributors. The information that was considered and compared
included market price to latest twelve months ("LTM") earnings, market price to
estimated calendar 1994 earnings and market price to estimated calendar 1995
earnings. The peer group multiples for LTM, 1994 and 1995 earnings were
approximately 13.3x, 11.1x, and 9.0x, respectively. The Company's earnings
multiples at the Merger price of $22.50 for those same time periods equal 17.9x,
17.2x and 13.2x, respectively.
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Comparable Transaction Analysis. Robinson-Humphrey performed an analysis
of various multiples and premiums paid for selected distribution company
transactions in the most recent four years for which financial information was
available. The nine comparable transactions considered yielded median firm value
(defined as market capitalization of equity plus debt minus cash) multiples to
latest twelve months revenues and EBITDA (earnings before interest, tax,
depreciation and amortization) of .30x and 7.9x versus firm value multiples
implied in the Merger of .46x revenues and 10.7x EBITDA. Median premiums paid
over stock prices prior to transaction announcements ranged from 26% to 43% for
comparable transactions versus a range of 22% to 51% for selected time periods
examined for the Company's Common Stock.
Discounted Cash Flow Analysis. Using a discounted cash flow analysis,
Robinson-Humphrey estimated the present value of the future stream of after-tax
cash flows that the Company could produce through 2004, under various
circumstances, assuming that the Company performed in accordance with earnings
projections of management for that time period. Robinson-Humphrey estimated the
terminal value for the Company at the end of the forecast period by applying
operating earnings multiples ranging from 6.0x to 8.0x and then discounting the
cash flow streams and terminal value using discount rates from 12% to 14%. These
discount rates were chosen to reflect different assumptions regarding the
required rates of return of the Company and the inherent risk surrounding
long-term forecasts. This discounted cash flow analysis indicated a midpoint
equity value of approximately $21.00 per share.
In connection with its opinion dated the date of this Proxy
Statement/Prospectus, Robinson-Humphrey confirmed the appropriateness of its
reliance on the analyses used to render its opinion as of June 24, 1994 by
reviewing the assumptions on which such analyses were based and the factors
considered therewith.
No company or transaction used in the comparable transaction or comparable
company analyses is identical to the Company. Accordingly, an analysis of the
foregoing necessarily involves complex considerations and judgments, as well as
other factors that affect the transaction value or trading value of any
enterprise to which the Company is being compared.
Compensation of Robinson-Humphrey
The Company retained Robinson-Humphrey pursuant to an agreement dated
December 31, 1993. Robinson-Humphrey, which acted as managing underwriter in the
Company's public offering of equity in June 1992, was chosen as the Company's
financial advisor because of its knowledge of the Company and the wholesale
microcomputer distribution industry. Pursuant to such engagement, the Company
will pay to Robinson-Humphrey a fee equal to 0.875% of the principal amount of
any consideration paid to the Company's stockholders (as defined in the Merger
Agreement). Based on an approximate transaction size of $145 million (which
assumes consideration for and exercise of outstanding Company Stock Options),
Robinson-Humphrey will be entitled to a fee at closing of approximately
$1,270,000. Of such fee, $175,000 was due upon delivery of the June 24, 1994
opinion to the Company Board regardless of stockholder approval. The remainder
of the approximately $1,095,000 fee is conditioned upon closing of the Merger.
The Company has also agreed to indemnify and hold harmless Robinson-Humphrey and
its officers and employees against certain liabilities in connection with its
services under this engagement, except for liabilities resulting from gross
negligence of Robinson-Humphrey.
In the ordinary course of business, Robinson-Humphrey and its affiliates
may actively trade in the equity securities of the Company for its account and
the account of its customers and, therefore, may from time to time hold long or
short positions in such securities. Except as set forth above, Robinson-Humphrey
has not received any other fees from the Company in the last two years.
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INTERESTS OF CERTAIN PERSONS IN THE MERGER
Company Stock Options. The Company Board has granted Company Stock Options
pursuant to the Company's 1985 Amended and Restated Incentive Stock Option Plan,
the Company's 1987 Stock Option Plan, the Company's 1993 Stock Option Plan for
Outside Directors and certain stock options dated December 17, 1992 granted to
certain directors of the Company (such plans, collectively, the "Company Stock
Plans"). The Company Stock Options will continue in effect in accordance with
their terms until the Effective Time.
At the Effective Time, each outstanding Company Stock Option to purchase
shares of Company Common Stock issued under the Company Stock Plans will be
assumed by Arrow and thereafter will be deemed to constitute an Arrow Option to
acquire, on the same terms and conditions as were applicable under such Company
Stock Option, such number of shares of Arrow Common Stock as the holder of such
Company Stock Option would have been entitled to receive pursuant to the Merger
had such holder exercised such Company Stock Option in full immediately prior to
the Effective Time (whether or not then exercisable), at a price per share equal
to (x) the exercise price for the shares of Company Common Stock otherwise
purchasable pursuant to such Company Stock Option divided by (y) the Conversion
Ratio.
Indemnification. From and after the Effective Time, Arrow and the
Surviving Corporation shall indemnify the present and former officers and
directors of the Company against certain liabilities arising out of or
pertaining to the transactions contemplated by the Merger Agreement. See "THE
MERGER AGREEMENT -- Indemnification."
Severance Agreement with Chief Financial Officer. The Company expects to
enter into an agreement with William T. Mauldin, the Company's Chief Financial
Officer, pursuant to which Mr. Mauldin would receive a termination payment from
the Company if the Company terminates his employment in certain circumstances
following the Effective Time. The termination payment would be equal to Mr.
Mauldin's base salary and bonus for the fiscal year ended June 30, 1994, which
the Company expects to be approximately $225,000.
Affiliate Registration Rights. The shares of Arrow Common Stock received
in connection with the Merger by Cheyenne and Gates, affiliates of the Company,
will be subject to resale restrictions imposed by Rule 145 under the Securities
Act. See "THE MERGER -- Restrictions on Resales by Affiliates." To eliminate
certain of these restrictions, pursuant to the Merger Agreement Arrow has
prepared and filed with the SEC a registration statement on Form S-3 with
respect to the sale of such shares of Arrow Common Stock to be received by
Cheyenne and Gates.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
It is the opinion of Winthrop, Stimson, Putnam & Roberts, counsel to Arrow,
and Alston & Bird, counsel to the Company, that for federal income tax purposes,
under current law, assuming that the Merger and related transactions will take
place as described in the Merger Agreement:
(i) the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code, and Arrow, the Company and Sub will each be a
party to the reorganization within the meaning of Section 368(b) of the
Code;
(ii) no gain or loss will be recognized by Arrow, the Company or Sub
in the Merger;
(iii) no gain or loss will be recognized by the stockholders of the
Company upon their receipt of Arrow Common Stock in exchange for their
Company Common Stock, except that stockholders who receive cash in lieu of
fractional interests in Arrow Common Stock will recognize gain or loss
equal to the difference between such cash proceeds and the tax basis
allocated to their fractional share interests, and such gain or loss will
constitute capital gain or loss if their Company Common Stock is held as a
capital asset at the Effective Time;
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(iv) the tax basis of the shares of Arrow Common Stock (including
fractional share interests) received by the stockholders of the Company
will be the same as the tax basis of their Company Common Stock exchanged
therefor; and
(v) the holding period of Arrow Common Stock in the hands of the
Company stockholders will include the holding period of their Company
Common Stock exchanged therefor, provided such Company Common Stock is held
as a capital asset at the Effective Time.
In rendering the foregoing opinions, such counsel have relied upon
representations by Arrow, the Company and certain stockholders of the Company
that own more than 5% of the Company Common Stock set forth in their respective
representation letters to such counsel dated on or about the date of this Proxy
Statement/Prospectus, and upon the validity, as of the Effective Time, of such
representations.
Consummation of the Merger is conditioned upon the opinions described above
by Winthrop, Stimson, Putnam & Roberts to Arrow and by Alston & Bird to the
Company not being withdrawn or modified in any material respect prior to the
Effective Time.
THE DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY. IT
DOES NOT ADDRESS THE STATE, LOCAL OR FOREIGN TAX ASPECTS OF THE MERGER. THE
DISCUSSION IS BASED ON CURRENTLY EXISTING PROVISIONS OF THE CODE, EXISTING AND
PROPOSED TREASURY REGULATIONS THEREUNDER AND CURRENT ADMINISTRATIVE RULINGS AND
COURT DECISIONS. THE OPINIONS OF COUNSEL DESCRIBED ABOVE ARE NOT BINDING UPON
THE INTERNAL REVENUE SERVICE, AND NO RULINGS OF THE INTERNAL REVENUE SERVICE
WILL BE SOUGHT OR OBTAINED. THERE IS NO ASSURANCE THAT THE INTERNAL REVENUE
SERVICE WILL AGREE WITH THE OPINIONS DESCRIBED ABOVE. ALL OF THE FOREGOING IS
SUBJECT TO CHANGE AND ANY SUCH CHANGE COULD AFFECT THE CONTINUING VALIDITY OF
THIS DISCUSSION. THIS DISCUSSION DOES NOT APPLY TO STOCKHOLDERS WHO ACQUIRED
THEIR SHARES AS COMPENSATION. EACH COMPANY STOCKHOLDER SHOULD CONSULT HIS OR HER
OWN TAX ADVISOR WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO
HIM OR HER, INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND FOREIGN TAX
LAWS.
ACCOUNTING TREATMENT
The Merger is designed to qualify as a "pooling-of-interests" for
accounting and financial reporting purposes. Under this method of accounting,
the recorded assets and liabilities of Arrow and the Company will be carried
forward to the combined corporation at their recorded amounts; income of the
combined corporation will include income of Arrow and the Company for the entire
fiscal year in which the Merger occurs; and the reported income of the separate
corporations for prior periods will be combined and restated as income of the
combined corporation. The obligations of the parties to the Merger Agreement to
consummate the Merger are subject to the receipt from Ernst & Young, the
independent auditors for Arrow, and from KPMG Peat Marwick, the independent
auditors for the Company, of their respective opinions that the Merger qualifies
as a "pooling-of-interests." See "THE MERGER AGREEMENT -- Conditions."
REGULATORY FILINGS AND APPROVALS
The Merger is subject to the requirements of the HSR Act and the rules and
regulations thereunder, which provide that certain transactions may not be
consummated until required information and material have been furnished to the
Antitrust Division of the Department of Justice (the "Antitrust Division") and
the Federal Trade Commission (the "FTC") and certain waiting periods have
expired or been terminated. Arrow and the Company filed the required information
and material with the Antitrust Division and FTC on June 29, 1994. The
requirements of the HSR Act are satisfied for one year following expiration of
the waiting period. If the Merger is not consummated by the end of this one
year-period, Arrow and the Company will be required to refile under the HSR Act.
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The expiration of the waiting period does not preclude the Antitrust Division or
FTC from challenging the Merger on antitrust grounds.
Neither Arrow nor the Company is aware of any other regulatory approvals
required to consummate the Merger.
RESTRICTIONS ON SALES BY AFFILIATES
The shares of Arrow Common Stock to be issued in the Merger will have been
registered under the Securities Act. Such shares will be freely transferable
under the Securities Act, except for shares issued to any person who may be
deemed to be an affiliate (as such term is defined for purposes of Rule 145
under the Securities Act, an "Affiliate") of the Company. Affiliates may not
sell their shares of Arrow Common Stock acquired in connection with the Merger
except pursuant to (i) an effective registration statement under the Securities
Act covering such shares; (ii) paragraph (d) of Rule 145; or (iii) any other
applicable exemption under the Securities Act. SEC guidelines indicate further
that the "pooling-of-interests" method of accounting will generally not be
challenged on the basis of sales by Affiliates of the acquiring or acquired
company if they do not dispose of any of the shares of the corporation they own
or shares of a corporation they receive in connection with a merger during the
period beginning 30 days before the merger and ending when financial results
covering at least 30 days of post-merger operations of the combined entity have
been published. The Company has agreed to use its best efforts to procure
written agreements ("Affiliate Agreements") from directors and other Affiliates
of the Company containing appropriate representations and commitments intended
to ensure compliance with the Securities Act and preserve the ability to treat
the Merger as a "pooling-of-interests."
LISTING ON STOCK EXCHANGE
Arrow has agreed to use its best efforts to list the shares of Arrow Common
Stock to be issued in the Merger on the NYSE. The obligations of the parties to
the Merger Agreement to consummate the Merger are subject to the approval of
such listing by the NYSE. See "THE MERGER AGREEMENT -- Conditions".
NO DISSENTERS' RIGHTS
Holders of Company Common Stock are not entitled to dissenters' rights
under the DGCL in connection with the Merger.
THE MERGER AGREEMENT
Set forth below is a description of certain of the terms and conditions of
the Merger Agreement. The descriptions of the terms and conditions of the Merger
Agreement set forth in this Proxy Statement/Prospectus are qualified in their
entirety by the complete texts thereof set forth in Exhibit A hereto (and the
exhibits thereto) and the texts thereof are incorporated by reference herein.
THE MERGER
At the Effective Time of the Merger, Sub will be merged with and into the
Company, which will be the Surviving Corporation, and the Company will thereby
become a wholly owned subsidiary of Arrow.
At the Effective Time of the Merger,
(i) each then outstanding share of Company Common Stock (other than
shares held in the treasury of the Company and shares held by Arrow, Sub,
or any subsidiary of Arrow, which
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shares will be canceled) will be converted into the right to receive the
number of shares of Arrow Common Stock equal to $22.50 divided by the Arrow
Stock Price; and
(ii) each then outstanding share of Sub common stock will be converted
into one share of common stock of the Surviving Corporation.
Notwithstanding the foregoing, no fractional shares of Arrow Common Stock
will be issued to the holders of Company Common Stock in the Merger and holders
of Company Common Stock will be entitled to a cash payment in lieu of fractional
shares of Arrow Common Stock as described below under "-- No Fractional Shares."
A description of the relative rights, privileges and preferences of the
Arrow Common Stock to be issued to Company stockholders in the Merger is set
forth below under "COMPARISON OF RIGHTS OF HOLDERS OF COMPANY COMMON STOCK AND
ARROW COMMON STOCK."
CLOSING; EFFECTIVE TIME
The closing (the "Closing", and the date of which is the "Closing Date") of
the transactions contemplated by the Merger Agreement will take place no later
than the second business day following the satisfaction or waiver of the
conditions provided by the Merger Agreement, or at such other time as Arrow and
the Company shall mutually agree.
The Effective Time will occur at such time as a copy of the Certificate of
Merger as required under the DGCL is filed by the Secretary of State of
Delaware, or at such later time as is provided in the Certificate of Merger.
Delivery for such filing will be made as soon as practicable after the Closing.
EXCHANGE OF STOCK CERTIFICATES
From and after the Effective Time, each holder of an outstanding
certificate which immediately prior to the Effective Time represented shares of
Company Common Stock (each such Company stock certificate is hereinafter
referred to as a "Certificate" and collectively as "Certificates") will be
entitled to receive in exchange therefor, upon surrender thereof to Chemical
Bank (or such other exchange agent selected by Arrow and reasonably acceptable
to the Company) (the "Exchange Agent"), a certificate or certificates
representing the number of whole shares of Arrow Common Stock into which such
holder's shares were converted pursuant to the Merger Agreement and, in respect
of any fractional share of Arrow Common Stock to which such holder would
otherwise be entitled, a cash payment in accordance with the Merger Agreement as
described below under "-- No Fractional Shares."
No holder of a Certificate will be entitled to receive any dividend or
payment for any fractional share from Arrow until surrender of such holder's
Certificate for a certificate or certificates representing shares of Arrow
Common Stock in accordance with the Merger Agreement. Upon surrender of their
Certificates, holders of such Certificates will be paid the amount of any
dividends or distributions (without interest) which theretofore became payable,
but which were not paid by reason of the foregoing, with respect to the number
of whole shares of Arrow Common Stock represented by the certificate or
certificates issued upon such surrender.
After the Effective Time, each Certificate, until surrendered and
exchanged, will be deemed, for all purposes, to evidence only the right to
receive the number of shares of Arrow Common Stock which the holder of such
Certificate is entitled to receive pursuant to the Merger and the right to
receive any cash payment in lieu of fractional shares of Arrow Common Stock. All
shares of Arrow Common Stock issued upon the surrender for exchange of shares of
Company Common Stock (and cash paid in lieu of fractional shares) shall be
deemed to have been issued in full satisfaction of all rights pertaining to such
shares of Company Common Stock, subject to the payment of any dividends or
distributions which were payable with respect to such shares but were not paid
prior to surrender of Certificates.
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If any certificate for shares of Arrow Common Stock is to be issued in a
name other than that in which the Certificate for shares surrendered in exchange
therefor is registered, it will be a condition of such exchange that the person
requesting such exchange provide to the Exchange Agent all documents required to
evidence and effect such transfer and to evidence that any transfer or other
taxes required by reason of the issuance of certificates in a name other than
that of the registered holder of the Certificate surrendered have been paid or
are not applicable.
As soon as practicable after the Effective Time, the Exchange Agent will
mail to each holder of record of a Certificate or Certificates 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 actual delivery of the
Certificates to the Exchange Agent) and instructions for use in effecting the
surrender of the Certificates in exchange for certificates representing shares
of Arrow Common Stock. Stockholders of the Company should not submit their
Certificates for exchange until such letter of transmittal and instructions are
received. Upon surrender of Certificates for cancellation to the Exchange Agent,
together with a duly executed letter of transmittal, the holder of such
Certificates will be entitled to receive in exchange therefor a certificate
representing that number of whole shares of Arrow Common Stock into which the
shares represented by the Certificates surrendered have been converted pursuant
to the Merger Agreement, plus cash in lieu of fractional shares as described
below under "-- No Fractional Shares," and the Certificates so surrendered will
be canceled. COMPANY STOCKHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL
THEY RECEIVE A LETTER OF TRANSMITTAL.
Neither the Exchange Agent nor any party to the Merger Agreement will be
liable to any holder of Company Common Stock for any shares of Arrow Common
Stock, or dividends or distributions thereon, or proceeds from the sale of
fractional interests, delivered to a public official pursuant to applicable
escheat laws.
NO FRACTIONAL SHARES
No certificates or scrip for fractional shares of Arrow Common Stock will
be issued upon the surrender for exchange of Certificates in the Merger, and
such fractional interests will not entitle the owner thereof to vote or to any
other rights of a security holder. In lieu of any such fractional shares, each
holder of Company Common Stock who would otherwise have been entitled to a
fraction of a share of Arrow Common Stock upon surrender of Certificates for
exchange will be entitled to receive from the Exchange Agent a cash payment
equal to such fraction multiplied by the Arrow Stock Price.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties of the
parties thereto, including, among others, representations and warranties of the
Company that (i) it is duly incorporated, validly existing and in good standing
under the laws of the jurisdiction of its incorporation and that it has the
power and authority to own, lease and operate its assets and to carry on its
business as currently being conducted; (ii) it is authorized to enter into the
Merger Agreement and, subject to required stockholder approval, to consummate
the transactions contemplated thereby; (iii) the Merger Agreement has been duly
executed and delivered by the Company and 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; (iv) the
Company has no subsidiaries or, except as disclosed to Arrow, any other
interests in any person; (v) the capital stock of the Company is validly issued,
fully paid and non-assessable and free of pre-emptive rights; (vi) except as
disclosed to Arrow, the execution and delivery of the Merger Agreement and the
consummation of the transactions contemplated thereby will neither
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violate any debt instrument or certain other contracts or agreements by which it
is bound, nor violate its Certificate of Incorporation or bylaws, any applicable
law or regulation or any judgment or order; (vii) except as disclosed to Arrow,
no governmental or third party consents or approvals are required to consummate
the transactions contemplated by the Merger Agreement; (viii) except as
disclosed to Arrow, its financial statements and filings with the SEC, as
required, have been made and, as of their respective dates, were materially
accurate; (ix) since March 31, 1994, it has neither incurred, nor had at such
date, certain undisclosed liabilities; (x) its inventory conforms to certain
specifications and satisfies certain other requirements; (xi) its accounts
receivable, as disclosed to Arrow, represent valid obligations owing to the
Company and are fully collectible, subject to specified reserves; (xii) its real
and personal property (including intellectual property) conforms to certain
specifications; (xiii) it has made all requisite tax filings and payments with
respect to certain taxes and certain other tax matters; (xiv) it has met its
obligations under existing employee benefit plans and has complied with certain
provisions of ERISA in all material respects; (xv) it has not, since March 31,
1994, experienced any events, changes or occurrences which have had or are
likely to have a Material Adverse Effect on the Company; (xvi) it has, since
March 31, 1994, conducted its business only in the ordinary course and has not
taken or experienced certain specified actions or events (including, among other
things, the incurrence of certain indebtedness, the creation of certain liens,
the acquisition or disposition of certain assets, the redemption or
reclassification of its capital stock or the payment of any dividend thereon,
the increase of certain compensation and the change of certain tax matters);
(xvii) it is not subject to any litigation, except as disclosed to Arrow;
(xviii) except as disclosed to Arrow, it has complied with applicable laws,
including environmental laws, is not in default of its Certificate of
Incorporation, bylaws or any contracts or agreements, and has obtained all
permits and licenses required for its business; (xix) its insurance conforms to
certain specifications; (xx) its dealings with affiliates have been disclosed to
Arrow and were commercially reasonable and fair to the Company; (xxi) its
customers and suppliers have not taken certain actions; (xxii) it has not made
certain specified payments; (xxiii) its information provided for the
Registration Statement and this Proxy Statement/Prospectus is accurate and
complete; (xxiv) Robinson-Humphrey has delivered its opinion as to the fairness
of the Merger; (xxv) no vote by the holders of the Company's capital stock is
required to approve the Merger other than a vote of a majority of the
outstanding shares of the Company Common Stock; (xxvi) it has not taken any
actions which would prevent the Merger from being accounted for as a
pooling-of-interests; (xxvii) it does not have a certain status as a stockholder
of Arrow; and (xxviii) Section 203 of the DGCL is not applicable to the Merger.
The Merger Agreement includes representations and warranties of Arrow and
Sub that (i) each of Arrow and Sub is duly incorporated, validly existing and in
good standing under the laws of its jurisdiction of incorporation; (ii) each of
Arrow and Sub is authorized to enter into the Merger Agreement and, subject to
required stockholder approval of Sub, to consummate the transactions
contemplated thereby; (iii) the Merger Agreement has been duly executed and
delivered by each of Arrow and Sub and constitutes a valid and binding
obligation of Arrow 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; (iv) the
capital stock of Arrow is validly issued, fully paid and non-assessable and free
of pre-emptive rights; (v) except as disclosed to the Company, the execution and
delivery of the Merger Agreement and the consummation of the transactions
contemplated thereby will neither violate certain debt instruments or other
contracts or agreements by which Arrow or Sub is bound, nor violate their
articles or certificates of incorporation or by-laws, any applicable law or
regulation or any judgment or order; (vi) except as disclosed to the Company, no
governmental or third party consents or approvals are required to consummate the
transactions contemplated by the Merger Agreement; (vii) Arrow's financial
statements and filings with the SEC, as required, have been
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made and, as of their respective dates, were materially accurate; and (viii) the
information provided by Arrow for the Registration Statement is accurate and
complete.
COVENANTS
The Merger Agreement contains various agreements and covenants of the
parties thereto, including covenants of Arrow and the Company to (i) cooperate
with respect to the preparation of the Registration Statement and this Proxy
Statement/Prospectus; (ii) take all actions necessary to satisfy any legal
requirements with respect to the Merger and to obtain any consents or approvals
required to consummate the transactions contemplated by the Merger Agreement;
(iii) cooperate with each other with respect to the investigation by each of the
other's interest in the Merger; (iv) maintain the confidentiality of any
information obtained from the other; (v) cooperate with each other as to the
form and substance of any press release or public disclosure regarding the
Merger; and (vi) use its best efforts to do all things necessary to consummate
the transactions contemplated by the Merger Agreement.
Pursuant to the Merger Agreement, the Company has agreed that, until the
Closing Date, it (except with the written consent of Arrow) will: (i) conduct
its business in the ordinary and usual course of business and consistent with
prior practice; (ii) not take certain specified actions (including, among other
things, the incurrence of certain indebtedness, the creation of certain liens,
the acquisition or disposition of certain assets, the redemption or
reclassification of its capital stock or the payment of any dividend thereon,
the increase of certain compensation and the change of certain tax matters);
(iii) not issue any capital stock (with certain exceptions), any rights to
acquire any capital stock or any securities convertible or exchangeable for
capital stock; (iv) not amend its Certificate of Incorporation or bylaws; (v)
not take any action which would result in any of the Company's representations
and warranties not to be true or in any of the conditions to the Merger not
being satisfied; (vi) preserve intact its business organization, and use its
best efforts to keep available the services of its present officers and
employees and preserve its business relationships with suppliers, distributors,
customers and others; (vii) maintain its insurance policies in effect; (viii)
pursue its rights with respect to certain claims and proceedings; (ix) not take
certain actions with respect to its employee benefit plans; (x) cause to be
delivered to Arrow certain letters of the Company's accountants; (xi) use its
best efforts to cause to be delivered to Arrow certain letters of persons deemed
to be affiliates of the Company under Rule 145 of the Securities Act; and (xii)
call the Special Meeting to be held as soon as practicable after the
Registration Statement becomes effective and recommend through the Company
Board, subject to the Company Board's fiduciary duties, that the Merger
Agreement be adopted by the Company stockholders.
Arrow has agreed pursuant to the Merger Agreement that, until the Closing
Date, except with the written consent of the Company, it will (i) conduct its
business and that of its subsidiaries on a consolidated basis in a manner
designed in its reasonable judgment to enhance the long-term value of the Arrow
Common Stock and, to the extent consistent therewith, use its best efforts to
preserve the goodwill of Arrow's and its subsidiaries' suppliers, customers and
others having business relations with Arrow and its subsidiaries and (ii) not
take any action which would result in Arrow's or Sub's representations and
warranties in the Merger Agreement not to be true or in any of the conditions to
the Merger not being satisfied. Arrow has also agreed pursuant to the Merger
Agreement to use its best efforts to cause the shares of Arrow Common Stock to
be issued pursuant to the Merger and such other shares to be issued pursuant to
the Arrow Options, to be approved for listing on the NYSE, subject to official
notice of issuance, prior to the Closing Date.
NO SOLICITATION OF TRANSACTIONS
The Merger Agreement provides that the Company may not solicit or
encourage, and will cause its officers, directors and employees and investment
bankers, attorneys, accountants and other agents retained by it not to, solicit
or encourage, any Takeover Proposal (as defined in "THE MERGER -- Amendments,
Termination and Waivers" below) except that, if the Company does not
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breach the foregoing covenant, the Company may furnish information to an entity
to facilitate any Takeover Proposal received and take such other actions, if
counsel to the Company or the Company Board advises the Company Board that
furnishing such information or taking such actions is necessary so as to not
subject the directors of the Company to liability for breach of their fiduciary
duties.
INDEMNIFICATION
The Merger Agreement provides that the Company and Sub will, and from and
after the Effective Time, the Surviving Corporation and Arrow will, indemnify,
defend and hold harmless each person who was as of the date of the Merger
Agreement or has been at any time prior to the date thereof, or who becomes
prior to the Effective Time, an officer, director or employee of the Company or
Sub against 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 the Company or Sub, whether
pertaining to any matter existing or occurring at or prior to the Effective Time
and whether asserted or claimed prior to, or at or after, the Effective Time
("Indemnified Liabilities"), and all Indemnified Liabilities based in whole or
in part on, or arising in whole or in part out of, or pertaining to the Merger
Agreement or the transactions contemplated thereby, in each case to the full
extent a corporation is permitted under the DGCL to indemnify its own directors,
officers or employees, as the case may be.
COMPANY STOCK OPTIONS
The treatment under the Merger Agreement of the Company Stock Options is
described under "THE MERGER -- Interests of Certain Persons in the Merger."
CONDITIONS
In addition to the approval and adoption of the Merger Agreement and the
terms of the Merger by the stockholders of the Company, the obligations of the
parties to effect the Merger are subject to the fulfillment or waiver on or
prior to the Closing Date of certain conditions specified in the Merger
Agreement including, among others, (i) the continuing accuracy on the Closing
Date of the representations and warranties of the respective parties contained
in the Merger Agreement; (ii) the performance by the respective parties of all
obligations under the Merger Agreement required to be performed on or prior to
the Closing Date; (iii) the approval for listing on the NYSE of the shares of
Arrow Common Stock to be issued in the Merger, subject to official notice of
issuance; (iv) the absence of any injunction prohibiting consummation of the
Merger; (v) the absence of any governmental investigation, action or proceeding
seeking to restrain, prevent or change the Merger or questioning the legality
thereof or seeking damages in connection therewith; (vi) the receipt by Arrow
and the Company, and confirmation at the Effective Time, of letters from the
respective accountants with respect to the qualification of the Merger as a
pooling-of-interests; (vii) the receipt by the respective parties of certain
certificates from each beneficial owner of 5% or more of the outstanding shares
of Company Common Stock; (viii) the receipt by the respective parties of certain
satisfactory opinions of tax counsel; and (ix) the receipt of the consents
required to permit Arrow and the Company to consummate the transaction.
The obligation of each of Arrow and Sub to effect the Merger is subject to
additional conditions, including (i) the absence of any action or proceeding
(other than those referred to in (v) of the preceding paragraph) seeking to
restrain, prevent or change the Merger or questioning the legality thereof or
seeking damages in connection therewith; (ii) the receipt of the Affiliate
Agreements; and (iii) the absence of, since June 24, 1994, 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.
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The consummation of the Merger is also conditioned upon the receipt of all
required governmental authorizations, consents, orders and approvals, including
expiration or termination of the relevant waiting period under the HSR Act. The
Company and Arrow filed on June 29, 1994 the requisite notices under the HSR
Act. Neither Arrow nor the Company is aware of any additional regulatory
approvals required to consummate the Merger.
AMENDMENTS, TERMINATION AND WAIVERS
The Merger Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval by the stockholders of the Company, (i)
by the mutual consent of Arrow and the Company; (ii) by either Arrow or the
Company if, without fault of the terminating party, the Merger is not
consummated on or before November 15, 1994 (or such later date that the parties
may agree to in writing); (iii) by Arrow, if the Company breaches any of its
representations, warranties or obligations under the Merger Agreement and such
breach is not cured or waived and the Company fails to provide reasonable
assurance that such breach will be cured by the Closing Date; (iv) by the
Company, if Arrow or Sub breaches any of their respective representations,
warranties or obligations under the Merger Agreement and such breach is not
cured or waived and Arrow fails to provide reasonable assurance that such breach
will be cured by the Closing Date; (v) by either Arrow or the Company if a
Trigger Event or Takeover Proposal occurs and the Company Board in connection
therewith, after consultation with its legal counsel, withdraws or modifies its
approval and recommendation of the Merger Agreement and the transactions
contemplated thereby after determining that to cause the Company to proceed with
the transactions contemplated by the Merger Agreement would violate the Company
Board's fiduciary duty to the stockholders of the Company; (vi) by either Arrow
or the Company if (a) any permanent injunction or other order of a court or
other competent authority preventing the consummation of the Merger becomes
final and nonappealable or (b) any required approval of the stockholders of the
Company is not 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; (vii) by the Company, in the event (a) of the acquisition, by any
person or group of persons (other than persons or groups of persons who (1)
acquired shares of Arrow Common Stock pursuant to any merger of Arrow in which
Arrow was the surviving corporation or any acquisition by Arrow of all or
substantially all of the capital stock or assets of another person or (2)
disclose their beneficial ownership of shares of Arrow Common Stock on Schedule
13G under the Exchange Act), of beneficial ownership of 30% or more of the
outstanding shares of Arrow 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 (b) the Board
of Directors of Arrow accepts or publicly recommends acceptance of an offer from
a third party to acquire 50% or more of the outstanding shares of Arrow Common
Stock or of Arrow's consolidated assets; (viii) by Arrow, if the Arrow Stock
Price is less than $30 or greater than $42; or (ix) by the Company, if the Arrow
Stock Price is less than $25 or greater than $42.
For purposes of the Merger Agreement, 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, and a "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 Arrow or any
of its subsidiaries or any proposal or offer to acquire in any manner a
substantial equity interest in, or a substantial portion of the assets of, the
Company other than the transactions contemplated by the Merger Agreement or the
Stock Option Agreement.
The Merger Agreement may be amended by the parties at any time before or
after approval thereof by the stockholders of the Company by written agreement
executed by the parties thereto. After any such approval, however, no amendment
may be made which by law requires the further
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approval of the Company's stockholders without such further approval. Any
amendment to the Merger Agreement must be authorized by the Boards of Directors
of the respective parties. Such directors will exercise their fiduciary duties
in determining whether any such amendment is in the best interests of the
stockholders and, in the case of the Company, exercise their business judgment
in determining whether stockholder approval of such amendment is required or
desirable in light of the nature of the amendment.
The conditions to each of the parties' obligations to consummate the
Merger, other than the obtaining of stockholder approval, may be waived by such
party. Neither Arrow, Sub nor the Company presently intends to waive any
condition to its obligations to consummate the Merger. However, each of the
parties reserves the right to waive any condition in the future. Any
determination to waive a condition would depend upon the facts and circumstances
existing at the time of such waiver and would be made by such party's Board of
Directors, exercising its fiduciary duties to such party and its stockholders.
The Merger Agreement does not require that any waiver be approved by the
stockholders, even if such waiver may be deemed by some stockholders to be
adverse to their interests. In the event the Merger is approved by the Company
stockholders, the Company stockholders may not thereafter independently
determine not to exchange their shares upon the occurrence of an event some
stockholders may deem adverse to their interests, including, without limitation,
a material decline in Arrow's earnings or stock price. However, Arrow would have
the right to determine not to effect the Merger if there had been, since June
24, 1994, 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.
In the event that (i) either Arrow or the Company terminates the Merger
Agreement following the occurrence of a Trigger Event or a Takeover Proposal and
either (1) the Company Board's withdrawal or modification of its approval of the
Merger Agreement or (2) the failure of the Company to obtain the requisite
Company stockholder vote to approve the Merger Agreement, or (ii) Arrow
terminates the Merger Agreement due to the Company's failure to perform and
comply with all agreements and conditions required 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 pursuant to the
Merger Agreement and prior thereto there shall have occurred a Trigger Event or
a Takeover Proposal, the Company will be required to pay to Arrow liquidated
damages of $4,000,000 plus reimbursement of out-of-pocket fees and expenses
incurred by Arrow in connection with the Merger Agreement and the transactions
contemplated thereby (including, without limitation, the fees and expenses of
its advisers, accountants and legal counsel) up to a maximum amount of
$1,000,000.
EXPENSES
The Merger Agreement provides that, whether or not the Merger is
consummated, all expenses (other than the liquidated damages and out-of-pocket
expenses described in the section entitled "-- Amendments, Termination and
Waivers" above) incurred in connection with the Merger Agreement and the
transactions contemplated thereby will be paid by the party incurring such
expenses, except that expenses incurred in connection with printing of the
Registration Statement and this Proxy Statement/Prospectus, as well as the
filing fee payable to the SEC in connection therewith, will be shared equally by
Arrow and the Company.
For a description of the liquidated damages and certain expenses that may
become payable by the Company under certain circumstances pursuant to the terms
of the Merger Agreement, see "-- Amendments, Termination and Waivers" above.
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THE STOCK OPTION AGREEMENT
The following is a brief summary of the terms of the Stock Option
Agreement, a copy of which is attached as Exhibit C to this Proxy
Statement/Prospectus and is incorporated herein by reference. Such summary is
qualified in its entirety by reference to the Stock Option Agreement.
GENERAL
Pursuant to the Stock Option Agreement, Arrow has the right (the "Company
Option"), under certain circumstances, to acquire up to 1,257,063 shares of
authorized but unissued shares of Company Common Stock (the "Company Shares")
(constituting approximately 19.9% of the outstanding shares of Company Common
Stock prior to giving effect to such issuance and approximately 16.6% after
giving effect to such issuance) at a price, payable in cash, of $22.50 per share
(the "Exercise Price"). Pursuant to the terms of the Stock Option Agreement, the
type and number of securities subject to the Company Option, and the price per
share, shall be adjusted in the event of any change in the Company Common Stock
by reason of certain events, including recapitalizations, combinations, exchange
of shares or the like. Furthermore, in the event the Company enters into certain
types of agreements involving the merger of the Company, or sale of
substantially all its assets, such agreements must provide Arrow with
consideration for each share of Company Common Stock with respect to which the
Company Option has not been exercised, equal to the amount of consideration a
holder of Company Common Stock would receive less the Exercise Price. The Stock
Option Agreement could have the effect of making an acquisition of the Company
by a third party more costly because of the need to acquire the Company Shares
in any such transaction.
The Stock Option Agreement is exercisable by Arrow, in whole or in part, at
any time or from time to time after any event occurs which would permit Arrow to
terminate the Merger Agreement and recover the liquidated damages and
out-of-pocket expenses described in "THE MERGER AGREEMENT -- Amendments,
Termination and Waivers" (regardless of whether the Merger Agreement has
actually terminated as a result thereof). The Company Option will terminate upon
the earlier of: (i) the Effective Time; (ii) the termination of the Merger
Agreement pursuant to its terms (other than a termination in connection with
which Arrow is entitled to the payment of the liquidated damages and
out-of-pocket expenses); or (iii) 180 days following any termination of the
Merger Agreement in connection with which Arrow is entitled to the payment of
the liquidated damages and out-of-pocket expenses (or, if at the expiration of
such 180-day period the Company Option cannot be exercised by reason of any
applicable judgment, decree, order, law or regulation, 10 business days after
such impediment to exercise shall have been removed or shall have become final
and not subject to appeal, but in no event later than June 24, 1996).
Notwithstanding the foregoing, the Company Option may not be exercised if Arrow
is in material breach of any of its representations, warranties, covenants or
agreements contained in the Stock Option Agreement or in the Merger Agreement.
CERTAIN REPURCHASES
Under the terms of the Stock Option Agreement, at any time during which the
Company Option is exercisable (the "Repurchase Period"), Arrow has the right to
require the Company (or any successor entity thereof) to repurchase from Arrow
the Company Option, and the Company (or any successor entity thereof) has the
right, if the Market/Tender Offer Price (as defined below) exceeds the Exercise
Price by more than $8.00, to require Arrow to sell to the Company (or such
successor entity) the Company Option, at the price set forth in subparagraph (i)
below. Also, at any time prior to June 24, 1996, Arrow has the right to require
the Company (or any successor entity thereof) to repurchase from Arrow, and the
Company (or any successor entity thereof) has the right, if the Market/Tender
Offer Price exceeds the Exercise Price by more than $8.00, to require
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Arrow to sell to the Company (or such successor entity), the Company Shares
purchased by Arrow pursuant to the Company Option at the 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 requesting party gives notice of
its intent to exercise its rights 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 such date pursuant to any tender or exchange
offer or other Takeover Proposal (as defined above in "THE MERGER
AGREEMENT -- Amendments, Termination and Waivers") which was made prior to
such date and not terminated or withdrawn as of such date (the "Tender
Price") or (B) the average of the high and low bid prices of shares of
Company Common Stock on NASDAQ for the ten trading days immediately
preceding such date, or if on any of such ten trading days Company Common
Stock shall not be quoted in the NASDAQ System, the average of the high and
low bid prices on such day in the domestic over-the-counter market as
reported by the National Quotation Bureau, Incorporated, or any similar
successor organization (the "Market Price").
(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 Offer Price shall be the highest price per share offered
pursuant to a tender or exchange offer or other Takeover Proposal during
the Repurchase Period.
The maximum amount payable to Arrow in the event Arrow or the Company
elects for the Company to repurchase the Option and/or the Company Shares from
Arrow, shall not exceed $10,056,064 plus the amount of the aggregate Exercise
Price paid by Arrow for any shares of the Company Common Stock acquired pursuant
to the Company Option.
REGISTRATION RIGHTS
Subsequent to the termination of the Merger Agreement, Arrow may by written
notice ("Registration Notice") request the Company to register under the
Securities Act all or any part of the Restricted Shares (as defined in Section 8
of the Stock Option Agreement). The Company may, at its option, purchase these
shares ("Registrable Shares") within ten business days after the receipt of the
Registration Notice. If the Company does not elect to exercise its option to
purchase the Registrable Shares, it shall use its best efforts to register the
unpurchased Registrable Shares; provided, however, (i) Arrow shall not be
entitled to more than an aggregate of two effective registration statements and
(ii) the Company will not be required to file any such registration statement
for a certain period of time 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 such 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.
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COMPARISON OF RIGHTS OF HOLDERS OF
COMPANY COMMON STOCK AND ARROW COMMON STOCK
GENERAL
Arrow is incorporated in the State of New York. The Company is incorporated
in the State of Delaware. The rights of stockholders of the Company are
currently governed by the DGCL and by the Company Certificate of Incorporation
and Bylaws. Stockholders of the Company who receive Arrow Common Stock pursuant
to the Merger will become shareholders of Arrow and their rights as such will be
governed by the New York Business Corporation Law (the "BCL") and Arrow's
Restated Certificate of Incorporation (the "Arrow Certificate of Incorporation")
and By-laws, as amended from time to time in accordance with the BCL.
Certain differences between the rights of Arrow shareholders and Company
stockholders are summarized below. This summary is qualified in its entirety by
reference to the full text of such documents. For information as to how such
documents may be obtained, see "AVAILABLE INFORMATION."
BUSINESS COMBINATIONS
Generally, under the DGCL, the affirmative vote of the holders of a
majority of the outstanding shares entitled to vote on the matter is required to
approve mergers, consolidations, and any sales, leases or exchanges of all or
substantially all of the assets of a corporation.
The Company Certificate of Incorporation does not contain any provisions
relating to business combinations.
Under the BCL, the affirmative vote of the holders of two-thirds of all
outstanding shares of stock of a New York corporation entitled to vote thereon
is required to approve mergers and consolidations, and for sales, leases,
exchanges or other dispositions of all or substantially all the assets of a
corporation, if not made in the usual or regular course of the business actually
conducted by such corporation.
In addition, the Arrow Certificate of Incorporation requires the
affirmative vote of 90% of the outstanding shares of Arrow Common Stock to
authorize certain mergers into, sales of assets to, and other transactions with
any person or entity that acquires directly or indirectly 30% or more of the
outstanding shares of capital stock entitled to vote generally in the election
of directors. A 90% vote of such shares is also required to approve corporate
reorganizations which materially reduce the percentage of outstanding shares
entitled to vote.
APPRAISAL RIGHTS
Under Section 262 of the DGCL, except as otherwise provided by the DGCL,
stockholders who continuously hold their shares through the effective date of a
merger or consolidation, who perfect their appraisal rights under Section 262(d)
of the DGCL, and who neither vote in favor of the merger or consolidation nor
otherwise consent thereto in writing are entitled upon petition to receive
payment of the fair value of their stock, as determined by the Delaware Court of
Chancery, in the event the merger or consolidation is consummated.
Under certain Sections of the BCL, including Sections 806(b)(6) and 910,
shareholders of a New York corporation have the right to dissent and receive
payment of the fair value of their shares, except as otherwise provided by the
BCL, in the event of certain amendments or changes to the certificate of
incorporation adversely affecting their shares, certain mergers or
consolidations, certain sales, exchanges or other dispositions of all or
substantially all of the corporation's assets and certain share exchanges. A
shareholder intending to enforce such right must comply with the procedures set
forth in Section 623 of the BCL.
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STATE TAKEOVER LEGISLATION
Section 203 of the DGCL prohibits a publicly held Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date such person became an interested
stockholder, unless (i) prior to such date, the business combination or the
transaction which resulted in the stockholder becoming an interested stockholder
is approved by the board of directors of the corporation, (ii) upon consummation
of the transaction which resulted in the stockholder becoming an interested
stockholder, the interested stockholder owns at least 85% of the outstanding
voting stock, or (iii) on or after such date the business combination is
approved by the board of directors of the corporation and by the affirmative
vote, not by written consent, of at least 66 2/3% of the outstanding voting
stock which is not owned by the interested stockholder. A "business combination"
includes mergers, consolidations, asset transfers (including any sale, lease,
exchange, mortgage, pledge or other disposition of assets) and other
transactions resulting in a financial benefit to the stockholder. An "interested
stockholder" is a person who (i) owns 15% or more of the outstanding voting
stock of the corporation or (ii) is an affiliate or associate of a corporation
and was the owner of 15% or more of the outstanding voting stock within the past
three years.
On June 24, 1994, prior to the execution of the Merger Agreement, the
Company Board duly adopted irrevocable resolutions that approved the Merger and
provide that, for as long as the Merger Agreement remains in full force and
effect, the transactions contemplated by the Merger Agreement are exempt from
Section 203 of the DGCL to the extent that the statute is applicable thereto.
Section 912 of the BCL (the "New York Business Combination Law") prohibits
any business combination (defined to include a variety of transactions,
including mergers, consolidations, sales or dispositions of assets, issuances of
stock, liquidations, reclassifications and the receipt of certain benefits from
the corporation, including loans or guarantees) with, involving or proposed by
any interested shareholder (defined generally as any person who, (i) directly or
indirectly, beneficially owns 20% or more of the outstanding voting stock of a
resident domestic New York corporation or (ii) is an affiliate or associate of
such resident domestic corporation and at any time within the past five years
was a beneficial owner of 20% or more of such stock) for a period of five years
after the date on which the interested shareholder became such. After such
five-year period a business combination between a resident domestic New York
corporation and such interested shareholder is prohibited unless either certain
"fair price" provisions are complied with or the business combination is
approved by a majority of the outstanding voting stock not beneficially owned by
such interested shareholder or its affiliates or associates. The New York
Business Combination Law exempts from its prohibitions any business combination
with an interested shareholder if such business combination, or the purchase of
stock by the interested shareholder that caused such shareholder to become such,
is approved by the board of directors of the resident domestic New York
corporation prior to the date on which the interested shareholder becomes such.
Provided that at least ten percent of the voting stock of Arrow is owned
beneficially by residents of (or organizations having their principal offices
in) the State of New York, Arrow is a resident domestic New York corporation.
The New York Business Combination Law also excludes resident domestic
corporations having no class of voting stock registered with the SEC, unless the
certificate of incorporation provides otherwise.
A resident domestic New York corporation may adopt an amendment to its
by-laws, approved by the affirmative vote of the holders, other than interested
shareholders and their affiliates and associates, of a majority of the
outstanding voting stock, excluding the voting stock of interested shareholders
and their affiliates and associates, expressly electing not to be governed by
the New York Business Combination Law. However, such amendment will not be
effective until 18 months after such shareholder vote and will not apply to any
business combination with an interested shareholder who was such on or prior to
the effective date of such amendment. Arrow has not
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amended the Arrow By-laws to elect not to be governed by the New York Business
Combination Law.
STOCKHOLDER RIGHTS PLANS
The Company does not have a stockholder rights plan.
In March 1988, Arrow paid a dividend of one Arrow Right on each outstanding
share of Arrow Common Stock pursuant to the Rights Agreement. Each Arrow Right
entitles the registered holder to purchase from Arrow one one-hundredth of a
share of Arrow Participating Preferred Stock for a price of $50, subject to
adjustment. Although the Arrow Rights are not intended to prevent a takeover of
Arrow at a full and fair price, they may have certain anti-takeover effects.
They may deter an attempt to acquire Arrow in a manner which seeks to deprive
Arrow's shareholders of the full and fair value of their investment and may
deter attempts by significant shareholders to take advantage of Arrow and its
shareholders through certain self-dealing transactions. The Arrow Rights may
cause substantial dilution to a person or group that acquires or attempts to
acquire Arrow without the Arrow Rights being redeemed by the Arrow Board of
Directors. Accordingly, the Arrow Rights should encourage any potential acquiror
to seek to negotiate with the Arrow Board of Directors. Unless the approval is
first obtained from the Arrow Board of Directors, the Arrow Rights may deter
transactions, including tender offers, which the majority of shareholders may
believe are beneficial to them. Under the Rights Agreement, one Arrow Right will
also be issued with each share of Arrow Common Stock issued pursuant to the
Merger.
AMENDMENTS TO CERTIFICATE OF INCORPORATION
Under Section 242 of the DGCL, a charter amendment proposed by the board
requires an affirmative vote of a majority of the outstanding stock entitled to
vote thereon and a majority of the outstanding stock of each class entitled to
vote thereon. Whether or not entitled by the charter, the holders of the
outstanding shares of a class are entitled to vote on a charter amendment if the
amendment would increase or decrease the aggregate number of authorized shares
of such class or adversely affect the powers, preferences or special rights of
such class.
Under Section 803 of the BCL, amendments of the certificate of
incorporation may be authorized by vote of the board, followed by a vote of the
holders of a majority of all outstanding shares entitled to vote thereon at a
meeting of shareholders. Certain categories of amendments which adversely affect
the rights of any holders of shares of a class or series of stock require the
affirmative vote of the holders of a majority of all outstanding shares of such
class or series, voting separately.
AMENDMENTS TO BY-LAWS
Under Section 109 of the DGCL, the by-laws of a corporation generally may
be amended or repealed by the affirmative vote of the holders of a majority of
the shares entitled to vote thereon. As permitted by the DGCL, the Company
Certificate of Incorporation provides that the Company By-laws may be made,
altered or repealed by the Company Board.
Under Section 601 of the BCL, except as otherwise provided in the
certificate of incorporation, by-laws may be amended, repealed or adopted by the
holders of shares entitled to vote in the election of any director. When so
provided in the certificate of incorporation or a by-law adopted by the
shareholders, by-laws may also be amended, repealed or adopted by the board by
such vote as may be therein specified, which may be greater than the vote
otherwise prescribed by law, but any by-law adopted by the board may be amended
or repealed by the shareholders entitled to vote thereon as provided by the BCL.
The Arrow By-laws may be amended, repealed or adopted by the holders of
voting shares or the Board of Arrow, except that any amendment changing the
number of directors requires a vote of
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the majority of the entire Board. Any by-law adopted by the Arrow Board may be
amended or repealed by the shareholders in accordance with the BCL.
PREEMPTIVE RIGHTS
Under Section 102(b)(3) of the DGCL, unless the certificate of
incorporation provides otherwise, a stockholder is granted no preemptive rights.
The Company Certificate of Incorporation does not provide for preemptive rights.
Under Section 622 of the BCL, except as otherwise provided in the BCL or in
the certificate of incorporation, the holders of equity shares are granted
certain preemptive rights. The Arrow Certificate of Incorporation provides that
no holder of shares of Arrow Common Stock has any preemptive rights to purchase
any shares or other securities of Arrow.
DIVIDEND SOURCES
Section 170 of the DGCL permits the payment of dividends on capital stock,
subject to any restrictions contained in the certificate of incorporation, out
of a corporation's surplus (the excess of net assets over capital) or, in case
there is no surplus, out of net profits for the current and/or preceding fiscal
year. If the capital of the corporation is diminished to an amount less than the
aggregate amount of capital represented by the outstanding stock having a
preference on the distribution of assets, then dividends may not be declared and
paid out of such net profits until the deficiency in the amount of capital
represented by the preferred shares shall have been repaired. The Company
Certificate of Incorporation and Bylaws do not restrict the payment of dividends
on the Company Common Stock. Section 9.1 of the Bylaws allows the directors, in
their absolute discretion, to set aside reserves out of any funds available for
dividends for any purpose the directors shall think conducive to the Company's
interests. The Company, however, is a party to certain agreements which
currently limit the amount of dividends that can be paid by the Company.
Under Section 510 of the BCL, except as otherwise provided in the BCL,
dividends may be declared or paid and other distributions may be made out of
surplus only, so that the net assets of the corporation remaining after such
declaration, payment or distribution must at least equal the amount of its
stated capital. When any dividend is paid or any other distribution is made from
sources other than earned surplus, a written notice must accompany such payment
or distribution as provided by the BCL. A corporation may declare and pay
dividends or make other distributions except when currently the corporation is
insolvent or would thereby be made insolvent, or when the declaration, payment
or distribution would be contrary to any restrictions contained in the
corporation's certificate of incorporation. Arrow is a party to certain
agreements which currently limit the amount of dividends that can be paid by
Arrow.
DURATION OF PROXIES
Under Section 212 of the DGCL, no proxy is valid for more than three years
after its date unless provided otherwise in the proxy.
Under Section 609 of the BCL, no proxy is valid after the expiration of
eleven months from the date thereof unless otherwise provided in the proxy.
Irrevocable proxies may be created for (i) a pledgee, (ii) a person who has
purchased or agreed to purchase the shares, (iii) a creditor of the corporation
who extends or continues credit in consideration of the proxy, (iv) a person who
has contracted to perform services as an officer of the corporation if the proxy
is required by the employment contract and (v) a person designated under a
voting agreement.
STOCKHOLDER ACTION
Under Section 228 of the DGCL, unless otherwise provided in the certificate
of incorporation, any action required or permitted to be taken at any meeting of
stockholders may instead be taken
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without a meeting, without prior notice and without a vote, if a written consent
setting forth the action taken is signed by holders of outstanding stock having
not less than the minimum number of votes that would be required to authorize
such action at a meeting of stockholders at which all shares entitled to vote
thereon were present and voting and a prompt notice of the action so taken is
provided to those stockholders who have not consented in writing. The Company
Certificate of Incorporation does not prohibit or otherwise limit action by
written consent.
Under Section 615 of the BCL, any action required or permitted to be taken
by vote may be taken without a meeting by written consent, setting forth the
action so taken, signed by the holders of all outstanding shares entitled to
vote thereon, provided that the certificate of incorporation may contain a
provision requiring the written consent of the holders of less than all
outstanding shares. The Arrow Certificate of Incorporation does not contain such
a provision.
SPECIAL STOCKHOLDER MEETINGS
Under Section 211 of the DGCL, a special meeting of stockholders may be
called only by the board of directors or by such person or persons as may be
authorized by the certificate of incorporation or by-laws. The Company Bylaws
provide that a special meeting of stockholders may be called by the chief
executive officer and shall be called by the chief executive officer or
secretary at the request in writing of a majority of the Company Board or the
holders of the issued and outstanding shares of capital stock entitled to cast
not less than a majority of the vote at the meeting.
Under Section 602 of the BCL, a special meeting of shareholders may be
called by the board of directors or by such person or persons as may be
authorized by the certificate of incorporation or by-laws. The Arrow By-laws
provide that special meetings of the shareholders may be called at any time by
the Chairman of the Board or by the Board of Directors. In addition, Section 603
of the BCL provides that if, for a period of one month after the date fixed by
or under the by-laws for the annual meeting of shareholders, or if no date has
been so fixed, for a period of thirteen months after the last annual meeting,
there is a failure to elect a sufficient number of directors to conduct the
business of the corporation, the board shall call a special meeting for the
election of directors. If such special meeting is not called by the board within
two weeks after the expiration of such period or if it is called but there is a
failure to elect such directors for a period of two months after the expiration
of such period, holders of ten percent of the shares entitled to vote in an
election of directors may, in writing, demand the call of a special meeting for
the election of directors.
CUMULATIVE VOTING
Under Section 214 of the DGCL, the certificate of incorporation may provide
for cumulative voting of shares in all elections of directors. The Company
Certificate of Incorporation does not provide for cumulative voting for the
election of directors.
Under Section 618 of the BCL, the certificate of incorporation may provide
that in all elections of directors each shareholder is entitled to cumulate such
shareholder's votes. The Arrow Certificate of Incorporation does not contain
such a provision.
REMOVAL OF DIRECTORS
Except as otherwise provided in the DGCL, under Section 141(k) of the DGCL,
the entire board of directors or any individual director may be removed from
office, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors.
Section 706 of the BCL provides that any or all of the directors may be
removed for cause by vote of the shareholders and, if the certificate of
incorporation or the specific provisions of a by-law adopted by the shareholders
provide, directors may be removed by action of the board of directors. If the
certificate of incorporation or the by-laws so provide, any or all of the
directors may be
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removed without cause by vote of the shareholders. The removal of directors,
with or without cause, is subject to the following: (i) in the case of a
corporation having cumulative voting, no director may be removed when the votes
cast against such director's removal would be sufficient to elect the director
if voted cumulatively and (ii) if a director is elected by the holders of shares
of any class or series, such director may be removed only by the applicable vote
of the holders of the shares of that class or series voting as a class. An
action to procure a judgment removing a director for cause may be brought by the
attorney-general or by the holders of ten percent of the outstanding shares,
whether or not entitled to vote.
The Arrow Certificate of Incorporation provides that any or all of the
directors may be removed without cause by action of the shareholders.
VACANCIES ON THE BOARD
As permitted under Section 223 of the DGCL, the Company Bylaws provide that
the Company Board may increase or decrease the number of directors and fill any
vacancy on the Company Board, including vacancies resulting from an increase in
the number of directors.
Under Section 705 of the BCL, newly created directorships resulting from an
increase in the number of directors and vacancies occurring in the board for any
reason except the removal of directors without cause may be filled by vote of
the board. However, the certificate of incorporation or by-laws may provide that
such newly created directorships or vacancies are to be filled by vote of the
shareholders. Unless the certificate of incorporation or the specific provision
of a by-law adopted by the shareholders provide that the board may fill
vacancies occurring in the board by reason of the removal of directors without
cause, such vacancies may be filled only by vote of the shareholders. A director
elected to fill a vacancy, unless elected by the shareholders, will hold office
until the next meeting of shareholders at which the election of directors is in
the regular order of business and until his or her successor has been elected
and qualified.
The Arrow By-laws provide that any vacancy in the Arrow Board of Directors
(other than removal without cause) may be filled by a majority vote of the
remaining directors.
INDEMNIFICATION OF DIRECTORS
Section 145 of the DGCL generally provides that a corporation may, and in
certain circumstances, must, indemnify any person who is or was threatened with
any action, suit or proceeding by reason of the fact that he or she is or was a
director, officer, employee or agent of such corporation for expenses, judgments
or settlements actually and reasonably incurred by such person in connection
with suits and other legal action or proceedings if such person acted in good
faith and in a manner he or she reasonably believed to be in or not opposed to
the best interests of the corporation and, with respect to any criminal action
or proceeding, had no reasonable cause to believe their conduct was unlawful.
The determination of whether a director, officer, employee or agent has met the
applicable standard of conduct is made (i) by a majority vote of a quorum of
directors not party to the action, suit or proceeding, or (ii) by an independent
legal counsel in a written opinion if a quorum of disinterested directors is
unobtainable or if the disinterested directors so direct or (iii) by the
shareholders. In the case of shareholder derivative suits, the corporation may
indemnify any person who is or was threatened with any action, suit or
proceeding by reason of the fact that he or she is or was a director, officer,
employee or agent if such person acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification may be made in respect of any claim,
issue or matter as to which such person shall have been adjudged liable to the
corporation unless and only to the extent that the Court of Chancery or the
court in which the action was brought determined upon application that, in view
of all the circumstances of the case, the person is fairly and reasonably
entitled to indemnity for such expenses as the court deems proper. The DGCL also
permits a corporation to adopt procedures for advancing expenses to directors,
officers and others without
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the need for a case-by-case determination of eligibility, so long as in the case
of officers and directors they undertake to repay the amounts advanced if it is
ultimately determined that the officer or director was not entitled to be
indemnified. The aforementioned provisions relating to indemnification and
advancement of expenses are not exclusive and a corporation may provide
additional rights to those seeking indemnification or advancement of expenses.
The provisions of the DGCL relating to indemnification and advancement of
expenses to directors, employees, officers and agents are incorporated into the
Company Certificate of Incorporation and Bylaws.
Under Section 722 of the BCL, a corporation may indemnify any person made,
or threatened to be made, a party to any action or proceeding, except for
shareholder derivative suits, by reason of the fact that he or she was a
director or officer of the corporation, provided such director or officer acted
in good faith for a purpose which he or she reasonably believed to be in the
best interests of the corporation and, in criminal proceedings, in addition, had
no reasonable cause to believe his or her conduct was unlawful. In the case of
shareholder derivative suits, the corporation may indemnify any person by reason
of the fact that he or she was a director or officer of the corporation if he or
she acted in good faith for a purpose which he or she reasonably believed to be
in the best interests of the corporation, except that no indemnification may be
made in respect of (i) a threatened action, or a pending action which is settled
or otherwise disposed of, or (ii) any claim, issue or matter as to which such
person has been adjudged to be liable to the corporation, unless and only to the
extent that the court on which the action was brought, or, if no action was
brought, any court of competent jurisdiction, determines upon application that,
in view of all the circumstances of the case, the person is fairly and
reasonably entitled to indemnity for such portion of the settlement amount and
expenses as the court deems proper.
The indemnification described above under the BCL is not exclusive of other
indemnification rights to which a director or officer may be entitled, whether
contained in the certificate of incorporation or by-laws, or, when authorized by
(i) such certificate of incorporation or by-laws, (ii) a resolution of
shareholders, (iii) a resolution of directors, or (iv) an agreement providing
for such indemnification, provided that no indemnification may be made to or on
behalf of any director or officer if a judgment or other final adjudication
adverse to the director or officer establishes that his or her acts were
committed in bad faith or were the result of active and deliberate dishonesty
and were material to the cause of action so adjudicated, or that he or she
personally gained in fact a financial profit or other advantage to which he or
she was not legally entitled.
Any person who has been successful on the merits or otherwise in the
defense of a civil or criminal action or proceeding will be entitled to
indemnification. Except as provided in the preceding sentence, unless ordered by
a court pursuant to the BCL, any indemnification under the BCL pursuant to the
above paragraphs may be made only if authorized in the specific case and after a
finding that the director or officer met the requisite standard of conduct (i)
by the disinterested directors if a quorum is available, or (ii) in the event a
quorum of disinterested directors is not available or so directs by either (A)
the board upon the written opinion of independent legal counsel, or (B) by the
shareholders.
The Arrow Certificate of Incorporation provides that Arrow shall indemnify
directors, officers and employees of Arrow with respect to proceedings by reason
of the fact that he or she was a director, officer or employee of Arrow, except
where such officer, director or employee is liable for negligence or misconduct
in the performance of his or her duties. The Arrow Certificate of Incorporation
also provides that such rights to indemnification are not exclusive.
The Arrow By-laws provide that Arrow is authorized, by (i) a resolution of
shareholders, (ii) a resolution of directors or (iii) an agreement providing for
such indemnification, to provide indemnification and to advance expenses to its
directors and officers in respect of claims, actions, suits or proceedings based
upon, arising from, relating to or by reason of the fact that any such director
or officer serves or served in such capacity with Arrow or at the request of
Arrow in any capacity with any other enterprise.
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Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling Arrow or the
Company pursuant to the foregoing provisions, Arrow and the Company have been
informed that in the opinion of the SEC such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable.
LIMITATION OF PERSONAL LIABILITY OF DIRECTORS
Section 102(b)(7) of the DGCL permits a corporation to include in its
certificate of incorporation a provision that would eliminate a director's
monetary liability for breaches of his fiduciary duty in a lawsuit by or on
behalf of the corporation or in an action by stockholders of the corporation,
provided that such provision may not eliminate or limit the liability of a
director (i) for any breach of the director's duty of loyalty, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) for unlawful payments of dividends or stock purchases or
redemptions, or (iv) for any transaction from which the director derived an
improper personal benefit. The Company Certificate of Incorporation contains
such a provision.
Section 402(b) of the BCL provides that a corporation's certificate of
incorporation may contain a provision eliminating or limiting the personal
liability of directors to the corporation or its shareholders for damages for
any breach of duty in such capacity. However, no such provision can eliminate or
limit (i) the liability of any director if a judgment or other final
adjudication adverse to such director establishes that such director's acts or
omissions were in bad faith, or involved intentional misconduct or a knowing
violation of law, or that the director personally gained in fact a financial
profit or other advantage to which such director was not legally entitled or
that the director's acts violated certain provisions of the BCL or (ii) the
liability of any director for any act or omission prior to the adoption of such
a provision in the certificate of incorporation.
The Arrow Certificate of Incorporation provides that no director shall be
personally liable to Arrow or any of its shareholders for damages for any breach
of duty as a director, except for liability resulting from a judgment or other
final adjudication adverse to the director (i) for acts or omissions in bad
faith or which involve intentional misconduct or a knowing violation of the law,
(ii) for any transaction from which the director derived a financial profit or
other advantage to which the director was not legally entitled, or (iii) under
Section 719 of the BCL.
RECENT DEVELOPMENTS
The Company has entered into an Agreement to Terminate Distribution
Services, dated June 24, 1994 (the "Termination Agreement"), pursuant to which
the Company will terminate the distribution services it currently provides for
ScanSource. Currently, the Company provides warehousing, shipping and limited
accounting services to ScanSource at cost, and the Company provides financing
for ScanSource at the Company's cost of borrowed funds plus 1%. During the 1993
fiscal year, ScanSource was billed a total of $26,934 for services and the
largest amount of financing outstanding at any time during that year was
$1,314,851. For the 1994 fiscal year through May 31, 1994, ScanSource had
incurred approximately $178,278 in warehouse charges and approximately $115,590
in finance charges with the Company. Under the current services agreement with
ScanSource, the Company guarantees certain vendor lines of credit for ScanSource
and the Company is subject to non-competition restrictions. In addition,
pursuant to a stock option granted to the Company by ScanSource, on December 30,
1993 the Company purchased 250,000 shares of ScanSource common stock (the
"ScanSource Stock") for $1.50 per share, representing an 11.6% interest in
ScanSource.
Pursuant to the Termination Agreement, not later than September 30, 1994
the Company will cease providing services, financing and guarantees to or on
behalf of ScanSource. The Termination Agreement provides, among other things,
that the Company will cease providing guarantees for vendor lines of credit for
ScanSource ten business days after the date of the Termination Agreement, and
that ScanSource will pay all amounts owed to the Company in cash within three
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days following the date of termination of services (the "Settlement Date"). The
Company has agreed to pay to ScanSource $1.4 million in cash on the Settlement
Date in consideration for the modification of certain terms of the
non-competition restrictions. The Company has also granted to ScanSource an
option (which may be transferred to a new distributor engaged by ScanSource) to
purchase the ScanSource Stock at a price of $4.00 per share, payable in cash.
This option, which is subject to the condition that the Company obtain certain
required consents, will expire if not exercised within six months and two days
after the date of the Termination Agreement. In the event that the option is not
exercised, the Company has a right to require ScanSource to immediately purchase
the ScanSource Stock, also subject to certain required consents, at a price of
$3.00 per share, payable in cash.
ScanSource was founded by Steven H. Owings, a director and former executive
officer of the Company. Mr. Owings owns a 15.0% interest in ScanSource, and
Dennis Gates, Irwin Lieber and Eli Oxenhorn, all of whom are directors of the
Company, respectively own 7.0%, 2.5% and 6.0% interests in ScanSource. Mr.
Owings is Chairman of the Board and Chief Executive Officer of ScanSource and
each of Messrs. Lieber and Oxenhorn are directors of ScanSource. Additionally,
at the Company's request, William T. Mauldin, the Company's Vice President of
Finance and Chief Financial Officer, serves as a director of ScanSource.
LEGAL OPINION
The validity of the shares of Arrow Common Stock offered to the Company
stockholders by this Proxy Statement/Prospectus will be passed upon for Arrow by
Winthrop, Stimson, Putnam & Roberts.
EXPERTS
The historical consolidated financial statements and related schedules of
Arrow Electronics, Inc. at December 31, 1993 and 1992, and for each of the three
years in the period ended December 31, 1993 incorporated by reference from
Arrow's Annual Report on Form 10-K in this Proxy Statement/ Prospectus, have
been audited by Ernst & Young, independent auditors, as set forth in their
report appearing elsewhere therein, and are incorporated in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
The financial statements and schedules of the Company as of June 30, 1993
and 1992 and for each of the years in the three-year period ended June 30, 1993,
have been incorporated herein and in the Registration Statement in reliance upon
the reports of KPMG Peat Marwick, independent auditors, which are incorporated
by reference herein, and upon the authority of said firm as experts in
accounting and auditing. The report of KPMG Peat Marwick covering the June 30,
1993 financial statements refers to a change in the method of accounting for
income taxes in 1993 to adopt the provisions of the Financial Accounting
Standards Board's Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes."
SOLICITATION OF PROXIES
Arrow and the Company will share equally the expenses in connection with
printing this Proxy Statement/Prospectus. The costs of solicitations of proxies
will be borne by the Company. Directors, officers and other employees of the
Company may, without additional compensation (except for customary overtime pay,
when applicable), solicit proxies by mail, in person or by telecommunication.
The Company will reimburse brokers, fiduciaries, custodians and other nominees
for reasonable out-of-pocket expenses incurred in sending this Proxy
Statement/Prospectus and other proxy materials to, and obtaining instructions
relating to such materials from, beneficial owners of the Company Common Stock.
In addition, the Company has retained Corporate Investor Communications, Inc., a
proxy solicitation firm, to assist in soliciting proxies from beneficial owners
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of Company Common Stock held by banks, brokerage houses, and other custodians,
nominees and fiduciaries. The Company anticipates that the cost of such
assistance will not exceed $10,000.
PROPOSALS BY COMPANY STOCKHOLDERS
If the Merger is not consummated, management of the Company expects that
its 1994 Annual Meeting of Stockholders will be held in December 1994. As stated
in the Company's Proxy Statement for its 1993 Annual Meeting, proposals that
Company stockholders desired to have included in the Company's proxy materials
for its 1994 Annual Meeting must have been received by the Company on or prior
to June 26, 1994. The Company has received no such stockholder proposals.
BY ORDER OF THE BOARD OF DIRECTORS
OF GATES/FA DISTRIBUTING, INC.
/s/ Cynthia L. Armstrong
--------------------------------------
Cynthia L. Armstrong
Secretary
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EXHIBIT A
___________________________________________________________
AGREEMENT AND PLAN OF MERGER
By and Among
Arrow Electronics, Inc.
AFG Acquisition Company
and
Gates/FA Distributing, Inc.
Dated as of June 24, 1994
___________________________________________________________
A-1
<PAGE> 59
TABLE OF CONTENTS
Page
----
ARTICLE 1
THE MERGER
1.1 Effective Time of the Merger . . . . . . . . . . . . . . . . . . . . A-7
1.2 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-7
1.3 Effects of the Merger . . . . . . . . . . . . . . . . . . . . . . . A-7
ARTICLE 2
CONVERSION OF SECURITIES
2.1 Conversion of Capital Stock . . . . . . . . . . . . . . . . . . . . A-8
(a) Capital Stock of Sub . . . . . . . . . . . . . . . . . . . . . A-8
(b) Cancellation of Treasury Stock and Parent-Owned
Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-8
(c) Conversion Ratio for the Company Common Stock . . . . . . . . . A-8
2.2 Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . . A-9
(a) Exchange Agent . . . . . . . . . . . . . . . . . . . . . . . . A-9
(b) Exchange Procedures . . . . . . . . . . . . . . . . . . . . . . A-9
(c) Distribution with Respect to Unexchanged Shares . . . . . . . . A-10
(d) No Further Ownership Rights in the Company
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . A-10
(e) No Fractional Shares . . . . . . . . . . . . . . . . . . . . . A-11
(f) Termination of Exchange Fund . . . . . . . . . . . . . . . . . A-11
(g) No Liability. . . . . . . . . . . . . . . . . . . . . . . . . . A-11
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3.1 Corporate Organization and Authority of the Company . . . . . . . . A-12
3.2 Subsidiaries and Equity Investments . . . . . . . . . . . . . . . . A-13
3.3 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . A-13
3.4 No Violation; Consents and Approvals . . . . . . . . . . . . . . . . A-14
3.5 SEC Reports and Financial Statements of the Company . . . . . . . . A-15
3.6 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . . A-15
3.7 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-16
3.8 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . A-16
3.9 Title to Property . . . . . . . . . . . . . . . . . . . . . . . . . A-16
A-2
<PAGE> 60
3.10 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . A-17
3.11 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-18
3.12 Employee Matters . . . . . . . . . . . . . . . . . . . . . . . . . A-18
3.13 No Material Change . . . . . . . . . . . . . . . . . . . . . . . . A-20
3.14 Absence of Change or Event . . . . . . . . . . . . . . . . . . . . A-20
3.15 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-22
3.16 Compliance With Law and Other Instruments . . . . . . . . . . . . . A-22
3.17 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-27
3.18 Affiliate Interests . . . . . . . . . . . . . . . . . . . . . . . . A-27
3.19 Customers and Suppliers . . . . . . . . . . . . . . . . . . . . . . A-28
3.20 Absence of Questionable Payments . . . . . . . . . . . . . . . . . A-28
3.21 Information Supplied . . . . . . . . . . . . . . . . . . . . . . . A-29
3.22 Opinion of Financial Advisor . . . . . . . . . . . . . . . . . . . A-29
3.23 Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . A-29
3.24 Accounting Matters . . . . . . . . . . . . . . . . . . . . . . . . A-29
3.25 Company Not an Interested Shareholder or a
30% Shareholder . . . . . . . . . . . . . . . . . . . . . . . . . A-29
3.26 Section 203 of the DGCL Not Applicable . . . . . . . . . . . . . . A-30
3.27 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-30
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
4.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-30
4.2 Corporate Authority . . . . . . . . . . . . . . . . . . . . . . . . A-30
4.3 No Violation; Consents and Approvals . . . . . . . . . . . . . . . . A-31
4.4 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . A-31
4.5 SEC Reports and Financial Statements of Parent . . . . . . . . . . . A-32
4.6 Information Supplied . . . . . . . . . . . . . . . . . . . . . . . . A-33
ARTICLE 5
CERTAIN COVENANTS AND AGREEMENTS
OF THE COMPANY AND PARENT
5.1 Conduct of the Company's Business Prior to the
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . A-33
5.2 Conduct of Parent's Business Prior to the Closing
Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-34
5.3 Preparation of S-4 and the Proxy Statement . . . . . . . . . . . . . A-35
5.4 Letter of the Company's Accountants . . . . . . . . . . . . . . . . A-35
5.5 Legal Conditions to Merger . . . . . . . . . . . . . . . . . . . . . A-35
5.6 Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-36
5.7 Stock Exchange Listing . . . . . . . . . . . . . . . . . . . . . . . A-36
5.8 Stockholders' Meeting . . . . . . . . . . . . . . . . . . . . . . . A-36
5.9 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . A-36
5.10 Broker's and Finder's Fees . . . . . . . . . . . . . . . . . . . . A-37
5.11 Access to Information and Confidentiality . . . . . . . . . . . . . A-38
5.12 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . A-38
5.13 Additional Agreements; Best Efforts . . . . . . . . . . . . . . . . A-40
5.14 No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . A-40
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5.15 Advice of Changes; SEC Filings . . . . . . . . . . . . . . . . . . A-40
5.16 Press Releases . . . . . . . . . . . . . . . . . . . . . . . . . . A-41
5.17 Company Option Plans . . . . . . . . . . . . . . . . . . . . . . . A-41
5.18 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . A-42
ARTICLE 6
CONDITIONS PRECEDENT
6.1 Conditions to Each Party's Obligation to Effect
the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-42
(a) Stockholder Approval . . . . . . . . . . . . . . . . . . . . . A-42
(b) NYSE Listing . . . . . . . . . . . . . . . . . . . . . . . . . A-42
(c) Other Approvals . . . . . . . . . . . . . . . . . . . . . . . . A-42
(d) S-4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-43
(e) No Injunctions or Restraints . . . . . . . . . . . . . . . . . A-43
(f) No Governmental Actions . . . . . . . . . . . . . . . . . . . . A-43
(g) Pooling Letter . . . . . . . . . . . . . . . . . . . . . . . . A-43
(h) Tax Free Reorganization . . . . . . . . . . . . . . . . . . . . A-43
6.2 Conditions to Obligations of Parent and Sub . . . . . . . . . . . . A-43
(a) Representations and Warranties; Performance of
Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . A-43
(b) Tax Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . A-44
(c) No Actions . . . . . . . . . . . . . . . . . . . . . . . . . . A-44
(d) Consents Under Agreements . . . . . . . . . . . . . . . . . . . A-44
(e) Letter from Company Affiliates . . . . . . . . . . . . . . . . A-44
(f) Material Adverse Change . . . . . . . . . . . . . . . . . . . . A-44
(g) No Amendments to Resolutions . . . . . . . . . . . . . . . . . A-44
6.3 Conditions to Obligations of the Company . . . . . . . . . . . . . . A-45
(a) Representations and Warranties; Performance of
Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . A-45
(b) Tax Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . A-45
(c) Consents Under Agreements . . . . . . . . . . . . . . . . . . . A-45
(d) No Amendments to Resolutions . . . . . . . . . . . . . . . . . A-45
ARTICLE 7
TERMINATION AND AMENDMENT
7.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-46
7.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . A-47
7.3 Extension; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . A-47
7.4 Amendment and Modification . . . . . . . . . . . . . . . . . . . . . A-48
ARTICLE 8
GENERAL PROVISIONS
8.1 Nonsurvival of Representations, Warranties and
Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-48
8.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-48
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8.3 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . A-49
8.4 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . A-49
8.5 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-49
8.6 Entire Agreement; No Third Party Beneficiaries;
Rights of Ownership . . . . . . . . . . . . . . . . . . . . . . . . A-49
8.7 No Remedy in Certain Circumstances . . . . . . . . . . . . . . . . . A-50
8.8 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-50
8.9 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-50
Exhibit 5.6 Affiliate Agreement
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of June 24, 1994, by
and among Arrow Electronics, Inc., a New York corporation ("Parent"), AFG
Acquisition Company, a Delaware corporation and a wholly owned subsidiary of
Parent ("Sub"), and Gates/FA Distributing, Inc., a Delaware corporation (the
"Company").
WHEREAS, the respective Boards of Directors of Parent, Sub and
the Company deem it advisable and in the best interests of their respective
stockholders to consummate, and have approved, the business combination
transaction provided for herein in which Sub would merge with and into the
Company and the Company would become a wholly owned subsidiary of Parent (the
"Merger");
WHEREAS, for Federal income tax purposes, it is intended that
the Merger qualify as a reorganization under the provisions of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, for accounting purposes, it is intended that the
Merger shall be accounted for as a pooling of interests;
WHEREAS, concurrently with the execution of this Agreement and
as an inducement to Parent and Sub to enter into this Agreement, (i) the
Company and Parent have entered into a stock option agreement dated the date
hereof (the "Option Agreement") providing for the purchase by Parent of
newly-issued shares of the Company's Common Stock, (ii) each of Cheyenne
Software, Inc. and Dennis Gates has on the date hereof granted to Parent an
irrevocable proxy to vote the shares of the Company's Common Stock owned by
such stockholders, respectively, to approve the Merger; and
WHEREAS, Parent, Sub and the Company desire to make certain
representations, warranties and agreements in connection with the Merger and
also to prescribe various conditions to the Merger.
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NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set forth
herein, the parties hereto agree as follows:
ARTICLE 1
THE MERGER
1.1 Effective Time of the Merger. Subject to the provisions
of this Agreement, a certificate of merger (the "Certificate of Merger") shall
be duly prepared, executed and acknowledged by the Surviving Corporation (as
defined in Section 1.3) and thereafter delivered to the office of the Secretary
of State of the State of Delaware, for filing and thereafter recorded, as
provided in the Delaware General Corporation Law (the "DGCL"), as soon as
practicable on or after the Closing Date (as defined in Section 1.2). The
Merger shall become effective upon the filing of the Certificate of Merger with
the office of the Secretary of State of the State of Delaware or at such time
thereafter as is provided in the Certificate of Merger (the "Effective Time").
1.2 Closing. The closing of the Merger (the "Closing")
will take place at the offices of Winthrop, Stimson, Putnam & Roberts, One
Battery Park Plaza, New York, New York, at 10:00 A.M. (local time) on a date to
be specified by Parent and the Company, which shall be no later than the second
business day after satisfaction or waiver of the latest to occur of the
conditions set forth in Article 6 (other than Sections 6.2(a)(i) and 6.3(a)(i)
and the delivery of the officer's certificates referred to in Sections 6.2(a)
and 6.3(a)) (the "Closing Date") or at such other place, time and date as may
be agreed upon in writing by Parent and the Company.
1.3 Effects of the Merger. (a) At the Effective Time (i)
the separate existence of Sub shall cease and Sub shall be merged with and into
the Company (Sub and the Company are sometimes referred to herein as the
"Constituent Corporations" and the Company is sometimes referred to herein as
the "Surviving Corporation"), (ii) the Certificate of Incorporation of the
Company as in effect immediately prior to the Effective Time shall be the
Certificate of Incorporation of the Surviving Corporation and (iii) the By-laws
of the Company as in effect immediately prior to the Effective Time shall be
the By-laws of the Surviving Corporation.
(b) The Merger shall have the effects set forth in Sections
259 and 261 of the DGCL.
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<PAGE> 65
ARTICLE 2
CONVERSION OF SECURITIES
2.1 Conversion of Capital Stock. As of the Effective Time,
by virtue of the Merger and without any further action on the part of the
holder of any shares of Common Stock, par value $.01 per share, of the Company
(the "Company Common Stock") or capital stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share
of the capital stock of Sub shall be converted into and become one fully paid
and nonassessable share of Common Stock, par value $.01 per share, of the
Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned Stock.
All shares of the Company Common Stock that are owned by the Company as
treasury stock and any shares of the Company Common Stock owned by Parent, Sub
or any wholly owned Subsidiary of the Company or Parent shall be canceled and
retired and shall cease to exist and no stock of Parent or other consideration
shall be delivered in exchange therefor. All shares of Common Stock, par value
$1.00 per share, of Parent (the "Parent Common Stock"), if any, owned by the
Company shall remain unaffected by the Merger. As used in this Agreement, the
word "Subsidiary" means, with respect to any party, any corporation or other
organization, whether incorporated or unincorporated, of which (i) such party
or any other Subsidiary of such party is a general partner (excluding
partnerships, the general partnership interests of which held by such party or
any Subsidiary of such party do not have a majority of the voting interest in
such partnership) or (ii) at least a majority of the securities or other
interests having by their terms ordinary voting power to elect a majority of
the Board of Directors or others performing similar functions with respect to
such corporation or other organization is directly or indirectly owned or
controlled by such party or by any one or more of its Subsidiaries, or by such
party and one or more of its Subsidiaries.
(c) Conversion Ratio for the Company Common Stock. Subject
to Section 2.2(e), each issued and outstanding share of the Company Common
Stock (other than shares to be canceled in accordance with Section 2.1(b))
shall be converted into the right to receive the number (the "Conversion
Ratio") of shares of Parent Common Stock equal to a fraction the numerator of
which is $22.50 and the denominator of which is the average closing price on
the New York Stock Exchange, Inc. (the "NYSE") of one share of Parent Common
Stock over the twenty-day trading period ending two trading days before the
Closing Date (the "Parent Stock Price"). Each share of the Parent Common Stock
issued pursuant to the Merger shall entitle the holder thereof to the
corresponding number of rights (the "Parent Rights") to purchase shares of
Participating Preferred Stock of Parent pursuant to the Rights Agreement dated
as of March 2, 1988, as amended, between Parent
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<PAGE> 66
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
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<PAGE> 67
which is not registered in the transfer records of the Company, a certificate
representing the proper number of shares of the Parent Common Stock may be
issued to a transferee if the Certificate representing the Company Common Stock
is presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and by evidence that any applicable stock
transfer taxes have been paid. Until surrendered as contemplated by this
Section 2.2, each Certificate shall be deemed at any time after the Effective
Time to represent only the right to receive upon such surrender the certificate
representing shares of the Parent Common Stock and cash in lieu of any
fractional shares of the Parent Common Stock as contemplated by this Section
2.2.
(c) Distribution with Respect to Unexchanged Shares. No
dividends or other distributions declared or made after the Effective Time with
respect to the Parent Common Stock with a record date after the Effective Time
shall be paid to the holder of any unsurrendered Certificate with respect to
the shares of the Parent Common Stock represented thereby and no cash payment
in lieu of fractional shares shall be paid to any such holder pursuant to
Section 2.2(e) until the holder of record of such Certificate shall surrender
such Certificate. Subject to the effect of applicable laws, following
surrender of any such Certificate, there shall be paid to the record holder of
the certificates representing whole shares of the Parent Common Stock issued in
exchange therefor, without interest, (i) at the time of such surrender, the
amount (to the extent such amount has been determined in accordance with
Section 2.2(e)) of any cash payable in lieu of a fractional share of the Parent
Common Stock to which such holder is entitled pursuant to Section 2.2(e) and
the amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole shares of the Parent
Common Stock, and (ii) at the appropriate payment date, the amount of dividends
or other distributions with a record date after the Effective Time but prior to
surrender and a payment date subsequent to surrender payable with respect to
such whole shares of the Parent Common Stock.
(d) No Further Ownership Rights in the Company Common
Stock. All shares of the Parent Common Stock issued upon the surrender for
exchange of shares of the Company Common Stock in accordance with the terms
hereof (including any cash paid pursuant to Section 2.2(c) or 2.2(e)) shall be
deemed to have been issued in full satisfaction of all rights pertaining to
such shares of the Company Common Stock, subject, however, to the Surviving
Corporation's obligation to pay any dividends or make any other distributions
with a record date prior to the Effective Time which may have been declared or
made by the Company on such shares of the Company Common Stock in accordance
with the terms of this Agreement or prior to the date hereof and which remain
unpaid at the Effective Time, and there shall be no further registration of
transfers on the stock transfer books of the Surviving Corporation of the
shares of the Company Common Stock
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which were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation for any
reason, they shall be canceled and exchanged as provided in this Article 2.
(e) No Fractional Shares. No certificates or scrip
representing fractional shares of the Parent Common Stock shall be issued upon
the surrender for exchange of Certificates, and such fractional share interests
will not entitle the owner thereof to vote or to enjoy any other rights of a
stockholder of Parent. All fractional shares of the Parent Common Stock that a
holder of the Company Common Stock would otherwise be entitled to receive as a
result of the Merger shall be aggregated and if a fractional share results from
such aggregation, such holder shall be entitled to receive, in lieu thereof, an
amount in cash determined by multiplying the Parent Stock Price by the fraction
of a share of the Parent Common Stock to which such holder would otherwise have
been entitled. The Surviving Corporation shall timely make available to the
Exchange Agent any cash necessary to make payments in lieu of fractional shares
as aforesaid. Alternatively, Parent shall have the option of instructing the
Exchange Agent to aggregate all fractional shares of the Parent Common Stock,
sell such shares in the public market and distribute to holders of the Company
Common Stock a pro rata portion of the proceeds of such sale. No such cash in
lieu of fractional shares of the Parent Common Stock shall be paid to any
holder of the Company Common Stock until Certificates representing such Company
Common Stock are surrendered and exchanged in accordance with Section 2.2(b).
(f) Termination of Exchange Fund. Any portion of the
Exchange Fund and any cash in lieu of fractional shares of the Parent Common
Stock made available to the Exchange Agent which remains undistributed to the
stockholders of the Company for six months after the Effective Time shall be
delivered to Parent, upon demand, and any stockholders of the Company who have
not theretofore complied with this Article 2 shall thereafter look only to
Parent for payment of their claim for the Parent Common Stock, any cash in lieu
of fractional shares of the Parent Common Stock and any dividends or
distributions with respect to the Parent Common Stock.
(g) No Liability. Neither Parent nor the Company shall
be liable to any holder of shares of the Company Common Stock or the Parent
Common Stock, as the case may be, for such shares (or dividends or
distributions with respect thereto) or cash in lieu of fractional shares of the
Parent Common Stock delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub as
follows:
3.1 Corporate Organization and Authority of the Company.
The Company is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware and has full corporate power
and authority to own, lease and operate its properties and to carry on its
business as now being conducted, and, except as disclosed in the Company's
Disclosure Memorandum furnished to Parent on the date hereof (the "Disclosure
Memorandum") with specific reference to this Section, is duly licensed or
qualified and in good standing as a foreign corporation in each jurisdiction in
which the nature of the activities conducted by it or the character of the
properties owned, leased or operated by it requires it to be so licensed or so
qualified, except where the failure to be so licensed or so qualified would not
have a Material Adverse Effect on the Company. As used in this Agreement, the
term "Material Adverse Effect" means, with respect to any party, a material
adverse effect on the financial condition, assets, liabilities (contingent or
otherwise), results of operation, business or business prospects of such party
and its Subsidiaries, if any, taken as a whole. For purposes of this
Agreement, with respect to the Company, a Material Adverse Effect shall not
include a material adverse effect on the financial condition, assets,
liabilities (contingent or otherwise), results of operation, business or
business prospects of the Company (i) as a result of the proposed acquisition
of the Company by Parent and the impact thereof on the operating performance of
the Company pursuant to the terms of this Agreement or (ii) that is disclosed
in the Company SEC Documents (as defined in Section 3.5) or in the Disclosure
Memorandum. The Company has heretofore delivered to Parent complete and
correct copies of its Amended and Restated Certificate of Incorporation, as
amended, and Amended and Restated Bylaws, as amended, as currently in effect.
The Company has full corporate power and authority to enter into this Agreement
and, subject to approval of this Agreement by the stockholders of the Company
in accordance with the applicable provisions of the DGCL, to consummate the
transactions contemplated hereby. The execution, delivery and performance by
the Company of this Agreement have been duly authorized by all requisite
corporate action on the part of the Company, subject to such approval of this
Agreement by the stockholders of the Company in accordance with the applicable
provisions of the DGCL. This Agreement has been duly executed and delivered by
the Company, and (assuming due execution and delivery by Parent and Sub) this
Agreement constitutes a valid and binding obligation of the Company,
enforceable in accordance with its terms, except as enforcement may be limited
by bankruptcy, insolvency or other
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similar laws affecting the enforcement of creditors' rights generally, and
except that the availability of equitable remedies, including specific
performance, is subject to the discretion of the court before which any
proceeding therefor may be brought, and except as indemnification may be
limited by public policy.
3.2 Subsidiaries and Equity Investments. The Company has
no direct or indirect Subsidiary. Except as disclosed in the Disclosure
Memorandum with specific reference to this Section, the Company does not own,
directly or indirectly, any capital stock or other equity securities of any
corporation or have any direct or indirect equity or ownership interest,
including interests in partnerships and joint ventures, in any business or
entity.
3.3 Capitalization. As of the date hereof, the
authorized capital stock of the Company consists of 20,000,000 shares of the
Company Common Stock and 10,000,000 shares of Preferred Stock, par value $.01
per share (the "Company Preferred Stock"). As of the date hereof, (i)
6,316,901 shares of the Company Common Stock are issued and outstanding, and
129,665, 58,423, 25,000 and 18,300 shares of the Company Common Stock are
reserved for issuance pursuant to the Company's 1985 Amended and Restated
Incentive Stock Option Plan, the Company's 1987 Stock Option Plan, the
Company's 1993 Stock Option Plan for Outside Directors and the three stock
options dated December 17, 1992 granted to certain directors of the Company
(collectively, the "Company Option Plans"), respectively, (ii) no shares of the
Company Common Stock are reflected on the books and records of the Company as
treasury shares, (iii) no shares of the Company Preferred Stock are issued or
outstanding, and (iv) no notes, bonds, debentures or other indebtedness having
the right to vote (or convertible into or exchangeable for securities having
the right to vote) ("Voting Debt") of the Company are issued or outstanding.
All such issued and outstanding shares of the Company Common Stock have been,
and any shares of the Company Common Stock which may be issued pursuant to the
Company Option Plans will be, validly issued, fully paid and nonassessable and
not subject to preemptive rights. Except for (a) the rights created pursuant
to this Agreement and the Option Agreement, (b) the rights outstanding on the
date hereof created pursuant to the Company Option Plans to purchase in the
aggregate 231,388 shares of the Company Common Stock and (c) the issued and
outstanding shares of the Company Common Stock set forth herein, as of the date
hereof, there are no (i) outstanding shares of capital stock or Voting Debt of
the Company, (ii) outstanding options, warrants, calls, subscriptions or other
rights of any kind to acquire, or agreements or commitments in effect to which
the Company is a party or by which the Company is bound obligating the Company
to issue or sell, or cause to be issued or sold, any additional shares of
capital stock or any Voting Debt of the Company, or (iii) outstanding
securities convertible into or exchangeable for, or which otherwise confer on
the holder thereof
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any right to acquire, any such additional shares or Voting Debt. The Company
is not committed to issue any such option, warrant, call, subscription, right
or security, and after the Effective Time, there will be no such option,
warrant, call, subscription, right, agreement, commitment or security. There
are no contracts, commitments or agreements relating to voting, purchase or
sale of the Company's capital stock or Voting Debt (including, without
limitation, any redemption by the Company thereof) (i) between or among the
Company and any of its stockholders and (ii) to the best of the Company's
knowledge, between or among any of the Company's stockholders.
3.4 No Violation; Consents and Approvals. Except as
disclosed in the Disclosure Memorandum with specific reference to this Section,
neither the Company nor any of its properties or assets is subject to or bound
by any provision of:
(a) any law, statute, rule, regulation, ordinance or judicial
or administrative decision;
(b) its Amended and Restated Certificate of Incorporation, as
amended, Amended and Restated Bylaws, as amended, or similar
organizational document;
(c) any (i) credit or loan agreement, mortgage, deed of
trust, note, bond, indenture, license, concession, franchise, permit,
trust, custodianship or other restriction, (ii) instrument,
obligation, contract or agreement (including, without limitation, any
lease or any plan, fund or arrangement contemplated by Section
3.12(a)), other than those contemplated by clause (i), which, in the
case of this clause (ii), individually involves the payment or receipt
by the Company of in excess of $15,000 or (iii) instruments,
obligations, contracts or agreements (including, without limitation,
leases or plans, funds or arrangements contemplated by Section
3.12(a)), other than those contemplated by clause (i), which, in the
case of this clause (iii), collectively involve the payment or receipt
by the Company of in excess of $150,000; or
(d) any judgment, order, writ, injunction or decree;
that would restrict, prohibit or prevent, or would be violated or breached by,
or would result in the creation of any Encumbrance (as defined in Section 3.9)
as a result of, or under which there would be a material default (with or
without notice or lapse of time, or both) or right of termination, cancellation
or acceleration of any obligation or the loss of a material benefit as a result
of, the execution, delivery and performance by the Company of this Agreement
and the consummation of the transactions contemplated hereby. Except as
disclosed in the Disclosure Memorandum with specific reference to this Section,
no consent, order, approval or authorization of, or declaration, notice,
registration or filing with, any court, administrative
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agency or commission or other governmental authority or instrumentality (each a
unincorporated organization (together with Governmental Entities, each a
"Person") is required by or with respect to the Company in connection with the
execution, delivery and performance by the Company of this Agreement and the
consummation of the transactions contemplated hereby.
3.5 SEC Reports and Financial Statements of the Company. The
Company has filed with the Securities and Exchange Commission (the "SEC"), and
has heretofore provided to Parent true and complete copies of, all forms,
reports, schedules, statements and other documents required to be filed by it
since January 1, 1989 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") or the Securities Act of 1933, as amended (the "Securities
Act") (as such documents have been amended since the time of their filing,
collectively, the "Company SEC Documents"), except, with respect to any period
prior to January 1, 1992, for failures to file which, individually or in the
aggregate, are not reasonably likely to have a Material Adverse Effect on the
Company. Except as disclosed in the Disclosure Memorandum with specific
reference to this Section, the Company SEC Documents, including without
limitation any financial statements and schedules included therein, at the time
filed or, if subsequently amended, as so amended, (i) did not contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading and (ii)
complied in all material respects with the applicable requirements of the
Exchange Act and the Securities Act, as the case may be, and the applicable
rules and regulations of the SEC thereunder. Except as disclosed in the
Disclosure Memorandum with specific reference to this Section, the financial
statements of the Company included in the Company SEC Documents comply as to
form in all material respects with applicable accounting requirements and with
the published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles ("GAAP")
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto or, in the case of the unaudited statements, as
permitted by Form 10-Q of the SEC) and fairly present (subject, in the case of
the unaudited statements, to customary year-end audit adjustments) the
financial position of the Company as at the dates thereof and the results of
its operations and cash flows.
3.6 Absence of Undisclosed Liabilities. Except as and to the
extent set forth in the Company's Annual Report on Form 10-K for the year ended
June 30, 1993, or as disclosed in the Form 10-Q for the nine month period ended
March 31, 1994, or as disclosed in the Disclosure Memorandum with specific
reference to this Section, as of March 31, 1994, the Company had no
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liabilities or obligations of any nature, whether or not accrued, contingent or
otherwise, that would be required by GAAP to be reflected on the balance sheet
of the Company (including the notes thereto) as of such date. Since March 31,
1994, the Company has not incurred any liabilities or obligations of any
nature, whether or not accrued, contingent or otherwise, not in the ordinary
course of business or which would have, individually or in the aggregate, a
Material Adverse Effect on the Company.
3.7 Inventory. Except as disclosed in the Disclosure
Memorandum with specific reference to this Section, the inventories of the
Company are in good condition, conform in all respects with applicable
specifications and warranties of the manufacturer thereof, are not obsolete and
are saleable in the ordinary course of business and at values not less than the
book value amounts thereof. The value of all items of slow-moving (which for
purposes hereof shall mean items where the quantity on hand exceeds the actual
sales thereof by the Company during the preceding twelve months), excessive,
redundant, or obsolete inventory and of inventory of below standard quality or
which cannot be returned to the manufacturer thereof under the applicable
distribution agreement has been written down to net realizable value or
adequate reserves have been provided therefor, and since March 31, 1994, has
been accrued on the books of the Company in the ordinary course of business
consistent with past practices in accordance with GAAP.
3.8 Accounts Receivable. The accounts receivable disclosed
in the Company SEC Documents as of March 31, 1994, and all accounts receivable
created since that date through the Closing Date, represent and will represent
valid obligations owing to the Company and are fully collectible by the
Company, subject to the reserve for doubtful accounts disclosed in such Company
SEC Documents and, with respect to accounts receivable created since such date,
any subsequently filed Company SEC Documents, or as accrued on the books of the
Company in the ordinary course of business consistent with past practices in
accordance with GAAP since the last filed Company SEC Documents.
3.9 Title to Property.
(a) Except as disclosed in the Disclosure Memorandum with
specific reference to this Section, the Company has good and valid title to all
of its properties, assets and other rights that do not constitute real
property, free and clear of all Encumbrances. Except as disclosed in the
Disclosure Memorandum with specific reference to this Section, the Company
owns, has valid leasehold interests in or valid contractual rights to use, all
of the assets, tangible and intangible, used by, or necessary for the conduct
of the business of, the Company.
(b) The machinery, tools, equipment and other tangible
physical assets of the Company (other than items of inventory) are in good
working order, normal wear and tear excepted, are
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being used or are useful in the business of the Company at its present level of
activity and are in an operating condition sufficient to conduct the business
of the Company as now being conducted.
(c) The Disclosure Memorandum sets forth with specific
reference to this Section each and every parcel of real property or interest
in real estate owned, held under a lease or used by, or necessary for the
conduct of the business of, the Company (the "Real Property").
(d) Except as disclosed in the Disclosure Memorandum with
specific reference to Section 3.9(c), the Company:
(i) owns and has good and marketable title in fee simple
to the Real Property designated as "owned property" in the Disclosure
Memorandum free and clear of all pledges, liens, charges, encumbrances,
easements, defects, security interests, claims, options and
restrictions of every kind ("Encumbrances"), except (A) minor
imperfections of title, none of which, individually or in the aggregate,
materially detracts from the value of or impairs the use of the
affected property or impairs the operations of the Company and (B)
liens for current taxes not yet due and payable;
(ii) with respect to the Real Property designated as
"leased property" in the Disclosure Memorandum, is in peaceful and
undisturbed possession of the space and/or estate under each lease
under which it is a tenant, and there are no material defaults by it
as tenant thereunder; and
(iii) has good and valid rights of ingress and egress to
and from all the Real Property from and to the public street systems
for all usual street, road and utility purposes.
(e) Except as disclosed in the Disclosure Memorandum with
specific reference to this Section, all of the buildings, structures,
improvements and fixtures used by or useful in the business of the Company,
owned or leased by the Company, are in a good state of repair, maintenance and
operating condition and, except as so disclosed and, except for normal wear and
tear, there are no defects with respect thereto which would impair the
day-to-day use of any such buildings, structures, improvements or fixtures or
which would subject the Company to liability under applicable law.
3.10 Intellectual Property. Except as disclosed in the
Disclosure Memorandum with specific reference to this Section, the Company owns
or has valid rights to use all patents, patent rights, trademarks, trademark
rights, trade names, trade name rights, copyrights, service marks, trade
secrets, applications for trademarks and for service marks, know-how and
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other proprietary rights and information used or held for use in connection
with the business of the Company as currently conducted or as contemplated to
be conducted, and to the best knowledge of the Company, there is no assertion
or claim challenging the validity of any of the foregoing which, individually
or in the aggregate, could have a Material Adverse Effect on the Company.
Except as disclosed in the Disclosure Memorandum with specific reference to
this Section, the conduct of the business of the Company as currently conducted
does not conflict in any way with any patent, patent right, license, trademark,
trademark right, trade name, trade name right, service mark or copyright of any
third party that, individually or in the aggregate, could have a Material
Adverse Effect on the Company. Except as disclosed in the Disclosure
Memorandum with specific reference to this Section, to the best knowledge of
the Company, there are no infringements of any proprietary rights owned by the
Company which, individually or in the aggregate, could have a Material Adverse
Effect on the Company.
3.11 Tax Matters. The Company (or any predecessor) and any
consolidated, combined, unitary, affiliated or aggregate group for Tax purposes
of which the Company (or any predecessor) is or has been a member (a
"Consolidated Group") has, to the best of the Company's knowledge, timely filed
all Tax Returns required to be filed by it, has paid all Taxes shown on any Tax
Return to be due and has provided adequate reserves in its financial statements
for any Taxes that have not been paid, whether or not shown as being due on any
Tax Returns. Except as disclosed in the Disclosure Memorandum with specific
reference to this Section and to the Company's best knowledge, (i) no material
claim for unpaid Taxes has become a lien against the property of the Company or
is being asserted against the Company, (ii) no audit of any Tax Return of the
Company is being conducted by a Tax authority, and (iii) no extension of the
statute of limitations on the assessment of any Taxes has been granted by the
Company and is currently in effect. As used herein, "Taxes" shall mean all
taxes of any kind, including, without limitation, those on or measured by or
referred to as income, gross receipts, sales, use, ad valorem, franchise,
profits, license, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, value added, property or windfall profits taxes, customs,
duties or similar fees, assessments or charges of any kind whatsoever, together
with any interest and any penalties, additions to tax or additional amounts
imposed by any governmental authority, domestic or foreign. As used herein,
"Tax Return" shall mean any return, report or statement required to be filed
with any governmental authority with respect to Taxes.
3.12 Employee Matters. (a) With respect to each employee
benefit plan (including, without limitation, any "employee benefit plan" as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), and any material bonus, pension, profit sharing,
deferred compensation, incentive compensation, stock ownership,
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stock purchase, stock option, phantom stock, retirement, vacation, severance,
disability, death benefit, hospitalization, insurance or other plan,
arrangement or understanding (whether or not legally binding) (all the
foregoing being herein called the "Benefit Plans"), maintained or contributed
to by the Company, the Company has made available to Parent a true and correct
copy of (i) the most recent annual report (Form 5500) filed with the Internal
Revenue Service, (ii) such Benefit Plan, (iii) each trust agreement and group
annuity contract, if any, relating to such Benefit Plan and (iv) the most
recent actuarial report or valuation relating to a Benefit Plan subject to
Title IV of ERISA, if any.
(b) With respect to the Benefit Plans, individually and in
the aggregate, no event has occurred, and to the Company's best knowledge,
there exists no condition or set of circumstances, other than as disclosed in
the Disclosure Memorandum with specific reference to this Section, in
connection with which the Company could be subject to any liability that is
reasonably likely to have a Material Adverse Effect on the Company (except
liability for benefits claims and funding obligations payable in the ordinary
course), under ERISA, the Code or any other applicable law.
(c) Except as set forth in the Disclosure Memorandum with
specific reference to this Section, with respect to the Benefit Plans,
individually and in the aggregate, there are no funded benefit obligations for
which contributions have not been made or properly accrued and there are no
unfunded benefit obligations which have not been accounted for by reserves, or
otherwise properly footnoted in accordance with GAAP, on the financial
statements of the Company, which obligations could have a Material Adverse
Effect on the Company.
(d) Except as set forth in the Disclosure Memorandum with
specific reference to this Section, and except as described in Section 5.17
hereof, the Company is not a party to any oral or written (i) consulting
agreement not terminable on 60 days or less notice or union or collective
bargaining agreement, (ii) agreement with any director, executive officer or
key employee of the Company the benefits of which are contingent, or the terms
of which are materially altered, upon the occurrence of a transaction involving
the Company of the nature contemplated by this Agreement, or agreement with
respect to any executive officer of the Company providing any term of
employment or compensation guarantee extending for a period longer than one
year, or (iii) agreement or plan, including any stock option plan, stock
appreciation right plan, restricted stock plan or stock purchase plan, any of
the benefits of which will be increased, or the vesting of the benefits of
which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits of which
will be calculated on the basis of any of the transactions contemplated by this
Agreement.
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3.13 No Material Change. Since March 31, 1994, there have
been no events, changes or occurrences which have had, or are reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on the
Company.
3.14 Absence of Change or Event. Except as contemplated by
this Agreement or the Option Agreement or as disclosed in the Disclosure
Memorandum with specific reference to this Section, since March 31, 1994, the
Company has conducted its business only in the ordinary course and has not:
(a) incurred any obligation or liability, absolute,
accrued, contingent or otherwise, whether due or to become due, except
liabilities or obligations incurred in the ordinary course of business
and consistent with prior practice;
(b) mortgaged, pledged or subjected to lien,
restriction or any other Encumbrance any of the property, businesses
or assets, tangible or intangible, of the Company, except for liens
arising in the ordinary course of business and consistent with prior
practice (i) to secure debt incurred for the purpose of financing all
or part of the purchase price or the cost of construction or
improvement of the equipment or other property subject to such liens,
provided that (A) the principal amount of any debt secured by such
lien does not exceed 100% of such purchase price or cost, (B) such
lien does not extend to or cover any other property other than such
item of property and any improvements on such item and (C) the
incurrence of such debt was in the ordinary course of business and
consistent with prior practice and (ii) pursuant to the terms of the
Amended and Restated Loan and Security Agreement dated as of October
27, 1993 between the Company and Transamerica Business Credit
Corporation, as amended through the date hereof (the "Credit
Agreement");
(c) sold, transferred, leased or loaned to others or
otherwise disposed of any of its assets (or committed to do any of the
foregoing), including the payment of any loans owed to any affiliate,
except for inventory sold to customers or returned to vendors in the
ordinary course of business and consistent with prior practice, or
canceled, waived, released or otherwise compromised any debt or claim,
or any right of significant value, except in the ordinary course of
business and consistent with prior practice;
(d) suffered any damage, destruction or loss
(whether or not covered by insurance) which has had or is reasonably
likely to have a Material Adverse Effect on the Company;
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(e) made or committed to make any capital
expenditures or capital additions or betterments in excess of an
aggregate of $200,000;
(f) encountered any labor union organizing activity,
had any actual or threatened employee strikes, or any work stoppages,
slow-downs or lock-outs related to any labor union organizing activity
or any actual or threatened employee strikes;
(g) instituted any litigation, action or proceeding
before any court, governmental body or arbitration tribunal relating
to it or its property, except for litigation, actions or proceedings
instituted in the ordinary course of business and consistent with
prior practice;
(h) split, combined or reclassified any of its
capital stock, or declared or paid any dividend or made any other
payment or distribution in respect of its capital stock, or directly
or indirectly redeemed, purchased or otherwise acquired any of its
capital stock;
(i) acquired, or agreed to acquire, by merging or
consolidating with, or by purchasing a substantial equity interest in
or a substantial portion of the assets of, or by any other manner, any
business or any corporation, partnership, association or other
business organization or division thereof, or otherwise acquired, or
agreed to acquire, any assets which are material, individually or in
the aggregate, to the Company, except for purchases of inventory in
the ordinary course of business and consistent with prior practice;
(j) increased, or agreed or promised to increase,
the compensation of any officer, employee or agent of the Company,
directly or indirectly, including by means of any bonus, pension plan,
profit sharing, deferred compensation, savings, insurance, retirement,
or any other employee benefit plan, except in the ordinary course of
business and consistent with prior practice;
(k) increased promotional or advertising
expenditures except in the ordinary course of business and consistent
with prior practice or otherwise changed its policies or practices
with respect thereto;
(l) made or changed any election concerning Taxes or
Tax Returns, changed an annual accounting period, adopted or changed
any accounting method, filed any amended Tax Return or extended the
applicable statute of limitations for any taxable period; or
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(m) received notification of an examination, audit
or pending assessment with respect to Taxes, entered into any closing
agreement with respect to Taxes, settled or compromised any Tax claim
or assessment or surrendered any right to claim a refund of Taxes or
obtained or entered into any Tax ruling, agreement, contract,
understanding, arrangement or plan except, solely with respect to the
period from the date hereof through the Closing Date, if (i) such
event or the subject matter thereof has not had or is not reasonably
likely to have, individually and in the aggregate, a Material Adverse
Effect on the Company and (ii) the Company has fully reserved against
such event or the subject matter thereof.
3.15 Litigation. Except as specifically disclosed in the
Company SEC Documents filed prior to the date hereof, there is no (i)
outstanding consent, order, judgment, writ, injunction, award or decree of any
Governmental Entity or arbitration tribunal against or involving the Company or
any of its properties or assets, (ii) action, suit, claim, counterclaim,
litigation, arbitration, dispute or proceeding pending or, to the Company's
best knowledge, threatened against or involving the Company or any of its
properties or assets or (iii) to the Company's best knowledge, investigation or
audit pending or threatened against or relating to the Company or any of its
properties or assets or any of its officers or directors (in their capacities
as such) (collectively, "Proceedings") which are, individually or in the
aggregate, reasonably likely to have a Material Adverse Effect on the Company,
or would restrict, prohibit or prevent the consummation of the transactions
contemplated hereby. To the Company's best knowledge, there is no basis for
any Proceeding which, if commenced, would be reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on the Company, or
would restrict, prohibit or prevent the consummation of the transactions
contemplated hereby.
3.16 Compliance With Law and Other Instruments. (a) Except
as disclosed in the Disclosure Memorandum with specific reference to this
Section, the Company and its properties, assets, operations and activities,
have complied and are in compliance in all respects with all applicable
federal, state and local laws, rules, regulations, ordinances, orders,
judgments and decrees including, without limitation, health and safety statutes
and regulations and all Environmental Laws, including, without limitation, all
restrictions, conditions, standards, limitations, prohibitions, requirements,
obligations, schedules and timetables contained in the Environmental Laws or
contained in any regulation, code, plan, order, decree, judgment, injunction,
notice or demand letter issued, entered, promulgated or approved thereunder,
except, with respect to laws, rules, regulations, ordinances, orders, judgments
and decrees other than those relating to Environmental Laws, the Foreign
Corrupt Practices Act and applicable criminal statutes, where the failure
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to have complied or be in compliance is not, individually or in the aggregate,
reasonably likely to have a Material Adverse Effect on the Company, or that
would restrict, prohibit or prevent the consummation of the transactions
contemplated hereby. The Company is not in violation of or in default under
any terms or provisions of (i) its Amended and Restated Certificate of
Incorporation, as amended, or Amended and Restated By-laws, as amended (ii) any
credit or loan agreement (including, without limitation, the Credit Agreement
and the Loan Agreement dated June 19, 1992 between the Company and The Citizens
and Southern National Bank of South Carolina), mortgage or security agreement,
deed of trust, note, bond or indenture, (iii) the Lease Agreement dated October
25, 1993 between the Company and Holmes Road Associates or the Equipment Lease
Agreement dated November 1, 1989 between the Company and CLG, Inc., as amended,
modified or supplemented through the date hereof or (iv) any other instrument,
obligation, contract or agreement to which it is subject or by which it is
bound, except, in the case of clause (iv), for violations or defaults which are
not, individually or in the aggregate, reasonably likely to have a Material
Adverse Effect on the Company. Notwithstanding anything to the contrary
contained in this Section 3.16, with respect to any representation and warranty
given with respect to Environmental Laws or related matters which is limited to
events, occurrences or circumstances which, individually or in the aggregate,
are reasonably likely to have a Material Adverse Effect on the Company
(including, without limitation, the representations and warranties contained in
subsections (a) and (e) through (k) hereof), such limitations (or words of
similar import) shall be applicable solely with respect to the period from the
date hereof through the Closing Date.
(b) The Disclosure Memorandum sets forth with specific
reference to this Section, as of the date hereof and as of the Closing Date:
(i) all federal, state, local and foreign governmental licenses, permits,
consents, approvals and other authorizations ("Permits") of the business of the
Company; and (ii) all reports of inspection of the Company and its properties
under all applicable federal, state and local health and safety laws, rules,
regulations and ordinances. The Company has heretofore delivered to Parent
complete and correct copies of all of the foregoing.
(c) Except as disclosed in the Disclosure Memorandum with
specific reference to this Section, the Company has obtained all Permits that
are (i) required under all federal, state and local laws, rules, regulations,
ordinances, orders, judgments and decrees, including, without limitation, the
Environmental Laws, for the ownership, use and operation of each property,
facility or location owned, operated or leased by the Company (the "Property")
or (ii) otherwise necessary in the conduct of the business of the Company,
except for failures to obtain Permits (other than those that would result in
the imposition of criminal sanctions) which are not, individually or in the
aggregate,
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reasonably likely to have a Material Adverse Effect on the Company. Except as
disclosed in the Disclosure Memorandum with specific reference to this Section,
all such Permits are in effect, no appeal nor any other action is pending to
revoke any such Permit, and the Company is in full compliance with all terms
and conditions of all such Permits, except for failures to be in compliance
which are not, individually or in the aggregate, reasonably likely to have a
Material Adverse Effect on the Company.
(d) The Company has heretofore delivered to Parent true and
complete copies of all environmental studies in the Company's possession
relating to the Property or any other property or facility previously owned,
operated or leased by the Company.
(e) Except as disclosed in the Disclosure Memorandum with
specific reference to this Section, there is no civil, criminal or
administrative action, suit, demand, claim, hearing, notice of violation,
investigation, proceeding, notice or demand letter pending relating to the
Company or the Property (or any other property or facility formerly owned,
operated or leased by the Company) or, to the Company's best knowledge,
threatened relating to the Company or the Property (or any other such property
of facility) and relating in any way to the Environmental Laws or any
regulation, code, plan, order, decree, judgment, injunction, notice or demand
letter issued, entered, promulgated or approved thereunder, except for such
actions, suits, demands, claims, hearings, notices of violation, proceedings,
notices or demand letters which are not, individually or in the aggregate,
reasonably likely to have a Material Adverse Effect on the Company.
(f) Except as disclosed in the Disclosure Memorandum with
specific reference to this Section, the Company has not, and to the Company's
best knowledge, no other Person has, Released, placed, stored, buried or dumped
any Hazardous Substances, Oils, Pollutants or Contaminants or any other wastes
produced by, or resulting from, any business, commercial, or industrial
activities, operations, or processes, on, beneath, or adjacent to the Property
(or any other property or facility formerly owned, operated or leased by the
Company) except for inventories of such substances to be used, and wastes
generated therefrom, in the ordinary course of business of the Company (which
inventories and wastes, if any, were and are stored or disposed of in
accordance with applicable laws and regulations and in a manner such that there
has been no Release of any such substances into the environment), except where
such remediations of Hazardous Substances, Oils, Pollutants or Contaminants are
not, individually or in the aggregate, reasonably likely to have a Material
Adverse Effect on the Company.
(g) Except as disclosed in the Disclosure Memorandum with
specific reference to this Section, no Release or Cleanup
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occurred at the Property (or any other property or facility formerly owned,
operated or leased by the Company) which could result in the assertion or
creation of a lien on the Property by any Governmental Entity with respect
thereto, nor has any such assertion of a lien been made by any Governmental
Entity with respect thereto, except for such Releases, Cleanups or assertions
of liens which are not, individually or in the aggregate, reasonably likely to
have a Material Adverse Effect on the Company.
(h) Except as disclosed in the Disclosure Memorandum with
specific reference to this Section, no employee of the Company in the course of
his or her employment with the Company has been exposed to any Hazardous
Substances, Oils, Pollutants or Contaminants or any other substance, generated,
produced or used by the Company which could give rise to any claim against the
Company, except for such claims which are not, individually or in the
aggregate, reasonably likely to have a Material Adverse Effect on the Company.
(i) Except as disclosed in the Disclosure Memorandum with
specific reference to this Section, the Company has not received any notice or
order from any Governmental Entity or private or public entity advising it that
the Company is responsible for or potentially responsible for Cleanup or paying
for the cost of Cleanup of any Hazardous Substances, Oils, Pollutants or
Contaminants or any other waste or substance, and the Company has not entered
into any agreements concerning such Cleanup, nor is the Company aware of any
facts which might reasonably give rise to such notice, order or agreement,
except for such notices, orders or agreements which are not, individually or in
the aggregate, reasonably likely to have a Material Adverse Effect on the
Company.
(j) Except as disclosed in the Disclosure Memorandum with
specific reference to this Section, and except for such items which are not,
individually or in the aggregate, reasonably likely to have a Material Adverse
Effect on the Company, the Property does not contain any: (i) underground
storage tanks; (ii) asbestos; (iii) equipment using PCBs; (iv) underground
injection wells; or (v) septic tanks in which process wastewater or any
Hazardous Substances, Oils, Pollutants or Contaminants have been disposed.
(k) Except as disclosed in the Disclosure Memorandum with
specific reference to this Section, with regard to the Company and the Property
(or any other property or facility formerly owned, operated or leased by the
Company), and except where the following are not, individually or in the
aggregate, reasonably likely to have a Material Adverse Effect on the Company,
there are no past or present or, to the Company's best knowledge, future
events, conditions, circumstances, activities, practices, incidents, actions or
plans which may interfere with or prevent compliance or continued compliance
with the
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Environmental Laws as in effect on the date hereof or with any regulation,
code, plan, order, decree, judgment, injunction, notice or demand letter
issued, entered, promulgated or approved thereunder, or which may give rise to
any common law or legal liability under the Environmental Laws, or otherwise
form the basis of any claim, action, demand, suit, proceeding, hearing, notice
of violation, study or investigation, based on or related to the manufacture,
generation, processing, distribution, use, treatment, storage, place of
disposal, transport or handling, or the Release or threatened Release into the
indoor or outdoor environment by the Company or a present or former facility of
the Company, of any Hazardous Substances, Oils, Pollutants or Contaminants.
(l) The Company has not entered into any agreement that may
require it to pay to, reimburse, guaranty, pledge, defend, indemnify or hold
harmless any person for or against Environmental Liabilities and Costs.
(m) The following terms shall be defined as follows:
"Cleanup" means all actions required to: (1) cleanup, remove, treat
or remediate Hazardous Substances, Oils, Pollutants or Contaminants in
the indoor or outdoor environment; (2) prevent the Release of
Hazardous Substances, Oils, Pollutants or Contaminants so that they do
not migrate, endanger or threaten to endanger public health or welfare
or the indoor or outdoor environment; (3) perform pre-remedial studies
and investigations and post-remedial monitoring and care; or (4)
respond to any government requests for information or documents in any
way relating to cleanup, removal, treatment or remediation or
potential cleanup, removal, treatment or remediation of Hazardous
Substances, Oils, Pollutants or Contaminants in the indoor or outdoor
environment.
"Environmental Laws" means all foreign, federal, state and local laws,
regulations, rules and ordinances relating to pollution or protection
of the environment, including, without limitation, laws relating to
Releases or threatened Releases of Hazardous Substances, Oils,
Pollutants or Contaminants into the indoor or outdoor environment
(including, without limitation, ambient air, surface water,
groundwater, land, surface and subsurface strata) or otherwise
relating to the manufacture, processing, distribution, use, treatment,
storage, Release, transport or handling of Hazardous Substances, Oils,
Pollutants or Contaminants, and all laws and regulations with regard
to recordkeeping, notification, disclosure and reporting requirements
respecting Hazardous Substances, Oils, Pollutants or Contaminants.
"Environmental Liabilities and Costs" means all liabilities,
obligations, responsibilities, obligations to conduct
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Cleanup, losses, damages, deficiencies, punitive damages,
consequential damages, treble damages, costs and expenses (including,
without limitation, all fees, disbursements and expenses of counsel,
expert and consulting fees and costs of investigations and feasibility
studies and responding to government requests for information or
documents), fines, penalties, restitution and monetary sanctions,
interest, direct or indirect, known or unknown, absolute or
contingent, past, present or future, resulting from any claim or
demand, by any Person, whether based in contract, tort, implied or
express warranty, strict liability, joint and several liability,
criminal or civil statute, including any Environmental Law, or arising
from environmental, health or safety conditions, involving the Release
or threatened Release of Hazardous Substances, Oils, Pollutants or
Contaminants into the environment, as a result of past or present
ownership, leasing or operation of any properties, owned, leased or
operated by the Company, including, without limitation, any of the
foregoing incurred in connection with the conduct of any Cleanup.
"Hazardous Substances, Oils, Pollutants or Contaminants" means all
substances defined as such in the National Oil and Hazardous
Substances Pollution Contingency Plan, 40 C.F.R. Section 300.5, or
defined as such by, or regulated as such under, any Environmental Law.
"Release" means, when used as a noun, any release, spill, emission,
discharge, leaking, pumping, injection, deposit, disposal, discharge,
dispersal, leaching or migration into the indoor or outdoor
environment (including, without limitation, ambient air, surface
water, groundwater, and surface or subsurface strata) or into or out
of any property, including the movement of Hazardous Substances, Oils,
Pollutants or Contaminants through or in the air, soil, surface water,
groundwater or property, and when used as a verb, the occurrence of
any Release.
3.17 Insurance. Except as disclosed in the Disclosure
Memorandum with specific reference to this Section, the insurance policies in
force with respect to the business and properties of the Company are in full
force and effect, all premiums with respect thereto covering all periods up to
and including the Closing Date have been paid, and no notice of cancellation or
termination has been received with respect to any such policy. Such policies
are sufficient for material compliance with all requirements of law and all
agreements to which the Company is a party; are valid, outstanding and
enforceable policies; and provide adequate insurance coverage for the assets
and operations of the Company.
3.18 Affiliate Interests. (a) Except as disclosed by the
Company SEC Documents and except for services provided by the Company's
directors and executive officers in their capacities as
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such since the date of the Company's most recent Proxy Statement filed pursuant
to the Exchange Act and the compensation paid therefor, the Disclosure
Memorandum sets forth all amounts paid (or deemed for accounting purposes to
have been paid) and services provided by the Company to, or received by the
Company from, any affiliate of the Company since December 31, 1991 and all such
amounts currently owed by the Company to, or to the Company by, any affiliate
of the Company. For purposes of this Agreement, the term "affiliate" shall
have the meaning ascribed thereto in Rule 405 of the Securities Act.
(b) Each contract, agreement, plan or arrangement between the
Company, on the one hand, and any affiliate of the Company or affiliate
thereof, on the other hand ("Affiliate Agreements") is disclosed in the
Disclosure Memorandum with specific reference to this Section or Section
3.18(a). Except as disclosed in the Disclosure Memorandum with specific
reference to this Section or Section 3.18(a), each of the transactions
described in Section 3.18(a) and each of the Affiliate Agreements was entered
into in the ordinary course of business and on commercially reasonable terms
and conditions.
3.19 Customers and Suppliers. Except as set forth in the
Disclosure Memorandum with specific reference to this Section, no customer or
customers which, individually or in the aggregate, accounted for more than 5%
of the Company's gross revenues during the 12 month period preceding the date
hereof, and no supplier or suppliers which, individually or in the aggregate,
accounted for more than 5% of the Company's cost of goods sold during the 12
month period preceding the date hereof, has canceled or otherwise terminated,
or made any written threat to the Company to cancel or otherwise terminate, for
any reason, including without limitation the consummation of the transactions
contemplated hereby, its relationship with the Company, or has at any time on
or after March 31, 1994 decreased materially its services or supplies to the
Company in the case of any such supplier, or its usage of the services or
products of the Company. Except as set forth in the Disclosure Memorandum with
specific reference to this Section, to the Company's best knowledge, no such
supplier or customer intends to cancel or otherwise terminate its relationship
with the Company or to decrease materially its services or supplies to the
Company or its usage of the services or products of the Company, as the case
may be.
3.20 Absence of Questionable Payments. Neither the Company
nor any director, officer, agent, employee or other Person acting on behalf of
the Company, has used, or authorized the use of, any corporate or other funds
for unlawful contributions, payments, gifts, or entertainment, or made any
unlawful expenditures relating to political activity to government officials or
others or established or maintained any unlawful or unrecorded funds in
violation of Section 30A of the Exchange Act. Neither the Company nor any
current director,
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officer, agent, employee or other Person acting on behalf of the Company, has
accepted or received any unlawful contributions, payments, gifts, or
expenditures.
3.21 Information Supplied. None of the information supplied
or to be supplied by the Company for inclusion or incorporation by reference in
(i) the registration statement on Form S-4 to be filed with the SEC by Parent
in connection with the issuance of shares of the Parent Common Stock in the
Merger (the "S-4") will, at the time the S-4 becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading, (ii) the proxy statement in definitive form
relating to the meeting of the Company's stockholders to be held in connection
with the Merger (the "Proxy Statement") will, at the date first mailed to
stockholders, contain any untrue statement of a material fact or omit to state
any material fact necessary to make the statements therein, in light of
circumstances under which they are made, not misleading and (iii) the Proxy
Statement or any amendment thereof or supplement thereto will, at the time of
the meeting of Company stockholders to be held in connection with the Merger,
contain any untrue statement of a material fact, or omit to state any material
fact necessary to correct any statement in any earlier communication with
respect to the solicitation of any proxy for such meeting of stockholders. The
Proxy Statement will comply as to form in all material respects with the
provisions of the Exchange Act and the rules and regulations thereunder.
3.22 Opinion of Financial Advisor. The Company has received
the opinion of The Robinson-Humphrey Company, Inc., dated the date hereof, to
the effect that, as of such date, the consideration to be received in the
Merger by the Company's stockholders is fair to the Company's stockholders from
a financial point of view, a copy of which opinion has been delivered to
Parent.
3.23 Vote Required. The affirmative vote of the holders of a
majority of the outstanding shares of the Company Common Stock is the only vote
of the holders of any class or series of the Company's capital stock necessary
to approve this Agreement and the transactions contemplated hereby.
3.24 Accounting Matters. Neither the Company nor any of its
affiliates has through the date of this Agreement taken or agreed to take any
action that (without giving effect to any action taken or agreed to be taken by
Parent or any of its affiliates) would prevent Parent from accounting for the
business combination to be effected by the Merger as a pooling of interests.
3.25 Company Not an Interested Shareholder or a 30%
Shareholder. As of the date hereof, neither the Company nor any of its
affiliates is an "interested shareholder" of Parent as
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such term is defined in Section 912 of the New York Business Corporation Law or
a "30% Shareholder" of Parent as such term is defined in Article TENTH of
Parents' Restated Certificate of Incorporation.
3.26 Section 203 of the DGCL Not Applicable. The provisions
of Section 203 of the DGCL will not, prior to the termination of this
Agreement, apply to this Agreement, the Option Agreement, the Merger or the
other transactions contemplated hereby.
3.27 Disclosure. (a) No representation or warranty by the
Company in this Agreement, including the Disclosure Memorandum, contains or
will contain any untrue statement of a material fact or omits or will omit to
state any material fact necessary, in light of the circumstances under which it
was made, to make the statements herein or therein not misleading. There is no
fact known to the Company which has or could have a Material Adverse Effect on
the Company, which has not been set forth in this Agreement, including the
Disclosure Memorandum.
(b) The Company has made available or caused to be made
available to Parent complete and correct copies of all agreements, instruments
and documents set forth in the Disclosure Memorandum or underlying a disclosure
set forth in the Disclosure Memorandum.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant to the Company as follows:
4.1 Organization. Parent is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of New York. Sub is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware.
4.2 Corporate Authority. Each of Parent and Sub has full
corporate power and authority to enter into this Agreement and to consummate
the transactions contemplated hereby. The execution, delivery and performance
by each of Parent and Sub of this Agreement have been duly authorized by all
requisite corporate action on the part of Parent and Sub, respectively. This
Agreement has been duly executed and delivered by each of Parent and Sub, and
(assuming due execution and delivery by the Company) this Agreement constitutes
a valid and binding obligation of Parent and Sub, enforceable in accordance
with its terms, except as enforcement may be limited by bankruptcy, insolvency
or other similar laws affecting the enforcement of creditors' rights generally,
and except that the availability of
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equitable remedies, including specific performance, is subject to the
discretion of the court before which any proceeding therefor may be brought,
and except as indemnification may be limited by public policy.
4.3 No Violation; Consents and Approvals. Except as
disclosed in Parent's Disclosure Memorandum furnished to the Company on the
date hereof (the "Parent Disclosure Memorandum"), neither Parent, Sub nor any
of their respective properties or assets, is subject to or bound by any
provision of:
(a) any law, statute, rule, regulation, ordinance or
judicial or administrative decision;
(b) any articles or certificate of incorporation or
by-laws;
(c) any (i) credit or loan agreement, mortgage, deed of
trust, note, bond, indenture, license, concession, franchise, permit,
trust, custodianship, other restriction, (ii) instrument, obligation,
contract or agreement (including, without limitation, any lease),
other than those contemplated by clause (i), which, in the case of
this clause (ii), individually involves the payment or receipt by
Parent of in excess of $50,000 or (iii) instruments, obligations,
contracts or agreements (including, without limitation, leases) other
than those contemplated by clause (i), which in the case of this
clause (iii), collectively involve the payment or receipt by Parent of
in excess of $500,000; or
(d) any judgment, order, writ, injunction or decree;
that would restrict, prohibit or prevent, or would be violated or breached by,
or under which there would be a material default (with or without notice or
lapse of time, or both) as a result of, the execution, delivery and performance
by each of Parent and Sub of this Agreement and the consummation of the
transactions contemplated hereby. Except as disclosed in the Parent Disclosure
Memorandum, no consent, order, approval or authorization of, or declaration,
notice, registration or filing with, any Person is required by or with respect
to the execution, delivery and performance by Parent and Sub of this Agreement
and the consummation of the transactions contemplated hereby.
4.4 Capitalization. As of the date hereof, the
authorized capital stock of Parent consists of 60,000,000 shares of the Parent
Common Stock and 2,000,000 shares of Preferred Stock, par value $1.00 per share
(the "Parent Preferred Stock"). At the close of business on June 3, 1994, (i)
31,506,174 shares of the Parent Common Stock were issued and outstanding,
2,682,641 shares of the Parent Common Stock were reserved for issuance pursuant
to Parent's Stock Option Plan (the "Parent Option Plan"), and 3,773,625 shares
of the Parent Common Stock
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were reserved for issuance pursuant to Parent's Convertible Subordinated
Debentures (the "Convertible Debentures"), (ii) 11,247 shares of the Parent
Common Stock were reflected on the books and records of Parent as treasury
shares, (iii) no shares of the Parent Preferred Stock were issued or
outstanding and (iv) other than the Convertible Debentures, no Voting Debt of
Parent was issued or outstanding. All such issued and outstanding shares of
the Parent Common Stock have been, and any shares of the Parent Common Stock
which may be issued pursuant to the Parent Option Plan or the Convertible
Debentures will be, validly issued, fully paid and nonassessable and not
subject to preemptive rights. All shares of the Parent Common Stock which are
to be issued pursuant to the Merger will be, when issued in accordance with the
terms hereof, validly issued, fully paid and nonassessable. Except for (a) the
rights created pursuant to this Agreement, (b) the rights created pursuant to
the Parent Option Plan to purchase 2,682,641 shares of the Parent Common Stock,
the rights created pursuant to the Convertible Debentures to purchase 3,773,625
shares of the Parent Common Stock and the Parent Rights created pursuant to the
Parent Rights Agreement to purchase 315,061.74 shares of the Parent Preferred
Stock and (c) the issued and outstanding shares of the Parent Common Stock and
the Convertible Debentures set forth herein (except for changes since June 3,
1994 resulting from the exercise of the rights created pursuant to the Parent
Option Plan and the Convertible Debentures), as of the date hereof, there are
no (i) outstanding shares of capital stock or Voting Debt of Parent, (ii)
outstanding options, warrants, calls, subscriptions or other rights of any kind
to acquire, or agreements or commitments in effect to which Parent is a party
or by which Parent is bound obligating Parent to issue or sell, or cause to be
issued or sold, any additional shares of capital stock or any Voting Debt of
Parent or (iii) outstanding securities convertible or exchangeable for, or
which otherwise confer on the holder thereof any right to acquire, any such
additional shares or Voting Debt. Except as contemplated by this Agreement, as
of the date hereof, Parent is not committed to issue any such option, warrant,
call, subscription, right or security.
4.5 SEC Reports and Financial Statements of Parent. Parent
has filed with the SEC, and has heretofore provided to the Company true and
complete copies of, all forms, reports, schedules, statements and other
documents required to be filed by it since January 1, 1989 under the Exchange
Act or the Securities Act (as such documents have been amended since the time
of their filing, collectively, the "Parent SEC Documents"). The Parent SEC
Documents, including without limitation any financial statements and schedules
included therein, at the time filed or, if subsequently amended, as so amended,
(i) did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading and (ii) complied in all material respects with the applicable
requirements of the Exchange Act and
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the Securities Act, as the case may be, and the applicable rules and
regulations of the SEC thereunder. The financial statements of Parent included
in the Parent SEC Documents comply as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance with GAAP
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto or, in the case of the unaudited statements, as
permitted by Form 10-Q of the SEC) and fairly present (subject, in the case of
the unaudited statements, to customary year-end audit adjustments) the
consolidated financial position of the Company and its consolidated
Subsidiaries as at the dates thereof and the consolidated results of their
operations and cash flows.
4.6 Information Supplied. None of the information supplied
or to be supplied by Parent for inclusion or incorporation by reference in the
S-4 will, at the time the S-4 becomes effective under the Securities Act, at
the time of the meeting of the Company stockholders to be held in connection
with the Merger or at the Closing Date, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading.
ARTICLE 5
CERTAIN COVENANTS AND AGREEMENTS
OF THE COMPANY AND PARENT
5.1 Conduct of the Company's Business Prior to the Closing
Date. The Company agrees that, between the date hereof and the Closing Date:
(a) Except as contemplated by this Agreement, as disclosed in
the Disclosure Memorandum with specific reference to this Section or as
permitted by the prior written consent of Parent, the Company shall operate its
business only in the usual, regular and ordinary course consistent with prior
practice and not:
(i) take any action of the nature referred to in
Section 3.14, except as permitted therein;
(ii) issue, deliver or sell, or authorize or
propose the issuance, delivery or sale of, any shares of its capital
stock (except pursuant to, and in accordance with the terms of, the
rights outstanding on the date hereof created pursuant to the Company
Option Plans) or any Voting Debt, or any securities convertible into
or exchangeable for, or any rights, warrants, calls, subscriptions or
options to acquire, any shares of its capital stock or any Voting
Debt;
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(iii) change the Company's banking or safe deposit
arrangements;
(iv) modify or amend, or authorize or propose to modify
or amend, the Company's Amended and Restated Certificate of
Incorporation, as amended, or Amended and Restated Bylaws, as amended;
or
(v) take any action that would or is reasonably
likely to result in any of the Company's representations and
warranties set forth in this Agreement not to be true as of the date
made (to the extent so limited) or in any of the conditions to the
Merger set forth in Article 6 not being satisfied.
(b) The Company shall preserve the business organization of
the Company intact and shall use its best efforts to keep available to Parent
the services of the present officers and employees of the Company and to
preserve for Parent the good will of the Company's suppliers, customers, and
others having business relations with the Company. Except with the prior
written consent of Parent (not to be unreasonably withheld), the Company shall
not terminate or cause to be terminated any distribution agreement to which it
is a party.
(c) The Company shall maintain in force the insurance
policies referred to in Section 3.17 or insurance policies providing the same
or substantially similar coverage; provided, however, that the Company will
notify Parent prior to the expiration of any of such insurance policies.
(d) The Company shall diligently pursue its rights with
respect to the matters listed in the Disclosure Memorandum with respect to
Sections 3.14 and 3.15.
(e) Except as contemplated by this Agreement or permitted
by the prior written consent of Parent, no plan, fund, or arrangement referred
to in Section 3.12 has been or will be:
(i) terminated by the Company;
(ii) amended (except as expressly required by law) in any
manner which would directly or indirectly increase the benefits
accrued, or which may be accrued, by any participant thereunder; or
(iii) amended in any manner which would materially
increase the cost to Parent of maintaining such plan, fund, or
arrangement.
5.2 Conduct of Parent's Business Prior to the Closing Date.
Parent agrees that, between the date hereof and the Closing Date, except as
contemplated by this Agreement or permitted by the prior written consent of the
Company, Parent
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shall (a) conduct its business and the business of its Subsidiaries on a
consolidated basis in a manner designed in its reasonable judgment to enhance
the long-term value of the Parent Common Stock and to the extent consistent
therewith, use its best efforts to preserve the goodwill of Parents' and its
Subsidiaries' suppliers, customers and others having business relations with
Parent and its Subsidiaries and (b) not take any action that would or is
reasonably likely to result in any of Parent's or Sub's representations and
warranties set forth in this Agreement not to be true as of the date made (to
the extent so limited) or in any of the conditions of the Merger set forth in
Article 6 not being satisfied.
5.3 Preparation of S-4 and the Proxy Statement. The Company
shall promptly prepare and file with the SEC the Proxy Statement and Parent
shall promptly prepare and file with the SEC the S-4, in which the Proxy
Statement will be included as a prospectus. Parent shall use its best efforts
to have the S-4 declared effective under the Securities Act as promptly as
practicable after such filing. Parent shall also take any action (other than
qualifying to do business in any jurisdiction in which it is not now so
qualified) required to be taken under any applicable state securities laws in
connection with the issuance of the Parent Common Stock in the Merger and the
Company shall furnish all information concerning the Company and the holders of
the Company Common Stock as may be reasonably requested in connection with any
such action.
5.4 Letter of the Company's Accountants. The Company shall
use its best efforts to cause to be delivered to the Company and to Parent a
letter of KPMG Peat Marwick, the Company's independent auditors, dated a date
within two business days before the date on which the S-4 shall become
effective and addressed to the Company and to Parent, in form and substance
reasonably satisfactory to the Company and to Parent and customary in scope and
substance for letters delivered by independent public accountants in connection
with registration statements similar to the S-4.
5.5 Legal Conditions to Merger. Each of the Company, Parent
and Sub will take all reasonable actions necessary to comply promptly with all
legal requirements which may be imposed on itself with respect to the Merger
(which actions shall include, without limitation, furnishing all information
required in connection with approvals of or filing with any Governmental
Entity) and will promptly cooperate with each other and furnish information to
each other in connection with any such requirements imposed upon any of them or
any of their Subsidiaries in connection with the Merger. Each of the Company,
Parent and Sub will, and will cause its Subsidiaries to, take all reasonable
actions necessary to obtain (and will cooperate with each other in obtaining)
any consent, authorization, order or approval of, or any exemption by, any
Governmental Entity or other public or private third party, required to be
obtained or
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made by Parent, the Company or any of their Subsidiaries in connection with the
Merger or the taking of any action contemplated thereby or by this Agreement.
5.6 Affiliates. Prior to the Closing Date the Company shall
deliver to Parent a letter identifying all Persons (including, without
limitation, Cheyenne Software, Inc., Dennis Gates and the Company's other
directors) who are, at the time this Agreement is submitted for approval to the
stockholders of the Company, "affiliates" of the Company for purposes of Rule
145 under the Securities Act. The Company shall use its best efforts to cause
each such Person to deliver to Parent on or prior to the Closing Date a written
agreement, substantially in the form attached as Exhibit 5.6 hereto. Parent
shall promptly prepare and file with the SEC a registration statement on Form
S-3 (the "S-3") with respect to the sale of shares of Parent Common Stock
received by Cheyenne Software, Inc. and Dennis Gates in connection with the
Merger, and shall use its best efforts to have the S-3 declared effective under
the Securities Act as promptly as practicable after such filing. Parent shall
maintain the effectiveness under the Securities Act of the S-3 for a period of
two years.
5.7 Stock Exchange Listing. Parent shall use its best
efforts to cause the shares of Parent Common Stock to be issued in the Merger,
and such other shares of Parent Common Stock to be issued pursuant to the
Parent Options (as defined in Section 5.17), to be approved for listing on the
NYSE and any other national securities exchange on which shares of Parent
Common Stock may at such time be listed, subject to official notice of
issuance, prior to the Closing Date.
5.8 Stockholders' Meeting. The Company shall call a
meeting of its stockholders to be held as promptly as practicable for the
purpose of voting upon the adoption of this Agreement and related matters. The
Company will, through its Board of Directors, unanimously recommend to its
stockholders approval of such matters and will coordinate and cooperate with
Parent with respect to the timing of such meeting and shall use its best
efforts to hold such meeting as soon as practicable after the S-4 is declared
effective; provided, however, that the Board of Directors shall not be
obligated to recommend approval of this Agreement, the Merger, and related
matters to its stockholders if the Board of Directors of the Company, acting
with the advice of the Company's counsel and financial advisors, determines
that such recommendation would be contrary to their legal obligations under the
DGCL as directors of the Company.
5.9 Fees and Expenses. (a) Except as set forth in Section
5.9(b), whether or not the Merger is consummated, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expense (it being agreed that
the out-of-pocket costs and expenses incurred by the Company in connection with
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this Agreement and the transactions contemplated hereby (including, without
limitation, the fees and expenses of its advisors, accountants and legal
counsel) shall not exceed $2,000,000), and, in connection therewith, each of
Parent and the Company shall pay, with its own funds and not with funds
provided by the other party, any and all property or transfer taxes imposed on
such party resulting from the Merger, except that expenses incurred in
connection with the Proxy Statement and the S-4 shall be shared equally by
Parent and the Company.
(b) In the event that (i) either Parent or the Company
shall terminate this Agreement pursuant to Section 7.1(e), (ii) either Parent
or the Company shall terminate this Agreement pursuant to Section 7.1(f)(ii)
following a failure of the stockholders of the Company to approve this
Agreement and, prior to the time of the meeting of the Company's stockholders,
there shall have been (A) a Trigger Event with respect to the Company or (B) a
Takeover Proposal (as defined in Section 5.14) with respect to the Company
which at the time of the meeting of the Company's stockholders shall not have
been (x) rejected by the Company and (y) withdrawn by the third party, or (iii)
Parent shall terminate this Agreement pursuant to Section 7.1(c), due in whole
or in part to any failure by the Company to use its best efforts to perform and
comply with all agreements and conditions required by this Agreement to be
performed or complied with by the Company prior to or on the Closing Date or
any failure by the Company's affiliates to take any actions required to be
taken hereby, and prior thereto there shall have been (A) a Trigger Event with
respect to the Company or (B) a Takeover Proposal with respect to the Company
which shall not have been (x) rejected by the Company and (y) withdrawn by the
third party, then the Company shall reimburse Parent for all of the
out-of-pocket costs and expenses incurred by Parent in connection with this
Agreement and the transactions contemplated hereby (including, without
limitation, the fees and expenses of its advisors, accountants and legal
counsel) up to a maximum amount of $1,000,000, and, in addition, the Company
shall promptly pay to Parent the sum of $4,000,000, as liquidated damages and
not as a penalty. As used herein, a "Trigger Event" shall occur if any Person
acquires securities representing 10% or more, or commences a tender or exchange
offer following the successful consummation of which the offeror and its
affiliates would beneficially own securities representing 25% or more, of the
voting power of the Company.
5.10 Broker's and Finder's Fees. Each of Parent, Sub and the
Company represents, as to itself, its Subsidiaries, and its affiliates, that no
agent, broker, investment banker, financial advisor or other firm or person is
or will be entitled to any broker's or finder's fee or any other commission or
similar fee in connection with any of the transactions contemplated by this
Agreement, except The Robinson-Humphrey Company, Inc. whose fees and expenses
will be paid by the Company in accordance with the Company's agreement with
such firm (copies of which have been delivered by the Company to Parent prior
to
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the date of this Agreement), and each of Parent and the Company respectively
agrees to indemnify and hold the other harmless from and against any and all
claims, liabilities or obligations with respect to any other fees, commissions
or expenses asserted by any person on the basis of any act or statement alleged
to have been made by such party or its affiliate.
5.11 Access to Information and Confidentiality. The Company
agrees that Parent and Sub may conduct such reasonable investigation with
respect to the business, business prospects, assets, liabilities (contingent or
otherwise), results of operations, employees and financial condition of the
Company as will permit Parent and Sub to evaluate their interest in the
transactions contemplated by this Agreement. Parent and Sub agree that the
Company may conduct such reasonable investigation with respect to the business,
business prospects, assets, liabilities (contingent or otherwise), results of
operations, employees and financial condition of Parent and Sub as will permit
the Company to evaluate its interest in the transactions contemplated by this
Agreement. Each of the Company, Parent and Sub will hold and will cause their
respective representatives to hold in strict confidence, unless compelled to
disclose by judicial or administrative process, or, in the opinion of its
counsel, by other requirements of law, all documents and information concerning
the Company furnished to Parent and Sub and all documents and information
concerning Parent and Sub furnished to the Company in connection with the
transactions contemplated by this Agreement (except to the extent that such
information can be shown to have been (a) previously known by Parent or Sub
prior to its disclosure to Parent or Sub by the Company, (b) previously known
by the Company prior to its disclosure to the Company by Parent and Sub, (c) in
the public domain through no fault of the Company or Parent or Sub or (d) later
lawfully acquired by the Company or Parent or Sub from other sources that are
not under an obligation of confidentiality) and will not release or disclose
such information to any other Person, except in connection with this Agreement
to its lenders, auditors, attorneys, financial advisors and other consultants
and advisors.
5.12 Indemnification. (a) Each of the Constituent
Corporations shall, and from and after the Effective Time Parent and the
Surviving Corporation shall, indemnify, defend and hold harmless each person
who is now, or has been at any time prior to the date hereof or who becomes
prior to the Effective Time, an officer, director or employee of such
Constituent Corporation (the "Indemnified Parties") against (i) all losses,
claims, damages, costs, expenses, liabilities or judgments or amounts that are
paid in settlement with the approval of the indemnifying party (which approval
shall not be unreasonably withheld) of or in connection with any claim, action,
suit, proceeding or investigation based in whole or in part on or arising in
whole or in part out of the fact that such person is or was a director, officer
or employee of such Constituent Corporation, whether
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pertaining to any matter existing or occurring at or prior to the Effective
Time and whether reasserted or claimed prior to, or at or after, the Effective
Time ("Indemnified Liabilities") and (ii) all Indemnified Liabilities based in
whole or in part on, or arising in whole or in part out of, or pertaining to
this Agreement or the transactions contemplated hereby, in each case to the
full extent a corporation is permitted under the DGCL to indemnify its own
directors, officers and employees, as the case may be (and each of the
Constituent Corporations, Parent and the Surviving Corporation, as the case may
be, will pay expenses in advance of the final disposition of any such action or
proceeding to each Indemnified Party to the full extent permitted by law).
Without limiting the foregoing, in the event any such claim, action, suit,
proceeding or investigation is brought against any Indemnified Party (whether
arising before or after the Effective Time), (i) the Indemnified Parties may
retain counsel satisfactory to them and such Constituent Corporation (or them,
Parent and the Surviving Corporation after the Effective Time); (ii) such
Constituent Corporation (or after the Effective Time, Parent and the Surviving
Corporation) shall pay all reasonable fees and expenses of such counsel for the
Indemnified Parties promptly as statements therefor are received; and (iii)
such Constituent Corporation (or after the Effective Time, Parent and the
Surviving Corporation) will use all reasonable efforts to assist in the
vigorous defense of any such matter, provided that neither such Constituent
Corporation nor Parent or the Surviving Corporation shall be liable for any
settlement of any claim effected without its written consent, which consent,
however, shall not be unreasonably withheld. Any Indemnified Party wishing to
claim indemnification under this Section 5.12, upon learning of any such claim,
action, suit, proceeding or investigation, shall notify the Constituent
Corporation (or after the Effective Time, Parent or the Surviving Corporation)
(but the failure so to notify a party shall not relieve such party from any
liability which it may have under this Section 5.12 except to the extent such
failure prejudices such party). The Indemnified Parties as a group may retain
only one law firm to represent them with respect to each such matter unless
there is, under applicable standards of professional conduct, a conflict on any
significant issue between the positions of any two or more Indemnified Parties,
in which case they may retain such number of law firms as is necessary to
address such conflict.
(b) The provisions of this Section 5.12 are intended to be
for the benefit of, and shall be enforceable by, each Indemnified Party, his
heirs and his representatives.
(c) If Parent shall consolidate with or merge into any other
Person and shall not be the continuing or surviving Person of such
consolidation or merger or shall transfer all or substantially all of its
assets to any Person then, and in each case, proper provision shall be made so
that successors and assigns of Parent shall assume the obligations of Parent
set forth in this Section 5.12.
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5.13 Additional Agreements; Best Efforts. Subject to the
terms and conditions of this Agreement, each of the parties hereto agrees to
use best efforts to take, or cause to be taken, all action and, to do or cause
to be done all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement and the Option Agreement, subject to the appropriate vote of
stockholders of the Company described in Section 5.8, including cooperation
fully with the other party, including by provision of information and making
all necessary filings in connection with, among other things, any approvals
required from Governmental Entities. In case at any time after the Effective
Time any further action is necessary or desirable to carry out the purposes of
this Agreement, the proper officers and directors of each party to this
Agreement shall take all such necessary action.
5.14 No Solicitation. The Company shall not, nor shall it
authorize or permit any of its officers, directors or employees or any
investment banker, financial advisor, attorney, accountant or other
representative retained by it to, (a) solicit, initiate or encourage (including
by way of furnishing information), or take any other action to facilitate, any
inquiries or the making of any proposal which constitutes, or may reasonably be
expected to lead to, any Takeover Proposal (as hereinafter defined), or (b)
agree to or endorse any Takeover Proposal. Notwithstanding the immediately
preceding sentence, if the Company shall not have breached the covenant
provided by clause (a) of the immediately preceding sentence and a Takeover
Proposal shall occur, then, to the extent necessary in the written opinion of
legal counsel to the Company or its Board of Directors consistent with the
fiduciary obligations of the Company's Board of Directors, the Company and its
officers, directors, employees, investment bankers, financial advisors,
attorneys, accountants and other representatives retained by it may furnish
information and take other action to facilitate such Takeover Proposal. The
Company shall promptly advise Parent orally and in writing of any such
inquiries or Takeover Proposals. As used in this Agreement, "Takeover
Proposal" shall mean any tender or exchange offer, proposal for a merger,
consolidation or other business combination involving the Company and made by a
Person other than Parent or any of its Subsidiaries or any proposal or offer to
acquire in any manner a substantial equity interest in, or a substantial
portion of the assets of, the Company other than the transactions contemplated
by this Agreement or the Option Agreement.
5.15 Advice of Changes; SEC Filings. Each party shall confer
on a regular and frequent basis with the other, report on operational matters
and promptly advise the other of any change or event having, or which, insofar
as can reasonably be foreseen, could have, a Material Adverse Effect on such
party and its Subsidiaries taken as a whole. Each party shall promptly provide
the other (or its counsel) copies of all filings made by such
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party with any state or Federal Governmental Entity in connection with this
Agreement, the Option Agreement and the transactions contemplated hereby and
thereby.
5.16 Press Releases. Prior to the Effective Time, the
Company and Parent shall consult with each other as to the form and substance
of any press release or other public disclosure related to this Agreement or
any of the transactions contemplated hereby; provided, however, that nothing in
this Section 5.16 shall be deemed to prohibit any party from making any
disclosure which its legal counsel deems necessary or advisable in order to
satisfy such disclosure obligations under applicable laws or regulations.
5.17 Company Option Plans.
(a) At the Effective Time, each unexpired and unexercised
option to purchase shares of Company Common Stock (each a "Company Option")
under the Company Option Plans shall be deemed to be automatically converted
into an option (a "Parent Option") to purchase the number of shares of Parent
Common Stock equal to the number of shares of Company Common Stock that could
have been purchased under such Company Option multiplied by the Conversion
Ratio (with the resulting number of shares rounded down to the nearest whole
share), at a price per share of Parent Common Stock equal to the exercise price
of such Company Option divided by the Conversion Ratio and the result thereof
rounded up to the nearest whole cent provided, however, that, in case any
Company Option intended to qualify as an incentive stock option under Section
422 of the Code (or a predecessor thereto) is deemed converted into a Parent
Option as provided above, the option price, the number of shares of Parent
Common Stock purchasable pursuant to such Parent Option and the terms and
conditions of such Parent Option shall be determined in order to comply with
Section 424(a) of the Code. Such Parent Option shall otherwise be subject to
the same terms and conditions as the Company Option, provided, that there shall
be no accelerated exercisability of any Company Option solely as a result of
consummation of the Merger. The date of grant of the substituted Parent Option
shall be the date on which the corresponding Company Option was granted. The
Board of Directors of the Company shall take such actions as are necessary or
advisable to effect the transactions contemplated by this Section 5.17.
(b) At the Effective Time, Parent shall (i) assume all of the
Company's obligations with respect to Company Options as contemplated by
Section 5.17(a) above, (ii) reserve for issuance the number of shares of Parent
Common Stock that will become subject to Parent Options pursuant to this
Section 5.17, (iii) from and after the Effective Time, upon exercise of the
Parent Options in accordance with the terms thereof, make available for
issuance all shares of Parent Common Stock covered thereby, and (iv) as soon as
practicable after the Effective Time, issue to
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each holder of an outstanding Company Option a document evidencing the
foregoing assumption by Parent.
(c) The Company's Company Stock Purchase Plan shall be
terminated effective as of the Effective Time.
(d) Within a reasonable period of time after the Effective
Time, Parent shall file a registration statement covering the shares of Parent
Common Stock issuable upon the exercise of Company Options (converted to Parent
Options pursuant to this Section 5.17) and shall use its best efforts to cause
the offer and sale of such shares to be registered under the Securities Act,
and to maintain such registration in effect until the exercise or termination
of the Company Options. Parent shall also use its best efforts to cause such
shares of Parent Common Stock to be authorized for listing on the NYSE and
shall make all necessary blue sky law filings in connection therewith.
5.18 Employee Benefits. Following the Effective Time, for
purposes of participation and vesting under Parent's employee benefit plans
(other than stock option or other plans involving the potential issuance of
Parent Common Stock), the service of employees of the Company prior to the
Effective Time shall be treated as service with Parent in such employee benefit
plans.
ARTICLE 6
CONDITIONS PRECEDENT
6.1 Conditions to Each Party's Obligation to Effect the
Merger. The obligation of each party to effect the Merger shall be subject to
the satisfaction prior to the Closing Date of the following conditions:
(a) Stockholder Approval. This Agreement shall have been
adopted by the affirmative vote of the holders of a majority of the outstanding
shares of the Company Common Stock entitled to vote on the Merger.
(b) NYSE Listing. The shares of the Parent Common Stock
issuable to the Company's stockholders pursuant to this Agreement and such
other shares required to be reserved for issuance in connection with the Merger
shall have been authorized for listing on the NYSE upon official notice of
issuance.
(c) Other Approvals. All authorizations, consents,
orders or approvals of, or declarations or filings with, or expirations or
terminations of waiting periods imposed by, any Governmental Entity the failure
to obtain which would have a Material Adverse Effect on the Surviving
Corporation shall have been filed, occurred or been obtained. Parent shall
have received all state securities or "Blue Sky" permits and other
authorizations necessary to issue the Parent Common Stock in
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exchange for the Company Common Stock and to consummate the Merger.
(d) S-4. The S-4 shall have become effective under the
Securities Act and shall not be the subject of any stop order or proceedings
seeking a stop order.
(e) No Injunctions or Restraints. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal restraint or prohibition (an
"Injunction") preventing the consummation of the Merger shall be in effect.
(f) No Governmental Actions. No investigation by any
Governmental Entity shall have been commenced, and no action, suit or
proceeding by any Governmental Entity shall have been threatened, against
Parent, Sub, the Company or any Subsidiary thereof or any of the principals,
officers or directors of any of them, seeking to restrain, prevent or change
the transactions contemplated hereby or questioning the legality or validity of
any such transactions or seeking damages in connection with any such
transactions.
(g) Pooling Letter. Parent and the Company shall have
received a letter from each of KPMG Peat Marwick and Ernst & Young, dated the
date of the Proxy Statement and confirmed in writing at the Effective Time and
addressed to Parent and the Company, stating that the Merger will qualify as a
pooling of interests transaction under Opinion 16 of the Accounting Principles
Board.
(h) Tax Free Reorganization. Each of the Company and
Parent shall have received a certificate, in form and substance satisfactory to
the Company or Parent, as the case may be, from each stockholder of the Company
that owns 5% or more of the outstanding Company Common Stock representing that
such stockholder has no plan or intention to sell, exchange, or otherwise
dispose of (i) shares of Parent Common Stock received in the Merger, (ii)
shares of Parent Common Stock held by such stockholder prior to the Effective
Time, or (iii) except as provided in the Merger Agreement, shares of Company
Common Stock held by such stockholder prior to the Effective Time.
6.2 Conditions to Obligations of Parent and Sub. The
obligations of Parent and Sub to effect the Merger are subject to the
satisfaction of the following conditions, unless waived by Parent and Sub:
(a) Representations and Warranties; Performance of
Obligations. Except as otherwise contemplated or permitted by this Agreement,
(i) the representations and warranties of the Company contained in this
Agreement or in any certificate or document delivered to Parent pursuant hereto
shall be deemed to have been made again at and as of the Closing Date and shall
then
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be true in all respects and (ii) the Company shall have performed and complied
with all agreements and conditions required by this Agreement to be performed
or complied with by the Company prior to or on the Closing Date, and Parent
shall have been furnished with a certificate of an appropriate officer of the
Company, dated the Closing Date, certifying to the effect of clauses (i) and
(ii) hereof.
(b) Tax Opinion. The opinion, based on appropriate
representations of the Company and Parent, of Winthrop, Stimson, Putnam &
Roberts, counsel to Parent, in form and substance satisfactory to such counsel,
to the effect that the Merger will be treated for Federal income tax purposes
as a reorganization within the meaning of Section 368(a) of the Code, and that
Parent, Sub and the Company will each be a party to that reorganization within
the meaning of Section 368(b) of the Code, dated on or about the date of and
referred to in the Proxy Statement as first mailed to stockholders of the
Company, shall not have been withdrawn or modified in any material respect.
(c) No Actions. No action, suit or proceeding before any
court or governmental or regulatory authority shall be pending (other than
those referred to in Section 6.1(f)), against Parent, Sub, the Company, any
Subsidiary thereof or any of the principals, officers or directors of any of
them, seeking to restrain, prevent or change the transactions contemplated
hereby or questioning the legality or validity of any such transactions or
seeking damages in connection with any such transactions.
(d) Consents Under Agreements. The Company shall have
obtained the consent or approval of each Person (other than the Governmental
Entities referred to in Section 6.1(c)) whose consent or approval shall be
required in order to permit the succession by the Surviving Corporation
pursuant to the Merger to any obligation, right or interest of the Company
under any loan or credit agreement, note, mortgage, indenture, lease or other
agreement or instrument, except those for which failure to obtain such consents
and approvals would not, individually or in the aggregate, have a Material
Adverse Effect on the Company or restrict, prohibit or prevent the consummation
of the transactions contemplated hereby.
(e) Letter from Company Affiliates. Parent shall have
received from each Person named in the letter referred to in Section 5.6, an
executed copy of an agreement substantially in a form of Exhibit 5.6 hereto.
(f) Material Adverse Change. Since the date hereof,
there shall not have been any events, changes or occurrences which have had, or
are reasonably likely to have individually or in the aggregate, a Material
Adverse Effect on the Company.
(g) No Amendments to Resolutions. Neither the Board of
Directors of the Company nor any committee thereof shall have
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amended, modified, rescinded or repealed the resolutions adopted by the Board
of Directors on June 24, 1994 (accurate and complete copies of which have been
provided to Parent) and shall not have adopted any other resolutions in
connection with this Agreement and the transactions contemplated hereby
inconsistent with such resolutions.
6.3 Conditions to Obligations of the Company. The
obligation of the Company to effect the Merger is subject to satisfaction of
the following conditions, unless waived by the Company:
(a) Representations and Warranties; Performance of
Obligations. Except as otherwise contemplated or permitted by this Agreement,
(i) the representations and warranties of Parent and Sub contained in this
Agreement or in any certificate or document delivered to the Company pursuant
hereto shall be deemed to have been made again at and as of the Closing Date
and shall then be true in all respects and (ii) Parent and Sub shall have
performed and complied with all agreements and conditions required by this
Agreement to be performed or complied with by them prior to or on the Closing
Date, and the Company shall have been furnished a certificate of an appropriate
officer of Parent, dated the Closing Date, certifying to the effect of clauses
(i) and (ii) hereof.
(b) Tax Opinion. The opinion, based on appropriate
representations of the Company and Parent, of Alston & Bird, counsel to the
Company, in form and substance satisfactory to such counsel, to the effect that
the Merger will be treated for Federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code, and that Parent, Sub and the
Company will each be a party to that reorganization within the meaning of
Section 368(b) of the Code, dated on or about the date of and referred to in
the Proxy Statement as first mailed to stockholders of the Company, shall not
have been withdrawn or modified in any material respect.
(c) Consents Under Agreements. Parent shall have
obtained the consent or approval of each Person (other than the Governmental
Entities referred to in Section 6.1(c)) whose consent or approval shall be
required in connection with the transactions contemplated hereby under any loan
or credit agreement, note, mortgage, indenture, lease or other agreement or
instrument, except those for which failure to obtain such consents and
approvals would not, individually or in the aggregate, have a Material Adverse
Effect on Parent and its Subsidiaries taken as a whole or restrict, prohibit or
prevent the consummation of the transactions contemplated hereby.
(d) No Amendments to Resolutions. Neither the Board of
Directors of Parent nor any committee thereof shall have amended, modified,
rescinded or repealed the resolutions adopted by the Board of Directors on June
24, 1994 (accurate and complete copies of which have been provided to the
Company) and shall not
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have adopted any other resolutions in connection with this Agreement and the
transactions contemplated hereby inconsistent with such resolutions.
ARTICLE 7
TERMINATION AND AMENDMENT
7.1 Termination. At any time prior to the Effective
Time, whether before or after approval of the matters presented in connection
with the Merger by the stockholders of the Company or Sub, this Agreement may
be terminated:
(a) by mutual consent of Parent and the Company;
(b) by either Parent or the Company, if, without fault of the
terminating party, the Closing shall not have occurred on or before
November 15, 1994 (or such later date as may be agreed upon in writing
by the parties hereto);
(c) by Parent, if the Company shall breach any of its
representations, warranties or obligations hereunder and such breach
shall not have been cured or waived and the Company shall not have
provided reasonable assurance that such breach will be cured on or
before the Closing Date;
(d) by the Company, if Parent or Sub shall breach any of
their respective representations, warranties or obligations hereunder
and such breach shall not have been cured or waived and Parent shall
not have provided reasonable assurance that such breach will be cured
on or before the Closing Date;
(e) by either Parent or the Company if a Trigger Event or
Takeover Proposal shall have occurred and the Board of Directors of
the Company in connection therewith, after consultation with its legal
counsel, withdraws or modifies its approval and recommendation of this
Agreement and the transactions contemplated hereby after determining
that to cause the Company to proceed with the transactions
contemplated hereby would violate the Board of Directors' fiduciary
duty to the stockholders of the Company;
(f) by either Parent or the Company if (i) any permanent
Injunction or other order of a court or other competent authority
preventing the consummation of the Merger shall have became final and
nonappealable or (ii) if any required approval of the stockholders of
the Company shall not have been obtained by reason of the failure to
obtain the required vote upon a vote held at a duly held meeting of
stockholders or at any adjournment thereof;
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(g) by the Company, in the event (i) of the acquisition, by
any person or group of persons (other than persons or groups of
persons who (A) acquired shares of Parent Common Stock pursuant to any
merger of Parent in which Parent was the surviving corporation or any
acquisition by Parent of all or substantially all of the capital stock
or assets of another person or (B) disclose their beneficial ownership
of shares of Parent Common Stock on Schedule 13G under the Exchange
Act), of beneficial ownership of 30% or more of the outstanding shares
of Parent Common Stock (the terms "person," "group" and "beneficial
ownership" having the meanings ascribed thereto in Section 13(d) of
the Exchange Act and the regulations promulgated thereunder), or (ii)
the Board of Directors of Parent accepts or publicly recommends
acceptance of an offer from a third party to acquire 50% or more of
the outstanding shares of Parent Common Stock or of Parent's
consolidated assets;
(h) by Parent, if the Parent Stock Price shall be less than
$30.00 or greater than $42.00; or
(i) by the Company, if the Parent Stock Price shall be less
than $25.00 or greater than $42.00.
In the event of any change in the outstanding number of shares
of Parent Common Stock by reason of stock dividends, stock splits,
recapitalizations or combinations of shares into a smaller number of shares,
the prices of the Parent Common Stock set forth in clauses (h) and (i) of this
Section 7.1 shall be adjusted appropriately.
7.2 Effect of Termination. In the event of termination
of this Agreement by either Parent or the Company as provided in Section 7.1,
(a) this Agreement shall forthwith become void and there shall be no liability
or obligation on the part of Parent, Sub or the Company or their respective
officers or directors except (i) with respect to Section 5.9, 5.10, 5.11 and
5.12, (ii) to the extent that such termination results from the willful breach
by a party hereto of any of its representations, warranties, covenants or
agreements set forth in this Agreement except as provided in Section 8.7 and
(iii) this Section 7.2 shall survive such termination and (b) the letter
agreement dated March 4, 1994 between Parent and the Company, as amended on
April 18, 1994, shall thereafter revive and remain in full force and effect
according to the terms thereof.
7.3 Extension; Waiver. At any time prior to the
Effective Time, the parties hereto, by action duly taken, may, to the extent
legally allowed, (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (iii) waive compliance with any of the
agreements or conditions contained herein. Any
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agreement on the part of a party hereto to any such extension or waiver shall
be valid only if set forth in a written instrument signed on behalf of such
party.
7.4 Amendment and Modification. This Agreement may be
amended by the parties hereto, by action taken or authorized by their
respective Boards of Directors, at any time before or after adoption of the
Agreement by the stockholders of the Company, but after any such adoption, no
amendment shall be made which by law requires further approval by such
stockholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
ARTICLE 8
GENERAL PROVISIONS
8.1 Nonsurvival of Representations, Warranties and
Agreements. None of the representations, warranties and agreements in this
Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Effective Time, except for the agreements contained in Section 2.1,
2.2, the last sentence of Section 5.6, 5.12, 5.17 and the last sentence of
Section 7.4 and Article 8, and the agreements of the "affiliates" of the
Company delivered pursuant to Section 5.6.
8.2 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given upon receipt
of: hand delivery, overnight courier, certified or registered mail, return
receipt requested, or telecopy transmission with confirmation of receipt:
(i) If to the Company, to:
Gates/FA Distributing, Inc.
39 Pelham Ridge Drive
Greenville, South Carolina 29615
Telecopier: (803) 627-2180
Telephone: (803) 234-0736
Attention: Philip D. Ellett
(with a copy to)
Alston & Bird
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309
Telecopier: (404)881-7777
Telephone: (404)881-7000
Attention: Bryan E. Davis, Esq.
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(ii) If to Parent, to
Arrow Electronics, Inc.
25 Hub Drive
Melville, New York 11747
Telecopier: (516) 391-1683
Telephone: (516) 391-1830
Attention: Robert E. Klatell
(with a copy to)
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, New York 10004
Telecopier: (212) 858-1500
Telephone: (212) 858-1000
Attention: Howard S. Kelberg, Esq.
Such names and addresses may be changed by written notice to each person listed
above.
8.3 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to any applicable provisions relating to conflicts of laws.
8.4 Interpretation. When a reference is made in this
Agreement to Sections, such reference shall be to a Section of this Agreement
unless otherwise indicated. The table of contents and headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement. Whenever the words "include",
"includes" or "including" are used in this Agreement, they shall be deemed to
be followed by the words "without limitation". The phrase "made available" in
this Agreement shall mean that the information referred to has been made
available if requested by the party to whom such information is to be made
available. The phrases "the date of this Agreement", "the date hereof", and
terms of similar import, unless the context otherwise requires, shall be deemed
to refer to June 24, 1994.
8.5 Counterparts. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when two or more counterparts have been signed by
each of the parties and delivered to the other parties, it being understood
that all parties need not sign the same counterpart.
8.6 Entire Agreement; No Third Party Beneficiaries;
Rights of Ownership. This Agreement (including the documents and the
instruments referred to herein, including the Option Agreement) (a) constitutes
the entire agreement and supersedes all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof and
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(b) except as otherwise contemplated by Sections 2.1, 2.2 and 5.12 (which
covenants shall be enforceable by the persons affected thereby following the
Effective Time), is not intended to confer upon any person other than the
parties hereto any rights or remedies hereunder. The parties hereby
acknowledge that, except as otherwise specifically provided in the Option
Agreement or as hereafter agreed to in writing, no party shall have the right
to acquire or shall be deemed to have acquired shares of common stock of the
other party pursuant to the Merger until consummation thereof.
8.7 No Remedy in Certain Circumstances. Each party agrees
that, should any court or other competent authority hold any provision of this
Agreement or the Option Agreement or part hereof or thereof to be null, void or
unenforceable, or order any party to take any action inconsistent herewith or
not to take any action required herein, the other party shall not be entitled
to specific performance of such provision or part hereof or thereof or to any
other remedy, including but not limited to money damages, for breach hereof or
thereof or of any other provision of this Agreement or the Option Agreement or
part hereof or thereof as a result of such holding or order.
8.8 Severability. Any term or provision of this Agreement
which is invalid or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or affecting the validity or enforceability of
any of the terms or provisions of this Agreement in any other jurisdiction. If
any provision of this Agreement is so broad as to be unenforceable, the
provision shall be interpreted to be only so be broad as is enforceable.
8.9 Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties, except that Sub may assign, in its sole
discretion, any or all of its rights, interests and obligations hereunder to
Parent or to any direct or indirect wholly owned Subsidiary of Parent. Subject
to the preceding sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors
and assigns.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
ARROW ELECTRONICS, INC.
By: /s/ Robert E. Klatell
--------------------------------
Name: Robert E. Klatell
Title: Senior Vice President and
Chief Financial Officer
AFG ACQUISITION COMPANY
By: /s/ Robert E. Klatell
--------------------------------
Name: Robert E. Klatell
Title: Senior Vice President,
Treasurer and Secretary
GATES/FA DISTRIBUTING, INC.
By: /s/ Philip D. Ellett
-------------------------------
Name: Philip D. Ellett
Title: President and Chief Executive Officer
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EXHIBIT 5.6
[Name]
[Address]
Gentlemen:
The undersigned, a holder of shares of Common Stock, par value
$.01 per share (the "Company Common Stock"), of Gates/FA Distributing, Inc., a
Delaware corporation (the "Company"), is entitled to receive in connection with
the merger (the "Merger") of the Company with AFG Acquisition Company, a
Delaware corporation ("Sub"), shares of Common Stock, par value $1 per share
(the "Parent Common Stock"), of Arrow Electronics, Inc., a New York corporation
("Parent"). The undersigned acknowledges that the undersigned may be deemed to
be an "affiliate" of the Company for purposes of Rule 145 ("Rule 145")
promulgated under the Securities Act of 1933, as amended (the "Act") and for
purposes of "pooling-of-interests" accounting treatment, although nothing
contained herein should be construed as an admission of such fact.
If in fact the undersigned were an affiliate of the Company
under the Act, the undersigned's ability to sell, assign or transfer the Parent
Common Stock received by it in exchange for any shares of Company Common Stock
pursuant to the Merger may be restricted unless such transaction is registered
under the Act or an exemption from such registration is available. The
undersigned understands that such exemptions are limited and the undersigned
has obtained advice of counsel as to the nature and conditions of such
exemptions, including information with respect to the applicability to the sale
of the Parent Common Stock of Rules 144 and 145(d) promulgated under the Act.
The undersigned hereby represents to and covenants with Parent
that it will not sell, assign or transfer any of the shares of Parent Common
Stock received by it in exchange for shares of Company Common Stock pursuant to
the Merger except (i) pursuant to an effective Registration Statement under the
Act, or (ii) in a transaction which, in the opinion of independent counsel
reasonably satisfactory to Parent (the reasonable fees of which counsel will be
paid by Parent) or as described in a "no-action" or interpretive letter from
the Staff of the Securities and Exchange Commission (the "Commission"), is not
required to be registered under the Act.
The undersigned further represents to and covenants with
Parent that it has not, within the preceding 30 days, sold, transferred to
otherwise disposed of any shares of Company Common Stock held by it and that it
will not sell, transfer or otherwise dispose of any shares of Parent Common
Stock received by it in the Merger until after such time as results covering at
least 30 days of combined operations of Parent and the Company have been
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published by Parent, in the form of a quarterly earnings report, an effective
registration statement filed with the Commission, a report to the Commission on
Form 10-K, 10-Q, or 8-K, or any other public filing or announcement which
includes such combined results of operations.
In the event of a sale or other disposition pursuant to Rule
145, the undersigned will supply Parent with evidence of compliance with such
Rule, in the form of a letter in the form of Exhibit A hereto and the opinion
of counsel referred to above. The undersigned understands that Parent may
instruct its transfer agent to withhold the transfer of any securities disposed
of by it but that upon receipt of such letter the transfer agent shall
effectuate the transfer of the shares indicated as sold in the letter.
The undersigned acknowledges and agrees that appropriate
legends will be placed on certificates representing the Parent Common Stock
received by the undersigned in the Merger or held by a transferee thereof,
which legends will be removed by delivery of substitute certificates upon the
registration of such Parent Common Stock under the Act or the receipt of an
opinion in form and substance reasonably satisfactory to Parent from
independent counsel reasonably satisfactory to Parent (the reasonable fees of
which counsel will be paid by Parent) to the effect that such legends are no
longer required for purposes of the Act.
The undersigned acknowledges that (i) it has carefully read
this letter and understands the requirements hereof and the limitations imposed
upon the distribution, sale, transfer or other disposition of shares of Parent
Common Stock and (ii) the receipt by Parent of this letter is an inducement and
a condition to Parent's obligations to consummate the Merger.
Very truly yours,
_____________________________
Name:
Date: _________________
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EXHIBIT A
To Exhibit 5.6
[Name]
[Address]
Gentlemen:
On _______________, I sold ____________ shares of capital
stock ("Capital Stock") of Arrow Electronics, Inc. (the "Company") received by
me in connection with the merger of AFG Acquisition Company, a subsidiary of
the Company, with and into Gates/FA Distributing, Inc.
Based upon the most recent report or statement filed by the
Company with the Securities and Exchange Commission, the shares of Capital
Stock sold by me were within the prescribed limitations set forth in paragraph
(e) of Rule 144 promulgated under the Securities Act of 1933, as amended (the
"Act").
I hereby represent that the above-described shares of Capital
Stock were sold in "brokers' transactions" within the meaning of Section 4(4)
of the Act or in transactions directly with a "market maker" as that term is
defined in Section (3)(a)(38) of the Securities Exchange Act of 1934, as
amended. I further represent that I have not solicited or arranged for the
solicitation of orders to buy the above-described shares of Capital Stock, and
that I have not made any payment in connection with the offer or sale of such
shares to any person other than to the broker who executed the order in respect
of such sale.
Very truly yours,
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EXHIBIT B
THE ROBINSON-HUMPHREY COMPANY, INC.
CORPORATE FINANCE July 20, 1994 INVESTMENT BANKERS
DEPARTMENT SINCE 1894
Board of Directors
Gates/FA Distributing, Inc.
39 Pelham Ridge Drive
Greenville, SC 29615
Dear Gentlemen,
We understand that Arrow Electronics, Inc. ("Arrow"), through
its wholly owned subsidiary, AFG Acquisition Company, intends to merge with and
thereby acquire Gates/FA Distributing, Inc. (the "Company"), in exchange for
Arrow's stock (the "Proposed Transaction"). Each issued and outstanding share
of the Company common stock shall be converted into the right to receive the
number of shares of Arrow equal to a fraction, the numerator of which is $22.50
and the denominator of which is the average closing price on the New York Stock
Exchange of Arrow common stock over the twenty-day trading period ending two
trading days before the closing date. The terms and conditions of the Proposed
Transaction are set forth in more detail in the Agreement and Plan of Merger
(the "Agreement") between the Company and Arrow.
We have been requested by the Company to render our opinion
with respect to the fairness, from a financial point of view, to the Company's
stockholders of the consideration to be offered in the Proposed Transaction.
The Robinson-Humphrey Company, with 100 years of experience in the securities
industry, is well qualified in the area of securities valuation. As a member
of The New York Stock Exchange and all other leading securities exchanges and
as a full service investment banking and brokerage firm, we are constantly
involved in judging the value of securities in connection with debt and equity
financing, mergers and acquisitions and private stock valuations. Further,
members of our Corporate Finance Department are active in the merger and
acquisition field, having advised clients in over 160 transactions since 1985.
In arriving at our opinion, we reviewed and analyzed: (1) the Agreement,
(2) the Proxy Statement/Prospectus relating to the Proposed Transaction and
the Registration Statement of which it is a part, (3) the most recent annual
reports, Form 10-Ks, Form 10-Qs, proxy statements and such other publicly
available information concerning both the Company and Arrow which we believe
to be relevant to our inquiry, (4) financial and operating information with
respect to the business, operations and prospects of the Company and Arrow
furnished to us by both the Company and Arrow, respectively, (5) a comparison
of the historical financial results and present financial condition of both the
Company and Arrow with those of other companies which we deemed relevant,
(6) trading histories of the common stock of both the Company and Arrow, and
(7) a comparison of the financial terms of the Proposed Transaction with the
terms of certain other recent transactions which we deemed relevant. In
addition, we have had discussions with the management of both the Company and
Arrow concerning their respective business, operations, assets, present
condition and future propects and undertook such other studies, analyses and
investigations as we deemed appropriate.
We have assumed and relied upon the accuracy and completeness of the
financial and other information used by us in arriving at our opinion without
independent verification. With respect to financial forecasts of the Company,
we have assumed that they have been reasonably prepared by the Company on bases
reflecting the best currently available estimates and judgments of the
Company's
ATLANTA FINANCIAL CENTER
3333 PEACHTREE ROAD, NE * ATLANTA, GEORGIA 30326
(404) 266-6000
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Board of Directors
Gates/FA Distributing, Inc.
July 20, 1994
Page 2
management as to the future financial performance of the Company. With respect
to the financial forecasts of Arrow, we have assumed they have been reasonably
prepared by independent research analysts with guidance from Arrow's management
on bases reflecting the best currently available estimates and judgments as to
the future financial performance of Arrow. In arriving at our opinion, we have
not conducted a physical inspection of the properties and facilities of either
the Company or Arrow, nor have we made or obtained any evaluations of either of
their respective assets or liabilities. Our opinion is necessarily based upon
market, economic and other conditions as they exist on, and can be evaluated as
of, the date of this letter.
We have acted as financial advisor to the Company in
connection with the Proposed Transaction and will receive a fee for our
services which is contingent upon the consummation of the Proposed Transaction.
In addition, the Company has agreed to indemnify us for certain liabilities
arising out of the rendering of this opinion. We have also performed various
investment banking services for the Company in the past (including acting as
lead manager in the Company's secondary stock offering of 2.6 million shares on
June 10, 1992) and have received customary fees for such services. In the
ordinary course of our business, we have actively traded in the equity
securities of the Company for our own account and for the accounts of our
customers and, accordingly, may at any time hold a long or short position in
such securities.
Based upon and subject to the foregoing, we are of the opinion
as of the date hereof that the consideration in the Proposed Transaction of
$22.50 per share in Arrow common stock to be received by holders of the
Company's common stock is fair from a financial point of view.
Very truly yours,
The Robinson-Humphrey Company, Inc.
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EXHIBIT C
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT (the "Agreement"), dated as of June 24,
1994, by and between Arrow Electronics, Inc., a New York corporation
("Parent"), and Gates/FA Distributing, Inc., a Delaware corporation (the
"Company").
WHEREAS, concurrently with the execution and delivery of this
Agreement, the Company, Parent and AFG Acquisition Company, a Delaware
corporation ("Sub"), are entering into an Agreement and Plan of Merger, dated
as of the date hereof (the "Merger Agreement"), which provides that, among
other things, upon the terms and subject to the conditions thereof, Sub will be
merged with and into the Company (the "Merger"), with the Company continuing as
the surviving corporation; and
WHEREAS, as a condition and inducement to Parent's willingness
to enter into the Merger Agreement, Parent has required that the Company agree,
and the Company has so agreed, to grant to Parent an option with respect to
certain shares of the Company's common stock on the terms and subject to the
conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants and agreements set forth herein and in the Merger Agreement,
the parties hereto agree as follows:
1. Grant of Option. The Company hereby grants Parent an
irrevocable option (the "Company Option") to purchase up to 1,257,063 shares
(the "Company Shares") of common stock, par value $.01 per share, of the
Company (the "Company Common Stock") in the manner set forth below at a price
(the "Exercise Price") of $22.50 per Company Share, payable in cash.
Capitalized terms used herein but not defined herein shall have the meanings
set forth in the Merger Agreement.
2. Exercise of Option. The Company Option may be
exercised by Parent, in whole or in part, at any time or from time to time
after the occurrence of any of the events described in clauses (i), (ii) and
(iii) of Section 5.9(b) of the Merger Agreement (regardless of whether the
Merger Agreement has actually terminated as a result thereof). In the event
Parent wishes to exercise the Company Option, Parent shall deliver to the
Company a written notice (an "Exercise Notice") specifying the total number of
Company Shares it wishes to purchase. Each closing of a purchase of Company
Shares (a "Closing") shall occur at a place, on a date and at a time designated
by Parent in an
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Exercise Notice delivered at least two business days prior to the date of the
Closing. The Company Option shall terminate upon the earlier of: (i) the
Effective Time; (ii) the termination of the Merger Agreement pursuant to
Section 7.1 thereof (other than a termination in connection with which Parent
is entitled to the payment specified in Section 5.9(b) thereof); or (iii) 180
days following any termination of the Merger Agreement in connection with which
Parent is entitled to the payment specified in Section 5.9(b) thereof (or if,
at the expiration of such 180 day period, the Company Option cannot be
exercised by reason of any applicable judgment, decree, order, law or
regulation, ten business days after such impediment to exercise shall have been
removed or shall have become final and not subject to appeal, but in no event
under this clause (iii) later than June 24, 1996). Notwithstanding the
foregoing, the Company Option may not be exercised if Parent is in material
breach of any of its representations, warranties, covenants or agreements
contained in this Agreement or in the Merger Agreement.
3. Conditions to Closing. The obligation of the Company
to issue the Company Shares to Parent hereunder is subject to the conditions
that (i) all waiting periods, if any, under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations promulgated
thereunder ("HSR Act"), applicable to the issuance of the Company Shares
hereunder shall have expired or have been terminated; (ii) all consents,
approvals, orders or authorizations of, or registrations, declarations or
filings with, any Federal, state or local administrative agency or commission
or other Federal state or local governmental authority or instrumentality, if
any, required in connection with the issuance of the Company Shares hereunder
shall have been obtained or made, as the case may be; and (iii) no preliminary
or permanent injunction or other order by any court of competent jurisdiction
prohibiting or otherwise restraining such issuance shall be in effect.
4. Closing. At any Closing, (a) the Company will
deliver to Parent a single certificate in definitive form representing the
number of the Company Shares designated by Parent in its Exercise Notice, such
certificate to be registered in the name of Parent and to bear the legend set
forth in Section 13, and (b) Parent will deliver to the Company the aggregate
price for the Company Shares so designated and being purchased by wire transfer
of immediately available funds or certified check or bank check. At any
Closing at which Parent is exercising the Company Option in part, Parent shall
present and surrender this Agreement to the Company, and the Company shall
deliver to Parent an executed new agreement with the same terms as this
Agreement evidencing the right to purchase the balance of the shares of Company
Common Stock purchasable hereunder.
5. Representations and Warranties of the Company. The
Company represents and warrants to Parent that (a) the Company is a corporation
duly incorporated, validly existing and
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in good standing under the laws of the State of Delaware and has the corporate
power and authority to enter into this Agreement and to carry out its
obligations hereunder, (b) the execution and delivery of this Agreement by the
Company and the consummation by the Company of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of the Company and no other corporate proceedings on the part of the Company
are necessary to authorize this Agreement or any of the transactions
contemplated hereby, (c) this Agreement has been duly executed and delivered by
the Company and constitutes a valid and binding obligation of the Company, and,
assuming this Agreement constitutes a valid and binding obligation of Parent,
is enforceable against the Company in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors' rights generally, and except that the
availability of equitable remedies, including specific performance, is subject
to the discretion of the court before which any proceeding therefor may be
brought, and except as indemnification may be limited by public policy, (d) the
Company has taken all necessary corporate action to authorize and reserve for
issuance and to permit it to issue, upon exercise of the Company Option, and at
all times from the date hereof through the expiration of the Company Option
will have reserved, 1,257,063 unissued Company Shares, all of which, upon their
issuance and delivery in accordance with the terms of this Agreement, will be
validly issued, fully paid and nonassessable, (e) upon delivery of the Company
Shares to Parent upon the exercise of the Company Option, Parent will acquire
the Company Shares free and clear of all claims, liens, charges, encumbrances
and security interests of any nature whatsoever, (f) except as described in
Section 3.1 or 3.4 of the Merger Agreement, the execution and delivery of this
Agreement by the Company does not, and the performance of this Agreement by the
Company will not, conflict with, or result in any violation of, or material
default (with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancellation or acceleration of any obligation or
the loss of a material benefit under, or the creation of a lien, pledge,
security interest or other encumbrance on assets pursuant to (any such
conflict, violation, default, right of termination, cancellation or
acceleration, loss or creation, a "Violation"), (A) any provision of the
Amended or Restated Certificate of Incorporation, as amended, or Amended and
Restated By-laws, as amended, of the Company or (B) any provisions of any loan
or credit agreement, note, mortgage, indenture, lease, benefit plan or other
agreement, obligation, instrument, permit, concession, franchise, license or
(C) any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to the Company or its properties or assets, which Violation, in the
case of each of clauses (B) and (C), would have a Material Adverse Effect on
the Company and (g) except as described in Section 3.1 or 3.4 of the Merger
Agreement and Section 3(i) of this Agreement, the execution and delivery of
this Agreement by the Company does not, and the performance of this Agreement
by the Company will not,
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require any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority.
6. Representations and Warranties of Parent. Parent
represents and warrants to the Company that (a) Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York and has the corporate power and authority to enter into this Agreement
and to carry out its obligations hereunder, (b) the execution and delivery of
this Agreement by Parent and the consummation by Parent of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Parent and no other corporate proceedings on the part of Parent
are necessary to authorize this Agreement or any of the transactions
contemplated hereby, (c) this Agreement has been duly executed and delivered by
Parent and constitutes a valid and binding obligation of Parent, and, assuming
this Agreement constitutes a valid and binding obligation of the Company, is
enforceable against Parent in accordance with its terms, except as enforcement
may be limited by bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights generally, and except that the availability of
equitable remedies, including specific performance, is subject to the
discretion of the court before which any proceeding therefor may be brought,
and except as indemnification may be limited by public policy, (d) except as
described in Section 4.2 or 4.3 of the Merger Agreement, the execution and
delivery of this Agreement by Parent does not, and the performance of this
Agreement by Parent will not, result in any Violation pursuant to, (A) any
provision of the Certificate of Incorporation or By-laws of Parent, (B) any
provisions of any loan or credit agreement, note, mortgage, indenture, lease,
Benefit Plan or other agreement, obligation, instrument, permit, concession,
franchise, license or (C) any judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to Parent or its properties or assets, which
Violation, in the case of each of clauses (B) and (C), would have a Material
Adverse Effect on Parent and its Subsidiaries taken as a whole, (e) except as
described in Section 4.2 or 4.3 of the Merger Agreement and Section 3(i) of
this Agreement, the execution and delivery of this Agreement by Parent does
not, and the performance of this Agreement by Parent will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any governmental or regulatory authority and (f) any Company Shares
acquired upon exercise of the Company Option will not be, and the Company
Option is not being, acquired by Parent with a view to the public distribution
thereof.
7. Certain Repurchases.
(a) Put and Call. At any time during which the Company
Option is exercisable pursuant to Section 2 (the "Repurchase Period"), upon
demand by Parent, Parent shall have the right to sell to the Company (or any
successor entity
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thereof) and the Company (or such successor entity) shall be obligated to
repurchase from Parent (the "Put"), and upon demand by the Company, subject to
Section 7(d) hereof, the Company (or any successor entity thereof) shall have
the right to repurchase from Parent and Parent shall be obligated to sell to
the Company (or such successor entity) (the "Call") all or any portion of the
Company Option, at the price set forth in subparagraph (i) below, or, at any
time prior to June 24, 1996, all or any portion of the Company Shares purchased
by Parent pursuant thereto with respect to which Parent or any affiliate
thereof has beneficial ownership, at a price set forth in subparagraph (ii)
below:
(i) the difference between the
"Market/Tender Offer Price" for shares of Company Common Stock as of
the date (the "Notice Date") notice of exercise of the Put or Call, as
the case may be, is given to the other party (defined as the higher of
(A) the price per share offered as of the Notice Date pursuant to any
tender or exchange offer or other Takeover Proposal which was made
prior to the Notice Date and not terminated or withdrawn as of the
Notice Date (the "Tender Price") or (B) the average of the high and
low bid prices of shares of the Company Common Stock on NASDAQ for the
ten trading days immediately preceding the Notice Date, or if on any
of such ten trading days the Company Common Stock shall not be quoted
in the NASDAQ System, the average of the high and low bid prices on
such day in the domestic over-the-counter market as reported by the
National Quotation Bureau, Incorporated, or any similar successor
organization (the "Market Price")), and the Exercise Price, multiplied
by the number of Company Shares purchasable pursuant to the Company
Option (or portion thereof with respect to which Parent or the Company
is exercising its rights under this Section 7), but only if the
Market/Tender Offer Price is greater than the Exercise Price;
(ii) the Exercise Price paid by Parent for
the Company Shares acquired pursuant to the Company Option plus the
difference between the Market/Tender Offer Price and the Exercise
Price, but only if the Market/Tender Offer Price is greater than the
Exercise Price, multiplied by the number of Company Shares so
purchased. For purposes of this clause (ii), the Tender Price shall
be the highest price per share offered pursuant to a tender or
exchange offer or other Takeover Proposal during the Repurchase
Period.
(b) Payment and Redelivery of Company Option or Shares.
In the event Parent or the Company exercises its rights under this Section 7,
the Company shall, within ten business days of the Notice Date, pay the
required amount to Parent in immediately available funds and Parent shall
surrender to the Company the Company Option or the certificates evidencing the
Company Shares purchased by Parent pursuant thereto, and Parent shall warrant
that it owns such shares and that such shares are
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then free and clear of all liens, claims, charges and encumbrances of any kind
or nature whatsoever.
(c) Limitation on Repurchase Price. Notwithstanding anything
to the contrary provided in this Section 7, the maximum amount payable to
Parent pursuant to the Put and/or the Call shall not exceed $10,056,504 plus
the amount of the aggregate Exercise Price paid by Parent for any shares of
Company Common Stock acquired pursuant to the Company Option.
(d) Limitation on Call. The Call shall not be exercisable by
the Company (or any successor entity thereof) unless the difference between the
Market/Tender Offer Price and the Exercise Price as of the Notice Date with
respect to such Call is greater than $8.00.
8. Voting of Shares. Following the date hereof and
prior to the Expiration Date (as defined in Section 9(b)), Parent shall vote
any shares of Company Common Stock acquired pursuant to this Agreement
("Restricted Shares") on each matter submitted to a vote of stockholders of the
Company for and against such matter in the same proportion as the vote of all
other stockholders of the Company are voted (whether by proxy or otherwise) for
and against such matter.
9. Restrictions on Certain Actions.
(a) Restrictions. Other than pursuant to the Merger
Agreement, following the date hereof and prior to the Expiration Date, without
the prior written consent of the Company, Parent shall not, nor shall Parent
permit its affiliates to, directly or indirectly, alone or in concert or
conjunction with any other Person or Group (as defined in Section 9(b)), (i) in
any manner acquire, agree to acquire or make any proposal to acquire, any
securities of, equity interest in, or any material property of, the Company
(other than pursuant to this Agreement or the Merger Agreement), (ii) except at
the specific written request of the Company, propose to enter into any merger
or business combination involving the Company or to purchase a material portion
of the assets of the Company, (iii) make or in any way participate in any
"solicitation" of "proxies" (as such terms are used in Regulation 14A
promulgated under the Exchange Act) to vote, or seek to advise or influence any
Person with respect to the voting of, any voting securities of the Company,
(iv) form, join or in any way participate in a Group with respect to any voting
securities of the Company, (v) seek to control or influence the management,
Board of Directors or policies of the Company, (vi) disclose any intention,
plan or arrangement inconsistent with the foregoing, (vii) advise, assist or
encourage any other Person in connection with the foregoing or (viii) request
the Company (or its directors, officers, employees or agents) to amend or waive
any provisions of this Section 9, or take any action which may require the
Company to make a public announcement regarding the possibility of a business
combination or merger with such party.
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The Company shall not adopt any Rights Agreement in any manner which would
cause Parent, if Parent has complied with its obligations under this Agreement,
to become an "Acquiring Person" under such Rights Agreement solely by reason of
the beneficial ownership of the shares purchasable hereunder.
(b) Certain Definitions. For purposes of this Agreement,
(i) the term "Person" shall mean any corporation, partnership, individual,
trust, unincorporated association or other entity or Group (within the meaning
of Section 13(d)(3) of the Exchange Act), (ii) the term "Expiration Date" with
respect to any obligation or restriction imposed on one party shall mean the
earlier to occur of (A) the third anniversary of the date hereof or (B) such
time as the other party shall have suffered a Change of Control and (iii) a
"Change of Control" with respect to one party shall be deemed to have occurred
whenever (A) there shall be consummated (1) any consolidation or merger of such
party in which such party is not the continuing or surviving corporation, or
pursuant to which shares of such party's common stock would be converted in
whole or in part into cash, other securities or other property, other than a
merger of such person in which the holders of such party's common stock
immediately prior to the merger have substantially the same proportionate
ownership of common stock of the surviving corporation immediately after the
merger, or (2) any sale, lease, exchange or transfer (in one transaction or a
series of related transactions) of all or substantially all the assets of such
party, or (B) the stockholders of such party shall approve any plan or proposal
for the liquidation or dissolution of such party, or (C) any party, other than
such party or a subsidiary thereof or any employee benefit plan sponsored by
such party or a subsidiary thereof or a corporation owned, directly or
indirectly, by the stockholders of such party in substantially the same
proportions as their ownership of stock of such party, shall become the
beneficial owner of securities of such party representing 25% or more of the
combined voting power of then outstanding securities ordinarily (and apart from
rights accruing in special circumstances) having the right to vote in the
election of directors, as a result of a tender or exchange offer, open market
purchases, privately negotiated purchases or otherwise, or (D) at any time
during the period commencing on the date of this Agreement and ending on the
Expiration Date, individuals who at the date hereof constituted the Board of
Directors of such party shall cease for any reason to constitute at least a
majority thereof, unless the election or the nomination for election by such
party's stockholders of each new director during the period commencing on the
date of this Agreement and ending on the Expiration Date was approved by a vote
of at least two-thirds of the directors then still in office who were directors
at the date hereof, or (E) any other event shall occur with respect to such
party that would be required to be reported in response to Item 6(e) (or any
successor provision) of Schedule 14A of Regulation 14A promulgated under the
Exchange Act.
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10. Restrictions on Transfer.
(a) Restrictions on Transfer. Prior to the Expiration
Date, Parent shall not, directly or indirectly, by operation of law or
otherwise, sell, assign, pledge, or otherwise dispose of or transfer any
Restricted Shares beneficially owned by Parent, other than (i) pursuant to
Section 7, or (ii) in accordance with Section 10(b) or 11.
(b) Permitted Sales. Following the termination of the
Merger Agreement, Parent shall be permitted to sell any Restricted Shares
beneficially owned by it if such sale is made pursuant to a tender or exchange
offer that has been approved or recommended, or otherwise determined to be fair
and in the best interests of the stockholders of the Company, by a majority of
the members of the Board of Directors of the Company (which majority shall
include a majority of directors who were directors prior to the announcement of
such tender or exchange offer).
11. Registration Rights. (a) Following the termination
of the Merger Agreement, Parent may by written notice (the "Registration
Notice") to the Company request the Company to register under the Securities
Act all or any part of the Restricted Shares beneficially owned by Parent (the
"Registrable Securities") pursuant to a bona fide firm commitment underwritten
public offering in which Parent and the underwriters shall effect as wide a
distribution of such Registrable Securities as is reasonably practicable and
shall use their best efforts to prevent any Person (including any Group) and
its affiliates from purchasing through such offering Restricted Shares
representing more than 1% of the outstanding shares of Common Stock of the
Company on a fully diluted basis (a "Permitted Offering"). The Registration
Notice shall include a certificate executed by Parent and its proposed managing
underwriter, which underwriter shall be an investment banking firm of
nationally recognized standing (the "Manager"), stating that (i) they have a
good faith intention to commence promptly a Permitted Offering and (ii) the
Manager in good faith believes that, based on the then prevailing market
conditions, it will be able to sell the Registrable Securities at a per share
price equal to at least 80% of the Fair Market Value of such shares. For
purposes of this Section 11, the term "Fair Market Value" shall mean the per
share average of the closing sale prices of the Company's Common Stock on the
Nasdaq National Market System for the ten trading days immediately preceding
the date of the Registration Notice. The Company (and/or any Person designated
by the Company) shall thereupon have the option exercisable by written notice
delivered to Parent within ten business days after the receipt of the
Registration Notice, irrevocably to agree to purchase all or any part of the
Registrable Securities for cash at a price (the "Option Price") equal to the
product of (i) the number of Registrable Securities and (ii) the Fair Market
Value of such shares. Any such purchase of Registrable Securities by the
Company hereunder shall take place at a closing to be held at the
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principal executive offices of the Company or its counsel at any reasonable
date and time designated by the Company and/or such designee in such notice
within 20 business days after delivery of such notice. Any payment for the
shares to be purchased shall be made by delivery at the time of such closing of
the Option Price in immediately available funds.
(b) If the Company does not elect to exercise its option to
purchase pursuant to Section 11(a) with respect to all Registrable Securities,
it shall use its best efforts to effect, as promptly as practicable, the
registration under the Securities Act of the unpurchased Registrable
Securities; provided, however, that (i) Parent shall not be entitled to more
than an aggregate of two effective registration statements hereunder and (ii)
the Company will not be required to file any such registration statement during
any period of time (not to exceed 40 days after such request in the case of
clause (A) below or 90 days in the case of clauses (B) and (C) below) when (A)
the Company is in possession of material non-public information which it
reasonably believes would be detrimental to be disclosed at such time and, in
the written opinion of counsel to the Company, such information would have to
be disclosed if a registration statement were filed at that time; (B) the
Company is required under the Securities Act to include audited financial
statements for any period in such registration statement and such financial
statements are not yet available for inclusion in such registration statement;
or (C) the Company determines, in its reasonable judgment, that such
registration would interfere with any financing, acquisition or other material
transaction involving the Company or any of its affiliates. If consummation of
the sale of any Registrable Securities pursuant to a registration hereunder
does not occur within 120 days after the filing with the SEC of the initial
registration statement, the provisions of this Section 11 shall again be
applicable to any proposed registration; provided, however, that Parent shall
not be entitled to request more than two registrations pursuant to this Section
11. The Company shall use its best efforts to cause any Registrable Securities
registered pursuant to this Section 11 to be qualified for sale under the
securities or Blue Sky laws of such jurisdictions as Parent may reasonably
request and shall continue such registration or qualification in effect in such
jurisdiction; provided, however, that the Company shall not be required to
qualify to do business in, or consent to general service of process in, any
jurisdiction by reason of this provision.
(c) The registration rights set forth in this Section 11 are
subject to the condition that Parent shall provide the Company with such
information with respect to Parent's Registrable Securities, the plans for the
distribution thereof, and such other information with respect to Parent as, in
the reasonable judgment of counsel for the Company, is necessary to enable the
Company to include in such registration statement all
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material facts required to be disclosed with respect to a registration
thereunder.
(d) If the Company's securities of the same type as the
Registrable Securities are then authorized for quotation or trading or listing
on the New York Stock Exchange, Nasdaq National Market System, or any other
securities exchange or automated quotations system, the Company, upon the
request of Parent, shall promptly file an application, if required, to
authorize for quotation, trading or listing the shares of Registrable
Securities on such exchange or system and will use its reasonable efforts to
obtain approval, if required, of such quotation, trading or listing as soon as
practicable.
(e) A registration effected under this Section 11 shall be
effected at the Company's expense, except for underwriting discounts and
commissions and the fees and the expenses of counsel to Parent, and the Company
shall provide to the underwriters such documentation (including certificates,
opinions of counsel and "comfort" letters from auditors) as are customary in
connection with underwritten public offerings as such underwriters may
reasonably require. In connection with any such registration, the parties
agree (i) to indemnify each other and the underwriters in the customary manner
and (ii) to enter into an underwriting agreement in form and substance
customary to transactions of this type with the Manager and the other
underwriters participating in such offering.
12. Adjustment Upon Changes in Capitalization. (a) In
the event of any change in Company Common Stock by reason of stock dividends,
splitups, mergers (other than the Merger), recapitalizations, combinations,
exchange of shares or the like, the type and number of shares or securities
subject to the Company Option, and the purchase price per share provided in
Section 1, shall be adjusted appropriately, and proper provision shall be made
in the agreements governing such transaction so that Parent shall receive, upon
exercise of the Company Option, the number and class of shares or other
securities or property that Parent would have received in respect of the
Company Common Stock if the Company Option had been exercised immediately prior
to such event or the record date therefor, as applicable.
(b) In the event that the Company shall enter in an
agreement: (i) to consolidate with or merge into any person, other than Parent
or one of its Subsidiaries, and shall not be the continuing or surviving
corporation of such consolidation or merger; (ii) to permit any person, other
than Parent or one of its Subsidiaries, to merge into the Company and the
Company shall be the continuing or surviving corporation, but, in connection
with such merger, the then-outstanding shares of Company Common Stock shall be
changed into or exchanged for stock or other securities of the Company or any
other person or cash or any other property or the outstanding shares of Company
Common Stock immediately prior to such merger shall after such merger
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represent less than 50% of the outstanding shares and share equivalents of the
merged company; or (iii) to sell or otherwise transfer all or substantially all
of its assets to any person, other than Parent or one of its Subsidiaries,
then, and in each such case, the agreement governing such transaction shall
make proper provisions so that upon the consummation of any such transaction
and upon the terms and conditions set forth herein, Parent shall receive for
each Company Share with respect to which the Company Option has not been
exercised an amount of consideration in the form of and equal to the per share
amount of consideration that would be received by the holder of one share of
Company Common Stock less the Exercise Price (and, in the event of an election
or similar arrangement with respect to the type of consideration to be received
by the holders of Company Common Stock, subject to the foregoing, proper
provision shall be made so that the holder of the Company Option would have the
same election or similar rights as would the holder of the number of shares of
Company Common Stock for which the Company Option is then exercisable).
13. Restrictive Legends. Each certificate representing
shares of Company Common Stock issued to Parent hereunder shall include a
legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE
REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE. SUCH SECURITIES ARE ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH IN THE STOCK OPTION
AGREEMENT, DATED AS OF JUNE 24, 1994, A COPY OF WHICH MAY BE OBTAINED
FROM THE ISSUER.
14. Binding Effect; No Assignment. This Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns. Except as expressly provided for
in this Agreement, neither this Agreement nor the rights or the obligations of
either party hereto are assignable, except by operation of law, or with the
written consent of the other party. Nothing contained in this Agreement,
express or implied, is intended to confer upon any person other than the
parties hereto and their respective permitted assigns any rights or remedies of
any nature whatsoever by reason of this Agreement. Any Restricted Shares sold
by Parent in compliance with the provisions of Section 11 shall, upon
consummation of such sale, be free of the restrictions imposed with respect to
such shares by this Agreement, unless and until Parent shall repurchase or
otherwise become the beneficial owner of such shares, and any transferee of
such shares shall not be entitled to the rights of Parent. Certificates
representing shares sold in a registered public offering pursuant to Section 11
shall not be required to bear the legend set forth in Section 13.
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15. Specific Performance. The parties recognize and
agree that if for any reason any of the provisions of this Agreement are not
performed in accordance with their specific terms or are otherwise breached,
immediate and irreparable harm or injury would be caused for which money
damages would not be an adequate remedy. Accordingly, each party agrees that,
in addition to other remedies, the other party shall be entitled to an
injunction restraining any violation or threatened violation of the provisions
of this Agreement. In the event that any action should be brought in equity to
enforce the provisions of this Agreement, neither party will allege, and each
party hereby waives the defense, that there is adequate remedy at law.
16. Entire Agreement. This Agreement and the Merger
Agreement (including the Disclosure Memorandum relating thereto) constitute the
entire agreement among the parties with respect to the subject matter hereof
and supersede all other prior agreements and understandings, both written and
oral, among the parties or any of them with respect to the subject matter
hereof.
17. Further Assurances. Each party will execute and
deliver all such further documents and instruments and take all such further
action as may be necessary in order to consummate the transactions contemplated
hereby.
18. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
the other provisions of this Agreement, which shall remain in full force and
effect. In the event any court or other competent authority holds any
provision of this Agreement to be null, void or unenforceable, the parties
hereto shall negotiate in good faith the execution and delivery of an amendment
to this Agreement in order, as nearly as possible, to effectuate, to the extent
permitted by law, the intent of the parties hereto with respect to such
provision. Each party agrees that, should any court or other competent
authority hold any provision of this Agreement or part hereof to be null, void
or unenforceable, or order any party to take any action inconsistent herewith,
or not take any action required herein, the other party shall not be entitled
to specific performance of such provision or part hereof or to any other
remedy, including but not limited to money damages, for breach hereof or of any
other provision of this Agreement or part hereof as the result of such holding
or order.
19. Notices. Any notice or communication required or
permitted hereunder shall be in writing and either delivered personally,
telegraphed or telecopied or sent by certified or registered mail, postage
prepaid, and shall be deemed to be given, dated and received when so delivered
personally, telegraphed or telecopied or, if mailed, five business days after
the date of mailing to the following address or telecopy number, or to such
other address or addresses as such person may subsequently designate by notice
given hereunder.
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(a) if to Parent, to:
Arrow Electronics, Inc.
25 Hub Drive
Melville, New York 11747
Attention: Robert E. Klatell
Telecopy: (516) 391-1683
Telephone: (516) 391-1830
with a copy to:
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, New York 10004
Attention: Howard S. Kelberg, Esq.
Telecopy: (212) 858-1500
Telephone: (212) 858-1000
and
(b) if to the Company, to:
Gates/FA Distributing, Inc.
39 Pelham Ridge Drive
Greenville, South Carolina 29615
Attention: Philip D. Ellett
Telecopy: (803) 627-2180
Telephone: (803) 234-0736
with a copy to:
Alston & Bird
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Attention: Bryan E. Davis, Esq.
Telecopy: 404-881-7777
Telephone: 404-881-7000
20. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware applicable
to agreements made and to be performed entirely within such State without
regard to any applicable conflicts of law rules.
21. Descriptive Headings. The descriptive headings
herein are inserted for convenience of reference only and are not intended to
be part of or to affect the meaning or interpretation of this Agreement.
22. Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed to be an original, but all
of which, taken together, shall constitute one and the same instrument.
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<PAGE> 127
23. Expenses. Except as otherwise expressly provided
herein or in the Merger Agreement, all costs and expenses incurred in
connection with the transactions contemplated by this Agreement shall be paid
by the party incurring such expenses.
24. Amendments; Waiver. This Agreement may be amended by
the parties hereto and the terms and conditions hereof may be waived only by an
instrument in writing signed on behalf of each of the parties hereto, or, in
the case of a waiver, by an instrument signed on behalf of the party waiving
compliance.
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<PAGE> 128
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective duly authorized officers as of the
date first above written.
ARROW ELECTRONICS, INC.
By: /s/ Robert E. Klatell
------------------------------
Name: Robert E. Klatell
Title: Senior Vice President
and Chief Financial
Officer
GATES/FA DISTRIBUTING, INC.
By: /s/ Philip D. Ellett
------------------------------
Name: Philip D. Ellett
Title: President and Chief
Executive Officer
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<PAGE> 129
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article 9 of the Registrant's Restated Certificate of Incorporation permits
the indemnification of officers and directors under certain circumstances to the
full extent that such indemnification may be permitted by law.
Such rights of indemnification are in addition to, and not in limitation
of, any rights to indemnification to which any officer or director of the
Registrant is entitled under the Business Corporation Law of the State of New
York (Sections 721 through 726) which provides for indemnification by a
corporation of its officers and directors under certain circumstances as stated
in the Business Corporation Law and subject to specified limitations set forth
in the Business Corporation Law.
The Registrant also maintains directors' and officers' liability insurance
coverage which insures directors and officers of the Registrant against certain
losses arising from claims made, and for which the Registrant has not provided
reimbursement, by reason of their being directors and officers of the Registrant
or its subsidiaries.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) See Exhibit Index.
(b) See the financial statement schedules included in the Annual Reports on
Form 10-K incorporated by reference in the Proxy Statement/Prospectus included
in this Registration Statement.
ITEM 22. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing
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<PAGE> 130
of an employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) The undersigned Registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
(d) The Registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (c) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Securities Act of 1933 and is used
in connection with an offering of securities subject to Rule 415, will be filed
as a part of an amendment to the Registration Statement and will not be used
until such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(e) Insofar as indemnification (other than insurance pursuant to Item 20
above) for liabilities arising under the Securities Act of 1933 may be permitted
to directors, officers and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(f) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Proxy
Statement/Prospectus pursuant to Items 4, 10(b), 11 or 13 of this form, within
one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of the
Registration Statement through the date of responding to the request.
(g) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
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<PAGE> 131
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS DULY
CAUSED THIS AMENDMENT NUMBER 1 TO REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF MELVILLE,
STATE OF NEW YORK, ON THIS 20TH DAY OF JULY, 1994.
ARROW ELECTRONICS, INC.
By: /s/ ROBERT E. KLATELL
--------------------------
ROBERT E. KLATELL
Senior Vice President and
Chief Financial Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NUMBER 1 TO REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN
THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ----------------------- ---------------------
<C> <S> <C>
PRINCIPAL EXECUTIVE OFFICER:
*STEPHEN P. KAUFMAN Chairman and Chief July 20, 1994
- ---------------------------------------- Executive Officer
STEPHEN P. KAUFMAN
PRINCIPAL FINANCIAL OFFICER:
/s/ ROBERT E. KLATELL Senior Vice President July 20, 1994
- ---------------------------------------- and Chief Financial
ROBERT E. KLATELL Officer
PRINCIPAL ACCOUNTING OFFICER:
*PAUL J. REILLY Controller July 20, 1994
- ----------------------------------------
PAUL J. REILLY
DIRECTORS:
*DANIEL W. DUVAL Director July 20, 1994
- ----------------------------------------
DANIEL W. DUVAL
- ----------------------------------------
CARLO GIERSCH
*J. SPENCER GOULD Director July 20, 1994
- ----------------------------------------
J. SPENCER GOULD
*STEPHEN P. KAUFMAN Director July 20, 1994
- ----------------------------------------
STEPHEN P. KAUFMAN
*LAWRENCE R. KEM Director July 20, 1994
- ----------------------------------------
LAWRENCE R. KEM
</TABLE>
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<PAGE> 132
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ----------------------- ---------------------
<C> <S> <C>
/s/ ROBERT E. KLATELL Director July 20, 1994
- -----------------------------------------
ROBERT E. KLATELL
*STEVEN W. MENEFEE Director July 20, 1994
- -----------------------------------------
STEVEN W. MENEFEE
*KAREN GORDON MILLS Director July 20, 1994
- -----------------------------------------
KAREN GORDON MILLS
*ANNE POL Director July 20, 1994
- -----------------------------------------
ANNE POL
*RICHARD S. ROSENBLOOM Director July 20, 1994
- -----------------------------------------
RICHARD S. ROSENBLOOM
*JOHN C. WADDELL Director July 20, 1994
- -----------------------------------------
JOHN C. WADDELL
*By /s/ ROBERT E. KLATELL
----------------------------
ROBERT E. KLATELL
ATTORNEY-IN-FACT
</TABLE>
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<PAGE> 133
FORM S-4
ARROW ELECTRONICS, INC.
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------ ---------------------------------------------------------------------------- -----
<C> <C> <S> <C>
2 -- Agreement and Plan of Merger dated as of June 24, 1994 by and among the
Registrant, AFG Acquisition Company and Gates/FA Distributing, Inc.
(attached as Exhibit A to the Proxy Statement/Prospectus included in this
Registration Statement).....................................................
3(1) -- Amended and Restated Certificate of Incorporation of the Registrant
(incorporated by reference to Exhibit 4(1) to Registrant's Registration
Statement on Form S-3, Registration No. 33-67890)...........................
3(2) -- Certificate of Amendment of the Amended and Restated Certificate of
Incorporation of the Registrant dated as of August 24, 1993 (incorporated by
reference to Exhibit 4(2) to Registrant's Registration Statement on Form
S-3, Registration No. 33-67890).............................................
3(3) -- By-laws of the Registrant (incorporated by reference to Exhibit 3(b) to
Registrant's Annual Report on Form 10-K for the year ended December 31,
1986, File No. 1-4482)......................................................
4(1) -- Amended and Restated Credit Agreement dated as of January 28, 1994 among the
Registrant, Bankers Trust Company, Chemical Bank and the other banks and
financial institutions from time to time parties thereto (incorporated by
reference to Exhibit 10(e) to Registrant's Annual Report on Form 10-K for
the year ended December 31, 1993, File No. 1-4482)..........................
4(2) -- Indenture, including Debenture, dated as of November 25, 1992, between the
Registrant and the Bank of Montreal Trust Company, as Trustee with respect
to the Registrant's 5 3/4% Convertible Subordinated Debentures due 2002
(incorporated by reference to Exhibit 4(a) to Registrant's Annual Report on
Form 10-K for the year ended December 31, 1992, File No. 1-4482)............
4(3) -- Senior Note Purchase Agreement dated as of December 29, 1992 between the
Registrant and each of the Purchasers listed on Annex A thereto
(incorporated by reference to Exhibit 10(d) to Registrant's Annual Report on
Form 10-K for the year ended December 31, 1992, File No. 1-4482)............
4(4) -- Rights Agreement dated as of March 2, 1988 between the Registrant and
Chemical Bank (formerly Manufacturers Hanover Trust Company), as Rights
Agent, which includes as Exhibit A a Certificate of Amendment of the
Restated Certificate of Incorporation for the Registrant for the
Participating Preferred Stock, as Exhibit B a letter to shareholders
describing the Rights and a summary of the provisions of the Rights
Agreement and as Exhibit C the forms of Rights Certificate and Election to
Exercise (incorporated by reference to Exhibit 1 to Registrant's Current
Report on Form 8-K dated March 3, 1988, File No. 1-4482)....................
4(5) -- First Amendment, dated June 30, 1989, to the Rights Agreement in 4(4) above
(incorporated by reference to Exhibit 4(b) to Registrant's Current Report on
Form 8-K dated June 30, 1989, File No. 1-4482)..............................
4(6) -- Second Amendment, dated June 8, 1991, to the Rights Agreement in 4(4) above
(incorporated by reference to Exhibit 4(i)(iii) to Registrant's Annual
Report on Form 10-K for the year ended December 31, 1991, File No.
1-4482).....................................................................
</TABLE>
- ---------------
* Previously filed.
<PAGE> 134
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------ ---------------------------------------------------------------------------- -----
<S> <C> <C> <C>
4(7) -- Third Amendment, dated July 19, 1991, to the Rights Agreement in 4(4) above
(incorporated by reference to Exhibit 4(i)(iv) to Registrant's Annual Report
on Form 10-K for the year ended December 31, 1991, File No. 1-4482).........
4(8) -- Fourth Amendment, dated August 26, 1991, to the Rights Agreement in 4(4)
above (incorporated by reference to Exhibit 4(i)(v) to Registrant's
Annual Report on Form 10-K for the year ended December 31, 1991,
File No. 1-4482). ..........................................................
5 -- Opinion of Winthrop, Stimson, Putnam & Roberts dated July 19, 1994,
containing the consent of such counsel. ....................................
8(1) -- Opinion of Winthrop, Stimson, Putnam & Roberts dated July 19, 1994,
containing the consent of such counsel. ....................................
8(2) -- Opinion of Alston & Bird dated July 19, 1994, containing the consent of
such counsel. ..............................................................
21 -- Subsidiaries of the Registrant (incorporated by reference to Exhibit 22 to
Registrant's Annual Report on Form 10-K for the year ended December 31,
1993, File No. 1-4482). ....................................................
23(1) -- Consent of Ernst & Young.*..................................................
23(2) -- Consent of KPMG Peat Marwick.*..............................................
23(3) -- Consent of Winthrop, Stimson, Putnam & Roberts (see Exhibit 5 and Exhibit
8(1) above). ...............................................................
23(4) -- Consent of Alston & Bird (see Exhibit 8(2) above). .........................
23(5) -- Consent of The Robinson-Humphrey Company, Inc. .............................
24 -- Power of Attorney.*.........................................................
99(1) -- Stock Option Agreement dated as of June 24, 1994 between the Registrant
and Gates/FA Distributing, Inc. (attached as Exhibit C to the Proxy
Statement/Prospectus included in this Registration Statement). .............
99(2) -- Irrevocable Proxies dated June 24, 1994, granted by Cheyenne Software, Inc.
and Dennis Gates to the Registrant.*........................................
99(3) -- Form of Proxy for the Special Meeting of Stockholders of Gates/FA
Distributing, Inc. .........................................................
</TABLE>
- ---------------
* Previously filed.
<PAGE> 1
EXHIBIT 5
WINTHROP, STIMSON, PUTNAM & ROBERTS
ONE BATTERY PARK PLAZA
NEW YORK, NY 10004-1490
TELEPHONE: 212-858-1000
TELEFAX: 212-858-1500
TELEX: 62854 WINSTIM
July 19, 1994
Arrow Electronics, Inc.
25 Hub Drive
Melville, NY 11747
Gentlemen:
We have acted as counsel to Arrow Electronics, Inc., a New York
corporation (the "Company"), in connection with the Registration Statement on
Form S-4 of the Company, filed with the Securities and Exchange Commission (the
"Commission") on July 1, 1994 (the "Registration Statement"), relating to the
registration under the Securities Act of 1933, as amended (the "Securities
Act"), of (i) 4,859,638 shares (the "Shares") of the common stock, $1.00 par
value per share, of the Company and (ii) the associated rights to purchase
Participating Preferred Stock of the Company (the "Rights"), to be issued
pursuant to a Rights Agreement, dated as of March 2, 1988, as amended, between
the Company and Chemical Bank (formerly Manufacturers Hanover Trust Company), as
Rights Agent (the "Rights Agreement").
This opinion is delivered in accordance with the requirements of Item
601(b)(5) of Regulation S-K promulgated under the Securities Act.
In connection with this opinion, we have examined originals,
certified copies or copies otherwise identified to our satisfaction, of the
following: (i) the Registration Statement; (ii) the Amended and Restated
Certificate of Incorporation, as amended, and By-laws of the Company, as
currently in effect; (iii) certain resolutions of the Board of Directors of the
Company relating to the issuance of the Shares and the other transactions
contemplated by the Registration Statement; (iv) the Rights Agreement; and (v)
<PAGE> 2
such other documents and such questions of law as we have deemed necessary or
appropriate as a basis for the opinions set forth below. In our examination,
we have assumed the genuineness of all signatures, the legal capacity of all
natural persons, the authenticity of all documents submitted to us as
originals, the conformity to original documents of all documents submitted to
us as certified or photostatic copies and the authenticity of the originals of
such copies. As to any facts material to this opinion that we did not
independently establish or verify, we have relied upon statements and
representations of officers and other representatives of the Company and
others.
Based upon the foregoing, we are of the opinion that:
(1) the Shares, if and when issued in exchange for shares of common
stock of Gates/FA Distributing, Inc. ("Gates/FA") pursuant to the terms of the
Agreement and Plan of Merger, dated as of June 24, 1994, by and among the
Company, AFG Acquisition Company and Gates/FA, will be validly issued, fully
paid and nonassessable; and
(2) the Rights associated with the Shares have been duly
authorized, and such Rights, when issued in accordance with said authorization,
will be validly issued, and will constitute valid and legally binding
obligations of the Company.
We hereby consent to the filing of this opinion with the Commission as
an exhibit to the Registration Statement, as it may be amended, and to the
reference to our firm under the heading "Legal Opinion" in the Proxy
Statement/Prospectus constituting a part of the Registration Statement. In
giving this consent, we do not thereby admit that we are within the category of
persons whose consent is required under Section 7 of the Securities Act.
Very truly yours,
Winthrop, Stimson, Putnam & Roberts
<PAGE> 1
EXHIBIT 8(1)
WINTHROP, STIMSON, PUTNAM & ROBERTS
ONE BATTERY PARK PLAZA
NEW YORK, NY 10004-1490
Telephone: 212-858-1000
Telefax: 212-858-1500
Telex: 62854 WINSTIM
July 19, 1994
Arrow Electronics, Inc.
AFG Acquisition Company
25 Hub Drive
Melville, New York 11747
Gentlemen:
You have requested our opinion as to the federal income tax
consequences to Arrow Electronics, Inc., a New York corporation ("Parent"),
Gates/FA Distributing, Inc., a Delaware corporation (the "Company"), and the
shareholders of the Company, resulting from the consummation of the merger (the
"Merger") of AFG Acquisition Company, a Delaware corporation and a wholly-owned
subsidiary of Parent ("Sub"), with and into the Company pursuant to the
Agreement and Plan of Merger, dated as of June 24, 1994, by and among Parent,
Sub and the Company (the "Merger Agreement"). As counsel to Parent, we have
assisted in the preparation of the Proxy Statement to be used in connection
with the Merger, including the description of certain federal income tax
consequences resulting therefrom contained therein under the heading "Certain
Federal Income Tax Consequences of the Merger."
Except as otherwise provided, capitalized terms not defined
herein have the meanings set forth in the Merger Agreement or in the
certificates dated July 19, 1994 delivered to us by Parent, the Company and Sub
for purposes of this opinion
<PAGE> 2
containing certain representations of Parent, the Company and Sub (the
"Officer's Certificates"). All section references, unless otherwise indicated,
are to the Internal Revenue Code of 1986, as amended (the "Code").
Pursuant to the Merger Agreement, (i) the separate existence
of Sub shall cease, Sub shall be merged with and into the Company and the
Company will become a wholly-owned subsidiary of Parent, (ii) each issued and
outstanding share of the capital stock of Sub shall be converted into and
become one fully paid and nonassessable share of Company Common Stock, (iii)
each share of Company Common Stock owned by the Company as treasury stock and
any shares of 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
as consideration in exchange therefor, (iv) all shares of Parent Common Stock,
if any, owned by the Company shall be unaffected by the Merger, (v) subject to
Section 2.2(e) of the Merger Agreement, each issued and outstanding share of
Company Common Stock (other than shares to be canceled as described above)
shall be converted into the right to receive the number of shares of Parent
Common Stock equal to a fraction the numerator of which is $22.50 and the
denominator of which is the average closing price on the New York Stock
Exchange, Inc. of one share of Parent Common Stock over the twenty-day trading
period ending two trading days before the Closing Date, (vi) each share of
Parent Common Stock issued pursuant to the Merger shall entitle the holder
thereof to the
-2-
<PAGE> 3
corresponding number of 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, and (vii) the stockholders of the Company shall
receive cash in lieu of fractional interests in Parent Common Stock to which
they would otherwise be entitled.
The description referred to in the first paragraph hereof, and
our opinion as stated herein, are based upon and subject to (i) the Merger
being effected in the manner described in the Proxy Statement and in accordance
with the provisions of the Merger Agreement, (ii) the accuracy of the
representations made to us by Parent, the Company and Sub in their respective
Officer's Certificates, which representations shall, by the terms of such
Officer's Certificates, be true and correct at all times through the Effective
Time of the Merger except to the extent we have received written notification
to the contrary from the appropriate officer, (iii) the accuracy of the
representations made to us by Dennis Gates and Cheyenne Software, Inc.
("Cheyenne") in the Continuity of Interest Certificates dated July 19, 1994,
which representations shall, by the terms of such Continuity of Interest
Certificates, be true and correct at all times through the Effective Time of
the Merger except to the extent we have received written notification to the
contrary from Dennis Gates or Cheyenne, (iv) the accuracy and completeness of
the statements concerning the Merger set forth in the Proxy Statement,
including the purposes of the Company for consummating
-3-
<PAGE> 4
the Merger, and (v) the accuracy of the statements concerning the Merger that
have come to our attention during our engagement.
Based on our examination of the foregoing items and subject to
the limitations set forth herein, we are of the opinion that for federal income
tax purposes:
(i) the Merger will constitute a reorganization within the
meaning of Section 368(a) of the Code, and Parent, the Company and Sub will
each be a party to the reorganization within the meaning of Section 368(b) of
the Code;
(ii) no gain or loss will be recognized by Parent, the Company or
Sub in the Merger;
(iii) no gain or loss will be recognized by the stockholders of
the Company upon their receipt of Parent Common Stock in exchange for their
Company Common Stock, except that stockholders who receive cash in lieu of
fractional interests in Parent Common Stock will recognize gain or loss equal
to the difference between such cash proceeds and the tax basis allocated to
their fractional share interests, and such gain or loss will constitute
capital gain or loss if their Company Common Stock is held as a capital asset
at the Effective Time;
(iv) the tax basis of the shares of Parent Common Stock
(including fractional share interests) received by the stockholders of the
Company will be the same as the tax basis of their Company Common Stock
exchanged therefor; and
(v) the holding period of Parent Common Stock in the hands of
the Company stockholders will include the holding
-4-
<PAGE> 5
period of their Company Common Stock exchanged therefor, provided such Company
Common Stock is held as a capital asset at the Effective Time.
This opinion does not address state, local or foreign tax
consequences that may result from the Merger. In addition, no opinion is
expressed as to any federal income tax consequence of the Merger except as
specifically set forth herein and this opinion may not be relied upon except
with respect to the consequences specifically discussed herein.
This opinion has been delivered to you in accordance with
Section 6.2(b) of the Merger Agreement. We hereby consent to (i) the filing of
this opinion with the SEC as an exhibit to the S-4 and (ii) the reference to
our firm under the heading "Certain Federal Income Tax Consequences of the
Merger" in the Proxy Statement which constitutes part of the S-4. In giving
such consent, we do not thereby admit that we are in the category of persons
whose consent is required under Section 7 of the Securities Act.
Very truly yours,
Winthrop, Stimson, Putnam & Roberts
-5-
<PAGE> 1
EXHIBIT 8(2)
ALSTON & BIRD
ONE ATLANTIC CENTER
1201 WEST PEACHTREE STREET
ATLANTA, GEORGIA 30309-3424
404-881-7000
FAX: 404-881-7777 TELEX: 54-2996
July 19, 1994
Arrow Electronics, Inc.
25 Hub Drive
Melville, New York 11747
Gates/FA Distributing, Inc.
29 Pelham Ridge Drive
Greenville, South Carolina 29615
Re: Proposed Plan of Reorganization Involving Arrow Electronics,
Inc., AFG Acquisition Company and Gates/FA Distributing, Inc.
-------------------------------------------------------------
Ladies and Gentlemen:
We have acted as counsel to Gates/FA Distributing, Inc. ("the
Company"), a Delaware corporation, in connection with the proposed
reorganization of Arrow Electronics, Inc. ("Parent"), a New York corporation
and the Company pursuant to the Agreement and Plan of Merger (the "Agreement"),
dated as of June 24, 1994, by and among the Company, Parent and AFG Acquisition
Company ("Sub"). Under the Agreement, Sub shall be merged with and into the
Company, with the Company to survive as the wholly-owned subsidiary of Parent.
In rendering this opinion, we have examined (i) the Internal Revenue
Code of 1986, as amended (the "Code") and Treasury Regulations, (ii) the
legislative history of applicable sections of the Code, and (iii) appropriate
Internal Revenue Service and court decisional authority. In addition, we have
relied upon certain information made known to us as more fully described below.
All capitalized terms used herein without definition shall have the respective
meanings specified in the Agreement. Unless otherwise specified, all section
references herein are to the Code.
700 Thirteenth Street, N.W., Suite 350 3575 Koger Boulevard, Suite 200
Washington, D.C. 20005-3960 Duluth, Georgia 30136-4958
<PAGE> 2
Arrow Electronics, Inc.
Gates/FA Distributing, Inc.
July 19, 1994
Page 2
INFORMATION RELIED UPON
-----------------------
In rendering the opinions expressed herein, we have examined such
documents as we have deemed appropriate, including:
(1) the Agreement;
(2) the Proxy Statement/Prospectus included in Parent's
Registration Statement on Form S-4, being filed with the
Securities and Exchange Commission with respect to the
proposed transaction; and
(3) such additional documents we have considered relevant.
In our examination of such documents, we have assumed, with your
consent, that all documents submitted to us as photocopies faithfully reproduce
the originals thereof, that such originals are authentic, that all such
documents have been or will be duly executed to the extent required, and that
all statements set forth in such documents are accurate.
We also have obtained such additional information and representations
as we have deemed relevant and necessary through consultation with various
officers and representatives of the Company and Parent, through the Certificate
dated July 19, 1994, provided by the management of the Company and the
Certificate dated July 19, 1994, provided by the management of Parent and
through representations made to us by Dennis Gates and Cheyenne Software, Inc.
in certificates dated July 19, 1994.
The following will occur pursuant to the Agreement.
1. The Merger.
-----------
At the Effective Time, Sub shall be merged with and into the Company.
Company will be the surviving corporation of the Merger and as a result will
become a wholly-owned subsidiary of Parent. As a result of the Merger,
stockholders of the Company shall become stockholders of Parent.
2. Terms of Exchange.
------------------
As of the Effective Time, by virtue of the Agreement and without any
further action on the part of the holder of any shares of Common Stock, the
following shall occur:
<PAGE> 3
Arrow Electronics, Inc.
Gates/FA Distributing, Inc.
July 19, 1994
Page 3
(a) Each issued and outstanding share of the capital stock of Sub
shall be converted into and become one fully paid and
nonassessable share of Common Stock, par value $.01 per share,
of the Surviving Corporation.
(b) 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.
(c) Each issued and outstanding share of the Company Common Stock
(other than shares to be canceled in accordance with the above
paragraph) shall be converted into the right to receive the
number (the "Conversion Ratio") of shares of Parent Common
Stock equal to a fraction, the numerator of which $22.50 and
the denominator of which is the average closing price on the
New York Stock Exchange, Inc. (the "NYSE") of one share of
Parent Common Stock over the 20-day trading period ending two
days before the Closing Date (the "Parent Stock Price"). Each
share of 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").
3. Fractional Shares.
------------------
No certificates or scrip representing fractional shares of Parent
Common Stock shall be issued upon the surrender or exchange of Certificates. A
holder of Company Common Stock otherwise entitled to receive a fractional share
shall 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.
We also have assumed that the following statements are true as of the
date hereof and will be true at all times through the Effective Time:
<PAGE> 4
Arrow Electronics, Inc.
Gates/FA Distributing, Inc.
July 19, 1994
Page 4
(1) The fair market value of the Parent Common Stock received by each
stockholder of the Company will be approximately equal to the fair
market value of shares of the Company Common Stock surrendered in
exchange therefor and the aggregate consideration received by the
stockholders of the Company in exchange for their shares of the
Company Common Stock will be approximately equal to the fair market
value of all the shares of the Company Common Stock issued and
outstanding.
(2) There is no plan or intention by any stockholder of the Company who
owns five percent (5%) or more of the shares of the Company Common
Stock and, to the best of the knowledge of the management of the
Company, there is no plan or intention on the part of the remaining
stockholders of the Company (a "Plan"), to sell, exchange, transfer,
distribute, pledge, redeem, or otherwise dispose of (or engage in any
other transaction that would result in a reduction of ownership or a
direct or indirect disposition) of a number of shares of Parent Common
Stock received in the Merger that would reduce the Company
stockholders' ownership of Parent Common Stock (i) to a number of
shares having a value, as of the Effective Time of the Merger, of less
than fifty percent (50%) of the aggregate value, immediately prior to
the Merger, of all the formerly outstanding stock of the Company as of
the same date or (ii) to a number of shares that is less than fifty
percent (50%) of the shares of Parent Common Stock received in the
Merger.
For purposes of this representation, shares of the Company Common
Stock (or any portion thereof) exchanged for cash or other property,
surrendered by dissenters, or exchanged for cash in lieu of fractional
shares of Parent Common Stock will be treated as outstanding Common
Stock of the Company on the date of the Merger that was exchanged for
Parent Common Stock in the Merger and then disposed of pursuant to a
Plan. Moreover, shares of the Company Common Stock and shares of
Parent Common Stock held by the stockholders of the Company and
otherwise sold, redeemed, or disposed of prior or subsequent to the
Merger will be considered in making this representation.
(3) Pursuant to the Merger, Sub will merge with and into the Company and
the Company will acquire all of the assets and liabilities of Sub.
Following the Merger, the Company will hold at least ninety
percent (90%) of the fair market value of its net assets and at least
seventy percent (70%) of the fair market value of its gross assets held
immediately prior to the Merger. The Company will also hold at least
ninety percent (90%) of the fair market value of Sub's net assets and
at least seventy percent (70%) of the fair market value of Sub's
gross assets held immediately prior to the Merger.
<PAGE> 5
Arrow Electronics, Inc.
Gates/FA Distributing, Inc.
July 19, 1994
Page 5
For the purpose of determining the percentage of the net and gross
assets held by the Company or Sub, as the case may be, immediately
after the Merger, the following assets will be included as assets held
by the Company or Sub, as the case may be, immediately prior to the
Merger (but not subsequent thereto): (i) assets of the Company or Sub,
as the case may be, used to pay (A) stockholders perfecting dissenters'
rights, (B) stockholders who receive cash or other property, (C) any
other expenses or liabilities incurred in connection with the Merger,
and (D) for all redemptions and distributions (except for regular,
normal dividends) made by the Company; and (ii) assets disposed of by
the Company or Sub, as the case may be (other than assets "disposed
of" by Sub pursuant to the transfer from Sub to the Company as part of
the Merger), prior or subsequent to the Merger and in contemplation
thereof or pursuant to the "plan of reorganization."
(4) At all times prior to the Merger, Parent has owned all of the
outstanding equity interests in Sub (including rights to acquire an
equity interest in Sub, if any). Accordingly, prior to the
transaction, Parent will be in control of Sub. "Control", for these
purposes, means the ownership of stock possessing at least eighty
percent (80%) of the total combined voting power of all classes of
stock entitled to vote and at least eighty percent (80%) of the total
number of shares of each class of non-voting stock. Parent formed Sub
solely for the purposes of effecting the Merger and, at all times prior
to the Merger, Sub has not and will not conduct any business
operations. Sub owns no assets other than assets transferred to it by
Parent pursuant to the Merger, if any.
(5) Following the Merger, Parent has no plan or intention to cause the
Company to issue additional equity interests that would result in
Parent's losing control, as defined above, of the Company.
(6) Parent has no plan or intention to reacquire any of its stock issued in
the Merger.
(7) After the Merger, Parent will own one hundred percent (100%) of the
outstanding equity interests in the Company (including any right to
acquire such an equity interest). Parent has no plan or intention to
liquidate the Company, to merge the Company with or into another
operation (including Parent), to sell, transfer ownership of, or
otherwise dispose of the stock of the Company, except for transfers of
stock to corporations controlled by Parent; or to cause the Company to
sell, transfer ownership of or otherwise dispose of any portion of its
assets (including those assets acquired from Sub) to any person
(including Parent), except for dispositions made in the ordinary course
of business or transfers of
<PAGE> 6
Arrow Electronics, Inc.
Gates/FA Distributing, Inc.
July 19, 1994
Page 6
assets to a corporation controlled by the Company or to pay expenses
incurred in connection with the Merger (including payments to
dissenters) ("Permissible Transfers").
(8) The liabilities of Sub assumed by the Company and the liabilities to
which the transferred assets of Sub are subject were incurred by Sub in
the ordinary course of its business.
(9) Parent intends that, following the Merger, it will cause the Company
either to continue its historic business or to continue to use a
significant portion of the Company's historic business assets in a
business; provided, however, to the extent that the business or assets
of the Company are subject to a Permissible Transfer, Parent intends
that the transferee will continue the historic businesses of the
Company or use a significant portion of the Company's assets in a
business.
(10) Each of Parent, Sub, the Company, and the stockholders of the Company
will pay separately its own expenses, if any, incurred in connection
with the Merger.
(11) There is no intercorporate indebtedness existing between Parent and the
Company or between Sub and the Company that was issued or acquired, or
that will be settled at a discount, as a result of the Merger.
(12) In the Merger, shares of the Company Common Stock representing control,
as defined above, of the Company will be exchanged solely for voting
Common Stock of Parent. For purposes of this representation, shares of
the Company Common Stock exchanged for cash or other property
originating with Parent will be treated as outstanding Common Stock of
the Company on the date of the Merger, but shares of the Company Common
Stock exchanged for cash or other property originating with the Company
will not be treated as outstanding Common Stock of the Company on the
date of the Merger.
(13) Neither Parent, Sub, nor any member of a controlled group of which
Parent is also a member ("Parent Controlled Group Member") owns or has
owned within the preceding five (5) years, directly or indirectly, any
stock of the Company. A "controlled group," for these purposes, means
either (i) a parent-subsidiary controlled group or (ii) a
brother-sister controlled group.
A parent-subsidiary controlled group exists where (1) one or more
chains of corporations are connected through stock ownership with a
common parent corporation, (2) 80% or more of the voting power or value
of the stock of each
<PAGE> 7
Arrow Electronics, Inc.
Gates/FA Distributing, Inc.
July 19, 1994
Page 7
corporation in the group other than the parent is owned by one or more
corporations in the group, and (3) the common parent owns at least 80% of
the voting power or value of the stock of one of the other corporations
in the group (not counting stock owned directly by other members).
A brother-sister controlled group exists if (1) five or fewer persons
(individuals, estates, or trusts) own at least 80% of the voting stock or
value of shares of each of two or more corporations, and (2) these five
or fewer persons own more than 50% of the voting power or value of
shares of each corporation, considering a particular person's stock only
to the extent that it is owned identically with regard to each
corporation. A person's stock ownership is not taken into account for
purposes of the 80% requirement unless that shareholder owns stock in
all of the corporations in the group.
(14) In connection with the Merger, no stockholder of the Company is acting
on behalf of, or as an agent for, Parent or any Parent Controlled Group
Member, other than with respect to the irrevocable proxy as provided in
Exhibit 99(2) to the Agreement.
(15) No two parties to the transaction are "investment companies." For
purposes of the foregoing, an "investment company" is a corporation that
is a regulated investment company, a real estate investment trust, or a
corporation fifty percent (50%) or more of the value of whose total
assets are stock and securities, and eighty percent (80%) or more of the
value of whose total assets are assets held for investment.
(16) Neither Parent, the Company, nor Sub is under the jurisdiction of a
court in a Title 11 of the United States Code case or a receivership,
foreclosure, or similar proceeding in a federal or state court.
(17) No fractional shares of Parent Common Stock will be issued in the
Merger. In lieu thereof, any fractional amount resulting from the
conversion of the Company Common Stock into Parent Common Stock as
provided in the Agreement shall be paid in cash at the closing price of
Parent Common Stock at the Effective Time of the Merger. The payment of
cash in lieu of fractional shares of Parent Common Stock is solely for
the purpose of avoiding the expense and inconvenience to Parent of
issuing fractional shares and does not represent separately bargained
for consideration. The total cash consideration that will be paid in
the Merger to the Company stockholders instead of issuing fractional
shares of Parent Common Stock will not exceed one percent (1%) of the
total consideration that will be issued in the exchange for their shares
of Company Common Stock. The
<PAGE> 8
Arrow Electronics, Inc.
Gates/FA Distributing, Inc.
July 19, 1994
Page 8
fractional share interest of each stockholder of the Company will be
aggregated, and no stockholder of the Company will receive cash in
an amount equal to or greater than the value of one full share of
Parent Common Stock.
(18) The Company has no plan or intention to issue additional shares of
its stock that would result in Parent's losing control, as defined
above, of the Company.
(19) None of the compensation received by any employees of the Company
who are also stockholders of the Company will be separate
consideration for, or allocable to, any of their shares of the
Company Common Stock; none of the shares of Parent Common Stock
received by any such persons will be separate consideration for, or
allocable to, any employee agreement; and the compensation paid to
any such persons will be for services actually rendered and will be
commensurate with amounts paid to third parties bargaining at arm's
length for similar services.
(20) The Parent Common Stock issued pursuant to the Merger will not be
subject to any restriction whatsoever (other than any restrictions
imposed under any applicable securities laws or for
pooling-of-interest requirements).
(21) At the time of the Merger (i) the Company will not have any
outstanding warrants, options, or convertible securities or any
other kind of right (written or unwritten, formal or informal,
contingent or otherwise) outstanding pursuant to which any person
could acquire stock in the Company or any other equity interest in
the Company ("Rights of the Company") except as set forth in the
Agreement and (ii) the Company has no outstanding equity interest
other than shares of the Company Common Stock and rights to acquire
the Company Common Stock. No Rights of the Company exist that if
exercised would affect Parent's acquisition and retention of control
of the Company, as defined above.
(22) There will be no Rights of the Company (as defined above)
outstanding immediately following the Merger, and the Company is
under no obligation and has no plan to issue Rights of the Company
following the Merger.
(23) Other than shares of the Company Common Stock or options to acquire
the Company Common Stock issued to present or former employees of
the Company in the ordinary course of business or as disclosed in
the Agreement, no issuances of the Company Common Stock or rights to
acquire the Company Common Stock have occurred or will occur during
the period prior to the Effective Time of the Merger (the
"Pre-Merger Period") other than pursuant to options, warrants or
agreements outstanding prior to the Pre-Merger Period or issued in
the ordinary
<PAGE> 9
Arrow Electronics, Inc.
Gates/FA Distributing, Inc.
July 19, 1994
Page 9
course of business pursuant to agreements entered into prior to the
Pre-Merger Period, or disclosed in the Agreement.
(24) No subsidiary of the Company owns any stock of the Company or Rights of
the Company.
(25) The liabilities of the Company have been incurred by the Company in the
ordinary course of business or in connection with the Merger.
(26) The fair market value of the assets of the Company will at the Effective
Time of the Merger, exceed the sum of its liabilities, plus the amount
of liabilities, if any, to which the assets are subject.
(27) No outstanding indebtedness of the Company represents equity for tax
purposes; no outstanding equity of the Company represents indebtedness
for tax purposes; no outstanding options on the Company Common Stock
represent equity for tax purposes; all outstanding Common Stock of the
Company represents equity for tax purposes; no stockholder of the
Company has guaranteed any indebtedness of the Company outstanding
during the Pre-Merger Period.
(28) At all times during the five-year period ending on the Effective Date of
the Merger, the fair market value of each of the Company's United States
real property interests was and will have been less than 50 percent of
the total fair market value of (a) its United States real property
interests, (b) its interests in real property located outside the United
States, and (c) its other assets used or held for use in a trade or
business. For purposes of the preceding sentence, (x) United States
real property interests include all interests (other than an interest
solely as a creditor) in real property and associated personal property
(such as movable walls and furnishings) located in the United States or
the Virgin Islands and interests in any corporation (other than a
controlled corporation) owning any United States real property interest,
(y) the Company is treated as owning its proportionate share (based on
the relative fair market value of its ownership interest to all
ownership interests) of the assets owned by any controlled corporation
or any partnership, trust, or estate in which the Company is a partner or
beneficiary, and (z) any such entity in turn is treated as owning its
proportionate share of the assets owned by any controlled corporation
or any partnership, trust, or estate in which the entity is a partner
or beneficiary. As used in this paragraph, "controlled corporation"
means any corporation at least 50 percent of the fair market value of
the stock of which is owned by the Company, in the case of a first-tier
subsidiary of the Company, or by a controlled corporation, in the case
of a lower-tier subsidiary.
<PAGE> 10
Arrow Electronic, Inc.
Gates/FA Distributing, Inc.
July 19, 1994
Page 10
(29) The terms of the Agreement and other agreements entered into in
connection therewith are the product of arm's length negotiations.
(30) Parent's and Company's principal reason for participating in the Merger
is as described in the Form S-4.
OPINIONS
--------
Based on the foregoing, we are of the opinion that:
(1) the Merger will constitute a reorganization within the meaning
of Section 368(a) of the Code, and the Parent, the Company and Sub will each be
a party to the reorganization within the meaning of Section 368(b) of the Code;
(2) no gain or loss will be recognized by Parent, the Company or
Sub in the Merger;
(3) no gain or loss will be recognized by the shareholders of the
Company upon their receipt of Parent Common Stock in exchange for their Company
Common Stock, except that shareholders who receive cash proceeds from the sale
of fractional interests in Parent Common Stock will recognize gain or loss equal
to the difference between such proceeds and the tax basis allocated to their
fractional share interest, and such gain or loss will constitute capital gain
or loss if their Company Common Stock is held as a capital asset at the
Effective Time;
(4) the aggregate tax basis of the shares of Parent Common Stock
(including fractional share interests) received by the shareholders of the
Company will be the same as the aggregate tax basis of their Company Common
Stock exchanged therefor; and
(5) the holding period of the Parent Common Stock in the hands of
the Company shareholders will include the holding period of their Company
Common Stock exchanged therefor, provided such Company Common Stock is held as
a capital asset at the Effective Time.
<PAGE> 11
Arrow Electronics, Inc.
Gates/FA Distributing, Inc.
July 19, 1994
Page 11
CONCLUSION
----------
The opinions expressed herein are based upon existing statutory,
regulatory, and judicial authority, any of which may be changed at any time
with retroactive effect. In addition, our opinions are based solely on the
documents that we have examined, the additional information that we have
obtained, and the statements set out herein, which we have assumed to be true
on the date hereof and will be true on the date on which the proposed
transaction is consummated. Our opinions cannot be relied upon if any of the
facts contained in those documents or in that additional information are, or
later become, inaccurate, or if any of the statements set out herein are, or
later become, inaccurate. Finally, our opinions are limited to the tax matters
specifically covered thereby, and we have not been asked to address, nor have
we addressed, any of the other tax consequences of the proposed transaction.
We consent to the use of our opinions as an exhibit to the Registration
Statement filed by Parent relating to the proposed merger and to the references
to our firm in the Proxy Statement/Prospectus included in the Parent's
Registration Statement. Our opinions are being provided solely for the use of
Parent, the Company and the Company's stockholders. No other person or party
shall be entitled to rely on our opinions.
Very truly yours,
ALSTON & BIRD
By: /s/ Pinney L. Allen
-------------------
PLA:tmc
<PAGE> 1
EXHIBIT 23(5)
CONSENT OF THE ROBINSON-HUMPHREY COMPANY, INC.
----------------------------------------------
We consent to the inclusion in this Amendment No.1 to the Registration
Statement on Form S-4 (Registration No. 33-54413) of our opinion, dated
July 20, 1994, set forth as Exhibit B to the Proxy Statement/Prospectus and to
the summarization thereof in the Proxy Statement/Prospectus under the caption
"THE MERGER - Opinion of Financial Advisor". In giving such consent, we do not
thereby admit that we come within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933 or the Rules and
Regulations of the Securities and Exchange Commission thereunder.
THE ROBINSON-HUMPHREY COMPANY, INC.
Atlanta, Georgia
July 20, 1994
<PAGE> 1
EXHIBIT 99(3)
PROXY
GATES/FA DISTRIBUTING, INC.
GREENVILLE, SOUTH CAROLINA
SPECIAL MEETING OF STOCKHOLDERS
The undersigned stockholder of Gates/FA Distributing, Inc. ("Gates/FA"),
Greenville, South Carolina, hereby constitutes and appoints Philip D. Ellett,
William T. Mauldin and Lee F. Nicholson or any one of them, each with full power
of substitution, to vote the number of shares of Gates/FA Common Stock which the
undersigned would be entitled to vote if personally present at the Special
Meeting of Stockholders to be held at the Greenville-Spartanburg Airport
Marriott, 1 Parkway East, Greenville, South Carolina 29615, on Monday, August
29, 1994 at 10:00 a.m., local time, and at any adjournments thereof (the
"Special Meeting"), upon the proposals described in the Notice of Special
Meeting of Stockholders and Proxy Statement/Prospectus, both dated July 20,
1994, the receipt of which is acknowledged, in the manner specified below.
1. GATES/FA MERGER PROPOSAL. On the proposal to approve and adopt the
Agreement and Plan of Merger, dated as of June 24, 1994, by and among Gates/FA,
Arrow Electronics, Inc. ("Arrow"), and AFG Acquisition Company ("Sub"), pursuant
to which Sub will merge into Gates/FA and Gates/FA will become a wholly owned
subsidiary of Arrow, as more fully described in the Proxy Statement/Prospectus:
/ / FOR / / AGAINST / / ABSTAIN
2. OTHER PROPOSALS. In their sole discretion, the Proxies are authorized
to vote upon such other business incidental to the conduct of the Special
Meeting as may properly come before the Special Meeting or any adjournments
thereof.
/ / FOR / / AGAINST / / WITHHOLD AUTHORITY
(continued on other side)
(continued from other side)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSAL 1, AND WITH DISCRETIONARY AUTHORITY ON ALL OTHER MATTERS INCIDENTAL
TO THE CONDUCT OF THE SPECIAL MEETING THAT MAY PROPERLY COME BEFORE THE SPECIAL
MEETING OR ANY ADJOURNMENT THEREOF.
Please sign exactly as your name appears on your stock certificate and date.
Where shares are held jointly, each stockholder should sign. When signing as
executor, administrator, trustee, or guardian, please give full title as such.
If a corporation, please sign in full corporate name by president or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
----------------------------
Signature of Stockholder
----------------------------
Signature of Stockholder (If
held Jointly)
Dated: , 1994
--------------------
Month Day
THIS PROXY IS SOLICITED ON BEHALF OF GATES/FA DISTRIBUTING, INC.'S BOARD OF
DIRECTORS
AND MAY BE REVOKED BY THE STOCKHOLDER PRIOR TO ITS EXERCISE.
